MISSION BROADCASTING INC - FORM 10-Q

Attached files

file	filename
EX-31.1 - NANCIE J SMITH CERTIFICATION 31.1 - MISSION BROADCASTING INC	njs31_1.htm
EX-32.1 - NANCIE J SMITH CERTIFICATION 32.1 - MISSION BROADCASTING INC	njs32_1.htm

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 March 31, 2011

¨	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.)

30400 Detroit Road, Suite 304, Westlake, Ohio	44145
(Address of Principal Executive Offices)	(Zip Code)

(440) 526-2227
(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 checkmark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (check one):


Large accelerated filer	¨	Accelerated filer	¨

Non-accelerated filer	x	Smaller reporting company	¨
(Do not check if a smaller reporting company)

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of March 31, 2011, Mission Broadcasting, Inc. had one shareholder, the estate of David S. Smith, which held all 1,000 shares of the outstanding common stock of Mission Broadcasting, Inc. As of May 1, 2011, Mission Broadcasting, Inc. had 1,000 shares of outstanding common stock.

TABLE OF CONTENTS


		Page
PART I	FINANCIAL INFORMATION

ITEM 1.	Financial Statements (Unaudited)

	Condensed Balance Sheets as of March 31, 2011 and December 31, 2010	1

	Condensed Statements of Operations for the three months ended March 31, 2011 and 2010	2

	Condensed Statement of Changes in Shareholder’s Deficit for the three months ended March 31, 2011	3

	Condensed Statements of Cash Flows for the three months ended March 31, 2011 and 2010	4

	Notes to Condensed Financial Statements	5

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13

ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	19

ITEM 4.	Controls and Procedures	19

PART II	OTHER INFORMATION

ITEM 1.	Legal Proceedings	20

ITEM 1A.	Risk Factors	20

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20

ITEM 3.	Defaults Upon Senior Securities	20

ITEM 4.	Reserved	20

ITEM 5.	Other Information	20

ITEM 6.	Exhibits	20

EXHIBIT INDEX

PART I. FINANCIAL INFORMATION

ITEM 1.

Financial Statements

MISSION BROADCASTING, INC.

CONDENSED BALANCE SHEETS

(in thousands, except share information, unaudited)

	March 31, 2011			December 31, 2010
ASSETS
Current assets:
Cash and cash equivalents	$	5,232		$	1,249
Accounts receivable		2,057			1,609
Current portion of broadcast rights		2,579			3,208
Prepaid expenses and other current assets		65			120
Deferred tax asset		9			8
Total current assets		9,942			6,194
Property and equipment, net		24,995			25,668
Broadcast rights		1,236			1,888
Goodwill		18,729			18,729
FCC licenses		20,698			20,698
Other intangible assets, net		19,087			20,369
Other noncurrent assets, net		1,070			1,124
Deferred tax asset		326			328
Total assets	$	96,083		$	94,998

LIABILITIES AND SHAREHOLDER’S DEFICIT
Current liabilities:
Current portion of debt	$	390		$	390
Current portion of broadcast rights payable		2,820			3,514
Accounts payable		174			264
Accrued expenses		595			525
Taxes payable		85			67
Interest payable (Note 6)		13,226			6,015
Deferred revenue		456			487
Due to Nexstar Broadcasting, Inc.		8,941			8,423
Total current liabilities		26,687			19,685
Debt (Note 6)		355,977			355,851
Broadcast rights payable		1,817			2,498
Deferred tax liabilities		8,740			8,449
Deferred revenue		417			475
Deferred gain on sale of assets		1,519			1,563
Other liabilities		4,562			4,554
Total liabilities		399,719			393,075
Commitments and contingencies

Shareholder’s deficit:
Common stock, $1 par value; 1,000 shares authorized, issued and outstanding as of each of March 31, 2011 and December 31, 2010		1			1
Subscription receivable		(1	)		(1	)
Contra equity due from affiliate on debt issuance (Note 6)		(193,129	)		(188,790	)
Accumulated deficit		(110,507	)		(109,287	)
Total shareholder’s deficit		(303,636	)		(298,077	)
Total liabilities and shareholder’s deficit	$	96,083		$	94,998

The accompanying Notes are an integral part of these Condensed Financial Statements.

MISSION BROADCASTING, INC.

CONDENSED STATEMENTS OF OPERATIONS

(in thousands, unaudited)

	Three Months Ended March 31,
	2011			2010
Net broadcast revenue	$	2,822		$	2,229
Revenue from Nexstar Broadcasting, Inc.		6,509			6,740
Net revenue		9,331			8,969
Operating expenses (income):
Direct operating expenses, excluding depreciation and amortization		1,253			1,446
Selling, general, and administrative expenses, excluding depreciation and amortization		598			602
Fees incurred pursuant to local service agreements with Nexstar Broadcasting, Inc.		1,785			1,800
Amortization of broadcast rights		1,002			973
Amortization of intangible assets		1,282			1,287
Depreciation		696			731
(Gain) loss on asset disposal, net		(18	)		32
Total operating expenses		6,598			6,871
Income from operations		2,733			2,098
Interest expense, net		(3,641	)		(2,335	)
Loss before income taxes		(908	)		(237	)
Income tax expense		(312	)		(311	)
Net loss	$	(1,220	)	$	(548	)

The accompanying Notes are an integral part of these Condensed Financial Statements.

MISSION BROADCASTING, INC.

CONDENSED STATEMENT OF CHANGES IN SHAREHOLDER’S DEFICIT

For the Three Months Ended March 31, 2011

(in thousands, except share information, unaudited)

	Common Stock				Subscription			Contra Equity Due from Affiliate on			Accumulated			Total Shareholder’s
	Shares		Par Value		Receivable			Debt			Deficit			Deficit
Balance as of December 31, 2010		1,000	$	1	$	(1	)	$	(188,790	)	$	(109,287	)	$	(298,077	)
Discount accretion on 8.875% senior secured second lien notes, Nexstar portion (Note 6)		—		—		—			(130	)		—			(130	)
Interest accrual on 8.875% senior secured second lien notes, Nexstar portion, net of Nexstar payments (Note 6)		—		—		—			(4,209	)		—			(4,209	)
Net loss		—		—		—			—			(1,220	)		(1,220	)
Balance as of March 31, 2011		1,000	$	1	$	(1	)	$	(193,129	)	$	(110,507	)	$	(303,636	)

The accompanying Notes are an integral part of these Condensed Financial Statements.

