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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

for the quarterly period ended September 30, 2004

for the transition period from              to              .

Commission File Number: 000-50478

NEXSTAR BROADCASTING GROUP, INC.

(Exact name of registrant as specified in its charter)

Securities Registered Pursuant to Section 12(b) of the Act: None

Securities Registered Pursuant to Section 12(g) of the Act:

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 November 4, 2004, 28,363,427 shares of the Registrant’s common stock were outstanding.

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

NEXSTAR BROADCASTING GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share information)

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

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NEXSTAR BROADCASTING GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars and shares in thousands, except per share amounts)

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

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NEXSTAR BROADCASTING GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

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

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NEXSTAR BROADCASTING GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars and shares in thousands, except per share amounts)

1. Description of Business

Nexstar Broadcasting Group, Inc. (“Nexstar”) owns, operates, programs or provides sales and other services to 44 television stations affiliated with the NBC, ABC, CBS, Fox or UPN television networks and one independent television station, in markets located in New York, Pennsylvania, Illinois, Indiana, Missouri, Texas, Louisiana, Arkansas, Alabama, Montana and Maryland. Through various local service agreements (as more fully described below), Nexstar programs certain television stations under Time Brokerage Agreements (“TBA”), has Shared Services Agreements (“SSA”) with certain television stations, and has SSAs and Joint Sales Agreements (“JSA”) with certain television stations.

Nexstar is highly leveraged, which makes it vulnerable to changes in general economic conditions. Nexstar’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 control of Nexstar. Nexstar believes that, taken together, its current cash balances, internally generated cash flow and availability under its credit facilities should result in Nexstar having adequate cash resources to meet its future requirements for working capital, capital expenditures and debt service for at least the next twelve months.

2. Summary of Significant Accounting Policies

Interim Financial Statements

The condensed consolidated financial statements as of September 30, 2004 and for the three and nine months ended September 30, 2003 and 2004 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 Securities and Exchange Commission. 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 disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. Results of operations for interim periods are not necessarily indicative of results for the full year. These financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Nexstar’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003. The balance sheet at December 31, 2003 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.

Certain prior year balance sheet amounts have been reclassified to conform to the current year presentation.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Nexstar and its subsidiaries. Also included in the financial statements are the accounts of independently-owned Mission Broadcasting, Inc. (“Mission”) (Nexstar and Mission are collectively referred to as “the Company”) and certain other entities where it is determined that the Company is the primary beneficiary of a variable interest entity (“VIE”) in accordance with Financial Accounting Standards Board (“FASB”) Interpretation No. 46, “Consolidation of Variable Interest Entities, an interpretation on Accounting Research Bulletin No. 51” (“FIN No. 46”) as revised in December 2003 (“FIN No. 46R”). All intercompany account balances and transactions have been eliminated in consolidation.

Mission

Mission is included in these consolidated financial statements because Nexstar is deemed to have a controlling financial interest in Mission for financial reporting purposes in accordance with FIN No. 46R as a result of (a) local service agreements Nexstar has with the Mission stations, (b) Nexstar’s guarantee of Mission’s debt (see Note 6) and (c) purchase options granted by Mission’s shareholder which will permit Nexstar to acquire the assets and assume the liabilities of each Mission station, subject to FCC consent. As of September 30, 2004, the assets of Mission consist of current assets of $4.3 million (excluding broadcast rights), broadcast rights of $5.4 million, FCC licenses of $25.8 million, goodwill and other intangible assets of $61.3 million, property and equipment of $16.0 million and other noncurrent assets of $22 thousand. Substantially all of Mission’s assets, except for FCC licenses, collateralize its secured debt obligation. Nexstar has entered into local service agreements with Mission to provide sales and/or operating services to the Mission stations. The following table summarizes the various local service agreements Nexstar has with the Mission stations as of September 30, 2004:

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NEXSTAR BROADCASTING GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars and shares in thousands, except per share amounts)

2. Summary of Significant Accounting Policies —(Continued)

Nexstar does not own Mission or Mission’s television stations; however, Nexstar is deemed to have a controlling financial interest in them under U.S. GAAP while complying with the Federal Communications Commission’s (“FCC”) rules regarding ownership limits in television markets. In order for both Nexstar and Mission to continue to comply with FCC regulations, Mission maintains complete responsibility for and control over programming, finances, personnel and operations of its stations.

