UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 
 FORM 10-Q
 
 x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 for the quarterly period ended September 30, 2010
 
 OR
 
  ̈
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 for the transition period from  to .
 
 Commission File Number: 333-62916-02
 
 MISSION BROADCASTING, INC.
 (Exact name of registrant as specified in its charter)
 
 Delaware
51-0388022(State of Organization

or Incorporation)
(IRS Employer

Identification No.)
 
 30400 Detroit Road, Suite 304

Westlake, Ohio 44145
(440) 526-2227(Address of Principal Executive Offices, including Zip Code)
(Registrant’s Telephone Number, Including Area Code)
 
 
 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that it was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No   ̈
 
 Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   ̈    No   ̈
 
 Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (check one):
 
 Large accelerated filer
 ̈
Accelerated filer
 ̈Non-accelerated filer
x  (Do not check if a smaller reporting company)
Smaller reporting company
 ̈
 
 Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ̈    No  x
 
 As of September 30, 2010, Mission Broadcasting, Inc. had one shareholder, David S. Smith. Mr. Smith held all 1,000 shares of the outstanding common stock of Mission Broadcasting, Inc. at September 30, 2010. As of November 1, 2010, Mission Broadcasting, Inc. had 1,000 shares of outstanding common stock.
  
  TABLE OF CONTENTS
 
 PagePART I
FINANCIAL INFORMATIONITEM 1.
Financial Statements (Unaudited)Condensed Balance Sheets at September 30, 2010 and December 31, 2009
1Condensed Statements of Operations for the three and nine months ended September 30, 2010 and 2009
2Condensed Statement of Changes in Shareholder’s Deficit for the nine months ended September 30, 2010
3Condensed Statements of Cash Flows for the nine months ended September 30, 2010 and 2009
4Notes to Condensed Financial Statements
5ITEM 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
15ITEM 3.
Quantitative and Qualitative Disclosures about Market Risk
23ITEM 4.
Controls and Procedures
23PART II
OTHER INFORMATIONITEM 1.
Legal Proceedings
24ITEM 1A.
Risk Factors
24ITEM 2.
Unregistered Sales of Equity Securities and Use of Proceeds
24ITEM 3.
Defaults Upon Senior Securities
24ITEM 4.
Reserved
24ITEM 5.
Other Information
24ITEM 6.
Exhibits
25EXHIBIT INDEX
  
  PART I. FINANCIAL INFORMATION
 
 ITEM 1.
Financial Statements
 MISSION BROADCASTING, INC.
 CONDENSED BALANCE SHEETS
 (in thousands, except share information, unaudited)
 
 September 30,

2010


December 31,

2009ASSETSCurrent assets:Cash and cash equivalents

$
3,062


$
903Accounts receivable


1,627



1,430Current portion of broadcast rights


3,742



3,014Prepaid expenses and other current assets


186



216Deferred tax asset


8



8Total current assets


8,625



5,571Property and equipment, net


26,485



28,610Broadcast rights


2,431



1,785Goodwill


18,729



18,729FCC licenses


20,698



20,698Other intangible assets, net


21,656



25,517Other noncurrent assets, net


1,262



1,785Deferred tax asset


329



336Total assets

$
100,215


$
103,031LIABILITIES AND SHAREHOLDER’S DEFICITCurrent liabilities:Current portion of debt

$
390


$
1,727Current portion of broadcast rights payable


4,104



3,362Taxes payable


42



56Accounts payable


24



111Accrued expenses


596



629Interest payable (Note 7)


12,905



24Deferred revenue


609



992Due to Nexstar Broadcasting, Inc.


10,741



13,370Total current liabilities


29,411



20,271Debt (Note 7)


355,730



170,633Broadcast rights payable


3,071



2,714Deferred tax liabilities


8,038



7,180Deferred revenue


534



709Deferred gain on sale of assets


1,606



1,737Other liabilities


4,545



4,441Total liabilities


402,935



207,685Commitments and contingenciesShareholder’s deficit:Common stock, $1 par value; 1,000 shares authorized; 1,000 shares issued and outstanding at each of September 30, 2010 and December 31, 2009


1



1Subscription receivable


(1
)


(1
)Contra equity due from affiliate on debt issuance (Note 7)


(192,684
)


—Accumulated deficit


(110,036
)


(104,654
)Total shareholder’s deficit


(302,720
)


(104,654
)Total liabilities and shareholder’s deficit

$
100,215


$
103,031
 
 The accompanying notes are an integral part of these condensed financial statements.
  1
  MISSION BROADCASTING, INC.
 CONDENSED STATEMENTS OF OPERATIONS
 (in thousands, unaudited)
 
 Three Months Ended

September 30,


Nine Months Ended

September 30,2010


2009


2010


2009Net broadcast revenue

$
2,395


$
2,134


$
6,988


$
6,308Revenue from Nexstar Broadcasting, Inc.


6,813



5,808



20,558



18,036Net revenue


9,208



7,942



27,546



24,344Operating expenses:Direct operating expenses (exclusive of depreciation and amortization shown separately below)


1,312



1,223



4,240



4,364Selling, general, and administrative expenses (exclusive of depreciation and amortization shown separately below)


608



822



1,738



2,164Fees incurred pursuant to local service agreements with Nexstar Broadcasting, Inc.


1,785



1,800



5,375



5,625Impairment of goodwill and intangible assets


—



2,258



—



2,258Amortization of broadcast rights


940



1,430



2,782



3,632Amortization of intangible assets


1,287



1,287



3,861



3,861Depreciation


741



828



2,204



2,721Loss (gain) on asset exchange


—



(1,354
)


11



(1,851
)Loss (gain) on asset disposal, net


2



(9
)


20



(7
)Total operating expenses


6,675



8,285



20,231



22,767Income (loss) from operations


2,533



(343
)


7,315



1,577Interest expense, including amortization of debt financing costs


(3,662
)


(1,052
)


(9,346
)


(3,768
)Loss on extinguishment of debt (Note 7)


—



—



(2,431
)


—Interest income


—



1



—



4Loss before income taxes


(1,129
)


(1,394
)


(4,462
)


(2,187
)Income tax expense


(305
)


(50
)


(920
)


(671
)Net loss

$
(1,434
)

$
(1,444
)

$
(5,382
)

$
(2,858
)
 
 The accompanying notes are an integral part of these condensed financial statements.
  2
  MISSION BROADCASTING, INC.
 CONDENSED STATEMENT OF CHANGES IN SHAREHOLDER’S DEFICIT
 For the Nine Months Ended September 30, 2010
 (in thousands, except share information, unaudited)
 
 Shares


Par Value


Subscription Receivable


Contra Equity

Due from Affiliate on Debt


Accumulated Deficit


Total

Shareholder’s

DeficitBalance as of December 31, 2009


1,000


$
1


$
(1
)

$
—


$
(104,654
)

$
(104,654
)Contra equity due from affiliate on debt issuance (Note 7)


—



—



—



(192,684
)


—



(192,684
)Net loss


—



—



—



—



(5,382
)


(5,382
)Balance as of September 30, 2010


1,000


$
1


$
(1
)

$
(192,684
)

$
(110,036
)

$
(302,720
)
 
 The accompanying notes are an integral part of these condensed financial statements.
  3
  MISSION BROADCASTING, INC.
 CONDENSED STATEMENTS OF CASH FLOWS
 (in thousands, unaudited)
 
 Nine Months Ended

September 30,2010


2009Cash flows from operating activities:Net loss

$
(5,382
)

$
(2,858
)Adjustments to reconcile net loss to net cash provided by operating activities:Deferred income taxes


865



623Depreciation of property and equipment


2,204



2,721Amortization of intangible assets


3,861



3,861Amortization of debt financing costs


261



33Amortization of broadcast rights, excluding barter


1,144



1,793Payments for broadcast rights


(1,432
)


(1,375
)Impairment of goodwill and intangible assets


—



2,258Loss (gain) on asset exchange


11



(1,851
)Loss (gain) on asset disposal, net


20



(7
)Loss on extinguishment of debt


2,431



—Amortization of debt discount


157



—Deferred gain recognition


(131
)


(130
)Changes in operating assets and liabilities:Accounts receivable


(197
)


(448
)Prepaid expenses and other current assets


30



(61
)Taxes payable


(14
)


(32
)Accounts payable and accrued expenses


(127
)


(1,241
)Interest payable


5,352



(6
)Deferred revenue


(558
)


(356
)Other noncurrent liabilities


117



258Due to Nexstar Broadcasting, Inc.


