Table of Contents

 

 

 

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

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**Form 10-Q**

 

**(MarkOne)**

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

** **

**FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2008**

 

**or**

 
| **o**      | ** ** | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934** |
|------------|------------|----------------------------------------------------------------------------------------------------------|
| ** ** | ** ** | ** **                                                                                               |
| ** ** | ** ** | **For the transition period  from:  Not Applicable**                                           |

 

**Commission file number: 1-14776**

 

**Hearst-Argyle Television, Inc.**

(Exact Name ofRegistrant as Specified in Its Charter)

 

| **Delaware**                                                   | ** ** | **74-2717523**                                             |
|----------------------------------------------------------------|------------|------------------------------------------------------------|
| (State  or other jurisdiction ofincorporation or organization) | ** ** | (I.R.S. Employer  Identification No.)            |
| ** **                                                     | ** ** | ** **                                                 |
| **300 West 57th St****New  York, NY 10019**                    | ** ** | **(212) 887-6800**                                         |
| (Address  of principal executive offices)                      | ** ** | (Registrant’s  telephone number, including area code) |

 

**SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OFTHE ACT:**

 
| **Title of Each Class**              | ** ** | **Name of Each Exchange On Which Registered** |
|-----------------------------------------------------|------------|-----------------------------------------------------------------------------|
| Series A Common Stock, par value$.01 per share |       | New York Stock Exchange                                                |

 

SECURITIES REGISTEREDPURSUANT TO SECTION 12(g) OF THE ACT:

**None**

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the precedingtwelve months (or for such shorter period that the registrant was required tofile such reports), and (2) has been subject to such filing requirementsfor the past 90 days.     Yes  x        No  o

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer or a smaller reporting company.  See definitions of “large accelerated filer”,“accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the ExchangeAct.

 

| Large accelerated filer  o | Accelerated filer x | Non-accelerated filer o                        | Smaller reporting  company o |
|----------------------------|--------------------------|------------------------------------------------|-----------------------------------|
|                       |                     | (Do not check if a  smaller reporting company) |                              |
|                            |                          |                                                |                                   |  |  |

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).  Yes  o No x

 

Shares of the registrant’scommon stock outstanding as of July 25, 2008: 93,564,968 shares(consisting of 52,266,320 shares of Series A Common Stock and 41,298,648shares of Series B Common Stock).

 

 

 

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Table of Contents

 

**HEARST-ARGYLE TELEVISION, INC.**

 

**Index**

** **
| ** **       | ** **                                                                                                                                     | ** **   | **Page  No.** |
|------------------|------------------------------------------------------------------------------------------------------------------------------------------------|--------------|---------------|
| **Part I**  | **Financial**Information**                                                                                                                     | *** *** |          |
|             |                                                                                                                                           |         |          |
| **Item 1.** | **Financial  Statements**                                                                                                                      |         |          |
|             | Condensed Consolidated Balance Sheets as of June 30,  2008 (unaudited) and December 31, 2007 |         | 1             |
|             | Condensed  Consolidated Statements of Income for the Three and Six Months Ended  June 30, 2008 and 2007 (unaudited)                  |         | 2             |
|             |
|             | Condensed  Consolidated Statements of Cash Flows for the Six Months Ended June 30,  2008 and 2007 (unaudited)                        |         | 3             |
|             |
|             | Notes to Condensed Consolidated Financial Statements                                                                                           |         | 5             |
|             |                                                                                                                                           |         |          |
| **Item 2.** | **Management’s  Discussion and Analysis of Financial Condition and Results of Operations**                                                |         | 15            |
|             |                                                                                                                                           |         |          |
| **Item 3.** | **Quantitative  and Qualitative Disclosures about Market Risk**                                                                                |         | 23            |
|             |                                                                                                                                           |         |          |
| **Item 4.** | **Controls and  Procedures**                                                                                                                   |         | 24            |
|             |                                                                                                                                           |         |          |
| **Part II** | **Other  Information**                                                                                                                         |         |          |
|             |                                                                                                                                           |         |          |
| **Item 1A.**     | **Risk Factors**                                                                                                                               | ** **   | 24            |
|             |                                                                                                                                           |         |          |
| **Item 2.** | **Unregistered  Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity  Securities**                                       |         | 25            |
|             |                                                                                                                                           |         |          |
| **Item 4.**      | **Submission of  Matters to a Vote of Security Holders**                                                                                       | ** **   | 26            |
|             |                                                                                                                                           |         |          |
| **Item 6.** | **Exhibits**                                                                                                                                   |         | 27            |
|             |                                                                                                                                           |         |          |
| **Signatures**   |                                                                                                                                           |         | 28            |

 

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**PART I**

**FINANCIAL INFORMATION**

 

**Item 1. Financial Statements**

 

**HEARST-ARGYLE TELEVISION, INC.**

 

**Condensed Consolidated Balance Sheets**

 
| ** **                                       | ** ** | **June 30, 2008** | ** ** | **December 31, 2007** | ** ** |
|--------------------------------------------------|------------|-----------------------------|------------|---------------------------------|------------|
| ** **                                       | ** ** | **(Unaudited)**             | ** ** |
| ** **                                       | ** ** | **(In thousands)**     | ** ** |
| **Assets**                                       |       |                        |       |                            |       |
| Current assets:                                  |       |                        |       |                            |       |
| Cash and cash  equivalents                       |       | $                           | 9,195      |                            | $          | 5,964 |   |
| Accounts  receivable, net                        |       | 146,619                     |       | 164,764                         |       |
| Program and  barter rights                       |       | 22,731                      |       | 65,097                          |       |
| Deferred income  tax asset                       |       | 4,794                       |       | 4,794                           |       |
| Other                                            |       | 6,745                       |       | 5,698                           |       |
| Total current  assets                            |       | 190,084                     |       | 246,317                         |       |
| Property, plant  and equipment, net              |       | 300,351                     |       | 305,971                         |       |
| Intangible  assets, net                          |       | 2,510,363                   |       | 2,513,340                       |       |
| Goodwill                                         |       | 816,728                     |       | 816,728                         |       |
| Other assets:                                    |       |                        |       |                            |       |
| Deferred  financing costs, net                   |       | 7,563                       |       | 8,000                           |       |
| Investments                                      |       | 36,792                      |       | 41,948                          |       |
| Program and  barter rights, noncurrent           |       | 9,800                       |       | 8,399                           |       |
| Other assets                                     |       | 14,671                      |       | 18,273                          |       |
| Total other  assets                              |       | 68,826                      |       | 76,620                          |       |
| Total assets                                     |       | $                           | 3,886,352  |                            | $          | 3,958,976 |   |
|                                             |       |                        |       |                            |       |
| **Liabilities  and Stockholders’ Equity**   |       |                        |       |                            |       |
| Current  liabilities:                            |       |                        |       |                            |       |
| Current portion  of long-term debt               |       | $                           | 90,000     |                            | $          | 90,016 |   |
| Accounts payable                                 |       | 8,883                       |       | 15,103                          |       |
| Accrued  liabilities                             |       | 46,164                      |       | 48,376                          |       |
| Program and  barter rights payable               |       | 22,696                      |       | 64,687                          |       |
| Payable to  Hearst Corporation, net              |       | 5,492                       |       | 5,747                           |       |
| Other                                            |       | 4,686                       |       | 6,482                           |       |
| Total current  liabilities                       |       | 177,921                     |       | 230,411                         |       |
| Program and  barter rights payable, noncurrent   |       | 17,632                      |       | 15,587                          |       |
| Long-term debt                                   |       | 797,110                     |       | 703,110                         |       |
| Note payable to  Capital Trust                   |       | —                      |       | 134,021                         |       |
| Deferred income  tax liability                   |       | 863,501                     |       | 856,790                         |       |
| Other  liabilities                               |       | 61,520                      |       | 66,658                          |       |
| Total noncurrent  liabilities                    |       | 1,739,763                   |       | 1,776,166                       |       |
| Commitments and  contingencies                   |       |                        |       |                            |       |
| Stockholders’  equity:                      |       |                        |       |                            |       |
| Series A  common stock                      |       | 574                         |       | 573                             |       |
| Series B  common stock                      |       | 413                         |       | 413                             |       |
| Additional  paid-in capital                      |       | 1,343,154                   |       | 1,336,786                       |       |
| Retained  earnings                               |       | 754,255                     |       | 743,264                         |       |
| Accumulated  other comprehensive loss, net       |       | (12,580                     | )          | (12,580                         | )          |
| Treasury stock,  at cost                         |       | (117,148                    | )          | (116,057                        | )          |
| Total  stockholders’ equity                 |       | 1,968,668                   |       | 1,952,399                       |       |
| Total  liabilities and stockholders’ equity |       | $                           | 3,886,352  |                            | $          | 3,958,976 |   |

 

See notes to condensed consolidated financialstatements.

 

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**HEARST-ARGYLE TELEVISION, INC.**

 

**Condensed Consolidated Statements ofIncome**

** **
| ** **                                       | ** ** | **Three Months Ended June 30,**                | ** ** | **Six Months Ended June 30,** | ** ** |
|--------------------------------------------------|------------|--------------------------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                       | ** ** | **2008**                                                           | ** ** | **2007**                                          | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                                       | ** ** | **(Unaudited)**                                                    | ** ** |
| ** **                                       | ** ** | **(In thousands, except per share data)** | ** ** |
|                                             |       |                                                               |       |                                              |       |   |   |   |   |
| Total revenue                                    |       | $                                                                  | 182,123    |                                              | $          | 193,019 |   | $ | 347,176 |   | $ | 362,402 |   |
| Station  operating expenses:                     |       |                                                               |       |                                              |       |   |   |   |   |
| Salaries,  benefits and other operating costs    |       | 101,946                                                            |       | 102,168                                           |       | 206,074 |   | 203,242 |   |
| Amortization of  program rights                  |       | 18,606                                                             |       | 19,422                                            |       | 37,318 |   | 38,650 |   |
| Depreciation and  amortization                   |       | 14,267                                                             |       | 14,185                                            |       | 28,319 |   | 29,181 |   |
| Insurance  settlement                            |       | —                                                             |       | —                                            |       | (11,549 | ) | — |   |
| Corporate,  general and administrative expenses  |       | 9,477                                                              |       | 8,887                                             |       | 18,193 |   | 16,668 |   |
| Operating income                                 |       | 37,827                                                             |       | 48,357                                            |       | 68,821 |   | 74,661 |   |
|                                             |       |                                                               |       |                                              |       |   |   |   |   |
| Interest expense                                 |       | 12,295                                                             |       | 16,028                                            |       | 25,177 |   | 31,917 |   |
| Interest income                                  |       | (10                                                                | )          | (407                                              | )          | (28 | ) | (752 | ) |
| Interest  expense, net – Capital Trust      |       | 6,148                                                              |       | 2,438                                             |       | 8,585 |   | 4,875 |   |
| Income before  income taxes and equity earnings  |       | 19,394                                                             |       | 30,298                                            |       | 35,087 |   | 38,621 |   |
|                                             |       |                                                               |       |                                              |       |   |   |   |   |
| Income tax  expense                              |       | 3,443                                                              |       | 12,525                                            |       | 7,733 |   | 16,517 |   |
| Equity in loss  of affiliates, net of tax        |       | 1,858                                                              |       | 752                                               |       | 3,220 |   | 831 |   |
| Net income                                       |       | $                                                                  | 14,093     |                                              | $          | 17,021 |   | $ | 24,134 |   | $ | 21,273 |   |
|                                             |       |                                                               |       |                                              |       |   |   |   |   |
| Net income per  net share – basic           |       | $                                                                  | 0.15       |                                              | $          | 0.18 |   | $ | 0.26 |   | $ | 0.23 |   |
| Number of common  shares used in the calculation |       | 93,556                                                             |       | 93,547                                            |       | 93,556 |   | 93,366 |   |
|                                             |       |                                                               |       |                                              |       |   |   |   |   |
| Net income per  net share – diluted         |       | $                                                                  | 0.15       |                                              | $          | 0.18 |   | $ | 0.26 |   | $ | 0.23 |   |
| Number of common  shares used in the calculation |       | 94,083                                                             |       | 94,508                                            |       | 94,093 |   | 94,306 |   |
|                                             |       |                                                               |       |                                              |       |   |   |   |   |
| Dividends per  common share declared             |       | $                                                                  | 0.07       |                                              | $          | 0.07 |   | $ | 0.14 |   | $ | 0.14 |   |

 

See notes to condensed consolidated financialstatements.