MISSION BROADCASTING, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)

	Three Months Ended March 31,
	2011			2010
Cash flows from operating activities:
Net loss	$	(1,220	)	$	(548	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Deferred income taxes		292			286
Depreciation of property and equipment		696			731
Amortization of intangible assets		1,282			1,287
Amortization of debt financing costs		53			166
Amortization of broadcast rights, excluding barter		365			411
Payments for broadcast rights		(458	)		(546	)
Loss (gain) on asset disposal, net		(18	)		32
Deferred gain recognition		(44	)		(44	)
Amortization of debt discount		93			—
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		(448	)		(92	)
Prepaid expenses and other current assets		56			40
Taxes payable		18			26
Accounts payable and accrued expenses		(31	)		(100	)
Interest payable		3,002			—
Deferred revenue		(89	)		(167	)
Other noncurrent liabilities		7			22
Due to Nexstar Broadcasting, Inc.		518			(878	)
Net cash provided by operating activities		4,074			626
Cash flows from investing activities:
Purchases of property and equipment		(12	)		(41	)
Proceeds from sale of assets		18			—
Net cash provided by (used in) investing activities		6			(41	)
Cash flows from financing activities:
Repayment of long-term debt		(97	)		(431	)
Net cash used in financing activities		(97	)		(431	)
Net increase (decrease) in cash and cash equivalents		3,983			154
Cash and cash equivalents at beginning of period		1,249			903
Cash and cash equivalents at end of period	$	5,232		$	1,057
Supplemental information:
Interest paid	$	503		$	2,169
Income taxes paid, net	$	—		$	—
Non-cash investing and financing activities:
Accrued purchases of property and equipment	$	13		$	3

The accompanying Notes are an integral part of these Condensed Financial Statements.

MISSION BROADCASTING, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

1.	Organization and Business Operations

As of March 31, 2011, Mission Broadcasting, Inc. (“Mission” or the “Company”) owned and operated 16 television stations and one digital multicast channel, affiliated with the NBC, ABC, CBS, Fox or MyNetworkTV television networks, in markets located in New York, Pennsylvania, Illinois, Indiana, Missouri, Louisiana, Texas and Montana. The Company operates in one reportable television broadcasting segment. Through local service agreements, Nexstar Broadcasting, Inc. (“Nexstar”) provides sales and operating services to all of the Mission television stations (see Note 4).

The Company is highly 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 its control, as well as Nexstar maintaining its pledge to continue the local service agreements with the Company’s stations. Management believes that with Nexstar’s pledge to continue the local service agreements as described in a letter of support dated March 4, 2011, the Company’s available cash, anticipated cash flow from operations and available borrowings under its senior secured credit facility should be sufficient to fund working capital, capital expenditure requirements, interest payments and scheduled debt principal payments for at least the next twelve months from March 31, 2011, enabling Mission to continue to operate as a going concern.

Nexstar’s senior secured credit facility agreement contains covenants which require Nexstar to comply with certain financial ratios, including (a) a maximum consolidated total leverage ratio, (b) a maximum consolidated first lien indebtedness ratio, and (c) a minimum consolidated fixed charge coverage ratio. The covenants, which are calculated on a quarterly basis, include the combined results of Nexstar and Mission. The Company’s senior secured credit facility agreement does not contain financial covenant ratio requirements; however it does include an event of default if Nexstar does not comply with all covenants contained in its credit agreement. As of March 31, 2011, Nexstar was in compliance with all covenants contained in the credit agreements governing the Company’s senior secured credit facility and the indentures governing the publicly-held notes.

2.	Summary of Significant Accounting Policies

Interim Financial Statements

The Condensed Financial Statements as of March 31, 2011, and for the three months ended March 31, 2011 and 2010 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 (“SEC”). The preparation of the Condensed 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 Condensed Financial Statements should be read in conjunction with the Financial Statements and related Notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. The Balance Sheet as of December 31, 2010 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.

Basis of Presentation

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

Recent Accounting Pronouncements

In October 2009, the FASB issued authoritative guidance about the accounting for revenue contracts containing multiple elements, allowing the use of companies’ estimated selling prices as the value for deliverable elements under certain circumstances and to eliminate the use of the residual method for allocation of deliverable elements. The Company adopted this guidance effective January 1, 2011, and the adoption did not result in a significant impact to the Company’s financial position or results of operations.

3. Fair Value Measurements

In accordance with authoritative literature pertaining to fair value measurements for financial assets and financial liabilities measured on a recurring basis the Company utilizes the following categories of methodology for valuation of such financial assets and liabilities:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability;

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

The Company invests in short term interest bearing obligations with original maturities less than 90 days, primarily money market funds. Mission does not enter into investments for trading or speculative purposes. As of March 31, 2011 and December 31, 2010, there were no investments in marketable securities.

4.	Local Service Agreements with Nexstar

Mission has entered into local service agreements with Nexstar to provide sales and operating services to all of Mission’s stations. Under the terms of a shared services agreement (“SSA”), the Nexstar station in the market provides certain services including news production, technical maintenance and security, in exchange for monthly payments from Mission to Nexstar. For each station that Mission has entered into an SSA, it has also entered into a joint sales agreement (“JSA”). Under the terms of the JSA, Nexstar sells the advertising time of the Mission station and retains a percentage of the net revenue it generates in return for monthly payments to Mission of the remaining percentage of net revenue. Under the terms of a time brokerage agreement (“TBA”), Nexstar programs most of the station’s broadcast time, sells the station’s advertising time and retains the advertising revenue it generates in exchange for monthly payments to Mission. JSA and TBA fees generated from Nexstar under the agreements are reported as “Revenue from Nexstar Broadcasting, Inc.”, and SSA fees incurred by Mission under the agreements are reported as “Fees incurred pursuant to local service agreements with Nexstar Broadcasting, Inc.” in accompanying Condensed Statements of Operations.

The arrangements under the local service agreements each Mission station has entered into with Nexstar have had the effect of Nexstar receiving substantially all of the available cash, after Mission’s payment of operating costs and debt service, generated by the Company’s stations. Mission anticipates that Nexstar will continue to receive substantially all of Mission’s available cash, after payments for operating costs and debt service, generated by its stations. In compliance with FCC regulations for both Mission and Nexstar, Mission maintains complete responsibility for and control over programming, finances, personnel and operations of its stations.

