Company Quick10K Filing
TEGNA
Price14.74 EPS1
Shares218 P/E16
MCap3,218 P/FCF15
Net Debt4,199 EBIT400
TEV7,417 TEV/EBIT19
TTM 2019-09-30, in MM, except price, ratios
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8-K 2020-11-09
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8-K 2018-02-22
8-K 2018-01-10

TGNA 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Note 1 - Accounting Policies
Note 2 - Goodwill and Other Intangible Assets
Note 3 - Investments and Other Assets
Note 4 - Long - Term Debt
Note 5 - Retirement Plans
Note 6 - Accumulated Other Comprehensive Loss
Note 7 - Earnings per Share
Note 8 - Fair Value Measurement
Note 9 - Other Matters
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-10.1 tgna-ex101_20210331x10q.htm
EX-10.2 tgna-ex102_20210331x10q.htm
EX-31.1 tgna-ex311_20210331x10q.htm
EX-31.2 tgna-ex312_20210331x10q.htm
EX-32.1 tgna-ex321_20210331x10q.htm
EX-32.2 tgna-ex322_20210331x10q.htm

TEGNA Earnings 2021-03-31

Balance SheetIncome StatementCash Flow
151296302012201420172020
Assets, Equity
1.81.41.00.60.2-0.22012201420172020
Rev, G Profit, Net Income
1.30.70.0-0.6-1.3-1.92012201420172020
Ops, Inv, Fin

tgna-20210331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 10-Q
_______________________
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
OR
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-6961
___________________________
TEGNA INC.
(Exact name of registrant as specified in its charter)
___________________________
Delaware
16-0442930
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
   8350 Broad Street, Suite 2000,Tysons,Virginia22102-5151
(Address of principal executive offices)(Zip Code)
(703) 873-6600
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common StockTGNANew 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. Yes 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). 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

The total number of shares of the registrant’s Common Stock, $1 par value, outstanding as of April 30, 2021 was 220,773,150.



INDEX TO TEGNA INC.
March 31, 2021 FORM 10-Q
 
Item No. Page
PART I. FINANCIAL INFORMATION
1.Financial Statements
2.
3.
4.
PART II. OTHER INFORMATION
1.
1A.
2.
3.
4.
5.
6.
2


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

TEGNA Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
In thousands of dollars (Unaudited)
Mar. 31, 2021Dec. 31, 2020
ASSETS
Current assets
Cash and cash equivalents$12,853 $40,968 
Accounts receivable, net of allowances of $7,188 and $7,035, respectively
613,896 550,755 
Other receivables11,653 14,031 
Syndicated programming rights32,283 47,331 
Prepaid expenses and other current assets22,276 19,509 
Total current assets692,961 672,594 
Property and equipment
Cost1,039,632 1,026,459 
Less accumulated depreciation(570,087)(556,100)
Net property and equipment469,545 470,359 
Intangible and other assets
Goodwill2,981,587 2,968,693 
Indefinite-lived and amortizable intangible assets, less accumulated amortization of $251,342 and $235,582, respectively
2,488,740 2,503,644 
Right-of-use assets for operating leases95,759 97,190 
Investments and other assets129,217 136,219 
Total intangible and other assets5,695,303 5,705,746 
Total assets$6,857,809 $6,848,699 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3


