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

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

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

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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, 2019.

The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. During the first quarter of 2020, a novel strain of coronavirus (COVID-19) believed to have been first identified in Wuhan, China, spread globally, including to every state in the United States. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19. The federal and state governments in the United States have responded by instituting a wide variety of mitigating control measures, including, mandatory quarantines, closures of non-essential businesses and all other places of social interaction, while implementing “shelter in place” orders and travel restrictions. Such mitigating measures began negatively impacting our advertising and marketing services (AMS) revenue stream in mid-March as demand for non-political advertising softened. This trend has continued into the second quarter of 2020 as such measures remain largely in place as of this date.

In mid-March, as a result of the expected near-term impact on non-political advertising demand caused by the COVID-19 pandemic, we implemented cost saving measures to reduce operating expenses and discretionary capital expenditures. These measures include implementing temporary furloughs for one week during the second quarter for most personnel, reducing compensation for executives and our board of directors, and reducing non-critical discretionary spending. As is true of most businesses, the ultimate magnitude of the COVID-19 pandemic cannot be reasonably estimated at this time, but we do expect it to have a material adverse effect on our near-term results of operations.

While it is too early to predict the duration of the pandemic or the long term effects on our financial condition, results of operations, and liquidity, we use the best information available in developing significant estimates included in our financial statements. Actual results could differ from these estimates, and these differences resulting from changes in facts and circumstances could be material. Significant estimates include, but are not limited to, evaluation of goodwill and other intangible assets for impairment, business combinations, fair value measurements, post-retirement benefit plans, income taxes including deferred taxes, and contingencies. 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 62 television stations and two radio stations operating in 51 markets, offering high-quality television programming and digital content. Our reportable segment determination is based on our management and internal reporting structure, the nature of products and services we offer, and the financial information that is evaluated regularly by our chief operating decision maker.

Accounting guidance adopted in 2020: In June 2016, the Financial Accounting Standards Board (FASB) issued new guidance related to the measurement of credit losses on financial instruments. The new guidance changed the way credit losses on accounts receivable are estimated. Under previous GAAP, credit losses on accounts receivable were recognized once it was probable that such losses will occur. Under the new guidance, we are required to estimate credit losses based on the expected amount of future collections which may result in earlier recognition of doubtful accounts. We adopted the new guidance on January 1, 2020 using a modified retrospective approach. Due to the short-term nature of our accounts receivable balance, there was no material change to our allowance for doubtful accounts as a result of adopting this new guidance.

In August 2018, the FASB issued new guidance that changed disclosures related to defined benefit pension and other postretirement benefit plans. The guidance removed disclosures that are no longer economically relevant, clarifies certain existing disclosure requirements and added some new disclosures. The most relevant elimination for us is the annual disclosure of the amount of gain/loss and prior service cost/credit amortization expected in the following year. Additions most relevant to us include annually disclosing narrative explanations of the drivers for significant changes in plan obligations or assets, and disclosure for cost of living adjustments for certain participants of our TEGNA retirement plan. We will include the new disclosures in our 2020 Annual Report on Form 10-K and will apply them on a retrospective basis.

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In March 2019, the FASB issued new guidance related to the accounting for episodic television series. The most significant aspect of this new guidance that was applicable to us relates to the level at which our capitalized programming assets are monitored for impairment. Under the new guidance these assets are monitored at the film group level which is the lowest level at which independently identifiable cash flows are identifiable. We adopted the new guidance prospectively on January 1, 2020. There was no material impact on our consolidated financial statements and related disclosures as of the adoption date.

Programming assets are recorded at the gross amount of the related liability when the programs are available for telecasting. The related assets are recorded at the lower of cost or estimated net realizable value. Expense is recognized on a straight line basis which appropriately matches the cost of the programs with the revenues associated with them. We incurred programming expense of $18.2 million and $13.5 million in the first quarter of 2020 and 2019, respectively. Programming expense is included in the “cost of revenue” line item of our Consolidated Statements of Income. As of March 31, 2020 we had $34.7 million of programming assets which will be expensed within the next twelve months.

