Document/ExhibitDescriptionPagesSize 1: 10-Q Quarterly Report HTML 933K
2: EX-4.1 Instrument Defining the Rights of Security Holders HTML 193K
3: EX-31.1 Certification -- §302 - SOA'02 HTML 21K
4: EX-31.2 Certification -- §302 - SOA'02 HTML 21K
5: EX-32.1 Certification -- §906 - SOA'02 HTML 18K
6: EX-32.2 Certification -- §906 - SOA'02 HTML 18K
13: R1 Cover Page HTML 70K
14: R2 Condensed Consolidated Balance Sheets HTML 146K
15: R3 Condensed Consolidated Balance Sheets HTML 30K
(Parenthetical)
16: R4 Consolidated Statements of Income HTML 105K
17: R5 Consolidated Statements of Comprehensive Income HTML 60K
18: R6 Consolidated Statements of Cash Flows HTML 107K
19: R7 Consolidated Statements of Equity And Redeemable HTML 97K
Noncontrolling Interest
20: R8 Consolidated Statements of Equity And Redeemable HTML 19K
Noncontrolling Interest (Parenthetical)
21: R9 Accounting policies HTML 46K
22: R10 Acquisitions HTML 93K
23: R11 Goodwill and other intangible assets HTML 39K
24: R12 Investments and other assets HTML 30K
25: R13 Income taxes HTML 24K
26: R14 Long-term debt HTML 44K
27: R15 Retirement plans HTML 41K
28: R16 Accumulated other comprehensive loss HTML 75K
29: R17 Earnings per share HTML 49K
30: R18 Fair value measurement HTML 23K
31: R19 Other matters HTML 30K
32: R20 Accounting policies (Policies) HTML 46K
33: R21 Accounting policies (Tables) HTML 32K
34: R22 Acquisitions (Tables) HTML 91K
35: R23 Goodwill and other intangible assets (Tables) HTML 36K
36: R24 Investments and other assets (Tables) HTML 26K
37: R25 Long-term debt (Tables) HTML 43K
38: R26 Retirement plans (Tables) HTML 37K
39: R27 Accumulated other comprehensive loss (Tables) HTML 77K
40: R28 Earnings per share (Tables) HTML 48K
41: R29 Accounting policies - Narrative (Details) HTML 34K
42: R30 Accounting policies - Revenue (Details) HTML 32K
43: R31 Acquisitions - Narrative (Details) HTML 57K
44: R32 Acquisitions - Summary of Estimated Preliminary HTML 155K
Fair Values of Assets Acquired and Liabilities
Assumed (Details)
45: R33 Goodwill and other intangible assets - Intangible HTML 47K
Assets and Goodwill (Details)
46: R34 Investments and other assets - Components of HTML 30K
Investments and Other Assets (Details)
47: R35 Investments and other assets - Narrative (Details) HTML 37K
48: R36 Income taxes (Details) HTML 26K
49: R37 Long-term debt - Schedule of Long-Term Debt HTML 65K
(Details)
50: R38 Long-term debt - Narrative (Details) HTML 79K
51: R39 Long-term debt - Schedule of Total Leverage Ratios HTML 28K
(Details)
52: R40 Retirement plans - Narrative (Details) HTML 31K
53: R41 Retirement plans - Benefit Costs (Details) HTML 39K
54: R42 Accumulated other comprehensive loss - Accumulated HTML 46K
Other Comprehensive Loss (Details)
55: R43 Accumulated other comprehensive loss - HTML 35K
Reclassifications out of Accumulated Other
Comprehensive Loss (Details)
56: R44 Earnings per share - Schedule of Earnings Per HTML 67K
Share (Details)
57: R45 Fair value measurement (Details) HTML 24K
58: R46 Other matters (Details) HTML 68K
60: XML IDEA XML File -- Filing Summary XML 103K
12: XML XBRL Instance -- tgna-20200930_htm XML 1.78M
59: EXCEL IDEA Workbook of Financial Reports XLSX 78K
8: EX-101.CAL XBRL Calculations -- tgna-20200930_cal XML 235K
9: EX-101.DEF XBRL Definitions -- tgna-20200930_def XML 418K
10: EX-101.LAB XBRL Labels -- tgna-20200930_lab XML 1.34M
11: EX-101.PRE XBRL Presentations -- tgna-20200930_pre XML 720K
7: EX-101.SCH XBRL Schema -- tgna-20200930 XSD 132K
61: JSON XBRL Instance as JSON Data -- MetaLinks 331± 464K
62: ZIP XBRL Zipped Folder -- 0000039899-20-000042-xbrl Zip 298K
i0000039899ifalsei2020iQ3i12/31Cost
of revenues exclude charges for depreciation and amortization expense, which are shown separately above.00000398992020-01-012020-09-30xbrli:shares00000398992020-10-31iso4217:USD00000398992020-09-3000000398992019-12-31iso4217:USDxbrli:shares00000398992020-07-012020-09-3000000398992019-07-012019-09-3000000398992019-01-012019-09-300000039899us-gaap:RetainedEarningsMember2020-07-012020-09-300000039899us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-07-012020-09-3000000398992018-12-3100000398992019-09-3000000398992020-06-300000039899us-gaap:CommonStockMember2020-06-300000039899us-gaap:AdditionalPaidInCapitalMember2020-06-300000039899us-gaap:RetainedEarningsMember2020-06-300000039899us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-06-300000039899us-gaap:TreasuryStockMember2020-06-300000039899us-gaap:AdditionalPaidInCapitalMember2020-07-012020-09-300000039899us-gaap:TreasuryStockMember2020-07-012020-09-300000039899us-gaap:CommonStockMember2020-09-300000039899us-gaap:AdditionalPaidInCapitalMember2020-09-300000039899us-gaap:RetainedEarningsMember2020-09-300000039899us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-09-300000039899us-gaap:TreasuryStockMember2020-09-3000000398992019-06-300000039899us-gaap:CommonStockMember2019-06-300000039899us-gaap:AdditionalPaidInCapitalMember2019-06-300000039899us-gaap:RetainedEarningsMember2019-06-300000039899us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-06-300000039899us-gaap:TreasuryStockMember2019-06-300000039899us-gaap:RetainedEarningsMember2019-07-012019-09-300000039899us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-07-012019-09-300000039899us-gaap:AdditionalPaidInCapitalMember2019-07-012019-09-300000039899us-gaap:TreasuryStockMember2019-07-012019-09-300000039899us-gaap:CommonStockMember2019-09-300000039899us-gaap:AdditionalPaidInCapitalMember2019-09-300000039899us-gaap:RetainedEarningsMember2019-09-300000039899us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-09-300000039899us-gaap:TreasuryStockMember2019-09-300000039899us-gaap:CommonStockMember2019-12-310000039899us-gaap:AdditionalPaidInCapitalMember2019-12-310000039899us-gaap:RetainedEarningsMember2019-12-310000039899us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-310000039899us-gaap:TreasuryStockMember2019-12-310000039899us-gaap:RetainedEarningsMember2020-01-012020-09-300000039899us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-09-300000039899us-gaap:AdditionalPaidInCapitalMember2020-01-012020-09-300000039899us-gaap:TreasuryStockMember2020-01-012020-09-300000039899us-gaap:CommonStockMember2018-12-310000039899us-gaap:AdditionalPaidInCapitalMember2018-12-310000039899us-gaap:RetainedEarningsMember2018-12-310000039899us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-12-310000039899us-gaap:TreasuryStockMember2018-12-310000039899us-gaap:RetainedEarningsMember2019-01-012019-09-300000039899us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-01-012019-09-300000039899us-gaap:AdditionalPaidInCapitalMember2019-01-012019-09-300000039899us-gaap:TreasuryStockMember2019-01-012019-09-30tgna:segmenttgna:stationtgna:radio_stationtgna:market0000039899tgna:AdvertisingAndMarketingServicesMember2020-07-012020-09-300000039899tgna:AdvertisingAndMarketingServicesMember2019-07-012019-09-300000039899tgna:AdvertisingAndMarketingServicesMember2020-01-012020-09-300000039899tgna:AdvertisingAndMarketingServicesMember2019-01-012019-09-300000039899tgna:SubscriptionMember2020-07-012020-09-300000039899tgna:SubscriptionMember2019-07-012019-09-300000039899tgna:SubscriptionMember2020-01-012020-09-300000039899tgna:SubscriptionMember2019-01-012019-09-300000039899tgna:PoliticalMember2020-07-012020-09-300000039899tgna:PoliticalMember2019-07-012019-09-300000039899tgna:PoliticalMember2020-01-012020-09-300000039899tgna:PoliticalMember2019-01-012019-09-300000039899tgna:OtherRevenueSourceMember2020-07-012020-09-300000039899tgna:OtherRevenueSourceMember2019-07-012019-09-300000039899tgna:OtherRevenueSourceMember2020-01-012020-09-300000039899tgna:OtherRevenueSourceMember2019-01-012019-09-300000039899tgna:NexstarMediaGroupTelevisionStationsMember2019-09-19tgna:affiliate0000039899tgna:NexstarMediaGroupTelevisionStationsMember2019-09-192019-09-190000039899tgna:DispatchStationsMember2019-08-080000039899tgna:DispatchStationsMember2019-08-082019-08-08xbrli:pure0000039899tgna:JusticeNetworkAndQuestMember2019-06-180000039899tgna:JusticeNetworkAndQuestMember2019-06-182019-06-180000039899tgna:WTOLandKWESMember2019-01-022019-01-020000039899tgna:ElevenLocalTelevisionStationsFromNexstarMediaGroupNexstarStationsMember2019-09-190000039899tgna:ElevenLocalTelevisionStationsFromNexstarMediaGroupDispatchStationsMember2019-08-080000039899tgna:WTOLandKWESMember2019-01-020000039899tgna:RecentAcquisitionsMember2020-09-300000039899us-gaap:LicensingAgreementsMembertgna:ElevenLocalTelevisionStationsFromNexstarMediaGroupNexstarStationsMember2019-09-190000039899tgna:ElevenLocalTelevisionStationsFromNexstarMediaGroupDispatchStationsMemberus-gaap:LicensingAgreementsMember2019-08-080000039899us-gaap:LicensingAgreementsMembertgna:JusticeNetworkAndQuestMember2019-06-180000039899us-gaap:LicensingAgreementsMembertgna:WTOLandKWESMember2019-01-020000039899us-gaap:LicensingAgreementsMembertgna:RecentAcquisitionsMember2020-09-300000039899tgna:ElevenLocalTelevisionStationsFromNexstarMediaGroupNexstarStationsMembertgna:NetworkAffiliationAgreementsMember2019-09-190000039899tgna:ElevenLocalTelevisionStationsFromNexstarMediaGroupDispatchStationsMembertgna:NetworkAffiliationAgreementsMember2019-08-080000039899tgna:JusticeNetworkAndQuestMembertgna:NetworkAffiliationAgreementsMember2019-06-180000039899tgna:WTOLandKWESMembertgna:NetworkAffiliationAgreementsMember2019-01-020000039899tgna:RecentAcquisitionsMembertgna:NetworkAffiliationAgreementsMember2020-09-300000039899tgna:ElevenLocalTelevisionStationsFromNexstarMediaGroupNexstarStationsMemberus-gaap:TransmissionServiceAgreementMember2019-09-190000039899tgna:ElevenLocalTelevisionStationsFromNexstarMediaGroupDispatchStationsMemberus-gaap:TransmissionServiceAgreementMember2019-08-080000039899us-gaap:TransmissionServiceAgreementMembertgna:JusticeNetworkAndQuestMember2019-06-180000039899us-gaap:TransmissionServiceAgreementMembertgna:WTOLandKWESMember2019-01-020000039899us-gaap:TransmissionServiceAgreementMembertgna:RecentAcquisitionsMember2020-09-300000039899us-gaap:OtherIntangibleAssetsMembertgna:ElevenLocalTelevisionStationsFromNexstarMediaGroupNexstarStationsMember2019-09-190000039899us-gaap:OtherIntangibleAssetsMembertgna:ElevenLocalTelevisionStationsFromNexstarMediaGroupDispatchStationsMember2019-08-080000039899us-gaap:OtherIntangibleAssetsMembertgna:JusticeNetworkAndQuestMember2019-06-180000039899us-gaap:OtherIntangibleAssetsMembertgna:WTOLandKWESMember2019-01-020000039899us-gaap:OtherIntangibleAssetsMembertgna:RecentAcquisitionsMember2020-09-300000039899tgna:ElevenLocalTelevisionStationsFromNexstarMediaGroupNexstarStationsMember2019-09-192019-09-190000039899tgna:ElevenLocalTelevisionStationsFromNexstarMediaGroupDispatchStationsMember2019-08-082019-08-080000039899tgna:RecentAcquisitionsMember2020-01-012020-09-300000039899us-gaap:TransmissionServiceAgreementMember2020-01-012020-09-300000039899us-gaap:LicensingAgreementsMember2020-09-300000039899us-gaap:LicensingAgreementsMember2019-12-310000039899us-gaap:TransmissionServiceAgreementMember2020-09-300000039899us-gaap:TransmissionServiceAgreementMember2019-12-310000039899tgna:NetworkAffiliationAgreementsMember2020-09-300000039899tgna:NetworkAffiliationAgreementsMember2019-12-310000039899us-gaap:OtherIntangibleAssetsMember2020-09-300000039899us-gaap:OtherIntangibleAssetsMember2019-12-310000039899us-gaap:TradeNamesMember2020-04-012020-06-300000039899tgna:CareerBuilderMember2020-01-012020-09-300000039899tgna:CareerBuilderMember2020-01-012020-03-310000039899tgna:CareerBuilderMember2020-09-300000039899tgna:CareerBuilderMember2019-12-31tgna:investment00000398992020-04-012020-06-300000039899us-gaap:DomesticCountryMember2020-07-012020-09-300000039899srt:ScenarioForecastMemberus-gaap:DomesticCountryMember2020-10-012020-12-310000039899tgna:UnsecuredFloatingRateTermLoanDueQuarterlyThroughJune2020Member2020-09-300000039899tgna:UnsecuredFloatingRateTermLoanDueQuarterlyThroughJune2020Member2019-12-310000039899tgna:UnsecuredFloatingRateTermLoanDueQuarterlyThroughSeptember2020Member2020-09-300000039899tgna:UnsecuredFloatingRateTermLoanDueQuarterlyThroughSeptember2020Member2019-12-310000039899us-gaap:SeniorNotesMembertgna:UnsecuredFixedRateNotes5.125PercentDueJuly2020Member2019-12-310000039899us-gaap:SeniorNotesMembertgna:UnsecuredFixedRateNotes5.125PercentDueJuly2020Member2020-09-300000039899tgna:UnsecuredFixedRateNotes4.875PercentDueSeptember2021Memberus-gaap:SeniorNotesMember2019-12-310000