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Item 1A. Risk Factors

2023-02-28 compared with 2022-02-28 · 223 added, 236 removed, 306 unchanged (60% of the section changed)

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Risks Related to Our Operations

COVID-19 and other public health emergencies may adversely affect our business, results of operations, financial condition and cash flows;

Our operating results are dependent on distribution revenue, which may be adversely affected by a number of factors, including non-renewal or renewal at less favorable terms of our retransmission consent agreements, changes in retransmission consent regulations and drop in subscriptions to cable and satellite providers;

Demand for television advertising may be adversely affected as consumers migrate to alternative media for entertainment;

The revenue generated by our stations could decline substantially if they fail to maintain or renew their network agreements on favorable terms, or at all;

A significant concentration of our revenue is from a select number of customers;

Our substantial debt could limit our ability to grow and compete;

Our growth may be limited if we are unable to implement our organic growth initiatives and/or acquisition strategy;

Changes in FCC rules may restrict our ability to own or provide services to multiple stations in local markets;

The FCC’s and DOJ’s local and national media ownership rules limit our ability to acquire television stations in particular markets or new markets;

The FCC may deny renewal of the FCC license of any of our stations, requiring that station to cease operation;

The owners of the VIEs may make decisions regarding the operation of their respective stations that could reduce the amount of cash we receive under our local service agreements;

Our pension and postretirement benefit plan obligations may be increased by a declining stock market and lower interest rates;

Future impairment charges on our goodwill, intangible assets and equity investments could adversely affect our future results from operations;

The recording of deferred tax asset valuation allowances in the future or the impact of tax law changes on such deferred tax assets could affect our operating results;

We may face additional tax liabilities stemming from proposed and ongoing tax audits;

The revenue generated by our stations could decline substantially if they fail to maintain or renew their network agreements on favorable terms, or at all;

Changes in retransmission consent revenues or regulations could have an adverse effect on our business, financial condition and results of operations;

The FCC may refuse to grant renewal of the FCC license of any of our stations, resulting in that station ceasing operations;

Our growth may be limited if we are unable to implement our acquisition strategy;

FCC actions may restrict our ability to create duopolies;

The FCC’s national ownership cap and multiple ownership rules limit our ability to acquire television stations in particular markets or new markets;

Future impairment charges on our goodwill, intangible assets and equity investments could adversely affect our future results from operations.

Any decrease or suspension of dividend payments could cause our stock price to decline;

Our pension and postretirement benefit plan obligations may be increased by a declining stock market and lower interest rates;

Adverse results from litigation or governmental investigations involving us can impact our business practices and operating results;

Any decrease in our dividend payments or suspension in our dividend payments or stock repurchases could cause our stock price to decline;

We may not be able to adequately protect the intellectual property and other proprietary rights that are material to our business;

Cybersecurity risks could affect our operating effectiveness;

A significant concentration of our revenue is to a select number of customers.

The continuing effects of COVID-19 may adversely affect our business, results of operations, financial condition and cash flows.

Risks Related to Our Industry

Our operating results are dependent on advertising revenue, making us potentially more vulnerable to economic downturns and other factors beyond our control;

Due to our high fixed operating expenses, a relatively small decrease in advertising revenue could have a significant negative impact on our financial results;

Due to our high fixed operating expenses, a relatively small decrease in revenue could have a significant negative impact on our operating income;

Our television business may not be able to compete effectively if we are unable to respond to changes in technology and evolving advertising trends;

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New legislation and regulation could significantly impact the operations of our stations or the television broadcasting industry as a whole;

The FCC’s reallocation of a portion of the spectrum available for use by television broadcasters to wireless broadband use could substantially impact our future operations.

Risks Related to Tribune’s Emergence from Bankruptcy

We may be unable to settle unresolved claims filed in connection with Tribune’s Chapter 11 proceedings and resolve the appeals seeking to overturn the order confirming Tribune’s bankruptcy plan.

The FCC’s reallocation of a portion of the spectrum available for use by television broadcasters to wireless broadband could substantially impact our future operations.

Risks Related to Tribune Media Company (“Tribune”)’s Emergence from Bankruptcy

We may incur unforeseen costs in connection with Tribune’s Chapter 11 proceedings.

Risks Related to Tribune Publishing’s Spin-Off

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Risks Related to Our Operations

Our business, results of operations, financial condition and cash flows have been and may continue to be adversely affected by pandemics, epidemics or other public health emergencies, such as the COVID-19 pandemic.

In March 2020, the World Health Organization characterized COVID-19 as a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency.

The outbreak has resulted in governments in the U.S.

and around the world implementing stringent measures to help control the spread of the virus, including quarantines, “shelter in place”

and “stay at home”

orders, travel restrictions, business curtailments, school closures, and other measures.

The ongoing impact of COVID-19 significantly reduced the demand for television advertising in 2020, mostly in the first part of the second quarter, and the supply chain and other disruptions that resulted from the pandemic continued in 2021 to negatively impact advertising by a number of our advertisers as compared to pre-pandemic levels.

