**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

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**Form10-Q**

**(Mark One)**

**x****     ****QUARTERLY REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**FOR THEQUARTERLY PERIOD ENDED JUNE 30, 2007**

**or**

**o****        ****TRANSITION REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

For the transition periodfrom:   ** Not Applicable**

**Commissionfile number 1-14776**

**Hearst-Argyle Television, Inc.**

(ExactName of Registrant as Specified in Its Charter)

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

 

**SECURITIES REGISTERED PURSUANT TO SECTION 12(b) 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

Indicateby check mark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding twelve months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.     Yes  x        No  o

Indicateby check mark whether the registrant is a large accelerated filer, an acceleratedfiler, or a non-accelerated filer.  Seedefinition of “accelerated filer and large accelerated filer” in Rule 12b-2 ofthe Exchange Act.  (Check one):

Largeaccelerated filer   o                      Acceleratedfiler x                             Non-acceleratedfiler  o

Indicateby check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).  Yes  o No x

Shares of the registrant’scommon stock outstanding as of July 23, 2007: 93,874,863 shares (consisting of52,576,215 shares of Series A Common Stock and 41,298,648 shares of Series BCommon Stock).

 

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**HEARST-ARGYLETELEVISION, INC.**

**Index**
| **Part I**       | ** ** | **Financial  Information**                                                                                                           |   | 1      |
|------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
|             |       |                                                                                                                                 |   |   |
| **Item 1.** | ** ** | **Financial  Statements**                                                                                                            |   |   |
|             |       | Condensed Consolidated Balance Sheets as of June  30, 2007 (unaudited) and December 31, 2006 |   | 1      |
|             |       | Condensed Consolidated Statements of Income for the  Three and Six Months Ended June 30, 2007 and 2006 (unaudited)              |   | 2      |
|             |       | Condensed Consolidated Statements of Cash Flows for  the Six Months Ended June 30, 2007 and 2006 (unaudited)                    |   | 3      |
|             |       | Notes to Condensed Consolidated Financial Statements                                                                                 |   | 5      |
|             |       |                                                                                                                                 |   |   |
| **Item 2.** | ** ** | **Management’s  Discussion and Analysis of Financial Condition and Results of Operations**                                      |   | 14     |
|             |       |                                                                                                                                 |   |   |
| **Item 3.** | ** ** | **Quantitative  and Qualitative Disclosures about Market Risk**                                                                      |   | 21     |
|             |       |                                                                                                                                 |   |   |
| **Item 4.** | ** ** | **Controls and  Procedures**                                                                                                         |   | 21     |
|             |       |                                                                                                                                 |   |   |
| **Part  II**     | ** ** | **Other Information**                                                                                                                |   | 22     |
|             |       |                                                                                                                                 |   |   |
| **Item 2.** | ** ** | **Unregistered  Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity  Securities**                             |   | 22     |
| ** **       | ** ** | ** **                                                                                                                           |   |   |
| **Item 4.**      | ** ** | **Submission  of Matters to a Vote of Security Holders**                                                                             |   | 22     |
| ** **       | ** ** | ** **                                                                                                                           |   |   |
| **Item 6.** | ** ** | **Exhibits**                                                                                                                         |   | 24     |
| ** **       |       |                                                                                                                                 |   |   |
| **Signatures**   |       |                                                                                                                                 |   | 25     |

 

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**PART I**

**FINANCIALINFORMATION**

**Item 1. FinancialStatements**

**HEARST-ARGYLE TELEVISION, INC.**

**Condensed Consolidated Balance Sheets**
| ** **                                       | ** ** | **June 30, 2007**          | ** ** | **December 31, 2006** | ** ** |
|--------------------------------------------------|------------|--------------------------------------|------------|---------------------------------|------------|
| ** **                                       | ** ** | **(Unaudited)  (In thousands)** | ** ** |
| **Assets**                                       | ** ** | ** **                           | ** ** | ** **                      | ** ** |
| Current assets:                                  |       |                                 |       |                            |       |
| Cash and cash  equivalents                       |       | $                                    | 39,813     |                            | $          | 18,610 |   |
| Accounts  receivable, net                        |       | 157,589                              |       | 161,783                         |       |
| Program and  barter rights                       |       | 25,076                               |       | 67,949                          |       |
| Deferred income  tax asset                       |       | 4,672                                |       | 4,672                           |       |
| Other                                            |       | 7,394                                |       | 5,671                           |       |
| Total current  assets                            |       | 234,544                              |       | 258,685                         |       |
| Property, plant and  equipment, net              |       | 298,704                              |       | 295,094                         |       |
| Intangible assets, net                           |       | 2,516,505                            |       | 2,520,040                       |       |
| Goodwill                                         |       | 816,728                              |       | 816,724                         |       |
| Other assets:                                    |       |                                 |       |                            |       |
| Deferred  financing costs, net                   |       | 8,752                                |       | 9,648                           |       |
| Investments                                      |       | 41,866                               |       | 40,454                          |       |
| Program and  barter rights, noncurrent           |       | 10,271                               |       | 15,227                          |       |
| Other assets                                     |       | 1,642                                |       | 2,216                           |       |
| Total other  assets                              |       | 62,531                               |       | 67,545                          |       |
| Total assets                                     |       | $                                    | 3,929,012  |                            | $          | 3,958,088 |   |
| ** **                                       | ** ** | ** **                           | ** ** | ** **                      | ** ** |
| **Liabilities and Stockholders’  Equity**   | ** ** | ** **                           | ** ** | ** **                      | ** ** |
| Current liabilities:                             |       |                                 |       |                            |       |
| Current portion  of long-term debt               |       | $                                    | 90,036     |                            | $          | 90,048 |   |
| Accounts payable                                 |       | 14,658                               |       | 18,208                          |       |
| Accrued  liabilities                             |       | 47,603                               |       | 66,515                          |       |
| Program and  barter rights payable               |       | 24,024                               |       | 65,473                          |       |
| Payable to  Hearst Corporation, net              |       | 7,360                                |       | 7,317                           |       |
| Other                                            |       | 3,031                                |       | 2,693                           |       |
| Total current  liabilities                       |       | 186,712                              |       | 250,254                         |       |
| Program and barter  rights payable, noncurrent   |       | 17,846                               |       | 22,411                          |       |
| Long-term debt                                   |       | 777,110                              |       | 777,122                         |       |
| Note payable to Capital  Trust                   |       | 134,021                              |       | 134,021                         |       |
| Deferred income tax  liability                   |       | 826,227                              |       | 838,229                         |       |
| Other liabilities                                |       | 87,730                               |       | 53,244                          |       |
| Total noncurrent  liabilities                    |       | 1,842,934                            |       | 1,825,027                       |       |
| Commitments and  contingencies                   |       |                                 |       |                            |       |
| Stockholders’ equity:                       |       |                                 |       |                            |       |
| Series A common  stock                           |       | 570                                  |       | 563                             |       |
| Series B common  stock                           |       | 413                                  |       | 413                             |       |
| Additional  paid-in capital                      |       | 1,329,260                            |       | 1,309,578                       |       |
| Retained  earnings                               |       | 713,016                              |       | 716,146                         |       |
| Accumulated  other comprehensive loss, net       |       | (33,109                              | )          | (33,109                         | )          |
| Treasury stock,  at cost                         |       | (110,784                             | )          | (110,784                        | )          |
| Total  stockholders’ equity                 |       | 1,899,366                            |       | 1,882,807                       |       |
| Total liabilities and  stockholders’ equity |       | $                                    | 3,929,012  |                            | $          | 3,958,088 |   |

 

Seenotes to condensed consolidated financial statements.

1

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**HEARST-ARGYLE TELEVISION, INC.**

**Condensed Consolidated Statements of Income**
| ** **                                         | ** ** | **Three Months Ended June 30,**                             | ** ** | **Six Months Ended June 30,** | ** ** |
|----------------------------------------------------|------------|---------------------------------------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                         | ** ** | **2007**                                                                        | ** ** | **2006**                                          | ** ** | **2007** | ** ** | **2006** | ** ** |
| ** **                                         | ** ** | **(Unaudited)  (In thousands, except per share data)** | ** ** |
|                                               |       |                                                                            |       |                                              |       |   |   |   |   |
| Total revenue                                      |       | $                                                                               | 193,019    |                                              | $          | 193,964 |   | $ | 362,402 |   | $ | 367,981 |   |
| Station  operating expenses:                       |       |                                                                            |       |                                              |       |   |   |   |   |
| Salaries, benefits and other operating costs       |       | 102,168                                                                         |       | 97,654                                            |       | 203,242 |   | 194,441 |   |
| Amortization of program rights                     |       | 19,422                                                                          |       | 15,951                                            |       | 38,650 |   | 31,283 |   |
| Depreciation and amortization                      |       | 14,185                                                                          |       | 16,080                                            |       | 29,181 |   | 31,468 |   |
| Corporate,  general and administrative expenses    |       | 8,887                                                                           |       | 7,626                                             |       | 16,668 |   | 14,899 |   |
| Operating income                                   |       | 48,357                                                                          |       | 56,653                                            |       | 74,661 |   | 95,890 |   |
|                                               |       |                                                                            |       |                                              |       |   |   |   |   |
| Interest expense                                   |       | 16,028                                                                          |       | 16,050                                            |       | 31,917 |   | 32,512 |   |
| Interest income                                    |       | (407                                                                            | )          | (1,943                                            | )          | (752 | ) | (3,244 | ) |
| Interest  expense, net – Capital Trust        |       | 2,438                                                                           |       | 2,438                                             |       | 4,875 |   | 4,875 |   |
| Other expense                                      |       | —                                                                          |       | 2,501                                             |       | — |   | 2,501 |   |
| Income before  income taxes and equity earnings    |       | 30,298                                                                          |       | 37,607                                            |       | 38,621 |   | 59,246 |   |
|                                               |       |                                                                            |       |                                              |       |   |   |   |   |
| Income tax  expense                                |       | 12,525                                                                          |       | 12,729                                            |       | 16,517 |   | 21,277 |   |
| Equity in loss  (income) of affiliates, net of tax |       | 752                                                                             |       | (139                                              | )          | 831 |   | (65 | ) |
| Net income                                         |       | $                                                                               | 17,021     |                                              | $          | 25,017 |   | $ | 21,273 |   | $ | 38,034 |   |
|                                               |       |                                                                            |       |                                              |       |   |   |   |   |
| Income  applicable to common stockholders          |       | $                                                                               | 17,021     |                                              | $          | 25,017 |   | $ | 21,273 |   | $ | 38,034 |   |
|                                               |       |                                                                            |       |                                              |       |   |   |   |   |
| Income per  common share – basic              |       | $                                                                               | 0.18       |                                              | $          | 0.27 |   | $ | 0.23 |   | $ | 0.41 |   |
| Number of common  shares used in the calculation   |       | 93,547                                                                          |       | 92,733                                            |       | 93,366 |   | 92,694 |   |
|                                               |       |                                                                            |       |                                              |       |   |   |   |   |
| Income per  common share – diluted            |       | $                                                                               | 0.18       |                                              | $          | 0.27 |   | $ | 0.23 |   | $ | 0.41 |   |
| Number of common  shares used in the calculation   |       | 94,508                                                                          |       | 93,197                                            |       | 94,306 |   | 93,185 |   |
|                                               |       |                                                                            |       |                                              |       |   |   |   |   |
| Dividends per  common share declared               |       | $                                                                               | 0.07       |                                              | $          | 0.07 |   | $ | 0.14 |   | 0.14 |   |

 

See notes to condensedconsolidated financial statements.