Variable Interest Entities

The Company, generally in connection with pending acquisitions subject to FCC consent, will enter into TBAs with stations. As a result of entering into the TBAs, the Company may determine that the station is a VIE and that it is the primary beneficiary of the variable interest. Under the terms of these agreements, the Company makes specific periodic payments to the owner-operator in exchange for the right to program and sell advertising on a portion of the station’s broadcast time. Nevertheless, the owner-operator retains control and responsibility for the operation of the station, including responsibility over all programming broadcast on the station. The Company will continue to operate the station under a TBA until the termination of such agreement. Termination of a TBA typically occurs on consummation of the acquisition of the station.

On May 9, 2003, Mission entered into a purchase agreement to acquire substantially all the assets of WBAK, the Fox affiliate in Terre Haute, Indiana and simultaneously entered into a TBA with Bahakel Communications and certain of its subsidiaries relating to WBAK. As a result of the TBA, Mission determined that it was the primary beneficiary of WBAK. Mission has consolidated the financial statements of WBAK from May 9, 2003 to April 6, 2004 when operations under the TBA were terminated upon Mission’s purchase of the station.

On October 13, 2003, Nexstar entered into a purchase agreement to acquire substantially all of the assets of KFTA/KNWA (formerly KPOM and KFAA), the NBC affiliate in Fort Smith-Fayetteville-Springdale-Rogers, Arkansas, from J.D.G. Television, Inc. (“J.D.G. TV”). The pending acquisition is expected to close in the first quarter of 2005, subject to FCC consent. Operations under a TBA between Nexstar and J.D.G. TV began on October 16, 2003. As a result of the TBA, Nexstar has determined that it is the primary beneficiary of KFTA/KNWA. Nexstar has consolidated the financial statements of KFTA/KNWA since October 16, 2003, and pursuant to FIN No. 46R, J.D.G. TV’s ownership is currently reflected as minority interest in these condensed consolidated financial statements. As of September 30, 2004, total assets of $15.8 million related to KFTA/KNWA are included in the condensed consolidated balance sheet. The net revenue of KFTA/KNWA included in the condensed consolidated statement of operations is $1.5 million and $4.3 million for the three and nine months ended September 30, 2004, respectively.

On May 21, 2004, Nexstar entered into a purchase agreement to acquire substantially all of the assets of KLST, the CBS affiliate in San Angelo, Texas, from Jewell Television Corporation (“Jewell”). The pending acquisition is expected to close in the fourth quarter of 2004. Operations under a TBA between Nexstar and Jewell began on June 1, 2004. As a result of the TBA, Nexstar has determined that it is the primary beneficiary of KLST. Nexstar has consolidated the financial statements of KLST since June 1, 2004, and pursuant to FIN No. 46R, Jewell’s ownership is currently reflected as minority interest in these condensed consolidated financial statements. As of September 30, 2004, total assets of $11.9 million related to KLST are included in the condensed consolidated balance sheet. The net revenue of KLST included in the condensed consolidated statement of operations is $1.3 million and $1.7 million for the three and nine months ended September 30, 2004, respectively.

        Nexstar has determined that it has a variable interest in WYZZ, the Fox affiliate in Peoria, Illinois, as a result of an outsourcing agreement it entered into effective December 1, 2001 with a subsidiary of Sinclair Broadcasting Group, Inc. (“Sinclair”) to provide certain engineering, production, sales and administrative services for WYZZ. Nexstar has evaluated its arrangement with Sinclair and has determined that it is not the primary beneficiary of the variable interest, and therefore, has not consolidated WYZZ under FIN No. 46R. Nexstar made payments under the outsourcing agreement with Sinclair of approximately $0.6 million and $1.0 million for the nine months ended September 30, 2003 and 2004, respectively. The Company does not have a material exposure to loss as a result of its variable interest in WYZZ.