We evaluate the net realizable value of our program broadcasting contract assets when a triggering event occurs, such as a change in our intended usage, or sustained lower-than-expected ratings for the program. Impairment analyses are performed at the syndicated program level (across all stations that utilize the program). We determine the net realizable value based on a projection of the estimated revenues less projected direct costs associated with the syndicated program (which is classified as Level 3 in the fair value hierarchy). If the future direct costs exceed expected revenues, impairment of the program asset may be required. No impairment charges were recognized in 2020 or 2019.

New accounting guidance not yet adopted: 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 customer’s ability to pay, such as economic growth, unemployment and demand for their products and services. 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, 2020, our allowance for doubtful accounts was $5.8 million as compared to $3.7 million as of December 31, 2019.

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) advertising & marketing services revenues, which include local and national non-political television advertising, digital marketing services (including Premion), and advertising on the stations’ websites and tablet and mobile products; 2) subscription revenues, reflecting fees paid by satellite, cable, OTT (companies that deliver video content to consumers over the Internet) and telecommunications providers to carry our television signals on their systems; 3) political advertising revenues, which are driven by even year election cycles at the local and national level (e.g. 2020, 2018) and particularly in the second half of those years; and 4) other services, such as production of programming and advertising material.

Revenue earned by these sources in the first quarter of 2020 and 2019 are shown below (amounts in thousands):

Copy History

	Quarter ended Mar. 31,
	2020				2019
Advertising & Marketing Services	$	295,153			$	264,402
Subscription	332,802				241,575
Political	47,387				2,704
Other	8,847				8,072
Total revenues	$	684,189			$	516,753

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NOTE 2 – Acquisitions

During 2019, we acquired the television stations listed in the table below, and a summary of each acquisition follows:

Market	Station	Affiliation	Seller
Indianapolis, IN	WTHR	NBC	Dispatch Broadcast Group
Columbus, OH	WBNS	CBS	Dispatch Broadcast Group
Hartford-New Haven, CT	WTIC/WCCT	FOX/CW	Nexstar Media Group
Harrisburg-Lancaster-Lebanon-York, PA	WPMT	FOX	Nexstar Media Group
Memphis, TN	WATN/WLMT	ABC/CW	Nexstar Media Group
Wilkes Barre-Scranton, PA	WNEP	ABC	Nexstar Media Group
Des Moines-Ames, IA	WOI/KCWI	ABC/CW	Nexstar Media Group
Huntsville-Decatur-Florence, AL	WZDX	FOX	Nexstar Media Group
Davenport, IA and Rock Island-Moline, IL	WQAD	ABC	Nexstar Media Group
Ft. Smith-Fayetteville-Springdale-Rogers, AR	KFSM	CBS	Nexstar Media Group
Toledo, OH	WTOL	CBS	Gray Television
Midland-Odessa, TX	KWES	NBC	Gray Television

Nexstar Stations

On September 19, 2019, we completed our acquisition of 11 local television stations in eight markets, including eight Big Four affiliates, from Nexstar Media Group (the Nexstar Stations). These stations were divested by Nexstar Media Group in connection with its acquisition of Tribune Media Company. The purchase price for the Nexstar Stations was $769.9 million which included a base purchase price of $740.0 million and working capital of $29.9 million (approximately $0.8 million was paid in April 2020 after finalization of working capital true-up with the sellers).

Dispatch Stations

On August 8, 2019, we completed the acquisition of Dispatch Broadcast Group’s two top-rated television stations and two radio stations (the Dispatch Stations). The purchase price for the Dispatch Stations was $560.5 million which consisted of a base purchase price of $535.0 million and working capital and cash acquired of $25.5 million.

Justice and Quest Multicast Networks

On June 18, 2019, we completed the acquisition of the remaining approximately 85% interest that we did not previously own in the multicast networks Justice Network and Quest from Cooper Media. Cash paid for this acquisition was $77.1 million (which included $4.6 million for working capital).

 

Gray Stations

On January 2, 2019, we completed our acquisition of WTOL, the CBS affiliate in Toledo, OH, and KWES, the NBC affiliate in Midland-Odessa, TX from Gray Television, Inc. for $109.9 million in cash (which included $4.9 million for working capital paid at closing).