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**HEARST-ARGYLETELEVISION, INC.**

**Condensed Consolidated Statements of Cash Flows**
| ** **                                                                         | ** ** | **Six Months Ended June 30,** | ** ** |
|------------------------------------------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                                                         | ** ** | **2007**                                          | ** ** | **2006** | ** ** |
| ** **                                                                         | ** ** | **(Unaudited)  (In thousands)**              | ** ** |
| **Operating  Activities**                                                          | ** ** | ** **                                        | ** ** | ** ** | ** ** |
| Net income                                                                         |       | $                                                 | 21,273     |   | $ | 38,034 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |                                              |       |   |   |
|                                                                               |       |                                              |       |   |   |
| Depreciation                                                                       |       | 25,646                                            |       | 28,483 |   |
| Amortization of intangible assets                                                  |       | 3,535                                             |       | 2,985 |   |
| Amortization of deferred financing costs                                           |       | 896                                               |       | 884 |   |
| Amortization of program rights                                                     |       | 38,650                                            |       | 31,283 |   |
| Deferred income taxes                                                              |       | 3,442                                             |       | 5,125 |   |
| Equity in loss (income) of affiliates, net                                         |       | 831                                               |       | (65 | ) |
| Provision for doubtful accounts                                                    |       | 617                                               |       | (37 | ) |
| Stock-based compensation expense                                                   |       | 4,120                                             |       | 3,905 |   |
| Investment write down                                                              |       | —                                            |       | 2,501 |   |
| (Gain) or loss on disposition of assets                                            |       | (4                                                | )          | (609 | ) |
| Program payments                                                                   |       | (36,284                                           | )          | (31,230 | ) |
| Changes in operating assets and liabilities:                                       |       |                                              |       |   |   |
| Decrease (increase) in Accounts receivable                                         |       | 2,786                                             |       | 3,654 |   |
| Decrease (increase) in Other assets                                                |       | (1,650                                            | )          | 4,485 |   |
| (Decrease) increase in Accounts payable and accrued  liabilities                   |       | (21,946                                           | )          | (608 | ) |
| (Decrease) increase in Other liabilities                                           |       | 7,705                                             |       | 39 |   |
| Net cash  provided by operating activities                                         |       | $                                                 | 49,617     |   | $ | 88,829 |   |
|                                                                               |       |                                              |       |   |   |
| **Investing  Activities**                                                          | ** ** | ** **                                        | ** ** | ** ** | ** ** |
| Purchases of  property, plant and equipment, net                                   |       | (28,764                                           | )          | (20,599 | ) |
| Cash proceeds  from insurance recoveries                                           |       | 1,000                                             |       | 1,391 |   |
| Investment in  affiliates and other, net                                           |       | (1,875                                            | )          | (6,705 | ) |
| Net cash used in  investing activities                                             |       | $                                                 | (29,639    | ) | $ | (25,913 | ) |
|                                                                               |       |                                              |       |   |   |
| **Financing  Activities**                                                          | ** ** | ** **                                        | ** ** | ** ** | ** ** |
| Dividends paid  on common stock                                                    |       | (13,069                                           | )          | (12,971 | ) |
| Series A Common  Stock repurchases                                                 |       | —                                            |       | (798 | ) |
| Principal  payments and repurchase of long term debt                               |       | (12                                               | )          | (10,023 | ) |
| Proceeds from  employee stock purchase plan and stock option exercises             |       | 14,306                                            |       | 2,729 |   |
| Net cash  provided by (used in) financing activities                               |       | $                                                 | 1,225      |   | $ | (21,063 | ) |
|                                                                               |       |                                              |       |   |   |
| Increase in cash  and cash equivalents                                             |       | 21,203                                            |       | 41,853 |   |
| Cash and cash  equivalents at beginning of period                                  |       | 18,610                                            |       | 120,065 |   |
| Cash and cash  equivalents at end of period                                        |       | $                                                 | 39,813     |   | $ | 161,918 |   |

 

See notes to condensedconsolidated financial statements.

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| ** **                                         | ** ** | **Six Months Ended June 30,** | ** ** |
|----------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                         | ** ** | **2007**                                          | ** ** | **2006** | ** ** |
| ** **                                         | ** ** | **(Unaudited)  (In thousands)**              | ** ** |
| **Supplemental  Cash Flow Information:**           | ** ** | ** **                                        | ** ** | ** ** | ** ** |
| **Cash  paid during the period for:**              | ** ** | ** **                                        | ** ** | ** ** | ** ** |
| Interest                                           |       | $                                                 | 30,551     |   | $ | 31,935 |   |
| Interest on Note payable to Capital Trust          |       | $                                                 | 2,438      |   | $ | 4,875 |   |
| Taxes, net of refunds                              |       | $                                                 | 23,537     |   | $ | 12,896 |   |
| **Non-cash  investing and financing activities:**  | ** ** | ** **                                        | ** ** | ** ** | ** ** |
| Accrued  property, plant & equipment purchases |       | $                                                 | 747        |   | $ | 6,496 |   |

 

See notes to condensedconsolidated financial statements.

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**Hearst-ArgyleTelevision, Inc.Notes to Condensed Consolidated Financial StatementsTabular amounts in thousands, except per share data**

**1.     Basis of Presentation**

Thecondensed consolidated financial statements include the accounts ofHearst-Argyle Television, Inc. and its wholly-owned subsidiaries (the “Company”or “we” or “us” or “our”), except for the Company’s wholly-owned subsidiarytrust (the “Capital Trust”) which cannot be consolidated under the FinancialAccounting Standards Board (“FASB”) Interpretation No. 46 (revised December2003), *Consolidation of Variable Interest Entities*(“FIN 46(R)”).  With the exception of theunconsolidated subsidiary trust, all significant intercompany accounts havebeen eliminated in consolidation.

Theaccompanying unaudited condensed consolidated financial statements do notinclude all of the information and notes required by accounting principlesgenerally accepted in the United States of America for complete financialstatements and should be read in conjunction with the Company’s consolidatedfinancial statements included in the Annual Report on our Form 10-K for the yearended December 31, 2006.  In the opinionof management, all adjustments considered necessary for a fair presentationhave been included and are normal and recurring in nature.  Operating results for the three and sixmonths ended June 30, 2007 are not necessarily indicative of the results thatmay be expected for the full year.

Onthe condensed consolidated statements of income, we have reclassified Interestincome from Interest expense, net as a separate component of Income beforeincome taxes and equity earnings.  As aresult, we have reclassified amounts from 2006 to conform to this presentation.This reclassification had no impact on reported net income.

**2.     Recent Developments and AccountingPronouncements**

OnAugust 31, 2006, the Company purchased the assets related to broadcasttelevision station WKCF-TV, a CW affiliate in Orlando, Florida.  The pro-forma results of operations andrelated per share information for the six months ended June 30, 2006 have notbeen presented as the amounts are considered immaterial.

In 2006 Sprint NextelCorporation (“Nextel”) was granted the right from the FCC to reclaim frombroadcasters in each market across the country the 1.9 GHz spectrum to use foran emergency communications system.  In order to claim 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 in each of ourmarkets beginning in the second half of 2007, we expect to record gains tothe extent that the fair market value of the equipment we receive exceeds thebook value of the analog equipment we exchange.

InFebruary 2007, the FASB issued Statement of Financial Accounting Standards (“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 will be effective for the Company on January 1, 2008. TheCompany is currently evaluating the impact of adopting SFAS 159 on itsfinancial position, cash flows, and results of operations.

In September2006, 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 and interimperiods within those fiscal years. We do not believe the adoption of SFAS 157will have a material impact on our financial position, cash flows or results ofoperations.

In September2006, 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 

5

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recognize incomprehensive income changes in the funded status of a defined benefitpostretirement plan in the year in which changes occur.  The requirementto recognize the funded status of a benefit plan and the disclosurerequirements are effective for fiscal years ending after December 15,2006.  We have adopted the requirement to recognize the funded status of abenefit plan as of December 31, 2006.  Asa result, Accumulated other comprehensive loss increased $26.4 million, net oftax, as of December 31, 2006. Additionally, the requirement to measure plan assets and benefitobligations as of the date of the employer’s fiscal year end is effectivefor all years ending after December 15, 2008.

InJune 2006, the FASB issued Financial Interpretation No. 48, *Accounting for 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.  See Note 7for further discussion regarding the adoption of FIN 48.

**3.     Stock-Based Compensation**

Stock-basedcompensation expense for the three and six months ended June 30, 2007 was $2.1million and $4.1 million, respectively, as compared to $2.0 million and $3.9million in the three and six months ended June 30, 2006.   The total deferred tax benefitrelated thereto was $0.8 million and $1.6 million for the three and six months ended June 30,2007 and $0.8 million and $1.5 million for the three and six months ended June30, 2006.  As of June 30, 2007, there was$12.0 million 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 $12.0 million, we expect torecognize approximately 31.3% in the remaining interim periods of 2007, 46.6%in 2008 and 22.1% in 2009.