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NEXSTAR BROADCASTING GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars and shares in thousands, except per share amounts)

2. Summary of Significant Accounting Policies —(Continued)

Under these local service agreements, the Company pays for certain operating expenses of the respective stations, except for WYZZ, and therefore may have unlimited exposure to any potential operating losses. Nexstar is responsible for reimbursing all of the operating expenses at KFTA/KNWA and KLST and may ultimately have unlimited exposure to potential operating losses. The Company believes that its minimum exposure to loss under the service agreements consists of the fees paid to the current owners of the stations. Additionally, Nexstar or Mission, as applicable, indemnifies the owners of the stations from and against all liability and claims arising out of or resulting from its activities, acts or omissions in connection with the agreements. The maximum potential amount of future payments Nexstar or Mission could be required to make for such indemnification is undeterminable at this time.

Basis of Presentation

The condensed consolidated financial statements for the three and nine months ended September 30, 2003 have been restated to include the financial results of the acquired entities discussed below.

On December 30, 2003, Nexstar completed the acquisition of all the direct and indirect subsidiaries of Quorum Broadcast Holdings, LLC (“Quorum”). Due to Nexstar’s principal stockholder, ABRY Partners, L.L.C. (“ABRY”), holding more than 50% of the voting ownership of both Nexstar and Quorum through its various funds both before and after the merger, the acquisition was accounted for as a merger of entities under common control in a manner similar to the pooling of interests.

Additionally, on December 30, 2003, Mission completed the acquisition of VHR Broadcasting, Inc. and its subsidiaries (“VHR”) and the acquisition of Mission Broadcasting of Amarillo, Inc. (“Mission of Amarillo”). Prior to December 30, 2003, Quorum provided management, sales or other services under local service agreements with VHR and Mission of Amarillo that were substantially similar to Nexstar’s local service agreements with Mission. Upon completion of the Quorum acquisition and the Mission mergers, Nexstar became a party to these local service agreements as successor to the Quorum subsidiaries and Mission became a party to such agreements as the successor to VHR and Mission of Amarillo. Mission also entered into new option agreements with Nexstar for the purchase of these stations. Nexstar and Quorum were deemed to have controlling financial interests under U.S. GAAP in VHR, Mission and Mission of Amarillo due to (a) service agreements with VHR, Mission and Mission of Amarillo, (b) their guarantees of VHR’s, Mission’s and Mission of Amarillo’s debt, and (c) the purchase option agreements Nexstar entered into with Mission. Due to these relationships, Mission’s acquisition of VHR and Mission of Amarillo was accounted for as a merger of entities under common control in a manner similar to the pooling of interests.

The conclusion to account for these acquisitions as a merger of entities under common control in a manner similar to the pooling of interests was based on the guidance in FASB Statement No. 141 “Business Combinations” and EITF 02-05 “Definition of ‘Common Control’ in relation to FASB No. 141”.

Accounting for Stock-Based Compensation

Nexstar accounts for its stock-based employee compensation plans under the recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB Opinion No. 25”), and related interpretations. Under APB Opinion No. 25, no compensation expense is recognized for stock options granted when the exercise price of the options is greater than or equal to the fair value of a company’s common stock on the date of the grant. Nexstar did not incur stock-based employee compensation costs for the three months and nine months ended September 30, 2004 as all options granted under its stock-based employee compensation plans had an exercise price equal to the market value of the underlying common stock on the date of the grant. No options were outstanding at September 30, 2003. The following table illustrates the effect on net income (loss) and net income (loss) per share if Nexstar had applied the fair value recognition provisions of SFAS Statement No. 123, “Accounting for Stock-Based Compensation”, to stock-based employee compensation.

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NEXSTAR BROADCASTING GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars and shares in thousands, except per share amounts)

2. Summary of Significant Accounting Policies—(Continued)

Earnings Per Share

Nexstar computes earnings per share in accordance with SFAS No. 128 “Earnings Per Share” (“SFAS No. 128”). Basic earnings per share is based upon the net earnings applicable to common shares after preferred dividends and accretion of preferred interests and divided by the weighted average number of shares outstanding during the period. There is no difference between basic and diluted earnings per share since potential common shares from the exercise of stock options are anti-dilutive for all periods presented and are excluded from the calculation. Stock options in the amount of approximately 1.42 million were excluded because the option exercise prices were greater than the average market value of our common stock and due to the Company incurring a net loss for the three months and nine months ended September 30, 2004.

The attributable net loss used in the calculation of both basic and diluted earnings per share for the nine months ended September 30, 2003 includes accretion of preferred interests of $15.3 million.

