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, 2020 . 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; the "Company" refers toNexstar and the variable interest entities ("VIE") 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 Coronavirus Disease
("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 benefits from the recently-passed American Rescue Plan Act
of 2021 ("ARPA"); 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, 2020
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.
25
--------------------------------------------------------------------------------Executive Summary 2021 Highlights
• During the first quarter of 2021, net revenue increased by
or 2.0% compared to the same period in 2020. The increase was primarily due
to the incremental revenue from the stations and digital business we
acquired in 2020 of
of our legacy stations of
offset by a decrease in revenue from core advertising of our legacy
stations of
a decrease in revenue from political advertising of legacy stations of
from our station and business unit divestitures of
million decrease in other revenue of our legacy stations.
• On January 27, 2021 , our Board of Directors approved an additional $1.0 billion new share repurchase program authorizing us to repurchase up to
common stock for
to
common stock for
this Quarterly Report on Form 10-Q, the remaining available amount under
the share repurchase authorization was $1.004 billion .
• During the first quarter of 2021, we received $177.7 million in cashdistribution from our 31.3% equity method investment in TV Food Network.
• During the first quarter of 2021, our Board of Directors declared and paid
cash dividends of
or total dividend payments of $30.4 million .
Debt Transactions
• During the three months ended
million in principal balance under our Term Loan B due 2024, funded by cash
on hand.
• During the three months ended
maturities of $5.4 million under our Term Loan A due 2024.
26
--------------------------------------------------------------------------------
Update on COVID-19 PandemicThe United States economy continued its path to recovery in the first quarter of 2021 with millions of Americans receiving the COVID-19 vaccine, the favorable effects of theU.S. government's stimulus programs and states and municipalities increasingly reopening and easing movement restrictions and public health initiatives since the outbreak of COVID-19 was first declared as a pandemic by theWorld Health Organization inMarch 2020 and as a national emergency by the President ofthe United States . During the first quarter of 2021, the Company continued to be profitable and continued to generate positive cash flows from its operations, its current year to date financial results were higher than the comparable prior year, and its market capitalization continued to increase and exceed the carrying amount of its equity by a substantial amount. These favorable financial results are primarily attributable to the Company's acquisitions of BestReviews, station WPIX and other stations in 2020 and the continuing signs of recovery from the effects of the COVID-19 pandemic, driven by the mass distribution of COVID-19 vaccines throughoutthe United States and theU.S. government's stimulus programs. Overall, the ongoing COVID-19 pandemic did not have a material impact on the Company's liquidity during the first quarter of 2021. As ofMarch 31, 2021 , the Company's unrestricted cash on hand amounted to$339.8 million and the Company had a positive working capital of$646.5 million , both increased from theDecember 31, 2020 levels of$152.7 million and$479.1 million , respectively. As ofMarch 31, 2021 , 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$94.7 million and$3.0 million under the respective amendedNexstar and Mission revolving credit facilities (with a maturity date ofOctober 2023 ) to meet the Company's 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. While we are encouraged by the trends we saw in the first quarter, we remain uncertain of the ultimate effect COVID-19 could have on our business and our future financial performance. To the extent that the pandemic continues to have negative impact on theU.S. economy, our results will be affected. The full extent of the impact of the COVID-19 pandemic on our future business operations will also depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the availability of effective treatments and vaccines, the speed at which these vaccines are administered, 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. We will continue to evaluate the nature and extent of the impact of COVID-19 pandemic on our business, financial condition and liquidity in future periods. The CARES Act/ARPA OnMarch 27, 2020 , the Coronavirus Aid, Relief, and Economic Security Act ("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. Under the CARES Act, we elected to defer$31.7 million of employer social security payments in two equal installments onDecember 31, 2021 and 2022. OnMarch 11, 2021 , the ARPA was signed into law. The ARPA includes changes to the employer funding requirements for single-employer pension plans and is designed to reduce the amounts of required contributions as a relief. The ARPA also includes multi-employer pension plan funding relief but had no significant impact onNexstar . The two key aspects of the ARPA funding relief for single-employer plans are extended amortization and "fresh start" of funding shortfalls and extended funding interest rate stabilization.Nexstar has no funding shortfalls but utilized the extended funding interest rate stabilization on its pension benefit plans. This relief increasedNexstar's funding target attainment and currently requires no cash contribution to its qualified pension benefit plans in 2021. 27
