Edgar Filing: NEXSTAR BROADCASTING GROUP INC

nxst10q_q32012.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, 2012

	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: 000-50478

NEXSTAR BROADCASTING GROUP, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	23-3083125
(State of Incorporation or Organization)	(I.R.S. Employer Identification No.)

5215 N. O’Connor Blvd., Suite 1400, Irving, Texas	75039
(Address of Principal Executive Offices)	(Zip Code)

(972) 373-8800
(Registrant’s Telephone Number, Including Area Code)

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

Indicate by check mark whether the registrant 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	x

Non-accelerated filer	¨	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 2, 2012, the registrant had 15,608,131 shares of Class A Common Stock and 13,411,588 shares of Class B Common Stock outstanding.

TABLE OF CONTENTS

		Page
PART I	FINANCIAL INFORMATION

ITEM 1.	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011	1

	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2012 and 2011	2

	Condensed Consolidated Statement of Changes in Stockholders’ Deficit for the nine months ended September 30, 2012	3

	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2012 and 2011	4

	Notes to Condensed Consolidated Financial Statements	5

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27

ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	36

ITEM 4.	Controls and Procedures	36

PART II	OTHER INFORMATION

ITEM 1.	Legal Proceedings	37

ITEM 1A.	Risk Factors	37

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37

ITEM 3.	Defaults Upon Senior Securities	37

ITEM 4.	Mine Safety Disclosures	37

ITEM 5.	Other Information	37

ITEM 6.	Exhibits	38

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

NEXSTAR BROADCASTING GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share information, unaudited)
	September 30,			December 31,
	2012			2011
ASSETS
Current assets:
Cash and cash equivalents	$	12,236		$	7,546
Accounts receivable, net of allowance for doubtful accounts of $1,597 and $1,313,		67,446			71,279
respectively		67,446			71,279
Current portion of broadcast rights		19,169			16,290
Prepaid expenses and other current assets		2,412			1,734
Total current assets		101,263			96,849
Property and equipment, net		139,742			146,613
Broadcast rights		16,381			9,351
Goodwill		112,575			112,575
FCC licenses		119,569			119,569
FCC licenses of Mission		21,939			21,939
Other intangible assets, net		64,924			81,519
Other noncurrent assets, net		34,966			6,619
Total assets	$	611,359		$	595,034
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current portion of debt	$	1,500		$	1,500
Current portion of broadcast rights payable		16,338			13,534
Accounts payable		8,948			9,175
Accrued expenses		13,512			13,223
Taxes payable		295			402
Interest payable		14,982			10,868
Deferred revenue		3,539			2,196
Other liabilities of Mission		5,914			5,201
Other liabilities		1,130			1,131
Total current liabilities		66,158			57,230
Debt		613,748			638,861
Broadcast rights payable		12,984			8,435
Deferred tax liabilities		43,666			40,278
Deferred revenue		136			428
Deferred gain on sale of assets		1,821			1,999
Deferred representation fee incentive		3,781			4,345
Other liabilities of Mission		21,410			18,729
Other liabilities		7,932			8,133
Total liabilities		771,636			778,438
Commitments and contingencies
Stockholders' deficit:
Preferred stock - $0.01 par value, 200,000 shares authorized; none issued and
outstanding at each of September 30, 2012 and December 31, 2011		-			-
Class A Common stock - $0.01 par value, 100,000,000 shares authorized; 15,607,131
and 15,387,131 shares issued and outstanding at September 30, 2012 and
December 31, 2011, respectively		156			154
Class B Common stock - $0.01 par value, 20,000,000 shares authorized; 13,411,588
shares issued and outstanding at each of September 30, 2012 and December 31, 2011		134			134
Class C Common stock - $0.01 par value, 5,000,000 shares authorized; none issued and
outstanding at each of September 30, 2012 and December 31, 2011		-			-
Additional paid-in capital		408,384			406,654
Accumulated deficit		(568,951	)		(590,346	)
Total stockholders' deficit		(160,277	)		(183,404	)
Total liabilities and stockholders' deficit	$	611,359		$	595,034

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

NEXSTAR BROADCASTING GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share information, unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011

Net revenue	$	89,952		$	74,839		$	262,458		$	220,289
Operating expenses (income):
Direct operating expenses, excluding depreciation and
amortization		21,950			20,826			65,930			59,634
Selling, general, and administrative expenses, excluding
depreciation and amortization		27,510			26,346			81,771			76,313
Amortization of broadcast rights		5,563			6,650			16,303			17,499
Amortization of intangible assets		5,480			7,213			16,595			20,411
Depreciation		5,896			5,618			17,359			16,053
(Gain) loss on asset disposal, net		(4	)		(82	)		(25	)		20
Total operating expenses		66,395			66,571			197,933			189,930
Income from operations		23,557			8,268			64,525			30,359
Interest expense, net		(12,438	)		(13,069	)		(37,921	)		(40,082	)
Loss on extinguishment of debt		-			-			(497	)		(1,155	)
Income (loss) before income taxes		11,119			(4,801	)		26,107			(10,878	)
Income tax expense		(1,558	)		(1,458	)		(4,712	)		(4,277	)
Net income (loss)	$	9,561		$	(6,259	)	$	21,395		$	(15,155	)
Net income (loss) per common share:
Basic	$	0.33		$	(0.22	)	$	0.74		$	(0.53	)
Diluted	$	0.31		$	(0.22	)	$	0.70		$	(0.53	)
Weighted average number of common shares outstanding:
Basic		28,960			28,799			28,881			28,568
Diluted		30,703			28,799			30,561			28,568

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

NEXSTAR BROADCASTING GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
For the Nine Months Ended September 30, 2012
(in thousands, except share information, unaudited)


