|
|



|SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549
|--------------------------------------------------------

|
|

|Form 10-K
|---------



|(Mark One)
|----------



||X| | ANNUAL REPORT PURSUANT TO SECTION 13
      OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ------------------------------------------------------------------------------------------





| | For the fiscal year ended December 31,
      2003
| | -------------------------------------------------





|or
|--



||_| | TRANSITION REPORT PURSUANT TO SECTION
      13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ----------------------------------------------------------------------------------------------





| | For the transition period from: Not
      Applicable
| | ----------------------------------------------------





|Commission file number 1-14776
|------------------------------



|Hearst-Argyle Television, Inc.(Exact Name of Registrant as Specified in Its Charter)
|------------------------------------------------------------------------------------

|Delaware(State or other jurisdiction of 
       incorporation or organization) | 74-2717523(I.R.S. Employer Identification No.)
|------------------------------------------------------------------------------ | ----------------------------------------------

|888 Seventh Avenue
      
       New York, NY 10106 (Address of principal executive Offices) | (212) 887-6800(Registrants telephone number, including area code)
|-------------------------------------------------------------------------------------------- | ------------------------------------------------------------------



|SECURITIES REGISTERED PURSUANT
TO SECTION 12(b) OF THE ACT:
|-----------------------------------------------------------

|Title of
      Each ClassSeries A Common Stock, par value $.01 per share | Name of
      Each Exchange On Which RegisteredNew York Stock Exchange
|------------------------------------------------------------------------ | ----------------------------------------------------------------------



|SECURITIES REGISTERED PURSUANT TO SECTION
      12(g) OF THE ACT:None
|---------------------------------------------------------------------



|Indicate by check
mark whether the registrant: (1) has filed all reports  required to be filed by Section
13 or 15(d) of the Securities Exchange Act of  1934 during the preceding 12 months (or
for such shorter period that the  Registrant was required to file such reports), and (2)
has been subject to such  filing requirements for the past 90 days. Yes |X| No |_|
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Indicate by check
mark if disclosure of delinquent filers pursuant to Item  405 of Regulation S-K is not
contained herein, and will not be contained, to the  best of registrants knowledge,
in definitive proxy or information statements  incorporated by reference in Part III of
this Form 10-K or any amendment to this  Form 10-K. |X|
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Indicate by check
mark whether the registrant is an accelerated filer (as  defined in Exchange Act Rule
12-b2). Yes |X| No |_|
|------------------------------------------------------------------------------------------------------------------------------



|The aggregate
market value of the registrants voting common stock held by  non-affiliates on
March 1, 2004, based on the closing price for the registrants  Series A Common
Stock on such date as reported on the New York Stock Exchange  (the NYSE),
was approximately $766,581,063.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Shares of the
registrants Common Stock outstanding as of March 1, 2004:  92,879,146 shares
(consisting of 51,580,498 shares of Series A Common Stock and  41,298,648 shares of
Series B Common Stock).
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|DOCUMENTS
INCORPORATED BY REFERENCE: Portions of the registrants Proxy Statement relating to
the 2004 Annual Meeting of Stockholders are incorporated by reference into Part III
(Items 10, 11, 12, 13 and 14).
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|
|



| |  | 
| |  | 



---





|FORWARD-LOOKING STATEMENTS
|--------------------------



|This report  includes or incorporates
forward-looking statements. We based these  forward-looking  statements on our current
expectations and projections about  future events. The  forward-looking statements
contained in this report,  concerning, among other things,  trends involving net
revenues, cash flow and  operating expenses, involve risks and  uncertainties, and are
subject to change  based on various important factors. Those  factors include the impact
on our  operations from:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Federal
governmental regulation of broadcasting;
| | - |  | ------------------------------------------------

| |  |  | Competition
in the  broadcast television markets we serve;
| | - |  | ----------------------------------------------------------

| |  |  | Our
ability to obtain quality  programming for our television stations;
| | - |  | -----------------------------------------------------------------------

| |  |  | Successful
integration of television  stations we acquire;
| | - |  | ----------------------------------------------------------

| |  |  | Pricing
fluctuations in local and national advertising;
| | - |  | -------------------------------------------------------

| |  |  | Changes
in national and regional economies;
| | - |  | -------------------------------------------

| |  |  | Our
ability to service and  refinance our outstanding debt;
| | - |  | -----------------------------------------------------------

| |  |  | Local
regulatory actions and conditions in the areas in which our stations operate; and
| | - |  | ---------------------------------------------------------------------------------------

| |  |  | Volatility
in programming costs, industry consolidation, technological  developments, and major
world news events.
| | - |  | ------------------------------------------------------------------------------------------------------------------



|Other matters we discuss in this report, or in
the documents we incorporate by  reference into this report, may also cause actual
results to differ from those  we describe. We undertake no obligation to update or revise
any forward-looking  statements, whether as a result of new information, future events or
otherwise.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2 | 
| | - | 



---





|HEARST-ARGYLE TELEVISION, INC.
2003 ANNUAL REPORT ON FORM 10-K
|--------------------------------------------------------------



|TABLE OF CONTENTS
|-----------------



|PART I
|------

|         | Page                                                                                                 
|-------- | -----------------------------------------------------------------------------------------------------
|Item 1.  | Business                                                                                             
|Item 2.  | Properties                                                                                           
|Item 3.  | Legal Proceedings                                                                                    
|Item 4.  | Submission of Matters to a Vote
        of Security Holders                                          
|         |                                                                                                      
|         | PART
        II                                                                                      
|         |                                                                                                      
|Item 5.  | Market for Registrants Common
        Equity and Related Stockholder Matters                        
|Item 6.  | Selected Financial Data                                                                              
|Item 7.  | Managements Discussion and
        Analysis of Financial Condition and
        Results of Operations
|Item 7A. | Quantitative and Qualitative Disclosures
        about Market Risk                                   
|Item 8.  | Financial Statements and Supplementary
        Data                                                  
|Item 9.  | Changes in and Disagreements with
        Accountants on Accounting and 
        Financial Disclosure
|Item 9A. | Controls and Procedures                                                                              
|         |                                                                                                      
|         | PART
        III                                                                                     
|         |                                                                                                      
|Item 10. | Directors and Executive Officers
        of the Registrant                                           
|Item 11. | Executive Compensation                                                                               
|Item 12. | Security Ownership of Certain Beneficial
        Owners and Management                               
|         | and Related Stockholder Matters                                                                      
|Item 13. | Certain Relationships and Related
        Transactions                                               
|Item 14. | Principal Accountant Fees and Services                                                               
|         |                                                                                                      
|         | PART
        IV                                                                                      
|         |                                                                                                      
|Item 15. | Exhibits, Financial Statement Schedules,
        and Reports on Form 8-K                             

| | 3 | 
| | - | 



---





|PART I
|------



|ITEM 1. BUSINESS
|----------------



|General
|-------



|Hearst-Argyle
Television, Inc. (the Company or we) is one of the  countrys
largest independent, or non-network-owned, television station groups.  Headquartered in
New York City, we own or manage 27 television stations reaching  approximately 17.8% of
television households in the United States. Our 12  ABC-affiliated television stations,
which cover 8.1% of U.S. television  households, comprise the largest ABC affiliate
group. Our 10 NBC-affiliated  television stations, which cover 7.2% of U.S. television
households, comprise  the second largest NBC affiliate group. We own two CBS-affiliated
television  stations and one WB station, and manage one UPN station and one independent
station. Our relationships with our affiliated television networks also include  several
strategic joint ventures in the areas of programming, production,  syndication and the
Internet. We also manage two radio stations.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We provide,
through our local television stations, free over-the-air  programming to our communities television
viewing audiences. Our programming  includes three main components:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | programs
produced by networks with which we are affiliated, such as ABC and NBC;
| | - |  | --------------------------------------------------------------------------------

| |  |  | programs
that we produce locally, such as news and entertainment; and
| | - |  | ---------------------------------------------------------------------

| |  |  | first-run syndicated programs that we acquire,
      such as the Oprah Winfrey Show and Dr. Phil.
| | - |  | -------------------------------------------------------------------------------------------------



|In keeping with
our commitment to serve the public interest of the  local communities in which we
operate, our television stations also provide  public service announcements and political
coverage and sponsor community  service projects and other public initiatives. In
addition, each of our stations  operates a local Web Site which provides our audience
with extended news,  weather, sports and informational content.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Our primary source
of revenue is the sale of commercial air time to  advertisers. Our objective is to meet
the needs of our advertising customers and  increase our advertiser base by delivering
mass audiences in key demographics,  primarily in the top 100 U.S. markets. We seek to
attract our television  audience by providing leading local news programming and
compelling network and  syndicated programs. In addition to offering advertising
customers commercial  air time, we offer a variety of marketing programs, including
community events,  sponsorships and Internet advertising.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We view providing
leading local news coverage, both on the air and on  the Web, as instrumental to our
stations success. Our stations and Web sites  demonstrate journalistic excellence
in the areas of national and local coverage,  breaking news, major weather events and
political coverage of issues,  candidates, debates, and elections. We typically rank
either first or second (by  share of demographic audience, adults 25-54) in local evening
news in 20 of the  23 markets where we produce news and our television stations have been
recognized with numerous local, state and national awards for outstanding news  coverage.
Our stations have received numerous honors, including Alfred I.  duPont-Columbia Awards,
George Foster Peabody Awards, Edward R. Murrow Awards,  National Headliners Awards, as
well as numerous local Emmys.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|For the period ending December
      31, 2003, we had revenues of $686.8 million, employed 3,208 full-time and
      part-time employees and operated in 24 U.S. markets. Information about our
      financial results is discussed under Item 7 Managements Discussion
      and Analysis of Financial Condition and Results of Operations beginning
      on page 22, and presented under Item 8 Financial Statements and Supplementary
      Data beginning on page 36.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We are
incorporated under the laws of the State of Delaware. Our  principal executive offices
are located at 888 Seventh Avenue, New York, New  York 10106, and our main telephone
number at that address is (212) 887-6800. Our  Series A Common Stock is listed on the New
York Stock Exchange under the symbol  HTV.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Company Background
|------------------



|Hearst-Argyle
Television,  Inc. was formed in August 1997 when The Hearst  Corporation  (Hearst)
combined  its  television  broadcast group and related broadcast operations (the Hearst
Broadcast Group) with those of Argyle Television, Inc. (Argyle).
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Hearst was founded in 1887.
      In 1928, Hearst entered the broadcasting business with its acquisition of
      radio station WSOE in Milwaukee, Wisconsin. In 1948, Hearst launched its
      first television station, WBAL-TV, in Baltimore, Maryland,
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4 | 
| | - | 



---





|which was the nations 19th television station. That
      same year, WLWT-TV, in Cincinnati, Ohio, later to become an Argyle station,
      was launched as the nations 20th television station. By 1997, when
      Hearst and Argyle combined their broadcast operations to form our company,
      they had a total of 15 television stations and two radio stations.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Since that time, we have acquired
      additional television stations through asset purchase, asset exchange or
      merger transactions, including merger transactions in 1999 with Pulitzer
      Publishing Company (Pulitzer), in which we acquired Pulitzers
      nine television stations and five radio stations, and with Kelly Broadcasting
      Company, in which we acquired our television stations in Sacramento, California,
      and a three-party asset exchange transaction in 2001 pursuant to which we
      sold three Phoenix radio stations and acquired WMUR-TV, Manchester, New
      Hampshire. In January of 2004, we signed an agreement to acquire an additional
      television station, WMTW-TV, Portland, Maine, which we expect to consummate
      in the second quarter of 2004. The transaction is conditioned on approval
      by the Federal Communications Commission and other customary closing conditions.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We also have made
strategic equity investments in Internet Broadcasting  Systems, Inc. (IBS)
and NBC/Hearst-Argyle Syndication, LLC. We formed a series  of local partnerships with
IBS for the development and management of local  news/information/entertainment Web
sites. NBC/Hearst-Argyle Syndication, LLC is  a limited liability company we formed with
NBC Enterprises as a joint venture to  produce and syndicate first-run broadcast and
original-for-cable programming. In  addition, we have a minor interest in the Arizona
Diamondbacks major league  baseball team, which we acquired in the Pulitzer transaction,
and have a  minority interest in ProAct Technologies Corporation (ProAct)
(formerly  Consumer Financial Network, Inc.), a provider of human resources and benefit
management solutions for employers and health plans.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|As of March 1,
2004, Hearst owned, through its wholly-owned  subsidiaries, Hearst Holdings, Inc., a
Delaware corporation (Hearst Holdings),  and Hearst Broadcasting, Inc., a
Delaware corporation (Hearst Broadcasting),  100% of the issued and
outstanding shares of our Series B Common Stock, par  value $.01 per share, (the Series
B Common Stock, and together with our Series  A Common Stock, par value $.01 per
share, the Series A Common Stock, the  Common Stock) and
approximately 37.47% of the issued and outstanding shares of  our Series A Common Stock,
representing in the aggregate approximately 65.28% of  the outstanding voting power of
our Common Stock (except with respect to the  election of directors, which is discussed
below). On March 1, 2004, Hearst  Broadcasting also owned 300,000 Series A Redeemable
Convertible Preferred  Securities due 2016 and 500,000 Series B Redeemable Convertible
Preferred  Securities due 2021 that were issued by Hearst-Argyle Capital Trust, our
wholly-owned subsidiary trust. Hearst Broadcasting may convert the Series A  Redeemable
Convertible Preferred Securities and Series B Redeemable Convertible  Preferred
Securities into securities that are convertible into 1,587,670 shares  of our Series A
Common Stock, representing in the aggregate approximately 1.71%  of the outstanding
voting power of our Common Stock as of March 1, 2004 (except  with respect to the
election of directors, which is discussed below). Because of  Hearsts ownership, we
are considered a controlled company under New York  Stock Exchange rules.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Hearst Broadcastings
ownership of our Series B Common Stock entitles  it to elect as a class all but two
members of our Board of Directors (the  Board). The holders of our Series A
Common Stock, voting together with our  Series A Preferred Stock, par value $.01 per
share, and Series B Preferred  Stock, par value $.01 per share, are entitled to elect the
remaining two members  of our Board. When Hearst contributed its broadcast group to
Argyle in August  1997 (the Hearst Transaction), Hearst agreed that, for
purposes of any vote to  elect directors and for as long as it held any shares of our
Series B Common  Stock, it would vote any shares of Series A Common Stock that it owned
only in  the same proportion as the shares of Series A Common Stock not held by Hearst
are voted in the election.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The Stations
|------------



|Of the 27
television stations we own or manage, 20 are in the top 50 of  the 210 generally
recognized geographic designated market areas (DMAs)  according to Nielsen
Media Research (Nielsen) estimates for the 2003-2004  television broadcasting
season. We own 24 television stations. In addition, we  manage three television stations
(WMOR-TV in the Tampa, Florida market, WPBF-TV  in the West Palm Beach, Florida market
and KCWE-TV in the Kansas City, Missouri  market) and two radio stations (WBAL-AM and
WIYY-FM in Baltimore, Maryland), all  of which, except KCWE-TV, are owned by Hearst. Our
management of KCWE-TV allows  Hearst to fulfill its obligations under a Program Service
and Time Brokerage  Agreement between Hearst and the licensee of KCWE-TV (the Missouri
LMA).
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5 | 
| | - | 



---





|The following
table sets forth certain information for each of our  owned and managed television
stations as of December 31, 2003:
|----------------------------------------------------------------------------------------------------------------------------------

|Station   | Market                               |  | Market
      Rank(1) |  | Network
      Affiliation(2) |  | Analog
      Channel |  | Digital
      Channel |  | Percentage
      of
      U.S.
      Television
      Households(3)
|--------- | ------------------------------------ |  | -------------------- |  | ---------------------------- |  | -------------------- |  | --------------------- |  | -------------------------------------------------------------------
|WCVB      | Boston, MA                           |  | 6                    |  | ABC                          |  | 5                    |  | 20                    |  | 2.2                                                                
|WMUR      | Manchester, NH(4)                    |  | 6                    |  | ABC                          |  | 9                    |  | 59                    |  |                                                                   
|WMOR      | Tampa, FL                            |  | 13                   |  | IND                          |  | 32                   |  | 19                    |  | 1.5                                                                
|KCRA      | Sacramento, CA                       |  | 19                   |  | NBC                          |  | 3                    |  | 35                    |  | 1.2                                                                
|KQCA      | Sacramento, CA(5)                    |  | 19                   |  | WB                           |  | 58                   |  | 46                    |  |                                                                   
|WESH      | Orlando, FL                          |  | 20                   |  | NBC                          |  | 2                    |  | 11                    |  | 1.2                                                                
|WTAE      | Pittsburgh, PA                       |  | 22                   |  | ABC                          |  | 4                    |  | 51                    |  | 1.1                                                                
|WBAL      | Baltimore, MD                        |  | 23                   |  | NBC                          |  | 11                   |  | 59                    |  | 1.0                                                                
|WISN      | Milwaukee, WI                        |  | 33                   |  | ABC                          |  | 12                   |  | 34                    |  | 0.8                                                                
|WLWT      | Cincinnati, OH                       |  | 32                   |  | NBC                          |  | 5                    |  | 35                    |  | 0.8                                                                
|KMBC      | Kansas City, MO                      |  | 31                   |  | ABC                          |  | 9                    |  | 7                     |  | 0.8                                                                
|KCWE      | Kansas City, MO(6)                   |  | 31                   |  | UPN                          |  | 29                   |  | 31                    |  |                                                                   
|WYFF      | Greenville, SC                       |  | 35                   |  | NBC                          |  | 4                    |  | 59                    |  | 0.7                                                                
|WPBF      | West Palm Beach, FL                  |  | 39                   |  | ABC                          |  | 25                   |  | 16                    |  | 0.7                                                                
|WDSU      | New Orleans, LA                      |  | 42                   |  | NBC                          |  | 6                    |  | 43                    |  | 0.6                                                                
|KOCO      | Oklahoma City, OK                    |  | 45                   |  | ABC                          |  | 5                    |  | 7                     |  | 0.6                                                                
|WXII      | Greensboro, NC                       |  | 46                   |  | NBC                          |  | 12                   |  | 31                    |  | 0.6                                                                
|WGAL      | Lancaster, PA                        |  | 47                   |  | NBC                          |  | 8                    |  | 58                    |  | 0.6                                                                
|KOAT      | Albuquerque, NM                      |  | 49                   |  | ABC                          |  | 7                    |  | 21                    |  | 0.6                                                                
|WLKY      | Louisville, KY                       |  | 50                   |  | CBS                          |  | 32                   |  | 26                    |  | 0.6                                                                
|KITV      | Honolulu, HI                         |  | 72                   |  | ABC                          |  | 4                    |  | 40                    |  | 0.4                                                                
|KCCI      | Des Moines, IA                       |  | 73                   |  | CBS                          |  | 8                    |  | 31                    |  | 0.4                                                                
|KETV      | Omaha, NE                            |  | 77                   |  | ABC                          |  | 7                    |  | 20                    |  | 0.4                                                                
|WAPT      | Jackson, MS                          |  | 90                   |  | ABC                          |  | 16                   |  | 21                    |  | 0.3                                                                
|WPTZ/WNNE | Plattsburgh, NY/Burlington,
      VT |  | 89                   |  | NBC                          |  | 5/31                 |  | 14/23                 |  | 0.3                                                                
|KHBS/KHOG | Fort Smith/Fayetteville, AR          |  | 108                  |  | ABC                          |  | 40/29                |  | 21/15                 |  | 0.2                                                                
|KSBW      | Monterey-Salinas, CA                 |  | 121                  |  | NBC                          |  | 8                    |  | 10                    |  | 0.2                                                                
|          | TOTAL                                |  |                      |  |                              |  |                      |  |                       |  | 17.8                                                               

|
|

|(1) |  | Market
rank is based on the relative size of the DMAs (defined by Nielsen  as geographic markets
for the sale of national spot and local advertising  time) among the 210
generally recognized DMAs in the U.S., based on Nielsen  estimates for the 2003-2004
season.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | ABC
refers to the ABC Television Network; CBS refers to the CBS Television  Network; IND
refers to an independent station not affiliated with a  network; NBC refers to the NBC
Television Network; UPN refers to The United  Paramount Network; and WB refers to The WB
Television Network.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Based
on Nielsen estimates for the 2003-2004 season.
|--- |  | ----------------------------------------------------

|(4) |  | The
Nielsen  estimates group data for Manchester, NH is under the Boston DMA.
|--- |  | -----------------------------------------------------------------------------

|(5) |  | Because
KQCA and KCRA are in the same DMA, Nielsen counts audience reach in  this DMA only once
for the two stations.
|--- |  | ---------------------------------------------------------------------------------------------------------------------

|(6) |  | Because
KCWE and KMBC are in  the same DMA, Nielsen counts audience reach in this DMA only once
for the  two stations.
|--- |  | ----------------------------------------------------------------------------------------------------------------------



|The following
table sets forth certain information for each of our  managed radio stations:
|-------------------------------------------------------------------------------------------

|Market           |  | Market Rank(1) |  | Station   |  | Format   
|---------------- |  | -------------- |  | --------- |  | ---------
|Baltimore, MD(2) |  | 20             |  | WBAL (AM) |  | News/Talk
|                 |  |                |  | WIYY (FM) |  | Rock     

|
|

|(1) |  | Market rank is based on the relative size of
      the Metro Survey Area (defined by Arbitron as generally corresponding to
      the Metropolitan Statistical Areas, defined by the U.S. Office of Management
      and Budget) for Arbitrons Winter 2004 Radio Market Report.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | WBAL (AM) and WIYY (FM) radio stations are managed
      by us under a management agreement with Hearst.
|--- |  | --------------------------------------------------------------------------------------------------------



| | 6 | 
| | - | 



---





|We have an option to acquire
      WMOR-TV and Hearsts interests and option with respect to KCWE-TV,
      which expires in August 2004. If Hearst elects to sell either station prior
      to, or during, the option period, we will have a right of first refusal
      to acquire it at its fair market value as determined by the parties, or
      by an independent third-party appraisal, subject to certain specified parameters.
      We will exercise any option or right of first refusal related to these properties
      by action of our independent directors, and we may withdraw any option exercise
      after we receive the third-party appraisal. We also have a right of first
      refusal to purchase WPBF-TV if Hearst proposes to sell the station to a
      third party. That right of first refusal also expires in August 2004.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Network Affiliations
|--------------------



|General. Twenty-six
      of our 27 owned or managed television stations are affiliated with one of
      the following networks pursuant to a network affiliation agreement: ABC
      (12 stations), NBC (ten stations), CBS (two stations), UPN (one station)
      and WB (one station). WMOR-TV in Tampa, Florida currently operates as an
      independent station.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Each affiliation
agreement provides the affiliated station with the  right to broadcast or rebroadcast all
programs transmitted by the applicable  network. In return, the network has the right to
sell a significant portion of  the advertising time during those broadcasts. The duration
of a majority of our  stations affiliations with their networks has exceeded 40
years and, for  certain stations, has continued for more than 50 years. Although we do
not  expect our network affiliation agreements to be terminated and expect to  continue
to be able to renew them, we can give no assurance they will not be  terminated or that
renewals will be obtained on as favorable terms. Our two  radio stations also have an
affiliation agreement with a network that provides  certain content (i.e., news, sports,
etc.) for the stations. However, our radio  stations are less dependent on their
affiliation agreements for programming.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Network Compensation.
      Historically, the long-established networks have paid compensation to their
      affiliates in exchange for the broadcasting of network programming. In recent
      years, network compensation has been sharply reduced and in the future may
      be eliminated. Our affiliation agreements with NBC provide for compensation
      that is weighted toward the first part of the term and declines to zero
      by the end of the term. In addition, the more recently established networks
      (FOX, UPN, WB and PAX) generally pay little or no cash compensation for
      the clearance of network programming. In the future the current cash/barter
      compensation structure may be modified to take into account a variety of
      alternatives, including additional commercial inventory that may be made
      available to us and value that we may derive from new business ventures
      with our networks.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ABC. The terms of
      the affiliation agreements for our ABC-affiliated stations expire as follows:
      KMBC, WISN, WCVB, WTAE and WPBF-August 28, 2004; KETV and KOAT-November
      1, 2004; WAPT-March 6, 2005; KITV-January 2, 2005; WMUR-August 7, 2005;
      KHBS/KHOG-August 29, 2004 and KOCO-December 31, 2004. We are in the process
      of negotiating the renewal of the affiliation agreements with ABC.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|NBC. The term of each
      affiliation agreement for our NBC-affiliated stationsWBAL, WLWT, WYFF,
      WGAL, WXII, WPTZ/WNNE, KSBW, KCRA, WESH and WDSUis for a period of
      nine years, six months, expiring December 31, 2009.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|CBS. The initial term
      of the affiliation agreements for our CBS-affiliated stations KCCI and WLKY
      is for 10 years (through June 30, 2005) and is subject to successive five-year
      renewals unless either party notifies the other of its intent not to renew
      at least six months prior to the end of the term.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|UPN and WB. The UPN
      affiliation agreement with KCWE is for an initial 10-year term (through
      August 31, 2008). The WB affiliation agreement with KQCA, with an initial
      term of five years, expires April 5, 2004. We are in the process of negotiating
      a renewal of the WB affiliation agreement. Unlike affiliates of ABC, CBS
      or NBC, KQCA may be required to pay compensation to WB (based upon ratings
      it generates) in exchange for the broadcast rights to WBs programming.
      Both UPN and WB have the right to terminate their affiliation agreements
      in the event of a material breach of the agreement by a station and in certain
      other circumstances.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Internet
|--------



|We and IBS have formed a series
      of local partnerships for the development and management of local news/information/entertainment
      Internet Web sites to complement our television stations. These Web sites
      enable our local television stations to provide additional content to viewers.
      Typically branded with the television stations call letters or channel
      number, the Web sites are accessed by our stations viewers with increasing
      frequency during the day-time hours, when a sizable portion of the television
      audience is at work. Our Web sites not only provide additional opportunities
      to connect with our stations viewing
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 7 | 
| | - | 



---







|audiences, but provide an additional opportunity to generate
      additional advertising revenues, as well. Links to each of these Web sites
      are provided from our corporate Web site, www.hearstargyle.com. In addition,
      IBS provides Web site development and operating services to the NBC Television
      Stations Division.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The Commercial Television Broadcasting
Industry
|-----------------------------------------------



|General. Commercial
      television broadcasting began on a regular basis in the 1940s. Currently
      a limited number of channels are available for broadcasting in any one geographic
      area, and a license to operate a television station must be granted by the
      Federal Communications Commission (the FCC). All television
      stations in the country are grouped by Nielsen into 210 generally recognized
      television markets that are ranked in size according to various formulae
      based upon actual or potential audience. Each of these markets, called Designated
      Market Areas or DMAs, is designated as an exclusive geographic
      area consisting of all counties whose largest viewing share is given to
      stations of that same market area. Nielsen regularly publishes data on estimated
      audiences for the television stations in each DMA, which data is a significant
      factor in determining our advertising rates.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Revenues. Television
      station revenues are derived primarily from local, regional and national
      advertising and, to a much lesser extent, from network compensation and
      other sources. Advertising rates are set based upon a variety of factors,
      including
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | a
programs popularity among the viewers an advertiser wishes to attract;
| | - |  | -------------------------------------------------------------------------

| |  |  | the
number of advertisers competing for the available time;
| | - |  | -----------------------------------------------------------

| |  |  | the
size and  demographic makeup of the market served by the station; and
| | - |  | -------------------------------------------------------------------------

| |  |  | the
availability  of alternative advertising media in the market area.
| | - |  | ----------------------------------------------------------------------



|Rates also are
determined by a stations overall ratings and share in  its market, as well as the
stations ratings and share among particular  demographic groups that an advertiser
may be targeting. Because television  stations rely on advertising revenues, they are
sensitive to cyclical changes in  the economy. The size of advertisers budgets,
which are affected by broad  economic trends, affect the broadcast industry in general
and the revenues of  individual broadcast television stations. The advertising revenues
of our  stations are generally highest in the second and fourth quarters of each year,
due in part to increases in consumer advertising in the spring and retail  advertising in
the period leading up to and including the holiday season.  Additionally, advertising
revenues in even-numbered years benefit from  advertising placed by candidates for
political offices, and demand for  advertising time in Olympic broadcasts.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Competition
|-----------



|General.
      The television broadcast industry is highly competitive. Some of the stations
      that compete with ours are owned and operated by large national or regional
      companies that may have greater resources, including financial resources,
      than we do. Competition in the television industry takes place on three
      primary levels:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | competition
for audience;
| | - |  | -------------------------

| |  |  | competition
for programming; and
| | - |  | --------------------------------

| |  |  | competition
for advertisers.
| | - |  | ----------------------------



|Additional factors material
      to a television stations competitive position include signal strength
      and coverage within a geographic area and assigned frequency or channel
      position. Although television stations that broadcast over the VHF band
      (channels 2-13) of the spectrum historically have had a competitive advantage
      over television stations that broadcast over the UHF band (channels above
      13) of the spectrum because the former usually have better signal coverage
      and operate at a lower transmission cost, the improvement of UHF transmitters
      and receivers, the complete elimination from the marketplace of VHF-only
      receivers, the expansion of cable television and satellite delivery systems
      and the commencement of digital broadcasting have reduced the VHF signals
      competitive advantage.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Audience. We compete
      for audience on the basis of program popularity, which has a direct effect
      on the rates we can charge our advertisers. Our stations affiliated
      networks supply a significant portion of our daily programming. Consequently,
      in time periods in which the network provides programming, our stations
      are primarily dependent upon the popularity of the networks programs
      to attract viewers. Our stations also compete in non-network time periods
      based on the performance of their
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 8 | 
| | - | 



---







|own programming during those periods, using the combination
      of locally-produced news, public affairs and entertainment programming,
      including syndicated programs, that the station believes will attract the
      most viewers.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In addition, although the commercial
      television broadcast industry has been dominated by the broadcast networks
      ABC, NBC, CBS (with which the majority of our stations are affiliated) and
      FOX, newer networks WB and UPN, as well as cable-originated programming,
      have become significant competitors for the broadcast television audience.
      While broadcast-originated signals still constitute the majority of viewing
      in most cable homes, the percentage of television households that are connected
      to a cable system has increased, as have made-for-cable programming and
      the number of cable channels and networks.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Our stations also
face competition from direct broadcast satellite  services, such as EchoStar (DISH
Network) and DIRECTV, which transmit  programming directly to homes equipped with special
receiving antennas. We  compete with these services both on the basis of service and
product performance  (quality of reception and number of channels that may be offered)
and price (the  relative cost to utilize these systems compared to broadcast television
viewing).
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Advances in
technology, such as increasing use of local-cable  advertising interconnects, which
allow for easier insertion of advertising on  local cable systems, may also increase
competition for household audiences and  advertisers. Video compression techniques, now
in use with direct broadcast  satellites and, in growing use with cable and wireless
cable, are expected to  permit greater numbers of channels to be carried within existing
bandwidth.  These compression techniques, as well as other technological developments,
are  applicable to all video delivery systems, including over-the-air broadcasting,  and
have the potential to provide vastly expanded programming to highly targeted  audiences.
Reduction in the cost of creating additional channel capacity could  lower entry barriers
for new channels and encourage the development of  increasingly specialized niche
programming. This ability to reach very narrowly  defined audiences is expected to
increase competition both for audience and for  advertising revenues. We cannot predict
the effect that technological changes  will have on the broadcast television industry or
the future results of our  stations.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Other sources of
competition for audience include
|-------------------------------------------------

| |  |  | home
entertainment systems (including VCRs, DVDs and playback systems);
| | - |  | -----------------------------------------------------------------------

| |  |  | digital
video recorders, also known as personal video recorders;
| | - |  | ----------------------------------------------------------------

| |  |  | video-on-demand
and television game devices;
| | - |  | --------------------------------------------

| |  |  | the
Internet;
| | - |  | -------------

| |  |  | multipoint
distribution systems;
| | - |  | --------------------------------

| |  |  | multichannel
multipoint distribution systems or wireless cable satellite master antenna
television systems; and
| | - |  | -----------------------------------------------------------------------------------------------------------------

| |  |  | other
sources of home entertainment.
| | - |  | ------------------------------------



|Programming. Competition
      for non-network programming involves negotiating with national program distributors
      or syndicators that sell first-run and off-network packages of programming.
      Our stations compete against other local broadcast stations for exclusive
      local access to first-run product (such as the Oprah Winfrey Show).
      To a lesser extent, we also compete for exclusive local access to off-network
      reruns (such as Seinfeld). Cable systems and DBS systems also compete
      with local stations for programming, and various national cable networks
      from time to time have acquired programs that otherwise would have been
      offered to local television stations.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Advertising. Broadcast
      television stations compete for advertising revenues with other broadcast
      television stations and a stations competitive edge is in large part
      determined by the success of its programming. Broadcast television stations
      also compete for advertising revenues with a variety of other media, such
      as radio stations, Internet Web sites, print media, direct marketing and
      cable system operators serving the same market. Since greater amounts of
      advertising time are available for sale by independent stations, independent
      stations typically achieve a greater proportion of television market advertising
      revenues relative to their share of the markets audience. Public broadcasting
      outlets in most communities compete with commercial broadcasters for viewers
      but not generally for significant advertising revenues.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Federal Regulation of Television Broadcasting
|---------------------------------------------



|General. Broadcasting
      is subject to the jurisdiction of the FCC under the Communications Act of
      1934, as amended, and most recently amended by the Telecommunications Act
      of 1996 (the Communications Act). The Communications Act requires
      the FCC to regulate broadcasting so as to serve the public interest,
      convenience and necessity. The Communications
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 9 | 
| | - | 



