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 September 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.) | |
| 7650 Chippewa Road, Suite 305 Brecksville, Ohio 44141 |
(440) 526-2227 | |
| (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 September 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 September 30, 2004.
| Page | ||||
| PART I |
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| ITEM 1. |
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| Condensed Balance Sheets - December 31, 2003 and September 30, 2004 |
1 | |||
| 2 | ||||
| Condensed Statements of Cash Flows for the nine months ended September 30, 2003 and 2004 |
3 | |||
| 4 | ||||
| ITEM 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
14 | ||
| ITEM 3. |
24 | |||
| ITEM 4. |
24 | |||
| PART II |
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| ITEM 1. |
25 | |||
| ITEM 2. |
25 | |||
| ITEM 3. |
25 | |||
| ITEM 4. |
25 | |||
| ITEM 5. |
25 | |||
| ITEM 6. |
25 | |||
| EXHIBIT INDEX | 25 | |||
i
CONDENSED BALANCE SHEETS
(Dollars in thousands, except share information)
| December 31, 2003 |
September 30, 2004 |
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| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 1,857 | $ | 1,634 | ||||
| Accounts receivable, net of allowance for doubtful accounts of $170 and $88, respectively |
3,631 | 2,399 | ||||||
| Current portion of broadcast rights |
2,917 | 3,584 | ||||||
| Prepaid expenses and other current assets |
61 | 227 | ||||||
| Total current assets |
8,466 | 7,844 | ||||||
| Property and equipment, net |
14,158 | 16,005 | ||||||
| Restricted cash |
800 | — | ||||||
| Broadcast rights |
2,774 | 1,777 | ||||||
| Other noncurrent assets |
1,703 | 22 | ||||||
| Goodwill, net |
11,583 | 13,007 | ||||||
| Intangible assets, net |
78,560 | 74,113 | ||||||
| Total assets |
$ | 118,044 | $ | 112,768 | ||||
| LIABILITIES AND SHAREHOLDER’S DEFICIT | ||||||||
| Current liabilities: |
||||||||
| Current portion of debt |
$ | 1,400 | $ | 1,520 | ||||
| Current portion of broadcast rights payable |
2,991 | 3,941 | ||||||
| Accounts payable |
358 | 116 | ||||||
| Accrued expenses |
922 | 858 | ||||||
| Taxes payable |
16 | 10 | ||||||
| Interest payable |
20 | 16 | ||||||
| Deferred revenue |
24 | 131 | ||||||
| Due to Nexstar Broadcasting, Inc. |
31,974 | 25,382 | ||||||
| Total current liabilities |
37,705 | 31,974 | ||||||
| Debt |
141,600 | 150,100 | ||||||
| Broadcast rights payable |
3,215 | 2,125 | ||||||
| Deferred tax liabilities |
3,567 | 4,351 | ||||||
| Deferred gain on sale of assets |
3,039 | 2,848 | ||||||
| Other liabilities |
375 | 606 | ||||||
| Total liabilities |
189,501 | 192,004 | ||||||
| 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 September 30, 2004, respectively |
1 | 1 | ||||||
| Subscription receivable |
(1 | ) | (1 | ) | ||||
| Accumulated deficit |
(74,269 | ) | (79,236 | ) | ||||
| Total shareholder’s deficit |
(74,269 | ) | (79,236 | ) | ||||
| Total liabilities and shareholder’s deficit |
$ | 118,044 | $ | 112,768 | ||||
The accompanying notes are an integral part of these condensed financial statements.
