Company Quick10K Filing
Quick10K
Mission Broadcasting
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2018-10-26 Enter Agreement, Off-BS Arrangement, Exhibits
MDXL Medixall Group 197
BUDZ Weed 46
WISH Wright Investors 9
CURM CUR Media 3
IMUC Immunocellular Therapeutics 1
BRRM Bare Metal Standard 0
IFCN IMH Financial 0
GBBT Global Boatworks Holdings 0
VDH Vigilant Diversified Holdings 0
ZDPY Zoned Properties 0
MBCC 2019-06-30
Part I. Financial Information
Item 1. Financial Statements
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 mbcc-ex311_6.htm
EX-32.1 mbcc-ex321_7.htm

Mission Broadcasting Earnings 2019-06-30

MBCC 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

mbcc-10q_20190630.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                     .

Commission File Number: 333-62916-02

 

MISSION BROADCASTING, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

 

51-0388022

(State of Incorporation or Organization)

 

(I.R.S. Employer Identification No.)

30400 Detroit Road, Suite 304, Westlake, Ohio

 

44145

(Address of Principal Executive Offices)

 

(Zip Code)

Registrant’s Telephone Number, Including Area Code: (440) 526-2227

Former name, former address and former fiscal year, if changed since last report:

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

 

 

 

 

 

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.    Yes      No  

Note: The registrant is a voluntary filer and is not subject to the filing requirements. However, the registrant 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.

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      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.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

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      No  

As of August 12, 2019, the Registrant had 1,000 shares of common stock outstanding, held by two shareholders.

 

 

 


TABLE OF CONTENTS

 

 

 

  

 

  

Page

PART I

  

FINANCIAL INFORMATION

  

 

 

 

 

 

 

ITEM 1.

  

Financial Statements (Unaudited)

  

 

 

 

 

 

 

 

  

Condensed Balance Sheets as of June 30, 2019 and December 31, 2018

  

1

 

 

 

 

 

 

  

Condensed Statements of Operations for the three and six months ended June 30, 2019 and 2018

  

2

 

 

 

 

 

 

 

Condensed Statements of Changes in Shareholders' Deficit for the three and six months ended June 30, 2019 and 2018

 

3

 

 

 

 

 

 

  

Condensed Statements of Cash Flows for the six months ended June 30, 2019 and 2018

  

4

 

 

 

 

 

 

  

Notes to Condensed Financial Statements

  

5

 

 

 

 

 

ITEM 2.

  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

  

15

 

 

 

 

 

ITEM 3.

  

Quantitative and Qualitative Disclosures about Market Risk

  

23

 

 

 

 

 

ITEM 4.

  

Controls and Procedures

  

23

 

 

 

 

 

PART II

  

OTHER INFORMATION

  

 

 

 

 

 

 

ITEM 1.

  

Legal Proceedings

  

24

 

 

 

 

 

ITEM 1A.

  

Risk Factors

  

24

 

 

 

 

 

ITEM 2.

  

Unregistered Sales of Equity Securities and Use of Proceeds

  

24

 

 

 

 

 

ITEM 3.

  

Defaults Upon Senior Securities

  

24

 

 

 

 

 

ITEM 4.

  

Mine Safety Disclosures

  

24

 

 

 

 

 

ITEM 5.

  

Other Information

  

24

 

 

 

 

 

ITEM 6.

  

Exhibits

  

24

 

 

 

 

 


PART I. FINANCIAL INFORMATION

 

ITEM 1.

Financial Statements

MISSION BROADCASTING, INC.

CONDENSED BALANCE SHEETS

(in thousands, except for share and per share information, unaudited)

 

 

June 30,

 

 

December 31,

 

 

2019

 

 

2018

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

8,970

 

 

$

10,798

 

Accounts receivable, net of allowance for doubtful accounts of $249 and $222, respectively

 

14,236

 

 

 

12,857

 

Due from Nexstar Broadcasting, Inc.