---









|Act prohibits the operation of television broadcasting
      stations except pursuant to licenses issued by the FCC and empowers the
      FCC, among other things, to
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | issue,
renew, revoke and modify broadcasting licenses;
| | - |  | ------------------------------------------------------

| |  |  | assign
frequency bands; determine stations frequencies, locations and power;  and
| | - |  | ----------------------------------------------------------------------------------

| |  |  | regulate
the equipment used by stations.
| | - |  | ----------------------------------------



|The Communications
Act prohibits the assignment of a license or the  transfer of control of a licensee
without the FCCs prior approval. The FCC also  regulates certain aspects of the
operation of cable television systems, DBS  systems and other electronic media that
compete with broadcast stations. In  addition, although the FCC has reduced significantly
its regulation of broadcast  stations, the FCC continues to regulate matters such as
network-affiliate  relations, cable and DBS systems carriage of television station
signals,  carriage of syndicated and network programming on distant stations, political
advertising practices, and obscene and indecent programming.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|License Renewals.
      Under the Communications Act, the FCC may grant broadcast licenses for terms
      of eight years. The Communications Act requires renewal of a broadcast license
      if the FCC finds that (i) the station has served the public interest, convenience
      and necessity; (ii) there have been no serious violations of either the
      Communications Act or the FCCs rules and regulations by the licensee;
      and (iii) there have been no other serious violations that taken together
      constitute a pattern of abuse. In making its determination, the FCC may
      consider petitions to deny but cannot consider whether the public interest
      would be better served by issuing the license to a person other than the
      renewal applicant. In addition, competing applications for the same frequency
      may be accepted only after the FCC has denied an incumbents application
      for renewal of license.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The following
table provides the expiration dates for the full power  station licenses of our owned and
managed television stations:
|------------------------------------------------------------------------------------------------------------------------------------

|Station                                         |  | Market              |  | Expiration
      ofFCC License(1)
|----------------------------------------------- |  | ------------------- |  | ---------------------------------
|WCVB                                            |  | Boston, MA          |  | April 1, 2007                    
|WMUR                                            |  | Manchester, NH      |  | April 1, 2007                    
|WMOR                                            |  | Tampa, FL           |  | February 1, 2005                 
|KCRA                                            |  | Sacramento, CA      |  | December 1, 2006                 
|KQCA                                            |  | Sacramento, CA      |  | December 1, 2006                 
|WESH                                            |  | Orlando, FL         |  | February 1, 2005                 
|WTAE                                            |  | Pittsburgh, PA      |  | August 1, 2007                   
|WBAL                                            |  | Baltimore, MD       |  | October 1, 2004*                 
|KMBC                                            |  | Kansas City, MO     |  | February 1, 2006                 
|KCWE                                            |  | Kansas City, MO     |  | February 1, 2006                 
|WLWT                                            |  | Cincinnati, OH      |  | October 1, 2005                  
|WISN                                            |  | Milwaukee, WI       |  | December 1, 2005                 
|WYFF                                            |  | Greenville, SC      |  | December 1, 2004*                
|WPBF                                            |  | West Palm Beach, FL |  | February 1, 2005                 
|WDSU                                            |  | New Orleans, LA     |  | June 1, 2005                     
|WXII                                            |  | Greensboro, NC      |  | December 1, 2004*                
|KOCO                                            |  | Oklahoma City, OK   |  | June 1, 2006                     
|WGAL                                            |  | Lancaster, PA       |  | August 1, 2007                   
|KOAT                                            |  | Albuquerque, NM     |  | October 1, 2006                  
|KOCT (satellite station of KOAT)**              |  | Carlsbad, NM        |  | October 1, 2006                  
|KOVT (satellite station of KOAT)**              |  | Silver City, NM     |  | October 1, 2006                  
|KOFT-DT (satellite station of
      KOAT)** (2) |  | Farmington, NM      |  | October 1, 2006                  
|WLKY                                            |  | Louisville, KY      |  | August 1, 2005                   
|KCCI                                            |  | Des Moines, IA      |  | February 1, 2006                 
|KITV                                            |  | Honolulu, HI        |  | February 1, 2007                 
|KHVO (satellite station of KITV)**              |  | Hilo, HI            |  | February 1, 2007                 
|KMAU (satellite station of KITV)**              |  | Wailuku, HI         |  | February 1, 2007                 
|KETV                                            |  | Omaha, NE           |  | June 1, 2006                     
|WAPT                                            |  | Jackson, MS         |  | June 1, 2005                     
|WPTZ                                            |  | Plattsburgh, NY     |  | June 1, 2007                     
|WNNE (satellite station of WPTZ)**              |  | Burlington, VT      |  | April 1, 2007                    

| | 10 | 
| | -- | 



---





|Station                            |  | Market               |  | Expiration
      ofFCC License(1)
|---------------------------------- |  | -------------------- |  | ---------------------------------
|KHBS                               |  | Fort Smith, AR       |  | June 1, 2005                     
|KHOG (satellite station of KHBS)** |  | Fayetteville, AR     |  | June 1, 2005                     
|KSBW                               |  | Monterey-Salinas, CA |  | December 1, 2006                 

|
|

|* |  | We will file for renewal of licenses
      for these stations this year.
|- |  | ------------------------------------------------------------------------

|**  |  | Satellite stations retransmit the
      signal of a primary station, and may offer some locally originated programming.         
|--- |  | --------------------------------------------------------------------------------------------------------------------------------
|(1) |  | For more information, please refer to Digital
      Television Service below relating to the transition to digital television.
|(2) |  | Our satellite station KOFT-DT in Farmington,
      NM operates in digital mode only.                                            



|Ownership Regulation.
      The Communications Act and FCC rules restrict the ownership of broadcast
      stations. The FCC limits the ability of individuals and entities to own
      or have an official position or ownership interest above a certain level
      (an attributable interest) in broadcast stations. Both Hearst
      and Pulitzer have attributable interests in our company that restrict our
      ability to acquire stations in areas in which they own media properties.
      On June 2, 2003, the FCC issued an order substantially revising its rules.
      This order was the culmination of the most comprehensive review of media
      ownership regulation in the agencys history, spanning 20 months and
      encompassing a public record of more than 520,000 comments. Various appeals
      of this order are currently pending before the United States Court of Appeals
      for the Third Circuit. During the pendency of the Third Circuits review
      of the FCCs new rules, the FCCs prior ownership rules remain
      in effect. We cannot predict what actions the Third Circuit or the FCC will
      take in the future or how changes in the rules will impact our business.
      The FCCs current ownership rules that are material to our operations
      are summarized below:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Local Market Television
      Ownership. Under the currently effective rules, a party may own two
      television stations without regard to signal contour overlap provided they
      are located in separate Nielsen DMAs. In addition, the rules permit parties
      in larger markets to own up to two TV stations in the same DMA so long as
      at least eight independently owned and operating full-power commercial and
      non-commercial television stations remain in the market at the time of acquisition
      and at least one of the two stations is not among the top four-ranked stations
      in the market based on audience share. In addition, without regard to the
      number of remaining or independently owned television stations, the FCC
      will permit television duopolies within the same DMA so long as certain
      signal contours of the stations involved do not overlap. Satellite
      stations that rebroadcast the programming of a parent
      station will continue to be exempt from the rule if located in the same
      DMA as the parent station. The FCC may grant a waiver of the
      local television ownership rule under specified circumstances. We are currently
      in compliance with the local television ownership rule.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The FCCs
June 2, 2003 rules, which are currently not effective and are  pending before the Third
Circuit, would permit parties to own two stations in  markets with five or more TV
stations so long as both of the two stations are  not among the top four-ranked stations
in the markets based on audience share.  Further, in markets with 18 or more TV stations
a party would be able to own  three stations, but only one of these stations could be
among the top-four  ranked stations in the market. Under the new rules, the FCC has said
that it  would also consider, on a case-by-case basis, requests to waive the top
four-ranked restriction in markets with 11 or fewer television stations.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|National Television Ownership
      Cap. The national television ownership rule limits the number of television
      stations one entity may own nationally. Under the FCCs old rules,
      no entity may have an attributable interest in television stations whose
      audience reach, in the aggregate, exceeds 35% of all U.S. television households.
      The FCCs June 2, 2003 rules increased the 35% cap to 45%. However,
      Congress later passed, and the President signed, a bill into law on January
      23, 2004 that fixed the cap at 39%. The Third Circuit, in the currently
      pending case, has announced that it views the challenges to the 45% cap
      as having been mooted by this recent legislation.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|The FCC currently discounts
      the audience reach of a UHF station by 50%. Further, for entities that have
      attributable interests in two stations in the same market, the FCC counts
      the audience reach of the station in that market only once for national
      cap purposes. The FCC is currently studying the UHF discount. The propriety
      of the UHF discount is also at issue before the Third Circuit.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Dual Network Rule.
      The dual network rule prohibits a merger between or among four major broadcast
      television networks ABC, CBS, FOX and NBC. The FCCs June 2003 order
      retains this prohibition.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Local Radio Ownership.
      With respect to radio, the maximum allowable number of stations that can
      be commonly owned in a market varies depending on the number of radio stations
      within that market, as determined using a contour-overlap method. In markets
      with more than 45 stations, one company may own, operate or control eight
      stations, with no more than five in any one service (AM or FM). In markets
      of 30-44 stations, one company may own seven stations, with no more than
      four in any one service; in markets of 15-29 stations, one entity may own
      six stations, with no more than four in any one service. In
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 11 | 
| | -- | 



---







|markets with 14 commercial stations or less, one company
      may own up to five stations or 50% of all of the stations, whichever is
      less, with no more than three in any one service. The FCCs June 2,
      2003 Order changed the radio market definition from the contour-overlap
      method to a more restrictive definition using Arbitron markets. The new
      market definition is currently under review by the Third Circuit.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Media Cross-Ownership.
      The FCCs currently effective rules prohibit the licensee of an AM,
      FM, or TV station from directly or indirectly owning, operating, or controlling
      a daily newspaper if the stations specified service contour encompasses
      the entire community where the newspaper is published. The rules also permit
      cross ownership of radio and television stations under a graduated test
      based on the number of independently owned media voices in the local market.
      In large markets, i.e., markets with at least 20 independently owned media
      voices, a single entity can own up to one television station and seven radio
      stations (if 8 full-power television stations would remain in the market
      post transaction) or, if permissible under the local television ownership
      rule, two television stations and six radio stations.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The FCCs
June 2, 2003 rules, which are currently not effective and are  pending before the Third
Circuit, would replace the broadcast-newspaper and the  radio-television cross-ownership
rules with the following cross-media limits:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | In
markets with three or fewer TV stations, no cross-ownership would be  permitted among TV,
radio, and newspapers. A company could obtain a  waiver of that ban if it can show that
the television station does not  serve the area served by the cross-owned property (i.e.,
the radio  station or the newspaper).
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | In
markets with between 4 and 8 TV stations, combinations would be limited to one of the
following:
| | - |  | ---------------------------------------------------------------------------------------------------

| |  |  | (A)
A daily newspaper, one TV station, and up to half of the radio  station limit for that
market (i.e., if the radio limit in the market  is 6, the company can only own 3), or
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | (B)
A daily newspaper; and up to the radio station limit for that  market (i.e., no TV
stations), or
| |  |  | ----------------------------------------------------------------------------------------------------

| |  |  | (C)
Two (or three) TV stations (if permissible under local TV ownership  rule); and up to the
radio station limit for that market (i.e., no  daily newspapers).
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | In
markets with 9 or more TV stations, the newspaper-broadcast  cross-ownership ban and the
television-radio cross-ownership ban would  be eliminated.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



|Cable-Television Cross-Ownership.
      In January 2003, the FCC repealed its rule that had prohibited common control
      of a television station and a cable television system in the same local
      market. The elimination of the rule would permit the ownership of a cable
      system and a television station in the same local market.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Attribution of Ownership.
      Under the FCCs attribution rules, the following relationships and
      interests generally are attributable for purposes of the agencys broadcast
      ownership restrictions:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | holders
of 5% or more of the licensees voting stock;
| | - |  | -----------------------------------------------------

| |  |  | all
officers and directors of a licensee and its direct or indirect parent(s);
| | - |  | ------------------------------------------------------------------------------

| |  |  | voting stock interests of at least 20%, if the
      holder is a passive institutional investor (investment companies, banks,
      insurance companies);
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | any equity interest in a limited partnership or
      limited liability company, unless properly insulated from management
      activities; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | equity and/or debt interests which in the aggregate
      exceed 33% of a licensees total assets, if the interest holder supplies
      more than 15% of the stations total weekly programming, or is a same-market
      broadcast company, cable operator or newspaper.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|All non-conforming interests
      acquired before November 7, 1996 are permanently grandfathered and thus
      do not constitute attributable ownership interests. There is also an exemption
      from attribution for voting stock interests of minority shareholders in
      a corporation in which a single shareholder owns more than 50% of the voting
      stock. These minority interests are not attributable unless the minority
      shareholders financial interest amounts to over 33% of the companys
      total asset value (equity plus debt) and the majority shareholder is either
      a major program supplier to the company or a same-market media entity.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 12 | 
| | -- | 



---







|Thus, in our case, where Hearst is the single majority shareholder,
      ownership of minority stock interests of up to 33% would not be attributable
      absent other factors. A proceeding remains open at the FCC considering the
      elimination of the single majority shareholder exception.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Alien Ownership. The
      Communications Act of 1934 restricts the ability of foreign entities or
      individuals to own or control broadcast licenses. Non-U.S. citizens, collectively,
      may directly or indirectly own or vote up to 20% of the voting stock of
      a corporate licensee.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Local Marketing Agreements.
      Through an LMA (sometimes also referred to as a Time Brokerage Agreement
      or TBA) the licensee of one station may provide the programming for another
      licensees station. Under the FCCs rules, an entity that owns
      a television station and programs more than 15% of the broadcast time on
      another television station in the same market is now required to count the
      LMA station toward its television ownership limits even though it does not
      own the station. Consequently, we cannot enter into an LMA with another
      television station in the same market in which we own a television station
      if we would not be permitted to acquire that station under the local television
      ownership rule.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In adopting these rules concerning
      LMAs, however, the FCC provided grandfathering relief for LMAs
      that were in effect at the time of the rule change. Television LMAs that
      were in place before November 5, 1996, were allowed to continue at least
      through the FCCs next comprehensive review and re-evaluation of its
      broadcast ownership rules, which is not currently scheduled to commence
      until at least 2006. The Missouri LMA, pursuant to which programming is
      provided to KCWE in Kansas City, Missouri, is grandfathered for this period.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Other Regulations, Legislation and Recent
Developments Affecting Broadcast Stations
|-----------------------------------------------------------------------------------



|The 1992 Cable Act.
      The FCC has adopted various regulations to implement provisions of the Cable
      Television Consumer Protection and Competition Act of 1992 (1992 Cable
      Act) which includes provisions respecting the carriage of television
      stations signals by cable systems. These so-called must carry
      provisions generally require cable operators to devote up to one-third of
      their activated channel capacity to the carriage of local commercial television
      stations. The 1992 Cable Act also prohibits cable operators and other multi-channel
      video programming distributors from carrying broadcast signals without obtaining
      the stations consent. The must carry and retransmission
      consent provisions are related in that a local television broadcaster, on
      a cable system-by-cable system basis, must make a choice once every three
      years whether to proceed under the must carry rules or to waive
      the right to mandatory but uncompensated carriage and negotiate a grant
      of retransmission consent to permit the cable system to carry the stations
      signal, in most cases in exchange for some form of consideration from the
      cable operator. We have entered into an agreement with Lifetime, an entity
      owned 50% by an affiliate of Hearst and 50% by ABC, that gives Lifetime
      the right to negotiate the grant of retransmission consent rights on behalf
      of our stations in return for compensation to be paid to us by Lifetime.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The FCC has ruled
that cable systems are required under the FCCs must  carry rules to
carry only one analog broadcast television program stream and  program-related content.
Thus, digital services and multiplexed program or data  streams are not required to be
carried by cable systems. The FCC is currently  considering whether cable systems can and
should be required to carry both the  analog and digital channels of local television
stations during the digital  television transition period.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Digital Television Service.
      The FCC has taken a number of steps to implement digital television service
      and phase out analog service in the United States. The FCC has provided
      authorized analog television stations with a second channel on which to
      broadcast a digital television signal, and has attempted to provide digital
      television coverage areas that are comparable to stations existing
      analog service areas. Television licensees may use their digital channels
      for a wide variety of services such as high-definition television, multiple
      channels of standard definition television programming, audio, data, and
      other types of communications, subject to the requirement that each broadcaster
      provide at least one free video channel equal in quality to the current
      technical standard.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Digital television channels
      will generally be located in the range of channels from channel 2 through
      channel 51. The FCC required affiliates of ABC, CBS, NBC and FOX in the
      top 30 markets to begin digital broadcasting by November 1, 1999, and all
      other commercial television broadcasters were required to follow suit by
      May 1, 2002 or secure an extension of time to begin digital broadcasting.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We have constructed and commenced
      DTV broadcast operations at all of our stations, except WPTZ and two of
      our satellite stations (WNNE and KMAU), which have obtained extensions of
      time from the FCC to complete construction or are otherwise not required
      by the FCC to have completed construction at the present time. Additional
      construction or investments in additional equipment will be required at
      19 (including satellite stations) of these stations to bring them up to
      full maximum authorized power in addition to the main station and satellite
      stations for which initial construction has not been completed. From
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 13 | 
| | -- | 



---







|1997 through December 31, 2003, we have invested approximately
      $60 million in capital expenditures related to the digital conversion of
      our stations. At the present time, the FCC has not set the deadline by which
      DTV stations must be operating at maximum authorized power. The FCC is considering
      proposed maximization deadlines in a pending rule making proceeding.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The FCCs plan calls for
      the digital television transition period to end in the year 2006, at which
      time the FCC expects that television broadcasters will cease analog broadcasting
      and return their analog channel to the government, allowing that spectrum
      to be recovered for other uses. Under the Balanced Budget Act of 1997, however,
      the FCC is authorized to extend the December 31, 2006 deadline for reclamation
      of a television stations non-digital channel if, in any given market:
      (i) one or more television stations affiliated with ABC, CBS, NBC or FOX
      is not broadcasting digitally, and the FCC determines that such stations
      have exercised due diligence in attempting to convert to digital
      broadcasting; (ii) digital-to-analog converter technology is not available
      in such market; or (iii) 15% or more of the television households in the
      market do not subscribe to a multichannel video service that carries at
      least one digital channel from each of the local stations in that market,
      and 15% or more of the television households in the market cannot receive
      digital signals off the air using either a set-top converter box for an
      analog television set or a new digital television set.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In January 2003,
the FCC began a further review of the transition to  digital television. The FCC is
considering, among other things, the following:  (i) setting July 1, 2005 (for top-four
network affiliates in markets 1 through  100) and July 1, 2006 (for all other commercial
and noncommercial DTV stations)  as the deadlines by which stations with construction
permits for maximized  digital facilities must either provide service to the maximized
coverage areas  or lose DTV protection to the uncovered portions of those areas, and (ii)
how to  interpret various provisions of Balanced Budget Act of 1997 which authorizes the
FCC to extend the December 31, 2006 deadline for reclamation of a television  stations
non-digital channel under various circumstances. In addition, the FCC  has requested
further comments on issues earlier raised in a pending proceeding  begun in December 1999
concerning the public interest obligations of television  broadcast licensees.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The implementation of digital
      television has and will impose substantial additional costs on television
      stations because of the need to replace analog equipment and because some
      stations will need to operate at higher utility cost. We can give no assurance
      that our stations will be able to increase revenue to offset these costs.
      In addition, the Telecommunications Act of 1996 allows the FCC to charge
      a spectrum fee to broadcasters who use the digital spectrum for purposes
      other than free, over-the-air broadcasting. The FCC has adopted rules that
      require broadcasters to pay a fee of 5% of gross revenues received from
      ancillary or supplementary uses of the digital spectrum for which they charge
      subscription fees, excluding revenues from the sale of commercial time.
      We cannot predict what future actions the FCC might take with respect to
      digital television, nor can we predict the effect of the FCCs present
      digital television implementation plan or such future actions on our business.
      We have incurred considerable expense in the conversion of digital television
      and are unable to predict the extent or timing of consumer demand for any
      such digital television services.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Direct Broadcast Satellite
      Systems.There are currently in operation several direct
      broadcast satellite (or DBS) systems that serve the United States.
      Direct broadcast satellite systems provide programming on a subscription
      basis to those who have purchased and installed a satellite signal receiving
      dish and associated decoder equipment, in competition with our broadcast
      stations.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|In November 1999, Congress
      enacted the Satellite Home Viewer Improvement Act of 1999 (SHVIA),
      which established a copyright licensing system for limited distribution
      of television network programming to 16 DBS viewers. Under SHVIA, satellite
      carriers are required to enter into retransmission consent agreements to
      allow for satellite carriage of local television stations. Our agreement
      with Lifetime also applies to the grant of DBS retransmission consent rights.
      SHVIA also contemplates a market-specific requirement for mandatory carriage
      of local television stations, similar to that applicable to cable systems,
      for those markets in which a satellite carrier chooses to provide any local
      signal. In addition, SHVIA extended the compulsory license allowing the
      satellite distribution of distant network signals to unserved households
      (i.e., those that do not receive a Grade B signal from a local network affiliate).
      All of our stations are currently distributed by at least one DBS system.
      SHVIA is due to expire at the end of 2004. It is anticipated that Congress
      will act to reauthorize SHVIA.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Employees
|---------



|As of December 31, 2003, we
      had approximately 2,831 full-time employees and 377 part-time employees.
      A total of approximately 889 of our employees are represented by five unions
      (the American Federation of Television and Radio Artists, the International
      Brotherhood of Electrical Workers, the International Alliance of Theatrical
      Stage Employees, the Directors Guild of America, and the National Association
      of Broadcast Electrical Technicians). We have not experienced any significant
      labor problems, and believe that our relations with our employees are satisfactory.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 14 | 
| | -- | 



---







|Available Information
|---------------------



|We maintain an Internet Web
      site at www.hearstargyle.com. We make available, free of charge, on our
      Web site, our annual report on Form 10-K, quarterly reports on Form 10-Q,
      current reports on Form 8-K, and amendments to those reports filed or furnished
      pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
      as soon as reasonably practicable after we electronically file those materials
      with, or furnish them to, the SEC. We also make available on our Web site
      news releases, earnings releases, archived audio Web casts, forthcoming
      corporate events and lists of analysts who cover us. In addition, we will
      post to our Internet Web site the following documents by the time of our
      2004 Annual Stockholders Meeting on May 5, 2004:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Our
Code of Business Conduct and Ethics;
| | - |  | ----------------------------------------

| |  |  | Our
Corporate Governance Guidelines;
| | - |  | ------------------------------------

| |  |  | Our
Audit Committee Charter; and
| | - |  | --------------------------------

| |  |  | Our
Compensation Committee Charter.
| | - |  | -----------------------------------



|You may obtain a
free copy of our Code of Business Conduct and Ethics,  our Corporate Governance
Guidelines, or our Board committee charters that we  file on our Web site by writing to
us at Hearst-Argyle Television, Inc., 888  Seventh Avenue, New York, NY 10106.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ITEM 2.  PROPERTIES
|-------------------



|Our principal
executive offices are located at 888 Seventh Avenue, New  York, New York 10106. The real
property of each of our stations generally  includes owned or leased offices, studios,
transmitters and tower sites.  Typically, offices and main studios are located together,
while transmitters and  tower sites are in separate locations that are more suitable for
optimizing  signal strength and coverage. Set forth below are our stations principal
facilities as of December 31, 2003. In addition to the property listed below, we  and the
stations also lease other property primarily for communications  equipment.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Station   |  | Location          |  | Use                        |  | Ownership    |  | Approximate 
      Size
|--------- |  | ----------------- |  | -------------------------- |  | ------------ |  | -----------------------
|Corporate |  | Washington D.C.   |  | Washington D.C. Office     |  | Leased       |  | 3,974 sq. ft.          
|          |  | New York, NY      |  | New York Office            |  | Leased       |  | 39,864 sq. ft.         
|          |  |                   |  |                            |  |              |  |                        
|WCVB      |  | Boston, MA        |  | Office and studio          |  | Owned        |  | 89,625 sq. ft.         
|          |  |                   |  | Warehouse                  |  | Leased       |  | 3,617 sq. ft.          
|          |  |                   |  | Tower and transmitter      |  | Leased       |  | 1,600 sq. ft.          
|          |  |                   |  |                            |  |              |  |                        
|WMUR      |  | Manchester, NH    |  | Office and studio          |  | Owned        |  | 67,440 sq. ft.         
|          |  |                   |  | Tower and transmitter      |  | Owned        |  | 4.5 acres              
|          |  |                   |  | Office                     |  | Leased       |  | 1,963 sq. ft.          
|          |  |                   |  |                            |  |              |  |                        
|KCRA/KQCA |  | Sacramento, CA    |  | Office, studio and tower   |  | Owned        |  | 75,000 sq. ft.         
|          |  |                   |  | Tower and transmitter      |  | Owned        |  | 2,400 sq. ft.          
|          |  |                   |  | Tower and transmitter      |  | Leased       |  | 1,200 sq. ft.          
|          |  |                   |  | Office                     |  | Leased       |  | 2,048 sq. ft.          
|          |  |                   |  |                            |  |              |  |                        
|WTAE      |  | Pittsburgh, PA    |  | Office and studio          |  | Owned        |  | 68,033 sq. ft.         
|          |  |                   |  | Tower and transmitter      |  | Owned        |  | 37 acres               
|          |  |                   |  | Office                     |  | Leased       |  | 609 sq. ft.            
|          |  |                   |  |                            |  |              |  |                        
|WESH      |  | Orlando, FL       |  | Studio, transmitter, tower |  | Owned        |  | 61,300 sq. ft.         
|          |  | Daytona Beach, FL |  | Studio and office          |  | Owned        |  | 26,000 sq. ft.         
|          |  |                   |  | Office                     |  | Leased       |  | 1,310 sq. ft.          
|          |  |                   |  | Tower                      |  | Partnership* |  | 190 acres              
|          |  |                   |  | Transmitter                |  | Partnership* |  | 8,050 sq. ft.          
|          |  |                   |  |                            |  |              |  |                        
|WBAL      |  | Baltimore, MD     |  | Office and studio          |  | Owned        |  | 63,000 sq. ft.         
|          |  |                   |  | Tower                      |  | Partnership* |  | 0.2 acres              
|          |  |                   |  |                            |  |              |  |                        
|KMBC      |  | Kansas City, MO   |  | Office and studio(1)       |  | Leased       |  | 58,514 sq. ft.         
|          |  |                   |  | Tower and transmitter      |  | Owned        |  | 11.6 acres             
|          |  |                   |  |                            |  |              |  |                        

| | 15 | 
| | -- | 



---



|Station   |  | Location                    |  | Use                            |  | Ownership |  | Approximate 
      Size
|--------- |  | --------------------------- |  | ------------------------------ |  | --------- |  | -----------------------
|WLWT      |  | Cincinnati, OH              |  | Office and studio              |  | Owned     |  | 54,000 sq. ft.         
|          |  |                             |  | Tower and transmitter          |  | Owned     |  | 4.2 acres              
|          |  |                             |  |                                |  |           |  |                        
|WISN      |  | Milwaukee, WI               |  | Office and studio              |  | Owned     |  | 88,000 sq. ft.         
|          |  |                             |  | Tower and transmitter land     |  | Leased    |  | 5.5 acres              
|          |  |                             |  | Transmitter building           |  | Owned     |  | 3,192 sq. ft.          
|          |  |                             |  |                                |  |           |  |                        
|WYFF      |  | Greenville, SC              |  | Office and studio              |  | Owned     |  | 60,000 sq. ft.         
|          |  |                             |  | Tower and transmitter          |  | Owned     |  | 1.5 acres              
|          |  |                             |  | Office                         |  | Leased    |  | 3,352 sq. ft.          
|          |  |                             |  |                                |  |           |  |                        
|WDSU      |  | New Orleans, LA             |  | Office and studio              |  | Owned     |  | 50,525 sq. ft.         
|          |  |                             |  | Transmitter                    |  | Owned     |  | 8.3 acres              
|          |  |                             |  |                                |  |           |  |                        
|KOCO      |  | Oklahoma City, OK           |  | Office and studio              |  | Owned     |  | 28,000 sq. ft.         
|          |  |                             |  | Tower and transmitter          |  | Owned     |  | 85 acres               
|          |  |                             |  |                                |  |           |  |                        
|WGAL      |  | Lancaster, PA               |  | Office, studio and tower       |  | Owned     |  | 58,900 sq. ft.         
|          |  |                             |  | Office                         |  | Leased    |  | 2,380 sq. ft.          
|          |  |                             |  |                                |  |           |  |                        
|WXII      |  | Winston-Salem, NC           |  | Office and studio              |  | Owned     |  | 38,027 sq. ft.         
|          |  |                             |  | Tower and transmitter          |  | Owned     |  | 223.6 acres            
|          |  |                             |  |                                |  |           |  |                        
|WLKY      |  | Louisville, KY              |  | Office and studio              |  | Owned     |  | 37,842 sq. ft.         
|          |  |                             |  | Tower and transmitter          |  | Owned     |  | 40.0 acres             
|          |  |                             |  | Transmitter                    |  | Leased    |  | 1,350 sq. ft.          
|          |  |                             |  |                                |  |           |  |                        
|KOAT      |  | Albuquerque, NM             |  | Office and studio              |  | Owned     |  | 37,315 sq. ft.         
|          |  |                             |  | Tower and transmitter          |  | Owned     |  | 328.5 acres            
|          |  |                             |  |                                |  |           |  |                        
|KCCI      |  | Des Moines, IA              |  | Office, studio and transmitter |  | Owned     |  | 52,000 sq. ft.         
|          |  |                             |  | Tower and transmitter          |  | Owned     |  | 119.5 acres            
|          |  |                             |  |                                |  |           |  |                        
|KITV      |  | Honolulu, HI                |  | Office and studio              |  | Owned     |  | 35,000 sq. ft.         
|          |  |                             |  | Tower and transmitter          |  | Leased    |  | 130 sq. ft.            
|          |  |                             |  | Tower and transmitter          |  | Leased    |  | 304 sq. ft.            
|          |  |                             |  | Tower and transmitter          |  | Leased    |  | 2.7 acres              
|          |  |                             |  |                                |  |           |  |                        
|KETV      |  | Omaha, NE                   |  | Office and studio              |  | Owned     |  | 39,204 sq. ft.         
|          |  |                             |  | Tower and transmitter(2)       |  | Owned     |  | 23.3 acres             
|          |  |                             |  | Transmitter building           |  | Owned     |  | 30,492 sq. ft.         
|          |  |                             |  | Office                         |  | Leased    |  | 597 sq. ft.            
|          |  |                             |  |                                |  |           |  |                        
|WAPT      |  | Jackson, MS                 |  | Office and studio              |  | Owned     |  | 10,600 sq. ft.         
|          |  |                             |  | Tower and transmitter          |  | Owned     |  | 24 acres               
|          |  |                             |  |                                |  |           |  |                        
|WPTZ      |  | Plattsburgh, NY             |  | Office and studio              |  | Owned     |  | 12,800 sq. ft.         
|          |  |                             |  | Office                         |  | Leased    |  | 3,919 sq. ft.          
|          |  |                             |  | Tower and transmitter          |  | Owned     |  | 13.4 acres             
|          |  |                             |  |                                |  |           |  |                        
|WNNE      |  | White River Junction, VT    |  | Office and studio              |  | Leased    |  | 5,600 sq. ft.          
|          |  |                             |  | Tower and transmitter          |  | Leased    |  |                       
|          |  |                             |  |                                |  |           |  |                        
|KHBS/KHOG |  | Fort Smith/Fayetteville, AR |  | Office and studio              |  | Owned     |  | 47,004 sq. ft.         
|          |  |                             |  | Office and studio              |  | Leased    |  | 1,110 sq. ft.          
|          |  |                             |  | Tower and transmitter          |  | Leased    |  | 2.5 acres              
|          |  |                             |  | Tower and transmitter          |  | Owned     |  | 26.7 acres             
|          |  |                             |  |                                |  |           |  |                        



| | 16 | 
| | -- | 



---



|Station |  | Location             |  | Use                   |  | Ownership |  | Approximate 
      Size
|------- |  | -------------------- |  | --------------------- |  | --------- |  | -----------------------
|KSBW    |  | Monterey-Salinas, CA |  | Office and studio     |  | Owned     |  | 44,000 sq. ft.         
|        |  |                      |  | Tower and transmitter |  | Owned     |  | 160.2 acres            
|        |  |                      |  | Office                |  | Leased    |  | 1,150 sq. ft.          



|
|

|* |  | Owned
by the Company in partnership with certain third parties.
|- |  | ---------------------------------------------------------------

|(1) |  | In
September 2003 we entered into an agreement to purchase real property on  which to build
an owned office and studio facility for KMBC. The closing of  that purchase is expected
to occur in the second quarter of 2004.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | In
July 2003, KETVs tower collapsed. The collapse also damaged the  transmitter
building. In September 2003 we entered into an interim lease  for tower space and
transmitter building space (127 sq. ft.) pending the  construction of a new tower and the
repair of the transmitter building.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ITEM 3.  LEGAL PROCEEDINGS
|--------------------------



|From time to time,
we become involved in various claims and lawsuits  that are incidental to our business.
In our opinion, there are no legal  proceedings pending against us or any of our
subsidiaries that are reasonably  expected to have a material adverse effect on our
consolidated financial  condition or results of operations.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS
|------------------------------------------------------------



|Not applicable.
|---------------

|PART II
|-------



|ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND
      RELATED STOCKHOLDER MATTERS
|-----------------------------------------------------------------------------------



|Our Series A Common Stock is
      listed on the NYSE under the symbol HTV. All of the outstanding
      shares of our Series B Common Stock are currently held by Hearst Broadcasting,
      a wholly-owned subsidiary of Hearst Holdings, which is in turn a wholly-owned
      subsidiary of Hearst. Our Series B Common Stock is not publicly traded.
      The table below sets forth, for the calendar quarters indicated, the reported
      high and low sales prices of our Series A Common Stock on the NYSE:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                     | High |        | Low
|-------------------- | ---- | ------ | ---
|2002                 |      |        |    
|First
      Quarter  |      | $25.87 |    
|Second
      Quarter |      | 27.76  |    
|Third
      Quarter  |      | 25.52  |    
|Fourth
      Quarter |      | 28.48  |    
|                     |      |        |    
|2003                 |      |        |    
|First
      Quarter  |      | $25.00 |    
|Second
      Quarter |      | 26.03  |    
|Third
      Quarter  |      | 26.00  |    
|Fourth
      Quarter |      | 27.95  |    

|On March 1, 2004, the closing
      price for our Series A Common Stock on the NYSE was $26.75, and the approximate
      number of shareholders of record of our Series A Common Stock at the close
      of business on that date was 672.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In December 2003, we declared
      a quarterly cash dividend of $0.06 per share on our Series A Common Stock
      and our Series B Common Stock; dividends declared on the Common Stock amounted
      to approximately $5.6 million in 2003. Our credit facility (the Credit
      Facility) with a consortium of banks (led by JP Morgan Chase Bank,
      Bank of New York, Toronto Dominion and Bank of Montreal) limits our ability
      to pay dividends under certain conditions. For more information concerning
      our dividends, please refer to Note 10 to the consolidated financial statements
      in Item 8 of this report.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 17 | 
| | -- | 



