Mission Broadcasting 10-K 2012 FY Annual report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

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

For the fiscal year ended December 31, 2012

OR

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

For the transition period from              to             .

Commission File Number: 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
(Address of Principal Executive Offices)	(Zip Code)
(440) 526-2227
(Registrant’s Telephone Number, Including Area Code)

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

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

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

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 Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    x

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	Smaller reporting company  ¨
		(Do not check if a smaller reporting company)

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

As of March 26, 2013, the Registrant had 1,000 shares of common stock outstanding.

TABLE OF CONTENTS

		Page
PART I
ITEM 1.	Business	2
ITEM 1A.	Risk Factors	9
ITEM 1B.	Unresolved Staff Comments	16
ITEM 2.	Properties	16
ITEM 3.	Legal Proceedings	17
ITEM 4.	Mine Safety Disclosures	17
PART II
ITEM 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	17
ITEM 6.	Selected Financial Data	18
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
ITEM 7A.	Quantitative and Qualitative Disclosures About Market Risk	30
ITEM 8.	Financial Statements and Supplementary Data	30
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	30
ITEM 9A.	Controls and Procedures	31
ITEM 9B.	Other Information	31
PART III
ITEM 10.	Directors, Executive Officers and Corporate Governance	32
ITEM 11.	Executive Compensation	32
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	33
ITEM 13.	Certain Relationships and Related Transactions, and Director Independence	34
ITEM 14.	Principal Accountant Fees and Services	35
PART IV
ITEM 15.	Exhibits and Financial Statement Schedules	36
Index to Financial Statements		F-1
Index to Exhibits		E-1

General

As used in this Annual Report on Form 10-K and unless the context indicates otherwise, “Mission,” “we,” “our,” “ours”, “us” and the “Company” refer to Mission Broadcasting, Inc., “Nexstar Broadcasting Group” refers to Nexstar Broadcasting Group, Inc. and its consolidated subsidiaries and “Nexstar” refers to Nexstar Broadcasting, Inc., an indirect subsidiary of Nexstar Broadcasting Group. Mission has entered into time brokerage, shared services and joint sales agreements (which we generally refer to as local service agreements) with certain television stations owned by Nexstar, but Mission does not own any equity interests in Nexstar and Nexstar does not own any equity interests in Mission. For a description of the relationship between Mission and Nexstar, see Item 13. “Certain Relationships and Related Transactions, and Director Independence.”

There are 210 generally recognized television markets, known as Designated Market Areas, or DMAs, in the United States. DMAs are ranked in size according to various factors based upon actual or potential audience. DMA rankings contained in this Annual Report on Form 10-K are from Investing in Television Market Report 2012 4th Edition, as published by BIA Financial Network, Inc.

Reference is made in this Annual Report on Form 10-K to the following trademarks/tradenames which are owned by the third parties referenced in parentheses: Two and a Half Men (Warner Bros. Domestic Television) and Entertainment Tonight (CBS Television Distribution).

Cautionary Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K 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, as amended (“Exchange Act”). 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 a 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 discussed under Item 1A. “Risk Factors” elsewhere in this Annual Report on Form 10-K and in our other filings with the Securities and Exchange Commission (“SEC”). The forward-looking statements made in this Annual Report on Form 10-K 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.

PART I

Item 1.                      Business

Overview

We are a television broadcasting company focused exclusively on the acquisition, development and operation of television stations in medium-sized markets in the United States, primarily markets that rank from 50 to 175 out of the 210 generally recognized television markets, as reported by A.C. Nielsen Company.

As of December 31, 2012, we owned and operated 17 stations and four digital multicast (“DM”) channels. The stations are in markets located in New York, Pennsylvania, Illinois, Indiana, Missouri, Louisiana, Texas and Montana. Our stations are affiliated with NBC (3 stations), FOX (4 stations), ABC (5 stations), CBS (2 stations), MyNetworkTV (2 stations and one DM), Bounce TV (3 DMs) and one of our stations is independent.

Effective January 1, 2013, the Company acquired the assets of KLRT-TV, the FOX affiliate, and KASN, the CW affiliate, both in the Little Rock, Arkansas market, from Newport Television, LLC (“Newport”) for a total purchase price of $60.0 million, subject to adjustments for working capital acquired. Pursuant to the terms of the purchase agreement, the Company made an initial payment of $6.0 million against the purchase price on July 18, 2012 to acquire the assets of KLRT-TV and KASN. The Company paid the remaining $54.0 million on January 3, 2013 funded by the $60.0 million proceeds of additional term loan under the Company’s senior secured credit facility.

On March 1, 2013, the Company acquired the assets of WVNY, the ABC affiliate in the Burlington, Vermont market, from Smith Media, LLC (“Smith Media”) for a total purchase price of $5.6 million paid on March 1, 2013. The purchase price was funded by a $5.0 million borrowing from the Company’s revolving credit facility and cash on hand.

We believe that medium-sized markets offer significant advantages over large-sized markets, most of which result from a lower level of competition. First, because there are fewer well-capitalized acquirers with a medium-market focus, we have been successful in purchasing stations on more favorable terms than acquirers of large market stations. Second, in many of our markets only four or five local commercial television stations exist. As a result, we achieve lower programming costs than stations in larger markets because the supply of quality programming exceeds the demand.

Our stations provide free over-the-air programming to our markets’ television viewing audiences. This programming includes (a) programs produced by networks with which the stations are affiliated; (b) programs that the stations produce; and (c) first-run and rerun syndicated programs that the stations acquire. Our primary source of revenue is indirectly derived from the sale of commercial air time on our stations to local and national advertisers by Nexstar under local service agreements.

Our principal offices are located at 30400 Detroit Road, Suite 304, Westlake, Ohio 44145. Our telephone number is (440) 526-2227.

Local Service Agreements and Purchase Options

The following table summarizes the various local service agreements our stations had in effect as of December 31, 2012 with Nexstar-owned stations:

Service Agreements	Stations
TBA Only(1)	WFXP and KHMT
SSA & JSA(2)	KJTL, KJBO-LP, KOLR, KCIT, KCPN-LP, KAMC, KRBC, KSAN, WUTR, WAWV, WYOU, KODE, KTVE, WTVO and WTVW

(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 Mission, based on the station’s monthly operating expenses.

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

Under these agreements, we are responsible for certain operating expenses of our stations and therefore may have unlimited exposure to any potential operating losses. We expect to continue to operate our stations under the SSAs and JSAs or TBAs until the termination of such agreements. The SSAs and JSAs generally have terms of eight to ten years. Nexstar indemnifies Mission for Nexstar’s activities pursuant to the local service agreements.

2

Under these local service agreements, Nexstar has received substantially all of our available cash, after satisfaction of operating costs and debt obligations. We anticipate that Nexstar will continue to receive substantially all of our available cash, after satisfaction of operating costs and debt obligations. In compliance with Federal Communications Commission (“FCC”) regulations for Mission and Nexstar, Mission maintains complete responsibility for and control over programming, finances, personnel and operations of its stations.

Nexstar Broadcasting Group guarantees all obligations incurred under our senior secured credit facility. We are a guarantor of the senior secured credit facility entered into by Nexstar and the senior unsecured notes issued by Nexstar. In consideration of Nexstar Broadcasting Group’s guarantee of our senior secured credit facility, we have granted Nexstar purchase options to acquire the assets and assume the liabilities of each Mission television station for consideration equal to the greater of (1) seven times the station’s cash flow, as defined in the option agreement, less the amount of its indebtedness as defined in the option agreement, or (2) the amount of its indebtedness. Additionally, on November 29, 2011, Mission’s shareholders granted Nexstar an option to purchase any or all of our stock for a price equal to the pro rata portion of the greater of (1) five times the stations’ cash flow, as defined in the agreement, reduced by the amount of indebtedness, as defined in the agreement, or (2) $100,000. These option agreements (which expire on various dates between 2013 and 2022) are freely exercisable or assignable by Nexstar without our consent or approval. We expect these option agreements to be renewed upon expiration. Nexstar’s acquisition of any station or our stock pursuant to an exercise of the applicable option is subject to prior FCC approval.

Refer to Part III, Item 13. “Certain Relationships and Related Transactions, and Director Independence” for a more complete disclosure of the local service and option agreements our stations had in effect as of December 31, 2012.

Business Strategy

The operating revenue of our stations is derived primarily from broadcast advertising revenue sold and collected by Nexstar and paid to us under the JSAs. Broadcast advertising revenue is affected by a number of factors, including the economic conditions of the markets in which we operate, the demographic makeup of those markets and the marketing strategy employed in each market. Our primary operating expense consists of fixed monthly SSA fees paid to Nexstar for news production and technical and other services. To a lesser extent, our operating expenses include employee compensation and related benefits. A large percentage of the costs involved in the operation of our stations remains fixed.

The Stations

The following chart sets forth general information about the stations that we owned and operated as of December 31, 2012:

Market Rank(1)	Market	Station	Affiliation	Commercial Stations in Market (2)	FCC License Expiration Date
54	Wilkes Barre-Scranton, PA	WYOU	CBS	7	(3)
74	Springfield, MO	KOLR	CBS	5	(3)
104	Evansville, IN	WTVW	Independent	4	8/1/13
130	Amarillo, TX	KCIT	FOX	6	(3)
		KCPN-LP	MyNetworkTV		(3)
134	Rockford, IL	WTVO/WTVO-D-2	ABC/MyNetworkTV	4	(3)
137	Monroe, LA-El Dorado, AR	KTVE	NBC	4	6/1/13
142	Wichita Falls, TX- Lawton, OK	KJTL/KJTL-D-2	FOX/Bounce TV	4	(3)
		KJBO-LP	MyNetworkTV		(3)
143	Lubbock, TX	KAMC/KAMC-D-2	ABC/Bounce TV	5	(3)
146	Erie, PA	WFXP	FOX	4	(3)
149	Joplin, MO-Pittsburg, KS	KODE	ABC	4	(3)
154	Terre Haute, IN	WAWV	ABC	3	(3)
164	Abilene-Sweetwater, TX	KRBC/KRBC-D-2	NBC/Bounce TV	4	(3)
168	Billings, MT	KHMT	FOX	5	(3)
172	Utica, NY	WUTR	ABC	3	(3)
197	San Angelo, TX	KSAN	NBC	3	(3)

(1) Market rank refers to ranking the size of the Designated Market Area (“DMA”) in which the station is located in relation to other DMAs. Source: Investing in Television Market Report 2012 4th Edition, as published by BIA Financial Network, Inc.

(2) The term “commercial station” means a television broadcast station and excludes non-commercial stations and religious stations, cable program services or networks. Source: Investing in Television Market Report 2012 4th Edition, as published by BIA Financial Network, Inc.

(3) Application for renewal of license was submitted timely to the FCC. Under the FCC’s rules, a license expiration date automatically is extended pending review of and action on the renewal application by the FCC.

Effective January 1, 2013, the Company acquired the assets of KLRT-TV, the FOX affiliate, and KASN, the CW affiliate, both in the Little Rock, Arkansas market, from Newport.

3

On March 1, 2013, the Company acquired the assets of WVNY, the ABC affiliate in the Burlington, Vermont market, from Smith Media.

Industry Background

Commercial television broadcasting began in the United States on a regular basis in the 1940s. Currently a limited number of channels are available for over-the-air broadcasting in any one geographic area and a license to operate a television station must be granted by the FCC. All television stations in the country are grouped by A.C. Nielsen Company, a national audience measuring service, into 210 generally recognized television markets, known as DMAs, that are ranked in size according to various metrics based upon actual or potential audience. Each DMA is an exclusive geographic area consisting of all counties in which the home-market commercial stations receive the greatest percentage of total viewing hours. A.C. Nielsen periodically publishes data on estimated audiences for the television stations in the DMA. The estimates are expressed in terms of a “rating,” which is a station’s percentage of the total potential audience in the market, or a “share,” which is the station’s percentage of the audience actually watching television. A station’s rating and share in a market can be a factor in determining advertising rates.

Most television stations are affiliated with networks and receive a significant part of their programming, including prime-time hours, from networks. Whether or not a station is affiliated with one of the four major networks (NBC, ABC, CBS or FOX) has a significant impact on the composition of the station’s revenue, expenses and operations. Network programming is provided to the affiliate by the network in exchange for the network’s retention of a substantial majority of the advertising time during network programs. The network then sells this advertising time and retains the revenue. The affiliate retains the revenue from the remaining advertising time it sells during network programs and from advertising time it sells during non-network programs.

Broadcast television stations compete for advertising revenue primarily with other commercial broadcast television stations, cable and satellite television systems and the Internet and, to a lesser extent, with newspapers and radio stations advertising serving the same market. Non-commercial, religious and Spanish-language broadcasting stations in many markets also compete with commercial stations for viewers. In addition, the Internet and other leisure activities may draw viewers away from commercial television stations.

Network Affiliations

Most of our stations are affiliated with a network pursuant to an affiliation agreement, as described below:

Station	Market	Affiliation	Expiration
KCIT	Amarillo, TX	FOX	December 2013
KHMT	Billings, MT	FOX	December 2013
KJTL	Wichita Falls, TX-Lawton, OK	FOX	December 2013
WFXP	Erie, PA	FOX	December 2013
KCPN-LP	Amarillo, TX	MyNetworkTV	August 2014
KJBO-LP	Wichita Falls, TX-Lawton, OK	MyNetworkTV	August 2014
WTVO-D-2	Rockford, IL	MyNetworkTV	August 2014
KJTL-D-2	Wichita Falls, TX-Lawton, OK	Bounce TV	September 2014
KAMC-D-2	Lubbock, TX	Bounce TV	September 2014
KRBC-D-2	Abilene-Sweetwater, TX	Bounce TV	September 2014
KTVE	Monroe, LA-El Dorado, AR	NBC	December 2014
KSAN	San Angelo, TX	NBC	December 2014
KRBC	Abilene-Sweetwater, TX	NBC	December 2014
WYOU	Wilkes Barre-Scranton, PA	CBS	June 2015
WAWV	Terre Haute, IN	ABC	June 2017
WUTR	Utica, NY	ABC	June 2017
WTVO	Rockford, IL	ABC	June 2017
KAMC	Lubbock, TX	ABC	June 2017
KODE	Joplin, MO-Pittsburg, KS	ABC	June 2017
KOLR	Springfield, MO	CBS	December 2018

Effective January 1, 2013, the Company acquired the assets of KLRT-TV, the FOX affiliate, and KASN, the CW affiliate, both in the Little Rock, Arkansas market, from Newport.

On March 1, 2013, the Company acquired the assets of WVNY, the ABC affiliate in the Burlington, Vermont market, from Smith Media.

Each affiliation agreement provides the affiliated station with the right to broadcast all programs transmitted by the network with which it is affiliated. In exchange, the network has the right to sell a substantial majority of the advertising time during these broadcasts.

We expect all of the network affiliation agreements listed above to be renewed upon expiration.

4

Competition

Competition in the television industry takes place on several levels: competition for audience, competition for programming and competition for advertising.

Audience. Our stations compete for audience share specifically on the basis of program popularity. The popularity of a station’s programming has a direct effect on the advertising rates it can charge its advertisers. A portion of the daily programming on our stations is supplied by the network with which each station is affiliated. In those periods, the stations are dependent upon the performance of the network programs in attracting viewers. Stations program non-network time periods with a combination of self-produced news, public affairs and other entertainment programming, including movies and syndicated programs. The major television networks have also begun to sell their programming directly to the consumer via portable digital devices such as tablets and cell phones, which presents an additional source of competition for television broadcaster audience share. Other sources of competition for audiences include home entertainment systems (such as VCRs, DVDs, and DVRs), video-on-demand and pay-per-view, the Internet (including network distribution of programming through websites) and gaming devices.

Although the commercial television broadcast industry historically has been dominated by the ABC, NBC, CBS and FOX television networks, other newer television networks and the growth in popularity of subscription systems, such as local cable and direct broadcast satellite (“DBS”) systems which air exclusive programming not otherwise available in a market, have become significant competitors for the over-the-air television audience.

Programming. Competition for programming involves negotiating with national program distributors or syndicators that sell first-run and rerun packages of programming. Stations compete against in-market broadcast station operators for exclusive access to off-network reruns (such as Two and a Half Men) and first-run product (such as Entertainment Tonight) in their respective markets. Cable systems generally do not compete with local stations for programming, although various national cable networks from time to time have acquired programs that would have otherwise been offered to local television stations. Time Warner Inc., Comcast Corporation, Viacom Inc., News Corporation and the Walt Disney Company each owns a television network and also owns or controls major production studios, which are the primary source of programming for the networks. It is uncertain whether in the future such programming, which is generally subject to short-term agreements between the studios and the networks, will be moved to the networks. Television broadcasters also compete for non-network programming unique to the markets they serve. As such, stations strive to provide exclusive news stories and unique features such as investigative reporting and coverage of community events and to secure broadcast rights for regional and local sporting events.

Advertising. Stations compete for advertising revenue with other television stations in their respective markets and with other advertising media such as newspapers, radio stations, magazines, outdoor advertising, transit advertising, yellow page directories, direct mail, local cable systems, DBS systems and the Internet. Competition for advertising dollars in the broadcasting industry occurs primarily within individual markets. Generally, a television broadcast station in a particular market does not compete with stations in other market areas.

Additional Competitive Factors. The broadcasting industry is continually faced with technological change and innovation which increase the popularity of competing entertainment and communications media. Further advances in technology may increase competition for household audiences and advertisers. The increased use of digital technology by cable and DBS systems, along with video compression techniques, will reduce the bandwidth required for television signal transmission. These technological developments are applicable to all video delivery systems, including over-the-air broadcasting, and have the potential to provide vastly expanded programming to highly targeted audiences. Reductions in the cost of creating additional channel capacity could lower entry barriers for new channels and encourage the development of increasingly specialized “niche” programming. This ability to reach very narrowly defined audiences is expected to alter the competitive dynamics for advertising expenditures. We are unable to predict the effect that these or other technological changes will have on the broadcast television industry or on the future results of our operations.

Federal Regulation

Television broadcasting is subject to the jurisdiction of the FCC under the Communications Act of 1934, as amended (“the Communications Act”). The following is a brief discussion of certain provisions of the Communications Act and the FCC’s regulations and policies that affect the business operations of television broadcast stations. Over the years, Congress and the FCC have added, amended and deleted statutory and regulatory requirements to which station owners are subject. Some of these changes have a minimal business impact whereas others may significantly affect the business or operation of individual stations or the broadcast industry as a whole. For more information about the nature and extent of FCC regulation of television broadcast stations, you should refer to the Communications Act and the FCC’s rules, public notices and policies.

5

License Grant and Renewal. The Communications Act prohibits the operation of broadcast stations except under licenses issued by the FCC. Television broadcast licenses are granted for a maximum term of eight years and are subject to renewal upon application to the FCC. The FCC is required to grant an application for license renewal if during the preceding term the station served the public interest, the licensee did not commit any serious violations of the Communications Act or the FCC’s rules, and the licensee committed no other violations of the Communications Act or the FCC’s rules which, taken together, would constitute a pattern of abuse. A majority of renewal applications are routinely granted under this standard. If a licensee fails to meet this standard the FCC may still grant renewal on terms and conditions that it deems appropriate, including a monetary forfeiture or renewal for a term less than the normal eight-year period.

After a renewal application is filed, interested parties, including members of the public, may file petitions to deny the application, to which the licensee/renewal applicant is entitled to respond. After reviewing the pleadings, if the FCC determines that there is a substantial and material question of fact whether grant of the renewal application would serve the public interest, the FCC is required to hold a trial-type hearing on the issues presented. If, after the hearing, the FCC determines that the renewal applicant has met the renewal standard, the FCC will grant the renewal application. If the licensee/renewal applicant fails to meet the renewal standard or show that there are mitigating factors entitling it to renewal subject to appropriate sanctions, the FCC can deny the renewal application. In the vast majority of cases where a petition to deny is filed against a renewal application, the FCC ultimately grants the renewal without a hearing. No competing application for authority to operate a station and replace the incumbent licensee may be filed against a renewal application.

In addition to considering rule violations in connection with a license renewal application, the FCC may sanction a station licensee for failing to observe FCC rules and policies during the license term, including the imposition of a monetary forfeiture.

Station Transfer. The Communications Act prohibits the assignment or the transfer of control of a broadcast license without prior FCC approval.

Ownership Restrictions. The Communications Act limits the extent of non-U.S. ownership of companies that own U.S. broadcast stations. Under this restriction, a U.S. broadcast company such as ours may have no more than 20% (in the case of a license entity) or 25% (in the case of a parent entity) non-U.S. ownership (by vote and by equity).

The FCC also has rules which establish limits on the ownership of broadcast stations. These ownership limits apply to attributable interest in a station licensee held by an individual, corporation, partnership or other entity. In the case of corporations, officers, directors and voting stock interests of 5% or more (20% or more in the case of qualified investment companies, such as insurance companies and bank trust departments) are considered attributable interests. For partnerships, all general partners and non-insulated limited partners are attributable. Limited liability companies are treated the same as partnerships. The FCC also considers attributable the holder of more than 33% of a licensee’s total assets (defined as total debt plus total equity), if that person or entity also provides over 15% of the station’s total weekly broadcast programming or has an attributable interest in another media entity in the same market which is subject to the FCC’s ownership rules, such as a radio or television station or daily newspaper.

Local Television Ownership (Duopoly Rule). Under the current local television ownership, or “duopoly,” rule, a single entity is allowed to own or have attributable interests in two television stations in a market if (1) the two stations do not have overlapping service areas, or (2) after the combination there are at least eight independently owned and operating full-power television stations in the DMA with overlapping service contours and one of the combining stations is not ranked among the top four stations in the DMA. The duopoly rule allows the FCC to consider waivers to permit the ownership of a second station only in cases where the second station has failed or is failing or unbuilt. We currently own and operate two television stations in the Little Rock, Arkansas market.

Under the duopoly rule, the FCC attributes toward the local television ownership limits another in-market station when one station owner programs a second in-market station pursuant to a time brokerage or local marketing agreement, if the programmer provides 15% or more of the second station’s weekly broadcast programming. However, local marketing agreements entered into prior to November 5, 1996 are exempt attributable interests until the FCC determines otherwise. This “grandfathering,” when reviewed by the FCC, is subject to possible extension or termination.

In certain of our markets, we own and operate both full-power and low-power television broadcast stations (in Wichita Falls, we own and operate KJTL and KJBO-LP; and in Amarillo, we own and operate KCIT and KCPN-LP). The FCC’s duopoly rules and policies regarding ownership of television stations in the same market apply only to full-power television stations and not low-power television stations such as KJBO-LP and KCPN-LP.

6

National Television Ownership.There is no nationwide limit on the number of television stations which a party may own. However, the FCC’s rules limit the percentage of U.S. television households which a party may reach through its attributable interests in television stations. This rule provides that when calculating a party’s nationwide aggregate audience coverage, the ownership of a UHF station is counted as 50% of a market’s percentage of total national audience. In 2004, Congress determined that one party may have an attributable interest in television stations which reach, in the aggregate, 39% of all U.S. television households; and the FCC thereafter modified its corresponding rule. The FCC currently is considering whether this act has any impact on the FCC’s authority to examine and modify the UHF discount. Our stations have a combined national audience reach of 1.7% of television households with the UHF discount.

Radio/Television Cross-Ownership Rule (One-to-a-Market Rule). In markets with at least 20 independently owned media “voices”, ownership of one television station and up to seven radio stations, or two television stations (if allowed under the television duopoly rule) and six radio stations is permitted. If the number of independently owned media “voices” is fewer than 20 but greater than or equal to 10, ownership of one television station (or two if allowed) and four radio stations is permitted. In markets with fewer than 10 independent media “voices”, ownership of one television station (or two if allowed) and one radio station is permitted. In calculating the number of independent media “voices” in a market, the FCC includes all radio and television stations, independently owned cable systems (counted as one voice), and independently owned daily newspapers which have circulation that exceeds 5% of the households in the market. In all cases, the television and radio components of the combination must also comply, respectively, with the local television ownership rule and the local radio ownership rule.

Local Television/Newspaper Cross-Ownership Rule. Under this rule, a party is prohibited from having an attributable interest in a television station and a daily newspaper in the same market.

As a result of the FCC’s 2006 rulemaking proceeding, which provided a comprehensive review of all of its media ownership rules, in February 2008, the FCC adopted modest changes to its newspaper cross-ownership rule, while retaining the rest of its rules as then currently in effect. In July 2011, however, the U.S. Court of Appeals for the Third Circuit vacated the FCC’s changes to the newspaper/broadcast cross-ownership rule while upholding the FCC’s retention of its other media ownership rules. The U.S. Supreme Court declined to review the Third Circuit’s decision.

The FCC is required to review its media ownership rules every four years and to eliminate those rules it finds no longer serve the “public interest, convenience and necessity”. During 2009, the FCC held a series of hearings designed to evaluate possible changes to its rules. In May 2010, the FCC formally initiated its 2010 review of its media ownership rules with the issuance of a Notice of Inquiry. In December 2011, the FCC issued a Notice of Proposed Rulemaking (NPRM) seeking comment on specific proposed changes to its ownership rules. Among the specific changes proposed in the NPRM are (1) elimination of the contour overlap provision of the local television ownership rule (making the rule entirely DMA-based), (2) elimination of the radio/television cross-ownership rule and (3) modest relaxation of the newspaper/broadcast cross-ownership rule. The NPRM also seeks comment on shared services agreements (SSAs) and other joint operating arrangements between television stations, and whether such agreements should be considered attributable. Initial comments on the NPRM were filed on March 5, 2012, and reply comments were filed in April 2012. The FCC may act on this proceeding in 2013. We cannot predict what rules the FCC will adopt or when they will be adopted. However, the FCC may deem television JSAs to be attributable ownership interests and require the termination of existing JSAs within a specified period of time if the newly attributable JSAs do not comply with the local television ownership limits.

Local Television/Cable Cross-Ownership. There is no FCC rule prohibiting common ownership of a cable television system and a television broadcast station in the same area.

Cable and Satellite Carriage of Local Television Signals.  Broadcasters may obtain carriage of their stations’ signals on cable, satellite and other multichannel video programming distributors (“MVPDs”) through either mandatory carriage or through “retransmission consent.” Every three years all stations must formally elect either mandatory carriage (“must-carry” for cable distributors and “carry one-carry all” for satellite television providers) or retransmission consent. The next election must be made by October 1, 2014, and will be effective January 1, 2015. Must-carry elections require that the MVPD carry one station programming stream and related data in the station’s local market. However, MVPDs may decline a must-carry election in certain circumstances. MVPDs do not pay a fee to stations that elect mandatory carriage.

A broadcaster that elects retransmission consent waives its mandatory carriage rights, and the broadcaster and the MVPD must negotiate in good faith for carriage of the station’s signal. Negotiated terms may include channel position, service tier carriage, carriage of multiple program streams, compensation and other consideration. If a broadcaster elects to negotiate retransmission terms, it is possible that the broadcaster and the MVPD will not reach agreement and that the MVPD will not carry the station’s signal.

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MVPD operators are actively seeking to change the regulations under which retransmission consent is negotiated before both the U.S. Congress and the FCC in order to increase their bargaining leverage with television stations. On March 3, 2011, the FCC initiated a Notice of Proposed Rulemaking to reexamine its rules (i) governing the requirements for good faith negotiations between MVPDs and broadcasters, including implementing a prohibition on one station negotiating retransmission consent terms for another station under a local service agreement; (ii) for providing advance notice to consumers in the event of dispute; and (iii) to extend certain cable-only obligations to all MVPDs. The FCC has also asked for comment on eliminating the network non-duplication and syndicated exclusivity protection rules, which may permit MVPDs to import out-of-market television stations during a retransmission consent dispute.

The FCC’s rules also govern which local television signals a satellite subscriber may receive. Congress and the FCC have also imposed certain requirements relating to satellite distribution of local television signals to “unserved” households that do not receive a useable signal from a local network-affiliated station and to cable and satellite carriage of out-of-market signals.

We elected to exercise retransmission consent rights for all of our stations where we have a legal right to do so. We have negotiated retransmission consent agreements with the majority of the MVPDs which carry the stations’ signals.

Programming and Operation. The Communications Act requires broadcasters to serve “the public interest.” Television station licensees are required to present programming that is responsive to community problems, needs and interests and to maintain certain records demonstrating such responsiveness. The FCC may consider complaints from viewers concerning programming when it evaluates a station’s license renewal application, although viewer complaints also may be filed and considered by the FCC at any time. Stations also must follow various rules promulgated under the Communications Act that regulate, among other things:

• political advertising (its price and availability);

• sponsorship identification;

• contest and lottery advertising;

• obscene and indecent broadcasts;

• technical operations, including limits on radio frequency radiation;

• discrimination and equal employment opportunities;

• closed captioning and video description;

• children’s programming;

• program ratings guidelines; and

• network affiliation agreements.

Technical Regulation. FCC rules govern the technical operating parameters of television stations, including permissible operating channel, power and antenna height and interference protections between stations. Under various FCC rules and procedures, all full power television stations completed the transition from analog to digital television (DTV) broadcasting in June 2009. The FCC has adopted rules with respect to the conversion of existing low power and television translator stations to digital operation, establishing a September 1, 2015 deadline by which low power and television translator stations must cease analog operation.

Employees

As of December 31, 2012, we had a total of 35 employees, all of which were full-time. As of December 31, 2012, none of our employees were covered by a collective bargaining agreement. We believe that our employee relations are satisfactory, and we have not experienced any work stoppages at any of our facilities.

Available Information

We file annual, quarterly and current reports, and other information with the SEC. You may read and copy any reports, statements and other information filed by us at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549-0102. Please call (800) SEC-0330 for further information on the Public Reference Room. The SEC maintains an Internet website that contains reports, proxy and information statements and other information regarding issuers, including us, that file electronically with the SEC. The address for the SEC’s website is http://www.sec.gov.

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Item 1A.                      Risk Factors

You should carefully consider the following risk factors, which we believe are the most significant risks related to our business, as well as the other information contained in this document.

Risks Related to Our Operations

General trends in the television industry could adversely affect demand for television advertising as consumers flock to alternative media, including the Internet, for entertainment.  

Television viewing among consumers has been negatively impacted by the increasing availability of alternative media, including the Internet. As a result, in recent years demand for television advertising has been declining and demand for advertising in alternative media has been increasing, and we expect this trend to continue.

The networks may stream their programming on the Internet and other distribution platforms in close proximity to network programming broadcast on local television stations, including those we own, and recently some networks have begun streaming special events and sports programming on the Internet simultaneously with their broadcast on local stations. These and other practices by the networks dilute the exclusivity and value of network programming originally broadcast by the local stations and may adversely affect the business, financial conditions and results of operations of our stations.

We had a history of net losses in prior years.

We had net losses of $1.7 million and $2.7 million for the years ended December 31, 2011 and 2010, respectively. We may not be able to achieve or maintain profitability in future years.

Our substantial debt could limit our ability to grow and compete.

As of December 31, 2012, we had $362.9 million of debt, including $319.4 million of debt co-issued with Nexstar, which represented 355.4% of our total capitalization. Our high level of debt could have important consequences to our business. For example, it could:

• limit our ability to borrow additional funds or obtain additional financing in the future;

• limit our ability to pursue acquisition opportunities;

• expose us to greater interest rate risk since the interest rate on borrowings under our senior secured credit facility is variable;

• limit our flexibility to plan for and react to changes in our business and our industry; and

• impair our ability to withstand a general downturn in our business and place us at a disadvantage compared to our competitors that are less leveraged.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations––Contractual Obligations” for disclosure of the approximate aggregate amount of principal indebtedness scheduled to mature.

We could also incur additional debt in the future. The terms of our senior secured credit facility limit, but do not prohibit, us from incurring substantial amounts of additional debt. To the extent we incur additional debt, we would become even more susceptible to the leverage-related risks described above.

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The agreement governing our debt contains various covenants that limit our management’s discretion in the operation of our business.

Our senior secured credit facility contains various covenants that restrict our ability to, among other things:

• incur additional debt and issue preferred stock;

• pay dividends and make other distributions;

• make investments and other restricted payments;

• make acquisitions;

• merge, consolidate or transfer all or substantially all of our assets;

• enter into sale and leaseback transactions;

• create liens;

• sell assets or stock of our subsidiaries; and

• enter into transactions with affiliates.

Our bank credit facility agreement does not contain financial covenant ratio requirements, but does provide for default in the event Nexstar does not comply with all covenants contained in its credit agreement. Future financing agreements may contain financial covenants which could limit our management’s ability to operate our business at its discretion, and consequently we may be unable to compete effectively, pursue acquisitions or take advantage of new business opportunities, any of which could harm our business.

If we fail to comply with the restrictions in present or future financing agreements, a default may occur. A default could allow creditors to accelerate the related debt as well as any other debt to which a cross-acceleration or cross-default provision applies. A default could also allow creditors to foreclose on any collateral securing such debt.

Our ability to continue as a going concern is dependent on Nexstar’s pledge to continue the local services agreements described in a letter of support dated March 11, 2013. Nexstar’s senior secured credit facility agreement contains covenants which require Nexstar to comply with certain financial ratios, including consolidated leverage ratios and fixed charge coverage ratios. The covenants, which are calculated on a quarterly basis, include the combined results of Nexstar 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 December 31, 2012, Nexstar was in compliance with all covenants contained in the credit agreements governing its senior secured credit facility and the indentures governing its publicly-held notes.

We guarantee $250.0 million of outstanding 6.875% senior unsecured notes issued by Nexstar and $246.0 million of amounts outstanding under Nexstar’s senior secured credit facilty.

If Nexstar, which is highly leveraged with debt, is unable to satisfy its debt obligations, we can be held liable for those obligations under our guarantees. Additionally, Nexstar has $65.0 million of unused revolver commitments available under its senior secured credit facility, which is also guaranteed by us.

The recording of deferred tax asset valuation allowances in the future or the impact of tax law changes on such deferred tax assets could affect our operating results.

We currently have significant net deferred tax assets resulting from tax credit carryforwards, net operating losses and other deductible temporary differences that are available to reduce taxable income in future periods. Based on our assessment of our deferred tax assets, we determined that as of December 31, 2012, based on projected future income, approximately $45.5 million of our deferred tax assets will more likely than not be realized in the future, and no valuation allowance is currently required for this portion of our deferred tax assets. Should we determine in the future that these assets will not be realized, we will be required to record a valuation allowance in connection with these deferred tax assets and our operating results would be adversely affected in the period such determination is made. In addition, tax law changes could negatively impact our deferred tax assets.

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Our ability to use net operating loss carry-forwards (“NOLs”) to reduce future tax payments may be limited if taxable income does not reach sufficient levels or there is a change in ownership of the Company.

At December 31, 2012, we had NOLs of approximately $106.2 million for U.S. federal tax purposes and $39.8 million for state tax purposes. These NOLs expire at varying dates through 2031. To the extent available, we intend to use these NOLs to reduce the corporate income tax liability associated with our operations. Section 382 of the Internal Revenue Code of 1986, as amended, generally imposes an annual limitation on the amount of NOLs that may be used to offset taxable income when a corporation has undergone significant changes in stock ownership. In general, an ownership change, as defined by Section 382 of the Internal Revenue Code, results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders or public groups, which are generally outside of our control. While our analysis shows that historical events have not resulted in ownership changes that would limit our ability to use these NOLs, any subsequent ownership changes could result in such a limitation. In addition, our ability to use NOLs will be dependent on our ability to generate taxable income. The NOLs could expire before we generate sufficient taxable income. To the extent our use of NOLs is significantly limited, our income could be subject to corporate income tax earlier than it would if we were able to use NOLs, which could have a negative effect on our financial results and results of operations.

Our broadcast operations could be adversely affected if our stations fail to maintain or renew their network affiliation agreements on favorable terms, or at all.

Due to the quality of the programming provided by the networks, stations that are affiliated with a network generally have higher ratings than unaffiliated independent stations in the same market. As a result, it is important for stations to maintain their network affiliations. Most of the stations that we operate have network affiliation agreements – 3 stations have primary affiliation agreements with NBC, 2 with CBS, 5 with ABC, 4 with FOX and 2 with MyNetworkTV. Each of NBC, CBS and ABC generally provides affiliated stations with up to 22 hours of prime time programming per week, while each of FOX and MyNetworkTV provides affiliated stations with up to 15 hours of prime time programming per week. In return, affiliated stations broadcast the respective network’s commercials during the network programming.

All of the network affiliation agreements of our stations are scheduled to expire at various times through December 2018. In order to renew certain of our affiliation agreements we may be required to make cash payments to the network, and to accept other material modifications of existing affiliation agreements. If any of our stations cease to maintain affiliation agreements with networks for any reason, we would need to find alternative sources of programming, which may be less attractive and more expensive. Further, some of our network affiliation agreements are subject to earlier termination by the networks under specified circumstances. For more information regarding these network affiliation agreements, see Item 1. “Business––Network Affiliations.”

The loss of or material reduction in retransmission consent revenues could have an adverse effect on our business, financial condition, and results of operations.  

Mission’s retransmission consent agreements with cable operators, DBS systems, and others permit the operators to carry our stations’ signals in exchange for the payment of compensation to us from the system operators as consideration. The television networks have recently asserted to their local television station affiliates the networks’ position that they, as the owners or licensees of programming we broadcast and provide for retransmission, are entitled to a portion of the compensation under the retransmission consent agreements and are including these provisions in their network affiliation agreements. In addition, our affiliation agreements with some broadcast networks include certain terms that may affect our ability to allow MVPDs to retransmit network programming, and in some cases, we may lose the right to grant retransmission consent to such providers. Inclusion of these or similar provisions in our network affiliation agreements could materially reduce this revenue source and could have an adverse effect on our business, financial condition, and results of operations.

In addition, system operators are actively seeking to change the regulations under which retransmission consent is negotiated before both the U.S. Congress and the FCC in order to increase their bargaining leverage with television stations. On March 3, 2011, the FCC initiated a Notice of Proposed Rulemaking to reexamine its rules (1) governing the requirements for good faith negotiations between MVPDs and broadcasters, including implementing a prohibition on one station negotiating retransmission consent terms for another station under a local service agreement; (2) for providing advance notice to consumers in the event of dispute; and (3) to extend certain cable-only obligations to all MVPDs. The FCC also asked for comment on eliminating the network non-duplication and syndicated exclusivity protection rules, which may permit MVPDs to import out-of-market television stations during a retransmission consent dispute. If the FCC prohibits joint negotiations or modifies the network non-duplication and syndicated exclusivity protection rules, such changes could materially reduce this revenue source and could have an adverse effect on our business, financial condition and results of operations.

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The FCC could decide not to grant renewal of the FCC license of any of the stations we operate, which would require that station to cease operations.

Television broadcast licenses are granted for a maximum term of eight years and are subject to renewal upon application to the FCC. The FCC is required to grant an application for license renewal if, during the preceding term, the station served the public interest, the licensee did not commit any serious violations of the Communications Act or the FCC’s rules, and the licensee committed no other violations of the Communications Act or the FCC’s rules which, taken together, would constitute a pattern of abuse. A majority of renewal applications are routinely granted under this standard. If a licensee fails to meet this standard the FCC may still grant renewal on terms and conditions that it deems appropriate, including a monetary forfeiture or renewal for a term less than the normal eight-year period.

On January 3, 2006, Cable America Corporation (“Cable America”) submitted a petition to deny the applications for renewal of license for Nexstar’s station, KOZL, and our station, KOLR, both licensed to Springfield, Missouri. Cable America alleged that Nexstar’s local service agreement arrangements with us give Nexstar improper control over our operations. We and Nexstar submitted a joint opposition to this petition to deny and Cable America submitted a reply. Cable America subsequently requested that the FCC dismiss its petition. However, the petition remains pending with the FCC.

We filed renewal of license applications for our stations between February 2005 and April 2007. The majority of these applications, including the KOLR application discussed above, remain pending with the FCC. Once a renewal application is timely filed, a station may continue to operate under its license even if its expiration date has passed. We expect the FCC to renew the licenses for our stations in due course but cannot provide any assurances that the FCC will do so.

On June 1, 2012, the FCC’s renewal cycle for television stations reinitiated.  We are required to submit new renewal of license applications for our stations between February 1, 2013 and April 1, 2015. Third parties are permitted to submit objections to these applications.

Our growth may be limited if we are unable to implement our acquisition strategy.

We intend to continue our growth by selectively pursuing acquisitions of television stations. The television broadcast industry is undergoing consolidation, which may reduce the number of acquisition targets and increase the purchase price of future acquisitions. Some of our competitors may have greater financial or management resources with which to pursue acquisition targets. Therefore, even if we are successful in identifying attractive acquisition targets, we may face considerable competition and our acquisition strategy may not be successful.

FCC rules and policies may also make it more difficult for us to acquire additional television stations. Television station acquisitions are subject to the approval of the FCC and, potentially, other regulatory authorities. FCC rules limit the number of television stations a company may own and define the types of local service agreements that “count” as ownership by the party providing the services. Those rules are subject to change. The need for FCC and other regulatory approvals could restrict our ability to consummate future transactions if, for example, the FCC or other government agencies believe that a proposed transaction would result in excessive concentration in a market, even if the proposed combinations may otherwise comply with FCC ownership limitations.

Growing our business through acquisitions involves risks and if we are unable to manage effectively our growth, our operating results will suffer.

Since January 1, 2003, we have tripled the number of stations that we operate, having acquired 11 stations. During the first quarter of 2013, we completed the acquisition of two television stations in the Little Rock, Arkansas market and one television station in the Burlington, Vermont market. We will continue to actively pursue additional acquisition opportunities. To manage effectively our growth and address the increased reporting requirements and administrative demands that will result from future acquisitions, we will need, among other things, to continue to develop our financial and management controls and management information systems. We will also need to continue to identify, attract and retain highly skilled finance and management personnel. Failure to do any of these tasks in an efficient and timely manner could seriously harm our business.

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There are other risks associated with growing our business through acquisitions. For example, with any past or future acquisition, there is the possibility that:

• we may not be able to successfully reduce costs, increase advertising revenue or audience share or realize anticipated synergies and economies of scale with respect to any acquired station;

• an acquisition may increase our leverage and debt service requirements or may result in our assuming unexpected liabilities;

• our management may be reassigned from overseeing existing operations by the need to integrate the acquired business;

• we may experience difficulties integrating operations and systems, as well as company policies and cultures;

• we may fail to retain and assimilate employees of the acquired business; and

• problems may arise in entering new markets in which we have little or no experience.

The occurrence of any of these events could have a material adverse effect on our operating results, particularly during the period immediately following any acquisition.

The FCC may decide to terminate “grandfathered” time brokerage agreements.

The FCC attributes time brokerage agreements and local marketing agreements (“TBAs”) to the programmer under its ownership limits if the programmer provides 15% or more of a station’s weekly broadcast programming. However, TBAs entered into prior to November 5, 1996 are exempt attributable interests for now. Our TBAs with Nexstar were entered into prior to November 1996 and are grandfathered.

The FCC will review these “grandfathered” TBAs in the future. During this review, the FCC may determine to terminate the “grandfathered” period and make all TBAs fully attributable to the programmer. If the FCC does so, we will be required to terminate the TBAs with Nexstar for stations WFXP and KHMT unless the FCC simultaneously changes its duopoly rules to allow ownership of two stations in the applicable markets.

FCC actions may restrict our ability to enter into local service agreements with Nexstar, which would harm our operations.

We have entered into local service agreements with Nexstar for our stations. While all of our existing local service agreements comply with FCC rules and policies, we cannot assure you that the FCC will continue to permit local service agreements as a means of creating substantial operating efficiencies, and the FCC may challenge our existing arrangements with Nexstar in the future.

On August 2, 2004, the FCC initiated a rule making proceeding to determine whether to make television joint sales agreements attributable under its ownership rules. Comments and reply comments were filed in this proceeding in the fourth quarter of 2004. The FCC has not yet issued a decision in this proceeding.

In addition, 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”. The FCC initiated its 2010 statutory review of its ownership rules in May 2010, and in December 2011 it issued a notice of proposed rulemaking (NPRM) in that review.  The NPRM specifically requests comment on shared services agreements and other joint operating arrangements between television stations, and whether such agreements should be considered attributable. We cannot predict what rules the FCC will adopt or when they will be adopted.  However, the FCC might act on these proceedings in 2013 and may deem television JSAs to be attributable ownership interests and require the termination of existing JSAs within a specified period of time if the newly attributable JSAs do not comply with the local television ownership limits. If the FCC adopts a joint sales agreement attribution rule, or any other new or modified rule affecting the ownership of or local service agreements between television stations, we will be required to comply with such rules.

Cable America has alleged that our local service agreements with Nexstar give Nexstar improper control over our operations. If the FCC challenges our existing arrangements with Nexstar and determines that our arrangements violate the FCC’s rules and policies, we may be required to terminate such arrangements and we could be subject to sanctions, fines and/or other penalties.

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We have a material amount of goodwill and intangible assets, and therefore we could suffer losses due to future asset impairment charges.

As of December 31, 2012, $50.9 million, or 42.6%, of our total assets consisted of goodwill and intangible assets, including FCC licenses and network affiliation agreements. We test goodwill and FCC licenses annually, and on an interim date if factors or indicators become apparent that would require an interim test of these assets, in accordance with accounting and disclosure requirements for goodwill and other intangible assets. We test network affiliation agreements whenever circumstances or indicators become apparent the asset may not be recoverable through expected future cash flows. The methods used to evaluate the impairment of our goodwill and intangible assets would be affected by a significant reduction in operating results or cash flows at one or more of our television stations, or a forecast of such reductions, a significant adverse change in the advertising marketplaces in which our television stations operate, the loss of network affiliations, or by adverse changes to FCC ownership rules, among others, which may be beyond our control. If the carrying amount of goodwill and intangible assets is revised downward due to impairment, such non-cash charge could materially affect our financial position and results of operations.

Risks Related to Our Industry

Preemption of regularly scheduled programming by network news coverage may affect our revenue and results of operations.

We may experience a loss of advertising revenue and incur additional broadcasting expenses due to preemption of our regularly scheduled programming by network coverage of a major global news event such as a war or terrorist attack. As a result, advertising may not be aired and the revenue for such advertising may be lost unless the station is able to run the advertising at agreed-upon times in the future. Advertisers may not agree to run such advertising in future time periods, and space may not be available for such advertising. The duration of such preemption of local programming cannot be predicted if it occurs. In addition, our stations may incur additional expenses as a result of expanded news coverage of a war or terrorist attack. The loss of revenue and increased expenses could negatively affect our results of operations.

If we are unable to respond to changes in technology and evolving industry trends, our television businesses may not be able to compete effectively. 

New technologies could also adversely affect our television stations. Information delivery and programming alternatives such as cable, direct satellite-to-home services, pay-per-view, the Internet, telephone company services, mobile devices, digital video recorders and home video and entertainment systems have fractionalized television viewing audiences and expanded the numbers and types of distribution channels for advertisers to access. Over the past decade, cable television programming services, other emerging video distribution platforms and the Internet have captured an increasing market share, while the aggregate viewership of the major television networks has declined. In addition, the expansion of cable and satellite television, the Internet and other technological changes have increased, and may continue to increase, the competitive demand for programming. Such increased demand, together with rising production costs, may increase our programming costs or impair our ability to acquire or develop desired programming.