Mission stations had the following local service agreements in effect with Nexstar as of March 31, 2011:

Station	Market	Affiliation	Type of Agreement	Expiration	Consideration received from or paid to Nexstar
WFXP	Erie, PA	Fox	TBA	8/16/11	Monthly payments received from Nexstar(1)

KJTL	Wichita Falls, TX-	Fox	SSA	5/31/19	$60 thousand per month paid to Nexstar
KJBO-LP	Lawton, OK	MyNetworkTV	JSA	5/31/19	70% of the KJTL/KJBO-LP net revenue collected each month received from Nexstar

WYOU	Wilkes Barre-	CBS	SSA	1/4/18	$35 thousand per month paid to Nexstar
	Scranton, PA		JSA	9/30/14	70% of the WYOU net revenue collected each month received from Nexstar

KODE	Joplin, MO-	ABC	SSA	3/31/12	$75 thousand per month paid to Nexstar
	Pittsburg, KS		JSA	9/30/14	70% of the KODE net revenue collected each month received from Nexstar

KRBC	Abilene-	NBC	SSA	6/12/13	$25 thousand per month paid to Nexstar
	Sweetwater, TX		JSA	6/30/14	70% of the KRBC net revenue collected each month received from Nexstar

KSAN	San Angelo, TX	NBC	SSA	5/31/14	$10 thousand per month paid to Nexstar
			JSA	5/31/14	70% of the KSAN net revenue collected each month received from Nexstar

WFXW	Terre Haute, IN	Fox	SSA	5/8/13	$10 thousand per month paid to Nexstar
			JSA	5/8/13	70% of the WFXW net revenue collected each month received from Nexstar

KCIT	Amarillo, TX	Fox	SSA	4/30/19	$50 thousand per month paid to Nexstar
KCPN-LP		MyNetworkTV	JSA	4/30/19	70% of the KCIT/KCPN-LP net revenue collected each month received from Nexstar

KHMT	Billings, MT	Fox	TBA	12/13/17	Monthly payments received from Nexstar(1)

KAMC	Lubbock, TX	ABC	SSA	2/15/19	$75 thousand per month paid to Nexstar
			JSA	2/15/19	70% of the KAMC net revenue collected each month received from Nexstar

KOLR	Springfield, MO	CBS	SSA	2/15/19	$150 thousand per month paid to Nexstar
			JSA	2/15/19	70% of the KOLR net revenue collected each month received from Nexstar

WUTR	Utica, NY	ABC	SSA	3/31/14	$10 thousand per month paid to Nexstar
			JSA	3/31/14	70% of the WUTR net revenue collected each month received from Nexstar

WTVO	Rockford, IL	ABC/	SSA	10/31/14	$75 thousand per month paid to Nexstar
		MyNetworkTV	JSA	10/31/14	70% of the WTVO net revenue collected each month received from Nexstar

KTVE	Monroe, LA-	NBC	SSA	1/16/18	$20 thousand per month paid to Nexstar
	El Dorado, AR		JSA	1/16/18	70% of the KTVE net revenue collected each month received from Nexstar

(1)	Payments are variable based on station’s monthly operating expenses.

Under these agreements, Mission is responsible for certain operating expenses of its stations and, therefore, may have unlimited exposure to any potential operating losses. Mission will continue to operate its stations under the SSAs and JSAs or TBAs until the termination of such agreements. The SSAs and JSAs generally have a term of ten years. Nexstar indemnifies Mission from Nexstar’s activities pursuant to the local service agreement to which Nexstar is a party.

5.	Intangible Assets and Goodwill

Intangible assets subject to amortization consisted of the following (in thousands):

			March 31, 2011							December 31, 2010
	Estimated useful life, in years		Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Network affiliation agreements		15	$	66,443	$	(49,678	)	$	16,765	$	66,443	$	(48,616	)	$	17,827
Other definite-lived intangible assets		1-15		13,117		(10,795	)		2,322		13,117		(10,575	)		2,542
Other intangible assets			$	79,560	$	(60,473	)	$	19,087	$	79,560	$	(59,191	)	$	20,369

Total amortization expense from definite-lived intangibles was $1.3 million for each of the three months ended March 31, 2011 and 2010.

The following table presents the Company’s estimate of amortization expense for the remainder of 2011, each of the five succeeding years ended December 31 and thereafter for definite-lived intangible assets as of March 31, 2011 (in thousands):

Remainder of 2011	$	3,811
2012		5,081
2013		4,254
2014		1,382
2015		1,098
2016		1,098
Thereafter		2,363

The carrying amounts of goodwill and FCC licenses were as follows (in thousands):

	Goodwill							FCC Licenses
	Gross		Accumulated Impairment			Net		Gross		Accumulated Impairment			Net
Balance as of December 31, 2010		20,279		(1,550	)		18,729		31,395		(10,697	)		20,698
Balance as of March 31, 2011		20,279		(1,550	)		18,729		31,395		(10,697	)		20,698

There were no changes recorded to goodwill or FCC licenses during the year ended December 31, 2010 or the three months ended March 31, 2011. The Company expenses, as incurred, any costs to renew or extend its FCC licenses. Indefinite-lived intangible assets are not subject to amortization, but are tested for impairment annually or whenever events or changes in circumstances indicate that such assets might be impaired. As of March 31, 2011, the Company did not identify any events that would trigger an impairment assessment.

Debt

Long-term debt consisted of the following (in thousands):

	March 31, 2011			December 31, 2010
Term loans	$	38,708		$	38,805
Revolving credit facility		—			—
8.875% Senior secured second lien notes due 2017, net of discount of $7,341 and $7,564, respectively		317,659			317,436
		356,367			356,241
Less: current portion		(390	)		(390	)
	$	355,977		$	355,851

Unused Commitments and Borrowing Availability

As of March 31, 2011, Mission had $10.0 million of total unused revolving loan commitments under its senior secured credit facility, all of which was available for borrowing, based on the covenant calculations.

Collateralization and Guarantees of Debt

Nexstar Broadcasting Group, Inc. (Nexstar’s ultimate parent) and its subsidiaries guarantee full payment of all obligations under the Mission senior secured credit facility in the event of its default. Similarly, Mission is a guarantor of Nexstar’s senior secured credit facility, the 7% PIK senior subordinated notes (“7% PIK Notes”) and the 7% senior subordinated notes (“7% Notes”), both due 2014, issued by Nexstar. The senior secured credit facilities are collateralized by a security interest in substantially all the combined assets, excluding FCC licenses, of Nexstar and Mission.

