Frontdoor Announces Full-Year 2019 Revenue Increase of 8 Percent to $1.36 Billion; Net Income Improved 23 Percent to $153 Million

Frontdoor Announces Full-Year 2019 Revenue Increase of 8 Percent to $1.36 Billion; Net Income Improved 23 Percent to $153 Million

MEMPHIS, Tenn.–(BUSINESS WIRE)–Frontdoor, Inc. (NASDAQ: FTDR), the nation’s leading provider of home service plans, today announced fourth-quarter and full-year 2019 results.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Results

 

 

Three Months Ended

 

Year Ended

 

 

December 31,

 

December 31,

$ millions (except as noted)

 

2019

 

2018

 

Change

 

2019

 

2018

 

Change

Revenue

 

$

300

 

$

279

 

7

%

 

$

1,365

 

$

1,258

 

8

%

Gross Profit

 

 

139

 

 

125

 

11

%

 

 

678

 

 

572

 

18

%

Net Income

 

 

19

 

 

17

 

11

%

 

 

153

 

 

125

 

23

%

Diluted Earnings per Share

 

 

0.22

 

 

0.20

 

10

%

 

 

1.80

 

 

1.47

 

22

%

Adjusted Net Income(1)

 

 

21

 

 

19

 

11

%

 

 

162

 

 

150

 

8

%

Adjusted Diluted Earnings per Share(1)

 

 

0.25

 

 

0.23

 

10

%

 

 

1.90

 

 

1.77

 

7

%

Adjusted EBITDA(1)

 

 

48

 

 

47

 

3

%

 

 

303

 

 

238

 

27

%

Home Service Plans (number in millions)

 

 

 

 

2.2

 

 

2.1

 

3

%

Fourth-Quarter 2019 Summary

  • Revenue increased seven percent to $300 million
  • Gross profit margin increased 170 basis points to 46 percent
  • Net income increased 11 percent to $19 million
  • Adjusted EBITDA increased three percent to $48 million
  • Successfully launched Candu offering and completed Streem acquisition

Full-Year 2019 Summary

  • Revenue increased eight percent to $1.36 billion
  • Gross profit margin increased 420 basis points to 50 percent
  • Net income increased 23 percent to $153 million
  • Adjusted EBITDA increased $65 million to $303 million; Adjusted EBITDA Margin(1) improved 325 basis points to 22 percent
  • Net Cash Provided from Operating Activities was $200 million; Free Cash Flow(1) improved 10 percent to $178 million

Full-Year 2020 Outlook

  • Revenue of $1.47 billion to $1.49 billion
  • Adjusted EBITDA(2) of $300 million to $320 million

“Last year was a foundational period for our company as we successfully improved business processes, launched Candu, our on-demand offering, and completed the acquisition of Streem,” said Chief Executive Officer Rex Tibbens. “In 2020, we will focus on driving top-line growth and providing new solutions to our customers, which will further strengthen our platform and provide long-term value for our stakeholders.”

“Our financial performance dramatically improved in 2019,” said Chief Financial Officer Brian Turcotte. “We increased Adjusted EBITDA by nearly 30 percent and generated $200 million in cash from operations. Our 2020 outlook reflects our commitment to grow the business, diversify our revenue streams and drive further process improvements.”

Fourth-Quarter 2019 Results

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue by Major Customer Acquisition Channel

 

 

Three Months Ended

 

 

December 31,

$ millions

 

2019

 

2018

 

Change

Renewals

 

$

204

 

$

187

 

10

%

Real estate (First-Year)

 

 

56

 

 

57

 

%

Direct-to-consumer (First-Year)

 

 

36

 

 

34

 

5

%

Other

 

 

3

 

 

1

 

*

 

Total

 

$

300

 

$

279

 

7

%

 

* not meaningful

 

Fourth-quarter 2019 revenue increased seven percent over the prior year period. Renewal revenue increased 10 percent, primarily driven by growth in the number of home service plans and improved price realization. First-year real estate revenue was relatively flat with the prior year as improved price realization was offset by a decline in new unit sales. First-year direct-to-consumer revenue increased five percent, primarily due to growth in new sales that was mostly driven by increased investments in marketing.

Fourth-quarter 2019 net income was $19 million, or diluted earnings per share of $0.22, versus $17 million in fourth-quarter 2018, or diluted earnings per share of $0.20. Fourth-quarter 2019 net income included a $16 million favorable impact from higher revenue conversion(3) that was mostly offset by a $15 million increase in selling and administrative expenses.

 

 

 

 

 

 

 

 

Period-over-Period Adjusted EBITDA Bridge

$ millions

 

 

Three Months Ended December 31, 2018

 

$

47

 

Impact of change in revenue

 

 

16

 

Contract claims costs

 

 

(1

)

Sales, marketing and customer service costs

 

 

(6

)

General and administrative costs

 

 

(7

)

Three Months Ended December 31, 2019

 

$

48

 

Fourth-quarter 2019 Adjusted EBITDA of $48 million was three percent higher than the prior year period, primarily due to $16 million of higher revenue conversion(3), partially offset by:

  • $1 million of higher contract claims costs, consisting of:

    • $3 million in process improvements and cost reduction initiatives,
    • $3 million net favorable impact of adjustments related to contract claims cost development, and
    • $2 million in lower claims incidence driven by seasonally mild weather, more than offset by
    • $9 million in higher inflation and tariff costs;
  • $6 million of increased sales, marketing and customer service costs, primarily investments in the direct-to-consumer channel; and
  • $7 million of increased general and administrative costs, primarily higher personnel costs.

Full-Year 2019 Results

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue by Major Customer Acquisition Channel

 

 

Year Ended

 

 

December 31,

$ millions

 

2019

 

2018

 

Change

Renewals

 

$

926

 

$

835

 

11

%

Real estate (First-Year)

 

 

263

 

 

262

 

%

Direct-to-consumer (First-Year)

 

 

167

 

 

156

 

7

%

Other

 

 

8

 

 

6

 

*

 

Total

 

$

1,365

 

$

1,258

 

8

%

* not meaningful

Full-year 2019 revenue increased eight percent over the prior year period. Renewal revenue increased 11 percent, primarily driven by growth in the number of home service plans and improved price realization. First-year real estate revenue was relatively flat with the prior year as improved price realization was offset by a decline in new unit sales. First-year direct-to-consumer revenue increased seven percent, primarily due to growth in new sales that was mostly driven by increased investments in marketing.

Full-year 2019 net income was $153 million, or diluted earnings per share of $1.80, versus $125 million, or diluted earnings per share of $1.47 in 2018. Full-year 2019 net income included a $74 million favorable impact from higher revenue conversion(3), a $37 million decrease in contract claims costs and $22 million in lower Spin-off charges. These benefits were partially offset by a $54 million increase in selling and administrative expenses, and a $39 million increase in interest expense related to the debt offering completed in August 2018 in conjunction with the Spin-off.

 

 

 

 

 

 

 

 

Period-over-Period Adjusted EBITDA Bridge

$ millions

 

 

Year Ended December 31, 2018

 

$

238

Impact of change in revenue

 

 

74

Contract claims costs

 

 

37

Sales, marketing and customer service costs

 

 

(19)

Spin-off dis-synergies

 

 

(4)

General and administrative costs

 

 

(25)

Year Ended December 31, 2019

 

$

303

Full-year 2019 Adjusted EBITDA of $303 million was 27 percent higher than the prior year period, primarily due to the following items:

  • $74 million of higher revenue conversion(3), including the net contribution from new customers and higher pricing;
  • $37 million of lower contract claims costs, consisting of:

    • $30 million from process improvements and cost reduction initiatives,
    • $22 million favorable impact from seasonally mild weather on claims incidence, and
    • $10 million net favorable impact of adjustments related to contract claims cost development, partially offset by
    • $25 million in higher inflation and tariff costs;
  • $19 million of increased sales, marketing and customer service costs, primarily in the direct-to-consumer channel;
  • $4 million in higher spin-off dis-synergies, primarily related to the separation of technology systems; and
  • $25 million of increased general and administrative costs, including higher personnel costs of $10 million, insurance-related costs of $7 million, incentive compensation expense of $5 million, and a $3 million increase in other general and administrative costs, primarily consisting of professional fees.

Cash Flow

 

 

 

 

 

 

 

 

 

Year Ended December 31,

$ millions

 

2019

 

2018

Net cash provided from (used for):

 

 

 

 

 

 

Operating Activities

 

$

200

 

 

$

189

 

Investing Activities

 

 

(61

)

 

 

(10

)

Financing Activities

 

 

(7

)

 

 

(165

)

Cash increase during the period

 

$

132

 

 

$

14

 

For the twelve months ended December 31, 2019, net cash provided from operating activities was $200 million, an increase of $11 million from the twelve months ended December 31, 2018. Working capital was an $11 million source of cash for the twelve months ended December 31, 2019 compared to a $32 million source of cash for the prior year period.

Net cash used for investing activities was $61 million for the twelve months ended December 31, 2019 compared to $10 million for the prior year period. The change in investing activities was primarily due to the acquisition of Streem in the fourth quarter of 2019, as well as a reduction in cash flows from marketable securities transactions.

Net cash used for financing activities was $7 million for the twelve months ended December 31, 2019 and was primarily related to debt payments. This compares to $165 million for the twelve months ended December 31, 2018, which was primarily related to net cash transfers to our former parent that occurred prior to the Spin-off.

Free Cash Flow(1) was $178 million for the twelve months ended December 31, 2019 compared to $163 million for the prior year period. The increase of $16 million includes higher Adjusted EBITDA and lower payments for Spin-off charges, partially offset by higher cash payments for interest and taxes.

Cash and marketable securities totaled $434 million as of December 31, 2019, a $129 million increase from December 31, 2018.

Total restricted net assets decreased to $168 million at December 31, 2019 from $202 million at September 30, 2019.

Full-Year 2020 Outlook

  • Revenue is anticipated to range from $1.47 billion to $1.49 billion;
  • Gross profit margin is anticipated to range from 49 to 50 percent;
  • Adjusted EBITDA(2) is anticipated to range from $300 million to $320 million;
  • Capital expenditures are anticipated to range from $30 million to $40 million; and
  • Annual Effective Tax Rate is anticipated to be approximately 25 percent.

Additionally, first-quarter 2020 Adjusted EBITDA(2) is anticipated to range from $40 million to $45 million.

Fourth-Quarter and Full-Year 2019 Earnings Conference Call

Frontdoor has scheduled a conference call today, February 26, 2020, at 8:00 a.m. Central time (9:00 a.m. Eastern time). During the call, Rex Tibbens, Chief Executive Officer, and Brian Turcotte, Chief Financial Officer, will discuss the company’s operational performance and financial results for fourth-quarter and full-year 2019. They will also discuss the full-year 2020 outlook and respond to questions from the investment community. To participate on the conference call, interested parties should call 877-407-8291 (or international participants, 201-689-8345). Additionally, the conference call will be available via webcast which will include a slide presentation highlighting the company’s results. To participate via webcast and view the slide presentation, visit Frontdoor’s investor relations home page. The call will be available for replay for approximately 60 days. To access the replay of this call, please call 877-660-6853 and enter conference ID 13698519 (international participants: 201-612-7415, conference ID 13698519).

About Frontdoor

Frontdoor is a company that’s obsessed with taking the hassle out of owning a home. With services powered by people and enabled by technology, it is the parent company of four home service plan brands: American Home Shield, HSA, Landmark and OneGuard, as well as Candu Home Solutions, an on-demand membership service for home repairs and maintenance, and Streem, a technology company that enables businesses to serve customers through an enhanced augmented reality, computer vision and machine learning platform. Frontdoor serves 2.2 million customers across the U.S. through a network of approximately 17,000 pre-qualified contractor firms that employ approximately 60,000 technicians. The company’s customizable home service plans help customers protect and maintain their homes from costly and unexpected breakdowns of essential home systems and appliances. With nearly 50 years of experience, the company responds to over four million service requests annually. For details, visit frontdoorhome.com.

References in this news release to “ServiceMaster” refer to ServiceMaster Global Holdings, Inc. and its consolidated subsidiaries. References to the “Spin-off” refer to the spin-off by ServiceMaster of the ownership and operations of its businesses operated under the American Home Shield, HSA, OneGuard and Landmark brand names into Frontdoor, which was completed on October 1, 2018 and resulted in Frontdoor operating as an independent, publicly traded company trading on Nasdaq under the symbol “FTDR”.

Forward-Looking Statements

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, in particular, projected future performance and any statements about Frontdoor’s plans, strategies and prospects. Forward-looking statements can be identified by the use of forward-looking terms such as “believe,” “expect,” “estimate,” “could,” “should,” “intend,” “may,” “plan,” “seek,” “anticipate,” “project,” “will,” “shall,” “would,” “aim,” or other comparable terms. These forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control. Such risks and uncertainties include, but are not limited to: weather conditions and seasonality; weakening general economic conditions; lawsuits, enforcement actions and other claims by third parties or governmental authorities; the effects of our substantial indebtedness; the success of our business strategies; and failure to achieve some or all of the expected benefits of the Spin-off. We caution you that forward-looking statements are not guarantees of future performance or outcomes and that actual performance and outcomes, including, without limitation, our actual results of operations, financial condition and liquidity, and the development of new markets or market segments in which we operate, may differ materially from those made in or suggested by the forward-looking statements contained in this news release. For a discussion of other important factors that could cause Frontdoor’s results to differ materially from those expressed in, or implied by, the forward-looking statements included in this document, you should refer to the risks and uncertainties detailed from time to time in Frontdoor’s periodic reports filed with the SEC as well as the disclosure contained in Item 1A. Risk Factors in our 2018 Annual Report on Form 10-K filed with the SEC. Except as required by law, Frontdoor does not undertake any obligation to update or revise these forward-looking statements to reflect new information or events or circumstances that occur after the date of this news release or to reflect the occurrence of unanticipated events or otherwise. Readers are advised to review Frontdoor’s filings with the Securities and Exchange Commission, which are available from the SEC’s EDGAR database at sec.gov, and via Frontdoor’s website at frontdoorhome.com.