 

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**HEARST-ARGYLE TELEVISION, INC.**

 

**Condensed Consolidated Statements ofCash Flows**

** **
| ** **                                                                         | ** ** | **Six Months Ended June 30,** | ** ** |
|------------------------------------------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                                                         | ** ** | **2008**                                          | ** ** | **2007** | ** ** |
| ** **                                                                         | ** ** | **(Unaudited)**                                   | ** ** |
| ** **                                                                         | ** ** | **(In thousands)**                           | ** ** |
| **Operating  Activities**                                                          |       |                                              |       |   |   |
| Net income                                                                         |       | $                                                 | 24,134     |   | $ | 21,273 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |                                              |       |   |   |
|                                                                               |       |                                              |       |   |   |
| Depreciation                                                                       |       | 25,343                                            |       | 25,646 |   |
| Amortization of  intangible assets                                                 |       | 2,976                                             |       | 3,535 |   |
| Amortization of  deferred financing costs                                          |       | 437                                               |       | 896 |   |
| Amortization of  program rights                                                    |       | 37,318                                            |       | 38,650 |   |
| Deferred income  taxes                                                             |       | 7,121                                             |       | 3,442 |   |
| Equity in loss  of affiliates, net                                                 |       | 3,220                                             |       | 831 |   |
| Provision for  doubtful accounts                                                   |       | 734                                               |       | 617 |   |
| Stock-based  compensation expense                                                  |       | 4,135                                             |       | 4,120 |   |
| Insurance  settlement                                                              |       | (11,549                                           | )          | — |   |
| Business  interruption insurance proceeds                                          |       | 8,659                                             |       | — |   |
| (Gain) or loss  on disposition of assets                                           |       | (557                                              | )          | (4 | ) |
| Program payments                                                                   |       | (36,299                                           | )          | (36,284 | ) |
| Changes in  operating assets and liabilities:                                      |       |                                              |       |   |   |
| Decrease  (increase) in Accounts receivable                                        |       | 17,411                                            |       | 2,786 |   |
| Decrease  (increase) in Other assets                                               |       | 2,655                                             |       | (1,650 | ) |
| (Decrease)  increase in Accounts payable and accrued liabilities                   |       | (9,565                                            | )          | (21,946 | ) |
| (Decrease)  increase in Other liabilities                                          |       | (7,193                                            | )          | 7,705 |   |
| Net cash  provided by operating activities                                         |       | $                                                 | 68,980     |   | $ | 49,617 |   |
| **Investing  Activities**                                                          |       |                                              |       |   |   |
| Purchases of  property, plant and equipment, net                                   |       | (18,126                                           | )          | (28,764 | ) |
| Proceeds from  redemption of Capital Trust                                         |       | 4,021                                             |       | — |   |
| Cash proceeds  from insurance recoveries                                           |       | 2,890                                             |       | 1,000 |   |
| Investment in  affiliates and other, net                                           |       | (2,500                                            | )          | (1,875 | ) |
| Net cash used in  investing activities                                             |       | $                                                 | (13,715    | ) | $ | (29,639 | ) |
| **Financing  Activities**                                                          |       |                                              |       |   |   |
| Dividends paid  on common stock                                                    |       | (13,140                                           | )          | (13,069 | ) |
| Redemption of  Notes Payable to Capital Trust                                      |       | (134,021                                          | )          | — |   |
| Borrowings  (Payments) on credit facility, net                                     |       | 94,000                                            |       | — |   |
| Series A  Common Stock repurchases                                            |       | (1,091                                            | )          | — |   |
| Proceeds from  employee stock purchase plan and stock option exercises             |       | 2,234                                             |       | 14,306 |   |
| Principal  payments on capital lease obligations                                   |       | (16                                               | )          | (12 | ) |
| Net cash (used  in) provided by financing activities                               |       | $                                                 | (52,034    | ) | $ | 1,225 |   |
|                                                                               |       |                                              |       |   |   |
| Increase in cash  and cash equivalents                                             |       | 3,231                                             |       | 21,203 |   |
| Cash and cash  equivalents at beginning of period                                  |       | 5,964                                             |       | 18,610 |   |
| Cash and cash  equivalents at end of period                                        |       | $                                                 | 9,195      |   | $ | 39,813 |   |

 

See notes to condensed consolidated financialstatements.

 

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| ** **                                              | ** ** | **Six Months Ended June 30,** | ** ** |
|---------------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                              | ** ** | **2008**                                          | ** ** | **2007** | ** ** |
| ** **                                              | ** ** | **(Unaudited)**                                   | ** ** |
| ** **                                              | ** ** | **(In thousands)**                           | ** ** |
| **Supplemental  Cash Flow Information:**                |       |                                              |       |   |   |
| **Cash  paid during the period for:**                   |       |                                              |       |   |   |
| Interest                                                |       | $                                                 | 25,062     |   | $ | 30,551 |   |
| Interest on Note  payable to Capital Trust              |       | $                                                 | 8,586      |   | $ | 2,438 |   |
| Taxes, net of  refunds                                  |       | $                                                 | 6,545      |   | $ | 23,537 |   |
| **Non-cash  investing and financing activities:**       |       |                                              |       |   |   |
| Accrued  property, plant & equipment purchases |       | $                                                 | 1,133      |   | $ | 747 |   |

 

See notes to condensed consolidated financialstatements.

 

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** **

**Hearst-Argyle Television, Inc.**

**Notes to Condensed ConsolidatedFinancial Statements**

**Tabular amounts in thousand, exceptper share data**

** **

**1.    Basisof Presentation**

** **

The condensedconsolidated financial statements include the accounts of Hearst-ArgyleTelevision, Inc. and its wholly-owned subsidiaries (the “Company” or “we”or “us” or “our”), except for the Company’s wholly-owned subsidiary trust (the “CapitalTrust”) which cannot be consolidated under the Financial Accounting StandardsBoard (“FASB”) Interpretation No. 46 (revised December 2003), *Consolidation of Variable Interest Entities* (“FIN 46(R)”).  See Note 2 for additional informationregarding the Capital Trust. With the exception of the unconsolidatedsubsidiary trust, all significant intercompany accounts have been eliminated inconsolidation.

 

The accompanyingunaudited condensed consolidated financial statements do not include all of theinformation and notes required by accounting principles generally accepted inthe United States of America for complete financial statements and should beread in conjunction with the Company’s consolidated financial statementsincluded in the Annual Report on our Form 10-K for the year ended December 31,2007 (the “2007 10-K”).  In the opinionof management, all adjustments considered necessary for a fair presentationhave been included and are normal and recurring in nature.  Operating results for the three and six monthsended June 30, 2008 are not necessarily indicative of the results that maybe expected for the full year.

 

**2.****             ****Recent Developments**

** **

As of July 1,2008, the Company became a member, for U.S. federal income taxpurposes, of the affiliated group of corporations of which Hearst Holdings, Inc.(“Holdings”), a wholly-owned subsidiary of The Hearst Corporation (“Hearst”),is the common parent, as a result of Hearst’s ownership of at least 80% of theoutstanding voting power of the Company’s Common Stock.  Consequently, theCompany will file federal and certain state tax returns with Holdings on aconsolidated basis commencing July 1, 2008.  TheCompany will continue to file separate income tax returns in states where aconsolidated return is not permitted. The provision for income taxes in the Company’s consolidated financialstatements will be determined on a separate return basis.

 

On June 23, 2008,the Company redeemed all $134.0 million of its 7.5% Series B ConvertibleJunior Subordinated Debentures (“Series B Debentures”), which wereclassified as Notes payable to Capital Trust. This redemption in turn triggereda simultaneous redemption by the Capital Trust of all $130.0 million of its7.5% Series B Convertible Preferred Securities, which were convertible into5.1 million shares of the Company’s Series A Common Stock, and theCompany’s $4.0 million investment in the Capital Trust. As a result of theredemption, Notes payable to Capital Trust was reduced by $134.0 million andInvestments was reduced by $4.0 million. In addition, as a result of the redemption of the 7.5% Series BConvertible Preferred Securities, the Company paid a redemption premium of $3.9million, which was included in Interest expense, net - Capital Trust.   The redemption was funded by an advanceunder the Company’s credit facility.

 

During the first quarterof 2008, the Company reached a final settlement with its insurance carriersrelated to lost property, increased expenses and interrupted business atWDSU-TV in New Orleans, Louisiana, resulting from Hurricane Katrina in2005.  The Company received $11.5 millionin the first quarter of 2008 to bring the total recoveries to $16.5 million,net of deductibles, including an advance payment of $5.0 million in the fourthquarter of 2006.  The $11.5 millionreceived in the first quarter of 2008 has been recorded as an offset to Stationoperating expenses.

 

In 2006 Sprint NextelCorporation (“Nextel”) was granted the right from the Federal CommunicationsCommission (“FCC”) to reclaim from broadcasters in each market across thecountry the 1.9 GHz spectrum to use for an emergency communicationssystem.  In order to reclaim this signal, Nextel must replace all analogequipment currently using this spectrum with digital equipment.  Allbroadcasters have agreed to use the digital substitute that Nextel willprovide.  The transition will be completed on a market-by-marketbasis.  As the equipment is exchanged and put into service in each of ourmarkets, we will record gains to the extent that the fair market value of theequipment we 

 

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**Hearst-Argyle Television, Inc.**

**Notes to Condensed ConsolidatedFinancial Statements**

**Tabular amounts in thousand, exceptper share data**

 

receive exceeds the bookvalue of the analog equipment we exchange. During the second quarter of 2008, we recognized a gain of approximately$0.6 million resulting from the transition in one of our markets, which wasrecorded as on offset to Salaries, benefits and other operating costs.

 

**3.   Accounting Pronouncements**

** **

In December 2007,the Financial Accounting Standards Board (“FASB”) issued Statement of FinancialAccounting Standards (“SFAS”) No. 160, *Non-Controlling Interests in Consolidated FinancialStatements,**an amendment of ARB No. 51*(“SFAS160”), whichestablishes new standards that will govern the accounting for and reporting ofnon-controlling interests in partially owned consolidated subsidiaries and theloss of control of subsidiaries.  SFAS160 requires that non-controlling interests be reported as a component ofequity in a Company’s consolidated financial statements and that losses will beallocated to these interests even when such allocation might result in adeficit balance.  SFAS 160 is effectivefor all fiscal years beginning after December 15, 2008 and interim periodswithin those years.  We do not believethe adoption of SFAS 160 will have a material impact on our financial position,cash flows or results of operations.

 

In December 2007,the FASB issued SFAS No. 141(R), *BusinessCombinations* (“SFAS 141(R)”), to replace SFAS No. 141, *Business Combinations*.  SFAS 141(R) requiresuse of the acquisition method of accounting, defines the acquirer, establishesthe acquisition date and broadens the scope to all transactions and otherevents in which one entity obtains control over one or more other businesses.SFAS 141(R) is effective for business combinations for which theacquisition date is on or after the beginning of the first annual reportingperiod beginning on or after December 15, 2008. The impact of adoptingSFAS 141(R) will be dependent on business combinations that we maypursue after its effective date.

 

In February 2007, theFASB issued SFAS No. 159, *The Fair Value Option forFinancial Assets and Financial Liabilities* (“SFAS 159”), whichpermits entities to choose to measure many financial instruments and certainother items at fair value that are not currently required to be measured atfair value. SFAS 159 became effective for the Company on January 1, 2008.The adoption of SFAS 159 does not have a material impact on our financialposition, cash flows or results of operations.

 

In September 2006,the FASB issued SFAS No. 157,*Fair Value Measurements*(“SFAS 157”), which applies whenever other standards require (or permit) assetsor liabilities to be measured at fair value. SFAS 157 establishes a fair value hierarchy that prioritizes theinformation used to develop the assumptions that market participants would usewhen pricing an asset or liability.  SFAS157 is effective for fiscal years beginning after November 15, 2007 andinterim periods within those fiscal years. In February 2008, theFASB delayed the effective date of SFAS 157 for all non-financialassets and non-financial liabilities, except those that are recognized ordisclosed at fair value in the financial statements on a recurring basis (atleast annually) until fiscal years beginning after November 15, 2008 and interimperiods within those years. The adoption of SFAS 157 does not have a materialimpact on our financial position, cash flows or results of operations.