Debt Covenants

The Mission senior secured credit facility agreement does not contain financial covenant ratio requirements, but does provide for default in the event Nexstar does not comply with all covenants contained in its credit agreement. Nexstar has informed the Company that it was in compliance with its debt covenants as of March 31, 2011.

8.875% Senior Secured Second Lien Notes

On April 19, 2010, Mission and Nexstar, as co-issuers, completed the issuance and sale of $325.0 million of 8.875% senior secured second lien notes due 2017 (“the 8.875% Notes”). The net proceeds to Mission and Nexstar from the sale of the 8.875% Notes were $316.8 million, net of $8.2 million original issuance discount. Mission received $131.9 million of the net proceeds and $184.9 million was received by Nexstar. As the obligations under the 8.875% Notes are joint and several to Nexstar and Mission, each entity reflects the full amount of the 8.875% Notes and related accrued interest in its separate financial statements. Further, the portions of the net proceeds and related accrued interest attributable to the respective co-issuer are reflected as a reduction to equity (due from affiliate) in their separate financial statements given the common control nature of the entities. As of March 31, 2011, Nexstar had a balance of $185.4 million of debt and $7.7 million of interest payable related to the 8.875% Notes, both of which are included in contra equity due from affiliate on the Condensed Balance Sheet.

Fair Value of Debt

The aggregate carrying amounts and estimated fair value of Mission’s debt were as follows (in thousands):

	March 31, 2011				December 31, 2010
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Term loans(1)	$	38,708	$	38,708	$	38,805	$	38,805
8.875% Senior secured second lien notes(2)		317,659		351,813		317,436		345,313

(1)	The fair value of bank credit facilities is computed based on borrowing rates currently available to Mission for bank loans with similar terms and average maturities. These fair value measurements are considered Level 3 (significant and unobservable).

(2)	The fair value of Mission’s fixed rate debt is estimated based on bid prices obtained from an investment banking firm that regularly makes a market for these financial instruments. This fair value measurement is considered Level 2 (significant and observable).

7.	FCC Regulatory Matters

Television broadcasting is subject to the jurisdiction of the FCC under the Communications Act of 1934, as amended (the “Communications Act”). The Communications Act prohibits the operation of television broadcasting stations except under a license issued by the FCC, and empowers the FCC, among other things, to issue, revoke, and modify broadcasting licenses, determine the location of television stations, regulate the equipment used by television stations, adopt regulations to carry out the provisions of the Communications Act and impose penalties for the violation of such regulations. The FCC’s ongoing rule making proceedings could have a significant future impact on the television industry and on the operation of the Company’s stations and the stations it provides services to. In addition, the U.S. Congress may act to amend the Communications Act in a manner that could impact the Company’s stations, the stations it provides services to and the television broadcast industry in general.

The FCC has initiated a proceeding with respect to the conversion of existing low power and television translator stations to digital operations. The FCC has asked for comment on whether to adopt a date in 2012 by which such analog low power and television translator stations must cease analog operations. The Company holds two low power analog station licenses and two analog television translator station licenses which will need to transition to digital operations by the final transition date established by the FCC.

Media Ownership

In 2006, the FCC initiated a rulemaking proceeding to review all of its media ownership rules, as required by the Communications Act. The Commission considered rules relating to ownership of two or more TV stations in a market, ownership of local TV and radio stations by daily newspapers in the same market, cross-ownership of local TV and radio stations, and changes to how the national TV ownership limits are calculated. In February 2008, the FCC adopted modest changes to its newspaper broadcast cross-ownership rule while retaining the rest of its ownership rules then currently in effect. Multiple challenges to this proceeding were filed with the U.S. Courts of Appeal. The court proceedings remain pending.

The FCC is required by statute to review its media ownership rules every four years and to eliminate those rules it finds no longer serve the “public interest, convenience and necessity.” During 2009, the FCC held a series of hearings designed to evaluate possible changes to its rules. In May 2010, the FCC formally initiated its 2010 review of its media ownership rules with the issuance of a Notice of Inquiry (NOI). The NOI is intended to assist the Commission in establishing a framework within which to analyze whether its media ownership rules remain “necessary in the public interest as a result of competition,” due to the dramatic changes occurring in the media marketplace. Numerous parties have filed comments and reply comments in response to the NOI. In June 2010, the FCC issued a Request for Proposal with respect to nine economic studies related to its media ownership rules. These studies have not yet been provided to the general public for review and comment. The Company believes that upon completion of the studies the next step will be for the FCC to issue a Notice of Proposed Rulemaking (NPRM) to seek comment on specific proposed changes to its ownership rules. The Company cannot predict when the FCC will issue this NPRM.

Spectrum

The FCC has initiated various proceedings to assess the availability of spectrum to meet future wireless broadband needs. The FCC’s March 2010 “National Broadband Plan” recommends the reallocation of 120 megahertz of the spectrum currently used for broadcast television for wireless broadband use. The FCC has thus far requested comment on proposals that include, among other things, whether to add new frequency allocations in the television bands for licensed fixed and mobile wireless uses, whether to permit two television stations to share a single 6 megahertz channel and whether to implement technical rule modifications to improve the viability of certain channels that are underutilized by digital television stations. At the same time, Congress is considering legislation that would authorize the FCC to conduct incentive auctions whereby spectrum holders, including television broadcasters, could voluntarily relinquish all or part of their spectrum in exchange for consideration. A reallocation of television spectrum for wireless broadband use would likely involve a “repacking” of the television broadcast band, which would require some television stations to change channel or otherwise modify their technical facilities. If Congress or the FCC determines to move forward with one or more of these proposals, it may be to the detriment of the Company’s investment in digital facilities, could require substantial additional investment to continue current operations, and may require viewers to invest in additional equipment or subscription services to continue receiving broadcast television signals. The Company cannot predict the resolution of the proposals or their impact to its business.

