Edgar Filing: NEXSTAR BROADCASTING GROUP INC

Form 10-Q

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, 2005

¨	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 Organization or Incorporation)		(IRS Employer Identification No.)

909 Lake Carolyn Parkway, Suite 1450 Irving, Texas 75039		(972) 373-8800
(Address of Principal Executive Offices, including Zip Code)		(Registrant’s Telephone Number, Including Area Code)

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

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


Title of Each Class		Name of Each Exchange on Which Registered
Class A Common Stock, $0.01 par value per share		The Nasdaq Stock Market’s National Market

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

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

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 October 31, 2005, the Registrant had outstanding:

14,289,310 shares of Class A Common Stock;

13,411,588 shares of Class B Common Stock; and

662,529 shares of Class C Common Stock

TABLE OF CONTENTS


		Page
PART I	FINANCIAL INFORMATION

ITEM 1.	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets at September 30, 2005 and December 31, 2004	1

	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2005 and 2004	2

	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2005 and 2004	3

	Notes to Condensed Consolidated Financial Statements	4

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33

ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	44

ITEM 4.	Controls and Procedures	44

PART II	OTHER INFORMATION

ITEM 1.	Legal Proceedings	45

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45

ITEM 3.	Defaults Upon Senior Securities	45

ITEM 4.	Submission of Matters to a Vote of Security Holders	45

ITEM 5.	Other Information	45

ITEM 6.	Exhibits	45

EXHIBIT INDEX		45

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

NEXSTAR BROADCASTING GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share information)


	September 30, 2005			December 31, 2004
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	5,782		$	18,505
Accounts receivable, net of allowance for doubtful accounts of $875 and $1,119, respectively		43,940			48,391
Current portion of broadcast rights		16,771			17,292
Prepaid expenses and other current assets		2,410			2,580
Property held for sale		516			—

Total current assets		69,419			86,768

Property and equipment, net		99,021			101,068
Broadcast rights		4,700			6,423
Goodwill, net		146,272			145,576
Intangible assets, net		354,445			374,050
Other noncurrent assets		8,408			21,080

Total assets	$	682,265		$	734,965

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Current portion of debt	$	3,485		$	2,350
Current portion of broadcast rights payable		17,323			17,561
Accounts payable		7,266			8,092
Accrued expenses		12,042			12,561
Taxes payable		243			89
Interest payable		2,990			8,866
Deferred revenue		3,987			2,000

Total current liabilities		47,336			51,519

Debt		641,026			627,548
Broadcast rights payable		5,900			7,153
Deferred tax liabilities		33,129			29,369
Deferred revenue		3,285			4,286
Deferred gain on sale of assets		6,349			6,676
Other liabilities		5,158			4,159

Total liabilities		742,183			730,710

Commitments and contingencies

Minority interest in consolidated entity		—			21,550

Stockholders’ deficit:
Preferred stock - $0.01 par value, authorized 200,000 shares; no shares issued and outstanding at both September 30, 2005 and December 31, 2004		—			—
Common stock:
Class A Common - $0.01 par value, authorized 100,000,000 shares; issued and outstanding 14,289,310 at both September 30, 2005 and December 31, 2004		143			143
Class B Common - $0.01 par value, authorized 20,000,000 shares; issued and outstanding 13,411,588 at both September 30, 2005 and December 31, 2004		134			134
Class C Common - $0.01 par value, authorized 5,000,000 shares; issued and outstanding 662,529 at both September 30, 2005 and December 31, 2004		7			7
Additional paid-in capital		392,393			392,393
Accumulated deficit		(452,595	)		(409,972	)

Total stockholders’ deficit		(59,918	)		(17,295	)

Total liabilities and stockholders’ deficit	$	682,265		$	734,965

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 amounts)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2005			2004			2005			2004
	(Unaudited)						(Unaudited)
Revenue (excluding trade and barter)	$	56,767		$	63,948		$	172,191		$	185,634
Less: commissions		(7,387	)		(8,571	)		(22,383	)		(24,821	)

Net broadcast revenue (excluding trade and barter)		49,380			55,377			149,808			160,813
Trade and barter revenue		4,585			4,507			14,720			14,464

Total net revenue		53,965			59,884			164,528			175,277

Operating expenses (income):
Direct operating expenses (exclusive of depreciation and amortization shown separately below)		16,663			16,685			49,630			48,094
Selling, general, and administrative expenses (exclusive of depreciation and amortization shown separately below)		18,129			17,898			52,643			51,542
Merger related expenses		—			—			—			456
Loss on property held for sale		—			—			616			—
Loss (gain) on asset disposal (including deferred gain recognition), net		(2	)		(109	)		29			(185	)
Amortization of broadcast rights		5,681			6,126			17,121			18,438
Amortization of intangible assets		6,630			6,308			20,039			20,197
Depreciation		3,996			4,107			12,746			13,438

Total operating expenses, net		51,097			51,015			152,824			151,980

Income from operations		2,868			8,869			11,704			23,297
Interest expense, including amortization of debt financing costs		(11,364	)		(13,132	)		(35,332	)		(39,005	)
Loss on extinguishment of debt		—			(1,880	)		(15,715	)		(8,704	)
Interest income		61			29			144			62
Other income, net		424			753			376			4,383

Loss before income taxes		(8,011	)		(5,361	)		(38,823	)		(19,967	)
Income tax expense		(876	)		(924	)		(3,800	)		(2,837	)

Loss before minority interest in consolidated entity		(8,887	)		(6,285	)		(42,623	)		(22,804	)
Minority interest in consolidated entity		—			583			—			1,563

Net loss	$	(8,887	)	$	(5,702	)	$	(42,623	)	$	(21,241	)

Net loss per common share:
Basic and diluted	$	(0.31	)	$	(0.20	)	$	(1.50	)	$	(0.75	)
Weighted average number of common shares outstanding:
Basic and diluted		28,363			28,363			28,363			28,363

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)


	Nine Months Ended September 30,
	2005			2004
	(Unaudited)
Cash flows from operating activities:
Net loss	$	(42,623	)	$	(21,241	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Deferred income taxes		3,760			2,535
Depreciation of property and equipment		12,746			13,438
Amortization of intangible assets		20,039			20,197
Amortization of debt financing costs		1,045			1,801
Amortization of broadcast rights, excluding barter		7,649			8,831
Payments for broadcast rights		(7,320	)		(7,898	)
Loss on asset disposal, net		356			142
Loss on property held for sale		616			—
Loss on extinguishment of debt		15,715			8,704
Amortization of debt discount		8,163			7,541
Effect of accounting for derivative instruments		(197	)		(3,164	)
Call premium and interest paid in connection with repayments of senior discount and senior subordinated notes		(15,981	)		(5,934	)
Minority interest in consolidated entity		—			(1,563	)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		4,484			(1,820	)
Prepaid expenses and other current assets		173			(1,251	)
Other noncurrent assets		(311	)		(247	)
Accounts payable and accrued expenses		(1,595	)		(10,085	)
Taxes payable		154			(192	)
Interest payable		(5,876	)		6,632
Deferred revenue		986			2,394
Other noncurrent liabilities and deferred gain on sale of assets		(78	)		249

Net cash provided by operating activities		1,905			19,069

Cash flows from investing activities:
Additions to property and equipment		(10,644	)		(7,370	)
Proceeds from sale of assets		139			229
Acquisition of broadcast properties and related transaction costs		(12,481	)		(6,780	)
Down payment on acquisition of station		—			(1,750	)
Change in restricted cash		—			800

Net cash used for investing activities		(22,986	)		(14,871	)

Cash flows from financing activities:
Proceeds from debt issuance		427,375			235,000
Repayment of long-term debt		(262,825	)		(247,587	)
Proceeds from revolver draws		1,000			42,000
Repayment of senior discount notes		—			(28,862	)
Repayment of senior subordinated notes		(153,619	)		—
Payments for debt financing costs		(3,573	)		(980	)

Net cash provided by (used for) financing activities		8,358			(429	)

Net increase (decrease) in cash and cash equivalents		(12,723	)		3,769

Cash and cash equivalents at beginning of period		18,505			10,848

Cash and cash equivalents at end of period	$	5,782		$	14,617

Supplemental schedule of cash flow information:
Cash paid for interest, net	$	39,742		$	23,669

Cash paid for income taxes, net	$	168		$	789

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

NEXSTAR BROADCASTING GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Business Operations

Nexstar Broadcasting Group, Inc. (“Nexstar”) owns, operates, programs or provides sales and other services to 46 television stations, 45 of which are affiliated with the NBC, ABC, CBS, Fox or UPN television networks and one independent television station, in markets located in New York, Pennsylvania, Illinois, Indiana, Missouri, Texas, Louisiana, Arkansas, Alabama, Montana and Maryland. Through various local service agreements, Nexstar provides sales, programming and other services to stations owned and/or operated by independent third parties.

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.