--------------------------------------------------------------------------------
Overview of Operations
As ofMarch 31, 2021 , we owned, operated, programmed or provided sales and other services to 198 full power television stations, including those owned by VIEs, and one AM radio station in 116 markets in 39 states and 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 37 full power television stations owned by independent third parties, of which 36 full power television stations are VIEs that are consolidated into our financial statements. OnOctober 1, 2020 ,Nexstar Broadcasting, Inc. , our wholly-owned subsidiary, filed a Certificate of Amendment with the Secretary ofState of Delaware to change its name toNexstar Inc. In connection with this change, effective onNovember 1, 2020 , we merged our two primary operating subsidiaries,Nexstar Inc. andNexstar Digital, LLC , withNexstar Inc. surviving the merger as our single operating subsidiary. Accordingly, our broadcasting, network and digital businesses are now operating under theNexstar Inc. umbrella. OnApril 16, 2021 ,Nexstar Inc. changed its name toNexstar Media Inc. We guarantee full payment of all obligations incurred under Mission's senior secured credit facility in the event of its default. Mission is a guarantor of our senior secured credit facility, our 5.625% Notes due 2027 and our 4.75% Notes due 2028. In consideration of our guarantee of Mission's senior secured credit facility, except for three stations, Mission has granted us purchase options to acquire the assets and assume the liabilities of each Mission station, subject 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 for financial reporting purposes in these entities because of (1) the local service agreements we have with their stations, (2) our guarantee of the obligations incurred under Mission's senior secured credit facility, (3) our power over significant activities affecting the VIEs' economic performance, including budgeting for advertising revenue, advertising sales and, in some cases, hiring and firing of sales force personnel and (4) purchase options granted by each consolidated VIE which permit us to acquire the assets and assume the liabilities of each of these VIEs' stations, exclusive of stations KMSS, KPEJ and KLJB, at any time, subject 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. 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, including a discussion of the local service agreements we have with these independent third parties. 28
--------------------------------------------------------------------------------
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 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 television JSA attribution rule. That elimination became effective onFebruary 7, 2018 . OnSeptember 23, 2019 , a federal court of appeals vacated theFCC 'sNovember 2017 order on reconsideration, and onDecember 20, 2019 theFCC issued an order that formally reinstated the rule. OnApril 17, 2020 , theFCC and a group of media industry stakeholders (includingNexstar ) filed separate petitions for certiorari requesting that theU.S. Supreme Court review theSeptember 2019 appeals court decision. TheSupreme Court granted certiorari onOctober 2, 2020 . OnApril 1, 2021 theSupreme Court reversed the appeals court decision. The effect ofSupreme Court ruling will be for theFCC to reinstate the reconsideration order. 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 share a channel with another station since 2018, one station that moved to a VHF channel in 2019, one station that moved to a VHF channel in 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. Seventy-four (74) 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. These stations have commenced operation on their new assigned channels and have ceased operating on their former channels.Congress has allocated up to an industry-wide total of$2.75 billion to reimburse television broadcasters, MVPDs and other parties for costs reasonably incurred due to the repack. During the three months endedMarch 31, 2021 and 2020, the Company spent a total of$4.4 million and$16.9 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 months endedMarch 31, 2021 and 2020, the Company received$5.4 million and$12.8 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 ofMarch 31, 2021 , approximately$27.6 million of estimated remaining costs in connection with the station repack are expected to be incurred by the Company, some or all of which will be reimbursable. If theFCC fails to fully reimburse the Company's repacking costs, the Company could