TEGNA Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
In thousands of dollars, except par value and share amounts (Unaudited)
Mar. 31, 2021Dec. 31, 2020
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND EQUITY
Current liabilities
Accounts payable$42,972 $58,049 
Accrued liabilities
   Compensation35,153 46,213 
   Interest15,920 47,249 
   Contracts payable for programming rights100,442 130,522 
   Other79,901 78,219 
Dividends payable21,030  
Income taxes payable93,823 63,923 
Total current liabilities389,241 424,175 
Noncurrent liabilities
Income taxes9,109 7,303 
Deferred income tax liability533,280 530,240 
Long-term debt3,517,092 3,553,220 
Pension liabilities80,273 85,908 
Operating lease liabilities97,432 99,337 
Other noncurrent liabilities76,824 75,488 
Total noncurrent liabilities4,314,010 4,351,496 
Total liabilities4,703,251 4,775,671 
Commitments and contingent liabilities (see Note 9)
Redeemable noncontrolling interest (see Note 1)15,220 14,933 
Shareholders’ equity
Common stock of $1 par value per share, 800,000,000 shares authorized, 324,418,632 shares issued
324,419 324,419 
Additional paid-in capital27,596 113,267 
Retained earnings7,151,716 7,075,640 
Accumulated other comprehensive loss(119,798)(121,076)
Less treasury stock at cost, 103,728,046 shares and 104,918,360 shares, respectively
(5,244,595)(5,334,155)
Total equity2,139,338 2,058,095 
Total liabilities, redeemable noncontrolling interest and equity$6,857,809 $6,848,699 
The accompanying notes are an integral part of these condensed consolidated financial statements.


4


TEGNA Inc.
CONSOLIDATED STATEMENTS OF INCOME
Unaudited, in thousands of dollars, except per share amounts
Quarter ended Mar. 31,
20212020
Revenues$727,051 $684,189 
Operating expenses:
Cost of revenues1
394,692 369,368 
Business units - Selling, general and administrative expenses
89,326 92,968 
Corporate - General and administrative expenses
16,870 21,714 
Depreciation
15,896 16,900 
Amortization of intangible assets
15,760 16,216 
Spectrum repacking reimbursements and other, net
(1,423)(7,515)
Total531,121 509,651 
Operating income195,930 174,538 
Non-operating income (expense):
Equity (loss) income in unconsolidated investments, net (1,329)9,015 
Interest expense
(46,485)(56,960)
Other non-operating items, net330 (19,270)
Total(47,484)(67,215)
Income before income taxes148,446 107,323 
Provision for income taxes35,614 21,125 
Net Income
112,832 86,198 
Net (income) loss attributable to redeemable noncontrolling interest(215)110 
Net income attributable to TEGNA Inc.$112,617 $86,308 
Net income per share:
Basic $0.51 $0.40 
Diluted $0.51 $0.39 
Weighted average number of common shares outstanding:
Basic shares220,602 218,277 
Diluted shares221,198 218,863 
1 Cost of revenues exclude charges for depreciation and amortization expense, which are shown separately above.
The accompanying notes are an integral part of these condensed consolidated financial statements.
5


TEGNA Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Unaudited, in thousands of dollars
Quarter ended Mar. 31,
20212020
Net income$112,832 $86,198 
Other comprehensive income, before tax:
Foreign currency translation adjustments496 402 
Recognition of previously deferred post-retirement benefit plan costs1,225 1,498 
Other comprehensive income, before tax1,721 1,900 
Income tax effect related to components of other comprehensive income(443)(478)
Other comprehensive income, net of tax1,278 1,422 
Comprehensive income114,110 87,620 
Comprehensive (income) loss attributable to redeemable noncontrolling interest(215)110 
Comprehensive income attributable to TEGNA Inc.$113,895 $87,730 
The accompanying notes are an integral part of these condensed consolidated financial statements.
6


