XML 37 R26.htm IDEA: XBRL DOCUMENT

Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2020

The Condensed Consolidated Financial Statements include the accounts of Nexstar and the accounts of independently-owned VIEs for which we are the primary beneficiary (See Note 2, “Variable Interest Entities”). Nexstar and the consolidated VIEs are collectively referred to as the “Company.” Noncontrolling interests represent the VIE owners’ share of the equity in the consolidated VIEs and are presented as a component separate from Nexstar’s stockholders’ equity. All intercompany account balances and transactions have been eliminated in consolidation. Nexstar management evaluates each arrangement that may include variable interests and determines the need to consolidate an entity where it determines Nexstar is the primary beneficiary of a VIE in accordance with related authoritative literature and interpretive guidance.

The following are assets of consolidated VIEs, excluding intercompany amounts, that are not available to settle the obligations of Nexstar and the liabilities of consolidated VIEs, excluding intercompany amounts, for which their creditors do not have recourse to the general credit of Nexstar (in thousands):

	September 30, 2020		December 31, 2019
Current assets	$	9,735	$	9,837
Property and equipment, net		19,776		19,586
Goodwill		102,447		102,447
FCC licenses		151,782		138,482
Network affiliation agreements, net		51,767		55,378
Other intangible assets, net		-		22
Other noncurrent assets, net		4,106		6,818
Total assets	$	339,613	$	332,570

Current liabilities	$	19,819	$	19,653
Noncurrent liabilities		40,010		42,012
Total liabilities	$	59,829	$	61,665

Liquidity

The Company is leveraged, which makes it vulnerable to changes in general economic conditions. The Company’s ability to repay or refinance its debt will depend on, among other things, financial, business, market, competitive and other conditions, many of which are beyond the Company’s control, for instance, uncertainties surrounding the business outlook caused by Coronavirus Disease 2019 (“COVID-19”). In December 2019, COVID-19 was reported and has spread globally, including to every state in the United States. In March 2020, the World Health Organization declared COVID-19 a pandemic and the United States government declared a national emergency with respect to COVID-19. COVID-19 has created and may continue to create significant uncertainty in global financial markets, which may reduce demand for the Company’s advertising, retransmission, and digital services, impact the productivity of its workforce, reduce its access to capital, and harm its business and results of operations.

The ongoing effect of the COVID-19 pandemic had an adverse impact on the Company’s financial results mostly in the first part of the second quarter in 2020. This was followed by a significant improvement in the Company’s financial results in the remaining part of second quarter and in the third quarter of 2020 as certain areas throughout the United States permitted the re-opening of non-essential businesses which has had a favorable impact to the macroeconomic environment and to the Company’s revenue. As of September 30, 2020, the Company remained profitable. Its current year results were also higher than prior year results primarily due to contributions from the acquisition of Tribune Media Company (“Tribune”) in September 2019 and revenue from political advertising in 2020. Overall, the disruptions from COVID-19 did not have a material impact on the Company’s liquidity. As of September 30, 2020, the Company’s unrestricted cash on hand amounted to $409.9 million and the Company had a positive working capital of $669.5 million, both increased from the December 31, 2019 levels of $232.1 million and $404.2 million, respectively. As of September 30, 2020, the Company was in compliance with its financial covenants contained in the amended credit agreements governing its senior secured credit facilities. The Company believes it has sufficient unrestricted cash on hand and has availability to access additional cash up to $172.7 million and $25.0 million under the respective amended Nexstar and Mission revolving credit facilities (with a maturity date of October 2023) to meet its business operating requirements, its capital expenditures and to continue to service its debt for at least the next 12 months as of the filing date of this Quarterly Report on Form 10-Q. The Company also believes its leverage is well positioned to withstand the current challenges as the nearest maturity of its outstanding debt will not occur until October 2023.