have increased costs related to the repack. Seasonality Advertising revenue is positively affected by national and regional political election campaigns and certain events such as theOlympic Games or theSuper Bowl . Advertising revenue is generally highest in the second and fourth quarters of each year, due in part to increases in consumer advertising in the spring and retail advertising in the period leading up to, and including, the holiday season. In addition, advertising revenue is generally higher during even-numbered years, when state, congressional and presidential elections occur and from advertising aired during theOlympic Games . As 2021 is not an election year, we expect a decrease in political advertising revenue to be reported in 2021 compared to 2020. However, the rescheduling of the 2020Summer Olympics to 2021 due to the COVID-19 pandemic is expected to increase our core advertising revenue in 2021 if theSummer Olympics occur as scheduled. 29
--------------------------------------------------------------------------------
Historical Performance
Revenue
The following table sets forth the amounts of the Company's principal types of
revenue (in thousands) and each type of revenue as a percentage of total net
revenue:
Three Months Ended March 31,
2021 2020
Amount % Amount %Core advertising$ 411,714 37.0$ 417,379 38.2 Political advertising 5,408 0.5 55,341 5.1 Distribution revenue 621,235 55.8 549,716 50.3 Digital 66,390 6.0 56,440 5.2 Other 7,733 0.6 10,152 0.9 Trade revenue 1,451 0.1 2,794 0.3 Total net revenue$ 1,113,931 100.0$ 1,091,822 100.0 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 March 31, 2021 2020 Amount % Amount % Net revenue$ 1,113,931 100.0$ 1,091,822 100.0 Operating expenses (income): Corporate expenses 43,480 3.9 53,474 4.9 Direct operating expenses, net of trade 447,782 40.2 441,781 40.5 Selling, general and administrative expenses, excluding corporate 199,957 18.0 164,910 15.1 Depreciation 39,468 3.5 35,407 3.2 Amortization of intangible assets 73,687 6.6 70,582 6.5 Amortization of broadcast rights 30,883 2.7 37,208 3.4 Trade expense 1,610 0.1 3,278 0.3 Reimbursement from theFCC related to station repack (5,415 ) (0.5 ) (12,758 ) (1.2 ) Gain on disposal of stations and entities, net (2,441 ) (0.2 ) (7,075 ) (0.6 ) Total operating expenses 829,011 786,807 Income from operations$ 284,920 $ 305,015 30
--------------------------------------------------------------------------------
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$411.7 million for the three months endedMarch 31, 2021 , compared to$417.4 million for the same period in 2020, a decrease of$5.7 million , or 1.4%. The decrease was primarily due to the ongoing impact of the COVID-19 pandemic on our legacy stations' core advertising revenue of$10.8 million and a decrease in revenue from our station divestitures of$12.3 million , partially offset by the incremental revenue from television stations we acquired in 2020 of$17.5 million . Our largest advertiser category, automobile, represented approximately 19% and 20% of our core advertising revenue for the three months endedMarch 31, 2021 and 2020, respectively. Overall, including past results of our newly acquired stations, automobile revenues decreased by approximately 5% during the quarter. The other categories representing our top five were medical/healthcare, attorneys, insurance and lottery, which all increased in 2021. While we are encouraged by the trends we saw in the first quarter, we remain uncertain of the ultimate effect COVID-19 could have on our core advertising revenue in fiscal year 2021. To the extent that the pandemic continues to have negative impacts on theU.S. economy, our results will be affected. However, the rescheduling of the summerOlympics to 2021, also due to the COVID-19 pandemic situation, is expected to increase our core advertising revenue in 2021 if such event occurs as scheduled. Political advertising revenue was$5.4 million for the three months endedMarch 31, 2021 , compared to$55.3 million for the same period in 2020, a decrease of$49.9 million , or 90.2% as 2021 is not an election year. Distribution revenue was$621.2 million for the three months endedMarch 31, 2021 , compared to$549.7 million for the same period in 2020, an increase of$71.5 million , or 13.0%. Our legacy stations' revenue increased by$48.6 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 new distribution agreements with higher contract rates with OVDs. Additionally, our stations acquired in 2020 increased our revenue in 2021 by$38.2 million , partially offset by a decrease in revenue from our station divestitures of$15.3 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. Digital media revenue, representing advertising revenue on our stations' web and mobile sites and other internet-based revenue, was$66.4 million for the three months endedMarch 31, 2021 , compared to$56.4 million for the same period in 2020, an increase of$10.0 million , or 17.6%. The increase was primarily due to incremental revenue from the digital business and television stations we acquired in 2020 of$12.1 million , partially offset by a decrease in revenue from station divestitures of$1.9 million .