TEGNA Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited, in thousands of dollars
Three months ended Mar. 31,
20212020
Cash flows from operating activities:
Net income$112,832 $86,198 
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation and amortization31,656 33,116 
Stock-based compensation8,761 (757)
     Company stock 401(k) contribution5,304 5,138 
Equity loss (income) from unconsolidated investments, net1,329 (9,015)
Pension contributions, net of income(4,410)(3,642)
Change in other assets and liabilities, net of acquisitions:
(Increase) decrease in trade receivables(63,120)38,131 
(Decrease) increase in accounts payable(15,077)3,633 
Increase in interest and taxes payable4,320 8,775 
Increase in deferred revenue923 270 
Change in other assets and liabilities, net(24,447)15,517 
Net cash flow from operating activities58,071 177,364 
Cash flows from investing activities:
Purchase of property and equipment(13,185)(13,264)
Reimbursements from spectrum repacking1,423 7,515 
Payments for acquisitions of businesses and other assets, net of cash acquired(13,341)(15,000)
Purchases of investments(157)(509)
Proceeds from investments2,022 695 
Proceeds from sale of assets and businesses7 5,000 
Net cash flow used for investing activities(23,231)(15,563)
Cash flows from financing activities:
Payments under revolving credit facilities, net(37,000)(118,000)
Proceeds from borrowings 1,000,000 
Debt repayments (985,000)
Payments for debt issuance costs and early redemption fee (27,603)
Proceeds from sale of minority ownership interest in Premion 14,000 
Dividends paid(15,439)(30,470)
Other, net
(10,516)(9,073)
Net cash flow used for financing activities(62,955)(156,146)
(Decrease) increase in cash(28,115)5,655 
Balance of cash, beginning of period40,968 29,404 
Balance of cash, end of period$12,853 $35,059 
Supplemental cash flow information:
Cash (received) paid for income taxes, net of refunds$(33)$793 
Cash paid for interest$76,045 $66,240 
The accompanying notes are an integral part of these condensed consolidated financial statements.
7


TEGNA Inc.
CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NONCONTROLLING INTEREST
Unaudited, in thousands of dollars, except per share data
Quarters Ended:Redeemable noncontrolling interestCommon
stock
Additional
paid-in
capital
Retained
earnings
Accumulated
other
comprehensive
loss
Treasury
stock
Total Equity
Balance at Dec 31, 2020$14,933 $324,419 $113,267 $7,075,640 $(121,076)$(5,334,155)$2,058,095 
Net income215 — — 112,617 — — 112,617 
Other comprehensive income, net of tax— — — — 1,278 — 1,278 
Total comprehensive income113,895 
Dividends declared: $0.165 per share
— — — (36,469)— — (36,469)
Company stock 401(k) contribution— — (16,254)— — 21,558 5,304 
Stock-based awards activity— — (78,518)— — 68,002 (10,516)
Stock-based compensation— — 8,761 — — — 8,761 
Adjustment of redeemable noncontrolling interest to redemption value72 — — (72)— — (72)
Other activity— — 340 — — — 340 
Balance at Mar. 31, 2021$15,220 $324,419 $27,596 $7,151,716 $(119,798)$(5,244,595)$2,139,338 
Redeemable noncontrolling interestCommon
stock
Additional
paid-in
capital
Retained
earnings
Accumulated
other
comprehensive
loss
Treasury
stock
Total
Balance at Dec 31, 2019$ $324,419 $247,497 $6,655,088 $(142,597)$(5,494,030)$1,590,377 
Net income (loss)(110)— — 86,308 — — 86,308 
Other comprehensive income, net of tax— — — — 1,422 — 1,422 
Total comprehensive income(110)87,730 
Dividends declared: $0.07 per share
— — — (15,282)— — (15,282)
Company stock 401(k) contribution— — (17,831)— — 22,969 5,138 
Stock-based awards activity— — (77,129)— — 68,056 (9,073)
Stock-based compensation— — (757)— — — (757)
Sale of minority ownership interest in Premion14,000 — — — — — — 
Adjustment of redeemable noncontrolling interest to redemption value203 — — (203)— — (203)
Other activity— — 326 — — — 326 
Balance at Mar. 31, 2020$14,093 $324,419 $152,106 $6,725,911 $(141,175)$(5,403,005)$1,658,256 
The accompanying notes are an integral part of these condensed consolidated financial statements.

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TEGNA Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – Accounting policies

Basis 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, 2020.