(2,629
)


(1,238
)Net cash provided by operating activities


5,983



1,944Cash flows from investing activities:Purchases of property and equipment


(103
)


(908
)Net cash used in investing activities


(103
)


(908
)Cash flows used for financing activities:Repayment of long-term debt and revolver loan


(133,458
)


(1,295
)Proceeds from debt issuance


131,906



—Payments for debt extinguishment


(992
)


—Payments for debt finance costs


(1,177
)


—Net cash used in financing activities


(3,721
)


(1,295
)Net increase (decrease) in cash and cash equivalents


2,159



(259
)Cash and cash equivalents at beginning of period


903



1,426Cash and cash equivalents at end of period

$
3,062


$
1,167Supplemental information:Cash paid for:Interest

$
3,733


$
3,741Income taxes, net

$
70


$
80Non-cash investing activities:Accrued purchases of property and equipment

$
15


$
33Non-cash financing activities:Proceeds from debt issuance received by Nexstar Broadcasting, Inc. classified as contra equity (Note 7)

$
184,934


$
—Interest payable by Nexstar Broadcasting, Inc. classified as contra equity (Note 7)

$
7,529


$
—
 
 The accompanying notes are an integral part of these condensed financial statements.
  4
  MISSION BROADCASTING, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS
 
 1.
Organization and Business Operations
 
 As of September 30, 2010, Mission Broadcasting, Inc. (“Mission” or the “Company”) owned and operated 16 television stations, all of which are affiliated with the NBC, ABC, CBS, Fox or MyNetworkTV television networks, in markets located in New York, Pennsylvania, Illinois, Indiana, Missouri, Texas, Louisiana, Arkansas and Montana. The Company operates in one reportable television broadcasting segment. Through local service agreements, Nexstar Broadcasting, Inc. (“Nexstar” or “Nexstar Broadcasting”) provides sales and operating services to all of the Mission television stations (see Note 4). As more fully described in Note 10, Mission’s sole shareholder has granted Nexstar purchase options to acquire the assets and assume the liabilities of each Mission station, subject to Federal Communications Commission (“FCC”) consent.
 
 The Company is highly leveraged, which makes it vulnerable to changes in general economic conditions. The Company’s ability to repay or refinance its debt will depend on, among other things, financial, business, market, competitive and other conditions, many of which are beyond its control, as well as Nexstar maintaining its pledge to continue the local service agreements with the Company’s stations. Management believes that with Nexstar’s pledge to continue the local service agreements through March 9, 2011, as described in a letter of support dated March 9, 2010, our available cash, anticipated cash flow from operations and available borrowings under our senior credit facility should be sufficient to fund working capital, capital expenditure requirements, interest payments and scheduled debt principal payments for at least the next twelve months from September 30, 2010, enabling Mission to continue to operate as a going concern.  If Mission fails to renew the letter of support from Nexstar, then Mission will no longer continue to operate as a going concern.
 
 Nexstar’s senior secured credit facility agreement contains covenants which require Nexstar to comply with certain financial ratios, including (a) maximum consolidated total leverage ratios, (b) a minimum consolidated first lien indebtedness ratio, and (c) a maximum consolidated fixed charge coverage ratio. The covenants, which are calculated on a quarterly basis, include the combined results of Nexstar Broadcasting and the Company. The Company’s senior secured credit facility agreement does not contain financial covenant ratio requirements; however it does include an event of default if Nexstar does not comply with all covenants contained in its credit agreement. As of September 30, 2010, Nexstar was in compliance with all covenants contained in the credit agreements governing the Company’s senior secured credit facility and the indentures governing the publicly-held notes.
 
 In April, 2010, Mission and Nexstar, as co-issuers, completed the issuance and sale of $325.0 million aggregate principal amount of senior secured second lien notes due 2017 (the “Notes”). The net proceeds to Mission and Nexstar from the sale of the Notes were approximately $316.8 million, net of approximately $8.2 million original issue discount. The Notes will mature on April 15, 2017. Interest on the Notes accrues at a rate of 8.875% per annum and is payable semiannually in arrears on April 15 and October 15 of each year, commencing on October 15, 2010.  The Company also refinanced its bank credit facilities, among other things, extending maturities, reducing the principal amount available under the new bank credit facilities, amending Nexstar’s financial covenants and providing additional flexibility thereunder.  See Note 7 for more details related to these transactions.
 
 2.
Summary of Significant Accounting Policies
 
 Interim Financial Statements
 
 The condensed financial statements as of September 30, 2010, and for the three and nine months ended September 30, 2010 and 2009 are unaudited. However, in the opinion of management, such financial statements include all adjustments (consisting solely of normal recurring adjustments) necessary for the fair statement of the financial information included herein in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The preparation of the condensed financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. Results of operations for interim periods are not necessarily indicative of results for the full year. These financial statements should be read in conjunction with the financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009. The balance sheet at December 31, 2009 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.
  5
  MISSION BROADCASTING, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS—(Continued)
 
 2.
Summary of Significant Accounting Policies—(Continued)
 
 Recent Accounting Pronouncements
 
 In January 2010, the FASB issued authoritative guidance which requires additional disclosures about transfers between Levels 1 and 2 of the fair value hierarchy and disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements.  This guidance was effective for the Company January 1, 2010, except for the Level 3 activity disclosures, which are effective for fiscal years beginning after December 15, 2010.  The adoption of this guidance, which is related to disclosure only, did not have a material impact on the Company’s financial position or results of operations.
 
 In June 2009, the FASB issued an amendment to the accounting and disclosure requirements for the consolidation of VIEs.  This amendment requires an analysis to determine whether a variable interest gives the entity a controlling financial interest in a variable interest entity. The amendment requires an ongoing reassessment and eliminates the quantitative approach previously required for determining whether an entity is the primary beneficiary. This amendment is effective for our fiscal year beginning January 1, 2010.  We adopted the amendment January 1, 2010 and it did not have any impact on the Company’s financial position or results of operations.
 
 In October 2009, the FASB issued authoritative guidance about the accounting for revenue contracts containing multiple elements, allowing the use of companies’ estimated selling prices as the value for deliverable elements under certain circumstances and to eliminate the use of the residual method for allocation of deliverable elements.  This guidance is effective for the Company beginning January 1, 2011.  The Company is currently evaluating the impact this standard will have on its financial statements.
 
 3.           Fair Value Measurements
 
 The Company adopted authoritative guidance effective January 1, 2008 for financial assets and financial liabilities measured on a recurring basis and January 1, 2009 for non-financial assets and non-financial liabilities. This guidance applies to all assets and liabilities that are being measured and reported on a fair value basis. There was no impact for adoption to the Unaudited Condensed Consolidated Financial Statements as it relates to assets and liabilities. This guidance requires disclosure that establishes a framework for measuring fair value and expands disclosure about fair value measurements. Fair value measurements must be classified and disclosed in one of the following three categories:
 
 Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
 
 Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability;
 
 Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
 
 The Company invests in short term interest bearing obligations with original maturities less than 90 days, primarily money market funds. Mission does not enter into investments for trading or speculative purposes. As of September 30, 2010 and December 31, 2009, there were no investments in marketable securities.
 
 4.
Local Service Agreements with Nexstar
 
 Mission has entered into local service agreements with Nexstar to provide sales and operating services to all of Mission’s stations. Under the terms of a shared services agreement (“SSA”), the Nexstar station in the market provides certain services including news production, technical maintenance and security, in exchange for monthly payments from Mission to Nexstar. For each station that Mission has entered into an SSA, it has also entered into a joint sales agreement (“JSA”). Under the terms of the JSA, Nexstar sells the advertising time of the Mission station and retains a percentage of the net revenue it generates in return for monthly payments to Mission of the remaining percentage of net revenue. Under the terms of a time brokerage agreement (“TBA”), Nexstar programs most of the station’s broadcast time, sells the station’s advertising time and retains the advertising revenue it generates in exchange for monthly payments to Mission. JSA and TBA fees generated from Nexstar under the agreements are reported as “Revenue from Nexstar Broadcasting, Inc.”, and SSA fees incurred by Mission under the agreements are reported as “Fees incurred pursuant to local service agreements with Nexstar Broadcasting, Inc.” in accompanying condensed statements of operations.
  6
  MISSION BROADCASTING, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS—(Continued)
 
 4.
Local Service Agreements with Nexstar—(Continued)
 
 The arrangements under the local service agreements each Mission station has entered into with Nexstar have had the effect of Nexstar receiving substantially all of the available cash, after Mission’s payment of operating costs and debt service, generated by the Company’s stations. Mission anticipates that Nexstar will continue to receive substantially all of Mission’s available cash, after payments for operating costs and debt service, generated by its stations.
 
 In order for both Nexstar and Mission to comply with FCC regulations, Mission maintains complete responsibility for and control over programming, finances, personnel and operations of its stations.
 