In addition, video compression techniques now in use with DBS systems, cable and wireless cable are expected to permit greater numbers of channels to be carried within existing bandwidth. These compression techniques as well as other technological developments are applicable to all video delivery systems, including over-the-air broadcasting, and have the potential to provide vastly expanded programming to targeted audiences. Reduction in the cost of creating additional channel capacity could lower entry barriers for new channels and encourage the development of increasingly specialized niche programming, resulting in more audience fractionalization. This ability to reach very narrowly defined audiences may alter the competitive dynamics for advertising expenditures. We are unable to predict the effect that these and other technological changes will have on the television industry or on our results of operations.

The FCC can sanction us for programming broadcast on our stations which it finds to be indecent.

In 2004, the FCC began to impose substantial fines on television broadcasters for the broadcast of indecent material in violation of the Communications Act and its rules. The FCC also revised its indecency review analysis to more strictly prohibit the use of certain language on broadcast television. In one of several judicial appeals of FCC enforcement actions, a Federal court in July 2010 held the FCC’s indecency standards to be unconstitutionally vague under the First Amendment. The U.S. Supreme Court agreed to review that decision and in June 2012, issued a narrow decision setting aside FCC orders citing FOX and ABC for indecency violations, finding that the FCC failed to provide adequate prior notice that the sanctioned materials could be found actionably indecent. The U.S. Supreme Court did not otherwise address whether the FCC’s current indecency policy is consistent with the First Amendment. Because our stations’ programming is in large part comprised of programming provided by the networks with which the stations are affiliated, we do not have full control over what is broadcast on our stations, and we may be subject to the imposition of fines if the FCC finds such programming to be indecent. Fines may be imposed on a television broadcaster for an indecency violation to a maximum of $325,000 per violation.

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Intense competition in the television industry could limit our growth and our profitability.

As a television broadcasting company, we face a significant level of competition, both directly and indirectly. Generally, we compete for our audience against all the other leisure activities in which one could choose to engage rather than watch television. Specifically, stations we own compete for audience share, programming and advertising revenue with other television stations in their respective markets and with other advertising media, including newspapers, radio stations, cable television, DBS systems and the Internet.

The entertainment and television industries are highly competitive and are undergoing a period of consolidation. Many of our current and potential competitors have greater financial, marketing, programming and broadcasting resources than we do. The markets in which we operate are also in a constant state of change arising from, among other things, technological improvements and economic and regulatory developments. Technological innovation and the resulting proliferation of television entertainment, such as cable television, wireless cable, DBS services, pay-per-view, home video and entertainment systems and Internet and mobile distribution of video programming have fractionalized television viewing audiences and have subjected free over-the-air television broadcast stations to increased competition. We may not be able to compete effectively or adjust our business plans to meet changing market conditions. We are unable to predict what form of competition will develop in the future, the extent of the competition or its possible effects on our business.

The FCC could implement regulations or Congress could adopt legislation that might have a significant impact on the operations of the stations we own and operate or the television broadcasting industry as a whole.

The FCC has initiated proceedings to determine whether to make TV joint sales agreements and shared services agreements attributable interests under its ownership rules; to determine whether it should establish formal rules under which broadcasters will be required to serve the local public interest; to determine whether to modify or eliminate certain of its broadcast ownership rules, including the radio-television cross-ownership rule and the newspaper-television cross-ownership rule; and whether to modify its retransmission consent rules. A change to any of these rules may have a significant impact on us.

In addition, the FCC has sought comment on whether there are alternatives to the use of DMAs to define local markets such that certain viewers whose current DMAs straddle multiple states would be provided with more in-state broadcast programming. If the FCC determines to modify the use of existing DMAs to determine a station’s local market, such change might materially alter current station operations and could have an adverse effect on our business, financial condition and results of operations.

The FCC may also decide to initiate other new rule making proceedings on its own or in response to requests from outside parties, any of which might have such an impact. Congress also may act to amend the Communications Act in a manner that could impact our stations or the television broadcast industry in general.

The FCC may reallocate some portion of the spectrum available for use by television broadcasters to wireless broadband use, which could substantially impact our future operations and may reduce viewer access to our programming.

The FCC has initiated various proceedings to assess the availability of spectrum to meet future wireless broadband needs. The FCC’s March 2010 “National Broadband Plan” recommends the reallocation of 120 megahertz of the spectrum currently used for broadcast television for wireless broadband use. The FCC has thus far adopted rules permitting television stations to share a single 6 megahertz channel and requested comment on proposals that include, among other things, whether to add new frequency allocations in the television bands for licensed fixed and mobile wireless uses and whether to implement technical rule modifications to improve the viability of certain channels that are underutilized by digital television stations. In February 2012, Congress adopted legislation authorizing the FCC to conduct an incentive auction whereby television broadcasters could voluntarily relinquish all or part of their spectrum in exchange for consideration. On September 28, 2012, the FCC issued a Notice of Proposed Rule Making seeking public comment on the design of the incentive auction and various technical issues related to the reallocation of television spectrum for mobile broadband use. Comments on the notice were filed in January 2013, and reply comments were filed in March 2013. A reallocation of television spectrum for wireless broadband use would likely involve a “repacking” of the television broadcast band, which would require some television stations to change channel or otherwise modify their technical facilities. Future steps to reallocate television spectrum to broadband use may be to the detriment of our investment in digital facilities, could require substantial additional investment to continue our current operations, and may require viewers to invest in additional equipment or subscription services to continue receiving broadcast television signals. We cannot predict the timing or results of television spectrum reallocation efforts or their impact to our business.

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Item 1B. Unresolved Staff Comments

None

Item 2.                      Properties

We own and lease facilities in the following locations:

Station Metropolitan Area and Use	Owned or Leased	Approximate Size	Expiration of Lease
WYOU—Wilkes Barre-Scranton, PA
Office-Studio(1)	—	—	—
Tower/Transmitter Site—Penobscot Mountain	100% Owned	120.33 Acres	—
Tower/Transmitter Site—Bald Mountain	100% Owned	7.2 Acres	—
Tower/Transmitter Site—Williamsport	33% Owned	1.35 Acres	—
Tower/Transmitter Site—Sharp Mountain	33% Owned	0.23 Acres	—
WAWV—Terre Haute, IN
Office-Studio(1)	—	—	—
Tower/Transmitter Site	100% Owned	1 Acre	—
WFXP—Erie, PA
Office-Studio(1)	—	—	—
Tower/Transmitter Site(1)	—	—	—
KJTL/KJBO-LP—Wichita Falls, TX—Lawton, OK
Office-Studio(1)	—	—	—
Tower/Transmitter Site	Leased	40 Acres	1/30/15
Tower/Transmitter Site	Leased	5 Acres	Year to Year
KODE—Joplin, MO-Pittsburg, KS
Office-Studio	100% Owned	2.74 Acres	—
Tower/Transmitter Site	Leased	215 Sq. Ft.	4/30/27
KRBC—Abilene-Sweetwater, TX
Office-Studio	100% Owned	5.42 Acres	—
Office-Studio	100% Owned	19,312 Sq. Ft.	—
Tower/Transmitter Site(1)	—	—	—
KSAN—San Angelo, TX
Office-Studio(1)	—	—	—
Tower/Transmitter Site	Leased	10 Acres	5/15/15
KOLR—Springfield, MO
Office-Studio	100% Owned	30,000 Sq. Ft.	—
Office-Studio	100% Owned	7 Acres	—
Tower/Transmitter Site	Leased	0.5 Acres	5/12/21
KCIT/KCPN-LP—Amarillo, TX
Office-Studio(1)	—	—	—
Tower/Transmitter Site	Leased	100 Acres	5/12/21
Tower/Transmitter Site—Parmer County, TX	Leased	80 Sq. Ft.	Month to Month
Tower/Transmitter Site—Guyman, OK	Leased	80 Sq. Ft.	Month to Month
Tower/Transmitter Site—Curry County, NM	Leased	6 Acres	Month to Month
KTVE—Monroe, LA-El Dorado, AR
Office-Studio(1)	—	—	—
Tower/Transmitter Site	Leased	2 Acres	4/30/32
Tower/Transmitter Site – El Dorado	Leased	3 Acres	4/30/32
Tower/Transmitter Site – Bolding	Leased	11.5 Acres	4/30/32

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Station Metropolitan Area and Use	Owned or Leased	Approximate Size	Expiration of Lease
KAMC—Lubbock, TX
Office-Studio(1)	—	—	—
Tower/Transmitter Site	Leased	40 Acres	5/12/21
Tower/Transmitter Site	Leased	1,200 Sq. Ft.	Month to Month
KHMT—Billings, MT
Office-Studio(1)	—	—	—
Tower/Transmitter Site	Leased	4 Acres	5/12/21
WUTR—Utica, NY
Office-Studio	100% Owned	12,100 Sq. Ft.	—
Tower/Transmitter Site	100% Owned	21 Acres	—
Tower/Transmitter Site-Mohawk	Leased	48 Sq. Ft	Month to Month
WTVO—Rockford, IL
Office-Studio-Tower/Transmitter Site	100% Owned	20,000 Sq. Ft.	—
WTVW-Evansville, IN
Office-Studio (1)	—	—	—
Tower/Transmitter Site	Leased	16.36 Acres	5/12/21
Corporate Office—Westlake, OH	Leased	640 Sq. Ft.	12/31/13

(1) These locations used by the stations are owned by Nexstar.

Item 3.                      Legal Proceedings

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

Item 4.                      Mine Safety Disclosures

None.

PART II

Item 5.                      Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information

As of December 31, 2012, our common stock was not traded on any market and two shareholders held all 1,000 shares of common stock outstanding. Our senior secured credit agreement restricts us from paying dividends to shareholders over the term of the agreement.

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Item 6.                         Selected Financial Data

We derived the following statements of operations and cash flows data for the years ended December 31, 2012, 2011 and 2010 and balance sheet data as of December 31, 2012 and 2011 from our Consolidated Financial Statements included herein. We derived the following statements of operations and cash flows data for the years ended December 31, 2009 and 2008 and balance sheet data as of December 31, 2010, 2009 and 2008 from our Consolidated Financial Statements included in our Annual Reports on Form 10-K for the years ended December 31, 2010 and 2009, respectively. This information should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Consolidated Financial Statements and related Notes included herein. Amounts below are presented in thousands.

	2012			2011			2010			2009			2008
Statement of Operations Data, for the years ended December 31:
Net broadcast revenue	$	18,610		$	18,933		$	18,086		$	16,210		$	16,124
Revenue from Nexstar(1)		33,352			27,800			29,878			25,435			35,283
Net revenue		51,962			46,733			47,964			41,645			51,407
Operating expenses (income):
Corporate expenses		1,056			913			1,090			1,263			908
Direct operating expenses, excluding depreciation and amortization		7,320			7,622			7,941			8,154			8,853
Selling, general and administrative expenses, excluding depreciation and amortization		1,831			3,594			3,601			3,574			3,811
Fees incurred pursuant to local service agreements with Nexstar(2)		7,740			7,190			7,160			7,425			8,090
Impairment of goodwill		-			-			-			261			1,289
Impairment of other intangible assets		-			-			-			1,997			10,149
Gain on asset exchange		-			-			-			(2,738	)		(869	)
(Gain) loss on asset disposal, net		(155	)		190			170			56			(349	)
Barter and trade expense		2,865			3,280			3,184			3,427			3,464
Amortization of broadcast rights, excluding barter		1,374			1,541			1,651			2,363			2,290
Depreciation and amortization		7,934			8,674			8,650			9,392			9,192
Income from operations		21,997			13,729			14,517			6,471			4,579
Interest expense		(15,037	)		(14,681	)		(12,998	)		(6,051	)		(9,420	)
Loss on extinguishment of debt		(233	)		-			(2,432	)		-			-
Income (loss) before income taxes		6,727			(952	)		(913	)		420			(4,841	)
Income tax benefit (expense)(3)		40,515			(749	)		(1,836	)		(986	)		737
Net income (loss)	$	47,242		$	(1,701	)	$	(2,749	)	$	(566	)	$	(4,104	)

(1)	We have joint sales agreements with Nexstar, which permit Nexstar to sell and retain a percentage of the net revenue from the advertising time on our stations in return for monthly payments to us of the remaining percentage of the net revenue. We also have time brokerage agreements with Nexstar that allow Nexstar to program most of the broadcast time for us, sell the advertising time and retain the advertising revenue generated in exchange for monthly payments to us.
(2)	We have shared services agreements with Nexstar, which allow the sharing of services including news production, technical maintenance and security, in exchange for Nexstar’s right to receive certain payments from us.
(3)	In the fourth quarter of 2012, the Company decreased its valuation allowance on deferred tax assets by $43.0 million.

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	2012				2011				2010				2009				2008
Balance Sheet Data, as of December 31:
Cash and cash equivalents		$	318			$	1,898			$	1,250			$	903			$	1,572
Working capital (deficit)			(3,336	)			(8,557	)			1,843				(2,169	)			(7,357	)
Net intangible assets and goodwill			50,864				55,945				61,476				66,806				74,038
Total assets(1)			119,381				87,892				104,213				106,322				114,443
Total debt(2)			362,861				363,477				356,241				172,360				174,087
Total shareholders’ deficit(3)			(260,771	)			(307,419	)			(279,814	)			(88,275	)			(87,709	)
Statement of Cash Flows Data, for the years ended December 31:
Net cash provided by (used in):
Operating activities		$	5,797			$	1,551			$	4,370			$	4,636			$	8,837
Investing activities			(6,091	)			(7,221	)			(295	)			(1,756	)			(15,592	)
Financing activities			(1,286	)			6,318				(3,728	)			(3,548	)			(1,727	)
Capital expenditures			287				541				295				1,756				8,247
Cash payments for broadcast rights			1,680				1,815				2,009				1,951				1,857

(1)	The Company revised its total assets as of December 31, 2011, 2010, 2009 and 2008 by a reduction of $3.2 million, $3.3 million, $4.9 million and $2.6 million, respectively, due to the change in accounting for broadcast rights. See Note 2 of the Consolidated Financial Statements for additional information.
(2)	On April 19, 2010, Mission and Nexstar co-issued $325.0 million of senior secured second lien notes due 2017 (the “8.875% Notes”) of which Mission received $131.9 million of the net proceeds and $184.9 million was received by Nexstar. Debt repayment will be split based on the same ratio as the proceeds were received. Please see Note 7 to the Financial Statements for additional information.
(3)	During the fourth quarter of 2012, the Company corrected its other noncurrent liabilities balance and accumulated deficit as of the earliest period being presented by $0.3 million for an error in deferred rent from tower leases recorded during a 2003 acquisition. See Note 11 of the Consolidated Financial Statements for additional information.

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Item 7.                      Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with Item 6. “Selected Financial Data” and the Financial Statements and related Notes included in Part IV, Item 15(a) of this Annual Report on Form 10-K. As used in this discussion, unless the context indicates otherwise, “Mission” refers to Mission Broadcasting, Inc., and all references to “we”, “our”, “us” and the “Company” refer to Mission.

Overview of Operations

As of December 31, 2012, we owned and operated 17 television stations and four digital multicast channels. We have local service agreements with certain television stations owned by Nexstar, through which Nexstar provides various programming, sales or other services to our television stations. In compliance with FCC regulations for both Nexstar and us, we maintain complete responsibility for and control over programming, finances and personnel for our stations.

The following table summarizes the various local service agreements our stations had in effect as of December 31, 2012 with Nexstar:

Service Agreements	Stations
TBA Only (1)	WFXP and KHMT
SSA & JSA (2)	KJTL, KJBO-LP, KOLR, KCIT, KCPN-LP, KAMC, KRBC, KSAN, WUTR, WAWV, WYOU, KODE, KTVE, WTVO and WTVW

(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, based on the station’s monthly operating expenses.

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

Under the local service agreements, Nexstar has received substantially all of our available cash, after satisfaction of operating costs and debt obligations. We anticipate that Nexstar will continue to receive substantially all of our available cash, after satisfaction of operating costs and debt obligations. For more information about our local service agreements with Nexstar, refer to Note 4 of our Financial Statements in Part IV, Item 15(a) of this Annual Report on Form 10-K.

The operating revenue of our stations is derived primarily from broadcast advertising revenue sold and collected by Nexstar and paid to us under the JSAs. Broadcast advertising revenue is affected by a number of factors, including the economic conditions of the markets in which we operate, the demographic makeup of those markets and the marketing strategy employed in each market. 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. 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, when state, congressional and presidential elections occur and from advertising aired during the Olympic Games. As 2012 was an election year, we are reporting an increase in political advertising revenue in 2012 compared to 2011 which is in line with our expectations.

We earn revenues from local cable providers, DBS services and other MVPDs for the retransmission of our broadcasts. These revenues are generally earned based on a price per subscriber of the MVPD within the retransmission area. We have been successful at negotiating favorable pricing with MVPDs, as well as signing retransmission agreements with additional MVPDs, driving significant revenue gains over the last few years.

Most of our stations have a network affiliation agreement pursuant to which the network provides programming to the stations during specified time periods, including prime time. NBC and CBS compensate some of 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 ABC, FOX, MyNetworkTV and Bounce TV do not provide for compensation. In recent years, in conjunction with the renewal of affiliation agreements, network compensation has been declining from year to year. In 2012, we renewed our affiliation agreements with NBC through December 2014 for our three NBC stations.

20

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 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. Barter broadcast rights are recorded at management’s estimate of the value of the advertising time exchanged using historical advertising rates, which approximates the fair value of the program material received. The assets are amortized using the straight-line method over the license period or period of usage, whichever ends earlier. The cash broadcast rights liabilities are reduced by monthly payments while the barter liability is amortized over the same amortization period as the asset as barter revenue.

Our primary operating expense consists of fixed monthly SSA fees paid to Nexstar for news production and technical and other services. To a lesser extent our operating expenses include employee compensation and related benefits. A large percentage of the costs involved in the operation of our stations remains fixed.

Amendment to Credit Agreement

On December 1, 2012, we entered into an amendment of our senior secured credit facility with a group of commercial banks which replaced our previous credit facility. Our new senior secured credit facility consists of a $104.0 million term loan and $35.0 million revolving credit facility. We used the proceeds of these loans to finance acquisitions (See Note 14 to the Financial Statements) as well as to repay $38.1 million debt outstanding under our previous Term Loan B, plus accrued interest. We recorded $3.0 million in legal and professional fees related to the new senior secured credit facility, which we capitalized as debt finance costs, included in other noncurrent assets, net on our balance sheet, and is being amortized over the term of the components of the senior secured credit facility.

21

Historical Performance

Revenue

The following table sets forth the principal types of revenue earned by our stations for the years ended December 31 and each type of revenue (other than barter revenue and revenue from Nexstar Broadcasting, Inc.) as a percentage of total gross revenue (dollars in thousands):

	2012				2011				2010
	Amount		%		Amount		%		Amount		%
Retransmission compensation	$	15,323		97.3	$	9,837		62.9	$	7,132		47.8
Net advertising revenue		-		-		5,363		34.3		6,685		44.9
Network compensation		245		1.6		351		2.2		986		6.6
Other		177		1.1		96		0.6		101		0.7
Net broadcast revenue before barter		15,745		100.0		15,647		100.0		14,904		100.0
Barter and trade revenue		2,865				3,286				3,182
Revenue from Nexstar		33,352				27,800				29,878
Net revenue	$	51,962			$	46,733			$	47,964

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:

	2012						2011				2010
	Amount			%			Amount		%		Amount		%
Net revenue	$	51,962			100.0		$	46,733		100.0	$	47,964		100.0
Operating expenses (income):
Corporate expenses		1,056			2.0			913		2.0		1,090		2.3
Station direct operating expenses, net of trade		7,320			14.2			7,622		16.3		7,941		16.6
Selling, general and administrative expenses		1,831			3.5			3,594		7.7		3,601		7.5
Fees incurred pursuant to local service agreements with Nexstar		7,740			14.9			7,190		15.4		7,160		14.9
(Gain) loss on asset disposal, net		(155	)		(0.3	)		190		0.4		170		0.4
Barter and trade expense		2,865			5.5			3,280		7.0		3,184		6.6
Depreciation and amortization		7,934			15.3			8,674		18.6		8,650		18.0
Amortization of broadcast rights, excluding barter		1,374			2.6			1,541		3.2		1,651		3.4
Income from operations	$	21,997					$	13,729			$	14,517

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Year Ended December 31, 2012 Compared to Year Ended December 31, 2011

Revenue

Net revenue for the year ended December 31, 2012 increased by $5.2 million, or 11.2%, from the same period in 2011. This increase was primarily attributed to an increase in retransmission compensation.

Revenue from Nexstar was $33.4 million for the year ended December 31, 2012, compared to $27.8 million for the same period in 2011, an increase of $5.6 million or 20.0%. The revenue we earn from Nexstar through our JSAs is directly correlated to the advertising revenue earned at our stations, which has increased as a result of the increase in political advertising in 2012, which is an election year. We entered into a JSA with Nexstar for WTVW on December 1, 2011 which increased our JSA revenue and discontinued our net advertising revenue stream.

Compensation from retransmission consent and network affiliation agreements was $15.6 million for the year ended December 31, 2012, compared to $10.2 million for the same period in 2011, an increase of $5.4 million, or 52.8%. The increase was primarily due to renegotiated cable agreements providing for higher rates per subscriber during the period.

Operating Expenses

Corporate expense mainly relates to costs associated with the centralized management of our stations. Corporate expenses were $1.1 million for the year ended December 31, 2012, compared to $0.9 million for the same period in 2011, an increase of $0.2 million, or 15.7%. This was due to an increase in legal and professional fees associated with our acquisitions of three television stations completed in January and March of 2013.

Station direct operating expenses, consisting primarily of news, engineering and programming, and selling, general and administrative expenses were $9.2 million for the year ended December 31, 2012, compared to $11.2 million for the same period in 2011, a decrease of $2.0 million, or 18.4%. We entered into a JSA with Nexstar for WTVW on December 1, 2011 which reduced station direct operating expenses and selling, general and administrative expenses by $3.7 million. This reduction was partially offset by increases in other program costs of $1.4 million primarily related to our renegotiated network affiliation agreements and increased health claims of $0.3 million.

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 were $7.7 million for the year ended December 31, 2012, compared to $7.2 million for the same period in 2011, an increase of $0.5 million, or 7.6%. The increase was due to the SSA with Nexstar for WTVW entered into on December 1, 2011.

Amortization of intangible assets was $5.1 million for the year ended December 31, 2012 compared to $5.5 million for the same period in 2011, a decrease of $0.4 million, or 8.1%.  The decrease was due to incremental amortization recorded in 2011 on network affiliation agreement intangibles on the WTVW FOX affiliate station which terminated on June 30, 2011. Depreciation of property and equipment remained relatively consistent at $2.9 million and $3.1 million for the year ended December 31, 2012 and 2011, respectively.

Interest Expense

Interest expense was $15.1 million for the year ended December 31, 2012, compared to $14.7 million for the same period in 2011, an increase of $0.4 million, or 2.4%. The increase was due to a $6.7 million borrowing on our revolving loan made on December 1, 2011 in connection with the acquisition of WTVW and $4.0 million borrowing on our revolving loan made on July 31, 2012 to partially finance the deposit to acquire the assets of two television stations from Newport.

