**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

** **

**Form 10-Q**

**(Mark One)**

**x**                              QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

** **

**For The Quarterly PeriodEnded September 30, 2006**

** **

**or**

** **

**o**                                 TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

** **

**For the transition period from:    **NotApplicable

** **

**Commission file number1-14776**

** **

**Hearst-Argyle Television, Inc.**

(Exact Name of Registrantas Specified in Its Charter)

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

 

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

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

 

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

None

 

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

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

| Large accelerated  filer  o |   | Accelerated  filer  x |   | Non-accelerated  filer  o |
|---------------------------------------|--------|---------------------------------|--------|-------------------------------------|

 

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o   No x

Shares of the registrant’s common stock outstanding asof October 23, 2006: 92,720,765 shares (consisting of 51,422,117 shares ofSeries A Common Stock and 41,298,648 shares of Series B Common Stock).

 

 

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**Hearst-ArgyleTelevision, Inc.**

**Index**
|                  | ** ** | ** **                                                                                                                                          | ** ** | **Page  No.** |
|------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------|
| **Part I**  | ** ** | **Financial Information**                                                                                                                      |       |          |   |   |
| ** **       | ** ** | ** **                                                                                                                                          |       |          |   |   |
| **Item 1.** | ** ** | **Financial  Statements**                                                                                                                           |       |          |   |   |
|             |       | Condensed Consolidated Balance Sheets as of September  30, 2006 (unaudited) and December 31, 2005 |       |          | 1 |   |
|             |       | Condensed Consolidated Statements of Income for the  Three and Nine Months Ended September 30, 2006 and 2005 (unaudited)                  |       |          | 2 |   |
|             |       | Condensed Consolidated Statements of Cash Flows for  the Nine Months Ended September 30, 2006 and 2005 (unaudited)                        |       |          | 3 |   |
|             |       | Notes to Condensed Consolidated Financial Statements                                                                                                |       |          | 4 |   |
|             |       |                                                                                                                                                |       |          |   |   |
| **Item 2.** | ** ** | **Management’s Discussion and Analysis of Financial  Condition and Results of Operations**                                                     |       |          | 18 |   |
|             |       |                                                                                                                                                |       |          |   |   |
| **Item 3.** | ** ** | **Quantitative and Qualitative Disclosures about Market  Risk**                                                                                     |       |          | 24 |   |
|             |       |                                                                                                                                                |       |          |   |   |
| **Item 4.** | ** ** | **Controls and Procedures**                                                                                                                         |       |          | 24 |   |
|             |       |                                                                                                                                                |       |          |   |   |
|             |       |                                                                                                                                                |       |          |   |   |
| **Part II**      | ** ** | **Other Information**                                                                                                                               |       |          |   |   |
|             |       |                                                                                                                                                |       |          |   |   |
| **Item 2.** | ** ** | **Unregistered Sales of Equity Securities, Use of  Proceeds and Issuer Purchases of Equity Securities**                                             |       |          | 25 |   |
| ** **       |       |                                                                                                                                                | ** ** | ** **    | ** ** |   |
| **Item 6.** | ** ** | **Exhibits**                                                                                                                                        |       |          | 26 |   |
| ** **       |       |                                                                                                                                                |       |          |   |   |
| **Signatures**   |       |                                                                                                                                                | 27         |          |

 

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**PART IFINANCIAL INFORMATION**

**Item 1. FinancialStatements**

**HEARST-ARGYLETELEVISION, INC.Condensed Consolidated Balance Sheets**
| ** **                                       | ** ** | **September 30, 2006**                          | ** ** | **December 31, 2005** | ** ** |
|--------------------------------------------------|------------|-----------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                       | ** ** | **(unaudited)**                                           | ** ** | ** **                      | ** ** |
| ** **                                       | ** ** | **(In thousands, except share data)** | ** ** |
| **Assets**                                       | ** ** | ** **                                                | ** ** | ** **                      | ** ** |
| Current assets:                                  |       |                                                      |       |                            |       |
| Cash and cash  equivalents                       |       | $                                                         | 80,804     |                            | $          | 120,065 |   |
| Accounts  receivable, net                        |       | 144,275                                                   |       | 157,672                         |       |
| Program and  barter rights                       |       | 90,838                                                    |       | 46,807                          |       |
| Deferred income  tax asset                       |       | 4,029                                                     |       | 4,029                           |       |
| Other                                            |       | 7,368                                                     |       | 9,153                           |       |
| Total current  assets                            |       | 327,314                                                   |       | 337,726                         |       |
| Property, plant and  equipment, net              |       | 291,173                                                   |       | 279,239                         |       |
| Intangible assets, net                           |       | 2,476,533                                                 |       | 2,396,086                       |       |
| Goodwill                                         |       | 859,850                                                   |       | 731,687                         |       |
| Other assets:                                    |       |                                                      |       |                            |       |
| Deferred  financing costs, net                   |       | 9,823                                                     |       | 11,276                          |       |
| Investments                                      |       | 39,734                                                    |       | 31,321                          |       |
| Program and  barter rights, noncurrent           |       | 17,852                                                    |       | 1,312                           |       |
| Pension and  other assets                        |       | 37,649                                                    |       | 43,712                          |       |
| Total other  assets                              |       | 105,058                                                   |       | 87,621                          |       |
| Total assets                                     |       | $                                                         | 4,059,928  |                            | $          | 3,832,359 |   |
| ** **                                       | ** ** | ** **                                                | ** ** | ** **                      | ** ** |
| **Liabilities and Stockholders’  Equity**   | ** ** | ** **                                                | ** ** | ** **                      | ** ** |
| Current liabilities:                             |       |                                                      |       |                            |       |
| Current portion  of long-term debt               |       | $                                                         | 90,047     |                            | $          | 90,047 |   |
| Accounts payable                                 |       | 14,024                                                    |       | 15,256                          |       |
| Accrued  liabilities                             |       | 57,472                                                    |       | 51,133                          |       |
| Program and  barter rights payable               |       | 90,803                                                    |       | 47,285                          |       |
| Payable to  Hearst Corporation, net              |       | 10,298                                                    |       | 6,981                           |       |
| Other                                            |       | 14,110                                                    |       | 6,868                           |       |
| Total current  liabilities                       |       | 276,754                                                   |       | 217,570                         |       |
| Program and barter  rights payable, noncurrent   |       | 22,025                                                    |       | 1,818                           |       |
| Long-term debt                                   |       | 867,135                                                   |       | 777,170                         |       |
| Note payable to Capital  Trust                   |       | 134,021                                                   |       | 134,021                         |       |
| Deferred income tax  liability                   |       | 856,142                                                   |       | 845,272                         |       |
| Other liabilities                                |       | 40,804                                                    |       | 35,049                          |       |
| Total noncurrent  liabilities                    |       | 1,920,127                                                 |       | 1,793,330                       |       |
| Commitments and  contingencies                   |       |                                                      |       |                            |       |
| Stockholders’ equity:                       |       |                                                      |       |                            |       |
| Preferred Stock                                  |       | —                                                    |       | —                          |       |
| Series A common  stock                           |       | 559                                                       |       | 557                             |       |
| Series B common  stock                           |       | 413                                                       |       | 413                             |       |
| Additional paid-in  capital                      |       | 1,300,645                                                 |       | 1,291,388                       |       |
| Retained earnings                                |       | 678,523                                                   |       | 643,414                         |       |
| Accumulated other  comprehensive loss, net       |       | (6,309                                                    | )          | (6,309                          | )          |
| Treasury stock, at cost                          |       | (110,784                                                  | )          | (108,004                        | )          |
| Total  stockholders’ equity                 |       | 1,863,047                                                 |       | 1,821,459                       |       |
| Total liabilities and  stockholders’ equity |       | $                                                         | 4,059,928  |                            | $          | 3,832,359 |   |

 

See notes to condensed consolidated financialstatements.

 

1

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**HEARST-ARGYLETELEVISION, INC.**

**CondensedConsolidated Statements of Income**
| ** **                                       | ** ** | **Three Months Ended September 30,**           | ** ** | **Nine Months Ended September 30,** | ** ** |
|--------------------------------------------------|------------|--------------------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                                       | ** ** | **2006**                                                           | ** ** | **2005**                                                | ** ** | **2006** | ** ** | **2005** | ** ** |
| ** **                                       | ** ** | **(Unaudited)**                                                    | ** ** | **(Unaudited)**                                         | ** ** |
| ** **                                       | ** ** | **(In thousands, except per share data)** | ** ** |
|                                             |       |                                                               |       |                                                    |       |   |   |   |   |
| Total revenue                                    |       | $                                                                  | 182,993    |                                                    | $          | 164,173 |   | $ | 550,974 |   | $ | 514,905 |   |
| Station operating  expenses:                     |       |                                                               |       |                                                    |       |   |   |   |   |
| Salaries,  benefits and other operating costs    |       | 99,574                                                             |       | 94,050                                                  |       | 294,016 |   | 273,333 |   |
| Amortization of  program rights                  |       | 17,751                                                             |       | 15,155                                                  |       | 49,034 |   | 45,648 |   |
| Depreciation and  amortization                   |       | 14,634                                                             |       | 12,427                                                  |       | 46,103 |   | 38,861 |   |
| Corporate, general and  administrative expenses  |       | 7,868                                                              |       | 6,003                                                   |       | 22,766 |   | 17,559 |   |
| Operating income                                 |       | 43,166                                                             |       | 36,538                                                  |       | 139,055 |   | 139,504 |   |
|                                             |       |                                                               |       |                                                    |       |   |   |   |   |
| Interest expense                                 |       | 16,427                                                             |       | 16,385                                                  |       | 48,942 |   | 49,050 |   |
| Interest income                                  |       | (1,736                                                             | )          | (972                                                    | )          | (4,983 | ) | (2,174 | ) |
| Interest expense,  net—Capital Trust        |       | 2,438                                                              |       | 2,438                                                   |       | 7,313 |   | 7,313 |   |
| Other expense                                    |       | —                                                             |       | —                                                  |       | 2,501 |   | — |   |
| Income before income  taxes and equity earnings  |       | 26,037                                                             |       | 18,687                                                  |       | 85,282 |   | 85,315 |   |
|                                             |       |                                                               |       |                                                    |       |   |   |   |   |
| Income tax expense  (benefit)                    |       | 9,531                                                              |       | 7,288                                                   |       | 30,807 |   | (4,154 | ) |
| Equity in income of  affiliates, net of tax      |       | (37                                                                | )          | (279                                                    | )          | (102 | ) | (899 | ) |
| Net income                                       |       | 16,543                                                             |       | 11,678                                                  |       | 54,577 |   | 90,368 |   |
|                                             |       |                                                               |       |                                                    |       |   |   |   |   |
| Less preferred stock  dividends                  |       | —                                                             |       | —                                                  |       | — |   | 2 |   |
| Income applicable to  common stockholders        |       | $                                                                  | 16,543     |                                                    | $          | 11,678 |   | $ | 54,577 |   | $ | 90,366 |   |
|                                             |       |                                                               |       |                                                    |       |   |   |   |   |
| Income per common  share—basic              |       | $                                                                  | 0.18       |                                                    | $          | 0.13 |   | $ | 0.59 |   | $ | 0.97 |   |
| Number of common shares  used in the calculation |       | 92,721                                                             |       | 92,867                                                  |       | 92,703 |   | 92,842 |   |
|                                             |       |                                                               |       |                                                    |       |   |   |   |   |
| Income per common  share—diluted            |       | $                                                                  | 0.18       |                                                    | $          | 0.13 |   | $ | 0.59 |   | $ | 0.96 |   |
| Number of common shares  used in the calculation |       | 93,154                                                             |       | 93,254                                                  |       | 93,177 |   | 98,388 |   |
|                                             |       |                                                               |       |                                                    |       |   |   |   |   |
| Dividends per common share declared              |       | $                                                                  | 0.07       |                                                    | $          | 0.07 |   | $ | 0.21 |   | $ | 0.21 |   |

 

See notes to condensed consolidated financialstatements.