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 fiscal year 2020 and continuing into 2021, the world has been, and continues to be, impacted by the novel coronavirus (COVID-19) pandemic. The impact of COVID-19 and the extent of its adverse impact on our financial and operating results will be dictated by the length of time that the pandemic continues to affect our advertising customers.

We use the best information available in developing significant estimates inherent in our financial statements, including potential impacts from the COVID-19 pandemic. 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. The 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 one operating and reportable segment, which primarily consists of our 64 television stations and two radio stations operating in 51 markets, providing 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.

Accounting guidance adopted in 2021: We did not adopt any accounting guidance in 2021 that had a material impact on our consolidated financial statements or disclosures.

New accounting guidance not yet adopted: There is currently no pending accounting guidance that we expect to have a material impact on our consolidated financial statements or disclosures.

Trade 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 March 31, 2021, our allowance for doubtful accounts was $7.2 million as compared to $7.0 million as of December 31, 2020.

Redeemable Noncontrolling interest: Our Premion business operates an advertising network for over-the-top (OTT) streaming and connected television platforms. In March 2020, we sold a minority interest in Premion to an affiliate of Gray Television (Gray) and entered into a 3 year commercial reselling agreement with the affiliate. Gray’s investment allows it to sell its interest to Premion if there is a change in control of TEGNA or if the existing commercial 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.”

Revenue 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) 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; 2) advertising & marketing services revenues, which include local and national non-political television advertising,
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digital marketing services (including Premion), and advertising on the stations’ websites, tablet and mobile products, and OTT apps; 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.

Revenue earned by these sources in the first three months of 2021 and 2020 are shown below (amounts in thousands):
Quarter ended Mar. 31,
20212020
Subscription$386,737 $332,802 
Advertising & Marketing Services322,834 295,153 
Political9,428 47,387 
Other8,052 8,847 
Total revenues$727,051 $684,189 

NOTE 2 – Goodwill and other intangible assets
The following table displays goodwill, indefinite-lived intangible assets, and amortizable intangible assets as of March 31, 2021 and December 31, 2020 (in thousands):
Mar. 31, 2021Dec. 31, 2020
GrossAccumulated AmortizationGrossAccumulated Amortization
Goodwill$2,981,587 $ $2,968,693 $ 
Indefinite-lived intangibles:
Television and radio station FCC broadcast licenses2,123,898 — 2,123,898 — 
Amortizable intangible assets:
Retransmission agreements235,215 (146,306)235,215 (138,928)
Network affiliation agreements309,503 (78,820)309,503 (72,694)
Other71,466 (26,216)70,610 (23,960)
Total indefinite-lived and amortizable intangible assets$2,740,082 $(251,342)$2,739,226 $(235,582)

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 from our multicast networks acquisition, which are also amortized on a straight-line basis over their useful lives.

On January 27, 2021, we acquired Locked On Podcast Network LLC for $13.3 million cash, which consisted of a base purchase price of $13.8 million and a working capital adjustment of $0.5 million. Locked On produces daily podcasts for every team across the four major professional sports leagues, as well as major college sports teams. In connection with this acquisition, we recorded initial values for goodwill and a tradename of $12.9 million and $0.9 million, respectively. These amounts are based on preliminary valuations, and therefore, these assets are subject to change as additional information is obtained about the facts and circumstances that existed as of the acquisition date. The goodwill is calculated as the excess of the purchase price over the net fair value of the identifiable assets acquired and liabilities assumed, and represents the future economic benefits expected to arise from the acquisition that do not qualify for separate recognition, including assembled workforce, as well as future synergies that we expect to generate. The goodwill recognized is expected to be tax deductible for tax purposes.

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 our 2020 Form 10-K, after completing our annual impairment test in the fourth quarter of 2020, we had one television station FCC license and one radio station FCC license, with a combined carrying value of $67.2 million and individual impairment headroom of less than 5%. Therefore, these two FCC licenses are at a heightened risk of future impairment. During the first quarter, and considering the
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negative effects COVID-19 has had and may continue to have on our AMS revenue and operating cash flows, we assessed whether it was more likely than not that either of these FCC licenses was impaired.

