** **

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

----

 

**Form 10-Q**

 

**(Mark One)**

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

 

**FOR THE QUARTERLY PERIOD ENDEDMARCH 31, 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 number1-14776**

 

**Hearst-Argyle Television, Inc.**

(Exact Name ofRegistrant as Specified in Its Charter)

 

| **Delaware**                                                     | ** ** | **74-2717523**                                             |
|------------------------------------------------------------------|------------|------------------------------------------------------------|
| (State  or other jurisdiction of  incorporation 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) |

 

SECURITIESREGISTERED PURSUANT TO SECTION 12(b) OF THE 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                                               |

 

SECURITIESREGISTERED PURSUANT 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 “largeaccelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2of the Exchange Act. (Check one):

 

| 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 April 25, 2008: 93,878,024 shares(consisting of 52,579,376 shares of Series A Common Stock and 41,298,648shares of Series B Common Stock).

 

 

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**HEARST-ARGYLE TELEVISION, INC.**

 

**Index**

 
| ** **       | ** **                                                                                                                                      | **Page****No.** |
|------------------|-------------------------------------------------------------------------------------------------------------------------------------------------|-----------------|
| **Part I**  | **Financial**Information**                                                                                                                      |            |
|             |                                                                                                                                            |            |
| **Item 1.** | **Financial Statements**                                                                                                                        |            |
|             | Condensed Consolidated Balance Sheets as of March 31,  2008 (unaudited) and December 31, 2007 | 1               |
|             | Condensed  Consolidated Statements of Income for the Three Months Ended March 31,  2008 and 2007 (unaudited)                          | 2               |
|             | Condensed  Consolidated Statements of Cash Flows for the Three Months Ended  March 31, 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**                                                 | 13              |
|             |                                                                                                                                            |            |
| **Item 3.** | **Quantitative  and Qualitative Disclosures about Market Risk**                                                                                 | 18              |
|             |                                                                                                                                            |            |
| **Item 4.** | **Controls and  Procedures**                                                                                                                    | 18              |
|             |                                                                                                                                            |            |
| **Part II** | **Other Information**                                                                                                                           |            |
|             |                                                                                                                                            |            |
| **Item 2.** | **Unregistered  Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity  Securities**                                        | 19              |
|             |                                                                                                                                            |            |
| **Item 6.** | **Exhibits**                                                                                                                                    | 20              |
| ** **       | ** **                                                                                                                                      | ** **      |
| **Signatures**   |                                                                                                                                            | 21              |

 

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**PART I****FINANCIALINFORMATION**

**Item 1. Financial Statements**

**HEARST-ARGYLETELEVISION, INC.**

**CondensedConsolidated Balance Sheets**

 
| ** **                                       | ** ** | **March 31, 2008** | ** ** | **December 31, 2007** | ** ** |
|--------------------------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| ** **                                       | ** ** | **(Unaudited)**              | ** ** | ** **                      | ** ** |
| ** **                                       | ** ** | **(In  thousands)**          | ** ** |
| **Assets**                                       |       |                         |       |                            |       |
| Current assets:                                  |       |                         |       |                            |       |
| Cash and cash  equivalents                       |       | $                            | 12,734     |                            | $          | 5,964 |   |
| Accounts  receivable, net                        |       | 132,654                      |       | 164,764                         |       |
| Program and  barter rights                       |       | 44,992                       |       | 65,097                          |       |
| Deferred income  tax asset                       |       | 4,794                        |       | 4,794                           |       |
| Other                                            |       | 6,833                        |       | 5,698                           |       |
| Total current  assets                            |       | 202,007                      |       | 246,317                         |       |
| Property, plant  and equipment, net              |       | 301,299                      |       | 305,971                         |       |
| Intangible  assets, net                          |       | 2,511,850                    |       | 2,513,340                       |       |
| Goodwill                                         |       | 816,728                      |       | 816,728                         |       |
| Other assets:                                    |       |                         |       |                            |       |
| Deferred  financing costs, net                   |       | 7,781                        |       | 8,000                           |       |
| Investments                                      |       | 40,563                       |       | 41,948                          |       |
| Program and  barter rights, noncurrent           |       | 11,541                       |       | 8,399                           |       |
| Other assets                                     |       | 16,436                       |       | 18,273                          |       |
| Total other  assets                              |       | 76,321                       |       | 76,620                          |       |
| Total assets                                     |       | $                            | 3,908,205  |                            | $          | 3,958,976 |   |
| ** **                                       |       |                         |       |                            |       |
| **Liabilities  and Stockholders’ Equity**   |       |                         |       |                            |       |
| Current  liabilities:                            |       |                         |       |                            |       |
| Current portion  of long-term debt               |       | $                            | 90,004     |                            | $          | 90,016 |   |
| Accounts payable                                 |       | 9,727                        |       | 15,103                          |       |
| Accrued  liabilities                             |       | 38,316                       |       | 48,376                          |       |
| Program and  barter rights payable               |       | 44,199                       |       | 64,687                          |       |
| Payable to  Hearst Corporation, net              |       | 5,469                        |       | 5,747                           |       |
| Other                                            |       | 5,770                        |       | 6,482                           |       |
| Total current  liabilities                       |       | 193,485                      |       | 230,411                         |       |
| Program and barter  rights payable, noncurrent   |       | 19,635                       |       | 15,587                          |       |
| Long-term debt                                   |       | 676,110                      |       | 703,110                         |       |
| Note payable to  Capital Trust                   |       | 134,021                      |       | 134,021                         |       |
| Deferred income  tax liability                   |       | 858,064                      |       | 856,790                         |       |
| Other  liabilities                               |       | 68,294                       |       | 66,658                          |       |
| Total noncurrent  liabilities                    |       | 1,756,124                    |       | 1,776,166                       |       |
| Commitments and  contingencies                   |       |                         |       |                            |       |
| Stockholders’  equity:                      |       |                         |       |                            |       |
| Series A  common stock                      |       | 573                          |       | 573                             |       |
| Series B  common stock                      |       | 413                          |       | 413                             |       |
| Additional  paid-in capital                      |       | 1,340,604                    |       | 1,336,786                       |       |
| Retained  earnings                               |       | 746,734                      |       | 743,264                         |       |
| Accumulated  other comprehensive loss, net       |       | (12,580                      | )          | (12,580                         | )          |
| Treasury stock,  at cost                         |       | (117,148                     | )          | (116,057                        | )          |
| Total  stockholders’ equity                 |       | 1,958,596                    |       | 1,952,399                       |       |
| Total  liabilities and stockholders’ equity |       | $                            | 3,908,205  |                            | $          | 3,958,976 |   |

 

See notes to condensedconsolidated financial statements.

 

1

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**HEARST-ARGYLETELEVISION, INC.**

 

**CondensedConsolidated Statements of Income**

 
| ** **                                       | ** ** | **Three Months Ended March 31,**               | ** ** |
|--------------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                       | ** ** | **2008**                                                           | ** ** | **2007** | ** ** |
| ** **                                       | ** ** | **(Unaudited)**                                                    | ** ** |
| ** **                                       | ** ** | **(In thousands, except per share data)** | ** ** |
|                                             |       |                                                               |       |   |   |
| Total revenue                                    |       | $                                                                  | 165,053    |   | $ | 169,383 |   |
| Station  operating expenses:                     |       |                                                               |       |   |   |
| Salaries,  benefits and other operating costs    |       | 104,128                                                            |       | 101,074 |   |
| Amortization of  program rights                  |       | 18,712                                                             |       | 19,228 |   |
| Depreciation and  amortization                   |       | 14,052                                                             |       | 14,996 |   |
| Insurance  settlement                            |       | (11,549                                                            | )          | — |   |
| Corporate,  general and administrative expenses  |       | 8,716                                                              |       | 7,779 |   |
| Operating income                                 |       | 30,994                                                             |       | 26,306 |   |
| Interest expense                                 |       | 12,883                                                             |       | 15,890 |   |
| Interest income                                  |       | (19                                                                | )          | (346 | ) |
| Interest  expense, net – Capital Trust      |       | 2,438                                                              |       | 2,438 |   |
| Income before  income taxes and equity earnings  |       | 15,692                                                             |       | 8,324 |   |
| Income tax  expense                              |       | 4,290                                                              |       | 3,993 |   |
| Equity in loss  of affiliates, net of tax        |       | 1,362                                                              |       | 80 |   |
| Net income                                       |       | $                                                                  | 10,040     |   | $ | 4,251 |   |
|                                             |       |                                                               |       |   |   |
| Income per  common share – basic            |       | $                                                                  | 0.11       |   | $ | 0.05 |   |
| Number of common  shares used in the calculation |       | 93,509                                                             |       | 93,183 |   |
|                                             |       |                                                               |       |   |   |
| Income per  common share – diluted          |       | $                                                                  | 0.11       |   | $ | 0.05 |   |
| Number of common  shares used in the calculation |       | 94,120                                                             |       | 94,189 |   |
|                                             |       |                                                               |       |   |   |
| Dividends per common  share declared             |       | $                                                                  | 0.07       |   | $ | 0.07 |   |

 

See notes to condensed consolidated financialstatements.