---







|The following
table summarizes our equity compensation plans as of  December 31, 2003:
|--------------------------------------------------------------------------------------

|Plan category                                                    |  | Number of securities
      to beissued upon exercise ofoutstanding options,
      warrantsand rights(a) |     |  | Weighted average exerciseprice of outstanding options,warrants and rights(b) |  | Number of securities
      availablefor future issuance underequity
      compensation plans(excluding
      securities reflectedin
      column (a))(c)
|---------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------- | --- |  | ---------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------
|Equity compensation plans 
      approved by security holders    |  | 7,424,472                                                                                               | (1) |  | $22.71                                                                       |  | 5,137,607                                                                                                                                               
|Equity compensation plans
      not approved by security holders |  | N/A                                                                                                     |     |  | N/A                                                                          |  | N/A                                                                                                                                                     
|                                                                 |  |                                                                                                         |     |  |                                                                              |  |                                                                                                                                                         
|Total                                                            |  | 7,424,472                                                                                               |     |  | $22.71                                                                       |  | 5,137,607                                                                                                                                               
|                                                                 |  |                                                                                                         |     |  |                                                                              |  |                                                                                                                                                         

|
|

|(1) |  | Includes shares of Series A Common Stock to
      be issued upon exercise of stock options granted under the Companys
      Amended and Restated 1997 Stock Option Plan.                                                                                                                       
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) |  | Includes 613,338 shares of Series A Common Stock
      available for future stock options granted under the Amended and Restated
      1997 Stock Option Plan and 4,524,269 shares of Series A Common Stock reserved
      for future issuance under the Companys Employee Stock Purchase Plan.



| | 18 | 
| | -- | 



---





|ITEM 6.  SELECTED FINANCIAL DATA
|--------------------------------



|The selected
financial data should be read in conjunction with the  historical financial statements
and notes thereto included elsewhere herein and  in Managements Discussion
and Analysis of Financial Condition and Results of  Operations.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|As discussed
herein and in the notes to the accompanying consolidated  financial statements:
|--------------------------------------------------------------------------------------------

| |  |  | On
August 29, 1997 (effective September 1, 1997 for accounting  purposes), The Hearst
Corporation (Hearst) contributed its  television broadcast group and related
broadcast operations, Hearst  Broadcast Group, to Argyle Television, Inc. (Argyle)
and merged a  wholly-owned subsidiary of Hearst with and into Argyle, with Argyle  as the
surviving corporation (renamed Hearst-Argyle Television, Inc.,  Hearst-Argyle or
we or the Company) (the Hearst Transaction).  The
merger was accounted for as a purchase of Argyle by Hearst in a  reverse acquisition.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | On
June 1, 1998, we exchanged our WDTN and WNAC/WPRI stations with  STC Broadcasting, Inc.
and certain related entities (collectively  STC) for KSBW, the NBC affiliate
serving the MontereySalinas,  California television market, and WPTZ/WNNE, the NBC
affiliates  serving the Plattsburgh, New YorkBurlington, Vermont television  market
(the STC Swap).
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | On
January 5, 1999 (effective January 1, 1999 for accounting  purposes) we acquired all of
the partnership interests in Kelly  Broadcasting Co., which includes KCRA, the Sacramento
station, and  the related Time Brokerage Agreement (TBA) for another station,
KQCA, (the Kelly Broadcasting Business), and Kelleproductions, Inc.  (the
Kelly Transaction). In connection with the Kelly Transaction,  we issued $450
million in senior notes to institutional investors, of  which $340 million was issued in
December 1998 and $110 million was  issued in January 1999. See Note 6 to the
consolidated financial  statements.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | On
March 18, 1999, we acquired the nine television and five radio  stations (Pulitzer
Broadcasting Business) of Pulitzer Publishing  Company (Pulitzer) in a
merger transaction (the Pulitzer Merger).  In connection with the Pulitzer
Merger, we issued approximately 37.1  million shares of our Series A Common Stock to the
Pulitzer  shareholders (the Pulitzer Issuance). Additionally, in connection
with the Kelly Transaction and the Pulitzer Merger, we drew down $725  million from our
revolving credit facility (the Financing).
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | On
June 30, 1999 we issued  approximately  3.7 million  shares of our Series A Common  Stock
to Hearst for $100  million  (the  Hearst Issuance).
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | On
January 31, 2000, we exercised our fixed-price option to acquire  the outstanding stock
of Channel 58, Inc. (the licensee for KQCA-TV  which we previously operated under a TBA
as discussed above).
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | On
August 1, 2000, Emmis Communications Corp. (Emmis) began  managing our radio
stations in Phoenix, Arizona (KTAR-AM, KMVP-AM and  KKLT-FM) (the Phoenix
Transaction) under a TBA for a period of up  to three years. On August 8, 2000, we
sold two of our radio stations,  WXII-AM (Greensboro, North Carolina) and WLKY-AM
(Louisville,  Kentucky), to Truth Broadcasting Corporation.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | On
March 28, 2001, we exchanged our radio stations in Phoenix,  Arizona (KTAR-AM, KMVP-AM
and KKLT-FM) (the Phoenix Stations) for  WMUR-TV, the ABC affiliate serving
Manchester, New Hampshire, which  is part of the Boston, Massachusetts television market,
in a three  party swap (the Phoenix/WMUR Swap). See Note 3 to the
consolidated  financial statements.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | On
April 30, 2001, pursuant to an Asset Purchase Agreement entered  into with WBOY-TV, Inc.,
we acquired WBOY-TV, the NBC affiliate  serving the Clarksburg-Weston, West Virginia
television market.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | On
August 7, 2001 (August 1, 2001 for accounting purposes), we  contributed our production
and distribution unit to NBC/Hearst-Argyle  Syndication, LLC in exchange for a 20% equity
interest in this  entity. See Note 3 to the consolidated financial statements.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | On
December 13, 2001, we sold WBOY-TV. See Note 3 to the consolidated  financial statements.
| | - |  | --------------------------------------------------------------------------------------------

| |  |  | On
December 20, 2001, our wholly-owned unconsolidated subsidiary  trust (the Capital
Trust) completed a private placement with  institutional investors of $200.0
million principal amount of  redeemable convertible preferred securities (the Redeemable
Convertible Preferred Securities). The parent company, Hearst-Argyle  Television,
Inc., then issued subordinated debentures of $206.2  million (the Subordinated
Debentures) to the Capital Trust in  exchange for $200.0 million in net proceeds
from the private  placement and 100% of the Capital Trusts common stock, valued at
$6.2 million. See Note 7 to the consolidated financial statements.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 19 | 
| | -- | 



---





|Hearst-Argyle Television, Inc.
(In thousands, except per share data)
|--------------------------------------------------------------------

|                                                                         |  | Years
      Ended December 31,
|------------------------------------------------------------------------ |  | ------------------------------
|                                                                         |  | 2003(a)                       
|Statement of income data:                                                |  |                               
|Total revenues                                                           |  | $                             
|                                                                         |  |                               
|Station operating expenses:                                              |  |                               
|Salaries, benefits
      and other operating costs                       |  |                               
|Amortization of
      program rights                                     |  |                               
|Depreciation and
      amortization                                      |  |                               
|Corporate, general and administrative expenses                           |  |                               
|Special charge(e)                                                        |  |                               
|                                                                         |  |                               
|Operating income                                                         |  |                               
|                                                                         |  |                               
|Interest expense, net(f)                                                 |  |                               
|Interest expense, net  Capital Trust(g)                                 |  |                               
|Other income (expense), net(h)                                           |  |                               
|Equity in income (loss) of affiliates(i)                                 |  |                               
|                                                                         |  |                               
|Income before income taxes                                               |  |                               
|                                                                         |  |                               
|Income taxes                                                             |  |                               
|                                                                         |  |                               
|Net income                                                               |  |                               
|                                                                         |  |                               
|Less preferred stock dividends(j)                                        |  |                               
|                                                                         |  |                               
|Income applicable to common stockholders                                 |  | $                             
|                                                                         |  |                               
|Income per common sharebasic                                            |  | $                             
|                                                                         |  |                               
|Number of common shares used in the calculation                          |  |                               
|Income per common sharediluted                                          |  | $                             
|                                                                         |  |                               
|Number of common shares used in the calculation                          |  |                               
|Dividends per share(k)                                                   |  | $                             
|                                                                         |  |                               
|Results adjusted for SFAS
      142(l):                                  |  |                               
|As reported income applicable to common
      stockholders               |  | $                             
|Amortization of goodwill and certain other
      intangibles (after tax) |  |                               
|                                                                         |  |                               
|Adjusted income applicable to common stockholders                        |  | $                             
|                                                                         |  |                               
|Adjusted income per common sharebasic                                   |  | $                             
|                                                                         |  |                               
|Adjusted income per common sharediluted                                 |  | $                             
|                                                                         |  |                               
|Balance sheet data (at
      year-end):                                  |  |                               
|Cash and cash equivalents                                                |  | $                             
|Total assets                                                             |  | $                             
|Long-term debt                                                           |  | $                             
|Note payable to Capital Trust                                            |  | $                             
|Stockholders equity                                                     |  | $                             
|                                                                         |  |                               
|Other data:                                                              |  |                               
|Net cash provided by operating
      activities                          |  | $                             
|Net cash used in investing activities(m)                                 |  | $                             
|Net cash (used in) provided by
      financing activities                |  | $                             
|Capital expenditures                                                     |  | $                             
|Program payments                                                         |  | $                             

|See accompanying notes on the
following pages.
|----------------------------------------------



| | 20 | 
| | -- | 



---





|Notes to Selected Financial Data
|--------------------------------



|(a) | Includes
the results of our 24 television stations which were owned for the  entire period
presented and the management fees derived from three  television stations (WMOR-TV,
WPBF-TV and KCWE-TV) and two radio stations  (WBAL-AM and WIYY-FM) managed by us for the
entire period presented  (hereafter the Managed Stations).
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | Includes
(i) the results of 23 (which excludes WMUR-TV and WBOY-TV) of our  television stations
which were owned for the entire period presented; (ii)  the management fees earned by us
from the Managed Stations for the entire  period presented; (iii) the TBA for WMUR-TV
from January 1 through March  27, 2001; (iv) the results of WMUR-TV, after its
acquisition by us, from  March 28 through December 31, 2001; (v) the TBA for the Phoenix
Stations  from January 1 through March 27, 2001; and (vi) the results of WBOY-TV  after
its acquisition by us, from April 30 to December 13, 2001, the date  of its disposition.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(c) | Includes (i) the results of 22 of our television
      stations which were owned for the entire period presented; (ii) the management
      fees earned by us from the Managed Stations for the entire period presented;
      (iii) the TBA for KQCA from January 1 through January 31, 2000 and the results
      of KQCA, after its acquisition by us, from February 1 through December 31,
      2000; (iv) WLKY-AM and WXII-AM from January 1 through August 8, 2000; and
      (v) the Phoenix Stations from January 1 through July 31, 2000 and the TBA
      for the Phoenix Stations from August 1 through December 31, 2000.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(d) | Includes
(i) the results of 12 of our television stations which were owned  for the entire period
presented; (ii) the management fee earned by us from  the Managed Stations for the entire
period presented; (iii) the results of  the Kelly Broadcasting Business for the entire
period presented; and (iv)  the results of the Pulitzer Broadcasting Business from March
19 through  December 31, 1999.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(e) | Represents
the one-time charge resulting from the cost of our early  retirement program.
|--- | ----------------------------------------------------------------------------------------



|(f) | On July 1, 2002 we adopted the provisions of
      the Financial Accounting Standards Board (FASB) Statement No.
      145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of SFAS
      No. 13, and Technical Corrections (SFAS 145). SFAS 145 eliminates
      the requirement that gains and losses from the extinguishment of debt be
      aggregated and, if material, classified as an extraordinary item, net of
      the related income tax effect. In accordance with SFAS 145, we have reclassified
      certain amounts reported in prior periods that were previously classified
      as extraordinary items, net of related income taxes. Such reclassifications
      had no effect upon our reported net income, but resulted in a decrease of
      approximately $0.9 million and $4.1 million to reported Interest expense,
      net, in the years ended December 31, 2001 and 2000, respectively, and an
      increase to reported Interest expense, net, of approximately $5.1 million
      in the year ended December 31, 1999.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(g) | Represents
interest expense on the note payable to our wholly-owned  unconsolidated subsidiary trust
which holds solely parent company  debentures in the amount of $206.2 million, offset by
our equity interest  in the earnings of the trust. See Note 7 of the consolidated
financial  statements.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(h) | In
the year ended December 31, 2002, Other income (expense), net represents  a supplemental
closing fee paid to us in connection with the sale of the  Phoenix Stations in March
2001. In the year ended December 31, 2001, Other  income (expense), net represents the
$72.6 million pre-tax gain from the  sale of the Phoenix Stations, partially offset by a
$23.8 million pre-tax  write-down of the carrying value of some of our investments. In
the year  ended December 31, 2000, Other income (expense), net represents a $4.9  million
write-down of the carrying value of a portion of our investments,  partially offset by
the $1.1 million pre-tax gain from the sale of WXII-AM  and WLKY-AM.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(i) | Represents
our equity interest in the operating results of: (i) Internet  Broadcasting Systems, Inc.
from December 2, 1999 through December 31, 2003;  (ii) the IBS/HATV LLC in the three
months ended December 31, 2002 (upon  achievement of year-to-date profitability) through
December 31, 2003; and  (iii) NBC/Hearst-Argyle Syndication, LLC from August 1, 2002
through  December 31, 2003. See Note 3 to the consolidated financial statements.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(j) | Represents
dividends on the preferred stock issued in connection with the  acquisition of
KHBS-TV/KHOG-TV.
|--- | ----------------------------------------------------------------------------------------------------------



|(k) | On
December 3, 2003, our Board of Directors declared a cash dividend for  the fourth quarter
of $0.06 per share on our Series A and Series B Common  Stock in the amount of $5.6
million. The dividend was paid on January 15,  2004 to all shareholders of record as of
January 5, 2004. We did not  declare or pay any dividends on Common Stock in 2002, 2001,
2000 and 1999.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(l) | On January 1, 2002 we adopted the provisions
      of FASB Statement No. 142, Goodwill and Other Intangible Assets (SFAS
      142). SFAS 142 requires that goodwill and intangible assets with indefinite
      useful lives no longer be amortized, but instead be assessed for impairment
      at least annually by applying a fair value-based test. The provisions of
      SFAS 142 are effective for periods after adoption and retroactive application
      is not permitted. The historical results of periods prior to 2002 do not
      reflect the effect of SFAS 142 and, accordingly, the adjusted results for
      the year ended December 31, 2001 include amortization expense of $82.7 million
      ($56.5 million net of pro forma tax effects); the adjusted results for the
      year ended December 31, 2000 include amortization expense of $80.7 million
      ($56.6 million net of pro forma tax effects); and the adjusted results for
      the year ended December 31, 1999 include amortization expense of $69.5 million
      ($50.2 million net of pro forma tax effects). In all periods presented,
      the adjusted results present net income applicable to common stockholders
      and income per common share (basic and diluted), as if SFAS 142 had been
      implemented on January 1, 1999.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(m) | Net cash used in investing activities in the
      year ended December 31, 1999 includes net cash paid in the acquisitions
      of Pulitzer Broadcasting Company of approximately $712.3 million, and Kelley
      Broadcasting Co. and Kelleproductions, Inc. of approximately $530.1 million.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 21 | 
| | -- | 



---







|ITEM 7. | MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------



|Introduction
|------------



|Hearst-Argyle
Television, Inc. and subsidiaries (hereafter we or the  Company)
owns and operates 24 network-affiliated television stations.  Additionally, we provide
management services to two network-affiliated and one  independent television stations
and two radio stations (the Managed Stations)  in exchange for a management
fee. See Note 14 to the consolidated financial  statements.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Critical Accounting Policies and Estimates
|------------------------------------------



|Accounting Policies
|-------------------



|We have identified
the accounting policies below as integral to our  business operations and the
understanding of our results of operations. See Note  2 to the consolidated financial
statements.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Revenue RecognitionOur
      primary source of revenue is television advertising. Other sources include
      network compensation and other revenues. Advertising revenues and network
      compensation together represented approximately 97% of our total revenues
      in each of the years ended December 2003, 2002 and 2001.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Advertising Revenues. Advertising revenues
      are recognized net of agency and national representatives commissions
      and in the period when the commercials are broadcast. Barter and trade revenues
      are included in advertising revenues and are also recognized when the commercials
      are broadcast. See Barter and Trade Transactions below.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Network Compensation. Eleven of our stations
      have network compensation agreements with ABC, ten have agreements with
      NBC, and two have agreements with CBS. In connection with the ABC and CBS
      agreements, revenue is recognized when our stations broadcast specific network
      television programs based upon a negotiated value for each program. In connection
      with the NBC agreements, revenue is recognized on a straight-line basis,
      based upon the cash compensation to be paid to our stations by NBC each
      year. Unlike the ABC and CBS agreements, the NBC network compensation is
      an annual amount and is not specifically assigned to individual network
      television programs.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Other Revenues. We generate revenue from
      other sources, which include the following types of transactions and activities:
      (i) management fees earned from The Hearst Corporation (Hearst)
      (see Note 14 to the consolidated financial statements); (ii) services revenue
      from Lifetime Entertainment Services (see Note 14 to the consolidated financial
      statements); (iii) services revenue from the production of commercials for
      advertising customers or from the production of programs to be sold in syndication;
      (iv) rental income pursuant to tower lease agreements with third parties
      providing for attachment of antennas to our towers; and (v) other miscellaneous
      revenues, such as licenses and royalties.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Accounts ReceivableWe
      extend credit based upon our evaluation of a customers credit worthiness
      and financial condition. For certain advertisers, we do not extend credit
      and require cash payment in advance. We monitor the collection of receivables
      and we maintain an allowance for estimated losses based upon the aging of
      such receivables and specific collection issues that may be identified.
      Concentration of credit risk with respect to accounts receivable is generally
      limited due to the large number of geographically diverse customers, individually
      small balances, and short payment terms.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Program RightsProgram
      rights represent the right to air various forms of existing programming.
      Program rights and the corresponding contractual obligations are recorded
      when the license period begins and the programs are available for use. Program
      rights are carried at the lower of unamortized cost or estimated net realizable
      value. Costs of first-run programming are amortized over the license period
      of the program, which is generally one year. Costs of off-network syndicated
      products, feature films, and cartoons are amortized on the future number
      of showings on an accelerated basis, contemplating the estimated revenue
      to be earned per showing, but generally not exceeding five years.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Barter and Trade TransactionsBarter
      transactions represent the exchange of commercial air time for programming.
      Trade transactions represent the exchange of commercial air time for merchandise
      or services. Barter transactions are generally recorded at the fair market
      value of the commercial airtime relinquished. Trade transactions are generally
      recorded at the fair market value of the merchandise or services received.
      Barter program rights and payables are recorded for barter transactions
      based upon the availability of the broadcast property. Revenue is recognized
      on barter and trade transactions when the commercials are broadcast; expenses
      are recorded when the merchandise or service received is utilized.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Intangible AssetsIntangible
      assets are recorded at cost and include FCC licenses, network affiliations,
      goodwill, and other intangible assets such as advertiser client base and
      favorable leases. On January 1, 2002, we adopted SFAS No. 142, Goodwill
      and Other Intangible Assets (SFAS 142).
      As a result, we no longer amortize goodwill and intangible assets with indefinite
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 22 | 
| | -- | 



---





|useful lives (FCC licenses), but instead perform a review
      for impairment annually, or earlier if indicators of potential impairment
      exist. In connection with the adoption of SFAS 142, amortization expense
      related to goodwill and indefinite-lived intangibles decreased by approximately
      $82.7 million annually. See Note 4 to the consolidated financial statements.
      Upon adoption of SFAS 142 on January 1, 2002 and again in the fourth quarters
      of 2002 and 2003, we completed an impairment review and found no impairment
      to the carrying value of goodwill or FCC licenses. Had we used different
      assumptions in developing our estimates, our reported results may have varied.
      We consider the assumptions used in our estimates to be reasonable. We amortize
      intangible assets with determinable useful lives over their respective estimated
      useful lives to their estimated residual values. Upon adoption of SFAS 142
      on January 1, 2002, we determined the remaining useful life of our network
      affiliation intangible assets to be approximately 28.5 years and the remaining
      useful life of our advertiser client base intangible asset to be approximately
      19 years. We amortize favorable lease intangible assets over the respective
      terms of each lease. In accordance with SFAS No. 144,Accounting
      for the Impairment or Disposal of Long Lived Assets, we evaluate the
      remaining useful life of our intangible assets with determinablelives
      each reporting period to determine whether events or circumstances warrant
      a revision to the remaining period of amortization.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Prior to the adoption of
      SFAS 142 on January 1, 2002, we amortized goodwill and intangible assets
      over periods ranging from three to 40 years. The recoverability of the carrying
      values of goodwill and intangible assets was evaluated quarterly to determine
      if an impairment in value had occurred. Pursuant to SFAS No. 121, Accounting
      for the Impairment of Long-lived Assets, an impairment in value was
      considered to have occurred when it had been determined that the undiscounted
      future operating cash flows generated by the acquired business were not
      sufficient to recover the carrying value of an intangible asset. If it had
      been determined that an impairment in value had occurred, goodwill and intangible
      assets would have been written down to an amount equivalent to the present
      value of the estimated undiscounted future operating cash flows to be generated
      by the acquired business. As of December 31, 2001, it was determined that
      there had been no impairment of intangible assets.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Income TaxesIncome
      taxes are accounted for in accordance with SFAS No. 109, Accounting for
      Income Taxes (SFAS 109), which requires that deferred tax
      assets and liabilities be recognized because of differences in the book
      and tax bases of certain assets and liabilities using enacted tax rates.
      SFAS 109 also requires that deferred tax assets be reduced by a valuation
      allowance if it is more likely than not, that some portion or all of the
      deferred tax assets will not be realized. Income tax expense was approximately
      $42.3 million or 31.0% of pre-tax income in our consolidated statement of
      income for the year ended December 31, 2003. Deferred tax assets were approximately
      $5.2 million and deferred tax liabilities were approximately $882.1 million
      as of December 31, 2003 (see Note 9 to the consolidated financial statements).
      Our estimates of income taxes and the significant items giving rise to the
      deferred assets and liabilities are set forth in Note 9 to the consolidated
      financial statements. These estimates reflect our assessment of actual future
      taxes to be paid on items reflected in the consolidated financial statements,
      giving consideration to both timing and probability. Actual income taxes
      could vary from such estimates as a result of future changes in income tax
      law or reviews by the Internal Revenue Service or other tax authorities.
      The deferred tax liability primarily relates to differences between book
      and tax basis of our FCC licenses. In accordance with the adoption of SFAS
      142 on January 1, 2002, we no longer amortize our FCC licenses, but instead
      test them for impairment annually. As the tax basis in our FCC licenses
      continues to amortize, our deferred tax liability will increase over time.
      We do not expect the significant portion of our deferred tax liability to
      reverse over time unless (i) our FCC licenses become impaired; or (ii) our
      FCC licenses are sold for cash, which would typically only occur in connection
      with the sale of net assets of a station or groups of stations or the entire
      company.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Related Party TransactionsWe
      have Management and Services Agreements as well as a series of other related
      agreements with Hearst. Revenues and expenses recorded by us in connection
      with such agreements amounted to less than 1% of our total revenues and
      less than 1% of our total operating expenses in each of the years ended
      December 2003, 2002 and 2001. See Note 14 to the consolidated financial
      statements for more information on these and other related party transactions.
      We believe that the terms of the Management and Services Agreements are
      reasonable to both parties; however, there can be no assurance that more
      favorable terms would not be available from third parties.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Purchase AccountingWhen
      allocating the purchase price in a purchase transaction to the acquired
      assets (tangible and intangible) and assumed liabilities, it is necessary
      to develop estimates of fair value. We utilize the services of an independent
      valuation consulting firm for the purpose of estimating required fair values.
      The specialized tangible assets in use at a broadcasting business are typically
      valued on the basis of the replacement cost of a new asset less observed
      depreciation. The appraisal of other fixed assets, such as furnishings,
      vehicles, and office machines, is based upon a comparable market approach.
      Identified intangible assets, including FCC licenses, are valued at estimated
      fair value. FCC licenses are valued using a direct approach. The direct
      approach measures the economic benefits that the FCC license brings to its
      holder. The fair market value of the FCC license is determined by discounting
      these future benefits utilizing discounted cash flows. The key assumptions
      used in the discounted cash flow analysis include initial
      and subsequent capital costs, network affiliation, VHF or UHF status, market
      revenue growth and station market share projections, operating profit margins,
      discount rates and terminal value estimates.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 23 | 
| | -- | 



---





|Off-Balance Sheet Financings
      and LiabilitiesOther than agreements for future barter and program
      rights not yet available for broadcast as of December 31, 2003, and employment
      contracts for key employees, all of which are disclosed in Note 15 to the
      consolidated financial statements, and contractual commitments and other
      legal contingencies incurred in the normal course of business, we do not
      have any off-balance sheet financings or liabilities. Other than the Hearst-Argyle
      Capital Trust (the Capital Trust), a wholly-owned unconsolidated
      subsidiary trust (see Note 2 to the consolidated financial statements under
      Reclassifications and New Accounting Pronouncements),
      we do not have any majority-owned subsidiaries that are not included in
      the consolidated financial statements, nor do we have any interests in or
      relationships with any special-purpose entities that are not reflected in
      our consolidated financial statements.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Accounting Estimates
|--------------------



|Our managements
discussion and analysis of financial condition and  results of operations is based on our
consolidated financial statements, which  have been prepared in accordance with
accounting principles generally accepted  in the United States of America. The
preparation of our consolidated financial  statements requires us to make estimates and
judgments that affect the reported  amounts of assets, liabilities, revenues, and
expenses, and related disclosure  of contingent assets and liabilities. On an ongoing
basis, we evaluate our  estimates, including those related to allowances for doubtful
accounts; program  rights, barter and trade transactions; useful lives of property, plant
and  equipment; intangible assets; carrying value of investments; accrued  liabilities;
contingent liabilities; income taxes; pension benefits; and fair  value of financial
instruments and stock options. We base our estimates on  historical experience and on
various other assumptions, which we believe to be  reasonable under the circumstances.
Had we used different assumptions in  determining our estimates, our reported results may
have varied. The different  types of estimates that are required to be made by us in the
preparation of our  consolidated financial statements vary significantly in the level of
subjectivity involved in their determination. We have identified the estimates  below as
those which contain a relatively higher level of subjectivity in their  determination and
therefore could have a more material effect upon our reported  results had we used
different assumptions.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Impairment Testing of
      Intangible AssetsIn performing our annual impairment testing of
      goodwill and FCC licenses, which are both considered to be intangible assets
      with indefinite useful lives, we must make a significant number of assumptions
      and estimates in applying a fair value based test. To assist in this process,
      we utilize the services of an independent valuation consulting firm. See
      Note 4 to the consolidated financial statements. The assumptions and estimates
      required under the impairment testing of goodwill and FCC licenses included
      future market revenue growth, operating profit margins, cash flow multiples,
      market revenue share, and our weighted-average cost of capital, among others.
      Upon adoption of SFAS 142 on January 1, 2002 and again in the fourth quarters
      of 2002 and 2003, we completed an impairment review and found no impairment
      to the carrying value of goodwill or FCC licenses. Had we utilized either
      a different valuation technique or different assumptions or estimates, the
      carrying values of goodwill and FCC licenses as of January 1, 2002, December
      31, 2002 and December 31, 2003 may have been different. We consider the
      assumptions used in our impairment testing of intangible assets to be reasonable.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Investment Carrying ValuesWe
      have investments in unconsolidated affiliates, which are accounted for under
      the equity method if our equity interest is from 20% to 50%, and under the
      cost method if our equity interest is less than 20% and we do not exercise
      significant influence over operating and financial policies. We review the
      carrying value of investments on an ongoing basis and adjust them to reflect
      net realizable value, where necessary. See Note 3 to the consolidated financial
      statements. As part of our analysis and determination of the net realizable
      value of investments, we must make assumptions and estimates regarding expected
      future cash flows, which involves assessing the financial results, forecasts,
      and strategic direction of the investee companies. In addition, we must
      make assumptions regarding discount rates, market growth rates, comparable
      company valuations and other factors, and the types of assumptions we must
      make differ according to the type of investment to be valued. Had we utilized
      different assumptions and estimates in our assessment of the net realizable
      value of investments, the carrying values of our investments as of December
      31, 2003 may have been different. We consider the assumptions used in our
      determination of investment carrying values to be reasonable.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Pension AssumptionsIn
      computing projected benefit obligations and the resulting pension expense,
      we are required to make a number of assumptions. To assist in this process,
      we use the services of an independent consulting firm. See Note 16 to the
      consolidated financial statements. To compute our projected benefit obligations
      as of the measurement date of September 30, 2003, we used the discount rate
      of 6.25% and a rate of compensation increase of 4.0%. In determining the
      discount rate assumption of 6.25%, we used a measurement date of September
      30, 2003 and constructed a portfolio of bonds to match the benefit payment
      stream that is projected to be paid from the Companys pension plans.
      The benefit payment stream is assumed to be funded from bond coupons and
      maturities as well as interest on the excess cash flows from the bond portfolio.
      To compute our pension expense in the year ended December
      31, 2003, we used a discount rate of 6.88%, an expected long-term rate of
      return on plan assets of 8.0%, and a rate of compensation increase of 4.0%.
      To determine the discount rate assumption of 6.88%, we used the measurement
      date of September 30, 2002 and used the same methodology to construct a
      portfolio of bonds to match the projected benefit payment. The expected
      long-term rate of return on plan assets assumption of 8.0% is based on the
      weighted average expected long-term returns for the target allocation of
      plan assets as of the measurement date of September 30, 2002. See
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 24 | 
| | -- | 



---





|Note 16 to the consolidated financial statements for further
      discussion on managements methodology for developing the expected
      long-term rate of return assumption. In calculating our pension expense
      for the year ending December 31, 2004, we anticipate using an assumed expected
      long-term rate of return of 7.75%. We consider the assumptions used in our
      determination of our projected benefit obligations and pension expense to
      be reasonable.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Pension Assumptions
      Sensitivity Analysis
|----------------------------------------------



|The
weighted-average assumptions used in computing our net pension expense  and projected
benefit obligation have a significant effect on the amounts  reported. A one-percentage
point change in each of the assumptions below would  have the following effects upon net
pension expense (benefit) and projected  benefit obligation, respectively, in the year
ended and as of December 31, 2003:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                              | One Percentage
      Point Increase |           | One Percentage
      Point Decrease          
|----------------------------- | ----------------------------------- | --------- | ---------------------------------------------
|                              | DiscountRate                        |           | Expected
       long-term
      rate ofreturn
|                              | (In
      thousands)                |          
|                              |                                     |           |                                              
|Net pension expense (benefit) |                                     | $  (1,247 | )                                            
|Projected benefit obligation  |                                     | $(18,505  | )                                            

|Significant Business Transactions
|---------------------------------



|During the
three-year period ended December 31, 2003, we were involved in  the following significant
transactions:
|------------------------------------------------------------------------------------------------------------------

| |  |  | On
March 28, 2001, we exchanged our radio stations in Phoenix, Arizona  (KTAR-AM, KMVP-AM,
and KKLT-FM) (the Phoenix Stations) for WMUR-TV,  the ABC affiliate serving
Manchester, New Hampshire, which is part of  the Boston, Massachusetts television market,
in a three-party swap  (the Phoenix Transaction). We sold the Phoenix
Stations to Emmis  Communications Corporation (Emmis) and purchased WMUR-TV
from  WMUR-TV, Inc. Prior to the swap, Emmis had been managing the Phoenix  Stations
pursuant to a Time Brokerage Agreement (TBA) since August  1, 2000 and we had
been managing WMUR-TV pursuant to a TBA since  January 8, 2001 (effective January 1, 2001
for accounting purposes).  See Note 3 to the consolidated financial statements.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | In
May 2001, we invested an additional $6.0 million in Internet  Broadcasting Systems, Inc. (IBS),
thereby increasing our original  $20.0 million investment in IBS made in December 1999
and bringing our  total investment in IBS to $26.0 million. With IBS, we and other
broadcasters have invested in the development and management of local
news/information/entertainment websites. As of December 31, 2003, we  had an approximate
24% equity interest in IBS and a 49.9% equity  interest in the IBS/HATV LLC. See Note 3
to the consolidated financial  statements.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | On
August 7, 2001 (August 1, 2001 for accounting purposes), we  contributed our production
and distribution unit to NBC/Hearst-Argyle  Syndication, LLC in exchange for a 20% equity
interest in this entity.  NBC/Hearst-Argyle Syndication, LLC is a joint venture between
NBC  Enterprises and us to produce and syndicate first-run broadcast and
original-for-cable programming. See Note 3 to the consolidated  financial statements.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | On
December 13, 2001, we sold WBOY-TV, an NBC affiliate serving the  Clarksburg-Weston, West
Virginia television market for $20.0 million  plus a working capital adjustment of $0.8
million less transaction  expenses. This station was previously acquired on April 20,
2001 from  WBOY-TV, Inc. for $20.0 million plus a working capital adjustment of  $0.7
million and transaction expenses. See Note 3 to the consolidated  financial statements.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | On
December 20, 2001, a wholly-owned unconsolidated subsidiary trust  of the Company
completed a private placement of redeemable convertible  preferred securities (Redeemable
Convertible Preferred Securities)  in the amount of $200.0 million. Such proceeds
were utilized by us to  reduce outstanding debt. See Note 7 to the consolidated financial
statements.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 25 | 
| | -- | 