 The following table summarizes the various local service agreements Mission-owned stations had in effect with Nexstar as of September 30, 2010:
 
 Station
Market
Affiliation
Type of

Agreement
Expiration
Consideration received from or paid to NexstarWFXP
Erie, PA
Fox
TBA
8/16/11
Monthly payments received from Nexstar(1)KJTL
Wichita Falls, TX-Lawton, OK
Fox
SSA
5/31/19
$60 thousand per month paid to NexstarKJBO-LP
Wichita Falls, TX-Lawton, OK
MyNetworkTV
JSA
5/31/19
70% of the KJTL/KJBO-LP net revenue collected each month received from NexstarWYOU
Wilkes Barre-Scranton, PA
CBS
SSA
1/4/18
$35 thousand per month paid to NexstarJSA
9/30/14
70% of the WYOU net revenue collected each month received from NexstarKODE
Joplin, MO-Pittsburg, KS
ABC
SSA
3/31/12
$75 thousand per month paid to NexstarJSA
9/30/14
70% of the KODE net revenue collected each month received from NexstarKRBC
Abilene-Sweetwater, TX
NBC
SSA
6/12/13
$25 thousand per month paid to NexstarJSA
6/30/14
70% of the KRBC net revenue collected each month received from NexstarKSAN
San Angelo, TX
NBC
SSA
5/31/14
$10 thousand per month paid to NexstarJSA
5/31/14
70% of the KSAN net revenue collected each month received from NexstarWFXW
Terre Haute, IN
Fox
SSA
5/8/13
$10 thousand per month paid to NexstarJSA
5/8/13
70% of the WFXW net revenue collected each month received from NexstarKCIT
Amarillo, TX
Fox
SSA
4/30/19
$50 thousand per month paid to NexstarKCPN-LP
Amarillo, TX
MyNetworkTV
JSA
4/30/19
70% of the KCIT/KCPN-LP net revenue collected each month received from NexstarKHMT
Billings, MT
Fox
TBA
12/13/17
Monthly payments received from Nexstar(1)KAMC
Lubbock, TX
ABC
SSA
2/15/19
$75 thousand per month paid to NexstarJSA
2/15/19
70% of the KAMC net revenue collected each month received from NexstarKOLR
Springfield, MO
CBS
SSA
2/15/19
$150 thousand per month paid to NexstarJSA
2/15/19
70% of the KOLR net revenue collected each month received from NexstarWUTR
Utica, NY
ABC
SSA
3/31/14
$10 thousand per month paid to NexstarJSA
3/31/14
70% of the WUTR net revenue collected each month received from NexstarWTVO
Rockford, IL
ABC
SSA
10/31/14
$75 thousand per month paid to NexstarJSA
10/31/14
70% of the WTVO net revenue collected each month received from NexstarKTVE
Monroe, LA – El Dorado, AR
NBC
SSA
1/16/18
$20 thousand per month paid to NexstarJSA
1/16/18
70% of the KTVE net revenue collected each month received from NexstarNexstar-owned:KFTA
Ft. Smith-Fayetteville-Springdale-Rogers, AR
Fox/NBC
TBA
(2)
$5 thousand per month paid to Nexstar

$20 thousand per month received from Nexstar
 (1)
Payments are variable based on station’s monthly operating expenses.
 (2)
TBA was terminated on May 1, 2010.
  7
  MISSION BROADCASTING, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS—(Continued)
 
 4.
Local Service Agreements with Nexstar—(Continued)
 
 Under these agreements, Mission is responsible for certain operating expenses of its stations and, therefore, may have unlimited exposure to any potential operating losses. Mission will continue to operate its stations under the SSAs and JSAs or TBAs until the termination of such agreements. The SSAs and JSAs generally have a term of ten years. Nexstar indemnifies Mission from Nexstar’s activities pursuant to the local service agreement to which Nexstar is a party.
 
 5.
Transaction with Nexstar
 
 On April 11, 2006, Nexstar and Mission filed an application with the FCC for consent to assignment of the license of KFTA Channel 24 (Ft. Smith, Arkansas) from Nexstar to Mission. Consideration for this transaction was set at $5.6 million. On August 28, 2006, Nexstar and Mission entered into a TBA whereby (a) Mission paid Nexstar $5 thousand per month for the right to broadcast Fox programming on KFTA during the Fox network programming time periods and (b) Nexstar paid Mission $20 thousand per month for the right to sell all advertising time on KFTA within the Fox network programming time periods. Also in 2006, Mission entered into an affiliation agreement with the Fox network which provided Fox programming to KFTA. In March 2008, the FCC granted the application to assign the license for KFTA from Nexstar to Mission. On March 9, 2010, Nexstar and Mission notified the FCC that the transaction would not be consummated.  The TBA terminated on May 1, 2010 and the Fox Affiliation agreement was assigned to Nexstar.
 
 6.
Intangible Assets and Goodwill
 
 Intangible assets subject to amortization consisted of the following (in thousands), as of:
 
 Estimated

useful life

(years)


September 30, 2010


December 31, 2009Gross


Accumulated

Amortization


Net


Gross


Accumulated

Amortization


NetNetwork affiliation agreements


15


$
66,443


$
(47,549
)

$
18,894


$
66,443


$
(44,348
)

$
22,095Other definite-lived intangible assets


1-15



13,117



(10,355
)


2,762



13,117



(9,695
)


3,422Total intangible assets subject to amortization





$
79,560


$
(57,904
)

$
21,656


$
79,560


$
(54,043
)

$
25,517
 
 Total amortization expense from definite-lived intangibles was $1.3 million for each of the three months ended September 30, 2010 and 2009 and $3.9 million for each of the nine months then ended. The Company’s estimate of amortization expense for definite-lived intangible assets as of September 30, 2010 is approximately $5.1 million for each year for the years of 2010 through 2012; $4.3 million for 2013 and $1.4 million for 2014.
 
 The aggregate carrying value of indefinite-lived intangibles, consisting of FCC licenses and goodwill, was $39.4 million as of both September 30, 2010 and December 31, 2009. The Company expenses any costs to renew its FCC licenses as incurred. Indefinite-lived intangible assets are not subject to amortization, but are tested for impairment annually or whenever events or changes in circumstances indicate that such assets might be impaired. As of September 30, 2010, the Company did not identify any events that would trigger an impairment assessment.
  8
  MISSION BROADCASTING, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS—(Continued)
 
 6.
Intangible Assets and Goodwill—(Continued)
 
 The changes in the carrying amount of goodwill for the nine months ended September 30, 2010 and the year ended December 31, 2009, respectively, are as follows (in thousands):
 
 2010


2009Goodwill

$
20,279


$
19,924Accumulated impairment losses


(1,550
)


(1,289
)Balance as of January 1

$
18,729


$
18,635
 
 Impairment


—



(261
)Reclassification of asset


—



355
 
 Goodwill

$
20,279


$
20,279Accumulated impairment losses


(1,550
)


(1,550
)Balance as of September 30, 2010 and December 31, 2009, respectively

$
18,729


$
18,729
 
 The changes in the carrying amount of FCC licenses for the nine months ended September 30, 2010 and the year ended December 31, 2009, respectively, are as follows (in thousands):
 
 2010


2009FCC licenses

$
31,395


$
31,395Accumulated impairment losses


(10,697
)


(8,700
)Balance as of January 1

$
20,698


$
22,695
 
 Impairment


—



(1,997
)
 
 FCC licenses

$
31,395


$
31,395Accumulated impairment losses


(10,697
)


(10,697
)Balance as of September 30, 2010 and December 31, 2009, respectively

$
20,698


$
20,698
 
 During the year ended December 31, 2009, the Company reclassified certain amounts representing goodwill that were improperly classified as property and equipment when recording the fair value of KTVE assets, which were acquired in 2008.
 
 7.
Debt
 
 Long-term debt consisted of the following (in thousands), as of:
 
 September 30,

2010


December 31,

2009Term loans

$
38,903


$
165,360Revolving credit facility


—



7,0008.875% senior secured second lien notes due 2017, net of discount of $7.8 million(1)


317,217



—356,120



172,360Less: current portion


(390)



(1,727
)$
355,730


$
170,633
 (1)
As co-issuers Mission received $131.9 million of the net proceeds and $184.9 million was received by Nexstar Broadcasting as further described below.
 
 On April 19, 2010, the Second Amendment to Mission’s Third Amended and Restated Credit Agreement, dated as of April 1, 2005 (as amended, the “Mission Credit Agreement” and together with the Nexstar Credit Agreement, the “Credit Agreements”), became effective among Mission, the several financial institutions from time to time parties thereto and Bank of America, N.A., as administrative agent and syndication agent. Under the terms of the Mission Credit Agreement, the principal amount available under the revolving credit facility was reduced to $10.0 million, and the Term Loan B was reduced to $39.0 million.
 
 On April 19, 2010, the Third Amendment to Nexstar Broadcasting’s Fourth Amended and Restated Credit Agreement dated as of April 1, 2005 (as amended, the “Nexstar Credit Agreement”), became effective among Nexstar Broadcasting, Nexstar Broadcasting Group, Inc., the several financial institutions from time to time parties thereto and Bank of America, N.A., as administrative agent and syndication agent. Under the terms of the Nexstar Credit Agreement, the principal amount available under the revolving credit facility was reduced to $65.0 million, and the Term Loan B was reduced to $61.0 million.
  9
  MISSION BROADCASTING, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS—(Continued)
 
 7.
Debt—(Continued)
 
 The Credit Agreements were amended to, among other things, (i) extend the revolving loan commitments to December 31, 2013 (subject to earlier springing maturity dates), (ii) extend the maturity date of the Term Loan B to September 30, 2016 (subject to earlier springing maturity dates), (iii) amend Nexstar’s financial covenants and provide additional flexibility thereunder, (iv) permit the incurrence of incremental Term Loan B facilities of up to an aggregate amount equal to $100.0 million, (v) permit Mission and Nexstar Broadcasting, under certain circumstances to incur indebtedness and make restricted payments, in each case, in part, to repurchase or extinguish existing indebtedness, (vi) provide additional flexibility under the covenants and (vii) relieve the respective borrowers from their obligation to make mandatory prepayments under certain circumstances.
 
 The Nexstar Credit Agreement (i) eliminates the requirement that Nexstar Broadcasting maintain a consolidated minimum interest coverage ratio and a consolidated maximum senior leverage ratio and institutes the requirement to maintain a consolidated maximum first lien indebtedness ratio, based on the aggregate first-lien indebtedness maintained by Nexstar and Mission, and (ii) changes the maximum and minimum covenant levels applicable to such financial ratios.  Additionally, the Credit Agreement removes mandatory quarterly repayments based on a computation of excess cash flow for the preceding fiscal year.
 
