MISSION BROADCASTING INC - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - MISSION BROADCASTING INC	Financial_Report.xls
EX-32.1 - DENNIS THATCHER CERTIFICATION 32.1 - MISSION BROADCASTING INC	exh32_1.htm
EX-31.1 - DENNIS THATCHER CERTIFICATION 31.1 - MISSION BROADCASTING INC	exh31_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 September 30, 2013

	OR

¨	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 x 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 November 4, 2013, the Registrant had 1,000 shares of common stock outstanding, held by two shareholders.

TABLE OF CONTENTS


		Page
PART I	FINANCIAL INFORMATION

ITEM 1.	Financial Statements (Unaudited)

	Condensed Balance Sheets as of September 30, 2013 and December 31, 2012	1

	Condensed Statements of Operations for the three and nine months ended September 30, 2013 and 2012	2

	Condensed Statement of Changes in Shareholders’ Deficit for the nine months ended September 30, 2013	3

	Condensed Statements of Cash Flows for the nine months ended September 30, 2013 and 2012	4

	Notes to Condensed Financial Statements	5

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	25

ITEM 4.	Controls and Procedures	26

PART II	OTHER INFORMATION

ITEM 1.	Legal Proceedings	26

ITEM 1A.	Risk Factors	26

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26

ITEM 3.	Defaults Upon Senior Securities	26

ITEM 4.	Mine Safety Disclosures	26

ITEM 5.	Other Information	26

ITEM 6.	Exhibits	27

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

MISSION BROADCASTING, INC.
CONDENSED BALANCE SHEETS
(in thousands, except share information, unaudited)
	September 30,			December 31,
	2013			2012
ASSETS
Current assets:
Cash and cash equivalents	$	2,042		$	318
Accounts receivable, net of allowance for doubtful accounts of $42 and $30, respectively		6,268			3,610
Current portion of broadcast rights		1,558			962
Due from Nexstar Broadcasting, Inc.		14,233			512
Deferred tax assets, net		933			933
Prepaid expenses and other current assets		319			122
Total current assets		25,353			6,457
Property and equipment, net		27,748			21,518
Goodwill		32,489			18,730
FCC licenses		41,563			21,939
Other intangible assets, net		25,315			10,195
Deferred tax assets, net		28,769			30,416
Deposits on station acquisitions		150			6,000
Other noncurrent assets, net		5,207			4,126
Total assets	$	186,594		$	119,381
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Current portion of debt	$	1,040		$	330
Current portion of broadcast rights payable		1,601			1,261
Accounts payable		580			364
Accrued expenses		2,327			1,172
Taxes payable		49			102
Interest payable (Note 6)		12,809			6,268
Deferred revenue		198			296
Total current liabilities		18,604			9,793
Debt (Note 6)		411,907			362,531
Other liabilities		8,627			7,828
Total liabilities		439,138			380,152
Commitments and contingencies
Shareholders' deficit:
Common stock - $1 par value, 1,000 shares authorized, issued and outstanding as of each of September 30, 2013 and December 31, 2012		1			1
Subscription receivable		(1	)		(1	)
Contra equity due from Nexstar Broadcasting, Inc. on debt issuance (Note 6)		(183,921	)		(189,924	)
Accumulated deficit		(68,623	)		(70,847	)
Total shareholders' deficit		(252,544	)		(260,771	)
Total liabilities and shareholders' deficit	$	186,594		$	119,381

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						Nine Months Ended
	September 30,						September 30,
	2013			2012			2013			2012
Net broadcast revenue	$	7,578		$	4,707		$	21,882		$	13,937
Revenue from Nexstar Broadcasting, Inc.		9,581			8,012			28,885			23,304
Net revenue		17,159			12,719			50,767			37,241
Operating expenses:
Direct operating expenses, excluding depreciation and amortization		3,751			1,833			10,756			5,347
Selling, general, and administrative expenses, excluding depreciation and amortization		705			794			2,266			2,041
Fees incurred pursuant to local service agreements with Nexstar Broadcasting, Inc.		2,445			1,935			7,295			5,805
Amortization of broadcast rights		1,729			1,099			4,821			3,214
Amortization of intangible assets		1,750			1,270			5,486			3,811
Depreciation		850			701			2,771			2,142
Total operating expenses		11,230			7,632			33,395			22,360
Income from operations		5,929			5,087			17,372			14,881
Interest expense, net		(4,453	)		(3,750	)		(13,436	)		(11,206	)
Income before income taxes		1,476			1,337			3,936			3,675
Income tax expense		(752	)		(338	)		(1,712	)		(985	)
Net income	$	724		$	999		$	2,224		$	2,690

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

MISSION BROADCASTING, INC.
CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT
For the Nine Months Ended September 30, 2013
(in thousands, unaudited)

										Contra Equity
										Due from
										Nexstar
										Broadcasting,
										Inc. on								Total
	Common Stock					Subscription				Debt				Accumulated				Shareholders'
	Shares		Amount			Receivable				Issuance				Deficit				Deficit
Balances as of December 31, 2012		1,000		$	1		$	(1	)		$	(189,924	)		$	(70,847	)		$	(260,771	)
Discount accretion on 8.875% senior secured second lien notes, Nexstar portion (Note 6)		-			-			-				(481	)			-				(481	)
Interest accrual on 8.875% senior secured second lien notes, Nexstar portion, net of Nexstar payments (Note 6)		-			-			-				(3,785	)			-				(3,785	)
Partial redemption of the 8.875% senior secured second lien notes, Nexstar portion (Note 6)		-			-			-				10,269				-				10,269
Net income		-			-			-				-				2,224				2,224
Balances as of September 30, 2013		1,000		$	1		$	(1	)		$	(183,921	)		$	(68,623	)		$	(252,544	)

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

MISSION BROADCASTING, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)