The spread of COVID-19 has had, and may continue to have, a material adverse impact on our financial condition, results of operations and cash flows in the future.

The extent to which COVID-19 may adversely impact our business depends on future developments, which are highly uncertain and unpredictable, including future surges and the severity of any resurgence of the virus, the length of time that the pandemic continues, current challenges to increase vaccination rates in the U.S.

and continued disruptions to supply chains.

Any resulting financial impact cannot be estimated reasonably at this time, but may materially adversely affect our business, results of operations, financial condition and cash flows.

Our liquidity could also be negatively impacted and we may be required to pursue additional sources of financing to obtain working capital to meet our business operating requirements, our capital expenditures and to continue to service our debt.

Our credit rating could also be negatively affected, which could also impact our liquidity, our financial condition and our ability to obtain financing.

Our distribution revenues, financial condition and results of operations may be adversely affected by non-renewals or renewals at less favorable terms of retransmission consent agreements, further change in the current retransmission consent regulations, or if the rate of declines in the number of subscribers of MVPDs increases.

A significant portion of Nexstar’s revenue comes from its retransmission consent agreements with MVPDs (mainly cable and satellite television providers) and OVDs.

These agreements permit the distributors to retransmit our stations’

and our cable and broadcast networks’

signals to their subscribers in exchange for the payment of compensation to us.

If we are unable to renegotiate these agreements on favorable terms, or at all, the failure to do so could have an adverse effect on our business, financial condition and results of operations.

Though we are typically able to renegotiate our retransmission consent agreements on favorable terms, the payments due us under these agreements are customarily based on a price per subscriber of the applicable distributor.

In the past several years, the number of subscribers to MVPDs has declined as the growth of direct internet streaming of video programming to televisions and mobile devices has led consumers to discontinue their cable or satellite service subscriptions.

As our retransmission consent agreements include payment terms by subscriber numbers, if the rate of reductions in the number of MVPD subscribers increases, this could also have an adverse effect on our business revenues, financial condition and results of operations.

Also, refer to “Risks Related to Our Industry–Intense competition in the television industry and alternative forms of media could limit our growth and profitability.”

Moreover, the national television broadcast networks have taken the position that they, as the owners or licensees of certain of the programming we broadcast and provide for retransmission, are entitled to a portion of the compensation we receive from MVPDs under our retransmission consent agreements and are requiring their network affiliation agreements with us to provide for such payments.

All of our affiliation agreements with the broadcast networks also include terms that limit our ability to grant retransmission consent rights to traditional MVPDs as well as OVDs, services that provide video streaming to consumers.

As a result, the networks negotiate directly with OVDs for carriage of their local affiliate stations, including certain of our stations.

The terms the networks negotiate may be unfavorable or unacceptable to us, as a result of which we may receive reduced revenue from our stations’

carriage on OVDs or may choose not to permit an OVD’s carriage of our stations at all.

The need to pay a portion of our retransmission consent revenue to our networks, and network limitations on our ability to enter into retransmission consent agreements or realize sufficient revenue from such agreements, could materially reduce this revenue source to the Company and could have an adverse effect on its business, financial condition and results of operations.

In addition, federal statutes and regulations govern our retransmission consent negotiations with MVPDs.

Under federal law, for example, we must negotiate retransmission consent in “good faith,”

and we are prohibited from negotiating jointly with non-commonly owned television stations (including our VIEs) in markets where we own a station.

These statutes and regulations are subject to change, and in recent years MVPDs have actively sought to change the regulations under which retransmission consent is negotiated before both the U.S.

Congress and the FCC in order to increase their bargaining leverage with television stations.

For example, pursuant to federal legislation, the FCC has adopted rules that require “large [television] groups”

(which include Nexstar) to negotiate retransmission consent in good faith with certain “qualified [MVPD] buying group[s]”

comprised of multiple MVPDs.

Nexstar’s obligation to negotiate retransmission consent on a collective basis with certain groups of MVPDs may add complexity to Nexstar’s overall negotiation process and could adversely affect the amount and flow of Nexstar’s retransmission consent revenues.

Moreover, there are still-open FCC proceedings to review the “totality of the circumstances”

test for good faith retransmission consent negotiations, to eliminate or modify the FCC’s non-duplication and syndicated exclusivity rules (which could permit MVPDs to import out-of-market television stations in certain circumstances), and to apply MVPD rules to certain OVDs.

These and other changes to the retransmission consent regulatory scheme, if adopted, could materially and adversely impact our retransmission revenues and thus our business.

General trends in the television industry could adversely affect demand for television advertising as consumers migrate to alternative media, including the internet, for entertainment.

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In recent years, demand for television advertising has been declining and demand for advertising in alternative media has been increasing, and we expect this trend to continue.

The networks have begun streaming the majority of their programming on the internet and other distribution platforms simultaneously with, or in close proximity to, network programming broadcast on local television stations, including those we own or provide services to.