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The following table summarizes the current fair values of the assets acquired and liabilities assumed in connection with these acquisitions (in thousands):

Copy History

		Nexstar Stations				Dispatch Stations				Justice & Quest				Gray Stations				Total
Cash		$	—			$	2,363			$	—			$	—			$	2,363
Accounts receivable		34,680				26,344				8,501				5,553				75,078
Prepaid and other current assets		3,776				6,092				6,987				987				17,842
Property and equipment		45,186				40,418				361				11,757				97,722
Goodwill		126,928				202,274				23,558				19,405				372,165
FCC licenses		374,269				295,983				—				47,061				717,313
Network affiliation agreements		123,926				60,765				—				14,420				199,111
Retransmission agreements		68,316				33,107				—				12,198				113,621
Other intangible assets		—				—				52,553				—				52,553
Right-of-use assets for operating leases		22,715				362				—				251				23,328
Other noncurrent assets		237				—				5,253				18				5,508
Total assets acquired		$	800,033			$	667,708			$	97,213			$	111,650			$	1,676,604
Accounts Payable		2,037				954				725				1				3,717
Accrued liabilities		8,122				9,011				4,236				1,494				22,863
Deferred income tax liability		—				97,044				(471		)		—				96,573
Operating lease liabilities - noncurrent		20,346				226				—				235				20,807
Other noncurrent liabilities		426				—				2,677				—				3,103
Total liabilities assumed		$	30,931			$	107,235			$	7,167			$	1,730			$	147,063
Net assets acquired		$	769,102			$	560,473			$	90,046			$	109,920			$	1,529,541
Less: cash acquired		$	—			$	(2,363	)		$	—			$	—			$	(2,363	)
Less: fair value of existing ownership		—				—				(12,995		)		—				(12,995		)
Cash paid for acquisitions		$	769,102			$	558,110			$	77,051			$	109,920			$	1,514,183

        

We accounted for the each of these acquisitions as business combinations, which requires us to record the assets acquired and liabilities assumed at fair value. The amount by which the purchase price exceeds the fair value of the net assets acquired is recorded as goodwill. The amounts recorded for assets and liabilities related to the Nexstar and Dispatch Stations and Justice and Quest Networks presented above are preliminary in nature and are subject to adjustment as additional information is obtained about the facts and circumstances that existed as of the acquisition date. Assets and liabilities related to the Gray Stations are the final amounts.

During the quarter ended March 31, 2020, we continued to analyze information related to the estimated fair values for certain tangible and intangible assets acquired, liabilities assumed and the amount of goodwill recognized for these acquisitions. As a result, the carrying amounts for certain assets and liabilities were updated. The most significant changes were to retransmission agreement intangible assets, which were reduced by $21.3 million and goodwill, whose carrying amount increased by $16.8 million. As a result of these adjustments, we expect our amortization expense related to intangible assets during fiscal year 2020 to be $68.0 million.

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NOTE 3 – Goodwill and other intangible assets

The following table displays goodwill, indefinite-lived intangible assets, and amortizable intangible assets as of March 31, 2020 and December 31, 2019 (in thousands):

Copy History

	Mar. 31, 2020								Dec. 31, 2019
	Gross				Accumulated Amortization				Gross				Accumulated Amortization
Goodwill	$	2,967,383			$	—			$	2,950,587			$	—
Indefinite-lived intangibles:
Television and radio station FCC broadcast licenses	2,105,332				—				2,090,732				—
Amortizable intangible assets:
Retransmission agreements	235,215				(112,853		)		256,533				(105,212		)
Network affiliation agreements	309,503				(54,319		)		309,496				(48,174		)
Other	73,306				(17,497		)		73,305				(15,066		)
Total indefinite-lived and amortizable intangible assets	$	2,723,356			$	(184,669	)		$	2,730,066			$	(168,452	)

Our retransmission agreements and network affiliation agreements are amortized on a straight-line basis over their estimated useful lives. Other intangibles primarily include distribution agreements and brand names from our Justice & Quest acquisition, which are also amortized on a straight-line basis over their useful lives.