039899tgna:UnsecuredFixedRateNotes4.875PercentDueSeptember2021Memberus-gaap:SeniorNotesMember2020-09-300000039899tgna:UnsecuredFixedRateNotes6.375PercentDueOctober2023Memberus-gaap:SeniorNotesMember2019-12-310000039899tgna:UnsecuredFixedRateNotes6.375PercentDueOctober2023Memberus-gaap:SeniorNotesMember2020-09-300000039899tgna:RevolvingCreditAgreementsExpiringAugust2024Member2020-09-300000039899tgna:RevolvingCreditAgreementsExpiringAugust2024Member2019-12-310000039899us-gaap:SeniorNotesMembertgna:UnsecuredFixedRateNotes5.500PercentDueSeptember2024Member2020-09-300000039899us-gaap:SeniorNotesMembertgna:UnsecuredFixedRateNotes5.500PercentDueSeptember2024Member2019-12-310000039899tgna:UnsecuredFixedRateNotes4750PercentDueMarch2026Memberus-gaap:SeniorNotesMember2019-12-310000039899tgna:UnsecuredFixedRateNotes4750PercentDueMarch2026Memberus-gaap:SeniorNotesMember2020-09-300000039899tgna:UnsecuredFixedRateNotes7.75PercentDueJune2027Memberus-gaap:SeniorNotesMember2020-09-300000039899tgna:UnsecuredFixedRateNotes7.75PercentDueJune2027Memberus-gaap:SeniorNotesMember2019-12-310000039899tgna:UnsecuredFixedRateNotes7.25PercentDueSeptember2027Memberus-gaap:SeniorNotesMember2020-09-300000039899tgna:UnsecuredFixedRateNotes7.25PercentDueSeptember2027Memberus-gaap:SeniorNotesMember2019-12-310000039899tgna:UnsecuredFixedRateNotes4.625PercentDueMarch2028Memberus-gaap:SeniorNotesMember2019-12-310000039899tgna:UnsecuredFixedRateNotes4.625PercentDueMarch2028Memberus-gaap:SeniorNotesMember2020-09-300000039899tgna:UnsecuredFixedRateNotes5.00PercentDueSeptember2029Memberus-gaap:SeniorNotesMember2020-09-300000039899tgna:UnsecuredFixedRateNotes5.00PercentDueSeptember2029Memberus-gaap:SeniorNotesMember2019-12-310000039899us-gaap:SeniorNotesMembertgna:SeniorNotesBearingInterestat4.625PercentDueMarch2028Member2020-01-090000039899us-gaap:SeniorNotesMembertgna:SeniorNotesBearingInterestat4.625PercentDueMarch2028Member2020-02-110000039899us-gaap:SeniorNotesMembertgna:UnsecuredFixedRateNotes5.125PercentDueJuly2020Member2020-02-112020-02-110000039899us-gaap:SeniorNotesMembertgna:UnsecuredFixedRateNotes5.125PercentDueJuly2020Member2020-02-110000039899tgna:UnsecuredFixedRateNotes6.375PercentDueOctober2023Memberus-gaap:SeniorNotesMember2020-02-112020-02-110000039899tgna:UnsecuredFixedRateNotes6.375PercentDueOctober2023Memberus-gaap:SeniorNotesMember2020-02-110000039899us-gaap:SeniorNotesMember2020-02-112020-02-110000039899tgna:RevolvingCreditAgreementsExpiringAugust2024Member2020-06-102020-06-100000039899tgna:RevolvingCreditAgreementsExpiringAugust2024Member2020-06-112020-06-110000039899tgna:DebtInstrumentCovenantPeriodOneMember2020-06-112020-06-110000039899tgna:DebtInstrumentCovenantPeriodTwoMember2020-06-112020-06-110000039899tgna:DebtInstrumentCovenantPeriodThreeMember2020-06-112020-06-110000039899tgna:DebtInstrumentCovenantPeriodFourMember2020-06-112020-06-110000039899tgna:DebtInstrumentCovenantPeriodFiveMember2020-06-112020-06-110000039899tgna:AmendedAndRestatedCompetitiveAdvanceAndRevolvingCreditAgreementMemberus-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMember2020-09-300000039899tgna:UnsecuredFixedRateNotes4750PercentDueMarch2026Memberus-gaap:SeniorNotesMember2020-09-100000039899tgna:UnsecuredFixedRateNotes4.875PercentDueSeptember2021Memberus-gaap:SubsequentEventMemberus-gaap:SeniorNotesMember2020-10-132020-10-130000039899us-gaap:SubsequentEventMemberus-gaap:SeniorNotesMembertgna:UnsecuredFixedRateNotes5.500PercentDueSeptember2024Member2020-10-132020-10-130000039899us-gaap:SubsequentEventMemberus-gaap:SeniorNotesMembertgna:UnsecuredFixedRateNotes5.500PercentDueSeptember2024Member2020-10-310000039899us-gaap:PensionPlansDefinedBenefitMember2020-09-300000039899us-gaap:PensionPlansDefinedBenefitMemberus-gaap:AccruedLiabilitiesMember2020-09-300000039899us-gaap:PensionPlansDefinedBenefitMember2020-01-012020-09-300000039899us-gaap:PensionPlansDefinedBenefitMember2019-01-012019-09-300000039899us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember2020-01-012020-09-300000039899us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember2019-01-012019-09-300000039899us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember2020-09-300000039899us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2020-06-300000039899us-gaap:AccumulatedTranslationAdjustmentMember2020-06-300000039899us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2020-07-012020-09-300000039899us-gaap:AccumulatedTranslationAdjustmentMember2020-07-012020-09-300000039899us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2020-09-300000039899us-gaap:AccumulatedTranslationAdjustmentMember2020-09-300000039899us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2019-06-300000039899us-gaap:AccumulatedTranslationAdjustmentMember2019-06-300000039899us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2019-07-012019-09-300000039899us-gaap:AccumulatedTranslationAdjustmentMember2019-07-012019-09-300000039899us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2019-09-300000039899us-gaap:AccumulatedTranslationAdjustmentMember2019-09-300000039899us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2019-12-310000039899us-gaap:AccumulatedTranslationAdjustmentMember2019-12-310000039899us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2020-01-012020-09-300000039899us-gaap:AccumulatedTranslationAdjustmentMember2020-01-012020-09-300000039899us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2018-12-310000039899us-gaap:AccumulatedTranslationAdjustmentMember2018-12-310000039899us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2019-01-012019-09-300000039899us-gaap:AccumulatedTranslationAdjustmentMember2019-01-012019-09-300000039899us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetPriorServiceCostCreditMember2020-07-012020-09-300000039899us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetPriorServiceCostCreditMember2019-07-012019-09-300000039899us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetPriorServiceCostCreditMember2020-01-012020-09-300000039899us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetPriorServiceCostCreditMember2019-01-012019-09-300000039899us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember2020-07-012020-09-300000039899us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember2019-07-012019-09-300000039899us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember2020-01-012020-09-300000039899us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember2019-01-012019-09-300000039899us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetTransitionAssetObligationMember2020-07-012020-09-300000039899us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetTransitionAssetObligationMember2019-07-012019-09-300000039899us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetTransitionAssetObligationMember2020-01-012020-09-300000039899us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetTransitionAssetObligationMember2019-01-012019-09-300000039899us-gaap:RestrictedStockMember2020-07-012020-09-300000039899us-gaap:RestrictedStockMember2019-07-012019-09-300000039899us-gaap:RestrictedStockMember2020-01-012020-09-300000039899us-gaap:RestrictedStockMember2019-01-012019-09-300000039899us-gaap:PerformanceSharesMember2020-07-012020-09-300000039899us-gaap:PerformanceSharesMember2019-07-012019-09-300000039899us-gaap:PerformanceSharesMember2020-01-012020-09-300000039899us-gaap:PerformanceSharesMember2019-01-012019-09-300000039899us-gaap:EmployeeStockOptionMember2020-07-012020-09-300000039899us-gaap:EmployeeStockOptionMember2019-07-012019-09-300000039899us-gaap:EmployeeStockOptionMember2020-01-012020-09-300000039899us-gaap:EmployeeStockOptionMember2019-01-012019-09-3000000398992019-04-012019-06-300000039899us-gaap:FairValueInputsLevel2Member2020-09-300000039899us-gaap:FairValueInputsLevel2Member2019-12-31tgna:defendant0000039899us-gaap:SettledLitigationMember2018-11-132018-12-130000039899us-gaap:SettledLitigationMember2019-06-172019-06-170000039899tgna:ClayMasseyAssociatesP.C.v.GrayTelevisionMember2018-07-302018-07-300000039899tgna:ClayMasseyAssociatesP.C.v.GrayTelevisionMember2019-06-012019-06-3000000398992017-04-012017-04-3000000398992019-01-012019-12-3100000398992020-07-032020-07-0300000398992017-04-3000000398992018-03-2300000398992019-01-012020-09-3000000398992018-05-012020-09-300000039899tgna:EquityAndDebtInvestmentMembersrt:AffiliatedEntityMember2020-07-012020-09-300000039899tgna:EquityAndDebtInvestmentMembersrt:AffiliatedEntityMember2020-01-012020-09-300000039899tgna:EquityAndDebtInvestmentMembersrt:AffiliatedEntityMember2019-07-012019-09-300000039899tgna:EquityAndDebtInvestmentMembersrt:AffiliatedEntityMember2019-01-012019-09-300000039899tgna:EquityAndDebtInvestmentMembersrt:AffiliatedEntityMember2020-09-300000039899tgna:EquityAndDebtInvestmentMembersrt:AffiliatedEntityMember2019-12-3100000398992020-03-022020-03-020000039899tgna:GrayTelevisionMember2020-03-022020-03-02
UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM i10-Q
_______________________
i☒ QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Exact
name of registrant as specified in its charter)
___________________________
iDelaware
i16-0442930
(State
or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
i8350 Broad Street, Suite 2000,
iTysons,
iVirginia
i22102-5151
(Address
of principal executive offices)
(Zip Code)
i(703)
i873-6600
(Registrant’s
telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
iCommon
Stock
iTGNA
iNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. iYes☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required
to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). iYes☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,”“accelerated filer,”“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
iLarge accelerated filer
☒
Accelerated
filer
☐
Non-accelerated filer
☐
Smaller reporting company
i☐
Emerging
growth company
i☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes i☐ No ☒
The total number of shares of the registrant’s Common Stock, $1 par value, outstanding as of October 31, 2020 was i219,241,555.
The
accompanying notes are an integral part of these condensed consolidated financial statements.
9
TEGNA Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – iAccounting
policies
iBasis of presentation: Our accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial reporting, the instructions for Form 10-Q and Article 10 of the U.S. Securities and Exchange Commission (SEC) Regulation S-X. Accordingly, they do not include all information and footnotes which are normally included in the Form
10-K and annual report to shareholders. In our opinion, the condensed consolidated financial statements reflect all adjustments of a normal recurring nature necessary for a fair statement of the results for the interim periods presented. The condensed consolidated financial statements should be read in conjunction with our (or TEGNA’s) audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019.
i
The preparation of these condensed
consolidated financial statements requires us to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. During the first quarter of 2020, a novel strain of coronavirus (COVID-19) believed to have been first identified in Wuhan, China, spread globally, including to every state in the United States. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19. The federal and state governments in the United States responded by instituting a wide variety of mitigating control measures, including, mandatory quarantines, closures of non-essential businesses and all other places of social interaction, while implementing “shelter in place” orders and travel restrictions in an
effort to slow the spread of the virus. Such mitigating measures began negatively impacting our advertising and marketing services (AMS) revenue stream in mid-March as demand for non-political advertising softened. While some of these measures have been lifted or relaxed in certain state and local governments, other jurisdictions have seen increases in new COVID-19 cases resulting in restrictions being reinstated, or new restrictions imposed. Overall, demand improved for advertising during the second and third quarters as steps toward economic re-opening were implemented. There continues to be considerable uncertainty regarding how current and future health and safety measures implemented in response to the pandemic will impact our business.