2. Summary of Significant Accounting Policies

Interim Financial Statements

The condensed consolidated financial statements as of September 30, 2005 and for the three and nine months ended September 30, 2005 and 2004 are unaudited. However, in the opinion of management, such financial statements include all adjustments (consisting solely of normal recurring adjustments) necessary for the fair statement of the financial information included herein in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“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 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 fiscal year ended December 31, 2004. The balance sheet at December 31, 2004 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.

Principles of Consolidation

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

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

Mission

Mission is included in these consolidated financial statements because Nexstar is deemed to have a controlling financial interest in Mission for financial reporting purposes in accordance with FIN No. 46R as a result of (a) local service agreements Nexstar has with the Mission stations, (b) Nexstar’s guarantee of the obligations incurred under Mission’s senior credit facility and (c) purchase options granted by Mission’s sole shareholder which will permit Nexstar to acquire the assets and assume the liabilities of each Mission station, subject to Federal Communications Commission (“FCC”) consent. As of September 30, 2005, the assets of Mission consisted of current assets of $2.1 million (excluding broadcast rights), broadcast rights of $4.3 million, FCC licenses of $28.7 million, goodwill and other intangible assets of $65.7 million, property and equipment of $21.5 million and other noncurrent assets of $0.6 million. Substantially all of Mission’s assets, except for its FCC licenses, collateralize its secured debt obligation.

NEXSTAR BROADCASTING GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies—(Continued)

Nexstar has entered into local service agreements with Mission to provide sales and/or operating services to the Mission stations. The following table summarizes the various local service agreements Nexstar has with Mission as of September 30, 2005:


Service Agreements		Mission Stations
TBA ⁽¹⁾		WFXP and KHMT

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

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

Variable Interest Entities

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

VIEs included in the accompanying consolidated financial statements as a result of TBAs entered into in connection with station acquisitions are discussed below.

As a result of TBAs the Company entered into with the owners of KFTA/KNWA, the NBC affiliate in Fort Smith-Fayetteville-Springdale-Rogers, Arkansas and WTVO, the ABC affiliate in Rockford, Illinois, Nexstar and Mission determined that they were the primary beneficiary of the respective stations and, accordingly, had consolidated their financial statements in prior periods. As discussed further in Note 3, the Company completed its acquisitions of KFTA/KNWA and WTVO in January 2005 and operations under the TBAs were terminated. Therefore, the Company discontinued its consolidation of these stations as VIEs during the first quarter of 2005.

VIEs in connection with other types of local service agreements entered into with stations in markets in which the Company owns and operates a station are discussed below.

Nexstar has determined that it has a variable interest in KTVE, the NBC affiliate in El Dorado, Arkansas, owned by Piedmont Television of Monroe/El Dorado LLC (“Piedmont”) as a result of local service agreements Nexstar has with Piedmont. As successor to a JSA and SSA entered into effective March 21, 2001 by Quorum Broadcasting of Louisiana, Inc., Nexstar, (a) under the JSA, permits Piedmont to sell to advertisers all of the time available for commercial advertisements on KARD, the Nexstar television station in the related market in return for a monthly fee paid to Nexstar and (b) under the SSA, shares with Piedmont the costs of certain services and procurements, which they individually require in connection with the ownership and operation of their respective television stations. The terms of the JSA and SSA with Piedmont are 10 years and may be extended automatically for two additional 10-year terms unless the agreements are otherwise terminated. Nexstar has evaluated its arrangement with Piedmont and has determined that it is not the primary beneficiary of the variable interest, and therefore, has not consolidated KTVE under FIN No. 46R. Nexstar received payments under the JSA with Piedmont of approximately $0.2 million and $0.3 million for the three months ended September 30, 2005 and 2004, respectively, and $0.7 million and $1.1 million for the nine months ended September 30, 2005 and 2004, respectively.

NEXSTAR BROADCASTING GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies—(Continued)

Nexstar has determined that it has a variable interest in WYZZ, the Fox affiliate in Peoria, Illinois, owned by a subsidiary of Sinclair Broadcasting Group, Inc. (“Sinclair”) as a result of an outsourcing agreement it entered into effective December 1, 2001 with Sinclair to provide certain non-programming related engineering, production, sales and administrative services for WYZZ. The outsourcing agreement expires in December 2008, but at any time it may be canceled by either party upon 180 days written notice. Nexstar has evaluated its arrangement with Sinclair and has determined that it is not the primary beneficiary of the variable interest, and therefore, has not consolidated WYZZ under FIN No. 46R. Nexstar made payments to Sinclair under the outsourcing agreement of $0.3 million for the three months ended September 30, 2005 and 2004, respectively, and $0.9 million and $1.0 million for the nine months ended September 30, 2005 and 2004, respectively.

Nexstar has determined that it has a variable interest in WUHF, the Fox affiliate in Rochester, New York, owned by a subsidiary of Sinclair as a result of an outsourcing agreement it entered into effective September 1, 2005 with Sinclair to provide certain non-programming related engineering, production, sales and administrative services for WUHF. The outsourcing agreement expires in December 2012, but at any time it may be canceled by either party upon 180 days written notice. Nexstar has evaluated its arrangement with Sinclair and has determined that it is not the primary beneficiary of the variable interest, and therefore, has not consolidated WUHF under FIN No. 46R. Nexstar made payments to Sinclair under the outsourcing agreement of $0.1 million for the three months and nine months ended September 30, 2005, respectively.

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 believes that its minimum exposure to loss under the Sinclair service agreements consist of the fees paid to Sinclair. Additionally, Nexstar indemnifies the owners of KTVE, 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.

Stock-Based Compensation

The Company accounts for Nexstar’s stock-based employee compensation plan under the alternative recognition and measurement principles of Accounting Principle Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”), and related interpretations rather than the fair value accounting method allowed by FASB Statement of Financial Accounting Standards No. 123 “Accounting for Stock-Based Compensation” (“SFAS No. 123”). Under the intrinsic value method of accounting of APB No. 25, no compensation expense is recognized for stock options granted when the exercise price of the options is greater than or equal to the fair market value of Nexstar’s common stock on the date of the grant. Nexstar did not incur stock-based employee compensation costs for the three and nine months ended September 30, 2005 and 2004 as all options granted under its stock-based employee compensation plan had an exercise price greater than or equal to the market price of the underlying common stock on the date of grant.

The Company has adopted the disclosure only provisions of SFAS No. 123. The following table illustrates the effect on net loss and net loss per share if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock-based employee compensation.


	Three Months Ended September 30,						Nine Months Ended September 30,
	2005			2004			2005			2004
	(in thousands, except per share amounts)						(in thousands, except per share amounts)
Net loss, as reported	$	(8,887	)	$	(5,702	)	$	(42,623	)	$	(21,241	)
Deduct: Total stock-based employee compensation expense determined under the fair value based method for all awards, net of related tax effect		(330	)		(247	)		(1,042	)		(734	)

Pro forma net loss	$	(9,217	)	$	(5,949	)	$	(43,665	)	$	(21,975	)

Basic and diluted net loss per common share, as reported	$	(0.31	)	$	(0.20	)	$	(1.50	)	$	(0.75	)
Basic and diluted net loss per common share, pro forma	$	(0.32	)	$	(0.21	)	$	(1.54	)	$	(0.77	)

Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed using the weighted-average number of common shares and dilutive potential common shares outstanding during the period using the treasury stock method. Potential common shares consist of stock options granted to employees. There is no difference between basic and diluted net loss per

NEXSTAR BROADCASTING GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies—(Continued)

share since the effect of stock options is not included in the computation of diluted net loss per share for the three and nine months ended September 30, 2005 and 2004, as the effect would be anti-dilutive. Stock options for 2,025,685 and 1,380,978 weighted-average common shares were outstanding during the three months ended September 30, 2005 and 2004, respectively, and stock options for 2,084,949 and 1,340,438 weighted-average common shares were outstanding during the nine months ended September 30, 2005 and 2004, respectively, but were not included in the diluted per share computation because the option exercise prices were greater than the average market price of the common stock.

Recent Accounting Pronouncements

In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123(R)”) which replaces SFAS No. 123 and supercedes APB No. 25. Generally, the approach in SFAS No. 123(R) is similar to the approach described in SFAS No. 123 as originally issued. However, SFAS No. 123(R) eliminates the use of the alternative APB No. 25 intrinsic value method of accounting that was provided in SFAS No. 123 and requires companies to expense the fair value of employee stock options and other forms of stock-based employee compensation in the financial statements over the period that an employee provides service in exchange for the award. The pro forma footnote disclosure previously permitted under SFAS No. 123 will no longer be an alternative to financial statement recognition. Under SFAS No. 123(R), compensation cost related to stock options is measured at the grant date based on the fair value of the award using an option-pricing model and will be recognized as expense ratably over the vesting period. SFAS No. 123(R) is effective as of the beginning of the first interim reporting period that begins after June 15, 2005; however, on April 14, 2005, the Securities and Exchange Commission issued a ruling that changed the effective date for public companies to fiscal years that begin after June 15, 2005 which for the Company is January 1, 2006. Nexstar has elected to adopt this new Standard as of the beginning of the 2006 fiscal year. Using the modified prospective method of adoption, beginning January 1, 2006 Nexstar will recognize compensation expense for all newly granted or modified stock options based on the requirements of SFAS No. 123(R) and will begin recognizing compensation expense over the remaining vesting period for the unvested portion of all stock options granted prior to adoption based on the fair values previously calculated for pro forma disclosure purposes. The Black-Scholes option-pricing model has been used to value Nexstar’s employee stock options for disclosure purposes and this option-pricing model will be used under SFAS No. 123(R).