 

In September 2006,the FASB issued SFAS No. 158, *Employers’ Accounting forDefined Benefit Pension and Other Postretirement Plans* (“SFAS158”), which requires employers to fully recognize the obligationsassociated with single-employer defined benefit pension, retiree healthcare andother postretirement plans in their financial statements.  SFAS 158 requires employers to recognizean asset or liability for a plan’s overfunded or underfunded status, measure aplan’s assets and obligations that determine its funded status as of the end ofthe employer’s fiscal year and recognize in comprehensive income changes in thefunded status of a defined benefit postretirement plan in the year in whichchanges occur.  The requirement to recognize the funded status of abenefit plan and the disclosure requirements are effective for fiscalyears ending after December 15, 2006.  We have adopted therequirement to recognize the funded status of a benefit plan as of December 31,2006.  As a result, accumulated othercomprehensive loss increased by $26.4 million, net of tax, as of December 31,2006.  Additionally, the requirementto measure plan assets and benefit obligations as of the date ofthe employer’s fiscal year end is effective for all years ending after December 15,2008. The Company plans to utilize the “15-month” method to change themeasurement date from

 

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**Hearst-Argyle Television, Inc.**

**Notes to Condensed ConsolidatedFinancial Statements**

**Tabular amounts in thousand, exceptper share data**

 

September 30 to December 31in 2008. As such, in the fourth quarter of 2008, the Company will record adecrease to Retained earnings of $2.9 million and an increase of $0.3 million,net of tax, in Accumulated other comprehensive income due to the change.

 

In June 2006, theFASB issued Financial Interpretation No. 48, *Accountingfor Uncertainty in Income Taxes* (“FIN 48”).  FIN 48 clarifies the accounting for uncertaintax positions by prescribing a minimum recognition threshold for recognition oftax benefits in the financial statements.The adoption of FIN 48 on January 1, 2007resulted in a decrease to Retained earnings of $11.3 million, a decrease inDeferred income tax liability of $15.8 million and an increase to Otherliabilities of $27.1 million.

 

**4.    Stock-BasedCompensation**

** **

Stock-based compensation expense for the three and six months ended June 30,2008 was $2.1 million and $4.1 million, respectively, as compared to $2.1million and $4.1 million in the three and six months ended June 30,2007.   The total deferred tax benefit related thereto was$0.8 million and $1.6 million for the three and six months ended June 30, 2008and $0.8 million and $1.6 million for the three and six months ended June 30,2007.  As of June 30, 2008, therewas $10.2 million of total unrecognized compensation cost related to unvestedshare-based compensation awards granted under the Company’s equity compensationplans, which does not include the effect of future grants of equitycompensation, if any.  Of the total $10.2million, we expect to recognize approximately 36% in the remaining interimperiods of 2008, 45% in 2009 and 19% in 2010, reflecting the timing of vestingof those awards.

 

**5.    Long-TermDebt**

** **

Long-term debt asof June 30, 2008 and December 31, 2007 consisted of the following:

 
| ** **                 | ** ** | **June 30, 2008** | ** ** | **December 31, 2007** | ** ** |
|----------------------------|------------|-----------------------------|------------|---------------------------------|------------|
| ** **                 | ** ** | **(Unaudited)**             | ** ** | ** **                      | ** ** |
| Revolving Credit  Facility |       | $                           | 335,000    |                            | $          | 241,000 |   |
| Senior Notes               |       | 282,110                     |       | 282,110                         |       |
| Private  Placement Debt    |       | 270,000                     |       | 270,000                         |       |
| Capital Lease  Obligations |       | —                      |       | 16                              |       |
|                       |       | 887,110                     |       | 793,126                         |       |
| Less: Current  Maturities  |       | (90,000                     | )          | (90,016                         | )          |
|                       |       |                        |       |                            |       |
| Total long-term  debt      |       | $                           | 797,110    |                            | $          | 703,110 |   |

 

**6.    EarningsPer Share**

 

The calculation ofbasic earnings per share (“EPS”) for each period is based on the weighted averagenumber of common shares outstanding during the period.  The calculation of diluted EPS for eachperiod is based on the weighted average number of common shares outstandingduring the period, including restricted stock issued to date, plus the effect,if any, from the assumed exercise of stock options and conversion of preferredsecurities.  The following table setsforth a reconciliation between basic EPS and diluted EPS, in accordance withSFAS No. 128, *Earnings Per Share*.

 

7

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Table of Contents

 

**Hearst-Argyle Television, Inc.**

**Notes to Condensed ConsolidatedFinancial Statements**

**Tabular amounts in thousand, exceptper share data**

 
| ** **                                                    | ** ** | **Three months ended June 30,** | ** ** | **Six months ended June 30,** | ** ** |
|---------------------------------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                                    | ** ** | **2008**                                            | ** ** | **2007**                                          | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                                                    | ** ** | **(Unaudited)**                                     | ** ** |
| Income  applicable to common stockholders (Basic and Diluted) |       | $                                                   | 14,093     |                                              | $          | 17,021 |   | $ | 24,134 |   | $ | 21,273 |   |
| Basic shares                                                  |       | 93,556                                              |       | 93,547                                            |       | 93,556 |   | 93,366 |   |
| Basic EPS                                                     |       | $                                                   | 0.15       |                                              | $          | 0.18 |   | $ | 0.26 |   | $ | 0.23 |   |
|                                                          |       |                                                |       |                                              |       |   |   |   |   |
| Diluted shares                                                |       | 94,083                                              |       | 94,508                                            |       | 94,093 |   | 94,306 |   |
| Diluted EPS                                                   |       | $                                                   | 0.15       |                                              | $          | 0.18 |   | $ | 0.26 |   | $ | 0.23 |   |
|                                                          |       |                                                |       |                                              |       |   |   |   |   |
| Basic shares                                                  |       | 93,556                                              |       | 93,547                                            |       | 93,556 |   | 93,366 |   |
| Add: Shares  issued upon assumed exercise of stock options    |       | 527                                                 |       | 961                                               |       | 537 |   | 940 |   |
| Diluted shares                                                |       | 94,083                                              |       | 94,508                                            |       | 94,093 |   | 94,306 |   |

 

For the three andsix month periods ended June 30, 2007, the Company was required to performa dilution test on the 7.5% Series B Convertible Preferred Securitiesissued by the Capital Trust which were outstanding as of June 30,2007.  The test considered only the totalnumber of shares that could be issued if converted and did not consider eitherthe conversion price or the share price of the underlying common shares. Forthe three and six months ended June 30, 2007, 5,127,881 shares of Series ACommon Stock to be issued upon the conversion of 2,600,000 shares of 7.5% Series BConvertible Preferred Securities, related to the Capital Trust, were notincluded in the number of common shares used in the calculation of diluted EPSbecause to do so would have been anti-dilutive. When the securities related tothe Capital Trust were dilutive, the interest, net of tax, related to theCapital Trust was added back to Income applicable to common stockholders forpurposes of the diluted EPS calculation.

 

Options topurchase 5,557,064 and 982,718 shares of Series A Common Stock (beforeapplication of the treasury stock method), outstanding as of June 30, 2008and 2007, respectively, were not included in the computation of diluted EPSbecause the exercise price was greater than the average market price of $20.68and $20.96 during the three and six months ended June 30, 2008,respectively, and $26.07 and $26.12 during three and six months ended June 30,2007, respectively.

 

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Table of Contents

 

**Hearst-Argyle Television, Inc.**

**Notes to Condensed ConsolidatedFinancial Statements**

**Tabular amounts in thousand, exceptper share data**

 

**7.    Goodwilland Intangible Assets**

 
| ** **                                                         | ** ** | **June 30, 2008** | ** ** | **December 31, 2007** | ** ** |
|--------------------------------------------------------------------|------------|-----------------------------|------------|---------------------------------|------------|
| ** **                                                         | ** ** | **(Unaudited)**             | ** ** | ** **                      | ** ** |
| Total intangible  assets subject to amortization                   |       | $                           | 97,106     |                            | $          | 100,083 |   |
| Intangible  assets not subject to amortization – FCC licenses |       | 2,413,257                   |       | 2,413,257                       |       |
| Total intangible  assets, net                                      |       | $                           | 2,510,363  |                            | $          | 2,513,340 |   |
|                                                               |       |                        |       |                            |       |
| Goodwill                                                           |       | $                           | 816,728    |                            | $          | 816,728 |   |

 

Summarized below are the carrying value of intangibleassets subject to amortization as of June 30, 2008 and December 31,2007:

 
| ** **                                        | ** ** | **June 30, 2008** | ** ** | **December 31, 2007** | ** ** |
|---------------------------------------------------|------------|-----------------------------|------------|---------------------------------|------------|
| ** **                                        | ** ** | ** **                  | ** ** | **(Unaudited)**                 | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                        | ** ** | **Gross**                   | ** ** | ** **                      | ** ** | **Net** | ** ** | **Gross** | ** ** | ** ** | ** ** | **Net** | ** ** |
| ** **                                        | ** ** | **Carrying**                | ** ** | **Accumulated**                 | ** ** | **Carrying** | ** ** | **Carrying** | ** ** | **Accumulated** | ** ** | **Carrying** | ** ** |
| ** **                                        | ** ** | **Value**                   | ** ** | **Amortization**                | ** ** | **Value** | ** ** | **Value** | ** ** | **Amortization** | ** ** | **Value** | ** ** |
| Intangible  assets subject to amortization:       |       |                        |       |                            |       |   |   |   |   |   |   |   |   |
| Advertiser  client base                           |       | $                           | 124,035    |                            | $          | 80,019 |   | $ | 44,016 |   | $ | 124,035 |   | $ | 78,248 |   | $ | 45,787 |   |
| Network  affiliations                             |       | 95,493                      |       | 42,463                          |       | 53,030 |   | 95,493 |   | 41,268 |   | 54,225 |   |
| Other                                             |       | 743                         |       | 683                             |       | 60 |   | 743 |   | 672 |   | 71 |   |
| Total intangible  assets subject to amortization: |       | $                           | 220,271    |                            | $          | 123,165 |   | $ | 97,106 |   | $ | 220,271 |   | $ | 120,188 |   | $ | 100,083 |   |

 

The Company’samortization expense for intangible assets was approximately $1.5 million and$3.0 million for the three and six months ended June 30, 2008,respectively, and $1.8 million and $3.5 million for the three and six monthsended June 30, 2007, respectively. Annual intangible asset amortization expense is estimated to beapproximately $6.0 million in each of the next five years.

 

**8.    IncomeTaxes**

 

The income tax expensefor the three and six months ended June 30, 2008 was $3.4 and $7.7million, respectively, as compared to $12.5 and $16.5 million for thethree and six months ended June 30, 2007, respectively.

 

The effective tax ratefor the three and six months ended June 30, 2008 was 17.8% and22.0% as compared to 41.3% and 42.8% for the three months and six monthsended June 30, 2007, respectively.  The Company’s effective tax ratein a given financial statement period may be materially impacted by changes inthe level of earnings by taxing jurisdiction, changes in the expected outcomeof tax return examinations or changes in deferred tax valuation allowances. Theeffective tax rate for the six months ended June 30, 2008 was favorablyimpacted by (i) the recognition of $4.6 million of net tax benefits andassociated interest recorded during the second quarter as a result of thesettlement of certain tax return examinations; and (ii) the $2.5million reduction in capital loss valuation allowance as a result of theutilization of the Company’s capital loss carry forwards to offset a portion ofthe insurance settlement gain recorded during the first quarter.

 

At December 31,2007, we had $38.1 million in unrecognized tax benefits and associated interestand penalties recorded in our balance sheets, as compared to $33.2 million asof June 30, 2008, after reflecting the impact of the settlement describedabove.  At December 31, 2007, we hadvaluation allowances associated with capital loss carry forwards (tax effected)of $4.5 million, expiring in 2009. In the first quarter of 2008, we utilized$2.5 million (tax effected) of the other capital loss carry forwards whichwould have expired in 2009.

 

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Table of Contents

 

**Hearst-Argyle Television, Inc.**

**Notes to Condensed ConsolidatedFinancial Statements**

**Tabular amounts in thousand, exceptper share data**

 

**9.    CommonStock**

** **

**CommonStock Repurchase**

** **

In May 1998,the Company’s Board of Directors authorized the repurchase of up to $300million of its outstanding Series A Common Stock.  Such repurchases may be effected from time totime in the open market or in private transactions, subject to marketconditions and management’s discretion. During the six months ended June 30,2008, the Company repurchased 49,000 shares of its outstanding Series ACommon Stock for $1.1 million at an average price of $22.26.  Between May 1998 and June 30, 2008,the Company repurchased approximately 4.8 million shares of Series ACommon Stock at a cost of approximately $117.1 million and an average price of$24.54, leaving $182.9 million under the Board authorization.  There can be no assurance that suchrepurchases will occur in the future or, if they do occur, what the terms ofsuch repurchases will be.