Changes in goodwill and amortizable intangible asset values in the first three months of 2020 are a result of the acquisitions discussed in Note 2. Certain of those assets are valued on a preliminary basis as we continue to review underlying assumptions and valuation methodologies utilized to calculate their respective fair values. 

Interim impairment assessment

We review our goodwill and intangible assets for impairment at least annually and also when events or changes in circumstances occur that indicate the fair value may be below its carrying amount. As discussed in Note 2, during 2019 we acquired 15 television stations and as such, the indefinite-lived FCC licenses recently acquired have limited headroom as they were recorded at fair value upon acquisition. As a result of the negative effects COVID-19 will have on our expected future AMS revenue and operating cash flows, we assessed whether it was more likely than not that our FCC licenses, including those that were recently acquired, were impaired.

In performing this assessment we analyzed the significant inputs used in the fair value determination of the recently acquired FCC license assets. This included reviewing the impact of potential changes in trends in market revenues and changes in the discount rate on the fair value of our licenses. While the impacts to AMS are expected to be material, the duration of these trends and the magnitude of such impacts cannot be precisely estimated at this time, as they are affected by a number of factors (many of which are outside of management’s control). However, based on currently known information about COVID-19 trends, we generally expect the second quarter of 2020 to be the most significantly impacted this year with sequential improvement throughout the remainder of the fiscal year.

Based on the analysis performed we concluded that none of our FCC licenses were more likely than not impaired as of March 31, 2020. However, a long sustained economic decline resulting from COVID-19 could result in future non-cash impairment charges of our recently acquired FCC licenses, and any related impairment could have a material adverse impact on our results of operations.

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NOTE 4 – Investments and other assets

Our investments and other assets consisted of the following as of March 31, 2020, and December 31, 2019 (in thousands):

Copy History

	Mar. 31, 2020				Dec. 31, 2019
Cash value life insurance	$	50,730			$	52,462
Equity method investments	36,646				27,650
Other equity investments	32,420				32,383
Deferred debt issuance costs	10,178				10,921
Other long-term assets	21,109				21,853
Total	$	151,083			$	145,269

Cash value life insurance: We are the beneficiary of life insurance policies on the lives of certain employees/retirees, which are recorded at their cash surrender value as determined by the insurance carrier. These policies are utilized as a partial funding source for deferred compensation and other non-qualified employee retirement plans. Gains and losses on these investments are included in “Other non-operating items, net” within our Consolidated Statement of Income and were not material for all periods presented.

Equity method investments: We hold equity method investments. Our largest equity method investment is our ownership in CareerBuilder, of which we own approximately 17% (or approximately 10% on a fully-diluted basis). In the first quarter of 2020, CareerBuilder sold its employment screening business; our estimated portion on the pre-tax gain of the sale is $12.1 million. Our investment balance was $17.4 million and $7.9 million as of March 31, 2020 and December 31, 2019, respectively.

Other equity investments: Represent 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. 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.

NOTE 5 – Income taxes

We generally estimate our annual effective tax rate for the full year and apply that rate to net income before tax in determining the provision for income taxes for interim periods. We record discrete items in each respective interim period as appropriate. However, for the three months ended March 31, 2020, we determined that the annual rate method would not provide for a reliable estimate due to volatility in the forecasting process as a result of the COVID-19 pandemic. As a result, we have recorded the provision for income taxes for the three months ended March 31, 2020 using the actual effective rate for the three months ended March 31, 2020 (the “cut-off” method). The effective tax rate for the three months ended March 31, 2020 was calculated based on an actual effective tax rate plus discrete items.

In response to the COVID-19 pandemic, President Donald Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) on March 27, 2020. The CARES Act provides numerous tax provisions and other stimulus measures, including refundable payroll tax credits, deferral of employer side social security payments, modifications to the net interest deduction limitations, expansions to the use and carryback of net operating losses, and a technical correction to the depreciation method applicable to qualified improvement property under the 2017 Tax Cuts and Jobs Act.  We will benefit from the technical correction for qualified improvement property which allows for immediate deduction of any eligible leasehold improvements placed in service during 2018 and 2019. We will also benefit from the new depreciation method available for qualified improvement property which allows for an immediate retroactive deduction of certain eligible leasehold improvements previously placed in service. As a result, our 2020 tax payments are expected to be reduced by approximately $7 million. There is no change to tax expense or our first quarter effective income tax rate since the changes are payment deferrals only. We will continue to monitor the impact of the CARES Act on our business as conditions change.