Beginning in mid-March, as a result of the expected near-term impact on non-political advertising demand caused by the COVID-19 pandemic, we implemented
cost saving measures to reduce operating expenses and discretionary capital expenditures. These measures included implementing temporary furloughs for one week during the second quarter for most personnel, reducing compensation for executives and our board of directors, and reducing non-critical discretionary spending. As is true of most businesses, the ultimate magnitude of the COVID-19 pandemic cannot be reasonably estimated at this time, but we do expect it to continue to have a dampening effect on our near-term AMS revenues.
While it is too early to predict the duration of the pandemic or the long term effects on our financial condition, results of operations, and liquidity, we use the best information available in developing significant estimates included in our financial statements. Actual results could differ from these estimates, and these differences resulting from changes
in facts and circumstances could be material. Significant estimates include, but are not limited to, evaluation of goodwill and other intangible assets for impairment, business combinations, fair value measurements, post-retirement benefit plans, income taxes including deferred taxes, and contingencies. iThe condensed consolidated financial statements include the accounts of subsidiaries we control. We eliminate all intercompany balances, transactions, and profits in consolidation. Investments in entities over which we have significant influence, but do not
have control, are accounted for under the equity method. Our share of net earnings and losses from these ventures is included in “Equity (loss) income in unconsolidated investments, net” in the Consolidated Statements of Income.
We operate iione/
operating and reportable segment, which primarily consists of our i63 television stations and itwo radio stations operating in i51
markets, offering high-quality television programming and digital content. Our reportable segment determination is based on our management and internal reporting structure, the nature of products and services we offer, and the financial information that is evaluated regularly by our chief operating decision maker.
iAccounting guidance adopted in 2020: In June 2016, the Financial Accounting Standards Board (FASB) issued new guidance
related to the measurement of credit losses on financial instruments. The new guidance changed the way credit losses on accounts receivable are estimated. Under previous GAAP, credit losses on accounts receivable were recognized once it was probable that such losses will occur. Under the new guidance, we are required to estimate credit losses based on the expected amount of future collections which may result in earlier recognition of doubtful accounts. We adopted the new guidance on January 1, 2020 using a modified retrospective approach. Due to the short-term nature of our accounts receivable balance, there was no material change to our allowance for doubtful accounts as a result of adopting this new guidance.
In March 2019, the FASB issued new guidance related to the accounting for episodic television series. The most significant aspect
of this new guidance that was applicable to us relates to the level at which our capitalized programming assets are monitored for impairment. Under the new guidance these assets are monitored at the film group level which is the lowest level at which independently identifiable cash flows are identifiable. We adopted the new guidance prospectively on January 1, 2020. There was no material impact on our consolidated financial statements and related disclosures as of the adoption date.
10
Programming assets are recorded at the gross amount of the related liability when the programs are available for telecasting. The related assets are recorded at the lower of cost or estimated net realizable
value. Expense is recognized on a straight line basis which appropriately matches the cost of the programs with the revenues associated with them. During the first nine months of 2020 and 2019, we incurred programming expense of $i53.6 million and $i42.5
million; in the third quarter of 2020 and 2019, we incurred programming expense of $i17.6 million and $i15.5 million, respectively. Programming expense is included in
the “Cost of revenues” line item of our Consolidated Statements of Income. As of September 30, 2020, $i60.4 million of programming assets had been recorded, to be expensed within the next twelve months.
We evaluate the net realizable value of our program broadcasting contract assets when a triggering event occurs, such as a change in our intended usage,
or sustained lower-than-expected ratings for the program. Impairment analyses are performed at the syndicated program level (across all stations that utilize the program). We determine the net realizable value based on a projection of the estimated revenues less projected direct costs associated with the syndicated program (which is classified as Level 3 in the fair value hierarchy). If the future direct costs exceed expected revenues, impairment of the program asset may be required. No impairment charges were recognized in 2020 or 2019.
New accounting guidance not yet adopted: In August 2018, the FASB issued new guidance that changed disclosures related to defined benefit pension and other postretirement benefit plans. The guidance removed disclosures that are no longer economically relevant, clarifies certain existing disclosure requirements and added some new
disclosures. The most relevant elimination for us is the annual disclosure of the amount of gain/loss and prior service cost/credit amortization expected in the following year. Additions most relevant to us include annually disclosing narrative explanations of the drivers for significant changes in plan obligations or assets, and disclosure for cost of living adjustments for certain participants of our TEGNA retirement plan. We will include the new disclosures in our 2020 Annual Report on Form 10-K and will apply them on a retrospective basis.
There is currently no other pending accounting guidance that we expect to have a material impact on our consolidated financial statements or disclosures.
iTrade
receivables and allowances for doubtful accounts: Trade receivables are recorded at invoiced amounts and generally do not bear interest. The allowance for doubtful accounts reflects our estimate of credit exposure, determined principally on the basis of our collection experience, aging of our receivables and any specific reserves needed for certain customers based on their credit risk. Our allowance also takes into account expected future trends which may impact our customers’ ability to pay, such as economic growth, unemployment and demand for our products and services, including the impacts of the COVID-19 pandemic on these trends. We monitor the credit quality of our customers and their ability to pay through the use of analytics and communication with individual customers. As of September 30, 2020, our allowance for doubtful accounts was $i8.4 million
as compared to $i3.7 million as of December 31, 2019.
iRevenue
recognition: Revenue is recognized upon the transfer of control of promised services to our customers in an amount that reflects the consideration we expect to receive in exchange for those services. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities. Amounts received from customers in advance of providing services to our customers are recorded as deferred revenue.
The primary sources of our revenues are: 1) advertising & marketing services revenues, which include local and national non-political television advertising, digital marketing services (including Premion), and advertising on the stations’ websites and tablet and mobile products; 2) subscription revenues,
reflecting fees paid by satellite, cable, OTT (companies that deliver video content to consumers over the Internet) and telecommunications providers to carry our television signals on their systems; 3) political advertising revenues, which are driven by even year election cycles at the local and national level (e.g. 2020, 2018) and particularly in the second half of those years; and 4) other services, such as production of programming and advertising material.
i
Revenue earned by these sources in the third quarter and first nine months of 2020 and 2019
are shown below (amounts in thousands):
During 2019, we acquired the television stations listed in the table below, and a summary
of each acquisition follows:
Market
Station
Affiliation
Seller
Indianapolis, IN
WTHR
NBC
Dispatch Broadcast Group
Columbus,
OH
WBNS
CBS
Dispatch Broadcast Group
Hartford-New Haven, CT
WTIC/WCCT
FOX/CW
Nexstar Media Group
Harrisburg-Lancaster-Lebanon-York, PA
WPMT
FOX
Nexstar Media Group
Memphis, TN
WATN/WLMT
ABC/CW
Nexstar
Media Group
Wilkes Barre-Scranton, PA
WNEP
ABC
Nexstar Media Group
Des Moines-Ames, IA
WOI/KCWI
ABC/CW
Nexstar Media Group
Huntsville-Decatur-Florence, AL
WZDX
FOX
Nexstar Media Group
Davenport, IA and Rock Island-Moline, IL
WQAD
ABC
Nexstar
Media Group
Ft. Smith-Fayetteville-Springdale-Rogers, AR
KFSM
CBS
Nexstar Media Group
Toledo, OH
WTOL
CBS
Gray Television
Midland-Odessa, TX
KWES
NBC
Gray Television
Nexstar Stations
On
September 19, 2019, we completed our acquisition of i11 local television stations in ieight
markets, including ieight Big Four affiliates, from Nexstar Media Group (the Nexstar Stations). These stations were divested by Nexstar Media Group in connection with its acquisition of Tribune Media Company. The purchase price for the Nexstar Stations was $i769.9
million which included a base purchase price of $i740.0 million and working capital of $i29.9 million.
Dispatch
Stations
On August 8, 2019, we completed the acquisition of Dispatch Broadcast Group’s itwotop-rated television stations and itworadio stations (the Dispatch Stations). The purchase price for the Dispatch Stations was $i560.5 million which consisted of a base purchase price of $i535.0
million and working capital and cash acquired of $i25.5 million.
Justice and Quest Multicast Networks
On June 18, 2019, we completed the acquisition of the remaining approximately i85%
interest that we did not previously own in the multicast networks Justice Network (recently rebranded as True Crime Network) and Quest from Cooper Media. Cash paid for this acquisition was $i77.1 million (which included $i4.6
million for working capital).
Gray Stations
On January 2, 2019, we completed our acquisition of WTOL and KWES from Gray Television, Inc. for $i109.9 million in cash (which included $i4.9
million for working capital paid at closing).
12
i
The following table summarizes the fair values of the assets acquired and liabilities assumed in connection with these acquisitions (in thousands):
Nexstar
Stations
Dispatch Stations
Justice & Quest
Gray Stations
Total
Cash
$
i—
$
i2,363
$
i—
$
i—
$
i2,363
Accounts
receivable
i34,680
i26,344
i8,501
i5,553
i75,078
Prepaid
and other current assets
i3,776
i6,092
i6,987
i987
i17,842
Property
and equipment
i45,186
i40,418
i361
i11,757
i97,722
Goodwill
i128,191
i202,312
i23,567
i19,405
i373,475
FCC
licenses
i374,269
i295,983
i—
i47,061
i717,313
Network
affiliation agreements
i123,926
i60,765
i—
i14,420
i199,111
Retransmission
agreements
i68,316
i33,107
i—
i12,198
i113,621
Other
intangible assets
i—
i—
i52,553
i—
i52,553
Right-of-use
assets for operating leases
i22,715
i362
i—
i251
i23,328
Other
noncurrent assets
i237
i—
i5,253
i18
i5,508
Total
assets acquired
$
i801,296
$
i667,746
$
i97,222
$
i111,650
$
i1,677,914
Accounts
payable
i2,037
i954
i725
i1
i3,717
Accrued
liabilities
i8,544
i9,011
i4,236
i1,494
i23,285
Deferred
income tax liability
i—
i97,082
(i462)
i—
i96,620
Operating
lease liabilities - noncurrent
i20,346
i226
i—
i235
i20,807
Other
noncurrent liabilities
i426
i—
i2,677
i—
i3,103
Total
liabilities assumed
$
i31,353
$
i107,273
$
i7,176
$
i1,730
$
i147,532
Net
assets acquired
$
i769,943
$
i560,473
$
i90,046
$
i109,920
$
i1,530,382
Less:
cash acquired
$
i—
$
(i2,363)
$
i—
$
i—
$
(i2,363)
Less:
fair value of existing ownership
i—
i—
(i12,995)
i—
(i12,995)
Cash
paid for acquisitions
$
i769,943
$
i558,110
$
i77,051
$
i109,920
$
i1,515,024
/
We
accounted for each of these acquisitions as business combinations, which required us to record the assets acquired and liabilities assumed at fair value. The amount by which the purchase price exceeds the fair value of the net assets acquired was recorded as goodwill.
During 2020, we continued to analyze information related to the estimated fair values for certain tangible and intangible assets acquired, liabilities assumed and the amount of goodwill recognized for these acquisitions. As a result, measurement period adjustments were reflected in the periods in which the adjustments occurred. The most significant changes were to retransmission agreement intangible assets, which were reduced by $i21.3
million and goodwill, the carrying amount of which increased by $i18.1 million. As a result of these adjustments, we expect our amortization expense related to intangible assets during fiscal year 2020 to be appropriately $i68.0
million. During the three months ended September 30, 2020, we finalized the fair value of assets acquired and liabilities assumed for the acquisitions; therefore, the amounts presented above are now final.
13
NOTE 3 – iGoodwill
and other intangible assets
i
The following table displays goodwill, indefinite-lived intangible assets, and amortizable intangible assets as of September 30, 2020 and December 31, 2019 (in thousands):
Television and radio station FCC broadcast licenses
i2,104,167
—
i2,090,732
—
Amortizable
intangible assets:
Retransmission agreements
i235,215
(i130,236)
i256,533
(i105,212)
Network
affiliation agreements
i309,503
(i66,569)
i309,496
(i48,174)
Other
i70,610
(i21,663)
i73,305
(i15,066)
Total
indefinite-lived and amortizable intangible assets
$
i2,719,495
$
(i218,468)
$
i2,730,066
$
(i168,452)
/
Our
retransmission agreements and network affiliation agreements are amortized on a straight-line basis over their estimated useful lives. Other intangibles primarily include distribution agreements and brand names from our Justice & Quest acquisition, which are also amortized on a straight-line basis over their useful lives.