	Nine Months Ended
	September 30,
	2013			2012
Cash flows from operating activities:
Net income	$	2,224		$	2,690
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Deferred income taxes		1,647			913
Provision for bad debts		12			5
Depreciation of property and equipment		2,771			2,142
Amortization of intangible assets		5,486			3,811
Amortization of debt financing costs		384			167
Amortization of broadcast rights, excluding barter		1,360			1,044
Payments for broadcast rights		(1,799	)		(1,268	)
Loss on asset disposal		58			-
Deferred gain recognition		(149	)		(149	)
Amortization of debt discount		394			314
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		(2,657	)		(937	)
Prepaid expenses and other current assets		(118	)		(116	)
Other noncurrent assets		(66	)		-
Taxes payable		(53	)		(9	)
Accounts payable and accrued expenses		1,051			266
Interest payable		2,756			3,008
Deferred revenue		(98	)		(172	)
Other noncurrent liabilities		(225	)		89
Due to/due from Nexstar Broadcasting, Inc.		(13,721	)		(10,042	)
Net cash (used in) provided by operating activities		(743	)		1,756
Cash flows from investing activities:
Purchases of property and equipment		(81	)		(166	)
Deposits and payments for acquisitions		(59,509	)		(6,000	)
Proceeds from disposal of property and equipment		2,917			-
Net cash used in investing activities		(56,673	)		(6,166	)
Cash flows from financing activities:
Proceeds from issuance of long-term debt		65,000			4,000
Repayments of long-term debt		(5,520	)		(993	)
Payments for debt financing costs		(340	)		(60	)
Net cash provided by financing activities		59,140			2,947
Net increase (decrease) in cash and cash equivalents		1,724			(1,463	)
Cash and cash equivalents at beginning of period		318			1,898
Cash and cash equivalents at end of period	$	2,042		$	435

Supplemental information:
Interest paid	$	9,901		$	7,717
Income taxes paid, net	$	118		$	81
Non-cash investing and financing activities:
Accrued purchases of property and equipment	$	-		$	53
Accrued debt financing costs	$	23		$	47

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

MISSION BROADCASTING, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

1.	Organization and Business Operations

As of September 30, 2013, Mission Broadcasting, Inc. (“Mission” or the “Company”) owned and operated 20 television stations and four digital multicast channels, affiliated with the NBC, ABC, CBS, FOX, MyNetworkTV, The CW or Bounce TV television networks, in markets located in New York, Pennsylvania, Illinois, Indiana, Missouri, Louisiana, Texas, Vermont, Arkansas 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 11, 2013, 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 September 30, 2013, 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 default provisions in the event Nexstar does not comply with all covenants contained in its credit agreement. As of September 30, 2013, Nexstar has informed Mission that it was in compliance with all covenants contained in its credit agreement and the indentures governing the publicly-held notes.

2.	Summary of Significant Accounting Policies

Interim Financial Statements

The Condensed Financial Statements as of September 30, 2013, and for the three and nine months ended September 30, 2013 and 2012, 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, 2012. The Balance Sheet as of December 31, 2012 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.

Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable, broadcast rights payable, accounts payable and accrued expenses approximate fair value due to their short-term nature. See Note 6 for fair value disclosures related to the Company’s debt.

Basis of Presentation

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

Recent Accounting Pronouncements

In July 2013, the FASB issued ASU No. 2013-11, Income Taxes (Topic 740) (“ASU 2013-11”) which provides guidance on financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The update is effective for years beginning after December 15, 2013. The Company does not expect the implementation of this standard to have a material impact on its financial position or results of operations.

In February 2013, the FASB issued ASU No. 2013-04, Liabilities (Topic 405) (“ASU 2013-04”). ASU 2013-04 provides guidance on measurement of fixed obligations resulting from joint and several liability arrangements as the sum of the amount a reporting entity agreed to pay on the basis of its arrangements among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors. ASU 2013-04 also requires disclosure of the nature and amount of the obligation as well as other information. The update is effective for years beginning after December 15, 2013. The Company does not expect the implementation of this standard to have a material impact on its financial position or results of operations.

3.	Acquisitions

On September 13, 2013, the Company entered into a definitive agreement to acquire WICZ and WBPN-LP, both in the Binghamton, New York market, from Stainless Broadcasting, L.P. (“Stainless”). This acquisition will allow Mission entry into this market. Under the terms of the purchase agreement, the Company will acquire the assets of WICZ and WBPN-LP for $15.3 million in cash, subject to adjustments for working capital to be acquired. A deposit of $0.2 million was paid upon signing the agreement. The remaining purchase price is expected to be funded through borrowings under the Company’s existing credit facility and cash on hand. The acquisition is subject to FCC approval and other customary conditions and the Company projects it to close in the first quarter of 2014.

On April 24, 2013, the Company and Nexstar entered into a stock purchase agreement to acquire the stock of privately-held Communications Corporation of America (“CCA”) and White Knight Broadcasting (“White Knight”), the owners of 19 television stations in 10 markets, for a total consideration of $270.0 million, subject to adjustments for working capital to be acquired. Pursuant to the stock purchase agreement, Mission agreed to purchase all the outstanding equity of White Knight and Nexstar has agreed to purchase all the outstanding equity of CCA. Mission will acquire 7 television stations and will enter into local service agreements with Nexstar. Nexstar will acquire 10 television stations and Rocky Creek Communications, Inc. (“Rocky Creek”), an independent third party, will acquire 2 television stations. These acquisitions will allow the Company entrance into three new markets. The Company and Nexstar expect to finance the purchase price through cash on hand, cash generated from operations prior to closing, borrowings under their existing credit facilities and future credit market transactions. The acquisitions are subject to FCC approval and other customary conditions and the Company and Nexstar project them to close in the fourth quarter of 2013 or the first quarter of 2014.

During the nine months ended September 30, 2013, the Company completed the acquisitions of KLRT-TV, the FOX affiliate, and KASN, the CW affiliate, both in the Little Rock, Arkansas market, and WVNY, the ABC affiliate in the Burlington, Vermont market. These acquisitions have been accounted for using the purchase method of accounting and, accordingly, the purchase price was allocated to assets acquired and liabilities assumed based on their estimated fair value on the acquisition date. The excess of the purchase price over the fair values assigned to the net assets acquired was recorded as goodwill.

KLRT-TV/KASN

Effective January 1, 2013, the Company acquired the assets of KLRT-TV and KASN from Newport Television, LLC (“Newport”) for $59.7 million in cash. The purchase price includes $6.0 million deposit paid by the Company upon signing the purchase agreement in July 2012. The remainder of the purchase price was funded by the proceeds of a $60.0 million term loan under the Company’s senior secured credit facility (See Note 6). This acquisition allows the Company entrance into this market. The transaction costs relating to this acquisition, including legal and professional fees of $22 thousand, were expensed as incurred.

The estimated fair values of the assets acquired and liabilities assumed in the acquisition are as follows (in thousands):

Broadcast rights	$	2,279
Prepaid expenses and other current assets		71
Property and equipment		11,153
FCC licenses		16,827
Network affiliation agreements		17,002
Other intangible assets		2,511
Goodwill		12,727
Other assets		7
Total assets acquired		62,577
Less: Broadcast rights payable		(2,492	)
Less: Accounts payable and accrued expenses		(386	)
Net assets acquired	$	59,699

The fair value assigned to goodwill is attributable to future expense reductions utilizing management’s leverage in programming and other station operating costs. The goodwill and FCC licenses are deductible for tax purposes. The intangible asset related to the network affiliation agreements acquired is amortized over 15 years. Other intangible assets are amortized over an estimated weighted average useful life of one year.

