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 June 30, 2009




OR




 ̈
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




for
the transition period from 
to .




Commission
File Number: 333-62916-02





MISSION
BROADCASTING, INC.


(Exact
name of registrant as specified in its charter)







Delaware
            51-0388022(State
      of Organization
              or
      Incorporation)
            (IRS
      Employer
              Identification
      No.)




7650
      Chippewa Road, Suite 305
              Brecksville,
      Ohio 44141
            (440)
      526-2227(Address
      of Principal Executive Offices, including Zip Code)
            (Registrant’s
      Telephone Number, Including Area
Code)







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




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




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




Large accelerated filer
             ̈
            Accelerated filer
             ̈Non-accelerated
      filer
            x  (Do
      not check if a smaller reporting company)
            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
June 30, 2009, Mission Broadcasting, Inc. had one shareholder, David S.
Smith. Mr. Smith held all 1,000 shares of the outstanding common stock of
Mission Broadcasting, Inc. at June 30, 2009. As of July 31, 2009,
Mission Broadcasting, Inc. had 1,000 shares of outstanding common
stock.





TABLE
OF CONTENTS




PagePART I
            FINANCIAL
      INFORMATIONITEM
      1.
            Financial
      Statements (Unaudited)Condensed
      Balance Sheets at June 30, 2009 and December 31, 2008
            1Condensed
      Statements of Operations for the three and six months ended June 30, 2009
      and 2008
            2Condensed
      Statement of Changes in Shareholder’s Deficit for the six months ended
      June 30, 2009
            3Condensed
      Statements of Cash Flows for the six months ended June 30, 2009 and
      2008
            4Notes
      to Condensed Financial Statements
            5ITEM
      2.
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
            14ITEM
      3.
            Quantitative
      and Qualitative Disclosures about Market Risk
            21ITEM
      4.
            Controls
      and Procedures
            21PART
      II
            OTHER
      INFORMATIONITEM
      1.
            Legal
      Proceedings
            22ITEM 1A.
            Risk
      Factors
            22ITEM
      2.
            Unregistered
      Sales of Equity Securities and Use of Proceeds
            22ITEM 3.
            Defaults
      Upon Senior Securities
            22ITEM 4.
            Submission
      of Matters to a Vote of Security Holders
            22ITEM
      5.
            Other
      Information
            22ITEM
      6.
            Exhibits
            22EXHIBIT
      INDEX




i


PART
I. FINANCIAL INFORMATION




ITEM 1.
            Financial
      Statements


MISSION
BROADCASTING, INC.


CONDENSED
BALANCE SHEETS


(in
thousands, except share information)




June 30,
                  2009
                
                
                December 31,
                  2008(Unaudited)
                
                
                (Note
      2)ASSETSCurrent
      assets:Cash
      and cash equivalents
                
                $
                803
                
                
                $
                1,426Accounts
      receivable
                
                
                1,315
                
                
                
                1,017Current
      portion of broadcast rights
                
                
                1,942
                
                
                
                3,410Prepaid
      expenses and other current assets
                
                
                56
                
                
                
                230Deferred
      tax asset
                
                
                8
                
                
                
                8Total
      current assets
                
                
                4,124
                
                
                
                6,091Property
      and equipment, net
                
                
                28,572
                
                
                
                29,269Broadcast
      rights
                
                
                1,209
                
                
                
                2,215Goodwill
                
                
                18,990
                
                
                
                18,635FCC
      licenses
                
                
                22,695
                
                
                
                22,695Other
      intangible assets, net
                
                
                28,091
                
                
                
                30,665Other
      noncurrent assets
                
                
                141
                
                
                
                164Deferred
      tax asset
                
                
                340
                
                
                
                344Total
      assets
                
                $
                104,162
                
                
                $
                110,078LIABILITIES
      AND SHAREHOLDER’S DEFICITCurrent
      liabilities:Current
      portion of debt
                
                $
                1,727
                
                
                $
                1,727Current
      portion of broadcast rights payable
                
                
                2,189
                
                
                
                3,579Taxes
      payable
                
                
                27
                
                
                
                74Accounts
      payable
                
                
                391
                
                
                
                549Accrued
      expenses
                
                
                842
                
                
                
                945Interest
      payable
                
                
                11
                
                
                
                16Deferred
      revenue
                
                
                1,024
                
                
                
                1,874Due
      to Nexstar Broadcasting, Inc.
                
                
                14,156
                
                
                
                15,468Total
      current liabilities
                
                
                20,367
                
                
                
                24,232Debt
                
                
                171,497
                
                
                
                172,360Broadcast
      rights payable
                
                
                1,853
                
                
                
                2,926Deferred
      tax liabilities
                
                
                6,847
                
                
                
                6,263Deferred
      revenue
                
                
                940
                
                
                
                316Deferred
      gain on sale of assets
                
                
                1,823
                
                
                
                1,910Other
      liabilities
                
                
                4,276
                
                
                
                4,098Total
      liabilities
                
                
                207,603
                
                
                
                212,105Commitments
      and contingenciesShareholder’s
      deficit:Common
      stock, $1 par value; 1,000 shares authorized; 1,000 shares issued and
      outstanding at both June 30 2009 and December 31,
      2008
                
                
                1
                
                
                
                1Subscription
      receivable
                
                
                (1
                )
                
                
                (1
                )Accumulated
      deficit
                
                
                (103,441
                )
                
                
                (102,027
                )Total
      shareholder’s deficit
                
                
                (103,441
                )
                
                
                (102,027
                )Total
      liabilities and shareholder’s deficit
                
                $
                104,162
                
                
                $
                110,078




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


1


MISSION
BROADCASTING, INC.




CONDENSED
STATEMENTS OF OPERATIONS


(in
thousands)




Three
      Months Ended
                  June 30,
                
                
                Six
      Months Ended
                  June 30,2009
                
                
                2008
                
                
                2009
                
                
                2008(Unaudited)
                
                
                (Unaudited)Net
      broadcast revenue
                
                $
                2,065
                
                
                $
                1,630
                
                
                $
                4,174
                
                
                $
                3,165Revenue
      from Nexstar Broadcasting, Inc.
                
                
                6,140
                
                
                
                8,768
                
                
                
                12,228
                
                
                
                16,553Net
      revenue
                
                
                8,205
                
                
                
                10,398
                
                
                
                16,402
                
                
                
                19,718Operating
      expenses:Direct
      operating expenses (exclusive of depreciation and amortization shown
      separately below)
                
                
                1,515
                
                
                
                1,578
                
                
                
                3,141
                
                
                
                3,107Selling,
      general, and administrative expenses (exclusive of depreciation and
      amortization shown separately below)
                
                
                597
                
                
                
                661
                
                
                
                1,342
                
                
                
                1,297Fees
      incurred pursuant to local service agreements with Nexstar Broadcasting,
      Inc.
                
                
                1,800
                
                
                
                2,025
                
                
                
                3,825
                
                
                
                4,040Amortization
      of broadcast rights
                
                
                1,040
                
                
                
                1,123
                
                
                
                2,202
                
                
                
                2,303Amortization
      of intangible assets
                
                
                1,287
                
                
                
                1,352
                
                
                
                2,574
                
                
                
                2,700Depreciation
                
                
                1,039
                
                
                
                831
                
                
                
                1,893
                
                
                
                1,698Gain
      on asset exchange
                
                
                (249
                )
                
                
                (593
                )
                
                
                (497
                )
                
                
                (593
                )(Gain)
      loss on asset disposal, net
                
                
                (1
                )
                
                
                (250
                )
                
                
                2
                
                
                
                (250
                )Total
      operating expenses
                
                
                7,028
                
                
                
                6,727
                
                
                
                14,482
                
                
                
                14,302Income
      from operations
                
                
                1,177
                
                
                
                3,671
                
                
                
                1,920
                
                
                
                5,416Interest
      expense, including amortization of debt financing costs
                
                
                (1,310
                )
                
                
                (1,985
                )
                
                
                (2,716
                )
                
                
                (4,959
                )Interest
      income
                
                
                2
                
                
                
                20
                
                
                
                3
                
                
                
                45Income
      (loss) before income taxes
                
                
                (131
                )
                
                
                1,706
                
                
                
                (793
                )
                
                
                502Income
      tax expense
                
                
                (310
                )
                
                
                (375
                )
                
                
                (621
                )
                
                
                (757
                )Net
      income (loss)
                
                $
                (441
                )
                
                $
                1,331
                
                
                $
                (1,414
                )
                
                $
                (255
                )




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


2


MISSION
BROADCASTING, INC.