 

69,273

 

 

 

77,521

 

Prepaid expenses and other current assets

 

621

 

 

 

1,130

 

Total current assets

 

93,100

 

 

 

102,306

 

Property and equipment, net

 

22,167

 

 

 

19,867

 

Goodwill

 

33,187

 

 

 

33,187

 

FCC licenses

 

43,102

 

 

 

43,102

 

Other intangible assets, net

 

12,702

 

 

 

13,712

 

Deferred tax assets, net

 

5,342

 

 

 

3,485

 

Other noncurrent assets, net

 

6,654

 

 

 

936

 

Total assets

$

216,254

 

 

$

216,595

 

LIABILITIES AND SHAREHOLDERS' DEFICIT

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Current portion of debt

$

2,285

 

 

$

2,285

 

Current portion of broadcast rights payable

 

297

 

 

 

325

 

Accounts payable

 

1,390

 

 

 

1,832

 

Interest payable

 

829

 

 

 

152

 

Accrued capital expenditures

 

1,823

 

 

 

1,251

 

Other accrued expenses

 

1,892

 

 

 

1,992

 

Current operating lease liabilities

 

1,925

 

 

 

721

 

Total current liabilities

 

10,441

 

 

 

8,558

 

Debt

 

221,560

 

 

 

222,354

 

Other noncurrent liabilities

 

10,842

 

 

 

6,820

 

Total liabilities

 

242,843

 

 

 

237,732

 

Commitments and contingencies (Note 10)

 

 

 

 

 

 

 

Shareholders' deficit:

 

 

 

 

 

 

 

Common stock - $1 par value, 1,000 shares authorized, issued and outstanding as of each of

June 30, 2019 and December 31, 2018

 

1

 

 

 

1

 

Subscription receivable

 

(1

)

 

 

(1

)

Accumulated deficit

 

(26,589

)

 

 

(21,137

)

Total shareholders' deficit

 

(26,589

)

 

 

(21,137

)

Total liabilities and shareholders' deficit

$

216,254

 

 

$

216,595

 

The accompanying Notes are an integral part of these Condensed Financial Statements.

 

 

 

1


MISSION BROADCASTING, INC.

CONDENSED STATEMENTS OF OPERATIONS

(in thousands, unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

 

 

2018

 

Net broadcast revenue

 

$

18,910

 

 

$

17,606

 

 

$

38,317

 

 

 

 

$

33,763

 

Revenue from Nexstar Broadcasting, Inc.

 

 

8,262

 

 

 

9,058

 

 

 

16,024

 

 

 

 

 

17,486

 

Net revenue

 

 

27,172

 

 

 

26,664

 

 

 

54,341

 

 

 

 

 

51,249

 

Operating expenses (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct operating expenses, excluding depreciation and amortization

 

 

11,995

 

 

 

10,013

 

 

 

24,031

 

 

 

 

 

20,160

 

Selling, general and administrative expenses, excluding depreciation and amortization

 

 

998

 

 

 

1,112

 

 

 

1,989

 

 

 

 

 

2,328

 

Fees incurred pursuant to local service agreements with Nexstar Broadcasting, Inc.

 

 

14,575

 

 

 

13,250

 

 

 

29,150

 

 

 

 

 

26,500

 

Amortization of broadcast rights

 

 

369

 

 

 

409

 

 

 

752

 

 

 

 

 

821

 

Amortization of intangible assets

 

 

491

 

 

 

540

 

 

 

1,010

 

 

 

 

 

1,084

 

Depreciation

 

 

620

 

 

 

504

 

 

 

1,228

 

 

 

 

 

1,021

 

Reimbursement from the FCC related to station repack

 

 

(764

)

 

 

(187

)

 

 

(2,300

)

 

 

 

 

(187

)

Total operating expenses

 

 

28,284

 

 

 

25,641

 

 

 

55,860

 

 

 

 

 

51,727

 

(Loss) Income from operations

 

 

(1,112

)

 

 

1,023

 

 

 

(1,519

)

 

 

 

 

(478

)

Interest expense

 

 

(2,898

)

 

 

(2,739

)

 

 

(5,784

)

 

 

 

 

(5,350

)

Loss before income taxes

 

 

(4,010

)

 

 

(1,716

)

 

 

(7,303

)

 

 

 

 

(5,828

)

Income tax benefit

 

 

1,016

 

 

 

425

 

 

 

1,851

 

 

 

 

 

1,406

 

Net loss

 

$

(2,994

)

 

$

(1,291

)

 

$

(5,452

)

 

 

 

$

(4,422

)

The accompanying Notes are an integral part of these Condensed Financial Statements.