Spin-off Impact to Financials

The accompanying consolidated and combined financial statements for periods prior to the Spin-off include all revenues, costs, assets and liabilities directly attributable to us. ServiceMaster’s debt and corresponding interest expense were not allocated to us for periods prior to the Spin-off since we were not the legal obligor of the debt. The accompanying consolidated and combined financial statements include expense allocations for certain corporate functions historically provided by ServiceMaster. These allocations may not be indicative of the level of expense which would have been incurred had the company operated as a separate entity prior to the Spin-off, nor are these costs necessarily indicative of costs we may incur in the future.

Non-GAAP Financial Measures

To supplement Frontdoor’s results presented in accordance with accounting principles generally accepted in the United States (“GAAP”), Frontdoor has disclosed the non-GAAP financial measures of Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash Flow, Adjusted Net Income, and Adjusted Diluted Earnings per Share.

We define “Adjusted EBITDA” as net income before: provision for income taxes; interest expense; interest income from affiliate; depreciation and amortization expense; non-cash stock-based compensation expense; restructuring charges; Spin-off charges; secondary offering costs; affiliate royalty expense; (gain) loss on insured home service plan claims; and other non-operating expenses. We believe Adjusted EBITDA is useful for investors, analysts and other interested parties as it facilitates company-to-company operating performance comparisons by excluding potential differences caused by variations in capital structures, taxation, the age and book depreciation of facilities and equipment, restructuring initiatives, Spin-off charges, arrangements with affiliates and equity-based, long-term incentive plans.

We define “Adjusted EBITDA Margin” as Adjusted EBITDA divided by revenue. We believe Adjusted EBITDA Margin is useful for investors, analysts and other interested parties as it facilitates company-to-company operating performance comparisons by excluding potential differences caused by variations in capital structures, taxation, the age and book depreciation of facilities and equipment, restructuring initiatives, Spin-off charges, arrangements with affiliates and equity-based, long-term incentive plans.

We define “Free Cash Flow” as net cash provided from operating activities less property additions. Free Cash Flow is not a measurement of our financial performance or liquidity under GAAP and does not purport to be an alternative to net cash provided from operating activities or any other performance or liquidity measures derived in accordance with GAAP. Free Cash Flow is useful as a supplemental measure of our liquidity. Management uses Free Cash Flow to facilitate company-to-company cash flow comparisons, which may vary from company to company for reasons unrelated to operating performance.

We define “Adjusted Net Income” as net income before: amortization expense; restructuring charges; Spin-off charges; secondary offering costs; affiliate royalty expense; interest income from affiliate; (gain) loss on insured home service plan claims; other non-operating expenses; and the tax impact of the aforementioned adjustments. We believe Adjusted Net Income is useful for investors, analysts and other interested parties as it facilitates company-to-company operating performance comparisons by excluding potential differences caused by items listed in this definition.

We define “Adjusted Diluted Earnings per Share” as Adjusted Net Income divided by the weighted-average diluted common shares outstanding.

See the schedules attached hereto for additional information and reconciliations of such non-GAAP financial measures. Management believes these non-GAAP financial measures provide useful supplemental information for its and investors’ evaluation of Frontdoor’s business performance and are useful for period-over-period comparisons of the performance of Frontdoor’s business. While we believe that these non-GAAP financial measures are useful in evaluating our business, this information should be considered as supplemental in nature and is not meant to be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not be the same as similarly entitled measures reported by other companies.

 

(1)

See “Reconciliations of Non-GAAP Financial Measures” accompanying this release for a reconciliation of Adjusted Net Income, Adjusted Diluted Earnings per Share, Adjusted EBITDA, Adjusted EBITDA Margin, and Free Cash Flow, each a non-GAAP measure, to the nearest GAAP measure. See “Non-GAAP Financial Measures” included in this release for descriptions of calculations of these measures.

 (2)

A reconciliation of the forward-looking first-quarter and full-year 2020 Adjusted EBITDA outlook to net income cannot be provided without unreasonable effort because of the inherent difficulty of accurately forecasting the occurrence and financial impact of the various adjusting items necessary for such reconciliation that have not yet occurred, are out of our control, or cannot be reasonably predicted. For the same reasons, the company is unable to assess the probable significance of the unavailable information, which could have a material impact on its future GAAP financial results.

 (3)

Revenue conversion is calculated using the estimated gross margin impact of new home service plan revenue along with the impact of price changes.

 

frontdoor, inc.

Consolidated and Combined Statements of Operations and Comprehensive Income (Unaudited)

($ millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Year Ended

 

 

December 31,

 

December 31,

 

 

2019

 

2018

 

2019

 

2018

Revenue

 

$

300

 

 

$

279

 

 

$

1,365

 

 

$

1,258

 

Cost of services rendered

 

 

161

 

 

 

155

 

 

 

687

 

 

 

686

 

Gross Profit

 

 

139

 

 

 

125

 

 

 

678

 

 

 

572

 

Selling and administrative expenses

 

 

95

 

 

 

80

 

 

 

392

 

 

 

338

 

Depreciation and amortization expense

 

 

6

 

 

 

6

 

 

 

24

 

 

 

21

 

Restructuring charges

 

 

1

 

 

 

 

 

 

1

 

 

 

3

 

Spin-off charges

 

 

 

 

 

1

 

 

 

1

 

 

 

24

 

Affiliate royalty expense

 

 

 

 

 

 

 

 

 

 

 

1

 

Interest expense

 

 

15

 

 

 

15

 

 

 

62

 

 

 

23

 

Interest income from affiliate

 

 

 

 

 

 

 

 

 

 

 

(2

)

Interest and net investment income

 

 

(2

)

 

 

(1

)

 

 

(6

)

 

 

(2

)

Income before Income Taxes

 

 

23

 

 

 

23

 

 

 

204

 

 

 

166

 

Provision for income taxes

 

 

5

 

 

 

6

 

 

 

51

 

 

 

42

 

Net Income

 

$

19

 

 

$

17

 

 

$

153

 

 

$

125

 

Other Comprehensive Income (Loss), Net of Income Taxes:

 

 

 

 

 

 

 

 

 

 

 

 

Net unrealized gain/(loss) on derivative instruments

 

 

4

 

 

 

(9

)

 

 

(12

)

 

 

(9

)

Total Comprehensive Income

 

$

23

 

 

$

8

 

 

$

141

 

 

$

116

 

Earnings per Share:

 

 

 

 

 

 

 

 

 

Basic

$

0.22

 

 

$

0.20

 

 

$

1.81

 

 

$

1.47

 

Diluted

$

0.22

 

 

$

0.20

 

 

$

1.80

 

 

$

1.47

 

Weighted-average Common Shares Outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

84.8

 

 

 

84.5

 

 

 

84.7

 

 

 

84.5

 

Diluted

 

 

85.1

 

 

 

84.7

 

 

 

84.9

 

 

 

84.7

 

frontdoor, inc.

Consolidated Statements of Financial Position (Unaudited)

($ millions)

 

 

 

 

 

 

 

 

 

As of

 

 

December 31,

 

 

2019

 

2018

Assets:

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

428

 

 

$

296

 

Marketable securities

 

 

7

 

 

 

9

 

Receivables, less allowance of $2

 

 

11

 

 

 

12

 

Prepaid expenses and other assets

 

 

16

 

 

 

13

 

Total Current Assets

 

 

461

 

 

 

330

 

Other Assets:

 

 

 

 

 

 

Property and equipment, net

 

 

51

 

 

 

47

 

Goodwill

 

 

501

 

 

 

476

 

Intangible assets, net

 

 

191

 

 

 

158

 

Operating lease right-of-use assets

 

 

17

 

 

 

 

Deferred customer acquisition costs

 

 

18

 

 

 

21

 

Other assets

 

 

11

 

 

 

10

 

Total Assets

 

$

1,250

 

 

$

1,041

 

Liabilities and Shareholders’ Equity:

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Accounts payable

 

$

48

 

 

$

41

 

Accrued liabilities:

 

 

 

 

 

 

Payroll and related expenses

 

 

17

 

 

 

10

 

Home service plan claims

 

 

66

 

 

 

67

 

Interest payable

 

 

9

 

 

 

9

 

Other

 

 

29

 

 

 

26

 

Deferred revenue

 

 

188

 

 

 

185

 

Current portion of long-term debt

 

 

7

 

 

 

7

 

Total Current Liabilities

 

 

364

 

 

 

345

 

Long-Term Debt

 

 

973

 

 

 

977

 

Other Long-Term Liabilities:

 

 

 

 

 

 

Deferred taxes

 

 

45

 

 

 

39

 

Operating lease liabilities

 

 

20

 

 

 

 

Other long-term obligations

 

 

27

 

 

 

24

 

Total Other Long-Term Liabilities

 

 

92

 

 

 

63

 

Commitments and Contingencies

 

 

 

 

 

 

Shareholders’ Equity:

 

 

 

 

 

 

Common stock, $.01 par value; 2,000,000,000 shares authorized; 85,309,260 shares issued and outstanding at December 31, 2019 and 84,545,152 shares issued and outstanding at December 31, 2018

 

 

1

 

 

 

1

 

Additional paid-in capital

 

 

29

 

 

 

1

 

Accumulated deficit

 

 

(188

)

 

 

(336

)

Accumulated other comprehensive loss

 

 

(21

)

 

 

(9

)

Total Deficit

 

 

(179

)

 

 

(344

)

Total Liabilities and Shareholders’ Equity

 

$

1,250

 

 

$

1,041

 

frontdoor, inc.

Consolidated and Combined Statements of Cash Flows (Unaudited)

($ millions)

 

 

 

 

 

 

 

Year Ended

 

December 31,

 

2019

 

2018

Cash and Cash Equivalents at Beginning of Period

$

296

 

 

$

282

 

Cash Flows from Operating Activities:

 

 

 

 

 

Net Income

 

153

 

 

 

125

 

Adjustments to reconcile net income to net cash provided from operating activities:

 

 

 

 

 

Depreciation and amortization expense

 

24

 

 

 

21

 

Deferred income tax provision

 

(1

)

 

 

7

 

Stock-based compensation expense

 

9

 

 

 

4

 

Restructuring charges

 

1

 

 

 

3

 

Payments for restructuring charges

 

(1

)

 

 

(5

)

Spin-off charges

 

1

 

 

 

24

 

Payments for spin-off charges

 

(1

)

 

 

(23

)

Other

 

4

 

 

 

1

 

Change in working capital, net of acquisitions:

 

 

 

 

 

Receivables

 

1

 

 

 

4

 

Prepaid expenses and other current assets

 

2

 

 

 

(1

)

Accounts payable

 

7

 

 

 

8

 

Deferred revenue

 

3

 

 

 

1

 

Accrued liabilities

 

(1

)

 

 

7

 

Accrued interest payable

 

 

 

 

9

 

Current income taxes

 

(1

)

 

 

4

 

Net Cash Provided from Operating Activities

 

200

 

 

 

189

 

Cash Flows from Investing Activities

 

 

 

 

 

Purchases of property and equipment

 

(22

)

 

 

(27

)

Business acquisitions, net of cash acquired

 

(38

)

 

 

 

Purchases of available-for-sale securities

 

(7

)

 

 

(15

)

Sales and maturities of available-for-sale securities

 

9

 

 

 

32

 

Other investing activities

 

(4

)

 

 

 

Net Cash Used for Investing Activities

 

(61

)

 

 

(10

)

Cash Flows from Financing Activities

 

 

 

 

 

Payments of debt and finance lease obligations

 

(7

)

 

 

(10

)

Net transfers to Parent

 

 

 

 

(137

)

Discount paid on issuance of debt

 

 

 

 

(2

)

Debt issuance costs paid

 

 

 

 

(16

)

Net Cash Used for Financing Activities

 

(7

)

 

 

(165

)

Cash Increase During the Period

 

132

 

 

 

14

 

Cash and Cash Equivalents at End of Period

$

428

 

 

$

296

 

Reconciliations of Non-GAAP Financial Measures

 

The following table presents reconciliations of net income to Adjusted Net Income.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Year Ended

 

 

December 31,

 

December 31,

($ millions except per share amounts)

 

2019

 

2018

 

2019

 

2018

Net Income

 

$

19

 

$

17

 

 

$

153

 

 

$

125

 

Amortization expense

 

 

1

 

 

2

 

 

 

6

 

 

 

8

 

Restructuring charges

 

 

1

 

 

 

 

 

1

 

 

 

3

 

Spin-off charges

 

 

 

 

1

 

 

 

1

 

 

 

24

 

Affiliate royalty expense

 

 

 

 

 

 

 

 

 

 

1

 

Interest income from affiliate

 

 

 

 

 

 

 

 

 

 

(2

)

Gain on insured home service plan claims

 

 

 

 

 

 

 

 

 

 

(2

)

Secondary offering costs

 

 

 

 

 

 

 

2

 

 

 

 

Other

 

 

1

 

 

 

 

 

 

 

 

 

Tax impact of adjustments

 

 

 

 

(1

)

 

 

(2

)

 

 

(7

)

Adjusted Net Income

 

$

21

 

$

19

 

 

$

162

 

 

$

150

 

Adjusted Earnings per Share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.25

 

$

0.23

 

 

$

1.91

 

 

$

1.78

 

Diluted

 

$

0.25

 

$

0.23

 

 

$

1.90

 