1
CONDENSED STATEMENTS OF OPERATIONS
(Dollars in thousands)
| Three Months Ended September 30, |
Nine Months Ended September 30, |
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| 2003 |
2004 |
2003 |
2004 |
|||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Revenue (excluding trade and barter) |
$ | 4,721 | $ | 4,172 | $ | 13,506 | $ | 14,183 | ||||||||
| Less: commissions |
(693 | ) | (551 | ) | (1,971 | ) | (1,912 | ) | ||||||||
| Net broadcast revenue (excluding trade and barter) |
4,028 | 3,621 | 11,535 | 12,271 | ||||||||||||
| Trade and barter revenue |
616 | 590 | 1,878 | 1,720 | ||||||||||||
| Revenue from Nexstar Broadcasting, Inc. |
2,605 | 5,059 | 7,579 | 12,650 | ||||||||||||
| Total net revenue |
7,249 | 9,270 | 20,992 | 26,641 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Direct operating expenses (exclusive of depreciation and amortization shown separately below) |
1,076 | 1,023 | 3,508 | 3,103 | ||||||||||||
| Selling, general, and administrative expenses (exclusive of depreciation and amortization shown separately below) |
1,537 | 1,198 | 4,574 | 3,564 | ||||||||||||
| Selling, general and administrative expenses paid to Nexstar Broadcasting, Inc. |
1,682 | 3,302 | 4,227 | 9,877 | ||||||||||||
| Amortization of broadcast rights |
1,053 | 1,228 | 3,014 | 3,381 | ||||||||||||
| Amortization of intangible assets |
1,481 | 1,354 | 4,490 | 3,946 | ||||||||||||
| Depreciation |
1,041 | 532 | 2,689 | 1,897 | ||||||||||||
| Total operating expenses |
7,870 | 8,637 | 22,502 | 25,768 | ||||||||||||
| Income (loss) from operations |
(621 | ) | 633 | (1,510 | ) | 873 | ||||||||||
| Interest expense, including amortization of debt financing costs |
(1,984 | ) | (1,488 | ) | (5,991 | ) | (4,242 | ) | ||||||||
| Loss on extinguishment of debt |
— | (1,094 | ) | (1,031 | ) | (1,094 | ) | |||||||||
| Interest income |
1 | 3 | 4 | 11 | ||||||||||||
| Other income |
22 | 54 | 1,045 | 132 | ||||||||||||
| Loss before income taxes |
(2,582 | ) | (1,892 | ) | (7,483 | ) | (4,320 | ) | ||||||||
| Income tax expense |
(261 | ) | (268 | ) | (986 | ) | (805 | ) | ||||||||
| Loss before minority interest in consolidated entity |
(2,843 | ) | (2,160 | ) | (8,469 | ) | (5,125 | ) | ||||||||
| Minority interest in consolidated entity |
158 | — | 263 | 158 | ||||||||||||
| Net loss |
$ | (2,685 | ) | $ | (2,160 | ) | $ | (8,206 | ) | $ | (4,967 | ) | ||||
The accompanying notes are an integral part of these condensed financial statements.
2
CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
| Nine Months Ended September 30, |
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| 2003 |
2004 |
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| (Unaudited) | ||||||||
| Net cash flows provided by (used for) operating activities |
$ | 8,983 | $ | (2,358 | ) | |||
| Cash flows from investing activities: |
||||||||
| Additions to property and equipment, net |
(923 | ) | (178 | ) | ||||
| Proceeds from sale of assets |
75 | 1 | ||||||
| Acquisition of broadcast properties and related transaction costs |
(9,043 | ) | (6,780 | ) | ||||
| Down payment on acquisition of assets |
(1,500 | ) | — | |||||
| Decrease in restricted cash |
— | 800 | ||||||
| Net cash used for investing activities |
(11,391 | ) | (6,157 | ) | ||||
| Cash flows from financing activities: |
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| Proceeds from debt issuance |
55,000 | 152,000 | ||||||
| Repayment of long-term debt |
(62,709 | ) | (152,380 | ) | ||||
| Proceeds from revolver draws |
12,150 | 9,000 | ||||||
| Payments for debt finance costs |
(1,483 | ) | (328 | ) | ||||
| Net cash provided by financing activities |
2,958 | 8,292 | ||||||
| Net increase (decrease) in cash and cash equivalents |
550 | (223 | ) | |||||
| Cash and cash equivalents at beginning of period |
526 | 1,857 | ||||||
| Cash and cash equivalents at end of period |
$ | 1,076 | $ | 1,634 | ||||
The accompanying notes are an integral part of these condensed financial statements.
3
NOTES TO CONDENSED FINANCIAL STATEMENTS
(dollars in thousands)
1. Organization and Business Operations
Mission Broadcasting, Inc. (“Mission” or the “Company”) owns and operates television stations in the United States of America, consisting of television stations affiliated with NBC, ABC, CBS, Fox or UPN television networks and one independent television station. The television stations described above are located in Pennsylvania, Indiana, Missouri, Texas, New York and Montana. Through local service agreements (as more fully described below), Nexstar Broadcasting, Inc. (“Nexstar”) programs certain of Mission’s television stations under Time Brokerage Agreements (“TBA”), has Shared Services Agreements (“SSA”) with certain of Mission’s television stations, and has SSAs and Joint Sales Agreements (“JSA”) with certain of Mission’s television stations (see Note 4).