 

 

 

2


MISSION BROADCASTING, INC.

CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT

For the Three and Six Months Ended June 30, 2019 and 2018

(in thousands, except share information, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Subscription

 

 

Accumulated

 

 

Shareholders'

 

 

 

Shares

 

 

Amount

 

 

Receivable

 

 

Deficit

 

 

Deficit

 

Balances as of March 31, 2019

 

 

1,000

 

 

$

1

 

 

$

(1

)

 

$

(23,595

)

 

$

(23,595

)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,994

)

 

 

(2,994

)

Balances as of June 30, 2019

 

 

1,000

 

 

$

1

 

 

$

(1

)

 

$

(26,589

)

 

$

(26,589

)

 

Balances as of March 31, 2018

 

 

1,000

 

 

$

1

 

 

$

(1

)

 

$

(18,439

)

 

$

(18,439

)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,291

)

 

 

(1,291

)

Balances as of June 30, 2018

 

 

1,000

 

 

$

1

 

 

$

(1

)

 

$

(19,730

)

 

$

(19,730

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Subscription

 

 

Accumulated

 

 

Shareholders'

 

 

 

Shares

 

 

Amount

 

 

Receivable

 

 

Deficit

 

 

Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances as of December 31, 2018

 

 

1,000

 

 

$

1

 

 

$

(1

)

 

$

(21,137

)

 

$

(21,137

)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(5,452

)

 

 

(5,452

)

Balances as of June 30, 2019

 

 

1,000

 

 

$

1

 

 

$

(1

)

 

$

(26,589

)

 

$

(26,589

)

 

Balances as of December 31, 2017

 

 

1,000

 

 

$

1

 

 

$

(1

)

 

$

(15,308

)

 

$

(15,308

)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(4,422

)

 

 

(4,422

)

Balances as of June 30, 2018

 

 

1,000

 

 

$

1

 

 

$

(1

)

 

$

(19,730

)

 

$

(19,730

)

 

The accompanying Notes are an integral part of these Condensed Financial Statements.


3


MISSION BROADCASTING, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(5,452

)

 

$

(4,422

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Deferred income tax benefit

 

 

(1,857

)

 

 

(1,458

)

Provision for bad debt

 

 

27

 

 

 

48

 

Depreciation of property and equipment

 

 

1,228

 

 

 

1,021

 

Amortization of intangible assets

 

 

1,010

 

 

 

1,084

 

Amortization of debt financing costs and debt discount

 

 

354

 

 

 

386

 

Amortization of broadcast rights

 

 

752

 

 

 

821

 

Payments for broadcast rights

 

 

(752

)

 

 

(817

)

Other noncash credits, net

 

 

(511

)

 

 

(99

)

Spectrum repack reimbursements from the FCC

 

 

(2,300

)

 

 

(187

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(1,406

)

 

 

1,726

 

Prepaid expenses and other current assets

 

 

404

 

 

 

80

 

Other noncurrent assets

 

 

91

 

 

 

(3

)

Accounts payable

 

 

(442

)

 

 

722

 

Accrued expenses and other current liabilities

 

 

577

 

 

 

(8,221

)

Other noncurrent liabilities

 

 

-

 

 

 

(217

)

Due from Nexstar Broadcasting, Inc.