On November 28, 2003, Nexstar undertook a corporate reorganization whereby, Nexstar Broadcasting Group, L.L.C., Nexstar’s predecessor, merged with and into Nexstar and all of the remaining existing membership interests in Nexstar Broadcasting Group, L.L.C. were converted into common shares of Nexstar.

3. Acquisitions

Each of the acquisitions listed below were consummated in the first nine months of 2004. Each acquisition was accounted for under the purchase method, and accordingly the condensed consolidated financial statements include the operating results of each business from the earlier of commencement of a time brokerage agreement or the date of acquisition.

WUTR

On December 17, 2003, Mission entered into a purchase agreement with a subsidiary of Clear Channel Communications, which owned WUTR, the ABC affiliate in Utica, New York. On April 1, 2004, Mission purchased substantially all of the assets of WUTR for $3.7 million, exclusive of transaction costs.

The acquisition was accounted for under the purchase method and, accordingly, the purchase price was allocated to assets acquired based on their estimated fair value on the acquisition date.

The following table summarizes the estimated fair values of the assets acquired at April 1, 2004. Mission obtained third-party valuations of certain acquired intangible assets.

Of the $1.7 million of acquired intangible assets, $0.5 million was assigned to FCC licenses that are not subject to amortization and $1.0 million was assigned to network affiliation agreements (estimated useful life of 15 years). The remaining $0.2 million of acquired intangible assets have a useful life of approximately 1 year. Goodwill of $0.4 million is expected to be deductible for tax purposes.

WBAK

        On May 9, 2003, Mission entered into a purchase agreement and a TBA with Bahakel Communications and certain of its subsidiaries, which owned WBAK, the Fox affiliate in Terre Haute, Indiana. Operations under the TBA commenced on May 9, 2003 and terminated upon the purchase of the station. On April 6, 2004, Mission purchased substantially all of the assets of WBAK for $3.0 million, exclusive of transaction costs. Pursuant to terms of the purchase agreement, Mission made a down payment of $1.5 million against the purchase price on May 9, 2003 and paid the remaining $1.5 million upon consummation of the acquisition, exclusive of transaction costs.

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NEXSTAR BROADCASTING GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars and shares in thousands, except per share amounts)

3. Acquisitions—(Continued)

The acquisition was accounted for under the purchase method and, accordingly, the purchase price was allocated to assets acquired based on their estimated fair value on the acquisition date.

The following table summarizes the estimated fair values of the assets acquired at April 6, 2004. Mission obtained third-party valuations of certain acquired intangible assets.

Of the $1.3 million of acquired intangible assets, $0.5 million was assigned to FCC licenses that are not subject to amortization and $0.5 million was assigned to network affiliation agreements (estimated useful life of 15 years). The remaining $0.3 million of acquired intangible assets have a useful life of approximately 1 year. Goodwill of $1.2 million is expected to be deductible for tax purposes.

The following unaudited pro forma information for the three months and nine months ended September 30, 2003 and 2004, has been presented as if the acquisitions had occurred on January 1, of each year:

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NEXSTAR BROADCASTING GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars and shares in thousands, except per share amounts)

3. Acquisitions—(Continued)

The selected unaudited pro forma information is presented for illustrative purposes only and is not necessarily indicative of results of operations in future periods or results that would have been achieved had the Company and the acquired stations been combined during the specified periods.

Pending Acquisitions

On October 13, 2003, Nexstar entered into a purchase agreement to acquire substantially all the assets of KFTA/KNWA (formerly KPOM and KFAA), the NBC affiliate in Fort Smith-Fayetteville-Springdale-Rogers, Arkansas from J.D.G. TV for $17.0 million. The pending acquisition is expected to close in the first quarter of 2005, subject to FCC consent. Operations under a TBA between Nexstar and J.D.G. TV began on October 16, 2003 and will terminate on the acquisition date. Effective August 13, 2004, KPOM changed its call letters to KFTA and KFAA changed its call letters to KNWA.

On May 21, 2004, Nexstar entered into a purchase agreement to acquire substantially all of the assets of KLST, the CBS affiliate in San Angelo, Texas, from Jewell Television Corporation for $12.0 million. The pending acquisition is expected to close during the fourth quarter of 2004.

4. Local Service Agreements

The stations listed below have commenced one or more local service agreements during the first nine months of 2004.