In the second quarter of 2020, we recognized a $i2.1 million impairment charge in connection with eliminating the use of the
Justice Network brand name and re-establishing the business under a new brand name called True Crime Network. The impairment was recorded in the “Spectrum repacking reimbursements and other, net” line item of the Consolidated Statements of Income.
Interim impairment assessment
We review our goodwill and intangible assets for impairment at least annually and also when events or changes in circumstances occur that indicate the fair value may be below its carrying amount. As discussed in Note 2, during 2019 we acquired i15
television stations and as such, the indefinite-lived FCC licenses recently acquired have limited valuation headroom as they were recorded at fair value upon acquisition. As a result of the negative effects we expect COVID-19 to have on our future AMS revenue and operating cash flows, we assessed whether it was more likely than not that our FCC licenses, including those that were recently acquired, were impaired.
In performing this assessment, we analyzed the significant inputs used in the fair value determination of the recently acquired FCC license assets. This included reviewing the impact of estimated changes in trends in market revenues and changes in the discount rate on the fair value of our licenses. Based on the analysis performed, we concluded that none of our FCC licenses were more likely than not impaired as of September 30,
2020. However, a sustained economic decline resulting from COVID-19 could result in future non-cash impairment charges of our recently acquired FCC licenses, and any related impairment could have a material adverse impact on our results of operations.
Cash
value life insurance: We are the beneficiary of life insurance policies on the lives of certain employees/retirees, which are recorded at their cash surrender value as determined by the insurance carrier. These policies are utilized as a partial funding source for deferred compensation and other non-qualified employee retirement plans. Gains and losses on these investments are included in “Other non-operating items, net” within our Consolidated Statement of Income and were not material for all periods presented.
Equity method investments: We hold equity method investments. Our largest equity method investment is our ownership in CareerBuilder, of which we own approximately i17% (or
approximately i10% on a fully-diluted basis). In the first quarter of 2020, CareerBuilder sold its employment screening business; our portion on the pre-tax gain of the sale was $i18.6
million, and is recorded within “Equity (loss) income in unconsolidated investments, net” on our Consolidated Statement of Income. Our investment balance was $i11.1 million and $i7.9
million as of September 30, 2020 and December 31, 2019, respectively.
Other equity investments: Represents investments in non-public businesses that do not have readily determinable pricing, and for which we do not have control or do not exert significant influence. These investments are recorded at cost less impairments, if any, plus or minus changes in observable prices for those investments. In the second quarter of 2020, we sold ione
of these investments for $i4.3 million. This investment had previously been recorded at estimated fair value. iNo gains or losses
were recorded on these investments in the first nine months of 2020.
Deferred debt issuance costs: These costs consist of amounts paid to lenders related to our revolving credit facility. Debt issuance costs paid for our term debt and unsecured notes are accounted for as a reduction in the debt obligation.
NOTE 5 - iIncome
taxes
We generally estimate our annual effective tax rate for the full year and apply that rate to net income before tax in
determining the provision for income taxes for interim periods. We record discrete items in each respective interim period as appropriate. However, for the three months ended March 31, 2020, we determined that the annual rate method would not provide for a reliable estimate due to volatility in the forecasting process as a result of the COVID-19 pandemic. As a result, we recorded the provision for income taxes for the three months ended March 31, 2020 using the actual effective rate plus discrete items for the three months ended March 31, 2020 (the “cut-off” method). We recorded the provision for income taxes
for the six months ended June 30, 2020 and the nine months ended September 30, 2020 using the annual rate method, consistent with our general practice.
In response to the COVID-19 pandemic, President Donald Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) on March 27, 2020. The CARES Act provides numerous tax provisions and other stimulus measures, including refundable payroll tax credits, deferral of employer social security payments, modifications to the net interest deduction limitations, expansions to the use and carryback of net operating losses, and a technical correction to the depreciation method applicable to qualified improvement property under the 2017 Tax Cuts and Jobs Act. We will benefit from
the technical correction for qualified improvement property which allows for an immediate deduction of any eligible leasehold improvements placed in service during 2018 and 2019. We will also benefit from the new depreciation method available for qualified improvement property which allows for an immediate retroactive deduction of certain eligible leasehold improvements previously placed in service. As a result, our 2020 tax payments are reduced by approximately $i5 million.
There is no change to our tax expense or our effective income tax rate since the changes are payment deferrals only. We will continue to monitor the impact of the CARES Act on our business as conditions change.
Due to guidance from the U.S. Department of the Treasury and the Internal Revenue Service, certain federal income tax payments due before July 15, 2020, were deferred to July 15, 2020. As a result, we made federal income tax payments of $i30 million
in the third quarter. We estimate making federal income tax payments of $i40 million in the fourth quarter.
15
NOTE 6 – iLong-term
debt
i
Our long-term debt is summarized below (in thousands):
Unsecured floating rate term loan due quarterly through June 2020
$
i—
$
i20,000
Unsecured
floating rate term loan due quarterly through September 2020
i—
i105,000
Unsecured
notes bearing fixed rate interest at ii5.125/%
due July 2020
i—
i310,000
Unsecured
notes bearing fixed rate interest at ii4.875/%
due September 20211
i350,000
i350,000
Unsecured
notes bearing fixed rate interest at ii6.375/%
due October 2023
i—
i650,000
Borrowings
under revolving credit agreement expiring August 2024
i175,000
i903,000
Unsecured
notes bearing fixed rate interest at ii5.500/%
due September 2024
i325,000
i325,000
Unsecured
notes bearing fixed rate interest at ii4.750/%
due March 2026
i550,000
i—
Unsecured
notes bearing fixed rate interest at ii7.75/%
due June 2027
i200,000
i200,000
Unsecured
notes bearing fixed rate interest at ii7.25/%
due September 2027
i240,000
i240,000
Unsecured
notes bearing fixed rate interest at ii4.625/%
due March 2028
i1,000,000
i—
Unsecured
notes bearing fixed rate interest at ii5.00/%
due September 2029
i1,100,000
i1,100,000
Total
principal long-term debt
i3,940,000
i4,203,000
Debt
issuance costs
(i40,175)
(i26,873)
Unamortized
premiums and discounts, net
i6,371
i3,118
Total
long-term debt
$
i3,906,196
$
i4,179,245
1
We have the intent and ability to refinance the principal payment due within the next 12 months on a long-term basis through our revolving credit facility. As such, all debt presented in the table above is classified as long-term on our September 30, 2020 Condensed Consolidated Balance Sheet.
/
On January 9, 2020, we completed a private placement offering of $i1.0
billion aggregate principal amount of senior unsecured notes bearing an interest rate of i4.625% which are due in March 2028.
On February 11, 2020 we used the net proceeds from the $i1.0
billion senior notes to repay the remaining $i310.0 million of unsecured notes bearing fixed rate interest of i5.125%, which were due in July 2020 and $i650.0
million of unsecured notes bearing fixed rate interest of i6.375%, which were due in October 2023. We incurred $i13.8 million of early
redemption fees in relation to the 2023 debt payoff. Additionally, we wrote off $i7.9 million of unamortized financing fees and discounts related to the early payoff of the 2020 and 2023 notes. These charges were recorded in the “Other non-operating items, net” within our Consolidated Statement of Income.
Given the unpredictability of market conditions during the pandemic, we amended our revolving credit facility on June
11, 2020 to extend the initial step-down of the maximum permitted total leverage ratio (from i5.50 to 1.00 to i5.25
to 1.00) until the fiscal quarter ending March 31, 2022, with additional step downs continuing thereafter. iThe maximum permitted total leverage ratios under our revolving credit facility are now as follows:
As of September 30, 2020, cash and cash equivalents totaled $i164.6
million and we had unused borrowing capacity of $i1.31 billion under our $i1.51 billion revolving
credit facility (which expires August 2024). We were in compliance with all covenants, including the leverage ratio (our one financial covenant) contained in our debt agreements and revolving credit facility. We believe that we will remain compliant with all covenants for the foreseeable future.
On September 10, 2020, we completed a private placement offering of $i550 million aggregate principal amount of senior unsecured notes bearing an interest
rate of i4.750% which are due in March 2026. The proceeds were used to pay down borrowings from our revolving credit facility. Then, on October 13, 2020 we utilized our revolving credit facility to repay the entire
16
$i350 million
aggregate principal amount of our ii4.875/%
Senior Notes due in 2021 and $i188 million aggregate principal amount of our ii5.500/%
Senior Notes due in 2024 and a $i3.4 million redemption premium on our Senior Notes due in 2024. After these payments, our revolving credit facility had an unused borrowing capacity of $i950 million
as of October 31, 2020.
NOTE 7 – iRetirement plans
We have various defined benefit retirement plans. Our principal defined benefit pension plan is the TEGNA Retirement Plan (TRP). The disclosure table below includes the pension
expenses of the TRP and the TEGNA Supplemental Retirement Plan (SERP). The total net pension obligations, including both current and non-current liabilities, as of September 30, 2020, were $i121.1 million, of which $i6.8
million is recorded as a current obligation within accrued liabilities on the Condensed Consolidated Balance Sheet.
i
Pension costs, which primarily include costs for the qualified TRP and the non-qualified SERP, are presented in the following table (in thousands):
(Gains
from) expense for company-sponsored retirement plans
$
(i1,332)
$
i727
$
(i3,994)
$
i2,866
/
Benefits
no longer accrue for substantially all TRP and SERP participants as a result of amendments to the plans in the past years and as such we no longer incur a significant amount of the service cost component of pension expense. All other components of our pension expense presented above are included within the “Other non-operating items, net” line item of the Consolidated Statements of Income.
During the nine months ended September 30, 2020 we made ino
cash contributions to the TRP, and made $i2.4 million during the nine months ended September 30, 2019. We made benefit payments to participants of the SERP of $i4.1
million and $i6.0 million, during nine months ended September 30, 2020 and 2019, respectively. Based on actuarial projections and funding levels, we do not expect to make any cash payments to the TRP in 2020. We expect to make additional cash payments of $i1.8
million to our SERP participants in 2020.
17
NOTE 8 – iAccumulated other comprehensive loss
i
The
following table summarizes the components of, and the changes in, Accumulated Other Comprehensive Loss (AOCL), net of tax (in thousands):
Reclassifications
from AOCL to the Consolidated Statements of Income are comprised of pension and other post-retirement components. Pension and other post retirement reclassifications are related to the amortization of prior service costs, and amortization of actuarial losses. iAmounts reclassified out of AOCL are summarized below (in thousands):
Net
(income) loss attributable to the noncontrolling interest
(i51)
i—
i433
i—
Accretion
of redeemable noncontrolling interest (see Note 11)
(i280)
i—
(i653)
i—
Adjustment
of redeemable noncontrolling interest to redemption value
i51
i—
(i433)
i—
Earnings
available to common shareholders
$
i131,990
$
i48,346
$
i237,388
$
i202,280
Weighted
average number of common shares outstanding - basic
i219,579
i217,315
i218,997
i217,040
Effect
of dilutive securities:
Restricted stock units
i180
i607
i163
i420
Performance
shares
i216
i364
i262
i312
Stock
options
i2
i24
i1
i36
Weighted
average number of common shares outstanding - diluted
i219,977
i218,310
i219,423
i217,808
Net
income per share - basic
$
i0.60
$
i0.22
$
i1.08
$
i0.93
Net
income per share - diluted
$
i0.60
$
i0.22
$
i1.08
$
i0.93
/
Our
calculation of diluted earnings per share includes the dilutive effects for the assumed vesting of outstanding restricted stock units and performance shares.
NOTE 10 – iFair value measurement
We measure and record certain assets and liabilities at fair value in the accompanying condensed consolidated financial statements. U.S.
GAAP establishes a hierarchy for those instruments measured at fair value that distinguishes between market data (observable inputs) and our own assumptions (unobservable inputs). The hierarchy consists of three levels:
Level 1 - Quoted market prices in active markets for identical assets or liabilities;
Level 2 - Inputs other than Level 1 inputs that are either directly or indirectly observable; and
Level 3 - Unobservable inputs developed using our own estimates and assumptions, which reflect those that a market participant would use.
In the second quarter of 2019 we recognized a $i1.6
million gain on one of our investments due to an observable price increase, which represents a Level 2 input. This gain was recorded in the Other non-operating items, net line item in our Consolidated Statements of Income. iiNo/other gains or losses were recorded on these investments in the nine months ended September 30, 2020 or 2019.
We additionally hold other financial instruments, including cash and cash equivalents, receivables, accounts payable and debt. The carrying amounts for cash and cash equivalents, receivables and accounts payable approximated their fair values. The fair value of our total debt, based on the bid and ask quotes for the related debt (Level 2), totaled $i3.99
billion at September 30, 2020, and $i4.32 billion at December 31, 2019.
19
NOTE 11 – iOther
matters
Litigation
In the third quarter of 2018, certain national media outlets reported the existence of a confidential investigation by the United States Department of Justice Antitrust Division (DOJ) into the local television advertising sales practices of station owners. We received a Civil Investigative Demand (CID) in connection with the DOJ’s investigation. On November 13 and December 13, 2018, the DOJ and iseven
broadcasters settled a DOJ complaint alleging the exchange of competitively sensitive information in the broadcast television industry. In June 2019, we and ifour other broadcasters entered into a substantially identical agreement with DOJ, which was entered by the court on December 3, 2019. The settlement contains no finding of wrongdoing or liability and carries no penalty. It prohibits us and the other settling entities from sharing certain confidential business information, or using such
information pertaining to other broadcasters, except under limited circumstances. The settlement also requires the settling parties to make certain enhancements to their antitrust compliance programs, to continue to cooperate with the DOJ’s investigation, and to permit DOJ to verify compliance. We do not expect the costs of compliance to be material.