 

$

1.77

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

84.8

 

 

84.5

 

 

 

84.7

 

 

 

84.5

 

Diluted

 

 

85.1

 

 

84.7

 

 

 

84.9

 

 

 

84.7

 

 

The following table presents reconciliations of net cash provided from operating activities to Free Cash Flow.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Year Ended

 

 

December 31,

 

December 31,

(In millions)

 

2019

 

2018

 

2019

 

2018

Net Cash Provided from Operating Activities

 

$

47

 

 

$

63

 

 

$

200

 

 

$

189

 

Property Additions

 

 

(7

)

 

 

(5

)

 

 

(22

)

 

 

(27

)

Free Cash Flow

 

$

40

 

 

$

58

 

 

$

178

 

 

$

163

 

 

The following table presents reconciliations of net income to Adjusted EBITDA.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Year Ended

 

 

December 31,

 

December 31,

(In millions)

 

2019

 

2018

 

2019

 

2018

Net Income

 

$

19

 

 

$

17

 

 

$

153

 

 

$

125

 

Depreciation and amortization expense

 

 

6

 

 

 

6

 

 

 

24

 

 

 

21

 

Restructuring charges

 

 

1

 

 

 

 

 

 

1

 

 

 

3

 

Spin-off charges

 

 

 

 

 

1

 

 

 

1

 

 

 

24

 

Provision for income taxes

 

 

5

 

 

 

6

 

 

 

51

 

 

 

42

 

Non-cash stock-based compensation expense

 

 

2

 

 

 

1

 

 

 

9

 

 

 

4

 

Affiliate royalty expense

 

 

 

 

 

 

 

 

 

 

 

1

 

Interest expense

 

 

15

 

 

 

15

 

 

 

62

 

 

 

23

 

Interest income from affiliate

 

 

 

 

 

 

 

 

 

 

 

(2

)

Secondary offering costs

 

 

 

 

 

 

 

 

2

 

 

 

 

Gain on insured home service plan claims

 

 

 

 

 

 

 

 

 

 

 

(2

)

Other

 

 

1

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

48

 

 

$

47

 

 

$

303

 

 

$

238

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

300

 

 

$

279

 

 

$

1,365

 

 

$

1,258

 

Net Income Margin

 

 

6

%

 

 

6

%

 

 

11

%

 

 

10

%

Adjusted EBITDA Margin

 

 

16

%

 

 

17

%

 

 

22

%

 

 

19

%

 

Key Business Metrics

 

 

 

 

 

 

 

 

 

As of December 31,

 

 

2019

 

2018

Growth in number of home service plans

 

3

%

 

6

%

Customer retention rate

 

75

%

 

75

%

 

Investor Relations:

Matt Davis

901.701.5199

ir@frontdoorhome.com

Media:

Nicole Ritchie

901.701.5198

nicole.ritchie@frontdoorhome.com

KEYWORDS: Tennessee United States North America

INDUSTRY KEYWORDS: Retail Home Goods Residential Building & Real Estate Commercial Building & Real Estate Construction & Property Building Systems

MEDIA:

Logo
Logo

Nexstar Media Group Fourth Quarter Net Revenue Rises 37.9% to a Record $1.1 Billion

Nexstar Media Group Fourth Quarter Net Revenue Rises 37.9% to a Record $1.1 Billion

Net Revenue Drives 4Q Operating Income of $256.5 Million, and Net Income of $113.9 Million

Record BCF of $416.8 Million, Adjusted EBITDA of $379.2 Million and Free Cash Flow of $173.9 Million

Repurchases $45.1 Million of Common Shares in the Fourth Quarter

Initiates Pro-Forma Average Annual Free Cash Flow Guidance for the 2020/2021 Cycle of $1.175 Billion

IRVING, Texas–(BUSINESS WIRE)–
Nexstar Media Group, Inc. (NASDAQ: NXST) (“Nexstar” or “the Company”) today reported financial results for the fourth quarter ended December 31, 2019 as summarized below. The actual results presented herein for the three months ended December 31, 2019 reflect the Company’s legacy Nexstar Broadcasting and digital operations and full quarter results from the Tribune Media stations which we acquired on September 19, 2019. Fourth quarter 2019 revenue from WGN America, also acquired in the Tribune transaction, is included in core advertising revenue and distribution fee revenue. A full quarter contribution from Nexstar’s 31.3% ownership stake in TV Food Network and other investments acquired in the Tribune transaction is included in the full income statement on page 7 under “Income (loss) on equity investments, net.” The comparable three month period ended December 31, 2018 reflects Nexstar’s legacy broadcasting and digital operations.

Summary 2019 Fourth Quarter and Full Year Highlights

 

 

Three Months Ended

December 31,

 

 

 

 

 

 

Years Ended

December 31,

 

 

 

 

 

($ in thousands)

 

2019

 

 

2018

 

Change

 

 

2019

 

2018

 

Change

Core Advertising Revenue

 

$

 

525,458

 

 

$

 

298,368

 

 

 

+76.1

%

 

$

 

1,335,126

 

 

$

 

1,089,920

 

 

 

+22.5

%

Political Advertising Revenue

 

$

 

36,526

 

 

$

 

140,160

 

 

 

(73.9

)%

 

$

 

51,889

 

 

$

 

251,209

 

 

 

(79.3

)%

Total Advertising Revenue

 

$

 

561,984

 

 

$

 

438,528

 

 

 

+28.2

%

 

$

 

1,387,015

 

 

$

 

1,341,129

 

 

 

+3.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distribution Fee Revenue

 

$

 

445,831

 

 

$

 

284,548

 

 

 

+56.7

%

 

$

 

1,368,881

 

 

$

 

1,121,081

 

 

 

+22.1

%

Digital Revenue

 

$

 

74,310

 

 

$

 

65,044

 

 

 

+14.2

%

 

$

 

241,519

 

 

$

 

261,159

 

 

 

(7.5

)%

Other Revenue

 

$

 

17,965

 

 

$

 

9,902

 

 

 

+81.4

%

 

$

 

41,909

 

 

$

 

43,327

 

 

 

(3.3

)%

Net Revenue

 

$

 

1,100,090

 

 

$

 

798,022

 

 

 

+37.9

%

 

$

 

3,039,324

 

 

$

 

2,766,696

 

 

 

+9.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from Operations

 

$

 

256,498

 

 

$

 

272,776

 

 

 

(6.0

)%

 

$

 

655,131

 

 

$

 

757,779

 

 

 

(13.5

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

 

113,851

 

 

$

 

154,490

 

 

 

(26.3

)%

 

$

 

236,295

 

 

$

 

388,265

 

 

 

(39.1

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Broadcast Cash Flow(1)

 

$

 

416,803

 

 

$

 

379,852

 

 

 

+9.7

%

 

$

 

1,054,636

 

 

$

 

1,123,581

 

 

 

(6.1

)%

Broadcast Cash Flow Margin(2)

 

 

37.9

%

 

 

47.6

%

 

 

 

 

 

 

34.7

%

 

 

40.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA Before One-

Time Transaction Expenses
(1)

 

$

 

408,224

 

 

$

 

358,251

 

 

 

+13.9

%

 

$

 

972,281

 

 

$

 

1,031,888

 

 

 

(5.8

)%

Adjusted EBITDA(1)

 

$

 

379,219

 

 

$

 

352,789

 

 

 

+7.5

%

 

$

 

898,149

 

 

$

 

1,023,415

 

 

 

(12.2

)%

Adjusted EBITDA Margin(2)

 

 

34.5

%

 

 

44.2

%

 

 

 

 

 

 

29.6

%

 

 

37.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Free Cash Flow Before One-Time

Transaction Expenses
(1)

 

$

 

202,865

 

 

$

 

255,381

 

 

 

(20.6

)%

 

$

 

520,885

 

 

$

 

692,713

 

 

 

(24.8

)%

Free Cash Flow(1)

 

$

 

173,860

 

 

$

 

249,919

 

 

 

(30.4

)%

 

$

 

439,457

 

 

$

 

684,240

 

 

 

(35.8

)%

(1)

Definitions and disclosures regarding non-GAAP financial information including reconciliations are included at the end of the press release.

(2)

Broadcast cash flow margin is broadcast cash flow as a percentage of net revenue. Adjusted EBITDA margin is Adjusted EBITDA as a percentage of net revenue.

CEO Comment

Perry A. Sook, Chairman, President and Chief Executive Officer of Nexstar Media Group, Inc. commented, “Nexstar’s 2019 fourth quarter financial results capped an outstanding year for the Company as we delivered another period of record off-cycle political year operating performance with net revenue, profitability, and cash flow metrics (before one-time transaction expenses) exceeding consensus expectations. Throughout 2019 we deployed Nexstar’s broad range of proven M&A, integration, financing, operating and other strategies to build scale and our competitive position, serve the communities where we operate, and create new value for shareholders. As a result, 2020 is off to a strong start as we embark upon a significant new free cash flow growth cycle which will fuel a material reduction in our net leverage while supporting our goals of driving shareholder returns.

“In 2019, we closed the highly accretive acquisition of Tribune Media creating the largest U.S. television broadcast station group; entered into deleveraging purchase and sale agreements with Fox Television Stations; completed new multi-year retransmission consent agreements representing approximately 70% of our subscribers; entered into new long-term network affiliation agreements with CBS, FOX and NBC and realigned our digital business to drive future growth and profitability. Our expanded operating base generated approximately $521 million in full year free cash flow before one-time expenses enabling us to invest in our broadcast and technology platform, while enhancing shareholder value through our return of capital and leverage reduction initiatives. During the year, we returned $82.8 million to shareholders in the form of dividends and, in the fourth quarter, we allocated $45.1 million of cash from operations to opportunistically repurchase approximately 440,000 Nexstar shares at an average purchase price of $102.57 per share, reducing our basic share count to 45.7 million outstanding class A common shares.

“With the continued sharing of best practices between the Nexstar and Tribune organizations coupled with key factors including the Super Bowl on FOX, Summer Olympics on NBC, double-digit distribution revenue growth and expected record levels of 2020 election cycle spending, Nexstar expects to generate pro-forma average annual free cash flow in excess of $1.175 billion for the 2020/2021 cycle, marking an increase of over 15% compared to our guidance of pro forma average annual free cash flow for the 2019/2020 cycle of $1.02 billion. Our robust free cash flow from operations will be bolstered by meaningful net proceeds from recent purchase and sale agreements and reinforces our confidence in attaining our post-Tribune closing priority of reducing Nexstar’s net leverage ratio to 4.0x or below by the end of 2020, allowing us to evaluate additional return of capital options to enhance shareholder value.

“Turning back to our fourth quarter results, the continued strength of Nexstar’s legacy operations combined with a healthy, full quarter contribution from the Tribune Media assets, led to double digit growth in all of our non-political revenue sources. For the fourth quarter, net revenue rose 37.9% to $1.1 billion, as our increased scale and the ongoing execution of our strategies to leverage our premium local content and distribution significantly offset the 73.9% year-over-year decline in political advertising. Fourth quarter total television advertising revenue increased 28.2% to $562 million, reflecting a 76.1% rise in core advertising revenue, partially offset by the year-over-year decline in political advertising. Transaction related revenue gains, the inclusion of WGN America and recent distribution fee renewals resulted in a 56.7% rise in distribution revenue to a quarterly record $445.8 million, and a 14.2% increase in digital revenue to $74.3 million, also a quarterly record. Notably, active spending by Presidential and gubernatorial candidates of both parties in the fourth quarter, combined with our expanded scale in key primary states, resulted in record fourth quarter odd-year political ad spending of $36.5 million, or more than double the comparable 2017 fourth quarter levels. Excluding political, fourth quarter net revenue would have increased approximately 62% over the prior year period. The combined Nexstar and Tribune operations generated organic growth in core advertising revenue during the quarter.

“Total combined fourth quarter digital and distribution fee revenue of $520 million rose approximately 49% over the prior year period and accounted for 47.3% of net revenue, compared to 43.8% of net revenue in the prior year period. The year-over-year increase in fourth quarter non-television revenue reflects new distribution agreements reached in the second half of 2019 and Tribune Media revenue synergies related to the after acquired clauses in our retransmission consent contracts, WGN America, and our realigned digital operations. With our successful renewal of 2019 year-end retransmission consent agreements representing approximately 70.0% of our subscriber base and the approximate 15% of the base to be renewed and repriced this year, continued revenue growth from this source remains highly visible for 2020 and beyond.

“The rise in fourth quarter station direct operating expenses (net of trade expense) primarily reflects a full quarter of incremental expenses related to the operation of the acquired Tribune stations and budgeted increases in network affiliation expense as a partial offset to the rising distribution revenue. Fourth quarter pro forma fixed expenses, excluding programming expenses, were down low single digits on a percentage basis.

“During the fourth quarter, we took actions to further optimize our balance sheet and capital structure as we completed the offering of an additional $665 million of 5.625% senior notes due 2027, which were issued with the same terms as our existing $1,120 million aggregate principal amount of 5.625% Senior Notes due 2027, as a part of the Tribune transaction financing. The net offering proceeds, together with cash on hand, were used to redeem Nexstar’s 6.125% Senior Notes due 2022 and 5.875% Senior Notes due 2022 and to pay related premiums, fees and expenses. By opportunistically accessing the capital markets, we were able to retire the most expensive pieces of our unsecured debt while addressing near-term bond maturities.