Operating Expenses
Corporate expenses, related to costs associated with the centralized management of our stations, were$43.5 million for the three months endedMarch 31, 2021 , compared to$53.5 million for the same period in 2020, a decrease of$10.0 million , or 18.7%. This was primarily attributable to a decrease in payroll and severance costs due primarily to reduction in employees and a decrease in legal and professional fees associated with our acquisitions during the first quarter of 2020. 31
-------------------------------------------------------------------------------- Station direct operating expenses, consisting primarily of news, engineering, programming and station selling, general and administrative expenses (net of trade expense) were$647.7 million for the three months endedMarch 31, 2021 , compared to$606.7 million for the same period in 2020, an increase of$41.0 million , or 6.8%. The increase was primarily due to expenses associated with our television stations and digital business we acquired in 2020 of$34.8 million (including network, programming and other direct operating costs of$21.1 million ). In addition, our legacy stations' programming costs increased by$19.6 million , primarily due to network affiliation renewals and annual increases in our network affiliation costs. These increases were partially offset by a decrease in expense from station divestitures of$16.1 million , and our digital products of$2.8 million . Depreciation of property and equipment was$39.5 million for the three months endedMarch 31, 2021 , compared to$35.4 million for the same period in 2020, an increase of$4.1 million , or 11.5%, primarily due to incremental depreciation from the television stations and digital business we acquired in 2020 and increased depreciation from newly capitalized assets related to station repacking and other activities. Amortization of intangible assets was$73.7 million for the three months endedMarch 31, 2021 , compared to$70.6 million for the same period in 2020, an increase of$3.1 million , or 4.4%. This was primarily due to increased amortization from the television stations and digital business we acquired in 2020 of$3.6 million , partially offset by decreases in amortization from our divested stations and certain fully amortized assets.
Amortization of broadcast rights was
Income on equity investments, net
Income on equity investments, net was$29.8 million for the three months endedMarch 31, 2021 , compared to$14.2 million for the same period in 2020, an increase of$15.6 million . The increase was primarily attributable to higher equity in income from our investment in TV Food Network, net of the amortization of basis difference, of$15.7 million .
Pension and other postretirement plans credit, net
Pension and other postretirement plans credit, net was$17.7 million for the three months endedMarch 31, 2021 , compared to$10.8 million for the same period in 2020, an increase of$6.9 million , primarily attributable to a reduction in estimated interest costs. Interest Expense, net Interest expense, net was$72.1 million for the three months endedMarch 31, 2021 , compared to$101.3 million for the same period in 2020, a decrease of$29.2 million , or 28.9%. The decrease was due primarily to the reduction in principal amount of our term loans from prepayments and reduction in theLondon Inter-Bank Offered Rate ("LIBOR").
Loss on Extinguishment of Debt
During the three months endedMarch 31, 2021 , loss on extinguishment of debt was$1.0 million due to prepayments on our Term Loan B due 2024 of$75.0 million . During the three months endedMarch 31, 2020 , we made prepayments of our term loans amounting to$430.0 million resulting in a loss on extinguishment of debt of$7.5 million . Income Taxes Income tax expense was$59.7 million for the three months endedMarch 31, 2021 compared to$64.3 million for the same period in 2020. The effective tax rates, which decreased in the current year, were 23.1% and 29.0% for each of the respective periods. In 2020,Nexstar recorded an income tax expense of$8.1 million attributable to nondeductible goodwill written off as a result of the sale of stations to Fox, or a 3.7% decrease to the effective tax rate in 2021. Additionally, certain state contingency reserves decreased as a result of audit settlements. This resulted in a decrease to income tax expense of$6.5 million in 2021, or a 2.5% decrease to the effective tax rate in 2021. 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. 32 --------------------------------------------------------------------------------
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 COVID-19. InDecember 2020 , theU.S. Food and Drug Administration issued emergency use authorizations of two vaccines for the prevention of COVID-19, with a third one approved inFebruary 2021 . COVID-19 has created and may continue to create significant uncertainty in global financial markets, which may reduce demand for the Company's advertising, retransmission, and digital services, impact the productivity of its workforce, reduce its access to capital, and harm its business and results of operations. The Company continues to monitor the effects COVID-19 could have on its operations and liquidity. During the first quarter of 2021, the Company continued to be profitable and continued to generate positive cash flows from its operations, its current year to date financial results were higher than the comparable prior year, and its market capitalization continued to increase and exceed the carrying amount of its equity by a substantial amount. These favorable financial results are primarily attributable to the Company's acquisitions of BestReviews, station WPIX and other stations in 2020 and the continuing signs of recovery from the effects of the COVID-19 pandemic, driven by the mass distribution of COVID-19 vaccines throughoutthe United States and theU.S. government's stimulus programs. Overall, the ongoing COVID-19 pandemic did not have a material impact on the Company's liquidity during the first quarter of 2021. As ofMarch 31, 2021 , the Company's unrestricted cash on hand amounted to$339.8 million and the Company had a positive working capital of$646.5 million , both increased from theDecember 31, 2020 levels of$152.7 million and$479.1 million , respectively. As ofMarch 31, 2021 , 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$94.7 million and$3.0 million under the respective amendedNexstar and Mission revolving credit facilities (with a maturity date ofOctober 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 untilOctober 2023 . The Company will continue to evaluate the nature and extent of the impact of COVID-19 pandemic on the market conditions, on the Company's liquidity and financial condition and its best use of operating cash flows in future periods.
