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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549



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FORM 10-Q



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|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------



for the quarterly period ended September 30, 2003



| ̈ | 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



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NEXSTAR FINANCE, L.L.C.

NEXSTAR FINANCE, INC.

(Exact name of
registrant as specified in its charter)



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|Delaware                                                     |  | 23-3063155 23-3063152                               
|------------------------------------------------------------ |  | ----------------------------------------------------
|(State of Organization or Incorporation)                     |  | (IRS Employer Identification No.)                   
|                                                             | 
|909 Lake Carolyn Parkway, Suite 1450 Irving, Texas 75039     |  | (972) 373-8800                                      
|(Address of Principal Executive Offices, including Zip Code) |  | (Registrants Telephone Number, Including Area Code)



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



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



As of September 30, 2003,
Nexstar Finance, L.L.C. had one member, Nexstar Finance Holdings, L.L.C., and Nexstar Finance, Inc. had 1,000 shares of common stock outstanding, all of which were owned by Nexstar Finance, L.L.C.



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##### Table of Contents

TABLE OF CONTENTS



|           |  |                                                                                                                                                        |  | Page
|---------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----
|PART I     |  | FINANCIAL INFORMATION                                                                                                                                  |  |     
|           |  |                                                                                                                                                       
|ITEM 1.    |  | Financial Statements (Unaudited)                                                                                                                       |  | 1   
|           |  |                                                                                                                                                       
|           |  | Consolidated Balance Sheets  December 31, 2002 and September 30, 2003                                                                                 |  | 1   
|           |  |                                                                                                                                                       
|           |  | Consolidated Statements of Operations and Other Comprehensive Income for the three months and the nine months ended September 30, 2002 and 2003        |  | 2   
|           |  |                                                                                                                                                       
|           |  | Consolidated Statements of Changes in Members Interest for the year ended December 31, 2002 and for the nine months ended September 30, 2002 and 2003 |  | 3   
|           |  |                                                                                                                                                       
|           |  | Consolidated Statements of Cash Flows for the nine months ended September 30, 2002 and 2003                                                            |  | 4   
|           |  |                                                                                                                                                       
|           |  | Notes to Consolidated Financial Statements                                                                                                             |  | 5   
|           |  |                                                                                                                                                       
|ITEM 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                                  |  | 19  
|           |  |                                                                                                                                                       
|ITEM 3.    |  | Quantitative and Qualitative Disclosures about Market Risk                                                                                             |  | 28  
|           |  |                                                                                                                                                       
|ITEM 4.    |  | Controls and Procedures                                                                                                                                |  | 28  
|           |  |                                                                                                                                                       
|PART II    |  | OTHER INFORMATION                                                                                                                                      |  |     
|           |  |                                                                                                                                                       
|ITEM 1.    |  | Legal Proceedings                                                                                                                                      |  | 29  
|           |  |                                                                                                                                                       
|ITEM 2.    |  | Changes in Securities and Use of Proceeds                                                                                                              |  | 29  
|           |  |                                                                                                                                                       
|ITEM 3.    |  | Defaults Upon Senior Securities                                                                                                                        |  | 29  
|           |  |                                                                                                                                                       
|ITEM 4.    |  | Submission of Matters to a Vote of Security Holders                                                                                                    |  | 29  
|           |  |                                                                                                                                                       
|ITEM 5.    |  | Other Information                                                                                                                                      |  | 29  
|           |  |                                                                                                                                                       
|ITEM 6.    |  | Exhibits and Reports on Form 8-K                                                                                                                       |  | 29  
|           | 
|SIGNATURES |  | 30                                                                                                                                                    



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##### Table of Contents

PART I. FINANCIAL INFORMATION



ITEM 1. FINANCIAL STATEMENTS



NEXSTAR FINANCE, L.L.C.



CONSOLIDATED BALANCE SHEETS



|                                                                                             |  | December 31, 2002      |          |   | September 30, 2003 |  
|-------------------------------------------------------------------------------------------- |  | ---------------------- | -------- | - | ------------------ | -
|                                                                                             |  | (Unaudited)            |          |   | (Unaudited)        |  
|                                                                                             |  | (dollars in thousands) |         
|ASSETS                                                                                       |  |                        |          |   |                    |  
|Current assets:                                                                              |  |                        |          |   |                    |  
|Cash and cash equivalents                                                                    |  | $                      | 19,879   |   |                    | $
|Accounts receivable, net of allowance for doubtful accounts of $660 and $1,067, respectively |  |                        | 26,065   |   |                    |  
|Current portion of broadcast rights                                                          |  |                        | 10,357   |   |                    |  
|Prepaid expenses and other current assets                                                    |  |                        | 1,005    |   |                    |  
|Deferred tax assets                                                                          |  |                        | 43       |   |                    |  
|Taxes receivable                                                                             |  |                        |         |   |                    |  
|                                                                                             |  |                        |          |   |                    |  
|Total current assets                                                                         |  |                        | 57,349   |   |                    |  
|                                                                                             |  |                       
|Property and equipment, net                                                                  |  |                        | 54,612   |   |                    |  
|Broadcast rights                                                                             |  |                        | 3,392    |   |                    |  
|Due from parent entities                                                                     |  |                        | 3,722    |   |                    |  
|Other noncurrent assets                                                                      |  |                        | 2,585    |   |                    |  
|Goodwill, net                                                                                |  |                        | 60,708   |   |                    |  
|Intangible assets, net                                                                       |  |                        | 219,920  |   |                    |  
|                                                                                             |  |                        |          |   |                    |  
|Total assets                                                                                 |  | $                      | 402,288  |   |                    | $
|                                                                                             |  |                        |          |   |                    |  
|LIABILITIES AND MEMBERS INTEREST                                                            |  |                        |          |   |                    |  
|Current liabilities:                                                                         |  |                        |          |   |                    |  
|Current portion of debt                                                                      |  | $                      | 2,567    |   |                    | $
|Current portion of broadcast rights payable                                                  |  |                        | 10,581   |   |                    |  
|Accounts payable                                                                             |  |                        | 2,624    |   |                    |  
|Accrued expenses                                                                             |  |                        | 7,000    |   |                    |  
|Taxes payable                                                                                |  |                        | 57       |   |                    |  
|Interest payable                                                                             |  |                        | 4,964    |   |                    |  
|Deferred revenue                                                                             |  |                        | 438      |   |                    |  
|                                                                                             |  |                        |          |   |                    |  
|Total current liabilities                                                                    |  |                        | 28,231   |   |                    |  
|Debt                                                                                         |  |                        | 292,943  |   |                    |  
|Broadcast rights payable                                                                     |  |                        | 3,732    |   |                    |  
|Deferred tax liabilities                                                                     |  |                        | 5,891    |   |                    |  
|Deferred revenue                                                                             |  |                        | 2,171    |   |                    |  
|Other liabilities                                                                            |  |                        | 5,641    |   |                    |  
|                                                                                             |  |                        |          |   |                    |  
|Total liabilities                                                                            |  |                        | 338,609  |   |                    |  
|                                                                                             |  |                        |          |   |                    |  
|Commitments and contingencies (Note 9)                                                       |  |                        |          |   |                    |  
|Minority interest in consolidated entity                                                     |  |                        |         |   |                    |  
|                                                                                             |  |                        |          |   |                    |  
|Members interest:                                                                           |  |                        |          |   |                    |  
|Contributed capital                                                                          |  |                        | 170,067  |   |                    |  
|Accumulated deficit                                                                          |  |                        | (106,388 | ) |                    |  
|                                                                                             |  |                        |          |   |                    |  
|Total members interest                                                                      |  |                        | 63,679   |   |                    |  
|                                                                                             |  |                        |          |   |                    |  
|Total liabilities and members interest                                                      |  | $                      | 402,288  |   |                    | $
|                                                                                             |  |                        |          |   |                    |  



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



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##### Table of Contents

NEXSTAR FINANCE, L.L.C.



CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME



|                                                                                                                  |  | Three Months EndedSeptember 30,    |        |   | Nine Months EndedSeptember 30,     |  
|----------------------------------------------------------------------------------------------------------------- |  | ---------------------------------- | ------ | - | ---------------------------------- | -
|                                                                                                                  |  | 2002                               |        |   | 2003                               |  
|                                                                                                                  |  | (Unaudited) (dollars in thousands) |        |   | (Unaudited) (dollars in thousands) |  
|                                                                                                                  | 
|Revenue (excluding trade and barter)                                                                              |  | $                                  | 33,816 |   |                                    | $
|Less: commissions                                                                                                 |  |                                    | (4,815 | ) |                                    |  
|                                                                                                                  |  |                                    |        |   |                                    |  
|Net broadcast revenue (excluding trade and barter)                                                                |  |                                    | 29,001 |   |                                    |  
|Trade and barter revenue                                                                                          |  |                                    | 2,689  |   |                                    |  
|                                                                                                                  |  |                                    |        |   |                                    |  
|Total net revenue                                                                                                 |  |                                    | 31,690 |   |                                    |  
|                                                                                                                  |  |                                    |        |   |                                    |  
|Operating expenses:                                                                                               |  |                                    |        |   |                                    |  
|Direct operating expenses (exclusive of depreciation and amortization shown separately below)                     |  |                                    | 8,573  |   |                                    |  
|Selling, general, and administrative expenses (exclusive of depreciation and amortization shown separately below) |  |                                    | 8,446  |   |                                    |  
|Amortization of broadcast rights                                                                                  |  |                                    | 3,921  |   |                                    |  
|Amortization of intangible assets                                                                                 |  |                                    | 3,370  |   |                                    |  
|Depreciation                                                                                                      |  |                                    | 3,443  |   |                                    |  
|                                                                                                                  |  |                                    |        |   |                                    |  
|Total operating expenses                                                                                          |  |                                    | 27,753 |   |                                    |  
|                                                                                                                  |  |                                    |        |   |                                    |  
|Income from operations                                                                                            |  |                                    | 3,937  |   |                                    |  
|Interest expense, including amortization of debt financing costs                                                  |  |                                    | (8,706 | ) |                                    |  
|Interest income                                                                                                   |  |                                    | 36     |   |                                    |  
|Other income (expenses), net                                                                                      |  |                                    | (2,104 | ) |                                    |  
|                                                                                                                  |  |                                    |        |   |                                    |  
|Loss before income taxes and cumulative effect of change in accounting principle                                  |  |                                    | (6,837 | ) |                                    |  
|Income tax benefit                                                                                                |  |                                    | 1,284  |   |                                    |  
|                                                                                                                  |  |                                    |        |   |                                    |  
|Loss before cumulative effect of change in accounting principle and minority interest in consolidated entity      |  |                                    | (5,553 | ) |                                    |  
|Cumulative effect of change in accounting principle, net of tax (Note 2)                                          |  |                                    |       |   |                                    |  
|Minority interest in consolidated entity                                                                          |  |                                    |       |   |                                    |  
|                                                                                                                  |  |                                    |        |   |                                    |  
|Net loss                                                                                                          |  | $                                  | (5,553 | ) |                                    | $
|                                                                                                                  |  |                                    |        |   |                                    |  
|Other comprehensive income:                                                                                       |  |                                    |        |   |                                    |  
|Change in market value of derivative instrument                                                                   |  | $                                  | 843    |   |                                    | $
|                                                                                                                  |  |                                    |        |   |                                    |  
|Net loss and other comprehensive income                                                                           |  | $                                  | (4,710 | ) |                                    | $
|                                                                                                                  |  |                                    |        |   |                                    |  



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



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NEXSTAR FINANCE, L.L.C.



CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS INTEREST



|                                                |  | Contributed Capital    |         |   | Accumulated Deficit |   |          | Other Comprehensive Income (Loss) |  |   | Total Members Interest |  
|----------------------------------------------- |  | ---------------------- | ------- | - | ------------------- | - | -------- | --------------------------------- |  | - | ----------------------- | -
|                                                |  | (dollars in thousands) |        
|Balance at January 1, 2002 (Unaudited)          |  | $                      | 171,479 |   |                     | $ | (63,487  | )                                 |  | $ | (3,731                  | )
|Contributions                                   |  |                        | 3       |   |                     |   |         |                                   |  |   |                        |  
|Distributions                                   |  |                        | (1,418  | ) |                     |   |         |                                   |  |   |                        |  
|Net loss                                        |  |                        |        |   |                     |   | (43,745  | )                                 |  |   |                        |  
|Change in market value of derivative instrument |  |                        |        |   |                     |   |         |                                   |  |   | 2,763                   |  
|                                                |  |                        |         |   |                     |   |          |                                   |  |   |                         |  
|Balance at September 30, 2002 (Unaudited)       |  |                        | 170,064 |   |                     |   | (107,232 | )                                 |  |   | (968                    | )
|Contributions                                   |  |                        | 3       |   |                     |   |         |                                   |  |   |                        |  
|Net income                                      |  |                        |        |   |                     |   | 844      |                                   |  |   |                        |  
|Change in market value of derivative instrument |  |                        |        |   |                     |   |         |                                   |  |   | 968                     |  
|                                                |  |                        |         |   |                     |   |          |                                   |  |   |                         |  
|Balance at December 31, 2002 (Unaudited)        |  |                        | 170,067 |   |                     |   | (106,388 | )                                 |  |   |                        |  
|Contributions                                   |  |                        | 71,371  |   |                     |   |         |                                   |  |   |                        |  
|Distributions                                   |  |                        | (1,522  | ) |                     |   |         |                                   |  |   |                        |  
|Net loss                                        |  |                        |        |   |                     |   | (18,772  | )                                 |  |   |                        |  
|                                                |  |                        |         |   |                     |   |          |                                   |  |   |                         |  
|Balance at September 30, 2003 (Unaudited)       |  | $                      | 239,916 |   |                     | $ | (125,160 | )                                 |  | $ |                        |  
|                                                |  |                        |         |   |                     |   |          |                                   |  |   |                         |  



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



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NEXSTAR FINANCE, L.L.C.



CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                                |  | Nine Months EndedSeptember 30,     |        
|------------------------------------------------------------------------------- |  | ---------------------------------- | -------
|                                                                                |  | 2002                               |        
|                                                                                |  | (Unaudited) (dollars in thousands) |        
|Cash flows from operating activities:                                           |  |                                    |        
|Net loss                                                                        |  | $                                  | (43,745
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |                                    |        
|Deferred income taxes                                                           |  |                                    | (1,614 
|Depreciation of property and equipment                                          |  |                                    | 9,846  
|Amortization of intangible assets                                               |  |                                    | 9,844  
|Amortization of debt financing costs                                            |  |                                    | 2,000  
|Amortization of broadcast rights, excluding barter                              |  |                                    | 5,879  
|Payments for broadcast rights                                                   |  |                                    | (5,785 
|Gain on asset disposal, net                                                     |  |                                    | (62    
|Cumulative effect of change in accounting principle, net of tax                 |  |                                    | 27,419 
|Amortization of debt discount                                                   |  |                                    | 486    
|Effect of accounting for derivative instruments                                 |  |                                    | 4,521  
|Minority interest in consolidated entity                                        |  |                                    |       
|Changes in assets and liabilities, net of acquisitions:                         |  |                                    |        
|                                                                                |  |                                   
|Decrease in accounts receivable and due from parent entities                    |  |                                    | 265    
|Increase in prepaid expenses and other current assets                           |  |                                    | (395   
|Increase in taxes receivable                                                    |  |                                    | (914   
|Decrease in other noncurrent assets                                             |  |                                    | 688    
|Increase (decrease) in accounts payable and accrued expenses                    |  |                                    | 1,208  
|Decrease in taxes payable                                                       |  |                                    |       
|Increase in interest payable                                                    |  |                                    | 3,846  
|Increase in deferred revenue                                                    |  |                                    | 2,586  
|                                                                                |  |                                    |        
|Net cash provided by operating activities                                       |  |                                    | 16,073 
|                                                                                |  |                                    |        
|Cash flows from investing activities:                                           |  |                                    |        
|Additions to property and equipment, net                                        |  |                                    | (5,780 
|Proceeds from sale of assets                                                    |  |                                    | 233    
|Acquisition of broadcast properties and related transaction costs               |  |                                    | (8,092 
|Down payment on acquisition of stations                                         |  |                                    |       
|                                                                                |  |                                    |        
|Net cash used for investing activities                                          |  |                                    | (13,639
|                                                                                |  |                                    |        
|Cash flows from financing activities:                                           |  |                                    |        
|Proceeds from debt issuance                                                     |  |                                    |       
|Repayment of loans                                                              |  |                                    | (2,835 
|Proceeds from revolver draws                                                    |  |                                    | 10,000 
|Proceeds from termination of derivative instrument                              |  |                                    | 4,387  
|Payments for debt finance costs                                                 |  |                                    | (386   
|Capital contributions                                                           |  |                                    | 3      
|Distributions                                                                   |  |                                    | (1,418 
|                                                                                |  |                                    |        
|Net cash provided by financing activities                                       |  |                                    | 9,751  
|                                                                                |  |                                    |        
|Net increase in cash and cash equivalents                                       |  |                                    | 12,185 
|                                                                                |  |                                   
|Cash and cash equivalents at beginning of period                                |  |                                    | 5,802  
|                                                                                |  |                                    |        
|Cash and cash equivalents at end of period                                      |  | $                                  | 17,987 
|                                                                                |  |                                    |        



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



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NEXSTAR FINANCE, L.L.C.



NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS



1. Organization and Business
Operations



Nexstar Finance, L.L.C. (Nexstar)
owns, operates and programs, through its subsidiaries, 16 television stations in the United States of America, consisting of seven NBC-affiliated television stations, four ABC-affiliated television stations, four CBS-affiliated television stations
and one UPN-affiliated television station. Nexstar has an outsourcing agreement to provide services for a Fox affiliate owned by a subsidiary of Sinclair Broadcast Group, Inc. Through various other local service agreements, Nexstar (i) programs one
Fox-affiliated television station and one NBC-affiliated station under Time Brokerage Agreements (TBA), (ii) has Shared Services Agreements (SSA) with two NBC-affiliated television stations, a CBS-affiliated television
station and an ABC-affiliated television station and (iii) has SSAs and Joint Sales Agreements (JSA) with two Fox-affiliated television stations and a low-power UPN-affiliated television station. The television stations described above
are located in New York, Pennsylvania, Illinois, Indiana, Missouri, Texas, Louisiana, Arkansas and Alabama.



Television broadcasting is subject to the jurisdiction of the Federal Communications Commission (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.



Nexstar is highly leveraged, which makes it
vulnerable to changes in general economic conditions. Nexstars ability to repay or refinance its debt will depend on, among other things, financial, business, market, competitive and other conditions, many of which are beyond the control of
Nexstar. Nexstar believes that, taken together, its current cash balances, internally generated cash flow and availability under its credit facilities should result in Nexstar having adequate cash resources to meet its future requirements for
working capital, capital expenditures and debt service for at least the next twelve months.



2. Summary of Significant Accounting Policies



Basis of Presentation



The consolidated
financial statements include the accounts of Nexstar and its wholly-owned subsidiaries and independently-owned Mission Broadcasting, Inc. (Mission) (collectively, the Company). Mission owns and operates the following
television stations: WYOU, WFXP, KODE, KJTL, KJBO-LP, KRBC and KSAN (formerly KACB). In addition, Mission provides most of the programming for WBAK, which is owned by Bahakel Communications, pursuant to a TBA. Nexstar does not own Mission or
Missions television stations; however, under U.S. generally accepted accounting principles (U.S. GAAP), Nexstar is deemed to have a controlling financial interest in them due to Nexstars guarantee of Missions debt and
the service and purchase option agreements described below. Additionally, Nexstar has evaluated the impact of accounting for Mission under Financial Accounting Standards Board (FASB) Interpretation No. 46, Consolidation of Variable
Interest Entities, an interpretation on Accounting Research Bulletin No. 51 (FIN No. 46) and has determined that Nexstar will be required to continue consolidating Missions financial position, results of operations and cash
flows under U.S. GAAP. In order for both Nexstar and Mission to continue to comply with FCC regulations, Mission must maintain complete responsibility for and control over programming, finances, personnel and operations of its stations. Nexstar has
entered into various service agreements with all of Missions stations. Nexstar has a TBA with WFXP, which allows Nexstar to program most of the stations broadcast time, sell the stations advertising time and retain the advertising
revenue generated by WFXP in exchange for monthly payments to Mission. Nexstar has an SSA with KJTL and KJBO-LP, which allows the sharing of services including news production, technical maintenance and security, in exchange for Nexstars right
to receive certain payments from Mission as described in the SSA. These payments have had the effect of Nexstar receiving substantially all of the available cash, after payment of debt service costs, generated by KJTL and KJBO-LP. Nexstar
anticipates that the payments required by the SSA with KJTL and KJBO-LP will continue to have the effect of Nexstar receiving substantially all of the available cash, after payment of debt service costs, generated by KJTL and KJBO-LP. Pursuant to a
JSA, Nexstar has also acquired the right to sell and receive the revenue from the advertising time on KJTL and KJBO-LP in return for monthly payments to Mission. Nexstar has an SSA with each of WYOU, KODE, KRBC, KSAN and WBAK and has a JSA with
WBAK, which have terms substantially similar to the terms of the SSA and JSA, as applicable, with KJTL and KJBO-LP, except that the payment terms for the WYOU, KRBC and KSAN SSAs provide for payment of a flat monthly fee. Nexstars ability to
receive cash from Mission is governed by these agreements.



In
addition to providing certain services to Missions television stations, Nexstar is also the guarantor of Missions debt (See Note 7). Mission is a guarantor of the senior credit facilities entered into and the senior subordinated notes
issued by Nexstar (See Note 7). The shareholder of Mission has granted Nexstar a purchase option to acquire the assets and liabilities of each Mission station for consideration equal to the greater of (1) seven times the stations broadcast
cash flow as defined in the option agreement less the amount of its indebtedness as defined in the option agreement or (2) the amount of its indebtedness. These option agreements are freely exercisable or assignable by Nexstar without consent or
approval by the shareholder of Mission.



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NEXSTAR FINANCE, L.L.C.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



2. Summary of Significant Accounting Policies(Continued)



As a result of the service arrangements, the debt guarantees and the option
agreements with Mission, Nexstar is deemed to have a controlling financial interest in Mission under U.S. GAAP while complying with the FCCs rules regarding ownership limits in television markets. As a result of Nexstars controlling
financial interest in Mission under U.S. GAAP, Nexstar consolidates the financial position, results of operations and cash flows of Mission with Nexstar as if it were a wholly-owned entity of Nexstar in order to provide a more meaningful
presentation of Nexstars performance. Because Mission has a net asset deficit and because there is no binding obligation on the shareholder of Mission to make capital contributions to cover the deficit, Nexstar recognizes 100% of
Missions losses. As discussed above, Nexstar has considered the method of accounting under FIN No. 46 and has determined that it will be required to continue consolidating Missions financial position, results of operations and cash flow.



The financial statements as of September 30, 2003 and for the
three months and nine months ended September 30, 2002 and 2003 are unaudited. However, in the opinion of management, such statements include all adjustments (consisting solely of normal recurring adjustments) necessary for the fair statement of the
financial information included herein in accordance with U.S. GAAP and pursuant to the rules and regulations of the Securities and Exchange Commission. The preparation of consolidated financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated 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. The financial statements should be read in conjunction with the
consolidated financial statements and related notes included in the Companys Annual Report on Form 10-K for the year ended December 31, 2002. The balance sheet at December 31, 2002 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.



All intercompany account balances and transactions have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform to
the current year presentation. Unless otherwise noted, all dollars are in thousands.



Trade Transactions



The Company trades
certain advertising time for various goods and services. These transactions are recorded at the estimated fair value of the goods or services received. Revenue from trade transactions is recognized when advertisements are broadcast and services or
merchandise received are charged to expense or capitalized when received or used. The Company recorded $1.0 million and $0.9 million of trade revenue for the three months ended September 30, 2003 and 2002, respectively, and $2.8 million and $2.7
million of trade revenue for the nine months ended September 30, 2003 and 2002, respectively.



Broadcast Rights and Broadcast Rights Payable, Cash and Barter



Broadcast rights, primarily in the form of syndicated programs and feature movie packages, are initially recorded at the amount paid or payable to program
suppliers for the limited right to broadcast the suppliers programming and are recorded when the following criteria are met: 1) the cost of each program is known or reasonably determinable, 2) the license period must have begun, 3) the program
material has been accepted in accordance with the license agreement, and 4) the programming is available for use. Broadcast rights are stated at the lower of unamortized cost or net realizable value. Amortization is computed using the straight-line
method based on the license period or usage, whichever yields the greater expense. The current portion of broadcast rights represents those rights available for broadcast which will be amortized in the succeeding year.



The Company barters advertising time for certain program material. These
transactions, except those involving exchange of advertising time for network programming, are recorded at managements estimate of the value of the advertising time exchanged, which approximates the fair value of the program material received.
The value of advertising time exchanged is estimated by applying average historical advertising rates for specific time periods. The Company recorded $1.8 million of barter revenue for both the three months ended September 30, 2003 and 2002,
respectively, and $5.6 million and $4.9 million of barter revenue for the nine months ended September 30, 2003 and 2002, respectively. The Company recorded $2.6 million and $2.4 million of trade and barter expense for the three months ended
September 30, 2003 and 2002, respectively, and $8.2 million and $7.3 million of trade and barter expense for the nine months ended September 30, 2003 and 2002, respectively.



Intangible Assets



Intangible assets include FCC licenses, network affiliation agreements, and goodwill. On January 1, 2002, the Company adopted Statement of Financial
Accounting Standards No. 142, Goodwill and Other Intangible Assets (SFAS No. 142). SFAS No. 142 requires companies to cease amortizing certain intangible assets including goodwill and FCC licenses. The amortization of
existing goodwill and FCC licenses resulting from acquisitions completed prior to July 1, 2001 ceased on December 31, 2001. Any goodwill and FCC licenses resulting from acquisitions completed after June 30, 2001 were not and will not be amortized.
SFAS No. 142 established a new method of testing goodwill and FCC licenses for impairment on an annual basis or on an interim basis if an event occurs or circumstances change which would reduce the fair value of a reporting unit below its carrying
value.



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##### Table of Contents

NEXSTAR FINANCE, L.L.C.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



2. Summary of Significant Accounting Policies(Continued)



As required by SFAS No. 142, the Company completed a transitional impairment
test for goodwill and FCC licenses as of January 1, 2002. As a result of this test, an impairment of $27.4 million, net of taxes, was recorded in the first quarter of 2002 as a cumulative effect of change in accounting principle. As of September 30,
2003, the Company did not identify any events that triggered any impairment assessment.



An impairment assessment of goodwill and FCC licenses could be triggered by a significant reduction in operating results or cash flows at one or more of the Companys television stations, or a forecast of such
reductions, a significant adverse change in the advertising marketplaces in which the Companys television stations operate, or by adverse changes to FCC ownership rules, among others.



Long Lived-Assets



The Company periodically evaluates the net realizable value of long-lived
assets, including tangible and intangible assets, relying on a number of factors including operating results, business plans, economic projections and anticipated future cash flows. An impairment in the carrying value of an asset is recognized when
the expected future operating cash flow derived from the asset is less than its carrying value.



3. Acquisitions



KODE



On December 31, 2001, Mission entered
into a TBA with GOCOM Broadcasting of Joplin, L.L.C. (GOCOM) and simultaneously entered into a purchase agreement to acquire substantially all of the assets of KODE for $14.0 million. Pursuant to the terms of the purchase agreement,
Mission made a down payment of $6.0 million against the purchase price on December 31, 2001 and paid the remaining $8.0 million upon the consummation of the acquisition on September 30, 2002, exclusive of transaction costs. KODE is the
ABC-affiliated television station in Joplin, Missouri. The acquisition has been accounted for under the purchase method and, accordingly, the purchase price was allocated to assets and liabilities acquired based on their estimated fair value on the
acquisition date. The TBA was terminated upon the closing of the acquisition, and non-recurring TBA fees in the amount of $0.1 million and $0.3 million, respectively, are included in the consolidated financial statements of the Company for the three
months and nine months ended September 30, 2002.



On April 1,
2002, Mission entered into an SSA with KSNF, a Nexstar-owned station in the Joplin, Missouri market. As a result of the SSA with KSNF, Mission was able to reduce overhead costs associated with operations at KODE. Based on the expectation of the cost
reductions through the SSA, Mission purchased KODE for an amount which resulted in the recognition of $0.4 million of goodwill, exclusive of transaction costs.



The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition. The Company
obtained third-party valuations of certain acquired intangible assets.



|                                      |  | At September 30, 2002
|------------------------------------- |  | ---------------------
|                                      |  | (in millions)        
|Broadcast rights                      |  | $                    
|Property and equipment                |  |                      
|Intangible assets                     |  |                      
|Goodwill, including transaction costs |  |                      
|                                      |  |                      
|Total assets acquired                 |  |                      
|Less: broadcast rights payable        |  |                      
|                                      |  |                      
|Net assets acquired                   |  | $                    
|                                      |  |                      



Of the $10.9 million
of acquired intangible assets, $4.3 million was assigned to FCC licenses that are not subject to amortization and $5.5 million was assigned to network affiliation agreements (useful life of 15 years). The remaining $1.1 million of acquired
intangible assets have a useful life of approximately 1 year. Goodwill of $0.7 million is expected to be deductible for tax purposes.



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##### Table of Contents

NEXSTAR FINANCE, L.L.C.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



3. Acquisitions(Continued)



KRBC and KSAN



On December 13, 2002, Mission entered into a purchase agreement and a local marketing agreement with LIN Television Corporation and two of its
subsidiaries, which owned KRBC, the NBC affiliate in Abilene-Sweetwater, Texas, and KSAN (formerly KACB), the NBC affiliate in San Angelo, Texas. Operations under the local marketing agreement commenced on January 1, 2003 and terminated upon the
purchase of the stations. On June 13, 2003, Mission purchased substantially all of the assets of the stations for $10.0 million. Pursuant to the terms of the purchase agreement, Mission made a down payment of $1.5 million against the purchase price
in December 2002, which has been included in noncurrent assets as of December 31, 2002, and paid the remaining $8.5 million upon the consummation of the acquisition on June 13, 2003, exclusive of transaction costs. The acquisition has been accounted
for under the purchase method and, accordingly, the purchase price was allocated to assets and liabilities acquired based on their estimated fair value on the acquisition date.



On June 13, 2003, Mission entered into an SSA with KTAB, a Nexstar-owned station in the Abilene-Sweetwater, Texas market,
whereby KTAB provides news production, technical maintenance and security for KRBC and KSAN. As a result of the SSA with KTAB, Mission should be able to reduce overhead costs associated with operations at KRBC and KSAN.