Income Taxes

We recognized an income tax benefit of $40.5 million for the year ended December 31, 2012, compared to income tax expense of $0.7 million for the same period in 2011, an increase in income tax benefit of $41.2 million. The increase in income tax benefit was due to the release of a valuation allowance against deferred tax assets for NOLs and other deferred tax assets partially offset by the tax provision for 2012.

23

Prior to 2012, our provision for income taxes was primarily created by an increase in the deferred tax liability position arising from the amortization of goodwill and FCC licenses for income tax purposes which are not amortized for financial reporting purposes. In the fourth quarter of 2012, we released our valuation allowance against deferred tax assets for NOLs and other deferred tax assets. Management’s assessment included consideration of all available positive and negative evidence including recent net operating loss utilization against our 2012 taxable income, cumulative pre-tax book income over the last three (3) years, historical operating results, projected future taxable income over the net operating loss carryforward period, the anticipated ability to sustain a level of earnings, a lower weighted average cost of debt and the continued renewal of network affiliation and retransmission consent agreements on favorable economic terms. Due to strong financial results and improved credit profile in recent years, we were able to obtain a lower interest rate on our refinanced senior secured credit facilities in the fourth quarter of 2012. In addition, we expanded our line of credit and borrowing capacity on favorable terms that significantly enhanced our ability to grow strategic market share through acquisition. During the first quarter of 2013, we completed the acquisition of two television stations in the Little Rock, Arkansas market and one television station in the Burlington, Vermont market. We also generated pre-tax income of $6.7 million from our 2012 operations. This expected level of earnings makes it more likely than not that a substantial portion of the Company’s deferred tax assets will be realized.

Based on the results of our in-depth assessment, management determined that it was more likely than not that the NOLs and other deferred tax assets were realizable based on all available positive and negative evidence. As a result, we decreased our valuation allowance by $43.0 million through income tax benefit in our 2012 Consolidated Statement of Operations.

Year Ended December 31, 2011 Compared to Year Ended December 31, 2010

Revenue

Net revenue for the year ended December 31, 2011 remained relatively consistent with a decrease of $1.2 million, or 2.6%, from the same period in 2010. This decrease was primarily attributed to decreases in revenue from Nexstar and net advertising revenue, which was partially offset by an increase in retransmission compensation.

Revenue from Nexstar and net advertising revenue was $33.2 million for the year ended December 31, 2011, compared to $36.6 million for the same period in 2010, a decrease of $3.4 million, or 9.3%. The decrease was primarily attributed to the decrease in political revenue that Nexstar generated from selling all of the advertising of our stations, which in turn decreased the revenue we earned from Nexstar through the JSAs. The decrease in political revenue was as we expected, as 2011 was not an election year.

Compensation from retransmission consent and network affiliation agreements was $10.2 million for the year ended December 31, 2011, compared to $8.1 million for the same period in 2010, an increase of $2.1 million, or 25.5%. The increase was primarily due to renegotiated cable agreements providing for higher rates per subscriber during the year, which is consistent with industry-wide trends.

Operating Expenses

Corporate expenses were $0.9 million for the year ended December 31, 2011 compared to $1.1 million for the same period in 2010, a decrease of $0.2 million or 16.2%. The decrease was primarily related to a decrease in employee compensation expense, due to the death of our former President on March 28, 2011 and vacancy in the position during a portion of the year. Our Chairman of the Board fulfilled certain management functions throughout the year, but received a lower salary than our former President. The position of President and Treasurer was filled, effective December 19, 2011, with our former Executive Vice President and Chief Operating Officer. Corporate expenses relate to costs associated with the centralized management of our stations.

Station direct operating expenses, consisting primarily of news, engineering and programming, and selling, general and administrative expenses remained relatively consistent with a decrease of $0.3 million, or 2.8% for the year ended December 31, 2011, compared to the same period in 2010. Within this category, we had a decrease of $0.4 million in technical costs, due to our release from certain tower leases for replaced analog equipment, which was partially offset by an increase of $0.3 million in programming costs, due to increased fees paid to our network affiliates.

Local service agreement fees associated with Nexstar relate to services provided by Nexstar in the production of newscasts, technical maintenance, administrative support and other services under the SSAs. SSA fees remained consistent at $7.2 million for each of the years ended December 31, 2011 and 2010.

Amortization of broadcast rights, excluding barter, remained fairly consistent at $1.5 million for the year ended December 31, 2011, compared to $1.6 million for the same period in 2010, a decrease of $0.1 million, or 6.7%.

Depreciation of property and equipment remained fairly consistent at $3.1 million for the year ended December 31, 2011, compared to $3.3 million for the same period in 2010.

24

Interest Expense

Interest expense, net, increased by $1.7 million, or 12.9%, for the year ended December 31, 2011, compared to the same period in 2010. The increase in interest expense was primarily related to the full year of interest and accretion of discount on the 8.875% Notes, which were issued in April of 2010.

Income Taxes

Income tax expense was $0.7 million for the year ended December 31, 2011, compared to $1.8 million for the same period in 2010. Our provision for income taxes is primarily created by an increase in the deferred tax liabilities position during the year arising from the amortizing of goodwill and other indefinite-lived intangible assets for income tax purposes which are not amortized for financial reporting purposes. No tax benefit was recorded with respect to the taxable losses for 2011 and 2010, as the utilization of such losses is not more likely than not to be realized in the foreseeable future.

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 under the local service agreements are a significant component of our cash flows. On March 11, 2013, 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 secured 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 December 31, 2012. 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.

On January 3, 2013, we borrowed $60.0 million in additional term loans under our new senior secured credit facility to fund the acquisition of the assets of KLRT-TV, the FOX affiliate, and KASN, the CW affiliate, both in the Little Rock, Arkansas market, from Newport for a total purchase price of $60.0 million, subject to adjustments for working capital acquired.

On March 1, 2013, we paid the purchase price of $5.6 million to complete the acquisition of the assets of WVNY, the ABC affiliate in the Burlington, Vermont market, from Smith Media. The transaction was funded by a $5.0 million borrowing from our revolving credit facility and cash on hand.

	Years Ended December 31,
	2012			2011			2010
Net cash provided by operating activities	$	5,797		$	1,551		$	4,370
Net cash used in investing activities		(6,091	)		(7,221	)		(295	)
Net cash (used in) provided by financing activities		(1,286	)		6,318			(3,728	)
Net (decrease) increase in cash and cash equivalents	$	(1,580	)	$	648		$	347
Cash paid for interest	$	14,137		$	14,075		$	9,956
Cash paid for taxes		81			65			61

	As of December 31,
	2012			2011
Cash and cash equivalents		$	318		$	1,898
Long-term debt including current portion(1)			362,861			363,477
Unused commitments under senior secured credit facilities			35,000			3,300

(1)   We co-issued $325.0 million of 8.875% Notes in April 2010, of which we received $131.9 million of the net proceeds and $184.9 million was received by Nexstar, as discussed in Note 7 of our Financial Statements. Debt repayment will be split based on the same ratio as the proceeds were received.

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Cash Flows – Operating Activities

Net cash flows provided by operating activities increased by $4.2 million, or 273.8% during the year ended December 31, 2012 compared to the same period in 2011. The increase was primarily due to the increase in net revenue of $5.2 million and decreased selling, general and administrative expenses of $1.8 million, which was partially offset by the timing of payments of amounts due to/from Nexstar of $2.6 million.

Net cash provided by operating activities decreased by $2.8 million, or 64.5% during the year ended December 31, 2011, compared to the same period in 2010. The decrease was primarily due to an increase in cash paid for interest of $4.1 million and a decrease of net revenue of $1.2 million, which was partially offset by a decrease in net repayments of amounts due to Nexstar of $2.1 million. The increase in cash paid for interest was due to the full year of interest payments on the 8.875% Notes, which were issued in April of 2010.

Cash Flows – Investing Activities

Net cash used in investing activities during the year ended December 31, 2012 included a $6.0 million deposit for the acquisition of two television stations from Newport and purchases of property and equipment of $0.3 million. Net cash used in investing activities during the year ended December 31, 2011 consisted of $0.5 million capital expenditures and $6.7 million payments for the acquisition of WTVW from Nexstar.

Net cash used in investing activities increased by $6.9 million during the year ended December 31, 2011 compared to the same period in 2010. Cash flows from investing activities consisted of capital expenditures and the acquisition of WTVW from Nexstar. Capital expenditures were $0.5 million for the year ended December 31, 2011, compared to $0.3 million for the same period in 2010. We acquired WTVW on December 1, 2011 for $6.7 million in cash.

Cash Flows – Financing Activities

Net cash flows used in financing activities was $1.3 million for the year ended December 31, 2012 compared to the net cash provided by financing activities of $6.3 million for the same period in 2011. During October and November 2012, we repaid all amounts outstanding under our revolving credit facilities which included the $6.7 million revolving loan obtained in December 1, 2011 to fund the acquisition of WTVW.

Net cash provided by financing activities was $6.3 million during the year ended December 31, 2011 compared to cash used in financing activities of $3.7 million for the same period in 2010. In connection with the acquisition of WTVW, on December 1, 2011, we borrowed $6.7 million of revolving loans in our senior secured credit facility. We paid $0.4 million of scheduled term loan maturities in our senior secured credit facility.

Our senior secured credit facility restricts the payment of cash dividends to our shareholders.

Future Sources of Financing and Debt Service Requirements

As of December 31, 2012, we had debt of $362.9 million, including $319.4 million of debt co-issued with Nexstar, which represented 355.4% 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 December 31, 2012, we have $35.0 million of total unused commitments under our senior secured credit facility.

The following table summarizes the approximate aggregate amount of principal indebtedness scheduled to mature for the periods referenced as of December 31, 2012 (in thousands):

	Total		2013			2014-2015		2016-2017	Thereafter
Senior secured credit facility	$	44,000	$	330	$	880	$	880	$	41,910
8.875% Notes(1)		325,000		-		-		325,000		-
	$	369,000	$	330	$	880	$	325,880	$	41,910

(1)   As co-issuers, we received $131.9 million of the net proceeds and $184.9 million was received by Nexstar, as discussed in Note 7 of our Financial Statements. Debt repayment will be split based on the same ratio as the proceeds were received.

We make semi-annual interest payments on our 8.875% Notes in April and October. Interest payments on our senior secured credit facility are generally paid every one to three months and are payable based on the type of interest rate selected.

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The terms of our senior secured credit facility and the indenture governing the 8.875% Notes limit, but do not prohibit, us from incurring substantial amounts of additional debt in the future.

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

Collateralization and Guarantees of Debt

Nexstar Broadcasting Group, Inc. (Nexstar’s ultimate parent) and its subsidiaries guarantee full payment of all obligations under our senior secured credit facility in the event of our default. Similarly, we are a guarantor of Nexstar’s senior secured credit facility and the $250.0 million 6.875% senior unsecured notes issued by Nexstar on November 9, 2012 (“6.875% Notes”). The senior secured credit facilities are collateralized by a security interest in substantially all the combined assets, excluding FCC licenses, of Nexstar and us. As of December 31, 2012, Nexstar had a maximum commitment of $311.0 million under its senior secured credit facility, of which $246.0 million of debt was outstanding and had $250.0 million of the 6.875% Notes outstanding.

Debt Covenants

Our ability to continue as a going concern is dependent on Nexstar’s pledge to continue the local services agreements described in a letter of support dated March 11, 2013. 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. Nexstar’s senior secured credit facility agreement contains covenants which require Nexstar to comply with certain financial ratios, including (a) a maximum consolidated total leverage ratio, (b) a maximum consolidated first lien indebtedness ratio, and (c) a minimum consolidated fixed charge coverage ratio. The covenants, which are calculated on a quarterly basis, include the combined results of Nexstar and us. The 8.875% Notes contain restrictive covenants customary for borrowing arrangements of this type. As of December 31, 2012, Nexstar has informed us that it 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. As of December 31, 2012, we were in compliance with all covenants related to the 8.875% Notes.

No Off-Balance Sheet Arrangements

As of December 31, 2012, 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.

Contractual Obligations

The following summarizes our contractual obligations as of December 31, 2012, and the effect such obligations are expected to have on our liquidity and cash flow in future periods (in thousands):

	Total		2013			2014-2015		2016-2017	Thereafter
Senior secured credit facility	$	44,110	$	440	$	880	$	880	$	41,910
8.875% senior secured second lien notes due 2017(1)		325,000		-		-		325,000		-
Cash interest on debt		143,944		30,995		61,934		47,432		3,583
Broadcast rights current cash commitments(2)		683		515		153		15		-
Broadcast rights future cash commitments		2,261		904		1,281		33		43
Operating lease obligations		22,487		1,536		3,241		3,522		14,188
Total contractual cash obligations	$	538,485	$	34,390	$	67,489	$	376,882	$	59,724

(1)	As co-issuers, we received $131.9 million of the net proceeds and $184.9 million was received by Nexstar as discussed in Note 7 of our Financial Statements. Principal and interest will be paid based on the ratio of the proceeds received. The full amounts are disclosed above as we are jointly and severally liable on these amounts as a co-issuer of the notes.
(2)	Excludes broadcast rights barter payable commitments recorded on the Financial Statements at December 31, 2012 in the amount of $1.3 million.

As of December 31, 2012, we had $3.7 million of unrecognized tax benefits. This liability represents an estimate of tax positions that the Company has taken in its tax returns which may ultimately not be sustained upon examination by the tax authorities. The resolution of these tax positions may not require cash settlement due to the existence of net operating loss carryforwards.

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Critical Accounting Policies and Estimates

Our Financial Statements have been prepared in accordance with U.S. GAAP which requires 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 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, retransmission revenue, broadcast rights, barter, income taxes and 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.

For an overview of our significant accounting policies, we refer you to Note 2 to the Financial Statements in Part IV, Item 15(a) of this Annual Report on Form 10-K. We believe the following critical accounting policies are those that are the most important to the presentation of our Financial Statements, affect our more significant estimates and assumptions, and require the most subjective of complex judgments by management.

Valuation of Goodwill and Intangible Assets

Intangible assets represented $50.9 million, or 42.6%, of our total assets as of December 31, 2012. Intangible assets principally include FCC licenses, goodwill and network affiliation agreements. If the fair value of these assets is less than the carrying value, we may be required to record an impairment charge.

We test the impairment of our FCC licenses annually or whenever events or changes in circumstances indicate that such assets might be impaired. The impairment test consists of a comparison of the fair value of FCC licenses with their carrying amount on a market-by-market basis using a discounted cash flow valuation method, assuming a hypothetical startup scenario.

We test the impairment of our goodwill annually or whenever events or changes in circumstances indicate that goodwill might be impaired. The first step of the goodwill impairment test compares the fair value of the market (“reporting unit”) to its carrying amount, including goodwill. The fair value of a reporting unit is determined through the use of a discounted cash flow analysis. The valuation assumptions used in the discounted cash flow model reflect historical performance of the reporting unit and the prevailing values in the markets for broadcasters. If the fair value of the reporting unit exceeds its carrying amount, goodwill is not considered impaired. If the carrying amount of the reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of goodwill with the carrying amount of that goodwill. The implied fair value of goodwill is determined by performing an assumed purchase price allocation, using the reporting unit’s fair value (as determined in the first step described above) as the purchase price. If the carrying amount of goodwill exceeds the implied fair value, an impairment loss is recognized in an amount equal to that excess but not more than the carrying value of goodwill.

We test network affiliation agreements whenever events or circumstances indicate that their carrying amount may not be recoverable, relying on a number of factors including operating results, business plans, economic projections and anticipated future cash flows. Impairment in the carrying amount of a network affiliation agreement is recognized when the expected future operating cash flow derived from the operations to which the asset relates is less than its carrying value.

We completed our annual test for impairment of goodwill and FCC licenses as of December 31, 2012 and 2011 which resulted in no impairment charges. In aggregate, the fair values of our goodwill and FCC licenses exceeded their book values by a margin of 364.0%.

The assumptions used in the valuation testing have certain subjective components including anticipated future operating results and cash flows based on our own internal business plans as well as future expectations about general economic and local market conditions.

We utilized the following assumptions in our impairment testing for the years ended December 31:

	2012	2011
Market growth rates	0.2 – 2.3%	0.8 – 2.7%
Operating profit margins – FCC licenses	12.0 – 25.0%	11.5 – 24.0%
Operating profit margins – goodwill	21.0 – 32.9%	20.0 – 31.6%
Discount rate	10.0%	10.0%
Tax rate	35.3 – 40.6%	35.3 – 40.6%
Capitalization rate	7.3 – 8.0%	7.3 – 8.0%

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Broadcast Rights Carrying Amount

We record Broadcast rights contracts as an asset and a liability when the license period has begun, the cost of each program is known or reasonably determinable, we have accepted the program material, and the program is available for broadcast. We consider programs that have been produced prior to our contract period to be available for broadcast, while programs that are produced throughout the contract period are recorded and amortized as they are aired. Broadcast rights are stated at the lower of unamortized cost or net realizable value. Cash broadcast rights are initially recorded at the amount paid or payable to program distributors for the limited right to broadcast the distributors’ programming. Barter broadcast rights are recorded at our estimate of the fair value of the advertising time exchanged, which approximates the fair value of the programming received. The fair value of the advertising time exchanged is estimated by applying average historical rates for specific time periods. Amortization of broadcast rights is computed using the straight-line method based on the license period or programming usage, whichever period yields the shorter life. The current portion of broadcast rights represents those rights available for broadcast which will be amortized in the succeeding year. When projected future net revenue associated with a program is less than the current carrying amount of the program broadcast rights, for example, due to poor ratings, we amortize the broadcast rights to equal the amount of projected future net revenue. If the expected broadcast period was shortened or cancelled we would be required to write-off the remaining value of the related broadcast rights to operations on an accelerated basis or possibly immediately. As of December 31, 2012, the carrying amounts of our current broadcast rights were $1.0 million and non-current broadcast rights were $0.6 million.

Characterization of SSA Fees

We present the fees incurred pursuant to SSAs with Nexstar as an operating expense in our Financial Statements. Our decision to characterize the SSA fees in this manner is based on our conclusion that (a) the benefit our stations receive from these local service agreements is sufficiently separate from the consideration paid to us from Nexstar under JSAs, (b) we can reasonably estimate the fair values of the benefits our stations receive under the SSA agreements, and (c) the SSA fees we pay to Nexstar do not exceed the estimated fair values of the benefits our stations receive.

Retransmission Revenue

We earn revenues from local cable providers, DBS services and other MVPDs for the retransmission of our broadcasts. These revenues are generally earned based on a price per subscriber of the MVPD within the retransmission area. The MVPDs report their subscriber numbers to us periodically, generally upon payment of the fees due to us. Prior to receiving the MVPD reporting, we record revenue based on management’s estimate of the number of subscribers, utilizing historical levels and trends of subscribers for each MVPD.

Barter and Trade Transactions

We barter 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 fair value of the advertising time exchanged, which approximates the fair value of the program material received. The fair value of advertising time exchanged is estimated by applying average historical advertising rates for specific time periods. We trade certain advertising time for various goods and services, which are recorded at the estimated fair values of the goods or services received. We recorded both barter revenue and barter expense of $2.9 million, $3.1 million and $3.0 million for the years ended December 31, 2012, 2011 and 2010, respectively. We recorded trade revenue and expense of no amounts, $0.2 million and $0.2 million for the years ended December 31, 2012, 2011 and 2010, respectively.

Income Taxes

We account for income taxes under the asset and liability method which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and tax basis of assets and liabilities. A valuation allowance is applied against net deferred tax assets if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. While we have considered future taxable income in assessing the need for a valuation allowance, in the event that we were to determine that we would not be able to realize all or part of our deferred tax assets in the future, an adjustment to the valuation allowance would be charged to income in the period such a determination was made. Section 382 of the Internal Revenue Code of 1986, as amended, generally imposes an annual limitation on the amount of NOLs that may be used to offset taxable income when a corporation has undergone significant changes in stock ownership. Ownership by our principal shareholder could limit our ability to use our NOLs. Ownership changes are evaluated as they occur.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities. The determination is based on the technical merits of the position and presumes that each uncertain tax position will be examined by the relevant taxing authority that has full knowledge of all relevant information. We recognize interest and penalties relating to income taxes as components of income tax expense.

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Recent Accounting Pronouncements

Refer to Note 2 of our Financial Statements in Part IV, Item 15(a) of this Annual Report on Form 10-K for a discussion of recently issued accounting pronouncements, including our expected date of adoption and effects on results of operations and financial position.

Item 7A.                      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.

The interest rate on the term loan borrowings under our senior secured credit facility was 4.5% as of December 31, 2012 and the interest rate on the revolver loans was 4.6%, which represented the base rate, or LIBOR, plus the applicable margin, as defined. Interest is payable in accordance with the credit agreement.

Including the impact of the LIBOR floor on our term loans, an increase in LIBOR of 100 basis points (one percentage point) from its December 31, 2012 level would increase our annual interest expense and decrease our cash flow from operations by $0.1 million, based on the outstanding balance of our credit facility as of December 31, 2012. An increase in LIBOR of 50 basis points (one-half of a percentage point) or a decrease in LIBOR by 100 or 50 basis points would not have any impact on our annual interest expense and our cash flow from operations. Our 8.875% Notes are fixed rate debt obligations and therefore are not exposed to market interest rate changes. As of December 31, 2012, we have no financial instruments in place to hedge against changes in the benchmark interest rates on our senior credit facility.

Impact of Inflation

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

Item 8. Financial Statements and Supplementary Data

Our Financial Statements are filed with this report. The Financial Statements and supplementary data are included in Part IV, Item 15(a) of this Annual Report on Form 10-K.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

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Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our President and Treasurer (our 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 our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act.

Based upon that evaluation, our President and Treasurer concluded that as of December 31, 2012, our disclosure controls and procedures were effective in providing reasonable assurance that information required to be disclosed in the reports we file or submit under the Exchange Act (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 our management, including our 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 our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Management assesses the effectiveness of our internal control over financial reporting as of December 31, 2012 based upon the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework.

Based on management’s assessment, we have concluded that our internal control over financial reporting was effective as of December 31, 2012.

Item 9B. Other Information

None.

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PART III

Item 10. Directors, Executive Officers of the Registrant and Corporate Governance

The table below sets forth information about our Directors and executive officers:

Name	Age	Position With Company
Nancie J. Smith	60	Chairman of the Board and Secretary
Dennis Thatcher	66	President, Treasurer and Director

Nancie J. Smith has served as our Secretary since December 1997. Ms. Smith was elected as Chairman of the Board effective December 19, 2011. Ms. Smith performed roles similar to our principal executive officer, principal financial officer and principal accounting officer until Mr. Thatcher’s appointment as President and Treasurer became effective.

Ms. Smith’s qualifications for being a Director of the Company include her years of experience in the television broadcast industry.

Dennis Thatcher was appointed as President and Treasurer and elected to the Board of Directors effective December 19, 2011. Mr. Thatcher previously served as our Executive Vice President and Chief Operating Officer since October 2004. From November 2003 to March 2004, Mr. Thatcher served as Regional Market Manager for United Media Partners. From November 2002 to October 2003, Mr. Thatcher served as General Sales Manager of KZTV for Eagle Creek Broadcasting. From July 2000 to October 2002, Mr. Thatcher pursued personal interests. From April 1998 to June 2000, Mr. Thatcher served as Senior Vice President and Central Regional Manager for Paxson Communications.

Mr. Thatcher’s qualifications for being a Director of the Company include his years of experience in the television broadcast industry.

Code of Ethics

Our Board of Directors adopted a code of ethics that applies to our senior management and Board of Directors, including our Named Executive Officers. The purpose of the code of ethics is to promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships, to promote full, fair, accurate, timely and understandable disclosure in periodic reports required to be filed by us, and to promote compliance with all applicable rules and regulations that apply to us and our officers and Directors. The code of ethics is filed hereby as Exhibit 14.1 to this Annual Report on Form 10-K. Any amendments to or waivers from a provision of this code of ethics will be filed on a Current Report on Form 8-K.