These and other practices by the networks dilute the exclusivity and value of network programming originally broadcast by the affiliated local stations and may adversely affect the business, financial condition and results of operations of our stations.

The networks are streaming the majority of their programming on the internet and other distribution platforms simultaneously with, or in close proximity to, network programming broadcast on local television stations, including those we own or provide services to.

These and other practices by the networks dilute the exclusivity and value of network programming historically broadcast by the affiliated local stations and may adversely affect the business, financial condition and results of operations of our stations.

Also, refer to “Risks Related to Our Industry––Intense competition in the television industry and alternative forms of media could limit our growth and profitability.”

The revenue generated by stations we operate or provide services to could decline substantially if they fail to maintain or renew their network affiliation agreements on favorable terms, or at all.

Due to the quality of the programming provided by the networks, stations that are affiliated with a network generally have higher ratings than unaffiliated independent stations in the same market.

As a result, it is important for stations to maintain their network affiliations.

Most of the stations that we operate or provide services to have network affiliation agreements.

Currently, 29 full power television stations have primary affiliation agreements with ABC, 35 with NBC, 42 with FOX, 49 with CBS, 23 with The CW and 18 with MNTV.

Each of ABC, NBC and CBS generally provides affiliated stations with up to 22 hours of prime-time programming per week, while each of FOX, MNTV and The CW provides affiliated stations with up to 15 hours of prime-time programming per week.

In return, affiliated stations broadcast the applicable network’s commercials during the network programming.

All of the network affiliation agreements of the stations that we own, operate, program or provide sales and other services to are scheduled to expire at various times through December 2026.

In order to renew certain of our affiliation agreements we may be required to make cash payments to the network and to accept other material modifications of existing affiliation agreements.

If any of our stations cease to maintain affiliation agreements with their networks for any reason, we would need to find alternative sources of programming, which may be less attractive to our audiences and more expensive to obtain.

In addition, a loss of a specific network affiliation for a station may affect our retransmission consent payments, resulting in us receiving less retransmission consent fees.

Further, some of our network affiliation agreements are subject to earlier termination by the networks under specified circumstances.

For more information regarding these network affiliation agreements, see Item 1, “Business—Network Affiliations.”

A significant concentration of our revenue is from a select number of customers.

During the years ended December 31, 2022, 2021 and 2020, the Company’s revenues from two customers exceeded 10%.

Each of these customers represents approximately 10% and 11% for 2022, 12% and 13% for 2021, and 11% each for 2020, of the Company’s consolidated net revenues.

A disruption in our relationship with any of these customers could adversely affect our business.

We could experience fluctuations in our customer base or the mix of revenue by customer as markets and strategies evolve.

In addition, any consolidation of our customers could reduce the number of customers to whom our services could be sold.

Our inability to meet our customers’

requirements could adversely impact our revenue.

The loss of one or more of our major customers or any significant reduction in the service requirements of these customers could have a material adverse effect on our business, results of operations, or financial condition.

The Company’s substantial debt could limit its ability to grow and compete.

As of December 31, 2022, the Company had $6.952 billion of debt, net of unamortized financing costs, discounts and premium, which represented 71.7% of the total combined capitalization.

The Company’s high level of debt could have important consequences to its business.

The Company’s high level of debt could have important consequences for its business.

For example, it could:

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expose the Company to greater interest rate risk since the interest rates on borrowings under the senior secured credit facilities are variable;

limit the Company’s flexibility to plan for and react to changes in our business and our industry;

limit the Company’s flexibility to plan for and react to changes in its business and its industry;

impair our ability to withstand a general downturn in our business and place us at a disadvantage compared to our competitors that are less leveraged.

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The Company could also incur additional debt in the future.

The terms of the Company’s senior secured credit facilities, as well as the indentures governing Nexstar’s $1.785 billion 5.625% senior unsecured notes due 2027 (“5.625% Notes due 2027”) and Nexstar’s $1.0 billion 4.75% senior unsecured notes due 2028 (“4.75% Notes due 2028”), limit, but do not prohibit the Company from incurring substantial amounts of additional debt.

The terms of the Company’s senior secured credit facilities, as well as the indentures governing Nexstar’s $1.714 billion 5.625% senior unsecured notes due 2027 (“5.625% Notes, due July 2027”) and Nexstar’s $1.0 billion 4.75% senior unsecured notes due 2028 (“4.75% Notes, due November 2028”), limit, but do not prohibit the Company from incurring substantial amounts of additional debt.

To the extent the Company incurs additional debt, it would become even more susceptible to the leverage-related risks described above.

The agreements governing the Company’s debt contain various covenants that limit management’s discretion in the operation of its business.