KLRT-TV/KASN’s net revenue of $5.6 million and net income of $2.7 million for the three months ended September 30, 2013 and net revenue of $15.5 million and net income of $7.0 million during the nine months ended September 30, 2013 have been included in the accompanying Condensed Statements of Operations.

WVNY

On March 1, 2013, the Company acquired the assets of WVNY from Smith Media, LLC (“Smith Media”) for $5.7 million in cash, funded by a combination of the Company’s $5.0 million borrowings from its revolving credit facility (See Note 6) and cash on hand. This acquisition allows the Company entrance into this market. No significant transaction costs were incurred in connection with this acquisition during the nine months ended September 30, 2013.

The estimated fair values of the assets acquired and liabilities assumed in the acquisition are as follows (in thousands):

Prepaid expenses and other current assets	$	22
Property and equipment		717
FCC licenses		2,797
Network affiliation agreements		1,060
Other intangible assets		33
Goodwill		1,032
Net assets acquired	$	5,661

WVNY’s net revenue of $0.4 million and net income of $0.1 million for the three months ended September 30, 2013 and net revenue of $1.1 million and net income of $0.2 million for the period March 1, 2013 to September 30, 2013 have been included in the accompanying Condensed Statements of Operations.

Unaudited Pro Forma Information

The Smith Media acquisition is immaterial, therefore pro forma information has not been provided for this acquisition.

The following unaudited pro forma information has been presented as if the Newport acquisition had occurred on January 1, 2012, for the three and nine months ended September 30 (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2013		2012		2013		2012
Net revenue	$	17,159	$	16,776	$	50,767	$	50,150
Income before income taxes		1,475		1,339		4,192		3,884
Net income		723		808		2,380		2,320

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

4.	Local Service Agreements with Nexstar

The Company has entered into local service agreements with Nexstar to provide sales and operating services to all of its stations. For the stations with 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 to Nexstar. For each station with which the Company has entered into an SSA, it has also entered into a joint sales agreement (“JSA”), whereby Nexstar sells the advertising time of the 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. For the stations with 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, based on the station’s monthly operating expenses. 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 the accompanying condensed statements of operations.

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 eight to ten years. Nexstar indemnifies Mission from Nexstar’s activities pursuant to the local service agreements to which Nexstar is a party.

Under the local service agreements, Nexstar receives substantially all of the Company’s available cash, after satisfaction of operating costs and debt obligations. The Company anticipates that Nexstar will continue to receive substantially all of its available cash, after satisfaction of operating costs and debt obligations. In compliance with FCC regulations for both the Company and Nexstar, Mission maintains complete responsibility for and control over programming, finances, personnel and operations of its stations. Mission had the following local service agreements in effect with Nexstar as of September 30, 2013:

Station	Market	Type of Agreement	Expiration	Consideration from Nexstar
WFXP	Erie, PA	TBA	8/16/16	Monthly payments received from Nexstar

KHMT	Billings, MT	TBA	12/13/17	Monthly payments received from Nexstar

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

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

KODE	Joplin, MO-Pittsburg, KS	SSA	3/31/22	$75 thousand per month paid to Nexstar
		JSA	9/30/14	70% of net revenue received from Nexstar

KRBC	Abilene-Sweetwater, TX	SSA	6/12/23	$25 thousand per month paid to Nexstar
		JSA	6/30/23	70% of net revenue received from Nexstar

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

WAWV	Terre Haute, IN	SSA	5/8/23	$10 thousand per month paid to Nexstar
		JSA	5/8/23	70% of net revenue received from Nexstar

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

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

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

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

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

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

WTVW	Evansville, IN	SSA	11/30/19	$50 thousand per month paid to Nexstar
		JSA	11/30/19	70% of net revenue received from Nexstar

KLRT-TV/KASN	Little Rock-Pine Bluff, AR	SSA	1/1/21	$150 thousand per month paid to Nexstar
		JSA	1/1/21	70% of net revenue received from Nexstar

WVNY	Burlington-Plattsburgh, VT	SSA	3/1/21	$20 thousand per month paid to Nexstar
		JSA	3/1/21	70% of net revenue received from Nexstar

5.	Intangible Assets and Goodwill

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

	Estimated		September 30, 2013										December 31, 2012
	useful life,					Accumulated										Accumulated
	in years		Gross			Amortization				Net			Gross			Amortization				Net
Network affiliation agreements		15		$	84,505		$	(61,079	)		$	23,426		$	66,443		$	(57,032	)		$	9,411
Other definite-lived intangible assets		1-15			15,662			(13,773	)			1,889			13,118			(12,334	)			784
Other intangible assets				$	100,167		$	(74,852	)		$	25,315		$	79,561		$	(69,366	)		$	10,195

The following table presents the Company’s estimate of amortization expense for the remainder of 2013, each of the five succeeding years ended December 31 and thereafter for definite-lived intangible assets as of September 30, 2013 (in thousands):

Remainder of 2013	$	2,533
2014		3,978
2015		3,694
2016		3,694
2017		3,570
2018		3,280
Thereafter		4,566
	$	25,315

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

	Goodwill										FCC Licenses
				Accumulated										Accumulated
	Gross			Impairment				Net			Gross			Impairment				Net
Balance as of December 31, 2012		$	20,280		$	(1,550	)		$	18,730		$	32,636		$	(10,697	)		$	21,939
Acquisitions (See Note 3)			13,759			-				13,759			19,624			-				19,624
Balance as of September 30, 2013		$	34,039		$	(1,550	)		$	32,489		$	52,260		$	(10,697	)		$	41,563

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 September 30, 2013, the Company did not identify any events that would trigger an impairment assessment.

Debt

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

	September 30,			December 31,
	2013			2012
Term loans, net of discount of $468 and $517, respectively	$	103,012		$	43,483
8.875% Senior secured second lien notes due 2017, net of discount of $4,640 and $5,622, respectively		309,935			319,378
		412,947			362,861
Less: current portion		(1,040	)		(330	)
	$	411,907		$	362,531

2013 Transactions

On January 3, 2013, the Company borrowed $60.0 million term loan under its senior secured credit facility to fund the acquisition of the assets of KLRT-TV and KASN from Newport (See Note 3).

On March 1, 2013, the Company borrowed $5.0 million from its revolving credit facility to partially finance the acquisition of WVNY from Smith Media (See Note 3). The revolving loan was repaid on July 31, 2013.

On June 28, 2013, the Company entered into an amendment to its senior secured credit facility. The amendment provided a commitment for an incremental term loan facility (“Term Loan A Facility”) available to the Company of $90.0 million, subject to reallocation of up to $18.0 million for the benefit of Rocky Creek, pursuant to the terms of the amended credit agreement. The incremental term loan facility is expected to be used by Mission to finance the acquisition of television stations from CCA and White Knight pursuant to the stock purchase agreement dated April 24, 2013 (See Note 3). As of September 30, 2013, no amount was borrowed by Mission under the Term Loan A Facility.

In July 2013, the Company repaid its outstanding revolving loan of $5.0 million. In June and September 2013, the Company paid the contractual maturity under its senior secured credit facility for a total payment of $0.5 million.

On October 1, 2013, the Company entered into an amendment to its senior secured credit facility. The amendment provided for an incremental term loan facility (“Term Loan B-2 Facility”) of $125.0 million and amended revolving credit facility available to the Company of $30.0 million. The principal amount under the Term Loan B-2 Facility is reduced by quarterly payments of 0.25% beginning December 31, 2013. The remainder of the principal is due in full at maturity on October 1, 2020. The Company expects to use the proceeds from the Term Loan B-2 Facility to repurchase the outstanding principal balance of the 8.875% Notes and to pay for related fees and expenses.

The Company recorded $0.2 million and $0.1 million in legal and professional fees related to the Term Loan A Facility and Term Loan B-2 Facility, respectively, which were capitalized as debt finance costs, included in other noncurrent assets, net on the Condensed Consolidated Balance Sheet as of September 30, 2013.

Unused Commitments and Borrowing Availability

As of September 30, 2013, the Company had $35.0 million unused revolving loan commitment under its senior secured credit facility, all of which was available for borrowing, based on the covenant calculations. The Company also had $90.0 million of unused Term Loan A Facility commitment under its amended senior secured credit facility, all of which was available for borrowing as of September 30, 2013.

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 $250.0 million 6.875% senior unsecured notes (the “6.875% Notes”) issued by Nexstar on November 9, 2012 and the additional $275.0 million 6.875% Notes issued by Nexstar on October 1, 2013. 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 includes default provisions 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 September 30, 2013.

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 the 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, net of discount, and related accrued interest in its separate financial statements. Further, the portions of the recorded balance of the 8.875% Notes and related accrued interest attributable to the respective co-issuer are reflected as a reduction to equity in Mission and Nexstar’s separate financial statements given Nexstar’s deemed controlling financial interest in Mission for financial reporting purposes. During September 2013, Nexstar repurchased $10.3 million of the 8.875% Notes, net of discount. The partial redemption was recorded by Mission as a reduction to the contra equity due from Nexstar Broadcasting, Inc. in its Condensed Statement of Changes in Shareholders’ Deficit. As of September 30, 2013, Nexstar had a balance of $176.6 million of debt and $7.3 million of interest payable related to the 8.875% Notes. As of December 31, 2012, Nexstar had a balance of $186.4 million of debt and $3.5 million of interest payable related to the 8.875% Notes. Nexstar’s balances of debt and interest payable are recorded in contra equity due from Nexstar Broadcasting, Inc. on the Condensed Balance Sheets.

On October 1, 2013, the Company and Nexstar repurchased $292.7 million of the 8.875% Notes at 108.875%, plus accrued and unpaid interest, in accordance with a tender offer dated September 17, 2013. The repurchase resulted Mission in a loss on extinguishment of debt of $13.4 million and a net reduction to the contra equity due from Nexstar Broadcasting, Inc. of $164.6 million. On October 16, 2013, the Company and Nexstar issued a notice of redemption to the holders of the remaining principal balance of $21.9 million at a redemption price as defined in the indenture, plus accrued and unpaid interest, to redeem such outstanding amount on November 16, 2013.

Fair Value of Debt

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

	September 30, 2013						December 31, 2012
	Carrying			Fair			Carrying			Fair
	Amount			Value			Amount			Value
Term loans(1)		$	103,012		$	102,455		$	43,483		$	44,484
8.875% Senior secured second lien notes(2)			309,935			342,462			319,378			359,125

(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, as significant inputs to the fair value calculation are unobservable in the market.

(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, as quoted market prices are available for low volume trading of these securities.

7.	Income Taxes

The Company’s effective tax rate for the nine months ended September 30, 2013 was 43.5%, which consists of federal and state income taxes. Prior to the fourth quarter of 2012, a valuation allowance was recorded against deferred tax assets for net operating loss carryforwards (“NOLs”) and other deferred tax assets, and the Company’s provision for income taxes was 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. In the fourth quarter of 2012, the Company released the full amount of its valuation allowance against deferred tax assets for NOLs and other deferred tax assets.

The Company’s deferred tax assets primarily result from federal and state NOLs. The Company’s NOLs are available to reduce future taxable income if utilized before their expiration. Section 382 of the Internal Revenue Code of 1986, as amended, generally imposes an annual limitation on the amount of NOLs that may be used to offset taxable income when a corporation has undergone significant changes in stock ownership. Ownership by our principal shareholder could limit our ability to use our NOLs. Ownership changes are evaluated as they occur.

8.	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. In addition, the U.S. Congress may act to amend the Communications Act or adopt other legislation in a manner that could impact the Company’s stations and the television broadcast industry in general.

The FCC has adopted rules with respect to the final conversion of existing low power and television translator stations to digital operations. The FCC has established a September 1, 2015 deadline by which low power and television translator stations must cease analog operations, and low power and television translator stations operating on channels 52-69 were required to cease operation on those channels by December 31, 2011. The Company has transitioned its television translator operations on channels 52-69 to digital operations and will transition its remaining low power and television translator stations to digital operations prior to September 1, 2015.

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 FCC 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. On July 7, 2011, the U.S. Court of Appeals for the Third Circuit vacated the FCC’s changes to its newspaper/broadcast cross-ownership rule while upholding the FCC’s retention of its other media ownership rules. In June 2012, the Supreme Court denied various petitions for Supreme Court review of the Third Circuit’s decision.

The FCC is required 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). In December 2011, the FCC issued a Notice of Proposed Rulemaking (NPRM) seeking comment on specific proposed changes to its ownership rules. Among the specific changes proposed in the NPRM are (1) elimination of the contour overlap provision of the local television ownership rule (making the rule entirely DMA-based), (2) elimination of the radio/television cross-ownership rule, and (3) modest relaxation of the newspaper/broadcast cross-ownership rule. The NPRM also sought comment on shared services agreements (SSAs) and other joint operating arrangements between television stations, and whether such agreements should be considered attributable. Comments and reply comments on the NPRM were filed in March and April 2012. In September 2013, the FCC commenced a rulemaking proceeding to consider whether to eliminate the “UHF discount” that is currently used to calculate compliance with the national television ownership. The Company cannot predict what rules the FCC will adopt in these proceedings or when they will be adopted.

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 adopted rules permitting television stations to share a single 6 megahertz channel and 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 and whether to implement technical rule modifications to improve the viability of certain channels that are underutilized by digital television stations. In February 2012, Congress adopted legislation authorizing the FCC to conduct an incentive auction whereby television broadcasters could voluntarily relinquish all or part of their spectrum in exchange for consideration. On September 28, 2012, the FCC adopted a Notice of Proposed Rule Making seeking public comment on the design of the incentive auction and various technical issues related to the reallocation of television spectrum for mobile broadband use. Comments on the notice were filed in January 2013, and reply comments were filed in March 2013. A reallocation of television spectrum for wireless broadband use would involve a “repacking” of the television broadcast band, which would require some television stations to change channel or otherwise modify their technical facilities. Future steps to reallocate television spectrum to broadband use 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 timing or results of television spectrum reallocation efforts 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 multichannel video program distributors (MVPDs) 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 the proposals or their impact to its business.

9.	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 $250.0 million 6.875% Notes issued on November 9, 2012 and the additional $275.0 million 6.875% Notes issued on October 1, 2013. The 6.875% Notes are general unsecured senior 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 would 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 and 6.875% Notes. As of September 30, 2013, Nexstar had a maximum commitment of $453.8 million under its senior secured credit facility, of which $349.8 million of debt was outstanding and had $250.0 million of the 6.875% Notes outstanding.

Purchase Options Granted to Nexstar

In consideration of the guarantee of Mission’s bank credit facility by Nexstar Broadcasting Group, Inc. and its subsidiaries, Mission has 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 agreement, 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. Additionally, Mission’s shareholders granted Nexstar an option to purchase any or all of the Company’s stock, subject to FCC consent, for a price equal to the pro rata portion of the greater of (1) five times the stations’ cash flow, as defined in the agreement, reduced by the amount of indebtedness, as defined in the agreement, or (2) $100,000. These option agreements (which expire on various dates between 2013 and 2023) are freely exercisable or assignable by Nexstar without consent or approval by Mission or its shareholders. 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 other 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 insignificant 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.

10.	Subsequent Events

In October 2013, the Company entered into an amendment to its senior secured credit facility which provided a Term Loan B-2 Facility and an amended revolving credit facility. The Company used the proceeds of the Term Loan B-2 Facility to repurchase a majority of the 8.875% Notes. The Company also issued a notice of redemption to redeem the remaining balance of the 8.875% Notes in November 2013. See Note 6 for additional information.

On November 6, 2013, Nexstar entered into a stock purchase agreement to acquire the outstanding equity of privately-held Grant Company, Inc. (“Grant”), the owner of 7 television stations in 4 markets. Simultaneous with this acquisition, Mission entered into a purchase agreement with Nexstar pursuant to which the Company will acquire one of Grant’s television stations for $15.3 million in cash, subject to adjustments for working capital to be acquired. The acquisition will allow Mission entrance into the Quad Cities, Iowa market. Upon consummation of the acquisition, the Company will also enter into local service agreements with Nexstar. The purchase price is expected to be funded by Mission through cash generated from operations prior to closing and borrowings under its existing credit facility. The acquisition is subject to FCC approval and other customary conditions and the Company is projecting it to close in the first quarter of 2014.

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, 2012. Throughout this discussion, all references to “Mission”, “we”, “our”, “us” and the “Company” refer to Mission Broadcasting, Inc.

Overview of Operations

As of September 30, 2013, we owned and operated 20 television stations and four digital multicast channels. We have local service agreements with certain television stations owned by Nexstar, through which Nexstar provides various programming, sales or other services to our television stations. In compliance with FCC regulations for both Nexstar and us, we maintain complete responsibility for and control over programming, finances, personnel and operations for our stations.

On November 6, 2013, Nexstar entered into a stock purchase agreement to acquire the outstanding equity of privately-held Grant Company, Inc. (“Grant”), the owner of 7 television stations in 4 markets. Simultaneous with this acquisition, we entered into a purchase agreement with Nexstar pursuant to which we will acquire one of Grant’s television stations for $15.3 million in cash, subject to adjustments for working capital to be acquired. Upon consummation of the acquisition, we will also enter into local service agreements with Nexstar. We expect to fund the purchase price through cash generated from operations prior to closing and borrowings under our existing credit facility. We project the acquisition to close in the first quarter of 2014.

On October 1, 2013, we entered into an amendment to our senior secured credit facility. The amendment provided us an incremental term loan facility (“Term Loan B-2 Facility”) of $125.0 million and amended revolving credit facility $30.0 million. The principal amount under the Term Loan B-2 Facility is reduced by quarterly payments of 0.25% beginning December 31, 2013. The remainder of the principal is due in full at maturity on October 1, 2020. We will use the proceeds from the Term Loan B-2 Facility to repurchase the outstanding principal balance of the 8.875% Notes and to pay for related fees and expenses. On October 1, 2013, we and Nexstar repurchased $292.7 million of the 8.875% Notes at 108.875%, plus accrued and unpaid interest, in accordance with a tender offer. The repurchase resulted in a loss on extinguishment of debt of $13.4 million. The tender offer expired on October 15, 2013 and we issued a notice of redemption to the holders of the remaining principal balance of $21.9 million at a redemption price as defined in the indenture, plus accrued and unpaid interest.

On September 13, 2013, we entered into a definitive agreement to acquire two television stations in the Binghamton, New York market, from Stainless Broadcasting, L.P. Under the terms of the purchase agreement, we will acquire the assets of WICZ and WBPN-LP for $15.3 million in cash, subject to adjustments for working capital to be acquired. A deposit of $0.2 million was paid upon signing the agreement. The remaining purchase price is expected to be funded through borrowings under our existing credit facility and cash on hand. The acquisition is subject to FCC approval and other customary conditions and we project it to close in the first quarter of 2014.

On June 28, 2013, we entered into an amendment to our senior secured credit facility. The amendment provided a commitment for an incremental term loan facility (“Term Loan A Facility”) available to us of $90.0 million, subject to reallocation of up to $18.0 million for the benefit of Rocky Creek Communications, Inc. (“Rocky Creek”), an independent third party, pursuant to the terms of the amended credit agreement. We expect to use the proceeds under the incremental term loan facility to finance our acquisition of television stations from CCA and White Knight pursuant to the stock purchase agreement dated April 24, 2013. As of September 30, 2013, we had no borrowings under the Term Loan A Facility.

On April 24, 2013, we and Nexstar entered into a stock purchase agreement to acquire the stock of privately-held Communications Corporation of America (“CCA”) and White Knight Broadcasting (“White Knight”), the owners of 19 television stations in 10 markets, for a total consideration of $270.0 million, subject to adjustments for working capital to be acquired. Pursuant to the stock purchase agreement, we agreed to purchase all the outstanding equity of White Knight and Nexstar has agreed to purchase all the outstanding equity of CCA. We will acquire 7 television stations and will enter into local service agreements with Nexstar. Nexstar will acquire 10 television stations and Rocky Creek will acquire 2 television stations. We and Nexstar expect to finance the purchase price through cash on hand, cash generated from operations prior to closing, borrowings under our existing credit facilities and future credit market transactions. The acquisitions are subject to FCC approval and other customary conditions and we and Nexstar project them to close in the fourth quarter of 2013 or the first quarter of 2014.

On March 1, 2013, we acquired the assets of WVNY, the ABC affiliate in the Burlington, Vermont market from Smith Media, LLC (“Smith Media”) for $5.7 million in cash, funded by a combination of $5.0 million borrowings from our revolving credit facility and cash on hand.

Effective January 1, 2013, we acquired the assets of KLRT-TV, the FOX affiliate, and KASN, the CW affiliate, both in the Little Rock, Arkansas market, from Newport Television, LLC (“Newport”) for $59.7 million in cash, funded by the proceeds of $60.0 million of term loan under our senior secured credit facility.

The following table summarizes the various local service agreements our stations had in effect as of September 30, 2013 with Nexstar:

Service Agreements	Stations
TBA Only(1)	WFXP and KHMT

SSA & JSA(2)	KJTL, KJBO-LP, KLRT-TV, KASN, KOLR, KCIT, KCPN-LP, KAMC, KRBC, KSAN, WUTR, WAWV, WYOU, KODE, KTVE, WTVO, WTVW and WVNY

(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.

Under the local service agreements, Nexstar receives substantially all of our available cash, after satisfaction of operating costs and debt obligations. We anticipate that Nexstar will continue to receive substantially all of our available cash, after satisfaction of operating costs and debt obligations. 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, and as a result may contribute to a decrease in the revenue of broadcast television stations. 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, when state, congressional and presidential elections occur and advertising airs during the Olympic Games. As 2013 is not an election or Olympic year, we expect less advertising revenue to be reported in 2013 compared to 2012 on our legacy stations.

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 September 30,								Nine Months Ended September 30,
	2013				2012				2013				2012
	Amount		%		Amount		%		Amount		%		Amount		%
Retransmission compensation	$	6,128		97.9	$	3,876		96.4	$	18,012		97.8	$	11,461		97.4
Network compensation		20		0.3		58		1.4		117		0.6		177		1.5
Other		111		1.8		87		2.2		292		1.6		129		1.1
Net broadcast revenue before barter		6,259		100.0		4,021		100.0		18,421		100.0		11,767		100.0
Barter and trade revenue		1,319				686				3,461				2,170
Revenue from Nexstar		9,581				8,012				28,885				23,304
Net revenue	$	17,159			$	12,719			$	50,767			$	37,241

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 September 30,								Nine Months Ended September 30,
	2013				2012				2013				2012
	Amount		%		Amount		%		Amount		%		Amount		%
Net revenue	$	17,159		100.0	$	12,719		100.0	$	50,767		100.0	$	37,241		100.0
Operating expenses:
Corporate expenses		204		1.2		226		1.8		741		1.6		640		1.7
Station direct operating expenses, net of trade		3,751		21.9		1,833		14.4		10,756		21.2		5,347		14.4
Selling, general and administrative expenses		501		2.8		568		4.5		1,525		3.1		1,401		3.8
Fees incurred pursuant to local service agreements with Nexstar		2,445		14.2		1,935		15.2		7,295		14.4		5,805		15.6
Barter and trade expense		1,319		7.7		686		5.4		3,461		6.8		2,170		5.8
Depreciation		850		5.0		701		5.5		2,771		5.5		2,142		5.8
Amortization of intangible assets		1,750		10.2		1,270		10.0		5,486		10.8		3,811		10.1
Amortization of broadcast rights, excluding barter		410		2.4		413		3.2		1,360		2.7		1,044		2.8
Income from operations	$	5,929			$	5,087			$	17,372			$	14,881

Three Months Ended September 30, 2013 Compared to Three Months Ended September 30, 2012

Revenue

Net revenue for the three months ended September 30, 2013 increased by $4.4 million, or 34.9%, from the same period in 2012. This increase was primarily attributed to revenue from our newly acquired stations.

Revenue from Nexstar was $9.6 million for the three months ended September 30, 2013, compared to $8.0 million for the same period in 2012, an increase of $1.6 million, or 19.6%. The revenue we earn from Nexstar through our JSAs is directly correlated to the advertising revenue earned at our stations, which has increased as a result of JSAs we entered with Nexstar for our newly acquired stations, KLRT-TV and KASN on January 1, 2013 and WVNY on March 1, 2013.

Compensation from retransmission consent and network affiliation agreements was $6.1 million for the three months ended September 30, 2013, compared to $3.9 million for the same period in 2012, an increase of $2.2 million, or 56.3%. The increase was primarily due to retransmission consent providing for higher rates per subscriber during the quarter and incremental revenue from our newly acquired stations.

Operating Expenses

Corporate expenses were consistent at $0.2 million for each of the three months ended September 30, 2013 and 2012. 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 $4.3 million for the three months ended September 30, 2013, compared to $2.4 million for the same period in 2012, an increase of $1.9 million, or 77.1%. The increase was primarily due to programming costs of our newly acquired stations during the third quarter of 2013 of $1.1 million and an increase in programming costs of our legacy stations of $0.7 million related to recently enacted network agreements. Networks now require additional compensation from broadcasters for the use of network programming. Network program fees have recently increased industry wide and will continue to increase over the next several years.

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 were $2.4 million for the three months ended September 30, 2013, compared to $1.9 million for the same period in 2012, an increase of $0.5 million, or 26.4%. The increase was due to the SSAs we entered into with Nexstar for our newly acquired stations, KLRT-TV and KASN on January 1, 2013 and WVNY on March 1, 2013.

Amortization of intangible assets was $1.8 million for the three months ended September 30, 2013, compared to $1.3 million for the same period in 2012, an increase of $0.5 million, or 37.8%. The increase was due to incremental amortization from our newly acquired stations.

Depreciation of property and equipment was $0.9 million for the three months ended September 30, 2013, compared to $0.7 million for the same period in 2012, an increase of $0.2 million, or 21.3%. The increase was due to incremental depreciation from our newly acquired stations.

Interest Expense

Interest expense, net was $4.5 million for the three months ended September 30, 2013, compared to $3.8 million for the same period in 2012, an increase of $0.7 million, or 18.7%. The increase was primarily attributable to borrowings from our senior secured credit facility during the first quarter of 2013 to fund the purchase price of newly acquired stations. This was partially offset by lower interest rates on our outstanding debt as a result of refinanced senior secured credit facility that we completed during the fourth quarter of 2012 as well as lower interest rates on our borrowings during 2013.

Income Taxes

Income tax expense was $0.8 million for the three months ended September 30, 2013 and $0.3 million for the same period in 2012, or an increase of $0.4 million. The effective tax rate for the three months ended September 30, 2013 was 50.9%. Prior to the fourth quarter of 2012, a valuation allowance was recorded against deferred tax assets for net operating loss carryforwards and other deferred tax assets, and our provision for income taxes was primarily created by changes in the position arising from the amortization of goodwill and other indefinite-lived assets for income tax purposes, which are not amortized for financial reporting purposes. In the fourth quarter of 2012, we released the full amount of our valuation allowance against deferred tax assets for net operating loss carryforwards and other deferred tax assets.

Nine Months Ended September 30, 2013 Compared to Nine Months Ended September 30, 2012

Revenue

Net revenue for the nine months ended September 30, 2013 increased by $13.5 million, or 36.3%, from the same period in 2012. This increase was primarily attributed to revenue from our newly acquired stations.

Revenue from Nexstar was $28.9 million for the nine months ended September 30, 2013, compared to $23.3 million for the same period in 2012, an increase of $5.6 million, or 23.9%. The revenue we earn from Nexstar through our JSAs is directly correlated to the advertising revenue earned at our stations, which has increased as a result of JSAs we entered with Nexstar for our newly acquired stations, KLRT-TV and KASN on January 1, 2013 and WVNY on March 1, 2013.

Compensation from retransmission consent and network affiliation agreements was $18.1 million for the nine months ended September 30, 2013, compared to $11.6 million for the same period in 2012, an increase of $6.5 million, or 55.8%. The increase was primarily due to retransmission consent providing for higher rates per subscriber during the period and incremental revenue from our newly acquired stations.

Operating Expenses

Corporate expenses were consistent at $0.7 million for the nine months ended September 30, 2013, compared to $0.6 million for the same period in 2012. 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 $12.3 million for the nine months ended September 30, 2013, compared to $6.7 million for the same period in 2012, an increase of $5.5 million, or 82.0%. The increase was primarily due to programming costs of our newly acquired stations during the nine months ended September 30, 2013 of $3.1 million and an increase in programming costs of our legacy stations of $1.8 million related to recently enacted network agreements. Networks now require additional compensation from broadcasters for the use of network programming. Network program fees have recently increased industry wide and will continue to increase over the next several years.

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 were $7.3 million for the nine months ended September 30, 2013, compared to $5.8 million for the same period in 2012, an increase of $1.5 million, or 25.7%. The increase was due to the SSAs we entered into with Nexstar for our newly acquired stations, KLRT-TV and KASN on January 1, 2013 and WVNY on March 1, 2013.

Amortization of intangible assets was $5.5 million for the nine months ended September 30, 2013, compared to $3.8 million for the same period in 2012, an increase of $1.7 million, or 44.0%. The increase was due to incremental amortization from our newly acquired stations.

Depreciation of property and equipment was $2.8 million for the nine months ended September 30, 2013, compared to $2.1 million for the same period in 2012, an increase of $0.6 million, or 29.4%. The increase was due to incremental depreciation from our newly acquired stations.

Interest Expense

Interest expense, net was $13.4 million for the nine months ended September 30, 2013, compared to $11.2 million for the same period in 2012, an increase of $2.2 million, or 19.9%. The increase was primarily attributable to borrowings from our senior secured credit facility during the first quarter of 2013 to fund the purchase price of newly acquired stations. This was partially offset by lower interest rates on our outstanding debt as a result of refinanced senior secured credit facility that we completed during the fourth quarter of 2012 as well as lower interest rates on our borrowings during 2013.

Income Taxes

Income tax expense was $1.7 million for the nine months ended September 30, 2013 and $1.0 million for the same period in 2012, an increase of $0.7 million, or 73.8%. The effective tax rate for the nine months ended September 30, 2013 was 43.5%. Prior to the fourth quarter of 2012, a valuation allowance was recorded against deferred tax assets for net operating loss carryforwards and other deferred tax assets, and our provision for income taxes was primarily created by changes in the position arising from the amortization of goodwill and other indefinite-lived assets for income tax purposes, which are not amortized for financial reporting purposes. In the fourth quarter of 2012, we released the full amount of our valuation allowance against deferred tax assets for net operating loss carryforwards and other deferred tax assets.

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 11, 2013, 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 September 30, 2013. In order to meet future cash needs we may, from time to time, borrow under our existing 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):

	Nine Months Ended
	September 30,
	2013			2012
Net cash (used in) provided by operating activities	$	(743	)	$	1,756
Net cash used in investing activities		(56,673	)		(6,166	)
Net cash provided by financing activities		59,140			2,947
Net increase (decrease) in cash and cash equivalents	$	1,724		$	(1,463	)
Cash paid for interest	$	9,901		$	7,717
Cash paid for taxes		118			81

		As of			As of
	September 30,			December 31,
	2013			2012
Cash and cash equivalents		$	2,042		$	318
Long-term debt including current portion(1)			412,947			362,861
Unused incremental term loan commitment under senior secured credit facility			90,000			-
Unused revolving loan commitment under senior secured credit facility			35,000			35,000

(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.

Cash Flows – Operating Activities

Net cash flows from operating activities decreased by $2.5 million during the nine months ended September 30, 2013 compared to the same period in 2012. This was primarily due to a $1.7 million use of cash resulting from the timing of collections of accounts receivable, an increase in net payments for amounts due to Nexstar of $3.7 million, an increase in cash paid for interest of $2.2 million and an increase in payments for broadcast rights of $0.5 million. These were partially offset by an increase in net revenue of $13.5 million less an increase in corporate expenses, station direct operating expenses, selling, general and administrative expenses and fees incurred pursuant to local service agreements with Nexstar of $7.1 million and a $0.8 million source of cash from the timing of payment to vendors.

Cash Flows – Investing Activities

Net cash flows used in investing activities increased by $50.1 million during the nine months ended September 30, 2013, compared to the same period in 2012. This was primarily due to our payments of $53.7 million to acquire the assets of KLRT-TV and KASN from Newport and $5.6 million to acquire the assets of WVNY from Smith Media. These payments were partially offset by the proceeds from the disposal of property and equipment of $2.9 million.