 

2

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**HEARST-ARGYLETELEVISION, INC.**

 

**CondensedConsolidated Statements of Cash Flows**

 
| ** **                                                                         | ** ** | **Three Months Ended March 31,** | ** ** |
|------------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                                         | ** ** | **2008**                                             | ** ** | **2007** | ** ** |
| ** **                                                                         | ** ** | **(Unaudited)**                                      | ** ** |
| ** **                                                                         | ** ** | **(In thousands)**                              | ** ** |
| **Operating  Activities**                                                          |       |                                                 |       |   |   |
| Net income                                                                         |       | $                                                    | 10,040     |   | $ | 4,251 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |                                                 |       |   |   |
|                                                                               |       |                                                 |       |   |   |
| Depreciation                                                                       |       | 12,564                                               |       | 13,229 |   |
| Amortization of  intangible assets                                                 |       | 1,488                                                |       | 1,767 |   |
| Amortization of  deferred financing costs                                          |       | 219                                                  |       | 448 |   |
| Amortization of  program rights                                                    |       | 18,712                                               |       | 19,228 |   |
| Deferred income  taxes                                                             |       | 1,291                                                |       | 203 |   |
| Equity in loss  of affiliates, net                                                 |       | 1,362                                                |       | 80 |   |
| Provision for doubtful  accounts                                                   |       | 415                                                  |       | 285 |   |
| Stock-based  compensation expense                                                  |       | 2,083                                                |       | 2,046 |   |
| Insurance  settlement                                                              |       | (11,549                                              | )          | — |   |
| Business  interruption insurance proceeds                                          |       | 8,659                                                |       | — |   |
| Program payments                                                                   |       | (18,189                                              | )          | (18,343 | ) |
| Changes in  operating assets and liabilities:                                      |       |                                                 |       |   |   |
| Decrease in  Accounts receivable                                                   |       | 31,695                                               |       | 17,780 |   |
| Decrease in  Other assets                                                          |       | 745                                                  |       | 1,334 |   |
| (Decrease) in  Accounts payable and accrued liabilities                            |       | (16,172                                              | )          | (24,497 | ) |
| Increase in  Other liabilities                                                     |       | 644                                                  |       | 3,705 |   |
| Net cash  provided by operating activities                                         |       | 44,007                                               |       | 21,516 |   |
|                                                                               |       |                                                 |       |   |   |
| **Investing  Activities**                                                          |       |                                                 |       |   |   |
| Purchases of  property, plant and equipment, net                                   |       | (7,190                                               | )          | (9,972 | ) |
| Property loss  insurance proceeds                                                  |       | 2,890                                                |       | 1,000 |   |
| Investment in  affiliates and other, net                                           |       | —                                               |       | (3 | ) |
| Net cash used in  investing activities                                             |       | (4,300                                               | )          | (8,975 | ) |
|                                                                               |       |                                                 |       |   |   |
| **Financing  Activities**                                                          |       |                                                 |       |   |   |
| Payments on  credit facility                                                       |       | (27,000                                              | )          | — |   |
| Dividends paid  on common stock                                                    |       | (6,569                                               | )          | (6,523 | ) |
| Series A  Common Stock repurchases                                            |       | (1,091                                               | )          | — |   |
| Principal  payments and repurchase of long term debt                               |       | (12                                                  | )          | (7 | ) |
| Proceeds from  employee stock purchase plan and stock option exercises             |       | 1,735                                                |       | 7,343 |   |
| Net cash (used  in) provided by financing activities                               |       | (32,937                                              | )          | 813 |   |
|                                                                               |       |                                                 |       |   |   |
| Increase in cash  and cash equivalents                                             |       | 6,770                                                |       | 13,354 |   |
| Cash and cash  equivalents at beginning of period                                  |       | 5,964                                                |       | 18,610 |   |
| Cash and cash  equivalents at end of period                                        |       | $                                                    | 12,734     |   | $ | 31,964 |   |

 

See notes to condensed consolidated financialstatements.

 

3

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| ** **                                              | ** ** | **Three Months Ended March 31,** | ** ** |
|---------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                              | ** ** | **2008**                                             | ** ** | **2007** | ** ** |
| ** **                                              | ** ** | **(Unaudited)**                                      | ** ** |
| ** **                                              | ** ** | **(In thousands)**                              | ** ** |
| **Supplemental  Cash Flow Information:**                |       |                                                 |       |   |   |
| **Cash  paid during the period for:**                   |       |                                                 |       |   |   |
| Interest                                                |       | $                                                    | 8,731      |   | $ | 7,331 |   |
| Interest on Note  payable to Capital Trust              |       | $                                                    | 2,438      |   | $ | — |   |
| Taxes, net of  refunds                                  |       | $                                                    | 5,501      |   | $ | 22,926 |   |
| **Non-cash  investing and financing activities:**       |       |                                                 |       |   |   |
| Accrued  property, plant & equipment purchases |       | $                                                    | 736        |   | $ | 1,608 |   |
|                                                         |            |                                                      |            |  |  |  |  |  |  |  |  |

 

See notes to condensed consolidated financialstatements.

 

4

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**Hearst-ArgyleTelevision, Inc.**

**Notes to Condensed Consolidated FinancialStatements**

**Tabularamounts in thousands, except per share data**

 

**1.    Basis of 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 was required to be deconsolidated upon adoption of the FinancialAccounting Standards Board (“FASB”) Interpretation No. 46 (revised December 2003),*Consolidation of Variable Interest Entities*(“FIN 46(R)”). Intercompany accounts have been eliminated in consolidation.

 

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. In the opinion of management, all adjustments considered necessary for afair presentation have been included and are normal and recurring in nature. Operatingresults for the three months ended March 31, 2008 are not necessarilyindicative of the results that may be expected for the full year.

 

**2.    Recent Developments**

 

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 in 2005. TheCompany received $11.5 million in the first quarter of 2008 to bring the totalrecoveries to $16.5 million, net of deductibles, given the receipt of anadvance payment of $5.0 million in the fourth quarter of 2006. The $11.5million received in the first quarter of 2008 has been recorded as an offset toStation Operating Expenses.

 

In 2006 Sprint Nextel Corporation (“Nextel”) was granted the right fromthe Federal Communications Commission (“FCC”) to reclaim from broadcasters ineach market across the country the 1.9 GHz spectrum to use for anemergency communications system.  In order to reclaim this signal,Nextel must replace all analog equipment currently using this spectrum withdigital equipment.  All broadcasters have agreed to use the digitalsubstitute that Nextel will provide.  The transition will be completed ona market-by-market basis.  As the equipment is exchanged and put intoservice in each of our markets, we will record gains to the extent that thefair market value of the equipment we receive exceeds the book value of theanalog equipment we exchange.  No markets were transitioned duringthe first quarter of 2008 or 2007.

 

**3.    AccountingPronouncements**

 

In December 2007,the Financial Accounting Standards Board (“FASB”) issued Statement of FinancialAccounting Standards (“SFAS”) No. 160, *Non-ControllingInterests in Consolidated Financial Statements,**an amendment of ARB No. 51*(“SFAS160”), which establishes new standards that will governthe accounting for and reporting of noncontrolling interests in partially ownedconsolidated subsidiaries and the loss of control of subsidiaries. SFAS 160requires that noncontrolling interests be reported as a component of equity ina Company’s consolidated financial statements and that losses will be allocatedto these interests even when such allocation might result in a deficit balance.SFAS 160 is effective for all fiscal years beginning after December 15,2008 and interim periods within those years. We do not believe the adoption ofSFAS 160 will have a material impact on our financial position, cash flows orresults 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 the future business combinationsthat we may pursue after its effective date.