Interim Financial Statements

The Condensed Consolidated Financial Statements as of September 30, 2020 and for the three and nine months ended September 30, 2020 and 2019 are unaudited. However, in the opinion of management, such financial statements include all adjustments (consisting solely of normal recurring adjustments) necessary for the fair statement of the financial information included herein in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). The preparation of the Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the period. Results of operations for interim periods are not necessarily indicative of results for the full year. Estimates are used for, but are not limited to, allowance for doubtful accounts, valuation of assets acquired and liabilities assumed in business combinations, distribution revenue recognized, income taxes, the recoverability of goodwill, FCC licenses and long-lived assets, the recoverability of investments, the recoverability of broadcast rights and the useful lives of property and equipment and intangible assets. As of September 30, 2020, the Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or to revise the carrying value of its assets or liabilities. However, these estimates and judgments may change as new events occur and additional information is obtained, which may result in changes being recognized in the Company’s consolidated financial statements in future periods. While the Company considered the effects of COVID-19 in its estimates and assumptions, due to the current level of uncertainty over the economic and operational impacts of COVID-19 on its business, there may be other judgments and assumptions that were not currently considered. Such judgments and assumptions could result in a meaningful impact on the Company’s consolidated financial statements in future periods. Actual results could differ from those estimates and any such differences may have a material impact on the Company’s condensed consolidated financial statements.

These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and related Notes included in Nexstar’s Annual Report on Form 10-K for the year ended December 31, 2019. The balance sheet as of December 31, 2019 has been derived from the audited financial statements as of that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.

Variable Interest Entities

Nexstar may determine that an entity is a VIE as a result of local service agreements entered into with that entity. The term local service agreement generally refers to a contract between two separately owned television stations serving the same market, whereby the owner-operator of one station contracts with the owner-operator of the other station to provide it with administrative, sales and other services required for the operation of its station. Nevertheless, the owner-operator of each station retains control of and responsibility for the operation of its station, including ultimate responsibility over all programming broadcast on its station. A local service agreement can be (1) a time brokerage agreement (“TBA”) or a local marketing agreement (“LMA”) which allows Nexstar to program most of a station’s broadcast time, sell the station’s advertising time and retain the advertising revenue generated in exchange for monthly payments, based on the station’s monthly operating expenses, (2) a shared services agreement (“SSA”) which allows the Nexstar station in the market to provide services including news production, technical maintenance and security, in exchange for Nexstar’s right to receive certain payments as described in the SSA, or (3) a joint sales agreement (“JSA”) which permits Nexstar to sell certain of the station’s advertising time and retain a percentage of the related revenue, as described in the JSA.

Consolidated VIEs

Nexstar consolidates entities in which it is deemed under U.S. GAAP to have controlling financial interests for financial reporting purposes as a result of (1) local service agreements Nexstar has with the stations owned by these entities, (2) Nexstar’s guarantees of the obligations incurred under certain VIEs’ senior secured credit facilities (see Note 9), (3) Nexstar having power over significant activities affecting these VIEs’ economic performance, including budgeting for advertising revenue, certain advertising sales and, in some cases, hiring and firing of sales force personnel and (4) purchase options granted by each such VIE which permit Nexstar to acquire the assets and assume the liabilities of these VIEs’ stations (except for Mission stations in three markets), subject to FCC consent.

The following table summarizes the various local service agreements Nexstar had in effect as of September 30, 2020 with its consolidated VIEs:

Service Agreements	Owner	Full Power Stations
TBA Only	Mission Broadcasting, Inc. ("Mission")	WFXP, KHMT and KFQX
LMA Only	WNAC, LLC	WNAC
	54 Broadcasting, Inc. (“54 Broadcasting”)	KNVA
SSA & JSA	Mission	KJTL, KLRT, KASN, KOLR, KCIT, KAMC, KRBC, KSAN, WUTR, WAWV, WYOU, KODE, WTVO, KTVE, WTVW and WVNY
	White Knight Broadcasting (“White Knight”)	WVLA, KFXK, KSHV
	Shield Media, LLC (“Shield”)	WXXA and WLAJ
	Vaughan Media, LLC (“Vaughan”)	WBDT, WYTV and KTKA
SSA Only	Tamer Media, LLC (“Tamer”)	KWBQ, KASY and KRWB
	Mission	KMSS, KPEJ, KLJB