---





|Results of Operations
|---------------------



|Results of
operations for the years ended December 31, 2003 and 2002  include the results of our 24
television stations which were owned for the  entire period presented and the management
fees derived by the three television  and two radio stations managed by us for the entire
period presented.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Results of
operations for the year ended December 31, 2001 include: (i)  the results of 23 (which
excludes WMUR-TV and WBOY-TV) of our television  stations which were owned for the entire
period presented; (ii) the management  fees earned by us from the three television and
two radio stations managed by us  for the entire period presented; (iii) the TBA for
WMUR-TV from January 1  through March 27, 2001; (iv) the results of WMUR-TV, after our
acquisition of  the station, from March 28 through December 31, 2001; (v) the TBA for the
Phoenix Stations from January 1 through March 27, 2001; and (vi) the results of  WBOY-TV
after our acquisition of the station, from April 30 to December 13,  2001, the date of
its disposition.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Year Ended
      December 31, 2003
           Compared to Year Ended December 31, 2002
|--------------------------------------------------------------------------------------



|Total revenues.
Total revenues includes: (i) cash and barter advertising revenues, net of agency and
national representatives commissions; (ii) network compensation; and (iii) other
revenues, which represent less than 4% of total revenues. See Revenue Recognition under
Note 2 to the consolidated financial statements. Total revenues in the year ended
December 31, 2003 were $686.8 million, as compared to $721.3 million in the year ended
December 31, 2002, a decrease of $34.5 million or 4.8%. This net decrease was primarily
attributable to the following factors: (i) a decrease in net political advertising
revenues of approximately $55.2 million, as a result of the normal, cyclical nature of
political spending on television broadcasting whereby, in which the demand for
advertising by candidates running for political office increases in even-numbered years
(such as 2002); (ii) a decrease in net advertising revenues due to the absence of
approximately $15.3 million in revenue generated in the first quarter of 2002 during the
broadcast of the Winter Olympics by our ten NBC affiliates; (iii) the loss of
approximately $5.0 million in net advertising revenues during March 2003 due to
advertiser cancellations, schedule adjustments, pre-emptions for network news coverage,
and lost new bookings, as a result of the commencement of the war in Iraq. These factors
were partially offset by an increase in demand by core national local advertisers,
particularly in the categories of financial services, automotive, packaged goods,
retail, and furniture and housewares. Our net political and Olympic advertising revenues
are likely to continue to be higher in even-numbered years (such as 2004), when demand
for advertising increases as a result of candidates running for political office and the
broadcasting of the Olympics.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Salaries, benefits
and other operating costs. Salaries, benefits and other operating costs were $330.5
million in the year ended December 31, 2003, as compared to $331.6 million in the year
ended December 31, 2002, a decrease of $1.1 million or 0.3%. This decrease was primarily
due to (i) a decrease of approximately $3.6 million in bad debt expenses; (ii) a
decrease in professional fees of approximately $1.3 million; and (iii) the fact that in
2002 we recorded approximately $2.2 million in loss on disposal of fixed assets;
partially offset by (iv) an increase in employee benefits and pension expenses of
approximately $3.9 million; and (v) an increase of approximately $2.0 million in news
gathering and promotional expenses.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Amortization of
program rights. Amortization of program rights was $62.8 million in the year ended
December 31, 2003, as compared to $60.8 million in the year ended December 31, 2002, an
increase of $2.0 million or 3.3%. This increase was primarily due to new program rights
acquisitions in September 2002 at our television stations in the Sacramento, California
and the Winston-Salem/Greensboro, North Carolina markets.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Depreciation and amortization.
      Depreciation and amortization was $55.5 million in the year ended December
      31, 2003, as compared to $43.6 million in the year ended December 31, 2002,
      an increase of $11.9 million or 27.3%. Depreciation expense was $46.0 million
      in the year ended December 31, 2003, as compared to $41.1 million in the
      year ended December 31, 2002, an increase of $4.9 million or 11.9%. This
      increase was primarily due to the recording of approximately $4.6 million
      of accelerated depreciation in the year ended December 31, 2003 on certain
      broadcasting equipment which we determined to be obsolete. We review, on
      a continuing basis, the financial statement carrying value of property,
      plant and equipment for impairment. If events or changes in circumstances
      indicate that an asset carrying value may not be recoverable, the carrying
      value is written down through accelerated depreciation. Amortization was
      $9.5 million in the year ended December 31, 2003, as compared to $2.5 million
      in the year ended December 31, 2002, an increase of $7.0 million, principally
      resulting from a catch-up to amortization related to a separately identified
      intangible asset, advertiser client base. In December 2003, we reversed
      a reclassification we had made in December 2001 related to this separately
      identified intangible asset. In December 2003, we determined that the advertiser
      client base should continue to be separately identified from goodwill and,
      as an intangible asset with a determinable useful life under SFAS 142, be
      amortized over its estimated useful life. Accordingly, we resumed amortization
      and recorded a catch-up to amortization expense on the
      advertiser client base of $7.1 million in the fourth quarter of 2003. We
      expect our depreciation and amortization expense to be approximately $48.5
      million in 2004. See Note 4 to the consolidated financial statements.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 26 | 
| | -- | 



---







|Corporate, general
and administrative expenses. Corporate, general and administrative expenses were $19.1
million in the year ended December 31, 2003, as compared to $19.7 million in the year
ended December 31, 2002, a decrease of $0.6 million or 3.0%. This decrease was primarily
due to: (i) a decrease of approximately $2.0 million in incentive compensation expense;
partially offset by (ii) an increase of approximately $0.7 million in director and
officer liability insurance premiums; and (iii) an increase of approximately $0.8
million in certain professional fees.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Operating income.
Operating income was $218.8 million in the year ended December 31, 2003, as compared to
$265.6 million in the year ended December 31, 2002, a decrease of $46.8 million or
17.6%. This net decrease in operating income was due to the items discussed above.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Interest expense,
net. Interest expense, net of interest income, was $68.2 million in the year ended
December 31, 2003, as compared to $73.4 million in the year ended December 31, 2002, a
decrease of $5.2 million or 7.1%. This decrease was primarily due to a lower outstanding
debt balance in the year ended December 31, 2003 as compared to the same period in 2002.
Our outstanding long-term debt balance as of December 31, 2003 was $882.4 million, as
compared to $973.4 million as of December 31, 2002. Interest expense, net, included
approximately $0.5 million of interest income in the year ended December 31, 2003 and
approximately $0.7 million in the year ended December 31, 2002. See Note 6 to the
consolidated financial statements.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Interest Expense,
net  Capital Trust. Interest expense, net, to our wholly-owned, unconsolidated
subsidiary trust (the Capital Trust) was $15.0 million in both the years ended December
31, 2003 and 2002. Interest expense, net  Capital Trust represents interest expense
incurred by the Company on the $206.2 million of Subordinated Debentures issued by the
Company. Interest paid by the Company to the Capital Trust was then utilized by the
Capital Trust to make dividend payments to the holders of the $200.0 million of
redeemable convertible preferred securities issued by the Capital Trust in December
2001. In accordance with FIN 46(R), the Company does not consolidate the accounts of
the Capital Trust in its consolidated financial statements. The Company uses the equity
method of accounting to record the parent companys equity interest in the earnings
of the Capital Trust and accordingly has included such earnings of $0.5 million in
Interest Expense, net  Capital Trust in both the years ended December 31, 2003 and
2002. See Note 7 to the consolidated financial statements.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Other income, net.
Other income, net, recorded in the year ended December 31, 2002 represented a
supplemental closing fee paid to us by Emmis in connection with the Phoenix/WMUR Swap
transaction, which occurred in March 2001. See Note 3 to the consolidated financial
statements. There was no Other income, net, recorded in the year ended December 31, 2003.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Equity in income
(loss) of affiliates. Equity in income (loss) of affiliates was $0.9 million of income
in the year ended December 31, 2003, as compared to $3.3 million of loss in the year
ended December 31, 2002, an increase of $4.2 million. See Note 3 to the consolidated
financial statements. This increase was primarily due to the improved operating results
of Internet Broadcasting Systems, Inc. (IBS). Our share in the financial
results of IBS entities was net income of approximately $1.0 million in the year ended
December 31, 2003, as compared to a net loss of approximately $1.4 million in the year
ended December 31, 2002. Our share in the financial results of NBC/Hearst-Argyle
Syndication, LLC was a net loss of approximately $0.1 million in the year ended December
31, 2003, as compared to a net loss of approximately $1.9 million in the year ended
December 31, 2002. Our capital commitment to the investment in NBC/Hearst-Argyle
Syndication, LLC is limited to $2.0 million.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Income taxes.
Income tax expense was $42.3 million in the year ended December 31, 2003, as compared to
$66.2 million in the year ended December 31, 2002, a decrease of $23.9 million or 36.1%.
This decrease in income tax expense was primarily due to (i) a decrease in income before
income taxes from $174.2 million in the year ended December 31, 2002 to $136.5 million
in the year ended December 31, 2003; and (ii) a decrease in our effective tax rate from
38.0% in the year ended December 31, 2002 to 31.0% in the year ended December 31, 2003.
In the year ended December 31, 2003, our effective tax rate included (i) a tax benefit
of approximately $4.0 million, reflecting the conclusion of a federal tax examination
covering our 1998 through 2000 tax years in the third quarter of 2003; and (ii) a tax
benefit of approximately $5.4 million, relating to the closure of certain state matters
in the fourth quarter of 2003. We expect our effective tax rate for the year ending
December 31, 2004 to be approximately 38.0%.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The current and deferred portions
      of our income tax expense were $6.7 million and $35.6 million, respectively,
      in the year ended December 31, 2003, compared to $14.5 million and $51.7
      million, respectively, in the year ended December 31, 2002. In the years
      ended December 31, 2003 and 2002, the current and deferred portions of our
      income tax expense were affected by increases in deferred tax expense of
      $29.7 million and $24.9 million, respectively, offset by corresponding decreases
      of $29.7 million and $24.9 million, respectively, in the current portion
      of our income tax expense, as well as cash tax payments, due to deductions
      of income tax basis associated with certain of our prior acquisitions. We
      received approval from the Internal Revenue Service regarding the methodology
      for determining these deductions. See Note 9 to the consolidated financial
      statements.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Our noncurrent deferred tax
      liability was $882.1 million and $844.8 million as of December 31, 2003
      and 2002, respectively. The deferred tax liability primarily relates to
      differences between book and tax basis of our FCC licenses. In accordance
      with the adoption of SFAS 142 on January 1, 2002, we no longer amortize
      our FCC licenses, but instead test them for
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 27 | 
| | -- | 



---







|impairment annually. As the tax basis in our FCC licenses
      continues to amortize, our deferred tax liability will increase over time.
      We do not expect the significant portion of our deferred tax liability to
      reverse over time unless (i) our FCC licenses become impaired; or (ii) our
      FCC licenses are sold for cash, which would typically only occur in connection
      with the sale of net assets of a station or groups of stations or the entire
      company.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Net income. Net
income was $94.2 million in the year ended December 31, 2003, as compared to $108.0
million in the year ended December 31, 2002, a decrease of $13.8 million or 12.8%. This
decrease was due to the items discussed above, primarily (i) a decrease of $46.8 million
in Operating income; partially offset by (ii) a decrease of $5.2 million in Interest
expense, net; (iii) an increase of $4.2 million in Equity in income (loss) in
affiliates; and (iv) a decrease of $23.9 million in Income taxes, in the year ended
December 31, 2003, as compared to the year ended December 31, 2002.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Year Ended
      December 31, 2002
           Compared to Year Ended December 31, 2001
|--------------------------------------------------------------------------------------



|Total revenues.
Total revenues includes: (i) cash and barter advertising revenues, net of agency and
national representatives commissions; (ii) network compensation; and (iii) other
revenues, which represent less than 4% of total revenues. See Revenue Recognition under
Note 2 to the consolidated financial statements. Total revenues in the year ended
December 31, 2002 were $721.3 million, as compared to $641.9 million in the year ended
December 31, 2001, an increase of $79.4 million or 12.4%. This increase was primarily
attributable to: (i) an increase in net political advertising revenues of approximately
$67.6 million; (ii) an increase in the demand for advertising by national and local
advertisers principally in the automotive, movies, and financial services categories;
and (iii) an increase in net advertising revenues of $15.3 million resulting from the
carriage of the Winter Olympics on our ten owned NBC affiliates during the first quarter
of 2002. Our net political and Olympic advertising revenues are likely to continue to be
higher in even-numbered years (such as 2002), when demand for advertising increases as a
result of candidates running for political office and the broadcasting of the Olympics.
During the year ended December 31, 2001, our television stations lost expected net
advertising revenues of (i) approximately $4.7 million due to the suspension of
advertising-supported commercial programming as a result of around-the-clock news
coverage in the days following the terrorist attacks on September 11, 2001; (ii)
approximately $7.0 million due to cancellations by advertisers in September 2001; and
(iii) an estimated $10.0 million of net revenues lost in the fourth quarter of 2001 in
the aftermath of September 11th.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Salaries, benefits
      and other operating costs. Salaries, benefits and other operating costs
      were $331.6 million in the year ended December 31, 2002, as compared to
      $323.5 million in the year ended December 31, 2001, an increase of $8.1
      million or 2.5%. This increase was primarily due to (i) an increase of approximately
      $8.1 million in commissions and bonuses related to the increase in our advertising
      revenues, as discussed above under Total revenues; (ii) increases
      in insurance costs, employee benefits and pension expenses; offset by (iii)
      decreases in news gathering and promotional expenses and bad debt expenses.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Amortization of
program rights. Amortization of program rights was $60.8 million in the year ended
December 31, 2002, as compared to $57.7 million in the year ended December 31, 2001, an
increase of $3.1 million or 5.4%. This increase was primarily due to new program rights
acquisitions at our television stations in the Sacramento, California and the
Winston-Salem/Greensboro, North Carolina markets.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Depreciation and
amortization. Depreciation and amortization was $43.6 million in the year ended December
31, 2002, as compared to $129.4 million in the year ended December 31, 2001, a decrease
of $85.8 million or 66.3%. This decrease in depreciation and amortization expense was
primarily due to our adoption on January 1, 2002 of the accounting standard SFAS 142.
SFAS 142 requires that goodwill and intangible assets with indefinite useful lives (FCC
licenses) no longer be amortized, but instead be assessed for impairment at least
annually by applying a fair value-based test. See Note 4 to the consolidated financial
statements. Depreciation expense was $41.1 million in the year ended December 31, 2002,
as compared to $40.7 million in the year ended December 31, 2001, an increase of $0.4
million or 1.0%.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Corporate, general and
      administrative expenses. Corporate, general and administrative expenses
      were $19.7 million in the year ended December 31, 2002, as compared to $15.8
      million in the year ended December 31, 2001, an increase of $3.9 million
      or 24.7%. This increase was primarily due to: (i) an increase of approximately
      $0.5 million in director and officer liability insurance premiums; (ii)
      an increase of approximately $1.8 million in incentive compensation expense,
      which was significantly lower in 2001 as a result of
      the adverse effect upon the our financial performance from the events of
      September 11th and the downturn in the U.S. economy; and (iii) an increase
      of approximately $1.0 million in certain professional fees.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Operating income.
      Operating income was $265.6 million in the year ended December 31, 2002,
      as compared to $115.4 million in the year ended December 31, 2001, an increase
      of $150.2 million or 130.2%. This net increase in operating income was due
      to the items discussed above.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Interest expense, net.
      Interest expense, net of interest income, was $73.4 million in the year
      ended December 31, 2002, as compared to $98.7 million in the year ended
      December 31, 2001, a decrease of $25.3 million or 25.6%. This decrease was
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 28 | 
| | -- | 



---







|primarily due to a lower outstanding debt balance in the
      year ended December 31, 2002 as compared to the same period in 2001. Our
      long-term debt balance as of December 31, 2002 was approximately $0.97 billion,
      as compared to approximately $1.16 billion as of December 31, 2001. Interest
      expense, net, included approximately $0.7 million of interest income in
      the year ended December 31, 2002 and approximately $0.6 million in the year
      ended December 31, 2001. See Note 6 to the consolidated financial statements.
      In connection with our adoption of SFAS 145 on July 1, 2002, we have reclassified
      certain amounts reported in prior periods that were previously reported
      as extraordinary items, net of related income taxes, as Interest expense,
      net, in the consolidated statements of income. Accordingly, we have reclassified
      approximately $0.9 million to Interest expense, net in the year ended December
      31, 2001.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Interest Expense, net
       Capital Trust. Interest expense, net, to our wholly-owned, unconsolidated
      subsidiary trust (the Capital Trust) was $15.0 million in the year ended
      December 31, 2002, as compared to $0.5 million in the year ended December
      31, 2001. Interest expense, net  Capital Trust represents interest
      expense incurred by the Company on the $206.2 million of Subordinated Debentures
      issued by the Company. Interest paid by the Company to the Capital Trust
      was then utilized by the Capital Trust to make dividend payments to the
      holders of the $200.0 million of redeemable convertible preferred securities
      issued by the Capital Trust in December 2001. In accordance with FIN 46(R),
      the Company does not consolidate the accounts of the Capital Trust in its
      consolidated financial statements. The Company uses the equity method of
      accounting to record the parent companys equity interest in the earnings
      of the Capital Trust and accordingly has included such earnings of $0.5
      million and $0.02 million in Interest Expense, net  Capital Trust
      for the years ended December 31, 2002 and 2001, respectively. See Note 7
      to the consolidated financial statements.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Other income, net.
Other income, net, was $0.3 million in the year ended December 31, 2002, as compared to
$48.8 million in the year ended December 31, 2001. Other income, net, recorded in the
year ended December 31, 2002 represented a supplemental closing fee paid to us by Emmis
in connection with the Phoenix/WMUR Swap transaction, which occurred in March 2001.
Other income, net, recorded in the year ended December 31, 2001 represented a $72.6
million gain from the sale of the Phoenix Stations, which was partially offset by
write-downs of $5.1 million and $18.8 million of the carrying value of our investments
in Geocast and ProAct, respectively. See Note 3 to the consolidated financial statements.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Equity in income
(loss) of affiliates. Equity in income (loss) of affiliates was $3.3 million of loss in
the year ended December 31, 2002, as compared to $6.5 million of loss in the year ended
December 31, 2001, a decrease of $3.2 million or 49.2%. See Note 3 to the consolidated
financial statements. This decrease was primarily due to the improved operating results
of IBS. Our share in the financial results of IBS entities was a net loss of
approximately $1.4 million in the year ended December 31, 2002, as compared to a net
loss of approximately $5.8 million in the year ended December 31, 2001. Our share in the
financial results of NBC/Hearst-Argyle Syndication, LLC was a net loss of approximately
$1.9 million in the year ended December 31, 2002, as compared to a net loss of
approximately $0.7 million in the year ended December 31, 2001. Our capital commitment
to the investment in NBC/Hearst-Argyle Syndication, LLC is limited to $2.0 million.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Income taxes.
Income tax expense was $66.2 million in the year ended December 31, 2002, as compared to
$27.4 million in the year ended December 31, 2001, an increase of $38.8 million or
141.6%. This increase was primarily due to the increase in income attributable to the
items described above and partially offset by a lower effective tax rate in the year
ended December 31, 2002. The effective tax rate was 38.0% in the year ended December 31,
2002, as compared to 47.0% in the year ended December 31, 2001. This decrease in the
effective tax rate was primarily attributable to our adoption of SFAS 142, which
discontinues the amortization of goodwill and certain other intangible assets. See Notes
4 and 9 to the consolidated financial statements.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Net income. Net income
      was $108.0 million in the year ended December 31, 2002, as compared to $31.1
      million in the year ended December 31, 2001, an increase of $76.9 million
      or 247.3%. This increase was due to the items discussed above, primarily
      (i) an increase of $150.2 million in Operating income and (ii) a decrease
      of $25.3 million in Interest expense, net; partially offset by (iii) an
      increase of $14.5 million in Interest expense, net  Capital Trust;
      (iv) a $48.5 million decrease in Other income, net; and (v) an increase
      of $38.8 million in Income taxes, in the year ended December 31, 2002, as
      compared to the year ended December 31, 2001.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Liquidity and Capital Resources
|-------------------------------



|As of December 31, 2003, the
      Companys cash and cash equivalents balance was $71.5 million, as compared
      to $4.4 million as of December 31, 2002 and $3.3 million of December 31,
      2001. The net increases in cash and cash equivalents of $67.1 million during
      2003 and $1.1 million during 2002 were due to the factors described below
      under Operating Activities, Investing Activities, and Financing Activities.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Operating
      Activities
|--------------------------



|Net cash provided by operating
      activities was approximately $179.1 million, $205.5 million and $165.9 million
      in the years ended December 31, 2003, 2002 and 2001, respectively. The decrease
      of net cash provided by operating activities of $26.4
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 29 | 
| | -- | 



---







|million in the year ended December 31, 2003 as compared to
      the year ended December 31, 2002 was primarily due to (i) the decrease in
      our revenues and net income, as discussed above under Total revenues,
      and Net income; (ii) the increase in depreciation expense; (iii)
      the increase in amortization of intangible assets; (iv) the decrease in
      deferred income tax expense; and (v) changes in working capital, primarily
      changes in accounts receivable, other assets, accounts payable and accrued
      liabilities and other liabilities (see changes in operating assets
      and liabilities in the accompanying consolidated statements of cash
      flows). The increase of net cash provided by operating activities of $39.6
      million in the year ended December 31, 2002 as compared to the year ended
      December 31, 2001 was primarily due to (i) the increase in our revenues
      and net income, as discussed above under Total revenues, and
      Net income; (ii) the decrease in amortization of intangible
      assets; (iii) the increase in deferred income tax expense; (iv) the decrease
      in other income, net; and (v) changes in working capital, primarily changes
      in accounts receivable, other assets, accounts payable and accrued liabilities
      and other liabilities (see changes in operating assets and liabilities
      in the accompanying consolidated statements of cash flows).
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Investing
      Activities
|--------------------------



|Net cash used in
investing activities was approximately $25.5 million,  $25.8 million and $72.9 million in
the years ended December 31, 2003, 2002 and  2001, respectively. There was no significant
change to the level of investing  activity from 2002 to 2003, as in both years we
invested approximately the same  amount in property, plant and equipment. The decrease in
net cash used in  investing activities in the year ended December 31, 2002 as compared to
the year  ended December 31, 2001 was primarily due to the investments made during 2001
in  connection with the business transactions discussed below.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In May 2001, we
invested $6.0 million in IBS, bringing our total  investment to $26.0 million for an
equity interest in IBS. This equity  investment was funded by net cash provided by
operating activities and through  our Credit Facility. See Notes 3 and 6 to the
consolidated financial statements.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In August 2001, we
contributed our production-and-distribution unit to  NBC/Hearst-Argyle Syndication, LLC,
a limited liability company formed by NBC  Enterprises and us to produce and syndicate
first-run broadcast and  original-for-cable programming. See Note 3 to the consolidated
financial  statements.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|On March 28, 2001,
we exchanged our radio stations in Phoenix, Arizona  (KTAR-AM, KMVP-AM, and KKLT-FM) (the
Phoenix Stations) for WMUR-TV, the ABC  affiliate serving Manchester, New
Hampshire, which is part of the Boston,  Massachusetts television market, in a
three-party swap (the Phoenix/WMUR  Swap). We sold the Phoenix Stations to
Emmis Communications Corporation  (Emmis) for $160.0 million, less
transaction expenses, and purchased WMUR-TV  from WMUR-TV, Inc. for $185.0 million, plus
a working capital adjustment of $3.5  million and transaction expenses. The purchase
price of WMUR-TV was funded  through an intermediary by approximately (i) $160.0 million
from Emmis and (ii)  $28.5 million plus the cost of the transaction expenses from our
Credit  Facility. See Notes 3 and 6 to the consolidated financial statements.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|On April 30, 2001,
pursuant to an Asset Purchase Agreement entered into  with WBOY-TV, Inc. we acquired
WBOY-TV, the NBC affiliate serving the  Clarksburg-Weston, West Virginia television
market for $20.0 million (the WBOY  Acquisition), plus a working capital
adjustment of $0.7 million and transaction  expenses. On December 13, 2001, we
subsequently sold WBOY-TV for approximately  $20.0 million plus a working capital
adjustment of $0.8 million less transaction  expenses. The original purchase price and
the eventual sales proceeds were  funded and repaid using our Credit Facility. See Notes
3 and 6 to the  consolidated financial statements.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|On January 23,
2004, we entered into an Asset Purchase Agreement with WMTW  Broadcast Group, LLC to
acquire WMTW-TV, Channel 8, the ABC affiliate serving  the Portland-Auburn, Maine
television market, for $37.5 million in cash. The  transaction is conditioned on approval
by the Federal Communications Commission  and other customary closing conditions, and is
expected to close in the second  quarter of 2004. See Note 19 to the consolidated
financial statements.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Investments in property, plant
      and equipment were $25.4 million, $25.9 million, and $32.3 million in the
      years ended December 31, 2003, 2002 and 2001, respectively, and were funded
      using our net cash provided by operating activities and through our Credit
      Facility. In the year ended December 31, 2003, we invested approximately
      (i) $3.8 million in digital conversions; (ii) $14.5 million in maintenance
      projects; and (iii) $7.1 million in special projects. In the year ended
      December 31, 2002, we invested approximately (i) $15.4 million in digital
      conversions; (ii) $5.4 million in maintenance projects; and (iii) $5.1 million
      in special projects. In the year ended December 31, 2001, we invested approximately
      (i) $18.6 million in digital conversions; (ii) $9.9 million in maintenance
      projects; and (iii) $3.8 million in special projects. For the year ending
      December 31, 2004, we expect to invest approximately $40.0 million in property,
      plant and equipment, including approximately (i) $4.0 million in digital
      projects; (ii) $25.0 million in maintenance projects; and (iii) $11.0 million
      in special projects. Since 1997 through December 31, 2003, we have invested
      approximately $60.0 million in capital expenditures related to digital conversions,
      as mandated by the Federal Communications Commission (FCC).
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 30 | 
| | -- | 



---







|Financing
      Activities
|--------------------------



|Net cash used in
financing activities was approximately $86.4 million,  $178.5 million, and $95.5 million
in the years ended December 31, 2003, 2002 and  2001, respectively. We used cash provided
by operating activities to pay off the  entire remaining balance on our Credit Facility
of $91.0 million in the year  ended December 31, 2003 and to pay down $184.0 million in
the year ended  December 31, 2002. In addition, our cash and cash equivalents balance
increased  from $4.4 million as of December 31, 2002 to $71.5 million as of December 31,
2003, reflecting a net accumulation of cash of $67.1 million in the year ended  December
31, 2003.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The decrease in
net cash used in financing activities of $92.1 million in  the year ended December 31,
2003 as compared to the year ended December 31, 2002  was primarily due to (i) a decrease
in net pay-downs to the Credit Facility,  from net cash provided by operating activities,
of $93.0 million in 2003 as  compared to 2002, since the Credit Facility was fully paid
off by September  2003; and (ii) the fact that in 2002 we used cash of $2.6 million to
repay the  Senior Subordinated Notes. This decrease in net cash used in financing
activities was partially offset by a decrease in proceeds from stock option  exercises of
approximately $4.0 million in 2003 as compared to 2002.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The increase in
net cash used in financing activities of $83.0 million in  the year ended December 31,
2002 as compared to the year ended December 31, 2001  was primarily due to (i) the fact
that in 2001 we received net proceeds of  $194.8 million in connection with the private
placement of redeemable  convertible preferred securities by our wholly-owned
unconsolidated subsidiary  trust (the Capital Trust) (see Note 7 to the consolidated
financial statements)  and (ii) the repayment of Senior Subordinated Notes of $2.6
million in 2002.  This increase in net cash used in financing activities was partially
offset by  (i) a decrease in net pay-downs to the Credit Facility, from net cash provided
by operating activities, of $87.0 million in 2002 as compared to 2001; (ii) an  increase
in proceeds from stock option exercises of $7.9 million in 2002 as  compared to 2001; and
(iii) the fact that in 2001 we used net cash of $4.1  million and $15.4 million for
Series A Common Stock repurchases and repayments  on our Senior Notes, respectively.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Long-term debt
outstanding as of December 31, 2003 and 2002, and the net  decreases to long-term debt in
the year ended December 31, 2003 were as follows  (in thousands):
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                    |  | CreditFacility |                |   | Senior Notes |  | PrivatePlacement
      Debt |  | Capital
      LeaseObligations |          |  | Total |       |  
|----------------------------------------------------------------------------------- |  | -------------- | -------------- | - | ------------ |  | --------------------------- |  | ------------------------------ | -------- |  | ----- | ----- | -
|Balance 12/31/02                                                                    |  |                | $ 91,000       |   |              |  | $432,110                    |  |                                | $450,000 |  |       | $ 268 |  
|Increases:                                                                          |  |                |                |   |              |  |                             |  |                                |          |  |       |       |  
|New
      capital leases                                                            |  |                |               |   |              |  |                            |  |                                |         |  |       | 229   |  
|Decreases:                                                                          |  |                |                |   |              |  |                             |  |                                |          |  |       |       |  
|Net
      pay-down with cash flow from
                  operating
      activities |  |                | (91,000        | ) |              |  |                            |  |                                |         |  |       |      |  
|Reclassification
      to current portion                                           |  |                |               |   |              |  |                            |  |                                |         |  |       | (198  | )
|                                                                                    |  |                |                |   |              |  |                             |  |                                |          |  |       |       |  
|Balance 12/31/03                                                                    |  |                | $     
       |   |              |  | $432,110                    |  |                                | $450,000 |  |       | $ 299 |  
|                                                                                    |  |                |                |   |              |  |                             |  |                                |          |  |       |       |  

|The Note payable
to Capital Trust balance outstanding as of December 31,  2003 and 2002 was $206.2
million. There was no activity related to the Note  payable to Capital Trust during 2003.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Our debt obligations contain
      certain financial and other covenants and restrictions on the Company. Certain
      of the financial covenants include credit ratios such as leverage, interest
      coverage and fixed charges coverage, but such covenants do not include any
      triggers explicitly tied to our credit ratings or stock price. We are in
      compliance with all such covenants and restrictions as of December 31, 2003.
      As of December 31, 2003, our long-term debt obligations, excluding capital
      lease obligations and excluding our Note Payable to our wholly-owned unconsolidated
      subsidiary trust, as discussed below, were approximately $882.1 million,
      all of which mature after 2005. See Note 6 to the consolidated financial
      statements. All of our long-term debt obligations as of December 31, 2003,
      exclusive of capital lease obligations, bear interest at a fixed rate. Our
      credit ratings for long-term debt obligations, respectively, were BBB- by
      Standard & Poors and Fitch Ratings and Baa3 by Moodys Investors
      Service, as of December 31, 2003. Such credit ratings are considered to
      be investment grade.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|On April 12, 1999, we retired
      our existing $1 billion revolving credit facility and replaced it with two
      new revolving credit facilities (the New Credit Facilities)
      with a consortium of banks led by JP Morgan Chase Bank, Bank of New York,
      Toronto Dominion and Bank of Montreal. The New Credit Facilities were structured
      as a $1 billion revolver (the $1 Billion Facility) and a $250
      million revolver/term loan (the $250 Million Facility). We elected
      to cancel the $250 Million Facility on April 10, 2000. On August 15, 2001,
      we exercised our contractual right to reduce the lender commitments of the
      $1 Billion Facility to $750 million (hereafter, the Credit Facility).
      On December 24, 2003, we again exercised our contractual right and further
      reduced the lender commitments to $500 million. The Credit Facility, which
      had been fully paid off as of September 30, 2003, leaving no
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 31 | 
| | -- | 



---







|remaining balance due as of December 31, 2003, and had an
      outstanding balance of $91.0 million as of December 31, 2002 will mature
      on April 12, 2004. We intend to enter into a new credit facility and are
      currently evaluating proposals.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|On December 20,
2001, our wholly-owned unconsolidated subsidiary trust  (the Capital Trust) completed a
$200.0 million private placement with  institutional investors. The parent company,
Hearst-Argyle Television, Inc.,  then issued subordinated debentures of $206.2 million
(the Subordinated  Debentures) to the Capital Trust in exchange for $200.0
million in net proceeds  from the private placement and 100% of the Capital Trusts
common stock, valued  at $6.2 million. The Subordinated Debentures are presented as Note
payable to  Capital Trust in our consolidated balance sheets. See Note 7 to the
consolidated  financial statements. See New Accounting Pronouncements below
for discussion  of de-consolidation of the Capital Trust, pursuant to FIN 46(R). We paid
the  Capital Trusts issuance costs of $5.2 million, resulting in net proceeds to us
of $194.8 million. We utilized the net proceeds to reduce outstanding borrowings  under
our Credit Facility.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|During 2001, we
repaid (i) $1.3 million of our 7.0% Senior Notes due  January 15, 2018, at a discounted
price of $1.1 million, and (ii) $15.9 million  of our 7.5% Senior Notes due November 15,
2027, at a discounted price of $14.3  million. These repayments were funded by the Credit
Facility. We wrote-off the  pro-rata share of deferred financing fees related to the
Senior Notes which were  repaid. The discounts from the repayments, net of the write-off
of the deferred  financing fees, resulted in a gain of approximately $0.9 million, before
income  tax expense, which was reclassified as a reduction to Interest expense, net, in
the accompanying consolidated statement of income for the year ended December  31, 2001,
in accordance with SFAS 145.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|On July 29, 2002, a holder
      of our Series A Preferred Stock, exercised the right to convert 1,657 shares
      of Series A Preferred Stock into 79,959 shares of Series A Common Stock.
      On February 27, 2003, a holder of our Series A Preferred Stock, exercised
      the right to convert 1,900 shares of Series A Preferred Stock into 89,445
      shares of Series A Common Stock. As of December 31, 2003, we had 7,381 shares
      outstanding of Series A Preferred Stock and 10,938 shares outstanding of
      Series B Preferred Stock. The remaining shares of Series A Preferred Stock
      shall be redeemed as follows: 1,600 shares on January 1, 2004; and 5,781
      shares on January 1, 2005. The remaining shares of Series B Preferred Stock
      shall be redeemed as follows: 5,468 shares on December 10, 2004; and 5,470
      shares on January 1, 2005.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|On July 31, 2002,
we redeemed the remaining outstanding Senior  Subordinated Notes in the principal amount
of approximately $2.6 million. The  Senior Subordinated Notes were due in 2005 and bore
interest at 9.75%  semi-annually. In connection with the redemption, we paid a premium of
approximately $84,000, which has been included in Interest expense, net, in the
accompanying consolidated statements of income in the year ended December 31,  2002. The
redemption was funded using net cash provided by operating activities.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|On December 3,
2003, our Board of Directors declared a cash dividend for  the fourth quarter of $0.06
per share on our Series A and Series B Common Stock  in the amount of $5.6 million.
Included in this amount was $3.6 million payable  to Hearst (see Note 14 to the
consolidated financial statements). The dividend  was paid on January 15, 2004 to all
shareholders of record as of January 5,  2004. We did not declare or pay any dividends on
Common Stock in 2002 and 2001.  Our Credit Facility limits our ability to pay dividends
under certain  conditions. See Note 10 to the consolidated financial statements.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Between May 1998 and December
      31, 2003, we have spent approximately $80.7 million to repurchase approximately
      3.2 million shares of Series A Common Stock at an average price of $25.24.
      In May 1998, our Board of Directors authorized the repurchase of up to $300
      million of its outstanding Series A Common Stock. Such repurchases may be
      effected from time to time in the open market or in private transactions,
      subject to market conditions and managements discretion. There can
      be no assurance that such repurchases will occur in the future or, if they
      do occur, what the terms of such repurchases will be.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Contractual
      Obligations
|-----------------------------



|The following table summarizes
      our future cash obligations as of December 31, 2003 under existing debt
      repayment schedules, non-cancelable leases, future payments for program
      rights, employment and talent contracts, Note payable to Capital Trust,
      and redemptions of shares of Series A and B Preferred Stock (including dividends):
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                           | 2004           |                 | 2005 |  | 2006       |  | 2007 |           | 2008 |  | Thereafter |  | Total
|---------------------------------------------------------- | -------------- | --------------- | ---- |  | ---------- |  | ---- | --------- | ---- |  | ---------- |  | -----
|                                                           | (In thousands)
|Long-term debt(1)                                          |                | $      
       |      |  | $      188 |  |      | $  90,047 |      |  | $215,048   |  |      
|Net non-cancelable operating 
           lease obligations |                | 4,014           |      |  | 3,840      |  |      | 3,219     |      |  | 2,703      |  |      
|Program rights                                             |                | 68,428          |      |  | 58,612     |  |      | 51,312    |      |  | 41,222     |  |      
|Employee talent contracts                                  |                | 59,506          |      |  | 37,056     |  |      | 16,506    |      |  | 5,145      |  |      
|Note payable to Capital Trust                              |                |                |      |  |           |  |      |          |      |  |           |  |      
|Preferred Stock redemptions(2)                             |                | 8,135           |      |  | 11,253     |  |      |          |      |  |           |  |      
|                                                           |                |                 |      |  |            |  |      |           |      |  |            |  |      
|                                                           |                | $140,083        |      |  | $110,949   |  |      | $161,084  |      |  | $264,118   |  |      
|                                                           |                |                 |      |  |            |  |      |           |      |  |            |  |      

|
|

|(1) |  | Includes capital lease obligations
|--- |  | ----------------------------------

|(2) |  | Includes dividend payments
|--- |  | --------------------------



| | 32 | 
| | -- | 



---







|The above table
does not include cash requirements for the payment of any  dividends that our Board of
Directors may decide to declare in the future on our  Series A and Series B Common Stock.
See Note 10 to the consolidated financial  statements.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We anticipate that
our primary sources of cash, which include current cash  balances, net cash provided by
operating activities, and amounts available under  the existing Credit Facility, will be
sufficient to finance the operating and  working capital requirements of our stations,
our debt service requirements,  anticipated capital expenditures, dividend payments, and
other of our  obligations for both the next 12 months and the foreseeable future
thereafter.  We intend to enter into a new credit facility and are currently evaluating
proposals.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Impact of Inflation
|-------------------



|The impact of
inflation on our operations has not been significant to  date. There can be no assurance,
however, that a high rate of inflation in the  future would not have an adverse impact on
our operating results.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Forward-Looking Statements
|--------------------------



|This report
includes or incorporates forward-looking statements. We based  these forward-looking
statements on our current expectations and projections  about future events. The
forward-looking statements contained in this report,  concerning, among other things,
trends involving net revenues, cash flow and  operating expenses, involve risks and
uncertainties, and are subject to change  based on various important factors. Those
factors include the impact on our  operations from: federal governmental regulation of
broadcasting; competition in  the broadcast television markets we serve; our ability to
obtain quality  programming for our television stations; successful integration of
television  stations we acquire; pricing fluctuations in local and national advertising;
changes in national and regional economies; our ability to service and refinance  our
outstanding debt; local regulatory actions and conditions in the areas in  which our
stations operate; and volatility in programming costs, industry  consolidation,
technological developments, and major world news events. Other  matters we discuss in
this report, or in the documents we incorporate by  reference into this report, may also
cause actual results to differ from those  we describe. We undertake no obligation to
update or revise any forward-looking  statements, whether as a result of new information,
future events or otherwise.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|New Accounting Pronouncements
|-----------------------------



|In April 2003, the FASB issued
      Statement of Financial Accounting Standard (SFAS) No. 149,Amendment of Statement 133 on Derivative Instruments and Hedging Activities
      (SFAS 149).SFAS 149 amends and clarifies accounting
      and reporting for derivative instruments, including certain derivative instruments
      embedded in other contracts (collectively referred to as derivatives)
      and for hedging activities under SFAS No. 133, Accounting for Derivative
      Instruments and Hedging Activities. SFAS 149 is effective for contracts
      entered into or modified after June 30, 2003, except in certain instances,
      and for hedging relationships designated after June 30, 2003. In addition,
      except in those certain instances, all provisions of SFAS 149 should be
      applied prospectively. Since we are not currently involved in any derivative
      financial instruments, SFAS 149 had no effect upon our financial statements
      in the year ended December 31, 2003. However, we may consider certain derivative
      strategies in the future.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|In May 2003, the FASB issued
      SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics
      of Both Liabilities and Equity (SFAS 150). SFAS 150 establishes
      standards for how a company classifies and measures certain financial instruments
      with characteristics of both liabilities and equity. SFAS 150 is effective
      for financial instruments entered into or modified after May 31, 2003, and
      otherwise is effective at the beginning of the first interim period beginning
      after June 15, 2003. We have determined that SFAS 150 does not affect the
      classification or measurement of any of our financial instruments.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In December 2003, the FASB
      issued SFAS No. 132 (revised 2003), Employers Disclosures about
      Pensions and Other Postretirement Benefits  an amendment of FASB Statements
      No. 87, 88 and 106 (SFAS 132(R)). SFAS 132(R) is effective
      for fiscal years ending after December 15, 2003. Interim disclosure requirements
      under SFAS 132(R) will be effective for interim periods beginning after
      December 15, 2003, and required disclosures related to estimated benefit
      payments will be effective for fiscal years ending after June 15, 2004.
      SFAS 132(R) replaces the disclosure requirements in SFAS No. 87, Employers
      Accounting for Pensions (SFAS 87), SFAS No. 88, Employers
      Accounting for Settlements and Curtailments of Defined Benefit Pension Plans
      and for Termination Benefits (SFAS 88), and SFAS 106, Employers
      Accounting for Postretirement Benefits Other Than Pensions (SFAS
      106). SFAS 132(R) addresses disclosures only and does not address
      measurement and recognition accounting for pension and postretirement benefits.
      SFAS 132(R) requires additional disclosures related to the description of
      plan assets including investment strategies, plan obligations, cash flows
      and net periodic benefit cost of defined benefit pension and other defined
      benefit postretirement plans. Effective December 31, 2003, we adopted the
      disclosure requirements of SFAS 132(R) with the exception of future expected
      benefit payments, which becomes effective for us for fiscal years ending
      after June 15, 2004 or December 31, 2004.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 33 | 
| | -- | 



---









|In December 2003, the FASB
      issued FIN 46(R), which served to clarify the guidance in Financial Interpretation
      No. 46, Consolidation of Variable Interest Entities (FIN 46),
      and provided additional guidance surrounding the application of FIN 46.
      FIN 46 establishes consolidation criteria for entities for which control
      is not easily discernable under Accounting Research Bulletin 51, Consolidated
      Financial Statements, which is based on the premise that holders of
      an entity control the entity by virtue of voting rights. FIN 46(R) provides
      guidance for identifying the party with a controlling financial interest
      resulting from arrangements or financial interests rather than from voting
      interests. FIN 46 established standards for determining the circumstances
      under which an entity (defined as a variable interest entity) should be
      consolidated based upon an evaluation of financial interests and other arrangements
      rather than voting control. FIN 46 also requires disclosure about any variable
      interest entities that we are not required to consolidate, but in which
      we have a significant variable interest. Application of FIN 46(R) is required
      for companies that have interests in those entities that are considered
      to be special-purpose entities, beginning in periods ending after December
      15, 2003, and application is required for interests in all other types of
      entities beginning in periods ending after March 15, 2004.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We adopted and applied the
      provisions of FIN 46(R) as of December 31, 2003 with respect to our wholly-owned
      trust subsidiary, the Hearst-Argyle Capital Trust (hereafter the Capital
      Trust), which is considered to be a special-purpose entity. The adoption
      of FIN 46(R) required us to de-consolidate the Capital Trust in our financial
      statements. In order to present the Capital Trust as an unconsolidated subsidiary,
      we adjusted the presentation in our consolidated balance sheets as follows,
      for all periods presented: (i) reclassified the amount of $200.0 million,
      which was previously classified as Company obligated redeemable convertible
      preferred securities of subsidiary trust holding solely parent company debentures
      to Note payable to Capital Trust; (ii) presented an investment
      in the Capital Trust of $6.2 million, which is included under Investments
      (see Note 3 to the consolidated financial statements); and (iii) presented
      a long-term note payable to the Capital Trust of $6.2 million, which is
      included under Note payable to Capital Trust, bringing the total
      Note payable to Capital Trust to $206.2 million (see Note 7
      to the consolidated financial statements). Once the redeemable convertible
      preferred securities have been redeemed or reached maturity, our investment
      in the Capital Trust of $6.2 million will be offset by our long-term note
      payable to the Capital Trust of $6.2 million, resulting in no effect to
      our consolidated income statement. In addition, we adjusted the presentation
      in our consolidated income statements in all periods presented to reclassify
      the amounts previously recorded as Dividends on redeemable convertible
      preferred securities to Interest expense, net - Capital Trust.
      These changes required under FIN 46(R) represent financial statement presentation
      only and are not a result of any changes to the legal, financial, or operating
      structure of the Capital Trust. With respect to any other entities, such
      as our Managed Stations, which could potentially be affected by FIN 46(R)
      and for which the application date of FIN 46(R) is the end of the first
      quarter of 2004, we are currently evaluating the impact, if any. Although
      we do not believe the full adoption of FIN 46(R) will have a material impact
      on our net income, we cannot make any definitive determination until we
      complete our evaluation.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|In January 2004, the FASB
      issued FASB Staff Position (FSP) 106-1, Accounting and Disclosure Requirements
      Related to the Medicare Prescription Drug, Improvement and Modernization
      Act of 2003 (FSP 106-1), which allowed companies to elect
      a one-time deferral of the recognition of the effects of the Medicare Prescription
      Drug Act in accounting for their plans under SFAS 106 and in providing disclosures
      related to the plan required by SFAS 132(R). The FASB allowed the one-time
      deferral due to the accounting issues raised by the Medicare Prescription
      Drug Act - in particular, the accounting for the federal subsidy that is
      not explicitly addressed in SFAS 106 - and due to the fact that uncertainties
      exist as to the direct effects of the Medicare Prescription Drug Act and
      its ancillary effects on plan participants. For companies electing the one-time
      deferral, such deferral remains in effect until authoritative guidance on
      the accounting for the federal subsidy is issued, or until certain other
      events, such as a plan amendment, settlement or curtailment, occur. We are
      currently evaluating the effects of the Medicare Prescription Drug Act on
      our other postretirement benefit plan and its participants, and have elected
      the one-time deferral. Our accumulated post-retirement benefit obligation
      and net post-retirement benefit cost for 2003 does not reflect the effects
      of the Medicare Prescription Drug Act. Additionally, once the specific authoritative
      guidance on the accounting for the federal subsidy is issued, it could result
      in a change to previously reported information.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 34 | 
| | -- | 



---







|Item 7A:  Quantitative and Qualitative
Disclosures about Market Risk
|--------------------------------------------------------------------



|Our long-term debt
obligations as of December 31, 2003 are at fixed  interest rates and therefore are not
sensitive to fluctuations in interest  rates. See Notes 2 and 6 to the consolidated
financial statements. The following  table presents the fair value of long-term debt
obligations (excluding capital  lease obligations) as of December 31, 2003 and 2002 and
the future cash flows by  expected maturity dates, based upon outstanding principal
balances as of  December 31, 2003. See Note 17 to the consolidated financial statements.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                              | December 31, 2003    | December 31, 2002
|----------------------------- | -------------------- | -----------------
|                              | Expected Maturity    |                  
|                              | 2004                 | 2005             
|                              | (In
      thousands)
|Long-term debt:               |                      |                  
|Variable rate:                |                      |                  
|Credit
      Facility         |                     |                 
|Fixed
      rate:             |                      |                  
|Senior
      Notes            |                     |                 
|Private
      Placement Debt  |                     |                 
|Note payable to Capital Trust |                     |                 

|Our annualized
weighted average interest rate for variable-rate long-term  debt outstanding for the
years ended December 31, 2003 and 2002 is 3.8% and  4.1%, respectively. The annualized
weighted average interest rate for fixed-rate  long-term debt outstanding is 7.2% for the
years ended December 31, 2003 and  2002. See Note 6 to the consolidated financial
statements. The Note payable to  Capital Trust carries a fixed interest rate of 7.5%. See
Note 7 to the  consolidated financial statements.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Our debt
obligations contain certain financial and other covenants and  restrictions on the
Company. Such covenants and restrictions do not include any  triggers of default related
to our overall credit rating or stock prices. As of  December 31, 2003, we were in
compliance with all such covenants and  restrictions.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The Credit
Facility does provide, however, that all outstanding balances  will become due and
payable at such time as Hearsts (and certain of its  affiliates) equity
ownership in us becomes less than 35% of the total equity,  and Hearst and such
affiliates no longer have the right to elect a majority of  the members of our Board of
Directors.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Our Credit
Facility is sensitive to interest rates. As of December 31,  2003, we are not involved in
any derivative financial instruments. However, we  may consider certain interest rate
risk strategies in the future.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 35 | 
| | -- | 



---





|ITEM 8.  FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
|----------------------------------------------------



|INDEX TO FINANCIAL STATEMENTS
|-----------------------------

|                                                                                                                       | Page
|---------------------------------------------------------------------------------------------------------------------- | ----
|Hearst-Argyle Television,
      Inc.                                                                                   |     
|Report of Deloitte & Touche LLP                                                                                        | 37  
|Consolidated Balance Sheets as of December
      31, 2003 and 2002                                                     | 38  
|Consolidated Statements of Income for the
      Years Ended
            December 31, 2003, 2002 and 2001               | 39  
|Consolidated Statements of Stockholders
      Equity for the Years Ended
            December 31, 2003, 2002 and 2001 | 40  
|Consolidated Statements of Cash Flows for
      the Years Ended
            December 31, 2003, 2002 and 2001           | 41  
|Notes to Consolidated Financial Statements                                                                             | 43  

| | 36 | 
| | -- | 



---





|INDEPENDENT AUDITORS REPORT
|----------------------------



|To the Stockholders and Board of Directors of
Hearst-Argyle Television, Inc.
|----------------------------------------------------------------------------



|We have audited
the accompanying consolidated balance sheets of  Hearst-Argyle Television, Inc. and
subsidiaries (the Company) as of December  31, 2003 and 2002, and the related
consolidated statements of income,  stockholders equity, and cash flows for each of
the three years in the period  ended December 31, 2003. Our audits also included the
financial statement  schedule listed in the Index at Item 15. These consolidated
financial statements  and financial statement schedule are the responsibility of the
Companys  management. Our responsibility is to express an opinion on these
consolidated  financial statements and financial statement schedule based on our audits.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We conducted our
audits in accordance with auditing standards generally  accepted in the United States of
America. Those standards require that we plan  and perform the audit to obtain reasonable
assurance about whether the financial  statements are free of material misstatement. An
audit includes examining, on a  test basis, evidence supporting the amounts and
disclosures in the financial  statements. An audit also includes assessing the accounting
principles used and  significant estimates made by management, as well as evaluating the
overall  financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In our opinion,
such consolidated financial statements present fairly, in  all material respects, the
financial position of the Company at December 31,  2003 and 2002, and the results of its
operations and its cash flows for each of  the three years in the period ended December
31, 2003 in conformity with  accounting principles generally accepted in the United
States of America. Also,  in our opinion, such financial statement schedule, when
considered in relation  to the basic consolidated financial statements taken as a whole,
presents fairly  in all material respects the information set forth therein.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|As discussed in
Note 4 to the consolidated financial statements, effective  January 1, 2002, the Company
changed its method of accounting for goodwill and  other intangible assets to conform to
Statement of Financial Accounting  Standards No. 142.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|/s/ DELOITTE & TOUCHE
      LLP
|-------------------------------



|New York, New YorkMarch 9, 2004
|-------------------------------



| | 37 | 
| | -- | 



---





|HEARST-ARGYLE TELEVISION, INC.
|------------------------------



|Consolidated Balance Sheets
|---------------------------

|                                                                                                                                                                                                                                                                                               | December 31,
      2003           |                     | December 31,
      2002
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------- | ------------------- | -----------------------
|                                                                                                                                                                                                                                                                                               | (In thousands, except share data)
|Assets                                                                                                                                                                                                                                                                                         |                                   |                     |                        
|Current assets:                                                                                                                                                                                                                                                                                |                                   |                     |                        
|Cash
      and cash equivalents                                                                                                                                                                                                                                                                |                                   | $     71,528        |                        
|Accounts
      receivable, net of allowance for doubtful accounts 
                  of $4,109
      and $4,702 in 2003 and 2002, respectively                                                                                                                                                 |                                   | 147,455             |                        
|Program
      and barter rights                                                                                                                                                                                                                                                                |                                   | 54,725              |                        
|Deferred
      income taxes                                                                                                                                                                                                                                                                    |                                   | 5,178               |                        
|Other                                                                                                                                                                                                                                                                                          |                                   | 5,786               |                        
|                                                                                                                                                                                                                                                                                               |                                   |                     |                        
|Total
      current assets                                                                                                                                                                                                                                                                     |                                   | 284,672             |                        
|Property, plant and equipment:                                                                                                                                                                                                                                                                 |                                   |                     |                        
|Land,
      building and improvements                                                                                                                                                                                                                                                          |                                   | 146,219             |                        
|Broadcasting
      equipment                                                                                                                                                                                                                                                                   |                                   | 320,846             |                        
|Office
      furniture, equipment and other                                                                                                                                                                                                                                                    |                                   | 32,901              |                        
|Construction
      in progress                                                                                                                                                                                                                                                                 |                                   | 6,253               |                        
|                                                                                                                                                                                                                                                                                               |                                   |                     |                        
|                                                                                                                                                                                                                                                                                               |                                   | 506,219             |                        
|Less
      accumulated depreciation                                                                                                                                                                                                                                                            |                                   | (217, 929           | )                      
|                                                                                                                                                                                                                                                                                               |                                   |                     |                        
|Property, plant and equipment, net                                                                                                                                                                                                                                                             |                                   | 288,290             |                        
|                                                                                                                                                                                                                                                                                               |                                   |                     |                        
|Intangible assets, net                                                                                                                                                                                                                                                                         |                                   | 2,412,071           |                        
|Goodwill, net                                                                                                                                                                                                                                                                                  |                                   | 732,217             |                        
|                                                                                                                                                                                                                                                                                               |                                   |                     |                        
|Total
      intangible assets and goodwill, net                                                                                                                                                                                                                                                |                                   | 3,144,288           |                        
|                                                                                                                                                                                                                                                                                               |                                   |                     |                        
|Other assets:                                                                                                                                                                                                                                                                                  |                                   |                     |                        
|Deferred
      financing costs, net of accumulated amortization of $20,677
                   
      and $17,767 in 2003 and 2002, respectively                                                                                                                                                |                                   | 14,592              |                        
|Investments                                                                                                                                                                                                                                                                                    |                                   | 34,059              |                        
|Program
      and barter rights, noncurrent                                                                                                                                                                                                                                                    |                                   | 2,562               |                        
|Other                                                                                                                                                                                                                                                                                          |                                   | 30,624              |                        
|                                                                                                                                                                                                                                                                                               |                                   |                     |                        
|Total
      other assets                                                                                                                                                                                                                                                                       |                                   | 81,837              |                        
|                                                                                                                                                                                                                                                                                               |                                   |                     |                        
|Total
      assets                                                                                                                                                                                                                                                                             |                                   | $3,799,087          |                        
|                                                                                                                                                                                                                                                                                               |                                   |                     |                        
|Liabilities and Stockholders
      Equity                                                                                                                                                                                                                                                     |                                   |                     |                        
|Current liabilities:                                                                                                                                                                                                                                                                           |                                   |                     |                        
|Accounts
      payable                                                                                                                                                                                                                                                                         |                                   | $      
      9,834 |                        
|Accrued
      liabilities                                                                                                                                                                                                                                                                      |                                   | 50,833              |                        
|Program
      and barter rights payable                                                                                                                                                                                                                                                        |                                   | 55,741              |                        
|Payable
      to The Hearst Corporation                                                                                                                                                                                                                                                        |                                   | 5,925               |                        
|Other                                                                                                                                                                                                                                                                                          |                                   | 8,085               |                        
|                                                                                                                                                                                                                                                                                               |                                   |                     |                        
|Total
      current liabilities                                                                                                                                                                                                                                                                |                                   | 130,418             |                        
|                                                                                                                                                                                                                                                                                               |                                   |                     |                        
|Program and barter rights payable, noncurrent                                                                                                                                                                                                                                                  |                                   | 4,141               |                        
|Long-term debt                                                                                                                                                                                                                                                                                 |                                   | 882,409             |                        
|Note payable to Capital Trust                                                                                                                                                                                                                                                                  |                                   | 206,186             |                        
|Deferred income taxes                                                                                                                                                                                                                                                                          |                                   | 882,098             |                        
|Other liabilities                                                                                                                                                                                                                                                                              |                                   | 21,453              |                        
|                                                                                                                                                                                                                                                                                               |                                   |                     |                        
|Total
      noncurrent liabilities                                                                                                                                                                                                                                                             |                                   | 1,996,287           |                        
|                                                                                                                                                                                                                                                                                               |                                   |                     |                        
|Commitments and contingencies                                                                                                                                                                                                                                                                  |                                   |                     |                        
|Stockholders equity:                                                                                                                                                                                                                                                                          |                                   |                     |                        
|Series A preferred stock, 10,938 shares
      issued at December 31, 2003 
             and 2002, respectively, and 7,381 and
      9,281 shares outstanding 
             at December 31, 2003 and 2002, respectively
      (aggregate liquidation
             preference of $7,381)         |                                   | 1                   |                        
|Series B preferred stock, 10,938 shares
      issued and outstanding at 
             December 31, 2003 and 2002, respectively
      (aggregate liquidation
             preference of $10,938)                                                                                                |                                   | 1                   |                        
|Series A common stock, par value $.01 per
      share, 200,000,000 shares 
             authorized at December 31, 2003 and
      2002, respectively and 
             54,665,011 and 54,262,791 shares issued
      and outstanding at 
             December 31, 2003 and 2002, respectively |                                   | 547                 |                        
|Series B common stock, par value $.01 per
      share, 100,000,000 shares 
             authorized at December 31, 2003 and
      2002, respectively and 
             41,298,648 shares issued and outstanding
      at December 31, 2003 
             and 2002, respectively                |                                   | 413                 |                        
|Additional paid-in capital                                                                                                                                                                                                                                                                     |                                   | 1,287,831           |                        
|Retained earnings                                                                                                                                                                                                                                                                              |                                   | 469,537             |                        
|Accumulated other comprehensive (loss),
      net of tax benefit of $3,471
             and $2,919 in 2003 and 2002, respectively                                                                                                                                                              |                                   | (5,249              | )                      
|Treasury stock, at cost, 3,197,152 shares
      of Series A common stock 
             at December 31, 2003 and 2002, respectively                                                                                                                                                             |                                   | (80,699             | )                      
|                                                                                                                                                                                                                                                                                               |                                   |                     |                        
|Total
      stockholders equity                                                                                                                                                                                                                                                               |                                   | 1,672,382           |                        
|                                                                                                                                                                                                                                                                                               |                                   |                     |                        
|Total
      liabilities and stockholders equity                                                                                                                                                                                                                                               |                                   | $3,799,087          |                        
|                                                                                                                                                                                                                                                                                               |                                   |                     |                        

|See notes to consolidated financial statements.
|-----------------------------------------------



| | 38 | 
| | -- | 



---





|HEARST-ARGYLE TELEVISION, INC.
|------------------------------



|Consolidated Statements of Income
|---------------------------------

|                                                   | Years
      Ended December 31,              |                  
|-------------------------------------------------- | ------------------------------------------- | -----------------
|                                                   | 2003                                        |                  
|                                                   | (In
      thousands, except per share data) |                  
|Total revenues                                     |                                             | $686,775         
|                                                   |                                             |                  
|Station operating expenses:                        |                                             |                  
|Salaries,
      benefits and other operating costs |                                             | 330,519          
|Amortization
      of program rights               |                                             | 62,845           
|Depreciation
      and amortization                |                                             | 55,467           
|Corporate, general and administrative expenses     |                                             | 19,122           
|                                                   |                                             |                  
|Operating income                                   |                                             | 218,822          
|                                                   |                                             |                  
|Interest expense, net                              |                                             | 68,215           
|Interest expense, net  Capital Trust              |                                             | 15,000           
|Other income, net                                  |                                             |                 
|Equity in income (loss) of affiliates              |                                             | 923              
|                                                   |                                             |                  
|Income before income taxes                         |                                             | 136,530          
|                                                   |                                             |                  
|Income taxes                                       |                                             | 42,309           
|                                                   |                                             |                  
|Net income                                         |                                             | 94,221           
|                                                   |                                             |                  
|Less preferred stock dividends                     |                                             | (1,211           
|                                                   |                                             |                  
|Income applicable to common stockholders           |                                             | $  93,010        
|                                                   |                                             |                  
|Income per common sharebasic:                     |                                             | $     
      1.00
|                                                   |                                             |                  
|Number of common shares used in the calculation    |                                             | 92,575           
|                                                   |                                             |                  
|Income per common sharediluted:                   |                                             | $     
      1.00
|                                                   |                                             |                  
|Number of common shares used in the calculation    |                                             | 92,990           
|                                                   |                                             |                  

|See notes to consolidated financial statements.
|-----------------------------------------------



| | 39 | 
| | -- | 



---





|HEARST-ARGYLE TELEVISION, INC.
|------------------------------



|Consolidated Statements of Stockholders
      Equity
|-----------------------------------------------------

|                                                                                     | Series A                                |      | Series B |  | Preferred
      Stock |  | Additional
      Paid-In
      Capital |     | Retained
      Earnings |  | AccumulatedOther
      Comprehensive
      (Loss) |   | Treasury 
      Stock |  | Total   
|------------------------------------------------------------------------------------ | --------------------------------------- | ---- | -------- |  | --------------------- |  | -------------------------------------- | --- | ----------------------- |  | ------------------------------------------------- | - | --------------------- |  | --------
|                                                                                     | (In thousands,
      except share data) |     
|                                                                                     |                                         |      |          |  |                       |  |                                        |     |                         |  |                                                   |   |                       |  |         
|BalancesJanuary 1, 2001                                                             |                                         | $536 |          |  | $413                  |  |                                        | $ 2 |                         |  | $1,274,257                                        |   |                       |  | $245,788
|Net income                                                                           |                                         |     |          |  |                      |  |                                        |    |                         |  |                                                  |   |                       |  | 31,087  
|Issuance costsCapital Trust                                                         |                                         |     |          |  |                      |  |                                        |    |                         |  | (5,175                                            | ) |                       |  |        
|Dividends on preferred stock ($65.00 per
      share)                                |                                         |     |          |  |                      |  |                                        |    |                         |  |                                                  |   |                       |  | (1,422  
|Employee stock purchase plan proceeds                                                |                                         | 1    |          |  |                      |  |                                        |    |                         |  | 1,639                                             |   |                       |  |        
|Stock options exercised                                                              |                                         |     |          |  |                      |  |                                        |    |                         |  | 112                                               |   |                       |  |        
|Tax benefit from stock plans                                                         |                                         |     |          |  |                      |  |                                        |    |                         |  | 75                                                |   |                       |  |        
|Treasury stock purchased Series A
      Common 
            Stock  (200,037 shares) |                                         |     |          |  |                      |  |                                        |    |                         |  |                                                  |   |                       |  |        
|                                                                                     |                                         |      |          |  |                       |  |                                        |     |                         |  |                                                   |   |                       |  |         
|BalancesDecember 31, 2001                                                           |                                         | 537  |          |  | 413                   |  |                                        | 2   |                         |  | 1,270,908                                         |   |                       |  | 275,453 
|Net income                                                                           |                                         |     |          |  |                      |  |                                        |    |                         |  |                                                  |   |                       |  | 108,017 
|Dividends on preferred stock ($65.00 per
      share)                                |                                         |     |          |  |                      |  |                                        |    |                         |  |                                                  |   |                       |  | (1,377  
|Redemption of Series A Preferred Stock                                               |                                         | 1    |          |  |                      |  |                                        |    |                         |  | (1                                                | ) |                       |  |        
|Employee stock purchase plan proceeds                                                |                                         | 1    |          |  |                      |  |                                        |    |                         |  | 1,588                                             |   |                       |  |        
|Stock options exercised                                                              |                                         | 4    |          |  |                      |  |                                        |    |                         |  | 8,038                                             |   |                       |  |        
|Tax benefit from stock plans                                                         |                                         |     |          |  |                      |  |                                        |    |                         |  | 755                                               |   |                       |  |        
|Additional minimum pension liability, net
            of tax benefit of $2,919       |                                         |     |          |  |                      |  |                                        |    |                         |  |                                                  |   |                       |  |        
|                                                                                     |                                         |      |          |  |                       |  |                                        |     |                         |  |                                                   |   |                       |  |         
|BalancesDecember 31, 2002                                                           |                                         | 543  |          |  | 413                   |  |                                        | 2   |                         |  | 1,281,288                                         |   |                       |  | 382,093 
|Net income                                                                           |                                         |     |          |  |                      |  |                                        |    |                         |  |                                                  |   |                       |  | 94,221  
|Dividends on preferred stock ($65.00 per
      share)                                |                                         |     |          |  |                      |  |                                        |    |                         |  |                                                  |   |                       |  | (1,211  
|Dividends on common stock ($0.06 per share)                                          |                                         |     |          |  |                      |  |                                        |    |                         |  |                                                  |   |                       |  | (5,566  
|Redemption of Series A Preferred Stock                                               |                                         | 1    |          |  |                      |  |                                        |    |                         |  | (1                                                | ) |                       |  |        
|Employee stock purchase plan proceeds                                                |                                         | 1    |          |  |                      |  |                                        |    |                         |  | 1,876                                             |   |                       |  |        
|Stock options exercised                                                              |                                         | 2    |          |  |                      |  |                                        |    |                         |  | 4,148                                             |   |                       |  |        
|Tax benefit from stock plans                                                         |                                         |     |          |  |                      |  |                                        |    |                         |  | 520                                               |   |                       |  |        
|Additional minimum pension liability,
           net of tax benefit of $552.         |                                         |     |          |  |                      |  |                                        |    |                         |  |                                                  |   |                       |  |        
|                                                                                     |                                         |      |          |  |                       |  |                                        |     |                         |  |                                                   |   |                       |  |         
|BalancesDecember 31, 2003                                                           |                                         | $547 |          |  | $413                  |  |                                        | $ 2 |                         |  | $1,287,831                                        |   |                       |  | $469,537
|                                                                                     |                                         |      |          |  |                       |  |                                        |     |                         |  |                                                   |   |                       |  |         

|See notes to consolidated financial statements.
|-----------------------------------------------



| | 40 | 
| | -- | 



---





|HEARST-ARGYLE TELEVISION, INC.
|------------------------------



|Consolidated Statements of Cash Flows
|-------------------------------------

|                                                                                                      | Years Ended
      December 31,
|----------------------------------------------------------------------------------------------------- | ------------------------------
|                                                                                                      | 2003                          
|                                                                                                      | (In
      thousands)          
|Operating Activities                                                                                  |                               
|Net income                                                                                            |                               
|Adjustments to reconcile net income to net
      cash provided by 
             operating activities: |                               
|Depreciation                                                                                          |                               
|Amortization
      of intangible assets                                                               |                               
|Amortization
      of deferred financing costs                                                        |                               
|Amortization
      of program rights                                                                  |                               
|Program
      payments                                                                                |                               
|Deferred
      income taxes                                                                           |                               
|Equity
      in (income) loss of affiliates                                                           |                               
|Provision
      for doubtful accounts                                                                 |                               
|Loss
      on disposal of fixed assets                                                                |                               
|Gain
      on early retirement of debt                                                                |                               
|Other
      (income), net                                                                             |                               
|Changes
      in operating assets and liabilities:                                                    |                               
|Accounts
      receivable                                                                             |                               
|Other
      assets                                                                                    |                               
|Accounts
      payable and accrued liabilities                                                        |                               
|Other
      liabilities                                                                               |                               
|                                                                                                      |                               
|Net cash provided by operating activities                                                             |                               
|                                                                                                      |                               
|Investing Activities                                                                                  |                               
|Purchases of property, plant and equipment:                                                           |                               
|Digital                                                                                               |                               
|Maintenance                                                                                           |                               
|Special
      projects/towers                                                                         |                               
|Phoenix/WMUR-TV Swap Transaction                                                                      |                               
|Acquisition of WBOY-TV                                                                                |                               
|Disposition of WBOY-TV                                                                                |                               
|Investment in Internet Broadcasting Systems,
      Inc.                                               |                               
|Investment in NBC/Hearst-Argyle Syndication,
      LLC                                                |                               
|Other, net                                                                                            |                               
|                                                                                                      |                               
|Net cash used in investing activities                                                                 |                               
|                                                                                                      |                               

|See notes to consolidated financial statements.
|-----------------------------------------------



| | 41 | 
| | -- | 



---





|HEARST-ARGYLE TELEVISION, INC.
|------------------------------



|Consolidated Statements of Cash Flows(Continued)
|-------------------------------------------------

|                                                               | Years
      Ended December 31,
|-------------------------------------------------------------- | ------------------------------
|                                                               | 2003                          
|                                                               | (In
      thousands)          
|Financing
      Activities                                     |                               
|Credit Facility:                                               |                               
|Proceeds
      from issuance of long-term debt                 |                               
|Repayment
      of long-term debt                              |                               
|Dividends paid on preferred
      stock                        |                               
|Issuance of Note payable to
      Capital Trust, net           |                               
|Series A Common Stock repurchases                              |                               
|Repayment of Senior Notes                                      |                               
|Repayment of Senior Subordinated
      Notes                   |                               
|Principal payments on capital
      lease obligations          |                               
|Proceeds from employee stock
      purchase plan               |                               
|Proceeds from stock option
      exercises                     |                               
|Financing costs and other                                      |                               
|                                                               |                               
|Net cash used in financing
      activities                    |                               
|                                                               |                               
|Increase (decrease) in cash
      and cash equivalents         |                               
|Cash and cash equivalents
      at beginning of period         |                               
|                                                               |                               
|Cash and cash equivalents
      at end of period               |                               
|                                                               |                               
|Supplemental
      Cash Flow Information:                      |                               
|                                                               |                               
|Businesses
      acquired in purchase transactions:            |                               
|                                                               |                               
|Phoenix/WMUR-TV Swap:                                          |                               
|Fair
      market value of assets acquired, net                |                               
|Fair
      market value of liabilities assumed, net            |                               
|Fair
      market value of assets exchanged, net               |                               
|Fair
      market value of liabilities exchanged, net          |                               
|                                                               |                               
|Net cash paid for swap                                         |                               
|Acquisition of WBOY-TV:                                        |                               
|Fair
      market value of assets acquired, net                |                               
|Fair
      market value of liabilities assumed, net            |                               
|                                                               |                               
|Net cash paid for WBOY-TV                                      |                               
|Cash paid
      during the year for:                           |                               
|Interest                                                       |                               
|                                                               |                               
|Interest
      on Note payable to Capital Trust                |                               
|                                                               |                               
|Taxes,
      net of refunds                                    |                               
|                                                               |                               
|Non-cash
      investing and financing activities:             |                               
|Capital
      lease obligations entered into during the period |                               
|                                                               |                               

|See notes to consolidated financial statements.
|-----------------------------------------------



| | 42 | 
| | -- | 



---





|HEARST-ARGYLE TELEVISION, INC.
|------------------------------



|Notes to Consolidated Financial Statements
|------------------------------------------



|1. Nature of Operations
|-----------------------



|Hearst-Argyle Television, Inc.
      and subsidiaries (the Company) owns and operates 24 network-affiliated
      television stations in geographically diverse markets in the United States.
      Ten of the stations are affiliates of the National Broadcasting Company,
      Inc. (NBC), eleven of the stations are affiliates of the American Broadcasting
      Companies (ABC), two of the stations are affiliates of Columbia Broadcasting
      Systems (CBS) and one station is affiliated with Time Warner, Inc.s
      Warner Brothers Television Network (WB). Additionally, the Company provides
      management services to two network-affiliated and one independent television
      stations and two radio stations (the Managed Stations). Based
      upon regular assessments of the Companys operations, performed by
      key management, the Company has determined that its material reportable
      segment is commercial television broadcasting. The economic characteristics,
      services, production process, customer type and distribution methods for
      the Companys operations are substantially similar and have therefore
      been aggregated as one reportable segment.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2. Summary of Accounting Policies and Use of Estimates
|------------------------------------------------------



|General
|-------



|The consolidated financial
      statements include the accounts of the Company and its wholly-owned subsidiaries,
      except for the Companys wholly-owned subsidiary trust which was required
      to be de-consolidated upon adoption of the Financial Accounting Standards
      Board (FASB) Interpretation No. 46 (revised December 2003),
      Consolidation of Variable Interest Entities (FIN 46(R)).
      The Company adopted FIN 46(R) as of December 31, 2003. See Reclassifications
      and New Accounting Pronouncements below. With the exception
      of the unconsolidated subsidiary trust, all significant intercompany accounts
      have been eliminated in consolidation.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Cash and Cash Equivalents
|-------------------------



|All highly liquid investments
      with maturities of three months or less when purchased are considered to
      be cash equivalents.
|---------------------------------------------------------------------------------------------------------------------------------------



|Accounts Receivable
|-------------------



|The Company extends credit
      based upon its evaluation of a customers credit worthiness and financial
      condition. For certain advertisers, the Company does not extend credit and
      requires cash payment in advance. The Company monitors the collection of
      receivables and maintains an allowance for estimated losses based upon the
      aging of such receivables and specific collection issues that may be identified.
      Concentration of credit risk with respect to accounts receivable is generally
      limited due to the large number of geographically diverse customers, individually
      small balances, and short payment terms.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Program Rights
|--------------



|Program rights and the corresponding
      contractual obligations are recorded when the license period begins and
      the programs are available for use. Program rights are carried at the lower
      of unamortized cost or estimated net realizable value on a program by program
      basis and such amounts are not discounted. Any reduction in unamortized
      costs to net realizable value is included in amortization of program rights
      in the accompanying consolidated statements of income. Such reductions in
      unamortized costs for the years ended December 31, 2003, 2002 and 2001 were
      not material. Costs of first-run programming are amortized over the license
      period of the program, which is generally one year. Costs of off-network
      syndicated products, feature films and cartoons are amortized on the future
      number of showings on an accelerated basis contemplating the estimated revenue
      to be earned per showing, but generally not exceeding five years. Program
      rights and the corresponding contractual obligations are classified as current
      or long-term based on estimated usage and payment terms, respectively.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Barter and Trade Transactions
|-----------------------------



|Barter transactions represent
      the exchange of commercial air time for programming. Trade transactions
      represent the exchange of commercial air time for merchandise or services.
      Barter transactions are generally recorded at the fair market value of the
      commercial air time relinquished. Trade transactions are generally recorded
      at the fair market value of the merchandise or services received. Barter
      program rights and payables are recorded for barter transactions based upon
      the availability of the broadcast property. Revenue is recognized on barter
      and trade transactions when the commercials are broadcast; expenses are
      recorded when the merchandise or service received is utilized. Barter and
      trade revenues are included in total revenues on the consolidated statements
      of income and were approximately $27.8 million, $28.4 million and $29.3
      million for the years ended December 31, 2003, 2002 and 2001, respectively.
      Of these amounts, trade revenues represented less than 20% in each of the
      years. Barter and trade expenses are included in Salaries, benefits and
      other operating costs under Station operating expenses on the consolidated
      statements of income and were approximately $27.7 million, $28.1 million
      and $29.3 million for the years ended December 31, 2003, 2002 and 2001,
      respectively. Of these amounts, trade expense represented less than 15%
      in each of the years.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 43 | 
| | -- | 



---







|HEARST-ARGYLE TELEVISION, INC.
|------------------------------



|Notes to Consolidated Financial Statements(Continued)
|------------------------------------------------------



|Property, Plant and Equipment
|-----------------------------



|Property, plant and equipment
      are recorded at cost. Depreciation is calculated on the straight-line method
      over the estimated useful lives as follows: buildings40 years; towers
      and transmitters15 to 20 years; other broadcasting equipmentfive
      to eight years; office furniture, computers, equipment and otherthree
      to eight years. Leasehold improvements are amortized on the straight-line
      method over the shorter of the lease term or the estimated useful life of
      the asset. Management reviews, on a continuing basis, the financial statement
      carrying value of property, plant and equipment for impairment. If events
      or changes in circumstances were to indicate that an asset carrying value
      may not be recoverable utilizing related undiscounted cash flows, a write-down
      of the asset would be recorded through a charge to operations. The Company
      has followed this policy for determining and measuring impairment of property
      and equipment both prior and subsequent to the adoption of Statement of
      Financial Accounting Standards (SFAS) No. 144, Accounting
      for the Impairment or Disposal of Long-Lived Assets (SFAS 144).
      Management also reviews the continuing appropriateness of the useful lives
      assigned to property, plant and equipment. Prospective adjustments to such
      lives are made when warranted.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Intangible Assets
|-----------------



|Intangible assets are recorded
      at cost and include FCC licenses, network affiliations, goodwill, and other
      intangible assets such as advertiser client base and favorable leases. On
      January 1, 2002, the Company adopted SFAS No. 142, Goodwill and Other
      Intangible Assets (SFAS 142). As a result, the Company no
      longer amortizes goodwill and intangible assets with indefinite useful lives
      (FCC licenses), but instead performs a review for impairment annually, or
      earlier if indicators of potential impairment exist. In connection with
      the adoption of SFAS 142, amortization expense related to goodwill and indefinite-lived
      intangibles decreased by approximately $82.7 million annually. See Note
      4. Upon adoption of SFAS 142 on January 1, 2002 and again in the fourth
      quarters of 2002 and 2003, the Company completed an impairment review and
      found no impairment to the carrying value of goodwill or FCC licenses. Had
      the Company used different assumptions in developing its estimates, the
      Companys reported results may have varied. The Company considers the
      assumptions used in its estimates to be reasonable. The Company amortizes
      intangible assets with determinable useful lives over their respective estimated
      useful lives to their estimated residual values. Upon adoption of SFAS 142
      on January 1, 2002, the Company determined the remaining useful life of
      its network affiliation intangible assets to be approximately 28.5 years
      and the remaining useful life of its advertiser client base intangible asset
      to be approximately 19 years. The Company amortizes favorable lease intangible
      assets over the respective terms of each lease. In accordance with SFAS
      144, the Company evaluates the remaining useful life of its intangible assets
      with determinable lives each reporting period to determine whether events
      or circumstances warrant a revision to the remaining period of amortization.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Prior to the adoption of SFAS
      142 on January 1, 2002, the Company amortized goodwill and intangible assets
      over periods ranging from three to 40 years. The recoverability of the carrying
      values of goodwill and intangible assets was evaluated quarterly to determine
      if an impairment in value had occurred. Pursuant to SFAS No. 121, Accounting
      for the Impairment of Long-lived Assets, an impairment in value was
      considered to have occurred when it has been determined that the undiscounted
      future operating cash flows generated by the acquired business were not
      sufficient to recover the carrying value of an intangible asset. If it had
      been determined that an impairment in value had occurred, goodwill and intangible
      assets would have been written down to an amount equivalent to the present
      value of the estimated undiscounted future operating cash flows to be generated
      by the acquired business. At December 31, 2001, it was determined that there
      had been no impairment of intangible assets.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Deferred Acquisition and Financing Costs
|----------------------------------------



|Acquisition costs are capitalized
      and are included in the purchase price of the acquired stations. Financing
      costs are deferred and are amortized using the interest method over the
      term of the related debt when funded.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Investments
|-----------



|The Company has investments
      in non-consolidated affiliates, which are accounted for under the equity
      method if the Companys equity interest is from 20% to 50%, and under
      the cost method if the Companys equity interest is less than 20% and
      the Company does not exercise significant influence over operating and financial
      policies. In addition, the Company has a wholly-owned unconsolidated subsidiary
      trust which is accounted for under the equity method. See Note 7. The Company
      evaluates its investments to determine if an impairment has occurred. Carrying
      values are adjusted to reflect realizable value, where necessary.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 44 | 
| | -- | 



---





|HEARST-ARGYLE TELEVISION, INC.
|------------------------------



|Notes to Consolidated Financial Statements(Continued)
|------------------------------------------------------



|Revenue Recognition
|-------------------



|The Companys primary
      source of revenue is television advertising. Other sources include network
      compensation and other revenues. Advertising revenues and network compensation
      together represented approximately 97% of the Companys total revenues
      in each of the years ended December 2003, 2002 and 2001.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Advertising Revenues. Advertising revenues
      are recognized net of agency and national representatives commissions
      and in the period when the commercials are broadcast. Barter and trade revenues
      are included in advertising revenues and are also recognized when the commercials
      are broadcast. See Barter and Trade Transactions above.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Network Compensation. Eleven of the Companys
      stations have network compensation agreements with ABC, ten have agreements
      with NBC, and two have agreements with CBS. In connection with the ABC and
      CBS agreements, revenue is recognized when the Companys station broadcasts
      specific network television programs based upon a negotiated value for each
      program. In connection with the NBC agreements, revenue is recognized on
      a straight-line basis, based upon the cash compensation to be paid to the
      Companys stations by NBC each year. Unlike the ABC and CBS agreements,
      the NBC network compensation is an annual amount and is not specifically
      assigned to individual network television programs.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Other Revenues. The Company generates
      revenue from other sources, which include the following types of transactions
      and activities: (i) management fees earned from The Hearst Corporation (Hearst)
      (see Note 14); (ii) services revenue from Lifetime Entertainment Services
      (see Note 14); (iii) services revenue from the production of commercials
      for advertising customers or from the production of programs to be sold
      in syndication; (iv) rental income pursuant to tower lease agreements with
      third parties providing for attachment of antennas to the Companys
      towers; and (v) other miscellaneous revenues, such as licenses and royalties.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Income Taxes
|------------



|The provision for income taxes
      is computed based on the pretax income included in the consolidated statements
      of income. The Company provides for federal and state income taxes currently
      payable, as well as for those deferred because of timing differences between
      reporting income and expenses for financial statement purposes versus tax
      purposes. Deferred tax assets and liabilities are recognized for the future
      tax consequences attributable to differences between the financial statement
      carrying amounts of existing assets and liabilities and their respective
      tax bases. Deferred tax assets and liabilities are measured using enacted
      tax rates expected to apply to taxable income in the years in which those
      temporary differences are expected to be recovered or settled.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The Company records reserves
      for estimates of probable settlements of federal and state audits. The results
      of these audits and negotiations with taxing authorities may affect the
      ultimate settlement of these issues. The Company also records a valuation
      allowance against its deferred tax assets arising from certain net operating
      losses when it is more likely than not that some portion or all of such
      net operating losses will not be realized. The Companys effective
      tax rate in a given financial statement period may be materially impacted
      by changes in the level of earnings by taxing jurisdiction, changes in the
      expected outcome of tax audits, or changes in the deferred tax valuation
      allowance.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Earnings Per Share (EPS)
|--------------------------



|Basic EPS is calculated by
      dividing net income less preferred stock dividends by the weighted average
      common shares outstanding. Diluted EPS is calculated similarly, except that
      it includes the dilutive effect, if any, of shares issuable under the Companys
      stock option plan, the conversion of the Companys Preferred Stock
      (see Note 11), or the conversion of the Redeemable Convertible Preferred
      Securities held by the Companys wholly-owned unconsolidated subsidiary
      trust (see Note 7). All per share amounts included in the notes are the
      same for basic and diluted earnings per share unless otherwise noted. See
      Note 8.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Off-Balance Sheet Financings and Liabilities
|--------------------------------------------



|Other than contractual commitments
      and other legal contingencies incurred in the normal course of business,
      agreements for future barter and program rights not yet available for broadcast
      as of December 31, 2003, and employment contracts for key employees, all
      of which are disclosed in Note 15, the Company does not have any off-balance
      sheet financings or liabilities. Other than its wholly-owned unconsolidated
      subsidiary trust (see Reclassifications and New Accounting
      Pronouncements below), the Company does not have any majority-owned
      subsidiaries that are not included in the consolidated financial
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 45 | 
| | -- | 



---





|HEARST-ARGYLE TELEVISION, INC.
|------------------------------



|Notes to Consolidated Financial Statements(Continued)
|------------------------------------------------------



|statements, nor does the Company have any interests in, or
      relationships with, any special-purpose entities that are not reflected
      in the consolidated financial statements.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Purchase Accounting
|-------------------



|When allocating the purchase
      price in a purchase transaction to the acquired assets (tangible and intangible)
      and assumed liabilities, it is necessary to develop estimates of fair value.
      The Company utilizes the services of an independent valuation consulting
      firm for the purpose of estimating required fair values. The specialized
      tangible assets in use at a broadcasting business are typically valued on
      the basis of the replacement cost of a new asset less observed depreciation.
      The appraisal of other fixed assets, such as furnishings, vehicles, and
      office machines, is based upon a comparable market approach. Identified
      intangible assets, including FCC licenses, are valued at estimated fair
      value. FCC licenses are valued using a direct approach. The direct approach
      measures the economic benefits that the FCC license brings to its holder.
      The fair market value of the FCC license is determined by discounting these
      future benefits utilizing discounted cash flows. The key assumptions used
      in the discounted cash flow analysis include initial and subsequent capital
      costs, network affiliation, VHF or UHF status, market revenue growth and
      station market share projections, operating profit margins, discount rates
      and terminal value estimates.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Stock-Based Compensation
|------------------------



|The Company accounts for
      employee stock-based compensation under Accounting Principles Board Opinion
      (APB) No. 25, Stock Issued to Employees (APB 25)
      and related interpretations. Under APB 25, because the exercise price of
      the Companys employee stock options equals the market price of the
      underlying stock on the date of grant, the stock options have no intrinsic
      value and therefore no compensation expense is recognized. The Company has
      adopted the disclosure-only provisions of SFAS No. 123,Accounting
      For Stock-Based Compensation (SFAS 123). Under SFAS 123,
      options are valued at their date of grant and then expensed over
      their vesting period. See Note 12.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The following table details
      the effect on net income and earnings per share had compensation expense
      been recorded based on the fair value method under SFAS 123, as amended,
      utilizing the Black-Scholes option valuation model:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |                                                                                                                                                                                      | Years Ended December 31,             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------------------
| |                                                                                                                                                                                      | 2003                                 
| |                                                                                                                                                                                      | (In thousands, except per share data)
| | Reported net income                                                                                                                                                                  | $  94,221                            
| | Add:                                                                                                                                                                                 |                                      
| | Total stock-based
      employee compensation expense included in 
                  
      reported net income, net of related tax effects                                          |                                     
| | Deduct:                                                                                                                                                                              |                                      
| | Total
      stock-based employee compensation expense determined
                   under
      the fair value method for all awards, net of related tax 
                   effects | (7,696                               
| |                                                                                                                                                                                      |                                      
| | Pro forma net income                                                                                                                                                                 | $  86,525                            
| |                                                                                                                                                                                      |                                      
| | Pro forma net income applicable to common
      stockholders                                                                                                                         | $  85,314                            
| |                                                                                                                                                                                      |                                      
| | Earnings per share:                                                                                                                                                                  |                                      
| | Basicas
      reported                                                                                                                                                              | $     1.00                           
| | Basicpro
      forma                                                                                                                                                                | $     0.92                           
| |                                                                                                                                                                                      |                                      
| | Dilutedas
      reported                                                                                                                                                            | $     1.00                           
| | Dilutedpro
      forma                                                                                                                                                              | $     0.92                           
| |                                                                                                                                                                                      |                                      





|The Company accounts for
      the income tax benefit resulting from the deduction triggered by the exercise
      of employee stock options as a credit to stockholders equity (additional
      paid-in capital) on the consolidated balance sheets and consolidated statements
      of stockholders equity. In accordance with Emerging Issues Task Force
      (EITF) Issue No. 00-15, Classification in the Statement of
      Cash Flows of the Income Tax Benefit Received by a Company upon Exercise
      of a Non-Qualified Employee Stock Option, the Company classifies the
      reduction of income taxes payable, as a result of the deduction triggered
      by the exercise of employee stock options, as an increase in operating cash
      flow on the consolidated statements of cash flows.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Use of Estimates
|----------------



|The preparation of the consolidated
      financial statements, in conformity with generally accepted accounting principles,
      requires management to make estimates and assumptions that affect amounts
      reported in the consolidated financial statements and accompanying notes.
      On an ongoing basis, the Company evaluates its estimates, including those
      related to allowances for doubtful accounts; program rights, barter and
      trade transactions; useful lives of property, plant and equipment; intangible
      assets;
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 46 | 
| | -- | 



---





|HEARST-ARGYLE TELEVISION, INC.
|------------------------------



|Notes to Consolidated Financial Statements(Continued)
|------------------------------------------------------

|carrying value of investments; accrued liabilities; contingent
      liabilities; income taxes; pension benefits; and fair value of financial
      instruments. Actual results could differ from those estimates.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Reclassifications
|-----------------



|For comparability, certain
      prior year amounts have been reclassified to conform with the 2003 presentation.
      Most significantly, in connection with the Companys adoption of FIN
      46(R), the Company has de-consolidated its wholly-owned subsidiary trust
      in all periods presented. See New Accounting Pronouncements
      below. In addition, in December 2003, the Company reclassified $66.9 million
      of its net goodwill balance to a separately identified intangible asset,
      advertiser client base. Accordingly, for comparability, the Company has
      made this reclassification in all periods presented. With respect to the
      reclassification of the advertiser client base, the Company resumed amortization
      and recorded a catch-up to amortization expense of $7.1 million in the fourth
      quarter of 2003, bringing the net book value of the advertiser client base
      to approximately $59.8 million as of December 31, 2003. See Note 4.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|New Accounting Pronouncements
|-----------------------------



|In April 2003, FASB issued
      SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and
      Hedging Activities (SFAS 149). SFAS 149 amends and clarifies
      accounting and reporting for derivative instruments, including certain derivative
      instruments embedded in other contracts (collectively referred to as derivatives)
      and for hedging activities under SFAS No. 133, Accounting for Derivative
      Instruments and Hedging Activities. SFAS 149 is effective for contracts
      entered into or modified after June 30, 2003, except in certain instances,
      and for hedging relationships designated after June 30, 2003. In addition,
      except in those certain instances, all provisions of SFAS 149 should be
      applied prospectively. Since the Company was not involved in any derivative
      financial instruments, SFAS 149 had no effect upon the Companys consolidated
      financial statements in the year ended December 31, 2003.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In May 2003, the FASB issued
      SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics
      of Both Liabilities and Equity (SFAS 150). SFAS 150 establishes
      standards for how a company classifies and measures certain financial instruments
      with characteristics of both liabilities and equity. SFAS 150 is effective
      for financial instruments entered into or modified after May 31, 2003, and
      otherwise is effective at the beginning of the first interim period beginning
      after June 15, 2003. The Company has determined that SFAS 150 does not affect
      the classification or measurement of any of its financial instruments.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In December 2003, the FASB
      issued SFAS No. 132 (revised 2003), Employers Disclosures about
      Pensions and Other Postretirement Benefits - an amendment of FASB Statements
      No. 87, 88 and 106 (SFAS 132(R)). SFAS 132(R) is effective
      for fiscal years ending after December 15, 2003. Interim disclosure requirements
      under SFAS 132(R) will be effective for interim periods beginning after
      December 15, 2003, and required disclosures related to estimated benefit
      payments will be effective for fiscal years ending after June 15, 2004.
      SFAS 132(R) replaces the disclosure requirements in SFAS No. 87, Employers
      Accounting for Pensions (SFAS 87), SFAS No. 88, Employers
      Accounting for Settlements and Curtailments of Defined Benefit Pension Plans
      and for Termination Benefits (SFAS 88), and SFAS 106, Employers
      Accounting for Postretirement Benefits Other Than Pensions (SFAS
      106). SFAS 132(R) addresses disclosures only and does not address
      measurement and recognition accounting for pension and postretirement benefits.
      SFAS 132(R) requires additional disclosures related to the description of
      plan assets including investment strategies, plan obligations, cash flows
      and net periodic benefit cost of defined benefit pension and other defined
      benefit postretirement plans. Effective December 31, 2003, the Company adopted
      the disclosure requirements of SFAS 132(R) with the exception of future
      expected benefit payments, which becomes effective for the Company for fiscal
      years ending after June 15, 2004 or December 31, 2004.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|In December 2003, the FASB
      issued FIN 46(R), which served to clarify the guidance in Financial Interpretation
      No. 46, Consolidation of Variable Interest Entities (FIN 46),
      and provided additional guidance surrounding the application of FIN 46.
      FIN 46 establishes consolidation criteria for entities for which control
      is not easily discernable under Accounting Research Bulletin 51, Consolidated
      Financial Statements, which is based on the premise that holders of
      an entity control the entity by virtue of voting rights. FIN 46(R) provides
      guidance for identifying the party with a controlling financial interest
      resulting from arrangements or financial interests rather than from voting
      interests. FIN 46 established standards for determining the circumstances
      under which an entity (defined as a variable interest entity) should be
      consolidated based upon an evaluation of financial interests and other arrangements
      rather than voting control. FIN 46 also requires disclosure about any variable
      interest entities that the Company is not required to consolidate, but in
      which it has a significant variable interest. Application of FIN 46(R) is
      required for companies that have interests in those entities that are considered
      to be special-purpose entities, beginning in periods ending after December
      15, 2003, and application is required for interests in all other types of
      entities beginning in periods ending after March 15, 2004.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 47 | 
| | -- | 



---





|HEARST-ARGYLE TELEVISION, INC.
|------------------------------



|Notes to Consolidated Financial Statements(Continued)
|------------------------------------------------------





|The Company adopted and applied
      the provisions of FIN 46(R) as of December 31, 2003 with respect to its
      wholly-owned trust subsidiary, the Hearst-Argyle Capital Trust (hereafter
      the Capital Trust), which is considered to be a special-purpose
      entity. The adoption of FIN 46(R) required the Company to de-consolidate
      the Capital Trust in its financial statements. In order to present the Capital
      Trust as an unconsolidated subsidiary, the Company adjusted the presentation
      in its consolidated balance sheets as follows, for all periods presented:
      (i) reclassified the amount of $200.0 million, which was previously classified
      as Company obligated redeemable convertible preferred securities of
      subsidiary trust holding solely parent company debentures to Note
      payable to Capital Trust; (ii) presented an investment in the Capital
      Trust of $6.2 million, which is included under Investments (see
      Note 3); and (iii) presented a long-term note payable to the Capital Trust
      of $6.2 million, which is included under Note payable to Capital Trust,
      bringing the total Note payable to Capital Trust to $206.2 million
      (see Note 7). Once the redeemable convertible preferred securities have
      been redeemed or reached maturity, the investment in the Capital Trust of
      $6.2 million will be offset by the long-term note payable to the Capital
      Trust of $6.2 million, resulting in no effect to the Companys consolidated
      income statement. In addition, the Company adjusted the presentation in
      our consolidated income statements in all periods presented to reclassify
      the amounts previously recorded as Dividends on redeemable convertible
      preferred securities to Interest expense, net  Capital
      Trust. These changes required under FIN 46(R) represent financial
      statement presentation only and are not a result of any changes to the legal,
      financial, or operating structure of the Capital Trust. With respect to
      any other entities, such as the Companys Managed Stations, which could
      potentially be affected by FIN 46(R) and for which the application date
      of FIN 46(R) is the end of the first quarter of 2004, the Company is currently
      evaluating the impact, if any. Although the Company does not believe the
      full adoption of FIN 46(R) will have a material impact on its net income,
      the Company cannot make any definitive determination until it has completed
      its evaluation.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In January 2004, the FASB
      issued FASB Staff Position (FSP) 106-1, Accounting and Disclosure Requirements
      Related to the Medicare Prescription Drug, Improvement and Modernization
      Act of 2003 (FSP 106-1), which allowed companies to elect
      a one-time deferral of the recognition of the effects of the Medicare Prescription
      Drug Act in accounting for their plans under SFAS 106 and in providing disclosures
      related to the plan required by SFAS 132(R). The FASB allowed the one-time
      deferral due to the accounting issues raised by the Medicare Prescription
      Drug Act - in particular, the accounting for the federal subsidy that is
      not explicitly addressed in SFAS 106 - and due to the fact that uncertainties
      exist as to the direct effects of the Medicare Prescription Drug Act and
      its ancillary effects on plan participants. For companies electing the one-time
      deferral, such deferral remains in effect until authoritative guidance on
      the accounting for the federal subsidy is issued, or until certain other
      events, such as a plan amendment, settlement or curtailment, occur. We are
      currently evaluating the effects of the Medicare Prescription Drug Act on
      our other postretirement benefit plan and its participants, and have elected
      the one-time deferral. The Companys accumulated post-retirement benefit
      obligation and net post-retirement benefit cost for 2003 does not reflect
      the effects of the Medicare Prescription Drug Act. Additionally, once the
      specific authoritative guidance on the accounting for the federal subsidy
      is issued, it could result in a change to previously reported information.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|3. Acquisitions, Dispositions and Investments
|---------------------------------------------



|Phoenix/WMUR Swap.
      On March 28, 2001, the Company exchanged its radio stations in Phoenix,
      Arizona (KTAR-AM, KMVP-AM and KKLT-FM) (the Phoenix Stations)
      for WMUR-TV, the ABC affiliate serving Manchester, New Hampshire, which
      is part of the Boston, Massachusetts television market, in a three-party
      swap (the Phoenix/WMUR Swap). The Company sold the Phoenix Stations
      to Emmis Communications Corporation (Emmis) for $160.0 million,
      less transaction expenses, and purchased WMUR-TV from
      WMUR-TV, Inc. for $185.0 million, plus a working capital adjustment of $3.5
      million and transaction expenses. The acquisition of WMUR-TV was accounted
      for under the purchase method of accounting and accordingly, the purchase
      price and related transaction expenses were allocated to the acquired assets
      and liabilities based upon their fair market values. Prior to the Phoenix/WMUR
      Swap, Emmis had been managing the Phoenix Stations pursuant to a Time Brokerage
      Agreement (TBA) since August 1, 2000, and the Company had been
      managing WMUR-TV pursuant to a TBA since January 8, 2001 (effective January
      1, 2001 for accounting purposes) until the acquisition on March 28, 2001.
      The purchase price of WMUR-TV was funded through an intermediary by approximately:
      (i) $160.0 million from Emmis, and (ii) $28.5 million plus the cost of the
      transaction expenses from the Companys revolving credit facility.
      The Company realized a gain of $72.6 million on the sale of the Phoenix
      Stations which is recorded in Other income, net in the accompanying consolidated
      statement of income for the year ended December 31, 2001.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







|WBOY-TV Acquisition and
      Disposition. On April 30, 2001, pursuant to an Asset Purchase Agreement
      entered into with WBOY-TV, Inc., the Company acquired WBOY-TV, the NBC affiliate
      serving the Clarksburg-Weston, West Virginia television market for $20.0
      million (the WBOY Acquisition) plus a working capital adjustment
      of $0.7 million and transaction expenses. The WBOY Acquisition was accounted
      for under the purchase method of accounting and, accordingly, the purchase
      price and related transaction expenses have been allocated to the acquired
      assets and liabilities based upon their fair market values. The purchase
      price plus the cost of transaction expenses were funded using the Companys
      revolving credit facility. The Company
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 48 | 
| | -- | 



---





|HEARST-ARGYLE TELEVISION, INC.
|------------------------------



|Notes to Consolidated Financial Statements(Continued)
|------------------------------------------------------

|later sold WBOY-TV on December 13, 2001 for $20.0 million
      plus a working capital adjustment of $0.8 million less transaction expenses.
|--------------------------------------------------------------------------------------------------------------------------------------------



|Investment in Internet
      Broadcasting Systems, Inc. On December 2, 1999, the Company entered
      into a series of agreements with Internet Broadcasting Systems, Inc. (IBS)
      and invested $20 million in exchange for an equity interest in IBS. With
      IBS, the Company and other broadcasters have invested in the development
      and management of local news/information/entertainment websites. In May
      2001, the Company invested an additional $6 million for a total investment
      of $26 million in IBS. The following provides a description of the key agreements,
      along with the associated accounting where appropriate:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Series B Preferred Stock Purchase Agreement.
      This agreement was entered into between IBS and a wholly-owned subsidiary
      of the Company, as well as other investors. Pursuant to this agreement,
      the Company initially invested $20 million in IBS. As of December 31, 2003,
      2002 and 2001, the Company had an equivalent equity interest in IBS of approximately
      24% in each year. Accordingly, this investment is accounted for using the
      equity method. The Companys share in the results of IBS is included
      in Equity in income (loss) of affiliates in the accompanying consolidated
      statements of income for the years ended December 31, 2003, 2002 and 2001.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | IBS/HATV LLC (Limited Liability Company) Agreement.
      This agreement was entered into by the Company and IBS to establish the
      IBS/HATV LLC, of which the Company owns 49.9% and IBS owns 50.1%. The IBS/HATV
      LLC is controlled and managed by IBS and is the parent company of 24 wholly-owned
      subsidiary limited liability companies established to own and operate the
      websites for each of the Companys television stations. The term of
      the agreement is indefinite until an agreement is reached by the parties
      to terminate. Under this agreement, net losses incurred by the IBS/HATV
      LLC are allocated 100% to IBS. Net income is to be allocated in proportion
      to the ownership interests. Through September 30, 2002, the IBS/HATV LLC
      incurred net losses since its inception in December 1999. In the fourth
      quarter of 2002, the IBS/HATV LLC achieved profitability and the Company
      began to record its 49.9% share of net income using the equity method. The
      Companys share in the results of the IBS/HATV LLC is included in Equity
      in income (loss) of affiliates in the accompanying consolidated statements
      of income for the years ended December 31, 2003 and 2002.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Website Development and Operating Agreement.
      This agreement was entered into by the Company, IBS, and the IBS/HATV LLC.
      The initial term of the agreement is six years, with additional three-year
      renewal terms unless a party gives written notice of its intention not to
      renew. Under this agreement, IBS designs, develops and operates each of
      the Companys stations websites owned by the wholly-owned subsidiary
      companies under the IBS/HATV LLC. The accounting for the activities under
      this agreement is included in the accounts and financial results of the
      IBS/HATV LLC.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Website License Agreement.This agreement
      was entered into by the Company, IBS, and the IBS/HATV LLC and runs co-terminous
      with the Website Development and Operating Agreement described above. Under
      this agreement, the Company has granted to IBS a non-exclusive license to
      use and display certain programming content and Company trademarks and logos
      on the each of the websites owned by the wholly-owned subsidiary companies
      under the IBS/HATV LLC.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In connection with the above
      agreements, the Company is able to offer its customers advertising packages
      containing both spot television as well as internet advertising. In the
      sale of such packages, the Company acts as the sales agent to each of the
      subsidiary companies under the IBS/HATV LLC. The revenue from spot advertising
      revenues is recognized by the Companys stations, and the revenue from
      internet advertising is recognized by the subsidiary companies under the
      IBS/HATV LLC.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Investment in ProAct
      Technologies Corporation.On March 22, 2000, the Company invested
      $25.0 million in ProAct Technologies Corporation (ProAct) for
      an equity interest in ProAct. ProAct is a provider of human resources and
      benefits management solutions for employers and health plans. As this investment
      represents less than a 20% interest in ProAct, the investment is accounted
      for using the cost method. In March 2001, the Company wrote-down its investment
      in ProAct by $18.8 million in order to approximate the investments
      realizable value. The write-down is included in Other income, net in the
      accompanying consolidated statement of income for the year ended December
      31, 2001. The Company has received revenue from ProAct relating to advertising
      sales. See Note 14.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Investment in Geocast
      Network Systems, Inc. In February 2001, the Company wrote-off its remaining
      basis of $5.1 million of its total $10.0 million investment in Geocast Network
      systems, Inc. (Geocast) after Geocasts Board of Directors
      declined various strategic alternatives and decided to liquidate the company.
      The write-down is included in Other income, net in the accompanying consolidated
      statement of income for the year ended December 31, 2001.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 49 | 
| | -- | 



---





|HEARST-ARGYLE TELEVISION, INC.
|------------------------------



|Notes to Consolidated Financial Statements(Continued)
|------------------------------------------------------





|Investment in NBC/Hearst-Argyle
      Syndication, LLC. On August 7, 2001, the Company contributed its production-and-distribution
      unit to NBC/Hearst-Argyle Syndication, LLC in exchange for a 20% equity
      interest in this entity. NBC/Hearst-Argyle Syndication, LLC is a limited
      liability company formed by NBC Enterprises and the Company to produce and
      syndicate first-run broadcast and original-for-cable programming. This investment
      is accounted for using the equity method. The Companys share in the
      results of NBC/Hearst-Argyle Syndication, LLC is included in Equity in income
      (loss) of affiliates in the accompanying consolidated statements of income
      for the years ended December 31, 2003, 2002 and 2001.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Investment in Capital
      Trust. On December 20, 2001, the Company purchased all of the Capital
      Trusts common stock (valued at $6.2 million) as part of the initial
      capitalization of the Capital Trust, and the Company received $200.0 million
      in connection with the issuance of the Subordinated Debentures (valued at
      $206.2 million) to the Capital Trust. The Subordinated Debentures are presented
      as Note payable to Capital Trust in the Companys consolidated balance
      sheets. The Capital Trust does not hold any other significant assets other
      than the $206.2 million in note receivable from the Company for the Subordinated
      Debentures. In accordance with the provisions of FIN 46(R), the Company
      does not consolidate the accounts of its wholly-owned subsidiary, the Capital
      Trust, in its consolidated financial statements. Therefore, this investment
      is accounted for using the equity method. Since the only earnings attributable
      to this investment are the Companys interest payments on the $6.2
      million portion of the Subordinated Debentures, the Company has recorded
      its share in the earnings of the Capital Trust as an offset to the interest
      expense that the Company pays on the Subordinated Debentures. See Note 7.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4. Goodwill and Intangible Assets
|---------------------------------



|On January 1, 2002, the Company
      adopted SFAS 142, which requires that goodwill and intangible assets with
      indefinite useful lives no longer be amortized, but instead be assessed
      for impairment at least annually by applying a fair value-based test. The
      Companys intangible assets with indefinite useful lives are licenses
      to operate its television stations which have been granted by the Federal
      Communications Commission (FCC). SFAS 142 also requires that
      intangible assets with determinable useful lives be amortized over their
      respective estimated useful lives to their estimated residual values, and
      reviewed for impairment in accordance with SFAS 144.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The Company completed its initial
      goodwill impairment review during the first quarter of 2002 and its annual
      goodwill impairment review during the fourth quarters of 2003 and 2002 using
      a fair value approach in accordance with SFAS 142 and found no impairment
      to the carrying value of the Companys goodwill or FCC licenses. In
      2002, the Company made an adjustment of approximately $0.4 million to the
      carrying value of goodwill to finalize certain purchase accounting adjustments.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The Company, as an FCC licensee,
      enjoys an expectancy of continued renewal of its licenses, so long as it
      continues to provide service in the public interest. The FCC has historically
      renewed the Companys licenses in the ordinary course of business,
      without compelling challenge and at little cost to the Company. Furthermore,
      the Company believes that over-the-air broadcasting will continue as a video
      distribution mode for the foreseeable future. Therefore, the cash flows
      derived from the Companys FCC licenses are expected to continue indefinitely
      and as such, and in accordance with SFAS 142, the life of the FCC license
      intangible asset is deemed to be indefinite.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







|In December 2003, the Company
      reversed a reclassification it had made in December 2001 related to a separately
      identified intangible asset, advertiser client base. In December 2001, the
      Company had reclassified the remaining net book value of the advertiser
      client base ($66.9 million) to goodwill in the consolidated balance sheet.
      In December 2003, the Company determined the advertiser client base should
      continue to be separately identified from goodwill. Accordingly, in December
      2003, the Company reversed its previous reclassification made in December
      2001 and therefore the classification of the advertiser client base has
      reverted to the Companys balance sheet presentation prior to December
      2001. Since the advertiser client base is considered to be an intangible
      asset with a determinable useful life under SFAS 142, it is required to
      be amortized over its estimated useful life. Accordingly, the Company resumed
      amortization and recorded a catch-up to amortization expense on the advertiser
      client base of $7.1 million in the fourth quarter of 2003, bringing the
      net book value of the advertiser client base to approximately $59.8 million
      as of December 31, 2003.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 50 | 
| | -- | 



---





|HEARST-ARGYLE TELEVISION, INC.
|------------------------------



|Notes to Consolidated Financial Statements(Continued)
|------------------------------------------------------



|Summarized below are the carrying
      value and accumulated amortization of intangible assets that continue to
      be amortized under SFAS 142, as well as the carrying value of those intangible
      assets that are no longer amortized and goodwill as of December 31, 2003
      and 2002:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                          | December 31, 2003                    |  | December 31, 2002               
|--------------------------------------------------------- | ------------------------------------ |  | --------------------------------
|                                                          | Gross
        Carrying
        Value |  | Accumulated
        Amortization
|                                                          | (In thousands)                      
|Intangible assets subject to
          amortization:      |                                     
|Advertiser client base                                    | $122,828                             |  | $62,938                         
|Network affiliations                                      | 95,493                               |  | 31,708                          
|Favorable leases                                          | 723                                  |  | 495                             
|                                                          |                                      |  |                                 
|Total intangible assets subject to
          amortization | $219,044                             |  | $95,141                         
|                                                          |                                      |  |                                 
|Intangible assets not subject to
          amortization:  |                                      |  |                                 
|FCC licenses                                              |                                      |  |                                 
|                                                          |                                      |  |                                 
|Total intangible assets, net                              |                                      |  |                                 
|                                                          |                                      |  |                                 
|                                                          |                                      |  |                                 
|Goodwill, net                                             |                                      |  |                                 
|                                                          |                                      |  |                                 



|The following table adjusts
      reported income applicable to common stockholders and earnings per share
      for the year ended December 31, 2001 (prior to the adoption date of SFAS
      142) to exclude amortization of goodwill and other intangible assets with
      indefinite useful lives:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                                 | Income
        applicable to 
        common
        stockholders 
        (In thousands) | Income per 
        common sharebasic 
        and diluted
|-------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------- | -----------------------------------------------------------
|Year
      Ended December 31, 2001                                               |                                                                                           |                                                            
|As
      reported                                                                | $ 29,665                                                                                  |                                                            
|Amortization
      of goodwill and certain other intangibles, net of tax effects | 56,468                                                                                    |                                                            
|                                                                                 |                                                                                           |                                                            
|Adjusted                                                                         | $ 86,133                                                                                  |                                                            



|The Companys amortization
      expense for definite-lived intangible assets was approximately $9.5 million
      in the year ended December 31, 2003. Estimated annual amortization expense
      for the next five years related to these intangible assets is expected to
      be as follows:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |      | (In thousands) | 
| | ---- | -------------- | 
| |      |               
| | 2004 | 5,977          | 
| | 2005 | 5,971          | 
| | 2006 | 5,952          | 
| | 2007 | 5,941          | 
| | 2008 | 5,941          | 



|5. Accrued Liabilities
|----------------------



|Accrued liabilities as of December
      31, 2003 and 2002 consisted of the following:
|--------------------------------------------------------------------------------------



|                                          | 2003           | 2002
|----------------------------------------- | -------------- | ----
|                                          | (In thousands)
|Payroll,
      benefits and related costs | $14,092        |     
|Accrued
      income taxes                | 12,128         |     
|Accrued
      interest                    | 9,492          |     
|Accrued
      vacation                    | 4,967          |     
|Accrued
      payables                    | 2,544          |     
|Other
      taxes payable                 | 1,081          |     
|Other
      accrued liabilities           | 6,529          |     
|                                          |                |     
|Total
      accrued liabilities           | $50,833        |     
|                                          |                |     

| | 51 | 
| | -- | 



---





|HEARST-ARGYLE TELEVISION, INC.
|------------------------------



|Notes to Consolidated Financial Statements(Continued)
|------------------------------------------------------



|6. Long-Term Debt
|-----------------



|Long-term debt as of December
      31, 2003 and 2002 consisted of the following:
|---------------------------------------------------------------------------------



| |                           | 2003                 | 2002
| | ------------------------- | -------------------- | ----
| |                           | (In thousands)      
| | Credit Facility           | $         
         |     
| | Senior Notes              | 432,110              |     
| | Private Placement Debt    | 450,000              |     
| | Capital Lease Obligations | 465                  |     
| |                           |                      |     
| |                           | 882,575              |     
| | Less current portion      | (166                 | )   
| |                           |                      |     
| | Total long-term debt      | $882,409             |     
| |                           |                      |     



|Credit Facility
|---------------



|On April 12, 1999, the Company
      retired its existing $1 billion revolving credit facility and replaced it
      with two new revolving credit facilities (the New Credit Facilities)
      with a consortium of banks led by JP Morgan Chase Bank (formerly known as
      The Chase Manhattan Bank) (Chase), Bank of New York, Toronto
      Dominion and Bank of Montreal. The New Credit Facilities were structured
      as a $1 billion revolver (the $1 Billion Facility) and a $250
      million 364-day facility (the $250 Million Facility). Management
      elected not to renew the $250 Million Facility on April 10, 2000.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|On August 15, 2001, the Company
      exercised its contractual right to reduce the lender commitments of the
      $1 Billion Facility to $750 million (hereafter, the Credit Facility).
      On December 24, 2003, the Company again exercised its contractual right
      and further reduced the lender commitments to $500 million. The Credit Facility,
      which was fully repaid as of December 31, 2003 and had an outstanding balance
      of $91 million as of December 31 2002, will mature on April 12, 2004.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Outstanding principal balances
      under the Credit Facility bear interest at either, at the Companys
      option, LIBOR or the alternate base rate (ABR), plus the applicable
      margin. The applicable margin for ABR loans is zero. The
      applicable margin for LIBOR loans varies between 0.75% and 1.25%
      depending on the ratio of the Companys total debt to operating cash
      flow (leverage ratio). The ABR is the higher of (i) Chases
      prime rate; (ii) 1% plus the secondary market rate for three month certificates
      of deposit; or, (iii) 0.5% plus the rates on overnight federal funds transactions
      with members of the Federal Reserve System. The Company is required to pay
      an annual commitment fee based on the unused portion of the Credit Facility.
      The commitment fee ranges from 0.2% to 0.3%. For the years ended December
      31, 2003, 2002 and 2001, the effective interest rate on borrowings from
      the Credit Facility outstanding during the year was 3.8%, 4.1% and 5.3%,
      respectively. The Credit Facility is a general unsecured obligation of the
      Company.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Senior Notes
|------------



|The Company issued $125 million
      principal amount of 7.0% senior notes due 2007, priced at 99.616% of par,
      and $175 million principal amount of 7.5% debentures due 2027, priced at
      98.823% of par, on November 7, 1997 and $200 million principal amount of
      7.0% senior notes due 2018, priced at 98.887% of par, on January 13, 1998
      (collectively, the Senior Notes). The Senior Notes are senior
      and unsecured obligations of the Company. Proceeds from the Senior Notes
      offerings were used to repay existing indebtedness of the Company. See discussion
      of Private Placement Debt and Senior Subordinated Notes below.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|During 2000, the Company repaid
      (i) $28.0 million of its 7.5% Senior Notes due November 15, 2027, at a discounted
      price of $24.8 million, and (ii) $22.7 million of its 7.0% Senior Notes
      due January 15, 2018, at a discounted price of $19.6 million. The Company
      wrote-off the pro-rata share of deferred financing fees related to the Senior
      Notes which were repaid.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|During 2001, the Company
      repaid (i) $1.3 million of its 7.0% Senior Notes due January 15, 2018, at
      a discounted price of $1.1 million, and (ii) $15.9 million of its 7.5% Senior
      Notes due November 15, 2027, at a discounted price of $14.3 million. These
      repayments were funded by the Credit Facility. The Company wrote-off the
      pro-rata share of deferred financing fees related to the Senior Notes which
      were repaid. The discounts from the repayments, net of the write-off of
      the deferred financing fees, resulted in a gain of approximately $0.9 million,
      before income tax expense, which was reclassified as Interest expense, net
      in the accompanying consolidated statement of income in the year ended December
      31, 2001, in accordance with SFAS No. 145, Rescission of FASB Statements
      No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 52 | 
| | -- | 



---





|HEARST-ARGYLE TELEVISION, INC.
|------------------------------



|Notes to Consolidated Financial Statements(Continued)
|------------------------------------------------------



|Private Placement Debt
|----------------------



|In connection with its acquisition
      of KCRA-TV in Sacramento, California on January 1, 1999, the Company issued
      $450 million in senior notes to institutional investors (the Private
      Placement Debt). Of the $450 million principal amount, $340 million
      was issued on December 15, 1998 and $110 million was issued on January 14,
      1999. The Private Placement Debt is a general unsecured obligation of the
      Company with a maturity of 12 years, an average life of 10 years, and an
      interest rate of 7.18% per annum. The Company used the proceeds from the
      Private Placement Debt to partially fund the acquisition of KCRA-TV. The
      Private Placement Debt matures in installments of $90 million per year beginning
      in 2006.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Capital Lease Obligations
|-------------------------



|The Company has capitalized
      the future minimum lease payments of equipment under leases that qualify
      as capital leases. The Company had capital lease obligations of approximately
      $0.5 million and $0.4 million as of December 31, 2003 and 2002, respectively.
      The capital leases have terms which expire in various years through 2008.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Senior Subordinated Notes
|-------------------------



|In October 1995, Argyle Television,
      Inc., which was merged with a wholly-owned subsidiary of Hearst on August
      29, 1997 (hereafter the Hearst Transaction), issued $150 million
      of senior subordinated notes (the Senior Subordinated Notes),
      which were due in 2005 and bore interest at 9.75% payable semi-annually.
      The Senior Subordinated Notes were general unsecured obligations of the
      Company. In December 1997 and February 1998, the Company repaid $45 million
      and $102.4 million, respectively. In July 2002, the Company repaid the remaining
      balance of $2.6 million. In connection with the redemption, the Company
      paid a premium of approximately $84,000, which has been included in Interest
      expense, net in the accompanying consolidated statements of income in the
      year ended December 31, 2002.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Aggregate Maturities of Long-term Debt
|--------------------------------------



|Approximate aggregate annual
      maturities of long-term debt (including capital lease obligations) are as
      follows:
|---------------------------------------------------------------------------------------------------------------------------



| |            | (In thousands) | 
| | ---------- | -------------- | 
| |            |               
| | 2004       | $             | 
| | 2005       | 188            | 
| | 2006       | 90,047         | 
| | 2007       | 215,048        | 
| | 2008       | 90,016         | 
| | Thereafter | 487,110        | 
| |            |                | 
| | Total      | $882,409       | 
| |            |                | 



|Debt Covenants and Restrictions
|-------------------------------



|The Companys debt obligations
      contain certain financial and other covenants and restrictions on the Company.
      Certain of the financial covenants include credit ratios such as leverage,
      interest coverage and fixed charges coverage. However, such covenants do
      not include any triggers explicitly tied to the Companys credit ratings
      or stock price. The Company is in compliance with all such covenants and
      restrictions as of December 31, 2003.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The Credit Facility does provide,
      however, that all outstanding balances will become due and payable at such
      time as Hearsts (and certain of its affiliates) equity ownership
      in the Company becomes less than 35% of the total equity of the Company
      and Hearst and such affiliates no longer have the right to elect a majority
      of the members of the Companys Board of Directors.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Interest Rate Risk Management
|-----------------------------



|The Company is not involved
      in any derivative financial instruments. However, the Company may consider
      certain interest rate risk strategies in the future. The Company may also
      consider in the future certain interest rate swap arrangements or debt-for-debt
      exchanges.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 53 | 
| | -- | 



---





|HEARST-ARGYLE TELEVISION, INC.
|------------------------------



|Notes to Consolidated Financial Statements(Continued)
|------------------------------------------------------



|Interest Expense, net
|---------------------



|Interest expense, net for the
      years ended December 31, 2003, 2002 and 2001 consisted of the following:
|------------------------------------------------------------------------------------------------------------



|                                                          | 2003           | 2002      | 2001     
|--------------------------------------------------------- | -------------- | --------- | ---------
|                                                          | (In thousands)
|Interest on borrowings:                                   |                |           |          
|Credit Facility                                           | $   2,572      | $   7,744 | $  32,765
|Senior
      Notes                                        | 30,934         | 30,903    | 31,899   
|Private
      Placement Debt                              | 32,310         | 32,310    | 32,310   
|Senior
      Subordinated Notes                           |               | 232       | 253      
|Amortization
      of deferred financings costs and other | 2,910          | 2,953     | 2,938    
|                                                          |                |           |          
|Total
      interest expense                              | 68,726         | 74,142    | 100,165  
|Gain on early retirement of debt                          |               |          | (873)    
|Interest income                                           | (511)          | (699)     | (567)    
|                                                          |                |           |          
|Total interest expense, net                               | $68,215        | $73,443   | $ 98,725 
|                                                          |                |           |          



|7. Note Payable to Capital Trust
|--------------------------------



|On December 20, 2001, the Companys
      wholly-owned unconsolidated subsidiary trust (the Capital Trust)
      completed a $200.0 million private placement with institutional investors.
      The parent company, Hearst-Argyle Television, Inc., then issued subordinated
      debentures of $206.2 million (the Subordinated Debentures) to
      the Capital Trust in exchange for $200.0 million in net proceeds from the
      private placement and 100% of the Capital Trusts common stock, valued
      at $6.2 million. The Subordinated Debentures are presented as Note payable
      to Capital Trust in the Companys consolidated balance sheets. See
      Note 2 under New Accounting Pronouncements for a discussion
      of de-consolidation of the Capital Trust, pursuant to FIN 46(R). The Company
      paid the Capital Trusts issuance costs of $5.2 million, resulting
      in net proceeds to the Company of $194.8 million. The Company utilized the
      net proceeds to reduce outstanding borrowings under the Credit Facility.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In connection with the private
      placement, the Capital Trust issued 1,400,000 shares of Series A Redeemable
      Convertible Preferred Securities due 2016 (liquidation preference $50 per
      redeemable convertible preferred security) for an aggregate of $70,000,000,
      and 2,600,000 shares of Series B Redeemable Convertible Preferred Securities
      due 2021 (liquidation preference $50 per redeemable convertible preferred
      security) for an aggregate of $130,000,000, to institutional investors.
      (Hereafter, the Series A and the Series B Redeemable Convertible Preferred
      Securities are together referred to as the Redeemable Convertible
      Preferred Securities.) The investor group included Hearst Broadcasting,
      Inc., a wholly-owned subsidiary of Hearst. Hearst Broadcasting, Inc. purchased
      an aggregate of 300,000 shares of the Series A Redeemable Convertible Preferred
      Securities and an aggregate of 500,000 shares of the Series B Redeemable
      Convertible Preferred Securities for a total of $40 million, or 20% of the
      Redeemable Convertible Preferred Securities. Hearst-Argyle Television, Inc.,
      the parent company of the Capital Trust, has made a full and unconditional
      guarantee of the Capital Trusts payments on the Redeemable Convertible
      Preferred Securities. See Note 15.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|As part of the transaction,
      the Company issued and sold to the Capital Trust, in exchange for the proceeds
      from the sale of the Redeemable Convertible Preferred Securities, $72,164,960
      in aggregate principal amount of 7.5% convertible junior subordinated deferrable
      interest debentures Series A, due 2016 (the Series A Subordinated
      Debentures) and $134,020,640 in aggregate principal amount of 7.5%
      convertible junior subordinated deferrable interest debentures Series B,
      due 2021 (the Series B Subordinated Debentures). (Hereafter,
      the Series A and the Series B Subordinated Debentures are together referred
      to as the Subordinated Debentures.)The Subordinated Debentures
      issued to the Capital Trust by the parent company, Hearst-Argyle Television,
      Inc., in the combined aggregate principal amount of $206,185,600 were issued
      in exchange for (i) the receipt of the proceeds of $200.0 million from the
      issuance of the Redeemable Convertible Preferred Securities; and (ii) $6,185,600
      which was owed by the parent company to the Capital Trust for its purchase
      of $6,185,600 of the Capital Trusts common stock, as part of the initial
      capitalization of the Capital Trust (see Note 3).
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The Redeemable Convertible
      Preferred Securities issued by the Capital Trust are effectively convertible,
      at the option of the holder at any time, into shares of the Companys
      Series A Common Stock, par value $.0l per share through an exchange of such
      Redeemable Convertible Preferred Securities for a portion of the Subordinated
      Debentures of the corresponding series held by the Capital Trust. The conversion
      terms are identical for all holders of the Redeemable Convertible Preferred
      Securities, including Hearst. The Series A Subordinated Debentures are convertible
      into the Companys Common Stock at an initial rate of 2.005133 shares
      of the Companys Common Stock per $50 principal amount of Series A
      Subordinated Debentures (equivalent to a conversion price of $24.9360 per
      share of the Companys Common Stock) and the Series B Subordinated
      Debentures are convertible into the Companys Common Stock at an initial
      rate of 1.972262 shares of the Companys Common Stock per $50
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 54 | 
| | -- | 



---





|HEARST-ARGYLE TELEVISION, INC.
|------------------------------



|Notes to Consolidated Financial Statements(Continued)
|------------------------------------------------------

|principal amount of Series B Subordinated Debentures (equivalent
      to a conversion price of $25.3516 per share of the Companys Common
      Stock). When the Subordinated Debentures are repaid or redeemed, the same
      amount of Redeemable Convertible Preferred Securities will simultaneously
      be redeemed with the proceeds from the repayment or redemption of the Subordinated
      Debentures. The Series A Redeemable Convertible Preferred Securities mature
      on December 31, 2016 with distributions payable thereon at a rate of 7.5%
      per year. The Series B Redeemable Convertible Preferred Securities mature
      on December 31, 2021 with distributions payable thereon at a rate of 7.5%
      per year.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The Series A Subordinated Debentures
      mature on December 31, 2016 and bear interest at a rate of 7.5% per year.
      The Series B Subordinated Debentures mature on December 31, 2021 and bear
      interest at a rate of 7.5% per year. The Company has the right to defer
      interest on the Subordinated Debentures (and therefore distributions on
      the Redeemable Convertible Preferred Securities) by extending the interest
      payment period from time to time in accordance with and subject to the terms
      of the Redeemable Convertible Preferred Securities. Further, the Series
      A Subordinated Debentures may be redeemed at the option of the Company (or
      at the direction of Hearst) at any time on or after December 31, 2004 and
      the Series B Subordinated Debentures may be redeemed at the option of the
      Company (or at the direction of Hearst) at any time on or after December
      31, 2006. The redemption prices (per $50 principal amount) of the Series
      A Subordinated Debentures range from $52.625 in 2005, declining to $50.375
      in 2011 and $50 thereafter to maturity. The redemption prices (per $50 principal
      amount) of the Series B Subordinated Debentures range from $51.875 in 2007,
      declining to $50.375 in 2011 and $50 thereafter to maturity.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Interest Expense, net  Capital Trust
|-------------------------------------



|Interest expense, net 
      Capital Trust was $15.0 million, $15.0 million and $0.5 million, respectively,
      in the years ended December 31, 2003, 2002 and 2001. Interest expense, net
       Capital Trust represents interest expense incurred by the Company
      on the $206.2 million of Subordinated Debentures issued by its wholly-owned
      unconsolidated subsidiary trust (the Capital Trust). Interest paid by the
      Company to the Capital Trust was then utilized by the Capital Trust to make
      dividend payments to the holders of the $200.0 million of Redeemable Convertible
      Preferred Securities issued by the Capital Trust in December 2001. In accordance
      with FIN 46(R), the Company does not consolidate the accounts of the Capital
      Trust in its consolidated financial statements. The Company uses the equity
      method of accounting to record the parent companys equity interest
      in the earnings of the Capital Trust and accordingly has included such earnings
      of $0.5 million, $0.5 million, and $0.02 million in Interest Expense, net
       Capital Trust in the accompanying consolidated statements of income
      for the years ended December 31, 2003, 2002 and 2001, respectively.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                            | Years Ended December 31,
|------------------------------------------- | ------------------------
|                                            | 2003                    
|                                            | (In thousands)          
|Interest on Subordinated Debentures:        |                         
|Series A Subordinated Debentures            | $    5,412              
|Series B Subordinated Debentures            | 10,052                  
|                                            |                         
|Total interest expense                      | 15,464                  
|Equity in earnings of Capital
        Trust | (464                    
|                                            |                         
|Total interest expense, net  Capital Trust | $ 15,000                
|                                            |                         



|8. Earnings Per Share
|---------------------



|The calculation of basic
      EPS for each period is based on the weighted average number of common shares
      outstanding during the period. The calculation of dilutive EPS for each
      period is based on the weighted average number of common shares outstanding
      during the period, plus the effect, if any, of dilutive common stock equivalent
      shares. The following tables set forth a reconciliation between basic EPS
      and diluted EPS, in accordance with SFAS 128, Earnings Per Share.
      See Note 2 under Earnings Per Share (EPS).
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 55 | 
| | -- | 



---





|HEARST-ARGYLE TELEVISION, INC.
|------------------------------



|Notes to Consolidated Financial Statements(Continued)
|------------------------------------------------------

|                                                                        | Year Ended December 31, 2003         
|----------------------------------------------------------------------- | -------------------------------------
|                                                                        | Income 
        (Numerator)          
|                                                                        | (In thousands, except per share data)
|                                                                        |                                      
|Net income                                                              | $ 94,221                             
|Less: Preferred stock dividends                                         | (1,211                               
|                                                                        |                                      
|Basic EPS                                                               |                                      
|Income applicable to common stockholders                                | $ 93,010                             
|Effect of Dilutive Securities                                           |                                      
|Assumed exercise of stock options                                       |                                     
|                                                                        |                                      
|Diluted EPS                                                             |                                      
|Income applicable to common stockholders
      plus assumed conversions | $ 93,010                             
|                                                                        |                                      

|                                                                        | Year Ended December 31, 2002         
|----------------------------------------------------------------------- | -------------------------------------
|                                                                        | Income 
        (Numerator)          
|                                                                        | (In thousands, except per share data)
|                                                                        |                                      
|Net income                                                              | $108,017                             
|Less: Preferred stock dividends                                         | (1,377                               
|                                                                        |                                      
|Basic EPS                                                               |                                      
|Income applicable to common stockholders                                | $106,640                             
|Effect of Dilutive Securities                                           |                                      
|Assumed exercise of stock options                                       |                                     
|                                                                        |                                      
|Diluted EPS                                                             |                                      
|Income applicable to common stockholders
      plus assumed conversions | $106,640                             
|                                                                        |                                      

|                                                                        | Year Ended December 31, 2001         
|----------------------------------------------------------------------- | -------------------------------------
|                                                                        | Income 
        (Numerator)          
|                                                                        | (In thousands, except per share data)
|                                                                        |                                      
|Net income                                                              | $31,087                              
|Less: Preferred stock dividends                                         | (1,422                               
|                                                                        |                                      
|Basic EPS                                                               |                                      
|Income applicable to common stockholders                                | $29,665                              
|Effect of Dilutive Securities                                           |                                      
|Assumed exercise of stock options                                       |                                     
|                                                                        |                                      
|Diluted EPS                                                             |                                      
|Income applicable to common stockholders
      plus assumed conversions | $29,665                              
|                                                                        |                                      



|The following shares were not
      included in the computation of diluted EPS, because to do so would have
      been anti-dilutive for the periods presented: (i) 7,381 shares of Series
      A Preferred Stock, outstanding as of December 31, 2003, 9,281 shares of
      Series A Preferred Stock, outstanding as of December 31, 2002, and 10,938
      shares of Series A Preferred Stock, outstanding as of December 31, 2001,
      which are convertible into Series A Common Stock (see Note 11); (ii) 10,938
      shares of Series B Preferred Stock, outstanding as of December 31, 2003,
      2002 and 2001, which are convertible into Series A Common Stock (see Note
      11); and (iii) 1,400,000 shares of Series A Redeemable Convertible Preferred
      Securities and 2,600,000 shares of Series B Redeemable Convertible Preferred
      Securities, outstanding as of December 31, 2003, 2002 and 2001, which are
      convertible into Series A Common Stock (see Note 7).
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Common stock options for 2,902,456,
      2,943,959 and 3,367,821 shares of Series A Common Stock (before application
      of the treasury stock method), outstanding as of December 31, 2003, 2002
      and 2001, respectively, were not included in the computation of diluted
      EPS because the exercise price was greater than the average market price
      of the common shares during the calculation period.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 56 | 
| | -- | 



---





|HEARST-ARGYLE TELEVISION, INC.
|------------------------------



|Notes to Consolidated Financial Statements(Continued)
|------------------------------------------------------



|9. Income Taxes
|---------------



|The provision for income taxes
      relating to income for the years ended December 31, 2003, 2002 and 2001,
      consists of the following:
|----------------------------------------------------------------------------------------------------------------------------------------------

|                           | Years Ended December 31,
|-------------------------- | ------------------------
|                           | 2003                    
|                           | (In thousands)          
|Current:                   |                         
|State and local            | $ 1,437                 
|Federal                    | 5,307                   
|                           |                         
|                           | 6,744                   
|                           |                         
|Deferred:                  |                         
|State
      and local      | 2,689                   
|Federal                    | 32,876                  
|                           |                         
|                           | 35,565                  
|                           |                         
|Provision for income taxes | $42,309                 
|                           |                         



|The Companys effective
      income tax rate in a given financial statement period may be materially
      impacted by changes in the level of earnings by taxing jurisdiction, changes
      in the expected outcome of tax examinations, or changes in the deferred
      tax valuation allowance. The effective income tax rate for the years ended
      December 31, 2003, 2002 and 2001 varied from the statutory U.S. Federal
      income tax rate due to the following:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                           | 2003 |   | 2002 |      | 2001
|---------------------------------------------------------- | ---- | - | ---- | ---- | ----
|Statutory
      U.S. Federal income tax                    | 35.0 | % |      | 35.0 | %   
|State
      income taxes, net of Federal tax benefit       | 2.0  |   |      | 2.2  |     
|Other non-deductible business expenses                     | (0.1 | ) |      | 0.3  |     
|Change in valuation allowances and other
        estimates | (5.8 | ) |      |     |     
|Other                                                      | (0.1 | ) |      | 0.5  |     
|                                                           |      |   |      |      |     
|Effective income tax rate                                  | 31.0 | % |      | 38.0 | %   
|                                                           |      |   |      |      |     



|Deferred income tax liabilities
      and assets at December 31, 2003 and 2002 consisted of the following:
|----------------------------------------------------------------------------------------------------------

|                                                                             | 2003           | 2002
|---------------------------------------------------------------------------- | -------------- | ----
|                                                                             | (In thousands) |     
|Deferred income tax liabilities:                                             |                |     
|Difference
      between book and tax basis of property, plant and equipment | $  47,403      |     
|Accelerated
      funding of pension benefit obligation                      | 6,311          |     
|Difference
      between book and tax basis of intangible assets             | 828,384        |     
|                                                                             |                |     
|Total deferred income tax liabilities                                        | 882,098        |     
|                                                                             |                |     
|Deferred income tax assets:                                                  |                |     
|Accrued expenses and other                                                   | 5,178          |     
|Operating loss carryforwards                                                 | 21,894         |     
|                                                                             |                |     
|                                                                             | 27,072         |     
|Less: Valuation allowance                                                    | (21,894        | )   
|                                                                             |                |     
|Total deferred income tax assets                                             | 5,178          |     
|                                                                             |                |     
|Net deferred income tax liabilities                                          | $876,920       |     
|                                                                             |                |     



|The net deferred income tax
      liabilities are presented under the following captions on the Companys
      consolidated balance sheets:
|--------------------------------------------------------------------------------------------------------------------------------------------

|                                    | 2003           |  | 2002      
|----------------------------------- | -------------- |  | ----------
|                                    | (In thousands)
|Current assets:                     |                |  |           
|Deferred
      income taxes         | $    5,178     |  | $    2,873
|Noncurrent
      liabilities:       |                |  |           
|Deferred
      income taxes         | 882,098        |  | 844,781   
|                                    |                |  |           
|Net deferred income tax liabilities | $876,920       |  | $841,908  
|                                    |                |  |           

| | 57 | 
| | -- | 



---





|HEARST-ARGYLE TELEVISION, INC.
|------------------------------



|Notes to Consolidated Financial Statements(Continued)
|------------------------------------------------------



|The deferred tax liabilities
      primarily relate to differences between book and tax basis of the Companys
      FCC licenses. In accordance with the adoption of SFAS 142 on January 1,
      2002, the Company no longer amortizes its FCC licenses, but instead tests
      them for impairment annually. As the tax basis in the Companys FCC
      licenses continues to amortize, the deferred tax liabilities will increase
      over time.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The Company has net operating
      loss carryforwards for state income tax purposes of approximately $437.6
      million, of which approximately $216.1 million expire between 2004 and 2014
      and approximately $221.5 million expire between 2015 and 2023. The valuation
      allowance is the result of an evaluation of the uncertainty associated with
      the realization of these net operating loss carryforwards.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|10. Common Stock
|----------------



|In connection with the Hearst
      Transaction, the Companys Certificate of Incorporation was amended
      and restated pursuant to which, among other things, (i) the Companys
      authorized common stock, par value $.01 per share, was increased from 50
      million to 200 million shares (100 million shares designated as Series A
      Common Stock and 100 million shares designated as Series B Common Stock);
      (ii) Series B Common Stock was authorized and thereafter 41.3 million shares
      were issued to Hearst in connection with the transaction; and, (iii) the
      Companys existing Series A Preferred Stock and Series B Preferred
      Stock received voting rights.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|On March 17, 1999, the Company
      amended and restated the Certificate of Incorporation to increase the number
      of authorized shares of Series A Common Stock from 100 million to 200 million,
      increasing the Companys total authorized shares of common stock to
      300 million. Except as otherwise described below, the issued and outstanding
      shares of Series A Common Stock and Series B Common Stock vote together
      as a single class on all matters submitted to a vote of stockholders, with
      each issued and outstanding share of Series A Common Stock and Series B
      Common Stock entitling the holder thereof to one vote on all such matters.
      With respect to any election of directors, (i) the holders of the shares
      of Series A Common Stock are entitled to vote separately as a class to elect
      two members of the Companys Board of Directors (the Series A Directors)
      and (ii) the holders of the shares of the Companys Series B Common
      Stock are entitled to vote separately as a class to elect the balance of
      the Companys Board of Directors (the Series B Directors); provided,
      however, that the number of Series B Directors shall not constitute less
      than a majority of the Companys Board of Directors.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|All of the outstanding shares
      of Series B Common Stock are held by a subsidiary of Hearst. No holder of
      shares of Series B Common Stock may transfer any such shares to any person
      other than to (i) Hearst; (ii) any corporation into which Hearst is merged
      or consolidated or to which all, or substantially all, of Hearsts
      assets are transferred; or, (iii) any entity controlled or consolidated
      or to which all or substantially all of Hearsts assets are transferred;
      or, (iv) any entity controlled by Hearst (each a Permitted Transferee).
      Series B Common Stock, however, may be converted at any time into Series
      A Common Stock and freely transferred, subject to the terms and conditions
      of the Companys Certificate of Incorporation and to applicable securities
      laws limitations.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In May 2001, the Companys
      stockholders and Board of Directors approved the amendment and restatement
      of the Companys 1997 Stock Option Plan (the Stock Option Plan).
      The amendment increased the number of shares reserved for issuance under
      the Stock Option Plan to 8.7 million shares of the Companys Series
      A Common Stock. See Note 12.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In May 1998, the Companys
      Board of Directors authorized the repurchase of up to $300 million of its
      outstanding Series A Common Stock. Such repurchases may be effected from
      time to time in the open market or in private transactions, subject to market
      conditions and managements discretion. Between May 1998 and December
      31, 2003, the Company has spent approximately $80.7 million to repurchase
      approximately 3.2 million shares of Series A Common Stock at an average
      price of $25.24. There can be no assurance that such repurchases will occur
      in the future or, if they do occur, what the terms of such repurchases will
      be.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Hearst has also notified the
      Company and the Securities and Exchange Commission of its intention to purchase
      up to 20 million shares of the Companys Series A Common Stock from
      time to time in the open market, in private transactions or otherwise. As
      of December 31, 2003, Hearst had purchased approximately 19.3 million shares
      (which includes approximately 3.7 million shares purchased in private transactions)
      of the Companys outstanding Series A Common Stock. Hearsts ownership
      in the Company was 65.4% and 65.6% as of December 31, 2003 and 2002, respectively.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|On December 3, 2003, the Companys
      Board of Directors declared a cash dividend for the fourth quarter of $0.06
      per share on the Companys Series A and Series B Common Stock in the
      amount of $5.6 million. Included in this amount was $3.6 million payable
      to Hearst (see Note 14). The dividend was paid on January 15, 2004 to all
      shareholders of record as of January 5, 2004. The Company did not declare
      or pay any dividends on Common Stock in 2002 and 2001. The Companys
      Credit Facility limits the Companys ability to pay dividends under
      certain conditions.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 58 | 
| | -- | 