The terms of the Company’s senior secured credit facilities and the indentures governing Nexstar’s 5.625% Notes due 2027 and Nexstar’s 4.75% Notes due 2028 contain various restrictive covenants customary for arrangements of these types that restrict our ability to, among other things:

The terms of the Company’s senior secured credit facilities and the indentures governing Nexstar’s 5.625% Notes, due July 2027 and Nexstar’s 4.75% Notes, due November 2028 contain various restrictive covenants customary for arrangements of these types that restrict our ability to, among other things:

incur additional debt and issue preferred stock;

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If the Company is unable to meet its debt service obligations, its lenders may determine to stop making loans to the Company, and/or the Company’s lenders or other holders of its debt could accelerate and declare due all outstanding obligations under the respective agreements, all of which could have a material adverse effect on the Company.

Our growth may be limited if we are unable to implement our acquisition strategy.

We achieved much of our growth through acquisitions.

We intend to continue our growth by selectively pursuing acquisitions of businesses that leverage our platform, scale and capabilities.

Some of our competitors may have greater financial or management resources with which to pursue acquisition targets.

Therefore, even if we are successful in identifying attractive acquisition targets, we may face considerable competition and our acquisition strategy may not be successful.

FCC rules and policies may also make it more difficult for us to acquire additional television stations.

Television station acquisitions are subject to the approval of the FCC and, potentially, other regulatory authorities.

FCC rules limit the ownership of television stations, both in local markets and nationally, and define the types of local service agreements that “count”

as ownership by the party providing the services.

Those rules are subject to change.

For instance, we currently own several television stations and provide services to other stations pursuant to the recent eliminations and modifications of certain FCC ownership rules.

The FCC is required to undertake periodic reviews of its media ownership rules, however, and as a part of any such review it may reimpose prior rules or adopt new rules that limit our ability to make acquisitions or enter into local service agreements, or that require us to divest existing stations or terminate existing agreements.

The need for FCC and other regulatory approvals could restrict our ability to consummate future transactions, if, for example, the FCC or other government agencies believe that a proposed transaction would result in excessive concentration or other public interest detriment in a market, even if the proposed combination may otherwise comply with FCC ownership limitations.

Additionally, our television acquisitions over the past several years have significantly increased our national audience reach to a level that approaches national television ownership limits imposed by the Communications Act and FCC rules.

This may restrict our future television station acquisitions and may require us to divest current stations in connection with any acquisition in order to comply with national television ownership limits.

The television broadcast industry has also undergoing significant consolidation, which has reduced the number of acquisition targets.

Growing our business through acquisitions involves risks and if we are unable to manage effectively our growth, our operating results will suffer.

In 2022, we completed our acquisition of a 75.0% ownership interest in The CW for no purchase consideration, in 2021 we acquired The Hill and in 2020 we acquired BestReviews.

To manage effectively our growth and address the increased reporting requirements and administrative demands that will result from future acquisitions, we will need, among other things, to continue to develop our financial and management controls and management information systems.

We will also need to continue to identify, attract and retain highly skilled finance and management personnel.

Failure to do any of these tasks in an efficient and timely manner could seriously harm our business.

There are other risks associated with growing our business through acquisitions.

For example, with any past or future acquisition, there is the possibility that:

we may not be able to successfully reduce costs, increase revenue or audience or realize anticipated synergies and economies of scale with respect to any acquired business;

we may not be able to generate adequate returns on our acquisitions or investments;

we may encounter and fail to address risks or other problems associated with or arising from our reliance on the representations and warranties and related indemnities, if any, provided to us by the sellers of acquired companies;

an acquisition may increase our leverage and debt service requirements or may result in our assuming unexpected liabilities;

our management may be reassigned from overseeing existing operations by the need to integrate the acquired business;

we may experience difficulties integrating operations and systems, as well as company policies and cultures;

we may be unable to retain and grow relationships with the acquired company’s key customers;

we may fail to retain and assimilate employees of the acquired business;

problems may arise in entering new markets in which we have little or no experience.

The occurrence of any of these events could have a material adverse effect on our operating results, particularly during the period immediately following any acquisition.

Changes in FCC rules may restrict our ability to own or provide services to multiple stations in local markets under local service agreements or common ownership, which may harm our existing operations and impair our acquisition strategy.

In a number of our markets, we have created duopolies by entering into what we refer to as local service agreements.

While these agreements take varying forms, a typical local service agreement is an agreement between two separately owned television stations serving the same market, whereby the owner of one station provides operational assistance to the other station, subject to ultimate editorial and other controls being exercised by the latter station’s owner.

By entering into and operating under local service agreements with same-market stations, we (and the other station) achieve significant operational efficiencies.

We also broaden our audience reach and enhance our ability to capture more advertising spending in a given market.

Additionally, we achieve significant operational efficiencies by owning multiple stations in a market where FCC rules allow us to do so.

Our local service agreements with independently owned television stations and our ownership of multiple stations in certain markets comply with current FCC media ownership rules.

Those rules, however, are subject to change.

For instance, in recent years FCC rules have prohibited us from entering into new JSAs and may have required us to terminate existing JSAs after a certain date.

Additionally, for many years the FCC’s duopoly rule required at least eight independently owned television stations to remain in a local market for a party to acquire a second station in that market.