Since the national media reports, numerous putative class action lawsuits were filed against owners of television stations (the Advertising Cases) in different jurisdictions. Plaintiffs are a class consisting of all persons and entities in the United States who paid for all or a portion of advertisement time on local television provided by the defendants. The Advertising Cases assert antitrust and other claims and seek monetary damages, attorneys’ fees, costs and interest, as well as injunctions against the allegedly wrongful conduct.
These
cases have been consolidated into a single proceeding in the United States District Court for the Northern District of Illinois, captioned Clay, Massey & Associates, P.C. v. Gray Television, Inc. et. al., filed on July 30, 2018. At the court’s direction, plaintiffs filed an amended complaint on April 3, 2019, that superseded the original complaints. Although we were named as a defendant in isixteen of the original complaints, the amended
complaint did not name TEGNA as a defendant. After TEGNA and ifour other broadcasters entered into consent decrees with the DOJ in June 2019, the plaintiffs sought leave from the court to further amend the complaint to add TEGNA and the other settling broadcasters to the proceeding. The court granted the plaintiffs’ motion, and the plaintiffs filed the second amended complaint on September 9, 2019. On October 8, 2019, the defendants jointly
filed a motion to dismiss the matter. On November 6, 2020, the court denied the motion to dismiss. We deny any violation of law, believe that the claims asserted in the Advertising Cases are without merit, and intend to defend ourselves vigorously against them.
We, along with a number of our subsidiaries, also are defendants in other judicial and administrative proceedings involving matters incidental to our business. We do not believe that any material liability will be imposed as a result of any of the foregoing matters.
FCC Broadcast Spectrum Program
In April 2017, the FCC announced the completion of a voluntary
incentive auction to reallocate certain spectrum then occupied by television broadcast stations to mobile wireless broadband services, along with a related “repacking” of the television spectrum for remaining television stations. None of our stations relinquished any spectrum rights as a result of the auction. Stations in ieighteen of our markets (which include ifour
of our recently acquired stations from 2019 and ione station we acquired in 2020 after it had completed its repacking) were repacked to new channels. As of July 3, 2020 - the end of the tenth and last official phase of the FCC’s post-auction transition schedule - all of our repacked stations had moved to their new channels, with ione
station broadcasting on an interim antenna pending the completion of its main post-auction facility. As of August 20, 2020, all of our repacked stations have completed construction on their permanent post-auction facilities.
The legislation authorizing the incentive auction and repacking established a $i1.75 billion fund for reimbursement of costs incurred by stations required to change
channels in the repacking. Subsequent legislation enacted on March 23, 2018, appropriated an additional $i1 billion for the repacking fund, of which up to $i750
million may be made available to repacked full power and Class A television stations and multichannel video programming distributors. Other funds are earmarked to assist affected low power television stations, television translator stations, and FM radio stations, as well for consumer education efforts. On October 7, 2020, the FCC announced that all final invoices and supporting documentation for reimbursement requests will be due no later than (1) October 8, 2021, for full power and Class A TV stations that transitioned in Phase 5 or earlier; (2) March 22, 2022, for full power and Class A TV stations that transitioned in Phase 6 or later; and (3) September 5, 2022, for all other entities entitled to seek repacking-related reimbursements (including low power television stations
and television translator stations). By law, the repacking reimbursement program will end July 3, 2023, at which point any remaining unobligated funds will be returned to the U.S. Treasury.
A majority of our capital expenditures in connection with the repack occurred in 2018 and 2019. To date, we have incurred approximately $i41.7 million in capital expenditures for the spectrum repack project
(of which $i6.1 million was paid during the first nine months of 2020). We have received FCC reimbursements of approximately $i37.0
million through September 30, 2020. We expect to receive reimbursements for the remaining $i4.7 million of our spend upon completion of the FCC’s reimbursement review process. The reimbursements were recorded as a contra operating expense within our “Spectrum repacking
20
reimbursements
and other, net” line item on our Consolidated Statement of Income and reported as an investing inflow on the Consolidated Statement of Cash Flows.
Related Party Transactions
We have an equity and debt investment in MadHive, Inc. (MadHive) which is a related party of TEGNA. In addition to our investment, we also have a commercial agreement with MadHive where they support our Premion business in acquiring and delivering over-the-top ad impressions. In the third quarter and first nine months of 2020, we incurred expenses of $i8.5
million and $i32.7 million, respectively, as a result of the commercial agreement with MadHive. In the third quarter and first nine months of 2019, we incurred expenses of $i5.8 million
and $i21.6 million respectively, as a result of the commercial agreement with MadHive. As of September 30, 2020 and December 31, 2019 we had accounts payable and accrued liabilities associated with the commercial agreement of $i10.9
million and $i4.3 million, respectively.
Sale of minority ownership interest in Premion
On March 2, 2020, we sold a minority ownership interest in Premion, LLC (Premion) for $i14.0
million to an affiliate of Gray Television (Gray). In connection with that transaction, Premion and Gray entered into a commercial arrangement under which Gray resells Premion services across all of Gray’s i93 television markets. Our TEGNA stations and Gray each have the right to independently sell Premion’s inventory in markets where we both operate a local television station. The sale of spot television advertising is not part of this agreement, and Gray and our TEGNA stations continue to sell spot advertising for our respective stations without any involvement from the other party.
In
connection with acquiring a minority interest, Gray has the right to sell its interest to Premion if there is a change in control of TEGNA or if the commercial reselling agreement terminates. Since redemption of the minority ownership interest is outside our control, Gray’s equity interest is presented outside of the Equity section on the Condensed Consolidated Balance Sheet in the caption “Redeemable noncontrolling interest.” On the date of sale, we recorded a $i14.0 million redeemable noncontrolling
interest on the Condensed Consolidated Balance Sheet in connection with Gray’s investment. When the redemption value or the carrying value (the acquisition date fair value adjusted for the noncontrolling interest’s share of net income (loss) and dividends) is less than the redemption value, we adjust the redeemable noncontrolling interest to equal the redemption value with changes recognized as an adjustment to retained earnings. Any such adjustment, when necessary, will be performed as of the applicable balance sheet date.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Company
Overview
We are an innovative media company that serves the greater good of our communities. Our business includes 63 television stations and two radio stations in 51 U.S. markets, we are the largest owner of top four network affiliates in the top 25 markets among independent station groups, reaching approximately 39% of U.S. television households. We also own leading multicast networks True Crime Network and Quest. Each television station also has a robust digital presence across online, mobile and social platforms, reaching consumers whenever, wherever they are. We have been consistently honored with the industry’s top awards, including Edward R. Murrow, George Polk, Alfred I. DuPont and Emmy Awards. Through TEGNA Marketing Solutions (TMS), our integrated sales and back-end fulfillment operations, we deliver results for advertisers across television, digital and Over the Top (OTT)
platforms, including Premion, our OTT advertising network.
We have one operating and reportable segment. The primary sources of our revenues are: 1) advertising & marketing services (AMS) revenues, which include local and national non-political television advertising, digital marketing services (including Premion), and advertising on the stations’ websites and tablet and mobile products; 2) subscription revenues, reflecting fees paid by satellite, cable, OTT (companies that deliver video content to consumers over the Internet) and telecommunications providers to carry our television signals on their systems; 3) political advertising revenues, which are driven by even year election cycles at the local and national level (e.g. 2020, 2018) and particularly in the second half of
those years; and 4) other services, such as production of programming and advertising material.
21
As illustrated in the table below, our business continues to evolve toward growing stable and profitable revenue streams. Our high margin subscription and political revenues account for approximately half of our total two-year revenue for the period ending September 30, 2020, and we expect it will account for a larger percentage on a rolling two-year cycle thereafter.
Over the past several years, we have transformed our company to become a pure-play broadcasting company, adding approximately 40 stations in attractive markets and divesting non-core assets. During 2019 alone, we completed four strategic acquisitions for a total purchase price of $1.5 billion
which enhanced our geographic diversity and bolstered our portfolio of Big Four stations while positioning our company to take full advantage of emerging viewing trends. As a result of this strategic evolution, we have increased revenue and cash flow, reduced economic cyclicality, and continue to be well-positioned to benefit from additional industry consolidation.
Recent Developments from COVID-19
During the first quarter of 2020, a novel strain of coronavirus (COVID-19) believed to have been first identified in Wuhan, China, spread globally, including to every state in the United States. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, and on March
13, 2020, the United States declared a national emergency with respect to COVID-19. The federal and state governments in the United States responded by instituting a wide variety of mitigating control measures, including, mandatory quarantines, closures of non-essential businesses and all other places of social interaction, while implementing “shelter in place” orders and travel restrictions in an effort to slow the spread of the virus. While some of these measures have been lifted or relaxed in certain state and local governments, other jurisdictions have seen increases in new COVID-19 cases resulting in restrictions being reinstated, or new restrictions imposed. Overall however, demand improved for advertising during the second and third quarters as steps toward re-opening were implemented. However, there continues to be considerable uncertainty regarding how current and future health and safety measures implemented in response to the pandemic will impact
our business.
Despite a strong start to the year, the wide variety of COVID-19 mitigating measures began negatively impacting our AMS revenue stream in mid-March as demand for non-political advertising softened. As noted above, the relative percentage of subscription and political revenues has grown over recent years and we expect this trend to continue. Historically, these revenue streams have been influenced less than AMS when economic conditions change. While the contribution of subscription and political revenues are increasing, AMS revenue still accounts for a significant amount of our total revenue. The impacts to AMS revenues in the near-term have been material. However, on a pro forma basis (assuming the businesses we acquired in mid-2019 were purchased on January 1, 2019) we have experienced sequential year over year improvement
in AMS revenue each month since April, the month most significantly impacted since the onset of the pandemic. In the third quarter of 2020, AMS revenue was flat compared to the same period in 2019, due to the partial impact of 2019 acquisitions, return of live sporting events, and stronger than previously expected demand for advertising.
The duration of these trends and the magnitude of such impacts cannot be precisely estimated at this time, as they are affected by a number of factors (many of which are outside of management’s control), including those presented in Part II, Item 1A. “Risk Factors” of this Quarterly Report. Based on currently known information about COVID-19 trends and the governmental emphasis on re-opening the economy, we expect on a pro forma basis, continued improvement in quarterly year-over-year comparisons for total revenues in the fourth quarter of 2020.
Our
broadcast business has been designated an essential business, and therefore, our stations’ operations are continuing with new safeguards put in place to create a safe work environment for our employees. At most of our television stations, a majority of the employees are working remotely. We have also adopted new measures based on current Centers for Disease Control guidelines to keep our employees safe and healthy. Measures include limiting the number of news and production employees in our stations to only those necessary to produce the newscasts, remote interviews, social distancing, and telework for all non-news personnel.
As a result of the near-term impact on non-political advertising demand caused by the COVID-19 pandemic, we implemented cost saving measures to reduce operating expenses and capital expenditures. These measures include implementing temporary furloughs for one week
during the second quarter for most personnel, reducing compensation for executives and our board of directors, and reducing non-critical discretionary spending. As is true of most businesses, the
22
ultimate magnitude of the COVID-19 pandemic cannot be reasonably estimated at this time, but we do expect it to continue to have an adverse effect on our near-term AMS revenues.
The scope and nature of the COVID-19 impacts continue to evolve each day. For a discussion of mitigating measures being taken by management to navigate through these conditions as well as a discussion of key trends and uncertainties that have affected our business, see the sections that follow under the captions “Consolidated
Results from Operations” and “Liquidity, Capital Resources and Cash Flows,” as well as within Part II, Item 1A “Risk Factors.”
Consolidated Results from Operations
The following discussion is a comparison of our consolidated results on a GAAP basis. The year-to-year comparison of financial results is not necessarily indicative of future results. In addition, see the section titled “Results from Operations - Non-GAAP Information” for additional tables presenting information which supplements our financial information provided on a GAAP basis.
During 2019, we acquired multiple local television stations and multicast networks. Specifically, we acquired
the Gray stations (January 2, 2019), Justice (recently rebranded as True Crime Network) and Quest multicast networks (June 18, 2019), the Dispatch stations (August 8, 2019) and the Nexstar stations (September 19, 2019). See Note 2 to the condensed consolidated financial statements for further details. The Dispatch and Nexstar stations are collectively referred to as the “2019 Acquisitions” in the discussion of the results for the quarter ended September 30, 2020 as compared to the same period in 2019. When discussing results for the nine months ended September 30, 2020 compared to the same period in 2019, the “2019 Acquisitions” also includes the multicast networks.
The absence of the operating results from these 2019 Acquisitions for the periods prior to their acquisition in our financial statements impacts the year-to-year comparability of our consolidated operating results. The Gray stations do not impact the year-to-year comparability.