				Common Stock									Additional				Total
	Preferred Stock			Class A			Class B			Class C			Paid-In		Accumulated		Stockholders'
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Capital		Deficit		Deficit
Balance as of December 31, 2011	-	$	-	15,387,131	$	154	13,411,588	$	134	-	$	-	$	406,654	$	(590,346)	$	(183,404)
Stock-based compensation expense	-		-	-		-	-		-	-		-		725		-		725
Exercise of stock options	-		-	220,000		2	-		-	-		-		1,005		-		1,007
Net income	-		-	-		-	-		-	-		-		-		21,395		21,395
Balance as of September 30, 2012	-	$	-	15,607,131	$	156	13,411,588	$	134	-	$	-	$	408,384	$	(568,951)	$	(160,277)

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

NEXSTAR BROADCASTING GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)

	Nine Months Ended
	September 30,
	2012			2011
Cash flows from operating activities:
Net income (loss)	$	21,395		$	(15,155	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Deferred income taxes		4,307			3,914
Provision for bad debts		1,448			1,517
Depreciation of property and equipment		17,359			16,053
Amortization of intangible assets		16,595			20,411
Amortization of debt financing costs		1,238			1,292
Amortization of broadcast rights, excluding barter		6,489			7,662
Payments for broadcast rights		(6,681	)		(8,008	)
Payment-in-kind interest accrued to debt		-			21
(Gain) loss on asset disposal, net		(25	)		20
Loss on extinguishment of debt		497			1,155
Premium on debt extinguishment, net		-			(254	)
PIK interest paid upon debt extinguishment		-			(215	)
Issue discount paid upon debt extinguishment		(1,190	)		(3,126	)
Deferred gain recognition		(327	)		(327	)
Amortization of debt discount		1,016			1,397
Amortization of deferred representation fee incentive		(564	)		(464	)
Stock-based compensation expense		725			863
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		2,385			1,343
Prepaid expenses and other current assets		(679	)		447
Other noncurrent assets		97			4
Accounts payable and accrued expenses		(179	)		1,470
Taxes payable		(107	)		(123	)
Interest payable		4,114			6,358
Deferred revenue		1,051			(714	)
Other liabilities of Mission		174			(208	)
Other noncurrent liabilities		(409	)		(367	)
Net cash provided by operating activities		68,729			34,966
Cash flows from investing activities:
Purchases of property and equipment		(11,024	)		(10,842	)
Proceeds from disposals of property and equipment		39			94
Deposits and payments for acquisitions		(28,554	)		(21,064	)
Net cash used in investing activities		(39,539	)		(31,812	)
Cash flows from financing activities:
Repayments of long-term debt		(95,735	)		(87,832	)
Payments for debt financing costs		(251	)		(533	)
Proceeds from issuance of long-term debt		70,500			69,300
Proceeds from exercise of stock options		1,007			67
Payments for capital lease obligations		(21	)		-
Net cash used in financing activities		(24,500	)		(18,998	)
Net increase (decrease) in cash and cash equivalents		4,690			(15,844	)
Cash and cash equivalents at beginning of period		7,546			23,658
Cash and cash equivalents at end of period	$	12,236		$	7,814
Supplemental information:
Interest paid	$	32,693		$	34,208
Income taxes paid, net	$	522		$	499
Non-cash investing and financing activities:
Accrued debt financing costs	$	259		$	30
Accrued purchases of property and equipment	$	1,547		$	1,068
Purchases of property and equipment through trade	$	192		$	430
Entry into capital leases for property and equipment	$	229		$	-
Station acquisition through issuance of Class A common stock	$	-		$	2,423

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

NEXSTAR BROADCASTING GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Business Operations

As of September 30, 2012, Nexstar Broadcasting Group, Inc. (“Nexstar”) owned, operated, programmed or provided sales and other services to 55 television stations and 11 digital multicast channels, including those owned by Mission Broadcasting, Inc. (“Mission”), in 32 markets in the states of Illinois, Indiana, Maryland, Missouri, Montana, Texas, Pennsylvania, Louisiana, Arkansas, Alabama, New York, Florida, Wisconsin and Michigan. The stations are affiliates of NBC (12 stations), CBS (11 stations), ABC (11 stations), FOX (11 stations), MyNetworkTV (5 stations and one digital multicast channel), The CW (2 stations), and Bounce TV (10 digital multicast channels) and three are independent. Through various local service agreements, Nexstar provided sales, programming and other services to 19 stations and four digital multicast channels owned and/or operated by independent third parties. Nexstar operates in one reportable television broadcasting segment. The economic characteristics, services, production process, customer type and distribution methods for Nexstar’s operations are substantially similar and are therefore aggregated as a single reportable segment.

2. Summary of Significant Accounting Policies

Principles of Consolidation

The Condensed Consolidated Financial Statements include the accounts of Nexstar and its subsidiaries. Also included in the Condensed Consolidated Financial Statements are the accounts of the independently-owned variable interest entity (“VIE”), Mission (Nexstar and Mission are collectively referred to as the “Company”). Where the assets of Mission are not available to be used to settle the obligations of Nexstar, they are presented as the assets of Mission on the Condensed Consolidated Balance Sheets. Conversely, where the creditors of Mission do not have recourse to the general credit of Nexstar, the related liabilities are presented as the liabilities of Mission on the Condensed Consolidated Balance Sheets. Nexstar management evaluates each arrangement that may include variable interests and determines the need to consolidate an entity where it determines Nexstar is the primary beneficiary of a VIE in accordance with related authoritative literature and interpretive guidance.

All intercompany account balances and transactions have been eliminated in consolidation.

Liquidity

Nexstar is highly leveraged, which makes it vulnerable to changes in general economic conditions. Nexstar’s ability to repay or refinance its debt will depend on, among other things, financial, business, market, competitive and other conditions, many of which are beyond Nexstar’s control.