WUTR

Mission entered into an SSA with Nexstar effective April 1, 2004, whereby Nexstar-owned WFXV provides certain services to Mission-owned WUTR including news production, technical maintenance and security in exchange for a flat monthly fee of $10 thousand per month. Nexstar also entered into a JSA effective April 1, 2004, whereby Nexstar-owned WFXV purchases all of the advertising time on WUTR and retains the advertising revenue in return for payments to Mission equal to 70% of the WUTR net revenue collected each month.

KLST

Nexstar entered into a TBA with Jewell Television Corporation which owns KLST, the CBS affiliate in San Angelo, Texas. Operations under the TBA commenced on June 1, 2004 and will terminate on the acquisition date. This agreement allows Nexstar to program most of KLST’s broadcasting time, sell its advertising time and retain the advertising revenue of KLST in return for monthly payments to Jewell of $15 thousand per month.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars and shares in thousands, except per share amounts)

5. Intangible Assets and Goodwill

Total amortization expense from definite-lived intangibles (excluding debt financing costs) for the three months ended September 30, 2003 and 2004 was $6.5 million and $6.3 million, respectively, and for the nine months ended September 30, 2003 and 2004 was $17.7 million and $20.2 million, respectively. The carrying value of indefinite-lived intangibles, excluding goodwill, at December 31, 2003 was $135.9 million (net of accumulated amortization of $22.2 million) and at September 30, 2004 was $135.5 million (net of accumulated amortization of $22.4 million), respectively.

The Company completed the annual tests of impairment for goodwill and FCC licenses as of December 31, 2003. These tests resulted in no impairment being recognized. As of September 30, 2004, the Company did not identify any events that would trigger an impairment assessment.

The change in the carrying amount of goodwill for the nine months ended September 30, 2004 is as follows:

The acquisitions of WUTR and WBAK during the second quarter of 2004 increased goodwill by approximately $1.6 million. The application of FIN No. 46R increased goodwill by approximately $4.6 million for the consolidation of KLST which occurred in the second quarter of 2004.

6. Debt

Long-term debt consists of the following:

The Nexstar Senior Secured Credit Facilities

On December 30, 2003, in conjunction with the Quorum merger with Nexstar and private placement of senior subordinated notes by Nexstar Broadcasting, Inc. (“Nexstar Broadcasting”), an indirect subsidiary of Nexstar, Nexstar Broadcasting amended its senior secured credit facilities (the “Nexstar Facilities”). The Nexstar Facilities consisted of a $55.0 million term loan and a $50.0 million revolver. The terms of the Nexstar Facilities, including covenants, interest rate and maturity, were substantially similar to the terms of Nexstar Broadcasting’s amended senior credit facilities as described below.

On August 13, 2004, Nexstar Broadcasting amended its senior secured credit facilities (the “Amended Nexstar Facilities”). The Amended Nexstar Facilities, among other things, permitted Nexstar Broadcasting to incur a term loan in the amount of $83.0 million, the proceeds of which were used to repay its term loan in the amount of $54.7 million plus accrued interest and its revolver loans in the amount of $28.0 million plus accrued interest. In addition, the applicable margin component of the interest rate on the term loan was decreased by 50 basis points, which represents one-half of one percentage point. The Amended Nexstar Facilities consist of an $83.0 million term loan and a $50.0 million revolver. The term loan amortizes at 1% annually in years 2004 through 2009, with the remaining 94% due in 2010. The outstanding principal amount on the revolving loans mature on December 31, 2009. As of September 30, 2004,

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars and shares in thousands, except per share amounts)

6. Debt—(Continued)

Nexstar Broadcasting had outstanding $82.8 million on its term loan and had no borrowings outstanding under its revolver. Interest rates associated with the Amended Nexstar Facilities are based, at the option of Nexstar Broadcasting, on (i) the higher of the prevailing prime rate or the Federal Funds Rate plus 0.50% plus an applicable margin or (ii) LIBOR plus an applicable margin, as defined in the credit agreement (3.73% at September 30, 2004).

The Mission Senior Secured Credit Facilities

On December 30, 2003, Mission amended its senior secured credit facilities (the “Mission Facilities”). The Mission Facilities consisted of a $140.0 million term loan and a $30.0 million revolver. The terms of the Mission Facilities, including covenants, interest rate and maturity, were substantially similar to the terms of Mission’s amended senior credit facilities as described below.