 On April 19, 2010, Mission and Nexstar Broadcasting, as co-issuers, also completed the issuance and sale of $325.0 million aggregate principal amount of 8.875% senior secured second lien notes due 2017.  On April 19, 2010, Mission used the net proceeds of the offering and cash on hand to repay $125.9 million of the outstanding term loans and $3.3 million of the outstanding revolving loans borrowed under the previous Credit Agreements.
 
 In conjunction with the amendments to the credit agreements and issuance of the 8.875% senior secured lien notes due 2014, approximately $1.2 million of professional and legal fees were incurred by Mission.  These costs were capitalized as debt finance cost, included in other noncurrent assets, net on the balance sheet, and are being amortized over the term of the credit facility. These transactions resulted in a loss on debt extinguishment of approximately $2.4 million for the nine months ended September 30, 2010, including approximately $1.0 million Mission paid to the creditors related to debt amendments.
 
 The Mission Senior Secured Credit Facility
 
 The Mission senior secured credit facility consists of a Term Loan B and a $10.0 million revolving loan. As of September 30, 2010 and December 31, 2009, Mission had $38.9 million and $165.4 million, respectively, outstanding under its Term Loan B and no amounts and $7.0 million, respectively, outstanding under its revolving loan.
 
 Terms of the Mission senior secured credit facility, including repayment, maturity and interest rates, are the same as the terms of the Nexstar senior secured credit facility described above. The total weighted average interest rate of the Mission senior secured credit facility was 5.0% for each of the nine months ended September 30, 2010 and the year ended December 31, 2009. Additionally, Mission is required to pay quarterly commitment fees on the unused portion of its revolving loan commitment of 0.75% per annum.
 
 On April 19, 2010, Mission repaid $125.9 million of Term Loan B leaving $39.0 million outstanding under the new amended credit facility. During the nine months ended September 30, 2010, repayments of Mission’s Term Loan B totaled $126.5 million, $0.5 million of which were scheduled maturities in the first quarter as required under the terms of the previous credit facilities and $0.1 million was a scheduled maturity in the third quarter of 2010.
 
 The revolving loan is not subject to incremental reduction and matures in December 2013. On April 19, 2010, Mission Broadcasting repaid $3.3 million of revolving loan. The remaining $3.7 million was repaid in the second quarter of 2010.  There was no outstanding revolving loan balance at September 30, 2010.
 
 Unused Commitments and Borrowing Availability
 
 Mission had $10.0 million of total unused revolving loan commitments under its credit facilities. The total amount of borrowings available under the revolving loan commitment of the Mission facility is based on covenant calculations contained in Nexstar’s credit agreement. As of September 30, 2010, all of the total unused commitments under the Mission facility were available for borrowing.
  10
  MISSION BROADCASTING, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS—(Continued)
 
 7.
Debt—(Continued)
 
 Collateralization and Guarantees of Debt
 
 Nexstar Broadcasting Group, Inc. (Nexstar’s ultimate parent) and its subsidiaries guarantee full payment of all obligations under the Mission credit facility and 8.875% senior secured second lien notes in the event of its default. Similarly, Mission is a guarantor of Nexstar’s bank credit facility, the 8.875% senior secured second lien notes, the 7% PIK senior subordinated notes and the 7% senior subordinated notes issued by Nexstar. The bank credit facilities are collateralized by a security interest in substantially all the combined assets, excluding FCC licenses, of Nexstar and Mission.
 
 Debt Covenants
 
 The Mission facility does not contain financial covenant ratio requirements, but does provide for default in the event Nexstar does not comply with all covenants contained in its credit agreement.  Nexstar was in compliance with their debt covenants at September 30, 2010.
 
 8.875% Senior Secured Second Lien Notes
 
 On April 19, 2010, Mission and Nexstar Broadcasting, as co-issuers, completed the issuance and sale of $325.0 million aggregate principal amount of 8.875% senior secured second lien notes due 2017. The Notes will mature on April 15, 2017. Interest on the Notes accrues at a rate of 8.875% per annum and is payable semiannually in arrears on April 15 and October 15 of each year, commencing on October 15, 2010.
 
 The Notes were issued pursuant to an Indenture, dated as of April 19, 2010 (the “Indenture”), by and among Mission and Nexstar Broadcasting, as co-issuers, Nexstar Broadcasting Group, as guarantor, and The Bank of New York Mellon, as trustee and collateral agent. Nexstar Broadcasting’s and Mission’s obligations under the Notes are jointly and severally, fully and unconditionally guaranteed by Nexstar Broadcasting Group and all of Nexstar Broadcasting’s and Mission’s future 100% owned domestic subsidiaries.
 
 The net proceeds to Mission and Nexstar from the sale of the Notes were approximately $316.8 million, net of approximately $8.2 million original issuance discount. Mission received $131.9 million of the net proceeds and $184.9 million was received by Nexstar Broadcasting.  As the obligations under the Notes are joint and several to Nexstar Broadcasting and Mission, each entity reflects the full amount of the Notes and related accrued interest in their separate financial statements.  Further, the portions of the net proceeds and related accrued interest attributable to the respective co-issuer are reflected as a reduction to equity (due from affiliate) in their separate financial statements given the common control nature of the entities.  At September 30, 2010, $7.5 million of interest payable related to the Notes allocable to Nexstar are included in the financial statements.  Mission used the net proceeds of the offering and cash on hand to refinance Mission’s old senior secured credit facilities, pay related fees and expenses and for general corporate purposes.
 
 The Notes are secured by second-priority liens, subject to certain exceptions and permitted liens, on all of the assets that secure Mission’s and Nexstar Broadcasting’s senior secured credit facilities on a first-priority lien basis. The Notes and the guarantees are Mission’s, Nexstar Broadcasting’s and the guarantors’ senior secured obligations, rank equal in right of payment with all of Mission’s, Nexstar Broadcasting’s and the guarantors’ existing and future senior indebtedness and rank senior in right of payment to all of Mission’s, Nexstar Broadcasting’s and the guarantors’ future subordinated indebtedness. The Notes and the guarantees are effectively junior to Mission’s, Nexstar Broadcasting’s and the guarantors’ obligations which are either secured by assets that are not collateral or which are secured on a first priority basis, including borrowings under Mission’s and Nexstar Broadcasting’s senior secured credit facilities, in each case, to the extent of the value of the assets securing such obligations.
 
 Mission and Nexstar Broadcasting have the option to redeem all or a portion of the Notes at any time prior to April 15, 2014 at a price equal to 100% of the principal amount of the Notes redeemed plus accrued and unpaid interest to the redemption date plus applicable premium. At any time on or after April 15, 2014, Mission and Nexstar Broadcasting may redeem the Notes, in whole or in part, at the redemption prices set forth in the Indenture. At any time before April 15, 2013, Mission and Nexstar Broadcasting may also redeem up to 35% of the aggregate principal amount of the Notes at a redemption price of 108.875% of the principal amount, plus accrued and unpaid interest, if any, to the date of redemption, with the proceeds of certain equity offerings.
 
 Upon the occurrence of a change of control (as defined in the Indenture), each holder of the Notes may require Mission and Nexstar Broadcasting to repurchase all or a portion of the Notes in cash at a price equal to 101% of the aggregate principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, thereon to the date of repurchase.
  11
  MISSION BROADCASTING, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS—(Continued)
 
 7.
Debt—(Continued)
 
 The Indenture contains covenants that limit, among other things, Mission’s and Nexstar Broadcasting’s ability to (1) incur additional debt and issue preferred stock, (2) make certain restricted payments, (3) consummate specified asset sales, (4) enter into transactions with affiliates, (5) create liens, (6) pay dividends or make other distributions, (7) make certain investments, (8) merge or consolidate with another person and (9) enter new lines of business.
 
 The Indenture provides for customary events of default (subject in certain cases to customary grace and cure periods), which include nonpayment, breach of covenants in the Indenture, payment defaults or acceleration of other indebtedness, a failure to pay certain judgments and certain events of bankruptcy and insolvency. The Indenture also provides for events of default with respect to the collateral, which include (i) default in the performance of the security documents which adversely affects the enforceability, validity, perfection or priority of the second priority liens on any collateral, individually or in the aggregate, having a fair market value in excess of $10.0 million, (ii) repudiation or disaffirmation by Mission, Nexstar Broadcasting, or any guarantor of material obligations under the security documents, and (iii) the determination in a judicial proceeding that the security documents are unenforceable or invalid against Mission, Nexstar Broadcasting, or any guarantor for any reason with respect to any collateral, individually or in the aggregate, having a fair market value in excess of $10.0 million. Generally, if an event of default occurs, the Trustee or holders of at least 25% in principal amount of the then outstanding Notes may declare the principal of and accrued but unpaid interest, including additional interest, on all the Notes to be due and payable.
 
