Nexstar Media(US:NXST)2023-02-28 22:11Debt and Financial Obligations - The company has a total principal indebtedness of approximately $1.714 billion in senior unsecured notes due July 2027 and $1.0 billion in senior unsecured notes due November 2028[121]. - The company must maintain a maximum consolidated first lien net leverage ratio of 4.25 to 1.00 under its senior secured credit facility[124]. - As of December 31, 2022, the company's senior secured credit facility included a Term Loan B with an outstanding principal balance of $296.3 million and a $75.0 million revolving credit facility, of which $61.5 million was drawn[143]. - The company may not be able to generate sufficient cash flow to meet its debt service requirements, which could necessitate refinancing or restructuring its debt[126]. - Interest rates on the company's term loan borrowings range from 5.86% to 6.89% as of December 31, 2022, impacting annual interest expenses significantly[332]. - A 100 basis point increase in SOFR or US LIBOR would raise annual interest expenses by $42.8 million, while a decrease would lower expenses by the same amount[333]. - The company has no financial instruments in place to hedge against changes in benchmark interest rates on its senior secured credit facilities[333]. - The company’s fixed-rate debt obligations are insulated from market interest rate changes, providing some stability in financial planning[333]. Acquisitions and Investments - In 2022, the company completed the acquisition of a 75.0% ownership interest in The CW without any purchase consideration[129]. - The company faces risks related to its acquisition strategy, including competition from other firms with greater financial resources[127]. - The company is subject to FCC rules that limit the ownership of television stations, which may restrict future acquisitions[128]. - The company has invested in digital businesses, which may lead to volatile operating results due to intense competition and rapid changes in the digital landscape[140]. Financial Performance and Assets - The company's income from equity investments in TV Food Network for the year ended December 31, 2022, was $226.7 million, with cash distributions of $249.4 million received[139]. - The company recorded a $90.8 million goodwill impairment during Q4 2022, with $8.305 billion, or 65.5%, of total assets consisting of goodwill and intangible assets[148]. - The company has net deferred tax assets of approximately $199.4 million expected to be realized in the future, subject to changes in tax law and future income projections[149]. - As of December 31, 2022, the company had net operating losses (NOLs) of approximately $165.7 million for U.S. federal tax purposes, with a valuation allowance against $134.3 million of federal NOLs[150]. - The pension benefit obligations for qualified retirement plans were $1.738 billion, with total net assets available of $1.562 billion, resulting in an underfunding of approximately $175.5 million as of December 31, 2022[160]. Dividends and Shareholder Returns - The company declared a total cash dividend of $3.60 per share in 2022, with a 50% increase to $1.35 per share approved for 2023[162]. - The company’s ability to pay dividends is subject to board discretion and limitations imposed by senior secured credit facilities[162]. Legal and Regulatory Risks - The company is subject to ongoing litigation and tax audits that could result in significant liabilities, including a proposed tax of $182.0 million related to past transactions[153][154]. - The company is limited to a maximum of 20% non-U.S. ownership under the Communications Act, which may restrict foreign investments[135]. - The spin-off agreement includes indemnification obligations for liabilities, which could lead to additional financial exposure if not met[194]. - The IRS ruling and special tax counsel's opinion are based on representations that, if found untrue, could invalidate the tax-free status of the spin-off[190]. - The spin-off's validity could be challenged under federal and state fraudulent transfer laws, potentially voiding the transaction and adversely affecting financial conditions[191]. Operational Challenges - The loss of the CEO could disrupt management and impair the execution of business strategies, as he is crucial to the company's strategic direction[141]. - Cybersecurity risks are a significant concern, with potential consequences including data loss, operational disruptions, and increased protection costs[169]. - The ongoing effects of COVID-19 have adversely affected the company's business, results of operations, and financial condition, with uncertainty regarding future impacts[171]. - A high percentage of operating expenses are fixed, making the company vulnerable to revenue fluctuations, particularly in advertising[174]. - The company may experience revenue loss due to preemption of scheduled programming by major news events, affecting advertising revenue[175]. - The television industry is highly competitive, with increased competition from digital media and alternative entertainment options impacting audience share and advertising revenue[180]. - The FCC's reallocation of broadcast spectrum for wireless broadband use may negatively affect viewer access to programming and require additional investments[184]. - The company may incur unforeseen costs related to Tribune's Chapter 11 bankruptcy proceedings, which could be material[187]. Spin-off Transactions - Tribune Publishing completed a spin-off transaction on August 4, 2014, distributing 98.5% of its common stock to stockholders, retaining only 1.5%[188]. - The IRS issued a private letter ruling confirming that the spin-off qualified as tax-free for U.S. federal income tax purposes, although it did not guarantee compliance with all requirements[189].