On August 13, 2004, Mission amended its senior secured credit facilities (the “Amended Mission Facilities”). The Amended Mission Facilities, among other things, permitted Mission to incur a term loan in the amount of $152.0 million, the proceeds of which were used to repay its term loan in the amount of $139.3 million plus accrued interest and its revolver loans in the amount of $12.0 million plus accrued interest. In addition, the applicable margin component of the interest rate on the term loan was decreased by 50 basis points, which represents one-half of one percentage point. The Amended Mission Facilities consist of a $152.0 million term loan and a $30.0 million revolver. The term loan amortizes at 1% annually in years 2004 through 2009, with the remaining 94% due in 2010. The outstanding principal amount on the revolving loans mature on December 31, 2009. As of September 30, 2004, Mission had outstanding $151.6 million on its term loan and had no borrowings outstanding under its revolver. Interest rates associated with the Amended Mission Facilities are based, at the option of Mission, on (i) the higher of the prevailing prime rate or the Federal Funds Rate plus 0.50% plus an applicable margin or (ii) LIBOR plus an applicable margin, as defined in the credit agreement (3.73% at September 30, 2004).

Cross Guarantees of Debt

Nexstar and its subsidiaries guarantee full payment of any obligations under Mission’s senior secured credit facilities in the event of Mission’s default. Similarly, Mission is a guarantor of Nexstar Broadcasting’s senior secured credit facilities and the senior subordinated notes issued by Nexstar Broadcasting.

Other Guarantees of Debt

On September 29, 2004, Nexstar executed full and unconditional guarantees with respect to the 7% senior subordinated notes due 2014 (the “7% notes”) and the 12% senior subordinated notes due 2008 (the “12% notes”), each issued by Nexstar Broadcasting, an indirect subsidiary of Nexstar, and the 11.375% senior discount notes due 2013 (the “11.375% notes”) issued by Nexstar Finance Holdings, Inc. (“Nexstar Finance Holdings”), a wholly-owned subsidiary of Nexstar.

Senior Discount Notes

On January 5, 2004, Nexstar Finance Holdings redeemed the approximately $37.0 million principal amount at maturity of senior discount notes (the “16% notes”) for a total cash payment of $34.8 million, consisting of $28.9 million of principal and $5.9 million in call premium and accelerated amortization related to the 16% notes. Nexstar Finance Holdings had issued the 16% notes on May 17, 2001 at a price of 54.0373%. The 16% notes were due to mature on May 15, 2009.

Registration

On May 13, 2004, the $125.0 million 7% senior subordinated notes issued by Nexstar Broadcasting on December 30, 2003 were registered under the Securities Act of 1933 in accordance with the terms of a registration rights agreement.

Debt Covenants

The bank debt agreements and the notes described above contain covenants which require the Company to comply with certain financial ratios, capital expenditure limits, cash payments for broadcast rights limits and other restrictions. The covenants are formally calculated on a quarterly basis.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars and shares in thousands, except per share amounts)

6. Debt—(Continued)

Debt Financing Costs

The refinancing of the senior secured credit facilities for Nexstar Broadcasting and Mission in February 2003 resulted in the write off of $5.8 million during the first quarter of 2003 of certain debt financing costs previously capitalized. The redemption of the 16% notes in January 2004 resulted in the write off of $0.9 million during the first quarter of 2004 of certain debt financing costs previously capitalized and $5.9 million in call premium and accelerated amortization related to the 16% notes. The amendment of the senior secured credit facilities for Nexstar Broadcasting and Mission in August 2004 resulted in the write off of $1.9 million during the third quarter of 2004 of certain debt financing costs previously capitalized. These amounts are included in loss on extinguishment of debt.