 In connection with the offering of the Notes, Nexstar Broadcasting and Mission have agreed, pursuant to a Registration Rights Agreement, dated April 19, 2010 (the “Registration Rights Agreement”), by and among Nexstar Broadcasting, Mission, Nexstar Broadcasting Group, Inc. and Banc of America Securities LLC, UBS Securities LLC, Deutsche Bank Securities Inc. and RBC Capital Markets Corporation, to (i) cause to be filed with the SEC no later than 270 days after the date of issuance of the Notes, a registration statement under the Securities Act, relating to an offer to exchange the Notes for new notes (the “Exchange Notes”), evidencing the same continuing indebtedness as the Notes and with terms substantially identical to the Notes except that the Exchange Notes will not be subject to restrictions on transfer in the United States, (ii) use their reasonable best efforts to cause such registration statement to become effective no later than 365 days after the date of issuance of the Notes, (iii) in connection with the foregoing, (A) file all pre-effective amendments to such registration statement as may be necessary in order to cause such registration statement to become effective, (B) if applicable, file a post-effective amendment to such registration statement and (C) cause all necessary filings in connection with the registration and qualification of the Exchange Notes to be made under the state securities or blue sky laws of such jurisdictions as are necessary to permit consummation of the exchange offer, and (iv) upon the effectiveness of such registration statement, commence the exchange offer and issue Exchange Notes in exchange for all Notes tendered pursuant to the exchange offer. In certain circumstances, Nexstar Broadcasting and Mission will file and cause to become effective a shelf registration statement relating to resales of any Notes and use their reasonable best efforts to maintain the effectiveness of the shelf registration statement for at least one year or such lesser period after which all of the notes registered therein have been sold. If Nexstar Broadcasting and Mission fail to satisfy these obligations as set forth in the Registration Rights Agreement, they will be required to pay additional interest to the holders of the Notes. The rate of the additional interest will be 0.25% per annum for the first 90-day period immediately following the occurrence of a Registration Default (as defined in the Registration Rights Agreement), and such rate will increase by an additional 0.25% per annum with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum additional interest rate of 1.0% per annum. Nexstar Broadcasting and Mission will pay such additional interest on regular interest payment dates until the cure of all the Registration Defaults relating to the Notes at which time the interest rate on the Notes will revert to the original interest rate on the Notes. Such additional interest will be in addition to any other interest payable from time to time with respect to Notes.
 
 Mission incurred approximately $0.8 million in professional fees related to the transaction, which were capitalized as debt finance cost, included in other noncurrent assets, net on the balance sheet, and are being amortized over the term of the Notes.
 
 Fair Value of Debt
 
 The aggregate carrying amounts and estimated fair value of Mission’s debt were as follows (in thousands):
 
 September 30, 2010


December 31, 2009Carrying

Amount


Fair Value


Carrying

Amount


Fair

ValueTerm loans(1)

$
38,903


$
38,611


$
165,360


$
154,850Revolving credit facilities(1)

$
—


$
—


$
7,000


$
6,6248.875% senior secured second lien notes (2)

$
317,217


$
338,000


$
—


$
—
 (1)
The fair value of senior secured credit facilities is computed based on borrowing rates currently available to Mission for bank loans with similar terms and average maturities.
 (2)
The fair value of Mission’s fixed rate debt is estimated based on bid prices obtained from an investment banking firm that regularly makes a market for these financial instruments.
  12
  MISSION BROADCASTING, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS—(Continued)
 
 8.
Income Taxes
 
 The Company’s provision for income taxes is primarily comprised of deferred income taxes created by an increase in the deferred tax liabilities position during the year resulting from the amortization of goodwill and other indefinite-lived intangible assets for income tax purposes which are not amortized for financial reporting purposes. These deferred tax liabilities do not reverse on a scheduled basis and are not used to support the realization of deferred tax assets. The Company’s deferred tax assets primarily result from federal and state net operating loss carryforwards (“NOLs”). The Company’s NOLs are available to reduce future taxable income if utilized before their expiration. The Company has provided a valuation allowance for certain deferred tax assets as it believes they may not be realized through future taxable earnings.
 
 At January 1, 2010, the Company had gross unrecognized tax benefits of approximately $3.7 million, which did not materially change as of September 30, 2010. If recognized, this amount would result in a favorable effect on the Company’s effective tax rate excluding impact on the Company’s valuation allowance. As of September 30, 2010, the Company has not accrued interest on the unrecognized tax benefits since an unfavorable outcome upon examination would not result in a cash outlay but would reduce NOLs subject to a valuation allowance. The Company does not expect the amount of unrecognized tax benefits to significantly change in the next twelve months.
 
 The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Company is subject to U.S. federal tax examinations for years after 2005. Additionally, any NOLs that were generated in prior years and that are utilized in the future may be subject to examination by the Internal Revenue Service. State jurisdictions that remain subject to examination are not considered significant.
 
 9.
FCC Regulatory Matters
 
 Television broadcasting is subject to the jurisdiction of the FCC under the Communications Act of 1934, as amended (the “Communications Act”). The Communications Act prohibits the operation of television broadcasting stations except under a license issued by the FCC and empowers the FCC, among other things, to issue, revoke, and modify broadcasting licenses, determine the location of television stations, regulate the equipment used by television stations, adopt regulations to carry out the provisions of the Communications Act and impose penalties for the violation of such regulations. The FCC’s ongoing rule making proceedings could have a significant future impact on the television industry and on the operation of the Company’s stations. In addition, the U.S. Congress may act to amend the Communications Act in a manner that could impact the Company’s stations and the television broadcast industry in general.
 
 The FCC has initiated a proceeding with respect to the conversion of existing low power and television translator stations to digital operations.  The FCC has asked for comment on whether to adopt a date in 2012 by which such analog low power and television translator stations must cease analog operations.  The Company holds four such analog station licenses which will need to transition to digital operations by the final transition date established by the FCC.
 
 Media Ownership
 
 In 2006, the FCC initiated a rulemaking proceeding which provides for a comprehensive review of all of its media ownership rules, as required by the Communications Act. The Commission considered rules relating to ownership of two or more TV stations in a market, ownership of local TV and radio stations by daily newspapers in the same market, cross-ownership of local TV and radio stations, and changes to how the national TV ownership limits are calculated. In February 2008, the FCC adopted modest changes to its newspaper broadcast cross-ownership rule while retaining the rest of its ownership rules then currently in effect.  Multiple challenges to this proceeding were filed with the U.S. Courts of Appeal.  The court proceedings remain pending.
 
 The FCC is required by statute to review its media ownership rules every four years and to eliminate those rules it finds no longer serve the “public interest, convenience and necessity.”  During 2009, the FCC held a series of hearings designed to evaluate possible changes to its rules.  In May 2010, the FCC formally initiated its 2010 review of its media ownership rules with the issuance of a Notice of Inquiry (NOI).  The  NOI is intended to assist the Commission in establishing a framework within which to analyze whether its media ownership rules remain “necessary in the public interest as a result of competition,” due to the dramatic changes occurring in the media marketplace.  Numerous parties have filed comments and reply comments in response to the NOI.In June 2010, the FCC issued a Request for Proposal with respect to nine economic studies related to its media ownership rules.  These studies have not yet been provided to the general public for review and comment.  We believe that upon completion of the studies the next step will be for the FCC to issue a Notice of Proposed Rulemaking (NPRM) to seek comment on specific proposed changes to its ownership rules.  We cannot predict when the FCC will issue this NPRM but anticipate it will be sometime in 2011.
  13
  MISSION BROADCASTING, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS—(Continued)
 
 10.
Commitments and Contingencies
 
 Guarantees of Nexstar Debt
 
 Mission is a guarantor of and has pledged substantially all its assets, excluding FCC licenses, to guarantee Nexstar’s bank credit facility and the 8.875% senior secured second lien notes due 2017.
 
 Mission is also a guarantor of the 7% senior subordinated notes (“7% Notes”) and 7% PIK senior subordinated notes, both due 2014, issued by Nexstar. The notes are general unsecured senior subordinated obligations subordinated to all of Mission’s senior debt.
 
 Mission guarantees full payment of all obligations incurred under Nexstar’s bank credit facility agreement and the Notes. In the event that Nexstar is unable to repay amounts due under these debt obligations, Mission will be obligated to repay such amounts. The maximum potential amount of future payments that Mission would be required to make under these guarantees would be generally limited to the amount of borrowings outstanding under Nexstar’s bank credit facility, the 8.875% senior secured second lien notes, the 7% PIK senior subordinated notes and the 7% Notes. At September 30, 2010, Nexstar had issued an aggregate principal amount of $325.0 million of the 8.875% notes, $47.0 million of the 7% Notes, $136.6 million of the 7% PIK senior subordinated notes and had $60.8 million outstanding under its bank credit facility.
 
 Purchase Options Granted to Nexstar
 
 In consideration of Nexstar Broadcasting Group’s guarantee of the Mission Facility, Mission’s sole shareholder has granted Nexstar purchase options to acquire the assets and assume the liabilities of each Mission station, subject to FCC consent, for consideration equal to the greater of (1) seven times the station’s cash flow, as defined in the option agreement, less the amount of its indebtedness as defined in the option agreements, or (2) the amount of its indebtedness. Cash flow is defined as income or loss from operations, plus depreciation and amortization (including amortization of broadcast rights), interest income, non-cash trade and barter expenses, nonrecurring expenses (including time brokerage agreement fees), network compensation payments received or receivable and corporate management fees, less payments for broadcast rights, non-cash trade and barter revenue and network compensation revenue. These option agreements (which expire on various dates between 2011 and 2018) are freely exercisable or assignable by Nexstar without consent or approval by Mission’s sole shareholder. The Company expects these option agreements to be renewed upon expiration.
 