CONDENSED
STATEMENT OF CHANGES IN SHAREHOLDER’S DEFICIT


For
the Six Months Ended June 30, 2009


(in
thousands, except share information)




Common
      Stock
                
                
                Subscription
                  Receivable
                
                
                Accumulated
                  Deficit
                
                
                Total
                  Shareholder’s
                  DeficitShares
                
                
                Par ValueBalance
      at January 1, 2009 (Note 2)
                
                
                1,000
                
                
                $
                1
                
                
                $
                (1
                )
                
                $
                (102,027
                )
                
                $
                (102,027
                )Net
      loss
                
                
                ––
                
                
                
                ––
                
                
                
                ––
                
                
                
                (1,414
                )
                
                
                (1,414
                )Balance
      at June 30, 2009 (Unaudited)
                
                
                1,000
                
                
                $
                1
                
                
                $
                (1
                )
                
                $
                (103,441
                )
                
                $
                (103,441
                )




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


3


MISSION
BROADCASTING, INC.





CONDENSED
STATEMENTS OF CASH FLOWS


(in
thousands)


Six
      Months Ended
                          June 30,2009
                        
                        
                        2008(Unaudited)Cash
      flows from operating activities:Net
      loss
                        
                        $
                        (1,414
                        )
                        
                        $
                        (255
                        )Adjustments
      to reconcile net loss to net cash provided by operating
      activities:Deferred
      income taxes
                        
                        
                        588
                        
                        
                        
                        719Depreciation
      of property and equipment
                        
                        
                        1,893
                        
                        
                        
                        1,698Amortization
      of intangible assets
                        
                        
                        2,574
                        
                        
                        
                        2,700Amortization
      of debt financing costs
                        
                        
                        23
                        
                        
                        
                        22Amortization
      of broadcast rights, excluding barter
                        
                        
                        947
                        
                        
                        
                        1,080Payments
      for broadcast rights
                        
                        
                        (936
                        )
                        
                        
                        (891
                        )Gain
      on asset exchange
                        
                        
                        (497
                        )
                        
                        
                        (593
                        )Gain
      (loss) on asset disposal, net
                        
                        
                        2
                        
                        
                        
                        (250
                        )Deferred
      gain recognition
                        
                        
                        (87
                        )
                        
                        
                        (89
                        )Changes
      in operating assets and liabilities net of acquisition:Accounts
      receivable
                        
                        
                        (298
                        )
                        
                        
                        484Prepaid
      expenses and other current assets
                        
                        
                        174
                        
                        
                        
                        120Other
      noncurrent assets
                        
                        
                        ––
                        
                        
                        
                        (1
                        )Taxes
      payable
                        
                        
                        (47
                        )
                        
                        
                        (37
                        )Accounts
      payable and accrued expenses
                        
                        
                        (1,076
                        )
                        
                        
                        961Interest
      payable
                        
                        
                        (5
                        )
                        
                        
                        (10
                        )Deferred
      revenue
                        
                        
                        (226
                        )
                        
                        
                        373Other
      noncurrent liabilities
                        
                        
                        178
                        
                        
                        
                        232Due
      to Nexstar Broadcasting, Inc.
                        
                        
                        (512
                        )
                        
                        
                        90Net
      cash provided by operating activities
                        
                        
                        1,281
                        
                        
                        
                        6,353Cash
      flows from investing activities:Additions
      to property and equipment
                        
                        
                        (1,041
                        )
                        
                        
                        (2,139
                        )Acquisition
      of broadcast properties and related transaction costs
                        
                        
                        ––
                        
                        
                        
                        (7,923
                        )Proceeds
      from insurance on casualty loss
                        
                        
                        ––
                        
                        
                        
                        250Net
      cash used for investing activities
                        
                        
                        (1,041
                        )
                        
                        
                        (9,812
                        )Cash
      flows used for financing activities:Repayment
      of long-term debt
                        
                        
                        (863
                        )
                        
                        
                        (864
                        )Net
      cash used for financing activities
                        
                        
                        (863
                        )
                        
                        
                        (864
                        )Net
      decrease in cash and cash equivalents
                        
                        
                        (623
                        )
                        
                        
                        (4,323
                        )Cash
      and cash equivalents at beginning of period
                        
                        
                        1,426
                        
                        
                        
                        9,916Cash
      and cash equivalents at end of period
                        
                        $
                        803
                        
                        
                        $
                        5,593Supplemental
      schedule of cash flow information:Cash
      paid during the period for:Interest
                        
                        $
                        2,697
                        
                        
                        $
                        4,946Income
      taxes, net
                        
                        $
                        80
                        
                        
                        $
                        75Non-cash
      investing activities:Acquisition
      of equipment in account payable
                        
                        $
                        16
                        
                        
                        $
                        —




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


4


MISSION
BROADCASTING, INC.




NOTES
TO CONDENSED FINANCIAL STATEMENTS




1.
            Organization
      and Business Operations




As of
June 30, 2009, Mission Broadcasting, Inc. (“Mission” or the “Company”) owned and
operated 16 television stations, all of which are affiliated with the NBC, ABC,
CBS, Fox or MyNetworkTV television networks, in markets located in New York,
Pennsylvania, Illinois, Indiana, Missouri, Texas, Louisiana, Arkansas and
Montana. The Company operates in one reportable television broadcasting segment.
Through local service agreements, Nexstar Broadcasting, Inc. (“Nexstar”)
provides sales and operating services to all of the Mission television stations
(see Note 4). As more fully described in Note 10, Mission’s sole shareholder has
granted Nexstar purchase options to acquire the assets and assume the
liabilities of each Mission station, subject to Federal Communications
Commission (“FCC”) consent.




The
Company is highly leveraged, which makes it vulnerable to changes in general
economic conditions. The Company’s ability to repay or refinance its debt will
depend on, among other things, financial, business, market, competitive and
other conditions, many of which are beyond its control, as well as Nexstar
maintaining its pledge to continue the local service agreements with the
Company’s stations. Management believes that with Nexstar’s pledge to continue
the local service agreements through March 27, 2010, as described in a letter of
support dated March 27, 2009, our available cash, anticipated cash flow from
operations and available borrowings under our senior credit facility should be
sufficient to fund working capital, capital expenditure requirements, interest
payments and scheduled debt principal payments for at least the next twelve
months from June 30, 2009, enabling Mission to continue to operate as a going
concern.  If Mission fails to renew the letter of support from Nexstar,
then Mission will no longer continue to operate as a going concern.




Our
ability to continue as a going concern is dependent on Nexstar’s pledge to
continue the local services agreements through March 27, 2010, as described in a
letter of support dated March 27, 2009. Nexstar’s senior secured credit
facility agreement contains covenants which require them to comply with certain
financial ratios, including (a) maximum total and senior leverage ratios,
(b) a minimum interest coverage ratio, and (c) a minimum fixed charge
coverage ratio. The covenants, which are calculated on a quarterly basis,
include the combined results of Nexstar Broadcasting and us. Our senior secured
credit facility agreement does not contain financial covenant ratio
requirements; however it does include an event of default if Nexstar does not
comply with all covenants contained in its credit agreement. As of June 30,
2009, Nexstar was in compliance with all covenants contained in the credit
agreements governing our senior secured credit facility and the indentures
governing the publicly-held notes.




On March
30, 2009, Nexstar closed an offer to exchange $143,600,000 of the 7% senior
subordinated notes due 2014 in exchange for $142,320,761 7% senior subordinated
PIK Notes due 2014 (the “PIK Notes”). Based on the financial covenants in the
Nexstar senior secured credit facility, the PIK Notes are not included in the
debt amount used to calculate the total leverage ratio until January 2011. In
addition to the debt exchange, Nexstar has undertaken certain actions as part of
their efforts to ensure they do not exceed the maximum total leverage and senior
leverage ratios including 1) the elimination of corporate bonuses for 2008 and
2009, 2) the consolidation of various back office processes in certain markets,
3) the execution of a management services agreement whereby Nexstar operates
four stations in exchange for a service fee, and 4) the consummation of purchase
agreements on March 12, 2009  and May 1, 2009 to acquire all the
assets of KARZ and WCWJ, respectively.




In addition
to the above items, Nexstar's plans for 2009 include certain other cost
containment measures, including one week Company furloughs for all employees and
reduction of discretionary operating expenses. Nexstar believes the consummation
of the exchange offer combined with the actions described above, will
allow Nexstar to maintain compliance with all covenants contained in the
credit agreements governing its senior secured facility and the indentures
governing its publicly held notes for a period of at least the next twelve
months from June 30, 2009. However, no assurance can be provided
that Nexstar's actions will be successful or that further adverse events
outside of Nexstar's control may arise that would result in its
inability to comply with the debt covenants.  In such
event, Nexstar would consider a range of transactions or strategies to
address any such situation.  For example, Nexstar might decide to
divest non-core assets, seek an amendment to its bank credit facility,
refinance its existing debt or obtain additional equity
financing.  There is no assurance that any such transactions, or any
other transactions, or strategies Nexstar might consider, could be
consummated on terms satisfactory to Nexstar or at all.