 

 

8,248

 

 

 

8,051

 

Net cash used in operating activities

 

 

(29

)

 

 

(1,485

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(2,956

)

 

 

(512

)

Spectrum repack reimbursements from the FCC

 

 

2,300

 

 

 

187

 

Net cash used in investing activities

 

 

(656

)

 

 

(325

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Repayments of long-term debt

 

 

(1,143

)

 

 

(1,157

)

Net cash used in financing activities

 

 

(1,143

)

 

 

(1,157

)

Net decrease in cash and cash equivalents

 

 

(1,828

)

 

 

(2,967

)

Cash and cash equivalents at beginning of period

 

 

10,798

 

 

 

9,524

 

Cash and cash equivalents at end of period

 

$

8,970

 

 

$

6,557

 

 

 

 

 

 

 

 

 

 

Supplemental information:

 

 

 

 

 

 

 

 

Interest paid

 

$

4,752

 

 

$

4,845

 

Income tax (refunded) paid, net

 

$

(226

)

 

$

105

 

Non-cash investing and financing activities

 

 

 

 

 

 

 

 

Accrued purchases of property and equipment

 

$

1,823

 

 

$

1,126

 

Right-of-use assets obtained in exchange for operating lease obligations (1)

 

$

6,450

 

 

$

-

 

The accompanying Notes are an integral part of these Condensed Financial Statements.

 

 

 

(1)   The entire amount represents transition adjustment for the adoption of ASC 842.

4


MISSION BROADCASTING, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

 

 

1.  Organization and Business Operations

As of June 30, 2019, Mission Broadcasting, Inc. (“Mission” or the “Company”) owned and operated 19 full power television stations, affiliated with the NBC, ABC, CBS, FOX, The CW and other broadcast television networks, in 18 markets located in the states of Arkansas, Colorado, Illinois, Indiana, Louisiana, Missouri, Montana, New York, Pennsylvania, Texas and Vermont. The Company operates in one reportable television broadcasting segment. Through local service agreements, Nexstar Broadcasting, Inc., a subsidiary of Nexstar Media Group, Inc. (collectively “Nexstar”), provides sales and operating services to all of the Mission television stations (see Note 3).

The Company is highly leveraged, which makes it vulnerable to changes in general economic conditions. The Company’s ability to repay or refinance its debt will depend on, among other things, financial, business, market, competitive and other conditions, many of which are beyond its control, as well as Nexstar maintaining its pledge to continue the local service agreements with the Company’s stations. Management believes that with Nexstar’s pledge to continue the local service agreements as described in a letter of support dated March 22, 2019, the Company’s available cash, anticipated cash flow from operations and available borrowings under its senior secured credit facility should be sufficient to fund working capital, capital expenditure requirements, interest payments and scheduled debt principal payments for at least the next 12 months from August 12, 2019, enabling Mission to continue to operate as a going concern.

Nexstar’s senior secured credit agreement contains a covenant which requires Nexstar to comply with a maximum consolidated first lien net leverage ratio of 4.25 to 1.00. The financial covenant, which is formally calculated on a quarterly basis, is based on the combined results of Nexstar and its variable interest entities, including Mission. Mission’s credit agreement does not contain financial covenant ratio requirements but does provide for default in the event Nexstar does not comply with all covenants contained in its credit agreement. As of June 30, 2019, Nexstar has informed Mission that it was in compliance with all covenants contained in its credit agreement and the indentures governing its senior unsecured notes.

 

2.  Summary of Significant Accounting Policies

Interim Financial Statements

The Condensed Financial Statements as of June 30, 2019 and for the three and six months ended June 30, 2019 and 2018 are unaudited. However, in the opinion of management, such financial statements include all adjustments (consisting solely of normal recurring adjustments) necessary for the fair statement of the financial information included herein in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). The preparation of the Condensed Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. Results of operations for interim periods are not necessarily indicative of results for the full year. These Condensed Financial Statements should be read in conjunction with the Financial Statements and related Notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. The balance sheet as of December 31, 2018 has been derived from the audited Financial Statements as of that date but does not include all the information and footnotes required by U.S. GAAP for complete financial statements.

Leases

As discussed in the “Recent Accounting Pronouncements” Section below, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) and all related amendments issued by the Financial Accounting Standards Board (“FASB”). Accounting Standards Codification (“ASC”) 842 establishes a comprehensive new lease accounting model that requires the recording of assets and liabilities arising from operating leases on the balance sheet accompanied by enhanced qualitative and quantitative disclosures in the notes to the financial statements. The standard was issued to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flow arising from leases.