The following table summarizes the estimated fair values of the assets
acquired and liabilities assumed at the date of acquisition. The Company obtained third-party valuations of certain acquired intangible assets.



|                                      |  | At June 13, 2003
|------------------------------------- |  | ----------------
|                                      |  | (in millions)   
|Accounts receivable                   |  | $               
|Broadcast rights                      |  |                 
|Property and equipment                |  |                 
|Intangible assets                     |  |                 
|Goodwill, including transaction costs |  |                 
|                                      |  |                 
|Total assets acquired                 |  |                 
|Less: accounts payable                |  |                 
|Less: broadcast rights payable        |  |                 
|                                      |  |                 
|Net assets acquired                   |  | $               
|                                      |  |                 



Of the $4.0 million of
acquired intangible assets, $2.1 million was assigned to FCC licenses that are not subject to amortization and $1.7 million was assigned to network affiliation agreements (useful life of 15 years). The remaining $0.2 million of acquired intangible
assets have a useful life of approximately 1 year. Goodwill of $0.3 million is expected to be deductible for tax purposes.



KARK and WDHN



On December 30, 2002, Nexstar entered into a purchase agreement and time brokerage agreements with two subsidiaries of Morris Multimedia, Inc., which
owned KARK, the NBC affiliate in Little Rock-Pine Bluff, Arkansas, and WDHN, the ABC affiliate in Dothan, Alabama. Operations under the time brokerage agreements commenced on February 1, 2003. On August 1, 2003, Nexstar completed the acquisition of
the stations for total consideration of $91.5 million, exclusive of transaction costs of $0.8 million. Pursuant to terms of the purchase agreement, Nexstar made a down payment of $40.0 million against the purchase price on January 31, 2003 and paid
the remaining $51.5 million upon the consummation of the acquisition, exclusive of transaction costs. The time brokerage agreements were terminated on August 1, 2003.



The acquisition was accounted for under the purchase method and accordingly the purchase price was allocated to assets
acquired and liabilities assumed based on their fair values at August 1, 2003. The Company obtained third-party valuations of certain acquired intangible assets.



|                                      |  | At August 1, 2003 |      
|------------------------------------- |  | ----------------- | -----
|                                      |  | (in millions)     |      
|Accounts receivable                   |  | $                 | 3.1  
|Property and equipment                |  |                   | 10.0 
|Intangible assets                     |  |                   | 68.5 
|Goodwill, including transaction costs |  |                   | 42.2 
|Accounts payable                      |  |                   | (0.8 
|Deferred tax liability                |  |                   | (30.2
|Deferred revenue                      |  |                   | (0.5 
|                                      |  |                   |      
|Total                                 |  | $                 | 92.3 
|                                      |  |                   |      



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##### Table of Contents

NEXSTAR FINANCE, L.L.C.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



3. Acquisitions(Continued)



Of the $68.5 million of acquired intangible assets, $27.3 million was assigned to FCC licenses that are not subject to
amortization and $36.3 million was assigned to network affiliation agreements (estimated useful life of 15 years). The remaining $4.9 million of acquired intangible assets have a useful life of approximately 1 year.



The selected unaudited pro forma consolidated information for the three
months and nine months ended September 30, 2002 and 2003 determined as if the acquisitions, described above, had occurred on January 1, of each year is as follows:



|                                                   |  | Three Months EndedSeptember 30, 2002 |         |   | Three Months EndedSeptember 30, 2003 |  
|-------------------------------------------------- |  | ------------------------------------ | ------- | - | ------------------------------------ | -
|                                                   |  | As Reported                          |         |   | Pro Forma                            |  
|                                                   |  | (Unaudited)                          |         |   | (Unaudited)                          |  
|Net broadcast revenue (excluding trade and barter) |  | $                                    | 29,001  |   |                                      | $
|Total net revenue                                  |  |                                      | 31,690  |   |                                      |  
|Income from operations                             |  |                                      | 3,937   |   |                                      |  
|Net loss                                           |  | $                                    | (5,553  | ) |                                      | $
|                                                   |  |                                     
|                                                   |  | Nine Months EndedSeptember 30, 2002  |         |   | Nine Months EndedSeptember 30, 2003  |  
|                                                   |  | As Reported                          |         |   | Pro Forma                            |  
|                                                   |  | (Unaudited)                          |         |   | (Unaudited)                          |  
|Net broadcast revenue (excluding trade and barter) |  | $                                    | 83,931  |   |                                      | $
|Total net revenue                                  |  |                                      | 91,534  |   |                                      |  
|Income from operations                             |  |                                      | 9,679   |   |                                      |  
|Net loss                                           |  | $                                    | (43,745 | ) |                                      | $



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



4. Operating and Management Agreements



WYZZ



Effective December 1, 2001, Nexstar entered into an outsourcing agreement
with a subsidiary of Sinclair Broadcast Group, Inc. (Sinclair) to provide certain engineering, production, sales and administrative services for WYZZ, the Fox affiliate in Peoria, Illinois. Pursuant to this agreement, the parties share
the combined broadcast cash flow, as defined in the agreement, generated by WYZZ and Nexstar-owned WMBD. The outsourcing agreement expires in December 2008, but at any time it may be canceled by either party upon 180 days written notice. Nexstar has
evaluated its arrangement with Sinclair under FIN No. 46 and has determined that it is not the primary beneficiary of WYZZ.



KRBC and KSAN



On December 13, 2002, Mission entered into a local marketing agreement with LIN Television Corporation and two of its subsidiaries, which owned KRBC, the
NBC affiliate in Abilene-Sweetwater, Texas, and KSAN (formerly KACB), the NBC affiliate in San Angelo, Texas. Operations under the local marketing agreement commenced on January 1, 2003 and terminated upon the purchase of the stations. On June 13,
2003, Mission purchased KRBC and KSAN (see Note 3) and entered into a shared services agreement with Nexstar whereby Nexstars station, KTAB, provides news production, technical maintenance and security for KRBC and KSAN. The local marketing
agreement was terminated on June 13, 2003.



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##### Table of Contents

NEXSTAR FINANCE, L.L.C.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



4. Operating and Management Agreements(Continued)



KARK and WDHN



On December 30, 2002, Nexstar entered into a purchase agreement and time
brokerage agreements with two subsidiaries of Morris Multimedia, Inc., which owned KARK, the NBC affiliate in Little Rock-Pine Bluff, Arkansas, and WDHN, the ABC affiliate in Dothan, Alabama. Operations under the time brokerage agreements commenced
on February 1, 2003. On August 1, 2003, Nexstar completed the acquisition of the stations for total consideration of $91.5 million. Pursuant to terms of the purchase agreement, Nexstar made a down payment of $40.0 million against the purchase price
on January 31, 2003 and paid the remaining $51.5 million upon the consummation of the acquisition, exclusive of transaction costs. The time brokerage agreements were terminated on August 1, 2003.



WBAK



On May 8, 2003, Mission entered into a time brokerage agreement with Bahakel Communications and certain of its subsidiaries
relating to WBAK and simultaneously entered into a purchase agreement to acquire substantially all of the assets of WBAK, the Fox affiliate in Terre Haute, Indiana, for $3.0 million. Operations under the time brokerage agreement commenced on May 9,
2003 and will terminate upon purchase of the station. Pursuant to the terms of the purchase agreement, Mission made a down payment of $1.5 million against the purchase price, which was funded from Missions senior credit facilities. The $1.5
million down payment has been included in noncurrent assets as of September 30, 2003. Additionally, Mission entered into a shared services agreement with Nexstar, effective May 9, 2003, whereby Nexstar-owned WTWO may provide certain services to
Mission for WBAK, including news production, technical maintenance and security in exchange for monthly payments from Mission. Mission also entered into a joint sales agreement, effective May 9, 2003, whereby Nexstar-owned WTWO purchases all of the
advertising time on WBAK and retains the advertising revenue in return for payments to Mission of $0.1 million per month, subject to adjustment to assure that each payment equals Missions actual operating costs plus $10.0 thousand per month.
The acquisition is expected to close in the fourth quarter of 2003, subject to FCC consent. Mission has evaluated its arrangement with Bahakel Communication under FIN No. 46 and has determined that it is the primary beneficiary of WBAK. Mission has
therefore consolidated the financial position and results of operations of WBAK since May 9, 2003. Therefore, pursuant to FIN No. 46, Bahakels ownership is currently reflected as minority interest in these consolidated financial statements.



Under these agreements, the Company pays for certain operating
expenses of the respective stations and therefore may have unlimited exposure to any potential operating losses. The Company is responsible for reimbursing all of the operating expenses at WBAK and may ultimately have unlimited exposure to potential
operating losses. The Company will continue to operate the stations under the time brokerage, shared services, joint sales and outsourcing agreements until the termination of such agreements. Termination of the time brokerage agreements typically
occurs on consummation of the acquisitions of the stations. Additionally, Nexstar or Mission, as applicable, indemnifies the owners of the stations from and against all liability and claims arising out of or resulting from its activities, acts or
omissions in connection with the agreements. The maximum potential amount of future payments Nexstar or Mission could be required to make for such indemnification is undeterminable at this time.



Quorum



On September 12, 2003, Nexstar Broadcasting Group, L.L.C. (Nexstar Group), Nexstars ultimate parent,
signed a definitive agreement to acquire all of the subsidiaries of Quorum Broadcast Holdings, LLC (Quorum). Quorum owns and operates 11 television stations (including WTVW, which certain Quorum subsidiaries have contracted to sell) and
provides management, sales or other services to an additional five stations, primarily in medium-sized markets. On the same date, Nexstar Group also entered into a management and consulting services agreement with Quorum pursuant to which Nexstar
Group will perform certain management functions pending completion of the purchase. Nexstar Group will receive no compensation under the management agreement, provided that the sale closes before March 31, 2004. Nexstar Group will, however, be
reimbursed for any expenses incurred. After March 31, 2004, the agreement requires Quorum to pay a quarterly management fee to Nexstar Group equal to 50% of the cost savings to Quorum resulting from Nexstar Groups performance of certain
management functions.



The Quorum acquisition will be
structured as a merger of Quorums direct subsidiaries with and into Nexstar Group. The consideration for the merger will consist of a combination of cash, shares of common stock of Nexstar Broadcasting Group, Inc. (see Note 12) and the
assumption of debt. As of June 30, 2003, Quorum and its related entities had total consolidated assets of approximately $196.5 million.



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##### Table of Contents

NEXSTAR FINANCE, L.L.C.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



5. Related Party Transactions



GuarantyChief Executive Officer



Pursuant to a continuing guaranty agreement dated June 16, 2001 with Nexstars primary lender, Nexstar guarantees a
$3.0 million non-revolving line of credit to its president and chief executive officer to enable him, among other uses, to purchase equity interests of Nexstar Broadcasting Group, L.L.C., Nexstars ultimate parent. The line of credit is
full-recourse to the officer. However, if the officer does not repay some or all of the loan then Nexstar may be required to pay up to the maximum potential amount of $3.0 million. The full amount has been drawn against the line of credit and is due
on December 31, 2004.



6. Intangible Assets and Goodwill



|                                                   |  | Estimateduseful life(years) |  | December 31, 2002 |         |   | September 30,2003 |  
|-------------------------------------------------- |  | --------------------------- |  | ----------------- | ------- | - | ----------------- | -
|                                                   |  |                             |  | (Unaudited)       |         |   | (Unaudited)       |  
|Network affiliation agreements                     |  | 15                          |  | $                 | 177,509 |   |                   | $
|FCC licenses                                       |  | indefinite                  |  |                   | 81,468  |   |                   |  
|Debt financing costs                               |  | term of debt                |  |                   | 16,583  |   |                   |  
|Other intangible assets                            |  | 1-15                        |  |                   | 12,122  |   |                   |  
|                                                   |  |                             |  |                   |         |   |                   |  
|                                                   |  |                             |  |                   | 287,682 |   |                   |  
|Less: accumulated amortization                     |  |                             |  |                   | (67,762 | ) |                   |  
|                                                   |  |                             |  |                   |         |   |                   |  
|Intangible assets, net of accumulated amortization |  |                             |  |                   | 219,920 |   |                   |  
|Goodwill                                           |  | indefinite                  |  |                   | 60,708  |   |                   |  
|                                                   |  |                             |  |                   |         |   |                   |  
|Intangible assets and goodwill, net                |  |                             |  | $                 | 280,628 |   |                   | $
|                                                   |  |                             |  |                   |         |   |                   |  



Total amortization
expense from definite-lived intangibles (excluding debt financing costs) for the year ended December 31, 2002 and nine months ended September 30, 2003 was $13.4 million and $11.8 million, respectively. The estimated useful life of network
affiliations contemplates renewals of the underlying agreements based on the Companys historical ability to renew such agreements without significant cost or modifications to the conditions from which the value of the affiliation was derived.
These renewals can result in estimated useful lives of individual affiliations ranging from 12 to 20 years. Management has determined that 15 years is a reasonable estimate within the range of such estimated useful lives. The carrying value of
indefinite-lived intangibles, excluding goodwill, at December 31, 2002 and September 30, 2003 was $68.6 million and $99.7 million, respectively. The use of an indefinite life for FCC licenses contemplates the Companys historical ability to
renew their licenses, that such renewals generally may be obtained indefinitely and at little cost, and that the technology used in broadcasting is not expected to be replaced in the foreseeable future. Therefore, cash flows derived from the FCC
licenses are expected to continue indefinitely.



7. Debt



Long-term debt consists of the following:



|                                                        |  | December 31, 2002 |         |   | September 30, 2003 |  
|------------------------------------------------------- |  | ----------------- | ------- | - | ------------------ | -
|                                                        | 
|                                                        |  | (Unaudited)       |         |   | (Unaudited)        |  
|Term loans                                              |  | $                 | 81,513  |   |                    | $
|Revolving credit facility                               |  |                   | 55,143  |   |                    |  
|12% Senior subordinated notes due 2008, net of discount |  |                   | 154,762 |   |                    |  
|SFAS No. 133 hedge accounting adjustment                |  |                   | 4,092   |   |                    |  
|                                                        |  |                   |         |   |                    |  
|                                                        |  |                   | 295,510 |   |                    |  
|Less: current portion                                   |  |                   | (2,567  | ) |                    |  
|                                                        |  |                   |         |   |                    |  
|                                                        |  | $                 | 292,943 |   |                    | $
|                                                        |  |                   |         |   |                    |  



The Nexstar Senior
Secured Credit Facilities



On January 12,
2001, Nexstar entered into senior secured credit facilities (the Nexstar credit facilities) with a group of commercial banks. The terms of the credit agreement provided for a revolving credit facility (the Nexstar revolver)
in the amount of $122.0 million and a term loan facility (the Nexstar term loan) in the amount of $110.0 million. The revolving credit facility was reduced to $72.0 million after the issuance of the senior subordinated notes discussed
below. The credit facilities were subsequently amended on June 14, 2001 to allow for a $50.0 million Term A facility, a $75.0 million Term B facility and a $57.0 million revolving



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##### Table of Contents

NEXSTAR FINANCE, L.L.C.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



7. Debt(Continued)



facility. On November 14, 2001, the credit facilities were further amended to adjust certain financial covenants effective for the period
ended September 30, 2001 and future periods because Nexstar was not in compliance with the consolidated total leverage ratio as of September 30, 2001, due in large part to the negative impact on advertising revenue resulting from the events of
September 11, 2001, and Nexstar anticipated non-compliance in future periods. The amendment also reduced the revolving facility to $42.0 million. On June 5, 2002, the Nexstar credit facilities were amended again to allow Nexstar to undertake the
reorganization and other transactions related to the proposed initial public offering by Nexstar Broadcasting Group, Inc., a member of Nexstar Group, including the redemption of the preferred membership interests of Nexstar Group, Nexstars
ultimate parent. Prior to the refinancing described below, the Nexstar revolver and Term A facility would have matured on January 12, 2007 and the Term B facility would have matured on July 12, 2007. Any excess amount outstanding at the time of a
mandatory reduction would have been payable at that time.