These restrictions are no longer in effect, but the FCC’s 2018 and 2022 quadrennial media ownership reviews are currently pending, and the agency could reinstitute these or other limitations in those or any future reviews.

We cannot predict what additional or modified media ownership rules the FCC will adopt or when they will be adopted.

In addition, uncertainty about media ownership regulations and adverse economic conditions have dampened the acquisition market from time to time, and changes in the regulatory approval process may make materially more expensive, or may materially delay, the Company’s ability to consummate further acquisitions in the future.

We are subject to foreign ownership limitations which limit foreign investments in us.

The Communications Act limits the extent of non-U.S.

ownership of companies that own U.S.

broadcast stations.

Under these restrictions, the holder of a U.S.

broadcast license may have no more than 20% non-U.S.

ownership (by vote and by equity).

The Communications Act prohibits more than 25% indirect foreign ownership or control of a licensee through a parent company if the FCC determines the public interest will be served by enforcement of such restriction.

The FCC has interpreted this provision to require an affirmative public interest showing before indirect foreign ownership of a broadcast licensee may exceed 25%.

Therefore, certain investors may be prevented from investing in us if our foreign ownership is at or near the FCC limits.

The FCC’s and DOJ’s local and national media ownership rules limit our ability to acquire television stations in particular markets, restricting our ability to execute our acquisition strategy.

The number of television stations we may acquire in any local market or nationwide is limited by FCC rules and may potentially also be impacted by actions and policies of the U.S.

Department of Justice and other regulatory authorities.

Our ability to acquire television stations may also vary depending upon whether the interests in other television stations of persons affiliated with us are attributable under FCC rules.

The broadcast television interests of our officers, directors and most stockholders with 5% or greater voting power are attributable under the FCC’s rules, which may limit us from acquiring or owning television stations in particular markets while those officers, directors or stockholders are associated with us.

In addition, the holder of otherwise non-attributable equity and/or debt in a licensee in excess of 33% of the total debt and equity of the licensee will be attributable where the holder is either a major program supplier to that licensee or the holder has an attributable interest in another media facility in the same market that is subject to the FCC’s media ownership rules.

The FCC may deny renewal of the FCC license of any of the stations we operate or provide services to, requiring that station to cease operation.

Television broadcast licenses are granted for a maximum term of eight years and are subject to renewal upon application to the FCC.

The FCC is required to grant an application for license renewal if, during the preceding term, the station served the public interest, the licensee did not commit any serious violations of the Communications Act or the FCC’s rules, and the licensee committed no other violations of the Communications Act or the FCC’s rules which, taken together, would constitute a pattern of abuse.

A majority of renewal applications are routinely granted under this standard.

If a licensee fails to meet this standard the FCC may still grant renewal on terms and conditions that it deems appropriate, including a monetary forfeiture or renewal for a term less than the normal eight-year period.

However, in an extreme case, the FCC may deny a station’s license renewal application, resulting in termination of the station’s authority to broadcast.

Under the Communications Act, the term of a broadcast license is automatically extended during the pendency of the FCC’s processing of a timely renewal application.

We are filing applications to renew our television licenses on a rolling schedule ending in April 2023.

The Company expects the FCC to grant pending and future renewal applications for its stations in due course but cannot provide any assurances that the FCC will do so.

The financial performance of our equity method investments could adversely impact our results of operations.

We have significant investments in businesses (primarily our 31.3% interest in TV Food Network) that we account for under the equity method of accounting.

Under the equity method, we report our proportionate share of the net earnings or losses of our equity affiliates in our Consolidated Statement of Operations and Comprehensive Income under “Income from equity method investments, net,”

which contributes to our income from continuing operations before income taxes.

For the year ended December 31, 2022, our income from equity investments from TV Food Network was $226.7 million, less the amortization of basis difference of $69.5 million (as described in more detail in Note 6 to our Consolidated Financial Statements).

During this period, we also received cash distributions from TV Food Network of $249.4 million.

If the earnings or losses of and distributions from our equity investments are material in any year, those earnings or losses and distributions may have a material effect on our net income, cash flows, financial condition and liquidity.

We do not control the day-to-day operations of our equity method investments or have the ability to cause them to pay dividends or make other payments or advances to their stockholders, including us, and thus the management of these businesses could impact our results of operations and cash flows.

Additionally, these businesses are subject to laws, regulations, market conditions and other risks inherent in their operations.

Any of these factors could adversely impact our results of operations, our cash flows and the value of our investment.

We have made investments in digital businesses.

We have invested in content-driven digital businesses as well as digital offerings through our broadcast stations.

Due to intense competition, investment in content that is subject to a greater degree of obsolescence, historical impairment losses on our digital assets, significant reliance on third-party vendors to deliver services, limited operating history, the rapid evolving nature of digital businesses and difficulties in integrating acquisitions into our operations, the future operating results could be volatile and may negatively impact the year-to-year trends of our operations.

The loss of the services of our chief executive officer could disrupt management of our business and impair the execution of our business strategies.

We believe that our success depends upon our ability to retain the services of Perry A.