The Company adopted this standard effective January 1, 2019 using the optional transition method. The most significant impact was the recognition of right-of-use (“ROU”) assets and lease liabilities for operating leases. Financial information for reporting periods beginning after January 1, 2019 is presented under ASC 842, while comparative financial information has not been adjusted and continues to be reported in accordance with the Company’s historical accounting policy for lease contracts prior to the adoption of ASC 842.

 

5


The Company has elected the package of practical expedients permitted under the transition guidance within ASC 842, which permits the Company to carry forward the historical lease classification and not reassess whether any expired or existing contracts are or contain leases. In addition, the Company is not required to reassess initial direct costs for any existing leases. The Company did not elect the land easements and the use of hindsight practical expedients in determining the lease term for existing leases. ASC 842 also provides practical expedients for an entity’s ongoing accounting. The Company has elected the short-term lease recognition exemption for all leases that qualify. As a result, for those leases with a term of less than 12 months, it will not recognize ROU assets or lease liabilities. The vast majority of the Company’s television station leases are comprised of fixed lease payments, with a small percentage of television station lease payments that are tied to a rate or index which may be subject to variability. For these leases, the calculation of the present value of future minimum lease payments is the base rate as of the later of (i) when the television station was acquired by the Company, or (ii) the commencement date of the lease agreement. Certain real estate leases also include executory costs such as common area maintenance (non-lease component), as well as property insurance and property taxes (non-components). These are not significant and the Company historically excluded these executory costs from its future minimum lease payments under its historical policy prior to the adoption of ASC 842. As such, the executory costs were excluded from the calculation of ROU assets and lease liabilities associated with operating leases upon transition. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise that option. The discount rate represents a risk-adjusted rate on a secured basis, and is the rate at which the Company would borrow funds to satisfy the scheduled lease liability payment streams commensurate with the lease term. On January 1, 2019, the discount rate used on existing leases at adoption was determined based on the remaining lease term using available data as of that date.

The Company recognized operating lease ROU assets on its Condensed Balance Sheet as of January 1, 2019 of $6.5 million, inclusive of the present value of remaining future operating lease payments of $11.0 million and reclassifications of certain operating lease related assets and liabilities under the Company’s historical accounting policy prior to the adoption of ASC 842 such as deferred rent, short-term prepaid expenses and other accruals. These are summarized in the table below (in thousands). The adoption did not result in a cumulative impact on retained earnings as of January 1, 2019.

 

 

 

 

 

ASC 842 Adoption Adjustments

 

 

 

 

 

 

 

 

Present Value of Remaining

 

Reclassifications of Operating Lease Related Balance Sheet Items to Operating Lease Right-of-Use Assets

 

 

 

 

Impact on Condensed Balance Sheets

December 31, 2018

 

Operating Lease Payments as of January 1, 2019

 

Deferred Rent

 

Other

 

Total

 

January 1, 2019

 

    Prepaid expenses and other current assets

$

1,130

 

$

-

 

$

-

 

$

(77

)

$

(77

)

$

1,053

 

    Other intangible assets, net

 

13,712

 

 

-

 

 

-

 

 

-

 

 

-

 

 

13,712

 

    Other noncurrent assets, net

 

936

 

 

10,957

 

 

(4,175

)

 

(332

)

 

6,450

 

 

7,386

 

Total Assets

 

216,595

 

 

10,957

 

 

(4,175

)

 

(409

)

 

6,373

 

 

222,968

 

    Other current liabilities

 

8,558

 

 

1,802

 

 

(531

)

 

(198

)

 

1,073

 

 

9,631

 

    Other noncurrent liabilities

 

6,820

 

 

9,155

 

 

(3,644

)

 

(211

)

 

5,300

 

 

12,120

 

Total Liabilities

 

237,732

 

 

10,957

 

 

(4,175

)

 

(409

)

 

6,373

 

 

244,105

 