In performing these assessments, we analyzed the significant inputs used in the fair value determination of these FCC license assets. This included reviewing the trends in actual and forecasted advertising revenues and changes in the discount rate, both of which impact the fair value of these licenses. Based on the analysis performed, we concluded that neither of these FCC licenses was more likely than not impaired as of March 31, 2021. However, a sustained economic decline, including one resulting from the COVID-19 pandemic, could result in future non-cash impairment charges of our FCC licenses, and any related impairment could have a material adverse impact on our results of operations.


NOTE 3 – Investments and other assets

Our investments and other assets consisted of the following as of March 31, 2021, and December 31, 2020 (in thousands):
Mar. 31, 2021Dec. 31, 2020
Cash value life insurance$53,143 $52,883 
Equity method investments30,331 32,067 
Other equity investments16,729 20,271 
Deferred debt issuance costs8,497 9,378 
Other long-term assets20,517 21,620 
Total$129,217 $136,219 

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.

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 first quarter of 2021, we recorded a $1.9 million impairment charge, in “Other non-operating items, net” within our Consolidated Statement of Income, due to the decline in the fair value of one of our investments. No gains or losses were recorded on these investments in the first three 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.

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NOTE 4 – Long-term debt
Our long-term debt is summarized below (in thousands):
Mar. 31, 2021Dec. 31, 2020
Borrowings under revolving credit agreement expiring August 2024$318,000 $355,000 
Unsecured notes bearing fixed rate interest at 5.500% due September 2024
137,000 137,000 
Unsecured notes bearing fixed rate interest at 4.750% due March 2026
550,000 550,000 
Unsecured notes bearing fixed rate interest at 7.75% due June 2027
200,000 200,000 
Unsecured notes bearing fixed rate interest at 7.25% due September 2027
240,000 240,000 
Unsecured notes bearing fixed rate interest at 4.625% due March 2028
1,000,000 1,000,000 
Unsecured notes bearing fixed rate interest at 5.00% due September 2029
1,100,000 1,100,000 
Total principal long-term debt3,545,000 3,582,000 
Debt issuance costs(35,507)(36,595)
Unamortized premiums and discounts, net7,599 7,815 
Total long-term debt$3,517,092 $3,553,220 
As of March 31, 2021, cash and cash equivalents totaled $12.9 million and we had unused borrowing capacity of $1.17 billion under our $1.51 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, based on our current financial forecasts and trends, that we will remain compliant with all covenants for the foreseeable future.

NOTE 5 – Retirement 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 March 31, 2021, were $88.0 million, of which $7.7 million is recorded as a current obligation within accrued liabilities on the Condensed Consolidated Balance Sheet.

Pension costs (income), which primarily include costs for the qualified TRP and the non-qualified SERP, are presented in the following table (in thousands):
Quarter ended Mar. 31,
20212020
Service cost-benefits earned during the period$ $2 
Interest cost on benefit obligation3,950 4,858 
Expected return on plan assets(8,650)(7,750)
Amortization of prior service cost25 (42)
Amortization of actuarial loss1,200 1,600 
Income from company-sponsored retirement plans$(3,475)$(1,332)

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 three months ended March 31, 2021 and 2020, we did not make any cash contributions to the TRP. We made benefit payments to participants of the SERP of $0.9 million and $2.3 million, during three months ended March 31, 2021 and 2020, respectively. Based on actuarial projections and funding levels, we do not expect to make any cash payments to the TRP in 2021. We expect to make additional cash payments of $6.8 million to our SERP participants in 2021.
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NOTE 6 – Accumulated other comprehensive loss