Overview
The following tables present summarized financial information management
believes is helpful in evaluating the Company's liquidity and capital resources
(in thousands):
Three Months Ended March 31,
2021 2020
Net cash provided by operating activities $ 448,255 $ 415,118
Net cash provided by (used in) investing
activities(1) (22,807 ) 351,029
Net cash used in financing activities (238,372 ) (564,150 ) Net increase in cash, cash equivalents and restricted cash$ 187,076 $ 201,997 Cash paid for interest$ 82,106 $ 125,516 Income taxes paid, net of refunds $ 5,511$ 2,110 As of December As of March 31, 31, 2021 2020 Cash, cash equivalents and restricted cash $ 356,385$ 169,309 Long-term debt, including current portion 7,592,107
7,668,003
Unused revolving loan commitments under senior secured credit facilities (1) 97,701 95,662
(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.
33
--------------------------------------------------------------------------------
Cash Flows - Operating Activities
Net cash flows provided by operating activities increased by$33.1 million during the three months endedMarch 31, 2021 , compared to the same period in 2020. This was primarily due to increases in revenue (excluding trade) of$23.5 million , source of cash due to lower interest payments of$43.4 million , an increase in distribution from our equity investment in TV Food Network of$7.3 million and lower payments of broadcast rights of$6.2 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$30.1 million , uses of cash resulting from timing of accounts receivable collections of$9.2 million and timing of payments to our vendors of$3.2 million , and higher tax payments of$3.4 million .
Cash Flows - Investing Activities
Net cash flows used in investing activities were$22.8 million during the three months endedMarch 31, 2021 , compared to net cash flows provided by investing activities of$351.0 million for the same period in 2020. In 2021, we spent a total of$32.1 million in capital expenditures, partially offset by reimbursements from theFCC related to station repack of$5.6 million and proceeds from the sale of a business unit of$2.5 million . 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 in cash proceeds from settlement of litigation between Sinclair and Tribune. These increases were reduced by the cash payment we made to acquire two television stations and certain non-license assets for a total cash consideration payment of$63.0 million . Our capital expenditures during the three months endedMarch 31, 2020 were$60.1 million , primarily due to station repack activities which are reimbursable from theFCC .
Cash Flows - Financing Activities
Net cash flows used in financing activities were$238.4 million during the three months endedMarch 31, 2021 , compared to$564.1 million for the same period in 2020. In 2021, we prepaid a portion of the outstanding principal balance of our Term Loan B due 2024 of$75 million and made scheduled principal payments on our Term Loan A due 2024 of$5.4 million , paid dividends to our common stockholders of$30.4 million ($0.70 per share during each quarter), repurchased common shares of$121.0 million , paid cash for taxes in exchange for shares of common stock withheld of$8.1 million resulting from net share settlements of certain stock-based compensation, and paid for finance lease and software obligations of$1.4 million . These decreases were offset by the proceeds from the exercise of stock option of$2.8 million . In 2020, we made payments on the outstanding principal balance of our term loans of$457.3 million (including$430.0 million in prepayments), paid dividends to our common stockholders of$25.7 million ($0.56 per share during the quarter), repurchased common shares of$72.6 million , paid cash for taxes in exchange for shares of common stock withheld of$6.5 million resulting from net share settlements of certain stock-based compensation, and paid for capital lease and software obligations of$1.8 million .
Our senior secured credit facility may limit the amount of dividends we may pay to stockholders over the term of the agreement.
34
--------------------------------------------------------------------------------Future Sources of Financing and Debt Service Requirements
As ofMarch 31, 2021 , the Company had total combined debt of$7.592 billion , net of financing costs and discounts, which represented 74.7% 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 Remainder of 2021 2022-2023 2024-2025 Thereafter
Nexstar senior secured credit
facility $ 4,550,200 $ 16,072 $ 597,070 $ 1,292,742 $ 2,644,316
Mission senior secured credit
facility 327,000 - 327,000 - -
5.625% Notes due 2027 1,785,000 - - - 1,785,000
4.75% Notes due 2028 1,000,000 - - - 1,000,000
$ 7,662,200 $ 16,072 $ 924,070 $ 1,292,742 $ 5,429,316
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
and Mission's senior secured credit facilities are generally paid every one to
three months and are payable based on the type of interest rate selected.