 

5

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**Hearst-ArgyleTelevision, Inc.**

**Notes toCondensed Consolidated Financial Statements**

**Tabularamounts in thousands, except per share data**

 

In February 2007,the FASB 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. The adoption of SFAS 157 does nothave a material impact on our financial position, cash flows or results ofoperations.

 

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.  It requires employers to recognize anasset 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 September 30 to December 31 in 2008. As such,in the fourth quarter of 2008, the Company will record a decrease to retainedearnings of $2.9 million and an increase of $0.3 million, net of tax, inaccumulated 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. FIN 48 also provides guidance onmeasurement, derecognition, classification, interest and penalties, accountingin interim periods, disclosure and transition. As a result of applying FIN 48,the amount of benefit recognized in the financial statements may differ fromthe amount taken or expected to be taken in a tax return. These differences arereferred to as unrecognized tax benefits and represent financial statementliabilities. In the event unrecognized tax positions are ultimately allowed(for example, when the matter is settled with taxing authorities or statutes oflimitations expire), the benefit is recognized, generally resulting in areduction of tax expense in the period of recognition.   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-Based Compensation**

 

Stock-based compensation expense for each ofthe three months ended March 31, 2008 and 2007 was $2.1 and $2.0 million,respectively.   The total deferredtax benefit related thereto was $0.8 million for the three months ended March 31,2008 and $0.7 million for the three months ended March 31, 2007.  As of March 31, 2008, there was $12.2million of total unrecognized compensation cost related to unvested share-basedcompensation awards granted under the equity compensation plans, which does notinclude the effect of future grants of equity compensation, if any.  Of the total $12.2 million, we expect torecognize approximately 46% in the remaining interim periods of 2008, 38% in2009 and 16% in 2010.

 

6

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**Hearst-ArgyleTelevision, Inc.**

**Notes toCondensed Consolidated Financial Statements**

**Tabularamounts in thousands, except per share data**

** **

**5.    Long-TermDebt**

 

Long-term debt as of March 31, 2008 and December 31, 2007consisted of the following:

 
| ** **                 | ** ** | **March 31, 2008** | ** ** | **December 31, 2007** | ** ** |
|----------------------------|------------|------------------------------|------------|---------------------------------|------------|
| ** **                 | ** ** | **(Unaudited)**              | ** ** | ** **                      | ** ** |
| Revolving  credit facility |       | $                            | 214,000    |                            | $          | 241,000 |   |
| Senior  notes              |       | 282,110                      |       | 282,110                         |       |
| Private  placement debt    |       | 270,000                      |       | 270,000                         |       |
| Capital  lease obligations |       | 4                            |       | 16                              |       |
| Total  debt                |       | 766,114                      |       | 793,126                         |       |
| Less:  Current maturities  |       | (90,004                      | )          | (90,016                         | )          |
|                       |       |                         |       |                            |       |
| Total  long-term debt      |       | $                            | 676,110    |                            | $          | 703,110 |   |

 

**6.    EarningsPer Share**

 

The calculation of basic earnings per share (“EPS”) for each period isbased on the weighted average number of common shares outstanding during theperiod.  The calculation of dilutive EPSfor each period is based on the weighted average number of common sharesoutstanding during the period, including restricted stock issued to date, plusthe effect, if any, from the assumed exercise of stock options and conversionof Redeemable Convertible Preferred Securities. The following table sets forth a reconciliation between basic EPS anddiluted EPS, in accordance with SFAS No. 128, *Earnings Per Share*:

 
| ** **                                                 | ** ** | **Three months ended March 31,** | ** ** |
|------------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                 | ** ** | **2008**                                             | ** ** | **2007** | ** ** |
| ** **                                                 | ** ** | **(Unaudited)**                                      | ** ** |
| Net  income (Basic and Diluted)                            |       | $                                                    | 10,040     |   | $ | 4,251 |   |
|                                                       |       |                                                 |       |   |   |
| Basic  shares                                              |       | 93,509                                               |       | 93,183 |   |
| Basic  EPS                                                 |       | $                                                    | 0.11       |   | $ | 0.05 |   |
|                                                       |       |                                                 |       |   |   |
| Diluted  shares                                            |       | 94,120                                               |       | 94,189 |   |
| Diluted  EPS                                               |       | $                                                    | 0.11       |   | $ | 0.05 |   |
|                                                       |       |                                                 |       |   |   |
| Basic  shares                                              |       | 93,509                                               |       | 93,183 |   |
| Add:  Shares issued upon assumed exercise of stock options |       | 611                                                  |       | 1,006 |   |
| Diluted  shares                                            |       | 94,120                                               |       | 94,189 |   |

 

The dilution test for the Redeemable Convertible Preferred Securitiesrelated to the Capital Trust is performed for all periods. This test considersonly the total number of shares that could be issued if converted and does notconsider either the conversion price or the share price of the underlyingcommon shares. For the three months ended March 31, 2008 and 2007, 5,127,881shares of Series A Common Stock to be issued upon the conversion of2,600,000 shares of Series B 7.5% Redeemable Convertible PreferredSecurities are not included in the number of common shares used in thecalculation of diluted EPS because to do so would have been anti-dilutive. Whenthe securities related to the Capital Trust are dilutive, the interest, net oftax, related to the Capital Trust is added back to Net income for purposes ofthe diluted EPS calculation.

 

Options to purchase 5,028,134 and 2,773,538 shares of Series ACommon Stock (before application of the treasury stock method), for the threemonths ended March 31, 2008 and 2007, respectively, were not included inthe

 

7

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**Hearst-ArgyleTelevision, Inc.**

**Notes toCondensed Consolidated Financial Statements**

**Tabularamounts in thousands, except per share data**

 

computationof diluted EPS because the exercise price was greater than the average marketprice of $21.25 and $26.16, respectively.

 

**7.    Goodwill and Intangible Assets**

 
| ** **                                                         | ** ** | **March 31, 2008** | ** ** | **December 31, 2007** | ** ** |
|--------------------------------------------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| ** **                                                         | ** ** | **(Unaudited)**              | ** ** | ** **                      |
| Total  intangible assets subject to amortization, net              |       | $                            | 98,593     |                            | $          | 100,083 |   |
| Intangible  assets not subject to amortization – FCC licenses |       | 2,413,257                    |       | 2,413,257                       |       |
| Total  intangible assets, net                                      |       | $                            | 2,511,850  |                            | $          | 2,513,340 |   |
|                                                               |       |                         |       |                            |       |
| Goodwill                                                           |       | $                            | 816,728    |                            | $          | 816,728 |   |

 

Summarized below are the carrying values ofintangible assets subject to amortization as of March 31, 2008 and December 31,2007:

 
| ** **                                       | ** ** | **March 31, 2008** | ** ** | **December 31, 2007** | ** ** |
|--------------------------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| ** **                                       | ** ** | **(Unaudited)**              | ** ** | ** **                      | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                       | ** ** | **Gross  Carrying  Value**   | ** ** | **Accumulated  Amortization**   | ** ** | **Net  Carrying  Value** | ** ** | **Gross  Carrying  Value** | ** ** | **Accumulated  Amortization** | ** ** | **Net  Carrying  Value** | ** ** |
| Intangible  assets subject to amortization:      |       |                         |       |                            |       |   |   |   |   |   |   |   |   |
| Advertiser  client base                          |       | $                            | 124,035    |                            | $          | 79,134 |   | $ | 44,901 |   | $ | 124,035 |   | $ | 78,248 |   | $ | 45,787 |   |
| Network  affiliations                            |       | 95,493                       |       | 41,867                          |       | 53,626 |   | 95,493 |   | 41,268 |   | 54,225 |   |
| Other                                            |       | 743                          |       | 677                             |       | 66 |   | 743 |   | 672 |   | 71 |   |
| Total  intangible assets subject to amortization |       | $                            | 220,271    |                            | $          | 121,678 |   | $ | 98,593 |   | $ | 220,271 |   | $ | 120,188 |   | $ | 100,083 |   |

 

The Company’s amortization expense for intangible assets wasapproximately $1.5 million and $1.8 million for the three months ended March 31,2008 and 2007, respectively. Annual intangible asset amortization expense isestimated to be approximately $6.0 million in each of the next five years.

 

**8.    Income Taxes**

 

The income tax expensefor the three months ended March 31, 2008 and 2007 was $4.3 million and$4.0 million, respectively.

