##### Table of Contents

---




SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





---




FORM 10-Q





(Mark one)





x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE


ACT OF 1934





FOR THE QUARTERLY
PERIOD ENDED JUNE 30, 2002





OR





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


ACT OF 1934





FOR THE TRANSITION PERIOD
FROM:    NOT APPLICABLE





COMMISSION FILE NUMBER:    0-27000





HEARST-ARGYLE TELEVISION, INC.


(Exact
name of registrant as specified in its charter)








Delaware

74-2717523(State or other jurisdiction of

(I.R.S. Employerincorporation or organization)

Identification Number)








888 Seventh Avenue

(212) 887-6800New York, NY 10106

(Registrants telephone number,(Address of principal executive offices)

including area code)





---




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





As of July 31, 2002,
the registrant had 92,209,523 shares of common stock outstanding, consisting of 50,910,875 shares of Series A Common Stock, and 41,298,648 shares of Series B Common Stock.





---



---

##### Table of Contents

HEARST-ARGYLE TELEVISION, INC.





Index








Page No.Part I

Financial InformationItem 1.

Financial StatementsCondensed Consolidated Balance Sheets as of June 30, 2002 (unaudited) and December 31, 2001

1Condensed Consolidated Statements of Income for the Three and Six Months EndedJune 30, 2002 and 2001 (unaudited)

3Condensed Consolidated Statements of Cash Flows for the Six Months EndedJune 30, 2002 and 2001 (unaudited)

4Notes to Condensed Consolidated Financial Statements

6Item 2.

Managements Discussion and Analysis of Financial Condition and Results of Operations

10Item 3.

Quantitative and Qualitative Disclosures about Market Risk

15Part II

Other InformationItem 4.

Submission of Matters to a Vote of Security Holders

15Item 5.

Other Information

16Item 6.

Exhibits and Reports on Form 8-K

16Signatures



17







---

##### Table of Contents

PART I





FINANCIAL INFORMATION





Item 1.    Financial Statements





HEARST-ARGYLE TELEVISION, INC.





CONDENSED CONSOLIDATED BALANCE SHEETS





June 30, 2002 (Unaudited)

December 31, 2001(In thousands)AssetsCurrent assets:Cash and cash equivalents

$
4,359

$
3,260Accounts receivable, net


141,838


142,146Program and barter rights


16,180


54,917Deferred income taxes


4,085


3,733Other


5,261


5,891Total current assets


171,723


209,947Property, plant and equipment, net


320,417


328,257Goodwill


799,527


799,527Intangible assets, net


2,357,062


2,357,117Other assets:Deferred acquisition and financing costs, net


18,813


20,259Investments


27,987


30,308Program and barter rights, noncurrent


2,231


3,272Other


31,516


31,018Total other assets


80,547


84,857Total assets

$
3,729,276

$
3,779,705





See notes to condensed consolidated financial statements.




1




---

##### Table of Contents




HEARST-ARGYLE TELEVISION, INC.





CONDENSED CONSOLIDATED BALANCE SHEETS(Continued)





June 30, 2002 (Unaudited)


December 31, 2001(In thousands)Liabilities and Stockholders EquityCurrent liabilities:Accounts payable

$
13,165


$
14,375Accrued liabilities


64,108



59,565Program and barter rights payable


15,578



53,930Payable to The Hearst Corporation


230



2,612Other


3,245



3,658Total current liabilities


96,326



134,140Noncurrent liabilities:Program and barter rights payable, noncurrent


4,098



5,045Long-term debt


1,082,152



1,160,205Deferred income taxes


810,028



792,327Other liabilities


17,393



21,374Total noncurrent liabilities


1,913,671



1,978,951Convertible preferred securities


200,000



200,000Stockholders equity:Series A preferred stock


1



1Series B preferred stock


1



1Series A common stock


541



537Series B common stock


413



413Additional paid-in capital


1,279,186



1,270,908Retained earnings


319,836



275,453Treasury stock, at cost


(80,699
)


(80,699
)Total stockholders equity


1,519,279



1,466,614Total liabilities and stockholders equity

$
3,729,276


$
3,779,705





See notes to condensed consolidated financial statements.




2




---

##### Table of Contents




HEARST-ARGYLE TELEVISION, INC.





CONDENSED CONSOLIDATED STATEMENTS OF INCOME





Three Months Ended June 30,

Six Months Ended June 30,2002

2001

2002

2001(Unaudited) (In thousands,
except per share data)Total revenues

$
182,303

$
176,368

$
337,225

$
324,710Station operating expenses


79,826


80,824


159,103


160,326Amortization of program rights


14,650


14,438


29,589


28,454Depreciation and amortization


10,476


32,849


20,921


65,152Station operating income


77,351


48,257


127,612


70,778Corporate general and administrative expenses


4,394


3,837


8,239


7,533Operating income


72,957


44,420


119,373


63,245Interest expense, net


18,786


24,974


37,163


53,466Trust preferred dividends


3,750





7,500


Other income, net


299





299


48,778Equity in loss of affiliates


1,226


1,477


2,276


3,038Income before income taxes


49,494


17,969


72,733


55,519Income taxes


18,715


8,266


27,639


25,539Net income


30,779


9,703


45,094


29,980Less preferred stock dividends


355


355


711


711Income applicable to common stockholders

$
30,424

$
9,348

$
44,383

$
29,269Income per common share  basic:

$
0.33

$
0.10

$
0.48

$
0.32Number of common shares used in the calculation


92,099


91,767


91,985


91,815Income per common share  diluted:

$
0.33

$
0.10

$
0.48

$
0.32Number of common shares used in the calculation


92,683


91,976


92,401


92,054





See notes to condensed consolidated financial statements.




3




---

##### Table of Contents




HEARST-ARGYLE TELEVISION, INC.





CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS





Six Months Ended June 30,2002


2001(Unaudited)(In thousands)Operating ActivitiesNet income

$
45,094


$
29,980Adjustments to reconcile net income to net cash provided by operating activities:Other income, net






(48,778
)Amortization of intangible assets


55



43,984Amortization of program rights


29,589



28,454Program payments


(29,158
)


(28,571
)Depreciation


20,866



21,168Deferred income taxes


17,349



9,105Equity in loss of affiliates


2,276



3,038Amortization of deferred financing costs


1,456



1,475Provision for doubtful accounts


2,976



896Changes in operating assets and liabilities, net


(5,655
)


9,555Net cash provided by operating activities


84,848



70,306Investing ActivitiesPurchases of property, plant, and equipment:Digital


(8,112
)


(8,026
)Maintenance


(2,891
)


(6,359
)Special projects/towers


(2,112
)


(2,498
)Phoenix/WMUR-TV Swap Transaction






(34,019
)Acquisition of WBOY-TV






(20,774
)Investment in Internet Broadcasting Systems, Inc






(6,000
)Other, net


(1
)


(71
)Net cash used in investing activities


(13,116
)


(77,747
)Financing ActivitiesCredit Facility:Proceeds


227,000



502,000Repayment


(305,000
)


(494,000
)Dividends paid on preferred stock


(711
)


(711
)Series A common stock repurchases






(4,079
)Proceeds from employee stock purchase plan


844



916Proceeds from stock option exercises


7,234



Net cash (used in) provided by financing activities


(70,633
)


4,126Increase (decrease) in cash and cash equivalents


1,099



(3,315
)Cash and cash equivalents at beginning of period


3,260



5,780Cash and cash equivalents at end of period

$
4,359


$
2,465





See notes to condensed consolidated financial statements.




4




---

##### Table of Contents




HEARST-ARGYLE TELEVISION, INC.





CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS





Six Months Ended June 30,2002

2001(Unaudited)(In thousands)Supplemental Cash Flow Information:Business acquired in purchase transaction:Phoenix/WMUR-TV SwapFair market value of assets acquired, net




$
225,971Fair market value of liabilities assumed, net





(35,300
)Fair market value of assets exchanged, net





(188,383
)Fair market value of liabilities exchanged, net





31,731Net cash paid for swap




$
34,019Acquisition of WBOY-TVFair market value of assets acquired, net




$
21,146Fair market value of liabilities assumed, net





(372
)Net cash paid for WBOY-TV




$
20,774Cash paid during the period:Interest

$
35,929

$
51,344Trust preferred dividends

$
4,250

$
Income taxes, net of refunds

$
5,814

$
6,910





See notes to condensed consolidated financial statements.




5




---

##### Table of Contents




HEARST-ARGYLE TELEVISION, INC.





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)


June 30, 2002





1.    SUMMARY OF ACCOUNTING POLICIES





General





The
condensed consolidated financial statements include the accounts of Hearst-Argyle Television, Inc. (the Company) and its wholly-owned subsidiaries. All significant intercompany accounts have been eliminated in consolidation.





The accompanying unaudited condensed consolidated financial statements do not include all of the information and
notes required by accounting principles generally accepted in the United States of America for complete financial statements and should be read in conjunction with the Companys consolidated financial statements included in the Annual Report on
Form 10-K for the year ended December 31, 2001, filed with the Securities and Exchange Commission. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three and
six-month periods ended June 30, 2002 and 2001 are not necessarily indicative of the results that may be expected for a full year. Certain reclassifications have been made to the 2001 condensed consolidated financial statements to conform with
classifications used as of and for the period ended June 30, 2002.





2.    ACQUISITIONS, DISPOSITIONS AND
INVESTMENTS





Phoenix/WMUR Swap.    On March 28, 2001, the Company exchanged its
radio stations in Phoenix, Arizona (KTAR-AM, KMVP-AM and KKLT-FM) (the Phoenix Stations) for WMUR-TV, the ABC affiliate serving the Manchester, NH television market, in a three-party swap (the Phoenix/WMUR Swap). The Company
sold the Phoenix Stations to Emmis Communications Corporation (Emmis) for $160 million, less transaction expenses, and purchased WMUR-TV from WMUR-TV, Inc. for $185 million, plus a working capital adjustment of $3.5 million and
transaction expenses. The acquisition of WMUR-TV was accounted for under the purchase method of accounting and accordingly, the purchase price and related transaction expenses were allocated to the acquired assets and liabilities based upon their
fair market values. The excess of the purchase price and transaction expenses over the fair market value of the tangible assets acquired less the liabilities assumed was allocated to FCC license. Prior to the Phoenix/WMUR Swap, Emmis had been
managing the Phoenix Stations pursuant to a Time Brokerage Agreement (TBA) since August 1, 2000, and the Company had been managing WMUR-TV pursuant to a TBA since January 8, 2001 (effective January 1, 2001 for accounting purposes). The
purchase price of WMUR-TV was funded through an intermediary by approximately: (i) $160 million from Emmis, and (ii) $28.5 million plus the cost of the transaction expenses from the Companys revolving credit facility. The Company realized a
gain of $72.6 million on the sale of the Phoenix Stations which is recorded in Other income, net in the accompanying condensed consolidated statement of income in the six months ended June 30, 2001.





WBOY Acquisition.    On April 30, 2001, pursuant to an Asset Purchase Agreement entered into with WBOY-TV,
Inc., the Company acquired WBOY-TV, the NBC affiliate serving the Clarksburg-Weston, West Virginia television market for $20 million (the WBOY Acquisition) plus a working capital adjustment of $0.7 million and transaction expenses. The
WBOY Acquisition was accounted for under the purchase method of accounting and, accordingly, the purchase price and related transaction expenses have been allocated to the acquired assets and liabilities based upon their fair market values. The
excess of the purchase price and transaction expenses over the fair market value of the tangible assets acquired less the liabilities assumed was allocated to FCC license. The purchase price plus the cost of transaction expenses were funded using
the Companys revolving credit facility. The Company later sold WBOY-TV on December 13, 2001 for $20 million plus a working capital adjustment of $0.8 million less transaction expenses.




6




---

##### Table of Contents

HEARST-ARGYLE TELEVISION, INC.





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)


(Unaudited)


June 30, 2002





Unaudited Pro
Forma Results of Operations.    The following unaudited pro forma results of operations are presented as required by applicable accounting rules relating to business acquisitions and other one-time events. These unaudited pro
forma results are not necessarily indicative of the actual results that would have been achieved had each of the stations been acquired at the beginning of the periods presented, nor are they indicative of future results.





The unaudited pro forma results include: (i) the combined results of operations of 23 of the Companys television stations which were
owned for the entire periods presented and (ii) the management fees earned by the Company for the entire periods presented (see Note 4). The unaudited pro forma results have been adjusted in order to reflect: (i) the Phoenix/WMUR Swap as if the
transaction had occurred on January 1, 2001; (ii) the WBOY acquisition and later disposition as if both events had never occurred; (iii) the exclusion of Other income, net; and (iv) the exclusion of amortization of goodwill and certain other
intangible assets resulting from new accounting standards as if the new standards had been effective January 1, 2001 (see Note 5).





Six Months Ended June
30,2002

2001(unaudited)(In thousands, except per share data)Total revenues

$
337,225

$
322,369Net income

$
44,909

$
30,563Income applicable to common stockholders

$
44,198

$
29,852Income per common sharebasic

$
0.48

$
0.33diluted

$
0.48

$
0.32Pro forma number of shares used in calculationsbasic


91,985


91,815diluted


92,401


92,054





Investments.    In February 2001, the
Company wrote-off the remaining $5.1 million of its investment in Geocast Network Systems, Inc. (Geocast), after Geocasts board of directors declined various strategic alternatives and decided to liquidate the company. In March
2001, the Company wrote-down $18.8 million of its investment in ProAct Technologies Corporation (ProAct) in order to approximate the investments realizable value. The investment write-downs are recorded in Other income,
net in the accompanying condensed consolidated statement of income in the six months ended June 30, 2001. In May 2001, the Company invested an additional $6 million of cash for a total investment of $26 million in Internet Broadcasting
Systems, Inc. (IBS). As of June 30, 2002 and 2001, the Company held an equity interest in IBS of approximately 24%.





3.    LONG-TERM DEBT





Long-term debt consists of the following:





June 30, 2002

December 31, 2001(unaudited)(In thousands)Credit Facility


197,000

$
275,000Senior Notes


432,110


432,110Private Placement Debt


450,000


450,000Senior Subordinated Notes


2,596


2,596Other Debt


446


499Total long-term debt

$
1,082,152

$
1,160,205




7




---

##### Table of Contents

HEARST-ARGYLE TELEVISION, INC.





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)


(Unaudited)


June 30, 2002





4.    RELATED
PARTY TRANSACTIONS





The Hearst Corporation.    The Company recorded revenues of
approximately $1.0 million and $1.6 million in the three and six months ended June 30, 2002, respectively, and approximately $0.6 million and $1.1 million in the three and six months ended June 30, 2001, respectively, relating to the Management
Agreement with The Hearst Corporation (Hearst). Pursuant to the Management Agreement, the Company provides certain management services, such as sales, news, programming, and financial and accounting management services, with respect to
certain Hearst owned or operated television and radio stations. The Company recorded expenses of approximately $0.9 million and $1.8 million in the three and six months ended June 30, 2002, respectively, and approximately $1.0 million and $2.0
million in the three and six months ended June 30, 2001, respectively, relating to the Services Agreement. Pursuant to the Services Agreement, Hearst provides the Company certain administrative services such as accounting, financial, legal,
insurance, data processing, and employee benefits administration. The Company believes that the terms of these agreements are reasonable to both parties; however, there can be no assurance that more favorable terms would not be available from third
parties. In addition, in the six months ended June 30, 2002, the Company recorded net revenues of approximately $0.7 million relating to advertising sales to Hearst on behalf of ESPN Classic, a property of ESPN, Inc., which is owned 20% by an
affiliate of Hearst and 80% by ABC.





ProAct Technologies Corporation.    The Company
recorded no revenues in the three months ended June 30, 2002, and approximately $3.2 million in the six months ended June 30, 2002, relating to advertising sales to ProAct, one of the Companys equity interest investments (which is accounted
for using the cost method). The Company did not receive revenues from ProAct in the three and six months ended June 30, 2001. Bob Marbut, Chairman of the Board of Directors and former Co-Chief Executive Officer of the Company, is a member of the
Board of Directors of ProAct, from which he does not receive compensation for his services.





Lifetime
Entertainment Services.    The Company has recorded revenues of approximately $1.0 million and $1.4 million from Lifetime Entertainment Services (Lifetime) in the three and six months ended June 30, 2002,
respectively, and approximately $0.3 million and $0.6 million in the three and six months ended June 30, 2001, respectively. The Company has an agreement with Lifetime, an entity owned 50% by an affiliate of Hearst and 50% by ABC, whereby the
Company assists Lifetime in securing Lifetime Movie Channel distribution and subscribers and Lifetime provides services to the Company in respect to the negotiation of the Companys retransmission consent agreements.





Other Parties.    The Company enters into transactions with other related parties in the ordinary course of its
business. None of such other related party transactions were significant to the Companys financial results during the three and six months ended June 30, 2002 and 2001.





5.    GOODWILL AND OTHER INTANGIBLE ASSETS





On January 1, 2002, the Company adopted the provisions of the Financial Accounting Standards Board (FASB) Statement No. 142, Goodwill and Other Intangible Assets (SFAS 142). SFAS 142 requires that
goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead be assessed for impairment at least annually by applying a fair value-based test. SFAS 142 also requires that intangible assets with determinable useful
lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with FASB Statement No. 144, Accounting for the Impairment or Disposal of Long Lived Assets.




8




---

##### Table of Contents

HEARST-ARGYLE TELEVISION, INC.





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)


(Unaudited)


June 30, 2002





The Company has
completed its goodwill impairment review as of January 1, 2002 using a fair value approach in accordance with SFAS 142 and found no impairment. In addition, no evidence of impairment was found with regard to the Companys intangible assets with
indefinite lives. The intangible assets with indefinite useful lives, other than goodwill, consist of FCC licenses of approximately $2.3 billion and related network affiliation agreements of approximately $68.6 million as of June 30, 2002 and
December 31, 2001. These assets are no longer amortized and are included in Intangible assets, net in the accompanying condensed consolidated balance sheets.





The following table adjusts reported net income and earnings per share for the three and six months ended June 30, 2001 (prior to the adoption date of SFAS 142) to exclude
amortization of goodwill and other intangible assets with indefinite useful lives:





Three Months Ended June 30, 2001

Income Applicable to Common Stockholders (in thousands)

Income per Common Share basic and diluted(unaudited)As reported

$    9,348

$  0.10Amortization of goodwill and certain other intangibles, net of tax effects

15,266

0.17Adjusted

$  24,614

$  0.27Six Months Ended June 30, 2001As reported

$  29,269

$  0.32Amortization of goodwill and certain other intangibles, net of tax effects

31,669

0.34Adjusted

$  60,938

$  0.66




9




---

##### Table of Contents

Item 2.    Managements Discussion and Analysis of Financial Condition and Results of Operations





Results of
Operations





Hearst-Argyle Television, Inc. and subsidiaries (the Company) owns and operates 24
network-affiliated television stations. and provides management services to two network-affiliated and one independent television stations and two radio stations (collectively the Managed Stations) in exchange for a management fee. See
Note 4 of the condensed consolidated financial statements.





On March 28, 2001, the Company exchanged its radio
stations in Phoenix, Arizona (KTAR-AM, KMVP-AM and KKLT-FM) (the Phoenix Stations) for WMUR-TV, the ABC affiliate serving the Manchester, NH television market, in a three-party swap. The Company sold the Phoenix Stations to Emmis
Communications Corporation (Emmis) and purchased WMUR-TV from WMUR-TV, Inc. on March 28, 2001. Prior to the swap, Emmis had been managing the Phoenix Stations pursuant to a Time Brokerage Agreement (TBA) since August 1, 2000,
and the Company had been managing WMUR-TV pursuant to a TBA since January 8, 2001 (effective January 1, 2001 for accounting purposes). See Note 2 of the condensed consolidated financial statements.





On April 30, 2001, pursuant to an Asset Purchase Agreement entered into with WBOY-TV, Inc., the Company acquired WBOY-TV, the NBC
affiliate serving the Clarksburg-Weston, West Virginia television market for $20 million plus a working capital adjustment of $0.7 million and transaction expenses. See Note 2 of the condensed consolidated financial statements.





The results of operations for the three and six months ended June 30, 2002 include: (i) the results of the Companys 24
television stations which were owned for the entire periods presented and (ii) the management fees earned by the Company from the Managed Stations for the entire periods presented. The results of operations for the three and six months ended June
30, 2001 include: (i) the results of 23 of the Companys television stations which were owned for the entire periods presented; (ii) the management fees earned by the Company from the Managed Stations for the entire periods presented; (iii) the
TBA for WMUR-TV from January 1 through March 27, 2001; (iv) the results of WMUR-TV after its acquisition by the Company, from March 28 through June 30, 2001; (v) the TBA for the Phoenix Stations from January 1 through March 27, 2001; and (vi) the
results of WBOY-TV after its acquisition by the Company, from April 30 to June 30, 2001.





Three Months Ended
June 30, 2002


Compared to Three Months Ended June 30, 2001





Total revenues.    Total revenues includes: (i) cash and barter advertising revenues, net of agency and national representatives
commissions, (ii) network compensation and (iii) other revenues. Total revenues in the three months ended June 30, 2002 were $182.3 million, as compared to $176.4 million in the three months ended June 30, 2001, an increase of $5.9 million or 3.3%.
This increase was primarily attributable to: (i) an increase in net political advertising revenues of approximately $6.6 million and (ii) an increase in the demand for advertising by national and local advertisers principally in the automotive and
financial services categories, partially offset by (iii) a decrease in network compensation of approximately $1.0 million.





Station operating expenses.    Station operating expenses were $79.8 million in the three months ended June 30, 2002, as compared to $80.8 million in the three months ended June 30, 2001, a decrease of $1.0
million or 1.2%.





Amortization of program rights.    Amortization of program rights was
$14.7 million in the three months ended June 30, 2002, as compared to $14.4 million in the three months ended June 30, 2001, an increase of $0.3 million or 2.1%.





Depreciation and amortization.    Depreciation and amortization was $10.5 million in the three months ended June 30, 2002, as compared to $32.8 million in the three months
ended June 30, 2001, a decrease of $22.3 million or 68.0%. This decrease in depreciation and amortization expense was due to the Companys adoption on January 1, 2002 of the accounting standard SFAS 142. SFAS 142 requires that goodwill and
intangible assets with indefinite useful lives no longer be amortized, but instead be assessed for impairment at least annually by applying a fair value-based test. See Note 5 of the condensed consolidated financial statements.





Station operating income.    Station operating income was $77.4 million in the three months ended
June 30, 2002, as compared to $48.3 million in the three months ended June 30, 2001, an increase of $29.1 million or 60.2%. This net increase in the operating income of the stations was due to the items discussed above.




10




---

##### Table of Contents

Corporate, general and administrative expenses.    Corporate general and administrative
expenses were $4.4 million in the three months ended June 30, 2002, as compared to $3.8 million in the three months ended June 30, 2001, an increase of $0.6 million or 15.8 %. This increase was primarily due to: (i) an increase in insurance premiums
and (ii) an increase in professional fees in connection with the Companys filing of a registration statement with the Securities and Exchange Commission in May 2002 (see Part II  Other Items) and the Companys initial
goodwill and intangible asset impairment testing under the new accounting standard SFAS 142.





Interest expense,
net.    Interest expense, net of interest income was $18.8 million in the three months ended June 30, 2002, as compared to $25.0 million in the three months ended June 30, 2001, a decrease of $6.2 million or 24.8%. This
decrease in interest expense was primarily due to a lower outstanding debt balance in the second quarter of 2002 than in the second quarter of 2001. The long-term debt balance as of June 30, 2002 was approximately $1,082 million, as compared to
approximately $1,456 million as of June 30, 2001. See Note 3 of the condensed consolidated financial statements.





Trust preferred dividends.    Trust preferred dividends were $3.8 million in the three months ended June 30, 2002, as compared to none in the three months ended June 30, 2001. The dividends are paid
quarterly in connection with the private placement of convertible trust preferred securities in the amount of $200 million by the Hearst-Argyle Capital Trust, a consolidated subsidiary trust of the Company, in December 2001. The net proceeds from
the private placement were utilized by the Company to reduce outstanding borrowings under the credit facility.





Other income, net.    Other income, net was $0.3 million in the three months ended June 30, 2002, as compared to none in the three months ended June 30, 2001. The other income, net recorded in the three
months ended June 30, 2002 represented an escrow closing fee paid to the Company by Emmis in connection with the Phoenix/WMUR Swap transaction, which occurred in March 2001. See Note 2 of the condensed consolidated financial statements.





Equity in loss of affiliates.    Equity in loss of affiliates was $1.2 million in the
three months ended June 30, 2002, as compared to $1.5 million in the three months ended June 30, 2001, a decrease of $0.3 million or 20.0%. This loss represents the Companys equity interests in the operating results of its unconsolidated
affiliates, which included Internet Broadcasting Systems, Inc. in the three months ended June 30, 2002 and 2001 and NBC/Hearst-Argyle Syndication, LLC in the three months ended June 30, 2002.





Income taxes.    Income tax expense was $18.7 million in the three months ended June 30, 2002, as compared to $8.3 million in the three
months ended June 30, 2001, an increase of $10.4 million or 125.3%. This increase was primarily due to the increase in income attributable to the items described above and partially offset by a lower effective tax rate in the three months ended June
30, 2002. The effective tax rate was 37.8% in the three months ended June 30, 2002, as compared to 46.0% in the three months ended June 30, 2001. This decrease in the effective tax rate was attributable to the Companys adoption of SFAS 142,
which discontinues the amortization of goodwill and certain other intangible assets. See Note 5 of the condensed consolidated financial statements. The Company expects its effective tax rate for the year ending December 31, 2002 to be approximately
38%. Income tax expense represents federal and state income taxes as calculated on the Companys income before income taxes.





Net income.    Net income was $30.8 million in the three months ended June 30, 2002, as compared to $9.7 million in the three months ended June 30, 2001, an increase of $21.1 million or 217.5%. This
increase was due to the items discussed above, primarily an increase of $29.1 million in station operating income, partially offset by an increase in income tax expense of $10.4 million, in the three months ended June 30, 2002, as compared to the
three months ended June 30, 2001.





Broadcast Cash Flow.    Broadcast cash flow, as
defined below, was $88.0 million in the three months ended June 30, 2002, as compared to $81.3 million in the three months ended June 30, 2001, an increase of $6.7 million or 8.2%. This increase in broadcast cash flow was primarily due to an
increase in net advertising revenues in the three months ended June 30, 2002, as discussed above under total revenues. Broadcast cash flow margin increased to 48.3% in the three months ended June 30, 2002 from 46.1% in the three months
ended June 30, 2001. Broadcast cash flow is defined as operating income, plus depreciation and amortization, plus amortization of program rights, minus program payments. The Company has included broadcast cash flow data because management believes
that such data are commonly used as a measure of performance among companies in the broadcast industry. Broadcast cash flow is also frequently used by investors, analysts, valuation firms and lenders as one of the important determinants of
underlying asset value. Broadcast cash flow should not be considered in isolation or as an alternative to Operating income (as determined in accordance with generally accepted accounting principles) as an indicator of the entitys
operating performance, or to Net cash provided by operating activities (as determined in accordance with generally accepted accounting principles) as a measure of liquidity. This measure is believed to be, but may not be, comparable to
similarly titled measures used by other companies.




11




---

##### Table of Contents

Six Months Ended June 30, 2002


Compared to Six Months Ended June 30, 2001





Total
revenues.    Total revenues includes: (i) cash and barter advertising revenues, net of agency and national representatives commissions, (ii) network compensation and (iii) other revenues. Total revenues in the six
months ended June 30, 2002 were $337.2 million, as compared to $324.7 million in the six months ended June 30, 2001, an increase of $12.5 million or 3.8%. This increase was primarily attributable to: (i) an increase in net political advertising
revenues of approximately $10.6 million; (ii) an increase in the demand for advertising by national and local advertisers principally in the automotive and financial services categories; and (iii) an increase in net advertising revenues resulting
from the carriage of the Olympics on the Companys ten owned NBC affiliates during the first quarter of 2002; partially offset by (iv) a decrease in network compensation of approximately $1.4 million.





Station operating expenses.    Station operating expenses were $159.1 million in the six months ended June 30,
2002, as compared to $160.3 million in the six months ended June 30, 2001, a decrease of $1.2 million or 0.7%.





Amortization of program rights.    Amortization of program rights was $29.6 million in the six months ended June 30, 2002, as compared to $28.5 million in the six months ended June 30, 2001, an increase of
$1.1 million or 3.9%.





Depreciation and amortization.    Depreciation and amortization
was $20.9 million in the six months ended June 30, 2002, as compared to $65.2 million in the six months ended June 30, 2001, a decrease of $44.3 million or 67.9%. This decrease in depreciation and amortization expense was due to the Companys
adoption on January 1, 2002 of the accounting standard SFAS 142. SFAS 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead be assessed for impairment at least annually by applying a fair
value-based test. See Note 5 of the condensed consolidated financial statements.





Station operating
income.    Station operating income was $127.6 million in the six months ended June 30, 2002, as compared to $70.8 million in the six months ended June 30, 2001, an increase of $56.8 million or 80.2%. This net increase in the
operating income of the stations was due to the items discussed above.





Corporate general and administrative
expenses.    Corporate general and administrative expenses were $8.2 million in the six months ended June 30, 2002, as compared to $7.5 million in the six months ended June 30, 2001, an increase of $0.7 million or 9.3%. This
increase was primarily due to: (i) an increase in insurance premiums and (ii) an increase in professional fees in connection with the Companys filing of a registration statement with the Securities and Exchange Commission in May 2002 (see
Part II  Other Items) and the Companys initial goodwill and intangible asset impairment testing under the new accounting standard SFAS 142.





Interest expense, net.    Interest expense, net of interest income was $37.2 million in the six months ended June 30, 2002, as compared to $53.5
million in the six months ended June 30, 2001, a decrease of $16.3 million or 30.5%. This decrease in interest expense was primarily due to a lower outstanding debt balance in the first and second quarters of 2002 than in 2001. The long-term debt
balance as of June 30, 2002 was approximately $1,082 million, as compared to approximately $1,456 million as of June 30, 2001. Interest expense, net included approximately $0.6 million of interest income in the six months ended June 30, 2002 and
approximately $0.4 million in the six months ended June 30, 2001. See Note 3 of the condensed consolidated financial statements.





Trust preferred dividends.    Trust preferred dividends were $7.5 million in the six months ended June 30, 2002, as compared to none in the six months ended June 30, 2001. The dividends are paid quarterly
in the amount of $3.75 million in connection with the private placement of convertible trust preferred securities in the amount of $200 million by the Hearst-Argyle Capital Trust, a consolidated subsidiary trust of the Company, in December 2001. The
net proceeds from the private placement were utilized by the Company to reduce outstanding borrowings under the credit facility.




12




---

##### Table of Contents

Other income, net.    Other income, net was $0.3 million in the six months ended June 30,
2002, as compared to $48.8 million in the six months ended June 30, 2001. The other income, net recorded in the six months ended June 30, 2002 represented an escrow closing fee paid to the Company by Emmis in connection with the Phoenix/WMUR Swap
transaction, which occurred in March 2001. The other income, net recorded in the six months ended June 30, 2001 represented a $72.6 million gain from the sale of the Phoenix Stations, which was partially offset by write-downs of $5.1 million and
$18.8 million of the carrying value of the Companys investments in Geocast and ProAct, respectively. See Note 2 of the condensed consolidated financial statements.





Equity in loss of affiliates.    Equity in loss of affiliates was $2.3 million in the six months ended June 30, 2002, as compared to $3.0 million
in the six months ended June 30, 2001, a decrease of $0.7 million or 23.3%. This loss represents the Companys equity interests in the operating results of its unconsolidated affiliates, which included Internet Broadcasting Systems, Inc. in the
six months ended June 30, 2002 and 2001 and NBC/Hearst-Argyle Syndication, LLC in the six months ended June 30, 2002.





Income taxes.    Income tax expense was $27.6 million in the six months ended June 30, 2002, as compared to $25.5 million in the six months ended June 30, 2001, an increase of $2.1 million or 8.2%. This
increase was primarily due to the increase in income attributable to the items described above and partially offset by a lower effective tax rate in the six months ended June 30, 2002. The effective tax rate was 38.0% in the six months ended June
30, 2002, as compared to 46.0% in the six months ended June 30, 2001. This decrease in the effective tax rate was attributable to the Companys adoption of SFAS 142, which discontinues the amortization of goodwill and certain other intangible
assets. See Note 5 of the condensed consolidated financial statements. The Company expects its effective tax rate for the year ending December 31, 2002 to be approximately 38%. Income tax expense represents federal and state income taxes as
calculated on the Companys income before income taxes.





Net income.    Net income
was $45.1 million in the six months ended June 30, 2002, as compared to $30.0 million in the six months ended June 30, 2001, an increase of $15.1 million or 50.3%. This increase was due to the items discussed above, primarily (i) an increase of
$56.8 million in station operating income and (ii) a decrease of $16.3 million in interest expense, net; partially offset by (iii) an increase of $7.5 million in trust preferred dividends and (iv) a $48.5 million decrease in other income, net, in
the six months ended June 30, 2002, as compared to the six months ended June 30, 2001.





Broadcast Cash
Flow.    Broadcast cash flow, as defined below, was $149.0 million in the six months ended June 30, 2002, as compared to $135.8 million in the six months ended June 30, 2001, an increase of $13.2 million or 9.7%. The increase
in broadcast cash flow was primarily due to an increase in net advertising revenues in the six months ended June 30, 2002, as discussed above under total revenues. Broadcast cash flow margin increased to 44.2% in the six months ended
June 30, 2002 from 41.8% in the six months ended June 30, 2001. Broadcast cash flow is defined as operating income, plus depreciation and amortization, plus amortization of program rights, minus program payments. The Company has included broadcast
cash flow data because management believes that such data are commonly used as a measure of performance among companies in the broadcast industry. Broadcast cash flow is also frequently used by investors, analysts, valuation firms and lenders as one
of the important determinants of underlying asset value. Broadcast cash flow should not be considered in isolation or as an alternative to Operating income (as determined in accordance with generally accepted accounting principles) as an
indicator of the entitys operating performance, or to Net cash provided by operating activities (as determined in accordance with generally accepted accounting principles) as a measure of liquidity. This measure is believed to be,
but may not be, comparable to similarly titled measures used by other companies.




13




---

##### Table of Contents

Liquidity and Capital Resources





Operating Activities





Net cash provided by operating
activities was $84.8 million in the six months ended June 30, 2002, as compared to $70.3 million in the six months ended June 30, 2001, an increase of $14.5 million or 20.6%.





Investing Activities





Net cash
used in investing activities was $13.1 million in the six months ended June 30, 2002, as compared to $77.7 million in the six months ended June 30, 2001, a decrease of $64.6 million or 83.1%. This decrease was primarily due to the investments made
in the six months ended June 30, 2001, in connection with the business transactions discussed below.





On March 28,
2001, the Company exchanged its radio stations in Phoenix, Arizona (KTAR-AM, KMVP-AM, and KKLT-FM) (the Phoenix Stations) for WMUR-TV, the ABC affiliate serving the Manchester, NH television market, in a three-party swap (the
Phoenix/WMUR Swap). The Company sold the Phoenix Stations to Emmis Communications Corporation (Emmis) for $160 million, less transaction expenses, and purchased WMUR-TV from WMUR-TV, Inc. for $185 million, plus a working
capital adjustment of $3.5 million and transaction expenses. The purchase price of WMUR-TV was funded through an intermediary by approximately (i) $160 million from Emmis and (ii) $28.5 million plus the cost of the transaction expenses from the
Companys revolving credit facility. See Note 2 to the condensed consolidated financial statements.





On April
30, 2001, pursuant to an Asset Purchase Agreement entered into with WBOY-TV, Inc., the Company acquired WBOY-TV, the NBC affiliate serving the Clarksburg-Weston, West Virginia television market for $20 million (the WBOY Acquisition) plus
a working capital adjustment of $0.7 million and transaction expenses. The purchase price plus the cost of the transaction expenses were funded using the Companys revolving credit facility. See Note 2 of the condensed consolidated financial
statements.





Capital expenditures were $13.1 million and $16.9 million in the six months ended June 30, 2002 and
2001, respectively. For the year ending December 31, 2002, the Company expects to spend approximately $31.0 million, including approximately (i) $20.2 million in FCC-mandated digital conversion; (ii) $4.8 million in maintenance projects; and (iii)
$6.0 million in special projects. For the year ended December 31, 2001, capital expenditures were $32.3 million, including approximately (i) $9.9 million in maintenance projects; (ii) $18.6 million in digital conversion, and (iii) $3.8 million in
special projects.





Financing Activities





Net cash used in financing activities was $70.6 million in the six months ended June 30, 2002, as compared to net cash provided by financing activities of $4.1 million in
the six months ended June 30, 2001, an increase in net cash used of $74.7 million. In the six months ended June 30, 2002, the Company used cash provided by operating activities to pay down the credit facility in the net amount of $78.0 million. In
the six months ended June 30, 2001, the Company borrowed from the credit facility in the net amount of $8.0 million in connection with the investing activities, as described above.





The Companys debt obligations contain certain financial and other covenants and restrictions on the Company. Such covenants and restrictions do not include any
triggers of default related to the Companys overall credit rating or stock price. The Company is in compliance with all such covenants and restrictions as of June 30, 2002.





As of June 30, 2002, the Companys long-term debt obligations were approximately $1.08 billion, of which approximately 82% matures after 2005. See Note 3 to the
condensed consolidated financial statements. Of the Companys long-term debt obligations as of June 30, 2002, approximately 82% bear interest at a fixed rate and 18% bear interest at a variable rate. The Companys credit ratings for its
long-term debt obligations, respectively, were BBB- by Standard & Poors and Baa3 by Moodys Investors Service, as of June 30, 2002. Such credit ratings are considered to be investment grade.





The Company anticipates that its primary sources of cash, which include current cash balances, operating cash flow, and amounts available
under the existing credit facility, will be sufficient to finance the operating and working capital requirements of its stations, the Companys debt service requirements, anticipated capital expenditures, and other obligations of the Company
for both the next 12 months and the foreseeable future thereafter.




14




---

##### Table of Contents

Forward-Looking Statements





This report includes or incorporates forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events. The forward-looking statements contained in
this report, concerning, among other things, increases in net revenues and broadcast cash flow and reductions in operating expenses, involve risks and uncertainties, and are subject to change based on various important factors, including the impact
of changes in national and regional economies, our ability to service our outstanding debt, successful integration of acquired television stations (including achievement of synergies and cost reductions), pricing fluctuations in local and national
advertising, volatility in programming costs and the effects of governmental regulation of broadcasting. Other matters set forth in this report, or in the documents incorporated herein by reference may also cause actual results in the future to
differ materially from those described in the forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks,
uncertainties and assumptions, the forward-looking events discussed in this report might not occur.





Item
3.    Quantitative and Qualitative Disclosures About Market Risk





The Companys
Credit Facility is sensitive to changes in interest rates. As of June 30, 2002, the Company was not involved in any derivative financial instruments. However, the Company may consider certain interest-rate risk strategies in the future.





PART II





OTHER INFORMATION





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





All nominees standing for
election as directors were elected at our annual shareholders meeting, which was held on May 16, 2002. The following chart indicates the number of votes cast for and against and the number withheld with respect to each nominee for director:





Proposal One





Nominee

For

Against

WithheldCaroline L. Williams (1)

39,559,295

0

1,064,281Frank A. Bennack, Jr. (2)

41,298,648

0

0John G. Conomikes (2)

41,298,648

0

0George R. Hearst, Jr. (2)

41,298,648

0

0Bob Marbut (2)

41,298,648

0

0Gilbert C. Maurer (2)

41,298,648

0

0


---

(1) Series A Director. To be elected by the holders of Series A Common shares
voting as a class.


(2) Series B Director. To be elected by the holders of Series B Common shares voting as a class.





The term of office of the following other directors continued after the annual shareholders meeting: David J. Barrett, Ken J. Elkins, Victor F. Ganzi, William R.
Hearst III, Michael E. Pulitzer, David Pulver and Virginia H. Randt.





The proposal to approve the rights of Hearst
Broadcasting, Inc. (Hearst Broadcasting) to convert certain securities issued by Hearst-Argyle Capital Trust, a wholly-owned subsidiary of the Company, to Hearst Broadcasting in connection with the private placement of $200 million of
such securities completed by the Company in December 2001 (the Conversion Proposal) was approved at the shareholders meeting. The following chart indicates the number of votes cast for and against and the number withheld with
respect to the Conversion Proposal:





Proposal Two





For

76,847,136Against

285,095Withheld

59,119




15




---

##### Table of Contents

PART II





OTHER INFORMATION





Item 5.    Other Information





On May 14, 2002, the Company filed a registration statement on Form S-3 (the Registration Statement) relating to an
aggregate of up to 11,005,058 shares of Series A common stock, which may be sold from time to time by certain selling security holders (the Selling Security Holders). Of these shares, 7,935,058 shares are issuable to holders of
convertible preferred securities (the Trust Security Holders) upon conversion of an aggregate of 4,000,000 convertible preferred securities of the Companys subsidiary trust, Hearst-Argyle Capital Trust (the Trust). The
Trust issued and sold 1,400,000 shares of 7.5% Series A Convertible Preferred Securities and 2,600,000 shares of 7.5% Series B Convertible Preferred Securities to the Trust Security Holders in a private placement on December 20, 2001. The Series A
Convertible Preferred Securities are convertible at the option of the holder at any time into shares of our Series A common stock at a conversion price of approximately $24.94 (subject to adjustments in certain circumstances) and the Series B
Convertible Preferred Securities are convertible at the option of the holder at any time into shares of the Companys Series A common stock at a conversion price of approximately $25.35 (subject to adjustments in certain circumstances). In
connection with this private placement, the Company entered into a registration rights agreement with the Trust Security Holders which required the Company to file a registration statement covering sales by those holders of the shares of Series A
common stock issuable upon conversion of the convertible preferred securities. Under the registration rights agreement, the Trust Security Holders have the right until December 20, 2006, under certain circumstances and subject to certain conditions,
to request us to arrange for up to two underwritten offerings of the Series A common stock issuable upon conversion of the convertible preferred securities.





The remaining 3,070,000 shares of Series A common stock covered by the Registration Statement are shares that the Company issued to certain selling security holders in a merger transaction that the
Company consummated with Pulitzer Publishing Company in 1999. In connection with this merger, the Company entered into a registration rights agreement with such selling security holders (the Pulitzer Security Holders), which among other
things gives them the ability to piggyback or have their shares included, subject to certain conditions, in registrations of the Companys common stock, including the registration for resale of the Companys Series A common
stock by the Trust Security Holders. Under the registration rights agreement, the Pulitzer Security Holders also have the right, under certain circumstances and subject to certain conditions, to require the Company to register their shares for sale
in the manner specified. These 3,070,000 shares of Series A common stock were included in the Registration Statement pursuant to the exercise by certain Pulitzer Security Holders of their piggyback registration rights with respect to those shares.





Item 6.     Exhibits and reports on Form 8-K





(a)    Exhibits:





The Company did not file any exhibits during the quarter ended June 30, 2002.





(b)    Reports on Form 8-K:





The Company did not file any reports on Form 8-K during the quarter ended June 30, 2002.




16




---

##### Table of Contents

SIGNATURES





Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.





HEARST-ARGYLE TELEVISION, INC.By:

/s/    JONATHAN C. MINTZERName:  Jonathan C. Mintzer Title:    Vice
President, Secretary and General CounselDated

August 1, 2002











Name

Title

Date/s/    HARRY T. HAWKS Harry T. Hawks

Executive Vice President and Chief Financial
Officer (Principal Financial Officer)

August 1, 2002/s/    BRAD HINCKLEY Brad Hinckley

(Principal Accounting Officer)

August 1, 2002




17