On
February 13, 2003, Nexstar obtained new senior secured credit facilities (the New Nexstar Facilities). The New Nexstar Facilities consist of a $130.0 million term loan and a $50.0 million revolver. Nexstar used the proceeds from the term
loan to refinance its existing senior secured credit facilities, pay related debt financing costs and provide additional working capital. Financial covenants under the New Nexstar Facilities include a total leverage ratio of 7.25 times the last
twelve months operating cash flow (as defined in the credit agreement) through March 30, 2004 and a senior leverage ratio of 4.25 times the last twelve months operating cash through June 29, 2004. Covenants also include, among others, an interest
coverage ratio of 1.50 to 1.00 through June 29, 2004 and a fixed charge coverage ratio of 1.10 to 1.00 through September 29, 2004. The term loans amortize at 1% annually in years 2004 through 2009, with the remaining 94% due in 2010. The outstanding
principal amount on the revolving loans mature on December 31, 2009. As of September 30, 2003, Nexstar had drawn $130.0 million on its term loan and had no borrowings outstanding under its revolver. Interest rates associated with the New Nexstar
Facilities are based, at the option of Nexstar, on (i) the higher of the prevailing prime rate or the Federal Funds Rate plus 0.50% plus an applicable margin or (ii) LIBOR plus an applicable margin, as defined in the credit agreement (4.12% at
September 30, 2003). Interest is fixed for a period ranging from one month to 12 months, depending on availability of the interest basis selected, except if Nexstar selects a prime-based loan, in which case the interest rate will fluctuate during
the period as the prime rate fluctuates. Interest is payable periodically based on the type of interest rate selected. In addition, Nexstar is required to pay quarterly commitment fees on the unused portion of the Nexstar revolver loan commitment
based on the Companys leverage ratio for that particular quarter. The Nexstar term loan is subject to scheduled mandatory repayments, and the Nexstar revolver is subject to scheduled mandatory commitment reductions commencing in 2004. The
borrowings under the Nexstar credit facilities are guaranteed by each existing and subsequently acquired or organized subsidiary of Nexstar and by Mission.



The Mission Senior Secured Credit Facilities



On January 12, 2001, Mission entered into a credit agreement (the Mission credit facility) with a group of commercial banks. The terms
provided for the banks to make revolving loans to Mission, not to exceed the aggregate commitment of $43.0 million. On November 14, 2001, the Mission credit facility was amended to increase the revolving facility to $58.0 million. The Mission credit
facility was amended again on September 30, 2002 in order to permit the merger of Bastet Broadcasting, Inc. and Mission Broadcasting of Joplin, Inc. into Mission. Prior to the refinancing described below, the Mission credit facility would have been
due and payable on the maturity date, January 12, 2007. Any excess amount outstanding at the time of a mandatory reduction would have been payable at that time.



On February 13, 2003, Mission obtained new senior secured credit facilities (the New Mission Facilities). The New Mission Facilities
consist of a $55.0 million term loan and a $30.0 million revolver. Mission used the proceeds from the loans to refinance its existing senior secured credit facility, pay related debt financing costs and provide additional working capital. Financial
covenants under the New Mission Facilities include a total leverage ratio of 7.25 times the last twelve months operating cash flow (as defined in the credit agreement) through March 30, 2004 and a senior leverage ratio of 4.25 times the last twelve
months operating cash through June 29, 2004. Covenants also include, among others, an interest coverage ratio of 1.50 to 1.00 through June 29, 2004 and a fixed charge coverage ratio of 1.10 to 1.00 through September 29, 2004. The term loan amortizes
at 1% annually in years 2004 through 2009, with the remaining 94% due in 2010. The outstanding principal amount on the revolving loans mature on December 31, 2009. As of September 30, 2003, Mission had drawn $55.0 million on its term loan and $12.2
million under its revolver. Interest rates associated with the New Mission Facilities are based, at the option of Mission, (i) the higher of the prevailing prime rate or the Federal Funds Rate plus 0.50% plus an applicable margin or (ii) LIBOR plus
an applicable margin, as defined in the credit agreement (ranging from 3.87% to 4.38% at September 30, 2003). Interest is fixed for a period ranging from one month to 12 months, depending on availability of the interest basis selected, except if
Mission selects a prime-based loan, in which case the interest rate will fluctuate during the period as the prime rate fluctuates. Interest is payable periodically based on the type of interest rate selected. In addition, Mission is required to pay
quarterly commitment fees on the unused portion of the Mission revolver loan commitment based on the Companys leverage ratio for that particular quarter. The Mission term loan is subject to scheduled mandatory repayments, and the Mission
revolver is subject to scheduled mandatory commitment reductions commencing in 2004. Nexstar guarantees full payment of any obligations outstanding in the event of Missions default.



12



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##### Table of Contents

NEXSTAR FINANCE, L.L.C.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



7. Debt(Continued)



The refinancing of the senior credit facilities for Nexstar and Mission resulted in the write off during the first quarter
of 2003 of $5.8 million of certain debt financing costs capitalized at December 31, 2002. The amount is included in interest expense.



Based on borrowing rates currently available to the Company for bank loans with similar terms and average maturities, the fair value of the Companys
credit facilities approximates their carrying value.



Senior
Subordinated Notes



On March 16, 2001, Nexstar issued
$160.0 million of 12.0% senior subordinated notes (the notes) at a price of 96.012%. The notes mature on April 1, 2008. Interest is payable every six months in arrears on April 1 and October 1. The notes are guaranteed by all of the
domestic existing and future restricted subsidiaries of Nexstar and by Mission. They are general unsecured senior subordinated obligations subordinated to all of the Companys senior secured credit facilities. The notes are redeemable on or
after April 1, 2005, at declining premiums, and Nexstar may redeem, at a premium, up to 35.0% of the aggregate principal amount of the notes before April 1, 2004 with the net cash proceeds from qualified equity offerings. The notes are not
redeemable by either the issuer or the note holder between April 1, 2004 and March 31, 2005. The proceeds of the offering were used to partially refinance existing indebtedness of Nexstar and fund working capital needs.



Debt Covenants



The bank debt agreements and the notes described above contain covenants
which require the Company to comply with certain financial ratios, capital expenditures, cash film payments and other limits. The Company was in compliance with all such covenants at September 30, 2003.



8. Income Taxes



The Companys income tax benefit for the nine months ended September 30, 2002 was $2.4 million, compared to $0.4
million for the nine months ended September 30, 2003. The Companys effective tax rate was 12.6% for the nine months ended September 30, 2002 as compared to the effective tax rate of 2.2% for the nine months ended September 30, 2003. The
significant differences from the statutory tax rate and the effective tax rate for the nine months ended September 30, 2003 include an increase in the valuation allowance, income earned by entities not subject to corporate income tax, and state
taxes, net of the federal benefit.



9. Commitments and Contingencies



Digital Conversion



All of the Companys stations currently are in compliance with FCC
regulations regarding broadcasting digital signals. The Company is currently working with Bahakel Communications to initiate low power digital facilities for WBAK, which has at least until March 2004 to begin digital operations. The purchase of WBAK
by Mission is expected to close during the fourth quarter of 2003, pending FCC consent. We estimate the digital conversion will require an average additional capital expenditure of $0.7 million per station to modify the transmitter for full-power
digital signal transmission. Digital conversion expenditures were $2.0 million for the nine months ended September 30, 2003.



Guarantor Arrangements



In November 2002, the FASB issued Interpretation No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (FIN No. 45). FIN No. 45 requires that a guarantor recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken by issuing the guarantee. FIN No. 45
also requires additional disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees it has issued. The accounting requirements for the initial recognition of guarantees are
applicable on a prospective basis for guarantees issued or modified after December 31, 2002. The disclosure requirements are effective for all guarantees outstanding, regardless of when they were issued or modified, during the first quarter of
fiscal 2003. The adoption of FIN No. 45 did not have a material effect on the accompanying consolidated financial statements. The following is a summary of the Companys agreements that have been determined to be within the scope of FIN No. 45.



13



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##### Table of Contents

NEXSTAR FINANCE, L.L.C.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



9. Commitments and Contingencies(Continued)



As permitted under Delaware law, the Company has agreements whereby the
Company indemnifies its officers and directors for certain events or occurrences while the officer or director is, or was, serving at the Companys request in such capacity. The term of the indemnification period is for the officers or
directors lifetime. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has a director and officer insurance policy that may limit the
Companys exposure and enable it to recover a portion of any future amount paid. As a result of the insurance policy coverage, the Company believes the estimated fair value of these indemnification agreements is minimal.



The Company enters into standard indemnification agreements in the ordinary
course of business. Pursuant to these agreements, the Company indemnifies, holds harmless, and agrees to reimburse the indemnified party for losses suffered or incurred by the indemnified party. The maximum potential amount of future payments the
Company could be required to make under these indemnification agreements is unlimited. The Company believes the estimated fair value of these agreements is minimal. Accordingly, there are no liabilities recorded for these agreements as of December
31, 2002 and September 30, 2003.



When, as part of an
acquisition, the Company acquires all of the assets and liabilities or all of the stock of a company, the Company assumes the liability for certain events or occurrences that took place prior to the date of acquisition. The maximum potential amount
of future payments that could be required to be made by the Company for such obligations is undeterminable at this time.



In connection with most of the Companys acquisitions, the Company enters into local service agreements for specified periods of time, usually six
months or less, whereby the Company indemnifies the owner and operator of the television station, their employees, agents and contractors from liability, claims, and damages arising from the activities of operating the television station under such
agreements. The maximum potential amount of future payments the Company could be required to make for such obligations is undeterminable at this time. The Company has not incurred significant costs to defend lawsuits or settle claims related to
these indemnification agreements.



Litigation



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



10. Members Interest



Nexstar is 100% owned and controlled by one member, Nexstar Finance
Holdings, L.L.C. (Holdings). In March 2002, Nexstar made a $1.4 million distribution to Holdings. In March 2003, Nexstar made a $1.5 million distribution to Holdings. Additionally, in March 2003, Nexstar received a capital contribution
of $71.4 million from Holdings. Holdings issued $130.0 million senior discount notes at a price of 57.442% in March 2003 and contributed the proceeds, net of issuance costs, to Nexstar.



11. Condensed Consolidating Financial Information



As a result of the service agreements, options and debt guarantees between Nexstar and Mission, as described in Note 2, Note
4 and Note 7, the financial position, results of operations and cash flows of Nexstar and Mission are consolidated.



The notes and borrowings under amounts drawn against the senior secured credit facilities are guaranteed on a joint and several, full and unconditional
basis by Nexstars wholly-owned subsidiaries and by Mission (see Note 7).



Nexstar has no independent assets or operations. All of Nexstars subsidiaries are wholly-owned and are guarantors of Nexstars debt. Therefore, Nexstar has included consolidated information with respect to
its subsidiaries in the column entitled Nexstar.



The following 2003 and 2002 condensed consolidating financial information presents the financial position, results of operations and cash flows of Nexstar and Mission, as well as the consolidating entries needed to arrive at the information
for the Company on a consolidated basis. The consolidating entries consist of fees and reimbursable expenses charged between Nexstar and Mission as a result of the local service arrangements or the unpaid balances of these charges.



14



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##### Table of Contents

NEXSTAR FINANCE, L.L.C.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



11. Condensed Consolidating Financial Information(Continued)



Balance Sheet

September 30, 2003



|                                         |  | Nexstar |         | Mission |   |         | ConsolidatingEntries |  |   | ConsolidatedCompany
|---------------------------------------- |  | ------- | ------- | ------- | - | ------- | -------------------- |  | - | -------------------
|ASSETS                                   |  |         |         |         |   |         |                      |  |   |                    
|Current assets                           |  | $       | 95,997  |         | $ | 6,616   |                      |  | $ | (7,120             
|Property and equipment, net              |  |         | 56,439  |         |   | 10,894  |                      |  |   | (80                
|Other noncurrent assets                  |  |         | 5,348   |         |   | 3,913   |                      |  |   |                   
|Intangible assets, net                   |  |         | 343,587 |         |   | 40,492  |                      |  |   |                   
|                                         |  |         |         |         |   |         |                      |  |   |                    
|Total assets                             |  | $       | 501,371 |         | $ | 61,915  |                      |  | $ | (7,200             
|                                         |  |         |         |         |   |         |                      |  |   |                    
|LIABILITIES AND MEMBERS INTEREST        |  |         |         |         |   |         |                      |  |   |                    
|Current liabilities                      |  | $       | 32,333  |         | $ | 10,810  |                      |  | $ | (7,125             
|Debt                                     |  |         | 287,841 |         |   | 66,737  |                      |  |   |                   
|Other liabilities                        |  |         | 44,567  |         |   | 3,284   |                      |  |   |                   
|Minority interest in consolidated entity |  |         |        |         |   | 2,883   |                      |  |   |                   
|Members interest                        |  |         | 136,630 |         |   | (21,799 | )                    |  |   | (75                
|                                         |  |         |         |         |   |         |                      |  |   |                    
|Total liabilities and members interest  |  | $       | 501,371 |         | $ | 61,915  |                      |  | $ | (7,200             
|                                         |  |         |         |         |   |         |                      |  |   |                    



Balance Sheet

December 31, 2002



|                                        |  | Nexstar |         | Mission |   |         | ConsolidatingEntries |  |   | ConsolidatedCompany
|--------------------------------------- |  | ------- | ------- | ------- | - | ------- | -------------------- |  | - | -------------------
|ASSETS                                  |  |         |         |         |   |         |                      |  |   |                    
|Current assets                          |  | $       | 59,083  |         | $ | 5,067   |                      |  | $ | (6,801             
|Property and equipment, net             |  |         | 48,853  |         |   | 5,759   |                      |  |   |                   
|Other noncurrent assets                 |  |         | 6,415   |         |   | 3,284   |                      |  |   |                   
|Intangible assets, net                  |  |         | 245,818 |         |   | 34,810  |                      |  |   |                   
|                                        |  |         |         |         |   |         |                      |  |   |                    
|Total assets                            |  | $       | 360,169 |         | $ | 48,920  |                      |  | $ | (6,801             
|                                        |  |         |         |         |   |         |                      |  |   |                    
|LIABILITIES AND MEMBERS INTEREST       |  |         |         |         |   |         |                      |  |   |                    
|Current liabilities                     |  | $       | 25,651  |         | $ | 9,381   |                      |  | $ | (6,801             
|Debt                                    |  |         | 237,800 |         |   | 55,143  |                      |  |   |                   
|Other liabilities                       |  |         | 15,388  |         |   | 2,047   |                      |  |   |                   
|Members interest                       |  |         | 81,330  |         |   | (17,651 | )                    |  |   |                   
|                                        |  |         |         |         |   |         |                      |  |   |                    
|Total liabilities and members interest |  | $       | 360,169 |         | $ | 48,920  |                      |  | $ | (6,801             
|                                        |  |         |         |         |   |         |                      |  |   |                    