As permitted by SFAS No. 123, Nexstar currently accounts for stock-based compensation to employees using the intrinsic value method of APB No. 25 and, as such, has not recognized compensation cost for employee stock options. Accordingly, the adoption of SFAS No. 123(R)’s expense recognition provision will have a significant impact on the Nexstar’s results of operations, although it will have no impact on the Company’s consolidated financial position. Nexstar is unable to quantify an estimate of the impact of adopting SFAS No. 123(R) at this time because it will depend on, among other factors, the market price of Nexstar’s common stock, and the terms, number and timing of future stock option award grants. However, had Nexstar adopted this new Standard in prior periods, the impact would not have been materially different from amounts determined for the pro forma footnote disclosure required by SFAS No. 123.

In December 2004, the FASB issued Statement of Financial Accounting Standards No. 153, “Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29” (“SFAS No. 153”). SFAS No. 153 requires that exchanges of nonmonetary assets be accounted for at fair value of the assets exchanged, unless the exchange lacks commercial substance. A nonmonetary exchange has commercial substance when the future cash flows of the entity are expected to change significantly as a result of the exchange. This new Standard eliminates a provision in APB Opinion No. 29 that exempted nonmonetary exchanges of similar productive assets from fair value accounting. SFAS No. 153 is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Therefore, SFAS No. 153 was effective for the Company on July 1, 2005. The adoption of this new Standard did not have a material impact on the Company’s financial position or results of operations.

In March 2005, the FASB issued Financial Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations, an interpretation of FASB Statement No. 143” (“FIN No. 47”). FIN No. 47 clarifies that an entity must record a liability for a conditional asset retirement obligation if the fair value of the obligation can be reasonably estimated. A conditional asset retirement obligation is a term used in Statement of Financial Accounting Standards No. 143, “Accounting for Asset Retirement Obligations”, that refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. FIN No. 47 is effective no later than the end of fiscal years ending after December 15, 2005, which is the Company’s current fiscal year ending December 31, 2005. Management is currently evaluating the impact the adoption of FIN No. 47 will have on the Company’s financial position or results of operations.

In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154, “Accounting Changes and Error Corrections - a replacement of APB No. 20 and FASB Statement No. 3” (“SFAS No. 154”). SFAS No. 154 requires entities that voluntarily make a change in accounting principle to apply that change retrospectively to all prior period financial statements, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. Previously under APB Opinion No. 20, “Accounting Changes”, most voluntary changes in accounting principle were recognized by including in net income of the period of change the cumulative effect of changing to the new accounting principle. In addition to voluntary changes, this new Standard

NEXSTAR BROADCASTING GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies—(Continued)

establishes retrospective application as the required method for adopting a newly issued accounting pronouncement when the pronouncement does not include specific transition provisions. SFAS No. 154 also requires that a change in method of depreciation, amortization, or depletion for long-lived, nonfinancial assets, be accounted for as a change in accounting estimate affected by a change in accounting principle, the effects of which are to be applied prospectively in the period of change and future periods. This Statement also makes a distinction between “retrospective application” of an accounting principle and the “restatement” of financial statements to reflect the correction of an error. SFAS No. 154 applies to accounting changes and error corrections that are made in fiscal years beginning after December 15, 2005. The Company will adopt the provisions of SFAS No. 154, as applicable, beginning in fiscal 2006.

3. Acquisitions

During the nine months ended September 30, 2005, the Company consummated the acquisitions listed below. These acquisitions have been accounted for using the purchase method of accounting and, accordingly, the purchase price was allocated to assets acquired based on their estimated fair value on the acquisition date. The excess of the purchase price over the fair values assigned to the assets acquired is recorded as goodwill. The consolidated financial statements include the operating results of each business from the TBA commencement date.


Station	Network Affiliation	Market	Date Acquired	Acquired By
WTVO⁽¹⁾	ABC	Rockford, Illinois	January 4, 2005	Mission

KFTA/KNWA⁽²⁾	NBC	Fort Smith-Fayetteville-Springdale-Rogers, Arkansas	January 7, 2005	Nexstar

⁽¹⁾	Mission commenced operations under a TBA on November 1, 2004 which terminated on the date of acquisition.

⁽²⁾	Nexstar commenced operations under a TBA on October 16, 2003 which terminated on the date of acquisition.

WTVO

On October 4, 2004, Mission entered into a purchase agreement and a TBA with Young Broadcasting, Inc. and Winnebago Television Corporation, which owned WTVO, the ABC affiliate in Rockford, Illinois. Mission commenced operations under the TBA on November 1, 2004 which terminated upon the purchase of the station. On January 4, 2005, Mission completed the acquisition of WTVO for total consideration of $20.75 million, exclusive of transaction costs. Pursuant to terms of the purchase agreement, Mission made an initial payment of $15.0 million against the purchase price on November 1, 2004, to acquire substantially all of the assets of WTVO, except for its FCC license and certain transmission equipment. Mission paid the remaining $5.75 million on January 4, 2005, exclusive of transaction costs, for the purchase of WTVO’s FCC license and certain transmission equipment.

The following table summarizes the estimated fair values of the assets acquired. Mission obtained third-party valuations of certain acquired intangible assets (in thousands).


Property and equipment	$	7,161
Intangible assets		10,279
Goodwill		3,658

Assets acquired	$	21,098

Of the $10.3 million of acquired intangible assets, $2.9 million was assigned to FCC licenses that are not subject to amortization and $6.7 million was assigned to network affiliation agreements (estimated useful life of 15 years). The remaining $0.7 million of acquired intangible assets have an estimated useful life of approximately 1 year. Goodwill of $3.7 million is expected to be deductible for tax purposes.

KFTA/KNWA

On October 13, 2003, Nexstar entered into a purchase agreement and a TBA with J.D.G. Television, Inc., which owned KFTA/KNWA, the NBC affiliate in Fort Smith-Fayetteville-Springdale-Rogers, Arkansas. Nexstar commenced operations under the TBA on October 16, 2003 which terminated upon the purchase of the station. On January 7, 2005, Nexstar purchased substantially all of the assets of KFTA/KNWA for $17.0 million, exclusive of transaction costs. Pursuant to terms of the purchase agreement, Nexstar made a down payment of $10.0 million against the purchase price on October 16, 2003 and paid $6.0 million upon consummation of the acquisition on January 7, 2005, exclusive of transaction costs. The remaining $1.0 million relates to a non-compete agreement being paid to a principal of the seller over a four year period.

NEXSTAR BROADCASTING GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

3. Acquisitions—(Continued)

The following table summarizes the estimated fair values of the assets acquired at the date of acquisition. Nexstar obtained third-party valuations of certain acquired intangible assets (in thousands).


Property and equipment	$	5,204
Intangible assets		11,121
Goodwill		1,013

Assets acquired	$	17,338

Of the $11.1 million of acquired intangible assets, $3.6 million was assigned to FCC licenses that are not subject to amortization and $5.4 million was assigned to network affiliation agreements (estimated useful life of 15 years). The remaining $2.1 million of acquired intangible assets includes a $1.0 million non-compete agreement and $1.1 million of other intangible assets, which are being amortized over 1 to 4 years. Goodwill of $1.0 million is expected to be deductible for tax purposes.

The following unaudited pro forma information has been presented as if the acquisitions of WTVO and KFTA/KNWA had occurred on January 1, 2004:


	Three Months Ended September 30, 2004			Nine Months Ended September 30, 2004
	(in thousands, except per share amounts)
Net broadcast revenue (excluding trade and barter)	$	56,735		$	164,977
Total net revenue		61,255			179,467
Income from operations		8,527			22,408
Net loss		(6,319	)		(23,003	)
Basic and diluted net loss per common share	$	(0.22	)	$	(0.81	)

The above selected unaudited pro forma information is presented for illustrative purposes only and is not necessarily indicative of results of operations in future periods or results that would have been achieved had the Company owned the acquired stations during the specified period. There is no pro forma information presented for the comparable periods in fiscal year 2005 since the acquisitions were consummated near the beginning of the year and the pro forma results would not be materially different from the Company’s consolidated results of operations as reported.

4. Property Held for Sale

During the second quarter of 2005, management committed to a plan to sell buildings in Abilene, Texas and Utica, New York, which were vacated after the Company finalized consolidation of its station operations in these markets. Accordingly, the buildings, building improvements and land have been recorded at their estimated fair value less costs to sell. Fair value is based on management’s estimate of the amount that could be realized from the sale of the properties in a current transaction between willing parties. The estimate is derived from professional appraisals and quotes obtained from local real estate brokers. The carrying value of assets held for sale at September 30, 2005 was $0.5 million. During the second quarter of 2005, the Company recorded a loss of $0.6 million related to the write-down of these assets which comprises loss on property held for sale.