Interim Financial Statements

The Condensed Consolidated Financial Statements as of September 30, 2012 and for the three and nine months ended September 30, 2012 and 2011 are unaudited. However, in the opinion of management, such financial statements include all adjustments (consisting solely of normal recurring adjustments) necessary for the fair statement of the financial information included herein in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The preparation of the Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. Results of operations for interim periods are not necessarily indicative of results for the full year. These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and related Notes included in Nexstar’s Annual Report on Form 10-K for the year ended December 31, 2011. The balance sheet as of December 31, 2011 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.

Mission

Mission is included in these Consolidated Financial Statements because Nexstar is deemed under U.S. GAAP to have a controlling financial interest in Mission as a VIE for financial reporting purposes as a result of (1) local service agreements Nexstar has with the Mission stations, (2) Nexstar’s guarantee of the obligations incurred under Mission’s senior secured credit facility (see Note 6), (3) Nexstar having power over significant activities affecting Mission’s economic performance, including budgeting for advertising revenue, advertising and hiring and firing of sales force personnel and (4) purchase options granted by Mission which permit Nexstar to acquire the assets and assume the liabilities of each Mission station, subject to Federal Communications Commission (“FCC”) consent. The purchase options are freely exercisable or assignable by Nexstar without consent or approval by Mission 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. Additionally, on November 29, 2011, Mission’s shareholders granted Nexstar an option to purchase any or all of Mission’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 2012 and 2022) 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. As of September 30, 2012, the assets of Mission consisted of current assets of $4.1 million (excluding broadcast rights and amounts due from Nexstar), broadcast rights of $7.9 million, FCC licenses of $21.9 million, goodwill of $18.7 million, other intangible assets of $11.5 million, property and equipment of $22.2 million and other noncurrent assets of $7.2 million. Substantially all of Mission’s assets, except for its FCC licenses, collateralize its secured debt obligation. See Note 12 for a presentation of condensed consolidating financial information of the Company, which includes the accounts of Mission.

Nexstar has entered into local service agreements with Mission to provide sales and operating services to the Mission stations. The following table summarizes the various local service agreements Nexstar had in effect with Mission as of September 30, 2012:

Service Agreements		Mission Stations
TBA Only(1)		WFXP and KHMT

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

(1)	Nexstar has a time brokerage agreement (“TBA”) with 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 Mission.
(2)	Nexstar has both a shared services agreement (“SSA”) and a joint sales agreement (“JSA”) with each of these stations. Each SSA allows the Nexstar station in the market to provide services including news production, technical maintenance and security, in exchange for Nexstar’s right to receive certain payments from Mission as described in the SSAs. Each JSA permits 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 Mission of the remaining percentage of net revenue as described in the JSAs.

Nexstar’s ability to receive cash from Mission is governed by these local service agreements. Under the local service agreements, Nexstar has received substantially all of Mission’s available cash, after satisfaction of operating costs and debt obligations. Nexstar anticipates it will continue to receive substantially all of Mission’s available cash, after satisfaction of operating costs and debt obligations. In compliance with FCC regulations for both Nexstar and Mission, Mission maintains complete responsibility for and control over programming, finances, personnel and operations of its stations.

Variable Interest Entities

The Company may determine that a station is a VIE as a result of local service agreements entered into with the owner-operator of the station. The term local service agreements generally refers to a contract between separately owned television stations serving the same market, whereby the owner-operator of one station contracts with the owner-operator of the other station to provide it with administrative, sales and other services required for the operation of its station. Nevertheless, the owner-operator of each station retains control and responsibility for the operation of its station, including ultimate responsibility over all programming broadcast on its station. In addition to those with Mission, Nexstar has VIEs in connection with local service agreements entered into with stations as discussed below.

Nexstar has determined that it has variable interests in WYZZ, the FOX affiliate in Peoria, Illinois and WUHF, the FOX affiliate in Rochester, New York, each owned by a subsidiary of Sinclair Broadcast Group, Inc. (“Sinclair”), as a result of outsourcing agreements it has entered into with Sinclair. Nexstar also has determined that it has a variable interest in WHP, the CBS affiliate in Harrisburg, Pennsylvania, which is owned by Newport Television License LLC (“Newport”), as a result of Nexstar becoming successor-in-interest to a TBA entered into by a former owner of WLYH. Nexstar has evaluated its arrangements with Sinclair and Newport and has determined that it is not the primary beneficiary of the variable interests because it does not have the ultimate power to direct the activities that most significantly impact the economic performance of the stations, including developing the annual operating budget, programming and oversight and control of sales management personnel. Therefore, Nexstar has not consolidated these stations under authoritative guidance related to the consolidation of variable interest entities. Under the outsourcing agreements with Sinclair, Nexstar pays for certain operating expenses of WYZZ and WUHF, and therefore may have unlimited exposure to any potential operating losses. Nexstar’s management believes that Nexstar’s minimum exposure to loss under the Sinclair outsourcing agreements consists of the fees paid to Sinclair. Additionally, Nexstar indemnifies the owners of WHP, WYZZ and WUHF from and against all liability and claims arising out of or resulting from its activities, acts or omissions in connection with the agreements. The maximum potential amount of future payments Nexstar could be required to make for such indemnification is undeterminable at this time. Nexstar made payments to Sinclair under the outsourcing agreements of $1.5 million and $1.0 million for the three months ended September 30, 2012 and 2011, respectively and $4.0 million and $3.7 million for the nine months then ended. Nexstar has a balance due to Sinclair for fees under these arrangements in the amount of $1.5 million and $0.7 million as of September 30, 2012 and December 31, 2011, respectively. Nexstar also has receivables in the amount of $2.5 million and $2.7 million as of September 30, 2012 and December 31, 2011, respectively, for advertising aired on these two stations.

Nexstar has also determined that it had a variable interest in Four Points Media Group Holdings, LLC (“Four Points”) due to a management services agreement between the two companies. Four Points owned and operated seven individual stations in four markets. Under this agreement, Nexstar managed the stations for Four Points but did not have ultimate control over the policies or operations of the stations. Nexstar had evaluated the business arrangement with Four Points and concluded that Nexstar was not the primary beneficiary of the variable interest because it did not have the ultimate power to direct the activities that most significantly impacted the economic performance of the stations, including developing the annual operating budget, setting advertising rates, programming and oversight and control of employees responsible for carrying out business activities of the stations. Therefore, Nexstar did not consolidate Four Points’ financial results into its own. In September 2011, Four Points entered into a definitive agreement to sell its stations to Sinclair. The sale closed on January 3, 2012, terminating the management services agreement, whereby Nexstar received a payment of $6.7 million, including the outstanding accounts receivable balance of $4.8 million and a contract termination fee of $1.9 million recorded in net revenue. As of September 30, 2012, all amounts due from Four Points had been received.

Financial Instruments

The Company utilizes the following categories to classify the valuation methodologies for fair values of financial assets and liabilities:

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

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

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

The Company invests in short-term interest bearing obligations with original maturities less than 90 days, primarily money market funds. The Company does not enter into investments for trading or speculative purposes. As of each of September 30, 2012 and December 31, 2011, the Company had $0.1 million invested in money market investments, which are carried at fair value. The Company has determined the fair value of the money market investment using methods that fall within Level 1 in the fair value hierarchy.

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.

Income (Loss) Per Share

Basic income (loss) per share is computed by dividing the net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted income (loss) per share is computed using the weighted-average number of common shares and potentially dilutive common shares outstanding during the period. Potentially dilutive common shares are calculated using the treasury stock method. They consist of stock options outstanding during the period and reflect the potential dilution that could occur if common stock were issued upon exercise of stock options. The following table shows the amounts used in computing the Company’s diluted shares for the three and nine months ended September 30, 2012 and 2011 (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2012		2011		2012		2011
Weighted average shares outstanding - basic		28,960		28,799		28,881		28,568
Effect of dilutive stock options		1,743		-		1,680		-
Weighted average shares outstanding - diluted		30,703		28,799		30,561		28,568

The Company reported a net loss for the three and nine months ended September 30, 2011 and stock options with potentially dilutive effect were excluded from the diluted shares calculation as the effect would have been anti-dilutive. During the three and nine months ended September 30, 2012 and 2011, the following weighted average options were outstanding (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2012		2011		2012		2011
Options with a potentially dilutive effect		3,500		1,454		3,579		1,350
Out-of-the-money and other anti-dilutive options		308		2,317		173		2,430
Total weighted average options outstanding		3,808		3,771		3,752		3,780

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 (loss) or stockholders’ deficit as previously reported.

Recent Accounting Pronouncements

In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurements and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). ASU 2011-04 clarifies certain topics regarding fair value measurement and adds some disclosures for fair value measurements. The update was effective for the Company beginning on January 1, 2012. The implementation of this standard did not have a material impact on the Company’s financial position or results of operations.

In September 2011, the FASB issued ASU No. 2011-08, Testing Goodwill for Impairment (Topic 350) (“ASU 2011-08”). ASU 2011-08 allows companies to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the annual two-step goodwill impairment test. The update is effective for the Company’s goodwill impairment testing performed in the fourth quarter of 2012, but early adoption is permitted. The Company does not expect the implementation of this standard to have a material impact on its financial position or results of operations.

In July 2012, the FASB issued ASU No. 2012-02, Testing Indefinite-Lived Intangible Assets for Impairment (Topic 350) (“ASU 2012-02”). ASU 2012-02 allows companies to first assess qualitative factors to determine whether it is more likely than not that the intangible asset is impaired as a basis for determining whether it is necessary to perform the annual quantitative indefinite-lived intangible asset impairment test. The update is effective for the Company’s indefinite-lived intangible asset impairment testing performed in the fourth quarter of 2013, but early adoption is permitted. 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 and Dispositions

Newport Acquisitions

On July 18, 2012, Nexstar and Mission signed definitive agreements to acquire the assets of twelve television stations in eight markets and Inergize Digital Media operations from Newport (the “Newport Acquisitions”) for $285.5 million, subject to adjustments for working capital acquired. Nexstar will acquire ten stations and Inergize Digital Media and Mission will acquire the two remaining stations. The stations to be acquired are as follows:

Market	Market Rank	Station	Affiliation
Nexstar:
Salt Lake City, UT	33	KTVX	ABC
		KUCW	CW
Memphis, TN	49	WPTY	ABC
		WLMT	CW
Syracuse, NY	84	WSYR	ABC
Binghamton, NY	157	WBGH	NBC
		WIVT	ABC
Elmira, NY	174	WETM	NBC
Jackson, TN	176	WJKT	FOX
Watertown, NY	177	WWTI	ABC

Mission:
Little Rock, AR	56	KLRT	FOX
		KASN	CW

Deposits totaling $28.6 million were made upon signing the agreements. The Company will finance the purchase price with new senior secured credit facilities (See Note 6). The acquisitions are subject to certain customary conditions and the Company expects them to close in December 2012.

On October 31, 2012, Nexstar entered into a definitive agreement to acquire the assets of KGPE, the CBS affiliate in the Fresno, California market, and KGET, the NBC/CW affiliate, and KKEY-LP, the low powered Telemundo affiliate, both in the Bakersfield, California market, from Newport for $35.4 million, subject to adjustments for working capital acquired. A deposit of $3.5 million was made upon signing the agreement. Nexstar intends to finance the purchase price of this acquisition from Newport with new senior secured credit facilities (See note 6). The acquisition is subject to FCC approval and other customary conditions and Nexstar, assuming the approvals are obtained and conditions are met, expects it to close in first quarter of 2013.