After transition to ASC 842, the Company determines if an arrangement is a lease at inception. The ROU assets arising from operating leases are included in other noncurrent assets, current operating lease liabilities and other noncurrent liabilities in the accompanying Condensed Balance Sheets. Operating lease ROU assets and operating lease liabilities that are recognized after the adoption of ASC 842 are based on the present value of the future minimum lease payments over the lease term at the commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and executory costs (not significant). The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise that option. When determining if a renewal option is reasonably certain of being exercised, the Company considers several factors, including but not limited to the significance of leasehold improvements incurred on the property, whether the asset is difficult to replace, or specific characteristics unique to the particular lease that would make it reasonably certain that the Company would exercise such option. In most cases, the Company has concluded that renewal and early termination options are not reasonably certain of being exercised by the Company (and thus not included in its ROU asset and lease liability) unless there is an economic, financial or business reason to do so. As most of the Company’s leases do not provide an implicit rate, the incremental borrowing rate was used based on the information available at the commencement date in determining the present value of future lease payments. The discount rate represents a risk-adjusted rate on a secured basis and is the rate at which the Company would borrow funds to satisfy the scheduled lease liability payment streams commensurate with the lease term. For new or renewed leases starting in 2019, the discount rate is determined using available data at lease commencement and based on the lease term including any reasonably certain renewal periods. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

6


In rare circumstances, the Company may enter into finance leases for specific equipment or real estate used in its operations, in which the lease term is for the major part of the remaining economic life of the underlying asset or the present value of the lease payments equals or exceeds substantially all of the estimated fair value of the underlying asset. The Company will record its finance leases within property, plant and equipment, other current liabilities and other noncurrent liabilities on the accompanying Condensed Balance Sheets.

See Note 6 for additional disclosures on leases as of June 30, 2019.

Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable, broadcast rights payable, accounts payable and accrued expenses approximate fair value due to their short-term nature. See Note 5 for fair value disclosures related to the Company’s debt.

Basis of Presentation

Certain prior year financial statement amounts have been reclassified to conform to the current year presentation. These reclassifications had no effect on net loss or shareholders’ deficit as previously reported.

Recent Accounting Pronouncements

 

New Accounting Standards Adopted

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The Company adopted this standard and all related amendments effective January 1, 2019 using the optional transition method. The standard had a material impact on the Company’s Condensed Balance Sheets but did not impact its operating results, cash flows or equity. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases. The adoption did not result in a cumulative impact on retained earnings as of January 1, 2019. See Leases above for the Company’s updated accounting policy and Note 6 for expanded disclosures.

New Accounting Standards Not Yet Adopted

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326) (“ASU 2016-13”).” The standard requires entities to estimate loss of financial assets measured at amortized cost, including trade receivables, debt securities and loans, using an expected credit loss model. The expected credit loss differs from the previous incurred losses model primarily in that the loss recognition threshold of “probable” has been eliminated and that expected loss should consider reasonable and supportable forecasts in addition to the previously considered past events and current conditions. Additionally, the guidance requires additional disclosures related to the further disaggregation of information related to the credit quality of financial assets by year of the asset’s origination for as many as five years. Entities must apply the standard provision as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The standard is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted for annual periods beginning after December 15, 2018, and interim periods within those fiscal years. The Company is currently evaluating the impact of adopting ASU 2016-13 on its financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820) (“ASU 2018-13”), which modifies the disclosure requirements on fair value measurements. The amendments in this update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for any removed or modified disclosures. The Company is currently evaluating the impact of adopting ASU 2018-13 on its financial statements.

 

7


3.  Local Service Agreements with Nexstar

The Company has entered into local service agreements with Nexstar to provide sales and/or operating services to all of its stations. For the stations with a shared services agreement (“SSA”), the Nexstar station in the market provides certain services including news production, technical maintenance and security, in exchange for monthly payments to Nexstar. For each station with which the Company has entered into an SSA, it has also entered into a joint sales agreement (“JSA”), whereby Nexstar sells certain advertising time of the station and retains a percentage of the related revenue. For the stations with a time brokerage agreement (“TBA”), Nexstar programs most of the station’s broadcast time, sells the station’s advertising time and retains the advertising revenue it generates in exchange for monthly payments to Mission, based on the station’s monthly operating expenses. JSA and TBA fees generated from Nexstar under the agreements are reported as “Revenue from Nexstar Broadcasting, Inc.” and SSA fees incurred by Mission under the agreements are reported as “Fees incurred pursuant to local service agreements with Nexstar Broadcasting, Inc.” in the accompanying Condensed Statements of Operations.

