- 4Q Operating Income of $32.1 Million
Drives 4Q Adjusted EBITDA of $49.3 Million and Free Cash Flow of
$32.7 Million -
- Record Full Year Operating Income of
$103.2 Million, Adjusted EBITDA of $166.7 Million and Free Cash
Flow of $84.9 Million -
Nexstar Broadcasting Group, Inc. (NASDAQ: NXST) (“Nexstar”)
today reported financial results for the fourth quarter and
year-ended December 31, 2013 as summarized below:
Summary 2013 Fourth Quarter Highlights
($ in thousands)
Three Months EndedDecember
31,
Twelve Months EndedDecember
31,
2013 2012
Change 2013
2012 Change Local Revenue
$ 75,106 $ 52,633 +42.7 % $ 265,376 $ 190,168 +39.5 %
National Revenue $ 32,827 $ 20,580 +59.5 % $
113,423 $ 76,123 +49.0 %
Local and National
Core Revenue $ 107,933 $ 73,213
+47.4 %
$ 378,799 $ 266,291 +42.3 %
Political Revenue $ 1,537 $ 27,347 (94.4 )% $ 5,152 $ 46,276
(88.9 )% Digital Media Revenue $ 6,623 $ 5,322 +24.4 % $ 30,846 $
18,363 +68.0 % Retransmission Fee Revenue $ 26,815 $ 16,052 +67.1 %
$ 101,119 $ 60,933 +66.0 % Management Fee Revenue $ 0 $ 0
-
$ 0 $ 1,961 (100.0 )% Network Comp, Other $ 1,070 $ 1,363 (21.5 )%
$ 4,280 $ 3,708 +15.4 % Trade and Barter Revenue $ 8,347
$ 6,353 +31.4 % $ 31,529 $ 21,920
+43.8 %
Gross Revenue $ 152,325
$ 129,650 +17.5 %
$ 551,725 $
419,452 +31.5 % Less Agency Commissions $ 14,203
$ 13,476 +5.4 % $ 49,395 $ 40,820
+21.0 %
Net Revenue $ 138,122 $
116,174 +18.9 %
$ 502,330 $
378,632 +32.7 %
Gross Revenue
Excluding Political
Revenue
$ 150,788 $ 102,303
+47.4
%
$ 546,573
$
373,176
+46.5
%
Income from Operations $ 32,078 $ 35,380 (9.3 )% $
103,241 $ 99,905 +3.3 %
Broadcast Cash Flow(1)
$ 55,311 $ 56,294 (1.7 )% $ 193,008 $ 170,980 +12.9 %
Broadcast
Cash Flow Margin(2) 40.0 % 48.5 % 38.4 % 45.2 %
Adjusted EBITDA(1) $ 49,266 $ 48,082 +2.5 % $
166,669 $ 146,344 +13.9 %
Adjusted EBITDA Margin(2)
35.7 % 41.4 % 33.2 % 38.7 %
Free Cash Flow(1)
$ 32,706 $ 28,652 +14.1 % $ 84,921 $ 80,515 +5.5 %
(1)
Definitions and disclosures regarding non-GAAP
financial information are included on page 4, while reconciliations
are included on page 7.
(2)
Broadcast cash flow margin is broadcast cash flow as a percentage
of net revenue. Adjusted EBITDA margin is Adjusted EBITDA as a
percentage of net revenue.
CEO Comment
Perry A. Sook, Chairman, President and Chief Executive Officer
of Nexstar Broadcasting Group, Inc. commented, “Nexstar’s strong
fourth quarter and full year financial results mark the conclusion
of another active and successful year of growth for the Company.
During 2013, we generated record free cash flow, EBITDA, BCF and
net revenue, completed or entered into agreements to strategically
expand our operating base in accretive transactions to 108
stations, lowered our weighted average cost of capital and
strengthened our balance sheet, and initiated the payment of a
quarterly cash dividend.
“Our near- and long-term path to growth and the enhancement of
shareholder value remains on plan and 2014 will see another period
of record financial results as Nexstar will benefit from its
expanded scale, new operating efficiencies and synergies related to
recent and soon-to-be-completed acquisitions, the renewal in the
2013 fourth quarter of a significant number of retransmission
consent agreements, an expansion of our digital media initiatives
and the return of the political cycle and highly rated special
event programming such as the winter Olympics.