During the three and nine months ended September 30, 2012, the Company incurred acquisition related costs of $0.8 million and $0.9 million, respectively, which primarily consisted of legal and professional fees. These costs are included in selling, general and administrative expenses of Nexstar’s condensed consolidated statements of operations.

Smith Media, LLC (“Smith Media”) Acquisition

On November 2, 2012, Nexstar and Mission entered into a definitive agreement to acquire the assets of WFFF, the FOX affiliate, and WVNY, the ABC affiliate, both in the Burlington, Vermont market, from Smith Media for a total of $17.1 million, subject to adjustments for working capital acquired. A deposit of $0.8 million was made upon signing the agreement. The Company intends to finance the purchase price with new senior secured credit facilities (See Note 6). The acquisition is subject to FCC approval and other customary conditions and the Company, assuming the approvals are obtained and conditions are met, expects it to close in first quarter of 2013.

Beaumont Station Sale

On August 16, 2012, Nexstar entered into a definitive agreement to sell the net assets of KBTV, its FOX and Bounce TV affiliate in Beaumont-Port Arthur, TX, to Deerfield Media (Port Arthur), Inc. for $14.0 million, subject to adjustments for working capital sold. The accounting for the transaction has not yet been determined, but Nexstar anticipates the recognition of a gain on the sale. Completion of the sale is subject to approval by regulatory authorities and other customary conditions, and Nexstar expects the sale to close prior to the end of 2012. Proceeds of the sale will be used to repay debt obligations and for general corporate purposes.

4.	Intangible Assets and Goodwill

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

	Estimated		September 30, 2012										December 31, 2011
	useful life,					Accumulated										Accumulated
	in years		Gross			Amortization				Net			Gross			Amortization				Net
Network affiliation
agreements		15		$	326,567		$	(263,434	)		$	63,133		$	326,567		$	(247,725	)		$	78,842
Other definite-lived
intangible assets		1-15			14,521			(12,730	)			1,791			14,521			(11,844	)			2,677
Other intangible assets				$	341,088		$	(276,164	)		$	64,924		$	341,088		$	(259,569	)		$	81,519

The following table presents the Company’s estimate of amortization expense for the remainder of 2012, each of the five succeeding years ended December 31 and thereafter for definite-lived intangible assets as of September 30, 2012 (in thousands):

Remainder of 2012	$	5,406
2013		16,912
2014		10,844
2015		9,457
2016		5,699
2017		5,431
Thereafter		11,175

The amounts recorded to 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, 2011		$	158,791		$	(46,216	)		$	112,575		$	191,710		$	(50,202	)		$	141,508
Balance as of September 30, 2012		$	158,791		$	(46,216	)		$	112,575		$	191,710		$	(50,202	)		$	141,508

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, 2012, the Company did not identify any events that would trigger an impairment assessment.

5.	Accrued Expenses

Accrued expenses consisted of the following (in thousands):

	September 30,		December 31,
	2012		2011
Compensation and related taxes	$	5,835	$	5,676
Sales commissions		1,701		1,547
Employee benefits		1,050		977
Property taxes		1,304		699
Other accruals related to operating expenses		3,622		4,324
	$	13,512	$	13,223

Debt

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

	September 30,		December 31,
	2012		2011
Term loans	$	147,000	$	148,125
Revolving loans		33,000		24,300
8.875% Senior secured second lien notes due 2017, net of discount of $5,884
and $6,638		319,116		318,362
7% Senior subordinated notes due 2014, net of discount of $26 and $396		3,886		37,516
7% Senior subordinated PIK notes due 2014, net of discount of $347 and $535		112,246		112,058
		615,248		640,361
Less: current portion		1,500		1,500
	$	613,748	$	638,861

2012 Transactions

In connection with the Newport Acquisitions, Nexstar and Mission have secured commitments for $445.0 million in new senior secured credit facilities comprised of $350.0 million in term loans due 2019 and $95.0 million in revolving credit due December 2017. The Company will use the proceeds of these loans to finance the acquisitions (See Note 3), as well as for retirement of debt outstanding under the Company’s existing senior secured credit facilities. The Company is currently evaluating the accounting impact of these transactions.

On October 24, 2012, Nexstar commenced an offer to sell $250.0 million of 6.875% Senior Notes due 2020 (the “6.875 Notes”) at par. The sale of the 6.875% Notes is expected to be completed on or about November 9, 2012. The proceeds of the 6.875% Notes will be used to retire the 7% Senior Subordinated Notes due 2014 (the “7% Notes”) and 7% Senior Subordinated PIK Notes due 2014 (the “7% PIK Notes”), repay a portion of the amounts outstanding under Nexstar’s senior secured credit facility and pay related fees and expenses. The 6.875% Notes will be senior unsecured obligations of Nexstar and will be guaranteed by Mission. On October 24, 2012, Nexstar commenced a tender offer to retire the 7% Notes and the 7% PIK Notes for $1,003 per each $1,000 of outstanding principal, plus any accrued and unpaid interest. The tender offer will expire on November 21, 2012, unless extended or earlier terminated by Nexstar in its sole discretion.

On October 23, 2012, Nexstar and Mission entered into amendments to each of their senior secured credit facilities. The amendments exclude, through and including December 31, 2012, from the calculation of indebtedness and prepayment requirement, the proceeds of the 6.875% Notes and permit Nexstar to hold the net proceeds of the 6.875% Notes, pending repurchase of its outstanding 7% Notes and 7% PIK Notes and refinancing of a portion of the borrowings outstanding under its senior secured credit facilities with such proceeds, until December 31, 2012.