Retransmission Consent

On March 3, 2011, the FCC initiated a Notice of Proposed Rulemaking to reexamine its rules (i) governing the requirements for good faith negotiations between MPVDs and broadcasters, including implementing a prohibition on one station negotiating retransmission consent terms for another station under a local service agreement; (ii) for providing advance notice to consumers in the event of dispute; and (iii) to extend certain cable-only obligations to all MVPDs. The FCC has also asked for comment on eliminating the network non-duplication and syndicated exclusivity protection rules, which may permit MVPDs to import out-of-market television stations during a retransmission consent dispute. If the FCC prohibits joint negotiations or modifies the network non-duplication and syndicated exclusivity protection rules, such changes likely would affect the Company’s ability to sustain its current level of retransmission consent revenues or grow such revenues in the future and could have an adverse effect on the Company’s business, financial condition and results of operations. The Company cannot predict the resolution of these proposals or their impact to its business.

8.	Commitments and Contingencies

Guarantees of Nexstar Debt

Mission is a guarantor of and has pledged substantially all its assets, excluding FCC licenses, to guarantee Nexstar’s senior secured credit facility. Mission is also a guarantor of Nexstar’s 7% Notes and 7% PIK Notes. The notes are general unsecured senior subordinated obligations subordinated to all of Mission’s senior debt. In the event that Nexstar is unable to repay amounts due under these debt obligations, Mission will be obligated to repay such amounts. The maximum potential amount of future payments that Mission would be required to make under these guarantees would be generally limited to the amount of borrowings outstanding under Nexstar’s senior secured credit facility, the 7% PIK Notes and the 7% Notes. As of March 31, 2011, Nexstar had a maximum commitment of $125.5 million under its senior secured credit facility, of which $60.5 million was outstanding, had $45.3 million of the 7% Notes outstanding and $133.1 million of the 7% PIK Notes outstanding. Additionally, in April 2011, Nexstar entered into an agreement to purchase the assets of two stations whereby $17.5 million will be drawn on its revolver and Nexstar signed an amendment to its senior secured credit facility agreement to increase its term loan by $50.0 million.

Purchase Options Granted to Nexstar

In consideration of the guarantee of the Company’s senior secured credit facility by Nexstar Broadcasting Group, Inc., Mission granted Nexstar purchase options to acquire the assets and assume the liabilities of each Mission station, subject to FCC consent, for consideration equal to the greater of (1) seven times the station’s cash flow, as defined in the option agreement, less the amount of its indebtedness as defined in the option agreements, or (2) the amount of its indebtedness. Cash flow is defined as income or loss from operations, plus depreciation and amortization (including amortization of broadcast rights), interest income, non-cash trade and barter expenses, nonrecurring expenses (including time brokerage agreement fees), network compensation payments received or receivable and corporate management fees, less payments for broadcast rights, non-cash trade and barter revenue and network compensation revenue. These option agreements (which expire on various dates between 2011 and 2018) are freely exercisable or assignable by Nexstar without consent or approval by Mission. The Company expects these option agreements to be renewed upon expiration.

Indemnification Obligations

In connection with certain agreements that the Company enters into in the normal course of its business, including local service agreements, business acquisitions and borrowing arrangements, the Company enters into contractual arrangements under which the Company agrees to indemnify the third party to such arrangement from losses, claims and damages incurred by the indemnified party for certain events as defined within the particular contract. Such indemnification obligations may not be subject to maximum loss clauses and the maximum potential amount of future payments the Company could be required to make under these indemnification arrangements may be unlimited. Historically, payments made related to these indemnifications have been immaterial and 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.

Chief Executive Officer

On March 28, 2011, Mission’s President and Treasurer, David S. Smith, passed away. Mr. Smith was previously performing similar functions of the principal executive officer, principal financial officer and principal accounting officer of Mission. Mr. Smith was also the sole shareholder and Director of Mission. His shares transferred to his estate upon his passing. Nancie J. Smith, Mission's Vice President and Secretary, is now performing similar functions of the principal executive officer, principal financial officer and principal accounting officer of Mission.

9.	Income Taxes

The Company’s provision for income taxes is primarily comprised of deferred income taxes resulting from the amortization of goodwill and other indefinite-lived intangible assets for income tax purposes which are not amortized for financial reporting purposes. No tax benefit has been recognized on the Company’s taxable losses for the three months ended March 31, 2011 and 2010 as the utilization of such losses is not more likely than not to be realized in the foreseeable future.

The deferred tax liabilities related to goodwill and other indefinite-lived intangible assets 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 before valuation allowance primarily result from federal and state net operating loss carryforwards (“NOLs”). The Company’s NOLs are available to reduce future taxable income if utilized before their expiration. The Company has provided a valuation allowance for certain deferred tax assets as it does not believe they are more likely than not to be realized through future taxable earnings.

10.	Subsequent Event

In April 2011, a building and certain equipment at one of the Company’s transmitter sites was destroyed by wildfires in the area. The majority of the assets were obsolete and fully-depreciated, but were insured, thus the Company anticipates recording a gain upon settlement with the insurer for the claim amount. The Company is still evaluating the amount of the damage and the insurance claim.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our Condensed Financial Statements and related Notes included elsewhere in this Quarterly Report on Form 10-Q and the Financial Statements and related Notes contained in our Annual Report on Form 10-K for the year ended December 31, 2010. Throughout this discussion, all references to “Mission”, “we”, “our”, “us” and the “Company” refer to Mission Broadcasting, Inc.

Overview of Operations

As of March 31, 2011, we owned and operated 16 television stations and one digital multicast channel. We have local service agreements with certain television stations of Nexstar Broadcasting, Inc. (“Nexstar”), through which Nexstar provides various programming, sales or other services to our television stations. In compliance with Federal Communications Commission (“FCC”) regulations for both Nexstar and us, we maintain complete responsibility for and control over programming, finances, personnel and operations of our stations.

The following table summarizes the various local service agreements our stations had in effect as of March 31, 2011 with Nexstar:

Service Agreements		Stations
TBA Only(1)		WFXP and KHMT

SSA & JSA(2)		KJTL, KJBO-LP, KOLR, KCIT, KCPN-LP, KAMC, KRBC, KSAN, WUTR, WFXW, WYOU, KODE, WTVO and KTVE

(1)	We have a time brokerage agreement (“TBA”) for each of these stations which allows Nexstar to program most of each station’s broadcast time, sell each station’s advertising time and retain the advertising revenue generated in exchange for monthly payments to us.