5. Intangible Assets and Goodwill

Intangible assets and goodwill consisted of the following:


	Estimated useful life (years)	September 30, 2005			December 31, 2004
		(in thousands)
Network affiliation agreements	15	$	335,588		$	335,153
FCC licenses	indefinite		160,856			160,856
Other intangible assets	1-15		24,078			24,581

			520,522			520,590
Less: accumulated amortization			(166,077	)		(146,540	)

Intangible assets, net of accumulated amortization			354,445			374,050
Goodwill, net	indefinite		146,272			145,576

Intangible assets and goodwill, net		$	500,717		$	519,626

Total amortization expense from definite-lived intangible assets for the three months ended September 30, 2005 and 2004 was $6.6 million and $6.3 million, respectively, and for the nine months ended September 30, 2005 and 2004 was $20.0 million and $20.2 million, respectively. The Company’s estimate of amortization expense for definite-lived intangible assets recorded on its books as of September 30, 2005 is approximately $24 million for each year for the years of 2006 through 2010.

NEXSTAR BROADCASTING GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

5. Intangible Assets and Goodwill—(Continued)

The carrying value of indefinite-lived intangible assets, consisting of FCC licenses and goodwill, at September 30, 2005 and December 31, 2004 was $284.7 million and $284.0 million, respectively (net of accumulated amortization of approximately $44.3 million). 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, 2005, the Company did not identify any events that would trigger an impairment assessment.

The change in the carrying amount of goodwill for the nine months ended September 30, 2005 was as follows (in thousands):


Balance as of January 1, 2005	$	145,576
Acquisitions		696

Balance as of September 30, 2005	$	146,272

The consummation of the acquisitions of WTVO and KFTA/KNWA during the nine months ended September 30, 2005 increased goodwill by approximately $0.7 million.

6. Accrued Expenses

Accrued expenses consisted of the following:


	September 30, 2005		December 31, 2004
	(in thousands)
Compensation and related taxes	$	3,793	$	3,448
Sales commissions		1,237		1,366
Employee benefits		1,080		600
Property taxes		1,154		585
Other accruals related to operating expenses		4,778		6,562

	$	12,042	$	12,561

7. Debt

Long-term debt consisted of the following:


	September 30, 2005			December 31, 2004
	(in thousands)
Term loans	$	348,500		$	233,825
Revolving credit facilities		—			21,500
12% senior subordinated notes due 2008, net of discount of $3,649		—			156,351
7% senior subordinated notes due 2014, net of discount of $2,517 and $0		197,483			125,000
11.375% senior discount notes due 2013, net of discount of $31,472 and $39,299		98,528			90,701
SFAS No. 133 hedge accounting adjustment		—			2,521

		644,511			629,898
Less: current portion		(3,485	)		(2,350	)

	$	641,026		$	627,548

The Nexstar and Mission Senior Secured Credit Facilities

On April 1, 2005, Nexstar Broadcasting, Inc. (“Nexstar Broadcasting”), an indirect subsidiary of Nexstar, entered into a new senior secured credit facility agreement with a group of commercial banks which replaced Nexstar Broadcasting’s previous credit facility that had provided for an $83.0 million term loan and a $50.0 million revolving loan. As of September 30, 2005, Nexstar Broadcasting’s new senior secured credit facility consisted of a $175.8 million term loan ($182.3 million original amount less a voluntary repayment of $6.5 million made on September 30, 2005) and a $50.0 million revolving loan. All borrowings outstanding under this new credit facility are due to mature in 2012. The term loan, which matures in October 2012, is payable in consecutive quarterly installments amortized at 0.25% quarterly commencing on December 31, 2005, with the remaining 93.25% due at maturity. The term loan bears interest at either the higher of the prevailing prime rate or the Federal Funds Rate plus 0.50% (the “Base Rate”), plus an applicable margin of 0.50%; or LIBOR plus 1.75%. The revolving loan bears interest at either the Base Rate plus an applicable margin ranging between 0.00% and 0.75%; or LIBOR plus an applicable margin ranging between 0.75% and 2.00%. Financial covenants under the new credit facility agreement include a maximum total combined leverage ratio of Nexstar Broadcasting and Mission of 7.50 times the last twelve months operating cash flow (as defined in the credit agreement) through June 30, 2006 and a maximum combined senior leverage ratio of Nexstar Broadcasting and Mission of 5.25 times the last twelve months operating cash flow through June 30, 2006. Covenants also include a minimum combined interest coverage ratio of 1.50 to 1.00 through December 30, 2008 and a fixed charge coverage ratio of 1.15 to 1.00. See Note 13 for a discussion on the subsequent modification to the debt covenant ratios.

NEXSTAR BROADCASTING GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

7. Debt—(Continued)

As of September 30, 2005 and December 31, 2004, Nexstar Broadcasting had $175.8 million and $82.6 million, respectively, outstanding under its term loan and no borrowings were outstanding under its revolving loan.

On April 1, 2005, Mission entered into a new senior secured credit facility agreement with a group of commercial banks which replaced its previous bank credit facility agreement that had provided for a $152.0 million term loan and a $30.0 million revolving loan. As of September 30, 2005, Mission’s new credit facility consisted of a $172.7 million term loan and a $47.5 million revolving loan. Terms of the new Mission credit facility, including maturity and interest rates, are the same as the terms of the new Nexstar credit facility described above.

As of September 30, 2005 and December 31, 2004, Mission had $172.7 million and $151.2 million, respectively, outstanding under its term loan and no borrowings and $21.5 million, respectively, were outstanding under its revolving loan.

As of September 30, 2005, there was approximately $97.5 million of total unused commitments under Nexstar Broadcasting’s and Mission’s senior secured credit facilities. Based on covenant calculations, as of September 30, 2005, there was approximately $6 million of total available borrowings that could be drawn under Nexstar Broadcasting’s and Mission’s senior secured credit facilities.

Senior Subordinated Notes

On April 1, 2005, Nexstar Broadcasting redeemed all the outstanding $160.0 million in aggregate principal amount of 12% senior subordinated notes (“12% Notes”) that were due to mature on April 1, 2008, at a price of $1,060 per $1,000 principal amount. Redemption of the 12% Notes was funded from proceeds obtained through a combination of an offering of senior subordinated notes (discussed below) and Nexstar Broadcasting’s senior secured credit facility. The aggregate redemption payment of $169.6 million plus accrued interest made on April 1, 2005 included a $9.6 million call premium related to the retirement of the notes. The redemption of the 12% Notes resulted in the recognition of a loss in the second quarter of 2005 consisting of $9.6 million in call premium, the write-off of approximately $3.6 million of previously capitalized debt financing costs and accelerated amortization of $3.4 million of unamortized discount on the notes. In conjunction with the redemption, Nexstar recorded a gain during the second quarter of 2005 of approximately $2.3 million from the derecognition of a SFAS No. 133 fair value hedge adjustment of the carrying amount of the 12% Notes.

On April 1, 2005, Nexstar Broadcasting issued $75.0 million in the aggregate principal amount of 7% senior subordinated notes at a price of 98.01% (“7% Notes”) due 2014. The 7% Notes were issued as an add-on to the $125.0 million aggregate principal amount of 7% Notes previously issued and registered under the Securities Act of 1933 by Nexstar Broadcasting. Proceeds obtained under the offering were net of a $1.1 million payment provided to investors purchasing the notes which is included as a component of the discount. The net proceeds from the offering, together with proceeds from Nexstar Broadcasting’s senior secured credit facility, were used to redeem the 12% Notes. The 7% Notes issued on April 1, 2005 have been registered under the Securities Act of 1933 in accordance with the terms of a registration rights agreement.

Collateralization and Guarantees of Debt

The bank credit facilities described above 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 under Mission’s senior secured credit facility in the event of Mission’s default. Similarly, Mission is a guarantor of Nexstar Broadcasting’s senior secured credit facility and the senior subordinated notes issued by Nexstar Broadcasting.

Loss on Extinguishment of Debt

The refinancing of the Nexstar Broadcasting and Mission senior secured credit facilities in April 2005 resulted in the write-off of $0.4 million of previously capitalized debt financing costs and $1.0 million of transaction costs during the second quarter of 2005. The redemption of the 12% Notes resulted in the recognition of a loss in the second quarter of 2005 consisting of $9.6 million in call premium, the write-off of $3.6 million of previously capitalized debt financing costs and accelerated amortization of $3.4 million of unamortized discount on the notes. In conjunction with the redemption, Nexstar recorded a gain during the second quarter of 2005 of approximately $2.3 million from the derecognition of a SFAS No. 133 fair value hedge adjustment of the carrying amount of the 12% Notes. These amounts comprise loss on extinguishment of debt for the nine months ended September 30, 2005.