Item 11. Executive Compensation

The Board of Directors has submitted the following report and has recommended that the Compensation Discussion and Analysis set forth below be included in this Annual Report on Form 10-K for the year ended December 31, 2012 for filing with the SEC.

Compensation Discussion and Analysis

The Company was a party to a management services agreement with its former President, David S. Smith, which provided compensation of $0.4 million per year for services performed. The management services agreement terminated upon his death on March 28, 2011.

On December 19, 2011, the Company entered into an employment agreement with Dennis Thatcher to serve as President of the Company. The agreement provides for $142,000 in annual compensation with 2% annual increases. The agreement has no fixed termination date. In the event of termination pursuant to a Consolidation, Merger or Comparable transaction, as defined in the agreement, Mr. Thatcher is eligible to receive his salary for a period of six months. Prior to December 19, 2011, Mr. Thatcher served as our Chief Operating Officer and was compensated based on his scope of responsibilities, taking into account competitive market compensation paid by other similarly situated companies for this position. Mr. Thatcher also serves as a Director.

On December 19, 2011, the Company entered into an employment agreement with Nancie J. Smith to serve as Chairman of the Board and Secretary of the Company. The agreement provides for $120,000 in annual compensation with 2% annual increases. The agreement has no fixed termination date. In the event of termination pursuant to a Consolidation, Merger or Comparable transaction, as defined in the agreement, Ms. Smith is eligible to receive her salary for a period of six months. During the interim period after the death of David S. Smith and prior to the execution of the agreement, Ms. Smith was employed by the Company as Vice President and Secretary and compensated at an annual salary of $120,000.

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The following table sets forth the compensation earned or awarded for services rendered to the Company by our executive officers for the fiscal years ended December 31.

Summary Compensation Table

	Year	Salary	Bonus	Stock Awards		Option Awards	Non-Equity Incentive Plan Compensation	Change in Pension Value and Non-Qualified Deferred Compensation Earnings	All Other Compensation	Total
Dennis Thatcher President, Treasurer and Director, former Executive Vice President and COO	2012	$142,309	$—	$—	$—		$ —	$ —	$ —	$142,309
	2011	$142,200	$—	$—	$—		$ —	$ —	$ —	$142,200
	2010	142,200	—	—	—		—	—	—	142,200
Nancie J. Smith Chairman of the Board and Secretary, former Vice President	2012	120,000	—	—	—		—	—	—	120,000
	2011	73,845	—	—	—		—	—	—	73,845
	2010	—	—	—	—		—	—	—	—

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

None.

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Item 13. Certain Relationships and Related Transactions, and Director Independence

The following table summarizes the various local service agreements Mission-owned stations had in effect with Nexstar as of December 31, 2012:

Station	Market	Type of Agreement	Expiration	Consideration from/to Nexstar
WFXP	Erie, PA	TBA	8/16/16	Monthly payments received from Nexstar
KHMT	Billings, MT	TBA	12/13/17	Monthly payments received from Nexstar
KJTL/KJBO-LP	Wichita Falls, TX-Lawton, OK	SSA	5/31/19	$60 thousand per month paid to Nexstar
		JSA	5/31/19	70% of net revenue received from Nexstar
WYOU	Wilkes Barre-Scranton, PA	SSA	1/4/18	$35 thousand per month paid to Nexstar
		JSA	9/30/14	70% of net revenue received from Nexstar
KODE	Joplin, MO-Pittsburg, KS	SSA	3/31/22	$75 thousand per month paid to Nexstar
		JSA	9/30/14	70% of net revenue received from Nexstar
KRBC	Abilene-Sweetwater, TX	SSA	6/12/13	$25 thousand per month paid to Nexstar
		JSA	6/30/14	70% of net revenue received from Nexstar
KSAN	San Angelo, TX	SSA	5/31/14	$10 thousand per month paid to Nexstar
		JSA	5/31/14	70% of net revenue received from Nexstar
WAWV	Terre Haute, IN	SSA	5/8/13	$10 thousand per month paid to Nexstar
		JSA	5/8/13	70% of net revenue received from Nexstar
KCIT/KCPN-LP	Amarillo, TX	SSA	4/30/19	$50 thousand per month paid to Nexstar
		JSA	4/30/19	70% of net revenue received from Nexstar
KAMC	Lubbock, TX	SSA	2/15/19	$75 thousand per month paid to Nexstar
		JSA	2/15/19	70% of net revenue received from Nexstar
KOLR	Springfield, MO	SSA	2/15/19	$150 thousand per month paid to Nexstar
		JSA	2/15/19	70% of net revenue received from Nexstar
WUTR	Utica, NY	SSA	3/31/14	$10 thousand per month paid to Nexstar
		JSA	3/31/14	70% of net revenue received from Nexstar
WTVO	Rockford, IL	SSA	10/31/14	$75 thousand per month paid to Nexstar
		JSA	10/31/14	70% of net revenue received from Nexstar
KTVE	Monroe, LA-El Dorado, AR	SSA	1/16/18	$20 thousand per month paid to Nexstar
		JSA	1/16/18	70% of net revenue received from Nexstar
WTVW	Evansville, IN	SSA	11/30/19	$50 thousand per month paid to Nexstar
		JSA	11/30/19	70% of net revenue received from Nexstar

Under these agreements, we are responsible for certain operating expenses of our stations and therefore may have unlimited exposure to any potential operating losses. We will continue to operate our stations under the SSAs and JSAs or TBAs until the termination of such agreements. The SSAs and JSAs generally have a term of eight to ten years. Nexstar indemnifies us for Nexstar’s activities pursuant to the local service agreements.

For disclosure of the amounts of revenue associated with and the fees incurred by Mission pursuant to the local service agreements our stations have with Nexstar, we refer you to Note 4 to the Financial Statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K.

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Option Agreements

In consideration of Nexstar Broadcasting Group’s guarantee of our indebtedness, Nexstar has options to purchase the assets of all of our stations. Additionally, on November 29, 2011, Mission’s shareholders granted Nexstar an option to purchase any or all of our stock for a price equal to the pro rata portion of the greater of (1) five times the stations’ cash flow, as defined in the agreement, reduced by the amount of indebtedness, as defined in the agreement, or (2) $100,000. This stock purchase option expires on November 29, 2019.

The following table summarizes the station option agreements we have in effect with Nexstar as of December 31, 2012:

Station	Market	Affiliation	Date of Execution	Expiration Date
WFXP	Erie, PA	FOX	12/01/05	12/01/14
KJTL and	Wichita Falls, TX-Lawton, OK	FOX	06/01/99	06/01/18
KJBO-LP		MyNetworkTV	06/01/99	06/01/18
WYOU	Wilkes Barre-Scranton, PA	CBS	05/19/98	05/19/18
KODE	Joplin, MO-Pittsburg, KS	ABC	04/24/02	04/24/21
KRBC	Abilene-Sweetwater, TX	NBC	06/13/03	05/09/22
KSAN	San Angelo, TX	NBC	06/13/03	05/09/22
WAWV	Terre Haute, IN	ABC	05/09/03	05/09/22
KCIT and	Amarillo, TX	FOX	03/17/09	05/01/18
KCPN-LP		MyNetworkTV	03/17/09	05/01/18
KHMT	Billings, MT	FOX	12/30/03	12/31/22
KAMC	Lubbock, TX	ABC	12/30/03	12/31/22
KTVE	Monroe, LA-El Dorado, AR	NBC	1/16/08	1/16/17
KOLR	Springfield, MO	CBS	12/30/03	12/31/22
WUTR	Utica, NY	ABC	04/01/04	04/01/13
WTVO	Rockford, IL	ABC/MyNetworkTV	11/01/04	11/01/13

Under the terms of these option agreements, Nexstar may exercise its option upon written notice to us. In each option agreement, the exercise price is the greater of (1) seven times the station’s cash flow, as defined in the option agreement, less the amount of its indebtedness as defined in the option agreement, or (2) the amount of its indebtedness. We may terminate each option agreement by written notice any time after the seventh anniversary date of the relevant option agreement. Nexstar’s acquisition of any station or our stock pursuant to an exercise of the applicable option is subject to prior FCC approval.

Item 14. Principal Accountant Fees and Services

We retained PricewaterhouseCoopers LLP to audit the Financial Statements of Mission Broadcasting, Inc. for the years ended December 31, 2012 and 2011, and review the Financial Statements included in each of its Quarterly Reports on Form 10-Q during such years and for tax compliance matters. The aggregate fees billed for professional services rendered by PricewaterhouseCoopers LLP in the years ended December 31, 2012 and 2011 for these various services were:

	2012		2011
Audit Fees (1)	$	146,250	$	178,750
Audit Related Fees (2)		—		—
Tax Fees (3)		55,041		73,778
All Other Fees (4)		—		—
Total	$	201,291	$	252,528

(1) “Audit Fees” are fees billed by PricewaterhouseCoopers LLP for professional services for the audit of the Financial Statements included in our Annual Report on Form 10-K and review of Financial Statements included in our Quarterly Reports on Form 10-Q, or for services that are normally provided by the auditors in connection with statutory and regulatory filings or engagements.

(2) “Audit Related Fees” are fees billed by PricewaterhouseCoopers LLP for assurance and related services that are reasonably related to the performance of the audit or review of our Financial Statements.

(3) “Tax Fees” are fees billed by PricewaterhouseCoopers LLP for tax compliance, tax advice and tax planning.

(4) “All Other Fees” are fees billed by PricewaterhouseCoopers LLP for any services not included in the first three categories.

35

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) Documents filed as part of this report:

(1) Financial Statements. The Financial Statements of Mission Broadcasting, Inc. listed on the index on page F-1 have been included beginning on page F-3 of this Annual Report on Form 10-K:

(2) Financial Statement Schedules. The schedule of Valuation and Qualifying Accounts appears in Note 13 to the Financial Statements filed as a part of this report.

(3) Exhibits. The exhibits filed in response to Item 601 of Regulation S-K are listed in the Exhibit Index beginning on page E-1 of this Annual Report on Form 10-K.

36

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.
By:	/s/ Dennis Thatcher
	Dennis Thatcher
	President and Treasurer (Principal Executive Officer and Principal Financial and Accounting Officer)

Dated: March 29, 2013

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities indicated on March 29, 2013.

/s/ Nancie J. Smith

Nancie J. Smith

Chairman of the Board

/s/ Dennis Thatcher

Dennis Thatcher

President, Treasurer and Director

(Principal Executive Officer and

Principal Financial and Accounting Officer)

MISSION BROADCASTING, INC.

INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm	F-2
Balance Sheets as of December 31, 2012 and 2011	F-3
Statements of Operations for the years ended December 31, 2012, 2011 and 2010	F-4
Statement of Changes in Shareholders’ Deficit for the three years ended December 31, 2012	F-5
Statements of Cash Flows for the years ended December 31, 2012, 2011 and 2010	F-6
Notes to Financial Statements	F-7

Report of Independent Registered Public Accounting Firm

To the Shareholders of Mission Broadcasting, Inc.:

In our opinion, the accompanying balance sheets and the related statements of operations, shareholders’ deficit and cash flows present fairly, in all material respects, the financial position of Mission Broadcasting, Inc. at December 31, 2012 and 2011, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2012 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

The Company has a significant relationship with Nexstar Broadcasting Group, Inc. that is discussed in Notes 1, 2, 4, 7 and 11 to the financial statements.

/s/PricewaterhouseCoopers LLP

Dallas, Texas

March 29, 2013

F-2

MISSION BROADCASTING, INC.
BALANCE SHEETS
(in thousands, except share information)
	December 31,
	2012			2011
ASSETS
Current assets:
Cash and cash equivalents	$	318		$	1,898
Accounts receivable, net of allowance for doubtful accounts of $30 and $113, respectively		3,610			2,511
Current portion of broadcast rights		962			902
Due from Nexstar Broadcasting, Inc.		512			-
Deferred tax assets		933			8
Prepaid expenses and other current assets		122			58
Total current assets		6,457			5,377
Property and equipment, net		21,518			24,140
Broadcast rights		649			1,193
Goodwill		18,730			18,730
FCC licenses		21,939			21,939
Other intangible assets, net		10,195			15,276
Deferred tax assets		30,416			-
Deposit on station acquisition		6,000			-
Other noncurrent assets, net		3,477			1,237
Total assets	$	119,381		$	87,892
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Current portion of debt	$	330		$	390
Current portion of broadcast rights payable		1,261			1,375
Accounts payable		364			192
Accrued expenses		1,172			740
Taxes payable		102			78
Interest payable (Note 7)		6,268			6,022
Deferred revenue		296			408
Due to Nexstar Broadcasting, Inc.		-			4,729
Total current liabilities		9,793			13,934
Debt (Note 7)		362,531			363,087
Broadcast rights payable		681			1,356
Deferred tax liabilities		-			9,600
Other liabilities		7,147			7,334
Total liabilities		380,152			395,311
Commitments and contingencies
Shareholders' deficit:
Common stock - $1.00 par value, 1,000 shares authorized, issued and outstanding as of each of December 31, 2012 and 2011		1			1
Subscription receivable		(1	)		(1	)
Contra equity due from Nexstar Broadcasting, Inc. on debt issuance (Note 7)		(189,924	)		(189,330	)
Accumulated deficit		(70,847	)		(118,089	)
Total shareholders' deficit		(260,771	)		(307,419	)
Total liabilities and shareholders' deficit	$	119,381		$	87,892

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

F-3

MISSION BROADCASTING, INC.
STATEMENTS OF OPERATIONS
(in thousands)
	Years Ended December 31,
	2012			2011			2010
Net broadcast revenue	$	18,610		$	18,933		$	18,086
Revenue from Nexstar Broadcasting, Inc.		33,352			27,800			29,878
Net revenue		51,962			46,733			47,964
Operating expenses (income):
Direct operating expenses, excluding depreciation and amortization		7,320			7,797			8,165
Selling, general, and administrative expenses, excluding depreciation and amortization		2,887			4,507			4,691
Fees incurred pursuant to local service agreements with Nexstar Broadcasting, Inc.		7,740			7,190			7,160
Amortization of broadcast rights		4,239			4,646			4,611
Amortization of intangible assets		5,081			5,531			5,330
Depreciation		2,853			3,143			3,320
(Gain) loss on asset disposal, net		(155	)		190			170
Total operating expenses		29,965			33,004			33,447
Income from operations		21,997			13,729			14,517
Interest expense, net		(15,037	)		(14,681	)		(12,998	)
Loss on extinguishment of debt		(233	)		-			(2,432	)
Income (loss) before income taxes		6,727			(952	)		(913	)
Income tax benefit (expense)		40,515			(749	)		(1,836	)
Net income (loss)	$	47,242		$	(1,701	)	$	(2,749	)

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

F-4

MISSION BROADCASTING, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT
For the Three Years Ended December 31, 2012
(in thousands, except per share information)
										Contra Equity
										Due from
										Nexstar
										Broadcasting,
										Inc. on								Total
	Common Stock					Subscription				Debt				Accumulated				Shareholders'
	Shares		Amount			Receivable				Issuance				Deficit				Deficit
Balance as of December 31, 2009		1,000		$	1		$	(1	)		$	-			$	(88,275	)		$	(88,275	)
Issuance of 8.875% senior secured second lien notes, Nexstar portion (Note 7)		-			-			-				(184,934	)			-				(184,934	)
Discount accretion on 8.875% senior secured second lien notes, Nexstar portion (Note 7)		-			-			-				(348	)			-				(348	)
Interest accrual on 8.875% senior secured second lien notes, Nexstar portion, net of Nexstar payments Nexstar portion (Note 7)												(3,508	)			-				(3,508	)
Net loss		-			-			-				-				(2,749	)			(2,749	)
Balance as of December 31, 2010		1,000			1			(1	)			(188,790	)			(91,024	)			(279,814	)
Discount accretion on 8.875% senior secured second lien notes, Nexstar portion (Note 7)		-			-			-				(540	)			-				(540	)
Excess of purchase price paid over the carrying value of net assets acquired (Note 3)		-			-			-				-				(5,125	)			(5,125	)
Net assets remaining with Nexstar Broadcasting, Inc. upon change in reporting entity (Note 3)		-			-			-				-				(20,239	)			(20,239	)
Net loss		-			-			-				-				(1,701	)			(1,701	)
Balance as of December 31, 2011		1,000			1			(1	)			(189,330	)			(118,089	)			(307,419	)
Discount accretion on 8.875% senior secured second lien notes, Nexstar portion (Note 7)		-			-			-				(594	)			-				(594	)
Net income		-			-			-				-				47,242				47,242
Balance as of December 31, 2012		1,000		$	1		$	(1	)		$	(189,924	)		$	(70,847	)		$	(260,771	)
The accompanying Notes are an integral part of these Financial Statements.

F-5

MISSION BROADCASTING, INC. STATEMENTS OF CASH FLOWS (in thousands)
	Years Ended December 31,
	2012			2011			2010
Cash flows from operating activities:
Net income (loss)	$	47,242		$	(1,701	)	$	(2,749	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Deferred income taxes		(40,621	)		673			1,764
Provision for bad debts		2			153			154
Depreciation of property and equipment		2,853			3,143			3,320
Amortization of intangible assets		5,081			5,531			5,330
Amortization of debt financing costs		229			214			310
Amortization of broadcast rights, excluding barter		1,374			1,541			1,651
Payments for broadcast rights		(1,680	)		(1,815	)		(2,009	)
(Gain) loss on asset disposal, net		(155	)		190			170
Deferred gain recognition		(198	)		(198	)		(198	)
Loss on extinguishment of debt		233			-			2,432
Amortization of debt discount		425			386			248
Changes in operating assets and liabilities:
Accounts receivable		(1,101	)		(600	)		(172	)
Prepaid expenses and other current assets		(64	)		59			94
Other noncurrent assets		-			(17	)		(1	)
Taxes payable		24			11			11
Accounts payable and accrued expenses		505			32			133
Interest payable		246			7			2,483
Deferred revenue		(234	)		(304	)		(753	)
Other noncurrent liabilities		133			111			139
Due to Nexstar Broadcasting, Inc.		(8,497	)		(5,865	)		(7,987	)
Net cash provided by operating activities		5,797			1,551			4,370
Cash flows from investing activities:
Purchases of property and equipment		(287	)		(541	)		(295	)
Deposits and payments for acquisition		(6,000	)		(6,700	)		-
Proceeds from disposals of property and equipment		196			20			-
Net cash used in investing activities		(6,091	)		(7,221	)		(295	)
Cash flows from financing activities:
Proceeds from issuance of long-term debt		48,000			6,700			131,906
Repayments of long-term debt		(49,115	)		(390	)		(133,555	)
Payments for (refunds of) debt financing costs		(171	)		8			(1,087	)
Consideration paid for debt extinguishment		-			-			(992	)
Net cash (used in) provided by financing activities		(1,286	)		6,318			(3,728	)
Net (decrease) increase in cash and cash equivalents		(1,580	)		648			347
Cash and cash equivalents at beginning of period		1,898			1,250			903
Cash and cash equivalents at end of period	$	318		$	1,898		$	1,250
Supplemental information:
Interest paid	$	14,137		$	14,075		$	9,956
Income taxes paid, net	$	81		$	65		$	61
Non-cash investing activities:
Accrued purchases of property and equipment	$	2		$	17		$	2
Accrued debt financing costs	$	114		$	-		$	-
Proceeds from debt issuance received by Nexstar Broadcasting, Inc. classified as contra equity (Note 7)	$	-		$	-		$	184,934
The accompanying Notes are an integral part of these Financial Statements.

F-6

MISSION BROADCASTING, INC.

NOTES TO FINANCIAL STATEMENTS

1. Organization and Business Operations

As of December 31, 2012, Mission Broadcasting, Inc. (“Mission” or the “Company”) owned and operated 17 television stations and four digital multicast channels, affiliated with the NBC, ABC, CBS, FOX, MyNetworkTV or Bounce TV television networks, in markets located in New York, Pennsylvania, Illinois, Indiana, Missouri, Louisiana, Texas and Montana. The Company operates in one reportable television broadcasting segment. Through local service agreements, Nexstar Broadcasting, Inc. (“Nexstar”) provides sales and operating services to all of the Mission television stations (see Notes 2 and 4).

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, as described in a letter of support dated March 11, 2013, the Company’s available cash, anticipated cash flow from operations and available borrowings under its senior secured 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 December 31, 2012, enabling Mission to 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 maximum consolidated first lien indebtedness ratio, and (c) a minimum consolidated fixed charge coverage ratio. The covenants, which are calculated on a quarterly basis, include the combined results of Nexstar 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 December 31, 2012, 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.

2. Summary of Significant Accounting Policies

Local Service Agreements and Purchase Options

The following table summarizes the various local service agreements Mission’s stations had in effect as of December 31, 2012 with Nexstar:

	Stations
TBA Only (1)	WFXP and KHMT
SSA & JSA (2)	KJTL, KJBO-LP, KOLR, KCIT, KCPN-LP, KAMC, KRBC, KSAN, WUTR, WAWV, WYOU, KODE, WTVO, KTVE and WTVW

(1) Mission has 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 Mission, based on the station’s monthly operating expenses.

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

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 terms of eight to ten years. Nexstar indemnifies Mission from Nexstar’s activities pursuant to the local service agreements. In compliance with Federal Communications Commission (“FCC”) regulations for both Nexstar and Mission, Mission maintains complete responsibility for and control over programming, finances, personnel and operation of its stations.

Under the local service agreements, Nexstar has received substantially all of Mission’s available cash, after satisfaction of operating costs and debt obligations. Mission anticipates that Nexstar will continue to receive substantially all of Mission’s available cash, after satisfaction of operating costs and debt obligations.

F-7

Mission 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 agreement, 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. Additionally, on November 29, 2011, Mission’ shareholders granted Nexstar an option to purchase any or all of the Company’s stock, subject to FCC consent, for a price equal to the pro rata portion of the greater of (1) five times the stations’ cash flow, as defined in the agreement, reduced by the amount of indebtedness, as defined in the agreement, or (2) $100,000. These option agreements (which expire on various dates between 2013 and 2022) are freely exercisable or assignable by Nexstar without consent or approval by Mission or its shareholders. The Company expects these option agreements to be renewed upon expiration.

Nexstar is deemed under U.S. GAAP to have a controlling financial interest in Mission as a variable interest entity (“VIE”) for financial reporting purposes as a results of (1) the local service agreements Nexstar has with the Mission stations, (2) Nexstar’s guarantee of the obligations incurred under Mission’s senior secured credit facility (see Note 7), (3) Nexstar having power over significant activities affecting Mission’s economic performance, including budgeting for advertising revenue, advertising and hiring and firing of sales force personnel and (4) the purchase options Mission has granted to Nexstar. Nexstar consolidates the financial accounts of Mission into its financial results.

Characterization of SSA Fees

The Company presents the fees incurred pursuant to SSAs with Nexstar as an operating expense in the Company’s Statements of Operations. The Company’s decision to characterize the SSA fees in this manner is based on management’s conclusion that (1) the benefit the Company’s stations receive from these local service agreements is sufficiently separate from the consideration paid to the Company from Nexstar under JSAs, (2) management can reasonably estimate the fair value of the benefit our stations receive under the SSA agreements, and (3) the SSA fees the Company pays to Nexstar do not exceed the estimated fair value of the benefits the Company’s stations receive.

Basis of Presentation

Certain prior year financial statement amounts have been reclassified to conform to the current year presentation.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and use assumptions that affect the reported amounts of assets and liabilities and the disclosure for contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The more significant estimates made by management include those relating to the allowance for doubtful accounts, retransmission revenue, barter transactions, income taxes, the recoverability of broadcast rights, the carrying amounts, recoverability, and useful lives of intangible assets and the fair values of non-monetary asset exchanges. Actual results may vary from estimates used.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of ninety days or less to be cash equivalents.

Accounts Receivable and Allowance for Doubtful Accounts

The Company’s accounts receivable consist primarily of billings to cable and satellite carriers for compensation associated with retransmission consent agreements. The Company maintains an allowance for doubtful accounts when necessary for estimated losses resulting from the inability of customers to make required payments. Management evaluates the collectability of accounts receivable based on a combination of factors, including customer payment history, known customer circumstances, as well as the overall aging of customer balances and trends. In circumstances where management is aware of a specific customer’s inability to meet its financial obligations, an allowance is recorded to reduce the receivable amount to an amount estimated to be collected.

F-8

Concentration of Credit Risk

Financial instruments which potentially expose the Company to a concentration of credit risk consist principally of cash and cash equivalents and accounts receivable. Cash deposits are maintained with several financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits; however, the Company believes these deposits are maintained with financial institutions of reputable credit and are not subject to any unusual credit risk. A significant portion of the Company’s accounts receivable is due from cable and satellite carriers. The Company does not require collateral from its customers, but maintains reserves for potential credit losses. Management believes that the allowance for doubtful accounts is adequate, but if the financial condition of the Company’s customers were to deteriorate, additional allowances may be required. The Company has not experienced significant losses related to receivables from individual customers or by geographical area.

Revenue Recognition

The Company’s revenue is primarily derived from the sale of television advertising by Nexstar under JSAs, retransmission compensation, network compensation and other broadcast related revenues:

• Revenue from Nexstar, representing a percentage of net advertising revenue derived from the sale of commercials on the Company’s stations, is recognized in the period during which the spots are broadcast.

• Retransmission compensation is recognized based on the number of subscribers over the contract period, based on historical levels and trends for individual providers.

• Network compensation is either recognized when the Company’s station broadcasts specific network programming based upon a negotiated hourly-rate, or on a straight-line basis based upon the total negotiated compensation to be received by the Company over the term of the agreement. Some of our network agreements included payments received at the beginning of the contract, which are recorded as deferred revenue until earned.

• Other revenues, which include tower rent revenue, are recognized in the period during which the services are provided.

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 fair value of the advertising time exchanged, which approximates the fair value of the program material received. The fair value of advertising time exchanged is estimated by applying average historical advertising rates for specific time periods. Revenue from barter transactions is recognized as the related advertising spots are broadcast. Barter expense is recognized at the time program broadcast rights assets are used. The Company recorded $2.9 million, $3.1 million and $3.0 million of barter revenue and expense for the years ended December 31, 2012, 2011 and 2010, respectively. Barter expense was included in amortization of broadcast rights in the Company’s Statements of Operations.

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 the related advertisement spots are broadcast. Trade expense is recognized when services or merchandise received are used. The Company recorded no amounts, $0.2 million and $0.2 million of trade revenue and expense for the years ended December 31, 2012, 2011 and 2010, respectively. Trade expense was included in direct operating expenses in the Company’s Statements of Operations.

F-9

Broadcast Rights and Broadcast Rights Payable

The Company records rights to programs, primarily in the form of syndicated programs and feature movie packages obtained under license agreements for the limited right to broadcast the suppliers’ programming when the following criteria are met: (1) the cost of each program is known or reasonably determinable, (2) the license period has begun, (3) the program material has been accepted in accordance with the license agreement, and (4) the programming is available for use. Programs that have been produced prior to our contract period are considered available for broadcast, while programs that are produced throughout the contract are recorded and amortized as they are aired. Broadcast rights are initially recorded at the amount paid or payable to program suppliers; or, in the case of barter transactions, at management’s estimate of the fair value of the advertising time exchanged using historical advertising rates, which approximates the fair value of the program material received. Broadcast rights are stated at the lower of unamortized cost or net realizable value. The current portion of broadcast rights represents those rights available for broadcast which will be amortized in the succeeding year. Amortization of broadcast rights is computed using the straight-line method based on the license period or programming usage, whichever period yields the shorter life. Broadcast rights liabilities are reduced by monthly payments to program suppliers; or, in the case of barter transactions, are amortized over the life of the associated programming license contract as a component of barter revenue. When projected future net revenue associated with a program is less than the current carrying amount of the program broadcast rights, for example, due to poor ratings, the Company records amortization of the broadcast rights such that they equal the amount of projected future net revenue. If the expected broadcast period was shortened or cancelled, the Company would be required to amortize the remaining value of the related broadcast rights on an accelerated basis or possibly immediately.

During the fourth quarter of 2012, the Company revised its accounting for broadcast rights. Previously, the Company recorded an asset and a liability for programming at the beginning of each license period. The Company has revised the accounting for programming that is produced throughout the license period, such that these contracts are now recorded and amortized as they are aired. The consolidated balance sheet as of December 31, 2011 has been revised and certain assets and liabilities have been reduced from prior presentation as follows: current portion of broadcast rights by $2.4 million, broadcast rights by $0.8 million, current portion of broadcast rights payable by $2.4 million, broadcast rights payable by $0.8 million. This revision had no effect on the statements of operations, statement of changes in shareholders’ deficit, or statements of cash flows and has been determined to be not material to previously issued financial statements.

Property and Equipment

Property and equipment is stated at cost. The cost and related accumulated depreciation applicable to assets sold or retired are removed from the accounts and the gain or loss on disposition is recognized. Major renewals and betterments are capitalized and ordinary repairs and maintenance are charged to expense in the period incurred. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets (see Note 5).

Intangible Assets

Intangible assets consist primarily of goodwill, representing the excess of the purchase price of acquired businesses over the fair values of net assets acquired on the acquisition date, and broadcast licenses (“FCC licenses”) and network affiliation agreements, recorded at estimated fair value at the date of acquisition using a discounted cash flow method. The Company’s goodwill and FCC licenses are considered to be indefinite-lived intangible assets and are not amortized but are tested for impairment annually or whenever events or changes in circumstances indicate that such assets might be impaired. The use of an indefinite life for FCC licenses contemplates the Company’s historical ability to renew its 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. Network affiliation agreements are subject to amortization computed on a straight-line basis over the estimated useful life of 15 years.

The Company aggregates its stations by market (“reporting unit”) for purposes of goodwill and FCC license impairment testing because management views, manages and evaluates its stations on a market basis. The impairment test for FCC licenses consists of a market-by-market comparison of the carrying amount of FCC licenses with their fair value, using a discounted cash flow analysis. The impairment test for goodwill utilizes a two-step fair value approach. The first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of the reporting unit to its carrying amount. The fair value of a reporting unit is determined using a discounted cash flow analysis. If the fair value of the reporting unit exceeds its carrying amount, goodwill is not considered impaired. If the carrying amount of the reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. The implied fair value of goodwill is determined by performing an assumed purchase price allocation, using the reporting unit fair value (as determined in Step 1) as the purchase price. If the carrying amount of goodwill exceeds the implied fair value, an impairment loss is recognized in an amount equal to that excess.

F-10

Determining the fair value of reporting units requires management to make a number of judgments about assumptions and estimates that are highly subjective and that are based on unobservable inputs. The actual results may differ from these assumptions and estimates; and it is possible that such differences could have a material impact on the Company’s Financial Statements. In addition to the various inputs (i.e. market growth, operating profit margins, discount rates) used to calculate the fair value of FCC licenses and reporting units, the Company evaluates the reasonableness of its assumptions by comparing the fair values of its reporting units and FCC licenses to recent market television station sale transactions.

The Company tests network affiliation agreements whenever events or changes in circumstances indicate that their carrying amount may not be recoverable, relying on a number of factors including operating results, business plans, economic projections and anticipated future cash flows. An impairment in the carrying amount of a network affiliation agreement is recognized when the expected future operating cash flow derived from the operation to which the asset relates is less than its carrying value. The impairment test for network affiliation agreements consists of a station-by-station comparison of the carrying amount of network affiliation agreements with their fair value, using a discounted cash flow analysis.

Debt Financing Costs

Debt financing costs represent direct costs incurred to obtain long-term financing and are amortized to interest expense over the term of the related debt. Previously capitalized debt financing costs are expensed and included in loss on extinguishment of debt if the Company determines that there has been a substantial modification of the related debt. As of December 31, 2012 and 2011, debt financing costs of $3.5 million and $0.9 million, respectively, were included in other noncurrent assets.

Comprehensive Income (Loss)

Comprehensive income (loss) includes net income (loss) and certain items that are excluded from net income (loss) and recorded as a separate component of shareholders’ deficit. During the years ended December 31, 2012, 2011 and 2010, the Company had no items of other comprehensive income (loss) and, therefore, comprehensive income (loss) does not differ from reported net income (loss).

Financial Instruments

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

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

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

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

The carrying amount of cash and cash equivalents, accounts receivable, broadcast rights payable, accounts payable and accrued expenses approximates fair value due to their short-term nature. See Note 7 for fair value disclosures related to the Company’s debt.

Income Taxes

The Company accounts for income taxes under the asset and liability method which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and tax basis of assets and liabilities. A valuation allowance is applied against net deferred tax assets if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities. The determination is based on the technical merits of the position and presumes that each uncertain tax position will be examined by the relevant taxing authority that has full knowledge of all relevant information. The Company recognizes interest and penalties relating to income taxes within income tax expense.

F-11

Recent Accounting Pronouncements

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

3. Acquisition

On December 1, 2011, the Company acquired the FCC license, the broadcast rights and related liabilities and certain transmission equipment of WTVW, an independent station serving the Evansville, Indiana market, from Nexstar for $6.7 million in cash, funded with borrowings from its senior secured credit agreement. Additionally, on December 1, 2011, the Company entered into local service agreements with Nexstar for WTVW, similar to the Company’s other local service arrangements with Nexstar. This acquisition allows the Company entrance into this market.

As Nexstar is deemed to have a controlling financial interest in Mission under U.S. GAAP, as discussed in Note 2, the acquisition was accounted for as a change in reporting entity. The Company’s Financial Statements were retrospectively adjusted to include the results of WTVW as if it was owned and operated by Mission as of the earliest period presented and acquired amounts were recorded at the historical carrying values of Nexstar.

The $6.7 million purchase price of WTVW was negotiated between Nexstar and Mission using recent appraisals of fair value of the net assets acquired and exceeded the carrying values of such net assets by $5.1 million. This excess of the purchase price over carrying value of the net assets was accounted for as an increase in shareholders’ deficit. The retrospectively adjusted historical Financial Statements include all of the assets, liabilities, revenues and expenses of WTVW as originally recorded by Nexstar in those periods. However, only certain assets and liabilities were acquired by the Company. Accordingly, the net assets that were not transferred to the Company in the acquisition have been eliminated from the financial statements, resulting in an increase in shareholders’ deficit of $20.2 million on December 1, 2011.

As of December 1, 2011, the assets and liabilities of WTVW acquired were recorded as follows:  FCC licenses of $1.2 million, broadcast rights of $1.1 million, broadcast rights payables of $1.1 million and property and equipment of $1.1 million.

4. Local Service Agreements with Nexstar

The Company has entered into local service agreements with Nexstar to provide sales and/or operating services to all of its stations. For the stations with 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 to Nexstar. For each station that the Company has entered into an SSA, it has also entered into a joint sales agreement (“JSA”), whereby Nexstar sells the advertising time of the 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. For the stations with 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, based on the station’s monthly operating expenses. 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 the accompanying Statements of Operations.

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 eight to ten years. Nexstar indemnifies Mission from Nexstar’s activities pursuant to the local service agreement to which Nexstar is a party.

F-12

Under the local service agreements, Nexstar receives substantially all of the Company’s available cash, after satisfaction of operating costs and debt obligations. The Company anticipates that Nexstar will continue to receive substantially all of its available cash, after satisfaction of operating costs and debt obligations. In compliance with FCC regulations for both the Company and Nexstar, Mission maintains complete responsibility for and control over programming, finances, personnel and operations of its stations. The Company had the following local service agreements in effect with Nexstar as of December 31, 2012:

Station	Market	Type of Agreement	Expiration	Consideration from Nexstar
WFXP	Erie, PA	TBA	8/16/16	Monthly payments received from Nexstar
KHMT	Billings, MT	TBA	12/13/17	Monthly payments received from Nexstar
KJTL/KJBO-LP	Wichita Falls, TX-Lawton, OK	SSA	5/31/19	$60 thousand per month paid to Nexstar
		JSA	5/31/19	70% of net revenue received from Nexstar
WYOU	Wilkes Barre-Scranton, PA	SSA	1/4/18	$35 thousand per month paid to Nexstar
		JSA	9/30/14	70% of net revenue received from Nexstar
KODE	Joplin, MO-Pittsburg, KS	SSA	3/31/22	$75 thousand per month paid to Nexstar
		JSA	9/30/14	70% of net revenue received from Nexstar
KRBC	Abilene-Sweetwater, TX	SSA	6/12/13	$25 thousand per month paid to Nexstar
		JSA	6/30/14	70% of net revenue received from Nexstar
KSAN	San Angelo, TX	SSA	5/31/14	$10 thousand per month paid to Nexstar
		JSA	5/31/14	70% of net revenue received from Nexstar
WAWV	Terre Haute, IN	SSA	5/8/13	$10 thousand per month paid to Nexstar
		JSA	5/8/13	70% of net revenue received from Nexstar
KCIT/KCPN-LP	Amarillo, TX	SSA	4/30/19	$50 thousand per month paid to Nexstar
		JSA	4/30/19	70% of net revenue received from Nexstar
KAMC	Lubbock, TX	SSA	2/15/19	$75 thousand per month paid to Nexstar
		JSA	2/15/19	70% of net revenue received from Nexstar
KOLR	Springfield, MO	SSA	2/15/19	$150 thousand per month paid to Nexstar
		JSA	2/15/19	70% of net revenue received from Nexstar
WUTR	Utica, NY	SSA	3/31/14	$10 thousand per month paid to Nexstar
		JSA	3/31/14	70% of net revenue received from Nexstar
WTVO	Rockford, IL	SSA	10/31/14	$75 thousand per month paid to Nexstar
		JSA	10/31/14	70% of net revenue received from Nexstar
KTVE	Monroe, LA-El Dorado, AR	SSA	1/16/18	$20 thousand per month paid to Nexstar
		JSA	1/16/18	70% of net revenue received from Nexstar
WTVW	Evansville, IN	SSA	11/30/19	$50 thousand per month paid to Nexstar
		JSA	11/30/19	70% of net revenue received from Nexstar

F-13

5. Property and Equipment, net

Property and equipment consisted of the following, as of December 31 (dollars in thousands):

	Estimated
	useful life,
	in years		2012			2011
Buildings and building improvements		39	$	7,798		$	7,767
Land		N/A		1,442			1,442
Leasehold improvements	term of lease			70			70
Studio and transmission equipment		5-15		37,416			37,469
Office equipment and furniture		3-7		1,299			1,282
Vehicles		5		778			904
Construction in progress		N/A		4			36
				48,807			48,970
Less: accumulated depreciation				(27,289	)		(24,830	)
Property and equipment, net			$	21,518		$	24,140

In 2001, the Company sold certain of its telecommunications tower facilities for cash and entered into noncancellable operating leases with the buyer for tower space. In connection with this transaction, a gain on the sale was deferred and is being recognized over the lease term which expires in May 2021. As of December 31, 2012 and 2011, the deferred gain was $1.6 million and $1.8 million, respectively, including $0.2 million in current liabilities as of December 31, 2012 and 2011.

6. Intangible Assets and Goodwill

Intangible assets subject to amortization consisted of the following, as of December 31 (dollars in thousands):

	Estimated		2012										2011
	useful life,					Accumulated										Accumulated
	in years		Gross			Amortization				Net			Gross			Amortization				Net
Network affiliation agreements		15		$	66,443		$	(57,032	)		$	9,411		$	66,443		$	(52,830	)		$	13,613
Other definite-lived intangible assets		1-15			13,118			(12,334	)			784			13,118			(11,455	)			1,663
Other intangible assets				$	79,561		$	(69,366	)		$	10,195		$	79,561		$	(64,285	)		$	15,276

The Company’s annual impairment test of goodwill and FCC licenses performed as of December 31, 2012 and 2011 resulted in no impairment charge being recognized. No events or circumstances were noted leading management to conclude that impairment testing should be performed during 2012 and 2011 on the intangible assets subject to amortization.

The estimated useful life of network affiliation agreements 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.

F-14

The following table presents the Company’s estimate of amortization expense for each of the five succeeding fiscal years and thereafter for definite-lived intangible assets recorded on its books as of December 31, 2012 (in thousands):

2013	$	4,254
2014		1,382
2015		1,098
2016		1,098
2017		974
Thereafter		1,389
	$	10,195

The carrying amounts of goodwill and FCC licenses for the years ended December 31, 2012 and 2011 are as follows (in thousands):

	Goodwill										FCC Licenses
				Accumulated										Accumulated
	Gross			Impairment				Net			Gross			Impairment				Net
Balance as of December 31, 2011		$	20,280		$	(1,550	)		$	18,730		$	32,636		$	(10,697	)		$	21,939
Balance as of December 31, 2012		$	20,280		$	(1,550	)		$	18,730		$	32,636		$	(10,697	)		$	21,939

There were no changes recorded to goodwill or FCC licenses during the years ended December 31, 2012 and 2011.

7. Debt

Long-term debt consisted of the following, as of December 31 (in thousands):

	2012			2011
Term loans, net of discount of $517 and $0	$	43,483		$	38,415
Revolving loans		-			6,700
8.875% Senior secured second lien notes due 2017, net of discount of $5,622 and $6,638, respectively		319,378			318,362
		362,861			363,477
Less: current portion		(330	)		(390	)
	$	362,531		$	363,087

2012 Transactions

On December 1, 2012, the Company entered into an amendment of its senior secured credit facility with a group of commercial banks which replaced the Company’s previous credit facility. The new senior secured credit facility consists of a $104.0 million term loan and $35.0 million revolving credit facility. The Company used the proceeds of these loans to finance acquisitions (See Note 14) as well as to repay $38.1 million debt outstanding under the Company’s previous Term Loan B, plus accrued interest. The repayment resulted in a loss on extinguishment of debt of $0.1 million.

The Company recorded $3.0 million in underwriting, legal and professional fees related to the new senior secured credit facility, which was capitalized as debt finance costs, included in other noncurrent assets, net on the balance sheet, and is being amortized over the term of the components of the senior secured credit facility.

During October and November of 2012, Mission repaid the principal amounts outstanding of its revolving credit facility of $10.0 million, plus accrued interest. These transactions resulted in a loss on extinguishment of debt of $0.1 million representing write-offs of unamortized deferred finance costs.

On October 23, 2012, the Company entered into an amendment to its senior secured credit facility. The amendment excludes, through and including December 31, 2012, from the calculation of indebtedness and prepayment requirement, the proceeds of certain debt of Nexstar pending refinancing transactions, until December 31, 2012.

F-15

On September 27, 2012, the Company entered into an amendment to its senior secured credit facility. The amendment removed the requirement for the Company to provide pro forma certificates to the lenders prior to entering into an acquisition and exclude any acquisitions from dollar limitations within the credit agreements if they are not to be funded with the existing senior secured credit facility.

Senior Secured Credit Facility

The Mission senior secured credit facility (the “Mission Facility”) consists of a $104.0 million term loan and a $35.0 million revolving loan. As of December 31, 2012 and 2011, Mission had $44.0 million and $38.4 million, respectively, of outstanding term loans, and no amounts and $6.7 million, respectively, of revolving loans.

The term loan, which matures in December 2019, is payable in consecutive quarterly installments of 0.25%, with the remaining 94% due at maturity. There were no scheduled repayments in 2012. During the years ended December 31, 2012 and 2011, Mission repaid scheduled maturities of $0.3 million and $0.4 million, respectively, of its previous Term Loan B.

Interest rates are selected at Mission’s option and the applicable margin is adjusted quarterly as defined in Mission’s Fourth Amended and Restated Credit Agreement. The interest rate of Mission’s term loan was 4.5% and 5.0% as of December 31, 2012 and 2011, respectively, and the interest rate on Mission’s revolving loans was 4.6% and 4.3% as of December 31, 2012 and 2011. Interest is payable periodically based on the type of interest rate selected. Additionally, Mission is required to pay quarterly commitment fees on the unused portion of its revolving loan commitment of 0.5% per annum.

8.875% Senior Secured Second Lien Notes

On April 19, 2010, Mission and Nexstar, as co-issuers, completed the issuance and sale of $325.0 million senior secured second lien notes due 2017 (the “8.875% Notes”). The 8.875% Notes will mature on April 15, 2017. Interest on the 8.875% 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.

The net proceeds to Mission and Nexstar from the sale of the 8.875% Notes were $316.8 million, net of $8.2 million original issuance discount. Mission received $131.9 million of the net proceeds and $184.9 million was received by Nexstar. As the obligations under the 8.875% Notes are joint and several to Mission and Nexstar, each entity reflects the full amount of the 8.875% Notes and related accrued interest in its separate financial statements. Further, the portions of the recorded balance of the 8.875% Notes and related accrued interest attributable to the respective co-issuer are reflected as a reduction to equity in Mission and Nexstar’s separate financial statements given Nexstar’s deemed controlling financial interest in Mission for financial reporting purposes. As of December 31, 2012 and 2011, Nexstar had a balance of $186.4 million and $185.8 million, respectively, of debt and $3.5 million of interest payable related to the 8.875% Notes, both of which are recorded in contra equity due from Nexstar on the Balance Sheet. Mission used the net proceeds of the offering and cash on hand to refinance Mission’s old senior secured credit facilities and pay related fees and expenses.

The 8.875% Notes were issued pursuant to an Indenture, dated as of April 19, 2010 (the “Indenture”), by and among Mission and Nexstar, as co-issuers, Nexstar Broadcasting Group, Inc., as guarantor, and The Bank of New York Mellon, as trustee and collateral agent. Mission’s and Nexstar’s obligations under the 8.875% Notes are jointly and severally, fully and unconditionally guaranteed by Nexstar Broadcasting Group, Inc. and all of Nexstar’s and Mission’s future 100% owned domestic subsidiaries, subject to certain customary release provisions.

The 8.875% Notes are secured by second-priority liens, subject to certain exceptions and permitted liens, on Nexstar’s, Mission’s and the guarantors’ assets that secure Mission’s and Nexstar’s senior secured credit facilities on a first-priority lien basis. The 8.875% Notes and the guarantees are Mission’s, Nexstar’s and the guarantors’ senior secured obligations, rank equal in right of payment with all of Mission’s, Nexstar’s and the guarantors’ existing and future senior indebtedness and rank senior in right of payment to all of Mission’s, Nexstar’s and the guarantors’ future subordinated indebtedness. The 8.875% Notes and the guarantees are effectively junior to Mission’s, Nexstar’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’s senior secured credit facilities, in each case, to the extent of the value of the assets securing such obligations.

Mission and Nexstar have the option to redeem all or a portion of the 8.875% Notes at any time prior to April 15, 2014 at a price equal to 100% of the principal amount of the 8.875% Notes redeemed plus accrued and unpaid interest to the redemption date plus applicable premium as of the date of redemption. At any time on or after April 15, 2014, Mission and Nexstar may redeem the 8.875% 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 may also redeem up to 35% of the aggregate principal amount of the 8.875% 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.