(2)

We have both a shared services agreement (“SSA”) and a joint sales agreement (“JSA”) for each of these stations. The SSA allows the sharing of services including news production, technical maintenance and security, in exchange for Nexstar’s right to receive certain payments from us as described in the SSAs. The JSAs permit Nexstar to sell the station’s advertising time and retain a percentage of the net revenue from the station’s advertising time in return for monthly payments to us of the remaining percentage of the net revenue, as described in the JSAs.

The arrangements under the local service agreements each Mission station has entered into with Nexstar have had the effect of Nexstar receiving substantially all of the available cash generated by our stations, after our payments of operating costs and debt service, generated by our stations. We anticipate that Nexstar will continue to receive substantially all of our available cash, after our payments for operating costs and debt service. For more information about our local service agreements with Nexstar, refer to Note 4 of our Condensed Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

The operating revenue of our stations is derived primarily from broadcast advertising revenue sold and collected by Nexstar and paid to us under the JSAs. Broadcast advertising revenue is affected by a number of factors, including the economic conditions of the markets in which we operate, the demographic makeup of those markets and the marketing strategy employed in each market. Advertising revenue is positively affected by strong local economies, national and regional political election campaigns, and certain events such as the Olympic Games or the Super Bowl. Because television broadcast stations rely on advertising revenue, declines in advertising budgets, particularly in recessionary periods, adversely affect advertising revenues in the broadcast industry. The stations’ advertising revenue is generally highest in the second and fourth quarters of each year, due in part to increases in consumer advertising in the spring and retail advertising in the period leading up to, and including, the holiday season. In addition, advertising revenue is generally higher during even-numbered years resulting from political advertising and advertising aired during the Olympic Games.

Each of our stations has a network affiliation agreement pursuant to which the network provides programming to the station during specified time periods, including prime time. NBC, CBS and ABC compensate some of our affiliated stations for distributing the network’s programming over the air and for allowing the network to keep a portion of advertising inventory during those time periods. The affiliation agreements with Fox and MyNetworkTV do not provide for compensation. In recent years, in conjunction with the renewal of affiliation agreements with NBC, CBS and ABC, the amount of network compensation has been declining from year to year. We expect this trend to continue in the future. Therefore, revenue associated with network compensation is being eliminated and many of the networks are now seeking cash payments from their affiliates.

Each station acquires licenses to broadcast programming in non-news and non-network time periods. The licenses are either purchased from a program distributor for cash or the program distributor is allowed to sell some of the advertising inventory as compensation to eliminate or reduce the cash cost for the license. The latter practice is referred to as barter broadcast rights. The station records the estimated fair market value of the licenses, including any advertising inventory given to the program distributor, as a broadcast right asset and liability. Barter broadcast rights are recorded at management’s estimate of the value of the advertising time exchanged using historical advertising rates, which approximates the fair value of the program material received. The assets are amortized as a component of amortization of broadcast rights. Amortization is computed using the straight-line method over the license period or period of usage, whichever ends earlier. The cash broadcast rights liabilities are reduced by monthly payments while the barter liability is amortized over the life of the contract as barter revenue.

Our primary operating expense consists of fixed monthly SSA fees paid to Nexstar for news production and technical and other services. To a lesser extent our operating expenses include employee compensation and related benefits. A large percentage of the costs involved in the operation of our stations remains fixed.

Historical Performance

Revenue

The following table sets forth the principal types of revenue earned by our stations (in thousands) and each type of revenue (other than barter revenue and revenue from Nexstar) as a percentage of total net broadcast revenue before barter:

	Three Months Ended March 31,
	2011				2010
	Amount		%		Amount		%
Retransmission compensation	$	2,059		94.2	$	1,405		84.3
Network compensation		102		4.7		234		14.0
Other		24		1.1		28		1.7
Net broadcast revenue before barter		2,185		100.0		1,667		100.0
Barter revenue		637				562
Revenue from Nexstar		6,509				6,740
Net revenue	$	9,331			$	8,969

Results of Operations

The following table sets forth a summary of our operations (in thousands) and the components of operating expense as a percentage of net revenue:

	Three Months Ended March 31,
	2011						2010
	Amount			%			Amount		%
Net revenue	$	9,331			100.0		$	8,969		100.0
Operating expenses (income):
Corporate expenses		259			2.8			261		2.9
Station direct operating expenses		1,253			13.5			1,446		16.1
Selling, general and administrative expenses		339			3.6			341		3.8
Fees incurred pursuant to local service agreements with Nexstar		1,785			19.1			1,800		20.1
(Gain) loss on asset disposal, net		(18	)		(0.2	)		32		0.3
Barter expense		637			6.8			562		6.3
Depreciation and amortization		1,978			21.2			2,018		22.5
Amortization of broadcast rights, excluding barter		365			3.9			411		4.6
Income from operations	$	2,733					$	2,098

Three Months Ended March 31, 2011 Compared to Three Months Ended March 31, 2010

Revenue

Net revenue for the three months ended March 31, 2011 increased by $0.4 million, or 4.0%, from the same period in 2010. This increase was primarily attributed to an increase in retransmission compensation, partially offset by a decrease in revenue from Nexstar, as discussed below.

Revenue from Nexstar was $6.5 million for the three months ended March 31, 2011, compared to $6.7 million for the same period in 2010, a decrease of $0.2 million, or 3.4%. The decrease was attributed to a decrease in advertising revenue at our stations, which in turn decreased the revenue we earned from Nexstar through JSAs.

Compensation from retransmission consent and network affiliation agreements was $2.2 million for the three months ended March 31, 2011, compared to $1.6 million for the same period in 2010, an increase of $0.5 million, or 31.8%. The increase was primarily due to renegotiated cable agreements providing for higher rates per subscriber during the year.

Operating Expenses

Corporate expenses were consistent at $0.3 million for each of the three months ended March 31, 2011 and 2010. Corporate expense relates to costs associated with the centralized management of our stations.

Station direct operating expenses, consisting primarily of news, engineering and programming, and selling, general and administrative expenses were $1.6 million for the three months ended March 31, 2011, compared to $1.8 million for the same period in 2010, a decrease of $0.2 million, or 10.9%. The decrease was primarily due to the expiration of certain analog tower leases in August 2010, which were no longer needed after the switch to digital broadcasts.

Local service agreement fees associated with Nexstar relate to services provided by Nexstar in the production of newscasts, technical maintenance, promotional and administrative support under the SSAs. SSA fees remained consistent at $1.8 million for each of the three months ended March 31, 2011 and 2010.