“In addition to our balance sheet and capital structure improvements, we continued to make significant progress in our integration of the Tribune Media assets into Nexstar’s platform, while extracting initial anticipated revenue and cost synergies and capitalizing on the many growth opportunities throughout our portfolio. In this regard, we have hired or promoted 11 general managers, added two regional vice presidents and promoted four finance department executives to support our expanded operations as well as added four corporate executives to manage content acquisition/WGNA, distribution, sales and corporate communications. On the local programming front, we expanded local news programming in our Portland and Sacramento markets, while launching a new state capitol news bureau in Missouri. We also began preparations for the summer 2020 launch of the WGN America News Nation prime-time newscast, which will reach approximately 75 million U.S. TV households and will be complemented by the around-the-clock mobile news app newsnationnow. By leveraging the local market, regional and national expertise and resources of Nexstar’s 5,400 local journalists — which is more than any other broadcast or cable network — in 110 local newsrooms across the country including capitol news bureaus in 20 states, and reallocating financial resources from WGN’s syndicated programming toward News Nation, we intend to provide viewers with fact-based news and information without bias or opinion, while delivering attractive marketing solutions for national advertisers.

“In summary, 2019 was a year of significant growth and change at Nexstar Media Group that has positioned us well for the future. With the accretive transaction of Tribune Media, we have become America’s leading television broadcast station group with an unmatched platform that delivers exceptional local content to inform and entertain our viewers, while providing premium local advertising opportunities at scale for advertisers and political campaigns. As the nation’s largest pure-play local broadcast television and digital media company, we now have truly national reach and coverage with Nexstar owned or operated stations reaching approximately 69 million U.S. television households. Our platform also benefits from the consistent and meaningful contributions from our 31.3% TV Food Network ownership stake and positive cash flow from our national cable network WGN America. At the same time, the active management of our capital structure and strong free cash flow growth has provided us with the financial flexibility to support our return of capital and leverage reduction initiatives including share repurchases, dividend payments, debt reduction and strategic business investments—all of which have delivered meaningful shareholder returns. In this regard, earlier this year the Board of Directors approved a 24.4% increase in the quarterly cash dividend to $0.56 per share beginning in first quarter of 2020. Looking ahead, we look forward to realizing the full value of the Tribune Media transaction later this year as we complete our proven integration and synergy realization game plan. With continued double-digit growth in distribution revenue related to recent contract renewals and what many expect to be substantial spending levels related to the upcoming 2020 presidential election cycle, we have excellent visibility to delivering on our free cash flow targets and a clear path for the continued near- and long-term enhancement of shareholder value.”

The consolidated debt of Nexstar and independently-owned Variable Interest Entities (VIEs) including, Mission Broadcasting, Inc. and Shield Media, LLC (collectively, the “Company”) at December 31, 2019, was $8,492.5 million including senior secured debt of $5,810.4 million. As of December 31, 2019, Nexstar deconsolidated Marshall. As such, Marshall’s senior secured debt of $48.9 million is no longer included in the Company’s total debt. The Company’s total net leverage ratio at December 31, 2019 was 5.18x and first lien net leverage ratio at December 31, 2019 was 3.52x compared to a covenant of 4.25x.

The table below summarizes the Company’s debt obligations (net of financing costs and discounts):

($ in millions)

 

12/31/2019

 

 

12/31/2018

 

Revolving Credit Facilities

 

$

 

 

 

$

 

5.6

 

First Lien Term Loans

 

$

 

5,810.4

 

 

$

 

2,407.5

 

6.125% Senior Unsecured Notes due 2022

 

$

 

 

 

$

 

273.4

 

5.875% Senior Unsecured Notes due 2022

 

$

 

 

 

$

 

406.2

 

5.625% Senior Unsecured Notes due 2024

 

$

 

890.0

 

 

$

 

888.2

 

5.625% Senior Unsecured Notes due 2027

 

$

 

1,792.1

 

 

$

 

 

Total Funded Debt

 

$

 

8,492.5

 

 

$

 

3,980.9

 

 

 

 

 

 

 

 

 

 

Unrestricted Cash

 

$

 

232.1

 

 

$

 

145.1

 

Share Repurchase Authorization and Activity

The Company repurchased a total of 439,743 shares of its Class A common stock in the fourth quarter of 2019 at an average purchase price of approximately $102.57 per share for a total cost of $45.1 million, which was funded from cash flow from operations. Reflecting the shares repurchased to date, Nexstar has approximately 45.7 million shares of Class A common stock outstanding (the only class of shares outstanding) and has approximately $156.8 million available under its share repurchase authorization.

Fourth Quarter Conference Call

Nexstar will host a conference call at 10:00 a.m. ET today. Senior management will discuss the financial results and host a question and answer session. The dial in number for the audio conference call is 334/777-6978, conference ID 3990181 (domestic and international callers). Participants can also listen to a live webcast of the call through the “Events and Presentations” section under “Investor Relations” on Nexstar’s website at www.nexstar.tv. A webcast replay will be available for 90 days following the live event at www.nexstar.tv.

Definitions and Disclosures Regarding non-GAAP Financial Information

Broadcast cash flow is calculated as net income, plus interest expense (net), loss on extinguishment of debt, income tax expense (benefit), depreciation, amortization of intangible assets and broadcast rights, (gain) loss on asset disposal, corporate expenses, other expense (income) and goodwill and intangible assets impairment, minus pension and other postretirement plans credit (net), reimbursement from the FCC related to station repack and broadcast rights payments. We consider broadcast cash flow to be an indicator of our assets’ operating performance. We also believe that broadcast cash flow and multiples of broadcast cash flow are useful to investors because it is frequently used by industry analysts, investors and lenders as a measure of valuation for broadcast companies.

Adjusted EBITDA is calculated as broadcast cash flow, plus pension and other postretirement plans credit (net), minus corporate expenses. We consider Adjusted EBITDA to be an indicator of our assets’ operating performance and a measure of our ability to service debt. It is also used by management to identify the cash available for strategic acquisitions and investments, maintain capital assets and fund ongoing operations and working capital needs. We also believe that Adjusted EBITDA is useful to investors and lenders as a measure of valuation and ability to service debt.

Free cash flow is calculated as net income, plus interest expense (net), loss on extinguishment of debt, income tax expense (benefit), depreciation, amortization of intangible assets and broadcast rights, (gain) loss on asset disposal, stock-based compensation expense, goodwill and intangible assets impairment and other expense (income), minus payments for broadcast rights, cash interest expense, capital expenditures, proceeds from disposals of property and equipment, and net operating cash income taxes. We consider Free Cash Flow to be an indicator of our assets’ operating performance. In addition, this measure is useful to investors because it is frequently used by industry analysts, investors and lenders as a measure of valuation for broadcast companies, although their definitions of Free Cash Flow may differ from our definition.

For a reconciliation of these non-GAAP financial measurements to the GAAP financial results cited in this news announcement, please see the supplemental tables at the end of this release.

With respect to our forward-looking guidance, no reconciliation between a non-GAAP measure to the closest corresponding GAAP measure is included in this release because we are unable to quantify certain amounts that would be required to be included in the GAAP measure without unreasonable efforts and we believe such reconciliations would imply a degree of precision that would be confusing or misleading to investors. In particular, reconciliation of forward-looking Free Cash Flow to the closest corresponding GAAP measure is not available without unreasonable efforts on a forward-looking basis due to the high variability, complexity and low visibility with respect to the charges excluded from these non-GAAP measures such as the measures and effects of stock-based compensation expense specific to equity compensation awards that are directly impacted by unpredictable fluctuations in our stock price and other non-recurring or unusual items such as impairment charges, transaction-related costs and gains or losses on sales of assets. We expect the variability of these items to have a significant, and potentially unpredictable, impact on our future GAAP financial results.

About Nexstar Media Group, Inc.

Nexstar Media Group is a leading diversified media company that leverages localism to bring new services and value to consumers and advertisers through its traditional media, digital and mobile media platforms. Nexstar owns, operates, programs or provides sales and other services to 197 television stations and related digital multicast signals reaching 115 markets or approximately 39% of all U.S. television households (reflecting the FCC’s UHF discount). Nexstar’s portfolio includes primary affiliates of NBC, CBS, ABC, FOX, MyNetworkTV and The CW. Nexstar’s community portal websites offer additional hyper-local content and verticals for consumers and advertisers, allowing audiences to choose where, when and how they access content while creating new revenue opportunities. Nexstar also owns WGN America, a growing national general entertainment cable network and a 31.3% ownership stake in TV Food Network, a top tier cable asset. For more information please visit www.nexstar.tv.

Forward-Looking Statements

This communication includes forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events. Forward-looking statements include information preceded by, followed by, or that includes the words “guidance,” “believes,” “expects,” “anticipates,” “could,” or similar expressions. For these statements, Nexstar claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The forward-looking statements contained in this communication, concerning, among other things, future financial performance, including changes in net revenue, cash flow and operating expenses, involve risks and uncertainties, and are subject to change based on various important factors, including the impact of changes in national and regional economies, the ability to service and refinance our outstanding debt, successful integration of acquired television stations and digital businesses (including achievement of synergies and cost reductions), pricing fluctuations in local and national advertising, future regulatory actions and conditions in the television stations’ operating areas, competition from others in the broadcast television markets, volatility in programming costs, the effects of governmental regulation of broadcasting, industry consolidation, technological developments and major world news events. Nexstar undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this communication might not occur. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this release. For more details on factors that could affect these expectations, please see Nexstar’s other filings with the Securities and Exchange Commission.

-tables follow-

Nexstar Media Group, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts, unaudited)

 

 

 

 

 

Three Months Ended

December 31,

 

 

Years Ended

December 31,

 

 

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net revenue

 

 

 

$

 

1,100,090

 

 

$

 

798,022

 

 

$

 

3,039,324

 

 

$

 

2,766,696

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate expenses

 

 

 

 

63,710

 

 

 

29,460

 

 

 

189,548

 

 

 

110,921

 

Direct operating expenses, net of trade

 

 

 

 

431,611

 

 

 

274,426

 

 

 

1,331,248

 

 

 

1,101,423

 

Selling, general and administrative expenses, excluding

corporate

 

 

 

 

196,770

 

 

 

129,368

 

 

 

540,433

 

 

 

469,012

 

Trade expense

 

 

 

 

5,787

 

 

 

4,726

 

 

 

17,384

 

 

 

16,494

 

Depreciation

 

 

 

 

38,485

 

 

 

31,212

 

 

 

123,375

 

 

 

109,789

 

Amortization of intangible assets

 

 

 

 

84,779

 

 

 

38,766

 

 

 

200,317

 

 

 

149,406

 

Amortization of broadcast rights

 

 

 

 

38,269

 

 

 

14,308

 

 

 

85,018

 

 

 

61,342

 

Reimbursement from the FCC related to station repack

 

 

 

 

(16,336

)

 

 

(16,931

)

 

 

(70,356

)

 

 

(29,381

)

Goodwill and intangible assets impairment

 

 

 

 

 

 

 

19,911

 

 

 

63,317

 

 

 

19,911

 

Loss (gain) on disposal of stations, net

 

 

 

 

517

 

 

 

 

 

 

(96,091

)

 

 

 

Total operating expenses

 

 

 

 

843,592

 

 

 

525,246

 

 

 

2,384,193

 

 

 

2,008,917

 

Income from operations

 

 

 

 

256,498

 

 

 

272,776

 

 

 

655,131

 

 

 

757,779

 

Income (loss) on equity investments, net

 

 

 

 

15,864

 

 

 

(624

)

 

 

17,925

 

 

 

(2,436

)

Interest expense, net

 

 

 

 

(106,831

)

 

 

(53,887

)

 

 

(304,350

)

 

 

(220,994

)

Loss on debt extinguishment

 

 

 

 

(6,577

)

 

 

(7,475

)

 

 

(10,301

)

 

 

(12,120

)

Pension and other postretirement plans credit, net

 

 

 

 

10,222

 

 

 

2,397

 

 

 

15,600

 

 

 

10,755

 

Other expenses

 

 

 

 

(893

)

 

 

(28

)

 

 

(684

)

 

 

(39

)

Income before income taxes

 

 

 

 

168,283

 

 

 

213,159

 

 

 

373,321

 

 

 

532,945

 

Income tax expense

 

 

 

 

(54,432

)

 

 

(58,669

)

 

 

(137,026

)

 

 

(144,680

)

Net income

 

 

 

 

113,851

 

 

 

154,490

 

 

 

236,295

 

 

 

388,265

 

Net (income) loss attributable to noncontrolling interests

 

 

 

 

(639

)

 

 

(1,381

)

 

 

(6,036

)

 

 

1,212

 

Net income attributable to Nexstar

 

 

 

$

 

113,212

 

 

$

 

153,109

 

 

$

 

230,259

 

 

$

 

389,477

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per common share attributable to Nexstar

Media Group, Inc.:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

$

 

2.46

 

 

$

 

3.36

 

 

$

 

5.01

 

 

$

 

8.52

 

Diluted

 

 

 

$

 

2.36

 

 

$

 

3.22

 

 

$

 

4.80

 

 

$

 

8.21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares

outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

45,952

 

 

 

45,619

 

 

 

45,986

 

 

 

45,718

 

Diluted

 

 

 

 

47,933

 

 

 

47,482

 

 

 

47,923

 

 

 

47,412

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

$

 

113,851

 

 

$

 

154,490

 

 

$

 

236,295

 

 

$

 

388,265

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrecognized amounts included in pension and

other postretirement benefit obligations, net of tax

(expense) benefit of ($11,723) in 2019 and $7,147 in 2018

 

 

 

 

34,166

 

 

 

(20,456

)

 

 

34,166

 

 

 

(20,456

)

Total comprehensive income

 

 

 

 

148,017

 

 

 

134,034

 

 

 

270,461

 

 

 

367,809

 

Total comprehensive income (loss) attributable to

noncontrolling interests

 

 

 

 

(639

)

 

 

(1,381

)

 

 

(6,036

)

 

 

1,212

 

Total comprehensive income attributable to Nexstar

Media Group, Inc.