F-16

Upon the occurrence of a change of control (as defined in the Indenture), each holder of the 8.875% Notes may require Mission and Nexstar to repurchase all or a portion of the 8.875% Notes in cash at a price equal to 101% of the aggregate principal amount of the 8.875% Notes to be repurchased, plus accrued and unpaid interest, if any, thereon to the date of repurchase.

The Indenture contains covenants that limit, among other things, Mission’s and Nexstar’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 (1) 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, (2) repudiation or disaffirmation by Mission, Nexstar or any guarantor of material obligations under the security documents and (3) the determination in a judicial proceeding that the security documents are unenforceable or invalid against Mission, Nexstar 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.

The Company incurred $0.7 million in professional fees related to the transaction, which were capitalized as debt finance costs, included in other noncurrent assets, net on the Balance Sheet, and are being amortized over the term of the 8.875% Notes.

Unused Commitments and Borrowing Availability

The Company had $35 million of total unused revolving loan commitments under the Mission Facility, all of which was available for borrowing, based on the covenant calculations.

Collateralization and Guarantees of Debt

Nexstar Broadcasting Group, Inc. and its subsidiaries guarantee full payment of all obligations under the Mission Credit Facility in the event of its default. Similarly, Mission is a guarantor of Nexstar’s bank credit facility and the 6.875% senior unsecured notes due 2020. 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 require financial covenant ratios, 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 its debt covenants as of December 31, 2012.

Fair Value of Debt

The aggregate carrying amounts and estimated fair values of the Company’s debt were as follows, as of December 31 (in thousands):

	2012				2011
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Term loans(1)	$	43,483	$	44,484	$	38,415	$	37,976
Revolving loans(1)		-		-		6,700		6,664
8.875% Senior secured second lien notes(2)		319,378		359,125		318,362		321,750

(1)	The fair value of bank credit facilities is computed based on borrowing rates currently available to Mission for bank loans with similar terms and average maturities. These fair value measurements are considered Level 3 (significant and unobservable).
(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. This fair value measurement is considered Level 2 (significant and observable).

F-17

Debt Maturities

As of December 31, 2012, scheduled maturities of Mission’s debt for the years ended December 31 are summarized as follows (in thousands):

2013	$	330
2014		440
2015		440
2016		440
2017		325,440
Thereafter		41,910
	$	369,000

8. Common Stock

The Company is owned by two shareholders, Nancie J. Smith, Chairman of the Board and Secretary, and Dennis Thatcher, President, Treasurer and Director. As of December 31, 2012 and 2011, the Company had authorized, issued and outstanding 1,000 shares of common stock with a one dollar par value. Each share of common stock is entitled to one vote.

9. Income Taxes

The income tax (benefit) expense consisted of the following components for the years ended December 31 (in thousands):

	2012			2011		2010
Current tax expense:
Federal	$	4		$	—	$	—
State		102			77		72
		106			77		72
Deferred tax expense:
Federal		(38,337	)		555		1,463
State		(2,284	)		117		301
		(40,621	)		672		1,764
Income tax expense:	$	(40,515	)	$	749	$	1,836

The Company’s 2012 income tax benefit relating to operations primarily resulted from a reduction in its valuation allowance. Based on the weight of available evidence including the Company’s generation of pre-tax income from operations on a three-year look-back basis, forecast of future earnings, and the anticipated ability to sustain a level of earnings, the Company determined, in the fourth quarter of 2012, it is more likely than not a substantial portion of its deferred tax assets will be realized and the Company decreased its valuation allowance by $43.0 million through its income tax benefit in the 2012 Consolidated Statement of Operations. Due to strong financial results and an improved credit profile in recent years, the Company was able to obtain a lower interest rate on its refinanced senior secured credit facility in the fourth quarter of 2012. In addition, the Company expanded its line of credit and borrowing capacity on favorable terms that significantly enhanced the Company’s ability to grow strategic market share through acquisition. During the first quarter of 2013, the Company completed the acquisitions of two television stations in the Little Rock, Arkansas market and one television station in the Burlington, Vermont market (See Note 14). The Company also generated a pre-tax income of $6.7 million in 2012. In addition, in the fourth quarter of 2012 the Company completed its forecast of future earnings. This expected level of earnings makes it more likely than not that a substantial portion of the Company’s deferred tax assets will be realized.

F-18

The income tax (benefit) expense differs from the amount computed by applying the statutory federal income tax rate of 35% to loss from operations before income taxes. The sources and tax effects of the differences were as follows, for the years ended December 31 (in thousands):

	2012			2011			2010
Income tax (benefit) expense at 35% statutory federal rate	$	2,354		$	(333	)	$	(320	)
Change in valuation allowance		(43,035	)		1,525			3,034
State and local taxes, net of federal benefit		418			(31	)		(47	)
Impact of change in reporting entity (Note 3)		—			(412	)		(831	)
Other, net		(252	)		—			—
Income tax expense	$	(40,515	)	$	749		$	1,836

 The components of the net deferred tax asset (liability) were as follows, as of December 31 (in thousands):

	2012			2011
Deferred tax assets:
Net operating loss carryforwards (“NOLs”)	$	39,294		$	39,552
Other intangible assets		3,862			5,070
Deferred revenue		788			867
Other		1,559			1,361
Total deferred tax assets		45,503			46,850
Valuation allowance		—			(43,035	)
Net deferred tax assets		45,503			3,815
Deferred tax liabilities:
Property and equipment		(3,349	)		(3,487	)
Goodwill		(5,000	)		(4,400	)
FCC licenses		(5,805	)		(5,200	)
Total deferred tax liabilities		(14,154	)		(13,087	)
Net deferred tax asset (liability)	$	31,349		$	(9,272	)

A reconciliation of the beginning and ending balances of the gross unrecognized tax benefits is as follows (in thousands):

	2012		2011		2010
Gross unrecognized tax benefits as of the beginning of the year	$	3,677	$	3,677	$	3,677
Increases in tax positions from prior years		—		—		—
Decreases in tax positions from prior years		—		—		—
Increases in tax positions for current year		—		—		—
Settlements		—		—		—
Lapse in statute of limitations		—		—		—
Gross unrecognized tax benefits as of December 31	$	3,677	$	3,677	$	3,677

If the gross unrecognized tax benefits were recognized, it would result in a favorable effect on the Company’s effective tax rate. The Company does not expect the amount of unrecognized tax benefits to significantly change in the next twelve months.

Interest expense and penalties related to the Company’s uncertain tax positions would be reflected as a component of income tax expense in the Company’s Statements of Operations. For the years ended December 31, 2012, 2011 and 2010, the Company did not accrue interest on the unrecognized tax benefits as an unfavorable outcome upon examination would not result in a cash outlay but would reduce NOLs.

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 2008. Additionally, any NOLs that were generated in prior years and will be utilized in the future may also be subject to examination by the Internal Revenue Service. State jurisdictions that remain subject to examination are not considered significant.

F-19

As of December 31, 2012, the Company has federal NOLs available of $106.2 million and post-apportionment state NOLs available of $39.8 million which are available to reduce future taxable income if utilized before their expiration. The federal NOLs expire through 2031 if not utilized. Utilization of NOLs in the future may be limited if changes in the Company’s ownership occur.

10. FCC Regulatory Matters

Television broadcasting is subject to the jurisdiction of the FCC under the Communications Act of 1934, as amended (the “Communications Act”). The Communications Act prohibits the operation of television broadcasting stations except under a license issued by the FCC, and empowers the FCC, among other things, to issue, revoke, and modify broadcasting licenses, determine the location of television stations, regulate the equipment used by television stations, adopt regulations to carry out the provisions of the Communications Act and impose penalties for the violation of such regulations. The FCC’s ongoing rule making proceedings could have a significant future impact on the television industry and on the operation of the Company’s stations. 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 adopted rules with respect to the conversion of existing low power and television translator stations to digital operations. The FCC has established a September 1, 2015 deadline by which low power and television translator stations must cease analog operations. The Company has transitioned its television translator operations on channels 52-69 to digital operations and will transition its remaining low power and television translator stations to digital operations prior to September 1, 2015.

Media Ownership

In 2006, the FCC initiated a rulemaking proceeding to review all of its media ownership rules, as required by the Communications Act. The FCC considered rules relating to ownership of two or more TV stations in a market, ownership of local TV and radio stations by daily newspapers in the same market, cross-ownership of local TV and radio stations, and changes to how the national TV ownership limits are calculated. In February 2008, the FCC adopted modest changes to its newspaper/broadcast cross-ownership rule while retaining the rest of its ownership rules then currently in effect. On July 7, 2011, the U.S. Court of Appeals for the Third Circuit vacated the FCC’s changes to its newspaper/broadcast cross-ownership rule while upholding the FCC’s retention of its other media ownership rules. In June 2012, the Supreme Court denied various petitions for Supreme Court review of the Third Circuit’s decision.

The FCC is required to review its media ownership rules every four years and to eliminate those rules it finds no longer serve the “public interest, convenience and necessity.” During 2009, the FCC held a series of hearings designed to evaluate possible changes to its rules. In May 2010, the FCC formally initiated its 2010 review of its media ownership rules with the issuance of a Notice of Inquiry. In December 2011, the FCC issued a Notice of Proposed Rulemaking (NPRM) seeking comment on specific proposed changes to its ownership rules. Among the specific changes proposed in the NPRM are (1) elimination of the contour overlap provision of the local television ownership rule (making the rule entirely DMA-based), (2) elimination of the radio/television cross-ownership rule, and (3) modest relaxation of the newspaper/broadcast cross-ownership rule. The NPRM also seeks comment on shared services agreements (SSAs) and other joint operating arrangements between television stations, and whether such agreements should be considered attributable. Initial comments on the NPRM were due on March 5, 2012, and reply comments are due in April 2012. The FCC may act on this proceeding in 2013. The Company cannot predict what rules the FCC will adopt or when they will be adopted. However, the FCC may deem television JSAs to be attributable ownership interests and require the termination of existing JSAs within a specified period of time if the newly attributable JSAs do not comply with the television ownership limits.

F-20

Spectrum

The FCC has initiated various proceedings to assess the availability of spectrum to meet future wireless broadband needs. The FCC’s March 2010 “National Broadband Plan” recommends the reallocation of 120 megahertz of the spectrum currently used for broadcast television for wireless broadband use. The FCC has thus far adopted rules permitting television stations to share a single 6 megahertz channel and requested comment on proposals that include, among other things, whether to add new frequency allocations in the television bands for licensed fixed and mobile wireless uses and whether to implement technical rule modifications to improve the viability of certain channels that are underutilized by digital television stations. In February 2012, Congress adopted legislation authorizing the FCC to conduct an incentive auction whereby television broadcasters could voluntarily relinquish all or part of their spectrum in exchange for consideration. On September 28, 2012, the FCC adopted a Notice of Proposed Rule Making seeking public comment on the design of the incentive auction and various technical issues related to the reallocation of television spectrum for mobile broadband use. Comments on the notice were filed in January 2013, and reply comments are due in March 2013. A reallocation of television spectrum for wireless broadband use would likely involve a “repacking” of the television broadcast band, which would require some television stations to change channel or otherwise modify their technical facilities. Future steps to reallocate television spectrum to broadband use may be to the detriment of the Company’s investment in digital facilities, could require substantial additional investment to continue current operations, and may require viewers to invest in additional equipment or subscription services to continue receiving broadcast television signals. The Company cannot predict the timing or results of television spectrum reallocation efforts or their impact to its business.

Retransmission Consent

On March 3, 2011, the FCC initiated a Notice of Proposed Rulemaking to reexamine its rules (i) governing the requirements for good faith negotiations between multichannel video program distributors (MVPDs) and broadcasters, including implementing a prohibition on one station negotiating retransmission consent terms for another station under a local service agreement; (ii) for providing advance notice to consumers in the event of dispute; and (iii) to extend certain cable-only obligations to all MVPDs. The FCC has also asked for comment on eliminating the network non-duplication and syndicated exclusivity protection rules, which may permit MVPDs to import out-of-market television stations during a retransmission consent dispute. If the FCC prohibits joint negotiations or modifies the network non-duplication and syndicated exclusivity protection rules, such changes likely would affect the Company’s ability to sustain its current level of retransmission consent revenues or grow such revenues in the future and could have an adverse effect on the Company’s business, financial condition and results of operations. The Company cannot predict the resolution of the proposals or their impact to its business.

11. Commitments and Contingencies

Broadcast Rights Commitments

Broadcast rights acquired for cash under license agreements are recorded as an asset and a corresponding liability at the inception of the license period. Future minimum payments for license agreements for which the license period has not commenced and no asset or liability has been recorded are as follows as of December 31, 2012 (in thousands):

2013	$	904
2014		799
2015		482
2016		33
2017		-
Thereafter		43
	$	2,261

F-21

Operating Leases

The Company leases towers, office space and operating equipment under noncancelable operating lease arrangements expiring through April 2032. Rent expense recorded in the Company’s Statements of Operations for such leases was $1.6 million, $1.6 million and $2.0 million for the years ended December 31, 2012, 2011 and 2010, respectively. Future minimum lease payments under these operating leases are as follows as of December 31, 2012 (in thousands):

2013	$	1,536
2014		1,601
2015		1,640
2016		1,717
2017		1,805
Thereafter		14,188
	$	22,487

During the fourth quarter of 2012, the Company corrected its other noncurrent liabilities balance and beginning accumulated deficit as of the earliest period being presented by an increase of $0.3 million for an error in deferred rent from tower leases recorded during a 2003 acquisition. If this error had been corrected prior to the earliest period presented, net income would not have been significantly impacted for each of the years ended December 31, 2012, 2011 and 2010. Management evaluated this error considering both qualitative and quantitative factors and considered its impact in relation to the year ended December 31, 2012, when it was corrected, as well as the period in which it originated and believes that the adjustment was not material to any previous annual or quarterly period.

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. Mission is also a guarantor of Nexstar’s $250.0 million 6.875% senior unsecured notes (“6.875% Notes”). The notes are general senior unsecured obligations subordinated to all of Mission’s senior debt. 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 senior secured credit facility and 6.875% Notes. As of December 31, 2012, Nexstar had a maximum commitment of $311.0 million under its senior secured credit facility, of which $246.0 million of debt was outstanding and had $250.0 million of the 6.875% Notes.

Purchase Options Granted to Nexstar

In consideration of the guarantee of Mission’s bank credit facility by Nexstar Broadcasting Group, Inc. and subsidiaries, Mission 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 agreement, 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. Additionally, on November 29, 2011, Mission’s shareholders granted Nexstar an option to purchase any or all of the Company’s stock, subject to FCC consent, for a price equal to the pro rata portion of the greater of (1) five times the stations’ cash flow, as defined in the agreement, reduced by the amount of indebtedness, as defined in the agreement, or (2) $100,000. These option agreements (which expire on various dates between 2013 and 2022) are freely exercisable or assignable by Nexstar without consent or approval by Mission or its shareholders. The Company expects these option agreements to be renewed upon expiration.

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 insignificant and the Company has not incurred significant costs to defend lawsuits or settle claims related to these indemnification agreements.

F-22

Litigation

From time to time, the Company is involved in 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.

12. Employee Benefits

The Company has established a retirement savings plan under Section 401(k) of the Internal Revenue Code (the “Plan”). The Plan covers substantially all employees of the Company who meet minimum age and service requirements, and allows participants to defer a portion of their annual compensation on a pre-tax basis. Contributions to the Plan may be made at the discretion of the Company. The Company contributed $16 thousand, $16 thousand and $14 thousand to the Plan for the years ended December 31, 2012, 2011 and 2010, respectively.

13. Valuation and Qualifying Accounts

Allowance for Doubtful Accounts Rollforward (in thousands)
				Additions
	Balance at			Charged to							Balance at
	Beginning			Costs and							End of
	of Period			Expenses			Deductions(1)				Period
Year Ended December 31, 2012		$	113		$	2		$	(85	)		$	30
Year Ended December 31, 2011			146			153			(186	)			113
Year Ended December 31, 2010			53			154			(61	)			146

(1) Primarily uncollectible accounts written off, net of recoveries.  In 2011, includes the allowance on the accounts receivable remaining with Nexstar upon change in reporting entity, as discussed in Note 3.

Valuation Allowance on Deferred Tax Assets Rollforward (in thousands)
				Additions			Additions
	Balance at			Charged to			Charged to							Balance at
	Beginning			Costs and			Other							End of
	of Period			Expenses(1)			Accounts(2)			Deductions(3)				Period
Year Ended December 31, 2012		$	43,035		$	-		$	-		$	(43,035	)		$	-
Year Ended December 31, 2011			39,792			1,554			1,689			-				43,035
Year Ended December 31, 2010			36,787			3,005			-			-				39,792

(1)	Increase in valuation allowance related to the generation of net operating losses and other deferred tax assets.
(2)	Impact of change in reporting entity, discussed in Note 3.
(3)	In the fourth quarter of 2012, the Company released the valuation allowance against deferred tax assets.

14. Subsequent Events

Effective January 1, 2013, the Company acquired the assets of KLRT-TV, the FOX affiliate, and KASN, the CW affiliate, both in the Little Rock, Arkansas market, from Newport Television, LLC for a total of $59.7 million. Pursuant to the terms of the purchase agreement, the Company made an initial payment of $6.0 million against the purchase price on July 18, 2012 to acquire the assets of KLRT-TV and KASN. The Company paid the remaining $53.7 million on January 3, 2013 funded by the $60.0 million proceeds of additional term loan under the Company’s senior secured credit facility. Transaction costs relating to this acquisition, including legal fees and travel of $0.1 million were expensed as incurred during the year ended December 31, 2012.

On March 1, 2013, the Company acquired the assets of WVNY, the ABC affiliate in the Burlington, Vermont market, from Smith Media, LLC for a total purchase price of $5.6 million paid on March 1, 2013. The purchase price was funded by a $5.0 million borrowing from the Company’s revolving credit facility and cash on hand. Transaction costs relating to this acquisition, including legal fees and travel of $37 thousand were expensed as incurred during the year ended December 31, 2012.

F-23

Exhibit No.	Exhibit Index
3.1	Certificate of Incorporation of Mission Broadcasting, Inc. (f/k/a Mission Broadcasting of Wichita Falls, Inc.) (Incorporated by reference to Exhibit 3.1 to Annual Report on Form 10-K for the year ended December 31, 2002 (File No. 333-62916-02) filed by Mission Broadcasting of Wichita Falls, Inc.)
3.2	By-laws of Mission Broadcasting, Inc. (f/k/a Mission Broadcasting of Wichita Falls, Inc.) (Incorporated by reference to Exhibit 3.2 to Annual Report on Form 10-K for the year ended December 31, 2002 (File No. 333-62916-02) filed by Mission Broadcasting of Wichita Falls, Inc.)
4.1	Indenture, dated as of April 19, 2010, by and among Nexstar Broadcasting, Inc. and Mission Broadcasting Inc., as Issuers, Nexstar Broadcasting Group, Inc., as Guarantor, and The Bank of New York Mellon, as Trustee, and The Bank of New York Mellon, as Collateral Agent. (Incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K (File No. 333-62916-02) filed by Mission Broadcasting, Inc. on April 23, 2010)
4.2	Indenture, dated as of November 9, 2012, among Nexstar Broadcasting, Inc., Nexstar Broadcasting Group, Inc., as a guarantor, Mission Broadcasting, Inc., as a guarantor, and The Bank of New York Mellon, as trustee (Incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K (File No. 000-50478) filed by Nexstar Broadcasting Group, Inc. on November 9, 2012)
10.1	Supplemental Indenture, dated as of April 1, 2005, among Nexstar Broadcasting, Inc., Nexstar Broadcasting Group, Inc., Mission Broadcasting, Inc., and The Bank of New York, as Trustee. (Incorporated by reference to Exhibit 99.4 to the Current Report on Form 8-K (File No. 000-50478) filed by Nexstar Broadcasting Group, Inc. on April 6, 2005)
10.2	Indenture, dated as of March 30, 2009, among Nexstar Broadcasting, Inc., Mission Broadcasting, Inc., as guarantor, and The Bank of New York Mellon, as Trustee. (Incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K (File No. 333-62916-02), filed by Mission Broadcasting, Inc. on April 3, 2009)
10.3	First Supplemental Indenture, dated as of March 30, 2009, among Nexstar Broadcasting, Inc., Mission Broadcasting, Inc., as guarantor, and Nexstar Broadcasting Group, Inc., as parent guarantor, and The Bank of New York Mellon, as Trustee. (Incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K (File No. 333-62916-02), filed by Mission Broadcasting, Inc. on April 3, 2009)
10.4	Guarantee, dated as of April 1, 2005, of Nexstar Broadcasting Group, Inc. executed pursuant to the Indenture dated as of December 30, 2003, among Nexstar Broadcasting, Inc., Mission Broadcasting, Inc. and The Bank of New York, as Trustee, as amended and supplemented by the Supplemental Indenture (as defined therein). (Incorporated by reference to Exhibit 99.5 to the Current Report on Form 8-K (File No. 000-50478) filed by Nexstar Broadcasting Group, Inc. on April 6, 2005)
10.5	First Amendment and Confirmation Agreement to Mission Guarantee of Nexstar Obligations, dated as of April 1, 2005, by and among Mission Broadcasting, Inc. as Guarantor and Bank of America, N.A. as Collateral Agent, on behalf of the Majority Lenders (as defined therein). (Incorporated by reference to Exhibit 99.2 to the Current Report on Form 8-K (File No. 333-62916-02) filed by Mission Broadcasting, Inc. on April 7, 2005)
10.6	Confirmation Agreement for the Smith Pledge Agreement, dated as of April 1, 2005, by David S. Smith and Bank of America, N.A. as Collateral Agent. (Incorporated by reference to Exhibit 99.3 to the Current Report on Form 8-K (File No. 333-62916-02) filed by Mission Broadcasting, Inc. April 7, 2005)
10.7	Guarantee, dated as of March 30, 2009, of Nexstar Broadcasting Group, Inc. executed pursuant to the Indenture, dated as of March 30, 2009, among Nexstar Broadcasting, Inc., Mission Broadcasting, Inc., as guarantor, and The Bank of New York Mellon, as Trustee, as amended and supplemented by the First Supplemental Indenture referenced above (included as part of Exhibit 10.5). (Incorporated by reference to Exhibit 4.3 to Current Report on Form 8-K (File No. 333-62916-02), filed by Mission Broadcasting, Inc. on April 3, 2009)
10.8	Third Amended and Restated Credit Agreement, dated as of April 1, 2005, among Mission Broadcasting, Inc., the several banks and other financial institutions or entities from time to time parties thereto, Bank of America, N.A., as the Administrative Agent for the Lenders, and UBS Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Co-Syndication Agents. (Incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K (File No. 333-62916-02) filed by Mission Broadcasting, Inc. on April 7, 2005)
10.9	First Amendment to Third Amended and Restated Credit Agreement dated October 8, 2009, among Mission Broadcasting, Inc., Bank of America, N.A., Banc of America Securities, UBS Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and the several banks parties thereto. (Incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q (File No. 333-62916-02), filed by Mission Broadcasting, Inc. on November 12, 2009)