8. Income Taxes

The Company’s provision for income taxes is primarily comprised of deferred income taxes created by an increase in the deferred tax liabilities position during the year resulting from the amortization of goodwill and other indefinite-lived intangible assets for income

NEXSTAR BROADCASTING GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

8. Income Taxes—(Continued)

tax purposes which are not amortized for financial reporting purposes. These deferred tax liabilities do not reverse on a scheduled basis and are not used to support the realization of deferred tax assets. The Company’s deferred tax assets primarily result from net operating loss carryforwards (“NOLs”). The Company’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 believes they may not be realized through future taxable earnings.

9. 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.

Some of the more significant FCC regulatory matters impacting the Company’s operations are discussed below.

Cable Retransmission Consent Rights

The Communications Act grants television broadcasters retransmission consent rights in connection with the carriage of their station’s signal by cable companies. If a broadcaster chooses to exercise retransmission consent rights, a cable television system which is subject to that election may not carry a station’s signal without the broadcaster’s consent. This generally requires the cable system operator and the television broadcaster to negotiate the terms under which the broadcaster will consent to the cable system’s carriage of its station’s signal. Nexstar and Mission have elected to exercise retransmission consent rights for all of their stations where they have a legal right to do so. Nexstar and Mission are in the process of negotiating these retransmission agreements and are unable to predict the outcome of these negotiations.

On October 20, 2005, Nexstar and Mission entered into a joint agreement with Cox Communications, Inc. (“Cox”) for the retransmission of their stations’ signals on the Cox cable systems in Abilene-Sweetwater, San Angelo, Lubbock, Amarillo, Odessa-Midland and Beaumont-Port Arthur, Texas; Shreveport, Louisiana; Fort Smith, Little Rock and Monroe-El Dorado, Arkansas; Springfield and Joplin, Missouri; and Pittsburg, Kansas. Under this agreement, Cox has agreed to compensate Nexstar and Mission for the right to carry the Company’s stations in these markets over the next five years. As a result, Cox now carries Nexstar’s television stations KLST (San Angelo) and KTAL (Shreveport) and Mission’s television station KRBC (Abilene). These stations had previously been off Cox’s cable systems when retransmission consent agreements expired on December 31, 2004 and February 1, 2005. In connection with the agreement, Cox has withdrawn a complaint it had submitted to the FCC against Nexstar and Mission.

On December 31, 2004, retransmission consent agreements with Cable One, Inc. (“Cable One”) expired for Nexstar’s television stations KTAL (Texarkana-Shreveport) and KSNF (Joplin), and for Mission’s television station KODE (Joplin). As a result, Cable One is not permitted by law to carry these stations’ signals. Nexstar and Mission have requested that Cable One pay a cash per subscriber fee in exchange for the right to carry the stations’ signals under new agreements. Cable One has informed Nexstar and Mission that it will not pay any cash fees for the carriage of the stations on its cable systems. If Nexstar and Mission do not reach new agreements with Cable One, the stations in the affected markets could lose audience share which may impact the stations’ revenue. The Company is currently unable to determine the ultimate outcome of this matter, but does not believe it will have a material effect on the Company’s financial condition or results of operations.

Digital Television Conversion

All commercial television stations in the United States were required to commence digital television (“DTV”) transmission operations by May 1, 2002, in addition to continuing their analog operations. Except for KNWA, all of the television stations the Company owns and operates are broadcasting at least a low power digital television signal. On August 31, 2004, the FCC granted consent to modify KNWA’s proposed DTV facilities, establishing a construction deadline of March 3, 2005. On January 21, 2005, Nexstar filed a request with the FCC to extend KNWA’s modified construction permit deadline. When the FCC acts on the extension request, Nexstar will have at least six months to complete construction of KNWA’s DTV facilities. If KNWA is not broadcasting a digital signal by the end of this six-month period, Nexstar could be subject to sanctions, including, eventually, loss of the DTV construction permit. The conversion to digital transmission required an average initial capital expenditure of $0.2 million per station for low-power transmission of a digital signal. Digital conversion expenditures were $4.3 million and $0.2 million for the nine months ended September 30, 2005 and 2004, respectively.

NEXSTAR BROADCASTING GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

9. FCC Regulatory Matters—(Continued)

Stations may broadcast both analog and digital signals until at least December 31, 2006. After December 31, 2006, on a date determined by Congress or the FCC, stations will operate with digital-only facilities. The digital transmissions may initially be low-power, but as discussed below, full-power transmission will be required.

The FCC’s ongoing rule making proceeding concerning implementation of the transition from analog to digital television broadcasts is likely to have a significant impact on the television industry and the operation of the Company’s stations.

Full-Power DTV Facilities Construction

On August 4, 2004, the FCC released rules setting the dates by which all television stations must be broadcasting a full-power DTV signal. Under these rules, stations affiliated with the four largest networks (ABC, CBS, NBC and Fox) in the top-100 markets were required to construct full-power DTV facilities by July 1, 2005. All other stations are required to construct full-power DTV facilities by July 1, 2006. Management estimates that it will require an average capital expenditure of approximately $1.5 million per station (for 40 stations) to modify Nexstar’s and Mission’s stations’ DTV transmitters for full-power digital signal transmission, including costs for the transmitter, transmission line, antenna and installation, and estimated costs for tower upgrades and/or modifications. The Company anticipates these expenditures will be funded through available cash on hand and cash generated from operations as incurred in future years. Stations that fail to meet these build-out deadlines will lose interference protection for their signals outside their low-power coverage areas. As of September 30, 2005, only Mission’s stations WUTR and WTVO are transmitting full-power digital signals.

The FCC will accept requests for extensions of the applicable deadlines for stations that cannot meet the full-power DTV deadlines due to severe financial constraints or circumstances beyond licensee control (such as zoning issues). Nexstar has filed a request for extension of time to construct full-power DTV facilities for its top four network affiliates in the top one hundred market stations. Mission also has filed a request for such extension for its top four network affiliates in the top one hundred market stations. The FCC has not yet acted on these requests for extension of time.

Additional DTV Requirements

The FCC also adopted additional Program System and Information Protocol (“PSIP”) requirements. The equipment and related installation necessary to meet the PSIP requirements cost approximately $1.3 million in total for all of the television stations the Company owns and operates. These expenditures were funded in 2005 through available cash on hand and cash generated from operations.

10. Commitments and Contingencies

Guarantee of Mission Debt

Nexstar and its subsidiaries guarantee full payment of all obligations incurred under Misson’s senior credit facility agreement. In the event that Mission is unable to repay amounts due under its credit facility, 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 under the Mission credit facility. At September 30, 2005, Mission had $172.7 million outstanding under its senior credit facility.

Indemnification Obligations

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

Litigation

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

NEXSTAR BROADCASTING GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11. Condensed Consolidating Financial Information

Senior Discount Notes

On March 27, 2003, Nexstar Finance Holdings, Inc. (“Nexstar Finance Holdings”), a 100% owned subsidiary of Nexstar, issued 11.375% senior discount notes (“11.375% Notes”) due in 2013. The 11.375% Notes are fully and unconditionally guaranteed by Nexstar. The following summarized consolidating financial information is presented in lieu of separate financial statements and other related disclosures of Nexstar Finance Holdings pursuant to Regulation S-X Rule 3-10 of the Securities Exchange Act of 1934, as amended, “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or being Registered”. The following represents summarized condensed consolidating financial information as of September 30, 2005 and December 31, 2004 with respect to the financial position and for the three and nine months ended September 30, 2005 and 2004 for results of operations and for the nine months ended September 30, 2005 and 2004 for cash flows of the Company and its 100%, directly or indirectly, owned subsidiaries.

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

NEXSTAR BROADCASTING GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11. Condensed Consolidating Financial Information—(Continued)

Balance Sheet

September 30, 2005

(in thousands)


	Nexstar		Nexstar Finance Holdings		Non-Guarantor Subsidiary		Eliminations			Consolidated Company
ASSETS
Current assets:
Cash and cash equivalents	$	—	$	—	$	5,782	$	—		$	5,782
Other current assets		—		6		63,631		—			63,637

Total current assets		—		6		69,413		—			69,419

Investments in subsidiaries eliminated upon consolidation		31,076		129,156		—		(160,232	)		—
Amounts due from parents eliminated upon consolidation		—		—		5,980		(5,980	)		—
Property and equipment, net		—		—		99,021		—			99,021
Goodwill, net		—		—		146,272		—			146,272
Intangible assets, net		—		—		354,445		—			354,445
Other noncurrent assets		1		2,417		10,701		(11	)		13,108

Total assets	$	31,077	$	131,579	$	685,832	$	(166,223	)	$	682,265

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Current portion of debt	$	—	$	—	$	3,485	$	—		$	3,485
Other current liabilities		117		—		43,734		—			43,851

Total current liabilities		117		—		47,219		—			47,336

Debt		—		98,528		542,498		—			641,026
Amounts due to subsidiary eliminated upon consolidation		4,007		1,973		—		(5,980	)		—
Other noncurrent liabilities		—		2		53,830		(11	)		53,821