Our consolidated results of operations on a GAAP basis were as follows (in thousands, except per share amounts):
Business
units - Selling, general and administrative expenses
89,943
78,439
15
%
267,919
223,845
20
%
Corporate - General and administrative expenses
11,263
29,792
(62
%)
61,289
60,363
2
%
Depreciation
16,086
15,381
5
%
49,697
44,831
11
%
Amortization
of intangible assets
17,113
15,018
14
%
50,577
32,530
55
%
Spectrum repacking reimbursements and other, net
(2,902)
(80)
***
(10,533)
(11,399)
(8
%)
Total
operating expenses
$
510,688
$
445,024
15
%
$
1,522,869
$
1,223,248
24
%
Total
operating income
$
227,701
$
106,833
***
$
477,336
$
382,294
25
%
Non-operating
expenses
(53,464)
(53,408)
0
%
(169,596)
(127,282)
33
%
Provision for income taxes
41,967
5,079
***
69,699
52,732
32
%
Net
income
132,270
48,346
***
238,041
202,280
18
%
Net (income) loss attributable to redeemable noncontrolling interest
(51)
—
***
433
—
***
Net
income attributable to TEGNA Inc.
$
132,219
$
48,346
***
$
238,474
$
202,280
18
%
Net
income per share - basic
$
0.60
$
0.22
***
$
1.08
$
0.93
16
%
Net income per share - diluted
$
0.60
$
0.22
***
$
1.08
$
0.93
16
%
***
Not meaningful
Revenues
Our AMS category includes all sources of our traditional television advertising and digital revenues including Premion and other digital advertising and marketing revenues across our platforms. Our Subscription revenue category includes revenue
23
earned from cable and satellite providers for the right to carry our signals and the distribution of TEGNA stations on OTT streaming services.
Our revenues and operating results are subject to seasonal fluctuations. Generally, our second and fourth quarter revenues and operating results are stronger than those
we report for the first and third quarter. This is driven by the second quarter reflecting increased spring seasonal advertising, while the fourth quarter typically includes increased advertising related to the holiday season. In addition, our revenue and operating results are subject to significant fluctuations across yearly periods resulting from political advertising. In even numbered years, political spending is usually significantly higher than in odd numbered years due to advertising for the local and national elections. Additionally, every four years, we typically experience even greater increases in political advertising in connection with the presidential election. The strong demand for advertising from political advertisers in these even years can result in the significant use of our available inventory (leading to a “crowd out” effect), which can diminish our AMS revenue in the even year of a two year election cycle, particularly in the fourth quarter
of those years. In addition, in even years, our advertising revenue typically benefits from the Olympics which is carried on NBC, our largest network affiliation, although the summer Olympics originally scheduled for 2020 have been postponed to July 2021 due to the COVID-19 pandemic. To a lesser extent, the Super Bowl can influence our advertising results, the degree to which depending on which network broadcasts the event.
As noted above, while we expect the impacts of the COVID-19 pandemic to continue to have a dampening effect on non-political advertising placements and revenues while containment measures are in place and possibly longer, it is too early to tell with any kind of precision how or the extent to which future declines in non-political advertising revenues, particularly with respect to local AMS advertising, will impact our revenues and operating results in future quarters.
The
following table summarizes the year-over-year changes in our revenue categories (in thousands):
Total revenues increased $186.5 million in the third quarter of 2020 compared to the same period in 2019. Our 2019 Acquisitions contributed revenues of $73.3 million in the third quarter of 2020. Excluding the 2019 Acquisitions, total revenues increased $113.2 million, primarily due to a $95.1 million increase in political advertising, reflecting increased spending on the upcoming elections. Also contributing to the increase was $39.1 million in subscription revenue, primarily due to annual rate increases under existing and newly renegotiated
retransmission agreements. This increase was partially offset by a decrease in AMS revenue of $21.7 million. AMS revenue was lower, due to reduced advertising demand primarily caused by COVID-19, partially offset by increases from Premion OTT revenue, increased advertising demand from the return of live sporting events, and an aggregate market share improvement across our portfolio.
In the first nine months of 2020, revenues increased $394.7 million compared to the same period in 2019. Our 2019 Acquisitions contributed total revenues of $270.5 million in the first nine months of 2020. Excluding the 2019 Acquisitions, total revenues increased $124.2 million. This increase is primarily due to an increase in political advertising of $145.7 million, reflecting increased spending on the upcoming elections and $119.1 million increase in subscription revenue for the first nine months of 2020
from annual rate increases under existing and newly renegotiated retransmission agreements. This increase was partially offset by a decline in AMS revenue of $142.4 million primarily driven by reduced advertising demand caused by COVID-19.
Cost of Revenues
Cost of revenues increased $72.7 million in the third quarter of 2020 compared to the same period in 2019. Our 2019 Acquisitions added cost of revenues of $38.6 million in the third quarter of 2020. Excluding the 2019 Acquisitions, cost of revenues increased $34.1 million. The increase was primarily due to a $33.4 million increase in programming costs, due to the growth in subscription revenues (certain programming costs are linked to such revenues).
In the first nine months of 2020, cost of revenues
increased $230.8 million compared to the same period in 2019. Our 2019 Acquisitions added cost of revenues of $149.0 million in the first nine months of 2020. Excluding the 2019 Acquisitions, cost of
24
revenues increased $81.8 million. This increase was primarily due to a $91.0 million increase in programming costs, due to the growth in subscription revenues.
Business Units - Selling, General and Administrative Expenses
Business unit selling, general and administrative (SG&A) expenses increased $11.5 million in the third quarter of 2020 compared to the same period in 2019. Our 2019 Acquisitions added business unit SG&A expenses of $8.2
million in the third quarter of 2020. Excluding the 2019 Acquisitions, SG&A expenses increased $3.3 million primarily due to higher outside professional services costs.
In the first nine months of 2020, business unit SG&A expenses increased $44.1 million compared to the same period in 2019. Our 2019 Acquisitions added business unit SG&A expenses of $33.4 million in the first nine months of 2020. Excluding the 2019 Acquisitions, SG&A expenses increased $10.7 million primarily due to increases to bad debt expense and outside professional services costs.
Corporate General and Administrative Expenses
Our corporate costs are separated from our business expenses and are recorded as general and administrative expenses in our Consolidated
Statement of Income. This category primarily consists of broad corporate management functions including Legal, Human Resources, and Finance, as well as activities and costs not directly attributable to the operations of our media business.
Corporate general and administrative expenses decreased $18.5 million in the third quarter of 2020 compared to the same period in 2019. The decrease was primarily driven by the absence in 2020 of $20.0 million of acquisition-related costs (principally advisory fees) incurred in 2019 associated with acquisitions and strategic initiatives.
In the first nine months of 2020, corporate general and administrative expenses increased $1.0 million compared to the same period in 2019. The increase was primarily due to $23.1 million of costs for successful activism defense and
$4.6 million of M&A due diligence costs. Partially offsetting this was a decrease of $29.1 million in acquisition-related costs (principally advisory fees) due to the reduction in acquisition activity in 2020.
Depreciation Expense
Depreciation expense increased by $0.7 million in the third quarter of 2020 compared to the same period in 2019. Our 2019 Acquisitions added depreciation expense of $2.3 million. Excluding the impact of the 2019 Acquisitions, depreciation expense decreased $1.6 million due to certain assets reaching the end of their assumed useful lives, therefore, becoming fully depreciated.
In the first nine months of 2020, depreciation expense increased $4.9 million compared to the same period in 2019. Our 2019 Acquisitions added depreciation
expense of $7.8 million. Excluding the impact of the 2019 Acquisitions, depreciation expense decreased $2.9 million due to certain assets reaching the end of their assumed useful lives.
Amortization Expense
Amortization expense increased $2.1 million in the third quarter of 2020 compared to the same period in 2019. Our 2019 Acquisitions added amortization expense of $3.9 million. Excluding the impact of the 2019 Acquisitions, amortization expense decreased $1.8 million due to certain assets reaching the end of their assumed useful lives, therefore, becoming fully amortized.
In the first nine months of 2020, amortization expense increased $18.0 million as compared to the same period in 2019. Our 2019 Acquisitions added amortization expense of $22.0
million. Excluding the impact of the 2019 Acquisitions, amortization expense decreased $4.0 million due to certain assets reaching the end of their assumed useful lives.
Spectrum Repacking Reimbursements and Other, net
Spectrum repacking reimbursements and other net gains were $2.9 million in the third quarter of 2020 compared to an immaterial amount in the same period in 2019. The 2020 activity is related to $2.9 million of reimbursements received from the Federal Communications Commission (FCC) for required spectrum repacking. The 2019 activity consists of gains of $5.5 million from reimbursements received from the FCC for required spectrum repacking, offset by a one-time contract termination and incremental transition costs of $5.5 million related
to bringing our national sales organization in-house.
In the first nine months of 2020, we recognized net gains of $10.5 million, compared to $11.4 million recognized in the same period in 2019. The 2020 net gains primarily consist of $12.7 million of reimbursements received from the FCC for required spectrum repacking, partially offset by a $2.1 million impairment charge due to the retirement of a brand name. The 2019 gain primarily relates to $14.0 million of reimbursements received from the FCC for required spectrum repacking and a gain of $2.9
25
million as a result of the sale of certain real estate. These 2019 gains were partially offset by $5.5 million in one-time contract
termination and incremental transition costs discussed above.
Operating Income
Our operating income increased $120.9 million in the third quarter of 2020 compared to the same period in 2019. Results from our 2019 Acquisitions added operating income of $20.4 million in the third quarter of 2020. Excluding the 2019 Acquisitions, operating income increased $100.5 million. The increase was driven by the changes in revenue and expenses discussed above, most notably the increase in political revenue.
Our operating income increased $95.0 million in the first nine months of 2020 compared to the same period in 2019. Our 2019 Acquisitions added operating income of $58.2 million in the first nine months of 2020. Excluding the 2019 Acquisitions,
total operating income increased $36.8 million in the first nine months compared to the same period. The increase was driven by the changes in revenue and expenses discussed above.
Non-Operating Expenses
Non-operating expenses increased $0.1 million in the third quarter of 2020 compared to the same period in 2019. Interest expense decreased by $0.6 million driven by a lower average interest rate due to the refinancings undertaken in 2019 and 2020 partially offset by higher average outstanding debt used to finance the 2019 Acquisitions. Total average outstanding debt was $4.04 billion for the third quarter of 2020, compared to $3.38 billion in the same period of 2019. The weighted average interest rate on total outstanding debt was 4.89% for
the third quarter of 2020, compared to 5.91% in the same period of 2019.
In the first nine months of 2020, non-operating expenses increased $42.3 million compared to the same period in 2019. This increase was partially due to a $13.8 million call premium related to the repayment of our 2023 Senior Notes, acceleration of $7.9 million of previously deferred financing fees associated with the 2023 and 2020 Senior notes in the first quarter of 2020 due to their early repayment. In addition, the increase was driven by the absence of a $7.3 million gain we recognized from the acquisition of Justice and Quest in 2019 and $13.1 million of gains recognized in our equity income in unconsolidated investments as a result of the sale of two investments in 2019. Further, interest expense increased $15.6 million driven by higher average outstanding debt used to finance the 2019 Acquisitions partially
offset by a lower average interest rate due to the refinancings undertaken in 2019 and 2020. The average debt outstanding was $4.12 billion for the first nine months of 2020, compared to $3.08 billion in the same period of 2019. The weighted average interest rate on total outstanding debt was 4.99% for the first nine months of 2020, compared to 6.00% in the same period of 2019. Partially offsetting the increase in non-operating expenses was equity income increase of $7.2 million from our CareerBuilder investment (which sold its employment screening business in 2020 resulting in a pre-tax gain of $18.6 million being recognized by us).
Income Tax Expense
Income tax expense increased $36.9 million in the third quarter of 2020 compared
to the same period in 2019. Income tax expense increased $17.0 million in the first nine months of 2020 compared to the same period in 2019. The increases were primarily due to increases in net income before tax. Our effective income tax rate was 24.1% for the third quarter of 2020, compared to 9.5% for the third quarter of 2019. Our effective income tax rate was 22.6% for the first nine months of 2020, compared to 20.7% for the same period in 2019. The tax rate for the third quarter and first nine months of 2019 are lower than the comparable amount in 2020 primarily as a result of the release of certain tax reserves due to a state audit settlement and the expiration of a statute of limitations as well as discrete tax benefits realized related to a 2019 acquisition and a previously-disposed business.
Net Income attributable to TEGNA Inc.
Net
income attributable to TEGNA Inc. was $132.2 million, or $0.60 per diluted share, in the third quarter of 2020 compared to $48.3 million, or $0.22 per diluted share, during the same period in 2019. For the first nine months of 2020, net income attributable to TEGNA Inc. was $238.5 million, or $1.08 per diluted share, compared to $202.3 million, or $0.93 per diluted share, for the same period in 2019. Both income and earnings per share were affected by the factors discussed above, most notably, the increase in political revenue reflecting increased spending on the upcoming elections, increase in subscription revenue from annual rate increases under existing and newly renegotiated retransmission agreements and decline of AMS due, in part, to reduced advertising demand as a result of the COVID-19 pandemic.
