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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 10-Q

 

 

x    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
     for the quarterly period ended June 30, 2004

 

¨    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
     for the transition period from              to             .

 

Commission File Number: 333-62916-02

 

 

MISSION BROADCASTING, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware   51-0388022
(State of Organization or Incorporation)   (IRS Employer Identification No.)

409 Lackawanna Avenue

Scranton, PA 18503

   (570) 961-2222
(Address of Principal Executive Offices, including Zip Code)   (Registrant’s Telephone Number, Including Area Code)

 

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that it was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

 

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).    Yes  ¨    No  x

 

As of June 30, 2004, Mission Broadcasting, Inc. had one shareholder, David S. Smith. Mr. Smith held all 1,000 shares of the outstanding common stock of Mission Broadcasting, Inc. at June 30, 2004.

 

Table of Contents

 

TABLE OF CONTENTS

 

PART I    FINANCIAL INFORMATION    Page
           
ITEM 1.    Financial Statements (Unaudited)     
     Condensed Balance Sheets—December 31, 2003 and June 30, 2004    1
     Condensed Statements of Operations for the three months and six months ended June 30, 2003 and 2004    2
     Condensed Statements of Cash Flows for the six months ended June 30, 2003 and 2004    3
     Notes to Condensed Financial Statements    4
ITEM 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations    13
ITEM 3.    Quantitative and Qualitative Disclosures about Market Risk    22
ITEM 4.    Controls and Procedures    22
PART II    OTHER INFORMATION     
ITEM 1.    Legal Proceedings    23
ITEM 2.    Unregistered Sales of Equity Securities and Use of Proceeds    23
ITEM 3.    Defaults Upon Senior Securities    23
ITEM 4.    Submission of Matters to a Vote of Security Holders    23
ITEM 5.    Other Information    23
ITEM 6.    Exhibits and Reports on Form 8-K    23
EXHIBIT INDEX    23

 

 

i

Table of Contents

PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

MISSION BROADCASTING, INC.

 

CONDENSED BALANCE SHEETS

(Dollars in thousands, except share information)

 

    

December 31,

2003

    

June 30,

2004

  
     (Unaudited)  

ASSETS

                 

Current assets:

                 

Cash and cash equivalents

    $ 1,857     $ 1,751  

Accounts receivable, net of allowance for doubtful accounts of $170 and $176, respectively

      3,631       3,186  

Current portion of broadcast rights

      2,917       1,785  

Prepaid expenses and other current assets

      61       21  
    
 

Total current assets

      8,466       6,743  

Property and equipment, net

      14,158       16,494  

Restricted cash

      800       —    

Broadcast rights

      2,774       1,311  

Other noncurrent assets

      1,703       13  

Goodwill, net

      11,583       13,053  

Intangible assets, net

      78,560       76,277  
    
 

Total assets

    $ 118,044     $ 113,891  
    
 

LIABILITIES AND SHAREHOLDER’S DEFICIT

                 

Current liabilities:

                 

Current portion of debt

    $ 1,400     $ 1,400  

Current portion of broadcast rights payable

      2,991       2,200  

Accounts payable

      358       187  

Accrued expenses

      922       1,246  

Taxes payable

      16       16  

Interest payable

      20       116  

Deferred revenue

      24       94  

Due to Nexstar Broadcasting, Inc.

      31,974       26,870  
    
 

Total current liabilities

      37,705       32,129  

Debt

      141,600       149,900  

Broadcast rights payable

      3,215       1,438  

Deferred tax liabilities

      3,567       4,083  

Deferred gain on sale of assets

      3,039       2,891  

Other liabilities

      375       526  
    
 

Total liabilities

      189,501       190,967  
    
 

Commitments and contingencies (Note 9)

                 

Minority interest in consolidated entity

      2,812       —    
    
 

Shareholder’s deficit:

                 

Common stock, $1 par value; 1,000 shares authorized; 1,000 shares issued and

outstanding at December 31, 2003 and June 30, 2004, respectively

      1       1  

Subscription receivable

      (1 )     (1 )

Accumulated deficit

      (74,269 )     (77,076 )
    
 

Total shareholder’s deficit

      (74,269 )     (77,076 )
    
 

Total liabilities and shareholder’s deficit

    $ 118,044     $ 113,891  
    
 

 

The accompanying notes are an integral part of these condensed financial statements.