Total liabilities		4,124		100,503		643,547		(5,991	)		742,183

Stockholders’ equity (deficit):
Common stock		284		—		—		—			284
Other stockholders’ equity (deficit)		26,669		31,076		42,285		(160,232	)		(60,202	)

Total stockholders’ equity (deficit)		26,953		31,076		42,285		(160,232	)		(59,918	)

Total liabilities and stockholders’ equity (deficit)	$	31,077	$	131,579	$	685,832	$	(166,223	)	$	682,265

NEXSTAR BROADCASTING GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11. Condensed Consolidating Financial Information—(Continued)

Balance Sheet

December 31, 2004

(in thousands)


	Nexstar		Nexstar Finance Holdings		Non-Guarantor Subsidiary		Eliminations			Consolidated Company
ASSETS
Current assets:
Cash and cash equivalents	$	—	$	—	$	18,505	$	—		$	18,505
Other current assets		—		6		68,257		—			68,263

Total current assets		—		6		86,762		—			86,768

Investments in subsidiaries eliminated upon consolidation		66,550		156,562		—		(223,112	)		—
Amounts due from parents eliminated upon consolidation		—		—		5,980		(5,980	)		—
Property and equipment, net		—		—		101,068		—			101,068
Goodwill, net		—		—		145,576		—			145,576
Intangible assets, net		—		—		374,050		—			374,050
Other noncurrent assets		1		2,658		24,856		(12	)		27,503

Total assets	$	66,551	$	159,226	$	738,292	$	(229,104	)	$	734,965

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Current portion of debt	$	—	$	—	$	2,350	$	—		$	2,350
Other current liabilities		—		—		49,169		—			49,169

Total current liabilities		—		—		51,519		—			51,519

Debt		—		90,701		536,847		—			627,548
Amounts due to subsidiary eliminated upon consolidation		4,007		1,973		—		(5,980	)		—
Other noncurrent liabilities		—		2		51,653		(12	)		51,643

Total liabilities		4,007		92,676		640,019		(5,992	)		730,710

Minority interest in consolidated entity		—		—		21,550		—			21,550

Stockholders’ equity (deficit):
Common stock		284		—		—		—			284
Other stockholders’ equity (deficit)		62,260		66,550		76,723		(223,112	)		(17,579	)

Total stockholders’ equity (deficit)		62,544		66,550		76,723		(223,112	)		(17,295	)

Total liabilities and stockholders’ equity (deficit)	$	66,551	$	159,226	$	738,292	$	(229,104	)	$	734,965

NEXSTAR BROADCASTING GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11. Condensed Consolidating Financial Information—(Continued)

Statement of Operations

For the Three Months Ended September 30, 2005

(in thousands)


	Nexstar			Nexstar Finance Holdings			Non-Guarantor Subsidiary			Eliminations		Consolidated Company
Net broadcast revenue (excluding trade and barter)	$	—		$	—		$	49,380		$	—	$	49,380
Trade and barter revenue		—			—			4,585			—		4,585

Total net revenue		—			—			53,965			—		53,965

Operating expenses (income):
Direct operating expenses (exclusive of depreciation and amortization shown separately below)		—			—			16,663			—		16,663
Selling, general, and administrative expenses (exclusive of depreciation and amortization shown separately below)		117			—			18,012			—		18,129
Gain on asset disposal (including deferred gain recognition), net		—			—			(2	)		—		(2	)
Amortization of broadcast rights		—			—			5,681			—		5,681
Amortization of intangible assets		—			—			6,630			—		6,630
Depreciation		—			—			3,996			—		3,996

Total operating expenses		117			—			50,980			—		51,097

Income (loss) from operations		(117	)		—			2,985			—		2,868
Interest expense, including amortization of debt financing costs		—			(2,737	)		(8,627	)		—		(11,364	)
Equity in earnings of subsidiaries		(6,231	)		(3,494	)		—			9,725		—
Other income, net		—			—			485			—		485

Loss before income taxes		(6,348	)		(6,231	)		(5,157	)		9,725		(8,011	)
Income tax (expense) benefit		78			—			(954	)		—		(876	)

Net loss	$	(6,270	)	$	(6,231	)	$	(6,111	)	$	9,725	$	(8,887	)

NEXSTAR BROADCASTING GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11. Condensed Consolidating Financial Information—(Continued)

Statement of Operations

For the Three Months Ended September 30, 2004

(in thousands)


	Nexstar			Nexstar Finance Holdings			Non-Guarantor Subsidiary			Eliminations		Consolidated Company
Net broadcast revenue (excluding trade and barter)	$	—		$	—		$	55,377		$	—	$	55,377
Trade and barter revenue		—			—			4,507			—		4,507

Total net revenue		—			—			59,884			—		59,884

Operating expenses (income):
Direct operating expenses (exclusive of depreciation and amortization shown separately below)		—			—			16,685			—		16,685
Selling, general, and administrative expenses (exclusive of depreciation and amortization shown separately below)		—			—			17,898			—		17,898
Gain on asset disposal (including deferred gain recognition), net		—			—			(109	)		—		(109	)
Amortization of broadcast rights		—			—			6,126			—		6,126
Amortization of intangible assets		—			—			6,308			—		6,308
Depreciation		—			—			4,107			—		4,107

Total operating expenses		—			—			51,015			—		51,015

Income from operations		—			—			8,869			—		8,869
Interest expense, including amortization of debt financing costs		—			(2,418	)		(10,714	)		—		(13,132	)
Loss on extinguishment of debt		—			—			(1,880	)		—		(1,880	)
Equity in earnings of subsidiaries		(3,542	)		(1,124	)		—			4,666		—
Other income, net		—			—			782			—		782

Loss before income taxes		(3,542	)		(3,542	)		(2,943	)		4,666		(5,361	)
Income tax expense		—			—			(924	)		—		(924	)

Loss before minority interest in consolidated entity		(3,542	)		(3,542	)		(3,867	)		4,666		(6,285	)
Minority interest in consolidated entity		—			—			583			—		583

Net loss	$	(3,542	)	$	(3,542	)	$	(3,284	)	$	4,666	$	(5,702	)

NEXSTAR BROADCASTING GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11. Condensed Consolidating Financial Information—(Continued)

Statement of Operations

For the Nine Months Ended September 30, 2005

(in thousands)


	Nexstar			Nexstar Finance Holdings			Non-Guarantor Subsidiary			Eliminations		Consolidated Company
Net broadcast revenue (excluding trade and barter)	$	—		$	—		$	149,808		$	—	$	149,808
Trade and barter revenue		—			—			14,720			—		14,720

Total net revenue		—			—			164,528			—		164,528

Operating expenses:
Direct operating expenses (exclusive of depreciation and amortization shown separately below)		—			—			49,630			—		49,630
Selling, general, and administrative expenses (exclusive of depreciation and amortization shown separately below)		117			—			52,526			—		52,643
Loss on property and asset disposal (including deferred gain recognition), net		—			—			645			—		645
Amortization of broadcast rights		—			—			17,121			—		17,121
Amortization of intangible assets		—			—			20,039			—		20,039
Depreciation		—			—			12,746			—		12,746

Total operating expenses		117			—			152,707			—		152,824

Income (loss) from operations		(117	)		—			11,821			—		11,704
Interest expense, including amortization of debt financing costs		—			(8,068	)		(27,264	)		—		(35,332	)
Loss on extinguishment of debt		—			—			(15,715	)		—		(15,715	)
Equity in earnings of subsidiaries		(35,474	)		(27,406	)		—			62,880		—
Other income, net		—			—			520			—		520

Loss before income taxes		(35,591	)		(35,474	)		(30,638	)		62,880		(38,823	)
Income tax expense		—			—			(3,800	)		—		(3,800	)

Net loss	$	(35,591	)	$	(35,474	)	$	(34,438	)	$	62,880	$	(42,623	)

NEXSTAR BROADCASTING GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11. Condensed Consolidating Financial Information—(Continued)

Statement of Operations

For the Nine Months Ended September 30, 2004

(in thousands)


	Nexstar			Nexstar Finance Holdings			Non-Guarantor Subsidiary			Eliminations		Consolidated Company
Net broadcast revenue (excluding trade and barter)	$	—		$	—		$	160,813		$	—	$	160,813
Trade and barter revenue		—			—			14,464			—		14,464

Total net revenue		—			—			175,277			—		175,277

Operating expenses (income):
Direct operating expenses (exclusive of depreciation and amortization shown separately below)		—			—			48,094			—		48,094
Selling, general, and administrative expenses (exclusive of depreciation and amortization shown separately below)		4			—			51,538			—		51,542
Merger related expenses		—			—			456			—		456
Gain on asset disposal (including deferred gain recognition), net		—			—			(185	)		—		(185	)
Amortization of broadcast rights		—			—			18,438			—		18,438
Amortization of intangible assets		—			—			20,197			—		20,197
Depreciation		—			—			13,438			—		13,438