 Indemnification Obligations
 
 In connection with certain agreements that the Company enters into in the normal course of its business, including local service agreements, business acquisitions and borrowing arrangements, the Company enters into contractual arrangements under which the Company agrees to indemnify the third party to such arrangement from losses, claims and damages incurred by the indemnified party for certain events as defined within the particular contract. Such indemnification obligations may not be subject to maximum loss clauses and the maximum potential amount of future payments the Company could be required to make under these indemnification arrangements may be unlimited. Historically, payments made related to these indemnifications have been immaterial and the Company has not incurred significant costs to defend lawsuits or settle claims related to these indemnification agreements.
 
 Litigation
 
 From time to time, the Company is involved with claims that arise out of the normal course of business. In the opinion of management, any resulting liability with respect to these claims would not have a material adverse effect on the Company’s financial position or results of operations.
  14
  ITEM 2.                      Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
 The following discussion and analysis should be read in conjunction with the unaudited condensed balance sheet as of September 30, 2010, unaudited condensed statements of operations for the three months and nine months ended September 30, 2010 and 2009, unaudited condensed statement of changes in shareholder’s deficit for the nine months ended September 30, 2010, unaudited condensed statements of cash flows for the nine months ended September 30, 2010 and 2009 and related notes included elsewhere in this Quarterly Report on Form 10-Q and the financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2009.
 
 Executive Summary
 
 Overview of Operations
 
 As of September 30, 2010, we owned and operated 16 television stations. We have local service agreements with certain television stations of Nexstar Broadcasting, Inc. (“Nexstar”), through which Nexstar provides various programming, sales or other services to our television stations. In order for both Nexstar and us to comply with Federal Communications Commission (“FCC”) regulations, we maintain complete responsibility for and control over programming, finances, personnel and operations of our stations.
 
 The following table summarizes the various local service agreements our stations had in effect as of September 30, 2010 with Nexstar:
 
 Service Agreements
StationsTBA Only(1)
WFXP and KHMTSSA & JSA(2)
KJTL, KJBO-LP, KOLR, KCIT, KCPN-LP, KAMC, KRBC, KSAN, WUTR, WFXW, WYOU, KODE, WTVO and KTVE
 (1)
We have a time brokerage agreement (“TBA”) for each of these stations which allows Nexstar to program most of each station’s broadcast time, sell each station’s advertising time and retain the advertising revenue generated in exchange for monthly payments to us.
 (2)
We have both a shared services agreement (“SSA”) and a joint sales agreement (“JSA”) for each of these stations. The SSA allows the Nexstar station in the market to provide certain services including news production, technical maintenance and security, in exchange for Nexstar’s right to receive certain payments from us as described in the SSAs. The JSA permits Nexstar to sell and retain a percentage of the net revenue from the station’s advertising time in return for monthly payments to us of the remaining percentage of the net revenue, as described in the JSAs.
 
 The arrangements under the local service agreements each Mission station has entered into with Nexstar has had the effect of Nexstar receiving substantially all of the available cash, after our payments of operating costs and debt service, generated by our stations. We anticipate that Nexstar will continue to receive substantially all of our available cash, after our payments for operating costs and debt service, generated by our stations listed above. For more information about our local service agreements with Nexstar, refer to Note 4 of our condensed financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.
 
 Issuance of Senior Secured Second Lien Notes Due 2017
 
 In April 2010, Nexstar and Mission, as co-issuers, completed the issuance and sale of $325.0 million of 8.875% senior secured second lien notes due 2017 (the “Notes”).  Mission used the net proceeds of the offering, together with borrowings under our amended senior secured credit facilities and cash on hand, to refinance Mission’s existing senior secured credit facilities, pay related fees and expenses and for general corporate purposes.
 
 Amendment to Credit Agreement
 
 In April 2010, the Second Amendment to Mission’s Third Amended and Restated Credit Agreement became effective among Mission and lenders.  Under the terms of the Nexstar Credit Agreement, the principal amount available under the revolving credit facility was reduced to $10.0 million, and the Term Loan B was reduced to $39.0 million. Repayments of our bank credit facility totaled $133.5 million during the first three quarters of 2010.
 
 Nexstar Broadcasting Group, Inc. and its subsidiaries (“Nexstar Broadcasting Group”) guarantee all obligations incurred under our senior credit facility and the 8.875% senior secured second lien notes due 2017. We are a guarantor of the senior credit facility entered into by Nexstar, the 8.875% senior secured second lien notes and the 7% senior subordinated notes issued by Nexstar. In consideration of Nexstar’s guarantee of our senior credit facility and the 8.875% senior secured second lien notes, our sole shareholder has granted Nexstar purchase options to acquire the assets and assume the liabilities of each of our television stations, subject to FCC consent. These option agreements (which expire on various dates between 2011 and 2018) are freely exercisable or assignable by Nexstar without consent or approval by our sole shareholder. We expect to renew these option agreements upon expiration.
  15
  Seasonality
 
 Advertising revenue, which drives our revenue from Nexstar, 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. The stations’ advertising revenue is generally highest in the second and fourth quarters of each year, due in part to increases in consumer advertising in the spring and retail advertising in the period leading up to, and including, the holiday season. In addition, advertising revenue is generally higher during even-numbered years resulting from political advertising and advertising aired during the Olympic Games.
 
 Historical Performance
 
 Revenue
 
 The following table sets forth the principal types of revenue earned by our stations (in thousands) and each type of revenue (other than barter revenue and revenue from Nexstar Broadcasting, Inc.) as a percentage of total net broadcast revenue before barter:
 
 Three Months Ended September 30,


Nine Months Ended September 30,2010


2009


2010


2009Amount


%


Amount


%


Amount


%


Amount


%Retransmission compensation

$
1,575



85.7


$
1,281



82.6


$
4,563



85.3


$
3,666



82.0Network compensation


240



13.0



242



15.6



711



13.3



741



16.6Other


23



1.3



27



1.8



76



1.4



62



1.4Net broadcast revenue before barter


1,838



100.0



1,550



100.0



5,350



100.0



4,469



100.0Barter revenue


557







584







1,638







1,839Revenue from Nexstar Broadcasting, Inc.


6,813







5,808







20,558







18,036Net revenue

$
9,208






$
7,942






$
27,546






$
24,344
 
 Results of Operations
 
 The following table sets forth a summary of our operations (in thousands) and the components of operating expense as a percentage of net revenue:
 
 Three Months Ended September 30,


Nine Months Ended September 30,2010


2009


2010


2009Amount


%


Amount


%


Amount


%


Amount


%Net revenue

$
9,208



100.0


$
7,942



100.0


$
27,546



100.0


$
24,344



100.0Operating expenses:Corporate expenses


276



3.0



408



5.1



742



2.7



960



3.9Station direct operating expenses


1,312



14.2



1,223



15.4



4,240



15.4



4,364



17.9Selling, general and administrative expenses


332



3.6



414



5.2



996



3.6



1,204



4.9Fees incurred pursuant to local service agreements with Nexstar Broadcasting, Inc.


1,785



19.4



1,800



22.7



5,375



19.5



5,625



23.1(Gain) loss on asset exchange


—



—



(1,354
)


(17.0
)


11



—



(1,851
)


(7.6
)(Gain) loss on asset disposal, net


2



—



(9
)


(0.1
)


20



0.1



(7
)


—Barter expense


557



6.1



584



7.4



1,638



5.9



1,839



7.6Depreciation and amortization


2,028



22.0



2,115



26.6



6,065



22.0



6,582



27.0Impairment of goodwill and intangible assets


—



—



2,258



28.4



—



—



2,258



9.3Amortization of broadcast rights, excluding barter


383



4.2



846



10.7



1,144



4.2



1,793



7.4Income (loss) from operations

$
2,533






$
(343
)





$
7,315






$
1,577
 
  16
  Three Months Ended September 30, 2010 Compared to Three Months Ended September 30, 2009.
 
 Revenue
 
 Net revenue was $9.2 million for the three months ended September 30, 2010 compared to $7.9 million for the same period in 2009, an increase of $1.3 million, or 15.9%. This increase was primarily attributed to an increase in revenue from Nexstar as well as an increase in retransmission compensation as discussed below.
 
 Revenue from Nexstar was $6.8 million for the three months ended September 30, 2010, compared to $5.8 million for the same period in 2009, an increase of $1.0 million, or 17.3%. The increase was attributed to an increase in revenue that Nexstar generated from selling all of the advertising of our stations, which in turn increased the revenue we earned from Nexstar through JSAs.
 
 Compensation from retransmission consent and network affiliation agreements was $1.8 million for the three months ended September 30, 2010, compared to $1.5 million for the same period in 2009, an increase of $0.3 million, or 19.2%. The increase was primarily due to an increase in billing rates on certain retransmission contracts and the addition of a new contract in the second half of 2009 and first half of 2010.
 
 Operating Expenses
 
 Corporate expenses were approximately $0.3 million and $0.4 million for the three months ended September 30, 2010 and 2009, respectively.  The decrease was primarily related to increased legal fees of $0.1 million in 2009 related to the revision of our credit agreement.  Corporate expense relates to costs associated with the centralized management of our stations.
 