On September 27, 2012, Nexstar and Mission entered into amendments to each of their senior secured credit facilities. The amendments remove the requirement for the Company to provide pro forma certificates to the lenders prior to entering into an acquisition and exclude any acquisitions from dollar limitations within the credit agreements if they are not to be funded with the existing senior secured credit facilities.

On May 11, 2012, Nexstar redeemed $34.0 million of its outstanding 7% Notes at 100.0%. As a result of the redemption, Nexstar recorded approximately $0.5 million of loss on extinguishment of debt related to this transaction. Nexstar funded the redemption of the notes from a combination of cash on hand and borrowings under its revolving credit facility.

During the nine months ended September 30, 2012, Nexstar and Mission borrowed a net amount of $5.4 million and $3.3 million, respectively, under their senior secured credit facilities resulting in a consolidated revolving loan balance of $33.0 million as of September 30, 2012. In March, June and September 2012, Nexstar and Mission each paid the contractual maturities under their senior secured credit facilities, for a total payment of $1.1 million.

Unused Commitments and Borrowing Availability

Nexstar had $42.0 million of total unused revolving loan commitments under its senior secured credit facility, all of which was available for borrowing, based on the covenant calculations as of September 30, 2012. The Company’s ability to access funds under its senior secured credit facilities depends, in part, on its compliance with certain financial covenants.

Debt Covenants

The Nexstar senior secured credit facility agreement contains covenants which require the Company to comply with certain financial covenant ratios, including (1) a maximum consolidated total leverage ratio of Nexstar Broadcasting, Inc. (“Nexstar Broadcasting”), a wholly-owned, indirect subsidiary of Nexstar, and Mission of 7.50 to 1.00 at September 30, 2012, (2) a maximum consolidated first lien indebtedness ratio of 2.50 to 1.00 at any time and (3) a minimum consolidated fixed charge coverage ratio of 1.10 to 1.00 at any time. The covenants, which are formally calculated on a quarterly basis, are based on the combined results of Nexstar Broadcasting and Mission. Mission’s senior secured credit agreement does not contain financial covenant ratio requirements, but does provide for default in the event Nexstar does not comply with all covenants contained in its senior secured credit facility agreement. As of September 30, 2012, the Company was in compliance with all of its covenants.

Collateralization and Guarantees of Debt

Nexstar and Mission’s senior secured credit facilities are collateralized by a security interest in substantially all the combined assets, excluding FCC licenses, of Nexstar and Mission. Nexstar and its subsidiaries guarantee full payment of all obligations incurred under the Mission senior secured credit facility in the event of Mission’s default. Similarly, Mission is a guarantor of the Nexstar senior secured credit facility and the senior subordinated notes issued by Nexstar.

Fair Value of Debt

The aggregate carrying amounts and estimated fair values of the Company’s debt were as follows (in thousands):

	September 30, 2012				December 31, 2011
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Term loans(1)	$	147,000	$	146,170	$	148,125	$	146,430
Revolving loans(1)		33,000		32,936		24,300		24,171
8.875% Senior secured second lien notes(2)		319,116		351,813		318,362		321,750
7% Senior subordinated notes(2)		3,886		3,902		37,516		37,154
7% Senior subordinated PIK notes(2)		112,246		112,312		112,058		110,341

(1)

The fair value of senior secured credit facilities is computed based on borrowing rates currently available to Nexstar and

Mission for bank loans with similar terms and average maturities. These fair value measurements are considered Level 3

(significant and unobservable).

(2)

The fair value of Nexstar’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. These fair value measurements are considered Level 2 (significant

and observable).

7.	Stock-Based Compensation

On September 26, 2012, Nexstar’s majority shareholders approved the 2012 Long-Term Equity Incentive Plan (the “2012 Plan”) which provides for the granting of stock options, stock appreciation rights, restricted stock and performance awards to directors, employees or consultants of Nexstar. Under the 2012 Plan, a maximum of 1,500,000 shares of Nexstar’s Class A common stock can be issued plus unissued available shares from Nexstar’s 2003 and 2006 Long-Term Equity Incentive Plans.

8.	Contract Termination

On March 31, 2008, Nexstar signed a ten year agreement for national sales representation with two units of Katz Television Group, a subsidiary of Katz Media Group (“Katz”), transferring 24 stations in 14 of its markets from Petry Television Inc. (“Petry”) and Blair Television Inc. (“Blair”). Nexstar, Blair, Petry and Katz entered into a termination and mutual release agreement under which Blair agreed to release Nexstar from its future contractual obligations in exchange for payments totaling $8.0 million. Katz is making the payments on behalf of Nexstar as an inducement for Nexstar to enter into the long-term contract with Katz. A liability of $7.2 million, representing the present value of the payments Katz is making to Blair, was recorded and is being recognized as a non-cash reduction to operating expenses over the term of the agreement with Katz. Effective May 1, 2009, Nexstar signed another agreement to transfer the remaining Nexstar stations to Katz and its related companies. Moving these contracts resulted in Nexstar cancelling multiple contracts with Blair. As a result, Blair sued the Company for additional termination fees. Katz indemnified the Company for all expenses related to the settlement and defense of this lawsuit. The lawsuit was settled effective May 7, 2010. Termination of these contracts resulted in an additional liability of $0.2 million, which is being recognized over the remaining contract term with Katz.

As of September 30, 2012, $0.7 million of this liability was included in other current liabilities and

$3.8 million was included in deferred representation fee incentive in the accompanying Condensed Consolidated Balance Sheet. The Company recognized $0.2 million of these incentives as a reduction in selling, general and administrative expense for each of the three months ended September 30, 2012 and 2011 and $0.6 million for each of the nine months then ended.