 

 

 

$

 

147,378

 

 

$

 

132,653

 

 

$

 

264,425

 

 

$

 

369,021

 

Nexstar Media Group, Inc.

Reconciliation of Broadcast Cash Flow and Adjusted EBITDA (Non-GAAP Measures)

(in thousands, unaudited)

 

 

 

Three Months Ended

December 31,

 

 

Years Ended

December 31,

 

Broadcast Cash Flow and Adjusted EBITDA:

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net income

 

$

 

113,851

 

 

$

 

154,490

 

 

$

 

236,295

 

 

$

 

388,265

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Add (Less):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

106,831

 

 

 

53,887

 

 

 

304,350

 

 

 

220,994

 

Loss on extinguishment of debt

 

 

6,577

 

 

 

7,475

 

 

 

10,301

 

 

 

12,120

 

Income tax expense

 

 

54,432

 

 

 

58,669

 

 

 

137,026

 

 

 

144,680

 

Depreciation

 

 

38,485

 

 

 

31,212

 

 

 

123,375

 

 

 

109,789

 

Amortization of intangible assets

 

 

84,779

 

 

 

38,766

 

 

 

200,317

 

 

 

149,406

 

Amortization of broadcast rights

 

 

38,269

 

 

 

14,308

 

 

 

85,018

 

 

 

61,342

 

Amortization of right-of-use assets attributable to

favorable leases

 

 

152

 

 

 

 

 

 

609

 

 

 

 

Loss on asset disposal, net

 

 

4,214

 

 

 

4,677

 

 

 

3,985

 

 

 

5,793

 

(Gain) Loss on operating lease terminations

 

 

(5

)

 

 

 

 

 

415

 

 

 

 

Corporate expenses

 

 

63,710

 

 

 

29,460

 

 

 

189,548

 

 

 

110,921

 

Goodwill and intangible assets impairment

 

 

 

 

 

19,911

 

 

 

63,315

 

 

 

19,911

 

(Income) loss on equity investments, net

 

 

(15,864

)

 

 

624

 

 

 

(17,925

)

 

 

2,436

 

Other expenses

 

 

893

 

 

 

28

 

 

 

684

 

 

 

39

 

Pension and other postretirement plans credit, net

 

 

(10,222

)

 

 

(2,397

)

 

 

(15,600

)

 

 

(10,755

)

Loss (gain) on disposal of stations, net

 

 

517

 

 

 

 

 

 

(96,091

)

 

 

 

Reimbursement from the FCC related to station repack

 

 

(16,336

)

 

 

(16,931

)

 

 

(70,356

)

 

 

(29,381

)

Payments for broadcast rights

 

 

(53,480

)

 

 

(14,327

)

 

 

(100,630

)

 

 

(61,979

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Broadcast cash flow

 

 

416,803

 

 

 

379,852

 

 

 

1,054,636

 

 

 

1,123,581

 

Margin %

 

 

37.9

%

 

 

47.6

%

 

 

34.7

%

 

 

40.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Add (Less):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distributions from equity investments

 

 

15,904

 

 

 

 

 

 

17,461

 

 

 

 

Pension and other postretirement plans credit, net

 

 

10,222

 

 

 

2,397

 

 

 

15,600

 

 

 

10,755

 

Corporate expenses, excluding one-time transaction

expenses

 

 

(34,705

)

 

 

(23,998

)

 

 

(115,416

)

 

 

(102,448

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA before one-time transaction expenses

 

 

408,224

 

 

 

358,251

 

 

 

972,281

 

 

 

1,031,888

 

Margin %

 

 

37.1

%

 

 

44.9

%

 

 

32.0

%

 

 

37.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate one-time transaction expenses, including

accelerated stock-based compensation expense

 

 

(29,005

)

 

 

(5,462

)

 

 

(74,132

)

 

 

(8,473

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

 

379,219

 

 

$

 

352,789

 

 

$

 

898,149

 

 

$

 

1,023,415

 

Margin %

 

 

34.5

%

 

 

44.2

%

 

 

29.6

%

 

 

37.0

%

Nexstar Media Group, Inc.

Reconciliation of Free Cash Flow (Non-GAAP Measure)

(in thousands, unaudited)

 

 

 

Three Months Ended

December 31,

 

 

Years Ended

December 31,

 

Free Cash Flow:

 

2019

 

 

2018

 

 

 

2019

 

 

2018

 

Net income

 

$

 

113,851

 

 

$

 

154,490

 

 

$

 

236,295

 

 

$

 

388,265

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Add (Less):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

106,831

 

 

 

53,887

 

 

 

304,350

 

 

 

220,994

 

Loss on extinguishment of debt

 

 

6,577

 

 

 

7,475

 

 

 

10,301

 

 

 

12,120

 

Income tax expense

 

 

54,432

 

 

 

58,669

 

 

 

137,026

 

 

 

144,680

 

Depreciation

 

 

38,485

 

 

 

31,212

 

 

 

123,375

 

 

 

109,789

 

Amortization of intangible assets

 

 

84,779

 

 

 

38,766

 

 

 

200,317

 

 

 

149,406

 

Amortization of broadcast rights

 

 

38,269

 

 

 

14,308

 

 

 

85,018

 

 

 

61,342

 

Amortization of right-of-use assets attributable to

favorable leases

 

 

152

 

 

 

 

 

 

609

 

 

 

 

Loss on asset disposal, net

 

 

4,214

 

 

 

4,677

 

 

 

3,985

 

 

 

5,793

 

(Gain) Loss on operating lease terminations

 

 

(5

)

 

 

 

 

 

415

 

 

 

 

Non-cash compensation expense

 

 

 

 

 

(1,933

)

 

 

 

 

 

 

Stock-based compensation expense(1)

 

 

9,590

 

 

 

8,453

 

 

 

37,368

 

 

 

31,260

 

Corporate one-time transaction expenses, including

accelerated stock-based compensation expense

 

 

29,005

 

 

 

5,462

 

 

 

74,132

 

 

 

8,473

 

Goodwill and intangible assets impairment

 

 

 

 

 

19,911

 

 

 

63,315

 

 

 

19,911

 

(Income) loss on equity investments, net

 

 

(15,864

)

 

 

624

 

 

 

(17,925

)

 

 

2,436

 

Distributions from equity investments

 

 

15,904

 

 

 

 

 

 

17,461

 

 

 

 

Loss (gain) on disposal of stations, net

 

 

517

 

 

 

 

 

 

(96,091

)

 

 

 

Other expenses

 

 

893

 

 

 

28

 

 

 

684

 

 

 

39

 

Payments for broadcast rights

 

 

(53,480

)

 

 

(14,327

)

 

 

(100,630

)

 

 

(61,979

)

Cash interest expense(2)

 

 

(101,846

)

 

 

(51,786

)

 

 

(257,673

)

 

 

(211,230

)

Capital expenditures, excluding station repack and CVR

spectrum(3)

 

 

(61,889

)

 

 

(28,642

)

 

 

(111,007

)

 

 

(76,521

)

Capital expenditures related to station repack

 

 

(23,051

)

 

 

(13,290

)

 

 

(79,340

)

 

 

(26,832

)

Proceeds from disposals of property and equipment

 

 

2,425

 

 

 

62

 

 

 

4,451

 

 

 

4,344

 

Operating cash income tax payments, net (4)

 

 

(46,924

)

 

 

(32,665

)

 

 

(115,551

)

 

 

(89,577

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Free cash flow before one-time transaction expenses

 

 

202,865

 

 

 

255,381

 

 

 

520,885

 

 

 

692,713

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate one-time transaction expenses, excluding

accelerated stock-based compensation expense

 

 

(29,005

)

 

 

(5,462

)

 

 

(72,880

)

 

 

(8,473

)

Cash interest expense on the 5.625% Notes due 2027

during the escrow period, net(5)

 

 

 

 

 

 

 

 

(8,548

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Free cash flow

 

$

 

173,860

 

 

$

 

249,919

 

 

$

 

439,457

 

 

$

 

684,240

 

(1)

Excludes accelerated stock-based compensation of $1.3 million in Q3 2019 associated with certain divestitures of Nexstar stations.

(2)

Excludes (i) payments of $26.6 million in one-time fees in September 2019 associated with the financing of Nexstar’s merger with Tribune and (ii) cash interest expense on the 5.625% Notes due 2027 during the escrow period (July 3, 2019 to September 18, 2019) of $13.4 million, less interest income earned during the same escrow period of $4.9 million.

(3)

During the three months and year ended December 31, 2019, capital expenditures related to relinquishment of the CVR spectrum were $2.3 million and $7.2 million, respectively. During the three months and year ended December 31, 2018, capital expenditures related to relinquishment of the CVR spectrum were $0.8 million and $2.9 million, respectively.

(4)

Excludes (i) $199.5 million in tax payments during Q4 2019 related to various sale of stations and (ii) the net tax payment of $1.1 million during the second half of 2018 related to tax liabilities assumed in an acquisition.

(5)

Represents the cash interest expense on the 5.625% Notes due 2027 during the escrow period (July 3, 2019 to September 18, 2019) of $13.4 million, less interest income earned during the same escrow period of $4.9 million.

 

Investors:

Thomas E. Carter

Chief Financial Officer

Nexstar Media Group, Inc.

972/373-8800

Joseph Jaffoni, Jennifer Neuman

JCIR

212/835-8500 or nxst@jcir.com

Media:

Gary Weitman

EVP and Chief Communications Officer

Nexstar Media Group, Inc.

312/222-3394 or gweitman@nexstar.tv

KEYWORDS: United States North America Texas

INDUSTRY KEYWORDS: Other Consumer Technology Entertainment Marketing Advertising Communications Audio/Video General Entertainment TV and Radio Consumer

MEDIA:

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Roadrunner Freight Automates Bill of Lading for Improved Customer Experience

Increased data integrity and real-time visibility deliver enhanced shipping experience

PR Newswire

DOWNERS GROVE, Ill., Feb. 26, 2020 /PRNewswire/ — Roadrunner Freight, a business unit of Roadrunner Transportation Systems, Inc. (“Roadrunner” or the “company”) (NYSE: RRTS), has digitized the paper bill of lading process through advanced API connectivity, providing a solution to a common obstacle for Less-Than-Truckload (LTL) shippers. This new integration will enable customers to electronically submit shipping documents and improve the quality of data throughout the pickup request process. 

Roadrunner Freight Logo (PRNewsfoto/Roadrunner Freight)

“This enhancement does more than just automate a paper bill of lading,” says Frank Hurst, President of Roadrunner Freight. “The LTL industry is dominated by paper and manual processes, and this new capability will transform the way that shippers and carriers communicate.”

Roadrunner Freight’s new technology enables LTL shippers to automate shipping processes and goes even further by enabling digital rate requests, Bill of Lading creation, document sharing, shipping label creation and pickup requests through a single API call.

“This new integration follows the launch of our free Transportation Management System (TMS), RapidShip LTL, and API Volume Spot Quote tool,” continues Hurst. “These advancements are just another step forward in our quest to automate and simplify LTL shipping for our customers.”

About Roadrunner Freight
Roadrunner Freight is committed to providing reliable and cost-effective less-than-truckload service. Through 29 service centers and strategic partnerships located across the country, Roadrunner Freight offers expansive long haul, regional and next day service in all major US markets. For more information, please visit rrts.com/freight.

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/roadrunner-freight-automates-bill-of-lading-for-improved-customer-experience-301011435.html

SOURCE Roadrunner Freight

Village Farms International’s Cannabis Joint Venture Pure Sunfarms Begins Shipping Branded Products to Alberta Provincial Wholesaler / Pure Sunfarms is Top Performing Dried Flower Brand for Fourth Quarter 2019 with Ontario Cannabis Store

PR Newswire


– Launch in Alberta Will Make Pure Sunfarms’ Products Available to Nearly Two-Thirds of Canadian Recreational Cannabis Market


1


 –

VANCOUVER, Feb. 26, 2020 /PRNewswire/ – Village Farms International, Inc. (“Village Farms” or the “Company”) (TSX: VFF) (NASDAQ: VFF) today announced its majority-owned joint venture for large-scale, low-cost, high-quality cannabis production, Pure Sunfarms, has begun shipping branded, packaged dried cannabis products to Alberta Gaming, Liquor & Cannabis (“AGLC”), the provincial wholesaler of recreational adult-use cannabis products to private retailers in Alberta and the only authorized online retailer in Alberta (AlbertaCannabis.org). Pure Sunfarms expects its products to be available to retail customers in Alberta beginning next week.

With the launch of Pure Sunfarms’ products in Alberta, Pure Sunfarms’ products will be available in three of Canada’s four most populous provinces (Ontario, British Columbia and Alberta) and accessible to nearly two-thirds of the Canadian recreational cannabis market1.

Alberta represents approximately 12% of Canada’s population, however with a network of more than 400 retail stores (by far the largest retail store network of any Canadian province) generated  22% of total retail trade cannabis sales (dollars) in Canada for the 12-month period ended December 31, 20192, making it the second largest provincial market for cannabis products in Canada.  As a result, Alberta has by far the highest per capita sales of legal recreational cannabis amongst the four most populous Canadian provinces during that same period2

“At Pure Sunfarms, we aim to bring high-quality cannabis at an accessible price to recreational consumers across Canada – that’s why we are so excited to expand our footprint into Alberta,” said Mandesh Dosanjh, President and CEO, Pure Sunfarms. “With the province’s extensive network of licensed retail outlets and strong retail sales, the Alberta cannabis market presents a substantial opportunity for Pure Sunfarms as we continue to share our high-quality BC bud with even more Canadians.”

Pure Sunfarms continues to advance discussions with other provincial distributors for potential supply agreements to further expand its presence in the Canadian cannabis market.