 Station direct operating expenses, consisting primarily of news, engineering and programming, and selling, general and administrative expenses were approximately $1.6 million for each of the three months ended September 30, 2010 and 2009.
 
 Local service agreement fees associated with Nexstar relate to services provided by Nexstar in the production of newscasts, technical maintenance, promotional and administrative support under the SSAs. SSA fees decreased slightly for the three months ended September 30, 2010, compared to the same period in 2009 as a result of the elimination of the TBA agreement with KFTA.
 
 Depreciation of property and equipment was $0.7 million and $0.8 million for the three months ended September 30, 2010 and 2009, respectively.  The decrease was primarily due to the acceleration of depreciation on obsolete analog equipment in 2009.
 
 Amortization of broadcast rights, excluding barter, decreased by $0.5 million, or 54.7%, for the three months ended September 30, 2010, compared to the same period in 2009.  The decrease was primarily related to net realizable value write-downs recorded in 2009.
 
 Amortization of intangible assets was $1.3 million for each of the three months ended September 30, 2010 and 2009.
 
 The gain from the exchange of equipment under an arrangement with Sprint Nextel Corporation decreased by $1.4 million for the three months ended September 30, 2010, compared to the same period in 2009.  This project was complete as of March 31, 2010.
 
 Income (Loss) from Operations
 
 Income from operations was $2.5 million for the three months ended September 30, 2010, compared to a loss of $0.3 million for the same period of 2009, an increase of $2.9 million. The increase in income from operations for the three months ended September 30, 2010 was primarily attributed to the overall increase in net revenue combined with the reduction in the amortization of broadcast rights and an impairment loss of $2.3 million recorded in 2009, partially offset by a gain on the exchange of equipment in 2009 of $1.4 million.
 
 Interest Expense
 
 Interest expense, including amortization of debt financing costs, increased by $2.6 million, or more than two times, for the three months ended September 30, 2010, compared to the same period in 2009. The increase was primarily related to the higher interest rate of the $325.0 million 8.875% Senior Secured Second Lien Notes compared to the senior credit facilities.
 
  17
  Income Taxes
 
 Income tax expense was approximately $0.3 million and $0.1 million for the three months ended September 30, 2010 and 2009, respectively. The increase was primarily due to the tax impact of the impairment charge recognized in 2009.
 
 Nine months Ended September 30, 2010 Compared to Nine Months Ended September 30, 2009.
 
 Revenue
 
 Net revenue was $27.5 million for the nine months ended September 30, 2010 compared to $24.3 million for the same period in 2009, an increase of $3.2 million, or 13.2%. This increase was primarily attributed to an increase in revenue from Nexstar as well as an increase in retransmission compensation as discussed below.
 
 Revenue from Nexstar was $20.6 million for the nine months ended September 30, 2010, compared to $18.0 million for the same period in 2009, an increase of $2.5 million, or 14.0%. The increase was attributed to an increase in revenue that Nexstar generated from selling all of the advertising of our stations, which in turn increased the revenue we earned from Nexstar through JSAs.
 
 Compensation from retransmission consent and network affiliation agreements was $5.3 million for the nine months ended September 30, 2010, compared to $4.4 million for the same period in 2009, an increase of $0.9 million, or 19.7%. The increase was primarily due to an increase in billing rates on certain retransmission contracts and the addition of a new contract in the second half of 2009.
 
 Operating Expenses
 
 Corporate expenses were $0.7 million and $1.0 million for the nine months ended September 30, 2010 and 2009 respectively, a decrease of $0.2 million or 22.7%. The decrease was primarily related to increased legal fees of $0.1 million in 2009 related to the revision of our credit agreement. Corporate expense relates to costs associated with the centralized management of our stations.
 
 Station direct operating expenses, consisting primarily of news, engineering and programming, and selling, general and administrative expenses were $5.2 million for the nine months ended September 30, 2010, compared to $5.6 million for the same period in 2009, a decrease of $0.3 million or 6.0%.  The decrease was primarily due to a decrease in utilities due to the DTV conversions completed in 2009.
 
 Local service agreement fees associated with Nexstar relate to services provided by Nexstar in the production of newscasts, technical maintenance, promotional and administrative support under the SSAs. SSA fees decreased by $0.3 million, or 4.4%, for the nine months ended September 30, 2010 compared to the same period in 2009. The decrease was a result of the elimination of the newscast in Wilkes-Barre and the related reduction of SSA fees, effective April 1, 2009 and the termination of the TBA agreement between KFTA and KNWA effective May 1, 2010.
 
 Depreciation of property and equipment was $2.2 million and $2.7 million for the nine months ended September 30, 2010 and 2009, respectively.  The decrease was primarily due to the acceleration of depreciation on the obsolete analog equipment in 2009.
 
 Amortization of broadcast rights, excluding barter was $1.1 million and $1.8 million for the nine months ended September 30, 2010, and 2009, respectively.  The decrease was primarily related to net realizable value write-downs recorded in 2009.
 
 Amortization of intangible assets was $3.9 million for each of the nine months ended September 30, 2010 and 2009.
 
 The gain from the exchange of equipment under an arrangement with Sprint Nextel Corporation decreased by $1.8 million for the nine months ended September 30, 2010, compared to the same period in 2009.  This project was complete as of March 31, 2010.
  18
  Income from Operations
 
 Income from operations was $7.3 million for the nine months ended September 30, 2010, compared to $1.6 million for the same period of 2009, an increase of $5.7 million or more than three times. The increase in income from operations for the nine months ended September 30, 2010 was primarily attributed to the overall increase in net revenue, combined with the reduction in SSA fees to Nexstar, station direct operating expense, selling general and administrative expense and depreciation expense along with an impairment loss of $2.3 million taken in 2009, partially offset by a gain on the exchange of equipment in 2009 of $1.9 million.
 
 Interest Expense
 
 Interest expense, including amortization of debt financing costs, increased by $5.6 million, or 148.0%, for the nine months ended September 30, 2010, compared to the same period in 2009. The increase was primarily related to the higher interest rate of the $325.0 million 8.875% Senior Secured Second Lien Notes compared to the senior credit facilities.
 
 Loss on Extinguishment of Debt
 
 For the nine months ended September 30, 2010, the Company repaid $133.5 million of its Senior Secured Credit Facility for a net loss of $2.4 million.
 
 Income Taxes
 
 Income tax expense was approximately $0.9 million and $0.7 million for the nine months ended September 30, 2010 and 2009, respectively. The increase was primarily due to the tax impact of the impairment charge recognized in 2009.
 
 Liquidity and Capital Resources
 
 We are highly leveraged, which makes us vulnerable to changes in general economic conditions. Our ability to meet the future cash requirements described below depends on our ability to generate cash in the future, which is subject to general economic, financial, competitive, legislative, regulatory and other conditions, many of which are beyond our control. Our ability to meet future cash requirements is also dependent upon the local service agreements we have entered into with Nexstar. Under our local service agreements, Nexstar sells our advertising time and pays us a percentage of the amount collected. The payments we receive from Nexstar are a significant component of our cash flows. On March 9, 2010, Nexstar represented to us that it will continue the various local service agreements under which it provides sales and other services to our television stations thereby providing financial support to enable us to continue to operate as a going concern. We believe that with Nexstar’s pledge to continue the local service agreements, our available cash, anticipated cash flow from operations and available borrowings under our senior credit facility should be sufficient to fund working capital, capital expenditure requirements, interest payments and scheduled debt principal payments for at least the next twelve months from September 30, 2010. In order to meet future cash needs we may, from time to time, borrow under our available credit facility. We will continue to evaluate the best use of our operating cash flow among capital expenditures, acquisitions and debt reduction.
 
 Overview
 
 The following tables present summarized financial information management believes is helpful in evaluating our liquidity and capital resources (in thousands):
 
 Nine Months Ended

September 30,2010


2009Net cash provided by operating activities

$
5,983


$
1,944Net cash used in investing activities


(103
)


(908
)Net cash used in financing activities


(3,721
)


(1,295
)Net increase (decrease) in cash and cash equivalents

$
2,159


$
(259
)September 30, 2010


December 31, 2009Cash and cash equivalents

$
3,062


$
903Long-term debt including current portion

$
356,120


$
172,360Unused commitments under senior credit facility(1)

$
10,000


$
8,000
 (1)
As of September 30, 2010, $10 million of total unused commitments under Mission’s credit facility were available for borrowing.
  19
  Cash Flows – Operating Activities
 
 Net cash flows from operating activities increased by $4.0 million during the nine months ended September 30, 2010 compared to the same period in 2009. The increase was primarily due to an increase in net revenue of $3.2 million combined with the timing of payments and accruals of expenses, including amounts due to Nexstar Broadcasting, Inc. and accrued interest.
 
 Cash paid for interest remained consistent at $3.7 million during the nine months ended September 30, 2010 compared to the same period in 2009 due to differences in the interest payment dates on the 8.875% senior secured second lien notes due 2017 from those of our credit facility.
 
 Due to our recent history of net operating losses, we currently do not pay any federal income taxes but we are subject to certain state taxes. These net operating losses may be carried forward, subject to expiration and certain limitations, and used to reduce taxable earnings in future years. Through the use of available loss carryforwards, it is possible that we may not pay significant amounts of federal income taxes in the foreseeable future.
 