Statement of
Operations

For the Three Months Ended September 30, 2003



|                                                                      |  | Nexstar |        |   | Mission |   |        | ConsolidatingEntries |  |   | ConsolidatedCompany |  
|--------------------------------------------------------------------- |  | ------- | ------ | - | ------- | - | ------ | -------------------- |  | - | ------------------- | -
|Net revenue                                                           |  | $       | 32,205 |   |         | $ | 4,977  |                      |  | $ | (2,420              | )
|Operating expenses                                                    |  |         | 29,942 |   |         |   | 5,227  |                      |  |   | (2,420              | )
|                                                                      |  |         |        |   |         |   |        |                      |  |   |                     |  
|Income (loss) from operations                                         |  |         | 2,263  |   |         |   | (250   | )                    |  |   |                    |  
|Interest expense                                                      |  |         | (7,692 | ) |         |   | (806   | )                    |  |   |                    |  
|Interest income and other income (expense), net                       |  |         | 1,003  |   |         |   | 1      |                      |  |   |                    |  
|                                                                      |  |         |        |   |         |   |        |                      |  |   |                     |  
|Loss before income taxes and minority interest in consolidated entity |  |         | (4,426 | ) |         |   | (1,055 | )                    |  |   |                    |  
|Income tax benefit (expense)                                          |  |         | 733    |   |         |   | (142   | )                    |  |   |                    |  
|Minority interest in consolidated entity                              |  |         |       |   |         |   | 158    |                      |  |   |                    |  
|                                                                      |  |         |        |   |         |   |        |                      |  |   |                     |  
|Net loss                                                              |  | $       | (3,693 | ) |         | $ | (1,039 | )                    |  | $ |                    |  
|                                                                      |  |         |        |   |         |   |        |                      |  |   |                     |  



15



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##### Table of Contents

NEXSTAR FINANCE, L.L.C.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



11. Condensed Consolidating Financial Information(Continued)



Statement of Operations

For the Three Months Ended September 30, 2002



|                                                |  | Nexstar |        |   | Mission |   |       | ConsolidatingEntries |  |   | ConsolidatedCompany |  
|----------------------------------------------- |  | ------- | ------ | - | ------- | - | ----- | -------------------- |  | - | ------------------- | -
|Net revenue                                     |  | $       | 29,428 |   |         | $ | 3,877 |                      |  | $ | (1,615              | )
|Operating expenses                              |  |         | 25,364 |   |         |   | 4,004 |                      |  |   | (1,615              | )
|                                                |  |         |        |   |         |   |       |                      |  |   |                     |  
|Income (loss) from operations                   |  |         | 4,064  |   |         |   | (127  | )                    |  |   |                    |  
|Interest expense                                |  |         | (7,994 | ) |         |   | (712  | )                    |  |   |                    |  
|Interest income and other income (expense), net |  |         | (2,068 | ) |         |   |      |                      |  |   |                    |  
|                                                |  |         |        |   |         |   |       |                      |  |   |                     |  
|Loss before income taxes                        |  |         | (5,998 | ) |         |   | (839  | )                    |  |   |                    |  
|Income tax benefit                              |  |         | 1,185  |   |         |   | 99    |                      |  |   |                    |  
|                                                |  |         |        |   |         |   |       |                      |  |   |                     |  
|Net loss                                        |  | $       | (4,813 | ) |         | $ | (740  | )                    |  | $ |                    |  
|                                                |  |         |        |   |         |   |       |                      |  |   |                     |  



Statement of
Operations

For the Nine Months Ended September 30, 2003



|                                                                      |  | Nexstar |         |   | Mission |   |        | ConsolidatingEntries |  |   | ConsolidatedCompany |  
|--------------------------------------------------------------------- |  | ------- | ------- | - | ------- | - | ------ | -------------------- |  | - | ------------------- | -
|Net revenue                                                           |  | $       | 94,076  |   |         | $ | 14,182 |                      |  | $ | (6,112              | )
|Operating expenses                                                    |  |         | 84,168  |   |         |   | 14,762 |                      |  |   | (6,112              | )
|                                                                      |  |         |         |   |         |   |        |                      |  |   |                     |  
|Income (loss) from operations                                         |  |         | 9,908   |   |         |   | (580   | )                    |  |   |                    |  
|Interest expense                                                      |  |         | (27,389 | ) |         |   | (3,286 | )                    |  |   |                    |  
|Interest income and other income (expense), net                       |  |         | 1,864   |   |         |   | 85     |                      |  |   | (75                 | )
|                                                                      |  |         |         |   |         |   |        |                      |  |   |                     |  
|Loss before income taxes and minority interest in consolidated entity |  |         | (15,617 | ) |         |   | (3,781 | )                    |  |   | (75                 | )
|Income tax benefit (expense)                                          |  |         | 1,068   |   |         |   | (630   | )                    |  |   |                    |  
|Minority interest in consolidated entity                              |  |         |        |   |         |   | 263    |                      |  |   |                    |  
|                                                                      |  |         |         |   |         |   |        |                      |  |   |                     |  
|Net loss                                                              |  | $       | (14,549 | ) |         | $ | (4,148 | )                    |  | $ | (75                 | )
|                                                                      |  |         |         |   |         |   |        |                      |  |   |                     |  



Statement of
Operations

For the Nine Months Ended September 30, 2002



|                                                                |  | Nexstar |         |   | Mission |   |        | ConsolidatingEntries |  |   | ConsolidatedCompany |  
|--------------------------------------------------------------- |  | ------- | ------- | - | ------- | - | ------ | -------------------- |  | - | ------------------- | -
|Net revenue                                                     |  | $       | 84,805  |   |         | $ | 11,312 |                      |  | $ | (4,583              | )
|Operating expenses                                              |  |         | 75,609  |   |         |   | 10,829 |                      |  |   | (4,583              | )
|                                                                |  |         |         |   |         |   |        |                      |  |   |                     |  
|Income from operations                                          |  |         | 9,196   |   |         |   | 483    |                      |  |   |                    |  
|Interest expense                                                |  |         | (23,921 | ) |         |   | (2,175 | )                    |  |   |                    |  
|Interest income and other income (expense), net                 |  |         | (2,280  | ) |         |   | 8      |                      |  |   |                    |  
|                                                                |  |         |         |   |         |   |        |                      |  |   |                     |  
|Loss before income taxes                                        |  |         | (17,005 | ) |         |   | (1,684 | )                    |  |   |                    |  
|Income tax benefit (expense)                                    |  |         | 2,410   |   |         |   | (47    | )                    |  |   |                    |  
|                                                                |  |         |         |   |         |   |        |                      |  |   |                     |  
|Loss before cumulative effect of change in accounting principle |  |         | (14,595 | ) |         |   | (1,731 | )                    |  |   |                    |  
|Cumulative effect of change in accounting principle, net of tax |  |         | (27,419 | ) |         |   |       |                      |  |   |                    |  
|                                                                |  |         |         |   |         |   |        |                      |  |   |                     |  
|Net loss                                                        |  | $       | (42,014 | ) |         | $ | (1,731 | )                    |  | $ |                    |  
|                                                                |  |         |         |   |         |   |        |                      |  |   |                     |  



16



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##### Table of Contents

NEXSTAR FINANCE, L.L.C.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



11. Condensed Consolidating Financial Information(Continued)



Statement of Cash Flows

For the Nine Months Ended September 30, 2003



|                                                                   |  | Nexstar |          |   | Mission |   |         | ConsolidatingEntries |  |   | ConsolidatedCompany |  
|------------------------------------------------------------------ |  | ------- | -------- | - | ------- | - | ------- | -------------------- |  | - | ------------------- | -
|Net cash provided by operating activities                          |  | $       | 14,195   |   |         | $ | 1,124   |                      |  | $ | (5                  | )
|                                                                   |  |         |          |   |         |   |         |                      |  |   |                     |  
|Cash flows from investing activities:                              |  |         |          |   |         |   |         |                      |  |   |                     |  
|Additions to property and equipment, net                           |  |         | (5,545   | ) |         |   | (542    | )                    |  |   | 5                   |  
|Acquisitions of broadcast properties and related transaction costs |  |         | (92,262  | ) |         |   | (10,543 | )                    |  |   |                    |  
|                                                                   |  |         |          |   |         |   |         |                      |  |   |                     |  
|Net cash used for investing activities                             |  |         | (97,807  | ) |         |   | (11,085 | )                    |  |   | 5                   |  
|                                                                   |  |         |          |   |         |   |         |                      |  |   |                     |  
|Cash flows from financing activities:                              |  |         |          |   |         |   |         |                      |  |   |                     |  
|Proceeds from debt issuance                                        |  |         | 130,000  |   |         |   | 55,000  |                      |  |   |                    |  
|Proceeds from revolver draws                                       |  |         | 25,000   |   |         |   | 12,150  |                      |  |   |                    |  
|Repayment of loans                                                 |  |         | (106,513 | ) |         |   | (55,143 | )                    |  |   |                    |  
|Payments for debt finance costs                                    |  |         | (3,433   | ) |         |   | (1,483  | )                    |  |   |                    |  
|Capital contributions, net                                         |  |         | 69,849   |   |         |   |        |                      |  |   |                    |  
|                                                                   |  |         |          |   |         |   |         |                      |  |   |                     |  
|Net cash provided by financing activities                          |  |         | 114,903  |   |         |   | 10,524  |                      |  |   |                    |  
|                                                                   |  |         |          |   |         |   |         |                      |  |   |                     |  
|Net increase in cash and cash equivalents                          |  |         | 31,291   |   |         |   | 563     |                      |  |   |                    |  
|Cash and cash equivalents at beginning of period                   |  |         | 19,376   |   |         |   | 503     |                      |  |   |                    |  
|                                                                   |  |         |          |   |         |   |         |                      |  |   |                     |  
|Cash and cash equivalents at end of period                         |  | $       | 50,667   |   |         | $ | 1,066   |                      |  | $ |                    |  
|                                                                   |  |         |          |   |         |   |         |                      |  |   |                     |  



Statement of Cash
Flows

For the Nine Months Ended September 30, 2002



|                                                                   |  | Nexstar |        |   | Mission |   |        | ConsolidatingEntries |  | ConsolidatedCompany |  
|------------------------------------------------------------------ |  | ------- | ------ | - | ------- | - | ------ | -------------------- |  | ------------------- | -
|Net cash provided by operating activities                          |  | $       | 15,512 |   |         | $ | 561    |                      |  | $                   | 
|                                                                   |  |         |        |   |         |   |        |                      |  |                     |  
|Cash flows from investing activities:                              |  |         |        |   |         |   |        |                      |  |                     |  
|Additions to property and equipment, net                           |  |         | (5,435 | ) |         |   | (112   | )                    |  |                     | 
|Acquisitions of broadcast properties and related transaction costs |  |         |       |   |         |   | (8,092 | )                    |  |                     | 
|                                                                   |  |         |        |   |         |   |        |                      |  |                     |  
|Net cash used for investing activities                             |  |         | (5,435 | ) |         |   | (8,204 | )                    |  |                     | 
|                                                                   |  |         |        |   |         |   |        |                      |  |                     |  
|Cash flows from financing activities:                              |  |         |        |   |         |   |        |                      |  |                     |  
|Repayment of loans                                                 |  |         | (2,835 | ) |         |   |       |                      |  |                     | 
|Proceeds from revolver draws                                       |  |         | 2,500  |   |         |   | 7,500  |                      |  |                     | 
|Proceeds from termination of derivative instrument                 |  |         | 4,387  |   |         |   |       |                      |  |                     | 
|Payments for debt finance costs                                    |  |         | (386   | ) |         |   |       |                      |  |                     | 
|Distributions, net                                                 |  |         | (1,415 | ) |         |   |       |                      |  |                     | 
|                                                                   |  |         |        |   |         |   |        |                      |  |                     |  
|Net cash provided by financing activities                          |  |         | 2,251  |   |         |   | 7,500  |                      |  |                     | 
|                                                                   |  |         |        |   |         |   |        |                      |  |                     |  
|Net increase (decrease) in cash and cash equivalents               |  |         | 12,328 |   |         |   | (143   | )                    |  |                     | 
|Cash and cash equivalents at beginning of period                   |  |         | 5,218  |   |         |   | 584    |                      |  |                     | 
|                                                                   |  |         |        |   |         |   |        |                      |  |                     |  
|Cash and cash equivalents at end of period                         |  | $       | 17,546 |   |         | $ | 441    |                      |  | $                   | 
|                                                                   |  |         |        |   |         |   |        |                      |  |                     |  



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##### Table of Contents

NEXSTAR FINANCE, L.L.C.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



12. Initial Public Offering



On April 24, 2002, Nexstar Broadcasting Group, Inc., filed a registration statement for an initial public offering with the
Securities and Exchange Commission (SEC). Nexstar Group, Nexstars ultimate parent, will undertake a reorganization in connection with the consummation of the initial public offering whereby Nexstar Group and certain of its direct
and indirect subsidiaries will be merged with and into Nexstar Broadcasting Group, Inc., which will be the surviving corporation.



13. Recently Issued Accounting Pronouncements



On April 30, 2003, the FASB issued FASB Statement No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities
(SFAS No. 149). SFAS No. 149 amends and clarifies the accounting guidance on (1) derivative instruments (including certain derivative instruments embedded in other contracts) and (2) hedging activities that fall within the scope of FASB
Statement No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS No. 133). SFAS No. 149 amends SFAS No. 133 and certain other existing pronouncements, which will result in more consistent reporting of
contracts that are derivative in their entirety or that contain embedded derivatives that warrant separate accounting. SFAS No. 149 is effective (1) for contracts entered into or modified after June 30, 2003, with certain exceptions, and (2) for
hedging relationships designated after June 30, 2003. The guidance is to be applied prospectively.



In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity
(SFAS 150). This statement addresses financial accounting and reporting for financial instruments with characteristics of both liabilities and equity and is effective at the beginning of the first interim period beginning after June 12,
2003.



The adoption of these new standards by the Company did
not have a significant accounting impact.



14. Subsequent Events



On October 13, 2003, Nexstar entered into a purchase
agreement to acquire substantially all of the assets of KPOM/KFAA, the NBC affiliate in Fort Smith-Fayetteville-Springdale-Rogers, Arkansas, from J.D.G. Television, Inc. for $17.0 million, exclusive of transaction costs. Operations under a time
brokerage agreement between Nexstar and J.D.G. Television, Inc. began on October 16, 2003. Pursuant to terms of the purchase agreement, Nexstar made a down payment of $10.0 million against the purchase price on October 16, 2003, which was funded
from available cash. The acquisition is expected to close in the first quarter of 2004, subject to FCC consent. The Company is currently evaluating the accounting impact of these agreements under FIN No. 46.



Nexstar plans to issue $125.0 million of senior subordinated notes (the
new notes) during the fourth quarter of 2003. The new notes are expected to be guaranteed by all of the domestic existing and future subsidiaries of Nexstar and by Mission. They are expected to be general unsecured senior subordinated
obligations subordinated to all of the Companys senior secured credit facilities. The indenture governing the new notes is expected to contain covenants that restrict the ability of the Company to incur additional indebtedness, pay dividends
and undertake certain other business activities.



Nexstar and
Mission plan to amend their senior secured credit facilities during the fourth quarter of 2003. The new facilities are expected to consist of a $195.0 million term loan (Nexstar - $55.0 million and Mission - $140.0 million) and an $80.0 million
revolver (Nexstar - $50.0 million and Mission - $30.0 million). Nexstar and Mission anticipate using the proceeds to refinance their existing senior secured credit facilities, pay for related debt financing costs and finance the Quorum and VHR
acquisitions, including the refinancing of all debt of Quorums subsidiaries. The amendments to the Nexstar and Mission senior secured credit facilities are expected to result in the write off of approximately $3.1 million of debt financing
costs during the fourth quarter of 2003.