 

Hearst and its indirect wholly-owned subsidiary, Hearst Broadcasting, Inc.(“Hearst Broadcasting”), are currently authorized by Hearst’s Board to purchaseup to eight million shares of our Series A Common Stock.  Hearst’s Board authorized these purchases in December 2007in order to increase Hearst’s ownership percentage to approximately 82% topermit us to be consolidated with Hearst for federal income tax purposes.  Previously, Hearst had authorized thepurchase of up to 25 million shares of our Series A Common Stock. During the three and six months ended June 30, 2008, HearstBroadcasting purchased 3.6 million and 5.6 million shares, respectively of Series ACommon Stock.  Between December 2000(the date of Hearst’s prior purchase authorization) and June 30, 2008,under these purchase authorizations Hearst purchased approximately 29.9 millionshares of the Company’s outstanding Series A Common Stock.

 

 As of June 30, 2008 and December 31,2007, Hearst owned 80.0% and 73.7%, respectively, of the Company’s outstandingcommon stock.  As of July 17, 2008,Hearst’s ownership increased to 81% of our outstanding common stock.

 

**CommonStock Dividends**

** **

During the sixmonths ended June 30, 2008, the Company’s Board of Directors declared acash dividend on shares of our Series A and Series B Common Stock asfollows:

 
| **Dividend Amount** | ** ** | **Declaration Date** | ** **          | **Record Date** | ** **         | **Payment Date** | ** **          | **Total Dividend** | ** ** | **Hearst Portion** | ** ** |
|--------------------------|------------|---------------------------|---------------------|----------------------|--------------------|-----------------------|---------------------|-------------------------|------------|-------------------------|------------|
| $                        | 0.07       |                      | March 27, 2008 |                 | April 5, 2008 |                  | April 15, 2008 |                    | $          | 6,571                   |       | $ | 4,992 |   |
| $                        | 0.07       |                      | May 6, 2008    |                 | July 5, 2008  |                  | July 15, 2008  |                    | $          | 6,573                   |       | $ | 5,241 |   |

 

**10.    PreferredStock**

** **

Under the Company’sCertificate of Incorporation, the Company has one million authorized shares ofPreferred Stock, par value $.01 per share. At each of June 30, 2008 and 2007, there was no Preferred Stockoutstanding.

 

**11.    RelatedParty Transactions**

** **

*Hearst*.    As of June 30,2008, Hearst owned approximately 64.3% of our Series A Common Stock and100% of our Series B Common Stock, representing in the aggregateapproximately 80.0% of both the economic interest and outstanding voting powerof our common stock, except with regard to the election of directors.  With regard to the election of directors,Hearst’s ownership of our Series B Common Stock entitles Hearst to elect11 of the 13 directorships of our Board of Directors. During the three and sixmonths ended June 30, 2008 and 2007, we were engaged in the followingtransactions with Hearst or parties related to Hearst:

 

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Table of Contents

 

**Hearst-Argyle Television, Inc.**

**Notes to Condensed ConsolidatedFinancial Statements**

**Tabular amounts in thousand, exceptper share data**

 

·                        *Hearst Tower Lease. *On May 5, 2006 the Company entered into a LeaseAgreement with Hearst to lease one floor of the newly constructed Hearst Towerin Manhattan for our corporate offices. For the three and six months ended June 30, 2008 and 2007, werecorded $0.4 million and $0.8 million in rent expense, net of a portion of the$1.9 million tenant improvement allowance, which the Company is amortizing overthe lease term.

 

·                  *Management Services Agreement*.   We recorded revenue ofapproximately $1.2 million and $2.3 million in the three and six months ended June 30,2008, respectively, and $1.8 million and $3.2 million in the three and sixmonths ended June 30, 2007, respectively, relating to a managementagreement with Hearst (the “Management Agreement”). Pursuant to the ManagementAgreement, we provide certain sales, news, programming, legal, financial,engineering and accounting management services for certain Hearst-owned televisionand radio stations.  Certain employees ofthese managed stations are also participants in our stock option plans.  We believe the terms of the ManagementAgreement are reasonable to both parties; however, there can be no assurancethat more favorable terms would not be available from third parties.

 

·                  *Intercompany Services Agreement*.    We incurredexpenses of approximately $1.7 million and $3.4 million in each of the threeand six months ended June 30, 2008 and 2007, respectively, relating to a servicesagreement with Hearst (the “Services Agreement”). Pursuant to the ServicesAgreement, Hearst provides the Company certain administrative services such asaccounting, auditing, financial, legal, insurance, data processing, andemployee benefits administration. We believe the terms of the ServicesAgreement are reasonable to both parties; however, there can be no assurancethat more favorable terms would not be available from third parties.

 

·                  *Interest Expense, Net – CapitalTrust.*  We incurred interest expense, net, related to the Series BDebentures issued to our wholly-owned unconsolidated subsidiary, the CapitalTrust, of $6.1 million and $8.6 million for the three and six months ended June 30,2008, respectively, which included a $3.9 million premium to redeem the Series BDebentures in full and $2.4 million and $4.9 million for the three and sixmonths ended June 30, 2007, respectively. The Capital Trust then paid comparable amounts to its 7.5% Series BConvertible Preferred Securities holders, including Hearst, which received $1.2million and $1.7 million in interest payments during the three and six monthsended June 30, 2008.  We redeemedthe Series B Debentures and in turn the Capital Trust redeemed its 7.5% Series BConvertible Preferred Securities on June 23, 2008.  Hearst, whose 7.5% Series B ConvertiblePreferred Securities were redeemed on the same terms as the other holders,received $26.2 million in the redemption.

 

·                  *Dividends on Common Stock.*    During the sixmonths ended June 30, 2008 and 2007, we paid the following dividends toHearst:

 
| **Dividend Amount** | ** ** | **Payment Date** | ** ** | **Total Dividend** | ** ** | **Hearst Portion** | ** ** |
|--------------------------|------------|-----------------------|------------|-------------------------|------------|-------------------------|------------|
| $                        | 0.07       |                  | 4/15/2008  |                    | $          | 6,571                   |       | $ | 4,992 |   |
| $                        | 0.07       |                  | 1/15/2008  |                    | $          | 6,569                   |       | $ | 4,846 |   |
| $                        | 0.07       |                  | 4/15/2007  |                    | $          | 6,546                   |       | $ | 4,816 |   |
| $                        | 0.07       |                  | 1/15/2007  |                    | $          | 6,523                   |       | $ | 4,816 |   |

 

·                  *Radio Facilities Lease.*    Pursuant to alease agreement, Hearst paid us approximately $0.2 million and $0.4 million foreach of the three and six months ended June 30, 2008 and 2007. Under thisagreement, Hearst leases from the Company premises for WBAL-AM and WIYY-FM,Hearst’s Baltimore, Maryland radio stations.

 

·                  *Lifetime Entertainment Services*.    We haveagreements with Lifetime Entertainment Services (“Lifetime”), an entity owned50% by an affiliate of Hearst and 50% by The Walt Disney Company, whereby forcertain periods of time (i) we have assisted Lifetime in securingdistribution and subscribers for the Lifetime Television, Lifetime MovieNetwork and/or Lifetime Real Women programming services; and (ii) Lifetime

 

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**Hearst-Argyle Television, Inc.**

**Notes to Condensed ConsolidatedFinancial Statements**

**Tabular amounts in thousand, exceptper share data**

 

has acted as our agent with respect to the negotiationof our agreements with cable, satellite and certain other multi-channel videoprogramming distributors.  Amountspayable to us by Lifetime depend on the specific terms of these agreements andmay be fixed or variable.  We recordedrevenue from the agreements of $5.9 million and $11.4 million in the three andsix months ended June 30, 2008, respectively, and $5.3 million and $10.5million in the three and six months ended June 30, 2007, respectively.

 

·                  *Wide Orbit, Inc. *In November 2004, weentered into an agreement to license from Wide Orbit Inc. (“Wide Orbit”)Traffic Sales and Billing Solutions software. Hearst owns approximately 10.7% of Wide Orbit. For each of the three andsix months ended June 30, 2008 and 2007, we paid Wide Orbit approximately$0.4 million and $0.8 million, respectively, under the agreement.

 

·                  *N*ew*England Cable News*. Our President and Chief Executive Officer, David J. Barrett, serves asHearst’s representative on the management board of New England Cable News, aregional cable channel, jointly owned by Hearst Cable News, Inc., anindirect wholly-owned subsidiary of Hearst, and Comcast MO Cable News, Inc.(“NECN”).  During the quarter, Hearstpaid $6,000 to the Company as compensation for his service.  In addition, two of our television stations,WPTZ/WNNE and WMTW, provide office space to certain of NECN’s reporters inexchange for news gathering services.

 

·                  *Other Transactions with Hearst*.    In the three andsix months ended June 30, 2008 and 2007, we recorded immaterial netrevenue relating to advertising sales from Hearst.

 

*Internet Broadcasting Systems, Inc.*    Asof June 30, 2008, we owned 41% of Internet Broadcasting Systems, Inc.(“Internet Broadcasting”).  We also havevarious agreements pursuant to which we paid Internet Broadcasting $4.6 millionand $5.2 million during the six months ended June 30, 2008 and 2007,respectively. In addition, Internet Broadcasting hosts our corporate Websitefor a nominal amount.  Harry T. Hawks,our Executive Vice President and Chief Financial Officer, serves on the Boardof Directors of Internet Broadcasting, for which he does not receivecompensation.

 

*Small Business Television*.   The Company utilizes the services of SmallBusiness Television (“SBTV”) to provide television stations with additionalrevenue through the marketing and sale of commercial time to smaller businessesthat do not traditionally use television advertising due to costs. In the threeand six month period ended June 30, 2008, these sales generated revenue ofapproximately $0.3 million and $0.5 million, respectively, of whichapproximately $0.1 million and $0.2 million was distributed to SBTV, respectively.In the three and six month period ended June 30, 2007, these salesgenerated revenue of approximately $0.4 million and $0.7 million, respectively,of which approximately $0.2 million and $0.3 million was distributed to SBTV,respectively. Dean Conomikes, the owner of SBTV, is the son of John G.Conomikes, a member of the Company’s Board of Directors.

 

*RDE.* During the second quarter of 2008, we invested an additional $2.5million in Ripe Digital Entertainment, Inc. (“RDE”) in the form of aConvertible Promissory Note.  As of June 30,2008, we owned 24.7% of RDE.  OurExecutive Vice President and Chief Financial Officer, Harry T. Hawks, serves onthe Board of Directors of RDE, for which he does not receive compensation.

 

*Other*.    In the ordinarycourse of business, the Company enters into transactions with related parties,none of which were significant to our financial results in the three monthsended June 30, 2008 and 2007.

 

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**Hearst-Argyle Television, Inc.**

**Notes to Condensed ConsolidatedFinancial Statements**

**Tabular amounts in thousand, exceptper share data**

 

**12.    Retirement Plans and OtherPost-Retirement Benefits**

** **

***Overview***

*** ***

The Company maintains seven defined benefit pensionplans (the “Pension Plans”) and other post-retirement benefit plans, consistingof medical and life insurance (“Post-Retirement Benefit Plans”), for active,retired and former employees.  Inaddition, the Company maintains 11 employee savings plans and participates inthree multi-employer union pension plans that provide retirement benefits tocertain union employees.

 

***Pension Plans and Other Post-RetirementBenefits***

*** ***

Benefits under thePension Plans are generally based on years of credited service, age atretirement and average of the highest five consecutive years’ compensation. Thecost of the Pension Plans is computed on the basis of the Project Unit CreditActuarial Cost Method. Past service cost is amortized over the expected futureservice periods of the employees.