 Cash Flows – Investing Activities
 
 Net cash flows used in investing activities decreased by $0.8 million during the nine months ended September 30, 2010 compared to the same period in 2009. Cash flows from investing activities consisted of cash used for capital additions.
 
 Capital expenditures were $0.1 million for the nine months ended September 30, 2010, compared to $0.9 million for the same period in 2009. The decrease was primarily attributed to the completion of station conversions to digital broadcasting in 2009.
 
 Cash Flows – Financing Activities
 
 Net cash flows used in financing activities increased $2.4 million during the nine months ended September 30, 2010 compared to the same period in 2009.  This increase was primarily due to the repayment of long term debt of $133.5 million and approximately $1.0 million of payments to lenders and approximately $1.2 million in payments of debt finance costs in April 2010, offset by the issuance of 8.875% senior secured second lien notes of $131.9 million.
 
 Although our senior credit facility allows for the payment of cash dividends, we do not currently intend to declare or pay a cash dividend.
 
 Future Sources of Financing and Debt Service Requirements
 
 As of September 30, 2010, we had debt of $356.1 million, which represented 666.9% of our total capitalization. Our high level of debt requires that a substantial portion of cash flow be dedicated to pay principal and interest on our debt which reduces the funds available for working capital, capital expenditures, acquisitions and other general corporate purposes.
 
 The total amount of borrowings available to us under the revolving loan commitment of our senior credit facility is based on covenant calculations contained in Nexstar’s credit agreement. As of September 30, 2010, $10 million of total unused commitments under our senior credit facility were available for borrowing.
 
 The following table summarizes the approximate aggregate amount of principal indebtedness scheduled to mature for the periods referenced as of September 30, 2010 (in thousands):
 
 Total


Remainder

of 2010



2011-2012



2013-2014


ThereafterSenior credit facility

$
38,903


$
98


$
780


$
780



37,2458.875% senior secured second lien notes due 2017(1)


325,000



—



—



—



325,000$
363,903


$
98


$
780


$
780


$
362,245
 
 
 (1)
As co-issuers Mission received $131.9 million of the net proceeds and $184.9 million was received by Nexstar Broadcasting as further discussed in Note 7 of our condensed financial statements.  Debt repayment will be split based on the same ratio as the proceeds were received.
 
 Interest payments on our senior credit facility are generally paid every one to three months and are payable based on the type of interest rate selected.
 
 The terms of our senior credit facility limit, but do not prohibit us from incurring substantial amounts of additional debt in the future.
  20
  We do not have any rating downgrade triggers that would accelerate the maturity dates of our debt. However, a downgrade in our credit rating could adversely affect our ability to renew existing, or obtain access to new, credit facilities in the future and could increase the cost of such facilities.
 
 Collateralization and Guarantees of Debt
 
 Nexstar Broadcasting Group, Inc. (Nexstar’s ultimate parent) and its subsidiaries guarantee full payment of all obligations under our senior credit facility and the 8.875% senior secured second lien notes due 2017 in the event of our default. Similarly, we are a guarantor of Nexstar’s bank credit facility and the senior secured second lien notes due 2017 and the senior subordinated notes due 2014 issued by Nexstar. The senior credit facilities and the 8.875% senior secured second lien notes are collateralized by a security interest in substantially all the combined assets, excluding FCC licenses, of Nexstar and us. As of September 30, 2010, Nexstar had a maximum commitment of $125.8 million under its senior credit facility, of which $60.8 million of debt was outstanding, and had issued an aggregate principal amount outstanding of $325.0 million of 8.875% senior secure second lien notes, $47.0 million of 7% senior subordinated notes and $136.6 million of 7% PIK senior subordinated notes.
 
 Debt Covenants
 
 Our ability to continue as a going concern is dependent on Nexstar’s pledge to continue the local services agreements through March 9, 2011, as described in a letter of support dated March 9, 2010. Nexstar’s senior secured credit facility agreement contains covenants which require them to comply with certain financial ratios, including (a) maximum consolidated total leverage ratios, (b) a minimum consolidated first lien indebtedness ratio, and (c) a maximum consolidated fixed charge coverage ratio. The covenants, which are calculated on a quarterly basis, include the combined results of Nexstar Broadcasting and us. Our senior secured credit facility agreement does not contain financial covenant ratio requirements; however it does include an event of default if Nexstar does not comply with all covenants contained in its credit agreement. As of September 30, 2010, Nexstar was in compliance with all covenants contained in the credit agreements governing our senior secured credit facility and the indentures governing the publicly-held notes.
 
 No Off-Balance Sheet Arrangements
 
 At September 30, 2010, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. We are, therefore, not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.
 
 Critical Accounting Policies and Estimates
 
 Our condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed financial statements and reported amounts of revenue and expenses during the period. On an ongoing basis, we evaluate our estimates, including those related to goodwill and intangible assets, bad debts, broadcast rights, trade and barter, income taxes, commitments and contingencies. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates. Results of operations for interim periods are not necessarily indicative of results for the full year.
 
 Information with respect to our critical accounting policies which we believe could have the most significant effect on our reported results and require subjective or complex judgments by management is contained on pages 26 through 29 in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2009. Management believes that as of September 30, 2010 there has been no material change to this information.
 
 Recent Accounting Pronouncements
 
 Refer to Note 2 of our condensed financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for a discussion of our adoption of recently issued accounting pronouncements, including our expected date of adoption and effects on results of operations and financial position.
 
  21
  Cautionary Note Regarding Forward-Looking Statements
 
 This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including: any projections or expectations of earnings, revenue, financial performance, liquidity and capital resources or other financial items; any assumptions or projections about the television broadcasting industry; any statements of our plans, strategies and objectives for our future operations, performance, liquidity and capital resources or other financial items; any statements concerning proposed new products, services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words “may,” “will,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and other similar words.
 
 Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ from this projection or assumption in any of our forward-looking statements. Our future financial position and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties, including those described in our Annual Report on Form 10-K for the year ended December 31, 2009 and in our other filings with the Securities and Exchange Commission. The forward-looking statements made in this Quarterly Report on Form 10-Q are made only as of the date hereof, and we do not have or undertake any obligation to update any forward-looking statements to reflect subsequent events or circumstances unless otherwise required by law.
 
  22
  ITEM 3.
Quantitative and Qualitative Disclosures About Market Risk
 
 Interest Rate Risk
 
 Our exposure to market risk for changes in interest rates relates primarily to our long-term debt obligations.
 
 All term loan borrowings at September 30, 2010 under our senior credit facility bear interest at 5%, which represented the base rate, or LIBOR, plus the applicable margin, as defined. Interest is payable in accordance with the credit agreement.
 
 If LIBOR were to increase by 100 basis points, or one percentage point, from its September 30, 2010 level, our annual interest expense would increase and cash flow from operations would decrease by approximately $0.1 million, based on the outstanding balance of our credit facility as of September 30, 2010.  Due to the LIBOR floor on our term loan, an increase of 50 basis points in LIBOR or any decrease in LIBOR would have no impact on our operations or cash flows.
 
 Impact of Inflation
 
 We believe that our results of operations are not affected by moderate changes in the inflation rate.
 
 ITEM 4.
Controls and Procedures
 
 Evaluation of Disclosure Controls and Procedures
 
 Mission’s management, with the participation of Mission’s President and Treasurer (who is Mission’s principal executive officer and principal financial and accounting officer), conducted an evaluation as of the end of the period covered by this report of the effectiveness of the design and operation of Mission’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934.
 
 Based upon that evaluation, Mission’s President and Treasurer concluded that as of the end of the period covered by this report Mission’s disclosure controls and procedures were effective in ensuring that information required to be disclosed by Mission in the reports it files or submits under the Securities Exchange Act of 1934 (i) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to Mission’s management, including its President and Treasurer, as appropriate to allow timely decisions regarding required disclosure.
 
 Changes in Internal Control over Financial Reporting
 
 During the quarterly period as of the end of the period covered by this report, there have been no changes in Mission’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.
  23
  PART II. OTHER INFORMATION
 
 
 
 ITEM 1.                       Legal Proceedings
 
 From time to time, we are involved in litigation that arises from the ordinary operations of business, such as contractual or employment disputes or other general actions. In the event of an adverse outcome of these proceedings, we believe the resulting liabilities would not have a material adverse effect on our financial condition or results of operations.
 
 ITEM 1A.                    Risk Factors
 
 There are no material changes from the risk factors previously disclosed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2009.
 
 ITEM 2.                       Unregistered Sales of Equity Securities and Use of Proceeds
 
 None.
 
 ITEM 3.                       Defaults Upon Senior Securities
 
 None.
 
 ITEM 4.                       Reserved
 
 ITEM 5.                       Other Information
 
 None.
 
  24
  ITEM 6.                       Exhibits
 
 Exhibit No.
Description31.1
Certification of David S. Smith pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
Certification of David S. Smith pursuant to 18 U.S.C. ss. 1350.
 
  25
  SIGNATURES
 
 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 MISSION BROADCASTING, INC./s/ DAVID S. SMITHBy:
David S. SmithIts:
President and Treasurer(Principal Executive Officer and Principal Financial and Accounting Officer)
 
 Dated: November 5, 2010
 
 
  26