Nexstar’s ability to receive cash from its VIEs is governed by the local service agreements. Under these agreements, Nexstar has received substantially all of the consolidated VIEs’ available cash, after satisfaction of operating costs and debt obligations. Nexstar anticipates it will continue to receive substantially all of the consolidated VIEs’ available cash, after satisfaction of operating costs and debt obligations. In compliance with FCC regulations for all the parties, each VIE maintains complete responsibility for and control over programming, finances, personnel and operations of its stations.

The carrying amounts and classification of the assets and liabilities, excluding intercompany amounts, of the VIEs which have been included in the Condensed Consolidated Balance Sheets were as follows (in thousands):

	September 30, 2020		December 31, 2019
Current assets:
Cash and cash equivalents	$	9,153	$	12,944
Accounts receivable, net		19,655		17,995
Prepaid expenses and other current assets		2,541		1,921
Total current assets		31,349		32,860
Property and equipment, net		47,360		42,308
Goodwill		138,936		135,634
FCC licenses		151,782		138,482
Network affiliation agreements, net		91,118		66,679
Other intangible assets, net		1,250		513
Other noncurrent assets, net		12,412		12,749
Total assets	$	474,207	$	429,225

Current liabilities:
Current portion of debt	$	1,492	$	3,433
Interest payable		454		834
Other current liabilities		19,819		19,653
Total current liabilities		21,765		23,920
Debt		244,259		241,190
Deferred tax liabilities		22,512		22,505
Other noncurrent liabilities		17,498		19,507
Total liabilities	$	306,034	$	307,122

On December 1, 2014, Nexstar met the accounting criteria for a controlling financial interest in Marshall Broadcasting Group, Inc. (“Marshall”) as a result of (i) local service agreements (JSAs and SSAs) Nexstar had with the three television stations previously owned by Marshall, (ii) Nexstar’s previous guarantee of the obligations incurred under Marshall’s previous senior secured credit facility, and (iii) Nexstar’s previous power over activities affecting Marshall’s significant economic performance, including management advice and consultation on broadcast matters, the ability to sell certain advertising on the Marshall stations, and the production of the Marshall stations’ news and other programming. Thus, Nexstar consolidated Marshall and its stations beginning on December 1, 2014. In December 2019, Marshall filed a voluntary petition for Chapter 11 protection in the U.S. Bankruptcy Court for the Southern District of Texas. Effective on December 6, 2019, the bankruptcy court ordered the cancellation of certain executory contracts between Nexstar and Marshall, including the JSAs.

As a result of Marshall’s filing for bankruptcy protection and the cancellation of the JSAs, Nexstar determined that it no longer had the power to direct the most significant economic activities of the entity and thus no longer met the accounting criteria for a controlling financial interest in Marshall due to the bankruptcy court taking control of Marshall’s significant financial affairs. Therefore, in accordance with the applicable accounting standards, Nexstar deconsolidated Marshall’s assets, liabilities and equity effective in December 2019. Accordingly, the operating results and cash flows of Marshall for the three and nine months ended September 30, 2020 were excluded and the operating results and cash flows of Marshall for the three and nine months ended September 30, 2019 were included in the accompanying Condensed Consolidated Statements of Operations and Consolidated Statements of Cash Flows. The assets, liabilities and equity of Marshall as of September 30, 2020 and December 31, 2019 were excluded in the accompanying Condensed Consolidated Balance Sheets.