The following table summarizes the components of, and the changes in, Accumulated Other Comprehensive Loss (AOCL), net of tax (in thousands):
Retirement PlansForeign Currency TranslationTotal
Quarters Ended:
Balance at Dec. 30, 2020$(120,979)$(97)$(121,076)
Other comprehensive loss before reclassifications 369 369 
Amounts reclassified from AOCL909  909 
Total other comprehensive income909 369 1,278 
Balance at Mar. 31, 2021$(120,070)$272 $(119,798)
Balance at Dec. 31, 2019$(142,398)$(199)$(142,597)
Other comprehensive loss before reclassifications 301 301 
Amounts reclassified from AOCL1,121  1,121 
Total other comprehensive income1,121 301 1,422 
Balance at Mar. 31, 2020$(141,277)$102 $(141,175)

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. Amounts reclassified out of AOCL are summarized below (in thousands):
Quarter ended Mar. 31,
20212020
Amortization of prior service cost (credit), net$25 $(110)
Amortization of actuarial loss1,200 1,608 
Total reclassifications, before tax1,225 1,498 
Income tax effect(316)(377)
Total reclassifications, net of tax$909 $1,121 

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NOTE 7 – Earnings per share

Our earnings per share (basic and diluted) are presented below (in thousands, except per share amounts):
Quarter ended Mar. 31,
20212020
Net Income$112,832 $86,198 
Net (income) loss attributable to the noncontrolling interest(215)110 
Adjustment of redeemable noncontrolling interest to redemption value(72)(203)
Earnings available to common shareholders$112,545 $86,105 
Weighted average number of common shares outstanding - basic
220,602 218,277 
Effect of dilutive securities:
Restricted stock units410 284 
Performance shares182 298 
Stock options4 4 
Weighted average number of common shares outstanding - diluted221,198 218,863 
Net income per share - basic$0.51 $0.40 
Net income per share - diluted$0.51 $0.39 

Our calculation of diluted earnings per share includes the dilutive effects for the assumed vesting of outstanding restricted stock units and performance shares.

NOTE 8 – Fair 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 first quarter of 2021, we recorded a $1.9 million impairment charge, in “Other non-operating items, net” within our Consolidated Statement of Income, due to the decline in the fair value apparent from an observable price decline of one of our investments (Level 2). 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 $3.72 billion at March 31, 2021, and $3.79 billion at December 31, 2020.

NOTE 9 – Other 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 seven other broadcasters settled a DOJ complaint alleging the exchange of competitively sensitive information in the broadcast television industry. In June 2019, we and four 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.
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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 sixteen of the original complaints, the amended complaint did not name TEGNA as a defendant. After TEGNA and four 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. By the end of 2020, all of our impacted stations had completed their repacking transitions to their new channels.

Throughout the repacking project the FCC has been reimbursing us for the costs we have incurred to change channels in the repacking on a lagged basis. During the first quarter of 2021, we received $1.4 million of reimbursements, which were recorded as a contra operating expense within our “Spectrum repacking 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. We expect to receive reimbursements for the remaining $3.0 million of our repacking spend upon completion of the FCC’s reimbursement review process.
    
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 first quarter of 2021 and 2020, we incurred expenses of $23.9 million and $10.5 million, respectively, as a result of the commercial agreement with MadHive. As of March 31, 2021 and December 31, 2020 we had accounts payable and accrued liabilities associated with the commercial agreement of $6.6 million and $13.5 million, respectively.

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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. Across platforms, we tell empowering stories, conduct impactful investigations and deliver innovative marketing services. With 64 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, connected television and social platforms, reaching consumers on all devices and platforms they use to consume news content. 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) 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; 2) 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, tablet and mobile products and OTT apps; 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.