Interest Rate Swap Agreements

At September 30, 2004, Nexstar had in effect an interest rate swap agreement to pay a fixed interest rate and receive a variable interest rate as required by its credit facility agreement, with a notional amount of $93.3 million. The $93.3 million notional swap, while economically being used to hedge the variability of cash flows on a portion of Nexstar’s variable rate debt, does not qualify for SFAS No. 133 hedge accounting and, thus, is being recorded on the balance sheet at fair value with changes in fair value each period reported in other income and expense. The marking-to-market of this derivative instrument resulted in a recognition of a gain of $0.9 million and $0.8 million, respectively, in other income and expense for the three months ended September 30, 2003 and 2004, and a gain of $1.4 million and $2.6 million, respectively, for the nine months ended September 30, 2003 and 2004. The differential to be paid or received on the swap is accrued as an adjustment to interest expense. The net fair value of the interest rate swap agreement representing the cash Nexstar would pay to settle the agreement was approximately $3.3 million and $0.7 million at December 31, 2003 and September 30, 2004, respectively. This interest rate swap agreement expires on December 31, 2004.

On June 13, 2003, Quorum terminated its notional interest rate swap contract in the amount of $80.0 million. The notional interest rate swap agreement, while being used to mitigate the impact of the variability of interest rates on the credit facilities, did not qualify for SFAS No. 133 hedge accounting and, thus, was recorded on the balance sheet at fair value with changes in fair value each period reported in other income and expense. For the nine months ended September 30, 2003, other income and expense includes a gain of $1.3 million from marking-to-market this derivative instrument.

On June 13, 2003, Quorum entered into an interest rate collar agreement for a notional amount of $60.0 million through September 13, 2003 and $40.0 million from September 13, 2003 through December 13, 2004. Under the agreement the ceiling and floor interest rates were 2.5% and 0.88%, respectively. This agreement was terminated on April 5, 2004 with no gain or loss recognized.

7. Income Taxes

The Company’s provision for income taxes is primarily comprised of deferred income taxes created by an increase in the deferred tax liabilities position during the year resulting from the amortizing of goodwill and other indefinite-lived intangible assets for income tax purposes which are not amortized for financial reporting purposes. These deferred tax liabilities do not reverse on a scheduled basis and are not used to support the realization of deferred tax assets. The Company’s deferred tax assets primarily result from net operating loss carryforwards (“NOLs”). The Company provides a full valuation allowance for net deferred tax assets as it believes that it is more likely than not that the deferred tax assets will not be realized. The provision for deferred income tax expense recorded for the three months and nine months ended September 30, 2004 included expense of approximately $0.8 million and approximately $2.5 million, respectively, due to an increase in the deferred tax liabilities. The Company’s NOLs are available to reduce future taxable income if utilized before their expiration. Utilization of NOLs in the future may be limited if changes in the Company’s ownership occurs.

8. Commitments and Contingencies

Digital Conversion

DTV Channel Election

On August 4, 2004, the FCC adopted a multi-step channel election process to determine the final DTV channel allotment for every television station. This channel election process will encompass three selection rounds. Nexstar’s stations and the stations to which it provides services will have the opportunity to choose permanent DTV channels in December 2004 in the first election round. However, stations with only one channel in the 2-51 range (Nexstar’s KQTV, WCFN, WFFT, WHAG, WJET and Mission’s WFXP and KOLR) may defer a permanent channel selection until the second round, which the FCC tentatively has scheduled for the summer of 2005.

DTV Facilities Construction

Except for WFXV, WQRF and KNWA (formerly KFAA), which Nexstar is expected to acquire from J.D.G. Television, Inc. in the first quarter of 2005 subject to FCC consent, all of the television stations Nexstar owns and operates or provides services to are broadcasting at least a low power digital television signal. WFXV and WQRF have not yet received DTV construction permits and, therefore, are not required to broadcast a digital signal. KNWA had until March 4, 2004 to construct DTV facilities. KNWA requested

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8. Commitments and Contingencies—(Continued)

an extension of time on February 20, 2004 to construct digital facilities and has at least six months from the date the FCC acts on its request for extension to construct its digital facilities. If the FCC denies KNWA’s request for extension, the licensee will have six months to complete construction of its DTV facilities and will be required to report to the FCC on construction during this period. If the station is not broadcasting a digital signal by the end of this six-month period, the licensee could be subject to further sanctions, including, eventually, loss of its DTV construction permit. The digital conversion required an average initial capital expenditure of $0.2 million per station for low-power transmission of a digital signal. Digital conversion expenditures were $3.1 million and $0.2 million, respectively, for the nine months ended September 30, 2003 and 2004.