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NOTE 6 – Long-term debt

Our long-term debt is summarized below (in thousands):

Copy History

	Mar. 31, 2020				Dec. 31, 2019
Unsecured floating rate term loan due quarterly through June 20201	$	10,000			$	20,000
Unsecured floating rate term loan due quarterly through September 20201	90,000				105,000
Unsecured notes bearing fixed rate interest at 5.125% due July 2020	—				310,000
Unsecured notes bearing fixed rate interest at 4.875% due September 2021	350,000				350,000
Unsecured notes bearing fixed rate interest at 6.375% due October 2023	—				650,000
Borrowings under revolving credit agreement expiring August 2024	785,000				903,000
Unsecured notes bearing fixed rate interest at 5.50% due September 2024	325,000				325,000
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				—
Unsecured notes bearing fixed rate interest at 5.00% due September 2029	1,100,000				1,100,000
Total principal long-term debt	4,100,000				4,203,000
Debt issuance costs	(34,389		)		(26,873		)
Unamortized premiums and discounts, net	6,286				3,118
Total long-term debt	$	4,071,897			$	4,179,245
1 We have the intent and ability to refinance the principal payments due within the next 12 months on a long-term basis through our revolving credit facility. As such, all debt presented in the table above is classified as long-term on our March 31, 2020 Condensed Consolidated Balance Sheet.

On January 9, 2020, we completed a private placement offering of $1.0 billion aggregate principal amount of senior unsecured notes bearing an interest rate of 4.625% which are due in March 2028.

On February 11, 2020 we used the net proceeds from the $1.0 billion senior notes to repay the remaining $310.0 million of unsecured notes bearing fixed rate interest of 5.125%, which were due in July 2020 and $650.0 million of unsecured notes bearing fixed rate interest of 6.375%, which were due in October 2023. We incurred $13.8 million of early redemption fees in relation to the 2023 debt payoff. Additionally, we wrote off $7.9 million of unamortized financing fees and discounts related to the early payoff of the 2020 and 2023 notes. These charges were recorded in the other non-operating items, net line item of the Statement of Income.

NOTE 7 – 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, 2020, were $128.7 million, of which $6.8 million is recorded as a current obligation within accrued liabilities on the Condensed Consolidated Balance Sheet.

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Pension costs, which primarily include costs for the qualified TRP and the non-qualified SERP, are presented in the following table (in thousands):

Copy History

	Quarter ended Mar. 31,
	2020				2019
Service cost-benefits earned during the period	$	2			$	—
Interest cost on benefit obligation	4,858				5,750
Expected return on plan assets	(7,750		)		(6,575		)
Amortization of prior service (credit) cost	(42		)		25
Amortization of actuarial loss	1,600				1,500
(Gains from) expense for company-sponsored retirement plans	$	(1,332	)		$	700

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.

NOTE 8 – 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):

Copy History

	Retirement Plans				Foreign Currency Translation				Total
Quarters Ended:
Balance at Dec. 31, 2019	$	(142,398	)		$	(199	)		$	(142,597	)
Other comprehensive income before reclassifications	—				301				301
Amounts reclassified from AOCL	1,121				—				1,121
Total other comprehensive income	1,121				301				1,422
Balance at Mar. 31, 2020	$	(141,277	)		$	102			$	(141,175	)
Balance at Dec. 31, 2018	$	(136,893	)		$	382			$	(136,511	)
Other comprehensive income before reclassifications	—				10				10
Amounts reclassified from AOCL	1,069				—				1,069
Total other comprehensive income	1,069				10				1,079
Balance at Mar. 31, 2019	$	(135,824	)		$	392			$	(135,432	)

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Reclassifications from AOCL to the Consolidated Statements of Income are comprised of pension and other post-retire