18



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##### Table of Contents

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Forward-Looking and Cautionary Statements



The following discussion and analysis should be read in conjunction with the unaudited consolidated balance sheet as of September 30, 2003, unaudited
consolidated statements of operations and other comprehensive income and other unaudited financial statements for the three months and nine months ended September 30, 2002 and 2003 and related notes included elsewhere in this Quarterly Report on
Form 10-Q. 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 Nexstars Annual Report on Form 10-K for the year ended December 31, 2002. The forward-looking statements are made only as of the date hereof, and we do not have or undertake any obligation to publicly update any forward-looking
statements to reflect subsequent events or circumstances unless otherwise required by law.



We make references throughout our Managements Discussion and Analysis of Financial Condition and Results of Operations to comparisons on a same station basis in order to provide a more
meaningful comparison of annual growth from internal operations which may be masked by growth from acquisitions. These comparisons refer to stations that we have owned or provided services to at the beginning and end of a particular period. In
particular, references to a comparison on a same station basis for the three months and nine months ended September 30, 2003 versus the three months and nine months ended September 30, 2002 include the following stations: WYOU, KQTV, WTWO, WBRE,
KFDX, KSNF, KBTV, WJET, WFXP, WROC, KJTL, KJBO-LP, KTAB, KMID, KTAL, WCIA, WMBD, WYZZ and KODE. As used in the report, unless the context indicates otherwise, Nexstar refers to Nexstar Finance, L.L.C. and its consolidated subsidiaries
including Nexstar Finance, Inc., and Mission refers to Mission Broadcasting, Inc. All references to we, our, and us refer to Nexstar.



Introduction



We currently own and operate, through our subsidiaries, 16 television stations. Through various local service agreements with Mission Broadcasting, Inc.
(Mission), we provide various management, sales or other services to additional television stations. Mission is 100% owned by an independent third party. Mission owns and operates the following television stations: WYOU, WFXP, KODE,
KJTL, KJBO-LP, KRBC and KSAN (formerly KACB). In addition, Mission provides most of the programming for WBAK, pursuant to a time brokerage agreement, pending Missions acquisition of WBAK from Bahakel Communications, which is expected to close
in the fourth quarter of 2003, subject to FCC consent. We do not own Mission or its television stations. In order for both Nexstar and Mission to continue to comply with FCC regulations, Mission must maintain complete responsibility for and control
over programming, finances, personnel and operations of its stations. However, as a result of Nexstars guarantee of Missions debt and our arrangements under the local service agreements and purchase option agreements with Mission
(described below), we are deemed under U.S. generally accepted accounting principles (U.S. GAAP) to have a controlling financial interest in Mission. Additionally, we have evaluated the impact of accounting for Mission under Financial
Accounting Standards Board (FASB) Interpretation No. 46, Consolidation of Variable Interest Entities, an interpretation of Accounting Research Bulletin No. 51 (FIN No. 46) and have determined that we
will be required to continue consolidating Missions financial position, results of operations and cash flows under U.S. GAAP.



Our ability to receive cash from Mission is governed by the following local service agreements:



| |  | We have a time brokerage agreement with WFXP, which allows us to program most of the stations broadcast time, sell the stations advertising time and retain the
advertising revenue generated by WFXP in exchange for monthly payments to Mission.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | We have a shared services agreement with KJTL and KJBO-LP, which allows the sharing of services, including news production, technical maintenance and security, in exchange for our
right to receive certain payments from Mission as described in the shared services agreement. Through a joint sales agreement, we have also acquired the rights to sell and receive the revenue from the advertising time on KJTL and KJBO-LP in return
for monthly payments to Mission. The arrangements under these agreements have had the effect of us receiving substantially all of the available cash, after payment of debt service costs, generated by KJTL and KJBO-LP. We anticipate that we will
continue to receive substantially all of the available cash, after payment of debt service costs, generated by KJTL and KJBO-LP under these agreements.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  | We have shared service agreements with each of WYOU, KODE, KRBC, KSAN and WBAK and a joint sales agreement with WBAK, which have terms substantially similar to the terms of the
shared services agreement and joint sales agreement, as applicable, with KJTL and KJBO-LP, except that the payment terms under the shared services agreements for WYOU, KRBC and KSAN provide for payment of a flat monthly fee.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | We have joint sales agreements with WYOU, KODE, KRBC and KSAN, the terms of which will begin only at the later of (a) the 10thday after our written notice to Mission and (b) the satisfaction of requirements, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The
terms of these joint sales agreements are substantially similar to the terms of our joint sales agreements with KJTL and KJBO-LP.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In addition to providing certain services to Missions television stations, we also guarantee Missions bank debt. Similarly, Mission is a
guarantor of the senior credit facilities entered into and the senior subordinated notes issued by Nexstar.



The shareholder of Mission has granted to us a purchase option to acquire the assets and liabilities of each Mission station for consideration equal to
the greater of (1) seven times the stations broadcast cash flow as defined in the option agreement less the amount of its indebtedness as defined in the option agreement or (2) the amount of its indebtedness. These option agreements are freely
exercisable or assignable by us without consent or approval by the shareholder of Mission.



Nexstar does not own Mission or Missions television stations. However, as a result of our guarantee of Missions debt and our arrangements under the local service arrangements and purchase option agreements
with Mission, we are deemed under U.S. GAAP to have a controlling financial interest in Mission while complying with the FCCs rules regarding ownership limits in television markets. In order for both Nexstar and Mission to continue to comply
with FCC regulations, Mission must maintain complete responsibility for and control over programming, finances, personnel and operations of its stations. As a result of our controlling financial interest in Mission under U.S. GAAP and in order to
present fairly our financial position, results of operations and cash flows, we consolidate the financial position, results of operations and cash flows of Mission as if it were a wholly-owned entity. We believe this presentation is meaningful for
understanding our financial performance. As discussed above, we have considered the method of accounting under FIN No. 46 and have determined that we will be required to continue consolidating Missions financial position, results of operations
and cash flows. Therefore, the following discussion of our financial position and results of operations includes Missions financial position and results of operations.



In addition to our agreements with Mission, pursuant to an outsourcing agreement with a subsidiary of Sinclair Broadcast
Group, Inc. (Sinclair) that became effective December 1, 2001, we provide engineering, production, sales and administrative services for WYZZ, the Fox affiliate in the Peoria-Bloomington, Illinois market. The parties share the combined
broadcast cash flow, as defined in the agreement, generated by WYZZ and Nexstar-owned WMBD. The outsourcing agreement expires in December 2008, but at any time it may be canceled by either party upon 180 days written notice. We evaluated the
arrangement under FIN No. 46 and determined that we are not the primary beneficiary of WYZZ.



The operating revenue of our stations is derived primarily from advertising revenue, which in turn depends on the economic conditions of the markets in which we operate, the demographic makeup of those markets and the
marketing strategy we employ in each market. The primary operating expenses consist of commissions on advertising revenue, employee compensation and related benefits, newsgathering and programming costs. A large percentage of the costs involved in
the operation of our stations remains relatively fixed.





Each of our stations has a network affiliation agreement pursuant to which the network provides programming to the station during specified time periods,
including prime time. Each of NBC, CBS and ABC compensates our affiliated stations for distributing the networks programming over the air and for allowing the network to keep a portion of advertising inventory during those time periods. The
affiliation agreements with Fox and UPN do not provide for compensation. Each station acquires licenses to broadcast programming in non-news and non-network time periods. The licenses are either purchased from a program distributor for cash and/or
the program distributor is allowed to sell some of the advertising inventory as compensation to eliminate or reduce the cash cost for the license. The latter practice is referred to as barter broadcast rights. The station records the estimated fair
market value of the licenses, including any advertising inventory given to the program distributor, as a broadcast right asset and liability. The assets are amortized as a component of amortization of broadcast rights. Amortization is computed using
the straight-line method based on the license period or usage, whichever is greater. The cash broadcast rights liabilities are reduced by monthly payments while the barter liability is amortized over the life of the contract as a component of trade
and barter revenue.



Advertising rates are based upon (1) a programs popularity among the viewers that an advertiser wishes to target, (2) the number of advertisers competing for the available time, (3) the
size and the demographic composition of the market served by the station, (4) the availability of alternative advertising media in the market area, and (5) the effectiveness of the stations sales force. Advertising rates are also
determined by a stations overall ability to attract viewers in its market area, as well as the stations ability to attract viewers among particular demographic groups that an advertiser may be targeting. Advertising revenue is positively
affected by strong local economies, national and regional political election campaigns, and certain events such as the Olympic Games or the Super Bowl. Because television broadcast stations rely on advertising revenue, declines in advertising
budgets, particularly in recessionary periods, adversely affect the broadcast industry, and as a result may contribute to a decrease in the revenue of broadcast television stations.



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Most advertising contracts are short-term and generally run for a few weeks. Excluding political revenue,
65.7% of Nexstars and Missions spot revenue for both the nine months ended September 30, 2002 and 2003, respectively, was generated from local advertising. The remainder of our advertising revenue represents inventory sold for national
or political advertising. Each station has an agreement with a national representative firm that provides for representation outside the particular stations market. National commission rates vary within the industry and are governed by each
stations agreement. All national and political revenue is derived from advertisements placed by advertising agencies. The agencies receive a commission rate of 15.0% of the gross amount of advertising schedules placed by them. While the
majority of local spot revenue is placed by local agencies, some advertisers place their schedules directly with the local sales staff, thereby eliminating the agency commission.



The advertising revenue of Nexstars and Missions stations is generally highest in the second and fourth quarters
of each year, due in part to increases in consumer advertising in the spring and retail advertising in the period leading up to, and including, the holiday season. In addition, advertising revenue is generally higher during even-numbered years as a
result of political advertising and advertising aired during the Olympic Games.



Acquisitions and Station Agreements



The
acquisitions and local service agreements described below, which were entered into by Nexstar and Mission during the fiscal year ended December 31, 2002 and the nine months ended September 30, 2003, affect the year-to-year comparability of the
operating results discussed in this Quarterly Report on Form 10-Q:



| |  | On April 1, 2002, we entered into a shared services agreement with Mission to provide news production, technical maintenance and security for KODE, in exchange for monthly fees paid
to us. The services provided by us resulted in higher miscellaneous revenue and operating expenses for Nexstar-owned KSNF, the station providing the services.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | On April 1, 2002, we converted WCFN from a satellite station of WCIA to a UPN-affiliated station. As a result, WCFN became a full-power station capable of generating revenue of its
own. For discussion purposes on a same station basis, we have excluded WCFNs revenue and expenses.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | On December 13, 2002, Mission entered into a purchase agreement and local marketing agreement with LIN Television Corporation and two of its subsidiaries, which owned KRBC, the NBC
affiliate in Abilene-Sweetwater, Texas, and KSAN (formerly KACB), the NBC affiliate in San Angelo, Texas. Operations under the local marketing agreement commenced on January 1, 2003 and terminated upon the purchase of the stations. On June 13, 2003,
Mission purchased substantially all of the assets of the stations for $10.0 million. Pursuant to the terms of the purchase agreement, Mission made a down payment of $1.5 million against the purchase price in December 2002 and paid the remaining $8.5
million upon the consummation of the acquisition on June 13, 2003, exclusive of transaction costs. On June 13, 2003, Mission entered into a shared services agreement with KTAB, a Nexstar-owned station in the Abilene-Sweetwater, Texas market, whereby
KTAB provides news production, technical maintenance and security for KRBC and KSAN in exchange for monthly payments from Mission.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | On December 30, 2002, Nexstar entered into a purchase agreement and time brokerage agreements with two subsidiaries of Morris Multimedia, Inc., which owned KARK, the NBC affiliate
in Little Rock-Pine Bluff, Arkansas, and WDHN, the ABC affiliate in Dothan, Alabama. Operations under the time brokerage agreements commenced on February 1, 2003. On August 1, 2003, Nexstar completed the acquisition of the stations for total
consideration of $91.5 million, and the time brokerage agreements were terminated. Pursuant to terms of the purchase agreement, Nexstar made a down payment of $40.0 million against the purchase price on January 31, 2003 and paid the remaining $51.5
million upon the consummation of the acquisition, exclusive of transaction costs.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | On May 8, 2003, Mission entered into a purchase agreement and a time brokerage agreement with Bahakel Communications and certain of its subsidiaries, the current owner of WBAK, the
Fox affiliate in Terre Haute, Indiana. Operations under the time brokerage agreement commenced on May 9, 2003 and will terminate upon the purchase of the station. Following FCC consent to the transaction, Mission will purchase substantially all of
the assets of WBAK for $3.0 million. Pursuant to the terms of the purchase agreement, on May 9, 2003, Mission made a down payment of $1.5 million against the purchase price, which was funded from Missions senior credit facilities.
Additionally, Mission entered into a shared services agreement with Nexstar, effective May 9, 2003, whereby Nexstar-owned WTWO may provide certain services to WBAK, including news production, technical maintenance and security in exchange for
monthly payments from Mission. Mission also entered into a joint sales agreement, effective May 9, 2003, whereby Nexstar-owned WTWO purchases all of the advertising time on WBAK and retains the advertising revenue in return for payments to Mission.
The transaction is expected to close in the fourth quarter of 2003, subject to FCC consent. Mission has evaluated its arrangement with Bahakel Communications under FIN No. 46 and has determined that it is the primary beneficiary of WBAK. Mission has
therefore consolidated the financial position and results of operations of WBAK since May 9, 2003.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | On September 12, 2003, Nexstar Broadcasting Group, L.L.C. (Nexstar Group), Nexstars ultimate parent, signed a definitive agreement to acquire all
of the subsidiaries of Quorum Broadcast Holdings, LLC (Quorum). Quorum owns and operates 11 television stations (including WTVW, which certain Quorum subsidiaries have contracted to sell) and provides management, sales or other services
to an additional five stations, primarily in medium-sized markets. On the same date, Nexstar Group also entered into a management and consulting services agreement with Quorum pursuant to which Nexstar Group will perform certain management functions
pending completion of the purchase. Nexstar Group will receive no compensation under the management agreement,
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | provided that the sale closes before March 31, 2004. Nexstar Group will, however, be reimbursed for any expenses incurred. After March 31, 2004, the
agreement requires Quorum to pay a quarterly management fee to Nexstar Group equal to 50% of the cost savings to Quorum resulting from Nexstar Groups performance of certain management functions. The Quorum acquisition will be structured as a
merger of Quorums direct subsidiaries with and into Nexstar Group. The consideration for the merger will consist of a combination of cash, shares of common stock of Nexstar Broadcasting Group, Inc. (see Note 12) and the assumption of debt.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Recent Developments



On February 13, 2003, Nexstar and Mission obtained new senior secured credit
facilities. The facilities consist of a $185.0 million term loan (Nexstar-$130.0 million and Mission-$55.0 million) and an $80.0 million revolver (Nexstar-$50.0 million and Mission-$30.0 million). We and Mission used the proceeds from the term loan
to refinance our existing senior credit facilities, pay for related debt financing costs and provide additional working capital. Financial covenants under the new senior credit facilities include a total leverage ratio of 7.25 times the last twelve
months operating cash flow (as defined in the credit agreement) through March 30, 2004 and a senior leverage ratio of 4.25 times the last twelve months operating cash flow (as defined in the credit agreement) through June 29, 2004. Covenants also
include, among others, an interest coverage ratio of 1.50 to 1.00 through June 29, 2004 and a fixed charge coverage ratio of 1.10 to 1.00 through September 29, 2004. The term loans amortize at 1% annually in years 2004 through 2009, with the
remaining 94% due in 2010. The outstanding principal amount on the revolving loans mature on December 31, 2009. As of September 30, 2003, Nexstar had drawn $130.0 million of term loans and had no borrowings outstanding under its new revolver and
Mission had drawn $55.0 million of term loans and $12.2 million under its new revolver. The refinancing of the predecessor senior credit facilities resulted in the write off during the first quarter of 2003 of $5.8 million of certain debt financing
costs capitalized at December 31, 2002.