On August 4, 2004, the FCC adopted rules setting the dates by which all television stations must be broadcasting a full-power DTV signal. Under these new rules, ABC, CBS, Fox and NBC affiliates in the top-100 markets are required to construct their authorized full-power DTV facilities by July 1, 2005; provided that if the permanent DTV channel elected is different from the DTV channel on which the station currently is operating, then the station need only construct DTV facilities that serve 100 percent of the population (based on the 2000 census) that their 1997 DTV allocation would serve. All other stations are required to construct their authorized full-power DTV facilities by July 1, 2006; provided that the remaining stations whose final elected DTV channel will be different from the DTV channel on which the station currently is operating need only construct DTV facilities that serve 80 percent of the population (based on the 2000 census) that their 1997 DTV allocation would serve. The Company estimates that it will require an average capital expenditure of approximately $1.0 million per station to modify its and Mission’s stations’ DTV transmitters for full-power digital signal transmission, including costs for the transmitter, line, antenna and installation. Additional costs may be required in some instances for tower upgrades and/or modifications. The Company anticipates these expenditures will be funded through available cash on hand and cash generated from operations. Stations that fail to meet these build-out deadlines will lose interference protection for their signals outside the low-power coverage area.

The FCC stated it plans to establish a limited waiver process for stations that cannot meet the above deadlines due to severe financial constraints or circumstances beyond licensee control (such as zoning issues).

Other New DTV Requirements

The FCC also adopted a DTV closed captioning standard, DTV station identification requirements and Program System and Information Protocol (“PSIP”) requirements. All DTV stations must comply with the new PSIP requirement, which will require the installation of new equipment, by February 1, 2005. Nexstar anticipates that installing the equipment necessary to meet the new PSIP requirements will cost approximately $1.3 million in total for its stations and the stations to which it provides services. Nexstar anticipates these expenditures will be funded through available cash on hand and cash generated from operations.

Guarantor Arrangements

When, as part of an acquisition, the Company acquires all of the assets and liabilities or all of the stock of a company, the Company assumes the liability for certain events or occurrences that took place prior to the date of acquisition.

In connection with most of its acquisitions, the Company enters into local service agreements for specified periods of time, usually six months or less. The Company indemnifies the owner and operator of the television station, their employees, agents and contractors from liability, claims, and damages arising from the activities of operating the television station under such agreements. The Company has not incurred significant costs to defend lawsuits or settle claims related to these indemnification agreements.

Litigation

From time to time, the Company is involved with claims that arise out of the normal course of business. In the opinion of management, any resulting liability with respect to these claims would not have a material adverse effect on the Company’s financial position or results of operations.

9. Preferred and Common Stock

On June 24, 2004, Banc of America Capital Investors L.P. converted 700,000 non-voting shares of Class C common stock to 700,000 voting shares of Class A common stock.

In March 2003, Nexstar made a $1.5 million tax distribution to holders of preferred equity interests of Nexstar Broadcasting Group, L.L.C.

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(Dollars and shares in thousands, except per share amounts)

10. Condensed Consolidating Financial Information

Senior Discount Notes

On March 27, 2003, Nexstar Finance Holdings, Inc., a 100% owned subsidiary of Nexstar Broadcasting Group, Inc., issued 11.375% senior discount notes (“11.375% Notes”) due in 2013. The 11.375% Notes are fully and unconditionally guaranteed by Nexstar Broadcasting Group, Inc. The following summarized consolidating financial information is presented in lieu of separate financial statements and other related disclosures of Nexstar Finance Holdings, Inc. pursuant to Regulation S-X Rule 3-10 of the Securities Exchange Act of 1934, as amended, “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or being Registered”. The following represents summarized condensed consolidating financial information as of December 31, 2003 and September 30, 2004 with respect to the financial position and for the three months and nine months ended September 30, 2003 and 2004 for results of operations and for the nine months ended September 30, 2003 and 2004 for cash flows of the Company and its 100%, directly or indirectly, owned subsidiaries.

The Nexstar column presents the parent company’s financial information. Nexstar is also the guarantor. The Nexstar Finance Holdings column presents the issuer’s financial information. The Non-Guarantor Subsidiary column presents the financial information of Nexstar Broadcasting, Inc., a 100% owned subsidiary of Nexstar Finance Holdings, Inc.

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10. Condensed Consolidating Financial Information—(Continued)

BALANCE SHEET

September 30, 2004