5


MISSION
BROADCASTING, INC.




NOTES
TO CONDENSED FINANCIAL STATEMENTS—(Continued)




2.
            Summary
      of Significant Accounting Policies




Interim
Financial Statements




The
condensed financial statements as of June 30, 2009, and for the three and six
months ended June 30, 2009 and 2008 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
preparation of the condensed financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and reported amounts of
revenue and expenses during the period. Actual results could differ from those
estimates. Results of operations for interim periods are not necessarily
indicative of results for the full year. These financial statements should be
read in conjunction with the financial statements and related notes included in
the Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2008. The balance sheet at December 31, 2008 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.




Basis
of Presentation


During the
second quarter of 2009, the Company corrected depreciation expense and certain
balance sheet accounts for an error discovered during the quarter which
increased three and six months ended June 30, 2009 net loss by $0.2
million.  The error related to the estimated fair values and
subsequent depreciation of certain fixed assets associated with the KTVE
acquisition in 2008 which had shortened useful lives due to the conversion from
analog to digital equipment as mandated by the FCC.  The impact of
correcting this error in 2008 would have also increased net loss by $0.2 million
for the annual period and lesser amounts for each quarter during the
year.  No periods prior to 2008 would have been impacted since the
assets were acquired in January 2008.  We evaluated this error taking
into account both qualitative and quantitative factors and considered the impact
of this error in relation to the current period, which is when it was corrected,
as well as the period in which it originated.  Management believes
this error is immaterial to both the consolidated three and six months ended
June 30, 2009 period and the annual financial statements as well as to 2008
quarterly and annual financial statements.


Recent
Accounting Pronouncements




SFAS No.
168, “The FASB Accounting Standards CodificationTM and the Hierarchy of Generally
Accepted Accounting Principles” a replacement of SFAS No. 162, “Hierarchy of
Generally Accepted Accounting Principles” (“the Codification”). The Codification
is the official single source of authoritative U.S. generally accepted
accounting principles (“GAAP”). All existing accounting standards are
superseded. All other accounting guidance not included in the Codification will
be considered non-authoritative. The Codification also includes all relevant
Securities and Exchange Commission (“SEC”) guidance organized using the same
topical structure in separate sections within the Codification. The Codification
is effective for our third-quarter 2009 financial statements. The Codification
is not expected to change GAAP. The principal impact on our financial statements
from the Codification adoption is limited to disclosures as all future
references to authoritative accounting literature will be referenced in
accordance with the Codification.




SFAS No.
167, “Amendments to FASB Interpretation No. 46(R)” (“FAS 167”). FAS 167 amends
FASB Interpretation No. 46 (“FIN 46”) (revised December 2003), “Consolidation of
Variable Interest entities” (“FIN 46R”) to require an analysis to determine
whether a variable interest gives the entity a controlling financial interest in
a variable interest entity. This statement requires an ongoing reassessment and
eliminates the quantitative approach previously required for determining whether
an entity is the primary beneficiary. FAS 167 is effective for our fiscal year
beginning January 1, 2010. We are currently evaluating the impact of adopting
this standard on our consolidated financial statements.




SFAS No.
166, “Accounting for Transfers of Financial Assets” (“FAS 166”). FAS 166 removes
the concept of a qualifying special-purpose entity from SFAS No. 140,
“Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities” (“FAS 140”) and removes the exception from applying FIN 46R.
This statement also clarifies the requirements for isolation and limitations on
portions of financial assets that are eligible for sale accounting. FAS 166 is
effective for our fiscal year beginning January 1, 2010. We are currently
evaluating the impact of adopting this standard on our consolidated financial
statements.




In May
2009, the FASB issued SFAS No. 165, “Subsequent Events” (“FAS 165”). FAS 165 is
intended to establish general standards of accounting for and disclosure of
events that occur after the balance sheet date but before financial statements
are issued or are available to be issued. It requires disclosure of the date
through which an entity has evaluated subsequent events and the basis for
selecting that date, that is, whether that date represents the date the
financial statements were issued or were available to be issued. FAS 165 is
effective for our second quarter ended June 30, 2009.  We have
evaluated subsequent events through August 12, 2009, which is the date the
financial statements were issued.




In April
2009, the FASB issued FSP No. 107-1, Interim Disclosures about Fair Value
of Financial Instruments (FSP 107-1), which increases the frequency of fair
value disclosures from an annual to a quarterly basis. The guidance relates to
fair value disclosures for any financial instruments that are not currently
reflected on the balance sheet at fair value. The FSP is effective for interim
and annual periods ending after June 15, 2009. The Company adopted this FSP
in the second quarter 2009.  The adoption of this FSP did not impact
our financial position or results of operations.  It did, however,
result in additional disclosures related to the fair value of our
debt.  See Note 7 of these financial statements.


6


MISSION
BROADCASTING, INC.




NOTES TO CONDENSED FINANCIAL
STATEMENTS—(Continued)




2.
            Summary
      of Significant Accounting Policies—(Continued)




In April
2009, the FASB issued FSP No. FAS 157-4, Determining Fair Value When the Volume
and Level of Activity for the Asset or Liability Have Significantly Decreased
and Identifying Transactions That Are Not Orderly. This FSP provides guidance
for estimating fair values when there is no active market or where the price
inputs being used represent distressed sales and identifying circumstances that
indicate a transaction is not orderly. This FSP is effective for interim and
annual reporting periods ending after June 15, 2009.  We adopted
this FSP in the second quarter of 2009. Adoption of the FSP did not have any
effect on the Company’s financial position or results of
operations.




In April
2008, the FASB issued FSP No. FAS 142-3, Determination of the Useful Life of
Intangible Assets. FSP No. FAS 142-3 amends the factors that should be
considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset under FASB Statement No. 142,
Goodwill and Other Intangible Assets. This new guidance also provides additional
disclosure requirements related to recognized intangible assets. The Company
adopted FSP No. FAS 142-3 in January 2009 and it did not have a material impact
on our financial position or results of operations.




In January 2008, the
Company adopted SFAS No. 157, Fair Value Measurements. The adoption did not
have a material impact on our financial position or results of operations. The
statement established a framework for measuring fair value, and it enhanced the
disclosures for fair value measurements. The statement applies when other
accounting pronouncements require or permit fair value measurements, but it does
not require new fair value measurements. In February 2008, the FASB issued a
one-year deferral for nonfinancial assets and liabilities to comply with SFAS
No. 157. The Company adopted SFAS No. 157 for nonfinancial assets and
liabilities in first quarter 2009. There were no material effects on our
financial statements upon adoption of this new accounting pronouncement;
however, this pronouncement could have a material impact in future
periods.




In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations, and
SFAS No. 160, Accounting and Reporting of Noncontrolling Interests in
Consolidated Financial Statements, an Amendment of Accounting Research Bulletin
No. 51. These new standards significantly change the accounting for and
reporting of business combination transactions and noncontrolling (minority)
interests in consolidated financial statements. The Company adopted SFAS Nos.
141(R) and 160 on January 1, 2009. The impact of adopting 141(R) will be
primarily limited to business combinations occurring on or after January 1,
2009. FAS 160 had no impact on our financial position or results of
operations.




3.
            Fair
      Value Measurements




The
Company adopted SFAS No. 157 effective January 1, 2008 for financial
assets and financial liabilities measured on a recurring basis and
January 1, 2009 for non-financial assets and non-financial liabilities.
SFAS No. 157 applies to all assets and liabilities that are being measured
and reported on a fair value basis. There was no impact for adoption of SFAS
No. 157 to the Unaudited Condensed Consolidated Financial Statements as it
relates to assets and liabilities. SFAS No. 157 requires disclosure that
establishes a framework for measuring fair value and expands disclosure about
fair value measurements. The statement requires fair value measurement be
classified and disclosed in one of the following three categories:




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




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




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




The
Company invests in short term interest bearing obligations with original
maturities less than 90 days, primarily money market funds. Mission does not
enter into investments for trading or speculative purposes. As of June 30, 2009
and December 31, 2008, there were no investments in marketable
securities.


7


MISSION
BROADCASTING, INC.




NOTES TO CONDENSED FINANCIAL
STATEMENTS—(Continued)




3.
            Fair
      Value Measurements—(Continued)







As of
June 30, 2009 and December 31, 2008, the Company had $680 thousand and $1
thousand invested in a money market investment, respectively. These investments
are required to be measured at fair value on a recurring basis. The Company has
determined that the money market investment is defined as Level 1 in the fair
value hierarchy. As of June 30, 2009 and December 31, 2008, the fair value
of the money market investment was an asset of $680 thousand and $1 thousand,
respectively.