The weighted average number of diluted common shares outstanding in the third quarter
of 2020 and 2019 were 220.0 million and 218.3 million, respectively. The weighted average number of diluted shares outstanding in the first nine months of 2020 and 2019 was 219.4 million and 217.8 million, respectively.
26
Results from Operations - Non-GAAP Information
Presentation of Non-GAAP information
We use non-GAAP financial performance measures to supplement the financial information presented on a GAAP basis. These non-GAAP financial measures should not be considered in isolation from, or as a substitute for,
the related GAAP measures, nor should they be considered superior to the related GAAP measures, and should be read together with financial information presented on a GAAP basis. Also, our non-GAAP measures may not be comparable to similarly titled measures of other companies.
Management and our Board of Directors use non-GAAP financial measures for purposes of evaluating company performance. Furthermore, the Leadership Development and Compensation Committee of our Board of Directors uses non-GAAP measures such as Adjusted EBITDA, non-GAAP net income, non-GAAP EPS and free cash flow to evaluate management’s performance. Therefore, we believe that each of the non-GAAP measures presented provides useful information to investors and other stakeholders by allowing them to view our business through the eyes of management and our Board of Directors, facilitating comparisons of results across
historical periods and focus on the underlying ongoing operating performance of our business. We also believe these non-GAAP measures are frequently used by investors, securities analysts and other interested parties in their evaluation of our business and other companies in the broadcast industry.
We discuss in this Form 10-Q non-GAAP financial performance measures that exclude from our reported GAAP results the impact of “special items” consisting of spectrum repacking reimbursements and other, gains related to businesses we account for under the equity method, acquisition-related costs, advisory fees related to activism defense, M&A due diligence costs, workforce restructuring costs, intangible asset impairment charges, certain non-operating expenses related to the early extinguishment of debt, and a TEGNA foundation donation. In addition, we have excluded certain income
tax special items associated with deferred tax benefits related to partial capital loss valuation allowance release, the tax impacts related to the recent acquisitions and adjustments related to previously-disposed businesses.
We believe that such expenses and gains are not indicative of normal, ongoing operations. While these items may be recurring in nature and should not be disregarded in evaluation of our earnings performance, it is useful to exclude such items when analyzing current results and trends compared to other periods as these items can vary significantly from period to period depending on specific underlying transactions or events that may occur. Therefore, while we may incur or recognize these types of expenses and gains in the future, we believe that removing these items for purposes of calculating the non-GAAP financial measures provides investors with a more focused
presentation of our ongoing operating performance.
We discuss Adjusted EBITDA (with and without corporate expenses), a non-GAAP financial performance measure that we believe offers a useful view of the overall operation of our businesses. We define Adjusted EBITDA as net income attributable to TEGNA before (1) net (income) loss attributable to redeemable noncontrolling interest, (2) income taxes, (3) interest expense, (4) equity (loss) income in unconsolidated investments, net, (5) other non-operating items, net, (6) workforce restructuring expense, (7) M&A due diligence costs, (8) acquisition-related costs, (9) advisory fees related to activism defense, (10) spectrum repacking reimbursements and other, net, (11) depreciation and (12) amortization. We believe these adjustments facilitate company-to-company operating performance comparisons by removing potential differences caused
by variations unrelated to operating performance, such as capital structures (interest expense), income taxes, and the age and book appreciation of property/equipment (and related depreciation expense). The most directly comparable GAAP financial measure to Adjusted EBITDA is Net income attributable to TEGNA. Users should consider the limitations of using Adjusted EBITDA, including the fact that this measure does not provide a complete measure of our operating performance. Adjusted EBITDA is not intended to purport to be an alternate to net income as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. In particular, Adjusted EBITDA is not intended to be a measure of cash flow available for management’s discretionary expenditures, as this measure does not consider certain cash requirements, such as working capital needs, capital expenditures, contractual commitments, interest payments, tax payments and other debt service
requirements.
We also discuss free cash flow, a non-GAAP performance measure that the Board of Directors uses to review the performance of the business. The most directly comparable GAAP financial measure to free cash flow is Net income attributable to TEGNA. Free cash flow is calculated as non-GAAP Adjusted EBITDA (as defined above), further adjusted by adding back (1) stock-based compensation, (2) non-cash 401(k) company match, (3) syndicated programming amortization, (4) pension reimbursements, (5) dividends received from equity method investments and (6) reimbursements from spectrum repacking. This is further adjusted by deducting payments made for (1) syndicated programming, (2) pension, (3) interest, (4) taxes (net of refunds) and (5) purchases of property and equipment. Like Adjusted EBITDA, free cash flow is not intended to be a measure of cash flow available for management’s
discretionary use.
27
Discussion of Special Charges Affecting Reported Results
Our results included the following items we consider “special items” that while at times recurring, can vary significantly from period to period:
•Workforce restructuring expense which included payroll and related benefit costs at our stations (including the shutdown of our TMS Phoenix operations) and corporate headquarters;
•Spectrum
repacking reimbursements and other, net consists of gains due to reimbursements from the FCC for required spectrum repacking, partially offset by an intangible asset impairment charge due to the retirement of a brand name;
•Advisory fees related to activism defense;
•M&A due diligence costs we incurred to assist prospective buyers of our company with their due diligence;
•A gain recognized in our equity income in unconsolidated investments, related to our share of CareerBuilder’s gain on the sale of its employment screening business;
•Other non-operating items primarily related to costs incurred in connection
with the early extinguishment of debt; and
•Deferred tax benefits related to partial capital loss valuation allowance release.
•Workforce restructuring expense which included payroll and related benefit costs at our stations and corporate headquarters;
•Acquisition-related costs associated with business acquisitions;
•Spectrum repacking reimbursements and other, net consisting of a gain recognized on the sale of real estate and gains due to reimbursements from the FCC for required spectrum repacking
and a one-time contract termination and incremental transition costs related to bringing our national sales organization in-house;
•Gains recognized in our equity income in unconsolidated investments as a result of the sale of two investments;
•Other non-operating items primarily relates to a gain for the remeasurement of our previously held ownership in Justice Network and Quest to fair value, and a charitable donation made to the TEGNA Foundation; and
•Realization of discrete tax benefits related to one of the recent acquisitions and a previously-disposed business.
28
Reconciliations
of certain line items impacted by special items to the most directly comparable financial measure calculated and presented in accordance with GAAP on our Consolidated Statements of Income follow (in thousands, except per share amounts):
Business
units - Selling, general and administrative expenses
223,845
(376)
—
—
—
—
—
223,469
Corporate
- General and administrative expenses
60,363
(201)
(29,092)
—
—
—
—
31,070
Spectrum
repacking reimbursements and other, net
(11,399)
—
—
11,399
—
—
—
—
Operating
expenses
1,223,248
(1,452)
(29,092)
11,399
—
—
—
1,204,103
Operating
income
382,294
1,452
29,092
(11,399)
—
—
—
401,439
Equity
income (loss) in unconsolidated investments, net
10,922
—
—
—
(13,126)
—
—
(2,204)
Other
non-operating items, net
6,962
—
—
—
—
(6,285)
—
677
Total
non-operating expense
(127,282)
—
—
—
(13,126)
(6,285)
—
(146,693)
Income
before income taxes
255,012
1,452
29,092
(11,399)
(13,126)
(6,285)
—
254,746
Provision
for income taxes
52,732
359
5,931
(2,850)
(3,169)
(1,574)
5,992
57,421
Net
income attributable to TEGNA Inc.
202,280
1,093
23,161
(8,549)
(9,957)
(4,711)
(5,992)
197,325
Net
income per share-diluted
$
0.93
$
0.01
$
0.11
$
(0.04)
$
(0.05)
$
(0.02)
$
(0.03)
$
0.91
30
Adjusted
EBITDA - Non-GAAP
Reconciliations of Adjusted EBITDA to net income presented in accordance with GAAP on our Consolidated Statements of Income are presented below (in thousands):
In the third quarter of 2020 Adjusted EBITDA margin was 37% without corporate expense or 35% with corporate expense, compared to third quarter of 2019 Adjusted EBITDA margin of 30% without corporate expense or 28% with corporate expense. For the nine months ended September 30, 2020, Adjusted EBITDA margin was 31% without corporate expense or 30% with corporate expense, compared to nine months ended September 30, 2019 Adjusted EBITDA of 32%
without corporate expense or 30% with corporate expense. The increases in Adjusted EBITDA margins are primarily driven by the increase in high-margin political revenue reflecting increased spending on the upcoming elections, as well as an increase in subscription revenue from annual rate increases under existing and newly renegotiated retransmission agreements.
Our total Adjusted EBITDA increased $101.9 million in the third quarter of 2020 compared to 2019. Our 2019 Acquisitions added Adjusted EBITDA of $26.6 million. Excluding the 2019 Acquisitions, Adjusted EBITDA increased by $75.3 million. This increase was primarily driven by the operational factors discussed above within the revenue and operating expense fluctuation explanation sections, most notably, the increase in political revenue.
For
the first nine months of 2020, Adjusted EBITDA increased $117.0 million primarily due to the same factors affecting the third quarter. Our 2019 Acquisitions added Adjusted EBITDA of $88.1 million. Excluding the 2019 Acquisitions, Adjusted EBITDA increased by $28.9 million. This increase was primarily driven by the operational factors discussed above within the revenue and operating expense fluctuation explanation sections, most notably, the increase in political revenue.
31
Free Cash Flow Reconciliation
Our free cash flow, a non-GAAP performance measure, was $391.4 million in the first half of 2020 compared to $265.4 millionfor the same period in 2019.
Reconciliations from “Net income” to “Free cash flow” follow (in thousands):
Net
income attributable to TEGNA Inc. (GAAP basis)
$
238,474
$
202,280
18
%
Plus: Provision for income taxes
69,699
52,732
32
%
Plus:
Interest expense
160,733
145,166
11
%
Plus: M&A due diligence costs
4,588
—
***
Plus:
Acquisition-related costs
—
29,092
***
Plus: Depreciation
49,697
44,831
11
%
Plus:
Amortization
50,577
32,530
55
%
Plus: Stock-based compensation
12,578
13,887
(9
%)
Plus:
Company stock 401(k) contribution
13,023
6,486
***
Plus: Syndicated programming amortization
53,599
42,510
26
%
Plus:
Workforce restructuring expense
1,021
1,452
(30
%)
Plus: Advisory fees related to activism
defense
23,087
—
***
Plus: Cash dividend from equity investments for return on capital
5,771
751
***
Plus:
Cash reimbursements from spectrum repacking
12,670
13,975
(9
%)
Plus: Other non-operating items, net
17,270
(6,962)
***
Less:
Net loss attributable to redeemable noncontrolling interest
(433)
—
***
Less: Income tax payments, net of refunds
(39,872)
(73,457)
(46
%)
Less:
Spectrum repacking reimbursements and other, net
(10,533)
(11,399)
(8
%)
Less: Equity income in unconsolidated investments, net
(8,407)
(10,922)
(23
%)
Less:
Syndicated programming payments
(52,840)
(40,038)
32
%
Less: Pension contributions
(4,192)
(8,407)
(50
%)
Less:
Interest payments
(174,575)
(117,913)
48
%
Less: Purchases of property and equipment
(30,583)
(51,231)
(40
%)
Free
cash flow (non-GAAP basis)
$
391,352
$
265,363
47
%
***
Not meaningful
32
Liquidity, Capital Resources and Cash Flows
Our operations have historically generated strong positive cash flow which, along with availability under our existing revolving credit facility and cash and
cash equivalents on hand, have been sufficient to fund our capital expenditures, interest expense, dividends, investments in strategic initiatives (including acquisitions) and other operating requirements.
The COVID-19 pandemic has had far-reaching material adverse impacts on many aspects of our operations, directly and indirectly, including our employees, consumer behavior, distribution of our content, our vendors, and the overall market. The full impact of the COVID-19 pandemic, particularly with regard to the broader advertising industry, remains uncertain and is evolving. In light of the uncertain and evolving situation relating to the COVID-19 pandemic, we have taken a number of precautionary measures to mitigate the financial impact of the pandemic, and minimize the resultant risks to our company,
employees, our shareholders, customers, and the communities in which we serve. Such steps include the following:
•Halted the discretionary repayment of short-term borrowings resulting in the build up our cash balance to approximately $164.6 million as of September 30, 2020;
•Refinanced $538.0 million of debt with maturities in 2021 or 2024 to 2026;
•Amended our revolving credit facility on June 11, 2020 to extend the initial step-down of the maximum permitted total leverage ratio by 15 months. Under the amendment our total leverage ratio will remain at 5.5x until the fiscal quarter ending March
31, 2022;
•Implemented temporary company-wide one-week furlough program of our workforce during the second quarter of 2020;
•Announced temporary pay reductions of 8% for certain key newsroom personnel, 20% for general managers and corporate senior vice presidents, and 25% for our CEO and Board of Directors during the second quarter of 2020, in lieu of the one week furlough;
•Reduced and/or deferred capital expenditures and non-critical operating expenses; and
•Implemented travel bans and restrictions.