E-1

Exhibit No.	Exhibit Index
10.10	Second Amendment to the Third Amended and Restated Credit Agreement, dated as of April 19, 2010, among Mission Broadcasting, Inc., the several financial institutions from time to time parties thereto, Bank of America, N.A., as administrative agent and syndication agent, and Banc of America Securities LLC, UBS Securities LLC, and Deutsche Bank Securities Inc., as joint lead arrangers, joint book managers and co-documentation agents. (Incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K (File No. 333-62916-02) filed by Mission Broadcasting, Inc. on April 23, 2010)
10.11	Third Amendment to the Third Amended and Restated Credit Agreement, dated as of July 29, 2011, by and among Mission Broadcasting, Inc., Bank of America, N.A. and the several Banks parties thereto. (Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K (File No. 333-62916-02) filed by Mission Broadcasting, Inc. on August 4, 2011)
10.12	Fourth Amendment to the Third Amended and Restated Credit Agreement, dated as of September 19, 2012 (Executed on September 27, 2012), by and among Mission Broadcasting, Inc., Bank of America, N.A. and the several Banks parties thereto. (Incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K (File No. 000-50478) filed by Nexstar Broadcasting Group, Inc. on October 3, 2012)
10.13	Fifth Amendment to the Third Amended and Restated Credit Agreement, dated as of October 23, 2012, by and among Mission Broadcasting, Inc., Bank of America, N.A. and the several Banks parties thereto. (Incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K (File No. 000-50478) filed by Nexstar Broadcasting Group, Inc. on October 25, 2012)
10.14	Fourth Amended and Restated Credit Agreement, dated December 3, 2012, by and among Mission Broadcasting, Inc., Bank of America, N.A., as administrative agent and collateral agent, UBS Securities, LLC, as syndication agent, joint lead arranger and joint book manager, RBC Capital Markets, as documentation agent, joint lead arranger and joint book manager, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as joint lead arranger and joint book manager, and a syndicate of other lenders (Incorporated by reference  to Exhibit 10.1 to Current Report on Form 8-K (File No. 333-62916-02) filed by Mission Broadcasting, Inc. on December 5, 2012)
10.15	Third Restated Guaranty (Nexstar Obligations) dated as of December 3, 2012. (Incorporated by reference  to Exhibit 10.2 to Current Report on Form 8-K (File No. 333-62916-02) filed by Mission Broadcasting, Inc. on December 5, 2012)
10.16	Fourth Amended and Restated Credit Agreement, dated as of April 1, 2005, among Nexstar Broadcasting, Inc., Nexstar Broadcasting Group, Inc., certain of its subsidiaries from time to time parties to the Credit Agreement, the several banks and other financial institutions or entities from time to time parties hereto, Bank of America, N.A., as the Administrative Agent for the Lenders, and UBS Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Co-Syndication Agents. (Incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K (File No. 000-50478) filed by Nexstar Broadcasting Group, Inc., on April 6, 2005)
10.17	First Amendment to the Fourth Amended and Restated Credit Agreement, dated as of October 20, 2005, among Nexstar Broadcasting, Inc., Nexstar Broadcasting Group, Inc., certain of its subsidiaries from time to time parties to the Credit Agreement, the several banks and other financial institutions or entities from time to time parties hereto, Bank of America, N.A., as the Administrative Agent for the Lenders, and UBS Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Co-Syndication Agents. (Incorporated by reference to Exhibit 10.121 to the Annual Report on Form 10-K (File No. 000-50478) filed by Nexstar Broadcasting Group, Inc., on March 16, 2006)
10.18	Second Amendment to the Fourth Amended and Restated Credit Agreement, dated as of October 8, 2009, among Nexstar Broadcasting, Inc., Nexstar Broadcasting Group, Inc., certain of its subsidiaries from time to time parties to the Credit Agreement, the several banks and other financial institutions or entities from time to time parties hereto, Bank of America, N.A., as the Administrative Agent for the Lenders, and UBS Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Co-Syndication Agents. (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 000-50478) filed by Nexstar Broadcasting Group, Inc., on October 15, 2009)
10.19	Third Amendment to the Fourth Amended and Restated Credit Agreement, dated as of April 19, 2010, among Nexstar Broadcasting, Inc., Nexstar Broadcasting Group, Inc., the several financial institutions from time to time parties thereto, Bank of America, N.A., as administrative agent and syndication agent, and Banc of America Securities LLC, UBS Securities LLC, and Deutsche Bank Securities Inc., as joint lead arrangers, joint book managers and co-documentation agents. (Incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K (File No. 333-62916-02) filed by Mission Broadcasting, Inc. on April 23, 2010)

E-2

Exhibit No.	Exhibit Index
10.20	Fourth Amendment to the Fourth Amended and Restated Credit Agreement, dated as of April 15, 2011, by and among Nexstar Broadcasting, Inc., Nexstar Broadcasting Group, Inc., Nexstar Finance Holdings, Inc., Bank of America, N.A. and the several Banks parties thereto. (Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K (File No. 000-50478) filed by Nexstar Broadcasting Group, Inc. on April 21, 2011)
10.21	Fifth Amendment to the Fourth Amended and Restated Credit Agreement, dated as of July 29, 2011, by and among Nexstar Broadcasting, Inc., Nexstar Broadcasting Group, Inc., Nexstar Finance Holdings, Inc., Bank of America, N.A. and the several Banks parties thereto. (Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K (File No. 000-50478) filed by Nexstar Broadcasting Group, Inc. on August 4, 2011)
10.22	Sixth Amendment to the Fourth Amended and Restated Credit Agreement, dated as of September 19, 2012 (Executed on September 27, 2012), by and among Nexstar Broadcasting, Inc., Nexstar Broadcasting Group, Inc., Nexstar Finance Holdings, Inc., Bank of America, N.A. and the several Banks parties thereto. (Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K (File No. 000-50478) filed by Nexstar Broadcasting Group, Inc. on October 3, 2012)
10.23	Seventh Amendment to the Fourth Amended and Restated Credit Agreement, dated as of October 23, 2012, by and among Nexstar Broadcasting, Inc., Nexstar Broadcasting Group, Inc., Nexstar Finance Holdings, Inc., Bank of America, N.A. and the several Banks parties thereto. (Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K (File No. 000-50478) filed by Nexstar Broadcasting Group, Inc. on October 25, 2012)
10.24	Fifth Amended and Restated Credit Agreement, dated December 3, 2012, by and among Nexstar Broadcasting, Inc., Nexstar Broadcasting Group, Inc., Nexstar Finance Holdings, Inc., Mission Broadcasting, Inc., Bank of America, N.A., as administrative agent, collateral agent, swing line lender and L/C issuer, UBS Securities, LLC, as syndication agent, joint lead arranger and joint book manager, RBC Capital Markets, as documentation agent, joint lead arranger and joint book manager, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as joint lead arranger and joint book manager, and a syndicate of other lenders (Incorporated by reference  to Exhibit 10.3 to Current Report on Form 8-K (File No. 333-62916-02) filed by Mission Broadcasting, Inc. on December 5, 2012)
10.25	Registration Rights Agreement, dated as of November 9, 2012, by and among Nexstar Broadcasting, Inc., Mission Broadcasting, Inc., Nexstar Broadcasting Group, Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, UBS Securities LLC and RBC Capital Markets, LLC (Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K (File No. 000-50478) filed by Nexstar Broadcasting Group, Inc. on November 9, 2012)
10.26	Option Agreement, dated as of June 1, 1999, among Mission Broadcasting of Wichita Falls, Inc., David Smith and Nexstar Broadcasting of Wichita Falls, L.P. (KJTL and KJBO-LP (Incorporated by reference to Exhibit 10.42 to Amendment No. 2 to Registration Statement on Form S-1 (File No. 333-86994) filed by Nexstar Broadcasting Group, Inc.)
10.27	Shared Services Agreement, dated as of June 1, 1999, among Mission Broadcasting of Wichita Falls, Inc., David Smith and Nexstar Broadcasting of Wichita Falls, L.P. (KJTL and KJBO-LP – KFDX) (Incorporated by reference to Exhibit 10.43 to Amendment No. 2 to Registration Statement on Form S-1 (File No. 333-86994) filed by Nexstar Broadcasting Group, Inc.)
10.28	Agreement of the Sale of Commercial Time, dated as of June 1, 1999, among Mission Broadcasting of Wichita Falls, Inc., David Smith and Nexstar Broadcasting of Wichita Falls, L.P. (KJTL and KJBO-LP – KFDX) (Incorporated by reference to Exhibit 10.44 to Amendment No. 2 to Registration Statement on Form S-1 (File No. 333-86994) filed by Nexstar Broadcasting Group, Inc.)
10.29	Option Agreement, dated as of May 19, 1998, among Bastet Broadcasting, Inc., David Smith and Nexstar Broadcasting of Northeastern Pennsylvania, L.P. (WYOU) (Incorporated by reference to Exhibit 10.45 to Amendment No. 2 to Registration Statement on Form S-1 (File No. 333-86994) filed by Nexstar Broadcasting Group, Inc.)
10.30	Shared Services Agreement, dated as of January 5, 1998, between Nexstar Broadcasting Group, L.P. and Bastet Broadcasting, Inc. (WYOU – WBRE) (Incorporated by reference to Exhibit 10.46 to Amendment No. 2 to Registration Statement on Form S-1 (File No. 333-86994) filed by Nexstar Broadcasting Group, Inc.)
10.31	Option Agreement, dated as of November 30, 1998, among Bastet Broadcasting, Inc., David Smith and Nexstar Broadcasting Group, L.L.C. (WFXP) (Incorporated by reference to Exhibit 10.47 to Amendment No. 2 to Registration Statement on Form S-1 (File No. 333-86994) filed by Nexstar Broadcasting Group, Inc.)
10.32	Time Brokerage Agreement, dated as of April 1, 1996, by and between SJL Communications, L.P. and NV Acquisitions Co. (WFXP – WJET) (Incorporated by reference to Exhibit 10.48 to Amendment No. 2 to Registration Statement on Form S-1 (File No. 333-86994) filed by Nexstar Broadcasting Group, Inc.)
10.33	Amendment to Time Brokerage Agreement, dated as of July 31, 1998,between SJL Communications, L.P. and NV Acquisitions Co. (WFXP – WJET) (Incorporated by reference to Exhibit 10.49 to Amendment No. 2 to Registration Statement on Form S-1 (File No. 333-86994) filed by Nexstar Broadcasting Group, Inc.)
10.34	Amendment to Time Brokerage Agreement, dated as of July 17, 2006, between Nexstar Braodcasting, Inc. and Mission Broadcasting, Inc. (WFXP – WJET) (Incorporated by reference to Exhibit 10.21 to Annual Report on Form 10-K for the year ended December 31, 2011 (File No. 000-50478) filed by Nexstar Broadcasting Group, Inc. on March 15, 2012)

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Exhibit No.	Exhibit Index
10.35	Letter, notifying Mission Broadcasting, Inc. of the election to extend Time Brokerage Agreement (WFXP – WJET) (Incorporated by reference to Exhibit 10.22 to Annual Report on Form 10-K for the year ended December 31, 2011 (File No. 000-50478) filed by Nexstar Broadcasting Group, Inc. on March 15, 2012)
10.36	Option Agreement, dated as of April 1, 2002, by and between Mission Broadcasting of Joplin, Inc. and Nexstar Broadcasting of Joplin, L.L.C. (KODE) (Incorporated by reference to Exhibit 10.50 to Amendment No. 2 to Registration Statement on Form S-1 (File No. 333-86994) filed by Nexstar Broadcasting Group, Inc.)
10.37	Shared Services Agreement, dated as of April 1, 2002, by and between Mission Broadcasting of Joplin, Inc. and Nexstar Broadcasting of Joplin, L.L.C. (KODE – KSNF) (Incorporated by reference to Exhibit 10.51 to Amendment No. 2 to Registration Statement on Form S-1 (File No. 333-86994) filed by Nexstar Broadcasting Group, Inc.)
10.38	Amendment to Option Agreements, dated as of October 18, 2002, among Mission Broadcasting, Inc., David Smith, Nexstar Broadcasting of Northeastern Pennsylvania, L.L.C., Nexstar Broadcasting Group, L.L.C., Nexstar Broadcasting of Wichita Falls, L.L.C., and Nexstar Broadcasting of Joplin, L.L.C. (WYOU, WFXP, KJTL, KJBO-LP and KODE) (Incorporated by reference to Exhibit 10.54 to Amendment No. 2 to Registration Statement on Form S-1 (File No. 333-86994) filed by Nexstar Broadcasting Group, Inc.)
10.39	Amendment to Option Agreement, dated April 25, 2011, by and between Mission Broadcasting, Inc. and Nexstar Broadcasting, Inc. (KODE) (Incorporated by reference to Exhibit 10.26 to Annual Report on Form 10-K for the year ended December 31, 2011 (File No. 000-50478) filed by Nexstar Broadcasting Group, Inc. on March 15, 2012)
10.40	Option Agreement, dated as of June 13, 2003, among Mission Broadcasting, Inc., David Smith and Nexstar Broadcasting of Abilene, L.L.C. (KRBC) (Incorporated by reference to Exhibit 10.64 to Registration Statement on Form S-1 (File No. 333-86994) filed by Nexstar Broadcasting Group, Inc.)
10.41	Shared Services Agreement, dated as of June 13, 2003, by and between Mission Broadcasting, Inc. and Nexstar Broadcasting of Abilene, L.L.C. (KRBC – KTAB) (Incorporated by reference to Exhibit 10.63 to Registration Statement on Form S-1 (File No. 333-86994) filed by Nexstar Broadcasting Group, Inc.)
10.42	Option Agreement, dated as of May 9, 2003, among Mission Broadcasting, Inc., David Smith and Nexstar Broadcasting of the Midwest, Inc. (WAWV) (Incorporated by reference to Exhibit 10.3 to Quarterly Report on Form 10-Q for the period ended June 30, 2003 (File No. 333-62916-02) filed by Mission Broadcasting, Inc.)
10.43	Shared Services Agreement, dated as of May 9, 2003, by and between Mission Broadcasting, Inc. and Nexstar Broadcasting of the Midwest, Inc. (WAWV – WTWO) (Incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the period ended June 30, 2003 (File No. 333-62916-02) filed by Mission Broadcasting, Inc.)
10.44	Agreement for the Sale of Commercial Time, dated as of May 9, 2003, by and between Mission Broadcasting, Inc. and Nexstar Broadcasting of the Midwest, Inc. (WAWV – WTWO) (Incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q for the period ended June 30, 2003 (File No. 333-62916-02) filed by Mission Broadcasting, Inc.)
10.45	Amendment to Agreement for Sale of Commercial Time, dated January 13, 2004, by and between Nexstar Broadcasting, Inc. and Mission Broadcasting, Inc. (WAWV-WTWO). (Incorporated by reference to Exhibit 10.97 to Amendment No. 1 to Registration Statement on Form S-4 (File No. 333-114963) filed by Nexstar Broadcasting, Inc.)
10.46	Amendment to Shared Services Agreement, dated January 13, 2004, by and between Nexstar Broadcasting, Inc. and Mission Broadcasting, Inc. (WAWV-WTWO). (Incorporated by reference to Exhibit 10.98 to Amendment No. 1 to Registration Statement on Form S-4 (File No. 333-114963) filed by Nexstar Broadcasting, Inc.)
10.47	Amendment to Agreement for Sale of Commercial Time, dated December 30, 2003, by and between Nexstar Broadcasting, Inc. and Mission Broadcasting, Inc. (KAMC-KLBK). (Incorporated by reference to Exhibit 10.91 to Amendment No. 1 to Registration Statement on Form S-4 (File No. 333-114963) filed by Nexstar Broadcasting, Inc.)

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Exhibit No.	Exhibit Index
10.48	Amendment to Shared Services Agreement, dated December 30, 2003, by and between Nexstar Broadcasting, Inc. and Mission Broadcasting, Inc. (KAMC-KLBK). (Incorporated by reference to Exhibit 10.92 to Amendment No. 1 to Registration Statement on Form S-4 (File No. 333-114963) filed by Nexstar Broadcasting, Inc.)
10.49	Amendment to Agreement for Sale of Commercial Time, dated December 30, 2003, by and between Nexstar Broadcasting, Inc. and Mission Broadcasting, Inc. (KOLR-KOZL). (Incorporated by reference to Exhibit 10.93 to Amendment No. 1 to Registration Statement on Form S-4 (File No. 333-114963) filed by Nexstar Broadcasting, Inc.)
10.50	Amendment to Shared Services Agreement, dated December 30, 2003, by and between Nexstar Broadcasting, Inc. and Mission Broadcasting, Inc. (KOLR-KOZL). (Incorporated by reference to Exhibit 10.94 to Amendment No. 1 to Registration Statement on Form S-4 (File No. 333-114963) filed by Nexstar Broadcasting, Inc.)
10.51	Amendment to Agreement for Sale of Commercial Time, dated January 1, 2004, by and between Nexstar Broadcasting, Inc. and Mission Broadcasting, Inc. (KCIT-KAMR). (Incorporated by reference to Exhibit 10.95 to Amendment No. 1 to Registration Statement on Form S-4 (File No. 333-114963) filed by Nexstar Broadcasting, Inc.)
10.52	Amendment to Shared Services Agreement, dated January 1, 2004, by and between Nexstar Broadcasting, Inc. and Mission Broadcasting, Inc. (KCIT-KAMR). (Incorporated by reference to Exhibit 10.96 to Amendment No. 1 to Registration Statement on Form S-4 (File No. 333-114963) filed by Nexstar Broadcasting, Inc.)
10.53	Agreement for Sale of Commercial Time, dated April 1, 2004, by and between Nexstar Broadcasting, Inc. and Mission Broadcasting, Inc. (WUTR-WFXV). (Incorporated by reference to Exhibit 10.99 to Amendment No. 1 to Registration Statement on Form S-4 (File No. 333-114963) filed by Nexstar Broadcasting, Inc.)
10.54	Shared Services Agreement, dated April 1, 2004, by and between Nexstar Broadcasting, Inc. and Mission Broadcasting, Inc. (WUTR-WFXV). (Incorporated by reference to Exhibit 10.100 to Amendment No. 1 to Registration Statement on Form S-4 (File No. 333-114963) filed by Nexstar Broadcasting, Inc.)
10.55	Amendment to Agreement for Sale of Commercial Time, dated January 1, 2004, by and between Nexstar Broadcasting, Inc. (as successor to Nexstar Broadcasting of Wichita Falls, L.P.) and Mission Broadcasting, Inc. (f/k/a Mission Broadcasting of Wichita Falls, Inc.) (KJBO-KFDX). (Incorporated by reference to Exhibit 10.101 to Amendment No. 1 to Registration Statement on Form S-4 (File No. 333-114963) filed by Nexstar Broadcasting, Inc.)
10.56	Amendment to Shared Services Agreement, dated January 1, 2004, by and between Nexstar Broadcasting, Inc. (as successor to Nexstar Broadcasting of Wichita Falls, L.P.) and Mission Broadcasting, Inc. (f/k/a Mission Broadcasting of Wichita Falls, Inc.) (KJBO-KFDX). (Incorporated by reference to Exhibit 10.102 to Amendment No. 1 to Registration Statement on Form S-4 (File No. 333-114963) filed by Nexstar Broadcasting, Inc.)
10.57	Stock Option Agreement, dated as of November 29, 2011, by and among Mission Broadcasting, Inc., Nancie J. Smith, Dennis Thatcher and Nexstar Broadcasting, Inc. (Incorporated by reference to Exhibit 10.44 to Annual Report on Form 10-K for the year ended December 31, 2011 (File No. 000-50478) filed by Nexstar Broadcasting Group, Inc. on March 15, 2012)
10.58	Shared Services Agreement, dated December 1, 2011, by and between Mission Broadcasting, Inc. and Nexstar Broadcasting, Inc. (WEHT-WTVW) (Incorporated by reference to Exhibit 10.45 to Annual Report on Form 10-K for the year ended December 31, 2011 (File No. 000-50478) filed by Nexstar Broadcasting Group, Inc. on March 15, 2012)
10.59	Agreement for the Sale of Commercial Time, dated December 1, 2011, by and between Mission Broadcasting, Inc. and Nexstar Broadcasting, Inc. (WEHT-WTVW) (Incorporated by reference to Exhibit 10.46 to Annual Report on Form 10-K for the year ended December 31, 2011 (File No. 000-50478) filed by Nexstar Broadcasting Group, Inc. March 15, 2012)
10.60	Executive Employment Agreement, dated December 19, 2011, by and between Nancie J. Smith and Mission Broadcasting, Inc. (Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K (File No. 333-62916-02) filed by Mission Broadcasting, Inc. on December 23, 2011)
10.61	Executive Employment Agreement, dated December 19, 2011, by and between Dennis Thatcher and Mission Broadcasting, Inc. (Incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K (File No. 333-62916-02) filed by Mission Broadcasting, Inc. on December 23, 2011)

E-5

Exhibit No.	Exhibit Index
10.62	Letter received from Nexstar Broadcasting, Inc. notifying Mission of the election to extend Shared Service Agreement (KODE-KSNF).  (Incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the period ended March 31, 2012 filed by Nexstar Broadcasting Group, Inc. on May 9, 2012)
10.63	Amendment of Option Agreement, dated as of May 1, 2012, by and between Mission Broadcasting, Inc. and Nexstar Broadcasting, Inc. (WAWV). (Incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q (File No. 000-50478), filed by Nexstar Broadcasting Group, Inc. on August 8, 2012)
10.64	Amendment of Option Agreement, dated as of June 1, 2012, by and between Mission Broadcasting, Inc. and Nexstar Broadcasting, Inc. (KRBC and KSAN). (Incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q (File No. 000-50478), filed by Nexstar Broadcasting Group, Inc. on August 8, 2012)
10.65	Amendment of Option Agreement, dated as of December 17, 2012, among Mission Broadcasting Inc. and Nexstar Broadcasting, Inc. (KAMC)*
10.66	Amendment of Option Agreement, dated as of December 17, 2012, among Mission Broadcasting Inc. and Nexstar Broadcasting, Inc. (KHMT)*
10.67	Amendment of Option Agreement, dated as of December 17, 2012, among Mission Broadcasting Inc. and Nexstar Broadcasting, Inc. (KOLR)*
10.68	Agreement for the Sale of Commercial Time, dated as of January 1, 2013, by and between Mission Broadcasting, Inc. and Nexstar Broadcasting, Inc. (KLRT-TV – KASN)*
10.69	Shared Services Agreement, dated as of January 1, 2013, by and between Mission Broadcasting, Inc. and Nexstar Broadcasting, Inc. (KLRT-TV – KASN)*
10.70	Option Agreement, dated as of January 1, 2013, among Mission Broadcasting Inc., Nancie Smith, Dennis Thatcher and Nexstar Broadcasting, Inc. (KLRT-TV – KASN)*
10.71	Agreement for the Sale of Commercial Time, dated as of March 1, 2013, by and between Mission Broadcasting, Inc. and Nexstar Broadcasting, Inc. (WVNY)*
10.72	Shared Services Agreement, dated as of March 1, 2013, by and between Mission Broadcasting, Inc. and Nexstar Broadcasting, Inc. (WVNY)*
10.73	Option Agreement, dated as of March 1, 2013, among Mission Broadcasting Inc., Nancie Smith, Dennis Thatcher and Nexstar Broadcasting, Inc. (WVNY)*
10.74	Asset Purchase Agreement, dated as of July 18, 2012, by and among Mission Broadcasting, Inc., Newport Television LLC and Newport Television License LLC. (Incorporated by reference to Exhibit 2.2 to Current Report on Form 8-K (File No. 000-50478), filed by Nexstar Broadcasting Group, Inc. on July 24, 2012)
14.1	Mission Broadcasting, Inc. Code of Ethics. (Incorporated by reference to Exhibit 14.1 to Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 333-62916-02) filed by Mission Broadcasting, Inc.)
23.1	Consent of PricewaterhouseCoopers LLP.*
31.1	Certification of Dennis Thatcher pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1	Certification of Dennis Thatcher pursuant to 18 U.S.C. ss. 1350.*
101	The Company’s Financial Statements and related Notes for the year ended December 31, 2012 from this Annual Report on Form 10-K, formatted in XBRL (eXtensible Business Reporting Language)

 _________________

*           Filed herewith

E-6