On March 30, 2020, Mission entered into an asset purchase agreement to acquire certain assets of the three television stations previously owned by Marshall: KMSS serving the Shreveport, Louisiana market, KPEJ serving the Odessa, Texas market and KLJB serving the Quad Cities, Iowa/Illinois market. On April 1, 2020, the acquisition was approved by the Bankruptcy Court for the Southern District of Texas. On September 1, 2020, Mission completed this acquisition. The purchase price for the acquisition was $53.2 million, of which $49.0 million was applied against Mission’s existing loans receivable from Marshall on a dollar-for-dollar basis and the remaining $4.2 million in cash was funded by cash on hand (See Note 3 for additional information). Upon closing of the acquisition, the SSAs between Nexstar and Marshall and the debt agreement between Mission and Marshall were terminated, thus, Nexstar no longer holds a variable interest in Marshall. On September 1, 2020, Mission entered into new SSAs with Nexstar.

As a result of Mission’s acquisition of the former Marshall stations, Nexstar determined that it has variable interests in these stations as a result of the new SSAs effective September 1, 2020 and Nexstar’s guarantee of the obligations incurred under Mission’s senior secured credit facility. Nexstar has also evaluated its arrangements with these stations and with Mission and determined that it is the primary beneficiary of the variable interests because Nexstar has the ultimate power to direct the activities that most significantly impact the economic performance of the stations including developing the annual operating budget, management advice and consultation on broadcast matters and the production of news and other programming. Therefore, Nexstar has consolidated these stations under authoritative guidance related to the consolidation of variable interest entities beginning on September 1, 2020.

Non-Consolidated VIEs

Nexstar has an outsourcing agreement with Cunningham Broadcasting Corporation (“Cunningham”), which continues through December 31, 2021. Under the outsourcing agreement, Nexstar provides certain engineering, production, sales and administrative services for WYZZ, the FOX affiliate in the Peoria, Illinois market, through WMBD, the Nexstar television station in that market. During the term of the outsourcing agreement, Nexstar retains the broadcasting revenue and related expenses of WYZZ and is obligated to pay a monthly fee to Cunningham based on the combined operating cash flow of WMBD and WYZZ, as defined in the agreement.

Nexstar has determined that it has a variable interest in WYZZ. Nexstar has evaluated its arrangements with Cunningham and has determined that it is not the primary beneficiary of the variable interest in this station because it does not have the ultimate power to direct the activities that most significantly impact the station’s economic performance, including developing the annual operating budget, programming and oversight and control of sales management personnel. Therefore, Nexstar has not consolidated WYZZ under authoritative guidance related to the consolidation of VIEs. Under the outsourcing agreement for WYZZ, Nexstar pays for certain operating expenses, and therefore may have unlimited exposure to any potential operating losses. Nexstar’s management believes that Nexstar’s minimum exposure to loss under the WYZZ agreement consists of the fees paid to Cunningham. Additionally, Nexstar indemnifies the owners of Cunningham from and against all liability and claims arising out of or resulting from its activities, acts or omissions in connection with the agreement. The maximum potential amount of future payments Nexstar could be required to make for such indemnification is undeterminable at this time. There were no significant transactions arising from Nexstar’s outsourcing agreement with Cunningham.

Income Per Share

Basic income per share is computed by dividing the net income by the weighted-average number of common shares outstanding during the period. Diluted income per share is computed using the weighted-average number of common shares and potentially dilutive common shares outstanding during the period. Potentially dilutive common shares are calculated using the treasury stock method. They consist of stock options and restricted stock units outstanding during the period and reflect the potential dilution that could occur if common shares were issued upon exercise of stock options and vesting of restricted stock units. The following table shows the amounts used in computing Nexstar’s diluted shares (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Weighted average shares outstanding - basic		44,979		46,114		45,313		45,997
Dilutive effect of equity incentive plan instruments		1,758		-		1,751		1,922
Weighted average shares outstanding - diluted		46,737		46,114		47,064		47,919

During the three months ended September 30, 2020 and 2019, stock options and restricted stock units to acquire a weighted average of 85,000 and 2,700 shares of Class A common stock, respectively, were excluded from the computation of diluted earnings per share because their impact would have been anti-dilutive.