4.
            Local
      Service Agreements with Nexstar




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




The
arrangements under the local service agreements each Mission station has entered
into with Nexstar have had the effect of Nexstar receiving substantially all of
the available cash, after Mission’s payment of operating costs and debt service,
generated by the Company’s stations. Mission anticipates that Nexstar will
continue to receive substantially all of Mission’s available cash, after
payments for operating costs and debt service, generated by its
stations.




In 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.







8


MISSION
BROADCASTING, INC.




NOTES
TO CONDENSED FINANCIAL STATEMENTS—(Continued)





4.
            Local
      Service Agreements with Nexstar—(Continued)





The
following table summarizes the various local service agreements Mission-owned
stations had in effect with Nexstar as of June 30, 2009:




Station
              Market
              Affiliation
              Type
      of
                Agreement
              Expiration
              Consideration
      received from or paid to NexstarMission-Owned:WFXP
              Erie,
      PA
              Fox
              TBA
              8/16/11
              Monthly
      payments received from Nexstar(1)KJTL
      and
              Wichita
      Falls, TX-Lawton, OK
              Fox
              SSA
              5/31/19
              $60
      thousand per month paid to NexstarKJBO-LP
              
              MyNetworkTV
              JSA
              5/31/19
              70%
      of the KJTL/KJBO-LP net revenue collected each month received from
      NexstarWYOU
              Wilkes
      Barre-Scranton, PA
              CBS
              SSA
              1/4/18
              $35
      thousand per month paid to NexstarJSA
              9/30/14
              70%
      of the WYOU net revenue collected each month received from
      NexstarKODE
              Joplin,
      MO-Pittsburg, KS
              ABC
              SSA
              3/31/12
              $75
      thousand per month paid to NexstarJSA
              9/30/14
              70%
      of the KODE net revenue collected each month received from
      NexstarKRBC
              Abilene-Sweetwater,
      TX
              NBC
              SSA
              6/12/13
              $25
      thousand per month paid to NexstarJSA
              6/30/14
              70%
      of the KRBC net revenue collected each month received from
      NexstarKSAN
              San
      Angelo, TX
              NBC
              SSA
              5/31/14
              $10
      thousand per month paid to NexstarJSA
              5/31/14
              70%
      of the KSAN net revenue collected each month received from
      NexstarWFXW
              Terre
      Haute, IN
              Fox
              SSA
              5/8/13
              $10
      thousand per month paid to NexstarJSA
              5/8/13
              70%
      of the WFXW net revenue collected each month received from
      NexstarKCIT
      and KCPN-LP
              Amarillo,
      TX
              Fox
              SSA
              4/30/19
              $50
      thousand per month paid to NexstarKCPN-LP
              
              MyNetworkTV
              JSA
              4/30/19
              70%
      of the KCIT/KCPN-LP net revenue collected each month received from
      NexstarKHMT
              Billings,
      MT
              Fox
              TBA
              12/13/09
              Monthly
      payments received from Nexstar(1)KAMC
              Lubbock,
      TX
              ABC
              SSA
              2/15/19
              $75
      thousand per month paid to NexstarJSA
              2/15/19
              70%
      of the KAMC net revenue collected each month received from
      NexstarKOLR
              Springfield,
      MO
              CBS
              SSA
              2/15/19
              $150
      thousand per month paid to NexstarJSA
              2/15/19
              70%
      of the KOLR net revenue collected each month received from
      NexstarWUTR
              Utica,
      NY
              ABC
              SSA
              3/31/14
              $10
      thousand per month paid to NexstarJSA
              3/31/14
              70%
      of the WUTR net revenue collected each month received from
      NexstarWTVO
              Rockford,
      IL
              ABC
              SSA
              10/31/14
              $75
      thousand per month paid to NexstarJSA
              10/31/14
              70%
      of the WTVO net revenue collected each month received from
      NexstarKTVE
              Monroe,
      LA – El Dorado, AR
              NBC
              SSA
              1/16/18
              $20
      thousand per month paid to NexstarJSA
              1/16/18
              70%
      of the KTVE net revenue collected each month received from
      NexstarNexstar-owned:KFTA
              Ft.
      Smith-Fayetteville-Springdale-Rogers, AR
              Fox/NBC
              TBA
              (2)
              $5
      thousand per month paid to Nexstar
                $20
      thousand per month received from
Nexstar





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


(2)
            TBA
      will terminate upon the assignment of KFTA’s FCC license from
      Nexstar.


9


MISSION
BROADCASTING, INC.




NOTES
TO CONDENSED FINANCIAL STATEMENTS—(Continued)





4.
            Local
      Service Agreements with Nexstar—(Continued)




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




5.
            Pending
      Transaction with Nexstar




On
April 11, 2006, Nexstar and Mission filed an application with the FCC for
consent to assignment of the license for KFTA Channel 24 (Ft. Smith, Arkansas)
from Nexstar to Mission. Consideration for this transaction is set at $5.6
million. On August 28, 2006, Mission and Nexstar entered into a local
service agreement (see Note 4) whereby Mission pays Nexstar for the right to
broadcast programming on KFTA and Nexstar pays Mission for the right to sell all
advertising time on KFTA within certain time periods. Also in 2006, Mission
entered into an affiliation agreement with the Fox network which provides Fox
programming to KFTA. Upon completing the assignment of KFTA’s license, the
Company plans to enter into JSA and SSA agreements with Nexstar-owned KNWA in
Fort Smith-Fayetteville-Springdale-Rogers, Arkansas, whereby KNWA will provide
local news, sales and other non-programming services to KFTA.




In March
2008, the FCC granted the application to assign the license for KFTA from
Nexstar to Mission. The grant contained conditions which Nexstar is currently
appealing.




6.
            Intangible
      Assets and Goodwill




Intangible
assets subject to amortization consisted of the following:




Estimated
                  useful
      life
                  (years)
                
                
                June 30,
      2009
                
                
                December 31,
      2008Gross
                
                
                Accumulated
                  Amortization
                
                
                Net
                
                
                Gross
                
                
                Accumulated
                  Amortization
                
                
                Net(in thousands)
                
                
                
                
                
                
                
                
                (in thousands)Network
      affiliation agreements
                
                
                15
                
                
                $
                66,443
                
                
                $
                (42,213
                )
                
                $
                24,230
                
                
                $
                66,443
                
                
                $
                (40,079
                )
                
                $
                26,364Other
      definite-lived intangible assets
                
                
                1-15
                
                
                
                13,117
                
                
                
                (9,256
                )
                
                
                3,861
                
                
                
                13,117
                
                
                
                (8,816
                )
                
                
                4,301Total
      intangible assets subject to amortization
                
                
                
                
                
                $
                79,560
                
                
                $
                (51,469
                )
                
                $
                28,091
                
                
                $
                79,560
                
                
                $
                (48,895
                )
                
                $
                30,665




Total
amortization expense from definite-lived intangibles was $1.3 million and $1.4
million for the three months ended June 30, 2009 and 2008, respectively and $2.6
million and $2.7 million, respectively for the six months then ended. The
Company’s estimate of amortization expense for definite-lived intangible assets
as of June 30, 2009 is approximately $5.2 million for each year for the years of
2009 through 2013.




The
aggregate carrying value of indefinite-lived intangibles, consisting of FCC
licenses and goodwill, was $41.7 million and $41.3 million at June 30, 2009 and
December 31, 2008, respectively. The Company expenses any costs to renew
its FCC licenses as incurred. 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 June
30, 2009, the Company did not identify any events that would trigger an
impairment assessment.




The
change in the carrying amount of goodwill for the six months ended June 30, 2009
was as follows (in thousands):







June
      30,
                  2009Beginning
      balance
                
                $
                18,635Reclassification
      of asset
                
                
                355Ending
      balance
                
                $
                18,990




During
the six months ended June 30, 2009, the Company reclassified certain amounts
representing goodwill that were improperly classified as property and equipment
when recording the fair value of KTVE assets, which were acquired in
2008.


10


MISSION
BROADCASTING, INC.




NOTES
TO CONDENSED FINANCIAL STATEMENTS—(Continued)




7.
            Debt




Long-term
debt consisted of the following:




June
      30,
                            2009
                          
                          
                          December 31,
                            2008(in
      thousands)Term
      loans
                          
                          $
                          166,224
                          
                          
                          $
                          167,087Revolving
      credit facility
                          
                          
                          7,000
                          
                          
                          
                          7,000173,224
                          
                          
                          
                          174,087Less:
      current portion
                          
                          
                          (1,727
                          )
                          
                          
                          (1,727
                          )$
                          171,497
                          
                          
                          $
                          172,360




Senior Secured
Credit Facility




The
Mission senior secured credit facility (the “Mission Facility”) consists of a
Term Loan B and a $15.0 million revolving loan. As of June 30, 2009 and
December 31, 2008, Mission had $166.2 million and $167.1 million,
respectively, outstanding under its Term Loan B and $7.0 million of borrowings
were outstanding under its revolving loan.




The Term
Loan B, which matures in October 2012, is payable in consecutive quarterly
installments amortized at 0.25% quarterly, with the remaining 93.25% due at
maturity. During the six months ended June 30, 2009, repayments of Mission’s
Term Loan B totaled $0.9 million, all of which were scheduled maturities. The
revolving loan is not subject to incremental reduction and matures in April
2012.




The total
weighted-average interest rate of the Mission Facility was 2.33% and 3.20% at
June 30, 2009 and December 31, 2008, respectively. Interest is payable
periodically based on the type of interest rate selected. Additionally, Mission
is required to pay quarterly commitment fees on the unused portion of its
revolving loan commitment ranging from 0.375% to 0.50% per annum, based on
the consolidated senior leverage ratio of Nexstar and Mission for that
particular quarter.




Unused
Commitments and Borrowing Availability




As of
June 30, 2009, there were $8.0 million of unused commitments under the Mission
Facility. The total amount of borrowings available under the revolving loan
commitment of the Mission Facility is based on covenant calculations contained
in Nexstar’s credit agreement. As of June 30, 2009, $2.2 million of total unused
commitments under the Mission Facility were available for
borrowing.




Collateralization
and Guarantees of Debt




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




Debt
Covenants




The
Mission Facility does not contain financial covenant ratio requirements, but
does provide for default in the event Nexstar does not comply with all covenants
contained in its credit agreement.  Nexstar was in compliance with
their debt covenants at June 30, 2009.


11


MISSION
BROADCASTING, INC.




NOTES TO CONDENSED FINANCIAL
STATEMENTS—(Continued)




7.
            Debt—(Continued)




Fair
Value of Debt




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







June
      30, 2009
              
              
              December
      31, 2008Carrying
                  Amount
              
              
              Fair
                  Value
              
              
              Carrying
                  Amount
              
              
              Fair
                  Value(in
      thousands)Term
      loans(1)
              
              $
              166,224
              
              
              $
              122,369
              
              
              $
              167,087
              
              
              $
              151,059Revolving
      credit facilities(1)
              
              $
              7,000
              
              
              $
              5,284
              
              
              $
              7,000
              
              
              $
              6,284





(1)
            The
      fair value of bank credit facilities is computed based on borrowing rates
      currently available to Mission for bank loans with similar terms and
      average maturities.




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 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 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
believes they may not be realized through future taxable earnings.




At
January 1, 2009, the Company had gross unrecognized tax benefits of
approximately $3.7 million, which did not materially change as of June 30, 2009.
If recognized, this amount would result in a favorable effect on the Company’s
effective tax rate excluding impact on the Company’s valuation allowance. As of
June 30, 2009, the Company has not accrued interest on the unrecognized tax
benefits since an unfavorable outcome upon examination would not result in a
cash outlay but would reduce NOLs subject to a valuation allowance. The Company
does not expect the amount of unrecognized tax benefits to significantly change
in the next twelve months.




The
Company files income tax returns in the U.S. federal jurisdiction and various
state jurisdictions. The Company is subject to U.S. federal tax examinations for
years after 2004. Additionally, any NOLs that were generated in prior years and
that are utilized in the future may be subject to examination by the Internal
Revenue Service. State jurisdictions that remain subject to examination are not
considered significant.




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. The FCC’s ongoing rule making proceedings
could have a significant future impact on the television industry and on the
operation of the Company’s stations and the stations it provides services to. In
addition, the U.S. Congress may act to amend the Communications Act in a manner
that could impact the Company’s stations, the stations it provides services to
and the television broadcast industry in general.




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




Digital
Television (“DTV”) Conversion




On June
12, 2009, all full-power television broadcasters were required to cease
operating in an analog format and operate exclusively in digital (DTV)
format.  All of Mission’s stations have completed the transition from
analog to digital and hold DTV authorizations issued by the
FCC.


12


MISSION
BROADCASTING, INC.




NOTES TO CONDENSED FINANCIAL
STATEMENTS—(Continued)





9.
            FCC
      Regulatory Matters—(Continued)




DTV
conversion expenditures were $1.0 million and $2.0 million, for the six months
ended June 30, 2009 and 2008, respectively.




Media
Ownership




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





10.
            Commitments
      and Contingencies




Guarantees
of Nexstar Debt




Mission
is a guarantor of and has pledged substantially all its assets, excluding FCC
licenses, to guarantee Nexstar’s bank credit facility. Nexstar’s bank credit
facility, which matures in 2012, consists of a Term Loan B and a $82.5 million
revolving loan.




Mission
is also a guarantor of the 7% senior subordinated notes (“7% Notes”) and 7% PIK
senior subordinated notes, both due 2014 issued by Nexstar. Both notes are
general unsecured senior subordinated obligations subordinated to all of
Mission’s senior debt.




Mission
guarantees full payment of all obligations incurred under Nexstar’s bank credit
facility agreement and the 7% Notes. In the event that Nexstar is unable to
repay amounts due under these debt obligations, Mission will be obligated to
repay such amounts. The maximum potential amount of future payments that Mission
would be required to make under these guarantees would be generally limited to
the amount of borrowings outstanding under Nexstar’s bank credit facility, the
7% PIK senior subordinated notes and the 7% Notes. At June 30, 2009, Nexstar had
issued an aggregate principal amount of $46.9 million of the 7% Notes, $127.7
million of the 7% PIK senior subordinated notes and had $235.2 million
outstanding under its bank credit facility.




Purchase
Options Granted to Nexstar




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




Indemnification
Obligations




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




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




13




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




The
following discussion and analysis should be read in conjunction with the
unaudited condensed balance sheet as of June 30, 2009, unaudited condensed
statements of operations for the three months and six months ended June 30,
2009 and 2008, unaudited condensed statement of changes in shareholder’s deficit
for the six months ended June 30, 2009, unaudited condensed statements of
cash flows for the six months ended June 30, 2009 and 2008 and related
notes included elsewhere in this Quarterly Report on Form 10-Q and the financial
statements contained in our Annual Report on Form 10-K for the year ended
December 31, 2008.




Executive
Summary




Overview
of Operations




As of
June 30, 2009, we owned and operated 16 television stations. We have local
service agreements with certain television stations of Nexstar Broadcasting,
Inc. (“Nexstar”), through which Nexstar provides various programming, sales or
other services to our television stations. In order for both Nexstar and us to
comply with Federal Communications Commission (“FCC”) regulations, we maintain
complete responsibility for and control over programming, finances, personnel
and operations of our stations.




The
following table summarizes the various local service agreements our stations had
in effect as of June 30, 2009 with Nexstar:




Service Agreements
            StationsTBA
      Only(1)
            WFXP
      and KHMTSSA &
      JSA(2)
            KJTL,
      KJBO-LP, KOLR, KCIT, KCPN-LP, KAMC, KRBC, KSAN, WUTR, WFXW, WYOU, KODE,
      WTVO and KTVE





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


(2)
            We
      have both a shared services agreement (“SSA”) and a joint sales agreement
      (“JSA”) for each of these stations. The SSA allows the Nexstar station in
      the market to provide certain services including news production,
      technical maintenance and security, in exchange for Nexstar’s right to
      receive certain payments from us as described in the SSAs. The JSA permits
      Nexstar to sell and retain a percentage of the net revenue from the
      station’s advertising time in return for monthly payments to us of the
      remaining percentage of the net revenue, as described in the
      JSAs.




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




Nexstar
Broadcasting Group, Inc. and its subsidiaries (“Nexstar Broadcasting Group”)
guarantee all obligations incurred under our senior credit facility. We are a
guarantor of the senior credit facility entered into by Nexstar and the 7%
senior subordinated notes issued by Nexstar. In consideration of Nexstar’s
guarantee of our senior credit facility, our sole shareholder has granted
Nexstar purchase options to acquire the assets and assume the liabilities of
each of our television stations, subject to FCC consent. These option agreements
(which expire on various dates between 2011 and 2018) are freely exercisable or
assignable by Nexstar without consent or approval by our sole shareholder. We
expect these option agreements to be renewed upon expiration.