9.	Income Taxes

The Company’s provision for income taxes is primarily comprised of deferred income taxes resulting from the amortization of goodwill and other indefinite-lived intangible assets for income tax purposes which are not amortized for financial reporting purposes. No benefit has been recognized for the Company’s taxable losses for the three and nine months ended September 30, 2012 and 2011 as the utilization of such losses is not more likely than not to be realized in the foreseeable future.

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

10.	FCC Regulatory Matters

Television broadcasting is subject to the jurisdiction of the FCC under the Communications Act of 1934, as amended (the “Communications Act”). The Communications Act prohibits the operation of television broadcasting stations except under a license issued by the FCC, and empowers the FCC, among other things, to issue, revoke, and modify broadcasting licenses, determine the location of television stations, regulate the equipment used by television stations, adopt regulations to carry out the provisions of the Communications Act and impose penalties for the violation of such regulations. The FCC’s ongoing rule making proceedings could have a significant future impact on the television industry and on the operation of the Company’s stations and the stations to which it provides services. 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, the stations to which it provides services 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). Numerous parties filed comments and reply comments in response to the NOI. In June and July 2011, the FCC released to the public eleven economic studies related to its media ownership rules. In December 2011, the FCC issued a Notice of Proposed Rulemaking (NPRM) to seek 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 along the lines of the changes in the 2006 proceeding that the court vacated. The NPRM also seeks 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. The Company cannot predict what rules the FCC will adopt 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. A reallocation of television spectrum for wireless broadband use would likely involve a “repacking” of the television broadcast band, which would require some television stations to change channel or otherwise modify their technical facilities. 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.

11.	Commitments and Contingencies

Guarantee of Mission Debt

Nexstar and its subsidiaries guarantee full payment of all obligations incurred under Mission’s senior secured credit facility. In the event that Mission is unable to repay amounts due, Nexstar will be obligated to repay such amounts. The maximum potential amount of future payments that Nexstar would be required to make under this guarantee would be generally limited to the amount of borrowings outstanding. As of September 30, 2012, Mission had a maximum commitment of $48.1 million under its senior secured credit facility, which is also outstanding.

Indemnification Obligations

In connection with certain agreements into which the Company enters 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 immaterial and the Company has not incurred significant costs to defend lawsuits or settle claims related to these indemnification agreements.

Litigation

From time to time, the Company is involved with claims that arise out of the normal course of its 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, results of operations or cash flows.

12.	Condensed Consolidating Financial Information

The following condensed consolidating financial information presents the financial position, results of operations and cash flows of the Company, each of its 100%, directly or indirectly, owned subsidiaries and its consolidated VIE. This information is presented in lieu of separate financial statements and other related disclosures pursuant to Regulation S-X Rule 3-10 of the Securities Exchange Act of 1934, as amended, “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered.”

The Nexstar column presents the parent company’s financial information (not including any subsidiaries). Nexstar owns, directly and indirectly, 100% of two subsidiaries, Nexstar Finance Holdings, Inc. (“Nexstar Holdings”) and Nexstar Broadcasting. The Nexstar Holdings column presents its financial information (not including any subsidiaries). The Nexstar Broadcasting column presents its financial information. The Mission column presents the financial information of Mission, an entity which Nexstar Broadcasting is required to consolidate as a VIE (see Note 2). Neither Mission nor Nexstar Broadcasting has any subsidiaries.

As discussed in Note 3 to the Company’s Financial Statements included in its Annual Report on Form 10-K for the year ended December 31, 2011, the acquisition of WTVW by Mission was deemed under U.S. GAAP to be a change in reporting entity of Mission, thus the historical results of Mission have been presented as if WTVW was owned and operated by Mission as of the earliest period presented.

Nexstar Broadcasting has the following notes outstanding (See Note 6):

(a)

7% Notes. The 7% Notes are fully and unconditionally guaranteed by Nexstar and Mission, subject to certain customary release provisions. These notes are not guaranteed by any other entities.

(b)

7% PIK Notes. The 7% PIK Notes are fully and unconditionally guaranteed by Nexstar and Mission, subject to certain customary release provisions. These notes are not guaranteed by any other entities.

(c)

8.875% Senior secured second lien notes (“8.875% Notes”). The 8.875% Notes are co-issued by Nexstar Broadcasting and Mission, jointly and severally, and fully and unconditionally guaranteed by Nexstar and all of Nexstar Broadcasting’s and Mission’s future 100% owned domestic subsidiaries, subject to certain customary release provisions. 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 Broadcasting. As the obligations under the 8.875% Notes are joint and several to Nexstar Broadcasting and Mission, each entity reflects the full amount of the 8.875% Notes and related accrued interest in their separate Financial Statements. Further, the portions of the net proceeds and related accrued interest attributable to the respective co-issuer are reflected as a reduction to equity (due from affiliate) in their separate financial statements given the contractual relationships between the entities.

CONDENSED CONSOLIDATING BALANCE SHEET
As of September 30, 2012
(in thousands)