 

*Net Periodic Pension and Post-Retirement Cost*

* *

The followingschedule presents net periodic pension cost for the Company’s Pension Plans inthe three and six months ended June 30, 2008 and 2007:

 
| ** **                          | ** ** | **Pension Benefits**                           | ** ** | **Pension Benefits**                         | ** ** |
|-------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                          | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
| ** **                          | ** ** | **2008**                                            | ** ** | **2007**                                          | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                          | ** ** | **(Unaudited)**                                     | ** ** | **(Unaudited)**                                   | ** ** |
| Service cost                        |       | $                                                   | 2,598      |                                              | $          | 2,645 |   | $ | 5,196 |   | $ | 5,290 |   |
| Interest cost                       |       | 2,972                                               |       | 2,700                                             |       | 5,944 |   | 5,400 |   |
| Expected return  on plan assets     |       | (3,248                                              | )          | (2,911                                            | )          | (6,496 | ) | (5,822 | ) |
| Amortization of  prior service cost |       | 106                                                 |       | 108                                               |       | 212 |   | 216 |   |
| Amortization of  net loss           |       | 419                                                 |       | 924                                               |       | 838 |   | 1,848 |   |
| Net periodic  pension cost          |       | $                                                   | 2,847      |                                              | $          | 3,466 |   | $ | 5,694 |   | $ | 6,932 |   |

 

The following schedule presents net periodic benefitcost for the Company’s other Post-Retirement Benefit Plans in the three and sixmonths ended June 30, 2008 and 2007:

 
| ** **                              | ** ** | **Post-Retirement Benefits**                   | ** ** | **Post-Retirement Benefits**                 | ** ** |
|-----------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                              | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
| ** **                              | ** ** | **2008**                                            | ** ** | **2007**                                          | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                              | ** ** | **(Unaudited)**                                     | ** ** | **(Unaudited)**                                   | ** ** |
| Service cost                            |       | $                                                   | 20         |                                              | $          | 41 |   | $ | 40 |   | $ | 82 |   |
| Interest cost                           |       | 98                                                  |       | 175                                               |       | 196 |   | 350 |   |
| Amortization of  prior service cost     |       | (23                                                 | )          | 10                                                |       | (46 | ) | 20 |   |
| Amortization of  initial net obligation |       | —                                              |       | 10                                                |       | — |   | 20 |   |
| Amortization of  net loss               |       | 44                                                  |       | 9                                                 |       | 88 |   | 18 |   |
| Net periodic  benefit cost              |       | $                                                   | 139        |                                              | $          | 245 |   | $ | 278 |   | $ | 490 |   |

 

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**Hearst-Argyle Television, Inc.**

**Notes to Condensed ConsolidatedFinancial Statements**

**Tabular amounts in thousand, exceptper share data**

 

*Contributions*

* *

For the year endingDecember 31, 2008, the Company expects to contribute $3.5 million to thePension Plans and expects to contribute approximately $0.4 million to thePost-Retirement Benefit Plans.  As of June 30,2008 the Company has contributed $1.0 million to our Pension Plans and $0.2million to our Post-Retirement Benefit Plans.

 

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**Item 2.    Management’s Discussion and Analysis ofFinancial Condition and Results of Operations**

 

**Organization of Information**

 

Management’sDiscussion and Analysis provides a narrative on our financial performance andcondition that should be read in conjunction with the accompanying condensedconsolidated financial statements.  Itincludes the following sections:

 

·                  Forward-Looking Statements

·                  Executive Summary

·                  Results of Operations

·                  Liquidity and Capital Resources

 

**Forward-LookingStatements**

 

This report****includes****or incorporates forward-lookingstatements.  We base theseforward-looking statements on our current expectations and projections aboutfuture events.  These forward-lookingstatements generally can be identified by the use of statements that includephrases such as “anticipate”, “will”, “may”, “likely”, “plan”, “believe”, “expect”,“intend”, “project”, “forecast” or other such similar words and/or phrases. Forthese statements, the Company claims the protection of the safe harbor forforward-looking statements contained in the Private Securities LitigationReform Act of 1995.  The forward-lookingstatements contained in this report, concerning, among other things, trends andprojections involving revenue, income, earnings, cash flow, liquidity,operating expenses, assets, liabilities, capital expenditures, dividends andcapital structure, involve risks and uncertainties, and are subject to changebased on various important factors. Those factors include the impact on our operations from

 

·                  Changes innational and regional economies;

·                  Changes inadvertising trends and our advertisers’ financial condition;

·                  Competition inthe broadcast television markets we serve;

·                  Pricingfluctuations in local and national advertising;

·                  Changes inFederal regulations that affect us, including changes in Federal communicationslaws or regulations;

·                  Localregulatory actions and conditions in the areas in which our stations operate;

·                  Our ability toobtain quality programming for our television stations;

·                  Successfulintegration of television stations we acquire;

·                  Our ability toservice and refinance our outstanding debt; and

·                  Volatility inprogramming costs, industry consolidation, technological developments, andmajor world events**.**

 

For a discussion of additionalrisk factors that are particular to our business, please refer to Part I, “Item 1A. Risk Factors”of the 2007 10-K, and to Part II, “Item1A. Risk Factors” of this report.  Theseand other matters we discuss in this report, or in the documents we incorporateby reference into this report, may cause actual results to differ from those wedescribe.  We undertake no obligation toupdate or revise any forward-looking statements, whether as a result of newinformation, future events or otherwise.

 

**Executive Summary**

 

Hearst-ArgyleTelevision, Inc. and its subsidiaries (hereafter “we” or the “Company”)own and operate 26 network-affiliated television stations.  Additionally, we provide management servicesto two network-affiliated stations and one independent television station andtwo radio stations owned by The Hearst Corporation (“Hearst”) in exchange formanagement fees.  We seek to attract ourtelevision audience by providing compelling content on multiple mediaplatforms.   We provide leading local newsprogramming and popular network and syndicated programs at each of ourtelevision stations, 20 of which are in the top 50 U.S. televisionmarkets.  We also own more than 30Websites and currently multicast 18 digital weather channels and one digital multicastchannel affiliated with the CW network. We stream a portion of our televisionprogramming, including our news and weather forecasts, and we publish communityinformation, user-generated content and entertainment content on our stations’Websites.  In many of our markets, we 

 

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have also established amobile presence for our stations’ Websites. We believe that aligning our content offerings with audience mediaconsumption patterns in this manner ultimately benefits our advertisers.  Our advertisers benefit from a variety ofmarketing opportunities, including traditional spot campaigns, community eventsand sponsorships at our television stations, as well as on our stations’Internet and/or mobile Websites, enabling them to reach our audience inmultiple ways.

 

*FactorsInfluencing Results*

 

·                  Net local and national advertising revenue, excludingpolitical, decreased 10% in the second quarter of 2008 to $148.7 million. Theeconomic downturn continues to impact the Company and contributed to areduction in advertising expenditures in the auto, retail, consumer packagedgoods, furniture, movies and restaurant categories.

 

·                  Political advertising increases in even-numberedyears, such as 2008, consistent with the increase in the number of candidatesrunning for political office in the presidential election cycle, as well asselected state and local elections. During the three and six months ended June 30, 2008, the Companyrecorded $8.5 million and $18.1 million, respectively, in net politicaladvertising revenue compared to $4.9 million and $6.4 million during the threeand six months ended June 30, 2007, respectively.

 

·                  For the three and six monthsended June 30, 2008, the Company recorded net digital media revenue of$5.7 million and $10.6 million, respectively, compared to $5.0 million and $9.0million for the same periods in 2007. Digital media expenses in the three and six months ended June 30,2008 were $4.6 and $9.1 million, respectively, compared to $3.5 million and$6.7 million for the same periods in 2007, reflecting the Company’s commitmentto digital media.

 

·                  During the first quarter of 2008, the Company reacheda final settlement with its insurance carriers related to lost property,increased expenses and interrupted business at WDSU-TV in New Orleans,Louisiana, resulting from Hurricane Katrina in 2005. The Company received $11.5million in the first quarter of 2008 bringing total recoveries to $16.5million, net of deductibles, given the receipt of an advance payment of $5.0million in the fourth quarter of 2006. The $11.5 million received in the firstquarter of 2008 has been recorded as an offset to Station Operating Expenses.The Company reduced its capital loss valuation allowance as a result ofutilizing capital loss carry forwards to offset a portion of the insurancesettlement gain recorded during the first quarter of 2008. The after-tax firstquarter 2008 effect of the insurance settlement was a $9.3 million increase innet income.

 

·                  On June 23,2008, the Company redeemed all $134.0 million of its 7.5% Series BConvertible Junior Subordinated Debentures (“Series B Debentures”), whichwere classified as Notes Payable to Capital Trust. This redemption in turntriggered a simultaneous redemption by the Capital Trust of all $130.0 millionof its 7.5% Series B Convertible Preferred Securities, which were convertibleinto 5.1 million shares of the Company’s Series A Common Stock, and theCompany’s $4.0 million investment in the Capital Trust. As a result of theredemption, Notes payable to Capital Trust was reduced by $134.0 million andInvestments was reduced by $4.0 million. In addition, as a result of the redemption of the 7.5% Series BConvertible Preferred Securities, the Company paid a redemption premium of $3.9million, which was included in Interest expense, net - Capital Trust.   The redemption was funded by an advanceunder the Company’s credit facility.

 

*IndustryTrends*

 

·                  The Federal Communications Commission (“FCC”) haspermitted broadcast television station licensees to use their digital spectrumfor a wide variety of services such as high-definition television programming,audio, data and other types of communication, subject to the requirement thateach broadcaster provide at least one free video channel equal in quality tothe current technical standards.  Our NBC stationscurrently broadcast the 

 

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WeatherPlus network, a 24/7 local and national weather broadcast network, on amulticast stream in addition to their main digital channels.  In addition, eight of our other stations havelaunched similar station-branded multicast weather channels and KHOG-TV inArkansas has launched a station affiliated with CW.  We have also affiliated with the Open MobileVideo Coalition, which contemplates launching a mobile video service using aportion of available digital spectrum.

 

·                  Pursuant to the Cable Television Consumer Protectionand Competition Act of 1992 (“1992 Cable Act”) and the FCC’s “must carry”regulations, cable operators are generally required to devote up to one-thirdof their activated channel capacity to the carriage of the analog signal oflocal commercial television stations.  Ona cable system-by-cable system basis, a local television broadcast station mustchoose once every three years whether to waive the right to mandatory, butuncompensated, carriage and, instead, to negotiate a grant of retransmissionconsent.  We will make retransmissionconsent elections by October 2008 to cover the period from January 1,2009 to December 31, 2011.

 

·                  The Satellite Home ViewerImprovement Act of 1999 (“SHVIA”) established a compulsory copyright licensing system for the distributionof local television station signals by direct broadcast satellite systems toviewers in each DMA.  Under SHVIA’s “carry-one,carry-all” provision, a direct broadcast satellite system generally is requiredto retransmit the analog signal of all local television stations in a DMA ifthe system chooses to retransmit the analog signal of any local televisionstation in that DMA.  Television stationslocated in markets in which satellite carriage of local stations is offered mayelect mandatory carriage or retransmission consent once every three years.  We will make retransmission consent elections by October 2008to cover the period from January 1, 2009 to December 31, 2011.

 

·                  Legislation that guides the transition from analog todigital television broadcasting includes a deadline of February 17, 2009for completion of the transition to digital broadcasting and the return of the analogspectrum to the government. As a result, the Company accelerated thedepreciation of certain equipment that may have a shorter useful life as aresult of the digital conversion.

 

**Resultsof Operations**

 

Resultsof operations for the three and six months ended June 30, 2008 and 2007include the results of our 26 television stations, which were owned for theentire period presented, and the management fees derived by the threetelevision and two radio stations managed by us for the entire period presented.

 

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*ThreeMonths Ended June 30, 2008*

*Comparedto Three Months Ended June 30, 2007*

 
| ** **                                      | ** ** | **For the three months ended June 30,** | ** ** | ** ** | ** ** | ** **        | ** ** |
|-------------------------------------------------|------------|-----------------------------------------------------------------------|------------|------------|------------|-------------------|------------|
| ** **                                      | ** ** | **2008**                                                              | ** ** | **2007**   | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| ** **                                      | ** ** | **(In thousands)**                                               | ** ** | ** ** | ** ** | ** **        | ** ** |
| Total revenue                                   |       | $                                                                     | 182,123    |       | $          | 193,019           |       | $ | (10,896 | ) | -5.6 | % |
| Station  operating expenses:                    |       |                                                                  |       |       |       |              |       |   |   |
| Salaries,  benefits and other operating costs   |       | 101,946                                                               |       | 102,168    |       | (222              | )          | -0.2 | % |
| Amortization of  program rights                 |       | 18,606                                                                |       | 19,422     |       | (816              | )          | -4.2 | % |
| Depreciation and  amortization                  |       | 14,267                                                                |       | 14,185     |       | 82                |       | 0.6 | % |
| Corporate,  general and administrative expenses |       | 9,477                                                                 |       | 8,887      |       | 590               |       | 6.6 | % |
| Operating income                                |       | 37,827                                                                |       | 48,357     |       | (10,530           | )          | -21.8 | % |
|                                            |       |                                                                  |       |       |       |              |       |   |   |
| Interest expense                                |       | 12,295                                                                |       | 16,028     |       | (3,733            | )          | -23.3 | % |
| Interest income                                 |       | (10                                                                   | )          | (407       | )          | (397              | )          | -97.5 | % |
| Interest  expense, net – Capital Trust     |       | 6,148                                                                 |       | 2,438      |       | 3,710             |       | 152.2 | % |
| Income before  income taxes and equity earnings |       | 19,394                                                                |       | 30,298     |       | (10,904           | )          | -36.0 | % |
|                                            |       |                                                                  |       |       |       |              |       |   |   |
| Income tax  expense                             |       | 3,443                                                                 |       | 12,525     |       | (9,082            | )          | -72.5 | % |
| Equity in loss  of affiliates, net of tax       |       | 1,858                                                                 |       | 752        |       | (1,106            | )          | 147.1 | % |
| Net income                                      |       | $                                                                     | 14,093     |       | $          | 17,021            |       | $ | (2,928 | ) | -17.2 | % |