Sook, our founder and Chief Executive Officer.

Sook has been instrumental in determining our strategic direction and focus.

The loss of Mr.

Sook’s services could adversely affect our ability to manage effectively our overall operations and successfully execute current or future business strategies.

On August 1, 2022, we extended Mr.

Sook’s appointment as our Chief Executive Officer through March 31, 2026, with automatic renewal for successive one-year periods.

The owners of the VIEs may make decisions regarding the operation of their respective stations that could reduce the amount of cash we receive under our local service agreements.

As of December 31, 2022, the VIEs are each 100% owned by independent third parties.

These entities owned and operated 36 full power television stations, of which 35 stations were included in our financial statements as consolidated VIEs.

These entities own and operate 36 full power television stations, of which 35 stations are included in our financial statements as consolidated VIEs.

We have entered into local service agreements with the VIEs, pursuant to which we provide services to their stations.

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As of December 31, 2022, Mission’s senior secured credit facility consisted of a Term Loan B, due June 2028 with an outstanding principal balance of $296.3 million and a $75.0 million revolving credit facility, of which $61.5 million was drawn and outstanding.

We guarantee full payment of all of the obligations incurred under Mission’s senior secured credit facility in the event of its default.

All of the stations owned by consolidated VIEs have granted purchase options that permit Nexstar to acquire the assets and assume the liabilities of each of those VIEs’

Nexstar (excluding The CW) guarantees full payment of all of the obligations incurred under Mission’s senior secured credit facility in the event of its default.

All of the consolidated VIEs have granted purchase options that permit Nexstar to acquire the assets and assume the liabilities of each of those VIEs’

stations, subject to FCC consent.

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However, we are deemed under U.S.

GAAP to have controlling financial interests in the consolidated VIEs because of (1) the local service agreements Nexstar has with the consolidated VIEs’

stations, (2) Nexstar’s guarantee of the obligations incurred under Mission’s senior secured credit facility, (3) Nexstar having power over significant activities affecting the consolidated VIEs’

economic performance, including budgeting for advertising revenue, advertising sales and, in some cases, hiring and firing of sales force personnel and (4) purchase options granted by each consolidated VIE which permit Nexstar to acquire the assets and assume the liabilities of each of the consolidated VIEs’

GAAP to have controlling financial interests in the consolidated VIEs because of (i) the local service agreements Nexstar has with the consolidated VIEs’

stations, (ii) Nexstar’s (excluding The CW) guarantee of the obligations incurred under Mission’s senior secured credit facility, (iii) Nexstar having power over significant activities affecting the consolidated VIEs’

economic performance, including budgeting for advertising revenue, advertising sales and, in some cases, hiring and firing of sales force personnel and (iv) purchase options granted by each consolidated VIE which permit Nexstar to acquire the assets and assume the liabilities of each of the consolidated VIEs’

stations at any time, subject to FCC consent.

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For instance, the VIEs may decide to obtain and broadcast programming which, in our opinion, would prove unpopular and/or would generate less advertising revenue.

Nexstar’s pension and other postretirement benefit plans (OPEB) are currently underfunded.

A declining stock market and lower interest rates could affect the value of the Company’s retirement plan assets and increase its postretirement obligations.

Nexstar has various funded, qualified non-contributory defined benefit retirement plans which cover certain employees and former employees.

As of December 31, 2021, the pension benefit obligations for these qualified retirement plans were $2.205 billion.

The qualified retirement plans also had $2.152 billion in total net assets available, or underfunded by approximately $52.7 million, to pay benefits to participants enrolled in the plans as of December 31, 2021.

Nexstar was not required and did not make contributions to its qualified pension benefit plans in 2021.

Nexstar also has non-contributory unfunded supplemental executive retirement and ERISA excess plans which supplement the coverage of the defined benefit retirement plans to certain employees and former employees.

During 2021, Nexstar contributed $4.2 million to these plans.

As of December 31, 2021, the total liability was $52.0 million.

Nexstar also has various retiree medical savings account plans which reimburse eligible retired employees for certain medical expenses and unfunded plans that provide certain health and life insurance benefits to certain retired employees.

Although Nexstar has frozen participation and benefits under all plans, two significant elements in determining the pension expense are the expected return on plan assets and the discount rate used in projecting obligations.

Large declines in the stock market and lower discount rates increase the expense and may necessitate higher cash contributions to the qualified retirement plans.

The Company has a material amount of goodwill and intangible assets, and therefore the Company could suffer losses due to future asset impairment charges.

As of December 31, 2022, $8.305 billion, or 65.5%, of the Company’s combined total assets consisted of goodwill and intangible assets, including FCC licenses and network affiliation agreements.

During the fourth quarter of 2022, Nexstar recorded a $90.8 million goodwill impairment attributable to a digital business.

The Company tests goodwill and FCC licenses annually, and on an interim date if factors or indicators become apparent that would require an interim test of these assets, in accordance with accounting and disclosure requirements for goodwill and other intangible assets.