**4.     Long-Term Debt**

Long-term debt as of June30, 2007 and December 31, 2006 consisted of the following:

|                            | ** ** | **June 30, 2007** | ** ** | **December 31, 2006** | ** ** |
|----------------------------|------------|-----------------------------|------------|---------------------------------|------------|
| ** **                 | ** ** | **(Unaudited)**             | ** ** | ** **                      | ** ** |
| Revolving Credit  Facility |       | $                           | 100,000    |                            | $          | 100,000 |   |
| Senior Notes (1)           |       | 407,110                     |       | 407,110                         |       |
| Private  Placement Debt    |       | 360,000                     |       | 360,000                         |       |
| Capital Lease  Obligations |       | 36                          |       | 60                              |       |
|                       |       | 867,146                     |       | 867,170                         |       |
| Less: Current  Maturities  |       | (90,036                     | )          | (90,048                         | )          |
|                       |       |                        |       |                            |       |
| Total long-term debt       |       | $                           | 777,110    |                            | $          | 777,122 |   |

 

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(1)The Company has theability and intent to refinance its $125.0 million 7% senior notes due November2007 and therefore has continued to classify the debt as a long-termobligation.

**5.     Earnings Per Share**

The calculation of basicearnings per share (“EPS”) for each period is based on the weighted averagenumber of common shares outstanding during the period.  The calculation of dilutive EPS for eachperiod is based on the weighted average number of common shares outstandingduring the period, including restricted stock issued to date, plus the effect,if any, from the assumed exercise of stock options and conversion of preferredsecurities.  The following 

6

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table sets forth areconciliation between basic EPS and diluted EPS, in accordance with SFAS No.128, *Earnings Per Share*.
| ** **                                                    | ** ** | **Three months ended June 30,** | ** ** | **Six months ended June 30,** | ** ** |
|---------------------------------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                                    | ** ** | **2007**                                            | ** ** | **2006**                                          | ** ** | **2007** | ** ** | **2006** | ** ** |
| ** **                                                    | ** ** | **(Unaudited)**                                     | ** ** |
| Income  applicable to common stockholders (Basic and Diluted) |       | $                                                   | 17,021     |                                              | $          | 25,017 |   | $ | 21,273 |   | $ | 38,034 |   |
| Basic shares                                                  |       | 93,547                                              |       | 92,733                                            |       | 93,366 |   | 92,694 |   |
| Basic EPS                                                     |       | $                                                   | 0.18       |                                              | $          | 0.27 |   | $ | 0.23 |   | $ | 0.41 |   |
|                                                          |       |                                                |       |                                              |       |   |   |   |   |
| Diluted shares                                                |       | 94,508                                              |       | 93,197                                            |       | 94,306 |   | 93,185 |   |
| Diluted EPS                                                   |       | $                                                   | 0.18       |                                              | $          | 0.27 |   | $ | 0.23 |   | $ | 0.41 |   |
|                                                          |       |                                                |       |                                              |       |   |   |   |   |
| Basic shares                                                  |       | 93,547                                              |       | 92,733                                            |       | 93,366 |   | 92,694 |   |
| Add: Shares issued upon assumed exercise of stock  options    |       | 961                                                 |       | 464                                               |       | 940 |   | 491 |   |
| Diluted shares                                                |       | 94,508                                              |       | 93,197                                            |       | 94,306 |   | 93,185 |   |

 

The dilution test for theRedeemable Convertible Preferred Securities related to the Capital Trust isperformed for all periods. This test considers only the total number of sharesthat could be issued if converted and does not consider either the conversionprice or the share price of the underlying common shares. For the three and sixmonths ended June 30, 2007 and 2006, 5,128,205 shares of Series A Common Stockto be issued upon the conversion of 2,600,000 shares of Series B 7.5%Redeemable Convertible Preferred Securities, related to the Capital Trust, arenot included in the number of common shares used in the calculation of dilutedEPS because to do so would have been anti-dilutive. When the securities relatedto the Capital Trust are dilutive, the interest, net of tax, related to theCapital Trust is added back to Income applicable to common stockholders forpurposes of the diluted EPS calculation.

Options to purchase 982,718and 6,029,785 shares of Series A Common Stock (before application of thetreasury stock method), outstanding as of June 30, 2007 and 2006, respectively,were not included in the computation of diluted EPS because the exercise pricewas greater than the average market price of $26.07 and $26.12 during the threeand six months ended June 30, 2007, respectively, and $22.57 and $23.17 duringthree and six months ended June 30, 2006, respectively.

7

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**6.     Goodwill and Intangible Assets**
| ** **                                                         | ** ** | **June 30, 2007** | ** ** | **December 31, 2006** | ** ** |
|--------------------------------------------------------------------|------------|-----------------------------|------------|---------------------------------|------------|
| ** **                                                         | ** ** | **(Unaudited)**             | ** ** | ** **                      | ** ** |
| Total intangible  assets subject to amortization                   |       | $                           | 103,248    |                            | $          | 106,783 |   |
| Intangible  assets not subject to amortization – FCC licenses |       | 2,413,257                   |       | 2,413,257                       |       |
| Total intangible  assets, net                                      |       | $                           | 2,516,505  |                            | $          | 2,520,040 |   |
|                                                               |       |                        |       |                            |       |
| Goodwill                                                           |       | $                           | 816,728    |                            | $          | 816,724 |   |

 

Summarized below are the carrying value ofintangible assets subject to amortization as of June 30, 2007 and December 31,2006:
| ** **                                        | ** ** | **June 30, 2007** | ** ** | **December 31, 2006** | ** ** |
|---------------------------------------------------|------------|-----------------------------|------------|---------------------------------|------------|
| ** **                                        | ** ** | **(Unaudited)**             | ** ** | ** **                      | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                        | ** ** | **Gross**                   | ** ** | ** **                      | ** ** | **Net** | ** ** | **Gross** | ** ** | ** ** | ** ** | **Net** | ** ** |
| ** **                                        | ** ** | **Carrying**                | ** ** | **Accumulated**                 | ** ** | **Carrying** | ** ** | **Carrying** | ** ** | **Accumulated** | ** ** | **Carrying** | ** ** |
| ** **                                        | ** ** | **Value**                   | ** ** | **Amortization**                | ** ** | **Value** | ** ** | **Value** | ** ** | **Amortization** | ** ** | **Value** | ** ** |
| Intangible  assets subject to amortization:       |       |                        |       |                            |       |   |   |   |   |   |   |   |   |
| Advertiser client base                            |       | $                           | 124,035    |                            | $          | 76,291 |   | $ | 47,744 |   | $ | 124,035 |   | $ | 73,967 |   | $ | 50,068 |   |
| Network affiliations                              |       | 95,493                      |       | 40,076                          |       | 55,417 |   | 95,493 |   | 38,880 |   | 56,613 |   |
| Other                                             |       | 743                         |       | 656                             |       | 87 |   | 743 |   | 641 |   | 102 |   |
| Total intangible assets  subject to amortization: |       | $                           | 220,271    |                            | $          | 117,023 |   | $ | 103,248 |   | $ | 220,271 |   | $ | 113,488 |   | $ | 106,783 |   |

 

The Company’s amortizationexpense for intangible assets was approximately $1.8 million and $3.5 millionfor the three and six months ended June 30, 2007, respectively, and $1.5million and $3.0 million for the three and six months ended June 30, 2006,respectively.  Annual intangible assetamortization expense is estimated to be approximately $6.8 million in 2007 and$6.0 million in each of the next four years.

**7.     Income Taxes**

The income taxexpense for the three and six months ended June 30, 2007 was $12.5 and $16.5million, respectively, as compared to $12.7 and $21.3 million for thethree and six months ended June 30, 2006, respectively.

On January 1,2007, the Company adopted FIN 48 which clarifies the accounting for uncertaintyin income taxes by prescribing a recognition threshold for tax positions takenor expected to be taken in a tax return. At the date of adoption, the total amount of unrecognized tax benefitswas $35.4 million, and the associated interest and penalties was $8.6million.    If recognized, theseamounts (net of tax impact) would favorably affect the effective income taxrate in future periods.  The adopted provisions of FIN 48 will result in acertain amount of variability in the effective tax rate in interim periods dueto the Company’s recording of associated interest expense, which is classified as a component of income taxes, asperiod costs.  Additionally, the Company’seffective income tax rate in a given financial statement period may bematerially impacted by 1) changes in the level of earnings by taxing jurisdiction2) changes in the expected outcome of tax examinations 3) the normal expirationof statutes of limitations or 4) the amount of deductions or changes in thedeferred tax valuation allowance.

Theamount of unrecognized tax benefits is expected, on a net basis, to decreasewithin 12 months of the reporting date due to scheduled closings ofexaminations and normal expirations of statutes of limitations.

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Theeffective tax rate for the three and six months ended June 30, 2007 was 41.3%and 42.8%, respectively, as compared to 33.8% and 35.9% for the three andsix months ended June 30, 2006, respectively.

**8.     Common Stock**

**CommonStock Repurchase**

In May 1998, the Company’sBoard of Directors authorized the repurchase of up to $300 million of itsoutstanding Series A Common Stock.  Suchrepurchases may be effected from time to time in the open market or in privatetransactions, subject to market conditions and management’s discretion. Duringthe six months ended June 30, 2007, the Company did not repurchase shares ofits outstanding Series A Common Stock. Between May 1998 and June 30, 2007, theCompany repurchased approximately 4.5 million shares of Series A Common Stockat a cost of approximately $110.8 million and an average price of $24.87.  There can be no assurance that suchrepurchases will occur in the future or, if they do occur, what the terms ofsuch repurchases will be.

The HearstCorporation (“Hearst”) and its indirect wholly-owned subsidiary, HearstBroadcasting, Inc. (“Hearst Broadcasting”), are authorized by the HearstBoard of Directors to purchase up to 25 million shares of the Company’s SeriesA Common Stock from time to time in the open market, in private transactions orotherwise.  During the six months endedJune 30, 2007, Hearst Broadcasting did not purchase any shares of Series ACommon Stock.  As of June 30, 2007, underthis plan Hearst purchased approximately 23.8 million shares of the Company’soutstanding Series A Common Stock.

 As of June 30, 2007 and December 31, 2006,Hearst owned 73.3% and 73.8%, respectively, of the Company’s outstanding commonstock.