 

*Totalrevenue*.    Totalrevenue includes:

 
| (i)   |   | cash advertising  revenue, net of agency and national representatives’ commissions;                                                                    |
|-------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (ii)  |   | retransmission consent  revenue;                                                                                                                            |
| (iii) |   | net digital media  revenue, which includes primarily Internet advertising revenue and, to a  lesser extent, revenue from advertising on multicast channels; |
| (iv)  |   | network compensation;  and                                                                                                                                  |
| (v)   |   | other revenue,  primarily barter and trade revenue and management fees earned from Hearst.                                                                  |

 

 
| ** **                                     | ** ** | **For the three months ended June 30,** | ** ** | ** ** | ** ** | ** **        | ** ** |
|------------------------------------------------|------------|-----------------------------------------------------------------------|------------|------------|------------|-------------------|------------|
| ** **                                     | ** ** | **2008**                                                              | ** ** | **2007**   | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| ** **                                     | ** ** | **(In thousands)**                                                    | ** ** | ** ** | ** ** | ** **        | ** ** |
| Net advertising  revenue (excluding political) |       | $                                                                     | 148,666    |       | $          | 165,274           |       | $ | (16,608 | ) | -10.0 | % |
| Net political  revenue                         |       | 8,477                                                                 |       | 4,867      |       | 3,610             |       | 74.2 | % |
| Retransmission  consent revenue                |       | 6,813                                                                 |       | 5,422      |       | 1,391             |       | 25.7 | % |
| Net digital  media revenue                     |       | 5,674                                                                 |       | 5,012      |       | 662               |       | 13.2 | % |
| Network  compensation                          |       | 2,333                                                                 |       | 2,625      |       | (292              | )          | -11.1 | % |
| Barter and trade  revenue                      |       | 6,389                                                                 |       | 6,438      |       | (49               | )          | -0.8 | % |
| Other revenue                                  |       | 3,771                                                                 |       | 3,381      |       | 390               |       | 11.5 | % |
| Total revenue                                  |       | $                                                                     | 182,123    |       | $          | 193,019           |       | $ | (10,896 | ) | -5.6 | % |

 

Total revenue in thethree months ended June 30, 2008 was $182.1 million as compared to $193.0million in the three months ended June 30, 2007, a decrease of $10.9million, or 5.6%. This decrease was primarily attributable to the followingfactors:

 
| (i)   |   | a $16.6 million  decrease in net advertising revenue due to the economic downturn which  resulted in declines in the automotive, retail, furniture and restaurants  categories; partially offset by |
|-------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (ii)  |   | a $3.6 million increase  in net political advertising;                                                                                                                                              |
| (iii) |   | a $1.4 million increase  in retransmission consent revenue; and                                                                                                                                     |
| (iv)  |   | a $0.7 million increase  in net digital media revenue.                                                                                                                                              |

 

*Salaries,benefits and other operating costs*.    During the three months endedJune 30, 2008, salaries, benefits and other operating costs were $101.9million, as compared to $102.2 million in the three months ended June 30,2007, a 

 

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decrease of $0.3million.  Higher digital media expensesand compensation costs were offset by a $0.5 million gain on the Nextelequipment exchange, lower sales commissions and lower spending on certaindiscretionary items.

 

*Amortizationof program rights*.  Amortizationof program rights was $18.6 million in the three months ended June 30,2008, as compared to $19.4 million in the three months ended June 30,2007, a decrease of $0.8 million or 4%. This decrease was primarily due to thewrite-down of an off-network syndicated program at one station in 2007.

 

*Depreciation and amortization*.   Depreciationand amortization expense was $14.3 million in the three months ended June 30,2008, as compared to $14.2 million in the three months ended June 30,2007, an increase of $0.1 million, or 1%. Depreciation expense was $12.8million in the three months ended June 30, 2008, as compared to $12.4million in the three months ended June 30, 2007, an increase of $0.3million, or 2.4%.  The increase indepreciation expense is primarilydue to the completion of several capital projects in 2007.

 

 *Corporate, general andadministrative expenses*.    Corporate, generaland administrative expenses were $9.5 million in the three months ended June 30,2008, as compared to $8.9 million in the three months ended June 30, 2007,an increase of $0.6million or6.7%. This increase was primarily due to:

 

(i)             a $0.4 million increase in employee costs and benefitsrelated to digital media initiatives; and

(ii)          a $0.2 million increase in other operationalexpenses.

 

*Interestexpense. *Interest expense was $12.3 million in the three monthsended June 30, 2008, as compared to $16.0 million in the three monthsended June 30, 2007, a decrease of $3.7 million, or 23%, due to loweraverage debt balances.

 

*Interest income.*    Interest income was $0.01 million in thethree months ended June 30, 2008, as compared to $0.4 million in the threemonths ended June 30, 2007. This decrease is due to lower cash balances in 2008 ascompared to the same period in 2007.

 

*Interestexpense, net – Capital Trust. *Interest expense, net – Capital Trust was$6.1 million in the three months ended June 30, 2008, as compared to $2.4million in the three months ended June 30, 2007, an increase of $3.9million, due to the premium paid on the redemption of the Series B Debentures on June 23, 2008.

 

*Incometax expense.*    Werecorded income tax expense of $3.4 million in the three months ended June 30,2008, compared to $12.5 million in the three months ended June 30, 2007, adecrease of $9.1 million.  This decreasewas due to:

 

(i)    a decrease in income before income taxes from $30.3million in the three months ended June 30, 2007 to $19.4 million in thethree months ended June 30, 2008; and

(ii)   $4.6 million in tax benefits recorded in the threemonths ended June 30, 2008, as a result of the settlement of certain taxreturn examinations.

 

The effective tax ratefor the three months ended June 30, 2008 was 17.8%, as compared to 41.3%for the three months ended June 30, 2007.

 

*Equity in loss of affiliates, net of tax*. Equity in loss of affiliates, net of tax was $1.9 million and $0.8million for three months ended June 30, 2008 and 2007, respectively, andrepresents our share of losses in Internet Broadcasting Systems, Inc. (“InternetBroadcasting”) and in Ripe Digital Entertainment, Inc. (“RDE”).  Both companies have incurred losses as theyinvest in their operations to support future growth.

 

*Netincome*.    Netincome was $14.1 million in the three months ended June 30, 2008, ascompared to $17.0 million in the three months ended June 30, 2007, adecrease of $2.9 million or 17.1%.  Thisdecrease was primarily due to the items described above.

 

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*SixMonths Ended June 30, 2008*

*Comparedto Six Months Ended June 30, 2007*

* *
| ** **                                      | ** ** | **For the six months ended June 30,** | ** ** | ** ** | ** ** | ** **        | ** ** |
|-------------------------------------------------|------------|---------------------------------------------------------------------|------------|------------|------------|-------------------|------------|
| ** **                                      | ** ** | **2008**                                                            | ** ** | **2007**   | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| ** **                                      | ** ** | **(In thousands)**                                             | ** ** | ** ** | ** ** | ** **        | ** ** |
| Total revenue                                   |       | $                                                                   | 347,176    |       | $          | 362,402           |       | $ | (15,226 | ) | -4.2 | % |
| Station  operating expenses:                    |       |                                                                |       |       |       |              |       |   |   |
| Salaries,  benefits and other operating costs   |       | 206,074                                                             |       | 203,242    |       | 2,832             |       | 1.4 | % |
| Amortization of  program rights                 |       | 37,318                                                              |       | 38,650     |       | (1,332            | )          | -3.4 | % |
| Depreciation and  amortization                  |       | 28,319                                                              |       | 29,181     |       | (862              | )          | -3.0 | % |
| Insurance  settlement                           |       | (11,549                                                             | )          | —     |       | (11,549           | )          |   |   |
| Corporate,  general and administrative expenses |       | 18,193                                                              |       | 16,668     |       | 1,525             |       | 9.1 | % |
| Operating income                                |       | 68,821                                                              |       | 74,661     |       | (5,840            | )          | -7.8 | % |
|                                            |       |                                                                |       |       |       |              |       |   |   |
| Interest expense                                |       | 25,177                                                              |       | 31,917     |       | (6,740            | )          | -21.1 | % |
| Interest income                                 |       | (28                                                                 | )          | (752       | )          | 724               |       | -96.3 | % |
| Interest  expense, net – Capital Trust     |       | 8,585                                                               |       | 4,875      |       | 3,710             |       | 76.1 | % |
| Income before  income taxes and equity earnings |       | 35,087                                                              |       | 38,621     |       | (3,534            | )          | -9.2 | % |
|                                            |       |                                                                |       |       |       |              |       |   |   |
| Income tax  expense                             |       | 7,733                                                               |       | 16,517     |       | (8,784            | )          | -53.2 | % |
| Equity in loss  of affiliates, net of tax       |       | 3,220                                                               |       | 831        |       | 2,389             |       | 287.5 | % |
| Net income                                      |       | $                                                                   | 24,134     |       | $          | 21,273            |       | $ | 2,861 |   | 13.4 | % |

* *
| ** **                                     | ** ** | **For the six months ended June 30,** | ** ** | ** ** | ** ** | ** **        | ** ** |
|------------------------------------------------|------------|---------------------------------------------------------------------|------------|------------|------------|-------------------|------------|
| ** **                                     | ** ** | **2008**                                                            | ** ** | **2007**   | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| ** **                                     | ** ** | **(In thousands)**                                             | ** ** | ** ** | ** ** | ** **        | ** ** |
| Net advertising  revenue (excluding political) |       | $                                                                   | 281,541    |       | $          | 311,892           |       | $ | (30,351 | ) | -9.7 | % |
| Net political  revenue                         |       | 18,080                                                              |       | 6,402      |       | 11,678            |       | 182.4 | % |
| Retransmission  consent revenue                |       | 13,089                                                              |       | 10,587     |       | 2,502             |       | 23.6 | % |
| Net digital  media revenue                     |       | 10,566                                                              |       | 9,036      |       | 1,530             |       | 16.9 | % |
| Network  compensation                          |       | 4,509                                                               |       | 5,114      |       | (605              | )          | -11.8 | % |
| Barter and trade  revenue                      |       | 12,636                                                              |       | 13,079     |       | (443              | )          | -3.4 | % |
| Other revenue                                  |       | 6,755                                                               |       | 6,292      |       | 463               |       | 7.4 | % |
| Total revenue                                  |       | $                                                                   | 347,176    |       | $          | 362,402           |       | $ | (15,226 | ) | -4.2 | % |

 

Total revenue in the sixmonths ended June 30, 2008 was $347.2 million as compared to $362.4million in the six months ended June 30, 2007, a decrease of $15.2million, or 4.2%. This decrease was primarily attributable to the followingfactors:

 
| (i)   |   | a $30.4 million decrease  in net advertising revenue due to the economic downturn which resulted in  declines in the automotive, retail, furniture and restaurants categories;  partially offset by |
|-------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (ii)  |   | an $11.7 million  increase in net political advertising;                                                                                                                                            |
| (iii) |   | a $2.5 million increase  in retransmission consent revenue; and                                                                                                                                     |
| (iv)  |   | a $1.5 million increase  in net digital media revenue.                                                                                                                                              |

 

*Salaries,benefits and other operating costs*.    Salaries, benefits and otheroperating costs were $206.1 million in the six months ended June 30, 2008,as compared to $203.2 million in the six months ended June 30, 2007, anincrease of $2.8 million, or 1.4%.  Thisincrease was primarily due to:

 

(i)             a $2.4 million increase related to digital media expenses; and

(ii)          a $0.5 million increase in compensationand employee benefits expense.

 

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*Amortizationof program rights*.  Amortizationof program rights was $37.3 million in the six months ended June 30, 2008,as compared to $38.7 million in the six months ended June 30, 2007, adecrease of $1.3 million, or 3.4%. This decrease was primarily due to awrite-off in 2007 of an off-network syndicated program at one station and loweramortization expense for off-network syndicated programming.