14


Historical
Performance




Revenue




The
following table sets forth the principal types of revenue earned by our stations
for the periods indicated and each type of revenue (other than barter revenue
and revenue from Nexstar Broadcasting, Inc.) as a percentage of total gross
revenue:





Three Months
      Ended June 30,
                  
                  
                  Six Months
      Ended June 30,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Amount
                  
                  
                  %
                  
                  
                  Amount
                  
                  
                  %
                  
                  
                  Amount
                  
                  
                  %
                  
                  
                  Amount
                  
                  
                  %(in
      thousands, except percentages)
                  
                  
                  (in
      thousands, except percentages)Retransmission
      compensation
                  
                  $
                  1,210
                  
                  
                  
                  82.4
                  
                  
                  $
                  705
                  
                  
                  
                  68.8
                  
                  
                  $
                  2,385
                  
                  
                  
                  81.7
                  
                  
                  $
                  1,365
                  
                  
                  
                  70.3Network
      compensation
                  
                  
                  243
                  
                  
                  
                  16.5
                  
                  
                  
                  293
                  
                  
                  
                  28.6
                  
                  
                  
                  499
                  
                  
                  
                  17.1
                  
                  
                  
                  528
                  
                  
                  
                  27.2Other
                  
                  
                  16
                  
                  
                  
                  1.1
                  
                  
                  
                  26
                  
                  
                  
                  2.6
                  
                  
                  
                  35
                  
                  
                  
                  1.2
                  
                  
                  
                  49
                  
                  
                  
                  2.5Net
      broadcast revenue before barter
                  
                  
                  1,469
                  
                  
                  
                  100.0
                  
                  
                  
                  1,024
                  
                  
                  
                  100.0
                  
                  
                  
                  2,919
                  
                  
                  
                  100.0
                  
                  
                  
                  1,942
                  
                  
                  
                  100.0Barter
      revenue
                  
                  
                  596
                  
                  
                  
                  
                  
                  
                  
                  606
                  
                  
                  
                  
                  
                  
                  
                  1,255
                  
                  
                  
                  
                  
                  
                  
                  1,223Revenue
      from Nexstar Broadcasting, Inc.
                  
                  
                  6,140
                  
                  
                  
                  
                  
                  
                  
                  8,768
                  
                  
                  
                  
                  
                  
                  
                  12,228
                  
                  
                  
                  
                  
                  
                  
                  16,553Net
      revenue
                  
                  $
                  8,205
                  
                  
                  
                  
                  
                  
                  $
                  10,398
                  
                  
                  
                  
                  
                  
                  $
                  16,402
                  
                  
                  
                  
                  
                  
                  $
                  19,718




Results
of Operations




The
following table sets forth a summary of our operations for the periods indicated
and their percentages of net revenue:




Three Months Ended
      June 30,
                  
                  
                  Six Months Ended
    June 30,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Amount
                  
                  
                  %
                  
                  
                  Amount
                  
                  
                  %
                  
                  
                  Amount
                  
                  
                  %
                  
                  
                  Amount
                  
                  
                  %(in
      thousands, except percentages)
                  
                  
                  (in
      thousands, except percentages)Net
      revenue
                  
                  $
                  8,205
                  
                  
                  
                  100.0
                  
                  
                  $
                  10,398
                  
                  
                  
                  100.0
                  
                  
                  $
                  16,402
                  
                  
                  
                  100.0
                  
                  
                  $
                  19,718
                  
                  
                  
                  100.0Operating
      expenses:Corporate
      expenses
                  
                  
                  223
                  
                  
                  
                  2.7
                  
                  
                  
                  177
                  
                  
                  
                  1.7
                  
                  
                  
                  552
                  
                  
                  
                  3.4
                  
                  
                  
                  457
                  
                  
                  
                  2.3Station
      direct operating expenses, net of trade
                  
                  
                  1,515
                  
                  
                  
                  18.5
                  
                  
                  
                  1,578
                  
                  
                  
                  15.2
                  
                  
                  
                  3,141
                  
                  
                  
                  19.2
                  
                  
                  
                  3,107
                  
                  
                  
                  15.8Selling,
      general and administrative expenses
                  
                  
                  374
                  
                  
                  
                  4.6
                  
                  
                  
                  484
                  
                  
                  
                  4.7
                  
                  
                  
                  790
                  
                  
                  
                  4.8
                  
                  
                  
                  840
                  
                  
                  
                  4.3Fees
      incurred pursuant to local service agreements with Nexstar Broadcasting,
      Inc.
                  
                  
                  1,800
                  
                  
                  
                  21.9
                  
                  
                  
                  2,025
                  
                  
                  
                  19.5
                  
                  
                  
                  3,825
                  
                  
                  
                  23.3
                  
                  
                  
                  4,040
                  
                  
                  
                  20.5Gain
      on asset exchange
                  
                  
                  (249
                  )
                  
                  
                  (3.0
                  )
                  
                  
                  (593
                  )
                  
                  
                  (5.7
                  )
                  
                  
                  (497
                  )
                  
                  
                  (3.0
                  )
                  
                  
                  (593
                  )
                  
                  
                  (3.0
                  )(Gain)
      loss on asset disposal, net
                  
                  
                  (1
                  )
                  
                  
                  —
                  
                  
                  
                  (250
                  )
                  
                  
                  (2.4
                  )
                  
                  
                  2
                  
                  
                  
                  —
                  
                  
                  
                  (250
                  )
                  
                  
                  (1.3
                  )Barter
      expense
                  
                  
                  596
                  
                  
                  
                  7.3
                  
                  
                  
                  606
                  
                  
                  
                  5.8
                  
                  
                  
                  1,255
                  
                  
                  
                  7.7
                  
                  
                  
                  1,223
                  
                  
                  
                  6.2Depreciation
      and amortization
                  
                  
                  2,326
                  
                  
                  
                  28.3
                  
                  
                  
                  2,183
                  
                  
                  
                  21.0
                  
                  
                  
                  4,467
                  
                  
                  
                  27.2
                  
                  
                  
                  4,398
                  
                  
                  
                  22.3Amortization
      of broadcast rights, excluding barter
                  
                  
                  444
                  
                  
                  
                  5.4
                  
                  
                  
                  517
                  
                  
                  
                  5.0
                  
                  
                  
                  947
                  
                  
                  
                  5.8
                  
                  
                  
                  1,080
                  
                  
                  
                  5.5Income
      from operations
                  
                  $
                  1,177
                  
                  
                  
                  
                  
                  
                  $
                  3,671
                  
                  
                  
                  
                  
                  
                  $
                  1,920
                  
                  
                  
                  
                  
                  
                  $
                  5,416
  Three
Months Ended June 30, 2009 Compared to Three Months Ended June 30,
2008.




Revenue




Net
revenue was $8.2 million for the three months ended June 30, 2009 compared
to $10.4 million for the same period in 2008, a decrease of $2.2 million, or
21.1%. This decrease was primarily attributed to a decrease in revenue from
Nexstar, partially offset by an increase in retransmission compensation, as
discussed below.




Revenue
from Nexstar was $6.1 million for the three months ended June 30, 2009,
compared to $8.8 million for the same period in 2008, a decrease of $2.7
million, or 30.0%. The decrease was attributed to a decrease in revenue that
Nexstar generated from selling all of the advertising of our stations, which in
turn decreased the revenue we earned from Nexstar through
JSA’s.


15




Compensation from retransmission
consent and network affiliation agreements was $1.5 million for the three months
ended June 30, 2009, compared to $1.0 million for the same period in 2008,
an increase of $0.5 million, or 45.6%. The increase was primarily due to
renegotiated retransmission consent agreements starting in January
2009.




Operating
Expenses




Corporate
expenses were $0.2 million for each of the three months ended June 30, 2009
and 2008.  Corporate expense relates to costs associated with the
centralized management of our stations.




Station
direct operating expenses, consisting primarily of news, engineering and
programming, and selling, general and administrative expenses decreased by $0.2
million, or 8.4% for the three months ended June 30, 2009, compared to the
same period in 2008. The decrease was primarily due to a reduction in the cost
of certain employee benefits in the current year period.




Local
service agreement fees associated with Nexstar relate to services provided by
Nexstar in the production of newscasts, technical maintenance, promotional and
administrative support under the SSAs. SSA fees decreased by $0.2 million, or
11.1%, for the three months ended June 30, 2009 compared to the same period
in 2008. The decrease was a result of the reduction in fees because of the
elimination of the newscast in Wilkes-Barre.




Depreciation
of property and equipment was $1.0 million and $0.8 million for the three months
ended June 30, 2009 and 2008, respectively.  The increase was
primarily due to the acceleration of depreciation on obsolete analog
equipment.




Amortization
of broadcast rights, excluding barter, decreased by $0.1 million, or 14.1%, for
the three months ended June 30, 2009, compared to the same period in
2008.




Amortization
of intangible assets was $1.3 million and $1.4 million for the three
months ended June 30, 2009 and 2008, respectively.




For the
three months ended June 30, 2009 and 2008, we recognized gains of $0.2 million
and $0.6 million from the exchange of equipment under an arrangement with Sprint
Nextel Corporation. During the three months ended June 30, 2008, we recognized a
gain of $0.2 million related to an insurance recovery of a casualty
loss.