Cash Flows – Financing Activities

Net cash flows provided by financing activities increased by $56.2 million during the nine months ended September 30, 2013, compared to the same period in 2012. During the nine months ended September 30, 2013, we borrowed a total of $65.0 million in additional term loan and revolving loan under our senior secured credit facility to finance the acquisition of KLRT-TV, KASN and WVNY. This was partially offset by our repayment of the $5.0 million outstanding revolving loans, payments for contractual maturity under our senior secured credit facility of $0.5 million and payments for debt financing costs of $0.3 million.

Our senior secured credit facility restricts but does not prohibit the payment of cash dividends to our shareholders.

Future Sources of Financing and Debt Service Requirements

As of September 30, 2013, we had debt of $412.9 million, including $309.9 million of debt co-issued with Nexstar, which represented 257.4% 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 September 30, 2013, we have $35.0 million unused revolving loan commitment under our senior secured credit facility.

Our unused Term Loan A Facility of $90.0 million is expected to be utilized to fund our acquisition of stations from CCA and White Knight, which we project to close in the fourth quarter of 2013 or the first quarter of 2014.

In October 2013, we generated $125.0 million from our Term Loan B-2 Facility and amended our available revolving credit facility to $30.0 million. We used proceeds of the Term Loan B-2 Facility to fund our repurchase of a majority of the 8.875% Notes.

We also signed an agreement to acquire two stations from Stainless and one station from Nexstar. We will fund the remaining $15.1 million to Stainless and $15.3 million to Nexstar, subject to adjustments for working capital, upon closing, which we project to occur in the first quarter of 2014.

The following table summarizes the approximate aggregate amount of principal indebtedness scheduled to mature for the periods referenced as of September 30, 2013 (in thousands):

	Total		Remainder of 2013			2014-2015		2016-2017	Thereafter
Senior secured credit facility(1)	$	103,480	$	260	$	2,080	$	2,080	$	99,060
8.875% Notes(1)		314,575		-		-		314,575		-
	$	418,055	$	260	$	2,080	$	316,655	$	99,060

(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. In October 2013, the Company and Nexstar repaid $292.7 million of the 8.875% Notes and issued a redemption notice for the remaining balance of $21.9 million to be paid on November 16, 2013. The Company also obtained an additional $125.0 million in term loans from its senior secured credit facility.

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 secured 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 and the 6.875% 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 September 30, 2013, Nexstar had a maximum commitment of $453.8 million under its senior secured credit facility, of which $349.8 million of debt was outstanding and had $250.0 million of the 6.875% Notes outstanding.

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 11, 2013. 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 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 us. As of September 30, 2013, Nexstar has informed us that it was in compliance with all covenants contained in its credit agreement and the indentures governing the publicly-held notes. As of September 30, 2013, we were in compliance with all covenants related to the 8.875% Notes.

No Off-Balance Sheet Arrangements

As of September 30, 2013, 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 U.S. GAAP, which requires 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, 2012. Management believes that as of September 30, 2013, there have been no material changes 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, 2012 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 September 30, 2013 under our senior secured credit facility bear interest at a rate of 4.3%, which represented the base rate, or LIBOR, plus the applicable margin, as defined. Our revolving loans bear interest at LIBOR plus the applicable margin, which totaled 4.4% at September 30, 2013. Interest is payable in accordance with the credit agreement.

If LIBOR were to increase by 100 basis points, or one percentage point, from its September 30, 2013 level, our annual interest expense would increase and cash flow from operations would decrease by approximately $0.3 million, based on the outstanding balance of our credit facility as of September 30, 2013. 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 significant impact on our operations or cash flows. As of September 30, 2013, 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 President and Treasurer (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 President and Treasurer 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 President and Treasurer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

As of the quarter ended September 30, 2013, 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, 2012.

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

None.

ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. Mine Safety Disclosures

None.

ITEM 5. Other Information

None.

ITEM 6. Exhibits

Exhibit No.	Description
4.1	Supplemental Indenture, dated October 1, 2013 by and among Nexstar Broadcasting, Inc., Nexstar Broadcasting Group, Inc., Mission Broadcasting, Inc. and The Bank of New York Mellon, as trustee (Incorporated by reference to Exhibit 4.3 to Current Report on Form 8-K (File No. 000-50478) filed by Nexstar Broadcasting Group, Inc. on October 2, 2013)
4.2	First Supplemental Indenture, dated October 1, 2013, by and among Nexstar Broadcasting Group, Inc., Nexstar Broadcasting, Inc., Mission Broadcasting, Inc. and The Bank of New York Mellon, as trustee and collateral agent (Incorporated by reference to Exhibit 4.4 to Current Report on Form 8-K (File No. 000-50478) filed by Nexstar Broadcasting Group, Inc. on October 2, 2013)
10.1	Second Amendment (Incremental Amendment) to the Fourth Amended and Restated Credit Agreement, dated as of October 1, by and among Mission Broadcasting, Inc., Bank of America, N.A. and the several Banks parties thereto (Incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K (File No. 000-50478) filed by Nexstar Broadcasting Group, Inc. on October 2, 2013)
10.2	Second Amendment (Incremental Amendment) to the Fifth Amended and Restated Credit Agreement, dated as of October 1, 2013, by and among Nexstar Broadcasting, Inc., Nexstar Broadcasting Group, Inc., Nexstar Finance Holdings, Inc., Bank of America, N.A. and the several Banks parties thereto (Incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K (File No. 000-50478) filed by Nexstar Broadcasting Group, Inc. on October 2, 2013)
10.3	Option Agreement, dated as of November 1, 2013, among Mission Broadcasting, Inc., Nancie Smith, Dennis Thatcher and Nexstar Broadcasting, Inc. (WTVW) (Incorporated by reference to Exhibit 10.4 to Quarterly Report on Form 8-K (File No. 000-50478) filed by Nexstar Broadcasting Group, Inc. on November 8, 2013)
31.1	Certification of Dennis Thatcher pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1	Certification of Dennis Thatcher pursuant to 18 U.S.C. ss. 1350.*
101	The Company’s unaudited Condensed Consolidated Financial Statements and related Notes for the quarter ended September 30, 2013 from this Quarterly Report on Form 10-Q, formatted in XBRL (eXtensible Business Reporting Language).*

* Filed herewith

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/ Dennis Thatcher
	By:	Dennis Thatcher
	Its:	President and Treasurer
		(Principal Executive Officer and Principal Financial and Accounting Officer)

Dated: November 13, 2013

Attached files

MISSION BROADCASTING INC Reports

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