The Company tests its finite-lived intangible assets whenever circumstances or indicators become apparent that the asset may not be recoverable through expected future cash flows.

The methods used to evaluate the impairment of the Company’s goodwill and intangible assets would be affected by a significant reduction, or a forecast of such reductions, in operating results or cash flows at the Company’s business units.

The broadcast business’s operating results and cash flows could be affected by a significant adverse change in the advertising marketplaces in which the Company’s television stations operate, the loss of network affiliations or by adverse changes to FCC ownership rules, among other things, which may be beyond the Company’s control.

Our digital business’s operating results and cash flows could be affected by intense competition, investment in technologies that are subject to a greater degree of obsolescence, significant reliance on third-party partners to deliver services, rapid evolving nature and other factors.

If the carrying amount of goodwill and intangible assets is revised downward due to impairment, such non-cash charge could materially affect the Company’s financial position and results of operations.

The recording of deferred tax asset valuation allowances in the future or the impact of tax law changes on such deferred tax assets could affect our operating results.

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Section 382 (“Section 382”) of the Internal Revenue Code of 1986, as amended (the “Code”), generally imposes an annual limitation on the amount of NOLs that may be used to offset taxable income when a corporation has undergone an “ownership change.”

In general, an “ownership change”, as defined by Section 382, results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders or public groups, which are generally outside of our control.

In general, an “ownership change,”

as defined by Section 382, results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders or public groups, which are generally outside of our control.

The Company’s NOLs are subject to limitations under Section 382.

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While we believe our tax positions and reserves are reasonable, the resolutions of certain tax issues related to a past transaction of Tribune Media Company (“Tribune”) are unpredictable and could negatively impact our effective tax rate, net income or cash flows for the period or periods in question.

Specifically, we may be faced with additional tax liabilities as a result of our acquisition of Tribune for the transactions contemplated by the agreement, dated August 21, 2009, between Tribune and Chicago Entertainment Ventures, LLC (formerly Chicago Baseball Holdings, LLC) (“CEV LLC”), and its subsidiaries (collectively, “New Cubs LLC”), governing the contribution of certain assets and liabilities related to the business of the Chicago Cubs Major League Baseball franchise then owned by Tribune and its subsidiaries to New Cubs LLC, and related agreements thereto (the “Chicago Cubs Transactions”).

Specifically, we may be faced with additional tax liabilities as a result of our acquisition of Tribune for the transactions contemplated by an agreement, dated August 21, 2009, between Tribune and Chicago Entertainment Ventures, LLC (formerly Chicago Baseball Holdings, LLC) (“CEV LLC”), and its subsidiaries (collectively, “New Cubs LLC”), governing the contribution of certain assets and liabilities related to the business of the Chicago Cubs Major League Baseball franchise then owned by Tribune and its subsidiaries to New Cubs LLC, and related agreements thereto (the “Chicago Cubs Transactions”).

We may also be faced with tax liabilities as a result of the federal income tax audits of Tribune for taxable years 2014 and 2015.

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After-tax interest on the aforementioned proposed tax and penalty through December 31, 2022 would be approximately $158.0 million.

In addition, if the IRS prevails with its position, under the tax rules for determining tax basis upon emergence from bankruptcy, the Company would be required to reduce its tax basis in certain assets.

In addition, if the IRS prevails in its position, under the tax rules for determining tax basis upon emergence from bankruptcy, the Company would be required to reduce its tax basis in certain assets.

The reduction in tax basis would be required to reflect the reduction in the amount of the Company’s guarantee of the New Cubs partnership debt which was included in the reported tax basis previously determined upon emergence from bankruptcy and subject to Tribune’s 2014 and 2015 federal income tax audits (described below).

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On October 26, 2021, the Tax Court issued an opinion related to the Chicago Cubs Transactions, which held that Tribune’s structure was, in substantial part, in compliance with partnership provisions of the Code and, as a result, did not trigger the entire 2009 taxable gain proposed by the IRS.

The Company is currently evaluating the potential for appeal to the Court of Appeals for the holdings within the opinion which are unfavorable to the Company.

While the Tax Court has issued its opinion, it has not held further proceedings on the penalty issue and has not entered a final decision that starts the time in which either party may appeal the ruling to the Court of Appeals.

On October 19, 2022, the Tax Court entered the decision that there is no tax deficiency or penalty due in the 2009 tax year.

On January 13, 2023, the IRS filed a notice of appeal to the U.S.

Court of Appeals for the Seventh Circuit.

On February 3, 2023, the Company filed a notice of cross-appeal.

As of December 31, 2022, we believe the tax impact of applying the Tax Court opinion is not material to the Company’s accounting for uncertain tax positions or to its Consolidated Financial Statements.

Although management believes its estimates and judgments are reasonable, the timing and ultimate resolution is unpredictable and could materially change.

Prior to Nexstar’s merger with Tribune in September 2019, Tribune and a few of its subsidiaries were undergoing separate federal income tax audits for taxable years 2014 and 2015.