2

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**HEARST-ARGYLE TELEVISION, INC.**

**Condensed Consolidated Statements of Cash Flows**

** **
| ** **                                                                         | ** ** | **Nine months ended September 30,**                              | ** ** |
|------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------|------------|
| ** **                                                                         | ** ** | **2006**                                                                             | ** ** | **2005** | ** ** |
| ** **                                                                         | ** ** | **(Unaudited)**                                                                      | ** ** |
| ** **                                                                         | ** ** | **(In thousands)**                                                              | ** ** |
| **Operating Activities**                                                           |       |                                                                                 |       |   |   |
| Net income                                                                         |       | $                                                                                    | 54,577     |   | $ | 90,368 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |                                                                                 |       |   |   |
| Depreciation                                                                       |       | 41,505                                                                               |       | 34,355 |   |
| Amortization of  intangible assets                                                 |       | 4,598                                                                                |       | 4,506 |   |
| Amortization of  deferred financing costs                                          |       | 1,453                                                                                |       | 1,286 |   |
| Amortization of  program rights                                                    |       | 49,034                                                                               |       | 45,648 |   |
| Deferred income  taxes                                                             |       | 10,587                                                                               | ** ** | 13,165 |   |
| Equity in income  of affiliates, net                                               |       | (102                                                                                 | )          | (899 | ) |
| (Benefit from)  provision for doubtful accounts                                    |       | (593                                                                                 | )          | 1,167 |   |
| Stock-based  compensation expense                                                  |       | 5,764                                                                                | ** ** | — | ** ** |
| Investment write  down                                                             |       | 2,501                                                                                | ** ** | — | ** ** |
| Gain on  disposition of assets                                                     |       | (812                                                                                 | )          | — | ** ** |
| Dividends  received from affiliates                                                |       | —                                                                               | ** ** | 2,504 | ** ** |
| Program payments                                                                   |       | (48,816                                                                              | )          | (47,467 | ) |
| Changes in  operating assets and liabilities                                       |       |                                                                                 |       |   |   |
| Decrease in  Accounts receivable                                                   |       | 13,208                                                                               |       | 6,552 |   |
| Decrease  (increase) in Other assets                                               |       | 7,925                                                                                |       | (9,608 | ) |
| Increase  (decrease) in Accounts payable and accrued liabilities                   |       | 4,090                                                                                |       | (8,280 | ) |
| Increase  (decrease) in Other liabilities                                          |       | 9,363                                                                                | ** ** | (35,799 | ) |
| Net cash provided by  operating activities                                         |       | 154,282                                                                              |       | 97,498 |   |
| **Investing Activities**                                                           |       |                                                                                 |       |   |   |
| Purchases of property,  plant and equipment                                        |       | (38,288                                                                              | )          | (24,706 | ) |
| Cash proceeds from  insurance recoveries                                           |       | 1,594                                                                                |       | — |   |
| Acquisition of WKCF                                                                |       | (217,385                                                                             | )          | — |   |
| Investment in  affiliates and other, net                                           |       | (10,681                                                                              | )          | (6,387 | ) |
| Net cash used in  investing activities                                             |       | (264,760                                                                             | )          | (31,093 | ) |
| **Financing Activities**                                                           |       |                                                                                 |       |   |   |
| Dividends paid on  preferred stock                                                 |       | —                                                                               |       | (2 | ) |
| Dividends paid on  common stock                                                    |       | (19,464                                                                              | )          | (19,505 | ) |
| Series A Common Stock  repurchases                                                 |       | (2,780                                                                               | )          | (9,361 | ) |
| Redemption of preferred  stock                                                     |       | —                                                                               |       | (11,251 | ) |
| Principal payments  & repurchase of long term debt                             |       | (10,035                                                                              | )          | (39 | ) |
| Borrowings on credit  facility                                                     |       | 100,000                                                                              |       | — |   |
| Proceeds from employee  stock purchase plan & stock option exercises           |       | 3,496                                                                                |       | 8,239 |   |
| Net cash provided by  (used in) financing activities                               |       | 71,217                                                                               |       | (31,919 | ) |
|                                                                               |       |                                                                                 |       |   |   |
| (Decrease) increase in  cash and cash equivalents                                  |       | (39,261                                                                              | )          | 34,486 |   |
| Cash and cash  equivalents at beginning of period                                  |       | 120,065                                                                              |       | 92,208 |   |
| Cash and cash  equivalents at end of period                                        |       | $                                                                                    | 80,804     |   | $ | 126,694 |   |
|                                                                               |       |                                                                                 |       |   |   |
| **Supplemental  Cash Flow Information:**                                           |       |                                                                                 |       |   |   |
| **Business  acquired in purchase transaction-**                                    |       |                                                                                 |       |   |   |
| Acquisition of WKCF:                                                               |       |                                                                                 |       |   |   |
| Fair  market value of assets acquired                                              |       | $         244,072                       |       | $                  — |   |
| Fair  market value of liabilities assumed                                          |       | (26,687                                                                              | )          | — |   |
| Net cash paid for WKCF                                                             |       | $         217,385                       |       | $                  — |   |
| **Cash paid  during the period for:**                                              |       |                                                                                 |       |   |   |
| Interest                                                                           |       | $           37,745            |       | $           37,859 |   |
| Interest  on Note payable to Capital Trust                                         |       | $             7,313 |       | $             7,313 |   |
| Taxes,  net of refunds                                                             |       | $           26,656            |       | $           35,717 |   |
| **Non-cash  investing and financing activities:**                                  |       |                                                                                 |       |   |   |
| Accrued property, plant  & equipment purchases                                 |       | $             7,645 |       | $                308 |   |

 

See notes to condensed consolidated financialstatements.

3

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

**1.    Basis ofPresentation**

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

Theaccompanying unaudited condensed consolidated financial statements do notinclude all of the information and notes required by accounting principlesgenerally accepted in the United States of America for complete financialstatements and should be read in conjunction with the Company’s consolidatedfinancial statements included in the Annual Report on our Form 10-K for theyear ended December 31, 2005.  In theopinion of management, all adjustments considered necessary for a fairpresentation have been included and are normal and recurring in nature.  Operating results for the three and ninemonths ended September 30, 2006 and 2005 are not necessarily indicative of theresults that may be expected for the full year.

Forcomparability, certain immaterial prior year amounts have been reclassified inthe condensed consolidated statements of cash flows to conform to the 2006presentation.  On the condensedconsolidated statements of income, we have reclassified Equity in income ofaffiliates, net of tax from Income before income taxes to below Income taxexpense (benefit).  As a result, we havereclassified amounts from 2005 to conform to this presentation. Additionally,we have reclassified interest income as a separate component of income beforeincome taxes and equity. These reclassifications had no impact on reported netincome.

**2.    RecentDevelopments and Accounting Pronouncements**

*WKCF-TV Clermont, Florida (“WKCF-TV”)  *On August 31, 2006, theCompany purchased the assets related to broadcast television station WKCF-TV, aCW affiliate in Orlando, Florida, for $217.4 million in cash funded with acombination of cash on hand and a borrowing of $100 million under the Company’s$250 million Credit Facility. The Company has recorded a preliminary estimateof the fair value of assets acquired and liabilities assumed, including $128.2million in goodwill and $83.6 million in FCC licenses as of September 30, 2006.These amounts along with amounts recorded for programming rights and certainother intangible assets are subject to change upon receipt of a final valuationreport from a third party valuation firm. The condensed consolidated financial statements include one month’sresults from WKCF-TV Orlando.

*Investment in Ripe Digital Entertainment, Inc.*  On August 14, 2006, the Company made anadditional investment of $4.1 million in Ripe Digital Entertainment, Inc. (“RipeTV”) resulting in a total investment of $9.1 million which represents a 24.7%ownership interest.   In addition, theCompany has committed to invest an additional $1.9 million in Ripe TV in2007.  Ripe TV was formed in 2003 tostart an advertising-supported digital video-on-demand program network.  Launched in October 2005, the program servicetargets men aged 18-34 and is available for distribution via digital cable,broadband, Internet and/or wireless systems. Since July 27, 2005, Steven A. Hobbs, Executive Vice President and ChiefLegal and Development Officer, and since August 14, 2006, Terry Mackin,Executive Vice President, have served on the Board of Directors of Ripe TV,from which they do not receive compensation for their services.  We account for this investment using theequity method.

*Hearst Lease  *On May 5, 2006, the Company entered into a LeaseAgreement with Hearst Corporation (“Hearst”). Under the Lease Agreement, theCompany has leased one floor of the newly constructed Hearst Tower in Manhattanlocated at 300 W. 57th Street, New York, NY for its corporateoffices. The term of the lease commenced August 1, 2006, and the lease term is11 years.  The Company incurred $6.9million in construction costs and other capital expenditures related to theleasehold improvement of its new corporate office.  Under the terms of the lease we are entitledto a tenant improvement allowance of $1.9 million.  We expect to record approximately $1.4million in rent expense annually under the terms of the Lease Agreement withHearst, net of the tenant improvement allowance, which allowance we willamortize over the lease term.

4

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** **

*USDTV Impairment*   On January 27, 2006, the Company investedapproximately $1 million in U.S. Digital Television, Inc. (“USDTV”), bringingits total ownership interest to $2.5 million or 6.175%. USDTV was formed toprovide a national digital subscription-based television programmingdistribution service using portions of the digital television spectrum.  In July 2006, USDTV filed for Chapter 7bankruptcy and the Company wrote off its investment of $2.5 million andincluded the write off in Other Expense for the quarter ended June 30, 2006 inthe accompanying condensed consolidated statements of income. In September2006, USDTV sold substantially all its assets to a third party and assigned itsspectrum lease with KOAT, our Albuquerque, New Mexico station, to the buyer.

*Investment in Internet Broadcasting Systems, Inc. *During both periodspresented the Company had an investment in Internet Broadcasting Systems, Inc.(“Internet Broadcasting”) and, during the nine months ended September 30, 2005,the Company had an investment in IBS/HATV LLC, the parent company of 26wholly-owned subsidiary limited liability companies each associated with localtelevision websites.   InternetBroadcasting operates a national network of station Internet sites and designs,develops and operates station Internet sites under operating agreements.  IBS/HATV LLC owned the Internet sites foreach of the Company’s television stations. On December 22, 2005, the Company restructured its investment inInternet Broadcasting and the IBS/HATV LLC relationship.  As part of the restructuring, IBS/HATV LLCand its subsidiaries were dissolved resulting in the recognition of localwebsite operating results directly on the books of the Company’s televisionstations while the operating results of the network component of these websitesis recognized on the books of Internet Broadcasting commencing in January 2006.In addition, 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 account for its investment in InternetBroadcasting using the equity method.

*Digital Television Transition. *The U.S. Congress passed,and the President signed into law, legislation that guides the transition fromanalog to digital television broadcasting. A component of this legislation is adeadline of February 17, 2009 for completion of the transition to digitalbroadcasting and the return of the analog spectrum to the government.  As a result, the Company accelerated thedepreciation of certain equipment that is affected by the digital conversion.

*Financial Interpretation No. 48, Accounting for Uncertainty in Income Taxes*(“FIN 48”).*    *In June 2006, the FinancialAccounting Standards Board (“FASB”) issued FIN 48, which clarifies theaccounting for uncertainty in income taxes by prescribing a recognitionthreshold for tax positions taken or expected to be taken in a tax return.  FIN 48 is effective for fiscal yearsbeginning after December 31, 2006.  Weare currently evaluating the impact FIN 48 will have on our financial positionand results of operations.

*Statement of Financial Accounting Standards No.157, Fair Value Measurements* (“SFAS 157”).   In September 2006, the FASB issued SFAS157, which applies whenever other standards require (or permit) assets orliabilities to be measured at fair value. SFAS 157 establishes a fair value hierarchy that prioritizes theinformation used to develop the assumption that market participants would usewhen pricing an asset or liability.  SFAS157 is effective for fiscal years beginning after November 15, 2007 and interimperiods within those fiscal years. We do not believe the adoption of SFAS 157will have a material impact on our financial position or results of operations.

*Statement of Financial Accounting Standards No.158, Employers’ Accounting for Defined Benefit Pension and OtherPostretirement Plan* (“SFAS 158”).  In September 2006, the FASB issuedSFAS 158, which requires employers to fully recognize the obligationsassociated with single-employer defined benefit pension, retiree healthcare andother postretirement plans in their financial statements.  It requires employers to recognize anasset or liability for a plan’s overfunded or underfunded status, measure aplan’s assets and obligations that determine its funded status as of the end ofthe employer’s fiscal year and recognize in comprehensive income changes in thefunded status of a defined benefit postretirement plan in the year in whichchanges occur.  The requirement to recognize the funded status of abenefit plan and the disclosure requirements are effective for fiscalyears ending after December 15, 2006.  The requirement to measureplan assets and benefit obligations as of the date of the employer’sfiscal year end is effective for all years ending after December 15, 2008.  We are currently evaluating the impact SFAS158 will have on our financial position and results of operations.

5

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** **

*Staff Accounting Bulletin No. 108, Considering the Effects of Prior YearMisstatements when Quantifying Misstatements in Current Year FinancialStatements*(“SAB 108”).** In September 2006, the Staff of the SEC issuedSAB 108*.* SAB 108 provides guidance on the considerationof the effects of prior year misstatements in quantifying current yearmisstatements for the purpose of determining whether the current year’sfinancial statements are materially misstated. SAB 108 is effective for fiscalyears ending after November 15, 2006. We do not believe the adoption of SAB 108will have a material impact on our financial statements.

**3.    Stock-BasedCompensation**

OnJanuary 1, 2006, the Company adopted FASB Statement No. 123(R), *Share-Based Payment* (“SFAS 123(R)”) using a modified prospectivetransition method. Accordingly, because we have adopted a prospective methodprior periods have not been restated. For the three and nine months endedSeptember 30, 2006, the adoption of SFAS 123(R) resulted in incrementalstock-based compensation expense, as well as a decrease in income before incometaxes of $1.9 million and $5.8 million, and a decrease in net income of $1.1million and $3.5 million, respectively. Additionally, the incremental stock-based compensation expense causedbasic earnings per share to decrease by $0.01 for the three months endedSeptember 30, 2006 and $0.04 for the nine months ended September 30, 2006, anddiluted earnings per share to decrease by $0.01 for the three months endedSeptember 30, 2006 and $0.03 for the nine months ended September 30, 2006.

Prior to the adoption of SFAS 123(R), the Companyapplied Accounting Principles Board Opinion No. 25, *Stock Issuedto Employees*(“APB 25”), to account for its stock-based awards, andthe disclosure-only provisions of FASB Statement No. 123, *Accountingfor Stock-Based Compensation*, as amended (“SFAS 123”), to presentstock-based compensation disclosure. Under APB 25, because the exercise price of the Company’s employee stockoptions equaled the market price of the underlying stock on the date of grant,the stock options had no intrinsic value and therefore no compensation expensewas recognized.  The following tabledetails the pro forma effects on net income and earnings per share for thethree and nine months ended September 30, 2005 had compensation expense beenrecorded based on the fair value method under SFAS 123, utilizing theBlack-Scholes option valuation model:
| ** **                                                                                                                  | ** ** | **Three Months  Ended**     | ** ** | **Nine Months  Ended**      | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|----------------------------------|------------|
| ** **                                                                                                                  | ** ** | **September 30, 2005** | ** ** | **September 30, 2005** | ** ** |
| Net income                                                                                                                  |       | $                                | 11,678     |                             | $          | 90,368 |   |
| Less:                                                                                                                       |       |                             |       |                             |       |
| Total stock-based  employee compensation expense determined under the fair value method for all  awards, net of related tax |       | (1,197                           | )          | (3,625                           | )          |
| Pro forma net income                                                                                                        |       | $                                | 10,481     |                             | $          | 86,743 |   |
| Less: Preferred stock  dividends                                                                                            |       | —                           |       | (2                               | )          |
| Pro forma net income  applicable to common stockholders (Basic)                                                             |       | $                                | 10,481     |                             | $          | 86,741 |   |
|                                                                                                                        |       |                             |       |                             |       |
| Add:                                                                                                                        |       |                             |       |                             |       |
| Interest  Expense, Net - Capital Trust, net of tax                                                                          |       | —                           |       | 4,461                            |       |
| Pro forma net income  applicable to common stockholders (Diluted)                                                           |       | $                                | 10,481     |                             | $          | 91,202 |   |
|                                                                                                                        |       |                             |       |                             |       |
| Earnings per share:                                                                                                         |       |                             |       |                             |       |
| Basic—as  reported                                                                                                     |       | $                                | 0.13       |                             | $          | 0.97 |   |
| Basic—pro forma                                                                                                        |       | $                                | 0.11       |                             | $          | 0.93 |   |
|                                                                                                                        |       |                             |       |                             |       |
| Diluted—as  reported                                                                                                   |       | $                                | 0.13       |                             | $          | 0.96 |   |
| Diluted—pro  forma                                                                                                     |       | $                                | 0.11       |                             | $          | 0.93 |   |

 

6

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** **

On May 5, 2004, the Company’sstockholders and Board of Directors approved the 2004 Long Term IncentiveCompensation Plan, which the Board further amended in July 2006 (as amended,the “Incentive Compensation Plan”).  TheIncentive Compensation Plan is intended to replace the Amended and Restated1997 Stock Option Plan (the “Stock Option Plan”) and all grants made after May5, 2004 are made under the new Incentive Compensation Plan.  Under the Incentive Compensation Plan theCompany may award various forms of incentive compensation, including stockoptions and restricted stock, to officers, other key employees and non-employeedirectors of the Company and its subsidiaries. The Company reserved for issuance under the Incentive Compensation Plan3.6 million shares of Series A Common Stock. As of September 30, 2006, under the Incentive Compensation Plan stockoptions were granted with exercise prices equal to the market price of theunderlying stock as of the date of grant. Each option is exercisable after the period or periods specified in the applicableoption agreement, but no option can be exercised after the expiration of 10years from the date of grant.  Generally,options 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 of Series A Common Stock were reserved for issuance.  Under the Stock Option Plan, stock optionswere granted with exercise prices equal to the market price of the underlyingstock on the date of grant.  Generally,options granted prior to December 2000 either (i) cliff-vest after three yearscommencing on the effective date of the grant or (ii) vest either after nineyears or in one-third increments upon attainment of certain market price goalsof the Company’s Series A Common Stock. Options granted in December 2000 vestin one-third increments per year commencing one year from the date of thegrant.  Generally, options granted afterDecember 2000 cliff-vest after three years commencing on the effective date ofthe grant.   All options granted pursuantto the Stock Option Plan will expire no later than ten years from the date ofgrant.

A summary of the status ofthe Company’s Stock Option Plan and Incentive Compensation Plan, and changesfor the three and nine months ended September 30, 2006 and for the year endedDecember 31, 2005 is presented below (not in thousands):  
| ** **                         | ** ** | ** **  | ** ** | **Weighted Average** | ** ** |
|------------------------------------|------------|-------------|------------|---------------------------|------------|
| ** **                         | ** ** | **Options** | ** ** | **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      |   |
| Granted                            |       | 8,800       |       | 22.92                     |       |
| Exercised                          |       | (78,400     | )          | 18.58                     |       |
| Forfeited                          |       | (2,400      | )          | 24.89                     |       |
| Outstanding at  June 30, 2006      |       | 8,518,747   |       | $                         | 23.59      |   |
| Granted                            |       | 20,000      |       | 21.07                     |       |
| Exercised                          |       | (14,944     | )          | 20.06                     |       |
| Forfeited                          |       | (45,452     | )          | 24.20                     |       |
| Outstanding at  September 30, 2006 |       | 8,478,351   |       | $                         | 23.59      |   |
|                               |       |        |       |                      |       |
| Exercisable at  December 31, 2004  |       | 4,392,112   |       | $                         | 21.84      |   |
| Exercisable at  December 31, 2005  |       | 4,720,837   |       | $                         | 22.25      |   |
| Exercisable at  September 30, 2006 |       | 4,784,163   |       | $                         | 22.46      |   |

 

7

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The following tablesummarizes information about stock options outstanding and exercisable atSeptember 30, 2006 (not in thousands):
| ** **                             | ** ** | **Options Outstanding**                                      | ** ** |
|----------------------------------------|------------|-------------------------------------------------------------------|------------|
| **Range of Exercise Prices** | ** ** | **Number Outstanding  at September 30, 2006** | ** ** | **Weighted Average  Remaining  Contractual Life** | ** ** | **Intrinsic Value of In  the money options at  September 30, 2006** | ** ** | **Weighted Average  Exercise Price** | ** ** |
| $18.56-$21.59                          |       | 2,456,818                                                         |       | 4.59 |   | $ | 8,373,266 |   | $ | 19.54 |   |
| $22.08-$24.89                          |       | 2,393,511                                                         |       | 7.81 |   | $ | 15,530 |   | $ | 24.08 |   |
| $25.13-$26.81                          |       | 3,465,908                                                         |       | 5.51 |   | — |   | $ | 25.83 |   |
| $27.75-$29.00                          |       | 148,114                                                           |       | 1.47 |   | — |   | $ | 28.87 |   |
| $35.25-$36.44                          |       | 14,000                                                            |       | 1.86 |   | — |   | $ | 36.44 |   |
|                                   |       | 8,478,351                                                         |       | 5.81 |   | $ | 8,388,796 |   | $ | 23.59 |   |

 
| ** **                                  | ** ** | **Options Exercisable**                              | ** ** |
|---------------------------------------------|------------|-----------------------------------------------------------|------------|
| **Range of Exercise Prices** | ** ** | **Number  Exercisable At  September 30,  2006** | ** ** | **Weighted Average  Remaining  Contractual Life** | ** ** | **Intrinsic Value of In  the money options at  September 30, 2006** | ** ** | **Weighted Average  Exercise Price** | ** ** |
| $18.56-$21.59                               |       | 2,436,818                                                 |       | 4.54 |   | $ | 8,335,666 |   | $ | 19.53 |   |
| $22.08-$24.89                               |       | 1,106,011                                                 |       | 6.22 |   | $ | 13,980 |   | $ | 24.08 |   |
| $25.13-$26.81                               |       | 1,095,720                                                 |       | 1.76 |   | — |   | $ | 26.37 |   |
| $27.75-$29.00                               |       | 131,614                                                   |       | 1.35 |   | — |   | $ | 28.93 |   |
| $35.35-$36.44                               |       | 14,000                                                    |       | 1.86 |   | — |   | $ | 36.44 |   |
|                                        |       | 4,784,163                                                 |       | 4.20 |   | $ | 8,349,646 |   | $ | 22.46 |   |

 

Under SFAS No. 123(R), options are valued at their date of grant andthen expensed over their vesting period. The values of the Company’s options were calculated at the date of grantusing the Black-Scholes option-pricing model for options granted in 2006and 2005.  The weighted average grant date fair value of options granted was $6.13and $6.78 for the three and nine months ended September 30, 2006. The weightedaverage grant date fair value of options granted was $7.90 and $7.88 for thethree and nine months ended September 30, 2005. The total intrinsic value (thedifference between market price and exercise price) of options exercised during the three and nine months ended September30, 2006 was $0.04 million and $0.4 million, respectively. The total intrinsicvalue (the difference between market price and exercise price) of options exercised during the three andnine months ended September 30, 2005 was $0.7 million and $2.3 million,respectively. The total fair value of shares vested during the three and ninemonth period ended September 30, 2006 was $0.2 million and $0.6 million,respectively. The total fair value of shares vested during the three and ninemonth period ended September 30, 2005 was $0.2 million and $0.3 million,respectively.

Thefollowing assumptions were used in the Black Scholes option-pricing model tovalue options granted during the three months ended September 30, 2006 and2005:

|                          | ** ** | **2006**       | ** ** | **2005**       | ** ** |
|--------------------------|------------|----------------|------------|----------------|------------|
| Expected life            |       | 5.9 years |       | 5.0 years |       |
| Volatility  factor       |       | 24.00          | %          | 30.14          | %          |
| Risk-free  interest rate |       | 4.89           | %          | 3.72           | %          |
| Dividend yield           |       | 1.33           | %          | 0.94           | %          |

 

8

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The expected life of optionsgranted was estimated based on the historical exercise behavior of employees.The expected volatility factor was based on historical volatility correspondingto the expected life for a period equal to the stock option’s expected life.The risk-free interest rate is based on the U.S. treasury yield curve in effectat the time of the grant.

Under the Incentive CompensationPlan, the Company awarded an aggregate of 5,000 restricted stock units tocertain non-employee directors during the three and nine months ended September30, 2006.  These units will vest twoyears from their grant date.  The fairvalue is equal to the market value on the date of grant.  A summary of the outstanding unvestedrestricted stock units as of September 30, 2006 and activity during the threeand nine months ended September 30, 2006 is presented below:

|                                | ** ** | **Restricted Stock Outstanding**           | ** ** |
|--------------------------------|------------|------------------------------------------------------|------------|
| ** **                     | ** ** | **Number of Restricted  Stock Units** | ** ** | **Weighted Average  Common Stock Price** | ** ** |
| Balance at  January 1, 2006    |       |                                                 |       |   |   |
| Granted                        |       | 5,000                                                |       | $ | 21.07 |   |
| Vested                         |       | —                                               |       | — |   |
| Forfeited                      |       | —                                               |       | — |   |
| Balance at  September 30, 2006 |       | 5,000                                                |       | $ | 21.07 |   |

 

The grant date fair value ofrestricted stock units granted during the three months ended September 30, 2006was $21.07.  Because this is a time basedaward, the expense is charged ratably over the vesting period.

The total compensation costof share-based awards recognized for the three and nine months ended September30, 2006 was $1.9 million and $5.8 million, respectively. The total tax benefitrelated thereto was $0.7 million and $2.3 million for the three and nine monthsended September 30, 2006, respectively. As of September 30, 2006, there was$9.4 million of total unrecognized compensation cost related to unvestedshare-based compensation awards granted under the stock option plans which doesnot include the effect of future grants of equity compensation, if any. Of thetotal $9.4 million, we expect to recognize approximately 16% in the remainderof 2006, 55% in 2007, and 29% in 2008, assuming average forfeitures. Wereceived $0.3 million and $1.8 million upon the exercise of stock optionsduring the three and nine month period ended September 30, 2006, and wereceived $2.1 million and $6.5 million upon the exercise of stock optionsduring the three and nine month period ending September 30, 2005, respectively.

**4.    Long-TermDebt**

Long-term debt as ofSeptember 30, 2006 and December 31, 2005 consisted of the following:  
| ** **                 | ** ** | **September 30, 2006** | ** ** | **December 31, 2005** | ** ** |
|----------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                 | ** ** | **(Unaudited)**                  | ** ** | ** **                      | ** ** |
| Revolving credit  facility |       | $                                | 100,000    |                            | $          | — |   |
| Senior notes               |       | 407,110                          |       | 417,110                         |       |
| Private  placement debt    |       | 450,000                          |       | 450,000                         |       |
| Capital lease  obligations |       | 72                               |       | 107                             |       |
|                       |       | 957,182                          |       | 867,217                         |       |
| Less current  portion      |       | (90,047                          | )          | (90,047                         | )          |
|                       |       |                             |       |                            |       |
| Total long-term debt       |       | $                                | 867,135    |                            | $          | 777,170 |   |

 

9

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During the nine months endedSeptember 30, 2006, the Company borrowed $100 million under our revolvingcredit facility to fund our acquisition of WKCF and the Company repurchased $10million of 7.00% senior notes due 2018.

**5.    EarningsPer Share**

The calculation of basicearnings per share (“EPS”) for each period is based on the weighted averagenumber of common shares outstanding during the period.  The calculation of dilutive EPS for eachperiod is based on the weighted average number of common shares outstandingduring the period, plus the effect, if any, from the exercise of stock options,lapse of restrictions on restricted stock and conversion of preferredsecurities.  The following table setsforth a reconciliation between basic EPS and diluted EPS, in accordance withSFAS No. 128, *Earnings Per Share*.
| ** **                                                                                   | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|----------------------------------------------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                                                                   | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** |
| ** **                                                                                   | ** ** | **(Unaudited)**                  | ** ** |
| ** **                                                                                   | ** ** | **2006**                         | ** ** | **2005**                        | ** ** | **2006** | ** ** | **2005** | ** ** |
| Reported net  income                                                                         |       | $                                | 16,543     |                            | $          | 11,678 |   | $ | 54,577 |   | $ | 90,368 |   |
| Less: Preferred  stock dividends                                                             |       | —                           |       | —                          |       | — |   | (2 | ) |
| Income  applicable to common stockholders (Basic)                                            |       | $                                | 16,543     |                            | $          | 11,678 |   | $ | 54,577 |   | $ | 90,366 |   |
|                                                                                         |       |                             |       |                            |       |   |   |   |   |
| Add: Interest  Expense, Net- Capital Trust, net of tax                                       |       | $                                | —     |                            | —     |   | $ | — |   | $ | 4,461 |   |
| Income  applicable to common stockholders (Diluted)                                          |       | $                                | 16,543     |                            | $          | 11,678 |   | $ | 54,577 |   | $ | 94,827 |   |
|                                                                                         |       |                             |       |                            |       |   |   |   |   |
| Basic shares                                                                                 |       | 92,721                           |       | 92,867                          |       | 92,703 |   | 92,842 |   |
| Basic EPS                                                                                    |       | $                                | 0.18       |                            | $          | 0.13 |   | $ | 0.59 |   | $ | 0.97 |   |
|                                                                                         |       |                             |       |                            |       |   |   |   |   |
| Diluted shares                                                                               |       | 93,154                           |       | 93,254                          |       | 93,177 |   | 98,388 |   |
| Diluted EPS                                                                                  |       | $                                | 0.18       |                            | $          | 0.13 |   | $ | 0.59 |   | $ | 0.96 |   |
|                                                                                         |       |                             |       |                            |       |   |   |   |   |
| Basic shares                                                                                 |       | 92,721                           |       | 92,867                          |       | 92,703 |   | 92,842 |   |
| Add: Shares  issued upon assumed exercise of stock options                                   |       | 433                              |       | 387                             |       | 474 |   | 418 |   |
| Add: Shares  issued upon conversion of Series B Redeemable Convertible Preferred  Securities |       | —                           |       | —                          |       | — |   | 5,128 |   |
| Diluted shares                                                                               |       | 93,154                           |       | 93,254                          |       | 93,177 |   | 98,388 |   |

 

The dilution test for theRedeemable Convertible Preferred Securities related to the Capital Trust isperformed for all periods. This test considers only the total number of sharesthat could be issued if converted and does not consider either the conversionprice or the share price of the underlying common shares. For the three and ninemonths ended September 30, 2006, 5,128,205 shares of Series A Common Stock tobe issued upon the conversion of 2,600,000 shares of Series B 7.5% RedeemableConvertible Preferred Securities, related to the Capital Trust, are notincluded in the number of common shares used in the calculation of diluted EPSbecause to do so would have been anti-dilutive. For the three months endedSeptember 30, 2005, diluted shares do not include 5,128,205 common sharesunderlying the Series B Redeemable Convertible Preferred Securities because todo so would have been antidilutive. For the nine months ended September 30,2005, diluted shares include 5,127,882 common shares underlying the Series BRedeemable Convertible Preferred Securities. When the securities related to theCapital Trust are dilutive, the interest, net of tax, related to the CapitalTrust is added back to Income applicable to common stockholders for purposes ofthe diluted EPS calculation.

Common stock options for5,984,133 and 3,893,078 shares of Series A Common Stock (before application ofthe treasury stock method), outstanding as of September 30, 2006 and 2005,respectively, were not included in the 

10

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computation of diluted EPS because the exercise pricewas greater than the average market price of the common shares during thecalculation period.

There were no shares ofSeries A or B Preferred Stock outstanding as of September 30, 2006 and 2005 andtherefore no shares were included in the computation of diluted EPS.  The dividends for the Series A and B PreferredStock were deducted from Net income for the calculation of Basic and DilutedEPS. These shares were redeemed in full as of January 1, 2005 and therefore,one day of dividends was recorded for the three and nine months ended September30, 2005.

**6.    Goodwilland Intangible Assets**

Summarized below are the carrying value ofintangible assets and goodwill as of September 30, 2006 and December 31, 2005:
| ** **                                       | ** ** | **September 30, 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                           |       | $                                | 124,327    |                            | $          | 72,830 |   | $ | 51,497 |   | $ | 122,891 |   | $ | 70,050 |   | $ | 52,841 |   |
| Network affiliations                             |       | 95,493                           |       | 38,272                          |       | $ | 57,221 |   | 95,493 |   | 36,489 |   | 59,004 |   |
| Other                                            |       | 743                              |       | 640                             |       | $ | 103 |   | 743 |   | 605 |   | 138 |   |
| Total intangible  assets subject to amortization |       | $                                | 220,563    |                            | $          | 111,742 |   | $ | 108,821 |   | $ | 219,127 |   | $ | 107,144 |   | $ | 111,983 |   |
| Intangible assets  not subject to amortization:  |       |                             |       |                            |       |   |   |   |   |   |   |   |   |
| FCC licenses                                     |       |                             |       |                            |       | 2,367,712 |   |   |   |   |   | 2,284,103 |   |
| **Total  intangible assets, net**                |       |                             |       |                            |       | $ | 2,476,533 |   |   |   |   |   | $ | 2,396,086 |   |
| **Goodwill**                                     |       |                             |       |                            |       | $ | 859,850 |   |   |   |   |   | $ | 731,687 |   |

 

The Company’s amortizationexpense for intangible assets was approximately $1.6 million and $4.6 millionfor each of the three and nine months, respectively, ended September 30, 2006and 2005.  Estimated annual intangibleasset amortization expense is approximately $6.9 million in 2007 and $6.0million in each of the next four years.

The increase in goodwill andintangible assets is due to purchase accounting entries for the WKCF-TVacquisition, completed on August 31, 2006. The Company’s preliminary estimates resulted in $128.2 million ingoodwill and $83.6 million in FCC licenses, each of which have an indefinitelife and are therefore not amortized for book purposes but will be amortizedfor tax purposes.  Additionally, theCompany’s preliminary estimates resulted in $1.4 million in advertiser clientbase which will be amortized over a period of one year.  The goodwill and intangible asset amounts aresubject to change upon receipt of a final valuation report from a third partyvaluation firm.

**7.    IncomeTaxes**

The income tax expense forthe three and nine months ended September 30, 2006 and 2005 consisted of thefollowing:

11

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** **
| ** **         | ** ** | **Three Months Ended September 30,** | ** ** | **Nine Months Ended September 30,** | ** ** |
|--------------------|------------|----------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **         | ** ** | **2006**                                                 | ** ** | **2005**                                                | ** ** | **2006** | ** ** | **2005** | ** ** |
| ** **         | ** ** | **(Unaudited)**                                          | ** ** | **(Unaudited)**                                         | ** ** |
| Current            |       | $                                                        | 4,069      |                                                    | $          | (3,496 | ) | $ | 20,220 |   | $ | (17,319 | ) |
| Deferred           |       | 5,462                                                    |       | 10,784                                                  |       | 10,587 |   | 13,165 |   |
| Income tax expense |       | $                                                        | 9,531      |                                                    | $          | 7,288 |   | $ | 30,807 |   | $ | (4,154 | ) |

 

The effective tax rate for the three and nine monthsended September 30, 2006 was 36.6% and 36.1%, as compared to 39% and (4.9)%,for the three and nine months ended September 30, 2005, respectively.  The Company expects its effective tax ratefor the fourth quarter of 2006 to be approximately 39.5%.  The Company’s effective tax rate in a givenfinancial statement period may be materially impacted by changes in the levelof earnings as calculated by the applicable taxing jurisdictions, changes inthe expected outcome of tax audits or changes in the deferred tax valuationallowance.  The Company records reservesfor estimates of probable settlements of federal and state audits.  The Company records a valuation allowanceagainst its deferred tax assets arising from certain net operating and capitallosses when it is more likely than not that some portion or all of such losseswill not be realized.

The Company’s netdeferred income tax liability is as follows:

|                                   | ** ** | **September 30, 2006** | ** ** | **December 31, 2005** | ** ** |
|-----------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                        | ** ** | **(Unaudited)**                  | ** ** | ** **                      | ** ** |
| Deferred income tax  liability    |       | $                                | 856,142    |                            | $          | 845,272 |   |
| Deferred income tax  asset        |       | 4,029                            |       | 4,029                           |       |
| Net deferred income tax liability |       | $                                | 852,113    |                            | $          | 841,243 |   |

 

The deferred tax liabilitiesprimarily relate to differences between book and tax basis of the Company’s FCClicenses. In accordance with the adoption of FASB No. 142, *Goodwill andIntangible Assets*, effective as of January 1, 2002, the Company nolonger amortizes its FCC licenses for book purposes, but instead tests them forimpairment annually.  For tax purposes,the FCC licenses continue to be amortized over their remaining useful livesand, as a result, the deferred tax liabilities will increase over time.

**8. Common Stock**

**Common StockRepurchase**

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 beeffected from time to time in the open market or in private transactions,subject to market conditions and management’s discretion. During the threemonths ended September 30, 2006, the Company repurchased 95,700 shares of stockat a cost of $2.0 million and an average price per share of $20.71. During thenine months ended September 30, 2006, the Company repurchased 129,150 shares ofSeries A Common Stock at a cost of $2.8 million and an average per share priceof $21.52.  Between May 1998 andSeptember 30, 2006, the Company repurchased approximately 4.5 million shares ofSeries A Common Stock at a cost of approximately $110.8 million and an averageprice of $24.87.  There can be noassurance that such repurchases will occur in the future or, if they do occur,what the terms of such repurchases will be.

Hearst and its indirect wholly-owned subsidiary,Hearst Broadcasting, Inc. (“Hearst Broadcasting”), are authorized by Hearst’sBoard of Directors to purchase up to 25 million shares of the Company’s SeriesA Common Stock from time to time in the open market, in private transactions orotherwise.  As of September 30, 2006,under this plan Hearst purchased approximately 23.8 million shares of theCompany’s outstanding Series A Common Stock.

As of September 30, 2006 and December 31, 2005, Hearst’sownership of the Company’s outstanding common stock was 74.2% and 70.5%,respectively.

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**Common StockDividends**

During the ninemonths ended September 30, 2006, the Company’s Board of Directors declared acash dividend on shares of our Series A and Series B Common Stock as follows:
| **Dividend Amount** | ** ** | **Declaration Date** | ** ** | **Record Date** | ** ** | **Payment Date** | ** ** | **Total Dividend** | ** ** | **Hearst Portion** | ** ** |
|--------------------------|------------|---------------------------|------------|----------------------|------------|-----------------------|------------|-------------------------|------------|-------------------------|------------|
| $0.07                    |       | March 31, 2006            |       | April  5, 2006       |       | April  15, 2006       |       | $6,485                  |       | $4,636                  |       |
| $0.07                    |       | May 4, 2006               |       | July  5, 2006        |       | July  15, 2006        |       | $6,493                  |       | $4,768                  |       |
| $0.07                    |       | September 21, 2006        |       | October 5, 2006      |       | October 15, 2006      |       | $6,490                  |       | $4,816                  |       |

 

**9. PreferredStock**

Under the Company’s Certificate of Incorporation, TheCompany has one million authorized shares of Preferred Stock, par value $.01per share.  At September 30, 2006, therewas 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. Related PartyTransactions**

*HearstCorporation.*   As of September 30, 2006, Hearstowned approximately 53.5% of our Series A Common Stock and 100% of our Series BCommon Stock, representing in the aggregate approximately 74.2% of theoutstanding voting power of our common stock, except with regard to theelection of directors.  With regard tothe election of directors, Hearst’s ownership of our Series B Common Stockentitles Hearst to elect 11 of the 13 members of our Board of Directors. Duringthe nine months ended September 30, 2006 and 2005, we were engaged in thefollowing transactions with Hearst or parties related to Hearst:

·                        *HearstLease.  *On May 5, 2006 the Company entered into a LeaseAgreement with Hearst to lease one floor of the newly constructed Hearst Towerin Manhattan for our corporate offices. Under the terms of the lease we are entitled to a tenant improvementallowance of $1.9 million.  We expect torecord approximately $1.4 million in rent expense annually under the terms ofthe Lease Agreement with Hearst, net of the tenant improvement allowance, whichallowance we will amortize over the lease term.

·                  *ManagementAgreement*.  We recorded revenue of approximately $1.7million and $4.7 million in the three and nine months ended September 30, 2006,respectively, and $0.9 million and $3.2 million in the three and nine monthsended September 30, 2005, respectively, relating to a management agreement withHearst (the “Management Agreement”). Pursuant to the Management Agreement, weprovide certain sales, news, programming, financial and accounting managementservices for certain Hearst owned or operated television and radiostations.  Certain employees of thesemanaged stations are also participants in our stock option plans.  We believe the terms of the ManagementAgreement are reasonable to both parties; however, there can be no assurancethat more favorable terms would not be available from third parties.  Until October 3, 2006, KCWE, Kansas City, MO,was owned by a third party and managed by Hearst, which further contracted usto manage the station pursuant to the Management Agreement.  On October 3, 2006, Hearst purchased theassets of KCWE, and we continue to manage the station for Hearst pursuant tothe Management Agreement.

·                  *ServicesAgreement*.  We incurred expenses of approximately $1.8million and $4.4 million in the three and nine months ended September 30, 2006,respectively, and $1.3 million and $3.8 million in the three and nine monthsended September 30, 2005, respectively, relating to a services agreement withHearst (the “Services Agreement”). Pursuant to the Services Agreement, Hearstprovides the Company certain administrative services such as accounting,auditing, financial, legal, insurance, data processing, and employee benefitsadministration. We believe the terms of the Services Agreement are reasonableto both parties; however, there can be no assurance that more favorable termswould not be available from third parties.

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·                  *InterestExpense, Net—Capital Trust.  *We incurred interest expense, net, related to the SubordinatedDebentures issued to our wholly-owned unconsolidated subsidiary, the CapitalTrust, of $2.4 million and $7.3 million for each of the three and nine monthsended September 30, 2006 and 2005, respectively.  The Capital Trust then paid comparableamounts to its Redeemable Convertible Preferred Securities holders, includingHearst, which received $0.9 million during the nine months ended September 30,2006.

·                  *Dividendson Common Stock.*  On each of September 21, 2006, May 4,2006 and March 31, 2006, our Board of Directors declared a cash dividend of$0.07 on our Series A and Series B Common Stock for $6.5 million. Included inthese amounts were $4.8 million, $4.8 million, and $4.6 million payable toHearst. On each of September 21, 2005, May 4, 2005 and March 31, 2005, ourBoard of Directors declared a cash dividend of $0.07 on our Series A and SeriesB Common Stock for a total amount on each date of $6.5 million.  Included in these amounts were $4.5 million,$4.5 million and $4.4 million payable to Hearst, respectively.

·                  *RadioFacilities Lease.*  Pursuant to a lease agreement, Hearstpaid us approximately $0.2 million and $0.6 million for each of the three andnine months ended September 30, 2006 and 2005, respectively. Under thisagreement, Hearst leases from the Company premises for WBAL-AM and WIYY-FM,Hearst’s Baltimore, Maryland radio 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 Lifetime depend on the specific terms of theseagreements and may be fixed or variable. We recorded revenue from the agreements of $4.7 million and $13.3million in the three and nine months ended September 30, 2006 and $2.6 millionand $5.1 million in the three and nine months ended September 30 2005,respectively.

·                  *WideOrbit, Inc.  *InNovember 2004, we entered into an agreement to license from Wide Orbit Inc. (“WideOrbit”) Traffic Sales and Billing Solutions software.  Hearst owns approximately 8% of WideOrbit.  For the three and nine monthsended September 30, 2006, we paid Wide Orbit approximately $0.3 million and$0.9 million under the agreement, respectively, under the agreement. For thethree and nine months ended September 30, 2005, we paid Wide Orbitapproximately $0.5 million and $1.2 million, respectively, under the agreement.

·                  *N*ew*England Cable News*.  Two of our executiveofficers, David J. Barrett and Steven A. Hobbs serve as Hearst’srepresentatives on the management board of New England Cable News, a regionalcable channel, jointly owned by Hearst Cable News, Inc., an indirectwholly-owned subsidiary of Hearst, and Comcast MO Cable News, Inc.  Hearst pays $4,000 per month to the Companyas compensation for their service.

·                  *OtherTransactions with Hearst*.  In the three and nine monthsended September 30, 2006 and 2005, we recorded immaterial net revenue relatingto advertising sales from Hearst.

*InternetBroadcasting.  *As of September 30, 2006, weowned 38% of Internet Broadcasting.  Ourshare of the (income) or loss of Internet Broadcasting included in Equity inloss (income) of affiliates, net of tax, was $0.4 million of income and $0.05million of loss for the three months ended September 30, 2006 and 2005,respectively. Our share of the (income) or loss, net of tax, of InternetBroadcasting was $0.8 million of income and $0.2 million of loss for the ninemonths ended September 30, 2006 and 2005, respectively.  Our share of income for IBS/HATV LLC includedin Equity in loss (income) of affiliates, net of tax, was $0.4 million and $1.1million of income for the three and nine months ended September 30, 2005,respectively.  Since January 2001, HarryT. Hawks, our Executive Vice President and Chief Financial Officer, sinceOctober 2002, Terry Mackin, our Executive Vice President, and since December2005, Steven 

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A. Hobbs, our Executive Vice President and Chief Legaland Development Officer, have served on the Board of Directors of InternetBroadcasting, from which they do not receive compensation for their services.In the three and nine months ended September 30, 2006, the Company incurredexpenses of $1.9 million and $5.8 million, respectively, under an operatingagreement pursuant to which Internet Broadcasting manages a national network ofstation Internet sites and designs, develops and operates the Internet sites underan operating agreement.  We also have anagreement with Internet Broadcasting pursuant to which they provide hostingservices for our corporate Internet site for a nominal amount.

*SmallBusiness Television.*  The Company utilizesservices of Small Business Television (“SBTV”) to provide television stationswith additional revenue through the marketing and sale of commercial time tosmaller businesses that do not traditionally use television advertising due tocosts. In the three and nine month period ended September 30, 2006, these salesgenerated revenue of approximately $0.3 million and $1.1 million, respectively,of which approximately $0.1 million and $0.5 million was distributed to SBTV,respectively. In the three and nine month period ended September 30, 2005,these sales generated revenue of approximately $0.3 million and $1.0 million,respectively, of which approximately $0.1 million and $0.5 million wasdistributed to SBTV, respectively. Mr. Dean Conomikes, the owner of SBTV, isthe son of John G. Conomikes, a member of the Company’s Board of Directors.

*NBCWeather Plus.*  In 2004, we invested inWeather Network Affiliates Company, LLC (“WNAC”), which owns the NBC WeatherPlus Network (“Weather Plus”).  SinceNovember 2004 we have launched Weather Plus in nine of our 10 markets—Sacramento,Orlando, Winston-Salem, Greenville, Cincinnati, Baltimore, Lancaster, Montereyand New Orleans—and cable carriage is presently available in eight of thosemarkets.  We expect to launch WeatherPlus in our remaining NBC market, Plattsburgh, in 2006.  Terry Mackin, our Executive Vice President,currently serves as the Past Chairman of the Board of the NBC TelevisionAffiliates Association, which is the managing member and the owner of certainownership interests in WNAC.  Mr. Mackinserved as the Chairman of the NBC Television Affiliates Association Board fromMay 2004 to May 2006. Additionally, since May 2006, Mr. Mackin has served as amember of the Board of Directors of NBC Weather Plus Network LLC and asChairman of the Futures Committee of NBC.  Mr. Mackin does not receive compensation for his Board service.

*USDTV.*  Currently,we and Hearst each own approximately 6.175% of USDTV.  In addition, our station KOAT-TV inAlbuquerque, New Mexico, has an agreement to lease a portion of its digitalspectrum to USDTV.  In July 2006, USDTVfiled for Chapter 7 bankruptcy and the Company wrote off its investment.  In September 2006, USDTV sold substantiallyall its assets to a third party and assigned its spectrum lease with KOAT tothe buyer.   From September 23, 2005 toJune 20, 2006, Steven A. Hobbs, our Executive Vice President and Chief Legaland Development Officer, served on the Board of Directors of USDTV, from whichhe did not receive compensation for his services.

*OtherRelated Parties.*  In the ordinary course ofbusiness, the Company enters into transactions with other related parties, noneof which were significant to our financial results in the nine months endedSeptember 30, 2006 and 2005.

**11. RetirementPlans and Other Post-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.  Inaddition, the Company participates in a multi-employer union pension plan thatprovides retirement benefits to certain union employees.  The seven defined benefit pension plans arehereafter collectively referred to as the “Pension Plans.”

***Pension Plans and Other Post-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 

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the Project Unit Credit Actuarial Cost Method. Pastservice cost is amortized over the expected future service periods of theemployees.

*Net PeriodicPension and Post-Retirement Cost*

The followingschedule presents net periodic pension cost for the Company’s Pension Plans inthe three and nine months ended September 30, 2006 and 2005:
| ** **                                 | ** ** | **Pension Benefits**                                | ** ** |
|--------------------------------------------|------------|----------------------------------------------------------|------------|
| ** **                                 | ** ** | **Three Months Ended September 30,** | ** ** | **Nine Months Ended September 30,** | ** ** |
| ** **                                 | ** ** | **2006**                                                 | ** ** | **2005** | ** ** | **2006** | ** ** | **2005** | ** ** |
| ** **                                 | ** ** | **(Unaudited)**                                          | ** ** | **(Unaudited)** | ** ** |
| Service cost                               |       | $                                                        | 2,496      |   | $ | 2,258 |   | $ | 7,488 |   | $ | 6,773 |   |
| Interest cost                              |       | 2,355                                                    |       | 2,165 |   | 7,065 |   | 6,496 |   |
| Expected return on plan  assets            |       | (2,779                                                   | )          | (2,447 | ) | (8,337 | ) | (7,342 | ) |
| Amortization of prior  service cost        |       | 108                                                      |       | 108 |   | 324 |   | 324 |   |
| Amortization of  transitional obligation . |       | —                                                   |       | 1 |   | 1 |   | 3 |   |
| Recognized actuarial  loss                 |       | 967                                                      |       | 739 |   | 2,901 |   | 2,216 |   |
| Net periodic pension  cost                 |       | $                                                        | 3,147      |   | $ | 2,824 |   | $ | 9,442 |   | $ | 8,470 |   |

 

The followingschedule presents net periodic pension cost for the Company’s post-retirementbenefit plan in the three and nine months ended September 30, 2006 and 2005:
| ** **                                        | ** ** | **Post-Retirement Benefits**                        | ** ** |
|---------------------------------------------------|------------|----------------------------------------------------------|------------|
| ** **                                        | ** ** | **Three Months Ended September 30,** | ** ** | **Nine Months Ended September 30,** | ** ** |
| ** **                                        | ** ** | **2006**                                                 | ** ** | **2005** | ** ** | **2006** | ** ** | **2005** | ** ** |
| ** **                                        | ** ** | **(Unaudited)**                                          | ** ** | **(Unaudited)** | ** ** |
| Service cost                                      |       | $                                                        | 29         |   | $ | 20 |   | $ | 88 |   | $ | 60 |   |
| Interest cost                                     |       | 122                                                      |       | 84 |   | 366 |   | 252 |   |
| Amortization of prior service cost                |       | 7                                                        |       | 5 |   | 21 |   | 15 |   |
| Amortization of transitional (asset) obligation . |       | 7                                                        |       | 5 |   | 21 |   | 15 |   |
| Recognized actuarial loss                         |       | 6                                                        |       | 4 |   | 18 |   | 12 |   |
| Net periodic pension  cost                        |       | $                                                        | 171        |   | $ | 118 |   | $ | 514 |   | $ | 354 |   |

 

*Contributions*

During the three and nine months ended September 30,2006, we did not make any contributions to our defined benefit plans and wecontributed approximately $0.2 million and $0.6 million, respectively, to ourpost-retirement benefit plans.  Duringthe year ending December 31, 2006, the Company is not required to contribute tothe Pension Plans and expects to contribute approximately $0.7 million to thepost-retirement benefit plan.

**12. Other Commitmentsand Contingencies**

The Company has guaranteed the payments by its CapitalTrust on the Redeemable Convertible Preferred Securities in the amount of $134million.  The guarantee is irrevocableand unconditional, and guarantees the payment in full of all (i) distributionson the Redeemable Convertible Preferred Securities to the extent of availablefunds of the Capital Trust; (ii) amounts payable upon redemption of theRedeemable Convertible Preferred Securities to the extent of available funds ofthe Capital Trust; and (iii) amounts payable upon dissolution of theCapital Trust.  The guarantee is 

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unsecured and ranks (i) subordinate to all otherliabilities of the Company, except liabilities that are expressly made *pari passu*; (ii) *pari passu* withthe most senior preferred stock issued by the Company, and *pari passu*with any guarantee of the Company in respect of any preferred stock of theCompany or any preferred security of any of the Company’s controlledaffiliates; and (iii) senior to the Company’s Common Stock.

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

**Organization ofInformation**

Management’s Discussion and Analysis provides anarrative on our financial performance and condition that should be read inconjunction with the accompanying condensed consolidated financialstatements.  It includes the followingsections:

·                  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 26 network-affiliatedtelevision stations. Additionally, we provide management services to twonetwork-affiliated stations and one independent television station and tworadio stations of Hearst (the “Managed Stations”) in exchange for a managementfee.

*Quarter Highlights*

·                  On August 31, 2006, the Companypurchased the assets related to broadcast television station WKCF-TV, a CWaffiliate in Orlando, Florida, for $217.4 million in cash funded with thecombination of cash on hand and a $100 million advance under the Company’s $250million Credit Facility.

·                  Results for the quarter endedSeptember 30, 2006 reflect the positive impact of strategic developmentsincluding the successful completion of certain retransmission consentnegotiations and continued focus on digital media.  In addition, results reflect politicalrevenue in an election year and the dampening impact of weak automotiveadvertising.

·                  For the three months ended September30, 2006, the Company recorded digital media revenue and associated expenses of$3.7 million and $2.3 million, respectively, in our income statement.  In addition, the Company has recognized localwebsite operating results since January 1, 2006 due to the restructuring of ourrelationship with Internet Broadcasting on December 22, 2005.

·                  Asa result of the adoption of the fair value recognition provisions of SFAS123(R), the Company recognized new stock-based compensation expense of $1.9million in the three months ended September 30, 2006.

*Industry Trends*

·                  Politicaladvertising increases in even-numbered years, such as 2006, consistent with theincrease in the number of candidates running for political office in theinterim national election cycle, as well as select state and local elections.

·                  Revenuefrom Olympic advertising occurs exclusively in even-numbered years, such as2006, with the alternating Winter and Summer Games occurring every two years.Our 10 NBC stations aired the 2006 Winter Olympics in February 2006.

·                  TheFederal Communications Commission has permitted broadcast television stationlicensees to use their digital spectrum for a wide variety of services such ashigh-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.  Nine of our NBCstations currently broadcast the Weather Plus network, a 24/7 local andnational weather broadcast network, on a multicast stream with their maindigital channels.  In addition, ourstation in Des Moines, Iowa has launched a digital weather channel.

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·                  Compensationfrom networks to their affiliates in exchange for broadcasting of networkprogramming has been sharply reduced in recent years and may be eliminated inthe future.

·                  Pursuantto the Cable Television Consumer Protection and Competition Act of 1992 (“1992Cable Act”) and the FCC’s “must carry” regulations, cable operators aregenerally required to devote up to one-third of their activated channelcapacity to the carriage of the analog signal of local commercial televisionstations.  On a cable system-by-cablesystem basis, a local television broadcast station must choose once every threeyears whether to waive the right to mandatory, but uncompensated, carriage and,instead, to negotiate a grant of retransmission consent.  We opted to negotiate retransmission consentwith most of the cable systems with which we do business and we record incomefrom most of these relationships.

·                  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 may have a shorter useful life as a result of thedigital conversion.

**Results ofOperations**

Results of operations for the three and nine monthsended September 30, 2006 and 2005 include the results of our 25 televisionstations, which were owned for the entire period presented, the results of WKCFfor one month in 2006 and the management fees derived by the three televisionand two radio stations of Hearst managed by us for the entire period presented.

*Three Months Ended September 30, 2006Compared to Three Months Ended September 30, 2005*

*Totalrevenue.*   Total revenue includes:

(i)                                     cashand barter advertising revenue, net of agency and national representatives’commissions;

(ii)                                  networkcompensation;

(iii)                               retransmission revenue;

(iv)                              digitalmedia revenue, which includes primarily Internet advertising revenue and, to alesser extent, revenue from multicasting, such as Weather Plus; and

(v)                                 otherrevenue.

Total revenue inthe three months ended September 30, 2006 was $183.0 million as compared to$164.2 million in the three months ended September 30, 2005, an increase of$18.8 million or 11.5%. This increase was primarily attributable to thefollowing factors:

(i)                                     a$21.0 million increase to $23.4 million of net political advertising revenueresulting from the normal, cyclical nature of the television broadcastingbusiness, in which the demand for advertising by candidates running forpolitical office significantly increases in even-numbered election years (suchas 2006);

(ii)                                  a$3.6 million increase in digital media revenue;

(iii)                               a $2.1 million increasein retransmission revenue;

(iv)                              anincrease in the retail, furniture, telecommunications, attractions and softliquor categories; partially offset by

(v)                                 a10.5% decrease in our largest advertising category, automotive, whichrepresents 26% of our net advertising revenue; and

(vi)                              a$1.8 million decrease in network compensation.

*Salaries, benefits andother operating costs.*   During the three monthsended September 30, 2006, salaries, benefits and other operating costs were$99.6 million, as compared to $94.1 million in the three months ended September30, 2005, an increase of $5.5 million or 5.8%. This increase was primarily due to:

(i)            a$2.3 million increase related to digital media expenses;

(ii)           a$1.5 million increase in compensation, pension and employee benefits expense;

(iii)          a$1.3 million increase in transmitter power, program direct costs andclosed-captioning expense; and

(iv)          a$0.9 million increase related to stock-based compensation expense.

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*Amortizationof program rights.*   Amortization of programrights was $17.8 million in the three months ended September 30, 2006, ascompared to $15.2 million in the three months ended September 30, 2005, anincrease of $2.6 million or 17.1%. This increase was due to the renewal of popularshows at higher rates and the purchase of WKCF-TV.

*Depreciationand amortization.*   Depreciation and amortizationexpense was $14.6 million in the three months ended September 30, 2006, ascompared to $12.4 million in the three months ended September 30, 2005, anincrease of $2.2 million or 17.7%. Depreciation expense was $13.0 million inthe three months ended September 30, 2006, as compared to $10.9 million in thethree months ended September 30, 2005, an increase of $2.1 million or 19.3%.  The increase in depreciation expense isprimarily due to the accelerated depreciation of analog equipment and highercapital expenditures.

*Corporate, general andadministrative expenses.*   Corporate, general andadministrative expenses were $7.9 million in the three months ended September30, 2006, as compared to $6.0 million in the three months ended September 30,2005, an increase of $1.9 million or 31.7%. This increase was primarily due to:

(i)            $1.0million increase related to stock-based compensation expense;

(ii)           $0.6million increase due in large part to the timing of professional servicesexpenses; and

(iii)          $0.2million increase related to increase in rent expense for the new Hearstbuilding.

*Interest expense.*  Interestexpense remained relatively unchanged at $16.4 million in the three monthsended September 30, 2006, as compared to $16.4 million in the three months endedSeptember 30, 2005.

*Interestincome.*   Interest income was $1.7 million in thethree months ended September 30, 2006, as compared to $1.0 million in the threemonths ended September 30, 2005, an increase of $0.7 million or 70% due tohigher interest rates in the third quarter of 2006 as compared to the sameperiod in 2005.

*Incometaxes.*   We recorded income tax expense of $9.5million in the three months ended September 30, 2006, compared to $7.3 millionin the three months ended September 30, 2005, an increase in income tax expenseof $2.2 million. The change is a result of an increase in income before incometaxes from $18.7 million in the three months ended September 30, 2005 to $26.0million in the three months ended September 30, 2006.

The effective tax rate for the three months endedSeptember 30, 2006 was 36.6% as compared to 39% for the three months endedSeptember 30, 2005.  The Company expectsits effective tax rate for the fourth quarter of 2006 to be approximately39.5%.

*Equityin income of affiliates, net of tax.*   Equity inincome of affiliates, net of tax, was $0.04 million in the three months endedSeptember 30, 2006 as compared to $0.3 million in the three months endedSeptember 30, 2005, a decrease of $0.3 million. For the three months ended September 30, 2006, our share of income inInternet Broadcasting was offset by our share of losses in Ripe DigitalEntertainment, Inc. (“Ripe TV”). For the three months ended September 30, 2005,our equity represented our share of income in IBS/HATV LLC and our share ofloss in Internet Broadcasting and Ripe TV.

*Netincome.*   Net income was $16.5 million in thethree months ended September 30, 2006, as compared to $11.7 million in thethree months ended September 30, 2005, an increase of $4.8 million or 41.0%.  This increase was primarily due to the itemsdescribed above.

*Nine  MonthsEnded September 30, 2006Compared to Nine  Months Ended September30, 2005*

Total revenue inthe nine months ended September 30, 2006 was $551.0 million as compared to$514.9 million in the nine months ended September 30, 2005, an increase of $36.1million or 7.0%. This increase was primarily attributable to the followingfactors:

(i)            a$33.0 million increase to $38.5 million of net political advertising revenueresulting from the normal, cyclical nature of the television broadcastingbusiness, in which the demand for advertising by candidates running forpolitical office significantly increases in even-numbered election years (suchas 2006);

(ii)           a$10.0 million increase in digital media revenue;

(iii)          a$8.1 million increase in retransmission revenue;

(iv)          anincrease in the retail, furniture, financial, telecommunication and attractioncategories; partially offset by

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(v)                                 a8.2% decrease in our largest advertising category, automotive, which represents27% of our net advertising sales revenue; and

(vi)                              a$7.4 million decrease in network compensation.

*Salaries, benefits andother operating costs.*   Salaries, benefits andother operating costs were $294.0 million in the nine months ended September30, 2006, as compared to $273.3 million in the nine months ended September 30,2005, an increase of $20.7 million or 7.6%. This increase was primarily due to:

(i)            a$7.8 million increase in compensation, pension, and employee benefits expense;

(ii)           a$6.7 million increase related to digital media expenses;

(iii)          a$3.2 million increase in news, transmitter power, utility and closed-captioningexpense; and

(iv)          a$2.9 million increase related to stock-based compensation expense.

*Amortizationof program rights.*   Amortization of programrights was $49.0 million in the nine months ended September 30, 2006, ascompared to $45.6 million in the nine months ended September 30, 2005, anincrease of $3.4 million or 7.5%. This increase was due to the renewal ofpopular shows at higher rates and the purchase of WKCF-TV.

*Depreciationand amortization.*   Depreciation and amortizationwas $46.1 million in the nine months ended September 30, 2006, as compared to$38.9 million in the nine months ended September 30, 2005, an increase of $7.2million or 18.5%.  Depreciation expensewas $41.5 million in the nine months ended September 30, 2006, as compared to$34.4 million in the nine months ended September 30, 2005, an increase of $7.1million or 20.6%.  Increase indepreciation expense is primarily due to the accelerated depreciation of analogequipment and leasehold improvements at our corporate headquarters for the moveto the Hearst Tower in New York City in August, and higher capitalexpenditures.

*Corporate, general andadministrative expenses.*   Corporate, general andadministrative expenses were $22.8 million in the nine months ended September30, 2006, as compared to $17.6 million in the nine months ended September 30,2005, an increase of $5.2 million or 29.5%. This increase was primarily due to:

(i)            a$2.8 million increase related to stock-based compensation expense;

(ii)           a$1.4 million increase due to the timing of and an increase in professionalservices expenses; and

(iii)          a$1.1 million increase in compensation expense.

*Interestexpense.*   Interest expense was $48.9 million inthe nine months ended September 30, 2006 as compared to $49.1 million in thenine months ended September 30, 2005, a decrease of $0.2 million or 0.4%.

*Interestincome.*   Interest income was $5.0 million in thenine months ended September 30, 2006, as compared to $2.2 million in the ninemonths ended September 30, 2005, an increase of $2.8 million due to higher cashbalances maintained during the year and higher interest rates in 2006 ascompared to the same period in 2005.

*Otherexpense.**  *Otherexpense increased $2.5 million in the nine months ended September 30, 2006 fromzero in the nine months ended September 30, 2005. The expense is associatedwith the write off of our investment in USDTV.

*Income taxes.*   Werecorded income tax expense of $30.8 million in the nine months ended September30, 2006, as compared to an income tax benefit of $4.2 million in the ninemonths ended September 30, 2005, an increase of income tax expense of $35.0million.  This change was due to:

(i)                                     $31.9million in tax benefits recorded as a result of the settlement of certain taxreturn examinations in the nine months ended September 30, 2005; and

(ii)                                  Adeferred tax benefit of $5.5 million as a result of Ohio tax law changes in thenine months ended September 30, 2005.

The effective tax rate for the nine months endedSeptember 30, 2006 was 36.1% as compared to (4.9)% for the nine months endedSeptember 30, 2005.

*Equityin income of affiliates, net of tax.*   Equity inincome of affiliates, net of tax was $0.1 million in the nine months endedSeptember 30, 2006, as compared to $0.9 million in the nine months endedSeptember 30, 2005, a decrease of $0.8 million. For the nine months ended September 30, 2006, our share of income in InternetBroadcasting 

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was offset by our share of losses in Ripe TV. For thenine months ended September 30, 2005, our equity represented our share ofincome in IBS/HATV LLC, offset by our share of losses at Internet Broadcastingand Ripe TV.

*Netincome.*   Net income was $54.6 million in the ninemonths ended September 30, 2006, as compared to $90.4 million in the ninemonths ended September 30, 2005, a decrease of $35.8 million or 39.6%.  This decrease was primarily due to a $35.0million increase in tax expense.

**Liquidity andCapital Resources**

As of September 30, 2006, our cash and cashequivalents balance was $80.8 million, as compared to $120.1 million as ofDecember 31, 2005, a decrease of $39.3 million as compared to an increase of$34.5 million in the comparable period in the prior year.  The change in cash and cash equivalents forthe nine months ended September 30, 2006 and 2005 were as follows:
| ** **                                           | ** ** | **Nine months ended September 30,** | ** ** | ** ** | ** ** | ** **                                | ** ** |
|------------------------------------------------------|------------|---------------------------------------------------------|------------|------------|------------|-------------------------------------------|------------|
| ** **                                           | ** ** | **2006**                                                | ** ** | **2005**   | ** ** | **2006 v. 2005  $ Change** | ** ** | **2006 v. 2005  % Change** | ** ** |
| ** **                                           | ** ** | **(Unaudited)**                                         | ** ** | ** ** | ** ** | ** **                                | ** ** |
| ** **                                           | ** ** | **(In thousands)**                                 | ** ** | ** ** | ** ** | ** **                                | ** ** |
| Net cash  provided by operating activities           |       |                                                    | $          | 154,282    |       |                                      |       | $ | 97,498 |   |   |   | $ | 56,784 |   |   |   | 58.2 | % |   |
| Net cash used in  investing activities               |       |                                                    | $          | (264,760   | )          |                                      |       | $ | (31,093 | ) |   |   | $ | (233,667 | ) |   |   | -751.5 | % |   |
| Net cash  provided by (used in) financing activities |       |                                                    | $          | 71,217     |       |                                      |       | $ | (31,919 | ) |   |   | $ | 103,136 |   |   |   | 323.1 | % |   |
|                                                 |       |                                                    |       |       |       |                                      |       |   |   |   |   |   |   |   |   |   |   |
| Cash paid for:                                       |       |                                                    |       |       |       |                                      |       |   |   |   |   |   |   |   |   |   |   |
| Interest                                             |       |                                                    | 37,745     |       |       |                                      | 37,859     |   |   |   | (114 | ) |   |   | -0.3 | % |   |
| Interest on Note payable to Capital Trust            |       |                                                    | 7,313      |       |       |                                      | 7,313      |   |   |   | 0 |   |   |   | 0.0 | % |   |
| Taxes, net of refunds.                               |       |                                                    | 26,656     |       |       |                                      | 35,717     |   |   |   | (9,061 | ) |   |   | -25.4 | % |   |
| Dividends paid  on common stock                      |       |                                                    | 19,464     |       |       |                                      | 19,505     |   |   |   | (41 | ) |   |   | 0.2 | % |   |
| Series A Common  Stock repurchases.                  |       |                                                    | 2,780      |       |       |                                      | 9,361      |   |   |   | (6,581 | ) |   |   | 70.3 | % |   |

 

*OperatingActivities*

Net cash providedby operating activities was $154.3 million in the nine months ended September30, 2006, as compared to $97.5 million in the nine months ended September 30,2005, an increase of $56.8 million or 58.2%. This increase was primarily dueto:

(i)                                     anincrease in political advertising which is paid prior to airing; and

(ii)                                  changesin working capital and other assets and liabilities, primarily an increase inaccounts payable and accrued liabilities resulting from the timing of paymentsand payments made to the pension plans in 2005 of approximately $18.9 millionthat were not made in 2006.

*InvestingActivities*

Net cash used in investing activities was $264.8million in the nine months ended September 30, 2006, as compared to $31.1million in the nine months ended September 30, 2005, an increase of $233.7million.  This increase is primarily dueto the acquisition of WKCF-TV for $217.4 million in August 2006 as well asadditional investments in Internet Broadcasting, Ripe and USDTV of $10.7million in the aggregate.

For the year endingDecember 31, 2006, we have approved capital expenditures totaling approximately$77 million in property, plant and equipment, although we expect actualexpenditures in 2006 to be less.  Whilethe maintenance expenditures included in this total remain consistent with thehistorical levels, the high level of capital investment relates to severalspecial projects 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;

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(iii)                               $4 million oninformation technology projects; and

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

*Financing Activities*

Net cash providedby financing activities was $71.2 million in the nine months ended September30, 2006, as compared to net cash used in financing activities of $31.9 millionin the nine months ended September 30, 2005, an increase of $103.1 million.This increase was primarily due to:

(i)                                     Borrowingson our credit facility of $100 million to fund the acquisition of WKCF in thenine months ended September 30, 2006; and

(ii)                                  Proceedsfrom stock option exercises and employee stock purchases of $3.5 million in thenine months ended September 30, 2006; offset by

(iii)                               the payment of $19.5million in common stock dividends during the nine months ended September 30,2006; and

(iv)                              therepurchase of $10.0 million of our senior notes due 2018 in the nine monthsended September 30, 2006.

*Credit Facilityand 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 Bank of Montreal (the “CreditFacility”).  The Credit Facility can beused for general corporate purposes including working capital, investments,acquisitions, debt repayment and dividend payments.  The Credit Facility is a general unsecuredobligation of the Company.  We haveborrowed $100.0 million under the Credit Facility as of September 30,2006.  We are currently consideringexpanding our Credit Facility by an additional $250 million.

As of September 30, 2006, our long-term debtobligations, exclusive of capital lease obligations, were $867.1 million andour current maturities totaled $90 million. Our long-term debt obligations bear interest at a fixed rate.  The Company’s credit ratings were BBB- byStandard & Poor’s and Fitch Ratings and Baa3 by Moody’s Investors Service,as of September 30, 2006.  Such creditratings are considered to be investment grade.

Our debt obligations contain certain financial andother covenants and restrictions on the Company.  Certain of the financial covenants includecredit ratios such as leverage and interest coverage, and threshold tests suchas consolidated net worth, but such covenants do not include any triggersexplicitly tied to the Company’s credit ratings or stock price.  We are in compliance with all such covenantsand restrictions as of September 30, 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-LookingStatements**

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

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

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·                  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**.**

For a discussion of additional risk factors that areparticular to our business, please refer to the Risk Factors section of ourAnnual Report on Form 10-K for the fiscal year ended December 31, 2005.  These and other matters we discuss in thisreport, or in the documents we incorporate by reference into this report, maycause actual results to differ from those we describe.  We undertake no obligation to update orrevise any forward-looking statements, whether as a result of new information,future events or otherwise.

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

As of September 30, 2006, the Company was not involvedin any derivative financial instruments. However, the Company may consider certain interest-rate risk strategiesin the future.

As of September 30, 2006, we have borrowed $100million under our Credit Facility, which loan bears interest at LIBOR plus theapplicable margin.  The applicable marginon LIBOR loans varies between 0.50% and 1.00% depending on the ratio of totaldebt to earnings before interest, taxes, depreciation and amortization asdefined by the credit agreement.

**Item 4.**                          Controlsand Procedures

The Company’s management performed an evaluation underthe supervision and with the participation of the Company’s Chief ExecutiveOfficer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness ofthe disclosure controls and procedures (as that term is defined in Exchange ActRule 13a-15(e)) as of the end of the fiscal quarter ended September 30,2006.  Based on that evaluation, and asof the end of the quarter for which this report is made, the Company’smanagement, including the CEO and CFO, concluded that the Company’s disclosurecontrols and procedures were effective. Our management, including the CEO and CFO, performed an evaluation ofany changes that occurred in our internal control over financial reporting (asthat term is defined in Exchange Act Rule 13a-15(f)) during the fiscal quarterended September 30, 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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**PartII**

**Other Information**

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

*Purchase of Equity Securities by the Issuer andAffiliated Purchasers*.  The following table reflects purchases of ourSeries A Common Stock made by Hearst Broadcasting during the three months endedSeptember 30, 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 (1)** | ** ** |
|----------------------------|------------|---------------------------------------------------------------|------------|-----------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------|------------|
| July 1- July 31            |       | 389,350                                                       |       | $                                                         | 20.31      |                                                                                                                      | 389,350    |                                                                                                                                  | 1,480,156  |   |
| August 1- August 31        |       | 295,500                                                       |       | $                                                         | 21.38      |                                                                                                                      | 295,500    |                                                                                                                                  | 1,184,656  |   |
| September 1- September  30 |       | —                                                        |       | —                                                    |       | —                                                                                                                    |       | 1,184,656                                                                                                                             |       |
| Total                      |       | 684,850                                                       |       | $                                                         | 20.77      |                                                                                                                      | 684,850    |                                                                                                                                  |       |   |

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(1)             OnSeptember 28, 2005, Hearst increased Hearst Broadcasting’s authorization topurchase the Company’s Series A Common Stock from 20 million to 25 millionshares.   Hearst may effect suchpurchases from time to time in the open market or in private transactions,subject to market conditions and management’s discretion. 

As of September 30, 2006, Hearst owned approximately53.5% of the Company’s outstanding Series A Common Stock and 100% of theCompany’s Series B Common Stock, representing in the aggregate approximately74.2% of our common stock.

The followingtable reflects purchases made by the Company of its Series A Common Stockduring the three months ended September 30, 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 (1)** | ** **  |
|----------------------------|------------|---------------------------------------------------------------|------------|-----------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------|-------------|
| July 1- July 31            |       | 14,350                                                        |       | $                                                         | 20.08      |                                                                                                                      | 14,350     |                                                                                                                                                 | 198,403,746 |   |
| August 1- August 31        |       | 81,350                                                        |       | $                                                         | 20.82      |                                                                                                                      | 81,350     |                                                                                                                                                 | 196,710,259 |   |
| September 1- September  30 |       | —                                                        |       | —                                                    |       | —                                                                                                                    |       | 196,710,259                                                                                                                                          |        |
| Total                      |       | 95,700                                                        |       | $                                                         | 20.71      |                                                                                                                      | 95,700     |                                                                                                                                                 |        |   |

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(1)             InMay 1998, the Company’s Board of Directors authorized the repurchase of up to$300 million of its outstanding Series A Common Stock.  Such purchases may be effected from time totime in the open market or in private transactions, subject to marketconditions and management’s discretion. As of September 30, 2006, the Company has spent approximately $110.8million to repurchase approximately 4.5 million shares of Series A Common Stockat an average price of $24.87. 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:**
| 10.1 |   | 2004 Long Term  Incentive Compensation Plan (incorporated by reference to Exhibit 10.1 of the  Company’s Current Report on Form 8-K dated July 26, 2006).                   |
|------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.2 |   | Amended and Restated  1997 Stock Option Plan (incorporated by reference to Exhibit 10.1 of the  Company’s Current Report on Form 8-K dated September 21, 2006).             |
| 31.1 |   | Certification of Chief  Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange  Act of 1934, as amended.                                                     |
| 31.2 |   | Certification of Chief  Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange  Act of 1934, as a mended.                                                    |
| 32.1 |   | Certification of Chief  Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section  1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |

** **

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** **

**SIGNATURES**

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized. 
|        | **HEARST-ARGYLE TELEVISION, INC.** |
|--------|------------------------------------|
|   |                               |   |
|   | By:                                | /s/  JONATHAN C. MINTZER |
|   |                               | Name: Jonathan C. Mintzer |
|   |                               | Title: Vice President, General Counsel and  Secretary |
|   |                               |   |
|   | Dated:                             | October 27, 2006 |

 
| Name                          | ** ** | **Title**                                                   | ** ** | **Date**         |
|-------------------------------|------------|-------------------------------------------------------------|------------|------------------|
|                          |       |                                                        |       |             |
| /s/  HARRY T. HAWKS |       | Executive Vice  President                                   |       | October 27, 2006 |
| Harry T. Hawks                |       | and Chief  Financial Officer  (Principal Financial Officer) |       |             |
|                          |       |                                                        |       |             |
| /s/  LYDIA G. BROWN |       | Corporate  Controller                                       |       | October 27, 2006 |
| Lydia G. Brown                |       | (Principal  Accounting Officer)                             |       |             |

 

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