 

*Depreciation and amortization*.   Depreciationand amortization was $28.3 million in the six months ended June 30, 2008,as compared to $29.2 million in the six months ended June 30, 2007, adecrease of $0.9 million, or 3.0%. Depreciation expense was $25.3 million in the six months ended June 30,2008, as compared to $25.6 million in the six months ended June 30, 2007,a decrease of $0.3 million, or 1.2%. Amortization expense was $3.0 million for the six months ended June 30,2008, as compared to $3.5 million for the six months ended June 30, 2007,a decrease of $0.5 million, or 14.3%. The decrease relates primarily to theamortization in full of certain intangibles acquired in the WKCF acquisition.The decrease in depreciation expense is primarily due to depreciation in full of certain fixedassets, including leasehold improvements from our previous corporate office.

 

* Insurance settlement. *As described above, in thethree months ended March 31, 2008, the Company recognized an $11.5 millioninsurance settlement resulting from Hurricane Katrina as an offset to Stationoperating expenses.

 

  *Corporate, general andadministrative expenses.*    Corporate, general and administrative expenseswere $18.2 million in the six months ended June 30, 2008, as compared to$16.7 million in the six months ended June 30, 2007, an increase of $1.5million, or 9.1%.  This increase wasprimarily due to:

 

(i)    a $1.1 million increase related to employeecompensation expense, a portion of which is related to our investment in ourdigital media initiatives; and

(ii)   a $0.4 million increase in operations expense.

 

*Interestexpense. *Interest expense was $25.2 million in the six monthsended June 30, 2008, as compared to $31.9 million in the six months ended June 30,2007, a decrease of $6.7 million, or 21.1%, due to lower average debt balances.

 

*Interest income.*    Interest income was $.03 million in thesix months ended June 30, 2008, as compared to $0.8 million in the sixmonths ended June 30, 2007. This decrease is due to lower cash balances in 2008 ascompared to the same period in 2007.

 

*Interestexpense, net – Capital Trust. *Interest expense, net – Capital Trust was$8.6 million in the six months ended June 30, 2008, as compared to $4.9million in the six months ended June 30, 2007, an increase of $3.7 million,due to the $3.9 million premium paid on the redemption of the Series BDebentures on June 23, 2008.

 

*Incometax expense.*    Werecorded income tax expense of $7.7 million in the six months ended June 30,2008, as compared to income tax expense of $16.5 million in the six monthsended June 30, 2007, a decrease of income tax expense of $8.8million.  This decrease was due to:

 
| (i)   |   | a decrease in income  before income taxes from $38.6 million in the six months ended June 30,  2007 to $35.1 million in the six months ended June 30, 2008; |
|-------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (ii)  |   | $4.6 million in tax  benefits recorded as a result of the settlement of certain tax return  examinations; and                                                         |
| (iii) |   | a $2.5 million tax  benefit associated with the utilization of capital loss carry forwards in the  six months ended June 30, 2008.                               |

 

The effective tax ratefor the six months ended June 30, 2008 was 22.0% as compared to 42.8% forthe six months ended June 30, 2007.

 

*Equity in loss of affiliates, net of tax*.  Equity in loss of affiliates, net of tax was$3.2 million in the six months ended June 30, 2008, as compared to $0.8million in the six months ended June 30, 2007, an increase of $2.4million. This increase represents our share of losses in Internet Broadcastingand in RDE. Both companies haveincurred losses as they invest in their operations to support future growth.

 

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*Netincome*.    Netincome was $24.1 million in the six months ended June 30, 2008, ascompared to $21.3 million in the six months ended June 30, 2007, anincrease of $2.9 million, or 13.4%.  Thisincrease was primarily due to the items described above.

 

**Liquidityand Capital Resources**

 

As of June 30, 2008,the Company’s cash and cash equivalents balance was $9.2 million, as comparedto $6.0 million as of December 31, 2007. The net increase in cash and cash equivalents of $3.2 million during2008 was due to the factors described below under Operating Activities,Investing Activities, and Financing Activities.

 
| ** **                                           | ** ** | **Six months ended June 30,** | ** ** | ** ** | ** ** |
|------------------------------------------------------|------------|---------------------------------------------------|------------|------------|------------|
| ** **                                           | ** ** | **2008**                                          | ** ** | **2007**   | ** ** | **$ Change** | ** ** |
| ** **                                           | ** ** | **(In thousands)**                           | ** ** | ** ** | ** ** |
| Net cash provided  by operating activities           |       | $                                                 | 68,980     |       | $          | 49,617 |   | $ | 19,363 |   |
| Net cash used in  investing activities               |       | $                                                 | (13,715    | )          | $          | (29,639 | ) | $ | 15,924 |   |
| Net cash (used  in) provided by financing activities |       | $                                                 | (52,034    | )          | $          | 1,225 |   | $ | (53,259 | ) |
|                                                 |       |                                              |       |       |       |   |   |
| Cash paid for:                                       |       |                                              |       |       |       |   |   |
| Interest                                             |       | $                                                 | 25,062     |       | $          | 30,551 |   | $ | (5,489 | ) |
| Interest on Note  payable to Capital Trust           |       | $                                                 | 8,586      |       | $          | 2,438 |   | $ | 6,148 |   |
| Taxes, net of  refunds                               |       | $                                                 | 6,545      |       | $          | 23,537 |   | $ | (16,992 | ) |
| Purchase of  property, plant and equipment, net      |       | $                                                 | 18,126     |       | $          | 28,764 |   | $ | (10,638 | ) |
| Dividends paid  on common stock                      |       | $                                                 | 13,140     |       | $          | 13,069 |   | $ | 71 |   |
| Series A  Common Stock repurchases              |       | $                                                 | 1,091      |       | $          | — |   | $ | 1,091 |   |

 

*Operating Activities*

 

Net cash provided by operating activities was $69.0 million in the sixmonths ended June 30, 2008, as compared to $49.6 million in the six monthsended June 30, 2007, an increase of $19.4 million.  This increase was primarily due to:

 
| (i)  |   | the receipt of $8.7 million of insurance proceeds in  the first quarter of 2008 for business interruption and to recover the  incremental expenses incurred due to Hurricane Katrina; and                                                                                                        |
|------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (ii) |   | relatively higher levels of cash generated from  political advertisements that are paid for in advance, thereby requiring a  lower level of investment in accounts receivable, and the timing of tax  payments which were significantly lower in the first six months of 2008  compared to 2007. |

 

*Investing Activities*

 

Net cash used in investing activities was $13.7 million in the sixmonths ended June 30, 2008, as compared to $29.6 million in the six monthsended June 30, 2007, a decrease of $15.9 million.  This change is primarily due to:

 
| (i)   |   | a decrease in capital expenditures to $18.1 million  in the six months ended June 30, 2008 from $28.8 million in the same  period in 2007 due to the completion of several large construction projects;                                                                                                                                             |
|-------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (ii)  |   | the receipt of $2.9 million of insurance proceeds on  property losses resulting from Hurricane Katrina in the first quarter of 2008  (In the first quarter of 2007, the Company received $1.0 million of insurance  proceeds as the final payment in the settlement of a property loss claim  resulting from the collapse of a tower in Omaha, NE.); and |
| (iii) |   | the receipt of $4.0 million of proceeds from the redemption  of the Common Securities issued by the Capital Trust.                                                                                                                                                                                                                                       |

 

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*Financing Activities*

 

Net cash used in financing activities was $52.0 million in the sixmonths ended June 30, 2008, as compared to net cash provided by financingactivities of $1.2 million in the six months ended June 30, 2007. Thischange was primarily due to:

 
| (i)   |   | the redemption of the outstanding $134.0 million  Series B Debentures in June 2008;                                                                                                        |
|-------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (ii)  |   | the net borrowing of $94.0 million on our credit  facility in the second quarter of 2008;                                                                                                            |
| (iii) |   | the repurchase of $1.1 million of our Series A  Common Stock in the first quarter of 2008; and                                                                                                  |
| (iv)  |   | proceeds from stock option exercises and employee  stock purchases of $2.2 million in the six months ended June 30, 2008  compared to $14.3 million in the six months ended June 30, 2007. |

 

*Credit Facility and Other Long Term Debt*

 

The Company has a $500 million five-year unsecured revolving creditfacility, which matures on April 15, 2010. The credit facility can be usedfor general corporate purposes including working capital, investments,acquisitions, debt repayment and dividend payments.  Outstanding principal balances under thecredit facility bear interest at our option at LIBOR or the alternate base rate(“ABR”), plus the applicable margin.  Theapplicable margin for ABR loans is zero. The applicable margin for LIBOR loans varies between 0.50% and 1.00%depending on the ratio of our total debt to earnings before interest, taxes,depreciation and amortization as defined by the credit agreement (the “LeverageRatio”).  The ABR is the greater of (i) theprime rate or (ii) the Federal Funds Effective Rate in effect plus0.5%.  We are required to pay a commitmentfee based on the unused portion of the credit facility.  The commitment fee ranges from 0.15% to 0.25%depending on our Leverage Ratio.  Thecredit facility is a general unsecured obligation of the Company.  We have borrowed $335.0 million under the creditfacility as of June 30, 2008.

 

As of June 30, 2008, our total long-term debt obligationsincluding the credit facility were $797 million and our current debt maturitiestotaled $90 million.  Our long-term debtobligations, excluding the revolving credit facility, bear interest at fixedrates.  The Company’s credit ratings wereBBB- by Standard & Poor’s and Fitch Ratings and Baa3 by Moody’sInvestors Service, as of June 30, 2008. Such credit ratings are considered to be investment grade.

 

Our debt obligationscontain certain financial and other covenants and restrictions on theCompany.  Certain of the financialcovenants include credit ratios such as leverage and interest coverage, andthreshold tests such as consolidated net worth, but such covenants do notinclude any triggers explicitly tied to the Company’s credit ratings or stockprice.  We are in compliance with allsuch covenants and restrictions as of June 30, 2008.

 

We anticipate that our primary sources of cash, which include currentcash balances, cash provided by operating activities, and amounts availableunder our credit facility, will be sufficient to finance the operating andworking capital requirements of our stations, as well as our debt servicerequirements, anticipated capital expenditures, and other obligations of theCompany for the next 12 months and the foreseeable future thereafter.

 

**Item 3.****    Quantitativeand Qualitative Disclosures About Market Risk**

 

As of June 30, 2008, the Company was not involved in anyderivative financial instruments. However, the Company may consider certain interest-rate risk strategiesin the future.

 

As of June 30, 2008, we have borrowed $335million under our credit facility, which loan bears interest at LIBOR plus theapplicable margin.  The applicable marginon LIBOR loans varies between 0.50% and 1.00% depending on the ratio of totaldebt to earnings before interest, taxes, depreciation and amortization asdefined by the credit agreement.

 

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**Item 4.****    Controlsand Procedures**

 

The Company’s managementperformed an evaluation under the supervision and with the participation of theCompany’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”),of the effectiveness of the disclosure controls and procedures (as that term isdefined in Exchange Act Rule 13a-15(e)) as of the end of the fiscalquarter ended June 30, 2008.  Basedon that evaluation, and as of the end of the quarter for which this report ismade, the Company’s management, including the CEO and CFO, concluded that theCompany’s disclosure controls and procedures were effective.  Our management, including the CEO and CFO,performed an evaluation of any changes that occurred in our internal controlover financial reporting (as that term is defined in Exchange Act Rule 13a-15(f))during the fiscal quarter ended June 30, 2008.  That evaluation did not identify any changesin the Company’s internal control over financial reporting that have materiallyaffected, or are reasonably likely to materially affect, the Company’s internalcontrol over financial reporting.

 

**PART II**

** OtherInformation**

 

**Item 1A.  Risk Factors**

 

In addition to the otherinformation set forth in this report, you should carefully consider the factorsdiscussed in Part I, “Item 1A. Risk Factors” of the 2007 10-K, whichcould materially affect our business, financial condition or future results.The risks described in the 2007 10-K are not the only risks facing us.Additional risks and uncertainties not currently known to us or that wecurrently deem to be immaterial also may materially adversely affect ourbusiness, financial condition and/or operating results.  There have been no material changes from therisk factors disclosed in the 2007 10-K, except for the following:

 

**A Decline in AdvertisingExpenditures Could Adversely Affect our Operating Results**

 

We rely substantially upon sales of advertising for our revenues.  Our stations compete for advertising revenues with other television stations in their respective markets.  They also compete with other advertising media, such as newspapers, radio stations, magazines, outdoor advertising, transit advertising, yellow page directories, direct mail, the Internet and local cable and satellite system operators.  Our stations are located in highly competitive markets.  Accordingly, our operating results are and will continue to be dependent upon the ability of each of our stations to compete successfully for advertising revenues in its respective market.  Our ability to generate advertising revenues is and will continue to be affected by changes in the national economy, as well as by regional economic conditions in each of the markets in which our stations operate.  The size of advertisers’ budgets, which are affected by broad economic trends, affect the broadcast industry in general and the revenues of individual broadcast television stations.  In particular, our advertisers have purchased less advertising time from us in recent months due to the current decline in the national economy, as well as in regional economies.  In addition, the occurrence of disasters, acts of terrorism, political uncertainty or hostilities could cause us to lose our ability to broadcast our television signals or, if we are able to broadcast, our broadcast operations may shift to around-the-clock news coverage, which would cause the loss of advertising revenues due to the suspension of advertising-supported commercial programming.