During the nine months ended September 30, 2020 and 2019, stock options and restricted stock units to acquire a weighted average of 157,000 shares and 10,900 shares of Class A common stock, respectively, were excluded from the computation of diluted earnings per share because their impact would have been anti-dilutive.

Basis of Presentation

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

Recent Accounting Pronouncements

New Accounting Standards Adopted

In April 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-04, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,” which provided certain improvements to ASU 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,” ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” and ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.” As the Company has adopted ASU 2016-01 and ASU 2017-12, the improvements in ASU 2019-04 are effective for fiscal years beginning after December 15, 2019, and the interim periods within those fiscal years. The Company adopted this guidance concurrent with its adoption of ASU 2016-13 effective January 1, 2020. The adoption of this standard did not have a material impact on the Company’s Condensed Consolidated Financial Statements and related disclosures and no cumulative-effect adjustment was required.

In March 2019, the FASB issued ASU 2019-02, “Entertainment-Films-Other Assets-Film Costs (Subtopic 926-20) and Entertainment-Broadcasters-Intangibles-Goodwill and Other (Subtopic 920-350).” The standard requires production costs of episodic television series to be capitalized as incurred, which aligns the guidance with the accounting for production costs of films. The guidance also provides that capitalized costs associated with films and license agreements will be tested for impairment based on the lower of unamortized cost or fair value, as opposed to the existing guidance where the impairment test is based on estimated net realizable value, and also includes additional disclosure requirements. The standard should be applied prospectively. The Company adopted this standard effective January 1, 2020. The adoption of this standard did not have a material impact on the Company’s Condensed Consolidated Financial Statements and related disclosures.

In October 2018, the FASB issued ASU 2018-17, “Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities.” The standard provides guidance for determining whether a decision-making fee is a variable interest and requires reporting entities to consider indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety (as currently required in GAAP). The Company adopted this standard effective January 1, 2020. The adoption of this standard did not have a material impact on the Company’s Condensed Consolidated Financial Statements and related disclosures.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820),” which removes, modifies and adds to the disclosure requirements on fair value measurements in Topic 820. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The Company adopted this standard effective January 1, 2020. The adoption of this standard did not have a material impact on the Company’s Condensed Consolidated Financial Statements and related disclosures.

In August 2018, the FASB issued ASU 2018-14, “Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20),” which removes certain disclosures that are not considered cost beneficial, clarifies certain required disclosures and adds additional disclosures. The standards are effective for fiscal years ending after December 15, 2020, and early adoption is permitted. The updated standard should be applied on a retrospective basis. The Company early adopted this standard effective January 1, 2020. The adoption of this standard did not have a material impact on the Company’s Condensed Consolidated Financial Statements and related disclosures.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326),” which requires measurement and recognition of expected credit losses for financial assets held. The standard is to be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the standard is effective. The Company adopted this standard effective January 1, 2020. The adoption of this standard did not have a material impact on the Company’s Condensed Consolidated Financial Statements and related disclosure and no cumulative-effect adjustment was required.

In connection with the Company’s estimate of allowance for doubtful accounts, due to the expected loss from future payments as a result of economic uncertainty arising from (i) the negative effects which the COVID-19 pandemic has had on the United States economy and financial markets, and (ii) other economic factors, the Company increased the allowance for doubtful accounts on its accounts receivable to $29.1 million as of September 30, 2020. In the third quarter of 2020, Nexstar also recorded a $13.1 million allowance for uncollectible amounts due from Marshall (in other noncurrent assets), an entity for which Nexstar had a variable interest (See Note 2, “Variable Interest Entities”). During the three and nine months ended September 30, 2020, the Company recorded bad debt expense of $14.4 million and $24.7 million, respectively, including the provision for amounts due from Marshall in the third quarter of 2020.