**CommonStock Dividends**

During the six months endedJune 30, 2007, the Company’s Board of Directors declared a cash dividend onshares of our Series A and Series B Common Stock as follows:
| **Dividend Amount** | ** ** | **Declaration Date** | ** **      | **Record Date** | ** **     | **Payment Date** | ** **      | **Total Dividend** | ** ** | **Hearst Portion** | ** ** |
|--------------------------|------------|---------------------------|-----------------|----------------------|----------------|-----------------------|-----------------|-------------------------|------------|-------------------------|------------|
| $                        | 0.07       |                      | March  29, 2007 |                 | April  5, 2007 |                  | April  15, 2007 |                    | $          | 6,546                   |       | $ | 4,816 |   |
| $                        | 0.07       |                      | May 3, 2007     |                 | July 5, 2007   |                  | July 16, 2007   |                    | $          | 6,570                   |       | $ | 4,816 |   |

 

**9.     Preferred Stock**

Under the Company’sCertificate of Incorporation, the Company has one million authorized shares ofPreferred Stock, par value $.01 per share. At June 30, 2007 and 2006, there was no Preferred Stock outstanding.

**10.  Related Party Transactions**

*Hearst*.    As of June 30, 2007, Hearst ownedapproximately 52.3% of our Series A Common Stock and 100% of our Series BCommon Stock, representing in the aggregate approximately 73.3% of both theeconomic interest and outstanding voting power of our common stock, except withregard to the election of directors. With regard to the election of directors, Hearst’s ownership of ourSeries B Common Stock entitles Hearst to elect 11 of the 13 members of ourBoard of Directors. During the three and six months ended June 30, 2007 and2006, we were engaged in the following transactions with Hearst or partiesrelated to Hearst:

·                        *Hearst TowerLease.  *On May 5, 2006 theCompany entered into a Lease Agreement with Hearst to lease one floor of thenewly constructed Hearst Tower in Manhattan for our corporate offices.  For the three and six months ended June 30,2007, we recorded $0.4 million and $0.8 million in rent expense, net of aportion of the $1.9 million tenant improvement allowance, which the Company isamortizing over the lease term.

9

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·                        *Management Services Agreement*.   We recordedrevenue of approximately $1.8 million and $3.2 million in the three and sixmonths ended June 30, 2007, respectively, and $1.7 million and $3.1 million inthe three and six months ended June 30, 2006, 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 ourstock option plans.  We believe the termsof the Management Agreement are reasonable to both parties; however, there canbe no assurance that more favorable terms would not be available from thirdparties.

·                  *IntercompanyServices Agreement*.    We incurred expenses ofapproximately $1.7 million and $3.4 million in the three and six months endedJune 30, 2007, respectively, and $1.3 million and $2.6 million in the three andsix months ended June 30, 2006, respectively, relating to a services agreementwith Hearst (the “Services Agreement”). Pursuant to the Services Agreement,Hearst provides the Company certain administrative services such as accounting,auditing, financial, legal, insurance, data processing, and employee benefitsadministration. We believe the terms of the Services Agreement are reasonableto both parties; however, there can be no assurance that more favorable terms wouldnot be available from third parties.

·                  *InterestExpense, Net – Capital Trust.*  We incurred interest expense, net,related to the Subordinated Debentures issued to our wholly-ownedunconsolidated subsidiary, the Capital Trust, of $2.4 million and $4.8 millionfor each of the three and six months ended June 30, 2007 and 2006.  The Capital Trust then paid comparableamounts to its Redeemable Convertible Preferred Securities holders, includingHearst, which received $0.5 million and $1.0 million in interest paymentsduring the three and six months ended June 30, 2007.

·                  *Dividendson Common Stock.*    During the six months endedJune 30, 2007 and 2006 we paid the following dividends to Hearst:
| Dividend Amount | ** ** | **Payment Date** | ** **             | **Total Dividend** | ** ** | **Hearst Portion** | ** ** |
|----------------------|------------|-----------------------|------------------------|-------------------------|------------|-------------------------|------------|
| $               | 0.07       |                  | April 15,  2007   |                    | $          | 6,546                   |       | $ | 4,816 |   |
| $                    | 0.07       |                  | January 15,  2007 |                    | $          | 6,523                   |       | $ | 4,816 |   |
| $                    | 0.07       |                  | April 15,  2006   |                    | $          | 6,485                   |       | $ | 4,636 |   |
| $                    | 0.07       |                  | January 15, 2006  |                    | $          | 6,486                   |       | $ | 4,575 |   |

 

·                  *RadioFacilities Lease.*    Pursuant to a leaseagreement, Hearst paid us approximately $0.2 million and $0.4 million for eachof the three and six months ended June 30, 2007 and 2006. Under this agreement,Hearst leases from the Company premises for WBAL-AM and WIYY-FM, Hearst’sBaltimore, Maryland radio stations.

·                  *Retransmission Consent Agreement*.    Wehave agreements with Lifetime Entertainment Services (“Lifetime”), an entityowned 50% by an affiliate of Hearst and 50% by The Walt Disney Company, whereby(i) we assist Lifetime in securing distribution and subscribers for theLifetime Television, Lifetime Movie Network and/or Lifetime Real Womenprogramming services; and (ii) Lifetime acts as our agent with respect to thenegotiation of our agreements with cable, satellite and certain othermulti-channel video programming distributors. Amounts payable to us by Lifetime depend on the specific terms of theseagreements and may be fixed or variable. We recorded revenue from the agreements of $5.3 million and $10.5million in the three and six months ended June 30, 2007, respectively, and $4.0million and $8.6 million in the three and six months ended June 30, 2006,respectively.

·                  *WideOrbit, Inc. *In November 2004, we entered into anagreement to license from Wide Orbit Inc. (“Wide Orbit”) Traffic Sales andBilling Solutions software.  Hearst ownsapproximately 8% of Wide Orbit.  For thethree and six months ended June 30, 2007, we paid Wide Orbit approximately $0.4million and $0.8 million, 

10

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respectively, and for thethree and six months ended June 30, 2006, we paid $0.4 and $0.7 million,respectively, under the agreement.

·                  *N*ew*England Cable News*. Two of our executive officers, David J. Barrett and Steven A. Hobbs,serve as Hearst’s representatives on the management board of New England CableNews, a regional cable channel, jointly owned by Hearst Cable News, Inc., anindirect wholly-owned subsidiary of Hearst, and Comcast MO Cable News,Inc.  Hearst pays $4,000 per month to theCompany as compensation for their service.  In addition, two of our television stations,WPTZ/WNNE and WMTW, provide office space to certain of NECN’s reporters inexchange for news gathering services.

·                  *OtherTransactions with Hearst*.    In the three andsix months ended June 30, 2007 and 2006, we recorded immaterial net revenuerelating to advertising sales from Hearst.

*InternetBroadcasting Systems, Inc*.    As of June30, 2007, we owned 36.1% of Internet Broadcasting Systems, Inc. (“InternetBroadcasting”).  We have an agreementwith Internet Broadcasting pursuant to which it provides hosting services forour corporate Internet site for a nominal amount.  Harry T. Hawks, Terry Mackin and Steven A.Hobbs, three of our executive officers, serve on the Board of Directors ofInternet Broadcasting, from which they do not receive compensation for theirservices.

*SmallBusiness Television*.  The Company utilizes services of Small Business Television (“SBTV”) toprovide television stations with additional revenue through the marketing andsale of commercial time to smaller businesses that do not traditionally usetelevision advertising due to costs. In the three and six month period endedJune 30, 2007, these sales generated revenue of approximately $0.4 and $0.7million, respectively, of which approximately $0.2 million and $0.3 million wasdistributed to SBTV, respectively. In the three and six month period ended June30, 2006, these sales generated revenue of approximately $0.4 and $0.6 million,respectively, of which approximately $0.2 million and $0.3 million wasdistributed to SBTV, respectively. Dean Conomikes, the owner of SBTV, is theson of John G. Conomikes, a member of the Company’s Board of Directors.

*NBC WeatherPlus.*  In 2004,we invested in Weather Network Affiliates Company, LLC (“WNAC”), which owns theNBC Weather Plus Network (“Weather Plus”). We have launched Weather Plus in all of our NBC-affiliated markets.  Terry Mackin, one of our executive officers,serves as the past Chairman of the Board of the NBC Television AffiliatesAssociation, the managing member and the owner of certain ownership interestsin WNAC.  As past NBC Affiliate Chairman, Mr. Mackin serves as chairman of theNBC Affiliates “Futures” committee, which is responsible for developingstrategic projects between NBC and the NBC Affiliates.  Mr. Mackin served as the Chairman ofthe NBC Television Affiliates Association Board from May 2004 to May 2006.  Additionally, since May 2006, Mr. Mackin hasserved as a member of the Board of Directors of NBC Weather Plus NetworkLLC.  Mr. Mackin does not receive compensation for his Board service.

*Ripe TV.* On June 29, 2007, theCompany made an additional investment of $1.9 million in Ripe DigitalEntertainment, Inc. (“Ripe TV”), resulting in a total investment of $11.0million which represents a 24.7% ownership interest.  In the fourth quarter of 2006 the Companyentered into a lease agreement with Ripe TV to sublet office space commencingJanuary 1, 2007, for approximately $0.1 million a year.

*USDTV*.  During the year ended December 31, 2006, weand Hearst each owned approximately 6.175% of USDTV.  In addition, our station KOAT-TV inAlbuquerque, New Mexico, had an agreement to lease a portion of its digitalspectrum to USDTV which the Company terminated effective April 15, 2007.  In July 2006, USDTV filed for Chapter 7bankruptcy and the Company wrote-off its investment of $2.5 million andincluded the write-off in Other expense in the accompanying condensedconsolidated statements of income.  InSeptember 2006, USDTV sold substantially all its assets to a third party. FromSeptember 23, 2005 to June 20, 2006, Steven A. Hobbs, one of our executiveofficers, served on the Board of Directors of USDTV, from which he did notreceive compensation for his services.

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*Other*.    In theordinary course of business, the Company enters into transactions with relatedparties, none of which were significant to our financial results in the threemonths ended June 30, 2007 and 2006.

**11.  Retirement Plansand Other Post-Retirement Benefits**

***Overview***

The Company maintains seven defined benefit pension plans, 12 employeesavings plans, and other post-retirement benefit plans for active, retired andformer employees.  In addition, theCompany participates in three multi-employer union pension plans that provideretirement benefits to certain union employees. The seven defined benefit pension plans are hereafter collectivelyreferred to as the “Pension Plans.”