Pure Sunfarms is Top Performing Dried Flower Cannabis Brand with Ontario Cannabis Store for Fourth Quarter of 2019

Pure Sunfarms was the top performing brand of dried flower by both kilograms sold and dollar sales with the Ontario Cannabis Store (OCS) for the three-month period ended December 31, 2019, achieving 13% market share (by kilograms sold). For the same period, Pure Sunfarms’ Afghan Kush was the top selling dried flower product (by dollar sales) with the OCS and two of the top five selling dried flower products (by dollar sales) with the OCS were Pure Sunfarms products (Afghan Kush and White Rhino).

“Pure Sunfarms’ reputation for quality products that customers want at the right price point is resonating well with Canadian consumers,” said Michael DeGiglio, CEO, Village Farms.  “2020 promises to be a year of significant growth for retail cannabis sales across Canada, and now, with access to nearly two-thirds of the Canadian population and a thriving brand, Pure Sunfarms is well positioned to participate in this market growth based on its leading market share performance.”

Notes

  1. As defined by population.
  2. Statistics Canada.

About Village Farms International, Inc.

Village Farms is one of the largest and longest-operating vertically integrated greenhouse growers in North America and the only publicly traded greenhouse produce company in Canada. Village Farms produces and distributes fresh, premium-quality produce with consistency 365 days a year to national grocers in the U.S. and Canada from more than nine million square feet of Controlled Environment Agriculture (CEA) greenhouses in British Columbia and Texas, as well as from its partner greenhouses in British Columbia, Ontario and Mexico.  The Company is now leveraging its 30 years of experience as a vertically integrated grower for the rapidly emerging global cannabis opportunity through its majority ownership of British Columbia-based Pure Sunfarms Corp., one of the single largest cannabis growing operations in the world.  The Company also intends to pursue opportunities to become a vertically integrated leader in the U.S. hemp-derived CBD market, subject to compliance with all applicable U.S. federal and state laws, Village Farms has established two joint ventures, Village Fields Hemp and Arkansas Valley Green and Gold Hemp, for outdoor hemp cultivation and CBD extraction and is pursuing controlled environment hemp production at a portion of its Texas greenhouse operations, which total 5.7 million square feet of production area.

Cautionary Language
Certain statements contained in this press release constitute forward-looking information within the meaning of applicable securities laws (“forward-looking statements”). Forward-looking statements may relate to the Company’s future outlook or financial position and anticipated events or results and may include statements regarding the financial position, business strategy, budgets, litigation, projected production, projected costs, capital expenditures, financial results, taxes, plans and objectives of or involving the Company. Particularly, statements regarding future results, performance, achievements, prospects or opportunities for the Company, Pure Sunfarms, the greenhouse vegetable industry or the cannabis and hemp industries are forward-looking statements. In some cases, forward-looking information can be identified by such terms as “outlook”, “may”, “might”, “will”, “could”, “should”, “would”, “occur”, “expect”, “plan”, “anticipate”, “believe”, “intend”, “estimate”, “predict”, “potential”, “continue”, “likely”, “schedule”, “objectives”, or the negative or grammatical variation thereof or other similar expressions concerning matters that are not historical facts.

Although the forward-looking statements contained in this press release are based upon assumptions that management believes are reasonable based on information currently available to management, there can be no assurance that actual results will be consistent with these forward-looking statements. Forward-looking statements necessarily involve known and unknown risks and uncertainties, many of which are beyond the Company’s control, that may cause the Company’s or the industry’s actual results, performance, achievements, prospects and opportunities in future periods to differ materially from those expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things, the factors contained in the Company’s filings with U.S. and Canadian securities regulators, including as detailed in the Company’s annual information form and management’s discussion and analysis for the year-ended December 31, 2018.

When relying on forward-looking statements to make decisions, the Company cautions readers not to place undue reliance on these statements, as forward-looking statements involve significant risks and uncertainties and should not be read as guarantees of future results, performance, achievements, prospects and opportunities. The forward-looking statements made in this press release only relate to events or information as of the date on which the statements are made in this press release. Except as required by law, the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Cision View original content:http://www.prnewswire.com/news-releases/village-farms-internationals-cannabis-joint-venture-pure-sunfarms-begins-shipping-branded-products-to-alberta-provincial-wholesaler–pure-sunfarms-is-top-performing-dried-flower-brand-for-fourth-quarter-2019-with-ontario-cannabi-301011351.html

SOURCE Village Farms International, Inc.

Chesapeake Energy Corporation Reports 2019 Full Year And Fourth Quarter Financial And Operational Results And Releases 2020 Guidance

PR Newswire

OKLAHOMA CITY, Feb. 26, 2020 /PRNewswire/ — Chesapeake Energy Corporation (NYSE:CHK) today reported financial and operational results for the 2019 full year and fourth quarter and released its annual guidance. Highlights from Chesapeake’s projected 2020 program include:

(PRNewsfoto/Chesapeake Energy Corporation)


  • Targeting Free Cash Flow

  • Reducing Capital Expenditure Budget by Approximately 30%, Maintaining Relatively Flat Oil Production and Decreasing Gas Production Year Over Year

  • Lowering Projected Production and General and Administrative (G&A) Expenses by Over 10% Year Over Year

  • Continuing to Recognize Capital Efficiency Improvements Across All Basins

  • Funding 2020 Maturities and Enhancing Liquidity Through $300 to $500 Million in Expected Non-Core Asset Sales

Doug Lawler, Chesapeake’s President and Chief Executive Officer, commented, “We are pleased to highlight our strong 2019 operational performance, delivering fourth quarter oil production of 126,000 barrels (bbls) of oil per day and increasing our oil mix to 26% of total production, the highest percentage in company history. These results, combined with certain lower cash costs, yielded adjusted EBITDAX growth of 19%, or 15% per barrel of oil equivalent (boe), compared to the 2018 fourth quarter, when we had significantly higher commodity prices. Our focus on shifting our portfolio composition and capital allocation to more oil and our commitment to cost leadership are resulting in improved financial performance, even at lower prices. We also made additional progress improving our balance sheet during the quarter, eliminating approximately $900 million in debt through capital markets transactions, and consolidating our $1.5 billion Brazos Valley unrestricted subsidiary.

“Our performance in 2019 positions us to target free cash flow in 2020. We plan to allocate approximately 80% of our projected 2020 capital expenditure program of $1.3 to $1.6 billion to our highest-margin oil opportunities. We expect oil production will remain relatively flat year over year, while total production is projected to decrease as gas volumes decline. In addition to cutting our 2020 capital program by approximately 30% compared to 2019, we expect to further improve our cost structure by reducing production and G&A expenses by over 10% year over year. We also plan to further enhance our liquidity by funding our 2020 maturities with $300 to $500 million in proceeds from expected non-core asset sales. We remain fully committed to strengthening our company in 2020 by achieving free cash flow, improving well productivity and capturing further cash costs savings.”

2019 Full Year Results

For the 2019 full year, Chesapeake reported a net loss of $308 million and a net loss available to common stockholders of $416 million, or $0.25 per diluted share, compared to net income of $228 million and net income available to common stockholders of $133 million, or $0.15 per diluted share, in 2018.  Adjusting for items that are typically excluded by securities analysts, the 2019 full year adjusted net loss attributable to Chesapeake was $454 million, or $0.27 per diluted share, compared to an adjusted net loss attributable to Chesapeake of $140 million, or $0.15 per diluted share in 2018, while the company’s adjusted EBITDAX was $2.530 billion, compared to $2.380 billion in 2018. Reconciliations of financial measures calculated in accordance with GAAP to non-GAAP measures are provided on pages 13 – 17 of this release.

Average daily production for 2019 was approximately 484,000 boe and consisted of approximately 118,000 bbls of oil, 1.995 billion cubic feet (bcf) of natural gas and 33,000 bbls of natural gas liquids (NGL). Average daily production for 2018 was approximately 521,000 boe and consisted of approximately 90,000 bbls of oil, 2.278 bcf of natural gas and 52,000 bbls of NGL. The increase in oil production of approximately 30% during 2019 was primarily driven by the WildHorse acquisition, while our legacy oil portfolio contributed 6% growth excluding acquisitions and divestitures.

In 2019, gathering, processing and transportation (GP&T) expenses were $6.13 per boe compared to $7.35 per boe in 2018. Production expenses in 2019 were $2.94 per boe compared to $2.50 per boe in 2018. This decrease in GP&T and increase in production expenses were primarily driven by the divestiture of the company’s Utica Shale properties in Ohio in 2018 and the 2019 acquisition of WildHorse, respectively. On a per boe basis, these combined expense categories decreased 8% year over year. G&A expenses (including stock-based compensation) were $1.78 per boe in 2019, compared to $1.76 per boe in 2018.

2019 Fourth Quarter Results

For the 2019 fourth quarter, Chesapeake reported a net loss of $324 million and a net loss available to common stockholders of $346 million, or $0.18 per diluted share, compared to net income of $605 million and net income available to common stockholders of $576 million, or $0.57 per diluted share, for the fourth quarter 2018. Adjusting for items typically excluded by securities analysts, the 2019 fourth quarter adjusted net loss attributable to Chesapeake was $80 million, or $0.04 per share, while adjusted EBITDAX was $665 million.  For the 2018 fourth quarter, adjusted net income attributable to Chesapeake was $32 million, while adjusted EBITDAX was $561 million. Reconciliations of financial measures calculated in accordance with GAAP to non-GAAP measures are provided on pages 13 – 17 of this release.

Average daily production for the 2019 fourth quarter was approximately 477,000 boe and consisted of approximately 126,000 bbls of oil, 1.935 bcf of natural gas and 29,000 bbls of NGL. Average daily production for the 2018 fourth quarter was approximately 464,000 boe and consisted of approximately 87,000 bbls of oil, 2.009 bcf of natural gas and 42,000 bbls of NGL. Overall, fourth quarter oil production grew approximately 45% from the 2018 fourth quarter, and represented approximately 26% of the company’s total production, the highest oil mix in Chesapeake’s history, compared to 19% in the 2018 fourth quarter.

Despite lower average prices for its oil, natural gas and NGL production, Chesapeake’s operating margin increased in the 2019 fourth quarter compared to the 2018 fourth quarter, due to an increase in oil production mix and a decrease in certain cash costs. GP&T and G&A expenses decreased by $76 million, or approximately $2.00 per boe, while production expense increased $21 million, or $0.38 per boe, as compared to the same quarter in 2018.

Capital Spending Overview

Chesapeake invested total capital expenditures of approximately $487 million during the 2019 fourth quarter, including capitalized interest of $6 million, compared to approximately $476 million in the 2018 fourth quarter. For 2020, the company’s projected capital expenditure program is $1.3 to $1.6 billion, compared to $2.245 billion in 2019, with approximately 80% expected to be allocated to higher-margin oil opportunities. See tables below for a summary of 2019 fourth quarter and full year activity and expenditures.


Three Months Ended


December 31,


2019


2018


Gross


Net


Gross


Net


Operated activity comparison

Average rig count

15

10

18

11

Wells spud

75

50

82

52

Wells completed

78

60

107

66

Wells connected

89

65

119

71

 


Years Ended


December 31,


2019


2018


Gross


Net


Gross


Net


Operated activity comparison

Average rig count

18

12

17

11

Wells spud

333

233

322

210

Wells completed

370

273

351

239

Wells connected

375

273

347

231

 


Three Months Ended


December 31,


Years Ended


December 31,


2019


2018*


2019


2018*


Type of cost ($ in millions)

Drilling and completion capital expenditures

$

467

$

455

$

2,148

$

2,021

Leasehold and additions to other PP&E

14

18

73

63


Subtotal capital expenditures


$


481


$


473


$


2,221


$


2,084

Capitalized interest

6

3

24

16


Total capital expenditures


$


487


$


476


$


2,245


$


2,100

*

Financial information for 2018 has been recast to reflect the retrospective application of the successful efforts method of accounting.

Balance Sheet and Liquidity

As of December 31, 2019, Chesapeake’s principal amount of debt outstanding was approximately $8.916 billion, compared to $8.168 billion as of December 31, 2018. As of December 31, 2019, the company had borrowed $1.590 billion under the $3.0 billionChesapeake credit facility, utilized approximately $59 million for various letters of credit and had additional borrowing capacity of approximately $1.351 billion. The borrowing base of the Chesapeake credit facility was re-affirmed in November 2019.

In December 2019, Chesapeake entered into a secured 4.5-year term loan facility for $1.5 billion to finance a tender offer for unsecured notes issued by Brazos Valley and Brazos Valley Longhorn Finance Corp., each a wholly owned subsidiary of Chesapeake, and to fund the retirement of Brazos Valley’s secured revolving credit facility. The company also exchanged new 11.5% Senior Secured Second Lien Notes due 2025 for certain outstanding senior unsecured notes. These transactions eliminated essentially all Brazos Valley unrestricted subsidiary debt and approximately $900 million in principal amount of debt from the company’s balance sheet.

As of February 26, 2020, including January and February derivative contracts that have settled, approximately 70% of the company’s 2020 forecasted oil, natural gas and NGL production revenue was hedged. The company had approximately 76% downside oil price protection through swaps and collars at an average price of $59.90 per bbl. The company had 39% downside gas price protection through swaps at $2.76 per mcf and 14% under put spread arrangements based on an average bought put NYMEX price of $2.05 per mcf and exposure below an average sold put NYMEX price of $1.80 per mcf.

Operations Update and Highlights

The following tables show average daily production and average sales prices received (excluding gains/losses on derivatives) by the company’s operating areas for the 2019 and 2018 fourth quarters.