 

1

Table of Contents

MISSION BROADCASTING, INC.

 

CONDENSED STATEMENTS OF OPERATIONS

(Dollars in thousands)

 

    

Three Months

Ended

June 30,

    

Six Months

Ended

June 30,

  
     2003
     2004
     2003
     2004
  
     (Unaudited)     (Unaudited)  

Revenue (excluding trade and barter)

    $ 4,894     $ 5,280     $ 8,785     $ 10,011  

Less: commissions

      (712 )     (723 )     (1,278 )     (1,361 )
    
 
 
 

Net broadcast revenue (excluding trade and barter)

      4,182       4,557       7,507       8,650  

Trade and barter revenue

      647       584       1,262       1,130  

Revenue from Nexstar Broadcasting, Inc.

      2,294       4,344       4,974       7,591  
    
 
 
 

Total net revenue

      7,123       9,485       13,743       17,371  
    
 
 
 

Operating expenses:

                                 

Direct operating expenses (exclusive of depreciation and amortization shown separately below)

      1,262       1,080       2,432       2,080  

Selling, general, and administrative expenses (exclusive of depreciation and amortization shown separately below)

      1,555       1,155       3,037       2,366  

Selling, general and administrative expenses paid to Nexstar Broadcasting, Inc.

      1,313       3,303       2,545       6,575  

Amortization of broadcast rights

      990       1,028       1,961       2,153  

Amortization of intangible assets

      1,521       1,306       3,009       2,592  

Depreciation

      849       597       1,648       1,365  
    
 
 
 

Total operating expenses

      7,490       8,469       14,632       17,131  
    
 
 
 

Income (loss) from operations

      (367 )     1,016       (889 )     240  

Interest expense, including amortization of debt financing costs

      (1,941 )     (1,404 )     (4,007 )     (2,754 )

Loss on extinguishment of debt

      —         —         (1,031 )     —    

Interest income

      1       6       3       8  

Other income

      545       43       1,023       78  
    
 
 
 

Loss before income taxes

      (1,762 )     (339 )     (4,901 )     (2,428 )

Income tax expense

      (379 )     (265 )     (725 )     (537 )
    
 
 
 

Loss before minority interest in consolidated entity

      (2,141 )     (604 )     (5,626 )     (2,965 )

Minority interest in consolidated entity

      105       —         105       158  
    
 
 
 

Net loss

    $ (2,036 )   $ (604 )   $ (5,521 )   $ (2,807 )
    
 
 
 

 

The accompanying notes are an integral part of these condensed financial statements.

 

2

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MISSION BROADCASTING, INC.

 

CONDENSED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

 

    

Six Months Ended

June 30,

  
     2003
     2004
  
     (Unaudited)  

Net cash flows provided by (used for) operating activities

    $ 8,236     $ (2,230 )
    
 

Cash flows from investing activities:

                 

Additions to property and equipment, net

      (500 )     (134 )

Proceeds from sale of assets

      75       1  

Acquisition of broadcast properties and related transaction costs

      (8,975 )     (6,827 )

Down payment on acquisition of stations

      (1,500 )     —    

Decrease in restricted cash

      —         800  
    
 

Net cash used for investing activities

      (10,900 )     (6,160 )
    
 

Cash flows from financing activities:

                 

Proceeds from debt issuance

      55,000       —    

Repayment of long-term debt

      (61,747 )     (700 )

Proceeds from revolver draws

      12,150       9,000  

Payments for debt finance costs

      (1,483 )     (16 )
    
 

Net cash provided by financing activities

      3,920       8,284  
    
 

Net increase (decrease) in cash and cash equivalents

      1,256       (106 )

Cash and cash equivalents at beginning of period

      526       1,857  
    
 

Cash and cash equivalents at end of period

    $ 1,782     $ 1,751  
    
 

 

The accompanying notes are an integral part of these condensed financial statements.

 

3

Table of Contents

MISSION BROADCASTING, INC.

 

NOTES TO CONDENSED FINANCIAL STATEMENTS

 

1. Organization and Business Operations

 

As of June 30, 2004, Mission Broadcasting, Inc. (“Mission” or the “Company”) owns 14 television stations in the United States of America, consisting of five Fox-affiliated television stations, two NBC-affiliated television stations, three ABC-affiliated television stations, two CBS-affiliated television stations, one UPN-affiliated television station and one independent television station. The television stations described above are located in Pennsylvania, Indiana,