***Pension Plans and Other Post-Retirement Benefits***

Benefits under the PensionPlans are generally based on years of credited service, age at retirement andaverage of the highest five consecutive years’ compensation. The cost of thePension Plans is computed on the basis of the Project Unit Credit ActuarialCost Method. Past service cost is amortized over the expected future serviceperiods of the employees.

*Net Periodic Pension and Post-Retirement Cost*

The following schedulepresents net periodic pension cost for the Company’s Pension Plans in the threeand six months ended June 30, 2007 and 2006:
| ** **                                 | ** ** | **Pension Benefits**                           | ** ** | **Pension Benefits**                         | ** ** |
|--------------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                 | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
| ** **                                 | ** ** | **2007**                                            | ** ** | **2006**                                          | ** ** | **2007** | ** ** | **2006** | ** ** |
| ** **                                 | ** ** | **(Unaudited)**                                     | ** ** | **(Unaudited)**                                   | ** ** |
| Service cost                               |       | $                                                   | 2,645      |                                              | $          | 2,496 |   | $ | 5,290 |   | $ | 4,993 |   |
| Interest cost                              |       | 2,700                                               |       | 2,355                                             |       | 5,400 |   | 4,709 |   |
| Expected return  on plan assets            |       | (2,911                                              | )          | (2,779                                            | )          | (5,822 | ) | (5,558 | ) |
| Amortization of  prior service cost        |       | 108                                                 |       | 108                                               |       | 216 |   | 216 |   |
| Amortization of  transitional obligation . |       | —                                              |       | —                                            |       | — |   | 1 |   |
| Amortization of  net loss                  |       | 924                                                 |       | 967                                               |       | 1,848 |   | 1,934 |   |
| Net periodic  pension cost                 |       | $                                                   | 3,466      |                                              | $          | 3,147 |   | $ | 6,932 |   | $ | 6,295 |   |

 

Thefollowing schedule presents net periodic benefit cost for the Company’s otherPost-Retirement Benefit Plans (medical and life insurance) in the three and sixmonths ended June 30, 2007 and 2006:
| ** **                              | ** ** | **Post-Retirement Benefits**                   | ** ** | **Post-Retirement Benefits**                 | ** ** |
|-----------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                              | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
| ** **                              | ** ** | **2007**                                            | ** ** | **2006**                                          | ** ** | **2007** | ** ** | **2006** | ** ** |
| ** **                              | ** ** | **(Unaudited)**                                     | ** ** | **(Unaudited)**                                   | ** ** |
| Service cost                            |       | $                                                   | 41         |                                              | $          | 29 |   | $ | 82 |   | $ | 59 |   |
| Interest cost                           |       | 175                                                 |       | 122                                               |       | 350 |   | 244 |   |
| Amortization of  prior service cost     |       | 10                                                  |       | 7                                                 |       | 20 |   | 14 |   |
| Amortization of  initial net obligation |       | 10                                                  |       | 7                                                 |       | 20 |   | 14 |   |
| Amortization of  net loss               |       | 9                                                   |       | 6                                                 |       | 18 |   | 12 |   |
| Net periodic  benefit cost              |       | $                                                   | 245        |                                              | $          | 171 |   | $ | 490 |   | $ | 343 |   |

 

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*Contributions*

During the three and sixmonths ended June 30, 2007, we contributed $1.1 million and $1.5 million,respectively, to our Pension Plans and $0.2 million and $0.3 million to ourPost-Retirement Plans, respectively. During the three and six months ended June 30, 2006, we did not make anycontributions to our Pension Plans and we contributed approximately $0.2million and $0.4 million, respectively, to our post-retirement benefitplans.  During the year ending December31, 2007, the Company expects to contribute $5.5 million to the Pension Plansand expects to contribute approximately $0.6 million to the Post-RetirementBenefit Plans.

**12.  OtherCommitments and Contingencies**

TheCompany has guaranteed the payments by its Capital Trust on the RedeemableConvertible Preferred Securities in the amount of $134 million.  The guarantee is irrevocable andunconditional, and guarantees the payment in full of all (i) distributions onthe Redeemable Convertible Preferred Securities to the extent of availablefunds of the Capital Trust; (ii) amounts payable upon redemption of the RedeemableConvertible Preferred Securities to the extent of available funds of theCapital 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 seniorpreferred stock issued by the Company, and *pari passu* withany guarantee of the Company in respect of any preferred stock of the Companyor any preferred security of any of the Company’s controlled affiliates; and(iii) senior to the Company’s Common Stock.

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**Item 2.**               **Management’sDiscussion and Analysis of Financial Condition and Results of Operations**

**Organizationof Information**

Management’s Discussion andAnalysis provides a narrative on our financial performance and condition thatshould be read in conjunction with the accompanying condensed consolidatedfinancial statements.  It includes thefollowing sections:

·                  Forward-LookingStatements

·                  ExecutiveSummary

·                  Resultsof Operations

·                  Liquidity and Capital Resources

**Forward-Looking Statements**

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

·                  Changesin Federal regulations that affect us, including changes in Federalcommunications laws or regulations;

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

·                  Competitionin the broadcast television markets we serve;

·                  Ourability to obtain quality programming for our television stations;

·                  Successfulintegration of television stations we acquire;

·                  Pricingfluctuations in local and national advertising;

·                  Changesin national and regional economies;

·                  Ourability to service and refinance our outstanding debt;

·                  Changesin advertising trends and our advertisers’ financial condition; and

·                  Volatility in programming costs, industry consolidation, technological developments, and major world events**.**

Fora discussion of additional risk factors that are particular to our business,please refer to the Risk Factors section of our Annual Report on Form 10-K forthe fiscal year ended December 31, 2006. These and other matters we discuss in this report, or in the documentswe incorporate by reference into this report, may cause actual results todiffer from those we describe.  Weundertake no obligation to update or revise any forward-looking statements,whether as a result of new information, future events or otherwise.

**ExecutiveSummary**

Hearst-Argyle Television,Inc. and its subsidiaries (hereafter “we” or the “Company”) own and operate 26network-affiliated television stations. Additionally, we provide management services to two network-affiliatedstations and one independent television station and two radio stations owned byThe Hearst Corporation (“Hearst”) in exchange for management fees.  We are a leader in the convergence of localbroadcast television and the Internet through our investment in, and operatingagreement with, Internet Broadcasting, which operates a nation-wide network oftelevision Websites.  Our stations’Websites typically provide news, weather, community information, user generatedcontent and entertainment content to our audience.  Also, 16 of our stations broadcast additionalchannels on a multicast stream with their main digital channel.

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*Quarter Highlights*

·                  Results for the three months endedJune 30, 2007 reflect a $8.1 million decrease in net political advertisingrevenue resulting from the normal, cyclical nature of the televisionbroadcasting business, partially offset by an increase in advertising revenueresulting from our acquisition of WKCF-TV on August 31, 2006.  Additionally, the results for the quarterended June 30, 2007 reflect the positive impact of retransmission consentrevenue and continued focus on digital media. In addition, results reflect the dampening impact of weak automotiveadvertising.

*Industry Trends*

·                  Politicaladvertising decreases in odd-numbered years, such as 2007, consistent with thedecrease in the number of candidates running for political office in theinterim national election cycle, as well as select state and local elections.

·                  Revenuefrom Olympic advertising occurs exclusively in even-numbered years, such as2006, with the alternating Winter and Summer Games occurring every two years.Consequently, our 10 NBC stations aired the 2006 Winter Olympics in February2006 and will not record any advertising revenue associated with the Olympicsin 2007.

·                  In2006, Sprint Nextel Corporation (“Nextel”) was granted the right from the FCCto reclaim from broadcasters in each market across the country the 1.9 GHzspectrum to use for an emergency communications system.  In order toclaim this signal, Nextel must replace all analog equipment currently usingthis spectrum with digital equipment.  All broadcasters have agreed to usethe digital substitute that Nextel will provide.  The transition will becompleted on a market by market basis.  As the equipment is exchanged ineach of our markets, we expect to record gains to the extent that the fairmarket value of the equipment we receive exceeds the book value of the analogequipment we exchange.

**Resultsof Operations**

Results of operations forthe three and six months ended June 30, 2007 and 2006 include (i) the resultsof our 25 television stations, which were owned for the entire periodpresented, and the management fees derived by the three television and tworadio stations managed by us for the entire period presented; (ii) the resultsof operations of WKCF-TV, after our acquisition of the station, on August 31,2006.

*ThreeMonths Ended June 30, 2007*

*Compared to Three Months Ended June 30, 2006*

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| ** **                                         | ** ** | **For the three months ended June 30,** | ** ** | ** ** | ** ** | ** **        | ** ** |
|----------------------------------------------------|------------|-----------------------------------------------------------------------|------------|------------|------------|-------------------|------------|
| ** **                                         | ** ** | **2007**                                                              | ** ** | **2006**   | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| ** **                                         | ** ** | **(In thousands)**                                               | ** ** | ** ** | ** ** | ** **        | ** ** |
| Total revenue                                      |       | $                                                                     | 193,019    |       | $          | 193,964           |       | $ | (945 | ) | -0.5 | % |
| Station  operating expenses:                       |       |                                                                  |       |       |       |              |       |   |   |
| Salaries, benefits and other operating costs       |       | 102,168                                                               |       | 97,654     |       | 4,514             |       | 4.6 | % |
| Amortization of program rights                     |       | 19,422                                                                |       | 15,951     |       | 3,471             |       | 21.8 | % |
| Depreciation and amortization                      |       | 14,185                                                                |       | 16,080     |       | (1,895            | )          | -11.8 | % |
| Corporate,  general and administrative expenses    |       | 8,887                                                                 |       | 7,626      |       | 1,261             |       | 16.5 | % |
| Operating income                                   |       | 48,357                                                                |       | 56,653     |       | (8,296            | )          | -14.6 | % |
|                                               |       |                                                                  |       |       |       |              |       |   |   |
| Interest expense                                   |       | 16,028                                                                |       | 16,050     |       | (22               | )          | -0.1 | % |
| Interest income                                    |       | (407                                                                  | )          | (1,943     | )          | (1,536            | )          | 79.1 | % |
| Interest  expense, net – Capital Trust        |       | 2,438                                                                 |       | 2,438      |       | —            |       | 0.0 | % |
| Other expense                                      |       | —                                                                |       | 2,501      |       | (2,501            | )          | -100.0 | % |
| Income before  income taxes and equity earnings    |       | 30,298                                                                |       | 37,607     |       | (7,309            | )          | -19.4 | % |
|                                               |       |                                                                  |       |       |       |              |       |   |   |
| Income tax  expense                                |       | 12,525                                                                |       | 12,729     |       | (204              | )          | -1.6 | % |
| Equity in loss  (income) of affiliates, net of tax |       | 752                                                                   |       | (139       | )          | (891              | )          | 641.0 | % |
| Net income                                         |       | $                                                                     | 17,021     |       | $          | 25,017            |       | $ | (7,996 | ) | -32.0 | % |

 

*Totalrevenue*.    Total revenue includes:

(i)             cash advertisingrevenue, net of agency and national representatives’ commissions;

(ii)          retransmission consentrevenue;

(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, primarilybarter and trade revenue and management fees earned from Hearst.
| ** **                                                 | ** ** | **For the three months ended June 30,** | ** ** | ** ** | ** ** | ** **        | ** ** |
|------------------------------------------------------------|------------|-----------------------------------------------------------------------|------------|------------|------------|-------------------|------------|
| ** **                                                 | ** ** | **2007**                                                              | ** ** | **2006**   | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| ** **                                                 | ** ** | **(In thousands)**                                               | ** ** | ** ** | ** ** | ** **        | ** ** |
| Net local &  national ad revenue (excluding political) |       | $                                                                     | 165,274    |       | $          | 161,866           |       | $ | 3,408 |   | 2.1 | % |
| Retransmission  consent revenue                            |       | 5,422                                                                 |       | 4,020      |       | 1,402             |       | 34.9 | % |
| Net digital  media revenue                                 |       | 5,012                                                                 |       | 3,377      |       | 1,635             |       | 48.4 | % |
| Net political  revenue                                     |       | 4,867                                                                 |       | 12,917     |       | (8,050            | )          | -62.3 | % |
| Network  compensation                                      |       | 2,625                                                                 |       | 2,253      |       | 372               |       | 16.5 | % |
| Other revenue                                              |       | 9,819                                                                 |       | 9,531      |       | 288               |       | 3.0 | % |
| Total revenue                                              |       | $                                                                     | 193,019    |       | $          | 193,964           |       | $ | (945 | ) | -0.5 | % |

 

Totalrevenue in the three months ended June 30, 2007 was $193.0 million as comparedto $194.0 million in the three months ended June 30, 2006, a decrease of $1.0million or 0.5%. This decrease was primarily attributable to the followingfactors:

(i)             an $8.1 milliondecrease in net political advertising revenue resulting from the normal,cyclical nature of the television broadcasting business, in which the demandfor advertising by candidates running for political office significantlydecreases in odd-numbered non-election years (such as 2007); and

(ii)          a decrease in theautomotive category; partially offset by

(iii)       an increase in net adrevenue due to the inclusion of results of operations from WKCF-TV;

(iv)      a $1.6 million increase innet digital media revenue; and

(v)         a $1.4 million increasein retransmission consent revenue.

16

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*Salaries,benefits and other operating costs*.    Duringthe three months ended June 30, 2007, salaries, benefits and other operatingcosts were $102.2 million, as compared to $97.7 million in the three monthsended June 30, 2006, an increase of $4.5 million or 4.6%.  This increase was primarily due to:

(i)             an increase inexpenses due to the inclusion of results of operations from WKCF-TV; and

(ii)          a $1.2 million increasein digital media expenses.

*Amortizationof program rights*.  Amortization of program rightswas $19.4 million in the three months ended June 30, 2007, as compared to $16.0million in the three months ended June 30, 2006, an increase of $3.4 million or21.3%. This increase was primarily due to:

(i)             an increase inamortization due to the purchase of WKCF-TV. Programming expense is a more significant component of operating expensefor WKCF-TV because the CW network provides fewer hours of programming thaneither ABC, NBC or CBS; and, to a lesser extent

(ii)          a $0.6 millionwrite-down of certain off-network syndicated programs.

*Depreciationand amortization*.   Depreciation andamortization expense was $14.2 million in the three months ended June 30, 2007,as compared to $16.1 million in the three months ended June 30, 2006, adecrease of $1.9 million or 11.8%. Depreciation expense was $12.4 million inthe three months ended June 30, 2007, as compared to $14.6 million in the threemonths ended June 30, 2006, a decrease of $2.2 million or 15.1%.  The decrease in depreciation expense is primarily due to depreciation in full ofcertain fixed assets, including leasehold improvements from our previouscorporate office, partially offset by additional depreciation from WKCF-TV.

*Corporate,general and administrative expenses*.    Corporate,general and administrative expenses were $8.9 million in the three months endedJune 30, 2007, as compared to $7.6 million in the three months ended June 30,2006, an increase of $1.3 million or 17.1%. This increase was primarily due to:

(i)             a $0.6 millionincrease in employee costs, a portion of which is related to our investment inour digital media initiatives; and

(ii)          a $0.4 million increasein recruitment and relocation costs; and

(iii)       a $0.3 million increase inprofessional services expenses.

*Interestexpense. *Interestexpense was $16.0 million in the three months ended June 30, 2007, as comparedto $16.1 million in the three months ended June 30, 2006, a decrease of $0.1million or 0.1%.

*Interestincome.*    Interest income was $0.4 million in the three months ended June 30,2007, as compared to $1.9 million in the three months ended June 30, 2006, adecrease of $1.5 million or 79.0%. This decrease is due to lower cash balances in2007 as compared to the same period in 2006.

*Otherexpense.  *In the threemonths ended June 30, 2006, we recorded a $2.5 million write-off of ourinvestment in USDTV.

*Incometax expense.*    We recorded income taxexpense of $12.5 million in the three months ended June 30, 2007, compared to$12.7 million in the three months ended June 30, 2006, a decrease of $0.2million.  This change was due to:

(i)             a decrease in incomebefore income taxes from $37.6 million in the three months ended June 30, 2006to $30.3 million in the three months ended June 30, 2007; and

(ii)          a $2.1 million taxbenefit associated with the utilization of capital loss carryforwards in thethree months ended June 30, 2006.

Theeffective tax rate for the three months ended June 30, 2007 was 41.3% ascompared to 33.8% for the three months ended June 30, 2006.  On a full year basis, the Company estimatesits annual effective tax rate to be approximately 38%.  The effective tax rate for 2007 gives effectto the adoption of FIN 48.

*Equity inloss (income) of affiliates, net of tax*. Equity in loss (income) of affiliates, net of tax was $0.8 million and($0.1) million for three months ended June 30, 2007 and 2006.  For all periods presented, our shareof income in Internet BroadcastingSystems, Inc. (“Internet Broadcasting”) was offset by our share oflosses in Ripe Digital Entertainment,Inc. (“Ripe TV”).

17

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*Netincome*.    Net income was $17.0 million inthe three months ended June 30, 2007, as compared to $25.0 million in the threemonths ended June 30, 2006, a decrease of $8.0 million or 32.0%.  This decrease was primarily due to the itemsdescribed above.

*SixMonths Ended June 30, 2007*

*Comparedto Six Months Ended June 30, 2006*
| ** **                                         | ** ** | **For the six months ended June 30,** | ** ** | ** ** | ** ** | ** **        | ** ** |
|----------------------------------------------------|------------|---------------------------------------------------------------------|------------|------------|------------|-------------------|------------|
| ** **                                         | ** ** | **2007**                                                            | ** ** | **2006**   | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| ** **                                         | ** ** | **(In thousands)**                                             | ** ** | ** ** | ** ** | ** **        | ** ** |
| Total revenue                                      |       | $                                                                   | 362,402    |       | $          | 367,981           |       | $ | (5,579 | ) | -1.5 | % |
| Station  operating expenses:                       |       |                                                                |       |       |       |              |       |   |   |
| Salaries, benefits and other operating costs       |       | 203,242                                                             |       | 194,441    |       | 8,801             |       | 4.5 | % |
| Amortization of program rights                     |       | 38,650                                                              |       | 31,283     |       | 7,367             |       | 23.5 | % |
| Depreciation and amortization                      |       | 29,181                                                              |       | 31,468     |       | (2,287            | )          | -7.3 | % |
| Corporate,  general and administrative expenses    |       | 16,668                                                              |       | 14,899     |       | 1,769             |       | 11.9 | % |
| Operating income                                   |       | 74,661                                                              |       | 95,890     |       | (21,229           | )          | -22.1 | % |
|                                               |       |                                                                |       |       |       |              |       |   |   |
| Interest expense                                   |       | 31,917                                                              |       | 32,512     |       | (595              | )          | -1.8 | % |
| Interest income                                    |       | (752                                                                | )          | (3,244     | )          | 2,492             |       | -76.8 | % |
| Interest  expense, net – Capital Trust        |       | 4,875                                                               |       | 4,875      |       | —            |       | 0.0 | % |
| Other expense                                      |       | —                                                              |       | 2,501      |       | (2,501            | )          | -100.0 | % |
| Income before  income taxes and equity earnings    |       | 38,621                                                              |       | 59,246     |       | (20,625           | )          | -34.8 | % |
|                                               |       |                                                                |       |       |       |              |       |   |   |
| Income tax  expense                                |       | 16,517                                                              |       | 21,277     |       | (4,760            | )          | -22.4 | % |
| Equity in loss  (income) of affiliates, net of tax |       | 831                                                                 |       | (65        | )          | 896               |       | -1378.5 | % |
| Net income                                         |       | $                                                                   | 21,273     |       | $          | 38,034            |       | $ | (16,761 | ) | -44.1 | % |

 
| ** **                                                 | ** ** | **For the six months ended June 30,** | ** ** | ** ** | ** ** | ** **        | ** ** |
|------------------------------------------------------------|------------|---------------------------------------------------------------------|------------|------------|------------|-------------------|------------|
| ** **                                                 | ** ** | **2007**                                                            | ** ** | **2006**   | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| ** **                                                 | ** ** | **(In thousands)**                                             | ** ** | ** ** | ** ** | ** **        | ** ** |
| Net local &  national ad revenue (excluding political) |       | $                                                                   | 311,892    |       | $          | 314,805           |       | $ | (2,913 | ) | -0.9 | % |
| Retransmission  consent revenue                            |       | 10,587                                                              |       | 8,629      |       | 1,958             |       | 22.7 | % |
| Net digital  media revenue                                 |       | 9,036                                                               |       | 6,550      |       | 2,486             |       | 38.0 | % |
| Net political  revenue                                     |       | 6,402                                                               |       | 15,061     |       | (8,659            | )          | -57.5 | % |
| Network  compensation                                      |       | 5,114                                                               |       | 4,258      |       | 856               |       | 20.1 | % |
| Other revenue                                              |       | 19,371                                                              |       | 18,678     |       | 693               |       | 3.7 | % |
| Total revenue                                              |       | $                                                                   | 362,402    |       | $          | 367,981           |       | $ | (5,579 | ) | -1.5 | % |

 

Totalrevenue in the six months ended June 30, 2007 was $362.4 million as compared to$368.0 million in the six months ended June 30, 2006, a decrease of $5.6million or 1.5%. This decrease was primarily attributable to the followingfactors:

(i)             adecrease in local and national ad revenue due to decrease in the automotive,fast food and financial categories; and

(ii)          a $8.7million decrease of net political advertising revenue resulting from thenormal, cyclical nature of the television broadcasting business, in which thedemand for advertising by candidates running for political office significantlydecreases in odd-numbered non-election years (such as 2007); partially offsetby

(iii)       theinclusion of results of operations from WKCF-TV;

(iv)      a $2.5 millionincrease in net digital media revenue; and

(v)         a $2.0 million increasein retransmission consent revenue.

18

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*Salaries,benefits and other operating costs*.    Salaries,benefits and other operating costs were $203.2 million in the six months endedJune 30, 2007, as compared to $194.4 million in the six months ended June 30,2006, an increase of $8.8 million or 4.5%. This increase was primarily due to:

(i)             anincrease in expenses due to the inclusion of results of operations fromWKCF-TV;

(ii)          a$2.2  million increase related to digitalmedia expenses;

(iii)       a$0.9 million increase in compensation, pension, and employee benefits expense;partially offset by

(iv)      a $1.1 million decrease innews gathering and sales expense.

*Amortizationof program rights*.  Amortization of program rightswas $38.7 million in the six months ended June 30, 2007, as compared to $31.3million in the six months ended June 30, 2006, an increase of $7.4 million or23.5%. This increase was primarily due to:

(i)             anincrease in amortization due to the purchase of WKCF-TV; and

(ii)          a $0.6 millionwrite-down of certain off-network syndicated programs.

*Depreciationand amortization*.   Depreciation andamortization was $29.2 million in the six months ended June 30, 2007, ascompared to $31.5 million in the six months ended June 30, 2006, a decrease of$2.3 million or 7.3%.  Depreciationexpense was $25.6 million in the six months ended June 30, 2007, as compared to$28.5 million in the six months ended June 30, 2006, a decrease of $2.9 millionor 10.2%.  The decrease in depreciationexpense is primarily due todepreciation in full of certain fixed assets, including leasehold improvementsfrom our previous corporate office, partially offset by additional depreciationfrom WKCF-TV.

*Corporate,general and administrative expenses*.    Corporate,general and administrative expenses were $16.7 million in the six months endedJune 30, 2007, as compared to $14.9 million in the six months ended June 30,2006, an increase of $1.8 million or 12.1%. This increase was primarily due to:

(i)             a $1.0million increase related to employee compensation expense, a portion of whichis related to our investment in our digital media initiatives; and

(ii)          a $0.6 million increasein rent, maintenance and repairs and operations expense.

*Interestexpense. *Interestexpense was $31.9 million in the six months ended June 30, 2007, as compared to$32.5 million in the six months ended June 30, 2006, a decrease of $0.6 millionor 1.8%.

*Interestincome.*    Interest income was $0.8 million in the six months ended June 30, 2007,as compared to $3.2 million in the six months ended June 30, 2006, a decreaseof $2.4 million or 75.0%. This decrease is due to lower cash balances in2007 as compared to the same period in 2006.

*Otherexpense.  *In the sixmonths ended June 30, 2006, we recorded a $2.5 million write-off of ourinvestment in USDTV.

*Incometax expense.*    We recorded income tax expenseof $16.5 million in the six months ended June 30, 2007, as compared to incometax expense of $21.3 million in the six months ended June 30, 2006, a decreaseof income tax expense of $4.8 million. This decrease was due to:

(i)             adecrease in income before income taxes from $59.2 million in the six monthsended June 30, 2006 to $38.6 million in the six months ended June 30, 2007; and

(ii)          a $2.1 million taxbenefit associated with the utilization of capital loss carryforwards in thesix months ended June 30, 2006.

Theeffective tax rate for the six months ended June 30, 2007 was 42.8% as comparedto 35.9% for the six months ended June 30, 2006.  The effective tax rate for 2007 gives effectto the adoption of FIN 48.

*Equity inloss (income) of affiliates, net of tax*.  Equity in loss (income) of affiliates, net oftax was $0.8 million in the six months ended June 30, 2007, as compared to($0.1) million in the six months ended June 30, 2006, a decrease of $0.9million.  For the six months ended June 30,2007, our share of income in Internet Broadcasting was offset by our share oflosses in Ripe Digital Entertainment.

19

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*Netincome*.    Net income was $21.3 millionin the six months ended June 30, 2007, as compared to $38.0 million in the sixmonths ended June 30, 2006, a decrease of $16.7 million or 44.1%.  This decrease was primarily due to a theitems described above.

**Liquidityand Capital Resources**

As ofJune 30, 2007, the Company’s cash and cash equivalents balance was $39.8million, as compared to $18.6 million as of December 31, 2006.  The net increase in cash and cash equivalentsof $21.2 million during 2007 was due to the factors described below underOperating Activities, Investing Activities, and Financing Activities.
| ** **                                           | ** ** | **For the six months ended June 30,** | ** ** | ** ** | ** ** | ** **        | ** ** |
|------------------------------------------------------|------------|---------------------------------------------------------------------|------------|------------|------------|-------------------|------------|
| ** **                                           | ** ** | **2007**                                                            | ** ** | **2006**   | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| ** **                                           | ** ** | **(in thousands)**                                             | ** ** | ** ** | ** ** | ** **        | ** ** |
| Net cash  provided by operating activities           |       | $                                                                   | 49,617     |       | $          | 88,829            |       | $ | (39,212 | ) | -44.1 | % |
| Net cash used in  investing activities               |       | $                                                                   | (29,639    | )          | $          | (25,913           | )          | $ | (3,726 | ) | 14.4 | % |
| Net cash  provided by (used in) financing activities |       | $                                                                   | 1,225      |       | $          | (21,063           | )          | $ | 22,288 |   | -105.8 | % |
|                                                 |       |                                                                |       |       |       |              |       |   |   |
| Cash paid during  the year for:                      |       |                                                                |       |       |       |              |       |   |   |
| Interest                                             |       | $                                                                   | 30,551     |       | $          | 31,935            |       | $ | (1,384 | ) | -4.3 | % |
| Interest on Note payable to Capital Trust            |       | $                                                                   | 2,438      |       | $          | 4,875             |       | $ | (2,437 | ) | -50.0 | % |
| Taxes, net of refunds                                |       | $                                                                   | 23,537     |       | $          | 12,896            |       | $ | 10,641 |   | 82.5 | % |
| Purchases of property, plant and equipment, net      |       | $                                                                   | 28,764     |       | $          | 20,599            |       | $ | 8,165 |   | 39.6 | % |
| Dividends paid on common stock                       |       | $                                                                   | 13,069     |       | $          | 12,971            |       | $ | 98 |   | 0.8 | % |
| Series A Common Stock repurchases                    |       | $                                                                   | —     |       | $          | 798               |       | $ | (798 | ) | -100.0 | % |

 

*Operating Activities*

Net cash providedby operating activities was $49.6 million in the six months ended June 30,2007, as compared to $88.8 million in the six months ended June 30, 2006, adecrease of $39.2 million or 44.1%. This decrease was primarily due to:

(i)             lowerrevenue and net income; and

(ii)          changes in otheroperating assets and liabilities, driven by higher tax and programming paymentsin 2007 than in the same period in 2006.

*Investing Activities*

Net cash used ininvesting activities was $29.6 million in the six months ended June 30, 2007,as compared to $25.9 million in the six months ended June 30, 2006, an increaseof $3.7 million or 14.3%.  This increaseis primarily due to:

(i)             capitalexpenditures of $28.8 million in the six months ended June 30, 2007 as comparedto $20.6 million the same period in 2006. The increased level of capitalinvestment relates primarily to construction projects at KMBC-TV in KansasCity, Missouri and at WBAL-TV in Baltimore, Maryland, and the timing of cashpayments; partially offset by

(ii)          a $1.9 millioninvestment in RipeTV in the six months ended June 30, 2007, as compared to $6.5million in investments in Internet Broadcasting and USDTV in the six monthsended June 30, 2006.

*FinancingActivities*

Net cash providedby financing activities was $1.2 million in the six months ended June 30, 2007,as compared to net cash used in financing activities of $21.1 million in thesix months ended June 30, 2006, a change of $22.3 million or 105.8%. Thischange was primarily due to:

(i)             proceedsfrom stock option exercises and employee stock purchases of $14.3 million inthe six months ended June 30, 2007 compared to $2.7 million in the six monthsended June 30, 2006; partially offset by

(ii)          the repurchaseof $10.0 million of our senior notes due 2018 in the six months ended June 30,2006; and

(iii)       the repurchase of $0.8million of Series A Common Stock during the six months ended June 30, 2006.

20

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*Credit Facility and Other Long Term Debt*

In November 2006, weincreased our five-year unsecured revolving credit facility which matures onApril 15, 2010 to $500 million. The credit facility can be used for generalcorporate purposes including working capital, investments, acquisitions, debtrepayment 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 prime rateor (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 $100.0 million under the credit facility as of June 30, 2007.

As of June 30,2007, our long-term debt obligations, exclusive of capital lease obligations,were $777.1 million and our current debt maturities totaled $90 million.  The Company has the ability and intent torefinance its $125 million principal amount of 7% senior notes due November2007 and therefore has continued to classify the debt at a long-term obligationon the consolidated balance sheet.  Ourlong-term debt obligations bear interest at a fixed rate.  The Company’s credit ratings were BBB- byStandard & Poor’s and Fitch Ratings and Baa3 by Moody’s Investors Service,as of June 30, 2007.  Such credit ratingsare considered to be investment grade.

Ourdebt obligations contain certain financial and other covenants and restrictionson the Company.  Certain of the financialcovenants include credit ratios such as leverage and interest coverage, andthreshold tests such as consolidated net worth, but such covenants do notinclude any triggers explicitly tied to the Company’s credit ratings or stockprice.  We are in compliance with allsuch covenants and restrictions as of June 30, 2007.

We anticipate thatour primary sources of cash, which include current cash balances, cash providedby operating activities, and amounts available under our credit facility, willbe sufficient to finance the operating and working capital requirements of ourstations, as well as our debt service requirements, anticipated capitalexpenditures, and other obligations of the Company for the next 12 months andthe foreseeable future thereafter.

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

As of June 30,2007, the Company was not involved in any derivative financialinstruments.  However, the Company mayconsider certain interest-rate risk strategies in the future.

As of June 30, 2007, we have borrowed $100 millionunder our credit facility, which loan bears interest at LIBOR plus theapplicable margin.  The applicable marginon LIBOR loans varies between 0.50% and 1.00% depending on the ratio of totaldebt to earnings before interest, taxes, depreciation and amortization asdefined by the credit agreement.

**Item 4.   Controlsand Procedures**

The Company’smanagement performed an evaluation under the supervision and with theparticipation of the Company’s Chief Executive Officer (“CEO”) and ChiefFinancial Officer (“CFO”), of the effectiveness of the disclosure controls andprocedures (as that term is defined in Exchange Act Rule 13a-15(e)) as of theend of the fiscal quarter ended June 30, 2007. Based on that evaluation, and as of the end of the quarter for whichthis report is made, the Company’s management, including the CEO and CFO,concluded that the Company’s disclosure controls and procedures wereeffective.  Our management, including theCEO and CFO, performed an evaluation of any changes that occurred in ourinternal control over financial reporting (as that term is defined in ExchangeAct Rule 13a-15(f)) during the fiscal quarter ended June 30, 2007.  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.

21

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**PART II**

**OtherInformation**

**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 Hearst Broadcastingduring the three months ended June 30, 2007:
| **Period**               | ** ** | **Total Number  of Shares  Purchased** | ** ** | **Average Price  Paid Per  Share** | ** ** | **Total Number of  Shares Purchased as  Part of Publicly  Announced Program** | ** ** | **Maximum Number of  Shares that May Yet Be  Purchased Under the  Program** | ** ** |
|--------------------------|------------|--------------------------------------------------|------------|----------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------|------------|
| April 1 – April  30 |       | 0                                                |       | $                                            | 0.00       |                                                                                                             | 0          |                                                                                                                |       |   |
| May 1 – May 31      |       | 0                                                |       | $                                            | 0.00       |                                                                                                             | 0          |                                                                                                                |       |   |
| June 1 – June 30    |       | 0                                                |       | $                                            | 0.00       |                                                                                                             | 0          |                                                                                                                | 1,184,656  | (1) |
| Total                    |       | 0                                                |       | $                                            | 0.00       |                                                                                                             | 0          |                                                                                                                |       |   |

 

----

(1)          On September 28, 2005,Hearst increased Hearst Broadcasting’s authorization to purchase the Company’sSeries A Common Stock from 20 million to 25 million shares.   Hearst may effect such purchases from timeto time in the open market or in private transactions, subject to marketconditions and management’s discretion.

As of June 30,2007, Hearst beneficially owned approximately 52.3% of the Company’soutstanding Series A Common Stock and 100% of the Company’s Series B CommonStock, representing in the aggregate approximately 73.3% of our common stock.

Thefollowing table reflects purchases made by the Company of its Series A CommonStock during the three months ended June 30, 2007.
| **Period**               | ** ** | **Total Number  of Shares  Purchased** | ** ** | **Average Price  Paid Per  Share** | ** ** | **Total Number of  Shares Purchased as  Part of Publicly  Announced Program** | ** ** | **Approximate Dollar  Value of Shares that  May Yet Be Purchased  Under the Program** | ** ** |
|--------------------------|------------|--------------------------------------------------|------------|----------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------|------------|
| April 1 – April  30 |       | 0                                                |       | $                                            | 0.00       |                                                                                                             | 0          |                                                                                                                               |       |   |
| May 1 – May 31      |       | 0                                                |       | $                                            | 0.00       |                                                                                                             | 0          |                                                                                                                               |       |   |
| June 1 – June 30    |       | 0                                                |       | $                                            | 0.00       |                                                                                                             | 0          |                                                                                                                               | $     | 196,710,259 | (1) |
| Total                    |       | 0                                                |       | $                                            | 0.00       |                                                                                                             | 0          |                                                                                                                               |       |   |
|                          |            |                                                  |            |                                              |            |                                                                                                                  |            |                                                                                                                                    |            |  |  |

 

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(1)          In May 1998, the Company’sBoard of Directors authorized the repurchase of up to $300 million of itsoutstanding Series A Common Stock.  Suchpurchases may be effected from time to time in the open market or in private transactions,subject to market conditions and management’s discretion.  As of June 30, 2007, the Company has spentapproximately $110.8 million to repurchase approximately 4.5 million shares ofSeries A Common Stock at an average price of $24.87. There can be no assurancethat such repurchases will occur in the future or, if they do occur, what theterms of such repurchases will be.

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

The following matters weresubmitted to a vote of security holders during the Company’s annual meeting ofshareholders held on May 3, 2007.

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

All nominees standing forelection as directors were elected:  thefollowing chart indicates the number of votes cast for, the number of voteswithheld and the number of broker non-votes with respect to each nominee fordirector:
| **Nominee**               | ** ** | **For**    | ** ** | **Withheld** | ** ** | **Broker Non-Votes** | ** ** |
|---------------------------|------------|------------|------------|--------------|------------|----------------------|------------|
| David Pulver (2)          |       | 50,187,610 |       | 469,639      |       | 0                    |       |
|                      |       |       |       |         |       |                 |       |
| David J. Barrett (3)      |       | 41,298,648 |       | 0            |       | 0                    |       |
|                      |       |       |       |         |       |                 |       |
| Ken J. Elkins (3)         |       | 41,298,648 |       | 0            |       | 0                    |       |
|                      |       |       |       |         |       |                 |       |
| Victor F. Ganzi (3)       |       | 41,298,648 |       | 0            |       | 0                    |       |
|                      |       |       |       |         |       |                 |       |
| William R. Hearst III (3) |       | 41,298,648 |       | 0            |       | 0                    |       |

 

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

 

The term of office of thefollowing other directors continued after the annual shareholders’ meeting:Caroline L. Williams, Frank A. Bennack, Jr., John G. Conomikes, George R.Hearst, Jr., Bob Marbut and Gilbert C. Maurer. Michael E. Pulitzer retired fromthe Board as of May 3, 2007.

**ProposalTwo — Incentive Compensation Plan.**

The proposal to approvean Incentive Compensation Plan under which the Company may award various formsof incentive compensation to officers and other key employees of the Companyand its subsidiaries (the “Incentive Compensation Plan Proposal”) was alsoapproved at the annual shareholders’ meeting. The following chart indicates thenumber of votes cast for and against, the number of votes withheld and thenumber of broker non-votes with respect to the Incentive Compensation PlanProposal:
| **For**                   |   | 87,966,077 |   |
|---------------------------|--------|------------|--------|
| ** **                |   |       |   |
| **Against**               |   | 1,819,151  |   |
| ** **                |   |       |   |
| **Abstained  (1)**        |   | 58,846     |   |
| ** **                |   |       |   |
| **Broker Non-Votes** |   | 2,364,591  |   |

 

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

 

**ProposalThree – Ratification of Independent Auditors.**

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

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| **For**                   |   | 92,097,500 |   |
|---------------------------|--------|------------|--------|
| ** **                |   |       |   |
| **Against**               |   | 70,889     |   |
| ** **                |   |       |   |
| **Abstained  (1)**        |   | 40,276     |   |
| ** **                |   |       |   |
| **Broker Non-Votes** |   | 0          |   |

 

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

 

**Proposal Four – ShareholderProposal.**

A proposal submitted byone of our shareholders requesting the formation of an independent committee ofthe Board for the purpose of selling the Company (the “Shareholder Proposal”)was defeated at the annual shareholders’ meeting.  The following chart indicates the number ofvotes cast for and against, the number of votes withheld and the number ofbroker non-votes with respect to the Shareholder Proposal:
| **For**                   |   | 8,092,793  |   |
|---------------------------|--------|------------|--------|
| ** **                |   |       |   |
| **Against**               |   | 81,678,311 |   |
| ** **                |   |       |   |
| **Abstained  (1)**        |   | 72,970     |   |
| ** **                |   |       |   |
| **Broker Non-Votes** |   | 2,364,591  |   |

 

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| (1) | Abstentions were counted as a vote against the  Shareholder Proposal. |
|-----|-----------------------------------------------------------------------|

 

**Item 6.    Exhibits**

**(a) Exhibits:**

31.1                                                     Certificationof Chief Executive Officer pursuant to Rule 13a-14(a) under the SecuritiesExchange Act of 1934, as amended.

31.2                                                     Certificationof Chief Financial Officer pursuant to Rule 13a-14(a) under the SecuritiesExchange Act of 1934, as amended.

32.1                                                     Certificationof 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 of2002.

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**SIGNATURES**

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.
|            | **HEARST-ARGYLE  TELEVISION, INC.** |
|------------|-------------------------------------|
|       |                                |   |
|       | By:                                 | /s/ jonathan c. mintzer |
|       |                                | Name: Jonathan C. Mintzer |
|       |                                | Title: Vice President, General Counsel and  Secretary |
| ** ** | ** **                          |
|       | Dated:                              | July 27, 2007 |
|            |                                     |  |  |

 
| Name               | ** ** | **Title**                                                   | ** ** | **Date**      |
|--------------------|------------|-------------------------------------------------------------|------------|---------------|
|               |       |                                                        |       |          |
| /s/ Harry T. Hawks |       | Executive Vice  President                                   |       | July 27, 2007 |
| Harry T. Hawks     |       | and Chief  Financial Officer  (Principal Financial Officer) |       |          |
|               |       |                                                        |       |          |
|               |       |                                                        |       |          |
| /s/ Lydia G. Brown |       | Corporate  Controller                                       |       | July 27, 2007 |
| Lydia G. Brown     |       | (Principal  Accounting Officer)                             |       |          |

 

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