“Fourth quarter results benefited from accretive station
acquisitions completed in 2013, our revenue diversification
initiatives, and ongoing focus on building new local direct
advertising. Reflecting growth in seven of our top ten ad
categories as well as a 19% year-over-year increase in new business
development, fourth quarter core ad revenue rose 47.4%, marking the
Company’s highest growth rate in this metric in 2013. Nexstar’s
strong core television ad growth was complemented by a 67.1% rise
in retransmission fee revenue and a 24.4% increase in digital media
revenue which collectively more than offset the impact of a $25.8
million, or 94.4%, year-over-year reduction in political
revenue.
“In addition to the strong core ad revenue growth, total
combined fourth quarter retransmission fee and digital media
revenue rose 56.4% to $33.4 million, representing 24.2% of 2013
fourth quarter net revenue. By comparison, total fourth quarter
retransmission fee and digital media revenue comprised 18.4% of net
revenue in the year-ago period and 16.9% of net revenue in the 2011
fourth quarter.
“The rise in fourth quarter station direct operating expenses
(net of trade expense) and SG&A primarily reflects higher
variable costs related to the significant increase in national and
local revenues and the operation of new stations. Corporate expense
declined as the year-ago period included approximately $2.6 million
in non-recurring expenses associated with personnel costs, recently
announced strategic transactions, and expenses related to capital
market activity compared to approximately $0.7 million in such
expenses in the 2013 fourth quarter. Notwithstanding these one-time
expenses, fourth quarter adjusted EBITDA grew 2.5% while fourth
quarter 2013 free cash flow was up 113.7% from the fourth quarter
of 2011, the previous non-political period, and exceeded the prior
year despite the benefit in Q4’12 of nearly $26 million of
additional political revenue.
“Throughout 2013 and in the fourth quarter, Nexstar actively
executed its long-term strategy to identify and structure accretive
transactions that expand our operating and revenue base to drive
free cash flow growth. In November, Nexstar entered into a
definitive agreement to acquire the stock of Grant Company, Inc.,
the owner of seven television stations in four markets, for $87.5
million in a transaction that is expected to be immediately
accretive to Nexstar’s free cash flow upon closing. We followed
this in December in conjunction with an agreement with Mission
Broadcasting, Inc. (“Mission”), to acquire six television stations
in two markets for $37.5 million, in transactions which are also
expected to be immediately accretive upon closing.
“Since July 2012, Nexstar has doubled the portfolio of
television stations that it owns or provides services to as we and
Mission acquired or agreed to acquire 55 television stations for a
total value of approximately $862 million. Significantly, all of
these transactions are accretive to free cash flow, strategically
diversify our and Mission’s revenue and operating base and create
additional duopolies or virtual duopolies. Upon completing all
announced transactions, and consistent with our M&A criteria
that emphasizes the development of duopolies, we will own or
provide services to multiple stations in 37 of the 56 markets where
we will operate. Our remaining pending transactions are before the
FCC and are expected to close in the second quarter.
“Pro-forma for the completion of these transactions we believe
Nexstar will generate free cash flow in excess of $350 million
during the 2014/2015 cycle, or average pro-forma free cash flow of
approximately $5.85 per share per year, in this two year period.
This level of free cash flow, which reflects continued reductions
in our cost of borrowings, is expected to result in Nexstar’s net
leverage declining to the mid-3x level at the end of 2014. With
significant and growing free cash flow Nexstar is positioned with
the financial capacity and flexibility to further consolidate
mid-sized markets and pursue accretive digital media transaction
while returning capital to shareholders and in January we announced
a 25% increase in the amount of our quarterly cash dividend.”
The consolidated total debt of Nexstar, its wholly owned
subsidiaries, and Mission (collectively, the “Company”) at December
31, 2013, was $1,071.1 million and senior unsecured debt was $545.4
million. The Company’s total net leverage ratio at December 31,
2013 was 5.84x compared to a total permitted leverage covenant of
7.25x. The Company’s first lien net indebtedness ratio at December
31, 2013 was 2.86x compared to the covenant maximum of 4.00x.
The table below summarizes the Company’s debt obligations:
($ in
millions)
12/31/13 12/31/12 First Lien Revolvers $
-
$
-
First Lien Term Loans $ 545.4 $ 288.2 8.875% Senior Second Lien
Notes due 2017 $
-
$ 319.4 6.875% Senior Notes due 2020 $ 525.7
$ 250.0
Total Debt $ 1,071.1 $ 857.6
Cash
on hand $ 40.0 $ 69.0
Dividends
On January 17, 2014 the Board of Directors approved a 25 percent
increase in the quarterly cash dividend to $0.15 per share of
Nexstar’s Class A common stock beginning with the dividend declared
for the first quarter of 2014. The dividend is payable on Friday,
February 28, 2014, to shareholders of record on Friday, February
14, 2014.