On October 13, 2003,
Nexstar entered into a purchase agreement to acquire substantially all of the assets of KPOM/KFAA, the NBC affiliate in Fort Smith-Fayetteville-Springdale-Rogers, Arkansas, from J.D.G. Television, Inc. for $17.0 million, exclusive of transaction
costs. Operations under a time brokerage agreement between Nexstar and J.D.G. Television, Inc. began on October 16, 2003. Pursuant to terms of the purchase agreement, Nexstar made a down payment of $10.0 million against the purchase price on October
16, 2003, which was funded from available cash. The acquisition is expected to close in the first quarter of 2004, subject to FCC consent. Nexstar is currently evaluating the impact of these agreements under FIN No. 46.



Nexstar plans to issue $125.0 million of senior subordinated notes
(the new notes) during the fourth quarter of 2003. The new notes are expected to be guaranteed by all of the domestic existing and future subsidiaries of Nexstar and by Mission. They are expected to be general unsecured senior
subordinated obligations subordinated to all of Nexstars senior secured credit facilities. The indenture governing the new notes is expected to contain covenants that restrict the ability of Nexstar to incur additional indebtedness, pay
dividends and undertake certain other business activities.



Nexstar and Mission plan to amend their senior secured credit facilities during the fourth quarter of 2003. The new facilities are expected to consist of a $195.0 million term loan (Nexstar - $55.0 million and Mission - $140.0 million) and
an $80.0 million revolver (Nexstar - $50.0 million and Mission - $30.0 million). Nexstar and Mission anticipate using the proceeds to refinance their existing senior secured credit facilities, pay for related debt financing costs and finance
the Quorum and VHR acquisitions, including the refinancing of all of the debt of Quorums subsidiaries. The amendments to the Nexstar and Mission senior secured credit facilities are expected to result in the write off of approximately $3.1
million of debt financing costs during the fourth quarter of 2003.



Capital
Contributions/Distributions



In March 2002, Nexstar made a
$1.4 million distribution to its direct parent company, Nexstar Finance Holdings, L.L.C. (Holdings). In March 2003, Nexstar made a $1.5 million distribution to Holdings. Additionally, in March 2003, Nexstar received a capital
contribution of $71.4 million from Holdings. Holdings issued $130.0 million senior discount notes at a price of 57.442% in March 2003 and contributed the proceeds, net of issuance costs, to Nexstar.



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Historical Performance



Revenue



The following table sets forth the principal types of revenue received by our stations for the periods indicated and each type of revenue (other than
trade and barter) as a percentage of total gross revenue, as well as agency and national sales representative commissions:



|                                                     |  | Three Months Ended September 30, |        | Nine Months Ended September 30,
|---------------------------------------------------- |  | -------------------------------- | ------ | -------------------------------
|                                                     |  | 2002                             |        | 2003                           
|                                                     |  | Amount                           |        | %                              
|                                                     |  | (dollars in thousands)           |        | (dollars in thousands)         
|Local                                                |  | $                                | 17,605 |                                
|National                                             |  |                                  | 9,099  |                                
|Political                                            |  |                                  | 5,056  |                                
|Network compensation                                 |  |                                  | 1,624  |                                
|Other                                                |  |                                  | 432    |                                
|                                                     |  |                                  |        |                                
|Total gross revenue                                  |  |                                  | 33,816 |                                
|Less: Agency and national representative commissions |  |                                  | 4,815  |                                
|                                                     |  |                                  |        |                                
|Net broadcast revenue                                |  |                                  | 29,001 |                                
|Trade and barter revenue                             |  |                                  | 2,689  |                                
|                                                     |  |                                  |        |                                
|Total net revenue                                    |  | $                                | 31,690 |                                
|                                                     |  |                                  |        |                                



Results of
Operations



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



|                                                   |  | Three Months Ended September 30, |        | Nine Months Ended September 30,
|-------------------------------------------------- |  | -------------------------------- | ------ | -------------------------------
|                                                   |  | 2002                             |        | 2003                           
|                                                   |  | Amount                           |        | %                              
|                                                   |  | (dollars in thousands)           |        | (dollars in thousands)         
|Total net revenue                                  |  | $                                | 31,690 |                                
|Operating expenses:                                |  |                                  |        |                                
|Corporate expenses                                 |  |                                  | 1,008  |                                
|Station direct operating expenses, net of trade    |  |                                  | 7,957  |                                
|Selling, general and administrative expenses       |  |                                  | 7,438  |                                
|Trade and barter expense                           |  |                                  | 2,445  |                                
|Depreciation and amortization                      |  |                                  | 6,813  |                                
|Amortization of broadcast rights, excluding barter |  |                                  | 2,092  |                                
|                                                   |  |                                  |        |                                
|Income from operations                             |  | $                                | 3,937  |                                
|                                                   |  |                                  |        |                                



Three Months Ended
September 30, 2003 Compared to Three Months Ended September 30, 2002.



Net broadcast revenue for the three months ended September 30, 2003 was $32.0 million, an increase of $3.0 million, compared to $29.0 million for the three months ended September 30, 2002. An increase in net broadcast
revenue of $5.1 million was attributed to stations for which a local service arrangement was entered into after January 1, 2002 and WCFN. On a same station basis, net broadcast revenue for the three months ended September 30, 2003 was $25.6 million
as compared to $27.7 million for the three months ended September 30, 2002, a decrease of 7.5%, or $2.1 million. Of this decrease, $3.2 million was attributed to a decline in political revenue resulting from a lack of election campaigns in most of
our markets in 2003, offset, in part, by increases in local demand of $0.6 million and national revenue of $0.5 million on a same station basis. We expect to have higher advertising revenue during the even-numbered years as a result of revenue
associated with the Olympic Games and political campaigns and lower advertising revenue during the odd-numbered years without Olympic Games and with nominal political activity.



Station direct operating expenses, consisting primarily of news, engineering and
programming, and selling, general and administrative expenses, net of trade, for the three months ended September 30, 2003 were $18.6 million, compared to $15.4 million for the comparable period in 2002, an increase of $3.2 million. Of the $3.2
million increase, $3.5 million was attributed to stations for which a local service arrangement was entered into after January 1, 2002 and WCFN, offset by $0.3 million of reductions in direct operating expenses at stations owned longer than one
year. On a same station basis, station direct operating expenses and selling, general and administrative expenses, net of trade, for the three months ended September 30, 2003 were $13.9 million as compared to $14.2 million for the three months ended
September 30, 2002, a decrease of 2.2%, or $0.3 million. This decrease resulted primarily from reduced payments under an outsourcing arrangement and reduced health benefit costs incurred during the third quarter of 2003.



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Corporate expenses, related to costs associated with the centralized management of our stations, for the
three months ended September 30, 2003 were $1.6 million, compared to $1.0 million for the three months ended September 30, 2002, an increase of $0.6 million. The increase was primarily attributed to an increase in personnel costs.



Amortization of broadcast rights, excluding barter, for the three months
ended September 30, 2003 was $1.9 million, compared to $2.1 million for the three months ended September 30, 2002, a decrease of $0.2 million.



Depreciation of property and equipment was $3.3 million for the three months ended September 30, 2003, compared to $3.4 million for the comparable period
in 2002, a decrease of $0.1 million. The decrease in depreciation was attributed to the curtailment of depreciation on certain assets that became fully depreciated as of December 31, 2002. The stations for which a local service arrangement was
entered into after January 1, 2002 and WCFN had no material effect on depreciation.



The amortization of intangibles was $4.7 million for the three months ended September 30, 2003, compared to $3.4 million for the same period in 2002, an increase of $1.3 million. The increase in amortization was
attributed to the amortization of intangible assets resulting from the following acquisitions: KODE, KRBC, KSAN, KARK and WDHN.



Income from operations for the three months ended September 30, 2003 was $2.0 million as compared to $3.9 million for the three months ended September 30,
2002, a decrease of $1.9 million. Loss from operations in the amount of $0.2 million was attributed to stations for which a local service arrangement was entered into after January 1, 2002 and WCFN. On a same station basis, income from operations
for the three months ended September 30, 2003 was $2.4 million as compared to $4.1 million for the three months ended September 30, 2002. The $1.7 million decrease in income from operations is primarily attributed to a decrease in net revenue as
described above.



The change in market values of our derivative
instruments and the marking-to-market of the interest rate swap agreement resulted in recognition of $0.9 million in other income for the three months ended September 30, 2003 and a loss of $2.2 million recognized in other expenses for the three
months ended September 30, 2002. The change was primarily due to a fluctuation in market interest rates.



Interest expense, including amortization of debt financing costs, for the three months ended September 30, 2003 was $8.5 million, compared to $8.7 million
for the same period in 2002. The decrease in interest expense was primarily attributable to a decline in interest rates on the senior secured credit facilities during the three months ended September 30, 2003 as compared to the same period in 2002.



The minority interest in consolidated entity of $0.2 million
for the three months ended September 30, 2003 relates to the recognition of $0.2 million of expenses due to the application of FIN No. 46 as it pertains to the local service arrangement Mission has with WBAK (see Note 4 of the consolidated financial
statements).



As a result of the factors discussed above, our
net loss was $4.7 million for the three months ended September 30, 2003, compared to $5.6 million for the same period in 2002, a decrease in net loss of $0.9 million.



Nine Months Ended September 30, 2003 Compared to Nine Months Ended September 30, 2002.



Net broadcast revenue for the nine months ended September 30, 2003 was $93.8
million, an increase of $9.9 million, compared to $83.9 million for the nine months ended September 30, 2002. An increase in net broadcast revenue of $14.0 million was attributed to stations for which a local service arrangement was entered into
after January 1, 2002 and WCFN. On a same station basis, net broadcast revenue for the nine months ended September 30, 2003 was $76.1 million as compared to $80.2 million for the nine months ended September 30, 2002, a decrease of 5.2%, or $4.1
million. Of this decrease, $5.4 million was attributed to a decline in political revenue resulting from a lack of election campaigns in most of our markets in 2003, offset, in part, by increases in local demand of $0.8 million and national revenue
of $0.6 million on a same station basis. In March 2003, we experienced cancellations and modifications of advertising schedules as a result of the news coverage of the war in Iraq. We expect to have higher advertising revenue during the
even-numbered years as a result of revenue associated with the Olympic Games and political campaigns and lower advertising revenue during the odd-numbered years without Olympic Games and with nominal political activity.



Station direct operating expenses, consisting primarily of news, engineering
and programming, and selling, general and administrative expenses, net of trade, for the nine months ended September 30, 2003 were $53.9 million, compared to $46.2 million for the comparable period in 2002, an increase of $7.7 million. Of the $7.7
million increase, $9.0 million was attributed to stations for which a local service arrangement was entered into after January 1, 2002 and WCFN, offset by $1.3 million of reductions in direct operating expenses at stations owned longer than one
year. On a same station basis, station direct operating expenses and selling, general and administrative expenses, net of trade, for the nine months ended September 30, 2003 were $41.7 million as compared to $43.0 million for the nine months ended
September 30, 2002, a decrease of 3.1%, or $1.3 million. This decrease resulted primarily from reduced payments under an outsourcing arrangement and reduced health benefit costs incurred during the nine months ended September 30, 2003.
In the first quarter of 2002, we made a non-recurring transfer tax payment of $0.2 million.



Corporate expenses, related to costs associated with the centralized management of our stations, for the nine months ended September 30, 2003 were $4.3 million, compared
to $2.9 million for the nine months ended September 30, 2002, an increase of $1.4 million. The increase was primarily attributed to an increase in personnel costs.



Amortization of broadcast rights, excluding barter, for the nine months ended September 30,
2003 was $5.5 million, compared to $5.9 million for the nine months ended September 30, 2002, a decrease of $0.4 million.



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Depreciation of property and equipment was $9.2 million for the nine months ended September 30, 2003,
compared to $9.8 million for the comparable period in 2002, a decrease of $0.6 million. The decrease in depreciation was attributed to the curtailment of depreciation on certain assets that became fully depreciated as of December 31, 2002. The
stations for which a local service arrangement was entered into after January 1, 2002 and WCFN had no material effect on depreciation.



The amortization of intangibles was $11.8 million for the nine months ended September 30, 2003, compared to $9.8 million for the same period in 2002. The
increase in amortization was attributed to the amortization of intangible assets resulting from the following acquisitions: KODE, KRBC, KSAN, KARK and WDHN.



Income from operations for the nine months ended September 30, 2003 was $9.3 million as compared to $9.7 million for the nine months ended September 30,
2002, a decrease of $0.4 million. Income from operations in the amount of $2.3 million was attributed to stations for which a local service arrangement was entered into after January 1, 2002 and WCFN. On a same station basis, income from operations
for the nine months ended September 30, 2003 was $6.9 million as compared to $9.6 million for the nine months ended September 30, 2002. The $2.7 million decrease in income from operations is primarily attributed to a decrease in net revenue as
described above.



The change in market values of our derivative
instruments and the marking-to-market of the interest rate swap agreement resulted in recognition of $1.4 million in other income for the nine months ended September 30, 2003 and a loss of $2.4 million recognized in other expenses for the nine
months ended September 30, 2002. The change was primarily due to a fluctuation in market interest rates.



Interest expense, including amortization of debt financing costs, for the nine months ended September 30, 2003 was $30.7 million, compared to $26.1
million for the same period in 2002. The increase in interest expense was primarily attributable to the refinancing of the predecessor senior credit facilities which resulted in the write off during the first quarter of 2003 of $5.8 million of
certain debt financing costs capitalized at December 31, 2002, partially offset by an overall decline in interest rates on the senior secured credit facilities.



During the first quarter of 2002, we incurred a write-down of $27.4 million, net of taxes, related to the impairment of goodwill for two of our
stations. The write-down was the result of us adopting Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (SFAS No. 142) on January 1, 2002 and was accounted for as a cumulative
effect of change in accounting principle. SFAS No. 142 required us to test goodwill for impairment based on fair values as of January 1, 2002.



The minority interest in consolidated entity of $0.3 million for the nine months ended September 30, 2003 relates to the recognition of $0.3 million of
expenses due to the application of FIN No. 46 as it pertains to the local service arrangement Mission has with WBAK (see Note 4 of the consolidated financial statements).



As a result of the factors discussed above, our net loss was $18.8 million for the nine months ended September 30, 2003,
compared to $43.7 million for the same period in 2002, a decrease in net loss of $24.9 million.



Liquidity and Capital Resources



As of September 30, 2003, cash and cash equivalents were $51.7 million, compared to $18.0 million as of September 30, 2002. Our primary sources of liquidity are cash flows from operating activities, borrowings from our senior credit
facilities and capital contributions.



Cash flows provided by
operating activities were $15.3 million for the nine months ended September 30, 2003, as compared to $16.1 million for the nine months ended September 30, 2002. The comparative decrease in cash flows provided by operations of $0.8 million is
primarily due to the timing of payments made or received on operating assets and liabilities along with better operating results for the nine months ended September 30, 2002 compared to the same period in 2003.



Cash flows used for investing activities were $108.9 million for the nine
months ended September 30, 2003, as compared to $13.6 million for the nine months ended September 30, 2002. Investing activities for the nine months ended September 30, 2003 included total payment of $91.5 million for the acquisition of KARK and
WDHN, the remaining $8.5 million payment by Mission for its acquisition of KRBC and KSAN, a down payment by Mission of $1.5 million against the purchase price of WBAK, and ongoing capital expenditures. We expect that Mission will pay the remaining
$1.5 million purchase price for WBAK during the fourth quarter of 2003. Investing activities for the same period in 2002 included the remaining $8.0 million payment for the acquisition of KODE and ongoing equipment purchases.