Total operating expenses		4			—			151,976			—		151,980

Income (loss) from operations		(4	)		—			23,301			—		23,297
Interest expense, including amortization of debt financing costs		—			(7,176	)		(31,829	)		—		(39,005	)
Loss on extinguishment of debt		—			(6,824	)		(1,880	)		—		(8,704	)
Equity in earnings of subsidiaries		(16,238	)		(2,238	)		—			18,476		—
Other income, net		—			—			4,445			—		4,445

Loss before income taxes		(16,242	)		(16,238	)		(5,963	)		18,476		(19,967	)
Income tax expense		(32	)		—			(2,805	)		—		(2,837	)

Loss before minority interest in consolidated entity		(16,274	)		(16,238	)		(8,768	)		18,476		(22,804	)
Minority interest in consolidated entity		—			—			1,563			—		1,563

Net loss	$	(16,274	)	$	(16,238	)	$	(7,205	)	$	18,476	$	(21,241	)

NEXSTAR BROADCASTING GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11. Condensed Consolidating Financial Information—(Continued)

Statement of Cash Flows

For the Nine Months Ended September 30, 2005

(in thousands)


	Nexstar		Nexstar Finance Holdings		Non-Guarantor Subsidiary			Eliminations		Consolidated Company
Cash flows provided by operating activities	$	—	$	—	$	1,905		$	—	$	1,905

Cash flows from investing activities:
Additions to property and equipment, net		—		—		(10,644	)		—		(10,644	)
Acquisition of broadcast properties and related transaction costs		—		—		(12,481	)		—		(12,481	)
Other investing activites		—		—		139			—		139

Net cash used for investing activities		—		—		(22,986	)		—		(22,986	)

Cash flows from financing activities:
Proceeds from debt issuance		—		—		427,375			—		427,375
Repayment of long-term debt		—		—		(262,825	)		—		(262,825	)
Proceeds from revolver draws		—		—		1,000			—		1,000
Repayment of senior subordinated notes		—		—		(153,619	)		—		(153,619	)
Payments for debt financing costs		—		—		(3,573	)		—		(3,573	)

Net cash provided by financing activities		—		—		8,358			—		8,358

Net decrease in cash and cash equivalents		—		—		(12,723	)		—		(12,723	)

Cash and cash equivalents at beginning of period		—		—		18,505			—		18,505

Cash and cash equivalents at end of period	$	—	$	—	$	5,782		$	—	$	5,782

NEXSTAR BROADCASTING GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11. Condensed Consolidating Financial Information—(Continued)

Statement of Cash Flows

For the Nine Months Ended September 30, 2004

(in thousands)


	Nexstar			Nexstar Finance Holdings			Non-Guarantor Subsidiary			Eliminations			Consolidated Company
Cash flows provided by (used for) operating activities	$	(227	)	$	(5,982	)	$	25,174		$	104		$	19,069

Cash flows from investing activities:
Additions to property and equipment, net		—			—			(7,370	)		—			(7,370	)
Acquisition of broadcast properties and related transaction costs		—			—			(8,530	)		—			(8,530	)
Other investing activites		—			—			1,029			—			1,029

Net cash used for investing activities		—			—			(14,871	)		—			(14,871	)

Cash flows from financing activities:
Proceeds from debt issuance		—			—			235,000			—			235,000
Repayment of long-term debt		—			—			(247,587	)		—			(247,587	)
Proceeds from revolver draws		—			—			42,000			—			42,000
Repayment of senior discount notes		—			(28,862	)		—			—			(28,862	)
Payments for debt financing costs		—			(5	)		(975	)		—			(980	)
Capital contributions/distributions		—			34,849			(34,745	)		(104	)		—

Net cash provided by (used for) financing activities		—			5,982			(6,307	)		(104	)		(429	)

Net increase (decrease) in cash and cash equivalents		(227	)		—			3,996			—			3,769

Cash and cash equivalents at beginning of period		227			—			10,621			—			10,848

Cash and cash equivalents at end of period	$	—		$	—		$	14,617		$	—		$	14,617

NEXSTAR BROADCASTING GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11. Condensed Consolidating Financial Information—(Continued)

Senior Subordinated Notes

On December 30, 2003 and April 1, 2005, Nexstar Broadcasting, a 100% owned subsidiary of Nexstar Finance Holdings, issued 7% senior subordinated notes (“7% Notes”) due in January 2014. The 7% Notes are fully and unconditionally guaranteed by Nexstar. The following summarized consolidating financial information is presented in lieu of separate financial statements and other related disclosures of Nexstar Broadcasting pursuant to Regulation S-X Rule 3-10 of the Securities Exchange Act of 1934, as amended, “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or being Registered”. The following represents summarized condensed consolidating financial information as of September 30, 2005 and December 31, 2004 with respect to the financial position and for the three and nine months ended September 30, 2005 and 2004 for results of operations and for the nine months ended September 30, 2005 and 2004 for cash flows of Nexstar and its 100%, directly or indirectly, owned subsidiaries and independently-owned Mission Broadcasting, Inc.

The Nexstar column presents the parent company’s financial information. Nexstar is also a guarantor. The Nexstar Broadcasting column presents the issuer’s financial information. The Mission column presents the financial information of Mission Broadcasting, Inc., an entity in which Nexstar Broadcasting is deemed to have a controlling financial interest and is required to be consolidated as a variable interest entity under FIN No. 46R (see Note 2). Mission is also a guarantor of the senior subordinated notes issued by Nexstar Broadcasting. The Non-Guarantor Subsidiary column presents the financial information of Nexstar Finance Holdings, the parent of Nexstar Broadcasting.

NEXSTAR BROADCASTING GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11. Condensed Consolidating Financial Information—(Continued)

Balance Sheet

September 30, 2005

(in thousands)


	Nexstar		Nexstar Broadcasting		Mission			Non-Guarantor Subsidiary		Eliminations			Consolidated Company
ASSETS
Current assets:
Cash and cash equivalents	$	—	$	4,260	$	1,522		$	—	$	—		$	5,782
Due from Mission		—		21,845		—			—		(21,845	)		—
Other current assets		—		59,697		3,934			6		—			63,637

Total current assets		—		85,802		5,456			6		(21,845	)		69,419

Investments in subsidiaries eliminated upon consolidation		31,076		—		—			129,156		(160,232	)		—
Amounts due from parents eliminated upon consolidation		—		5,980		—			—		(5,980	)		—
Property and equipment, net		—		77,602		21,460			—		(41	)		99,021
Goodwill, net		—		129,607		16,665			—		—			146,272
Intangible assets, net		—		276,703		77,742			—		—			354,445
Other noncurrent assets		1		9,172		1,529			2,417		(11	)		13,108

Total assets	$	31,077	$	584,866	$	122,852		$	131,579	$	(188,109	)	$	682,265

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Current portion of debt	$	—	$	1,758	$	1,727		$	—	$	—		$	3,485
Due to Nexstar Broadcasting		—		—		21,845			—		(21,845	)		—
Other current liabilities		117		38,911		4,823			—		—			43,851

Total current liabilities		117		40,669		28,395			—		(21,845	)		47,336

Debt		—		371,525		170,973			98,528		—			641,026
Amounts due to subsidiary eliminated upon consolidation		4,007		—		—			1,973		(5,980	)		—
Other noncurrent liabilities		—		43,516		10,314			2		(11	)		53,821

Total liabilities		4,124		455,710		209,682			100,503		(27,836	)		742,183

Stockholders’ equity (deficit):
Common stock		284		—		—			—		—			284
Other stockholders’ equity (deficit)		26,669		129,156		(86,830	)		31,076		(160,273	)		(60,202	)

Total stockholders’ equity (deficit)		26,953		129,156		(86,830	)		31,076		(160,273	)		(59,918	)

Total liabilities and stockholders’ equity (deficit)	$	31,077	$	584,866	$	122,852		$	131,579	$	(188,109	)	$	682,265

NEXSTAR BROADCASTING GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11. Condensed Consolidating Financial Information—(Continued)

Balance Sheet

December 31, 2004

(in thousands)


	Nexstar		Nexstar Broadcasting		Mission			Non-Guarantor Subsidiary		Eliminations			Consolidated Company
ASSETS
Current assets:
Cash and cash equivalents	$	—	$	11,524	$	6,981		$	—	$	—		$	18,505
Due from Mission		—		20,922		—			—		(20,922	)		—
Other current assets		—		63,999		4,258			6		—			68,263

Total current assets		—		96,445		11,239			6		(20,922	)		86,768

Investments in subsidiaries eliminated upon consolidation		66,550		—		—			156,562		(223,112	)		—
Amounts due from parents eliminated upon consolidation		—		5,980		—			—		(5,980	)		—
Property and equipment, net		—		78,546		22,574			—		(52	)		101,068
Goodwill, net		—		129,269		16,307			—		—			145,576
Intangible assets, net		—		291,607		82,443			—		—			374,050
Other noncurrent assets		1		22,525		2,331			2,658		(12	)		27,503

Total assets	$	66,551	$	624,372	$	134,894		$	159,226	$	(250,078	)	$	734,965

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Current portion of debt	$	—	$	830	$	1,520		$	—	$	—		$	2,350
Due to Nexstar Broadcasting		—		—		20,922			—		(20,922	)		—
Other current liabilities		—		43,906		5,263			—		—			49,169