Option Grant
In January and February 2014, options to purchase 745,000 shares
of the Company’s Class A Common Stock at exercise prices of $46.03
and $46.77 per share were granted to 53 officers and directors of
the Company. The options had an aggregate fair value of $23.8
million, which will be recognized ratably over the four year
vesting period of the options. The Company anticipates that the
option grant will result in a non-cash charge of up to
approximately $5.4 million in 2014 and up to approximately $6.0
million annually in 2015, 2016 and 2017 based on the option terms
and anticipated forfeiture rate.
Fourth Quarter Conference Call
Nexstar will host a conference call at 10:00 a.m. ET today.
Senior management will discuss the financial results and host a
question and answer session. The dial in number for the audio
conference call is 719/325-2177, conference ID 1280601 (domestic
and international callers). In addition, a live audio webcast of
the call will be accessible to the public on Nexstar’s web site,
www.nexstar.tv and a recording of the webcast will be archived on
the site for 90 days following the live event.
Definitions and Disclosures Regarding non-GAAP Financial
Information
Broadcast cash flow is calculated as income from operations,
plus corporate expenses, depreciation, amortization of intangible
assets and broadcast rights (excluding barter) and loss (gain) on
asset disposal, net, minus broadcast rights payments.
Adjusted EBITDA is calculated as broadcast cash flow less
corporate expenses.
Free cash flow is calculated as income from operations plus
depreciation, amortization of intangible assets and broadcast
rights (excluding barter), loss (gain) on asset disposal, net, and
non-cash stock option expense, less payments for broadcast rights,
cash interest expense, capital expenditures and net cash income
taxes.
Broadcast cash flow, adjusted EBITDA and free cash flow results
are non-GAAP financial measures. Nexstar believes the presentation
of these non-GAAP measures are useful to investors because they are
used by lenders to measure the Company’s ability to service debt;
by industry analysts to determine the market value of stations and
their operating performance; by management to identify the cash
available to service debt, make strategic acquisitions and
investments, maintain capital assets and fund ongoing operations
and working capital needs; and, because they reflect the most
up-to-date operating results of the stations inclusive of pending
acquisitions, TBAs or LMAs. Management believes they also provide
an additional basis from which investors can establish forecasts
and valuations for the Company’s business.
For a reconciliation of these non-GAAP financial measurements to
the GAAP financial results cited in this news announcement, please
see the supplemental tables at the end of this release.
About Nexstar Broadcasting Group, Inc.
Nexstar Broadcasting Group is a leading diversified media
company that leverages localism to bring new services and value to
consumers and advertisers through its traditional media, digital
and mobile media platforms. Nexstar owns, operates, programs or
provides sales and other services to 74 television stations and 19
related digital multicast signals reaching 44 markets or
approximately 12.1% of all U.S. television households. Nexstar’s
portfolio includes affiliates of ABC, NBC, CBS, FOX, MyNetworkTV,
The CW, Telemundo, Bounce TV and independent stations. Nexstar’s 43
community portal websites offer additional hyper-local content and
verticals for consumers and advertisers, allowing audiences to
choose where, when and how they access content while creating new
revenue opportunities.
Pro-forma for the completion of all announced transactions
Nexstar will own, operate, program or provides sales and other
services to 108 television stations and related digital multicast
signals reaching 56 markets or approximately 16.0% of all U.S.
television households.
Forward-Looking Statements
This news release includes forward-looking statements. We have
based these forward-looking statements on our current expectations
and projections about future events. Forward-looking statements
include information preceded by, followed by, or that includes the
words "guidance," "believes," "expects," "anticipates," "could," or
similar expressions. For these statements, the Company claims the
protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995.
The forward-looking statements contained in this news release,
concerning, among other things, changes in net revenue, cash flow
and operating expenses, involve risks and uncertainties, and are
subject to change based on various important factors, including the
impact of changes in national and regional economies, our ability
to service and refinance our outstanding debt, successful
integration of acquired television stations (including achievement
of synergies and cost reductions), pricing fluctuations in local
and national advertising, future regulatory actions and conditions
in the television stations' operating areas, competition from
others in the broadcast television markets served by the Company,
volatility in programming costs, the effects of governmental
regulation of broadcasting, industry consolidation, technological
developments and major world news events. Unless required by law,
we undertake no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise. In light of these risks, uncertainties and
assumptions, the forward-looking events discussed in this news
release might not occur. You should not place undue reliance on
these forward-looking statements, which speak only as of the date
of this release. For more details on factors that could affect
these expectations, please see our filings with the Securities and
Exchange Commission.