In the third quarter of 2020, the IRS completed its audits of the acquired Tribune entities, and with the exception of Tribune Media Company, all other entity audits have been resolved and closed.

For Tribune, the IRS issued a Revenue Agent’s Report which disallows the reporting of certain assets and liabilities related to Tribune’s emergence from Chapter 11 bankruptcy on December 31, 2012.

Although management believes its estimates and judgments are reasonable, the timing and ultimate resolution are unpredictable and could materially change.

Prior to Nexstar’s merger with Tribune in September 2019, Tribune was undergoing a federal income tax audit for taxable years 2014 and 2015.

In the third quarter of 2020, the IRS completed its audit and issued a Revenue Agent’s Report which disallowed the reporting of certain assets and liabilities related to Tribune’s emergence from Chapter 11 bankruptcy on December 31, 2012.

We disagree with the IRS’s proposed adjustments to the tax basis of certain assets and the related taxable income impact, and we are contesting the adjustments through the IRS administrative appeal procedures.

If the IRS prevails with its position and after taking into account the impact of the Tax Court Opinion, Nexstar would be required to reduce its tax basis in certain assets resulting in a $15.0 million increase in its federal and state taxes payable and a $71.0 million increase in deferred income tax liability as of December 31, 2021.

In accordance with ASC Topic 740, the Company has reflected $11.0 million for certain contested issues in its liability for uncertain tax positions at December 31, 2021 and December 31, 2020.

The revenue generated by stations we operate or provide services to could decline substantially if they fail to maintain or renew their network affiliation agreements on favorable terms, or at all.

Due to the quality of the programming provided by the networks, stations that are affiliated with a network generally have higher ratings than unaffiliated independent stations in the same market.

As a result, it is important for stations to maintain their network affiliations.

Most of the stations that we operate or provide services to have network affiliation agreements.

Currently, 29 full power television stations have primary affiliation agreements with ABC, 35 with NBC, 42 with FOX, 49 with CBS, 23 with The CW and 18 with MNTV.

In return, affiliated stations broadcast the applicable network’s commercials during the network programming.

All of the network affiliation agreements of the stations that we own, operate, program or provide sales and other services to are scheduled to expire at various times through December 2024.

In order to renew certain of our affiliation agreements we may be required to make cash payments to the network and to accept other material modifications of existing affiliation agreements.

In addition, a loss of a specific network affiliation for a station may affect our retransmission consent payments, resulting in us receiving less retransmission consent fees.

Further, some of our network affiliation agreements are subject to earlier termination by the networks under specified circumstances.

For more information regarding these network affiliation agreements, see Item 1, “Business—Network Affiliations.”

A significant portion of Nexstar’s revenue comes from its retransmission consent agreements with MVPDs (mainly cable and satellite television providers) and OVDs.

These agreements permit the distributors to retransmit our stations’

and NewsNation’s signals to their subscribers in exchange for the payment of compensation to us.

If we are unable to renegotiate these agreements on favorable terms, or at all, the failure to do so could have an adverse effect on our business, financial condition and results of operations.

In recent years the subscribership of MVPDs has declined, as the growth of direct internet streaming of video programming to televisions and mobile devices has incentivized consumers to “cut the cord”

and discontinue their cable or satellite service subscriptions.

Decreasing MVPD subscribership leads to less revenue under our retransmission agreements, which ultimately could have an adverse effect on our business, financial condition and results of operations.

Also, refer to “Risks Related to Our Industry–Intense competition in the television industry and alternative forms of media could limit our growth and profitability.”

The need to pay a portion of our retransmission consent revenue to our networks, and network limitations on our ability to enter into retransmission consent agreements, could materially reduce this revenue source to the Company and could have an adverse effect on its business, financial condition and results of operations.

In addition, federal statutes and regulations govern our retransmission consent negotiations with MVPDs.

Under federal law, for example, we must negotiate retransmission consent in “good faith,”

and we are prohibited from negotiating jointly with non-commonly owned television stations (including our VIEs) in markets where we own a station.

These statutes and regulations are subject to change, and in recent years MVPDs have actively sought to change the regulations under which retransmission consent is negotiated before both the U.S.

Congress and the FCC in order to increase their bargaining leverage with television stations.

For example, pursuant to federal legislation, the FCC has recently adopted rules that require “large [television] groups”

(which include Nexstar) to negotiate retransmission consent in good faith with certain “qualified [MVPD] buying group[s]”

comprised of multiple MVPDs.

Moreover, there are still-open FCC proceedings to review the “totality of the circumstances”

These and other changes to the retransmission consent regulatory scheme, if adopted, could materially and adversely impact our retransmission revenues and thus our business.

In recent years, the number of subscribers to MVPD services has declined as the growth of direct internet streaming of video programming to televisions and mobile devices has led consumers to discontinue their cable or satellite service subscriptions.

The FCC could decide not to grant renewal of the FCC license of any of the stations we operate or provide services to, which would require that station to cease operations.