New Accounting Standards Not Yet Adopted

On August 26, 2020, as part of its broader disclosure effectiveness initiative, the SEC issued Final Rule Release No. 33-10825, “Modernization of Regulation S-K Items 101, 103, and 105” (“SEC Rule 33-10825”), which amends the disclosure rules relating to the description of the business, legal proceedings, and risk factors which are required in many SEC filings, including Form 10-K and registration statements. Key changes include: (i) requiring a principles-based description of the company’s human capital resources, including any human capital measures/objectives that the company focuses on in managing its business (e.g., those that address the development, attraction, and retention of personnel) when material to understanding the business; (ii) eliminating the requirement to disclose business developments over the last five years and focusing on developments that are critical to understanding the company’s business, and, after an initial registration statement, permitting companies to provide only an update of material business developments, so long as the full discussion of business developments from a single previously-filed registration statement or report is incorporated by reference; (iii) increasing the quantitative threshold for disclosing certain governmental environmental proceedings and allowing legal proceedings disclosures to be hyperlinked or cross-referenced to other sections in the document; and (iv) shifting the focus to “material” risk factors categorized by relevant heading and requiring a risk factor summary when the risk factor section is longer than 15 pages. SEC Rule 33-10825 is effective on November 9, 2020. The Company is currently assessing the potential impacts of the adoption of SEC Rule 33-10825 may have on its Condensed Consolidated Financial Statements upon its adoption.

On May 21, 2020, the SEC issued Final Rule Release No. 33-10786, “Amendments to Financial Disclosures about Acquired and Disposed Businesses” (“SEC Rule 33-10786”), which amends the disclosure requirements applicable to acquisitions and dispositions of businesses to improve the financial information provided to investors, facilitate more timely access to capital, and reduce the complexity and costs to prepare disclosure. SEC Rule 33-10786, among other things, (i) amends the tests used to determine significance and expand the use of proforma financial information; (ii) revises the proforma information requirements; (iii) reduces the maximum number of years for which financial statements under Regulation S-X are required to two years; (iv) permit abbreviated financial statements for certain acquisitions; (v) modifies the disclosure requirements relating to the aggregate effect of acquisitions for which financial statements are not required; and (vi) conforms the significance threshold and tests on both disposed and acquired businesses. The amendments are effective January 1, 2021, but early compliance is permitted. The Company does not expect the standard to have a material impact on its Condensed Consolidated Financial Statements upon its adoption effective January 1, 2021.

In March 2020, FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848)” (“ASU 2020-04”), which provides optional guidance for a limited period of time to ease potential accounting impacts associated with transitioning away from reference rates that are expected to be discontinued, such as the London Interbank Offered Rate ("LIBOR"). The amendments in ASU 2020-04 apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued. The amendments in ASU 2020-04 are effective through December 31, 2022. The Company is currently assessing the potential impacts the adoption of ASU 2020-04 may have on its Condensed Consolidated Financial Statements upon its adoption.

In January 2020, FASB issued ASU 2020-01, “Investments—Equity securities (Topic 321)” (“ASU 2020-01”), which clarifies the interaction of the accounting for equity securities under Topic 321 and investments under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815. The amendments in ASU 2020-01 clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. The amendments in ASU 2020-01 are effective for all entities for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. The Company does not expect the standard to have a material impact on its Condensed Consolidated Financial Statements upon its adoption effective January 1, 2021.

In December 2019, the FASB issued ASU 2019-12, “Income taxes (Topic 740)—Simplifying the accounting for income taxes” (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 will be effective for interim and annual periods beginning after December 15, 2020 (January 1, 2021 for the Company). Early adoption is permitted. The Company is currently evaluating the impact the adoption of ASU 2019-12 will have on its Condensed Consolidated Financial Statements upon its adoption effective January 1, 2021.