Depreciation of property and equipment remained consistent at $0.7 million for each of the three months ended March 31, 2011 and 2010. Amortization of intangible assets remained consistent at $1.3 million for each of the three months ended March 31, 2011 and 2010.

Interest Expense

Interest expense, net increased by $1.3 million, or 55.9%, for the three months ended March 31, 2011, compared to the same period in 2010. The increase was primarily related to the higher interest rate and accretion of discount on the $325.0 million 8.875% Senior Secured Second Lien Notes due 2017 (“8.875% Notes”) compared to the senior secured credit facilities.

Income Taxes

Income tax expense remained consistent at $0.3 million for each of the three months ended March 31, 2011 and 2010, respectively. Our provision for income taxes is primarily created by an increase in the deferred tax liabilities position during the year arising from the amortization of goodwill and other indefinite-lived intangible assets for income tax purposes which are not amortized for financial reporting purposes. No tax benefit was recorded with respect to the taxable losses for 2011 and 2010, as the utilization of such losses is not more likely than not to be realized in the foreseeable future.

Liquidity and Capital Resources

We are highly leveraged, which makes us vulnerable to changes in general economic conditions. Our ability to meet the future cash requirements described below depends on our ability to generate cash in the future, which is subject to general economic, financial, competitive, legislative, regulatory and other conditions, many of which are beyond our control. Our ability to meet future cash requirements is also dependent upon the local service agreements we have entered into with Nexstar. Under our local service agreements, Nexstar sells our advertising time and pays us a percentage of the amount collected. The payments we receive from Nexstar are a significant component of our cash flows. On March 4, 2011, Nexstar represented to us that it will continue the various local service agreements under which it provides sales and other services to our television stations thereby providing financial support to enable us to continue to operate as a going concern. We believe that with Nexstar’s pledge to continue the local service agreements, our available cash, anticipated cash flow from operations and available borrowings under our senior secured credit facility should be sufficient to fund working capital, capital expenditure requirements, interest payments and scheduled debt principal payments for at least the next twelve months from March 31, 2011. In order to meet future cash needs we may, from time to time, borrow under our available senior secured credit facility. We will continue to evaluate the best use of our operating cash flow among capital expenditures, acquisitions and debt reduction.

Overview

The following tables present summarized financial information management believes is helpful in evaluating our liquidity and capital resources (in thousands):

	Three Months Ended March 31,
	2011			2010
Net cash provided by operating activities	$	4,074		$	626
Net cash provided by (used in) investing activities		6			(41	)
Net cash used in financing activities		(97	)		(431	)
Net increase (decrease) in cash and cash equivalents	$	3,983		$	154
Cash paid for interest	$	503		$	2,169

	March 31, 2011		December 31, 2010
Cash and cash equivalents	$	5,232	$	1,249
Long-term debt including current portion(1)	$	356,367	$	356,241
Unused commitments under senior secured credit facility(2)	$	10,000	$	10,000

(1)

We co-issued $325.0 million of 8.875% Notes in April 2010, of which we received $131.9 million of the net proceeds and $184.9 million was received by Nexstar, as discussed in Note 6 of our Condensed Financial Statements. Debt repayment will be split based on the same ratio as the proceeds were received.

(2)	As of March 31, 2011, all $10.0 million of total unused commitments under our senior secured credit facility were available for borrowing.

Cash Flows – Operating Activities

Net cash flows from operating activities increased by $3.4 million during the three months ended March 31, 2011 compared to the same period in 2010. The increase was primarily due to a decrease in cash paid for interest of $1.7 million and the impact of the timing of payments of amounts due to Nexstar of $1.4 million. The decrease in cash paid for interest was primarily due to the timing of interest payments on the 8.875% Notes, which are due in April and October, versus the senior secured credit facility, which generally has interest payments due each quarter.

Due to our recent history of net operating losses, we currently do not pay any federal income taxes. These net operating losses may be carried forward, subject to expiration and certain limitations, and used to reduce taxable earnings in future years. Through the use of available loss carryforwards, it is possible that we may not pay significant amounts of federal income taxes in the foreseeable future.

Cash Flows – Investing Activities

We had minimal cash flows from investing activities in each of the three months ended March 31, 2011 and 2010. Cash flows from investing activities consisted of cash used for capital additions, offset by proceeds from sale of assets.

Cash Flows – Financing Activities

Net cash flows used in financing activities totaled $0.1 million during the three months ended March 31, 2011, representing contractual maturities on our senior secured credit facility, and totaled $0.4 million during the three months ended March 31, 2010, representing payments on our senior secured credit facility, including a required excess cash flow payment.

Although our senior credit facility allows for the payment of cash dividends, we do not currently intend to declare or pay a cash dividend.

Future Sources of Financing and Debt Service Requirements

As of March 31, 2011, we had debt of $356.4 million, which represented 675.8% of our total capitalization. Our high level of debt requires that a substantial portion of cash flow be dedicated to pay principal and interest on our debt which reduces the funds available for working capital, capital expenditures, acquisitions and other general corporate purposes.

The total amount of borrowings available to us under the revolving loan commitment of our senior credit facility is based on covenant calculations contained in Nexstar’s credit agreement. As of March 31, 2011, $10.0 million of total unused commitments under our senior secured credit facility were available for borrowing.

The following table summarizes the approximate aggregate amount of principal indebtedness scheduled to mature for the periods referenced as of March 31, 2011 (in thousands):

	Total		Remainder of 2011			2012-2013		2014-2015	Thereafter
Senior secured credit facility	$	38,708	$	293	$	780	$	780	$	36,855
8.875% Notes (1)		325,000		—		—		—		325,000
	$	363,708	$	293	$	780	$	780	$	361,855

(1)	As co-issuers, we received $131.9 million of the net proceeds and $184.9 million was received by Nexstar as discussed in Note 6 of our Condensed Financial Statements. Debt repayment will be split based on the same ratio as the proceeds were received.

We make semi-annual interest payments on our 8.875% Notes in April and October. Interest payments on our senior secured credit facility are generally paid every one to three months and are payable based on the type of interest rate selected.

The terms of our senior credit facility limit, but do not prohibit us from incurring substantial amounts of additional debt in the future.

We do not have any rating downgrade triggers that would accelerate the maturity dates of our debt. However, a downgrade in our credit rating could adversely affect our ability to renew existing, or obtain access to new, credit facilities in the future and could increase the cost of such facilities.