As illustrated in the table below, our business continues to evolve toward growing recurring and highly profitable revenue streams, driven by the increasing concentration of both political and subscription revenue streams. As a result of the growing importance of even-year political advertising on our results, management increasingly looks at revenue trends over two-year periods. High margin-subscription and political revenues account for approximately half of our total two-year revenue, a trend that began in 2019, and are expected to comprise an increasingly larger percentage on a rolling two-year cycle thereafter.
Two Years Ending March 31,
20212020
Advertising & Marketing Services45 %50 %
Subscription45 %}54%42 %}49%
Political%%
Other%%
Total revenues100 %100 %

COVID-19 Update

During fiscal year 2020 and continuing into 2021, the world has been, and continues to be, impacted by the novel coronavirus (COVID-19) pandemic. The COVID-19 pandemic has brought unprecedented challenges and widespread economic and social change throughout the United States. The U.S. economy continued on a path to recovery during the first quarter of 2021 with millions of Americans receiving COVID-19 vaccines and states/municipalities increasingly reopening. In addition, the U.S. federal government continued to enact policies to provide fiscal stimulus to the economy and relief to those affected by the pandemic, with the most recent stimulus expected to bolster household finances as well as those of small businesses, states and municipalities. Our AMS revenues were most negatively impacted by the pandemic, but we have continued to experience quarterly sequential improvements since the height of the pandemic in the second quarter of 2020.

The roll out of vaccines together with lower COVID-19 case counts are encouraging. That said, the impact of COVID-19 and the extent of its adverse impact on our financial and operating results will be dictated by the length of time that the pandemic continues to affect our advertising customers. This will depend on future pandemic-related developments, including the duration of the pandemic, any potential subsequent waves of COVID-19 virus, the effectiveness, distribution and acceptance of COVID-19 vaccines, and related U.S. government actions to prevent and manage the virus spread, all of which are uncertain and cannot be predicted. While we use the best information available in developing significant estimates included in our financial statements, the effects of the pandemic on our operations may not be fully realized, or reflected in our financial results, until future periods. As such, actual results could differ from our estimates, and these differences resulting from changes in facts and circumstances could be material.


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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.

As discussed above, our operating results are subject to significant fluctuations across yearly periods (primarily driven by even-year election cycles). As such, in addition to one year ago comparisons, our management team and Board of Directors also review current period operating results compared to the annual period two years ago (e.g., 2021 vs. 2019). We believe this comparison will also provide useful information to investors, and therefore, we have supplemented our prior year comparison of consolidated results to also include a comparison against the first quarter of 2019 results (through operating income).

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). The multicast networks, Dispatch stations, and Nexstar stations are collectively referred to as the “2019 Acquisitions” in the discussion that follows. These 2019 Acquisitions did not contribute to the periods prior to their acquisition in our financial statements which impacts the current quarter to prior two year period comparability of our consolidated operating results. The Gray stations do not impact the 2021 to 2019 comparability.


Our consolidated results of operations on a GAAP basis were as follows (in thousands, except per share amounts):
Quarter ended Mar. 31,
20212020Change from 20202019Change from 2019
Revenues$727,051 $684,189 %$516,753 41 %
Operating expenses:
Cost of revenues394,692 369,368 %281,311 40 %
Business units - Selling, general and administrative expenses89,326 92,968 (4 %)71,465 25 %
Corporate - General and administrative expenses16,870 21,714 (22 %)14,735 14 %
Depreciation15,896 16,900 (6 %)14,917 %
Amortization of intangible assets15,760 16,216 (3 %)8,689 81 %
Spectrum repacking reimbursements and other, net(1,423)(7,515)(81 %)(7,013)(80 %)
Total operating expenses$531,121 $509,651 %$384,104 38 %
Total operating income$195,930 $174,538 12 %$132,649 48 %
Non-operating expenses(47,484)(67,215)(29 %)(35,896)32 %
Provision for income taxes35,614 21,125 69 %22,774 56 %
Net income112,832 86,198 31 %73,979 53 %
Net (income) loss attributable to redeemable noncontrolling interest(215)110 ***— ***
Net income attributable to TEGNA Inc.$112,617 $86,308 30 %$73,979 52 %
Net income per share - basic$0.51 $0.40 28 %$0.34 50 %
Net income per share - diluted$0.51