				Nexstar						Nexstar						Consolidated
	Nexstar			Broadcasting			Mission			Holdings			Eliminations			Company
ASSETS
Current assets:
Cash and cash equivalents	$	-		$	11,801		$	435		$	-		$	-		$	12,236
Due from Nexstar Broadcasting		-			-			5,313			-			(5,313	)		-
Other current assets		-			81,561			7,466			-			-			89,027
Total current assets		-			93,362			13,214			-			(5,313	)		101,263
Amounts due from subsidiary eliminated
upon consolidation		11,810			-			-			-			(11,810	)		-
Amounts due from parents eliminated
upon consolidation		-			3,430			-			-			(3,430	)		-
Property and equipment, net		-			117,541			22,201			-			-			139,742
Goodwill		-			93,845			18,730			-			-			112,575
FCC licenses		-			119,569			21,939			-			-			141,508
Other intangible assets, net		-			53,459			11,465			-			-			64,924
Other noncurrent assets		-			40,156			11,191			-			-			51,347
Total assets	$	11,810		$	521,362		$	98,740		$	-		$	(20,553	)	$	611,359
LIABILITIES AND
STOCKHOLDERS' DEFICIT
Current liabilities:
Current portion of debt	$	-		$	1,110		$	390		$	-		$	-		$	1,500
Due to Mission		-			5,313			-			-			(5,313	)		-
Other current liabilities		-			58,726			19,153			-			(13,221	)		64,658
Total current liabilities		-			65,149			19,543			-			(18,534	)		66,158
Debt		-			566,015			366,848			-			(319,115	)		613,748
Deficiencies in subsidiaries eliminated
upon consolidation		195,365			-			-			180,123			(375,488	)		-
Amounts due to subsidiary eliminated
upon consolidation		-			-			-			15,240			(15,240	)		-
Other noncurrent liabilities		(3	)		70,321			21,410			2			-			91,730
Total liabilities		195,362			701,485			407,801			195,365			(728,377	)		771,636
Stockholders' deficit:
Common stock		290			-			-			-			-			290
Other stockholders' deficit		(183,842	)		(180,123	)		(309,061	)		(195,365	)		707,824			(160,567	)
Total stockholders' deficit		(183,552	)		(180,123	)		(309,061	)		(195,365	)		707,824			(160,277	)
Total liabilities and
stockholders' deficit	$	11,810		$	521,362		$	98,740		$	-		$	(20,553	)	$	611,359

CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 2011
(in thousands)

				Nexstar						Nexstar						Consolidated
	Nexstar			Broadcasting			Mission			Holdings			Eliminations			Company
ASSETS
Current assets:
Cash and cash equivalents	$	-		$	5,648		$	1,898		$	-		$	-		$	7,546
Due from Mission		-			4,729			-			-			(4,729	)		-
Other current assets		-			83,417			5,886			-			-			89,303
Total current assets		-			93,794			7,784			-			(4,729	)		96,849
Amounts due from subsidiary eliminated
upon consolidation		10,077			-			-			-			(10,077	)		-
Amounts due from parents eliminated
upon consolidation		-			5,163			-			-			(5,163	)		-
Property and equipment, net		-			122,473			24,140			-			-			146,613
Goodwill		-			93,845			18,730			-			-			112,575
FCC licenses		-			119,569			21,939			-			-			141,508
Other intangible assets, net		-			66,243			15,276			-			-			81,519
Other noncurrent assets		-			12,783			3,187			-			-			15,970
Total assets	$	10,077		$	513,870		$	91,056		$	-		$	(19,969	)	$	595,034
LIABILITIES AND
STOCKHOLDERS' DEFICIT
Current liabilities:
Current portion of debt	$	-		$	1,110		$	390		$	-		$	-		$	1,500
Due to Nexstar Broadcasting		-			-			4,729			-			(4,729	)		-
Other current liabilities		-			50,517			11,222			-			(6,009	)		55,730
Total current liabilities		-			51,627			16,341			-			(10,738	)		57,230
Debt		-			594,136			363,087			-			(318,362	)		638,861
Deficiencies in subsidiaries eliminated
upon consolidation		210,753			-			-			195,511			(406,264	)		-
Amounts due to subsidiary eliminated
upon consolidation		-			-			-			15,240			(15,240	)		-
Other noncurrent liabilities		(3	)		63,618			18,730			2			-			82,347
Total liabilities		210,750			709,381			398,158			210,753			(750,604	)		778,438
Stockholders' deficit:
Common stock		288			-			-			-			-			288
Other stockholders' deficit		(200,961	)		(195,511	)		(307,102	)		(210,753	)		730,635			(183,692	)
Total stockholders' deficit		(200,673	)		(195,511	)		(307,102	)		(210,753	)		730,635			(183,404	)
Total liabilities and
stockholders' deficit	$	10,077		$	513,870		$	91,056		$	-		$	(19,969	)	$	595,034

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Three Months Ended September 30, 2012
(in thousands)

			Nexstar						Nexstar					Consolidated
	Nexstar		Broadcasting			Mission			Holdings		Eliminations			Company
Net broadcast revenue (including
trade and barter)	$	-	$	85,245		$	4,707		$	-	$	-		$	89,952
Revenue between consolidated
entities		-		1,935			8,012			-		(9,947	)		-
Net revenue		-		87,180			12,719			-		(9,947	)		89,952
Operating expenses (income):
Direct operating expenses,
excluding depreciation and
amortization		-		20,117			1,833			-		-			21,950
Selling, general, and
administrative expenses,
excluding depreciation and
amortization		-		26,716			794			-		-			27,510
Local service agreement fees
between consolidated entities		-		8,012			1,935			-		(9,947	)		-
Amortization of broadcast rights		-		4,464			1,099			-		-			5,563
Amortization of intangible assets		-		4,210			1,270			-		-			5,480
Depreciation		-		5,195			701			-		-			5,896
Gain on asset disposal, net		-		(4	)		-			-		-			(4	)
Total operating expenses		-		68,710			7,632			-		(9,947	)		66,395
Income from operations		-		18,470			5,087			-		-			23,557
Interest expense, net		-		(8,688	)		(3,750	)		-		-			(12,438	)
Equity in income of subsidiaries		8,562		-			-			8,562		(17,124	)		-
Income before income
taxes		8,562		9,782			1,337			8,562		(17,124	)		11,119
Income tax expense		-		(1,220	)		(338	)		-		-			(1,558	)
Net income	$	8,562	$	8,562		$	999		$	8,562	$	(17,124	)	$	9,561

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Three Months Ended September 30, 2011

(in thousands)