 

**We Have a Controlling Stockholder**

 

Hearst, through its beneficial ownership of our Series A and Series B Common Stock, has voting control of our company.  Through its beneficial ownership of 100% of our Series B Common Stock, Hearst also is entitled to elect as a class all but two members of our Board of Directors (currently, 11 of our 13 Board seats).  As a result, Hearst is able to control substantially all actions to be taken by our stockholders, and also is able to maintain control over our operations and business.

 

Further, in September 2007,Hearst launched a tender offer to acquire the outstanding shares of our Series ACommon Stock that it did not already own. Although that offer was unsuccessful, Hearst subsequently authorized the

 

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purchase up to eightmillion additional shares of our Series A Common Stock in order toincrease its ownership percentage to the level where it could include us in itsaffiliated group of corporations filing a consolidated U.S. federal income taxreturn.  According to the Schedule 13Damendment filed by Hearst on July 9, 2008, Hearst’s ownership of our Series Aand Series B Common stock exceeds the required 80 percent (by vote andvalue) ownership level and, accordingly, we will be included in the Hearstaffiliated group of corporations and will file our U.S. federal income taxreturn with Hearst on a consolidated basis as of July 1, 2008.

 

Hearst’s control, as well as certain provisions of our Certificate of Incorporation and of Delaware law, may make us a less attractive target for a takeover than we otherwise might be, or render more difficult or discourage a merger proposal, tender offer or other transaction involving an actual or potential change of control.  Hearst’s voting control also prevents other stockholders from exercising significant influence over our business decisions.

 

 **Item 2.    UnregisteredSales of Equity Securities, Use of Proceeds and Issuer Purchases of EquitySecurities.**

 

*Purchaseof Equity Securities by the Issuer and Affiliated Purchasers. *The following table reflects purchases of our Series ACommon Stock made by Hearst Broadcasting during the three months ended June 30,2008:

 
| **Period**                    | ** ** | **Total Number  of Shares  Purchased** | ** ** | **Average Price  Paid Per  Share** | ** ** | **Total Number of Shares  Purchased as Part of  Publicly Announced  Program** | ** ** | **Maximum Number of  Shares that May Yet Be  Purchased Under the  Program** | ** ** |
|-------------------------------|------------|--------------------------------------------------|------------|----------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------|------------|
| April 1 -  April 30 |       | 1,981,800                                        |       | $                                            | 20.55      |                                                                                                             | 1,981,800  |                                                                                                                |       |   |
| May 1 -  May 31     |       | 703,000                                          |       | $                                            | 20.84      |                                                                                                             | 703,000    |                                                                                                                |       |   |
| June 1 -  June 30   |       | 905,256                                          |       | $                                            | 20.68      |                                                                                                             | 905,256    |                                                                                                                | 1,922,246  | (1) |
| Total                         |       | 3,590,056                                        |       | $                                            | 20.68      |                                                                                                             | 3,590,056  |                                                                                                                |       |   |

 

----

(1) On December 6, 2007, Hearst filed an amendment to itsSchedule 13D with the Securities and Exchange Commission indicating that itsBoard of Directors had approved the purchase of up to eight million additionalshares of our Series A Common Stock in order to increase its ownershippercentage to approximately 82% to permit us to be consolidated with Hearst forfederal income tax purposes. Previously, Hearst had authorized the purchase ofup to 25 million shares of our Series A Common Stock.

 

As of June 30, 2008,Hearst beneficially owned approximately 64.3% of the Company’s outstanding Series ACommon Stock and 100% of the Company’s Series B Common Stock, representingin the aggregate approximately 80.0% of our outstanding common stock.

 

The following tablereflects purchases made by the Company of its Series A Common Stock duringthe three months ended June 30, 2008:

 
| **Period**                    | ** ** | **Total Number of  Shares Purchased** | ** ** | **Average Price  Paid Per Share** | ** ** | **Total Number of Shares  Purchased as Part of  Publicly Announced  Program** | ** ** | **Approximate Dollar  Value of Shares that  May Yet Be Purchased  Under the Program** | ** ** |
|-------------------------------|------------|------------------------------------------------------|------------|--------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------|------------|
| April 1 -  April 30 |       | 0                                                    |       | $                                                | 0.00       |                                                                                                             | 0          |                                                                                                                               |       |   |
| May 1 -  May 31     |       | 0                                                    |       | $                                                | 0.00       |                                                                                                             | 0          |                                                                                                                               |       |   |
| June 1 -  June 30   |       | 0                                                    |       | $                                                | 0.00       |                                                                                                             | 0          |                                                                                                                               | $          | 182,852,123.30 | (1) |
| Total                         |       | 0                                                    |       | $                                                | 0.00       |                                                                                                             | 0          |                                                                                                                               |       |   |
|                               |            |                                                      |            |                                                  |            |                                                                                                                  |            |                                                                                                                                    |            |  |  |

 

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(1)          In May 1998, the Company’s Board of Directorsauthorized the repurchase of up to $300 million of its outstanding Series ACommon Stock.  Such purchases may beeffected from time to time in the open market or in private 

 

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transactions, subject tomarket conditions and management’s discretion. As of June 30, 2008, the Company has spent approximately $117.1million to repurchase approximately 4.8 million shares of Series A CommonStock at an average price of $24.54. There can be no assurance that suchrepurchases will occur in the future or, if they do occur, what the terms ofsuch repurchases will be.

 

**Item 4.**       **Submission of Matters to a Vote of Security Holders**

 

Thefollowing matters were submitted to a vote of security holders during theCompany’s annual meeting of shareholders held on May 6, 2008.

 

**ProposalOne (1)**** – Election of Directors.**

 

 All nomineesstanding for election as directors were elected:  the following chart indicates the number ofvotes cast for, the number of votes withheld and the number of broker non-voteswith respect to each nominee for director:

 
| **Nominee**                     | ** ** | **For**    | ** ** | **Withheld** | ** ** | **Broker Non-Votes** | ** ** |
|---------------------------------|------------|------------|------------|--------------|------------|---------------------------|------------|
| Caroline L.  Williams (2)       |       | 50,512,181 |       | 511,774      |       | 0                         |       |
| Frank A.  Bennack, Jr. (3) |       | 41,298,648 |       | 0            |       | 0                         |       |
| John G.  Conomikes (3)          |       | 41,298,648 |       | 0            |       | 0                         |       |
| George R.  Hearst, Jr. (3) |       | 41,298,648 |       | 0            |       | 0                         |       |
| Gilbert C.  Maurer (3)          |       | 41,298,648 |       | 0            |       | 0                         |       |
| Bob Marbut (3)                  |       | 41,298,648 |       | 0            |       | 0                         |       |

 

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| (1) |   | Abstentions were not  counted in the election of the directors.                |
|-----|--------|--------------------------------------------------------------------------------|
| (2) |   | Series A Director.  Elected by the holders of Series A Common Stock. |
| (3) |   | Series B Director.  Elected by the holders of Series B Common Stock. |

 

The term of office of thefollowing other directors continued after the annual shareholders’ meeting:David J. Barrett, Victor F. Ganzi, Ken J. Elkins, William R. Hearst, IIIand David Pulver.  On June 18, 2008,Victor F. Ganzi announced that he intends to resign as a director of our Boardof Directors, as Chairman of our Board of Directors and as a member of ourBoard’s Compensation Committee and Executive Committee, in connection with hisresignation as President, Chief Executive Officer and director of Hearst.

 

**ProposalTwo – Incentive Compensation Plan.**

 

The proposal tore-approve the material performance goals of the Company’s 2003 IncentiveCompensation Plan under which the Company awards various forms of incentivecompensation to officers and other key employees of the Company and itssubsidiaries (the “Incentive Compensation Plan Proposal”) was also approved atthe annual shareholders’ meeting. The following chart indicates the number ofvotes cast for and against, the number of votes withheld and the number ofbroker non-votes with respect to the Incentive Compensation Plan Proposal:

 

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| **For**                   |   | 81,260,307 |   |
|---------------------------|--------|------------|--------|
| ** **                |   |       |   |
| **Against**               |   | 11,017,790 |   |
| ** **                |   |       |   |
| **Abstained  (1)**        |   | 44,506     |   |
| ** **                |   |       |   |
| **Broker Non-Votes** |   | 0          |   |

 

----

| (1) |   | Abstentions were  counted as a vote against the Incentive Compensation Plan Proposal. |
|-----|--------|---------------------------------------------------------------------------------------|

 

**ProposalThree – Ratification of Independent Auditors.**

 

The proposal to ratifythe selection of Deloitte & Touche LLP as the Company’s independentexternal auditors (the “Independent Auditors Ratification Proposal”) was alsoapproved at the annual shareholders’ meeting. The following chart indicates thenumber of votes cast for and against, the number of votes withheld and thenumber of broker non-votes with respect to the Independent AuditorsRatification Proposal:

 
| **For**                   |   | 92,300,919 |   |
|---------------------------|--------|------------|--------|
| ** **                |   |       |   |
| **Against**               |   | 9,592      |   |
| ** **                |   |       |   |
| **Abstained  (1)**        |   | 12,092     |   |
| ** **                |   |       |   |
| **Broker Non-Votes** |   | 0          |   |

 

----

| (1) |   | Abstentions were  counted as a vote against the Independent Auditors Ratification Proposal. |
|-----|--------|---------------------------------------------------------------------------------------------|

 

**Item 6.****    Exhibits**

 

**(a) Exhibits:**

 
| 10.1   |   | Amendment No. 1 to  Retransmission Rights Agency Agreement, dated as of June 30, 2008,  between Lifetime Entertainment Services and the Company (incorporated by  reference to Exhibit 10.1 to the Company’s Current Report on  Form 8-K filed July 7, 2008). Portions of this agreement have been  redacted pursuant to a request for confidential treatment submitted to the  Securities and Exchange Commission (“SEC”) on July 7, 2008. We have  filed the redacted material separately with the SEC. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.2   |   | Amendment No. 1 to  Retransmission Rights Agency Agreement, dated as of June 30, 2008,  between Lifetime Entertainment Services and the Company (incorporated by  reference to Exhibit 10.2 to the Company’s Current Report on  Form 8-K filed July 7, 2008). Portions of this agreement have been  redacted pursuant to a request for confidential treatment submitted to the  SEC on July 7, 2008. We have filed the redacted material separately with  the SEC.                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 31.1   |   | Certification of Chief  Executive Officer pursuant to Rule 13a-14(a) under the Securities  Exchange Act of 1934, as amended.*                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 31.2   |   | Certification of Chief  Financial Officer pursuant to Rule 13a-14(a) under the Securities  Exchange Act of 1934, as amended.*                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 32.1   |   | Certification of Chief  Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.  Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002.*                                                                                                                                                                                                                                                                                                                                                           |

 

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*Filed herewith.

 

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**SIGNATURES**

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 
|       | **HEARST-ARGYLE  TELEVISION, INC.** |
|------------|-------------------------------------|
|       |                                |
|       |                                |
|       | By:                                 | /s/ JONATHAN C.  MINTZER |
|       |                                | Name: Jonathan C.  Mintzer |
| ** ** | ** **                          | Title: Vice President,  General Counsel and Secretary |
| ** ** | ** **                          |   |
|       | Dated:                              | **July 31, 2008** |
|            |                                     |  |  |

 

 
| **Name**            | ** ** | **Title**                                                    | ** ** | **Date**            |
|---------------------|------------|--------------------------------------------------------------|------------|---------------------|
|                |       |                                                         |       |                |
| /s/ HARRY T.  HAWKS |       | Executive Vice  President                                    |       | July 31,  2008 |
| Harry T. Hawks      |       | and Chief  Financial Officer   (Principal Financial Officer) |       |                |

 

 
|                |   |                            |   |                |
|---------------------|--------|---------------------------------|--------|---------------------|
| /s/ LYDIA G.  BROWN |   | Corporate  Controller           |   | July 31,  2008 |
| Lydia G. Brown      |   | (Principal  Accounting Officer) |   |                |

 

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