Income
from Operations




Income
from operations was $1.2 million for the three months ended June 30, 2009,
compared to $3.7 million for the same period of 2008, a decrease of
$2.5 million or 67.9%. The decrease in income from operations for the three
months ended June 30, 2009 was primarily attributed to lower JSA revenue
from Nexstar, partially offset by an increase in retransmission
compensation.




Interest
Expense




Interest
expense, including amortization of debt financing costs, decreased by $0.7
million, or 34.0%, for the three months ended June 30, 2009, compared to
the same period in 2008. The decreased amount of interest expense was primarily
attributed to lower average interest rates during the current year
period.




Income
Taxes




Income
tax expense decreased by $0.1 million for the three months ended June 30,
2009, compared to the same period in 2008. The decrease was primarily due to a
reduction in deferred tax expense associated with deferred tax liabilities
representing the difference between the book and tax basis of goodwill and other
indefinite-lived intangible assets.  The impairment charges recorded
in September 30 and December 31, 2008 reduced these deferred tax liabilities
which resulted in a reduction in deferred tax expense during this
period.




Six
Months Ended June 30, 2009 Compared to Six Months Ended June 30,
2008.




Revenue




Net
revenue was $16.4 million for the six months ended June 30, 2009 compared
to $19.7 million for the same period in 2008, a decrease of $3.3 million, or
16.8%. This decrease was primarily attributed to a decrease in revenue from
Nexstar, partially offset by an increase in retransmission compensation, as
discussed below.


16




Revenue
from Nexstar was $12.2 million for the six months ended June 30, 2009,
compared to $16.6 million for the same period in 2008, a decrease of $4.4
million, or 26.1%. The decrease was attributed to a decrease in revenue that
Nexstar generated from selling all of the advertising of our stations, which in
turn decreased the revenue we earned from Nexstar through JSAs.




Compensation
from retransmission consent and network affiliation agreements was $2.9 million
for the six months ended June 30, 2009, compared to $1.9 million for the
same period in 2008, an increase of $1.0 million, or 52.4%. The increase was
primarily due to renegotiated retransmission consent agreements starting in
January 2009.




Operating
Expenses




Corporate
expenses were $0.6 million and $0.5 million for the six months ended
June 30, 2009 and 2008 respectively, an increase of $0.1 million or 20.8%.
Corporate expense relates to costs associated with the centralized management of
our stations.




Station
direct operating expenses, consisting primarily of news, engineering and
programming, and selling, general and administrative expenses remained
relatively flat for the six months ended June 30, 2009, compared to the
same period in 2008.




Local
service agreement fees associated with Nexstar relate to services provided by
Nexstar in the production of newscasts, technical maintenance, promotional and
administrative support under the SSAs. SSA fees decreased by $0.2 million, or
5.3%, for the six months ended June 30, 2009 compared to the same period in
2008. The decrease was a result of the reduction in fees caused by the
elimination of the newscast in Wilkes-Barre.




Depreciation
of property and equipment was $1.9 million and $1.7 million for the six months
ended June 30, 2009 and 2008, respectively.  The increase was
primarily due to the acceleration of depreciation on obsolete analog
equipment.




Amortization
of broadcast rights, excluding barter, decreased by $0.1 million, or 12.3%, for
the six months ended June 30, 2009, compared to the same period in
2008.




Amortization
of intangible assets was $2.6 million and $2.7 million for the six months ended
June 30, 2009 and 2008, respectively.




For the
six months ended June 30, 2009 and 2008, we recognized gains of $0.5 million and
$0.6 million from the exchange of equipment under an arrangement with Sprint
Nextel Corporation. During the six months ended June 30, 2008, we recognized a
gain of $0.2 million related to an insurance recovery of a casualty
loss.




Income
from Operations




Income
from operations was $1.9 million for the six months ended June 30, 2009,
compared to $5.4 million for the same period of 2008, a decrease of $3.5 million
or 64.5%. The decrease in income from operations for the six months ended
June 30, 2009 was primarily attributed to lower JSA revenue from Nexstar,
partially offset by an increase in retransmission compensation.




Interest
Expense




Interest
expense, including amortization of debt financing costs, decreased by $2.2
million, or 45.3%, for the six months ended June 30, 2009, compared to the
same period in 2008. The decreased amount of interest expense was primarily
attributed to lower average interest rates during the current year
period.




Income
Taxes




Income
tax expense decreased by $0.1 million for the six months ended June 30,
2009, compared to the same period in 2008. The decrease was primarily due to a
reduction in deferred tax expense associated with deferred tax liabilities
representing the difference between the book and tax basis of goodwill and other
indefinite-lived intangible assets.  The impairment charges recorded
in September 30 and December 31, 2008 reduced these deferred tax liabilities
which resulted in a reduction in deferred tax expense during this
period.




17


Liquidity
and Capital Resources




We are
highly leveraged, which makes us vulnerable to changes in general economic
conditions. Our ability to meet the future cash requirements described below
depends on our ability to generate cash in the future, which is subject to
general economic, financial, competitive, legislative, regulatory and other
conditions, many of which are beyond our control. Our ability to meet future
cash requirements is also dependent upon the local service agreements we have
entered into with Nexstar. Under our local service agreements, Nexstar sells our
advertising time and pays us a percentage of the amount collected. The payments
we receive from Nexstar are a significant component of our cash flows. On
March 27, 2009, Nexstar represented to us that it will continue the various
local service agreements under which it provides sales and other services to our
television stations thereby providing financial support to enable us to continue
to operate as a going concern. We believe that with Nexstar’s pledge to continue
the local service agreements, our available cash, anticipated cash flow from
operations and available borrowings under our senior credit facility should be
sufficient to fund working capital, capital expenditure requirements, interest
payments and scheduled debt principal payments for at least the next twelve
months from June 30, 2009. In order to meet future cash needs we may, from
time to time, borrow under our available credit facility. We will continue to
evaluate the best use of our operating cash flow among capital expenditures,
acquisitions and debt reduction.




Overview




The
following tables present summarized financial information management believes is
helpful in evaluating the Company’s liquidity and capital
resources:




Six
      Months Ended
                        June 30,2009
                      
                      
                      2008(in
      thousands)Net
      cash provided by operating activities
                      
                      $
                      1,281
                      
                      
                      $
                      6,353Net
      cash used for investing activities
                      
                      
                      (1,041
                      )
                      
                      
                      (9,812
                      )Net
      cash used for financing activities
                      
                      
                      (863
                      )
                      
                      
                      (864
                      )Net
      decrease in cash and cash equivalents
                      
                      $
                      (623
                      )
                      
                      $
                      (4,323
                      )June 30,
                        2009
                      
                      
                      December 31,
                        2008(in
      thousands)(in
      thousands)Cash
      and cash equivalents
                      
                      $
                      803
                      
                      
                      $
                      1,426Long-term
      debt including current portion
                      
                      $
                      173,224
                      
                      
                      $
                      174,087Unused
      commitments under senior credit facility(1)
                      
                      $
                      8,000
                      
                      
                      $
                      8,000


(1)
            As
      of June 30, 2009, $2.2 million of total unused commitments under
      Mission’s credit facility were available for
  borrowing.







Cash
Flows – Operating Activities




The
comparative net cash flows from operating activities decreased by $5.1 million
during the six months ended June 30, 2009 compared to the same period in
2008. The decrease was primarily due to the reduction in net revenue of $3.3
million, combined with changes in the timing of activity in accounts payable and
accounts receivable.




Cash
paid for interest decreased by $2.2 million during the six months ended
June 30, 2009 compared to the same period in 2008 due to lower average
interest rates incurred during the six months ended June 30, 2009 compared
to the same period in 2008 under our senior credit facility.




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




Cash
Flows – Investing Activities




The
comparative net cash flows used for investing activities decreased by $8.8
million during the six months ended June 30, 2009 compared to the same
period in 2008. Cash flows from investing activities consisted of cash used for
capital additions and acquisition-related payments.


18




Capital
expenditures were $1.0 million for the six months ended June 30, 2009,
compared to $2.1 million for the same period in 2008. The decrease was primarily
attributed to a greater amount of spending in 2008 for DTV
conversions.




Cash
Flows – Financing Activities




The
comparative net cash flows used for financing activities, consisting of
scheduled term loan maturities under our senior secured credit facility, were
$0.9 million for both the six months ended June 30, 2009 and
2008.




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




Future
Sources of Financing and Debt Service Requirements




As of
June 30, 2009, we had debt of $173.2 million, which represented 248.2% of
our total capitalization. Our high level of debt requires that a substantial
portion of cash flow be dedicated to pay principal and interest on our debt
which reduces the funds available for working capital, capital expenditures,
acquisitions and other general corporate purposes.




The total
amount of borrowings available to us under the revolving loan commitment of our
senior credit facility is based on covenant calculations contained in Nexstar’s
credit agreement. As of June 30, 2009, $2.2 million of total unused
commitments under our senior credit facility were available for
borrowing.




The
following table summarizes the approximate aggregate amount of principal
indebtedness scheduled to mature for the periods referenced as of June 30,
2009:




Total
                
                
                Remainder
                  of
      2009
                
                
                
                2010-2011
                
                
                
                2012-2013
                
                
                Thereafter(in
      thousands)Senior
      credit facility
                
                $
                173,224
                
                
                $
                864
                
                
                $
                3,454
                
                
                $
                168,906
                
                
                
                —




Interest
payments on our senior credit facility are generally paid every one to three
months and are payable based on the type of interest rate selected.




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




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




Collateralization
and Guarantees of Debt




Nexstar
Broadcasting Group, Inc. (Nexstar’s ultimate parent) and its subsidiaries
guarantee full payment of all obligations under our senior credit facility in
the event of our default. Similarly, we are a guarantor of Nexstar’s bank credit
facility and the senior subordinated notes issued by Nexstar. The senior credit
facilities are collateralized by a security interest in substantially all the
combined assets, excluding FCC licenses, of Nexstar and us. As of June 30,
2009, Nexstar had a maximum commitment of $239.7 million under its senior credit
facility, of which $235.2 million of debt was outstanding, and had issued an
aggregate principal amount outstanding of $46.9 million of 7% senior
subordinated notes and $127.7 million of 7% PIK senior subordinated
notes.




Debt
Covenants




Our
ability to continue as a going concern is dependent on Nexstar’s pledge to
continue the local services agreements described in a letter of support dated
March 27, 2009. Nexstar’s senior secured credit facility agreement contains
covenants which require them to comply with certain financial ratios, including
(a) maximum total and senior leverage ratios, (b) a minimum interest
coverage ratio, and (c) a minimum fixed charge coverage ratio. The
covenants, which are calculated on a quarterly basis, include the combined
results of Nexstar Broadcasting and us. Our senior secured credit facility
agreement does not contain financial covenant ratio requirements; however it
does include an event of default if Nexstar does not comply with all covenants
contained in its credit agreement. As of June 30, 2009, Nexstar was in
compliance with all covenants contained in the credit agreements governing our
senior secured credit facility and the indentures governing the publicly-held
notes.


19




On March
30, 2009, Nexstar closed an offer to exchange $143,600,000 of the 7% senior
subordinated notes due 2014 in exchange for $142,320,761 7% senior subordinated
PIK Notes due 2014 (the “PIK Notes”). Based on the financial covenants in the
Nexstar senior secured credit facility, the PIK Notes are not included in the
debt amount used to calculate the total leverage ratio until January 2011. In
addition to the debt exchange, Nexstar has undertaken certain actions as part of
their efforts to ensure they do not exceed the maximum total leverage and senior
leverage ratios including 1) the elimination of corporate bonuses for 2008 and
2009, 2) the consolidation of various back office processes in certain markets,
3) the execution of a management services agreement whereby Nexstar operates
four stations in exchange for a service fee, and 4) the consummation of purchase
agreements on March 11, 2009 and May 1, 2009 to acquire all the assets of KARZ
and WCWJ, respectively.




In
addition to the above items, Nexstar's plans for 2009 include certain other cost
containment measures, including one week Company furloughs for all employees and
reduction of discretionary operating expenses. Nexstar believes the consummation
of the exchange offer combined with the actions described above, will
allow Nexstar to maintain compliance with all covenants contained in the
credit agreements governing its senior secured facility and the indentures
governing its publicly held notes for a period of at least the next twelve
months from June 30, 2009. However, no assurance can be provided
that Nexstar's actions will be successful or that further adverse events
outside of Nexstar's control may arise that would result in its
inability to comply with the debt covenants.  In such
event, Nexstar would consider a range of transactions or strategies to
address any such situation.  For example, Nexstar might decide to
divest non-core assets, seek an amendment to its bank credit facility,
refinance its existing debt or obtain additional equity
financing.  There is no assurance that any such transactions, or any
other transactions, or strategies Nexstar might consider, could be
consummated on terms satisfactory to Nexstar or at all.




Cash
Requirements for DTV Conversion




On June
12, 2009, all full-power television broadcasters were required to cease
operating in an analog format and operate exclusively in digital (DTV)
format.  All of Mission’s stations have completed the transition from
analog to digital and hold DTV authorizations issued by the FCC.




DTV
conversion expenditures were $1.0 million and $2.0 million, respectively, for
the six months ended June 30, 2009 and 2008, respectively.




Cash
Requirements for Pending Transaction




On
April 18, 2006, we and Nexstar announced that we had filed an application
with the FCC for consent to assignment of the license for KFTA Channel 24 (Ft.
Smith, Arkansas) from Nexstar to us. The FCC granted the application in March
2008 with certain restrictions. Mission and Nexstar are appealing the
restrictions. Consideration for this transaction is set at $5.6 million. We
intend to finance this transaction through cash on hand and borrowings under our
senior secured credit facility.




No
Off-Balance Sheet Arrangements




At
June 30, 2009, we did not have any relationships with unconsolidated
entities or financial partnerships, such as entities often referred to as
structured finance or variable interest entities, which would have been
established for the purpose of facilitating off-balance sheet arrangements or
other contractually narrow or limited purposes. We are, therefore, not
materially exposed to any financing, liquidity, market or credit risk that could
arise if we had engaged in such relationships.




Critical
Accounting Policies and Estimates




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




Information
with respect to our critical accounting policies which we believe could have the
most significant effect on our reported results and require subjective or
complex judgments by management is contained on pages 27 through 30 in Part II,
Item 7, “Management’s Discussion and Analysis of Financial Condition and
Results of Operations”, of our Annual Report on Form 10-K for the fiscal year
ended December 31, 2008. Management believes that as of June 30, 2009
there has been no material change to this information.




Recent
Accounting Pronouncements




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




Cautionary
Note Regarding Forward-Looking Statements




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




Although
we believe that the expectations reflected in any of our forward-looking
statements are reasonable, actual results could differ from this projection or
assumption in any of our forward-looking statements. Our future financial
position and results of operations, as well as any forward-looking statements,
are subject to change and inherent risks and uncertainties, including those
described in our Annual Report on Form 10-K for the year ended December 31,
2008 and in our other filings with the Securities and Exchange Commission. The
forward-looking statements made in this Quarterly Report on Form 10-Q are made
only as of the date hereof, and we do not have or undertake any obligation to
update any forward-looking statements to reflect subsequent events or
circumstances unless otherwise required by law.




20




ITEM 3.
            Quantitative
      and Qualitative Disclosures About Market
Risk




Interest
Rate Risk




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




All term
loan borrowings at June 30, 2009 under our senior credit facility bear
interest at 2.35%, which represented the base rate, or LIBOR, plus the
applicable margin, as defined. All revolving loan borrowings at June 30,
2009 under our senior credit facility bear interest at 1.85%, which represented
the base rate, or LIBOR, plus the applicable margin, as defined. Interest is
payable in accordance with the credit agreement.




The
following table estimates the changes to cash flow from operations as of
June 30, 2009 if interest rates were to fluctuate by 100 or 50 basis
points, or BPS (where 100 basis points represents one percentage point), for a
twelve-month period:




Interest rate decrease
                
                
                Interest rate increase100 BPS
                
                
                50 BPS
                
                
                50 BPS
                
                
                100 BPS(in
      thousands)
                
                
                (in
      thousands)Senior
      credit facility
                
                $
                1,732
                
                
                $
                866
                
                
                $
                (866
                )
                
                $
                (1,732
                )




Impact
of Inflation




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




ITEM 4.
            Controls
      and Procedures




Evaluation
of Disclosure Controls and Procedures




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




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




Changes
in Internal Control over Financial Reporting




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







21


PART
II. OTHER INFORMATION









ITEM 1.
            Legal
      Proceedings




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




ITEM 1A.
            Risk
      Factors




There are
no material changes from the risk factors previously disclosed in Part I,
Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year
ended December 31, 2008.




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




None.




ITEM 3.
            Defaults
      Upon Senior Securities




None.




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




None.




ITEM 5.                      Other
Information




None.




ITEM 6.
            Exhibits




Exhibit No.
                Exhibit
      Index31.1
                Certification
      of David S. Smith pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.*32.1
                Certification
      of David S. Smith pursuant to 18 U.S.C. ss.
  1350.*





*
            Filed
      herewith




22


SIGNATURES




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




MISSION
      BROADCASTING, INC./s/
      DAVID S. SMITHBy:
            David
      S. SmithIts:
            President
      and Treasurer(Principal
      Executive Officer and Principal Financial and Accounting
      Officer)




Dated:
August 12, 2009







23