Collateralization and Guarantees of Debt

Nexstar Broadcasting Group, Inc. (Nexstar’s ultimate parent) and its subsidiaries guarantee full payment of all obligations under our senior secured credit facility in the event of our default. Similarly, we are a guarantor of Nexstar’s senior secured credit facility, the 7% senior subordinated notes due 2014 (“7% Notes”) and the 7% senior subordinated PIK notes due 2014 (“7% PIK Notes”) issued by Nexstar. The senior secured credit facilities are collateralized by a security interest in substantially all the combined assets, excluding FCC licenses, of Nexstar and us. As of March 31, 2011, Nexstar had a maximum commitment of $125.5 million under its senior secured credit facility, of which $60.5 million was outstanding, had $45.3 million of the 7% Notes outstanding and $133.1 million of the 7% PIK Notes outstanding. Additionally, in April 2011, Nexstar entered into an agreement to purchase the assets of two stations whereby $17.5 million will be drawn on its revolver and Nexstar signed an amendment to its senior secured credit facility agreement to increase its term loan by $50.0 million.

Debt Covenants

Our ability to continue as a going concern is dependent on Nexstar’s pledge to continue the local services agreements described in a letter of support dated March 4, 2011. Our senior secured credit facility agreement does not contain financial covenant ratio requirements; however it does include an event of default if Nexstar does not comply with all covenants contained in its credit agreement. Nexstar’s senior secured credit facility agreement contains covenants which require them to comply with certain financial ratios, including (a) a maximum consolidated total leverage ratio, (b) a maximum consolidated first lien indebtedness ratio, and (c) a minimum consolidated fixed charge coverage ratio. The covenants, which are calculated on a quarterly basis, include the combined results of Nexstar and us. The 8.875% Notes, the 7% Notes and the 7% PIK Notes contain restrictive covenants customary for borrowing arrangements of this type. As of March 31, 2011, Nexstar has informed us that it was in compliance with all covenants contained in the credit agreements governing our senior secured credit facility and the indentures governing the publicly-held notes. As of March 31, 2011, we were in compliance with all covenants related to the 8.875% Notes.

No Off-Balance Sheet Arrangements

As of March 31, 2011, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. We are, therefore, not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

Critical Accounting Policies and Estimates

Our Condensed Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) which require us 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 Condensed Financial Statements and reported amounts of revenue and expenses during the period. On an ongoing basis, we evaluate our estimates, including those related to goodwill and intangible assets, bad debts, broadcast rights, trade and barter, income taxes, commitments and contingencies. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates. Results of operations for interim periods are not necessarily indicative of results for the full year.

Information with respect to our critical accounting policies which we believe could have the most significant effect on our reported results and require subjective or complex judgments by management is contained in our Annual Report on Form 10-K for the year ended December 31, 2010. Management believes that as of March 31, 2011 there has been no material change to this information.

Recent Accounting Pronouncements

Refer to Note 2 of our Condensed Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for a discussion of our adoption of recently issued accounting pronouncements, including our expected date of adoption and effects on results of operations and financial position.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including: any projections or expectations of earnings, revenue, financial performance, liquidity and capital resources or other financial items; any assumptions or projections about the television broadcasting industry; any statements of our plans, strategies and objectives for our future operations, performance, liquidity and capital resources or other financial items; any statements concerning proposed new products, services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words “may,” “will,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and other similar words.

Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ from this projection or assumption in any of our forward-looking statements. Our future financial position and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties, including those described in our Annual Report on Form 10-K for the year ended December 31, 2010 and in our other filings with the Securities and Exchange Commission. The forward-looking statements made in this Quarterly Report on Form 10-Q are made only as of the date hereof, and we do not have or undertake any obligation to update any forward-looking statements to reflect subsequent events or circumstances unless otherwise required by law.

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

Our exposure to market risk for changes in interest rates relates primarily to our long-term debt obligations.

Our term loan borrowings as of March 31, 2011 under our senior secured credit facility bear interest at a weighted-average rate of 5%, which primarily represented the base rate, or LIBOR, plus the applicable margin, as defined. Interest is payable in accordance with the credit agreement.

If LIBOR were to increase by 100 basis points, or one percentage point, from its March 31, 2011 level, our annual interest expense would increase and cash flow from operations would decrease by approximately $0.1 million, based on the outstanding balance of our credit facility as of March 31, 2011. Due to the LIBOR floor on our term loan, an increase of 50 basis points in LIBOR or any decrease in LIBOR would have no impact on our operations or cash flows. Our 8.875% Notes are fixed rate debt obligations and therefore are not exposed to market interest rate changes. As of March 31, 2011, we have no financial instruments in place to hedge against changes in the benchmark interest rates on our senior secured credit facility.

Impact of Inflation

We believe that our results of operations are not affected by moderate changes in the inflation rate.

ITEM 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Mission’s management, with the participation of Mission’s Vice President and Secretary (who is Mission’s principal executive officer and principal financial and accounting officer), conducted an evaluation as of the end of the period covered by this report of the effectiveness of the design and operation of Mission’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934.

Based upon that evaluation, Mission’s Vice President and Secretary concluded that as of the end of the period covered by this report Mission’s disclosure controls and procedures were effective in ensuring that information required to be disclosed by Mission in the reports it files or submits under the Securities Exchange Act of 1934 (i) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to Mission’s management, including its Vice President and Secretary, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

During the quarterly period as of the end of the period covered by this report, there have been no changes in Mission’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

From time to time, we are involved in litigation that arises from the ordinary operations of business, such as contractual or employment disputes or other general actions. In the event of an adverse outcome of these proceedings, we believe the resulting liabilities would not have a material adverse effect on our financial condition or results of operations.

ITEM 1A. Risk Factors

There are no material changes from the risk factors previously disclosed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2010.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. Reserved

ITEM 5. Other Information

ITEM 6. Exhibits

Exhibit No.	Description

31.1	Certification of Nancie J. Smith pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certification of Nancie J. Smith pursuant to 18 U.S.C. ss. 1350.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		MISSION BROADCASTING, INC.

		/s/ NANCIE J. SMITH
	By:	Nancie J. Smith
	Its:	Vice President and Secretary
		(Principal Executive Officer and Principal Financial and Accounting Officer)

Dated: May 13, 2011

MISSION BROADCASTING INC - FORM 10-Q - May 13, 2011

Attached files

MISSION BROADCASTING INC Reports