Total current liabilities		—		44,736		27,705			—		(20,922	)		51,519

Debt		—		365,627		171,220			90,701		—			627,548
Amounts due to subsidiary eliminated upon consolidation		4,007		—		—			1,973		(5,980	)		—
Other noncurrent liabilities		—		41,616		10,037			2		(12	)		51,643

Total liabilities		4,007		451,979		208,962			92,676		(26,914	)		730,710

Minority interest in consolidated entity		—		15,831		5,719			—		—			21,550

Stockholders’ equity (deficit):
Common stock		284		—		1			—		(1	)		284
Other stockholders’ equity (deficit)		62,260		156,562		(79,788	)		66,550		(223,163	)		(17,579	)

Total stockholders’ equity (deficit)		62,544		156,562		(79,787	)		66,550		(223,164	)		(17,295	)

Total liabilities and stockholders’ equity (deficit)	$	66,551	$	624,372	$	134,894		$	159,226	$	(250,078	)	$	734,965

NEXSTAR BROADCASTING GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11. Condensed Consolidating Financial Information—(Continued)

Statement of Operations

For the Three Months Ended September 30, 2005

(in thousands)


	Nexstar			Nexstar Broadcasting			Mission			Non-Guarantor Subsidiary			Eliminations			Consolidated Company
Net broadcast revenue (excluding trade and barter)	$	—		$	48,823		$	557		$	—		$	—		$	49,380
Trade and barter revenue		—			4,001			584			—			—			4,585
Revenue between consolidated entities		—			2,850			6,847			—			(9,697	)		—

Total net revenue		—			55,674			7,988			—			(9,697	)		53,965

Operating expenses (income):
Direct operating expenses (exclusive of depreciation and amortization shown separately below)		—			15,512			1,151			—			—			16,663
Selling, general, and administrative expenses (exclusive of depreciation and amortization shown separately below)		117			17,471			541			—			—			18,129
Selling, general, and administrative expenses between consolidated entities		—			6,847			2,850			—			(9,697	)		—
Loss (gain) on asset disposal (including deferred gain recognition), net		—			41			(43	)		—			—			(2	)
Amortization of broadcast rights		—			4,512			1,169			—			—			5,681
Amortization of intangible assets		—			5,102			1,528			—			—			6,630
Depreciation		—			3,301			699			—			(4	)		3,996

Total operating expenses		117			52,786			7,895			—			(9,701	)		51,097

Income (loss) from operations		(117	)		2,888			93			—			4			2,868
Interest expense, including amortization of debt financing costs		—			(6,236	)		(2,391	)		(2,737	)		—			(11,364	)
Equity in earnings of subsidiaries		(6,231	)		—			—			(3,494	)		9,725			—
Other income, net		—			477			8			—			—			485

Loss before income taxes		(6,348	)		(2,871	)		(2,290	)		(6,231	)		9,729			(8,011	)
Income tax (expense) benefit		78			(623	)		(331	)		—			—			(876	)

Net loss	$	(6,270	)	$	(3,494	)	$	(2,621	)	$	(6,231	)	$	9,729		$	(8,887	)

NEXSTAR BROADCASTING GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11. Condensed Consolidating Financial Information—(Continued)

Statement of Operations

For the Three Months Ended September 30, 2004

(in thousands)


	Nexstar			Nexstar Broadcasting			Mission			Non-Guarantor Subsidiary			Eliminations			Consolidated Company
Net broadcast revenue (excluding trade and barter)	$	—		$	51,756		$	3,621		$	—		$	—		$	55,377
Trade and barter revenue		—			3,917			590			—			—			4,507
Revenue between consolidated entities		—			3,302			5,059			—			(8,361	)		—

Total net revenue		—			58,975			9,270			—			(8,361	)		59,884

Operating expenses (income):
Direct operating expenses (exclusive of depreciation and amortization shown separately below)		—			15,662			1,023			—			—			16,685
Selling, general, and administrative expenses (exclusive of depreciation and amortization shown separately below)		—			16,700			1,198			—			—			17,898
Selling, general, and administrative expenses between consolidated entities		—			5,059			3,302			—			(8,361	)		—
Gain on asset disposal (including deferred gain recognition), net		—			(66	)		(43	)		—			—			(109	)
Amortization of broadcast rights		—			4,898			1,228			—			—			6,126
Amortization of intangible assets		—			4,954			1,354			—			—			6,308
Depreciation		—			3,575			532			—			—			4,107

Total operating expenses		—			50,782			8,594			—			(8,361	)		51,015

Income from operations		—			8,193			676			—			—			8,869
Interest expense, including amortization of debt financing costs		—			(9,226	)		(1,488	)		(2,418	)		—			(13,132	)
Loss on extinguishment of debt		—			(786	)		(1,094	)		—			—			(1,880	)
Equity in earnings of subsidiaries		(3,542	)		—			—			(1,124	)		4,666			—
Other income, net		—			768			14			—			—			782

Loss before income taxes		(3,542	)		(1,051	)		(1,892	)		(3,542	)		4,666			(5,361	)
Income tax expense		—			(656	)		(268	)		—			—			(924	)

Loss before minority interest in consolidated entity		(3,542	)		(1,707	)		(2,160	)		(3,542	)		4,666			(6,285	)
Minority interest in consolidated entity		—			583			—			—			—			583

Net loss	$	(3,542	)	$	(1,124	)	$	(2,160	)	$	(3,542	)	$	4,666		$	(5,702	)

NEXSTAR BROADCASTING GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11. Condensed Consolidating Financial Information—(Continued)

Statement of Operations

For the Nine Months Ended September 30, 2005

(in thousands)


	Nexstar			Nexstar Broadcasting			Mission			Non-Guarantor Subsidiary			Eliminations			Consolidated Company
Net broadcast revenue (excluding trade and barter)	$	—		$	147,977		$	1,831		$	—		$	—		$	149,808
Trade and barter revenue		—			12,835			1,885			—			—			14,720
Revenue between consolidated entities		—			8,550			20,812			—			(29,362	)		—

Total net revenue		—			169,362			24,528			—			(29,362	)		164,528

Operating expenses (income):
Direct operating expenses (exclusive of depreciation and amortization shown separately below)		—			46,358			3,272			—			—			49,630
Selling, general, and administrative expenses (exclusive of depreciation and amortization shown separately below)		117			50,966			1,560			—			—			52,643
Selling, general, and administrative expenses between consolidated entities		—			20,812			8,550			—			(29,362	)		—
Loss (gain) on property and asset disposal (including deferred gain recognition), net		—			721			(76	)		—			—			645
Amortization of broadcast rights		—			13,719			3,402			—			—			17,121
Amortization of intangible assets		—			15,339			4,700			—			—			20,039
Depreciation		—			10,658			2,099			—			(11	)		12,746

Total operating expenses		117			158,573			23,507			—			(29,373	)		152,824

Income (loss) from operations		(117	)		10,789			1,021			—			11			11,704
Interest expense, including amortization of debt financing costs		—			(20,706	)		(6,558	)		(8,068	)		—			(35,332	)
Loss on extinguishment of debt		—			(15,207	)		(508	)		—			—			(15,715	)
Equity in earnings of subsidiaries		(35,474	)		—			—			(27,406	)		62,880			—
Other income, net		—			502			18			—			—			520

Loss before income taxes		(35,591	)		(24,622	)		(6,027	)		(35,474	)		62,891			(38,823	)
Income tax expense		—			(2,784	)		(1,016	)		—			—			(3,800	)

Net loss	$	(35,591	)	$	(27,406	)	$	(7,043	)	$	(35,474	)	$	62,891		$	(42,623	)

NEXSTAR BROADCASTING GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11. Condensed Consolidating Financial Information—(Continued)

Statement of Operations

For the Nine Months Ended September 30, 2004

(in thousands)


	Nexstar		Nexstar Broadcasting			Mission			Non-Guarantor Subsidiary		Eliminations			Consolidated Company
Net broadcast revenue (excluding trade and barter)	$	—	$	148,542		$	12,271		$	—	$	—		$	160,813
Trade and barter revenue		—		12,744			1,720			—		—			14,464
Revenue between consolidated entities		—		9,877			12,650			—		(22,527	)		—

Total net revenue		—		171,163			26,641			—		(22,527	)		175,277

Operating expenses (income):
Direct operating expenses (exclusive of depreciation and amortization shown separately below)		—		44,991			3,103			—		—			48,094
Selling, general, and administrative expenses (exclusive of depreciation and amortization shown separately below)		4		47,974			3,564			—		—			51,542
Selling, general, and administrative expenses between consolidated entities		—		12,650			9,877			—		(22,527	)		—
Merger related expenses		—		456			—			—		—			456
Gain on asset disposal (including deferred gain recognition), net		—		(57	)		(128	)		—		—			(185	)
Amortization of broadcast rights		—		15,057			3,381			—		—			18,438
Amortization of intangible assets		—		16,251			3,946			—		—			20,197
Depreciation		—

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