 

The effective tax ratefor the three months ended March 31, 2008 was 27.3% as compared to48.0% for the three months ended March 31, 2007.  The effective taxfor the first quarter of 2008 was favorably impacted by the reductionin capital loss valuation allowance as a result of the utilization of theCompany’s capital loss carry forwards to offset a portion of the insurancesettlement gain recorded during the quarter.  At December 31, 2007,we had valuation allowances associated with capital loss carry forwards (taxeffected) of $4.5 million, expiring in 2009. In the first quarter of 2008, weutilized $2.5 million (tax effected) of the other capital loss carry forwardswhich expire in 2009.

 

**9.    Common Stock**

 

**Common Stock Repurchase**

 

In May 1998, the Company’s Board of Directors authorized therepurchase of up to $300 million of its outstanding Series A CommonStock.  Such repurchases may be effectedfrom time to time in the open market or in

 

8

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**Hearst-ArgyleTelevision, Inc.**

**Notes toCondensed Consolidated Financial Statements**

**Tabularamounts in thousands, except per share data**

 

privatetransactions, subject to market conditions and management’s discretion. Duringthe three months ended March 31, 2008, the Company repurchased 49,000shares of its outstanding Series A Common Stock for $1.1 million at anaverage price of $22.26. Between May 1998 and March 31, 2008, theCompany repurchased approximately 4.8 million shares of Series A CommonStock at a cost of approximately $117.1 million and an average price of$24.54.  There can be no assurance thatsuch repurchases will occur in the future or, if they do occur, what the termsof such repurchases will be.

 

On December 6, 2007, Hearst filed anamendment to its Schedule 13D with the Securities and Exchange Commission (“SEC”)indicating that its Board of Directors had approved the purchase of up to eightmillion additional shares of our Series A Common Stock in order toincrease its ownership percentage to approximately 82% to permit us to beconsolidated with Hearst for federal income tax purposes. Previously, Hearsthad authorized the purchase of up to 25 million shares of our Series ACommon Stock.

 

During the three months ended March 31, 2008, Hearst Broadcastingpurchased 2.0 million shares of Series A Common Stock.  Between December 2000 (the date ofHearst’s first purchase authorization) and March 31, 2008, under thesepurchase authorizations Hearst purchased approximately 26.3 million shares ofthe Company’s outstanding Series A Common Stock.

 

 As of March 31, 2008 and December 31,2007, Hearst owned 75.8% and 73.7%, respectively, of the Company’s outstandingcommon stock.  Pursuant to a Schedule13-D Amendment filed April 15, 2008, as of April 11, 2008, Hearstowned approximately 77.8% of the Company’s outstanding common stock, assumingall 500,000 shares of Series B Convertible Preferred Securities held byHearst were converted into 986,131 common shares.

 

**Common Stock Dividends**

 

During the three months ended March 31, 2008, the Company’s Boardof Directors declared a cash dividend on shares of our Series A and Series BCommon Stock as follows:

 
| **Dividend Amount** | ** ** | **Declaration Date** | ** ** | **Record Date** | ** ** | **Payment Date** | ** ** | **Total Dividend** | ** ** |
|--------------------------|------------|---------------------------|------------|----------------------|------------|-----------------------|------------|-------------------------|------------|
| $ 0.07              |       | March 27,  2008      |       | April 5,  2008  |       | April 15,  2008  |       | $ 6,571            |

 

 **10.    RelatedParty Transactions**

 

*Hearst*.    As of March 31, 2008, The Hearst Corporation(“Hearst”) owned approximately 56.9% of our Series A Common Stock and 100%of our Series B Common Stock, representing in the aggregate approximately75.8% of both the economic interest and outstanding voting power of our commonstock, 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 13 members of our Board of Directors. During the three months ended March 31,2008 and 2007, we were engaged in the following transactions with Hearst orparties related to Hearst:

 

·                        *Hearst Tower Lease.    *On May 5, 2006 the Companyentered into a Lease Agreement with Hearst to lease one floor of the newlyconstructed Hearst Tower in Manhattan for our corporate offices.  For the three months ended March 31,2008 and 2007, we recorded $0.4 million in rent expense, net of a portion ofthe $1.9 million tenant improvement allowance, which the Company is amortizingover the lease term.

 

·                  *Management Agreement*.   Werecorded revenue of approximately $1.1 million and $1.5 million in the threemonths ended March 31, 2008 and 2007, respectively, relating to amanagement agreement with Hearst (the “Management Agreement”). Pursuant to theManagement Agreement, we provide certain sales, news, programming, legal,financial, engineering and accounting management services for certainHearst-owned television and radio stations. Certain employees of these managed stations are also participants in ourequity compensation plans.  We believethe terms of the Management Agreement are reasonable to both parties; however,there can be no assurance that more favorable terms would not be available fromthird parties.

 

9

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**Hearst-ArgyleTelevision, Inc.**

**Notes toCondensed Consolidated Financial Statements**

**Tabularamounts in thousands, except per share data**

 

·                  *Services Agreement*.  We incurredexpenses of approximately $1.7 million in the three months ended March 31,2008 and 2007, relating to a services agreement with Hearst (the “ServicesAgreement”). Pursuant to the Services Agreement, Hearst provides the Companycertain administrative services such as accounting, auditing, financial, legal,insurance, data processing, and employee benefits administration. We believethe terms of the Services Agreement are reasonable to both parties; however,there can be no assurance that more favorable terms would not be available fromthird parties.

 

·                  *Interest Expense, Net*–*Capital Trust.*  We incurred interest expense, net, related to theSubordinated Debentures issued to our wholly-owned unconsolidated subsidiary,the Capital Trust, of $2.4 million for each of the three months ended March 31,2008 and 2007.  The Capital Trust thenpaid comparable amounts to its Redeemable Convertible Preferred Securitiesholders, including Hearst, which received $0.5 million during the three monthsended March 31, 2008.

 

·                  *Dividends on Common Stock.*  Duringthe three months ended March 31, 2008 and 2007, we paid the followingdividends to Hearst:

 
| **Dividend Amount** | ** ** | **Payment Date**  | ** ** | **Total Dividend** | ** ** | **Hearst Portion** | ** ** |
|--------------------------|------------|------------------------|------------|-------------------------|------------|-------------------------|------------|
| $ 0.07              |       | January 15,  2008 |       | $ 6,569            |       | $ 4,846            |       |
| $ 0.07              |       | January 15,  2007 |       | $ 6,523            |       | $ 4,816            |       |

 

·                  *Radio Facilities Lease.*    Pursuantto a lease agreement, Hearst paid us approximately $0.2 million for each of thethree months ended March 31, 2008 and 2007. Under this agreement, Hearstleases from the Company premises for WBAL-AM and WIYY-FM, Hearst’s Baltimore,Maryland radio stations.

 

·                  *LifetimeEntertainment Services*.    We have agreementswith Lifetime Entertainment Services (“Lifetime”), an entity owned 50% by anaffiliate of Hearst and 50% by The Walt Disney Company, whereby for certainperiods of time (i) we have assisted Lifetime in securing distribution and subscribers for the LifetimeTelevision, Lifetime Movie Network and/or Lifetime Real Women programmingservices; and (ii) Lifetime has acted as our agent with respect to thenegotiation of certain of our agreements with cable, satellite and certainother multi-channel video programming distributors.  Amounts payable to us by Lifetime depend onthe specific terms of these agreements and may be fixed or variable.  We recorded revenue from the agreements of$5.5 million and $4.9 million in the three months ended March 31, 2008 and2007, respectively.

 

·                  *Wide Orbit, Inc. *In November 2004,we entered into an agreement to license from Wide Orbit, Inc. (“Wide Orbit”)traffic sales and billing solutions software. Hearst owns approximately 8% of Wide Orbit.  For the three months ended March 31,2008 and 2007, we paid Wide Orbit approximately $0.5 million, under theagreement.

 

·                  *N*ew*England Cable News*. Our President and Chief Executive Officer, David J. Barrett and ourformer executive officer, Steven A. Hobbs, serve as Hearst’s representatives onthe management board of New England Cable News, a regional cable channel,jointly owned by Hearst Cable News, Inc., an indirect wholly-ownedsubsidiary of Hearst, and Comcast MO Cable News, Inc. (“NECN”). During thequarter, Hearst paid $12,000 to the Company as compensation for theirservice.  In addition, two of ourtelevision stations, WPTZ/WNNE and WMTW, provide office space to certain ofNECN’s reporters in exchange for news gathering services.

 

·                  *Other Transactions with Hearst*.    Inthe three months ended March 31, 2008 and 2007, we recorded immaterial netrevenue relating to advertising sales from Hearst.

 

*Internet Broadcasting Systems, Inc.*    Asof March 31, 2008, we owned 41% of Internet Broadcasting Systems, Inc.(“Internet Broadcasting”).  We also havevarious agreements pursuant to which we paid Internet Broadcasting $2.9 millionand $2.6 million during the three months ended March 31, 2008 and 2007,respectively. In addition, Internet

 

10

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**Hearst-ArgyleTelevision, Inc.**

**Notes toCondensed Consolidated Financial Statements**

**Tabularamounts in thousands, except per share data**

 

Broadcasting hosts our corporate Website for a nominal amount. Harry T.Hawks, our Executive Vice President and Chief Financial Officer, and our formerexecutive officer Steven A. Hobbs, serve, and during the quarter our formerexecutive officer Terry Mackin, served on the Board of Directors of InternetBroadcasting, from which they did  notreceive compensation for their service.

 

*Small Business Television*.   The Company utilizes services of SmallBusiness Television and related companies (“SBTV”) to provide televisionstations with additional revenue through the marketing and sale of commercialtime to smaller businesses that do not traditionally use television advertisingdue to cost concerns. In the three-month period ended March 31, 2008 and2007, these sales generated revenue of approximately $0.2 million and $0.3million, respectively, of which approximately $0.1 million and $0.2 million,respectively, was distributed to the Company. Dean Conomikes, the owner of SBTV, is the son of John G. Conomikes, amember of the Company’s Board of Directors.

 

*RDE.*  As of March 31, 2008, we owned 24.7% ofRipe Digital Entertainment, Inc. (“RDE”). In the three- month period ended March 31, 2007, the Company earnedimmaterial rental income from RDE for office space in our former corporateheadquarters.  As of April 24, 2008,our Executive Vice President and Chief Financial Officer, Harry T. Hawks, waselected to serve, and prior to that, two of our former executive officers,Steven A. Hobbs and Terry Mackin served, on the Board of Directors of RDE, forwhich they did not receive compensation.

 

*Run Rabbit Run.* In 2007, we entered into an arrangement withRun Rabbit Run, LLC (“Run Rabbit Run”). Run Rabbit Run produces television specials featuring personality CarlosWatson.  Certain of our stations air thetelevision specials produced by Run Rabbit Run and sell the advertising airtime for those specials in exchange for a commission.  Under the arrangement, the Company wasgranted the opportunity to earn over time a 12.5% ownership interest in RunRabbit Run in exchange for broadcasting and promoting specials produced by RunRabbit Run. In March 2008, we agreed to loan $0.6 million to Run RabbitRun pursuant to a Promissory Note Agreement. Upon execution of the Promissory Note Agreement, our 12.5% ownershipinterest immediately vested and we also received an additional 5% interest inRun Rabbit Run, bringing our total ownership interest to 17.5%.  The principal and accrued interest, at 10%per annum, is due in March 2010. We account for the investment in RunRabbit Run under the cost method of accounting.

 

*Other*.    In the ordinary course of business, theCompany enters into transactions with related parties, none of which weresignificant to our financial results in the three months ended March 31,2008 and 2007.

 

**11.    RetirementPlans and Other Post-Retirement Benefits**

 

***Overview***

 

The Company maintains seven defined benefit pension plans (the “PensionPlans”) and other post-retirement benefit plans (medical and life insurance)for active, retired and former employees. In addition, the Company maintains 11 employee savings plans andparticipates in three multi-employer union pension plans that provideretirement benefits to certain union employees.

 

***Pension Plans and OtherPost-Retirement Benefits***

 

Benefits under the Pension Plans are generally based on years ofcredited service, age at retirement and average of the highest five consecutiveyears’ compensation. The service cost of the Pension Plans is computed on thebasis of the Project Unit Credit Actuarial Cost Method.  Prior service cost is amortized over theemployees’ expected future service periods.

 

*Net Periodic Pension andPost-Retirement Benefit Cost*

 

The following schedule presents net periodic pension cost for theCompany’s Pension Plans in the three months ended March 31, 2008 and 2007:

 

11

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**Hearst-ArgyleTelevision, Inc.**

**Notes toCondensed Consolidated Financial Statements**

**Tabularamounts in thousands, except per share data**

 
| ** **                          | ** ** | **Pension Benefits**                            | ** ** |
|-------------------------------------|------------|------------------------------------------------------|------------|
| ** **                          | ** ** | **Three Months Ended March 31,** | ** ** |
| ** **                          | ** ** | **2008**                                             | ** ** | **2007** | ** ** |
| ** **                          | ** ** | **(Unaudited)**                                      | ** ** |
| Service  cost                       |       | $                                                    | 2,598      |   | $ | 2,645 |   |
| Interest  cost                      |       | 2,972                                                |       | 2,700 |   |
| Expected  return on plan assets     |       | (3,248                                               | )          | (2,911 | ) |
| Amortization  of prior service cost |       | 106                                                  |       | 108 |   |
| Amortization  of net loss           |       | 419                                                  |       | 924 |   |
| Net  periodic pension cost          |       | $                                                    | 2,847      |   | $ | 3,466 |   |

 

The following schedule presents net periodic benefit cost for theCompany’s other post-retirement benefit plans in the three months ended March 31,2008 and 2007:

 
| ** **                              | ** ** | **Post-Retirement Benefits**                    | ** ** |
|-----------------------------------------|------------|------------------------------------------------------|------------|
| ** **                              | ** ** | **Three Months Ended March 31,** | ** ** |
| ** **                              | ** ** | **2008**                                             | ** ** | **2007** | ** ** |
| ** **                              | ** ** | **(Unaudited)**                                      | ** ** |
| Service  cost                           |       | $                                                    | 20         |   | $ | 41 |   |
| Interest  cost                          |       | 98                                                   |       | 175 |   |
| Amortization  of prior service cost     |       | (23                                                  | )          | 10 |   |
| Amortization  of initial net obligation |       | 0                                                    |       | 10 |   |
| Amortization  of net loss               |       | 44                                                   |       | 9 |   |
| Net  periodic benefit cost              |       | $                                                    | 139        |   | $ | 245 |   |

 

*Contributions*

 

During the three months ended March 31, 2008, we did not make anycontributions to our Pension Plans or our Post-Retirement Benefit Plans. During the three months ended March 31,2007, we contributed $0.4 million to our Pension Plans and we contributedapproximately $0.2 million to our Post-Retirement Benefit Plans.  During the year ending December 31, 2008,the Company expects to contribute approximately $3.5 million to the PensionPlans and approximately $0.3 million to the post-retirement benefit plans.

 

**12.    Other Commitments and Contingencies**

 

*Guarantees*

 

The Company hasguaranteed the payments by its Capital Trust on the Redeemable ConvertiblePreferred Securities in the amount of $134 million.  The guarantee is irrevocable andunconditional, and guarantees the payment in full of all (i) distributionson the Redeemable Convertible Preferred Securities to the extent of availablefunds of the Capital Trust; (ii) amounts payable upon redemption of theRedeemable Convertible Preferred Securities to the extent of available funds ofthe Capital Trust; and (iii) amounts payable upon dissolution of the CapitalTrust.  The guarantee is unsecured andranks (i) subordinate to all other liabilities of the Company, exceptliabilities that are expressly made *pari passu*; (ii) *pari passu* with the most senior preferred stock issued bythe Company, and *pari passu* with any guarantee ofthe Company in respect of any preferred stock of the Company or any preferredsecurity of any of the Company’s controlled affiliates; and (iii) seniorto the Company’s Common Stock.

 

12

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

 

**Organization of Information**

 

Management’s Discussion and Analysis provides a narrative on ourfinancial performance and condition that should be read in conjunction with theaccompanying condensed consolidated financial statements.  It includes the following sections:

 

·                  Forward-Looking Statements

·                  Executive Summary

·                  Results of Operations

·                  Liquidity and Capital Resources

 

**Forward-Looking Statements**

 

This report****includes****orincorporates forward-looking statements. We base these forward-looking statements on our current expectations andprojections about future events.  Theseforward-looking statements generally can be identified by the use of statementsthat include words and/or phrases such as “anticipate”, “will”, “may”, “likely”,“plan”, “believe”, “expect”, “intend”, “project”, “forecast” or other suchsimilar words and/or phrases. For these statements, the Company claims theprotection of the safe harbor for forward-looking statements contained in thePrivate Securities Litigation Reform Act of 1995.  The forward-looking statements contained inthis report, concerning, among other things, trends and projections involvingrevenue, income, earnings, cash flow, liquidity, operating expenses, assets,liabilities, capital expenditures, dividends and capital structure, involverisks and uncertainties, and are subject to change based on various importantfactors.  Those factors include theimpact on our operations from

 

·               Changes in Federalregulations that affect us, including changes in Federal communications laws orregulations;

 

·                  Local regulatoryactions and conditions in the areas in which our stations operate;

 

·                  Competition in thebroadcast television markets we serve;

 

·                  Our ability toobtain quality programming for our television stations;

 

·                  Successfulintegration of television stations we acquire;

 

·                  Pricingfluctuations in local and national advertising;

 

·                  Changes in nationaland regional economies;

 

·                  Our ability toservice and refinance our outstanding debt;

 

·                  Changes inadvertising trends and our advertisers’ financial condition; and

 

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

 

For a discussion of additional risk factors that areparticular to our business, please refer to the Risk Factors section of ourAnnual Report on Form 10-K for the fiscal year ended December 31,2007.  These and other matters we discussin this report, or in the documents we incorporate by reference into thisreport, may cause actual results to differ from those we describe.  We undertake no obligation to update orrevise any forward-looking statements, whether as a result of new information,future events or otherwise.

 

**Executive Summary**

 

Hearst-Argyle Television, Inc. and its subsidiaries (hereafter “we”or the “Company”) own and operate 26 network-affiliated televisionstations.  Additionally, we providemanagement services to two network-affiliated stations and one independenttelevision station and two radio stations owned by The Hearst Corporation (“Hearst”)in exchange for management fees.  We seekto attract our television audience by providing compelling content on multiplemedia platforms.   We provide leadinglocal news programming and popular network and syndicated programs at each ofour television stations, 20 of which are in the top 50 U.S. televisionmarkets.  In addition, we seek to makeour content available to our audience as they use additional content platforms,such as the Internet and portable devices, during their day.  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 

 

13

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markets,we have also established a mobile presence for our stations’ Websites.  We believe that aligning our contentofferings with audience media consumption patterns in this manner ultimatelybenefits our advertisers.  Ouradvertisers benefit from a variety of marketing opportunities, includingtraditional spot campaigns, community events and sponsorships at our televisionstations, as well as on our stations’ Internet and/or mobile Websites, enablingthem to reach our audience in multiple ways.

 

**Factors influencing Results**

 

·                  During the first quarter of 2008, the Companyreached a final settlement with its insurance carriers related to lostproperty, increased expenses and interrupted business at WDSU-TV in NewOrleans, Louisiana, resulting from Hurricane Katrina in 2005.  The Company received $11.5 million in thefirst quarter of 2008 bringing total recoveries to $16.5 million, net ofdeductibles, given the receipt of an advance payment of $5.0 million in thefourth quarter of 2006.   The $11.5million received in the first quarter of 2008 has been recorded as an offset toStation Operating Expenses. The Company reduced its capital loss valuationallowance as a result of utilizing capital loss carry forwards to offset aportion of the insurance settlement gain recorded during the first quarter of2008.  The after-tax first quarter 2008effect of the insurance settlement was a $9.3 million increase in net income.

 

·                  Political advertising increases ineven-numbered years, such as 2008, consistent with the increase in the numberof candidates running for political office in the presidential election cycle,as well as selected state and local elections. In the first quarter of 2008, the Company recorded $9.6 million inpolitical advertising revenue compared to $1.5 million in the first quarter of2007.

 

·                  Net local and national advertising revenue,excluding political, declined 9.4% in the first quarter of 2008 to $132.9million. The economic downturn has impacted the Company’s largest markets andcontributed to a reduction in advertising expenditures in the auto, retailproducts, home furnishings and restaurant categories.

 

·                  Forthe three months ended March 31, 2008, the Company recorded digital mediarevenue and associated expenses of $4.9 million and $4.5 million, respectively,compared to $4.0 million and $3.2 million in the first quarter of 2007. The 42%increase in expenses is evidence of the Company’s commitment to and investmentin digital media.

 

**Industry Trends**

 

·                  The Federal Communications Commission (“FCC”)has permitted broadcast television station licensees to use their digitalspectrum for a wide variety of services such as high-definition televisionprogramming, audio, data and other types of communication, subject to therequirement that each broadcaster provide at least one free video channel equalin quality to the current technical standards. Our NBC stations currently broadcast the Weather Plus network, a24/7 local and national weather broadcast network, on a multicast stream inaddition to their main digital channels. In addition, six of our other stations have launched similarstation-branded multicast weather channels and one has launched a stationaffiliated with CW.  We have alsoaffiliated with the Open Mobile Video Coalition, which utilizes the additionaldigital spectrum.

 

·                  Pursuant to the Cable Television ConsumerProtection and Competition Act of 1992 (“1992 Cable Act”) and the FCC’s “mustcarry” regulations, cable operators are generally required to devote up toone-third of their activated channel capacity to the carriage of the analogsignal of local commercial television stations. On a cable system-by-cable system basis, a local television broadcaststation must choose once every three years whether to waive the right tomandatory, but uncompensated, carriage and, instead, to negotiate a grant ofretransmission consent.  We will makeretransmission consent elections by October 2008 to cover the period from January 1,2009 to December 31, 2011.

 

·                  TheSatellite Home Viewer Improvement Act of 1999 (“SHVIA”) established acompulsory copyright licensingsystem for the distribution of local television station signals by directbroadcast satellite systems to viewers in each DMA.  Under SHVIA’s “carry-one, carry-all”provision, a direct broadcast satellite system generally is required toretransmit the analog signal of all local television stations in a DMA if thesystem chooses to retransmit the analog signal of any local television stationin that DMA.  Television stations locatedin markets in which satellite carriage of local stations is offered may electmandatory carriage or 

 

14

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retransmissionconsent once every three years.  Wewill make retransmission consent elections by October 2008 to cover theperiod from January 1, 2009 to December 31, 2011.

 

**Results of Operations**

 

Results of operations for the three months ended March 31,2008 and 2007 include the results of our 26 television stations, which wereowned for the entire period presented, and the management fees derived by thethree television and two radio stations managed by us for the entire periodpresented;

 

*ThreeMonths Ended March 31, 2008*

*Comparedto Three Months Ended March 31, 2007*

 
| ** **                                         | ** ** | **For the three months ended** | ** ** | ** ** | ** ** | ** ** | ** **       |
|----------------------------------------------------|------------|----------------------------------------------------|------------|------------|------------|------------|------------------|
| ** **                                         | ** ** | **2008**                                           | ** ** | **2007**   | ** ** | **$**      | ** Change** | ** ** | **% Change** | ** ** |
| ** **                                         | ** ** | **(In thousands)**                            | ** ** | ** ** | ** ** | ** ** | ** **       |
| Total revenue                                      |       | $                                                  | 165,053    |       | $          | 169,383    |             | $ | (4,330 | ) | -2.6 | % |
| Station  operating expenses:                       |       |                                               |       |       |       |       |             |   |   |
| Salaries,  benefits and other operating costs      |       | 104,128                                            |       | 101,074    |       | $          | 3,054            |   | 3.0 | % |
| Amortization of  program rights                    |       | 18,712                                             |       | 19,228     |       | $          | (516             | ) | -2.7 | % |
| Depreciation and  amortization                     |       | 14,052                                             |       | 14,996     |       | $          | (944             | ) | -6.3 | % |
| Insurance  settlement                              |       | (11,549                                            | )          | —     |       | $          | (11,549          | ) | 100.0 | % |
| Corporate,  general and administrative expenses    |       | 8,716                                              |       | 7,779      |       | $          | 937              |   | 12.0 | % |
| Operating income                                   |       | 30,994                                             |       | 26,306     |       | $          | 4,688            |   | 17.8 | % |
|                                               |       |                                               |       |       |       |       |             |   |   |
| Interest expense                                   |       | 12,883                                             |       | 15,890     |       | $          | (3,007           | ) | -18.9 | % |
| Interest income                                    |       | (19                                                | )          | (346       | )          | $          | 327              |   | -94.5 | % |
| Interest  expense, net – Capital Trust        |       | 2,438                                              |       | 2,438      |       | $          | —           |   | 0.0 | % |
| Income before  income taxes and equity earnings    |       | 15,692                                             |       | 8,324      |       | $          | 7,368            |   | 88.5 | % |
|                                               |       |                                               |       |       |       |       |             |   |   |
| Income tax  expense                                |       | 4,290                                              |       | 3,993      |       | $          | 297              |   | 7.4 | % |
| Equity in loss  (income) of affiliates, net of tax |       | 1,362                                              |       | 80         |       | $          | 1,282            |   | 1602.5 | % |
| Net income                                         |       | $                                                  | 10,040     |       | $          | 4,251      |             | $ | 5,789 |   | 136.2 | % |

 

*Totalrevenue*.    Total revenue 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 weather channels; |
| (iv)  | network compensation;  and                                                                                                                                          |
| (v)   | other revenue,  primarily barter and trade revenue and management fees earned from Hearst.                                                                          |

 
| ** **                                               | ** ** | **For the three months ended March 31,** | ** ** | ** ** | ** ** | ** **        | ** ** |
|----------------------------------------------------------|------------|------------------------------------------------------------------------|------------|------------|------------|-------------------|------------|
| ** **                                               | ** ** | **2008**                                                               | ** ** | **2007**   | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| ** **                                               | ** ** | **(In thousands)**                                                | ** ** | ** ** | ** ** | ** **        | ** ** |
| Net local and  national ad revenue (excluding political) |       | $                                                                      | 132,877    |       | $          | 146,618           |       | $ | (13,741 | ) | -9.4 | % |
| Net political  revenue                                   |       | 9,602                                                                  |       | 1,535      |       | 8,067             |       | 525.5 | % |
| Retransmission  consent revenue                          |       | 6,276                                                                  |       | 5,165      |       | 1,111             |       | 21.5 | % |
| Barter and trade  revenue                                |       | 6,247                                                                  |       | 6,641      |       | (394              | )          | 5.9 | % |
| Net digital  media revenue                               |       | 4,892                                                                  |       | 4,024      |       | 868               |       | 21.6 | % |
| Network  compensation                                    |       | 2,176                                                                  |       | 2,489      |       | (313              | )          | -12.6 | % |
| Other revenue                                            |       | 2,983                                                                  |       | 2,911      |       | 72                |       | 2.5 | % |
| Total revenue                                            |       | $                                                                      | 165,053    |       | $          | 169,383           |       | $ | (4,330 | ) | -2.6 | % |

 

15

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Total revenue in thethree months ended March 31, 2008 was $165.1 million as compared to $169.4million in the three months ended March 31, 2007, a decrease of $4.3million or 2.6%. This decrease was primarily attributable to the followingfactors:

 
| (i)    | a $13.7 million  decrease in net non-political local and national advertising due to the  economic downturn impacting our largest markets which resulted in declines in  the automotive, retail, furniture and restaurants categories; partially  offset by |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (ii)   | a $8.1 million increase  in net political advertising revenue;                                                                                                                                                                                              |
| (iii)  | a $1.1 million increase  in retransmission consent revenue; and                                                                                                                                                                                             |
| (iv)   | a $0.9 million increase  in net digital media revenue.                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                        |

*Salaries,benefits and other operating costs*.    Duringthe three months ended March 31, 2008, salaries, benefits and otheroperating costs (“SB&O”) were $104.1 million, as compared to $101.1 millionin the three months ended March 31, 2007, an increase of $3.1 million or3.0%.  This increase was primarily dueto:

 

(i)             an increase of $1.7million in payroll expenses, primarily related to an increase in news personnelin an election year; and

(ii)          an increase of $1.3million in digital media expenses.

 

*Amortizationof program rights*.  Amortization of program rightswas $18.7 million in the three months ended March 31, 2008, as compared to$19.2 million in the three months ended March 31, 2007, a decrease of $0.5million or 2.7%. This decrease was primarily due to lower amortization expensefor off-network syndicated programming.

 

*Depreciation and amortization*.  Depreciation and amortization expense was $14.1 million in the three monthsended March 31, 2008, as compared to $15.0 million in the three monthsended March 31, 2007, a decrease of $0.9 million or 6.3%. Depreciationexpense was $12.6 million in the three months ended March 31, 2008, ascompared to $13.2 million in the three months ended March 31, 2007, adecrease of 5%.  The decrease indepreciation expense is primarily dueto depreciation in full of certain fixed assets during 2007.

 

*Insurance settlement. *As described above,in the three months ended March 31, 2008, the Company recognized an $11.5million insurance settlement resulting from Hurricane Katrina as an offset toStation operating expenses.

 

*Corporate,general and administrative expenses*.    Corporate,general and administrative expenses were $8.7 million in the three months endedMarch 31, 2008, as compared to $7.8 million in the three months ended March 31,2007, an increase of $0.9 million or 12.0%. This increase was primarily due to:

 

(i)             a $0.7 million increase in employeecosts and benefits related to digital initiatives; and

(ii)          a $0.2 million increase in professional services fees.

 

*Interestexpense. *Interestexpense was $12.9 million in the three months ended March 31, 2008, ascompared to $15.9 million in the three months ended March 31, 2007, adecrease of $3.0 million or 18.9%, due to lower average debt balances.

 

*Interest income.*    Interest income was $19,000 in the threemonths ended March 31, 2008, as compared to $0.3 million in the threemonths ended March 31, 2007, a decrease of $0.3 million or 94.5%.  This decrease was due to lower cash balancesand lower interest rates in 2008 as compared to the same period in 2007.

 

*Incometax expense.*    We recorded income taxexpense of $4.3 million in the three months ended March 31, 2008, ascompared to $4.0 million in the three months ended March 31, 2007, anincrease of $0.3 million or 7.4%.  Thisincrease was primarily due to an increase in income before income taxes from$8.3 million in the three months ended March 31, 2007 to $15.7 million inthe three months ended March 31, 2008, partially offset by the decrease inthe valuation allowance described below.

 

The effective tax ratefor the three months ended March 31, 2008 was 27.3% as compared to 48.0%for the three months ended March 31, 2007. For the three months ended March 31, 2008, the effective tax ratewas primarily affected by the increase in income before income taxes and thedecrease in the valuation allowance on capital loss carryforwards as a resultof the insurance settlement gain.

 

16

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*Equity in loss of affiliates, netof tax*.  Equity in loss of affiliates, net of tax wasa loss of $1.4 million for the three months ended March 31, 2008, ascompared to a loss of $0.1 million for the three months ended March 31,2007.

 

*Netincome*.    Net income was $10.0 millionin the three months ended March 31, 2008, as compared to $4.3 million inthe three months ended March 31, 2007, an increase of $5.8 million or136.2%.  This increase was primarily dueto the items described above.

 

**Liquidityand Capital Resources**

 

As of March 31,2008, the Company’s cash and cash equivalents balance was $12.7 million, ascompared to $6.0 million as of December 31, 2007.  The net increase in cash and cash equivalentsof $6.8 million during the three months ended March 31, 2008 was due tothe factors described below under Operating Activities, Investing Activities,and Financing Activities.

 
| ** **                                           | ** ** | **2008**                | ** ** | **2007**   | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
|------------------------------------------------------|------------|-------------------------|------------|------------|------------|-------------------|------------|-------------------|------------|
| ** **                                           | ** ** | **(In thousands)** | ** ** | ** ** | ** ** | ** **        | ** ** |
| Net cash  provided by operating activities           |       | $                       | 44,007     |       | $          | 21,516            |       | $                 | 22,491     |   | 104.5 | % |
| Net cash used in  investing activities               |       | $                       | (4,300     | )          | $          | (8,975            | )          | $                 | 4,675      |   | 52.1 | % |
| Net cash (used  in) provided by financing activities |       | $                       | (32,937    | )          | $          | 813               |       | $                 | (33,750    | ) | N/A |   |
|                                                 |       |                    |       |       |       |              |       |              |       |
| Cash paid for:                                       |       |                    |       |       |       |              |       |              |       |
| Interest                                             |       | $                       | 8,731      |       | $          | 7,331             |       | $                 | 1,400      |   | 19.1 | % |
| Interest on Note  payable to Capital Trust           |       | $                       | 2,438      |       | $          | —            |       | $                 | 2,438      |   | 100.0 | % |
| Taxes, net of  refunds                               |       | $                       | 5,501      |       | $          | 22,926            |       | $                 | (17,425    | ) | -76.0 | % |
| Purchase of  property, plant and equipment, net      |       | $                       | 7,190      |       | $          | 9,972             |       | $                 | (2,782     | ) | -27.9 | % |
| Dividends paid  on common stock                      |       | $                       | 6,569      |       | $          | 6,523             |       | $                 | 46         |   | 0.7 | % |
| Series A  Common Stock repurchases              |       | $                       | 1,091      |       | $          | —            |       | $                 | 1,091      |   | 100.0 | % |

 

*Operating Activities*

 

Net cash provided by operating activities was $44.0 million in the threemonths ended March 31, 2008, as compared to $21.5 million in the threemonths ended March 31, 2007, an increase of $22.5 million or 104.5%. Thisincrease was primarily due to:

 
| (i)  | The receipt of $8.7 million of insurance proceeds  for business interruption and to recover the incremental expenses incurred  due to Hurricane Katrina; and                              |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (ii) | Relatively higher levels of working capital  generated from political advertisements that are paid for in advance, thereby  requiring a lower level of investment in accounts receivable. |

 

*Investing Activities*

 

Net cash used in investing activities was $4.3 million in the threemonths ended March 31, 2008, as compared to $9.0 million in the threemonths ended March 31, 2007.  Thischange was primarily due to:

 
| (i)  | 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 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. |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (ii) | A decrease in capital expenditures to $7.2 million  in the first three months of 2008 from $10.0 million in the three months  ended March 31, 2007. During 2007, the Company completed several large  construction projects and expects to spend less in 2008.                                                                        |

 

*FinancingActivities*

 

Net cash used in financing activities was $32.9 million in the threemonths ended March 31, 2008, as compared to net cash provided by financingactivities of $0.8 million in the three months ended March 31, 2007. Thischange was primarily due to:

 

17

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| (i)   | Repayment of $27.0 million on our credit facility in  the first quarter of 2008;                                                                                                                          |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (ii)  | repurchase of $1.1 million of our common stock in  the first quarter of 2008; and                                                                                                                         |
| (iii) | proceeds from stock option exercises and employee  stock purchases of $1.7 million in the three months ended March 31, 2008  compared to $7.3 million in the three months ended March 31, 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 the credit facility bear interestat our option at LIBOR or the alternate base rate (“ABR”), plus the applicablemargin.  The applicable margin for ABRloans is zero.  The applicable margin forLIBOR loans varies between 0.50% and 1.00% depending on the ratio of our totaldebt to earnings before interest, taxes, depreciation and amortization asdefined by the credit agreement (the “Leverage Ratio”).  The ABR is the greater of (i) the primerate or (ii) the Federal Funds Effective Rate in effect plus 0.5%.  We are required to pay a commitment fee basedon the unused portion of the credit facility. The commitment fee ranges from 0.15% to 0.25% depending on our LeverageRatio.  The credit facility is a generalunsecured obligation of the Company.  Wehave borrowed $214.0 million under the credit facility as of March 31,2008.

 

As of March 31, 2008, our total long-term debt obligationsincluding the credit facility exclusive of capital lease obligations were$676.1 million and our current debt maturities totaled $90.0 million.  Our long-term debt obligations bear interestat a fixed rate.  The Company’s creditratings were BBB- by Standard & Poor’s and Fitch Ratings and Baa3 byMoody’s Investors Service, as of March 31, 2008.  Such credit ratings are considered to beinvestment 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 March 31, 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 March 31, 2008, the Company was not involved in anyderivative financial instruments. However, the Company may consider certain interest-rate risk strategiesin the future.

 

As of March 31, 2008, we have borrowed $214.0million under our credit facility, which loan bears interest at LIBOR plus theapplicable margin. The applicable margin on LIBOR loans varies between 0.50%and 1.00% depending on the ratio of total debt to earnings before interest,taxes, depreciation and amortization as defined by the credit agreement.

 

**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 March 31, 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 March 31, 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.

 

18

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**PART IIOther Information**

 

**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 tablereflects purchases of our Series A Common Stock made by HearstBroadcasting during the three months ended March 31, 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** | ** ** |
|-------------------------------------|------------|--------------------------------------------------|------------|----------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------|------------|
| January 1 -  January 31   |       | 1,109,800                                        |       | $                                            | 20.47      |                                                                                                             | 1,109,800  |                                                                                                                |       |   |
| February 1  - February 29 |       | 439,728                                          |       | $                                            | 22.00      |                                                                                                             | 439,728    |                                                                                                                |       |   |
| March 1 -  March 31       |       | 494,770                                          |       | $                                            | 21.48      |                                                                                                             | 494,770    |                                                                                                                | 5,612,902  | (1) |
| Total                               |       | 2,044,298                                        |       | $                                            | 21.30      |                                                                                                             | 2,044,298  |                                                                                                                |       |   |

 

----

(1)          OnDecember 6, 2007, Hearst filed an amendment to its Schedule 13D with theSecurities and Exchange Commission indicating that its Board of Directors hadapproved the purchase of up to eight million additional shares of our Series ACommon Stock in order to increase its ownership percentage to approximately 82%to permit us to be consolidated with Hearst for federal income tax purposes.Previously, Hearst had authorized the purchase of up to 25 million shares ofour Series A Common Stock.

 

As of March 31,2008, Hearst beneficially owned approximately 56.9% of the Company’soutstanding Series A Common Stock and 100% of the Company’s Series BCommon Stock, representing in the aggregate approximately 75.8% of our commonstock.

 

The following tablereflects purchases made by the Company of its Series A Common Stock duringthe three months ended March 31, 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** | ** ** |
|-------------------------------------|------------|--------------------------------------------------|------------|----------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------|------------|
| January 1 -  January 31   |       | 0                                                |       | $                                            | 0.00       |                                                                                                             | 0          |                                                                                                                               |       |   |
| February 1  - February 29 |       | 7,000                                            |       | $                                            | 22.68      |                                                                                                             | 7,000      |                                                                                                                               |       |   |
| March 1 -  March 31       |       | 42,000                                           |       | $                                            | 22.25      |                                                                                                             | 42,000     |                                                                                                                               | $          | 182,852,123.30 | (1) |
| Total                               |       | 49,000                                           |       | $                                            | 22.26      |                                                                                                             | 49,000     |                                                                                                                               |       |   |
|                                     |            |                                                  |            |                                              |            |                                                                                                                  |            |                                                                                                                                    |            |  |  |

 

----

(1)          In May 1998, theCompany’s Board of Directors authorized the repurchase of up to $300 million ofits outstanding Series A Common Stock. Such purchases may be effected from time to time in the open market orin private transactions, subject to market conditions and management’sdiscretion.  As of March 31, 2008,the Company has spent approximately $117.1 million to repurchase approximately4.8 million shares of Series A Common Stock at an average price of $24.54.There can be no assurance that such repurchases will occur in the future or, ifthey do occur, what the terms of such repurchases will be.

 

19

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**Item 6.    Exhibits**

 
| **(a) Exhibits:** | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                    |
|------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.1                   |       | Retransmission Rights  Agency Agreement, dated as of April 2, 2008, between Lifetime  Entertainment Services and the Company. Portions of this agreement have been  redacted pursuant to a request for confidential treatment submitted to the  Securities and Exchange Commission (“SEC”), on May 2, 2008. We have  filed the redacted material separately with the SEC. |
|                   |       |                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.2                   |       | Retransmission Rights  Agency Agreement, dated as of April 2, 2008, between Lifetime  Entertainment Services and the Company. Portions of this agreement have been  redacted pursuant to a request for confidential treatment submitted to the  SEC, on May 2, 2008. We have filed the redacted material separately with  the SEC.                                                  |
|                   |       |                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.3                   |       | Employment Agreement  between the Company and Frank Biancuzzo, dated as of February 1, 2007.                                                                                                                                                                                                                                                                                             |
|                   |       |                                                                                                                                                                                                                                                                                                                                                                                          |
| 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.                                                                                                                                                                                                   |

 

20

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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:                                                                                |                                   May 2,  2008 |
|            |                                                                                       |  |  |  |

 

 
| **Name**            | ** ** | **Title**                       | ** ** | **Date**           |
|---------------------|------------|---------------------------------|------------|--------------------|
|                |       |                            |       |               |
| /S/ HARRY T.  HAWKS |       | Executive Vice  President       |       | May 2 ,  2008 |
| Harry T. Hawks      |       | and Chief  Financial Officer    |       |               |
|                |       | (Principal  Financial Officer)  |       |               |
|                |       |                            |       |               |
|                |       |                            |       |               |
| /S/ LYDIA G.  BROWN |       | Corporate  Controller           |       | May 2, 2008        |
| Lydia G. Brown      |       | (Principal  Accounting Officer) |       |               |

 

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