Under these agreements, Mission is responsible for certain operating expenses of its stations and therefore may have unlimited exposure to any potential operating losses. Mission will continue to operate its stations under the SSAs and JSAs or TBAs until the termination of such agreements. The local service agreements generally have a term of eight to ten years and have terms for renewal periods. Nexstar indemnifies Mission from Nexstar’s activities pursuant to the local service agreements.

Under the local service agreements, Nexstar receives substantially all of the Company’s available cash, after satisfaction of operating costs and debt obligations. The Company anticipates that Nexstar will continue to receive substantially all of its available cash, after satisfaction of operating costs and debt obligations. In compliance with Federal Communications Commission (“FCC”) regulations for both the Company and Nexstar, Mission maintains complete responsibility for and control over programming, finances, personnel and operations of its stations. Mission had the following local service agreements in effect with Nexstar as of June 30, 2019:

 

Service Agreements

 

Full Power Stations

TBA Only

 

WFXP, KHMT and KFQX

SSA & JSA

 

KJTL, KLRT, KASN, KOLR, KCIT, KAMC, KRBC, KSAN, WUTR, WAWV, WYOU, KODE, WTVO, KTVE, WTVW and WVNY

 

 

4.  Intangible Assets and Goodwill

Intangible assets subject to amortization consisted of the following (in thousands):

 

 

 

Estimated

 

 

June 30, 2019

 

 

December 31, 2018

 

 

 

useful life,

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

in years

 

 

Gross

 

 

Amortization

 

 

Net

 

 

Gross

 

 

Amortization

 

 

Net

 

Network affiliation agreements

 

 

15

 

 

$

86,248

 

 

$

(74,100

)

 

$

12,148

 

 

$

86,248

 

 

$

(73,153

)

 

$

13,095

 

Other definite-lived intangible assets

 

1-15

 

 

 

15,681

 

 

 

(15,127

)

 

 

554

 

 

 

15,681

 

 

 

(15,064

)

 

 

617

 

Other intangible assets

 

 

 

 

 

$

101,929

 

 

$

(89,227

)

 

$

12,702

 

 

$

101,929

 

 

$

(88,217

)

 

$

13,712

 

 

The following table presents the Company’s estimate of amortization expense for the remainder of 2019, each of the five succeeding years ended December 31 and thereafter for definite-lived intangible assets as of June 30, 2019 (in thousands):

 

 

 

 

 

 

Remainder of 2019

 

$

909

 

2020

 

 

1,518

 

2021

 

 

1,517

 

2022

 

 

1,517

 

2023

 

 

1,444

 

Thereafter

 

 

5,797

 

 

 

$

12,702

 

 

8


The carrying amounts of goodwill and FCC licenses were as follows (in thousands):

 

 

 

Goodwill

 

 

FCC Licenses

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

Gross

 

 

Impairment

 

 

Net

 

 

Gross

 

 

Impairment

 

 

Net

 

Balances as of December 31, 2018

 

$

34,737

 

 

$

(1,550

)

 

$

33,187

 

 

$

53,799

 

 

$

(10,697

)

 

$

43,102

 

Balances as of June 30, 2019

 

$

34,737

 

 

$

(1,550

)

 

$

33,187

 

 

$

53,799

 

 

$

(10,697

)

 

$

43,102

 

 

Indefinite-lived intangible assets are not subject to amortization but are tested for impairment annually or whenever events or changes in circumstances indicate that such assets might be impaired. During the three and six months ended June 30, 2019, the Company did not identify any events that would trigger an impairment assessment.

 

5.  Debt

Long-term debt consisted of the following (in thousands):

 

 

 

June 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

Term loans, net of financing costs and discount of $3,539 and $3,888, respectively

 

$

223,845

 

 

$

224,639

 

Less: current portion

 

 

(2,285

)