Nexstar Broadcasting Group,
Inc.Condensed Consolidated Statements of Operations(in
thousands, except per share amounts - unaudited)
Three Months EndedDecember
31,
Twelve Months EndedDecember
31,
2013 2012
2013 2012
Net revenue
$
138,122
$
116,174
$
502,330
$
378,632 Operating expenses: Station direct operating
expenses, net of trade, depreciation and amortization
37,251
23,696 139,807 84,743 Selling, general, and administrative expenses
net of depreciation and amortization 34,271 27,552 124,594 92,899
Loss on asset disposal, net 1,245 493 1,280 468 Trade and barter
expense 8,129 6,144 30,730 20,841 Corporate expenses 6,045 8,212
26,339 24,636 Amortization of broadcast rights, excluding barter
3,068 2,102 12,613 8,591 Amortization of intangible assets 7,248
6,399 30,148 22,994 Depreciation 8,787 6,196
33,578 23,555 Total operating
expenses 106,044 80,794 399,089
278,727 Income from operations 32,078 35,380
103,241 99,905 Interest expense, net (15,891 ) (13,638 )
(66,243 ) (51,559 ) Loss on extinguishment of debt (33,676 ) (2,775
) (34,724 ) (3,272 ) Other Expense (1,207 ) -
(1,459 ) - (Loss) income from continuing
operations before income tax expense (18,696 ) 18,967 815 45,074
Income tax benefit (expense) 6,244 136,991
(2,600 ) 132,279 (Loss) income from
continuing operations (12,452 ) 155,958 (1,785 ) 177,353 Gain on
disposal of station, net of income tax expense of $3,098 -
5,139 - 5,139
Net (loss) income
(12,452
)
161,097
(1,785
)
182,492
(Loss) income per common share from continuing operations: Basic
(0.41 ) 5.36 (0.06 ) 6.13 Diluted (0.41 ) 4.99 (0.06 ) 5.77 Gain on
disposal of station, net of income tax expense, per common share:
Basic - 0.18 - 0.18 Diluted - 0.16 - 0.17 Net (loss) income per
common share: Basic (0.41 ) 5.53 (0.06 ) 6.31 Diluted (0.41 ) 5.16
(0.06 ) 5.94 Weighted average number of shares outstanding: Basic
30,465 29,117 29,897 28,940 Diluted 30,465 31,243 29,897 30,732
Nexstar Broadcasting Group,
Inc.Reconciliation of Broadcast Cash Flow and Adjusted
EBITDA (Non-GAAP Measures)(in thousands - unaudited)
Three Months EndedDecember
31,
Twelve Months EndedDecember
31,
Broadcast Cash Flow and Adjusted EBITDA: 2013
2012 2013
2012 Income from
operations:
$
32,078
$
35,380
$
103,241
$
99,905 Add: Depreciation 8,787 6,196 33,578 23,555 Amortization of
intangible assets 7,248 6,399 30,148 22,994 Amortization of
broadcast rights, excluding barter
3,068
2,102
12,613
8,591
Loss on asset disposal, net 1,245 493 1,280 468 Corporate expenses
6,045 8,212 26,339 24,636 Less: Payments for broadcast
rights 3,160 2,488
14,191 9,169 Broadcast cash flow 55,311
56,294 193,008 170,980 Less: Corporate expenses 6,045
8,212 26,339
24,636 Adjusted EBITDA $ 49,266
$ 48,082 $ 166,669 $ 146,344
Nexstar Broadcasting Group,
Inc.Reconciliation of Free Cash Flow (Non-GAAP
Measure)(in thousands - unaudited)
Three Months EndedDecember
31,
Twelve Months EndedDecember
31,
Free Cash Flow: 2013
2012 2013
2012 Income from operations:
$
32,078
$
35,380
$
103,241
$
99,905 Add: Depreciation 8,787 6,196 33,578 23,555
Amortization of intangible assets 7,248 6,399 30,148 22,994
Amortization of broadcast rights, excluding barter 3,068 2,102
12,613 8,591 Loss on asset disposal, net 1,245 493 1,280 468
Non-cash stock option expense 500 637 2,080 1,362 Less:
Payments for broadcast rights 3,160 2,488 14,191 9,169 Cash
interest expense 15,194 12,953 62,963 48,570 Capital expenditures
1,880 6,039 18,736 17,024 Cash income taxes, net of refunds
(14
)
1,075 2,129
1,597 Free cash flow $ 32,706 $ 28,652
$ 84,921 $ 80,515
Nexstar Broadcasting Group, Inc.Thomas E. Carter,
972-373-8800Chief Financial OfficerorJCIRJoseph Jaffoni,
212-835-8500nxst@jcir.comorJennifer Neuman,
212-835-8500nxst@jcir.com
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