Three Months Ended December 31, 2019


Oil


Natural Gas


NGL


Total


mbbl


per day


$/bbl


mmcf


per day


$/mcf


mbbl


per day


$/bbl


mboe


per day


%


$/boe

Marcellus

980

2.21

164

34

13.27

Haynesville

605

2.25

101

21

13.50

Eagle Ford

60

59.17

153

2.59

19

17.92

104

22

41.07

Brazos Valley

40

56.74

56

1.77

7

6.09

56

12

43.11

Powder River Basin

19

54.27

86

2.37

5

19.74

38

8

34.83

Mid-Continent

7

56.13

54

2.01

(2)

7.87

14

3

33.12

Retained assets(a)

126

57.48

1,934

2.24

29

16.05

477

100

25.17

Divested assets

1

Total

126

57.48

1,935

2.24

29

16.05

477

100

%

25.17


Three Months Ended December 31, 2018


Oil


Natural Gas


NGL


Total


mbbl


per day


$/bbl


mmcf


per day


$/mcf


mbbl


per day


$/bbl


mboe


per day


%


$/boe

Marcellus

821

3.68

137

29

22.09

Haynesville

724

3.50

121

26

21.03

Eagle Ford

61

65.17

141

4.03

20

21.86

105

23

47.51

Powder River Basin

14

56.00

78

3.86

4

23.82

31

7

37.89

Mid-Continent

9

58.13

62

3.51

5

26.17

24

5

36.12

Retained assets(a)

84

62.89

1,826

3.64

29

22.83

418

90

30.14

Divested assets

3

65.41

183

3.13

13

30.19

46

10

25.14

Total

87

62.98

2,009

3.59

42

25.11

464

100

%

29.64

(a)  Includes assets retained as of December 31, 2019.

In Chesapeake’s Brazos Valley area in central Texas, the company placed 81 wells on production during 2019 while utilizing four rigs after the company closed the WildHorse acquisition on February 1, 2019. Currently, the company is operating three drilling rigs and expects to utilize two to three rigs throughout the year, resulting in 55 to 65 wells expected to be placed on production in 2020.

In the company’s South Texas Eagle Ford asset, the company placed 141 wells on production in 2019 while utilizing four rigs. The company is currently operating four drilling rigs and expects to utilize three to four rigs throughout the year, resulting in 110 to 120 wells expected to be placed on production in 2020.

In the Powder River Basin in Wyoming, the company placed 72 wells on production in 2019 while utilizing an average of five rigs. The company is currently operating three drilling rigs and expects to move to two rigs in the area in the 2020 first quarter, resulting in 25 to 30 wells expected to be placed on production.

In the Marcellus Shale in northeast Pennsylvania, the company placed 44 wells on production in 2019 while utilizing an average of two rigs. The company is currently operating three drilling rigs and expects to utilize two to three rigs throughout the year, resulting in 50 to 55 wells expected to be placed on production.

In the Haynesville Shale in Louisiana, Chesapeake placed 24 wells on production during 2019 utilizing an average of one rig. The company is currently operating one rig in the area and expects to utilize that rig through the end of the 2020 first quarter, with five to ten wells projected to be placed on production during 2020. In the Mid-Continent area in Oklahoma, the company placed 13 wells on production during 2019 and expects 10 to 15 wells targeting the Oswego formation to be placed on production in 2020. Overall, while Chesapeake intends to focus the vast majority of its 2020 capital on its highest-margin opportunities, the breadth and depth of its diverse portfolio affords the company the opportunity to react to changing market conditions while staying within the framework of its proposed $1.3 to $1.6 billion capital program.

Key Financial and Operational Results

The table below summarizes Chesapeake’s key financial and operational results during the 2019 fourth quarter and full year as compared to results in prior periods. The year ended December 31, 2019 includes Brazos Valley operations. The year ended December 31, 2018 does not include Brazos Valley operations.


Three Months
Ended


December 31,


Years Ended


December 31,


2019


2018*


2019


2018*

Barrels of oil equivalent production (in mboe)

43,865

42,711

176,620

190,266

Barrels of oil equivalent production (mboe/d)

477

464

484

521

Oil production (in mbbl/d)

126

87

118

90

Average realized oil price ($/bbl)(a)

58.97

56.86

60.00

57.42

Natural gas production (in mmcf/d)

1,935

2,009

1,995

2,278

Average realized natural gas price ($/mcf)(a)

2.48

3.19

2.60

3.00

NGL production (in mbbl/d)

29

42

33

52

Average realized NGL price ($/bbl)(a)

16.05

25.36

15.62

25.84

Production expenses ($/boe)

2.86

2.48

2.94

2.50

Gathering, processing and transportation expenses ($/boe)

6.09

7.92

6.13

7.35

Oil – ($/bbl)

3.41

6.02

3.20

4.30

Natural Gas – ($/mcf)

1.20

1.41

1.21

1.32

NGL – ($/bbl)

5.50

7.40

5.32

8.37

Severance and ad valorem taxes ($/boe)

1.29

1.17

1.27

0.99

Exploration expenses ($ in millions)

28

39

84

162

General and administrative expenses ($/boe)(b)

1.17

1.30

1.63

1.60

General and administrative expenses (stock-based compensation) (non-cash) ($/boe)

0.12

0.16

0.15

0.16

Depreciation, depletion, and amortization ($/boe)

13.50

9.41

12.82

9.13

Interest expense ($/boe)

3.14

3.53

3.68

3.33

Marketing net margin ($ in millions)(c)

(3)

(18)

(27)

(63)

Net cash provided by operating activities ($ in millions)

441

335

1,623

1,730

Net cash provided by operating activities ($/boe)

10.05

7.84

9.19

9.09

Net income (loss) ($ in millions)

(324)

605

(308)

228

Net income (loss) available to common stockholders ($ in millions)

(346)

576

(416)

133

Net income (loss) per share available to common stockholders – diluted ($)

(0.18)

0.57

(0.25)

0.15

Adjusted EBITDAX ($ in millions)(d)

665

561

2,530

2,380

Adjusted EBITDAX ($/boe)

15.16

13.13

14.32

12.51

Adjusted net income (loss) attributable to Chesapeake ($ in millions)(e)

(80)

32

(454)

(140)

Adjusted net income (loss) attributable to Chesapeake per share – diluted ($)(f)

(0.04)

0.03

(0.27)

(0.15)

* Financial information for 2018 has been recast to reflect the retrospective application of the successful efforts method of accounting.

(a)

Includes the effects of realized gains (losses) from hedging but excludes the effects of unrealized gains (losses) from hedging.

(b)

Excludes expenses associated with stock-based compensation, which are recorded in general and administrative expenses in Chesapeake’s Condensed Consolidated Statement of Operations.

(c)

Marketing net margin is marketing margin of ($2) million and ($23) million for the three months ended December 31, 2019 and 2018, excluding non-cash amortization of ($1) million and $5 million, respectively. Marketing net margin is marketing margin of ($36) million and ($82) million for the years ended December 31, 2019 and 2018, excluding non-cash amortization of $9 million and $19 million, respectively. Non-cash amortization is related to the buy down of a transportation agreement.

(d)

Defined as net income (loss) before interest expense, income taxes, depreciation, depletion and amortization expense, and exploration expense, as adjusted to remove the effects of certain items detailed in the Reconciliation of Net Income (Loss) to Adjusted EBITDAX.  This is a non-GAAP measure.

(e)

Defined as net income (loss) attributable to Chesapeake, as adjusted to remove the effects of certain items detailed in the Reconciliation of Adjusted Net Income (Loss) Attributable to Chesapeake. This is a non-GAAP measure.

(f)

Our presentation of diluted adjusted net income (loss) attributable to Chesapeake per share excludes 183 million and 1 million shares for the three months ended December 31, 2019 and 2018, respectively, and 183 million and 207 million shares for the years ended December 31, 2019 and 2018, which are considered antidilutive when calculating diluted earnings per share.

2019 Fourth Quarter and Year End Results Conference Call Information

The conference call to discuss the company’s financial and operational results has been scheduled on Wednesday, February 26, 2020 at 9:00 am EST. The telephone number to access the conference call is 888-317-6003 or 412-317-6061 for international callers. The passcode for the call is 7266124. The conference call will be webcast and can be found at www.chk.com in the “Investors” section of the company’s website.


Headquartered in Oklahoma City, Chesapeake Energy Corporation’s (NYSE: CHK) operations are focused on discovering and developing its large and geographically diverse resource base of unconventional oil and natural gas assets onshore in the United States.

This news release and the accompanying outlook include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are statements other than statements of historical fact. They include statements that give our current expectations, management’s outlook guidance or forecasts of future events, cost-cutting measures, reductions in expenditures, proposed refinancing transactions, capital exchange transactions, asset divestitures, reductions in capital expenditures, operational efficiencies, production and well connection forecasts, estimates of operating costs, anticipated capital and operational efficiencies, planned development drilling and expected drilling cost reductions, expected lateral lengths of wells, anticipated timing and number of wells to be placed into production, expected oil growth trajectory, projected capital expenditures, projected cash flow and liquidity
,
 our ability to enhance our cash flow and financial flexibility, plans and objectives for future operations, the ability of our employees, portfolio strength and operational leadership to create long-term value, and the assumptions on which such statements are based. Although we believe the expectations and forecasts reflected in the forward-looking statements are reasonable, we can give no assurance they will prove to have been correct. They can be affected by inaccurate or changed assumptions or by known or unknown risks and uncertainties.

Factors that could cause actual results to differ materially from expected results include those described under “Risk Factors” in Item 1A of our annual report on Form 10-K and any updates to those factors set forth in Chesapeake’s subsequent quarterly reports on Form 10-Q or current reports on Form 8-K (available at http://www.chk.com/investors/sec-filings). These risk factors include our ability to comply with the covenants under our revolving credit facilities and other indebtedness, the volatility of oil, natural gas and NGL prices; the limitations our level of indebtedness may have on our financial flexibility; our inability to access the capital markets on favorable terms; the availability of cash flows from operations and other funds to finance reserve replacement costs or satisfy our debt obligations; downgrade in our credit rating requiring us to post more collateral under certain commercial arrangements; write-downs of our oil and natural gas asset carrying values due to low commodity prices; our ability to replace reserves and sustain production; uncertainties inherent in estimating quantities of oil, natural gas and NGL reserves and projecting future rates of production and the amount and timing of development expenditures; our ability to generate profits or achieve targeted results in drilling and well operations; leasehold terms expiring before production can be established; commodity derivative activities resulting in lower prices realized on oil, natural gas and NGL sales; the need to secure derivative liabilities and the inability of counterparties to satisfy their obligations; adverse developments or losses from pending or future litigation and regulatory proceedings, including royalty claims; charges incurred in response to market conditions and in connection with our ongoing actions to reduce financial leverage and complexity; drilling and operating risks and resulting liabilities; effects of environmental protection laws and regulation on our business; legislative and regulatory initiatives further regulating hydraulic fracturing; our need to secure adequate supplies of water for our drilling operations and to dispose of or recycle the water used; impacts of potential legislative and regulatory actions addressing climate change; federal and state tax proposals affecting our industry; potential OTC derivatives regulation limiting our ability to hedge against commodity price fluctuations; competition in the oil and gas exploration and production industry; a deterioration in general economic, business or industry conditions; negative public perceptions of our industry; limited control over properties we do not operate; pipeline and gathering system capacity constraints and transportation interruptions; terrorist activities and cyber-attacks adversely impacting our operations; an interruption in operations at our headquarters due to a catastrophic event; certain anti-takeover provisions that affect shareholder rights; and our inability to increase or maintain our liquidity through debt repurchases, capital exchanges, asset sales, joint ventures, farmouts or other means.

In addition, disclosures concerning the estimated contribution of derivative contracts to our future results of operations are based upon market information as of a specific date. These market prices are subject to significant volatility. Our production forecasts are also dependent upon many assumptions, including estimates of production decline rates from existing wells and the outcome of future drilling activity. Expected asset sales may not be completed in the time frame anticipated or at all. We caution you not to place undue reliance on our forward-looking statements, which speak only as of the date of this news release, and we undertake no obligation to update any of the information provided in this release or the accompanying Outlook, except as required by applicable law. In addition, this news release contains time-sensitive information that reflects management’s best judgment only as of the date of this news release.


CHESAPEAKE ENERGY CORPORATION


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


($ in millions except per share data)


(unaudited)


Three Months Ended


December 31,


Years Ended


December 31,


2019


2018*


2019


2018*


REVENUES AND OTHER:

Oil, natural gas and NGL(a)

$

969

$

1,731

$

4,522

$

5,155

Marketing

929

1,338

3,967

5,076

Total Revenues

1,898

3,069

8,489

10,231

Other

18

15

63

63

Gains (losses) on sales of assets

10

(291)

43

(264)

Total Revenues and Other

1,926

2,793

8,595

10,030


OPERATING EXPENSES:

Oil, natural gas and NGL production

126

105

520

474

Oil, natural gas and NGL gathering, processing and transportation

267

338

1,082

1,398

Severance and ad valorem taxes

56

50

224

189

Exploration

28

39

84

162

Marketing

932

1,360

4,003

5,158

General and administrative

57

62

315

335

Restructuring and other termination costs

12

12

38

Provision for legal contingencies, net

16

9

19

26

Depreciation, depletion and amortization

592

402

2,264

1,737

Impairments

9

11

131

Other operating expense

13

1

92

Total Operating Expenses

2,099

2,375

8,626

9,648


INCOME (LOSS) FROM OPERATIONS

(173)

418

(31)

382


OTHER INCOME (EXPENSE):

Interest expense

(138)

(151)

(651)

(633)

Gains (losses) on investments

(43)

(71)

139

Gains on purchases or exchanges of debt

5

331

75

263

Other income

9

5

39

67

Total Other Income (Expense)

(167)

185

(608)

(164)


INCOME (LOSS) BEFORE INCOME TAXES

(340)

603

(639)

218

Income tax benefit

(16)

(2)

(331)

(10)


NET INCOME (LOSS)

(324)

605

(308)

228

Net income attributable to noncontrolling interests

(1)

(2)


NET INCOME (LOSS) ATTRIBUTABLE TO CHESAPEAKE

(324)

604

(308)

226

Preferred stock dividends

(22)

(23)

(91)

(92)

Loss on exchange of preferred stock

(17)

Earnings allocated to participating securities

(5)

(1)


NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS

$

(346)

$

576

$

(416)

$

133


EARNINGS (LOSS) PER COMMON SHARE:

Basic

$

(0.18)

$

0.63

$

(0.25)

$

0.15

Diluted

$

(0.18)

$

0.57

$

(0.25)

$

0.15


WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING (in millions):

Basic

1,948

910

1,665

909

Diluted

1,948

1,116

1,665

909

* Financial information for 2018 has been recast to reflect the retrospective application of the successful efforts method of accounting.