The terms of our and Mission's senior secured credit facilities, as well as the
indentures governing our 5.625% Notes due 2027 and 4.75% Notes due 2028, limit,
but do not prohibit us or Mission, 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 $94.7 million and $3.0 million of total unused revolving loan
commitments under the respective Nexstar and Mission senior secured credit
facilities, all of which were available for borrowing, based on the covenant
calculations as of March 31, 2021 . 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 September 1, 2020 , Nexstar's Board of Directors approved an additional $300
million in Nexstar's share repurchase authorization to repurchase its Class A
common stock. On January 27, 2021 , Nexstar's Board of Directors also approved a
new share repurchase program authorizing the Company to repurchase up to $1.0
billion of its Class A common stock. The new $1.0 billion share repurchase
program increased the Company's existing share repurchase authorization to a
total capacity of $1.175 billion when combined with the remaining available
amount under its prior authorization and before reduction for any repurchases in
the first quarter of 2021. During the three months ended March 31, 2021 , Nexstar
repurchased a total of 808,530 shares of its Class A common stock for $121.0
million , funded by cash on hand. From April 1, 2021 to May 3, 2021 , we
repurchased an additional 331,162 shares of our Class A common stock for $49.6
million , funded by cash on hand. As of the filing of this Quarterly Report on
Form 10-Q, the remaining available amount under the share repurchase
authorization was $1.004 billion .
On
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 amended credit agreement does not contain financial covenant ratio requirements but does provide for default in the event we do not comply with all covenants contained in our credit agreement. As ofMarch 31, 2021 , we were in compliance with our financial covenant. We believeNexstar and Mission 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 fromMarch 31, 2021 . 35
--------------------------------------------------------------------------------
Off-Balance Sheet Arrangements
As ofMarch 31, 2021 , 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 ofMarch 31, 2021 , we had outstanding standby letters of credit with various financial institutions amounting to$21.7 million , of which$18.2 million was in support of certain worker's compensation insurance programs. The outstanding balance of standby letters of credit is deducted against our unused revolving loan commitment under our senior secured credit facility and would not be available for withdrawal.
Summarized Financial Information
Nexstar Media Inc.'s (a wholly-owned subsidiary ofNexstar and herein referred to as the "Issuer") 5.625% Notes due 2027 and 4.75% Notes due 2028 are fully and unconditionally guaranteed (the "Guarantees"), jointly and severally, byNexstar Media Group, Inc. ("Parent"), Mission (a consolidated VIE) and certain ofNexstar Media Inc.'s restricted subsidiaries (collectively, the "Guarantors" and, together with the Issuer, the "Obligor Group "). The Guarantees are subject to release in limited circumstances upon the occurrence of certain customary conditions set forth in the indentures governing the 5.625% Notes due 2027 and the 4.75% Notes due 2028. The Issuer's 5.625% Notes due 2027 and 4.75% Notes due 2028 are not registered with theSEC . The following combined summarized financial information is presented for theObligor Group after elimination of intercompany transactions between Parent, Issuer and Guarantors in theObligor Group and amounts related to investments in any subsidiary that is a non-guarantor. This information is not intended to present the financial position or results of operations of the consolidated group of companies in accordance withU.S. GAAP. Summarized Balance Sheet Information (in thousands) - Summarized balance sheet information as ofMarch 31, 2021 andDecember 31, 2020 of theObligor Group is as follows: March 31, 2021 December 31, 2020 Current assets - external$ 1,371,625 $ 1,205,580 Current assets - due from consolidated entities outside of Obligor Group 35,857
35,572
Total current assets$ 1,407,482 $
1,241,152
Noncurrent assets - external(1) 10,603,048
10,676,397
Noncurrent assets - due from consolidated entities outside of Obligor Group 53,292 53,292 Total noncurrent assets$ 10,656,340 $ 10,729,689 Total current liabilities$ 725,943 $ 727,557 Total noncurrent liabilities$ 10,014,300 $ 10,123,544 Noncontrolling interests $ 6,996 $ 6,951
(1) Excludes Issuer's equity investments of
of
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 5 to our Condensed Consolidated Financial
Statements.
Summarized Statements of Operations Information for the
© Edgar Online, source