Cash flows provided by financing activities
were $125.4 million for the nine months ended September 30, 2003, as compared to $9.8 million for the nine months ended September 30, 2002. The change in cash flows from financing activities for the nine months ended September 30, 2003 was primarily
the result of (1) borrowings under the senior secured credit facilities of $222.2 million, (2) the repayment of $161.7 million of previous borrowings as a result of the refinancing of the senior credit facilities on February 13, 2003,
(3) additional equity proceeds of $69.9 million (net of a $1.5 million distribution), and (4) the payment of debt financing costs of approximately $4.9 million. For the nine months ended September 30, 2002, the change in cash flows from financing
activities was the result of (1) borrowings under the senior credit facilities of $10.0 million, (2) proceeds from termination of a derivative instrument of $4.4 million, (3) the repayment of $2.8 million of previous borrowings, and (4) the $1.4
million distribution to Holdings. As of September 30, 2003, there



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was approximately $67.9 million of unused commitments under the senior credit facilities, all of which could be drawn in compliance with the financial
covenants under the senior credit facilities. We were in compliance with all covenants contained in the credit agreements governing our senior secured credit facilities and the indenture governing our senior subordinated notes at September 30, 2003.
Our and Missions credit agreements were refinanced in February 2003 as a result of our pending acquisitions. The terms of the amended credit facilities are described below.



Senior Secured Credit Facilities



On January 12, 2001, Nexstar and Mission each entered into senior secured credit facilities with a group of commercial
banks. The terms of the credit agreement governing the Nexstar credit facilities provided for a reducing revolving credit facility in the amount of $122.0 million, which was subsequently reduced to $72.0 million after the issuance of Nexstars
senior subordinated notes, a term loan facility in the amount of $110.0 million and an uncommitted acquisition facility of $100.0 million. The Nexstar credit facilities were subsequently amended on June 14, 2001, to allow for a $50.0 million Term A
loan facility, a $75.0 million Term B loan facility and a $57.0 million reducing revolving facility. On November 14, 2001, the Nexstar credit facilities were further amended to adjust certain financial covenants effective September 30, 2001 and for
future periods because we were not in compliance with the consolidated total leverage ratio as of September 30, 2001, due in large part to the negative impact on advertising revenue resulting from the events of September 11, 2001 and anticipated
noncompliance in future periods. The financial covenants setting forth the consolidated total leverage ratio and consolidated interest coverage ratio were amended to relax the thresholds that we had to meet pursuant to the credit agreement. In
addition, we reduced the revolving facility from $57.0 million to $42.0 million. The terms of the credit agreement governing the Mission facility provided for a revolving credit facility in the amount of $43.0 million. On November 14, 2001, the
Mission credit facility was amended to increase the revolving facility to $58.0 million. Prior to the refinancing described below, the Nexstar revolving and Term A facilities and Missions credit facility matured on January 12, 2007, while the
Nexstar Term B facility matured on July 12, 2007.



On February
13, 2003, Nexstar and Mission obtained new senior credit facilities. The facilities consist of a $185.0 million term loan (Nexstar-$130.0 million and Mission-$55.0 million) and an $80.0 million revolver (Nexstar-$50.0 million and Mission-$30.0
million). Nexstar and Mission used the proceeds to refinance their existing senior credit facilities, pay for related debt financing costs and provide additional working capital. Financial covenants under the new senior credit facilities include a
total leverage ratio of 7.25 times the last twelve months operating cash flow (as defined in the credit agreement) through March 30, 2004 and a senior leverage ratio of 4.25 times the last twelve months operating cash flow through June 29, 2004.
Covenants also include, among others, an interest coverage ratio of 1.50 to 1.00 through June 29, 2004 and a fixed charge coverage ratio of 1.10 to 1.00 through September 29, 2004. The senior credit facilities contain covenants which require us to
comply with certain limitations on the incurrence of additional indebtedness, issuance of equity, payment of dividends and on certain other business activities. Nexstar and Mission were in compliance with all covenants contained in the credit
agreements governing our senior credit facilities at September 30, 2003. The term loans amortize at 1% annually in years 2004 through 2009, with the remaining 94% due in 2010. The outstanding principal amount on the revolving loans mature on
December 31, 2009. As of September 30, 2003, Nexstar had drawn $130.0 million of term loans and had no borrowings outstanding under its new revolver, and Mission had drawn $55.0 million of term loans and $12.2 million under its new revolver.
Interest rates associated with the Nexstar and the Mission credit facilities are based, at the borrowers option, on (i) the higher of the prevailing prime rate or the Federal Funds Rate plus 0.50% plus an applicable margin or (ii) LIBOR plus
an applicable margin. Interest is fixed for a period ranging from one month to 12 months, depending on availability of the interest basis selected, except if we select a prime-based loan, in which case the interest rate will fluctuate during the
period as the prime rate fluctuates. Interest is payable periodically based on the type of interest rate selected. In addition, Nexstar and Mission are required to pay quarterly commitment fees on the unused portion of the revolving commitments
based on their combined consolidated total leverage ratio for that particular quarter. The term loan is subject to scheduled mandatory repayments and the revolver is subject to scheduled mandatory commitment reductions commencing in 2004. The
refinancing of the senior credit facilities resulted in the write off during the first quarter of 2003 of $5.8 million of certain debt financing costs capitalized at December 31, 2002.



Debt Covenants



The bank debt agreements and the senior subordinated notes described in Note 7 contain covenants which require Nexstar and Mission to comply with certain
financial ratios, capital expenditures, cash film payments and other limits. Nexstar and Mission were in compliance with all such covenants at September 30, 2003.



Digital Conversion



All of the Companys stations currently are in compliance with FCC regulations regarding broadcasting digital signals. The Company is currently
working with Bahakel Communications to initiate low power digital facilities for WBAK, which has at least until March 2004 to begin digital operations. The purchase of WBAK by Mission is expected to close during the fourth quarter of 2003, pending
FCC consent. We estimate the digital conversion will require an average additional capital expenditure of $0.7 million per station to modify the transmitter for full-power digital signal transmission. Digital conversion expenditures were $2.0
million for the nine months ended September 30, 2003.



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Contractual Obligations



The following summarizes our contractual obligations at September 30, 2003, and the effect such obligations are expected to
have on our liquidity and cash flow in future periods.



|                                           |  | Total                  |         | 2003 |   | 2004-2005 |  | 2006-2007 |        | Thereafter
|------------------------------------------ |  | ---------------------- | ------- | ---- | - | --------- |  | --------- | ------ | ----------
|                                           |  | (dollars in thousands)
|Nexstar Senior credit facilities           |  | $                      | 130,000 |      | $ |           |  | $         | 2,600  |           
|Mission Senior credit facilities           |  |                        | 67,150  |      |   |          |  |           | 1,100  |           
|12% senior subordinated notes due 2008     |  |                        | 160,000 |      |   |          |  |           |       |           
|Cash interest on debt                      |  |                        | 194,799 |      |   | 13,868    |  |           | 65,599 |           
|Broadcast rights current commitments       |  |                        | 9,109   |      |   | 2,058     |  |           | 6,632  |           
|Broadcast rights future commitments        |  |                        | 9,705   |      |   |          |  |           | 6,176  |           
|Executive employee contracts               |  |                        | 9,467   |      |   | 521       |  |           | 4,323  |           
|Capital commitments for digital television |  |                        | 137     |      |   | 137       |  |           |       |           
|WBAK purchase price obligation             |  |                        | 1,500   |      |   | 1,500     |  |           |       |           
|KPOM/KFAA purchase price obligation        |  |                        | 17,000  |      |   | 10,000    |  |           | 7,000  |           
|Time brokerage fees                        |  |                        | 300     |      |   | 150       |  |           | 150    |           
|Operating lease obligations                |  |                        | 20,688  |      |   | 368       |  |           | 2,641  |           
|                                           |  |                        |         |      |   |           |  |           |        |           
|Total contractual cash obligations         |  | $                      | 619,855 |      | $ | 28,602    |  | $         | 96,221 |           
|                                           |  |                        |         |      |   |           |  |           |        |           



Nexstar and Mission
have remaining commitments on our announced acquisitions of $8.5 million. Mission has a remaining commitment of $1.5 million relating to its purchase of WBAK that is expected to be paid at closing in the fourth quarter of 2003. For KPOM/KFAA,
Nexstar paid a deposit of $10.0 million in October 2003, and expects to pay the remaining $7.0 million in the first quarter of 2004, pending FCC consent.



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.



We are highly leveraged, which makes us vulnerable to changes in general economic conditions. Our ability to repay or refinance our debt will depend on,
among other things, financial, business, market, competitive and other conditions, many of which are beyond our control. Based on the current operations and anticipated future growth, we believe that our available cash, anticipated cash flow from
operations, and available borrowings under our senior credit facilities will be sufficient to fund our working capital, capital expenditure requirements, interest payments and scheduled principal payments for at least the next twelve months.



Critical Accounting Policies and Estimates



Claims and Legal Proceedings



In the normal course of business, we are party to various claims and legal
proceedings. We record a reserve for these matters when an adverse outcome is probable and we can reasonably estimate our potential liability. Although the ultimate outcome of these matters is currently not determinable, we do not believe that the
resolution of these matters in a manner adverse to our interests will have a material effect upon our financial condition, results of operations or cash flows for an interim or annual period.



Recently Issued Accounting Standards



On April 30, 2003, the FASB issued FASB Statement No. 149, Amendment
of Statement 133 on Derivative Instruments and Hedging Activities (SFAS No. 149). SFAS No. 149 amends and clarifies the accounting guidance on (1) derivative instruments (including certain derivative instruments embedded in other
contracts) and (2) hedging activities that fall within the scope of FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS No. 133). SFAS No. 149 amends SFAS No. 133 and certain other
existing pronouncements, which will result in more consistent reporting of contracts that are derivative in their entirety or that contain embedded derivatives that warrant separate accounting. SFAS No. 149 is effective (1) for contracts entered
into or modified after June 30, 2003, with certain exceptions, and (2) for hedging relationships designated after June 30, 2003. The guidance is to be applied prospectively.



In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity (SFAS 150). This statement addresses financial accounting and reporting for financial instruments with characteristics of both liabilities and equity and is effective at the beginning of the first interim
period beginning after June 12, 2003. Based on this new standard, redeemable preferred and common units may be classified as a liability.



The adoption of these new standards by us did not have a significant accounting impact.



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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 borrowings at September 30, 2003 under our senior credit facilities bear
interest ranging from 3.87% to 4.38%, which represents the base rate, or LIBOR, plus the applicable margin, as defined. Interest is payable in accordance with the credit agreements.



The following table estimates the changes to cash flow from operations 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 time horizon after giving effect to the interest rate swap agreement described below:



|                                       |  | Interest rate decrease |        | No change tointerest rate |   | Interest rate increase
|-------------------------------------- |  | ---------------------- | ------ | ------------------------- | - | ----------------------
|                                       |  | 100 BPS                |        | 50 BPS                    |   |                       
|                                       |  | (dollars in thousands)
|Senior credit facilities               |  | $                      | 10,879 |                           | $ | 11,398                
|12% senior subordinated notes due 2008 |  |                        | 19,200 |                           |   | 19,200                
|                                       |  |                        |        |                           |   |                       
|Total                                  |  | $                      | 30,079 |                           | $ | 30,598                
|                                       |  |                        |        |                           |   |                       



We use derivative
instruments to manage our exposures to interest rate risks. Our objective for holding derivatives is to minimize these risks using the most effective methods to eliminate or reduce the impacts of these exposures. We used interest rate swap
arrangements, not designated as hedging instruments under SFAS No. 133, in connection with our variable rate senior credit facilities. We do not use derivative financial instruments for speculative or trading purposes.



At September 30, 2003, we had in effect an interest rate swap agreement with
a commercial bank, with a notional amount of $93.3 million. This interest rate swap agreement requires us to pay a fixed rate and receive a floating rate thereby creating fixed rate debt. The differential to be paid or received on the swap is
accrued as an adjustment to interest expense. We are exposed to credit loss in the event of nonperformance by the counterparty. The net fair value of the interest rate swap agreement, which represents the cash that we would pay to settle the
agreement, was approximately $4.2 million and $5.6 million at September 30, 2003 and December 31, 2002, respectively.



ITEM 4. CONTROLS AND PROCEDURES



(a) Nexstar carried out an evaluation as of the end of the period covered by this report, under the supervision and with the participation of Nexstars management, including Nexstars president and chief executive officer along
with the Nexstars chief financial officer, of the effectiveness of the design and operation of Nexstars disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(d) under the Securities Exchange Act of 1934. Based upon that
evaluation, Nexstars president and chief executive officer and chief financial officer concluded that Nexstars disclosure controls and procedures (1) were effective in timely alerting them to material information relating to Nexstar
(including its consolidated subsidiaries) required to be included in Nexstars periodic SEC filings and (2) were adequate to ensure that information required to be disclosed by Nexstar in the reports filed or submitted by Nexstar under the
Securities Exchange Act of 1934 is recorded, processed and summarized and reported within the time periods specified in the SECs rules and forms.



(b) There have been no significant changes in Nexstars internal control over financial reporting identified in connection with the evaluation
described in paragraph (a) above that have materially affected or are reasonably likely to materially affect, the Companys internal control over financial reporting.



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PART II



ITEM 1. LEGAL PROCEEDINGS



Not
applicable.



ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS



Not applicable.



ITEM 3. DEFAULTS UPON SENIOR SECURITIES



Not applicable.



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS



Not applicable.



ITEM 5. OTHER INFORMATION



Not
applicable.



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



a.
Exhibits



|Exhibit No. |  | Exhibit                                                                                                                                                        
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1        |  | Reorganization Agreement, dated as of September 12, 2003, between Nexstar Broadcasting Group, L.L.C. and Quorum Broadcast Holdings, LLC.                       
|            | 
|10.2        |  | Amendment No. 1 to Reorganization Agreement, dated as of November 5, 2003, by and between Nexstar Broadcasting Group, L.L.C. and Quorum Broadcast Holdings LLC.
|            | 
|10.3        |  | Purchase and Sale Agreement, dated as of October 13, 2003, by and between Nexstar Finance, L.L.C. and J.D.G. Television, Inc.                                  
|            | 
|10.4        |  | Time Brokerage Agreement, dated as of October 13, 2003, by and between Nexstar Finance, L.L.C. and J.D.G. Television, Inc.                                     
|            | 
|31.1        |  | Certification of Perry A. Sook pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                      
|            | 
|31.2        |  | Certification of G. Robert Thompson pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                 
|            | 
|32.1        |  | Certification of Perry A. Sook pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                           
|            | 
|32.2        |  | Certification of G. Robert Thompson pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                      



b. Reports on Form 8-K.



|(1) | Current Report on Form 8-K filed by Nexstar Finance, L.L.C. and Nexstar Finance, Inc. on August 14, 2003, reporting its financial results for the quarter ended June 30, 2003.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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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.



NEXSTAR FINANCE, L.L.C.NEXSTAR FINANCE, Inc./S/ PERRY A. SOOKBy:

Perry A. SookIts:

President and Chief Executive Officer(Principal Executive Officer)/S/ G. ROBERT THOMPSONBy:

G. Robert ThompsonIts:

Chief Financial Officer(Principal Accounting and Financial Officer)




|Dated:  November | 14, 2003
|---------------- | --------



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