Monday, March 28, 2005

Nothing in Mission Broadcasting's annual report, filed Friday with the federal Securities and Exchange Commission would lead anyone to belief it is actually a viable media company.
The filing suggests that Mission, the listed owner of KODE-TV in Joplin and KOLR in Springfield, is a company that exists only to allow Nexstar to operate more than one television station in several markets under joint agreements.
Mission Broadcasting has one stockholder, its CEO David S. Smith, who received a $330,000 salary in 2004, up from $248,987 in 2003, and $176,447 in 2002. Smith's wife, Nancie J. Smith, listed as vice president and secretary in the filing, received $6,240, about the same amount she received each of the previous two years.
In January, The Turner Report explored just how Mission Broadcasting operates, taking information both from SEC filings and from the Jan. 11, 2004, edition of the Akron, Ohio, Beacon Journal. Rev. David Smith is pastor of the St. Paul Lutheran Center in Akron, according to the article. It describes the home of Mission Broadcasting as "the tidy white house on a quiet street. It doesn't have transmission towers in the back yard. From the sidewalk, it looks like an ordinary house."
That's because, as the article points out, it is an ordinary house. Mission doesn't run TV stations, it holds station licenses and enters into agreements with Nexstar to run those stations, including the Joplin and Springfield stations.
The article described the operation of the Nexstar-operated stations in Wilkes-Barre, Pa., which are similar to the way the Joplin stations are run. "The two stations have separate news anchors and reporters, but they share camera operators, live-satellite trucks, editors and engineers, and sometimes producers and directors.
"This system has enabled Nexstar to dominate smaller markets, where owners are only allowed one station according to FCC rules," the article said.
It quotes Nexstar CEO Perry Sook as saying that David Smith "and his people" make all of the programming decisions for Mission and that he and other Nexstar officials have nothing whatsoever to do with it.
Despite the fact that Friday's SEC filing says Smith pulled down a $330,000 salary last year, he told the Beacon Journal in January 2004 that he has "no day-to-day responsibilities" with Mission. He did not know how many employees Mission had and couldn't explain his own company's business plan.
Friday's filing outlines how the arrangement between Nexstar and Mission works.
"Mission’s sole shareholder (David Smith) has granted Nexstar purchase options to acquire the assets and liabilities of each Mission television station, subject to FCC consent, for consideration equal to the greater of (1) seven times the station’s broadcast cash flow as defined in the option agreement less the amount of its indebtedness as defined in the option agreement or (2) the amount of its indebtedness. These option agreements are freely exercisable or assignable by Nexstar without consent or approval by Mission’s sole shareholder." That would seem to solidify Smith's puppet status.
The report features a brief overview of the retransmission issue, noting that KODE is no longer carried on Cable One in Joplin and other communities.
The filing also indicates that Mission's primary reason for existence is to buy more television stations for Nexstar to operate, though it doesn't phrase it in exactly those words.
The good news for Mission last year was that its financial outlook was better. The bad news is that's because the company lost only $5.5 million, instead of the $13 million it lost the previous year.
"We have a history of net losses and a substantial accumulated deficit," the report said. "We are highly leveraged, which makes us vulnerable to changes in general economic conditions. Our ability to repay or refinance our debt will depend on, among other things, financial, business, market, competitive and other conditions, many of which are beyond our control. Based on current operations, anticipated future growth, and the continuation of the various service arrangements with Nexstar, we believe that our available cash, anticipated cash flow from operations and available borrowings under our senior credit facility will be sufficient to fund our working capital, capital expenditure requirements, interest payments and scheduled principal payments for at least the next twelve months."
And God help Mission if there is another terrorist attack against the United States. The scenario was outlined in the report. "Foreign hostilities and further terrorist attacks may affect our revenue and results of operations. We may experience a loss of advertising revenue and incur additional broadcasting expenses in the event the United States of America engages in foreign hostilities or in the event there is a terrorist attack against the United States of America. A significant news event like a war or terrorist attack will likely result in the preemption of regularly scheduled programming by network news coverage of the event. As a result, advertising may not be aired and the revenue for such advertising may be lost unless the broadcasting station is able to run the advertising at agreed-upon times in the future. There can be no assurance that advertisers will agree to run such advertising in future time periods or that space will be available for such advertising. We cannot predict the duration of such preemption of local programming if it occurs. In addition, our broadcasting stations may incur additional expenses as a result of expanded news coverage of the local impact of a war or terrorist attack. The loss of revenue and increased expenses could negatively affect our results of operations."
The filing also clearly spells out that Mission is only holding ownership papers until the Federal Communications Commission allows Nexstar to buy KODE. "In Joplin, Nexstar has an option agreement with us and David S. Smith, dated as of April 24, 2002, as amended, to acquire the assets of KODE," the filing said.

No comments: