**SECURITIES AND EXCHANGECOMMISSION**

**Washington, D.C. 20549**

 

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**Form 10-Q**

 

**(Mark One)**

 
| **ý** | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE SECURITIES EXCHANGE ACT OF 1934**  |
|------------|-----------------------------------------------------------------------------------------------|
| ** ** | ** **                                                                                    |
| ** ** | **FOR THE  QUARTERLY PERIOD ENDED JUNE 30, 2005**                                             |
| ** ** | ** **                                                                                    |
| ** ** | **or**                                                                                        |
| ** ** | ** **                                                                                    |
| **o**      | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
| ** ** | ** **                                                                                    |
| ** ** | **For the transition period  from:    Not Applicable**                    |

 

**Commission file number 1-14776**

 

**Hearst-ArgyleTelevision, Inc.**

(Exact Name of Registrant as Specified in ItsCharter)

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

 

SECURITIES REGISTERED PURSUANT TO SECTION12(b) OF THE ACT:

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

 

SECURITIES REGISTERED PURSUANT TO SECTION12(g) OF THE ACT:

**None**

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the precedingtwelve months (or for such shorter period that the registrant was required tofile such reports), and (2) has been subject to such filing requirements forthe past 90 days.     Yes  ý        No  o

 

Indicate by check markwhether the registrant is an accelerated filer (as defined in Rule 12b-2 of theExchange Act). Yes  ý        No  o

 

Sharesof the registrant’s Common Stock outstanding as of July 22, 2005: 92,832,208 shares(consisting of 51,533,560 shares of Series A Common Stock and 41,298,648 sharesof Series B Common Stock).

 

 

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**HEARST-ARGYLE TELEVISION, INC.**

 

**Index**

 
| **Part I**       | **Financial Information**                                                                                                                       | ** ** |
|------------------|-------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| ** **       | ** **                                                                                                                                      | ** ** |
| **Item 1.** | **Financial  Statements**                                                                                                                       |       |
|             | Condensed Consolidated Balance Sheets as of June  30, 2005 (unaudited)  and December 31, 2004 |       |
|             | Condensed Consolidated  Statements of Income for the Three and Six Months Ended  June 30, 2005 and 2004 (unaudited)                             |       |
|             | Condensed Consolidated  Statements of Cash Flows for the Six Months Ended  June 30, 2005 and 2004 (unaudited)                                   |       |
|             | Notes  to Condensed Consolidated Financial Statements                                                                                           |       |
|             |                                                                                                                                            |       |
| **Item 2.** | **Management’s Discussion  and Analysis of Financial Condition and Results of Operations**                                                 |       |
|             |                                                                                                                                            |       |
| **Item 3.** | **Quantitative and  Qualitative Disclosures about Market Risk**                                                                                 |       |
|             |                                                                                                                                            |       |
| **Item 4.** | **Controls and Procedures**                                                                                                                     |       |
|             |                                                                                                                                            |       |
| **Part II**      | **Other Information**                                                                                                                           |       |
|             |                                                                                                                                            |       |
| **Item 2.** | **Unregistered Sales of Equity  Securities and Use of Proceeds**                                                                                |       |
|             |                                                                                                                                            | ** ** |
| **Item 4.** | **Submission of Matters to a  Vote of Security Holders**                                                                                        |       |
| ** **       | ** **                                                                                                                                      | ** ** |
| **Item 6.** | **Exhibits**                                                                                                                                    |       |
| ** **       | ** **                                                                                                                                      | ** ** |
| **Signatures**   |                                                                                                                                            |       |

 

2

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**PART I**

 

**FINANCIAL INFORMATION**

 

**Item 1.Financial Statements**

 

**HEARST-ARGYLE TELEVISION, INC.**

 

**Condensed Consolidated Balance Sheets**

 
| ** **                                                               | ** ** | **June 30,  2005**                    | ** ** | **December 31,  2004** | ** ** |
|--------------------------------------------------------------------------|------------|---------------------------------------|------------|-----------------------------|------------|
| ** **                                                               | ** ** | **(unaudited)**                       | ** ** | ** **                  | ** ** |
| ** **                                                               | ** ** | **(In thousands, except share data)** | ** ** |
| **Assets**                                                               |       |                                  |       |                        |       |
| Current assets:                                                          |       |                                  |       |                        |       |
| Cash and cash  equivalents                                               |       | $                                     | 103,247    |                        | $          | 92,208 |   |
| Accounts  receivable, net                                                |       | 157,146                               |       | 147,536                     |       |
| Program and  barter rights                                               |       | 15,446                                |       | 55,242                      |       |
| Deferred income  taxes                                                   |       | 4,979                                 |       | 4,979                       |       |
| Other                                                                    |       | 7,121                                 |       | 6,541                       |       |
| Total current  assets                                                    |       | 287,939                               |       | 306,506                     |       |
|                                                                     |       |                                  |       |                        |       |
| Property, plant  and equipment, net                                      |       | 285,227                               |       | 291,840                     |       |
|                                                                     |       |                                  |       |                        |       |
| Intangible  assets, net                                                  |       | 2,425,257                             |       | 2,428,265                   |       |
| Goodwill                                                                 |       | 734,746                               |       | 734,746                     |       |
|                                                                     |       |                                  |       |                        |       |
| Other assets:                                                            |       |                                  |       |                        |       |
| Deferred  financing costs, net                                           |       | 12,763                                |       | 12,452                      |       |
| Investments                                                              |       | 25,060                                |       | 26,362                      |       |
| Program and  barter rights, noncurrent                                   |       | 709                                   |       | 1,884                       |       |
| Other                                                                    |       | 36,709                                |       | 40,085                      |       |
| Total other  assets                                                      |       | 75,241                                |       | 80,783                      |       |
| Total assets                                                             |       | $                                     | 3,808,410  |                        | $          | 3,842,140 |   |
|                                                                     |       |                                  |       |                        |       |
| **Liabilities  and Stockholders’ Equity**                           |       |                                  |       |                        |       |
| Current  liabilities:                                                    |       |                                  |       |                        |       |
| Accounts payable                                                         |       | $                                     | 8,674      |                        | $          | 8,901 |   |
| Accrued  liabilities                                                     |       | 53,665                                |       | 63,640                      |       |
| Program and  barter rights payable                                       |       | 16,550                                |       | 57,056                      |       |
| Payable to The  Hearst Corporation, net                                  |       | 4,874                                 |       | 4,846                       |       |
| Other                                                                    |       | 5,727                                 |       | 3,465                       |       |
| Total current  liabilities                                               |       | 89,490                                |       | 137,908                     |       |
|                                                                     |       |                                  |       |                        |       |
| Program and  barter rights payable, noncurrent                           |       | 1,383                                 |       | 3,107                       |       |
| Long-term debt                                                           |       | 882,194                               |       | 882,221                     |       |
| Note payable to  Capital Trust                                           |       | 134,021                               |       | 134,021                     |       |
| Deferred income  taxes                                                   |       | 842,524                               |       | 839,746                     |       |
| Other  liabilities                                                       |       | 42,015                                |       | 80,049                      |       |
| Total noncurrent  liabilities                                            |       | 1,902,137                             |       | 1,939,144                   |       |
| Series A and B  preferred stock to be redeemed                           |       | —                                |       | 11,251                      |       |
|                                                                     |       |                                  |       |                        |       |
| Commitments and  contingencies                                           |       |                                  |       |                        |       |
|                                                                     |       |                                  |       |                        |       |
| Stockholders’  equity:                                              |       |                                  |       |                        |       |
| Preferred stock,  par value $0.01 per share, 1,000,000 shares authorized |       | —                                |       | —                      |       |
| Series A common  stock                                                   |       | 555                                   |       | 552                         |       |
| Series B common  stock                                                   |       | 413                                   |       | 413                         |       |
| Additional  paid-in capital                                              |       | 1,287,155                             |       | 1,281,474                   |       |
| Retained  earnings                                                       |       | 634,873                               |       | 569,178                     |       |
| Accumulated  other comprehensive loss, net                               |       | (6,161                                | )          | (6,161                      | )          |
| Treasury stock,  at cost                                                 |       | (100,052                              | )          | (91,619                     | )          |
| Total  stockholders’ equity                                         |       | 1,816,783                             |       | 1,753,837                   |       |
|                                                                     |       |                                  |       |                        |       |
| Total  liabilities and stockholders’ equity                         |       | $                                     | 3,808,410  |                        | $          | 3,842,140 |   |

 

See notes to condensed consolidated financial statements.

 

3

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**HEARST-ARGYLE TELEVISION, INC.**

 

**Condensed Consolidated Statements of Income**

** **
| ** **                                       | ** ** | **Three Months Ended June 30,**                                    | ** ** | **Six Months Ended June 30,** | ** ** |
|--------------------------------------------------|------------|--------------------------------------------------------------------|------------|-------------------------------|------------|
| ** **                                       | ** ** | **2005**                                                           | ** ** | **2004**                      | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                                       | ** ** | **(Unaudited)**                                                    | ** ** |
| ** **                                       | ** ** | **(In thousands, except per share data)** | ** ** |
|                                             |       |                                                               |       |                          |       |   |   |   |   |
| Total revenue                                    |       | $                                                                  | 188,453    |                          | $          | 197,958 |   | $ | 350,732 |   | $ | 364,822 |   |
|                                             |       |                                                               |       |                          |       |   |   |   |   |
| Station  operating expenses:                     |       |                                                               |       |                          |       |   |   |   |   |
| Salaries,  benefits and other operating costs    |       | 90,659                                                             |       | 87,210                        |       | 179,283 |   | 171,804 |   |
| Amortization of  program rights                  |       | 15,160                                                             |       | 14,818                        |       | 30,493 |   | 30,129 |   |
| Depreciation and  amortization                   |       | 13,294                                                             |       | 12,356                        |       | 26,432 |   | 24,851 |   |
| Corporate,  general and administrative expenses  |       | 5,640                                                              |       | 6,113                         |       | 11,556 |   | 11,702 |   |
| Operating income                                 |       | 63,700                                                             |       | 77,461                        |       | 102,968 |   | 126,336 |   |
|                                             |       |                                                               |       |                          |       |   |   |   |   |
| Interest  expense, net                           |       | 15,762                                                             |       | 16,005                        |       | 31,463 |   | 32,421 |   |
| Interest  expense, net – Capital Trust      |       | 2,438                                                              |       | 3,750                         |       | 4,875 |   | 7,500 |   |
| Equity in income  of affiliates, net             |       | (710                                                               | )          | (463                          | )          | (1,017 | ) | (662 | ) |
|                                             |       |                                                               |       |                          |       |   |   |   |   |
| Income before  income taxes                      |       | 46,210                                                             |       | 58,169                        |       | 67,647 |   | 87,077 |   |
|                                             |       |                                                               |       |                          |       |   |   |   |   |
| Income tax  (benefit) expense                    |       | (19,404                                                            | )          | 22,162                        |       | (11,044 | ) | 33,176 |   |
| Net income                                       |       | 65,614                                                             |       | 36,007                        |       | 78,691 |   | 53,901 |   |
|                                             |       |                                                               |       |                          |       |   |   |   |   |
| Less preferred  stock dividends                  |       | —                                                             |       | 272                           |       | 2 |   | 544 |   |
| Income  applicable to common stockholders        |       | $                                                                  | 65,614     |                          | $          | 35,735 |   | $ | 78,689 |   | $ | 53,357 |   |
|                                             |       |                                                               |       |                          |       |   |   |   |   |
| Income per  common share – basic            |       | $                                                                  | 0.71       |                          | $          | 0.38 |   | $ | 0.85 |   | $ | 0.57 |   |
| Number of common  shares used in the calculation |       | 92,810                                                             |       | 93,087                        |       | 92,830 |   | 92,995 |   |
|                                             |       |                                                               |       |                          |       |   |   |   |   |
| Income per  common share – diluted          |       | $                                                                  | 0.68       |                          | $          | 0.37 |   | $ | 0.83 |   | $ | 0.57 |   |
| Number of common  shares used in the calculation |       | 98,334                                                             |       | 101,601                       |       | 98,391 |   | 93,641 |   |
|                                             |       |                                                               |       |                          |       |   |   |   |   |
| Dividends per  common share declared             |       | $                                                                  | 0.07       |                          | $          | 0.06 |   | $ | 0.14 |   | $ | 0.12 |   |

 

See notes to condensed consolidated financial statements.

 

4

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**HEARST-ARGYLE TELEVISION, INC.**

**Condensed Consolidated Statements of Cash Flows**

 
| ** **                                                                         | ** ** | **Six Months Ended June 30,**   | ** ** |
|------------------------------------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                                                         | ** ** | **2005**                        | ** ** | **2004** | ** ** |
| ** **                                                                         | ** ** | **(Unaudited)  (In thousands)** | ** ** |
| **Operating  Activities**                                                          |       |                            |       |   |   |
| Net income                                                                         |       | $                               | 78,691     |   | $ | 53,901 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |                            |       |   |   |
| Depreciation                                                                       |       | 23,424                          |       | 21,860 |   |
| Amortization of  intangible assets                                                 |       | 3,008                           |       | 2,991 |   |
| Amortization of  deferred financing costs                                          |       | 828                             |       | 1,163 |   |
| Amortization of  program rights                                                    |       | 30,493                          |       | 30,129 |   |
| Program payments                                                                   |       | (31,746                         | )          | (30,386 | ) |
| Deferred income  taxes                                                             |       | 2,778                           |       | 8,969 |   |
| Equity in income  of affiliates, net                                               |       | (1,017                          | )          | (662 | ) |
| Provision for  doubtful accounts                                                   |       | 59                              |       | (408 | ) |
| Loss on disposal  of fixed assets                                                  |       | —                          |       | 7 |   |
| Dividends  received from affiliates                                                |       | 2,303                           |       | 1,330 |   |
| Changes in  operating assets and liabilities:                                      |       |                            |       |   |   |
| Decrease  (increase) in Accounts receivable                                        |       | (9,669                          | )          | (3,707 | ) |
| Decrease  (increase) in Other assets                                               |       | 1,657                           |       | 1,563 |   |
| (Decrease)  increase in Accounts payable and accrued liabilities                   |       | (10,202                         | )          | 5,888 |   |
| (Decrease)  increase in Other liabilities                                          |       | (35,737                         | )          | (3,579 | ) |
| Net cash  provided by operating activities                                         |       | 54,870                          |       | 89,059 |   |
|                                                                               |       |                            |       |   |   |
| **Investing  Activities**                                                          |       |                            |       |   |   |
| Purchases of  property, plant and equipment:                                       |       |                            |       |   |   |
| Digital projects                                                                   |       | (4,676                          | )          | (592 | ) |
| Maintenance  projects                                                              |       | (7,935                          | )          | (9,018 | ) |
| Special projects                                                                   |       | (4,183                          | )          | (7,357 | ) |
| Other, net                                                                         |       | (4                              | )          | 45 |   |
| Net cash used in  investing activities                                             |       | (16,798                         | )          | (16,922 | ) |
|                                                                               |       |                            |       |   |   |
| **Financing  Activities**                                                          |       |                            |       |   |   |
| Dividends paid  on preferred stock                                                 |       | (2                              | )          | (544 | ) |
| Dividends paid  on common stock                                                    |       | (13,003                         | )          | (11,147 | ) |
| Series A Common  Stock repurchases                                                 |       | (8,433                          | )          | — |   |
| Redemption of  preferred stock                                                     |       | (11,251                         | )          | (1,600 | ) |
| Principal  payments on capital lease obligations                                   |       | (27                             | )          | (88 | ) |
| Proceeds from  employee stock purchase plan                                        |       | 1,235                           |       | 1,100 |   |
| Proceeds from  stock option exercises                                              |       | 4,448                           |       | 6,681 |   |
| Net cash used in  financing activities                                             |       | (27,033                         | )          | (5,598 | ) |
|                                                                               |       |                            |       |   |   |
| Increase in cash  and cash equivalents                                             |       | 11,039                          |       | 66,539 |   |
| Cash and cash  equivalents at beginning of period                                  |       | 92,208                          |       | 71,528 |   |
| Cash and cash  equivalents at end of period                                        |       | $                               | 103,247    |   | $ | 138,067 |   |
|                                                                               |       |                            |       |   |   |
| **Supplemental  Cash Flow Information:**                                           |       |                            |       |   |   |
|                                                                               |       |                            |       |   |   |
| **Cash  paid during the period for:**                                              |       |                            |       |   |   |
| Interest                                                                           |       | $                               | 31,756     |   | $ | 31,895 |   |
| Interest on Note  payable to Capital Trust                                         |       | $                               | 4,875      |   | $ | 7,500 |   |
| Income taxes,  net of refunds                                                      |       | $                               | 27,887     |   | $ | 18,481 |   |

 

See notes to condensed consolidated financial statements.

 

5

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**Hearst-Argyle Television, Inc.**

**Notes to Condensed ConsolidatedFinancial Statements**

** **

**1.    Basis of Presentation**

 

The condensed consolidated financial statementsinclude the accounts of Hearst-Argyle Television, Inc. and its wholly-ownedsubsidiaries (the “Company” or “we” or “us” or “our”), except for the Company’swholly-owned subsidiary trust (the “Capital Trust”) which cannot be consolidatedunder the Financial Accounting Standards Board (“FASB”) Interpretation No. 46(revised December 2003), *Consolidation of VariableInterest Entities* (“FIN 46(R)”). With the exception of the unconsolidated subsidiary trust, allsignificant intercompany accounts have been eliminated in consolidation.

 

The accompanyingunaudited condensed consolidated financial statements do not include all of theinformation and notes required by accounting principles generally accepted inthe United States of America for complete financial statements and should beread in conjunction with the Company’s consolidated financial statementsincluded in the Annual Report on our Form 10-K/A for the year ended December31, 2004.  In the opinion of management,all adjustments considered necessary for a fair presentation have been includedand are normal and recurring in nature.  Operatingresults for the three and six months ended June 30, 2005 and 2004 are notnecessarily indicative of the results that may be expected for the full year.

 

**2.    Recent Accounting Pronouncements andDevelopments**

 

InMay 2005, the FASB issued Statement of Financial Accounting Standards (“SFAS”)No. 154, *Accounting Changes and Error Corrections*(“SFAS 154”).  SFAS 154 provides guidanceon accounting for and reporting of accounting changes and errorcorrections.  It requires changes inaccounting principle to be applied retrospectively to prior periods as if theprinciple had always been used. Previously, voluntary changes in accounting principle were required to berecognized cumulatively in net income in the period of change.  SFAS 154 is effective for accounting changesand error corrections made in fiscal years beginning after December 15, 2005.

 

InMarch 2005, the FASB issued Financial Interpretation No. 47, *Accounting for Conditional Asset Retirement Obligations, aninterpretation of FASB Statement No. 143,* (“FIN 47”).  FIN 47 clarifies that an entity must record aliability for a conditional asset retirement obligation if the fair value ofthe obligation can be reasonably estimated. FIN 47 is effective no later than the end of fiscal years ending afterDecember 15, 2005.  Therefore, FIN 47 willbe effective for the year ending December 31, 2005.  We do not believe the adoption of FIN 47 willhave a material impact on our financial position or results of operations.

 

InDecember 2004, the FASB issued SFAS No. 123(R), *Share-BasedPayments* (“SFAS 123(R)”), which requires companies to measure andrecognize compensation expense for all stock-based payments at fairvalue.  SFAS 123(R) was to be effective for all interim periods beginningafter June 15, 2005; however, on April 14, 2005, the Securities andExchange Commission changed the effective date to fiscal years that begin afterJune 15, 2005.  Therefore, SFAS 123(R) will be effective for us on January1, 2006.  The Company is currentlyevaluating the impact of SFAS 123(R) on its financial position and results ofoperations.

 

InDecember 2004, the FASB issued SFAS No. 153, *Exchanges ofNonmonetary Assets, an amendment of APB Opinion No. 29*(“SFAS 153”).  The amendments made by SFAS 153 are based onthe principle that exchanges of nonmonetary assets should be measured based onthe fair value of the assets exchanged. Further, the amendments eliminate the narrow exception for nonmonetaryexchanges of similar productive assets and replace it with a broader exceptionfor exchanges of nonmonetary assets that do not have commercial substance.  SFAS 153 is effective for nonmonetary assetexchanges occurring in fiscal periods beginning after June 15, 2005.  Therefore, SFAS 153 was effective for us onJuly 1, 2005.  We do not believe theadoption of SFAS 153 will have a material impact on our financial position orresults of operations.

 

Congressis currently considering whether and how to adjust the law governing thetransition to digital television broadcasting. Legislation has been introduced and hearings have been held before therelevant committees of both houses of Congress. When and if new legislation is passed governing the timing and otheraspects of the digital television transition, the Company expects to reevaluatethe estimated useful lives and residual values of certain equipment such asanalog transmitters, which in the future could result in a change indepreciation expense.  While significanttechnical and engineering evaluation has not been completed, the Companyestimates that, based upon the best information available today, there may beapproximately $22 million of net book value as of December 31, 2004 associatedwith potentially affected equipment. Such equipment is presently being depreciated over various remaininguseful lives, some of which extend to 2014.

 

6

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**3.    Stock-Based Compensation**

 

The Company accounts foremployee stock-based compensation under Accounting Principles Board (“APB”)Opinion No. 25, *Stock Issued to Employees*(“APB 25”) and related interpretations. Under APB 25, because the exercise price of the Company’s employee stockoptions equals the market price of the underlying stock on the date of grant,the stock options have no intrinsic value and therefore no compensation expenseis recognized.  The Company has adoptedthe disclosure-only provisions of SFAS No. 123, *AccountingFor Stock-Based Compensation* (“SFAS 123”). Under SFAS 123, optionsare valued at their date of grant and expensed over their vesting period.

 

The following tabledetails the effect on net income and earnings per share had compensationexpense been recorded based on the fair value method under SFAS 123, asamended, utilizing the Black-Scholes option valuation model:

 
| ** **                                                                                                                  | ** ** | **Three Months Ended June 30,**           | ** ** | **Six Months Ended June 30,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------|------------|-------------------------------|------------|
| ** **                                                                                                                  | ** ** | **(Unaudited)**                           | ** ** |
| ** **                                                                                                                  | ** ** | **(In thousands, except per share data)** | ** ** |
| ** **                                                                                                                  | ** ** | **2005**                                  | ** ** | **2004**                      | ** ** | **2005** | ** ** | **2004** | ** ** |
| Reported net  income                                                                                                        |       | $                                         | 65,614     |                          | $          | 36,007 |   | $ | 78,691 |   | $ | 53,901 |   |
| Less:                                                                                                                       |       |                                      |       |                          |       |   |   |   |   |
| Total  stock-based employee compensation expense determined under the fair value  method for all awards, net of related tax |       | (1,214                                    | )          | (1,227                        | )          | (2,428 | ) | (2,435 | ) |
| Preferred stock  dividends                                                                                                  |       | —                                    |       | (272                          | )          | (2 | ) | (544 | ) |
| Pro forma net  income applicable to common stockholders                                                                     |       | $                                         | 64,400     |                          | $          | 34,508 |   | $ | 76,261 |   | $ | 50,922 |   |
|                                                                                                                        |       |                                      |       |                          |       |   |   |   |   |
| Earnings per  share:                                                                                                        |       |                                      |       |                          |       |   |   |   |   |
| Basic – as  reported                                                                                                   |       | $                                         | 0.71       |                          | $          | 0.38 |   | $ | 0.85 |   | $ | 0.57 |   |
| Basic – pro  forma                                                                                                     |       | $                                         | 0.69       |                          | $          | 0.37 |   | $ | 0.82 |   | $ | 0.55 |   |
|                                                                                                                        |       |                                      |       |                          |       |   |   |   |   |
| Diluted – as  reported                                                                                                 |       | $                                         | 0.68       |                          | $          | 0.37 |   | $ | 0.83 |   | $ | 0.57 |   |
| Diluted – pro  forma                                                                                                   |       | $                                         | 0.65       |                          | $          | 0.36 |   | $ | 0.78 |   | $ | 0.54 |   |

 

**4.    Long-TermDebt**

 

Long-termdebt as of June 30, 2005 and December 31, 2004 consisted of the following:  

 
| ** **                 | ** ** | **June 30, 2005**  | ** ** | **December 31, 2004** | ** ** |
|----------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                 | ** ** | **(Unaudited)**    | ** ** | ** **            | ** ** |
| ** **                 | ** ** | **(In thousands)** | ** ** |
| Senior notes               |       | $                  | 432,110    |                  | $          | 432,110 |   |
| Private  placement debt    |       | 450,000            |       | 450,000               |       |
| Capital lease  obligations |       | 130                |       | 291                   |       |
|                       |       | 882,240            |       | 882,401               |       |
| Less current  portion      |       | (46                | )          | (180                  | )          |
|                       |       |               |       |                  |       |
| Total long-term  debt      |       | $                  | 882,194    |                  | $          | 882,221 |   |

 

7

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**5.    EarningsPer Share**

 

Thecalculation of basic earnings per share (“EPS”) for each period is based on theweighted average number 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 optionsand conversion of preferred stock.  Thefollowing table sets forth a reconciliation between basic EPS and diluted EPS,in accordance with SFAS No. 128, *EarningsPer Share*.

 
| ** **                                                                                   | ** ** | **Three Months Ended  June 30,**          | ** ** | **Six Months Ended  June 30,** | ** ** |
|----------------------------------------------------------------------------------------------|------------|-------------------------------------------|------------|--------------------------------|------------|
| ** **                                                                                   | ** ** | **(Unaudited)**                           | ** ** |
| ** **                                                                                   | ** ** | **(In thousands, except per share data)** | ** ** |
| ** **                                                                                   | ** ** | **2005**                                  | ** ** | **2004**                       | ** ** | **2005** | ** ** | **2004** | ** ** |
| Reported net  income                                                                         |       | $                                         | 65,614     |                           | $          | 36,007 |   | $ | 78,691 |   | $ | 53,901 |   |
| Less: Preferred  stock dividends                                                             |       | —                                    |       | (272                           | )          | (2 | ) | (544 | ) |
| Income  applicable to common stockholders (Basic)                                            |       | $                                         | 65,614     |                           | $          | 35,735 |   | $ | 78,689 |   | $ | 53,357 |   |
|                                                                                         |       |                                      |       |                           |       |   |   |   |   |
| Add: Interest  Expense, Net – Capital Trust, net of tax                                 |       | 1,487                                     |       | 2,321                          |       | 2,974 |   | — |   |
| Income applicable  to common stockholders (Diluted)                                          |       | $                                         | 67,101     |                           | $          | 38,056 |   | $ | 81,663 |   | $ | 53,357 |   |
|                                                                                         |       |                                      |       |                           |       |   |   |   |   |
| Basic shares                                                                                 |       | 92,810                                    |       | 93,087                         |       | 92,830 |   | 92,995 |   |
| Basic EPS                                                                                    |       | $                                         | 0.71       |                           | $          | 0.38 |   | $ | 0.85 |   | $ | 0.57 |   |
|                                                                                         |       |                                      |       |                           |       |   |   |   |   |
| Diluted shares                                                                               |       | 98,334                                    |       | 101,601                        |       | 98,391 |   | 93,641 |   |
| Diluted EPS                                                                                  |       | $                                         | 0.68       |                           | $          | 0.37 |   | $ | 0.83 |   | $ | 0.57 |   |
|                                                                                         |       |                                      |       |                           |       |   |   |   |   |
| Basic shares                                                                                 |       | 92,810                                    |       | 93,087                         |       | 92,830 |   | 92,995 |   |
| Add: Shares  issued upon assumed exercise of stock options                                   |       | 396                                       |       | 579                            |       | 433 |   | 646 |   |
| Add: Shares  issued upon conversion of Series A Redeemable Convertible Preferred  Securities |       | —                                    |       | 2,807                          |       | — |   | — |   |
| Add: Shares  issued upon conversion of Series B Redeemable Convertible Preferred  Securities |       | 5,128                                     |       | 5,128                          |       | 5,128 |   | — |   |
| Diluted shares                                                                               |       | 98,334                                    |       | 101,601                        |       | 98,391 |   | 93,641 |   |

 

Adilution test for convertible preferred stock is performed for all periods.This test considers only the total number of shares that could be issued uponconversion of convertible preferred stock and does not consider either theconversion price or the share price of the underlying common shares.  For the three and six months ended June 30,2005, diluted shares include 5,127,882 common shares underlying the Series B RedeemableConvertible Preferred Securities.  TheSeries A Convertible Preferred Securities were redeemed on December 31, 2004and therefore had no impact on the 2005 periods.For the six months ended June 30, 2004,7,935,068 common shares underlying the Series A and B Redeemable ConvertiblePreferred Securities were excluded from the calculation of Diluted EPS becauseto include them would have been antidilutive.

 

Commonstock options to purchase 3,932,079 and 1,274,172shares of Series A Common Stock (beforeapplication of the treasury stock method), outstanding as of June 30, 2005 and2004, respectively, were not included in the computation of diluted EPS becausethe exercise price was greater than the average market price of the commonshares during the calculation period.

 

Forthe three and six months ended June 30, 2004, shares of Series A and B PreferredStock were excluded from the computation of diluted EPS because to include themwould have been antidilutive.  Theseshares were redeemed in full as of January 1, 2005.  The dividends for the Series A and BPreferred Stock are deducted from Net Income for the calculation of Basic andDiluted EPS.

 

8

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** **

**6.    Goodwill and Intangible Assets**

 

Summarizedbelow are the carrying value of intangible assets and goodwill as of June 30,2005 and December 31, 2004:

 
| ** **                                                         | ** ** | **June 30, 2005 (unaudited)** | ** ** | **December 31, 2004**         | ** ** |
|--------------------------------------------------------------------|------------|-------------------------------|------------|-------------------------------|------------|
| ** **                                                         | ** ** | **Gross  Carrying  Value**    | ** ** | **Accumulated  Amortization** | ** ** | **Net  Carrying  Value** | ** ** | **Gross  Carrying  Value** | ** ** | **Accumulated  Amortization** | ** ** | **Net  Carrying  Value** | ** ** |
| ** **                                                         | ** ** | **(In thousands)**            | ** ** |
| Intangible  assets subject to amortization:                        |       |                          |       |                          |       |   |   |   |   |   |   |   |   |
| Advertiser  client base                                            |       | $                             | 122,891    |                          | $          | 68,278 |   | $ | 54,613 |   | $ | 122,891 |   | $ | 66,493 |   | $ | 56,398 |   |
| Network  affiliations                                              |       | 95,493                        |       | 35,292                        |       | 60,201 |   | 95,493 |   | 34,098 |   | 61,395 |   |
| Other                                                              |       | 743                           |       | 579                           |       | 164 |   | 743 |   | 550 |   | 193 |   |
| Total intangible  assets subject to amortization                   |       | $                             | 219,127    |                          | $          | 104,149 |   | 114,978 |   | $ | 219,127 |   | $ | 101,141 |   | 117,986 |   |
| Intangible  assets not subject to amortization – FCC licenses |       |                          |       |                          |       | 2,310,279 |   |   |   |   |   | 2,310,279 |   |
|                                                               |       |                          |       |                          |       |   |   |   |   |   |   |   |   |
| **Total  intangible assets, net**                                  |       |                          |       |                          |       | $ | 2,425,257 |   |   |   |   |   | $ | 2,428,265 |   |
|                                                               |       |                          |       |                          |       |   |   |   |   |   |   |   |   |
| **Goodwill**                                                       |       |                          |       |                          |       | $ | 734,746 |   |   |   |   |   | $ | 734,746 |   |

 

TheCompany’s amortization expense for intangible assets was approximately $1.5 millionand $3.0 million for the three and six months ended June 30, 2005, respectively.  Estimated annual intangible asset amortizationexpense for each of the next five years is approximately $6.0 million.

 

**7.    Income Taxes**

 

Theincome tax (benefit) expense for the three and six months ended June 30, 2005and 2004 consisted of the following:

 
| ** **                    | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
|-------------------------------|------------|---------------------------------|------------|-------------------------------|------------|
| ** **                    | ** ** | **2005**                        | ** ** | **2004**                      | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                    | ** ** | **(Unaudited)  (In thousands)** | ** ** |
| Current                       |       | $                               | (19,451    | )                             | $          | 16,309 |   | $ | (13,822 | ) | $ | 24,207 |   |
| Deferred                      |       | 47                              |       | 5,853                         |       | 2,778 |   | 8,969 |   |
| Income tax  (benefit) expense |       | $                               | (19,404    | )                             | $          | 22,162 |   | $ | (11,044 | ) | $ | 33,176 |   |

 

The effective tax ratefor the three and six months ended June 30, 2005 was (42.0)% and (16.3)%, respectivelyas compared to 38.1% for the three and six months ended June 30, 2004.  The June 30, 2005 effective tax rate includeda credit to the tax provision of $31.9 million as a result of the settlement ofcertain tax return examinations and a deferred tax benefit of $5.5 million as aresult of Ohio tax law changes the impact of which are reflected as of the law’senactment date (June 30, 2005) in accordance with FAS 109.  The Company expects its effective tax ratefor the remaining interim periods for the year ending December 31, 2005 to beapproximately 39.0%.  The Company recordsreserves for estimates of probable settlements of federal and stateaudits.  The Company’s effective tax ratein a given financial statement period may be materially impacted by changes inthe level of earnings by taxing jurisdictions, changes in the expected outcomeof tax audits, or changes in the deferred tax valuation allowance.  The Company records a valuation allowanceagainst its deferred tax assets arising from certain net operating and capital losseswhen it is more likely than not that some portion or all of such losses willnot be realized.

 

9

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TheCompany’s net deferred income tax liability is as follows: 

 
| ** **                                   | ** ** | **June 30, 2005**  | ** ** | **December 31, 2004** | ** ** |
|----------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                   | ** ** | **(Unaudited)**    | ** ** | ** **            | ** ** |
| ** **                                   | ** ** | **(In thousands)** | ** ** |
|                                         |       |               |       |                  |       |
| Deferred income  taxes — liability      |       | $                  | 842,524    |                  | $          | 839,746 |   |
| Deferred income  taxes — current assets |       | 4,979              |       | 4,979                 |       |
| Net deferred  income tax liability           |       | $                  | 837,545    |                  | $          | 834,767 |   |

 

Our noncurrent deferredtax liability was $842.5 million and $839.7 million as of June 30, 2005 andDecember 31, 2004, respectively.  Thedeferred tax liability primarily relates to differences between the book andtax basis of our FCC licenses created from the Company’s stock acquisition ofPulitzer Broadcasting on March 18, 1999. The Deferred tax liabilities will increase over time as the Company’sFCC licenses continue to amortize for tax purposes, but not for bookpurposes.  We do not expect thesignificant portion of our deferred tax liability to reverse over time unless:

(i)    ourFCC licenses become impaired; or

(ii)   ourFCC licenses are sold for cash, which would typically only occur in connectionwith the sale of the assets of a station or groups of stations or the entireCompany in a taxable transaction.

 

Duringthe fourth quarter of 2004, we reclassified certain income tax liabilities fromDeferred tax liabilities to Other liabilities. For the six months ended June 30, 2004, we reclassified $0.5 millionfrom Deferred tax provision to Current tax provision to conform with the currentyear’s presentation.

 

**8.    Common Stock**

 

**CommonStock Repurchase**

 

InMay 1998 the Company’s Board of Directors authorized the Company to repurchaseup to $300 million of its outstanding Series A Common Stock.  Such repurchases may be effected from time totime in the open market or in private transactions, subject to marketconditions and management’s discretion. During the three months ended June 30,2005, we repurchased 180,050 shares of Series A Common Stock at a cost of $4.5million and an average price per share of $24.88.  During the six months ended June 30, 2005, werepurchased 337,709 shares of Series A Common Stock at a cost of $8.4 millionand an average per share price of $24.97. Between May 1998 and June 30, 2005, the Company spent approximately $100.1million to repurchase approximately 4.0 million shares of Series A Common Stockat an average price of $25.05.  There canbe no assurance that such repurchases will occur in the future or, if they dooccur, what the terms of such repurchases will be.

 

Also,The Hearst Corporation (“Hearst”), through its indirect wholly-owned subsidiaryHearst Broadcasting, Inc. (“Hearst Broadcasting”), has notified the Company andthe Securities and Exchange Commission of its intention to purchase up to 20million shares of the Company’s Series A Common Stock from time to time in theopen market, in private transactions or otherwise.  As of June 30, 2005, under this plan Hearsthad purchased approximately 19.0 million shares of the Company’s outstandingSeries A Common Stock.  As of June 30,2005 and December 31, 2004, Hearst owned 68.9% and 67.6%, respectively, of theCompany’s outstanding Common Stock.

 

**CommonStock Dividends**

 

Duringthe six months ended June 30, 2005, the Company’s Board of Directors declared acash dividend on shares of our Series A and Series B Common Stock as follows:

 
| **Per Share  Dividend  Amount** | ** ** | **Declaration Date** | ** **     | **Record Date** | ** **    | **Payment Date** | ** **     | **Total  Dividend** | ** ** | **Hearst  Portion** | ** ** |
|---------------------------------|------------|----------------------|----------------|-----------------|---------------|------------------|----------------|---------------------|------------|---------------------|------------|
| ** **                      | ** ** | ** **           | ** **     | ** **      | ** **    | ** **       | ** **     | **(In thousands)**  | ** ** |
| $                               | 0.07       |                 | March 31, 2005 |            | April 5, 2005 |             | April 15, 2005 |                | $          | 6,496               |       | $ | 4,432 |   |
| $                               | 0.07       |                 | May 4, 2005    |            | July 5, 2005  |             | July 15, 2005  |                | $          | 6,497               |       | $ | 4,478 |   |

 

10

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**9.    Preferred Stock**

 

TheCompany has authorized under its Certificate of Incorporation one millionshares of preferred stock, par value $.01 per share. On January 1, 2005, alloutstanding shares of Preferred Stock were redeemed and cancelled.  On December 31, 2004, there were 5,781 sharesof Series A Preferred Stock and 5,470 shares of Series B Preferred Stockoutstanding.

 

**10.    Related Party Transactions**

 

*The Hearst Corporation*.    As of June 30, 2005,Hearst owned approximately 44.0% of our Series A Common Stock and 100% of ourSeries B Common Stock, representing in the aggregate approximately 68.9% 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 six months ended June 30, 2005 and 2004, we were engaged in the following materialtransactions with Hearst or parties related to Hearst:

 

•      *Management Agreement*.   We recorded revenueof approximately $1.3 million and $2.4 million, in the three and six months endedJune 30, 2005, respectively, and $1.2 and $2.2 million in the three and sixmonths ended June 30, 2004, respectively, relating to a management agreementwith Hearst (the “Management Agreement”). Pursuant to the Management Agreement,we provide certain management services, such as sales, news, programming,financial and accounting management services, with respect to certain Hearstowned or operated television and radio stations. We believe the terms of theManagement Agreement are reasonable to both parties; however, there can be noassurance that more favorable terms would not be available from third parties.

 

•      *Services Agreement*.    We incurredexpenses of approximately $1.3 million and $2.6 million in the three and sixmonths ended June 30, 2005, respectively, and $1.1 and $2.1 million in thethree and six months ended June 30, 2004, respectively, relating to a servicesagreement with Hearst (the “Services Agreement”). Pursuant to the ServicesAgreement, Hearst provides the Company certain administrative services such asaccounting, auditing, financial, legal, insurance, data processing, andemployee benefits administration. We believe the terms of the ServicesAgreement are reasonable to both parties; however, there can be no assurancethat more favorable terms would not be available from third parties.

 

•      *Interest Expense, Net – Capital Trust.*  Weincurred interest expense, net, related to the Subordinated Debentures issuedto our wholly-owned unconsolidated subsidiary, the Capital Trust, of $2.4million and $4.9 million in the three and six months June 30, 2005,respectively and $3.8 and $7.5 million in the three and six months ended June30, 2004, respectively.  The CapitalTrust then paid comparable amounts to its Redeemable Convertible PreferredSecurities holders, including Hearst, which received $0.5 million and $1.0million in the three and six months ended June 30, 2005, respectively.  As of June 30, 2005, Hearst holds $25 millionof the total $130 million outstanding Series B Redeemable Convertible PreferredSecurities.

 

•      *Dividends on Common Stock.*    On each ofMay 4, 2005 and March 31, 2005, our Board of Directors declared a cash dividendof $0.07 on our Series A and B Common stock for a total amount of $6.5 millionand $6.5 million, respectively.  Includedin these amounts were $4.5 million and $4.4 million payable to Hearst.  On each of May 4, 2004 and March 24, 2004,our Board of Directors declared a cash dividend of $0.06 per share on ourSeries A and B Common stock for a total amount of $5.6 million and $5.6million, respectively.  Included in theseamounts were $3.7 million and $3.6 million payable to Hearst.

 

•      *Purchase of 7% Senior Notes*.    In April2005, Hearst, through Hearst Broadcasting, purchased $2.6 million face amount ofour 7% Senior Notes due November 15, 2007 (“7% Senior Notes”).  As of June 30, 2005, Hearst owned $3.3million face amount of the 7% Senior Notes.

 

11

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•      *Radio Facilities Lease.*    Pursuant to alease agreement, Hearst paid us approximately $0.2 and $0.4 million for thethree and six months ended June 30, 2005 and 2004. Under this agreement, Hearstleases 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, an entity owned 50% by anaffiliate of Hearst and 50% by ABC Television Network, whereby (i) we assistLifetime in securing distribution and subscribers for the Lifetime Television,Lifetime Movie Network and/or Lifetime Real Women programming services; and(ii) Lifetime acts as our agent with respect to the negotiation of ouragreements with cable, satellite and certain other multi-channel videoprogramming distributors.  Amountspayable to us by Lifetime depend on the specific terms of these agreements andmay be fixed or variable.  Based on theterms of completed agreements, we are entitled to receive a minimum aggregateamount of $3.2 million during the period from January 1, 2005 to June 20,2009.  We recorded revenue from theagreements of $1.2 million and $2.2 million in the three and six months ended June30, 2005 and $0.5 and $1.0 million in the three and six months ended June 30, 2004,respectively.

 

•      *Wide Orbit, Inc.**   *In November 2004, we entered into anagreement with Wide Orbit, Inc. for licensing and servicing of Wide Orbit’sTraffic Sales and Billing Solutions software. Hearst owns approximately 8% of Wide Orbit, Inc.  For the three and six months ended June 30,2005, we paid Wide Orbit, Inc. approximately $0.7 and $0.4 million under theagreement.

 

•      *Other Transactions with Hearst*.    Fromtime to time, entities related to or owned by Hearst may purchase advertisingon our stations.  We believe that theterms of the sale of the advertising time are reasonable to both parties;however, there can be no assurance that more favorable terms would not beavailable from third parties. Advertising revenue from Hearst, if any, is included in our Total revenueand is immaterial to the financial statements.

 

*NBC*.    InAugust 2001, we contributed our production-and-distribution unit toNBC/Hearst-Argyle Syndication, LLC in exchange for a 20% equity interest inthis entity.  NBC/Hearst-ArgyleSyndication, LLC is a limited liability company formed by NBC Enterprises (nowNBC Universal) and us to produce and syndicate first-run broadcast andoriginal-for-cable programming. This investment is accounted for under theequity method.  Our share of the incomeor loss in NBC/Hearst-Argyle Syndication, LLC is included in Equity in incomeof affiliates, net in the accompanying Condensed Consolidated Statements ofIncome. Emerson Coleman, our Vice President, Programming, is a member of theBoard of Directors of NBC/Hearst-Argyle Syndication, LLC, from which he doesnot receive compensation for his services.

 

*Internet Broadcasting*.    In December 1999, weinvested $20 million of cash in Internet Broadcasting Systems, Inc. (“Internet Broadcasting”) in exchangefor an equity interest in InternetBroadcasting.  In May 2001, weinvested an additional $6 million of cash for a total investment of $26 millionin Internet Broadcasting, andcontributed our Web sites to a subsidiary of Internet Broadcasting, IBS/HATV, LLC, which operates our stationWeb sites.  Our investment is accountedfor under the equity method.  Our shareof the income or loss of InternetBroadcasting is included in Equity in income of affiliates, net in theaccompanying Condensed Consolidated Statements of Income. Since January 2001,Harry T. Hawks, our Executive Vice President and Chief Financial Officer, andsince October 2002, Terry Mackin, our Executive Vice President, have bothserved on the Board of Directors of InternetBroadcasting, from which they do not receive compensation for theirservices. From December 1999 through October 2002, David J. Barrett, Presidentand Chief Executive Officer of the Company, served on the Board of Directors ofInternet Broadcasting, fromwhich he did not receive compensation for his services.  In addition, Internet Broadcasting also provides hosting services for ourcorporate Web site for a nominal amount.

 

*ProAct Technologies Corporation*.    In December 2004,ProAct sold its operating assets to a third party as part of an overall plan ofliquidation.  From February 2003 to December 2004, Harry T. Hawks, theCompany’s Executive Vice President and Chief Financial Officer, served on theBoard of Directors of ProAct, from which he did not receive compensation forhis services.

 

12

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*SmallBusiness Television*.        The Company utilizes SmallBusiness Television’s (“SBTV”) services to provide television stations withadditional revenue through the marketing and sale of commercial time to smallerbusinesses that do not traditionally use television advertising due to costs.In the three and six month period ended June 30, 2005 these sales generatedrevenue of approximately $0.3 million and $0.7 million, respectively, of whichapproximately $0.1 and $0.3 million was distributed to SBTV, respectively, andapproximately $0.2 million and $0.4 million was distributed to the Company,respectively.  In the three and six monthperiod ended June 30, 2004 these sales generated revenue of approximately $0.2million and $0.5 million, respectively, of which approximately $0.1 and $0.2million was distributed to SBTV, respectively, and approximately $0.1 millionand $0.3 million was distributed to the Company, respectively.  Mr. Dean Conomikes, the owner of SBTV, is theson of John G. Conomikes, a member of the Company’s Board of Directors.

 

*NBC Weather Plus.*  In November 2004, NBC Weather Plus Network (“WeatherPlus”) was formed to launch the first digital local and national weathernetwork using a portion of the digital spectrum of NBC affiliated televisionstations.  Weather Plus is a 50/50 jointventure between two member limited liability companies:  NBC News Bureaus, Inc. and Weather NetworkAffiliates Company, LLC.  NBC affiliatedstations may participate in the venture by investing in Weather NetworkAffiliates Company, LLC.  We have aminority interest in Weather Network Affiliates Company, LLC, and have launchedNBC Weather Plus in five of our markets – Sacramento, Orlando and Winston-Salem,Greenville and Cincinatti, and signed agreements in three more markets,Baltimore, New Orleans and Lancaster.  TerryMackin, our Executive Vice President, is the Chairman of the Board of the NBCTelevision Affiliates Association, which is the managing member and the ownerof certain ownership interests in Weather Network Affiliates Company, LLC.  Mr.Mackin does not receive compensation for his Board service.  We account for this investment usingthe cost method.

 

*Other Related Parties*.    In the ordinarycourse of business, the Company enters into transactions with other relatedparties, none of which were significant to our financial results in the threemonths ended June 30, 2005 and 2004.

 

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

 

***Overview***

 

TheCompany maintains seven defined benefit pension plans, 12 employee savingsplans, and other post-retirement benefit plans for active, retired and formeremployees.  In addition, the Companyparticipates in a multi-employer union pension plan that provides retirementbenefits to certain union employees.  Theseven defined benefit pension plans are hereafter collectively referred to asthe “Pension Plans.”

 

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

 

Benefitsunder the Pension Plans are generally based on years of credited service, ageat retirement and average of the highest five consecutive years’ compensation.The cost of the Pension Plans is computed on the basis of the Project UnitCredit Actuarial Cost Method. Past service cost is amortized over the expectedfuture service periods of the employees.

 

*Net Periodic Pension and Post-Retirement Cost*

 

Thefollowing schedule presents net periodic pension cost for the Company’s PensionPlans in the three and six months ended June 30, 2005 and 2004:

 
| ** **                                       | ** ** | **Pension Benefits**            | ** ** |
|--------------------------------------------------|------------|---------------------------------|------------|
| ** **                                       | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
| ** **                                       | ** ** | **2005**                        | ** ** | **2004** | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                                       | ** ** | **(Unaudited)  (In thousands)** | ** ** |
| Service cost                                     |       | $                               | 2,258      |   | $ | 1,851 |   | $ | 4,516 |   | $ | 3,688 |   |
| Interest cost                                    |       | 2,165                           |       | 1,923 |   | 4,330 |   | 3,831 |   |
| Expected return  on plan assets                  |       | (2,447                          | )          | (2,244 | ) | (4,894 | ) | (4,470 | ) |
| Amortization of  prior service cost              |       | 108                             |       | 123 |   | 216 |   | 246 |   |
| Amortization of  transitional (asset) obligation |       | 1                               |       | (24 | ) | 2 |   | (48 | ) |
| Recognized  actuarial loss                       |       | 739                             |       | 362 |   | 1,478 |   | 719 |   |
| Net periodic  pension cost                       |       | $                               | 2,824      |   | $ | 1,991 |   | $ | 5,648 |   | $ | 3,966 |   |

 

13

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Thefollowing schedule presents net periodic pension cost for the Company’spost-retirement benefit plan in the three and six months ended June 30, 2005and 2004:

 
| ** **                               | ** ** | **Post-Retirement Benefits**    | ** ** |
|------------------------------------------|------------|---------------------------------|------------|
| ** **                               | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
| ** **                               | ** ** | **2005**                        | ** ** | **2004** | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                               | ** ** | **(Unaudited)  (In thousands)** | ** ** |
| Service cost                             |       | $                               | 20         |   | $ | 21 |   | $ | 40 |   | $ | 42 |   |
| Interest cost                            |       | 84                              |       | 85 |   | 168 |   | 170 |   |
| Amortization of  prior service cost      |       | 5                               |       | 5 |   | 10 |   | 10 |   |
| Amortization of  transitional obligation |       | 5                               |       | 5 |   | 10 |   | 10 |   |
| Amortization of  net loss                |       | 4                               |       | 6 |   | 8 |   | 12 |   |
| Net periodic  pension cost               |       | $                               | 118        |   | $ | 122 |   | $ | 236 |   | $ | 244 |   |

 

*Contributions*

 

Duringthe three and six months ended June 30, 2005, we made contributions of $0.8million and $1.2 million to our defined benefit plans and $0.1 million and $0.2million to our post-retirement benefit plans. During the year 2005, the Company expects to contribute approximately $3.2million to the Pension Plans and approximately $0.5 million to thepost-retirement benefit plan.

 

**12.****            Other Commitments and Contingencies**

 

The Company has guaranteed the payments by its CapitalTrust on the Redeemable Convertible Preferred Securities.  As of June 30, 2005, $130.0 million of SeriesB Redeemable Convertible Preferred Securities remained outstanding.  The guarantee is irrevocable andunconditional, and guarantees the payment in full of all (i) distributions onthe Redeemable Convertible Preferred Securities to the extent of availablefunds of the Capital Trust; (ii) amounts payable upon redemption of theRedeemable Convertible Preferred Securities to the extent of available funds ofthe Capital Trust; and (iii) amounts payable upon dissolution of the Capital Trust.  The guarantee is unsecured and ranks (i)subordinate to all other liabilities of the Company, except liabilities thatare expressly made *pari passu*;(ii) *pari passu* with the most seniorpreferred stock issued by the Company, and *pari passu* withany guarantee of the Company in respect of any preferred stock of the Companyor any preferred security of any of the Company’s controlled affiliates; and(iii) senior to the Company’s Common Stock.

 

**13.****            Subsequent****Event**

 

On July 27, 2005, the Company completed a $5 millioninvestment in Series A Preferred Stock of Ripe Digital Entertainment, Inc. (“RipeTV”).  Ripe TV is a start-up brandeddigital television free video-on-demand service which is intended to bedistributed to the end consumer through cable, broadband and/or wirelessdevices.  On a fully diluted basis, theCompany owns 31.25% of Ripe TV.

 

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** **

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

 

**Organization of Information**

 

Management’sDiscussion and Analysis provides a narrative on our financial performance andcondition that should be read in conjunction with the accompanying condensed consolidatedfinancial statements.  It includes thefollowing sections:

 

•      Executive Summary

•      Results of Operations

•      Liquidity and Capital Resources

•      Impact of Inflation

•      Forward-Looking Statements

 

**Executive Summary**

 

Hearst-ArgyleTelevision, Inc. and subsidiaries (hereafter “we” or “our” or the “Company”)owns and operates 25 network-affiliated television stations. Additionally, weprovide management services to two network-affiliated stations and oneindependent television station, and two radio stations (the “Managed Stations”)in exchange for a management fee. Results of operations for the three and sixmonths ended June 30, 2005 and 2004 include (i) the results of our 24television stations, which were owned for all periods presented, and themanagement fees derived by the three television and two radio stations managedby us for all periods presented; and (ii) the results of operations of WMTW-TV,which was acquired on July 1, 2004, for all periods presented that ended afterthe acquisition date.

 

*Quarter Highlights*

 

•      Total revenue decreased 4.8% primarily from (i)the decrease in political revenue as a result of the normal, cyclicalnature of the television broadcasting business, in which advertising bycandidates for political office significantly increases in even-numbered electionyears (such as 2004) and (ii) a decrease in network compensation.

 

•      Advertising revenue, excluding political,increased due to gains in the retail, pharmaceutical, furniture and housewarescategories, partially offset by decreases in the automotive, movies andtelecommunications categories.

 

•      Cash increased to $103.2 million as of June30, 2005 from $99.0 million as of March 31, 2005 and $92.2 million as ofDecember 31, 2004.

 

•      During the quarter, $31.9 million intax benefits were recorded as a result of the settlement of certain tax returnexaminations and $5.5 million in tax benefits were recorded as a result of achange in Ohio tax law.

 

**Resultsof Operations**

 

*Three Months Ended June 30, 2005*

*Compared to Three Months Ended June30, 2004*

 

*Total revenue*.    Totalrevenue includes primarily:

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

(ii)   networkcompensation; and

(iii)  otherrevenue (less than 3% of total revenue).

 

Total revenue in the three months ended June 30, 2005 was$188.5 million as compared to $198.0 million in the three months ended June 30,2004, a decrease of $9.5 million or 5%. This decrease was primarilyattributable to the following factors:

(i)    a$9.6 million decrease in net political advertising revenue resulting from thenormal, cyclical nature of the television broadcasting business, in which thedemand for advertising by candidates running for political office significantlyincreases in even-numbered election years (such as 2004);

(ii)   a$2.6 million decrease in network compensation; partially offset by

 

15

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(iii)  anincrease in advertising in the retail, pharmaceutical, furniture and housewarescategories, partially offset by decreases in the automotive, movies and telecommunicationscategories and

(iv)  anincrease in retransmission revenue.

 

*Salaries, benefits and otheroperating costs*.    During the threemonths ended June 30, 2005, salaries, benefits and other operating costs were $90.7million, as compared to $87.2 million in the three months ended June 30, 2004,an increase of $3.5 million or 4%.  Thisincrease was primarily due to:

(i)    a$2.1 million increase in Salaries, benefits and other operating costs resultingfrom the acquisition of WMTW-TV on July 1, 2004;

(ii)   a$0.9 million, or 2.2%, increase in payroll expense; and

(iii)  a$0.7 million increase in pension and benefit expenses.

 

*Amortization of program rights*.  Amortizationof program rights was $15.2 million in the three months ended June 30, 2005, ascompared to $14.8 million in the three months ended June 30, 2004 an increaseof $0.4 million or 2.7%.

 

*Depreciation and amortization*.  Depreciation and amortization was $13.3 million in the three months ended June30, 2005, as compared to $12.4 million in the three months ended June 30, 2004,an increase of $0.9 million or 7%.  Depreciationexpense was $11.8 million in the three months ended June 30, 2005, as comparedto $10.9 million in the three months ended June 30, 2004, an increase of $0.9million or 8%.  This increase wasprimarily due to increased depreciation expense from recent capital expendituresand the additional depreciation from WMTW-TV.  Amortization was $1.5 million in the threemonths ended June 30, 2005 and 2004, and principally results from amortizationrelated to advertiser client base and network affiliations.

 

*Corporate, general andadministrative expenses*.    Corporate,general and administrative expenses were $5.6 million in the three months endedJune 30, 2005, as compared to $6.1 million in the three months ended June 30,2004, a decrease of $0.5 million or 8%. This decrease was primarily due to decreases in professional servicesfees.

 

*Operating income.*    Operatingincome was $63.7 million in the three months ended June 30, 2005, as comparedto $77.5 million in the three months ended June 30, 2004, a decrease of $13.8million or 18%. This net decrease in operating income was due to the itemsdiscussed above.

 

*Interest expense, net.*    Interestexpense, net of interest income, was $15.8 million in the three months ended June30, 2005, as compared to $16.0 million in the three months ended June 30, 2004,a decrease of $0.2 million or 1%.

 

*Interest expense, net – CapitalTrust*.    Interest expense, net, to ourwholly-owned, unconsolidated subsidiary trust (the Hearst-Argyle Capital Trustor “Capital Trust”) was $2.4 million for the three months ended June 30, 2005 comparedto $3.8 million for the three months ended June 30, 2004.  The $1.4 million decrease results from theredemption of the $72.2 million Series A Debentures on December 31, 2004.

 

*Equity in income of affiliates,net*.  Equity in incomeof affiliates, net was $0.7 million in the three months ended June 30, 2005, ascompared to $0.5 million in the three months ended June 30, 2004, an increaseof $0.2 million.  This increase wasprimarily due to an increase in net income of IBS/HATV LLC which operates ourstation websites.  Equity in income ofaffiliates, net represents our equity interests in the financial results of unconsolidatedaffiliates.

 

*Income taxes.*    Werecorded an income tax benefit of $19.4 million in the three months ended June30, 2005, as compared to income tax expense of $22.2 million in the threemonths ended June 30, 2004, a decrease of $41.6 million.  This was due to (i) a decrease in incomebefore income taxes from $58.2 million in the three months ended June 30, 2004to $46.2 million in the three months ended June 30, 2005; (ii) $31.9 million intax benefits recorded as a result of the settlement of certain tax returnexaminations in the three months ended June 30, 2005; and (iii) a deferred taxbenefit of $5.5 million as a result of Ohio tax law changes.  The current and deferred portions of ourincome tax expense were $(19.5) million and $0.1 million, respectively, in thethree months ended June 30, 2005, compared to $16.3 million and $5.9 million,respectively, in the three months ended June 30, 2004.

 

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*Net income*.    Netincome was $65.6 million in the three months ended June 30, 2005, as comparedto $36.0 million in the three months ended June 30, 2004, an increase of $29.6million or 82%.  This increase was due tothe items discussed above.

 

*Six Months Ended June 30, 2005*

*Compared to Six Months Ended June30, 2004*

 

Total revenue in the six months ended June 30, 2005was $350.7 million as compared to $364.8 million in the six months ended June30, 2004, a decrease of $14.1 million or 4%. This decrease was primarilyattributable to the following factors:

(i)    a$19.0 million decrease in net political advertising revenue resulting from thenormal, cyclical nature of the television broadcasting business, in which thedemand for advertising by candidates running for political office significantlyincreases in even-numbered years (such as 2004);

(ii)   a$4.8 million decrease in network compensation; partially offset by

(iii)  anincrease in advertising in the categories of automotive, retail, packagedgoods, pharmaceutical and furniture and housewares, partially offset bydecreases in the telecommunications and movie categories; and

(iv)  an increase in retransmission revenue.

 

*Salaries, benefits and otheroperating costs*.    Salaries, benefitsand other operating costs were $179.3 million in the six months ended June 30,2005, as compared to $171.8 million in the six months ended June 30, 2004, anincrease of $7.5 million or 4%.  Thisincrease was primarily due to:

(i)    a$4.0 million increase in Salaries, benefits and other operating costs primarilyresulting from the acquisition of WMTW-TV on July 1, 2004;

(ii)   a$1.0 million increase in payroll expense; and

(iii)  a$1.5 million increase in pension and benefit expenses.

 

*Amortization of program rights*.  Amortizationof program rights was $30.5 million and $30.1 million in the six months endedJune 30, 2005 and 2004, respectively.

 

*Depreciation and amortization*.  Depreciation and amortization was $26.4 million in the six months ended June30, 2005, as compared to $24.9 million in the six months ended June 30, 2004, anincrease of $1.5 million or 6%. Depreciation expense was $23.4 million in the six months ended June 30,2005, as compared to $21.9 million in the six months ended June 30, 2004, anincrease of $1.5 million or 7%.  Thisincrease was primarily due to increased depreciation expense from recent capitalexpenditures and the additional depreciation from WMTW-TV.  Amortization was $3.0 million in the sixmonths ended June 30, 2005 and 2004, and principally results from amortizationrelated to separately identified intangible assets, advertiser client base andnetwork affiliations.

 

*Corporate, general andadministrative expenses*.    Corporate,general and administrative expenses were $11.6 million in the six months endedJune 30, 2005, as compared to $11.7 million in the six months ended June 30,2004, a decrease of $0.1 million or approximately 1%.  This decrease was primarily due to decreasesin professional services expense.

 

*Operating income.*    Operatingincome was $103.0 million in the six months ended June 30, 2005, as compared to$126.3 million in the six months ended June 30, 2004, a decrease of $23.3million or 18%. This net decrease in operating income was due to the itemsdiscussed above.

 

*Interest expense, net.*    Interestexpense, net of interest income, was $31.5 million in the six months ended June30, 2005, as compared to $32.4 million in the six months ended June 30, 2004, adecrease of $0.9 million or 3%.

 

*Interest expense, net – CapitalTrust*.    Interest expense, net, to ourwholly-owned, unconsolidated subsidiary trust (the Hearst-Argyle Capital Trustor “Capital Trust”) was $4.9 million for the six months ended June 30, 2005compared to $7.5 million for the six months ended June 30, 2004.  The decrease of $2.6 million results from theredemption of the $72.2 million Series A Debentures on December 31, 2004.

 

*Equity in income of affiliates,net*.  Equity in incomeof affiliates, net was $1.0 million in the six months ended June 30, 2005, ascompared to $0.7 million in the six months ended June 30, 2004, an increase of$0.3 million.  This increase 

 

17

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was primarily due to an increase in net income of IBS/HATV LLC, whichoperates our station websites.  Equity inincome of affiliates, net represents our equity interests in the financialresults of unconsolidated affiliates.

 

*Income taxes.*    Werecorded an income tax benefit of $11.0 million in the six months ended June30, 2005, as compared to an income tax expense of $33.2 million in the sixmonths ended June 30, 2004, a decrease of $44.2 million.  This decrease was due to (i) a decrease inincome before income taxes from $87.1 million in the six months ended June 30,2004 to $67.6 million in the six months ended June 30, 2005; (ii) $31.9 millionin tax benefits recorded as a result of the settlement of certain tax returnexaminations in the period ended June 30, 2005; and (iii) a deferred taxbenefit of $5.5 million as a result of Ohio tax law changes.  The current and deferred portions of ourincome tax expense were $(13.8) million and $2.8 million, respectively, in thesix months ended June 30, 2005, compared to $24.2 million and $9.0 million,respectively, in the six months ended June 30, 2004.

 

*Net income*.    Netincome was $78.7 million in the six months ended June 30, 2005, as compared to$53.9 million in the six months ended June 30, 2004, an increase of $24.8 millionor 46%.  This increase was due to theitems discussed above.

 

**Liquidity and Capital Resources**

 

As of June 30, 2005, ourcash and cash equivalents balance was $103.2 million, as compared to $92.2million as of December 31, 2004, an increase of $11.0 million.  The net increase in cash and cash equivalentsreflects the factors described below.

 

*OperatingActivities*

 

Net cash provided byoperating activities was $54.9 million in the six months ended June 30, 2005,as compared to $89.1 million in the six months ended June 30, 2004, a decreaseof $34.2 million or 38%. This decrease was primarily due to:

(i)    the decrease in our netrevenue compared to the same period in 2004;

(ii)   a decrease in Other Liabilitiesas a result of the settlement of certain tax return examinations as discussedabove under “Income Taxes;”

(iii)  changes resulting from:

a.     an increase inreceivables over the prior year, and

b.     a decrease inaccounts payable and accrued liabilities.

 

*InvestingActivities*

 

Net cash used ininvesting activities was $16.8 million in the six months ended June 30, 2005,as compared to $16.9 million in the six months ended June 30, 2004, a decrease of$0.1 million or approximately 1%.  Duringboth periods, our primary investing activities were equipment purchases relatedto:

(i)    digital projects;

(ii)   maintenance projects; and

(iii)  special projects.

 

Inthe six months ended June 30, 2005, we invested

(i)      $4.7 million in digital projects;

(ii)     $7.9 million in maintenance projects; and

(iii)    $4.2 million in special projects.

 

Forthe year ending December 31, 2005, we expect to invest approximately $40million in property, plant and equipment, including approximately

(i)      $7 million in digital projects;

(ii)     $18 million in maintenance projects; and

(iii)    $15 million in special projects.

 

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*FinancingActivities*

 

Net cash used infinancing activities was $27.0 million in the six months ended June 30, 2005,as compared to $5.6 million in the six months ended June 30, 2004, an increaseof $21.4 million. This increase was primarily due to:

(i)    the redemption of ourpreferred stock of $11.3 million in January 2005 compared to a redemption of$1.6 million in January 2004;

(ii)   the repurchase of $8.4 millionof Series A common stock during the six months ended June 30, 2005 compared tozero in the prior year period;

(iii)  proceeds from stock optionexercises and employee stock purchases of $5.6 million in the six months ended June30, 2005 compared to $7.8 million in the six months ended June 30, 2004; and

(iv)  a $1.9 million increase to $13.0million in common stock dividends paid.

 

*NewCredit Facility and Other Long Term Debt*

 

OnApril 15, 2005, we entered into a five year $250 million credit facility with aconsortium of banks led by JP Morgan Chase, Bank of America, Wachovia Bank, BNPParibas and Harris Nesbitt.  The newcredit facility can be used for general corporate purposes including workingcapital, investments, acquisitions, debt repayment and dividend payments.  On the same day, we capitalized $1.1 millionof costs related to the credit facility. Outstanding principal balances under the credit facility will bearinterest at our option at either LIBOR or the alternate base rate (“ABR”), plusthe applicable margin.  The applicablemargin for ABR loans is zero.  Theapplicable margin for LIBOR loans varies between 0.50% and 1.00% depending onthe ratio of our total debt to earnings before interest, taxes, depreciationand amortization as defined by the credit agreement (the “Leverage Ratio”).  The ABR is the greater of (i) the prime rateor (ii) the Federal Funds Effective Rate in effect plus 0.5%.  We are required to pay a commitment fee basedon the unused portion of the Credit Facility. The commitment fee ranges from 0.15% to 0.25% depending on our LeverageRatio.  The credit facility is a generalunsecured obligation of the Company.  Wehave not borrowed under this credit facility as of June 30, 2005.

 

As of June 30, 2005, ourlong-term debt obligations, exclusive of capital lease obligations, were $882.2million, all of which mature after 2005. All of our long-term debt obligations as of June 30, 2005 bear interestat a fixed rate.  The Company’s creditratings for its long-term debt obligations, respectively, were BBB- by Standard& Poor’s and Fitch Ratings and Baa3 by Moody’s Investors Service, as of June30, 2005.  Such credit ratings areconsidered to be investment grade.

 

Our debt obligationscontain certain financial and other covenants and restrictions on theCompany.  Certain of the financialcovenants include credit ratios such as leverage, interest coverage and fixedcharges coverage, but such covenants do not include any triggers explicitlytied to the Company’s credit ratings or stock price.  We are in compliance with all such covenantsand restrictions as of June 30, 2005.

 

We anticipate that ourprimary sources of cash, which include current cash balances, cash provided byoperating activities, and amounts available under our new credit facility, willbe sufficient to finance the operating and working capital requirements of ourstations, as well as our debt service requirements, anticipated capitalexpenditures, and other obligations of the Company for both the next 12 monthsand the foreseeable future thereafter.

 

**Impact of Inflation**

 

Theimpact of inflation on our operations has not been significant to date. Therecan be no assurance, however, that a high rate of inflation in the future wouldnot have an adverse impact on our operating results.

 

**Forward-Looking Statements**

 

This report****includes****or incorporates forward-lookingstatements.  We based theseforward-looking statements on our current expectations and projections aboutfuture events.  These forward lookingstatements generally can be identified by the use of statements that includephrases such as “anticipate”, “will”, “likely”, “plan”, “believe”, “expect”, “intend”,“project” or other such similar words and/or phrases. For these statements, theCompany claims the protection of the safe harbor for forward-looking statementscontained in the Private Securities Litigation Reform Act of 1995.  The forward-looking statements contained inthis report, concerning, among other things, trends and projections 

 

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involvingrevenue, income, earnings, cash flow, operating expenses, capital expenditures,dividends and capital structure, involve risks and uncertainties, and aresubject to change based on various important factors.  Those factors include the impact on ouroperations from

 

•      Changes in Federal regulation ofbroadcasting, including changes in Federal communications laws or regulations;

•      Local regulatory actions and conditions inthe areas in which our stations operate;

•      Competition in the broadcast televisionmarkets we serve;

•      Our ability to obtain quality programming forour television stations;

•      Successful integration of television stationswe acquire;

•      Pricing fluctuations in local and nationaladvertising;

•      Changes in national and regional economies;

•      Our ability to service and refinance ouroutstanding debt; and

•      Volatility in programming costs, industryconsolidation, technological developments, and major world events**.**

 

Theseand other matters we discuss in this report, or in the documents we incorporateby reference into this report, may cause actual results to differ from those wedescribe.  We undertake no obligation toupdate or revise any forward-looking statements, whether as a result of newinformation, future events or otherwise.

 

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

 

As of June 30, 2005, theCompany was not involved in any derivative financial instruments.  However, the Company may consider certaininterest-rate risk strategies in the future.

 

As of June 30, 2005, wedo not have any outstanding floating rate debt.

 

**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 June 30, 2005. Basedon that evaluation, and as of the end of the quarter for which this report ismade, the Company’s management, including the CEO and CFO, concluded that theCompany’s disclosure controls and procedures were effective.  Our management, including the CEO and CFO,performed an evaluation of any changes that occurred in our internal controlover financial reporting (as that term is defined in Exchange Act Rule13a-15(f)) during the fiscal quarter ended June 30, 2005.  That evaluation did not identify any changesin the Company’s internal control over financial reporting that have materiallyaffected, or are reasonably likely to materially affect, the Company’s internalcontrol over financial reporting.

 

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**PART II**

**Other Information**

 

**Item 2.    UnregisteredSales of Equity Securities and Use of Proceeds.**

 

*Purchase of Equity Securities by the Issuer andAffiliated Purchasers. *Thefollowing table reflects purchases made by Hearst Broadcasting during the threemonths ended June 30, 2005 of our Series A Common Stock:

 
| **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** | ** ** |
|--------------------------|------------|--------------------------------------------|------------|----------------------------------------|------------|------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------|------------|
| April 1 – April  30 |       | 324,900                                    |       | $                                      | 25.18      |                                                                               | 324,900    |                                                                             | 1,371,727  | (1) |
| May 1 – May 31      |       | 180,050                                    |       | $                                      | 24.88      |                                                                               | 180,050    |                                                                             | 1,191,677  |   |
| June 1 – June 30    |       | 169,083                                    |       | $                                      | 24.92      |                                                                               | 169,083    |                                                                             | 1,022,594  |   |
| Total                    |       | 674,033                                    |       |                                   |       |                                                                               |       |                                                                             |       |

 

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(1)   OnDecember 6, 2000, the Board of Directors of Hearst authorized HearstBroadcasting to purchase up to 20 million shares of our Series A Common Stock(inclusive of previously authorized and announced purchase amounts).  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 June 30, 2005, Hearst owned approximately 44% of the Company’s outstandingSeries A Common Stock and 100% of the Company’s Series B Common Stock.

 

The following tablereflects purchases made by the Company of its Series A Common Stock during the threemonths ended June 30, 2005.

 
| **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** | ** ** |
|--------------------------|------------|---------------------------------------------|------------|----------------------------------------|------------|------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------|------------|
| April 1 – April  30 |       | —                                      |       | $                                      | —     |                                                                               | —     |                                                                                       |       |   |
| May 1 – May 31      |       | 180,050                                     |       | $                                      | 24.88      |                                                                               | 180,050    |                                                                                       |       |   |
| June 1 – June 30    |       | —                                      |       | $                                      | —     |                                                                               | —     |                                                                                       | $          | 199,947,987 | (1) |
| Total                    |       |                                        |       |                                   |       |                                                                               |       |                                                                                       |       |
|                          |            |                                             |            |                                        |            |                                                                                    |            |                                                                                            |            |  |  |

 

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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 June 30, 2005, the Company has spent approximately $100.1 millionto repurchase approximately 4.0 million shares of Series A Common Stock at anaverage price of $25.05.

 

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

 

All nominees standing forelection as directors were elected at our annual shareholders’ meeting, whichwas held on May 4, 2005. The following chart indicates the number of votes castfor, the number of votes withheld and the number of broker non-votes withrespect to each nominee for director:

 

**Proposal One (1)**

 
| **Nominee**                      | ** ** | **For**    | ** ** | **Withheld** | ** ** | **Broker Non-Votes** | ** ** |
|----------------------------------|------------|------------|------------|--------------|------------|----------------------|------------|
|                             |       |       |       |         |       |                 |       |
| David Pulver (2)                 |       | 48,318,768 |       | 974,513      |       | 0                    |       |
|                             |       |       |       |         |       |                 |       |
| David J. Barrett  (3)            |       | 41,298,648 |       | 0            |       | 0                    |       |
|                             |       |       |       |         |       |                 |       |
| Ken J. Elkins  (3)               |       | 41,298,648 |       | 0            |       | 0                    |       |
|                             |       |       |       |         |       |                 |       |
| Victor F. Ganzi  (3)             |       | 41,298,648 |       | 0            |       | 0                    |       |
|                             |       |       |       |         |       |                 |       |
| William Randolph  Hearst III (3) |       | 41,298,648 |       | 0            |       | 0                    |       |
|                             |       |       |       |         |       |                 |       |
| Michael E.  Pulitzer (3)         |       | 41,298,648 |       | 0            |       | 0                    |       |
|                             |       |       |       |         |       |                 |       |
| Virginia H.  Randt (3)           |       | 41,298,648 |       | 0            |       | 0                    |       |

 

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(1)    Abstentionswere not counted in the election of the directors. 

(2)    SeriesA Director. Elected by the holders of Series A Common Stock. 

(3)    SeriesB Director. Elected by the holders of Series B Common Stock. 

 

The term of office of thefollowing other directors continued after the annual shareholders’ meeting:Caroline L. Williams, Frank A. Bennack, Jr., John G. Conomikes, George R.Hearst, Jr., Bob Marbut and Gilbert C. Maurer.

 

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

 

**Proposal Two**

 
| **For**                   |   | 90,345,782 |   |
|---------------------------|--------|------------|--------|
| ** **                |   |       |   |
| **Against (1)**      |   | 233,222    |   |
| ** **                |   |       |   |
| **Withheld**              |   | 12,925     |   |
| ** **                |   |       |   |
| **Broker Non-Votes** |   | 0          |   |

 

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(1)   Abstentionswere counted as a vote against the Independent Auditors Ratification Proposal. 

 

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**Item 6.    Exhibits**

 

**(a) Exhibits:**

 

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

 

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

 

32.1                  Certificationof Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of2002.

 

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**SIGNATURES**

 

 

Pursuant to 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, Secretary and General Counsel |
|   |                                |
|   | Dated:                              | July 28, 2005 | ** ** |
|        |                                     |  |  |  |  |

 

 
| **Name**           | ** ** | **Title**                                                   | ** ** | **Date**      |
|--------------------|------------|-------------------------------------------------------------|------------|---------------|
|               |       |                                                        |       |          |
| /s/ HARRY T. HAWKS |       | Executive Vice  President                                   |       |          |
| Harry T. Hawks     |       | and Chief Financial  Officer  (Principal Financial Officer) |       | July 28, 2005 |

 

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