Further, in response to COVID-19, President Donald Trump signed into law the Coronavirus Aid, Relief, and Economic Security
Act (the CARES Act) on March 27, 2020. The CARES Act provides numerous tax provisions and other stimulus measures. We believe we will benefit from the CARES Act as a result of lower 2020 tax payments of approximately $5 million from the provisions that allow for (1) immediate deduction of any eligible leasehold improvements placed in service during 2018 and 2019, and (2) temporary relaxation of net interest deduction limitations which will allow us to immediately deduct 2019 interest expense that would other otherwise have been disallowed and carried forward to future periods. We also elected to defer the employer portion of the social security payroll tax (6.2%) as outlined within the CARES Act. The deferral is effective from March 27, 2020 through December 31, 2020. We estimate the cash flow benefit of this to be approximately
$20 million in 2020. The deferred amount will be paid in two installments and the amount will be considered timely paid if 50% of the deferred amount is paid by December 31, 2021 and the remainder by December 31, 2022.
In addition, due to guidance from the U.S. Department of the Treasury and the Internal Revenue Service, certain federal income tax payments due before July 15, 2020, were deferred to July 15, 2020. As a result, we made federal income tax payments of $30 million in the third quarter. We estimate making federal income tax payments of $40 million in the fourth quarter of 2020.
As of September
30, 2020, we were in compliance with all covenants contained in our debt agreements and credit facility and our leverage ratio, calculated in accordance with our revolving credit agreement and term loan agreements, was 4.4x, well below the permitted leverage ratio of less than 5.5x. The leverage ratio is calculated using annualized adjusted EBITDA (as defined in the agreement) for the trailing eight quarters. We believe that we will remain compliant with all covenants for the foreseeable future.
We often present a different leverage ratio in our investor communications than the one required to be computed by our revolving covenant agreement. The ratio disclosed in our investor communications, which is regularly reviewed by our management and our board of directors, was 4.5x as of September 30, 2020. The primary difference between
this computation and the leverage ratio calculated in accordance with our revolving credit agreement is the definition of adjusted EBITDA in the revolving credit agreement version requires additional adjustments to add back non-cash compensation and contractual synergy benefits during periods in the trailing eight quarters that preceded the acquisition.
On September 13, 2019, we completed a private placement offering of $1.1 billion aggregate principal amount of unsecured notes bearing an interest rate of 5.00% which are due in September 2029. The proceeds from this note offering were used to finance a portion of the acquisition of the Nexstar Stations, and along with borrowing under the revolving credit facility, were used to repay the remaining $320 million of notes bearing fixed rate interest at 5.125% which had become due in October
2019. Additionally we early repaid $290 million of our $600 million unsecured notes bearing fixed interest at 5.125% which are due in July 2020.
On January 9, 2020 we completed a private placement offering of $1.0 billion senior notes bearing an interest rate of 4.625% which are due in March 2028. These senior notes, as well as those issued in September 2019, include customary market covenants and call provisions consistent with our past issuances. On February 11, 2020 we used the net proceeds to repay the remaining $310 million principal amount of our 5.125% Senior Notes due 2020, the $650 million principal amount of our 6.375%
33
Senior
Notes due 2023, a $13.8 million call premium on our 6.375% Senior Notes due 2023 and borrowings under our revolving credit facility.
On September 10, 2020, we completed a private placement offering of $550 million aggregate principal amount of senior unsecured notes bearing an interest rate of 4.750% which are due in March 2026. The proceeds were used to pay down borrowings from our revolving credit facility. Then, on October 13 ,2020 we utilized our revolving credit facility to repay the entire $350 million aggregate principal amount of our 4.875% Senior Notes due in 2021 and $188 million aggregate principal amount of our 5.500% Senior Notes due in 2024 and a $3.4 million redemption premium on our Senior Notes due in 2024.
As of September
30, 2020, our total debt was $3.9 billion, cash and cash equivalents totaled $164.6 million, and we had unused borrowing capacity of $1.31 billion under our revolving credit facility. Approximately $3.77 billion, or 96%, of our debt has a fixed interest rate. Following the October debt payments we had an unused borrowing capacity on our revolving credit facility of $950 as of October 31, 2020. Based on operating trends, we now expect that our net leverage ratio (as calculated for investor communications) will be 4.2x or less by the end of 2020.
Our financial and operating performance, as well as our ability to generate sufficient cash flow to maintain compliance with credit facility covenants, are subject to certain risk factors; see Item 1A. “Risk Factors” in this Report as well as our 2019 Annual Report on Form 10-K for
further discussion. We expect our existing cash and cash equivalents, cash flow from our operations, and borrowing capacity under the revolving credit facility will be more than sufficient to satisfy our debt service obligations, capital expenditure requirements, and working capital needs for the next twelve months.
Cash Flows
The following table provides a summary of our cash flow information followed by a discussion of the key elements of our cash flow (in thousands):
Balance of cash and cash equivalents beginning of the period
$
29,404
$
135,862
Operating
activities:
Net income
238,041
202,280
Depreciation, amortization and other non-cash adjustments
117,468
75,084
Pension contributions, net of expense
(8,144)
(5,543)
Decrease
(increase) in trade receivables
73,838
(24,708)
Increase (decrease) in interest and taxes payable
13,793
(1,815)
Other, net
80,755
(30,713)
Cash flow from operating activities
515,751
214,585
Investing
activities:
Payments for acquisitions of businesses and other assets, net of cash acquired
(15,841)
(1,507,483)
All other investing activities
(8,571)
(15,544)
Cash flow used for investing activities
(24,412)
(1,523,027)
Cash
flow (used for) provided by financing activities
(356,157)
1,181,774
Increase (decrease) in cash and cash equivalents
135,182
(126,668)
Balance of cash and cash equivalents end of the period
$
164,586
$
9,194
34
Operating
Activities -Cash flow from operating activities was $515.8 million for the nine months ended September 30, 2020, compared to $214.6 million for the same period in 2019. This increase was primarily driven by the $167.4 million increase in political revenue in 2020. As political advertisements are typically paid upfront, they provide an immediate benefit to operating cash flow as compared to non-political advertising which is billed and collected in arrears after the advertisement has been delivered. Also contributing to the increase was a favorable change in accounts receivable of $98.5 million due to increases in cash collection on AMS revenue and decrease in tax payments of $33.6 million. The 2019 Acquisitions and higher subscription revenue also contributed to the increase.
Investing
Activities -Cash flow used for investing activities was $24.4 million for the nine months ended September 30, 2020, compared to $1,523.0 million for the same period in 2019. The decrease was primarily due to $15.8 million being spent on acquisitions in 2020 as compared to cash used in the acquisitions of the Gray Stations, Justice and Quest multicast networks, Dispatch stations, and Nexstar stations for $1,507.5 million in the first nine months of 2019.
Financing Activities - Cash flow used for financing activities was $356.2 million for the nine months ended September 30, 2020, compared to $1,181.8 million for the same period in 2019. The change was primarily due to debt activity in 2020. Specifically,
in January 2020 we issued $1.0 billion of unsecured notes, the proceeds of which were used to early redeem $650.0 million of unsecured notes due in October 2023 and $310.0 million due in July 2020. Additionally, in September 2020 we issued $550 million of senior unsecured notes. We incurred fees of $36.9 million related to these debt issuances, and an amendment of the revolving credit facility. We also paid down $728.0 million on our revolving credit facility early in the first nine months of 2020 as compared to borrowing $223.0 million in the first nine months of 2019.
Certain Factors Affecting Forward-Looking Statements
Certain statements in this Quarterly Report on Form 10-Q contain forward-looking statements regarding business
strategies, market potential, future financial performance and other matters, which include, but are not limited to the adverse impacts caused by the COVID-19 pandemic and its effect on our revenues, particularly our non-political advertising revenues. The words “believe,”“expect,”“estimate,”“could,”“should,”“intend,”“may,”“plan,”“seek,”“anticipate,”“project” and similar expressions, among others, generally identify “forward-looking statements”. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results and events to differ materially from those anticipated in the forward-looking statements, including those described within Part II, Item 1A “Risk Factors” in this current report, as well as under Item 1A. “Risk Factors” in our 2019 Annual Report on Form 10-K.
Our
actual financial results may be different from those projected due to the inherent nature of projections. Given these uncertainties, forward-looking statements should not be relied on in making investment decisions. The forward-looking statements contained in this Form 10-Q speak only as of the date of its filing. Except where required by applicable law, we expressly disclaim a duty to provide updates to forward-looking statements after the date of this Form 10-Q to reflect subsequent events, changed circumstances, changes in expectations, or the estimates and assumptions associated with them. The forward-looking statements in this Form 10-Q are intended to be subject to the safe harbor protection provided by the federal securities laws.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
For
quantitative and qualitative disclosures about market risk, refer to the following section of our 2019 Annual Report on Form 10-K: “Item 7A. Quantitative and Qualitative Disclosures about Market Risk.” Our exposures to market risk have not changed materially since December 31, 2019.
As of September 30, 2020, approximately $3.77 billion of our debt has a fixed interest rate (which represents approximately 96% of our total principal debt obligation). Our remaining debt obligation of $175 million has floating interest rates. These obligations fluctuate with market interest rates. By way of comparison, a 50 basis points increase or decrease in the average interest rate for these obligations would result in a change in annual interest expense of approximately $0.9 million. The fair value
of our total debt, based on bid and ask quotes for the related debt, totaled $3.99 billion as of September 30, 2020 and $4.32 billion as of December 31, 2019.
35
Item 4. Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the Company’s
disclosure controls and procedures as of September 30, 2020. Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective, as of September 30, 2020, to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 are recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.
During the third quarter of 2020, we implemented an enterprise resource planning, or ERP, system. This upgraded system is a systems improvement initiative and is not in response to any identified deficiency or weakness in our internal control over financial reporting. We reviewed
the implementation effort as well as the impact on our internal controls over financial reporting and where appropriate, made changes to our controls to address the system changes. We believe that the internal control changes resulting from the new ERP implementation provide a more effective management of our business operations and improve the overall control environment.
There have been no other material changes in our internal controls or in other factors during the fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
36
PART
II. OTHER INFORMATION
Item 1. Legal Proceedings
See Note 11 to the condensed consolidated financial statements for information regarding our legal proceedings.
Item 1A. Risk Factors
While we attempt to identify, manage and mitigate risks and uncertainties associated with our business, some level of risk and uncertainty will always be present. “Item 1A. Risk Factors” of our 2019 Annual Report on Form 10-K describes the risks and uncertainties that we believe may have the potential to materially affect
our business, results of operations, financial condition, cash flows, projected results and future prospects. The information below represents a new risk factor related to the adverse impacts from the COVID-19 pandemic.
A resurgence in the rate of COVID-19 infections that is significant enough to force widespread business closures could materially and adversely affect our financial condition, results of operations and cash flows.
During the first quarter of 2020, a novel strain of coronavirus (COVID-19) believed to have been first identified in Wuhan, China, spread globally, including to every state in the United States. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020, the United States
declared a national emergency with respect to COVID-19. The federal and state governments in the United States have responded by instituting a wide variety of mitigating control measures, including, mandatory quarantines, closures of non-essential businesses and all other places of social interaction, while implementing “shelter in place” orders and restricting travel. Such control measures have resulted in cancellation or postponement of sporting events, including the Olympics, and suspension of popular entertainment content production. The mitigating control measures began negatively impacting our AMS revenue stream in mid-March as demand for non-political advertising softened. During the second and third quarters, certain state and local governments began to implement multi-step policies towards re-opening and lifting the control measures. Demand improved for advertising as this occurred. However, some states which re-opened also experienced increases in new
COVID-19 cases, forcing some to reinstate control measures and restrict public gatherings.
The extent of its impact on our financial and operational results, which could be material, will depend on the length of time that the pandemic continues and whether we experience subsequent waves of the infection, its effect on our customers’ demand for our advertising products (as well as their ability to pay us for services provided), the pace at which governmental regulations closing businesses and restricting movement imposed in response to the pandemic are relaxed, the success of large economic stimulus measures passed into law as well as uncertainty regarding all of the foregoing.
While we cannot at this time predict the full impact of the COVID-19 pandemic, it has had, and is likely to continue to have
a dampening effect on our near-term AMS revenues. In addition, a sustained adverse impact on our non-political advertising from the COVID-19 pandemic could eventually impact our ability to maintain compliance with covenants under our revolving credit facility in the future further affecting our liquidity and financial condition. In addition, we may experience an increased risk of undetected malicious cyber-security attacks due to our workforce working remotely. We continue to closely monitor the situation, to assess further possible implications to our business and customers, and to take actions in an effort to mitigate adverse consequences.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On September
19, 2017, we announced that our Board of Directors authorized a share repurchase program for up to $300.0 million of our common stock over three years, expiring in September 2020. During the third quarter of 2020, no shares were repurchased and, approximately $279.1 million remained under this program upon its expiration. As a result of our 2019 Acquisitions, we had suspended share repurchases under this program.
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
We agree to furnish to the Commission, upon request, a copy of each agreement with respect to long-term debt not filed herewith in reliance upon the exemption from filing applicable to any series of debt representing less than 10% of our total consolidated assets.
38
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