(a)

See Supplemental Data – Oil, Natural Gas and NGL Production and Sales Prices for a reconciliation of oil, natural gas and NGL revenue before and after the effect of financial derivatives.

 


CHESAPEAKE ENERGY CORPORATION


CONDENSED CONSOLIDATED BALANCE SHEETS


($ in millions)


(unaudited)


December 31,
2019


December 31,
2018*

Cash and cash equivalents

$

6

$

4

Other current assets

1,245

1,594

Total Current Assets

1,251

1,598

Property and equipment, net

14,756

10,818

Other long-term assets

186

319


Total Assets

$

16,193

$

12,735

Current liabilities

$

2,392

$

2,887

Long-term debt, net

9,073

7,341

Other long-term liabilities

327

374

Total Liabilities

11,792

10,602

Preferred stock

1,631

1,671

Noncontrolling interests

37

41

Common stock and other stockholders’ equity

2,733

421

Total Equity

4,401

2,133


Total Liabilities and Equity

$

16,193

$

12,735

*

Financial information for 2018 has been recast to reflect the retrospective application of the successful efforts method of accounting.

 


CHESAPEAKE ENERGY CORPORATION


CONDENSED CONSOLIDATED CASH FLOW DATA


($ in millions)


(unaudited)


Three Months Ended


December 31,


Years Ended


December 31,


2019


2018*


2019


2018*


Beginning cash and cash equivalents

$

14

$

4

$

4

$

5


Net cash provided by operating activities

441

335

1,623

1,730


Cash flows from investing activities:

Drilling and completion costs(a)

(540)

(441)

(2,180)

(1,848)

Business combination, net

(353)

Acquisitions of proved and unproved properties

(4)

(10)

(35)

(128)

Proceeds from divestitures of proved and unproved properties

20

1,836

130

2,231

Additions to other property and equipment

(21)

(10)

(48)

(21)

Proceeds from sales of other property and equipment

72

6

147

Proceeds from sales of investments

74


Net cash provided by (used in) investing activities

(545)

1,447

(2,480)

455


Net cash provided by (used in) financing activities

96

(1,782)

859

(2,186)


Change in cash and cash equivalents

(8)

2

(1)


Ending cash and cash equivalents

$

6

$

4

$

6

$

4

* Financial information for 2018 has been recast to reflect the retrospective application of the successful efforts method of accounting.

(a)

Includes capitalized interest of $6 million and $3 million for the three months ended December 31, 2019 and 2018, respectively, and includes capitalized interest of $24 million and $16 million for the years ended December 31, 2019 and 2018, respectively.

 


CHESAPEAKE ENERGY CORPORATION


SUPPLEMENTAL DATA – OIL, NATURAL GAS AND NGL PRODUCTION AND SALES PRICES


(unaudited)


Three Months Ended


December 31,


Years Ended


December 31,


2019


2018


2019


2018


Net Production:

Oil (mmbbl)

12

8

43

33

Natural gas (bcf)

178

185

728

832

NGL (mmbbl)

3

4

12

19

Oil equivalent (mmboe)

44

43

177

190

Average daily production (mboe)

477

464

484

521


Oil, Natural Gas and NGL Sales ($ in millions):

Oil sales

$

664

$

503

$

2,543

$

2,201

Natural gas sales

398

664

1,782

2,486

NGL sales

43

98

192

502

Total oil, natural gas and NGL sales

$

1,105

$

1,265

$

4,517

$

5,189


Financial Derivatives:

Oil derivatives – realized gains (losses)(a)

$

18

$

(48)

$

36

$

(321)

Natural gas derivatives – realized gains (losses)(a)

43

(76)

114

7

NGL derivatives – realized gains (losses)(a)

1

(13)

Total realized gains (losses) on financial derivatives

$

61

$

(123)

$

150

$

(327)

Oil derivatives – unrealized gains (losses)(b)

$

(181)

$

560

$

(248)

$

445

Natural gas derivatives – unrealized gains (losses)(b)

(16)

14

103

(154)

NGL derivatives – unrealized gains(b)

15

2

Total unrealized gains (losses) on financial derivatives

$

(197)

$

589

$

(145)

$

293

Total financial derivatives

$

(136)

$

466

$

5

$

(34)

Total oil, natural gas and NGL sales

$

969

$

1,731

$

4,522

$

5,155


Average Sales Price (excluding gains (losses) on derivatives):

Oil ($ per bbl)

$

57.48

$

62.98

$

59.16

$

67.25

Natural gas ($ per mcf)

$

2.24

$

3.59

$

2.45

$

2.99

NGL ($ per bbl)

$

16.05

$

25.11

$

15.62

$

26.50

Oil equivalent ($ per boe)

$

25.17

$

29.64

$

25.57

$

27.27


Average Sales Price (excluding unrealized gains (losses) on derivatives):

Oil ($ per bbl)

$

58.97

$

56.86

$

60.00

$

57.42

Natural gas ($ per mcf)

$

2.48

$

3.19

$

2.60

$

3.00

NGL ($ per bbl)

$

16.05

$

25.36

$

15.62

$

25.84

Oil equivalent ($ per boe)

$

26.57

$

26.75

$

26.42

$

25.56

(a)

Realized gains (losses) include the following items: (i) settlements and accruals for settlements of undesignated derivatives related to current period production revenues, (ii) prior period settlements for option premiums and for early-terminated derivatives originally scheduled to settle against current period production revenues, and (iii) gains (losses) related to de-designated cash flow hedges originally designated to settle against current period production revenues. Although we no longer designate our derivatives as cash flow hedges for accounting purposes, we believe these definitions are useful to management and investors in determining the effectiveness of our price risk management program.

(b)

Unrealized gains (losses) include the change in fair value of open derivatives scheduled to settle against future period production revenues offset by amounts reclassified as realized gains (losses) during the period. Although we no longer designate our derivatives as cash flow hedges for accounting purposes, we believe these definitions are useful to management and investors in determining the effectiveness of our price risk management program.

 


CHESAPEAKE ENERGY CORPORATION


RECONCILIATION OF ADJUSTED NET INCOME (LOSS) ATTRIBUTABLE TO CHESAPEAKE


($ in millions)


(unaudited)


Three Months Ended December 31,


2019


2018*


$


$/Share


$


$/Share


Net income (loss) available to common stockholders (GAAP)

$

(346)

$

(0.18)

$

576

$

0.63

Effect of dilutive securities

59

Diluted net income (loss) available to common stockholders(a) (GAAP)

$

(346)

$

(0.18)

$

635

$

0.57


Adjustments:

Unrealized (gains) losses on oil, natural gas and NGL derivatives

197

0.10

(596)

(0.54)

Restructuring and other termination costs

12

0.01

Provision for legal contingencies, net

16

0.01

9

0.01

(Gains) losses on sales of assets

(10)

(0.01)

291

0.26

Other operating expense

11

0.01

1

Impairments

9

0.01

Losses on investments

43

0.02

Gains on purchases or exchanges of debt

(5)

(331)

(0.30)

Other revenue

(14)

(0.01)

(15)

(0.01)

Other

(1)

1

Tax effect of adjustments(b)

(5)


Adjusted net income (loss) available to common stockholders(c) (Non-GAAP)

(102)

(0.05)

4

Preferred stock dividends

22

0.01

23

0.02

Earnings allocated to participating securities

5

0.01


Total adjusted net income (loss) attributable to Chesapeake(a)(c) (Non-GAAP)

$

(80)

$

(0.04)

$

32

$

0.03

*

Financial information for 2018 has been recast to reflect the retrospective application of the successful efforts method of accounting.

 


CHESAPEAKE ENERGY CORPORATION


RECONCILIATION OF ADJUSTED NET INCOME (LOSS) ATTRIBUTABLE TO CHESAPEAKE


($ in millions)


(unaudited)


Years Ended December 31,


2019


2018*


$


$/Share


$


$/Share


Net income (loss) available to common stockholders (GAAP)

$

(416)

$

(0.25)

$

133

$

0.15

Effect of dilutive securities

Diluted net income (loss) available to common stockholders(a) (GAAP)

$

(416)

$

(0.25)

$

133

$

0.15


Adjustments:

Unrealized (gains) losses on oil, natural gas and NGL derivatives

152

0.09

(300)

(0.33)

Restructuring and other termination costs

12

0.01

38

0.04

Provision for legal contingencies, net

19

0.01

26

0.03

(Gains) losses on sales of assets

(43)

(0.03)

264

0.29

Other operating expense(d)

90

0.05

Impairments

11

0.01

131

0.14

(Gains) losses on investments

71

0.04

(139)

(0.15)

Gains on purchases or exchanges of debt

(75)

(0.04)

(263)

(0.29)

Loss on exchange of preferred stock

17

0.01

Other revenue

(59)

(0.04)

(63)

(0.07)

Other

(5)

(60)

(0.06)

Income tax benefit(e)

(314)

(0.19)

Tax effect of adjustments(b)

(5)


Adjusted net loss available to common stockholders(c) (Non-GAAP)

(545)

(0.33)

(233)

(0.25)

Preferred stock dividends

91

0.06

92

0.10

Earnings allocated to participating securities

1


Total adjusted net loss attributable to Chesapeake(a)(c) (Non-GAAP)

$

(454)

$

(0.27)

$

(140)

$

(0.15)

* Financial information for 2018 has been recast to reflect the retrospective application of the successful efforts method of accounting.

(a)

Our presentation of diluted net income (loss) available to common stockholders per share and total adjusted net income (loss) attributable to Chesapeake per share excludes 183 million and 1 million shares considered antidilutive for the three months ended December 31, 2019 and 2018, respectively. Our presentation of diluted net income (loss) available to common stockholders per share and total adjusted net loss attributable to Chesapeake per share excludes 183 million and 207 million shares, respectively, considered antidilutive for the years ended December 31, 2019 and 2018. The number of shares used for the non-GAAP calculation was determined in a manner consistent with GAAP.

(b)

Tax effect is computed by applying an effective tax rate of 2.5% for the year ended December 31, 2019 to the pre-tax amount of adjustments. This effective tax rate is computed without regard to the separately itemized discrete tax benefit of $314 million associated with the Wildhorse acquisition. No income tax effect from adjustments is included in determining adjusted net income for the year ended December 31, 2018 as our effective tax rate was 0% due to our valuation allowance position.

(c)

Adjusted net income (loss) available to common stockholders and total adjusted net income (loss) attributable to Chesapeake, both in the aggregate and per dilutive share, are not measures of financial performance under GAAP, and should not be considered as an alternative to, or more meaningful than, net income (loss) available to common stockholders or earnings (loss) per share. Adjusted net income (loss) available to common stockholders and adjusted earnings (loss) per share exclude certain items that management believes affect the comparability of operating results. The company believes these adjusted financial measures are a useful adjunct to earnings calculated in accordance with GAAP because:

(i)

Management uses adjusted net income (loss) available to common stockholders to evaluate the company’s operational trends and performance relative to other oil and natural gas producing companies.

(ii)

Adjusted net income (loss) available to common stockholders is more comparable to earnings estimates provided by securities analysts.

(iii)

Items excluded generally are one-time items or items whose timing or amount cannot be reasonably estimated.  Accordingly, any guidance provided by the company generally excludes information regarding these types of items.

Because adjusted net income (loss) available to common stockholders and total adjusted net income (loss) attributable to Chesapeake exclude some, but not all, items that affect net income (loss) available to common stockholders our calculations of adjusted net income (loss) available to common stockholders and total adjusted net income (loss) attributable to Chesapeake may not be comparable to similarly titled measures of other companies.

(d)

The year ended December 31, 2019 includes $37 million in integration and acquisition costs as a result of Chesapeake’s merger with WildHorse Resource Development Corporation (WRD). Additionally, most WRD executives and employees were terminated and entitled to severance benefits of approximately $38 million in accordance with certain provisions of existing employment agreements that were triggered by the change in control.

(e)

For the year ended December 31, 2019, we recorded a net deferred tax liability of $314 million associated with the acquisition of WildHorse Resource Development Corporation. As a result of recording this net deferred tax liability through business combination accounting, we released a corresponding amount of the valuation allowance that we maintain against our net deferred tax asset position. This release resulted in an income tax benefit of $314 million.

 


CHESAPEAKE ENERGY CORPORATION


RECONCILIATION OF CASH PROVIDED BY OPERATING ACTIVITIES TO ADJUSTED EBITDAX


($ in millions)


(unaudited)


Three Months Ended


December 31,


Years Ended


December 31,


2019


2018*


2019


2018*


CASH PROVIDED BY OPERATING ACTIVITIES (GAAP)

$

441

$

335

$

1,623

$

1,730


Adjustments: