**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

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**Form 10-Q**

 

**(Mark One)**

 

| **ý** | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**  |
|------------|-----------------------------------------------------------------------------------------------|
|       |                                                                                          |
|       | **FOR THE QUARTERLY PERIOD ENDED MARCH 31,  2006**                                            |
|       |                                                                                          |
| ** ** | **or**                                                                                        |
|       |                                                                                          |
| **o**      | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
| ** ** | ** **                                                                                    |
| ** ** | **For  the transition period from:    Not Applicable**                    |

 

**Commission file number 1-14776**

 

**Hearst-Argyle Television, Inc.**

(ExactName of Registrant as Specified in Its Charter)

 

| **Delaware**                                                    | ** ** | **74-2717523**                                             |
|-----------------------------------------------------------------|------------|------------------------------------------------------------|
| (State  or other jurisdiction ofincorporation  or organization) |       | (I.R.S. Employer  Identification No.)            |
| ** **                                                      | ** ** | ** **                                                 |
| **888  Seventh Avenue****New York, NY  10106**                  | ** ** | **(212)  887-6800**                                        |
| (Address  of principal executive offices)                       |       | (Registrant’s  telephone number, including area code) |

 

SECURITIESREGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

 

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

 

 

SECURITIESREGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

**None**

 

Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding twelve months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.    Yes  ý        No  o

 

Indicate by check mark whether the registrant is a large acceleratedfiler, an accelerated filer, or a non-accelerated filer. See definition of “acceleratedfiler and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Checkone):

Large accelerated filer   o                      Acceleratedfiler ý                              Non-acceleratedfiler  o

 

Indicate by check mark whether the registrant is a shell company (asdefined in Rule 12b-2 of the Exchange Act).  Yes  o No ý

 

Shares of the registrant’s common stock outstanding as of April 24,2006: 92,707,351 shares (consisting of 51,408,703 shares of Series A CommonStock and 41,298,648 shares of Series B Common Stock).

 

 

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**HEARST-ARGYLE TELEVISION, INC.**

 

**Index**

 
|             |                                                                                                                                             |   |
|------------------|--------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| **Part I**       | **Financial* *Information**                                                                                                                 |   |
|             |                                                                                                                                             |   |
| **Item 1.** | **Financial Statements**                                                                                                                         |   |
|             | Condensed Consolidated Balance Sheets as of March  31, 2006 (unaudited)  and December 31, 2005 |   |
|             | Condensed Consolidated Statements of Income for the Three Months  Ended  March 31, 2006 and 2005 (unaudited)                                |   |
|             | Condensed  Consolidated Statements of Cash Flows for the Three Months Ended  March 31, 2006 and 2005 (unaudited)                            |   |
|             | Notes to Condensed Consolidated Financial Statements                                                                                             |   |
|             |                                                                                                                                             |   |
| **Item 2.** | **Management’s Discussion and Analysis of Financial Condition and  Results of Operations**                                                  |   |
|             |                                                                                                                                             |   |
| **Item 3.** | **Quantitative and Qualitative Disclosures about Market Risk**                                                                                   |   |
|             |                                                                                                                                             |   |
| **Item 4.** | **Controls and Procedures**                                                                                                                      |   |
|             |                                                                                                                                             |   |
| **Part II**      | **Other Information**                                                                                                                            |   |
|             |                                                                                                                                             |   |
| **Item 2.** | **Unregistered Sales of Equity Securities, Use of Proceeds and Issuer  Purchases of Equity Securities**                                          |   |
|             |                                                                                                                                             |   |
| **Item 6.** | **Exhibits**                                                                                                                                     |   |
|             |                                                                                                                                             |   |
| **Signatures**   |                                                                                                                                             |   |

 

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**PART I**

**FINANCIAL INFORMATION**

 

**Item 1. Financial Statements**

 

**HEARST-ARGYLETELEVISION, INC.**

 

**CondensedConsolidated Balance Sheets**

 
| ** **                                      | ** ** | **March 31, 2006**                              | ** ** | **December 31, 2005** | ** ** |
|-------------------------------------------------|------------|-----------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                      | ** ** | **(unaudited)**                                           | ** ** | ** **                      | ** ** |
| ** **                                      | ** ** | **(In thousands, except share data)** | ** ** |
| **Assets**                                      |       |                                                      |       |                            |       |
| Current assets:                                 |       |                                                      |       |                            |       |
| Cash and cash equivalents                       |       | $                                                         | 128,468    |                            | $          | 120,065 |   |
| Accounts receivable, net                        |       | 147,986                                                   |       | 157,672                         |       |
| Program and barter rights                       |       | 27,900                                                    |       | 46,807                          |       |
| Deferred income tax asset                       |       | 4,029                                                     |       | 4,029                           |       |
| Other                                           |       | 7,725                                                     |       | 9,153                           |       |
| Total current assets                            |       | 316,108                                                   |       | 337,726                         |       |
| Property, plant and equipment, net              |       | 273,388                                                   |       | 279,239                         |       |
| Intangible assets, net                          |       | 2,394,593                                                 |       | 2,396,086                       |       |
| Goodwill                                        |       | 731,687                                                   |       | 731,687                         |       |
| Other assets:                                   |       |                                                      |       |                            |       |
| Deferred financing costs, net                   |       | 10,707                                                    |       | 11,276                          |       |
| Investments                                     |       | 37,658                                                    |       | 31,321                          |       |
| Program and barter rights, noncurrent           |       | 2,610                                                     |       | 1,312                           |       |
| Pension and other assets                        |       | 41,567                                                    |       | 43,712                          |       |
| Total other assets                              |       | 92,542                                                    |       | 87,621                          |       |
| Total assets                                    |       | $                                                         | 3,808,318  |                            | $          | 3,832,359 |   |
|                                            |       |                                                      |       |                            |       |
| **Liabilities and Stockholders’ Equity**   |       |                                                      |       |                            |       |
| Current liabilities:                            |       |                                                      |       |                            |       |
| Current portion of long-term debt               |       | $                                                         | 90,047     |                            | $          | 90,047 |   |
| Accounts payable                                |       | 11,168                                                    |       | 15,256                          |       |
| Accrued liabilities                             |       | 48,199                                                    |       | 51,133                          |       |
| Program and barter rights payable               |       | 27,517                                                    |       | 47,285                          |       |
| Payable to Hearst Corporation, net              |       | 4,767                                                     |       | 6,981                           |       |
| Other                                           |       | 8,046                                                     |       | 6,868                           |       |
| Total current liabilities                       |       | 189,744                                                   |       | 217,570                         |       |
| Program and barter rights payable,  noncurrent  |       | 3,500                                                     |       | 1,818                           |       |
| Long-term debt                                  |       | 767,158                                                   |       | 777,170                         |       |
| Note payable to Capital Trust                   |       | 134,021                                                   |       | 134,021                         |       |
| Deferred income tax liability                   |       | 847,688                                                   |       | 845,272                         |       |
| Other liabilities                               |       | 36,497                                                    |       | 35,049                          |       |
| Total noncurrent liabilities                    |       | 1,788,864                                                 |       | 1,793,330                       |       |
| Commitments and contingencies                   |       |                                                      |       |                            |       |
| Stockholders’ equity:                      |       |                                                      |       |                            |       |
| Preferred Stock                                 |       | —                                                    |       | —                          |       |
| Series A common stock                           |       | 557                                                       |       | 557                             |       |
| Series B common stock                           |       | 413                                                       |       | 413                             |       |
| Additional paid-in capital                      |       | 1,293,906                                                 |       | 1,291,388                       |       |
| Retained earnings                               |       | 649,945                                                   |       | 643,414                         |       |
| Accumulated other comprehensive loss, net       |       | (6,309                                                    | )          | (6,309                          | )          |
| Treasury stock, at cost                         |       | (108,802                                                  | )          | (108,004                        | )          |
| Total stockholders’ equity                 |       | 1,829,710                                                 |       | 1,821,459                       |       |
| Total liabilities and stockholders’ equity |       | $                                                         | 3,808,318  |                            | $          | 3,832,359 |   |

 

See notes to condensedconsolidated financial statements.

 

1

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**HEARST-ARGYLETELEVISION, INC.**

 

**CondensedConsolidated Statements of Income**

 
| ** **                                       | ** ** | **Three Months Ended March 31,**               | ** ** |
|--------------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                       | ** ** | **2006**                                                           | ** ** | **2005** | ** ** |
| ** **                                       | ** ** | **(Unaudited)**                                                    | ** ** |
| ** **                                       | ** ** | **(In thousands, except per share data)** | ** ** |
|                                             |       |                                                               |       |   |   |
| Total revenue                                    |       | $                                                                  | 174,017    |   | $ | 162,279 |   |
| Station operating expenses:                      |       |                                                               |       |   |   |
| Salaries, benefits and other operating  costs    |       | 96,787                                                             |       | 88,624 |   |
| Amortization of program rights                   |       | 15,332                                                             |       | 15,333 |   |
| Depreciation and amortization                    |       | 15,388                                                             |       | 13,138 |   |
| Corporate, general and administrative  expenses  |       | 7,273                                                              |       | 5,916 |   |
| Operating income                                 |       | 39,237                                                             |       | 39,268 |   |
|                                             |       |                                                               |       |   |   |
| Interest expense, net                            |       | 15,160                                                             |       | 15,701 |   |
| Interest expense, net – Capital Trust       |       | 2,438                                                              |       | 2,438 |   |
| Income before income taxes and equity  earnings  |       | 21,639                                                             |       | 21,129 |   |
|                                             |       |                                                               |       |   |   |
| Income tax expense                               |       | 8,499                                                              |       | 8,361 |   |
| Equity in loss (income) of affiliates, net       |       | 123                                                                |       | (307 | ) |
| Net income                                       |       | 13,017                                                             |       | 13,075 |   |
|                                             |       |                                                               |       |   |   |
| Less preferred stock dividends                   |       | —                                                             |       | 2 |   |
| Income applicable to common stockholders         |       | $                                                                  | 13,017     |   | $ | 13,073 |   |
|                                             |       |                                                               |       |   |   |
| Income per common share – basic             |       | $                                                                  | 0.14       |   | $ | 0.14 |   |
| Number of common shares used in the  calculation |       | 92,655                                                             |       | 92,849 |   |
|                                             |       |                                                               |       |   |   |
| Income per common share – diluted           |       | $                                                                  | 0.14       |   | $ | 0.14 |   |
| Number of common shares used in the  calculation |       | 93,191                                                             |       | 93,319 |   |
|                                             |       |                                                               |       |   |   |
| Dividends per common share declared              |       | $                                                                  | 0.07       |   | $ | 0.07 |   |

 

See notes to condensedconsolidated financial statements.

 

2

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**HEARST-ARGYLETELEVISION, INC.**

 

**CondensedConsolidated Statements of Cash Flows**

 
| ** **                                                                         | ** ** | **Three months ended March 31,** | ** ** |
|------------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                                         | ** ** | **2006**                                             | ** ** | **2005** | ** ** |
| ** **                                                                         | ** ** | **(Unaudited)**                                      | ** ** |
| ** **                                                                         | ** ** | **(In thousands)**                              | ** ** |
| **Operating Activities**                                                           |       |                                                 |       |   |   |
| Net income                                                                         |       | $                                                    | 13,017     |   | $ | 13,075 |   |
| Adjustments to reconcile net income to net  cash provided by operating activities: |       |                                                 |       |   |   |
| Depreciation                                                                       |       | 13,895                                               |       | 11,634 |   |
| Amortization of intangible assets                                                  |       | 1,493                                                |       | 1,504 |   |
| Amortization of deferred financing costs                                           |       | 569                                                  |       | 390 |   |
| Amortization of program rights                                                     |       | 15,332                                               |       | 15,333 |   |
| Deferred income taxes                                                              |       | 2,416                                                |       | 2,731 |   |
| Equity in loss (income) of affiliates, net                                         |       | 123                                                  |       | (307 | ) |
| Provision for doubtful accounts                                                    |       | 136                                                  |       | 131 |   |
| Stock–based compensation expense                                              |       | 1,918                                                |       | — |   |
| (Gain) or loss on disposition of assets                                            |       | (609                                                 | )          | — |   |
| Program payments                                                                   |       | (15,807                                              | )          | (16,053 | ) |
| Changes in operating assets and  liabilities:                                      |       |                                                 |       |   |   |
| Decrease (increase) in Accounts receivable                                         |       | 8,768                                                |       | 7,641 |   |
| Decrease (increase) in Other assets                                                |       | 3,573                                                |       | 1,557 |   |
| (Decrease) increase in Accounts payable and  accrued liabilities                   |       | (7,022                                               | )          | (7,570 | ) |
| (Decrease) increase in Other liabilities                                           |       | 422                                                  |       | 4,687 |   |
| Net cash  provided by operating activities                                         |       | 38,224                                               |       | 34,753 |   |
|                                                                               |       |                                                 |       |   |   |
| **Investing Activities**                                                           |       |                                                 |       |   |   |
| Purchases of property, plant and equipment                                         |       | (7,764                                               | )          | (8,073 | ) |
| Cash proceeds from insurance recoveries                                            |       | 1,391                                                |       | — |   |
| Investment in affiliates and other, net                                            |       | (6,752                                               | )          | 12 |   |
| Net cash used in investing activities                                              |       | (13,125                                              | )          | (8,061 | ) |
|                                                                               |       |                                                 |       |   |   |
| **Financing Activities**                                                           |       |                                                 |       |   |   |
| Dividends paid on preferred stock                                                  |       | —                                               |       | (2 | ) |
| Dividends paid on common stock                                                     |       | (6,486                                               | )          | (6,500 | ) |
| Series A Common Stock repurchases                                                  |       | (798                                                 | )          | (3,973 | ) |
| Redemption of preferred stock                                                      |       | —                                               |       | (11,251 | ) |
| Principal payments & repurchase of long  term debt                             |       | (10,012                                              | )          | (16 | ) |
| Proceeds from employee stock purchase plan  & stock option exercises           |       | 600                                                  |       | 1,886 |   |
| Net cash used in financing activities                                              |       | (16,696                                              | )          | (19,856 | ) |
|                                                                               |       |                                                 |       |   |   |
| Increase in cash and cash equivalents                                              |       | 8,403                                                |       | 6,836 |   |
| Cash and cash equivalents at beginning of  period                                  |       | 120,065                                              |       | 92,208 |   |
| Cash and cash equivalents at end of period                                         |       | $                                                    | 128,468    |   | $ | 99,044 |   |
|                                                                               |       |                                                 |       |   |   |
| **Supplemental Cash Flow Information:**                                            |       |                                                 |       |   |   |
| **Cash paid during the period for:**                                               |       |                                                 |       |   |   |
| Interest                                                                           |       | $                                                    | 6,790      |   | $ | 6,160 |   |
| Interest on Note payable to Capital Trust                                          |       | $                                                    | 2,438      |   | $ | 2,438 |   |
| Taxes, net of refunds                                                              |       | $                                                    | 12,572     |   | $ | 16,662 |   |

 

See notes to condensedconsolidated financialstatements.

 

3

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**Hearst-Argyle Television, Inc.**

**Notes to Condensed Consolidated FinancialStatements**

**Tabular amounts in thousands, except per share data**

 

**1.    Basis of Presentation**

 

The condensed 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 the unconsolidated subsidiary trust, allsignificant intercompany accounts have been eliminated in consolidation.

 

The accompanying unaudited condensed consolidated financial statementsdo not include all of the information and notes required by accountingprinciples generally accepted in the United States of America for completefinancial statements and should be read in conjunction with the Company’sconsolidated financial statements included in the Annual Report on our Form10-K for the year ended December 31, 2005. In the opinion of management, alladjustments considered necessary for a fair presentation have been included andare normal and recurring in nature. Operating results for the three months endedMarch 31, 2006 and 2005 are not necessarily indicative of the results that maybe expected for the full year.

 

Certain prior year amounts have been reclassified to conform to thecurrent year presentation. These reclassifications had no impact on reportednet income.

 

**2.    Recent Developments**

 

*Investment in Internet Broadcasting Systems,Inc.*During the periods presented the Company had aninvestment in Internet Broadcasting Systems, Inc. (“Internet Broadcasting”)and, during the three months ended March 31, 2005, the Company had aninvestment in IBS/HATV LLC, the parent company of 26 wholly-owned subsidiarylimited liability companies. Internet Broadcasting operates a national networkof station Internet sites and designs, develops and operates station Internetsites under operating agreements. IBS/HATV LLC owned the Internet sites foreach of the Company’s television stations. On December 22, 2005, the Companyrestructured its investment in Internet Broadcasting and the IBS/HATV LLCrelationship. As part of the restructuring, IBS/HATV LLC and its subsidiarieswere dissolved resulting in the recognition of local website operating resultsdirectly on the books of the Company’s television stations commencing inJanuary 2006. The Company has received a portion of its share of the dissolvedLLC’s assets during the three months ended March 31, 2006 and expects toreceive the remainder of the assets within the next 12 months.  Inaddition, the Company purchased Internet Broadcasting common stock from anexisting Internet Broadcasting investor for $5.5 million in January 2006,increasing its ownership percentage to 38%. The Company continues to accountfor our investment in Internet Broadcasting using the equity method.

 

*Investment in USDTV*.On January 27, 2006, the Company invested approximately $1 million in USDTV,bringing its total ownership interest to 6.175%. The Company originallyinvested approximately $1.5 million in USDTV in September 2005. USDTV wasformed to provide a national digital subscription-based television programmingdistribution service using portions of the digital television spectrum. Currentlythe program service, which consists of local television signals combined withcertain of the most popular cable networks, is available in Albuquerque, NewMexico, Las Vegas, Nevada, Salt Lake City, Utah and Dallas, Texas. We accountfor this investment using the cost method.

 

*Digital Television Transition.*TheU.S. Congress passed, and the President signed into law, legislation thatguides the transition from analog to digital television broadcasting. Acomponent of this legislation is a deadline of February 17, 2009 for completionof the transition to digital broadcasting and the return of the analog spectrumto the government. As a result, the Company accelerated the depreciation ofcertain equipment that is affected by the digital conversion.

 

**3.    Stock-Based Compensation**

 

On January 1, 2006, the Company adopted FASB Statement No. 123(R), *Share-Based Payment* (“SFAS 123(R)”) using a modifiedprospective transition method. Accordingly, because we have adopted aprospective method prior periods have not been restated. In the first quarterof 2006, the adoption of SFAS 123(R) resulted in incremental stock-basedcompensation expense of $1.9 million. The incremental stock-based compensationexpense caused income before income

 

4

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taxes to decrease by $1.9million, net income to decrease by $1.1 million and basic and diluted earningsper share to decrease by $0.01 per share.

 

Prior to the adoption of SFAS 123(R), the Company applied AccountingPrinciples Board Opinion No. 25, *Stock Issued to Employees*(“APB25”), to account for its stock-based awards, and the disclosure-only provisionsof FASB Statement No. 123, *Accounting for Stock-BasedCompensation*, as amended (“SFAS 123”), to present stock-basedcompensation disclosure. Under APB 25, because the exercise price of theCompany’s employee stock options equaled the market price of the underlyingstock on the date of grant, the stock options had no intrinsic value andtherefore no compensation expense was recognized. The following table detailsthe pro forma effects on net income and earnings per share for the three monthsended March 31, 2005 had compensation expense been recorded based on the fairvalue method under SFAS 123, utilizing the Black-Scholes option valuationmodel:

 
| ** **                                                                                                                  | ** ** | **Three Months Ended** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|
| ** **                                                                                                                  | ** ** | **March 31, 2005**     | ** ** |
| Net income                                                                                                                  |       | $                      | 13,075     |   |
| Less:                                                                                                                       |       |                   |       |
| Total stock-based employee compensation  expense determined under the fair value method for all awards, net of related  tax |       | (1,214                 | )          |
| Pro forma net income                                                                                                        |       | $                      | 11,861     |   |
| Less: Preferred stock dividends                                                                                             |       | (2                     | )          |
| Pro forma net income applicable to common  stockholders                                                                     |       | $                      | 11,859     |   |
|                                                                                                                        |       |                   |       |
| Earnings per share:                                                                                                         |       |                   |       |
| Basic – as reported                                                                                                    |       | $                      | 0.14       |   |
| Basic – pro forma                                                                                                      |       | $                      | 0.13       |   |
|                                                                                                                        |       |                   |       |
| Diluted – as reported                                                                                                  |       | $                      | 0.14       |   |
| Diluted – pro forma                                                                                                    |       | $                      | 0.13       |   |

 

On May 5, 2004, the Company’s stockholders and Boardof Directors approved the 2004 Long Term Incentive Compensation Plan (“IncentiveCompensation Plan”). The Incentive Compensation Plan is intended to replace theAmended and Restated 1997 Stock Option Plan (the “Stock Option Plan”) and allgrants made after May 5, 2004 are made under the new Incentive CompensationPlan. Under the Incentive Compensation Plan the Company may award various formsof incentive compensation to officers, other key employees and non-employeedirectors of the Company and its subsidiaries. The Company reserved forissuance under the Incentive Compensation Plan 3.6 million shares of Series ACommon Stock. Generally, under the Incentive Compensation Plan stock optionsare granted with exercise prices equal to the market price of the underlyingstock on the date of grant. Each option is exercisable after the period or periodsspecified in the applicable option agreement, but no option can be exercisedafter the expiration of 10 years from the date of grant. Generally, options wehave granted to employees under the Incentive Compensation Plan cliff-vestafter three years commencing on the effective date of the grant.

 

Under the Stock Option Plan, 8.7 million shares ofSeries A Common Stock were reserved for issuance. Under the Stock Option Plan,stock options were granted with exercise prices equal to the market price ofthe underlying stock on the date of grant. Generally, options granted prior toDecember 2000 either (i) cliff-vest after three years commencing on theeffective date of the grant or (ii) vest either after nine years or inone-third increments upon attainment of certain market price goals of theCompany’s Series A Common Stock. Options granted in December 2000 vest inone-third increments per year commencing one year from the date of the grant. Generally,options granted after December 2000 cliff-vest after three years commencing onthe effective date of the grant. All options granted pursuant to the StockOption Plan will expire no later than ten years from the date of grant.

 

A summary of the status of the Company’s StockOption Plan and Incentive Compensation Plan, and changes for the three monthsended March 31, 2006 and for the year ended December 31, 2005 is presentedbelow (not in thousands):

 

5

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| ** **                       | ** ** | **Options** | ** ** | **Weighted Average  Exercise Price** | ** ** |
|----------------------------------|------------|-------------|------------|------------------------------------------------|------------|
| Outstanding at December 31, 2004 |       | 8,060,429   |       | $                                              | 23.36      |   |
| Granted                          |       | 1,273,400   |       | 24.14                                          |       |
| Exercised                        |       | (362,719    | )          | 18.64                                          |       |
| Forfeited                        |       | (450,263    | )          | 26.02                                          |       |
| Outstanding at December 31, 2005 |       | 8,520,847   |       | $                                              | 23.53      |   |
| Granted                          |       | 80,000      |       | 25.08                                          |       |
| Exercised                        |       | (4,600      | )          | 19.76                                          |       |
| Forfeited                        |       | (5,500      | )          | 25.00                                          |       |
| Outstanding at March 31, 2006    |       | 8,590,747   |       | $                                              | 23.54      |   |
|                             |       |        |       |                                           |       |
| Exercisable at December 31, 2004 |       | 4,392,112   |       | $                                              | 21.84      |   |
| Exercisable at December 31, 2005 |       | 4,720,837   |       | $                                              | 22.25      |   |
| Exercisable at March 31, 2006    |       | 4,763,931   |       | $                                              | 22.30      |   |

 

The following table summarizes information aboutstock options outstanding and exercisable at March 31, 2006 (not in thousands):

 
| ** **                              | ** ** | **Options Outstanding**                    | ** ** |
|-----------------------------------------|------------|-------------------------------------------------|------------|
| **Range of Exercise  Prices** | ** ** | **Number  Outstanding  at March 31, 2006** | ** ** | **Weighted Average  Remaining  Contractual Life** | ** ** | **Intrinsic Value of In  the money options at  March 31, 2006** | ** ** | **Weighted Average  Exercise Price** | ** ** |
| $18.56-$21.59                           |       | 2,534,562                                       |       | 5.03 years |   | $ | 9,773,358 |   | $ | 19.50 |   |
| $22.08-$24.89                           |       | 2,409,511                                       |       | 8.28 years |   | $ | 23,800 |   | $ | 24.08 |   |
| $25.13-$26.81                           |       | 3,483,060                                       |       | 6.02 years |   | — |   | $ | 25.83 |   |
| $27.75-$29.00                           |       | 149,614                                         |       | 1.95 years |   | — |   | $ | 28.87 |   |
| $36.44                                  |       | 14,000                                          |       | 2.36 years |   | — |   | $ | 36.44 |   |
|                                    |       | 8,590,747                                       |       | 6.29 years |   | $ | 9,797,158 |   | $ | 23.54 |   |

 
| ** **                              | ** ** | **Options Exercisable**                    | ** ** | ** **                                                  | ** ** |
|-----------------------------------------|------------|-------------------------------------------------|------------|-------------------------------------------------------------|------------|
| **Range of Exercise  Prices** | ** ** | **Number  Exercisable At  March 31, 2006** | ** ** | **Weighted Average  Remaining  Contractual Life** | ** ** | **Intrinsic Value of In  the money options at  March 31, 2006** | ** ** | **Weighted Average  Exercise Price** | ** ** |
| $18.56-$21.59                           |       | 2,534,562                                       |       | 5.03 years                                                  |       | $ | 9,773,358 |   | $ | 19.50 |   |
| $22.08-$24.89                           |       | 1,074,111                                       |       | 6.61 years                                                  |       | $ | 23,800 |   | $ | 24.07 |   |
| $25.13-$26.81                           |       | 1,008,144                                       |       | 2.34 years                                                  |       | — |   | $ | 26.36 |   |
| $27.75-$29.00                           |       | 133,114                                         |       | 1.84 years                                                  |       | — |   | $ | 28.92 |   |
| $36.44                                  |       | 14,000                                          |       | 2.36 years                                                  |       | — |   | $ | 36.44 |   |
|                                    |       | 4,763,931                                       |       | 4.72 years                                                  |       | $ | 9,797,158 |   | $ | 22.30 |   |

 

Under SFAS No. 123, options are valued at their dateof grant and then expensed over their vesting period. The value of the Company’soptions was calculated at the date of grant using the Black-Scholesoption-pricing model for options granted in 2006 and 2005. The weighted average grant date fair value ofoptions granted was $7.46 and $7.83 for the three months ended March 31, 2006and 2005, respectively. The total intrinsic value (the differencebetween market price and exercise price) ofoptions exercised during the three months ended March 31, 2006 and 2005 was$0.02 million and $0.6

 

6

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million, respectively. Thetotal fair value of shares vested during the three month period ended March 31,2006 and 2005 was $0.3 million and $0.06 million, respectively.

 

The following assumptions were used in the BlackScholes option-pricing model to value options granted during the three monthsended March 31, 2006 and 2005:

 
| ** **              | ** ** | **2006**       | ** ** | **2005**       | ** ** |
|-------------------------|------------|----------------|------------|----------------|------------|
| Expected life           |       | 5.9 years |       | 5.0 years |       |
| Volatility factor       |       | 27.71          | %          | 30.14          | %          |
| Risk-free interest rate |       | 4.43           | %          | 3.72           | %          |
| Dividend yield          |       | 1.12           | %          | 0.94           | %          |

 

The expected life of options granted was estimatedbased on the historical exercise behavior of employees. The expected volatilityfactor was based on historical volatility for a period equal to the stockoption’s expected life. The risk-free interest rate is based on the U.S.treasury yield curve in effect at the time of the grant.

 

The total compensation cost recognized in income forthe three months ended March 31, 2006 was $1.9 million. The total tax benefitrelated thereto was $0.7 million. As of March 31, 2006, there was $12.9 millionof total unrecognized compensation cost related to unvested share-basedcompensation awards granted under the stock option plans. Of the total $12.9million, we expect to recognize approximately 40% in the remainder of 2006, 40%in 2007, and 20% in 2008, assuming average forfeitures. We received $0.09million and $1.3 million due to the exercise of stock options during the threemonth period ended March 31, 2006 and 2005, respectively.

 

**4.    Long-Term Debt**

 

Long-term debt as of March 31, 2006 and December 31,2005 consisted of the following:

 
| ** **                | ** ** | **March 31, 2006** | ** ** | **December 31, 2005** | ** ** |
|---------------------------|------------|------------------------------|------------|---------------------------------|------------|
| ** **                | ** ** | **(Unaudited)**              | ** ** | ** **                      | ** ** |
| Senior notes              |       | $                            | 407,110    |                            | $          | 417,110 |   |
| Private placement debt    |       | 450,000                      |       | 450,000                         |       |
| Capital lease obligations |       | 95                           |       | 107                             |       |
|                      |       | 857,205                      |       | 867,217                         |       |
| Less current portion      |       | (90,047                      | )          | (90,047                         | )          |
| Total long-term debt      |       | $                            | 767,158    |                            | $          | 777,170 |   |

 

During the quarter ended March 31, 2006, the Companypurchased $10 million of senior notes due 2018.

 

**5.    Earnings Per Share**

 

The calculation of basic earnings per share (“EPS”)for each period is based on the weighted average number of common sharesoutstanding during the period. The calculation of dilutive EPS for each periodis based on the weighted average number of common shares outstanding during theperiod, plus the effect, if any, from the exercise of stock options andconversion of preferred securities. The following table sets forth areconciliation between basic EPS and diluted EPS, in accordance with SFAS No.128, *Earnings Per Share*.

 

7

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| ** **                                                                                  | ** ** | **Three Months Ended  March 31,** | ** ** |
|---------------------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                                  | ** ** | **(Unaudited)**                                  | ** ** |
| ** **                                                                                  | ** ** | **2006**                                         | ** ** | **2005** | ** ** |
| Reported net income                                                                         |       | $                                                | 13,017     |   | $ | 13,075 |   |
| Less: Preferred stock dividends                                                             |       | —                                           |       | (2 | ) |
| Income applicable to common stockholders  (Basic and diluted)                               |       | $                                                | 13,017     |   | $ | 13,073 |   |
|                                                                                        |       |                                             |       |   |   |
| Basic shares                                                                                |       | 92,655                                           |       | 92,849 |   |
| Basic EPS                                                                                   |       | $                                                | 0.14       |   | $ | 0.14 |   |
|                                                                                        |       |                                             |       |   |   |
| Diluted shares                                                                              |       | 93,191                                           |       | 93,319 |   |
| Diluted EPS                                                                                 |       | $                                                | 0.14       |   | $ | 0.14 |   |
|                                                                                        |       |                                             |       |   |   |
| Basic shares                                                                                |       | 92,655                                           |       | 92,849 |   |
| Add: Shares issued upon assumed exercise of  stock options                                  |       | 536                                              |       | 470 |   |
| Add: Shares issued upon conversion of  Series B Redeemable Convertible Preferred Securities |       | —                                           |       | — |   |
| Diluted shares                                                                              |       | 93,191                                           |       | 93,319 |   |

 

There were no shares of Series A or B PreferredStock outstanding as of March 31, 2006 and 2005 and therefore no shares wereincluded in the computation of diluted EPS. The dividends for the Series A andB Preferred Stock were deducted from Net income for the calculation of Basicand Diluted EPS. These shares were redeemed in full as of January 1, 2005.

 

The dilution test for the Redeemable ConvertiblePreferred Securities related to the Capital Trust is performed for all periods.This test considers only the total number of shares that could be issued ifconverted and does not consider either the conversion price or the share priceof the underlying common shares. For the three months ended March 31, 2006 and2005, 5,128,205 shares of Series A Common Stock to be issued upon theconversion of 2,600,000 shares of Series B 7.5% Redeemable ConvertiblePreferred Securities, related to the Capital Trust, are not included in thenumber of common shares used in the calculation of diluted EPS because to do sowould have been anti-dilutive. When the securities related to the Capital Trustare dilutive, the interest, net of tax, related to the Capital Trust is addedback to Income applicable to common stockholders for purposes of the dilutedEPS calculation.

 

Common stock options for 5,993,385 and 2,911,712shares of Series A Common Stock (before application of the treasury stockmethod), outstanding as of March 31, 2006 and 2005, respectively, were notincluded in the computation of diluted EPS because the exercise price wasgreater than the average market price of the common shares during thecalculation period.

 

8

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**6.    Goodwill and IntangibleAssets**

 

Summarized below are the carrying value ofintangible assets and goodwill as of March 31, 2006 and December 31, 2005:

 
| ** **                                            | ** ** | **March 31, 2006** | ** ** | **December 31, 2005** | ** ** |
|-------------------------------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| ** **                                            | ** ** | **(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                                |       | $                            | 122,891    |                            | $          | 70,941 |   | $ | 51,950 |   | $ | 122,891 |   | $ | 70,050 |   | $ | 52,841 |   |
| Network affiliations                                  |       | 95,493                       |       | 37,078                          |       | 58,415 |   | 95,493 |   | 36,489 |   | 59,004 |   |
| Other                                                 |       | 743                          |       | 618                             |       | 125 |   | 743 |   | 605 |   | 138 |   |
| Total intangible assets subject to  amortization      |       | $                            | 219,127    |                            | $          | 108,637 |   | $ | 110,490 |   | $ | 219,127 |   | $ | 107,144 |   | $ | 111,983 |   |
| Intangible assets not subject to  amortization – |       |                         |       |                            |       |   |   |   |   |   |   |   |   |
| FCC licenses                                          |       |                         |       |                            |       | 2,284,103 |   |   |   |   |   | 2,284,103 |   |
| **Total intangible assets, net**                      |       |                         |       |                            |       | $ | 2,394,593 |   |   |   |   |   | $ | 2,396,086 |   |
| **Goodwill**                                          |       |                         |       |                            |       | $ | 731,687 |   |   |   |   |   | $ | 731,687 |   |

 

The Company’s amortization expense for intangibleassets was approximately $1.5 million for the three months ended March 31, 2006and 2005. Estimated annual intangible asset amortization expense for each ofthe next five years is approximately $6.0 million.

 

**7.    Income Taxes**

 

The income tax expense for the three months endedMarch 31, 2006 and 2005 consisted of the following:

 
| ** **         | ** ** | **2006**        | ** ** | **2005** | ** ** |
|--------------------|------------|-----------------|------------|----------|------------|
| ** **         | ** ** | **(Unaudited)** | ** ** |
| Current            |       | $6,083          |       | $5,630   |       |
| Deferred           |       | 2,416           |       | 2,731    |       |
| Income tax expense |       | $8,499          |       | $8,361   |       |

 

The effective tax rate for the three months ended March 31, 2006 was39.3% as compared to 39.6% for the three months ended March 31, 2005. TheCompany expects its effective tax rate for the year ending December 31, 2006 tobe approximately 39.5%. The Company’s effective tax rate in a given financialstatement period may be materially impacted by changes in the level of earningsby taxing jurisdictions, changes in the expected outcome of tax audits, orchanges in the deferred tax valuation allowance. The Company records reservesfor estimates of probable settlements of federal and state audits. The Companyrecords a valuation allowance against its deferred tax assets arising fromcertain net operating and capital losses when it is more likely than not thatsome portion or all of such losses will not be realized.

 

The Company’s net deferred income tax liability isas follows:  

 

9

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| ** **                        | ** ** | **March 31, 2006** | ** ** | **December 31, 2005** | ** ** |
|-----------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| ** **                        | ** ** | **(Unaudited)**              | ** ** | ** **                      | ** ** |
| Deferred income tax liability     |       | $                            | 847,688    |                            | $          | 845,272 |   |
| Deferred income tax asset         |       | 4,029                        |       | 4,029                           |       |
| Net deferred income tax liability |       | $                            | 843,659    |                            | $          | 841,243 |   |

 

The deferred tax liabilities primarily relate todifferences between book and tax basis of the Company’s FCC licenses. Inaccordance with the adoption of FASB No. 142, *Goodwill andIntangible Assets*, on January 1, 2002, the Company no longeramortizes its FCC licenses, but instead tests them for impairment annually. Asthe tax basis in the Company’s FCC licenses continues to amortize, the deferredtax liabilities will increase over time.

 

**8.    Common Stock**

 

**Common Stock Repurchase**

 

In May 1998 the Company’s Board of Directorsauthorized the repurchase of up to $300 million of its outstanding Series ACommon Stock. Such repurchases may be effected from time to time in the openmarket or in private transactions, subject to market conditions and management’sdiscretion. During the three months ended March 31, 2006, the Companyrepurchased 33,450 shares of Series A Common Stock at a cost of $0.8 millionand an average per share price of $23.86. Between May 1998 and March 31, 2006,the Company repurchased approximately 4.4 million shares of Series A CommonStock at a cost of approximately $108.8 million and an average price of $24.96.There can be no assurance that such repurchases will occur in the future or, ifthey do occur, what the terms of such repurchases will be.

 

Hearst Corporation (“Hearst”) and itsindirect wholly-owned subsidiary, Hearst Broadcasting, Inc. (“HearstBroadcasting”), are authorized to purchase up to 25 million shares ofthe Company’s Series A Common Stock from time to time in the open market, inprivate transactions or otherwise. As of March 31, 2006, under this plan Hearstpurchased approximately 21.2 million shares of the Company’s outstanding SeriesA Common Stock. As of March 31, 2006 and December 31, 2005, Hearst’s ownershipof the Company’s outstanding common stock was 71.5% and 70.5%, respectively.

 

**Common Stock Dividends**

 

During the three months ended March 31, 2006, theCompany’s Board of Directors declared a cash dividend on shares of our Series Aand Series B Common Stock as follows:

 
| **Dividend Amount** | ** ** | **Declaration Date** | ** **     | **Record Date** | ** **    | **Payment Date** | ** **     | **Total Dividend** | ** ** | **Hearst Portion** | ** ** |
|--------------------------|------------|---------------------------|----------------|----------------------|---------------|-----------------------|----------------|-------------------------|------------|-------------------------|------------|
| $                        | 0.07       |                      | March 31, 2006 |                 | April 5, 2006 |                  | April 15, 2006 |                    | $          | 6,485                   |       | $ | 4,636 |   |
|                          |            |                           |                |                      |               |                       |                |                         |            |                         |            |  |  |  |

 

**9.    Preferred Stock**

 

The Company has one million authorized shares ofpreferred stock, par value $.01 per share. Under the Company’s Certificate ofIncorporation, the Company has two authorized series of preferred stock, SeriesA Preferred Stock and Series B Preferred Stock (collectively, the “PreferredStock”). At December 31, 2005, there was no Preferred Stock outstanding. OnJanuary 1, 2005, 5,781 shares of Series A Preferred Stock and 5,470 shares ofSeries B Preferred Stock were redeemed. The Preferred Stock had a cash dividendfeature whereby each share accrued $65 per share annually, to be paidquarterly.

 

 **10.    RelatedParty Transactions**

 

*The Hearst Corporation*.    As of March 31,2006, Hearst owned approximately 48.6% of our Series A Common Stock and 100% ofour Series B Common Stock, representing in the aggregate approximately 71.5% ofthe outstanding voting power of our common stock, except with regard to theelection of directors. With regard to the election of directors, Hearst’sownership of our Series B Common Stock entitles Hearst to elect 11 of the 13members of our Board of Directors.

 

10

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During the three monthsended March 31, 2006 and 2005, we were engaged in the following transactionswith Hearst or parties related to Hearst:

 

•                  *Management Agreement*.   Werecorded revenue of approximately $1.4 million and $1.1 million in the threemonths ended March 31, 2006 and 2005, respectively, relating to a managementagreement with Hearst (the “Management Agreement”). Pursuant to the ManagementAgreement, we provide certain management services, such as sales, news,programming, financial and accounting management services, with respect tocertain Hearst owned or operated television and radio stations. We believe theterms of the Management Agreement are reasonable to both parties; however,there can be no assurance that more favorable terms would not be available fromthird parties.

 

•                  *Services Agreement*.    Weincurred expenses of approximately $1.3 million in the three months ended March31, 2006 and 2005 relating to a services agreement with Hearst (the “ServicesAgreement”). Pursuant to the Services Agreement, Hearst provides the Companycertain administrative services such as accounting, auditing, financial, legal,insurance, data processing, and employee benefits administration. We believethe terms of the Services Agreement are reasonable to both parties; however,there can be no assurance that more favorable terms would not be available fromthird parties.

 

•                  *Interest Expense, Net – Capital Trust.*We incurred interest expense, net,related to the Subordinated Debentures issued to our wholly-ownedunconsolidated subsidiary, the Capital Trust, of $2.4 million in the threemonths March 31, 2006 and 2005. The Capital Trust then paid comparable amountsto its Redeemable Convertible Preferred Securities holders, including Hearst,which received $0.5 million in the three months ended March 31, 2006.

 

•                  *Dividends on Common Stock.*    Duringthe three months ended March 31, 2006 and 2005, our Board of Directors declaredquarterly cash dividends of $0.07 per share, or $6.5 million in the aggregate,on our Series A and Series B Common Stock. Included in this amount was $4.6million and $4.4 million respectively, payable to Hearst.

 

•                  *Radio Facilities Lease.*    Pursuantto a lease agreement, Hearst paid us approximately $0.2 million for the threemonths ended March 31, 2006 and 2005. Under this agreement, Hearst leases fromthe Company premises for WBAL-AM and WIYY-FM, Hearst’s Baltimore, Marylandradio stations.

 

•                  *Lifetime Entertainment Services*.    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 Lifetimedepend on the specific terms of these agreements and may be fixed or variable. Basedon the terms of completed agreements, we are entitled to receive a minimumaggregate amount of $2.5 million during the period from January 1, 2006 to June20, 2009. We recorded revenue from the agreements of $4.6 million and $1.0million in the three months ended March 31, 2006 and 2005, respectively.

 

•                  *Wide Orbit, Inc.*In November 2004, we entered into an agreement to license Wide OrbitInc.’s (“Wide Orbit”) Traffic Sales and Billing Solutions software. Hearst ownsapproximately 8% of Wide Orbit. For each of the three months ended March 31,2006 and 2005, we paid Wide Orbit approximately $0.3 million under theagreement.

 

•                  *N*ew*England Cable News*. Two of our executive officers, David J.Barrett and Steven A. Hobbs, serve as Hearst’s representatives on themanagement board of New England Cable News, a regional cable channel jointlyowned by Hearst Cable News, Inc., an indirect wholly-owned subsidiary ofHearst, and Comcast MO Cable News, Inc. Hearst pays $4,000 per month to theCompany as compensation for their service.

 

•                  *Other Transactions with Hearst*.    Inthe three months ended March 31, 2006 and 2005, we recorded immaterial netrevenue relating to advertising sales to Hearst.

 

11

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*Internet Broadcasting*.    As of March 31,2006, we owned 38% of Internet Broadcasting. Our share of the (income) or lossof Internet Broadcasting included in Equity in loss (income) of affiliates, netwas $0.4 million of income and $0.1 million of loss for the three months endedMarch 31, 2006 and 2005, respectively. Our share of income for IBS/HATV LLCincluded in Equity in loss (income) of affiliates, net was $0.5 million ofincome for the three months ended March 31, 2005. Since January 2001, Harry T.Hawks, our Executive Vice President and Chief Financial Officer, since October2002, Terry Mackin, our Executive Vice President, and since December 2005, StevenA. Hobbs, our Executive Vice President and Chief Legal and Development Officer,have served on the Board of Directorsof Internet Broadcasting, from which they do not receive compensation for theirservices. In the three months ended March 31, 2006, the Company paid $1.9million to Internet Broadcasting under an operating agreement pursuant to whichInternet Broadcasting provides hosting services for our stations’ Web sites. Wealso have an agreement with Internet Broadcasting pursuant to which theyprovide hosting services for our corporate Internet site for a nominal amount.

 

*Small Business Television*.The Company utilizes Small Business Television’s (“SBTV”) services to providetelevision stations with additional revenue through the marketing and sale ofcommercial time to smaller businesses that do not traditionally use televisionadvertising due to costs. In the three month period ended March 31, 2006 and2005, these sales generated revenue of approximately $0.3 million, of whichapproximately $0.2 million was distributed to the Company. Mr. Dean Conomikes,the owner of SBTV, is the son of John G. Conomikes, a member of the Company’sBoard of Directors.

 

*NBC Weather Plus.*In2004, we invested in Weather Network Affiliates Company, LLC, which owns theNBC Weather Plus Network (“Weather Plus”). Since November 2004 we have launchedWeather Plus in eight of our markets – Sacramento, Orlando, Winston-Salem,Greenville, Cincinnati, Baltimore, Lancaster and New Orleans – and expect tolaunch Weather Plus in our two remaining NBC markets in 2006. Terry Mackin, ourExecutive Vice President, is the Chairman of the Board of the NBC TelevisionAffiliates Association, which is the managing member and the owner of certainownership interests in Weather Network Affiliates Company, LLC. Mr. Mackin does not receive compensation forhis Board service.

 

*USDTV*. Currently, weand Hearst each own approximately 6.175% of USDTV. Our station, KOAT-TV inAlbuquerque, New Mexico, currently leases a portion of its digital spectrum toUSDTV. Since September 23, 2005, Steven A. Hobbs, our Executive Vice Presidentand Chief Legal and Development Officer, has served on the Board of Directorsof USDTV, from which he does not receive compensation for his services.

 

*Other Related Parties*.    In the ordinarycourse of business, the Company enters into transactions with other relatedparties, none of which were significant to our financial results in the threemonths ended March 31, 2006 and 2005.

 

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

 

***Overview***

 

The Company maintains seven defined benefit pensionplans, 12 employee savings plans, and other post-retirement benefit plans foractive, retired and former employees. In addition, the Company participates ina multi-employer union pension plan that provides retirement benefits tocertain union employees. The seven defined benefit pension plans are hereaftercollectively referred to as the “Pension Plans.”

 

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

 

Benefits under the Pension Plans are generally basedon years of credited service, age at retirement and average of the highest fiveconsecutive years’ compensation. The cost of the Pension Plans is computed onthe basis of the Project Unit Credit Actuarial Cost Method. Past service costis amortized over the expected future service periods of the employees.

 

*Net Periodic Pension and Post-Retirement Cost*

 

The following schedule presents net periodic pensioncost for the Company’s Pension Plans in the three months ended March 31, 2006and 2005:

 

12

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| ** **                                       | ** ** | **Pension Benefits** | ** ** |
|--------------------------------------------------|------------|---------------------------|------------|
| ** **                                       | ** ** | **2006**                  | ** ** | **2005** | ** ** |
| ** **                                       | ** ** | **(Unaudited)**           |
| Service cost                                     |       | $                         | 2,446      |   | $ | 2,258 |   |
| Interest cost                                    |       | 2,355                     |       | 2,165 |   |
| Expected return on plan assets                   |       | (2,779                    | )          | (2,447 | ) |
| Amortization of prior service cost               |       | 108                       |       | 108 |   |
| Amortization of transitional (asset)  obligation |       | —                    |       | 1 |   |
| Recognized actuarial loss                        |       | 967                       |       | 739 |   |
| Net periodic pension cost                        |       | $                         | 3,097      |   | $ | 2,824 |   |

 

The following schedule presents net periodic pensioncost for the Company’s post-retirement benefit plan in the three months endedMarch 31, 2006 and 2005:

 
| ** **                                       | ** ** | **Post-Retirement Benefits** | ** ** |
|--------------------------------------------------|------------|-----------------------------------|------------|
| ** **                                       | ** ** | **2006**                          | ** ** | **2005** | ** ** |
| ** **                                       | ** ** | **(Unaudited)**                   | ** ** |
| Service cost                                     |       | $                                 | 29         |   | $ | 20 |   |
| Interest cost                                    |       | 122                               |       | 84 |   |
| Amortization of prior service cost               |       | 7                                 |       | 5 |   |
| Amortization of transitional (asset)  obligation |       | 7                                 |       | 5 |   |
| Recognized actuarial loss                        |       | 6                                 |       | 4 |   |
| Net periodic pension cost                        |       | $                                 | 171        |   | $ | 118 |   |

 

*Contributions*

 

During the three months ended March 31, 2006, we didnot make any contributions to our defined benefit plans and we contributedapproximately $0.2 million to our post-retirement benefit plans. During theyear ending December 31, 2006, the Company is not required to contribute to thePension Plans, but may choose to do so voluntarily, and expects to contribute approximately$0.7 million to the post-retirement benefit plan.

 

**12.    OtherCommitments and Contingencies**

 

The Company has guaranteed the payments by its Capital Trust on theRedeemable Convertible Preferred Securities in the amount of $134 million. Theguarantee is irrevocable and unconditional, and guarantees the payment in fullof all (i) distributions on the Redeemable Convertible Preferred Securities tothe extent of available funds of the Capital Trust; (ii) amounts payable uponredemption of the Redeemable Convertible Preferred Securities to the extent ofavailable funds of the Capital Trust; and (iii) amounts payable upondissolution of the Capital Trust. The guarantee is unsecured and ranks (i)subordinate to all other liabilities of the Company, except liabilities thatare 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.

 

13

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

 

**Organization of Information**

 

Management’s Discussion and Analysis provides anarrative on our financial performance and condition that should be read inconjunction with the accompanying condensed consolidated financial statements. Itincludes the following sections:

 

•                  Executive Summary

•                  Results of Operations

•                  Liquidity and Capital Resources

•                  Forward-Looking Statements

 

**Executive Summary**

 

Hearst-Argyle Television, Inc. and its subsidiaries(hereafter “we” or the “Company”) own and operate 25 network-affiliated televisionstations. Additionally, we provide management services to twonetwork-affiliated stations and one independent television station and tworadio stations (the “Managed Stations”) in exchange for a management fee.

 

*First Quarter Highlights*

 

•                  Effective January 1, 2006, the Companyadopted the fair value recognition provisions of SFAS 123(R), using themodified prospective transition method. Under that method, we are required torecord compensation expense for all stock options granted, but not yet vested,for the three months ended March 31, 2006. We determine compensation expensebased on the options’ fair value at their grant date using the Black Scholesoption-pricing model. Because we have adopted a prospective transition method,results for prior periods have not been restated. Total compensation costrecognized in the three months ended March 31, 2006 was approximately $1.9million.

 

•                  EffectiveJanuary 1, 2006, the Company has recorded local Internet advertising revenueand associated expenses, including those pursuant to an operating agreementwith Internet Broadcasting, as digital media revenue and expenses in our incomestatement. Prior to the restructuring of our relationship with InternetBroadcasting on December 22, 2005 and the resulting dissolution of the IBS/HATVLLC, we reflected our share of the IBS/HATV LLC income as equity in earnings ofaffiliates.

 

•                  In 2006, the Company’s cash balance increased$8.4 million from December 31, 2005, after capital expenditures, interest andtaxes, the funding (with cash on-hand) of a repurchase of $10 million of our 7%Senior Notes due 2018, the payment of $6.5 million of dividends to our holdersof Series A and B Common Stock and the repurchase of $0.8 million of Series ACommon Stock.

 

*Industry Trends*

 

•                  Political advertising increases ineven-numbered years, such as 2006, due to the increase in the number ofcandidates running for political office.

 

•                  Revenue from Olympic advertising occursexclusively in even-numbered years, such as 2006, with the alternating Winterand Summer Games occurring every two years. Our 10 NBC stations aired the 2006Winter Olympics in February 2006.

 

•                  The FCC has permitted broadcast televisionstation licensees to use their digital spectrum for a wide variety of servicessuch as high-definition television programming, audio, data and other types ofcommunication, subject to the requirement that each broadcaster provide atleast one free video channel equal in quality to the current technicalstandards. Our station, KOAT-TV in Albuquerque, New Mexico, currentlyleases a portion of its digital spectrum to USDTV and eight of our NBC stationscurrently broadcast the Weather Plus network, a 24/7 local and national weatherbroadcast network, on a multicast stream with their main digital channels.

 

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•                  Compensation from networks to theiraffiliates in exchange for broadcasting of network programming has been sharplyreduced in recent years and may be eliminated in the future.

 

•                  Pursuant to the Cable Television ConsumerProtection and Competition Act of 1992 (“1992 Cable Act”) and the FCC’s “mustcarry” regulations, cable operators are generally required to devote up toone-third of their activated channel capacity to the carriage of the analogsignal of local commercial television stations. We record retransmission incomeresulting from most of our cable and satellite relationships.

 

•                  The U.S. Congress passed, and the Presidentsigned into law, legislation that guides the transition from analog to digitaltelevision broadcasting. A component of this legislation is a deadline ofFebruary 17, 2009 for completion of the transition to digital broadcasting andthe return of the analog spectrum to the government. As a result, the Companyaccelerated the depreciation of certain equipment that may have a shorteruseful life as a result of the digital conversion.

 

**Results of Operations**

 

Results of operations for the three months endedMarch 31, 2006 and 2005 include the results of our 25 television stations,which were owned for the entire period presented, and the management feesderived by the three television and two radio stations managed by us for theentire period presented.

 

*Three Months Ended March 31, 2006*

*Compared to Three Months Ended March 31, 2005*

 

*Total revenue*.    Totalrevenue includes:

(i)             cash and barter advertising revenue, netof agency and national representatives’ commissions;

(ii)          network compensation;

(iii)       retransmission revenue;

(iv)      digital media revenue, which includes primarilyInternet advertising revenue and, to a lesser extent, revenue frommulticasting, such as Weather Plus; and

(v)         other revenue.

 

Total revenue in the three months ended March 31, 2006 was $174.0million as compared to $162.3 million in the three months ended March 31, 2005,an increase of $11.7 million or 7.2%. This increase was primarily attributableto the following factors:

 

(i)             a $1.4 million increase in net politicaladvertising revenue resulting from the normal, cyclical nature of thetelevision broadcasting business, in which the demand for advertising bycandidates running for political office significantly increases ineven-numbered election years (such as 2006);

(ii)          a $3.2 million increase in net digitalrevenue;

(iii)       a $3.6 million increase in retransmissionrevenue;

(iv)      an increase in the retail, financial, fast foodsand telecommunication categories; partially offset by

(v)         a 3% decrease in our largest advertisingcategory, automotive; and

(vi)      a $2.9 million decrease in network compensation.

 

*Salaries, benefits and other operating costs*.    Duringthe three months ended March 31, 2006, salaries, benefits and other operatingcosts were $96.8 million, as compared to $88.6 million in the three monthsended March 31, 2005, an increase of $8.2 million or 9.3%. This increase wasprimarily due to:

(i)             a $3.0 million increase in payroll andemployee benefits expense;

(ii)          a $2.2 million increase digital mediaexpenses; and

(iii)       a $1.0 million increase related to stock-basedcompensation expense.

 

*Amortization of program rights*.  Amortizationof program rights was $15.3 million in the three months ended March 31, 2006,as compared to $15.3 million in the three months ended March 31, 2005,substantially unchanged reflecting a stable line-up of syndicated programs.

 

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*Depreciation and amortization*.  Depreciation and amortization expense was $15.4 million in the three monthsended March 31, 2006, as compared to $13.1 million in the three months ended March31, 2005, an increase of $2.3 million or 18%. Depreciation expense was $13.9million in the three months ended March 31, 2006, as compared to $11.6 millionin the three months ended March 31, 2005, an increase of $2.3 million or 20%.Increase in depreciation expense is due to the accelerated depreciation ofanalog equipment and leasehold improvements at our corporate headquarters inanticipation of the move to the Hearst Tower in New York City in August, andcapital expenditures. Amortization expense was $1.5 million in the three monthsended March 31, 2006 and 2005, and principally results from amortizationrelated to advertiser client base and network affiliations.

 

*Corporate, general and administrativeexpenses*.    Corporate, generaland administrative expenses were $7.3 million in the three months ended March31, 2006, as compared to $5.9 million in the three months ended March 31, 2005,an increase of $1.4 million or 24%. This increase was primarily due to:

(i)                                     $0.9 millionincrease related to stock-based compensation expense; and

(ii)                                  $0.5 million increasedue to the timing of professional services expenses.

 

*Operating income.*    Operatingincome was $39.2 million in the three months ended March 31, 2006, as comparedto $39.3 million in the three months ended March 31, 2005, a decrease of $0.1million or .25%. This net decrease in operating income was due to the itemsdiscussed above.

 

*Interest expense, net.*    Interestexpense, net of interest income, was $15.2 million in the three months endedMarch 31, 2006, as compared to $15.7 million in the three months ended March31, 2005, a decrease of $0.5 million or 3% due to the repurchase of $10.0million senior notes due 2018 and an increase in interest income due toincreased cash balances.

 

*Interest expense, net – Capital Trust*.    Interestexpense, net, to our wholly-owned, unconsolidated subsidiary trust (theHearst-Argyle Capital Trust or “Capital Trust”) was $2.4 million for each ofthe three months ended March 31, 2006 and 2005.

 

*Income taxes.*    Werecorded income tax expense of $8.5 million in the three months ended March 31,2006, compared to $8.4 million in the three months ended March 31, 2005, anincrease of $0.1 million, or 1%.

 

The effective tax rate for the three months ended March 31, 2006 was39.3% as compared to 39.6% for the three months ended March 31, 2005. TheCompany expects its effective tax rate for the remaining interim periods forthe year ending December 31, 2006 to be approximately 39.5%.

 

*Equity in loss ( income) of affiliates, net*.Equity in loss (income) of affiliates, net was a loss of $0.1 million in thethree months ended March 31, 2006 as compared to income of $0.3 million in thethree months ended March 31, 2005, a decrease of $0.4 million or 1.3%. For thethree months ended March 31, 2006, our share of losses in Ripe DigitalEntertainment was offset by our share of income in Internet Broadcasting. Forthe three months ended March 31, 2005, our equity represented our share ofincome in IBS/HATV LLC.

 

*Net income*.    Netincome was $13.0 million in the three months ended March 31, 2006, as comparedto $13.1 million in the three months ended March 31, 2005, a decrease of $0.1million or .76%. This decrease was due to the items discussed above.

 

**Liquidity and Capital Resources**

 

As of March 31, 2006, our cash and cash equivalents balance was $128.5million, as compared to $120.1 million as of December 31, 2005, an increase of$8.4 million as compared to an increase of $6.8 million in the comparableperiod in the prior year. The change in cash and cash equivalents for the threemonths ended March 31, 2006 and 2005 were as follows:

 

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| ** **                                | ** ** | **Three months ended March 31,** | ** ** | **2006 v. 2005 $** | ** ** | **2006 v. 2005 %** | ** ** |
|-------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------|------------|-----------------------------------|------------|
| ** **                                | ** ** | **2006**                                             | ** ** | **2005**                          | ** ** | **Change**                        | ** ** | **Change** | ** ** |
| ** **                                | ** ** | **(Unaudited)**                                      | ** ** | ** **                        | ** ** | ** **                        | ** ** |
| ** **                                | ** ** | **(In thousands)**                              | ** ** | ** **                        | ** ** | ** **                        | ** ** |
| Net cash provided by operating activities |       | $                                                    | 38,224     |                              | $          | 34,753                            |       | $ | 3,471 |   | 10.0 | % |
| Net cash used for investing activities    |       | $                                                    | (13,125    | )                                 | $          | (8,061                            | )          | $ | 5,064 |   | 62.8 | % |
| Net cash used for financing activities    |       | $                                                    | (16,696    | )                                 | $          | (19,856                           | )          | $ | (3,160 | ) | -15.9 | % |
|                                      |       |                                                 |       |                              |       |                              |       |   |   |
| Cash and cash equivalents                 |       | $                                                    | 128,468    |                              | $          | 99,044                            |       | $ | 29,424 |   | 29.7 | % |
| Cash paid for:                            |       |                                                 |       |                              |       |                              |       |   |   |
| Interest                                  |       | 6,790                                                |       | 6,160                             |       | 630                               |       | 10.2 | % |
| Interest on Note payable to Capital Trust |       | 2,438                                                |       | 2,438                             |       | 0                                 |       | 0.0 | % |
| Taxes, net of refunds                     |       | 12,572                                               |       | 16,662                            |       | (4,090                            | )          | -24.5 | % |
| Dividends paid on common stock            |       | (6,486                                               | )          | (6,500                            | )          | (14                               | )          | -0.2 | % |
| Series A Common Stock repurchases         |       | (798                                                 | )          | (3,973                            | )          | (3,175                            | )          | -79.9 | % |

 

*OperatingActivities*

 

Net cash provided by operating activities was $38.2million in the three months ended March 31, 2006, as compared to $34.8 millionin the three months ended March 31, 2005, an increase of 3.5 million or 10.0%.This increase was primarily due to an increase in our net revenue compared tothe same period in 2005 and the timing of tax payments.

 

*InvestingActivities*

 

Net cash used in investing activities was $13.1million in the three months ended March 31, 2006, as compared to $8.1 millionin the three months ended March 31, 2005, an increase of $5.1 million orapproximately 62.8%. This increase is primarily due to additional investmentsin Internet Broadcasting and USDTV in the three months ended March 31, 2006equal to $6.5 million in the aggregate.

 

For the yearending December 31, 2006, we have approved capital expenditures totalingapproximately $77 million in property, plant and equipment, although weanticipate that actual expenditures in 2006 may be less. While the maintenanceexpenditures included in this total remain consistent with the historicallevels, the high level of capital investment relates to several specialprojects as follows:

(i)                                     $31million on building projects in Kansas City, Missouri; Baltimore, Maryland;Omaha, Nebraska; and New York City, New York;

(ii)                                  $15million on news acquisition and editing equipment;

(iii)                               $5million on information technology projects; and

(iv)                              $3million for capital expenditures related to damage caused by Hurricane Katrinaat our New Orleans, Louisiana station.

 

From 1997 to March 31, 2006, we have investedapproximately $68 million in capital expenditures related to digitalconversions, as mandated by the FCC.

 

*FinancingActivities*

 

Net cash used in financing activities was $16.7million in the three months ended March 31, 2006, as compared to $19.9 millionin the three months ended March 31, 2005, a decrease of $3.2 million. Thisdecrease was primarily due to:

(i)             theredemption of $11.3 million of our preferred stock in January 2005; and

(ii)          therepurchase of $0.8 million of Series A common stock during the three monthsended March 31, 2006 compared to $4.0 million in the three months ended March31, 2005; offset by

 

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(iii)       proceeds from stock option exercises andemployee stock purchases of $0.6 million in the three months ended March 31,2006 compared to $1.9 million in the three months ended March 31, 2005; and

(iv)      therepurchase of $10.0 million of our senior notes due 2018 in the three monthsended March 31, 2006.

 

*Credit Facility and Other Long Term Debt*

 

On April 15, 2005, we entered into a five year $250million credit facility with a consortium of banks led by JP Morgan Chase, Bankof America, Wachovia Bank, BNP Paribas and Harris Nesbitt (the “Credit Facility”).The Credit Facility can be used for general corporate purposes includingworking capital, investments, acquisitions, debt repayment and dividendpayments. The Credit Facility is a general unsecured obligation of the Company.We have not borrowed under the Credit Facility as of March 31, 2006.

 

As of March 31, 2006, our long-term debt obligations,exclusive of capital lease obligations, were $767.1 million and our currentmaturities totaled $90 million. Our long-term debt obligations bear interest ata fixed rate. The Company’s credit ratings were BBB- by Standard & Poor’sand Fitch Ratings and Baa3 by Moody’s Investors Service, as of March 31, 2006. Suchcredit ratings are considered to be investment grade.

 

Our debt obligations contain certain financial and other covenants andrestrictions on the Company. Certain of the financial covenants include creditratios such as leverage, interest coverage and consolidated net worth, but suchcovenants do not include any triggers explicitly tied to the Company’s creditratings or stock price. We are in compliance with all such covenants andrestrictions as of March 31, 2006.

 

We anticipate that our primary sources of cash, whichinclude current cash balances, cash provided by operating activities, andamounts available under our Credit Facility, will be sufficient to finance theoperating and working capital requirements of our stations, as well as our debtservice requirements, anticipated capital expenditures, and other obligationsof the Company for the next 12 months and the foreseeable future thereafter.

 

**Forward-Looking Statements**

 

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

 

•                  Changes in Federalregulation of broadcasting, including changes in Federal communications laws orregulations;

 

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

 

•                  Competition in thebroadcast television markets we serve;

 

•                  Our ability toobtain quality programming for our television stations;

 

•                  Successfulintegration of television stations we acquire;

 

•                  Pricingfluctuations in local and national advertising;

 

•                  Changes in nationaland regional economies;

 

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

 

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

 

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For a discussion ofadditional risk factors that are particular to our business, please refer tothe Risk Factors section of our Annual Report on Form 10-K for the fiscal yearended December 31, 2005. These and other matters we discuss in this report, orin the documents we incorporate by reference into this report, may cause actualresults to differ from those we describe. We undertake no obligation to updateor revise any forward-looking statements, whether as a result of newinformation, future events or otherwise.

 

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

 

As of March 31, 2006, the Company was not involved inany derivative financial instruments. However, the Company may consider certaininterest-rate risk strategies in the future.

 

As of March 31, 2006, we do not have any outstandingfloating rate debt.

 

**Item 4.    Controls and Procedures**

 

The Company’s management performed an evaluation under the supervisionand with the participation of the Company’s Chief Executive Officer (“CEO”) andChief Financial Officer (“CFO”), of the effectiveness of the disclosurecontrols and procedures (as that term is defined in Exchange Act Rule13a-15(e)) as of the end of the fiscal quarter ended March 31, 2006. Based onthat evaluation, and as of the end of the quarter for which this report ismade, the Company’s management, including the CEO and CFO, concluded that theCompany’s disclosure controls and procedures were effective. Our management,including the CEO and CFO, performed an evaluation of any changes that occurredin our internal control over financial reporting (as that term is defined inExchange Act Rule 13a-15(f)) during the fiscal quarter ended March 31, 2006. Thatevaluation did not identify any changes in the Company’s internal control overfinancial reporting that have materially affected, or are reasonably likely tomaterially affect, the Company’s internal control over financial reporting.

 

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**PART II**

**Other Information**

 

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

 

*Purchase of Equity Securities by the Issuerand Affiliated Purchasers.*The following tablereflects purchases of our Series A Common Stock made by Hearst Broadcastingduring the three months ended March 31, 2006:

 
| **Period**                    | ** ** | **(a) Total  Number of  Shares  Purchased** | ** ** | **(b) Average  Price Paid  Per Share** | ** ** | **(c) Total Number of  Shares Purchased as  Part of Publicly  Announced Program** | ** ** | **(d) Maximum Number of  Shares that May Yet Be  Purchased Under the  Program** | ** ** |
|-------------------------------|------------|-------------------------------------------------------|------------|-------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------|------------|
| January 1 – January 31   |       | 413,100                                               |       | $                                                     | 23.88      |                                                                                                                      | 413,100    |                                                                                                                         | 4,222,026  |   |
| February 1 – February 28 |       | 98,600                                                |       | $                                                     | 26.50      |                                                                                                                      | 98,600     |                                                                                                                         | 4,123,426  |   |
| March 1 – March 31       |       | 366,850                                               |       | $                                                     | 22.88      |                                                                                                                      | 366,850    |                                                                                                                         | 3,756,576  |   |
| Total                         |       | 878,550                                               |       | $                                                     | 23.75      |                                                                                                                      | 878,550    |                                                                                                                         |       |   |

 

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(1)          On September 28, 2005, Hearst increasedHearst Broadcasting’s authorization to purchase the Company’s Series A CommonStock from 20 million to 25 million shares. Hearst may effect such purchasesfrom time to time in the open market or in private transactions, subject tomarket conditions and management’s discretion.

 

As of March 31, 2006, Hearst owned approximately 48.6% of the Company’soutstanding Series A Common Stock and 100% of the Company’s Series B CommonStock representing in the aggregate approximately 71.5% of our common stock.

 

The following table reflects purchases made by the Company of itsSeries A Common Stock during the three months ended March 31, 2006.

 
| **Period**                    | ** ** | **(a) Total  Number of  Shares  Purchased** | ** ** | **(b) Average  Price Paid  per Share** | ** ** | **(c) Total Number of  Shares Purchased as  Part of Publicly  Announced Program** | ** ** | **(d) Approximate  Dollar Value of Shares  that May Yet Be  Purchased Under the  Program** | ** ** |
|-------------------------------|------------|-------------------------------------------------------|------------|-------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------|------------|
| January 1 – January 31   |       | —                                                |       | —                                                |       | —                                                                                                                    |       |                                                                                                                                    | ** ** |
| February 1 – February 28 |       | 10,500                                                |       | $                                                     | 23.91      |                                                                                                                      | 10,500     |                                                                                                                                    | $          | 198,714,775 | ** ** |
| March 1 – March 31       |       | 22,950                                                |       | $                                                     | 23.83      |                                                                                                                      | 22,950     |                                                                                                                                    | $          | 198,691,825 | ** ** |
| Total                         |       | 33,450                                                |       | $                                                     | 23.86      |                                                                                                                      | 33,450     |                                                                                                                                    |       | ** ** |

 

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(1)          In May 1998, the Company’s Board of Directorsauthorized the repurchase of up to $300 million of its outstanding Series ACommon Stock. Such purchases may be effected from time to time in the openmarket or in private transactions, subject to market conditions and management’sdiscretion. As of March 31, 2006, the Company has spent approximately $108.8million to repurchase approximately 4.4 million shares of Series A Common Stockat an average price of $24.96. There can be no assurance that such repurchaseswill occur in the future or, if they do occur, what the terms of suchrepurchases will be.

 

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

 

 
|       | **HEARST-ARGYLE TELEVISION, INC.** |
|------------|------------------------------------|
| ** ** | ** **                         | ** ** |
|       |                               |   |
|       | By:                                | /s/    JONATHAN C.  MINTZER |
|       |                               | Name: Jonathan C. Mintzer  Title: Vice President, General Counsel and Secretary |
| ** ** | ** **                         | ** ** |
|       | Dated:                             | May 3, 2006 |
|            |                                    |  |  |

 
| **Name**                                  | ** ** | **Title**                                                  | ** ** | **Date**    |
|-------------------------------------------|------------|------------------------------------------------------------|------------|-------------|
|                                      |       |                                                       |       |        |
| /s/    HARRY T. HAWKS |       | Executive Vice President                                   |       | May 3, 2006 |
| Harry T. Hawks                            |       | and Chief Financial Officer  (Principal Financial Officer) |       |        |
|                                      |       |                                                       |       |        |
|                                      |       |                                                       |       |        |
|                                      |       |                                                       |       |        |
| /s/    LYDIA G. BROWN |       | Corporate Controller                                       |       | May 3, 2006 |
| Lydia G. Brown                            |       | (Principal Accounting Officer)                             |       |        |

 

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