---





|HEARST-ARGYLE TELEVISION, INC.
|------------------------------



|Notes to Consolidated Financial Statements(Continued)
|------------------------------------------------------



|11. Preferred Stock
|-------------------



|The Company has one million
      shares of authorized preferred stock, par value $.01 per share. Under the
      Companys Certificate of Incorporation, the Company has two issued
      and outstanding series of preferred stock, Series A Preferred Stock and
      Series B Preferred Stock (collectively, the Preferred Stock).
      The Series A Preferred Stock had 10,938 shares issued and 7,381 shares outstanding
      as of December 31, 2003, 10,938 shares issued and 9,281 shares outstanding
      as of December 31, 2002, and 10,938 shares issued and outstanding as of
      December 31, 2001. The Series B Preferred Stock had 10,938 shares issued
      and outstanding as of December 31, 2003, 2002 and 2001. The Preferred Stock
      has a cash dividend feature whereby each share accrues $65 per share annually,
      to be paid quarterly.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The Series A Preferred Stock
      is convertible at the option of the holders, at any time, into Series A
      Common Stock at a conversion price (the Series A Conversion Price)
      of (i) on or before December 31, 2000, $35; (ii) during the calendar year
      ended December 31, 2001, $38.50; and (iii) during each calendar year after
      December 31, 2001, the product of 1.1 times the preceding years Series
      A Conversion Price. The Company has the option to redeem all or a portion
      of the Series A Preferred Stock at any time, at a price equal to $1,000
      per share plus any accrued and unpaid dividends. On August 12, 2003, the
      Company exercised its option and notified the holders of its intent to redeem
      the remaining outstanding shares of Series A and B Preferred Stock. The
      remaining shares of Series A Preferred Stock shall be redeemed as follows:
      1,600 shares on January 1, 2004; and 5,781 shares on January 1, 2005. The
      remaining shares of Series B Preferred Stock shall be redeemed as follows:
      5,468 shares on December 10, 2004; and 5,470 shares on January 1, 2005.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|On July 29, 2002, a holder
      of the Companys Series A Preferred Stock exercised the right to convert
      1,657 shares of Series A Preferred Stock into 79,959 shares of the Companys
      Series A Common Stock. On February 27, 2003, a holder of the Companys
      Series A Preferred Stock, exercised the right to convert 1,900 shares of
      Series A Preferred Stock into 89,445 shares of the Companys Series
      A Common Stock.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The Series B Preferred Stock
      is convertible at the option of the holders, at any time, into Series A
      Common Stock at a conversion price equal to the average of the closing prices
      for the Series A Common Stock for each of the 10 trading days prior to such
      conversion date. The Company has the option to redeem all or a portion of
      the Series B Preferred Stock at any time, at a price equal to $1,000 per
      share plus any accrued and unpaid dividends.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|12. Employee Stock Plans
|------------------------



|1997 Stock
      Option Plan.
|-----------------------------



|In 1997, the Companys
      stockholders and Board of Directors approved the amendment and restatement
      of the Companys second amended and restated 1994 Stock Option Plan
      and adopted such plan as the resulting 1997 Stock Option Plan (the 1997
      Stock Option Plan). The amendment increased the number of shares reserved
      for issuance under the 1997 Stock Option Plan to 3 million shares of Series
      A Common Stock. The stock options are granted with exercise prices equal
      to the market price of the underlying stock on the date of grant. Options
      granted prior to December 2000 either (i) cliff-vest after three years commencing
      on the effective date of the grant or (ii) vest either after nine years
      or in one-third increments upon attainment of certain market price goals
      of the Companys stock. Options granted in December 2000, vest in one-third
      increments per year commencing one year from the date of the grant. All
      options granted pursuant to the 1997 Stock Option Plan will expire no later
      than ten years from the date of grant.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In May 2001, the Companys
      stockholders and Board of Directors approved the amendment and restatement
      of the 1997 Stock Option Plan (the Stock Option Plan). The amendment
      increased the number of shares reserved for issuance under the Stock Option
      Plan to 8.7 million shares of Series A Common Stock. Each option is exercisable
      after the period or periods specified in the applicable option agreement,
      but no option can be exercised after the expiration of 10 years from the
      date of grant.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 59 | 
| | -- | 



---





|HEARST-ARGYLE TELEVISION, INC.
|------------------------------



|Notes to Consolidated Financial Statements(Continued)
|------------------------------------------------------



|A summary of the status of
      the Companys Stock Option Plan as of December 31, 2003, 2002 and 2001,
      and changes for the years ended December 31, 2003, 2002 and 2001 is presented
      below:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                                  | Options   |   | Weighted Average
        Exercise Price
| | -------------------------------- | --------- | - | ---------------------------------------
| | Outstanding at December 31, 2000 | 5,184,256 |   | $21.79                                 
| | Granted                          | 1,249,891 |   | $21.02                                 
| | Exercised                        | (8,100    | ) | $13.81                                 
| | Forfeited                        | (106,723  | ) | $20.21                                 
| |                                  |           |   |                                        
| | Outstanding at December 31, 2001 | 6,319,324 |   | $20.71                                 
| | Granted                          | 1,235,650 |   | $24.22                                 
| | Exercised                        | (376,829  | ) | $21.34                                 
| | Forfeited                        | (567,647  | ) | $22.06                                 
| |                                  |           |   |                                        
| | Outstanding at December 31, 2002 | 6,610,498 |   | $22.16                                 
| | Granted                          | 1,179,450 |   | $25.22                                 
| | Exercised                        | (218,755  | ) | $18.97                                 
| | Forfeited                        | (146,721  | ) | $22.49                                 
| |                                  |           |   |                                        
| | Outstanding at December 31, 2003 | 7,424,472 |   | $22.71                                 
| |                                  |           |   |                                        
| | Exercisable at December 31, 2001 | 2,693,875 |   | $23.52                                 
| |                                  |           |   |                                        
| | Exercisable at December 31, 2002 | 3,139,652 |   | $22.25                                 
| |                                  |           |   |                                        
| | Exercisable at December 31, 2003 | 3,804,590 |   | $21.54                                 
| |                                  |           |   |                                        



|The following table summarizes
      information about stock options outstanding and exercisable at December
      31, 2003:
|----------------------------------------------------------------------------------------------------------------------------

|Options Outstanding      |  | Options Exercisable                             
|------------------------ |  | ------------------------------------------------
|Range of Exercise Prices |  | Number 
        Outstanding 
        at 12/31/03
|$10.00-$10.93            |  | 33,550                                          
|$14.58-$18.21            |  | 13,600                                          
|$18.22-$21.86            |  | 3,333,205                                       
|$21.87-$25.50            |  | 2,268,411                                       
|$25.51-$29.15            |  | 1,755,991                                       
|$32.79-$36.44            |  | 19,715                                          
|                         |  |                                                 
|                         |  | 7,424,472                                       
|                         |  |                                                 



|As of December 31, 2003, the
      Company has reserved 613,338 shares of Series A Common Stock for future
      grants under the Stock Option Plan.
|----------------------------------------------------------------------------------------------------------------------------------------------------



|The Company accounts for employee
      stock-based compensation under APB 25 and related interpretations. Under
      APB 25, because the exercise price of the Companys employee stock
      options equals the market price of the underlying stock on the date of grant,
      no compensation expense is recognized.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Pro forma information regarding
      net income and earnings per share is required by SFAS 123 and has been determined
      as if the Company had accounted for its employee stock options under the
      fair value method of SFAS 123. Under SFAS 123, options are valued at their
      date of grant and then expensed over their vesting period. The fair value
      of the Companys options was estimated at the date of grant using the
      Black-Scholes option-pricing model for options granted in 2003, 2002 and
      2001. The weighted average fair value of options granted was $8.71, $8.73
      and $8.18 and 2003, 2002 and 2001, respectively. The following assumptions
      were used for the years ended December 31, 2003, 2002 and 2001:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                              | 2003    | 2002 | 2001   
|----------------------------- | ------- | ---- | -------
|Risk-free
      interest rate | 3.25%   |      | 3.03%  
|Dividend
      yield          | 0.25%   |      | 0.0%   
|Volatility
      factor       | 33.9%   |      | 35.3%  
|Expected
      life           | 5 years |      | 5 years



|The Black-Scholes option valuation
      model was developed for use in estimating the fair value of traded options,
      which have no vesting restrictions and are fully transferable. In addition,
      option valuation models require the input of highly subjective assumptions
      including the expected stock price volatility. Because the Companys
      employee stock options have characteristics significantly different from
      those of traded options, and because changes in the subjective input assumptions
      can materially affect
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 60 | 
| | -- | 



---





|HEARST-ARGYLE TELEVISION, INC.
|------------------------------



|Notes to Consolidated Financial Statements(Continued)
|------------------------------------------------------

|the fair value estimate, in managements opinion, the
      existing models do not necessarily provide a reliable single measure of
      the fair value of its employee stock options.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|See Note 2 under Stock-Based
      Compensation for the pro forma effect on net income and earnings per
      share had compensation expense been recorded based on the fair value method
      under SFAS 123, as amended.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|13. Stock Purchase Plan
|-----------------------



|In April 1999, the Company
      implemented a non-compensatory employee stock purchase plan (ESPP)
      in accordance with Internal Revenue Code Section 423. The ESPP allows employees
      to purchase shares of the Companys Series A Common Stock, at 85% of
      its market price, through after-tax payroll deductions. The Company reserved
      and made available for issuance and purchases under the Stock Purchase Plan
      5,000,000 shares of Series A Common Stock. Employees purchased 94,020 and
      80,123 shares for aggregate proceeds of approximately $1.9 million and $1.6
      million in the years ended December 31, 2003 and 2002, respectively.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|14. Related Party Transactions
|------------------------------



|The Hearst Corporation.
      As of December 31, 2003, Hearst owned approximately 37.6% of the Companys
      Series A common stock and 100% of the Companys Series B common stock,
      representing in the aggregate approximately 65.4% of the outstanding voting
      power of the Companys common stock, except with regard to the election
      of directors. With regard to the election of directors, Hearsts ownership
      of the Companys Series B common stock entitles Hearst to elect 11
      of the 13 directors of the Companys Board of Directors. During the
      years ended December 31, 2003, 2002 and 2001, the Company entered into the
      following transactions with Hearst or parties related to Hearst:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Management Agreement. The Company recorded
      revenues of approximately $3.6 million, $3.3 million, and $2.4 million in
      the years ended December 31, 2003, 2002 and 2001, respectively, relating
      to a management agreement with Hearst (the Management Agreement).
      Pursuant to the Management Agreement, the Company provides certain management
      services, such as sales, news, programming, and financial and accounting
      management services, with respect to certain Hearst owned or operated television
      and radio stations. The Company believes that the terms of the Management
      Agreement are reasonable to both parties; however, there can be no assurance
      that more favorable terms would not be available from third parties.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Services Agreement.The Company
      incurred expenses of approximately $3.7 million, $3.8 million and $3.9 million
      in the years ended December 31, 2003, 2002 and 2001, respectively, relating
      to a services agreement with Hearst (the Services Agreement).
      Pursuant to the Services Agreement, Hearst provides the Company certain
      administrative services such as accounting, financial, legal, insurance,
      data processing, and employee benefits administration. The Company believes
      that the terms of the Services Agreement are reasonable to both parties;
      however, there can be no assurance that more favorable terms would not be
      available from third parties.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Interest Expense, Net  Capital Trust.
      The Company incurred interest expense, net, relating to the Subordinated
      Debentures issued to its wholly-owned unconsolidated subsidiary, the Capital
      Trust, of $15.0 million, $15.0 million and $0.5 million in the years ended
      December 31, 2003, 2002 and 2001, respectively. The Capital Trust then paid
      $3.0 million, $3.0 million and $0.1 million in the years ended December
      31, 2003, 2002 and 2001, respectively, to Hearst, since Hearst holds $40
      million of the total $200 million Redeemable Convertible Preferred Securities
      issued in December 2001 by the Capital Trust. See Note 7.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Dividend on Common Stock. On December
      3, 2003, the Company declared a cash dividend of $0.06 per share on its
      Series A and Series B Common Stock (see Note 10). The Company recorded Hearsts
      share of the dividend of $3.6 million under Payable to The Hearst Corporation
      on the consolidated balance sheet as of December 31, 2003. The dividend
      was paid on January 15, 2004 to all shareholders of record as of January
      5, 2004. The Company did not declare or pay any dividends on Common Stock
      in 2002 and 2001.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Radio Facilities Lease. Pursuant to a
      lease agreement, Hearst paid the Company approximately $0.7 million per
      year in the years ended December 31, 2003, 2002 and 2001, respectively.
      Under this agreement, Hearst leases from the Company premises for WBAL-AM
      and WIYY-FM, Hearsts Baltimore, Maryland radio stations. The lease
      was entered into on August 29, 1997 and subsequently extended. The lease
      for each radio station will continue until the earlier of (i) Hearsts
      divestiture of the radio station to a third party, in which case either
      party (i.e., the Company or the buyer of the station) will be entitled to
      terminate the lease with respect to that station upon certain prior written
      notice, or (ii) August 31, 2004.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 61 | 
| | -- | 



---





|HEARST-ARGYLE TELEVISION, INC.
|------------------------------



|Notes to Consolidated Financial Statements(Continued)
|------------------------------------------------------

| |  |  | Lifetime Entertainment Services. The Company
      recorded revenues of approximately $1.9 million, $2.5 million and $1.3 million
      from Lifetime Entertainment Services (Lifetime) in the years
      ended December 31, 2003, 2002 and 2001, respectively. The Company has an
      agreement with Lifetime, an entity owned 50% by an affiliate of Hearst and
      50% by ABC, whereby (i) the Company assists Lifetime in securing Lifetime
      Movie Network distribution and subscribers; and (ii) Lifetime provides services
      to the Company in respect to the negotiation of the Companys retransmission
      consent agreements.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Other Transactions with Hearst.In
      the year ended December 31, 2002, the Company recorded net revenues of approximately
      $0.7 million relating to advertising sales to Hearst on behalf of ESPN Classic,
      a property of ESPN, Inc., which is owned 20% by an affiliate of Hearst and
      80% by ABC. In the year ended December 31, 2003, the Company did not receive
      advertising revenues from Hearst.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|NBC. In August 2001,
      the Company contributed its production-and-distribution unit to NBC/Hearst-Argyle
      Syndication, LLC in exchange for a 20% equity interest in this entity. NBC/Hearst-Argyle
      Syndication, LLC is a limited liability company formed by NBC Enterprises
      and the Company to produce and syndicate first-run broadcast and original-for-cable
      programming. This investment is accounted for under the equity method. See
      Note 3. The Companys share of the income (loss) in NBC/Hearst-Argyle
      Syndication, LLC is included in Equity in income (loss) of affiliates in
      the accompanying consolidated statements of income. Emerson Coleman, Vice
      President, Programming of the Company, is a member of the Board of Directors
      of NBC/Hearst-Argyle Syndication, LLC, from which he does not receive compensation
      for his services.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|IBS. In December 1999,
      the Company invested $20 million of cash in IBS in exchange for an equity
      interest in IBS. In May 2001, the Company invested an additional $6 million
      of cash for a total investment of $26 million in IBS. This investment is
      accounted for under the equity method. See Note 3. The Companys share
      of the income (loss) of IBS is included in Equity in income (loss) of affiliates
      in the accompanying consolidated statements of income. Since January 2001,
      Harry T. Hawks, Executive Vice President and Chief Financial Officer of
      the Company, and since October 2002 Terry Mackin, Executive Vice President
      of the Company, have both served on the Board of Directors of IBS, from
      which they do not receive compensation for their services. From December
      1999 through October 2002, David J. Barrett, President and Chief Executive
      Officer of the Company, served on the Board of Directors of IBS, from which
      he did not receive compensation for his services. In addition, IBS also
      provides hosting services for the Companys corporate Web site for
      a nominal amount.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ProAct Technologies Corporation.
      The Company recorded no revenues in the year ended December 31, 2003, and
      $3.2 million and $1.2 million in the years ended December 31, 2002 and 2001,
      respectively, relating to advertising sales to ProAct, one of the Companys
      equity interest investments (which is accounted for under the cost method).
      See Note 3. Since February 2003, Harry T. Hawks, the Companys Executive
      Vice President and Chief Financial Officer, has served on the Board of Directors
      of ProAct, from which he does not receive compensation for his services.
      From March 2000 through December 2002, Bob Marbut, former Chairman of the
      Board of Directors and Co-Chief Executive Officer and a current Director
      of the Company, served on the Board of Directors of ProAct, from which he
      did not receive compensation for his services.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|JP Morgan Chase Bank.
      The lead agent bank under the Companys $500 million credit facility
      entered into in April 1999 is JP Morgan Chase Bank (Chase).
      The credit facility matures on April 12, 2004, and borrowings thereunder
      bear interest at an applicable margin that varies based on the Companys
      ratio of total debt to operating cash flow. See Note 6. The Company is required
      to pay an annual commitment fee based on the unused portion of the credit
      facility. Frank A. Bennack, Jr., a Director of the Company, is also a Director
      of Chase.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Argyle Communications,
      Inc. The Company had a consulting agreement with Argyle Communications,
      Inc. (ACI) beginning January 1, 2001 through December 31, 2002
      for the services of Bob Marbut, the Companys former non-executive
      Chairman of its Board of Directors, in connection with his rendering advice
      and his participation in strategic planning and other similar services.
      This agreement was not renewed in 2003. The Company has made payments of
      approximately $0.4 million in both the years ended December 31, 2002 and
      2001, in connection with the consulting agreement with ACI. Mr. Marbut is
      the sole stockholder of ACI. In addition, ACI has a separate consulting
      agreement with Hearst.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Small Business Television.
      The Company utilizes Small Business Televisions (SBTV)
      services to provide television stations with additional revenue through
      the marketing and sale of commercial time to smaller businesses that do
      not traditionally use television advertising due to costs. In the year ended
      December 31, 2003 these sales generated revenues of approximately $1.2 million,
      of which approximately $0.5 million was distributed to SBTV and approximately
      $0.7 million was distributed to the Company. In the year ended December
      31, 2002 these sales generated revenues of approximately $1.1 million, of
      which approximately $0.5 million was distributed to SBTV and approximately
      $0.6 million was distributed to the Company. In the year ended December
      31, 2001 these sales generated revenues of approximately $1.1 million, of
      which approximately $0.5 million
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 62 | 
| | -- | 



---





|HEARST-ARGYLE TELEVISION, INC.
|------------------------------



|Notes to Consolidated Financial Statements(Continued)
|------------------------------------------------------

|million was distributed to SBTV and approximately $0.6
      million was distributed to the Company. Mr. Dean Conomikes, the owner of
      SBTV, is the son of John J. Conomikes, a member of the Companys Board
      of Directors.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Other Related Parties.
      In the ordinary course of business, the Company enters into transactions
      with other related parties, none of which were significant to the Companys
      financial results in the years ended December 31, 2003, 2002 and 2001.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|15. Other Commitments and Contingencies
|---------------------------------------



|The Company has obligations
      to various program syndicators and distributors in accordance with current
      contracts for the rights to broadcast programs. Future payments and barter
      obligations as of December 31, 2003, scheduled under contracts for programs
      available are as follows (in thousands):
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |            | Program Rights | Barter Rights
| | ---------- | -------------- | -------------
| | 2004       | $ 40,241       |              
| | 2005       | 2,789          |              
| | 2006       | 635            |              
| | 2007       |               |              
| | 2008       |               |              
| | Thereafter |               |              
| |            |                |              
| |            | $ 43,665       |              
| |            |                |              



|The Company has various agreements
      relating to non-cancelable operating leases with an initial term of one
      year or more (some of which contain renewal options), future barter and
      program rights not available for broadcast at December 31, 2003, employment
      contracts for key employees, as well as contractual redemptions of shares
      of Series A and B Preferred Stock (including dividends). Future minimum
      cash payments (and barter obligations) under the terms of these agreements
      as of December 31, 2003 are as follows:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|           | Operating
      
      Leases | Deduct 
      Operating 
      Sublease | Net 
      Operating 
      Lease 
      Commitments | Program 
      Rights | Barter 
      Rights | Employment
      
      and Talent 
      Contracts | Preferred 
      Stock 
      Redemptions
|---------- | ----------------------------- | --------------------------------------- | ---------------------------------------------------- | --------------------- | -------------------- | --------------------------------------------------- | -----------------------------------------
|           | (In thousands)               
|2004       | $   
      4,921              |                                         | $   
      (907                                      | )                     | $   
      4,014     |                                                     | $   28,187                               
|2005       | 4,143                         |                                         | (303                                                 | )                     | 3,840                |                                                     | 55,823                                   
|2006       | 3,219                         |                                         |                                                     |                       | 3,219                |                                                     | 50,677                                   
|2007       | 2,703                         |                                         |                                                     |                       | 2,703                |                                                     | 41,222                                   
|2008       | 2,452                         |                                         |                                                     |                       | 2,452                |                                                     | 23,029                                   
|Thereafter | 4,720                         |                                         |                                                     |                       | 4,720                |                                                     | 9,218                                    
|           |                               |                                         |                                                      |                       |                      |                                                     |                                          
|           | $22,158                       |                                         | $(1,210                                              | )                     | $20,948              |                                                     | $208,156                                 
|           |                               |                                         |                                                      |                       |                      |                                                     |                                          



|Rent expense, net, for operating
      leases was approximately $8.6 million, $8.6 million and $8.3 million for
      the years ended December 31, 2003, 2002 and 2001, respectively.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|From time to time, the Company
      becomes involved in various claims and lawsuits that are incidental to its
      business. In the opinion of the Company, there are no legal proceedings
      pending against the Company or any of its subsidiaries that are likely to
      have a material adverse effect on the Companys consolidated financial
      condition or results of operations.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The Company has guaranteed
      the payments by its wholly-owned unconsolidated subsidiary trust (the Capital
      Trust) on the Redeemable Convertible Preferred Securities in the amount
      of $200.0 million. See Note 7. The guarantee is irrevocable and unconditional,
      and guarantees the payment in full of all (i) distributions on the Redeemable
      Convertible Preferred Securities to the extent of available funds of the
      Capital Trust; (ii) amounts payable upon redemption of the Redeemable Convertible
      Preferred Securities to the extent of available funds of the Capital Trust;
      and (iii) amounts payable upon a dissolution of the Capital Trust. The guarantee
      is unsecured and ranks (i) subordinate to all other liabilities of the Company,
      except liabilities that are expressly made pari passu; (ii) pari
      passu with the most senior preferred stock issued by the Company, and
      pari passu with any guarantee of the Company in respect of any preferred
      stock of the Company or any preferred security of any of the Companys
      controlled affiliates; and (iii) senior to the companys Common Stock.
      The Company made the guarantee to enable the Capital Trust to issue the
      Redeemable Convertible Preferred Securities in the amount of $200.0 million
      to the holders.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 63 | 
| | -- | 



---





|HEARST-ARGYLE TELEVISION, INC.
|------------------------------



|Notes to Consolidated Financial Statements(Continued)
|------------------------------------------------------



|16. Retirement Plans and Other Post-Retirement Benefits
|-------------------------------------------------------



|Overview
|--------



|The Company maintains seven
      defined benefit pension plans, 12 employee savings plans, and other post-retirement
      benefit plans for active, retired and former employees. In addition, the
      Company participates in a multi-employer union pension plan that provides
      retirement benefits to certain union employees. The seven defined benefit
      pension plans are hereafter collectively referred to as the Pension
      Plans.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|Benefits under the Pension
      Plans are generally based on years of credited service, age at retirement
      and average of the highest five consecutive years compensation. The
      cost of the Pension Plans is computed on the basis of the Project Unit Credit
      Actuarial Cost Method. Past service cost is amortized over the expected
      future service periods of the employees.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Pension Plan
      Assets
|-------------------------



|The Pension Plans weighted
      average asset allocations as of the measurement dates September 30, 2003
      and 2002, by asset category, are as follows:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------

|               | Percentage of Plan 
      Assets as of September 30,
|-------------- | ----------------------------------------------------
|Asset Category | 2003                                                
|Equity         | 66.4%                                               
|Fixed income   | 30.4%                                               
|Real estate    | 1.7%                                                
|Other          | 1.5%                                                
|               |                                                     
|Total          | 100.0%                                              
|               |                                                     



|The assets of the Pension Plans
      are invested with the objective of being able to meet current and future
      benefit payment needs, while controlling pension expense volatility. Plan
      assets are invested with a number of investment managers and are diversified
      among equities, fixed income, real estate and other investments, as shown
      in the table above. Approximately 80% of the assets of the Pension Plans
      are invested in a master trust, which has a target allocation of approximately
      70% equities and 30% fixed income. When adding the remaining 20% of the
      assets of the Pension Plans which are outside of the master trust, the aggregate
      target allocation is comparable to that of the master trust, but with a
      slightly higher target allocation percentage for fixed income investments
      (approximately 68% equities and 32% fixed income). Each of the Pension Plans
      employs active investment management programs, and each has an Investment
      Committee which reviews the respective plans asset allocation on a
      periodic basis and determines when and how to re-balance the portfolio when
      appropriate. None of the Pension Plans has any dedicated target allocation
      to the Companys Common Stock.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Net Periodic
      Pension and Post-Retirement Cost (Benefit)
|-------------------------------------------------------------



|The following schedule presents
      net periodic pension cost (benefit) for the Companys Pension Plans
      in the years ended December 31, 2003, 2002 and 2001:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                          | Pension Benefits
|----------------------------------------- | ----------------
|                                          | 2003            
|                                          | (In thousands)  
|Service cost                              | $ 6,085         
|Interest cost                             | 6,893           
|Expected return on plan assets            | (9,346          
|Amortization of prior service cost        | 497             
|Amortization of transitional asset        | (113            
|Recognized actuarial gain                 | (40             
|                                          |                 
|Net periodic pension
      cost (benefit) | $ 3,976         
|                                          |                 

| | 64 | 
| | -- | 



---





|HEARST-ARGYLE TELEVISION, INC.
|------------------------------



|Notes to Consolidated Financial Statements(Continued)
|------------------------------------------------------



|The following schedule presents
      net periodic pension cost for the Companys post-retirement benefit
      plan in the years ended December 31, 2003, 2002 and 2001:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                        | Post-Retirement
      Benefits
|--------------------------------------- | ------------------------------
|                                        | 2003                          
|                                        | (In thousands)                
|Service cost                            | $  58                         
|Interest cost                           | 315                           
|Amortization of prior service cost      | 17                            
|Amortization of transitional obligation | 18                            
|Recognized actuarial gain               |                              
|                                        |                               
|Net periodic pension
      cost         | $408                          
|                                        |                               

|Summary Disclosure
      Schedule
|---------------------------------



|The following schedule presents
      the change in benefit obligation, change in plan assets, a reconciliation
      of the funded status, amounts recognized in the statement of financial position,
      and additional year-end information for the Companys Pension Plans.
      The measurement dates for the determination of the benefit obligation, plan
      assets, and assumptions were September 30, 2003 and 2002.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                                                                 | Pension Benefits
|-------------------------------------------------------------------------------------------------------------------------------- | ----------------
|                                                                                                                                 | 2003            
|                                                                                                                                 | (In thousands)  
|Change in benefit
      obligation:                                                                                              |                 
|Benefit
      obligation at beginning of year                                                                                    | $102,181        
|Service
      cost                                                                                                               | 6,085           
|Interest
      cost                                                                                                              | 6,893           
|Participant
      contributions                                                                                                  | 8               
|Plan
      amendments                                                                                                            |                
|Benefits
      and administrative expenses paid                                                                                  | (4,161          
|Actuarial
      loss                                                                                                             | 13,471          
|                                                                                                                                 |                 
|Benefit
      obligation at end of year                                                                                          | $124,477        
|                                                                                                                                 |                 
|Change in plan assets:                                                                                                           |                 
|Fair
      value of plan assets at beginning of year                                                                             | $  85,674       
|Actual
      gain (loss) on plan assets, net                                                                                     | 13,515          
|Employer
      contributions                                                                                                     | 2,174           
|Participant
      contributions                                                                                                  | 8               
|Benefits
      and administrative expenses paid                                                                                  | (4,161          
|                                                                                                                                 |                 
|Fair
      value of plan assets end of year                                                                                      | $  97,210       
|                                                                                                                                 |                 
|Reconciliation of funded
      status:                                                                                           |                 
|Funded
      status                                                                                                              | $ (27,267       
|Contributions
      paid during the fourth quarter                                                                               | 65              
|Unrecognized
      actuarial loss                                                                                                | 47,530          
|Unrecognized
      prior service cost                                                                                            | 2,957           
|Unrecognized
      transition asset                                                                                              | (89             
|                                                                                                                                 |                 
|Net
      amount recognized at end of year                                                                                       | $  23,137       
|                                                                                                                                 |                 
|Amounts recognized in the
      statement of financial 
          position (as of December 31,):                                 |                 
|Other
      assets                                                                                                               | $  28,397       
|Other
      liabilities                                                                                                          | (13,980         
|Accumulated
      other comprehensive loss                                                                                       | 8,720           
|                                                                                                                                 |                 
|Net
      amount recognized at end of year                                                                                       | $  23,137       
|                                                                                                                                 |                 
|Increase
      in minimum liability included in other comprehensive income                                                       | $    1,423      
|Additional year-end information
      for all defined benefit plans                                                              |                 
|Accumulated
      benefit obligation                                                                                             | $109,482        
|Additional year-end information
      for pension plans with accumulated 
         benefit obligations in excess of plan assets: |                 
|Projected
      benefit obligation                                                                                               | $ 49,955        
|Accumulated
      benefit obligation                                                                                             | $ 42,540        
|Fair
      value of plan assets                                                                                                  | $ 29,097        

| | 65 | 
| | -- | 



---





|HEARST-ARGYLE TELEVISION, INC.
|------------------------------



|Notes to Consolidated Financial Statements(Continued)
|------------------------------------------------------



|The following schedule presents
      the change in benefit obligation, change in plan assets, a reconciliation
      of the funded status, and amounts recognized in the statement of financial
      position for the Companys post-retirement benefit plan. The measurement
      dates for the determination of the benefit obligation and assumptions were
      September 30, 2003 and 2002.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                           | Post-Retirement Benefits
|------------------------------------------------------------------------------------------ | ------------------------
|                                                                                           | 2003                    
|                                                                                           | (In thousands)          
|Change in benefit obligation:                                                              |                         
|Benefit obligation at beginning of year                                                    | $ 4,446                 
|Service cost                                                                               | 58                      
|Interest cost                                                                              | 315                     
|Benefits and administrative
      expenses paid                                            | (558                    
|Actuarial loss                                                                             | 802                     
|                                                                                           |                         
|Benefit obligation at end of year                                                          | $ 5,063                 
|                                                                                           |                         
|Change in plan assets:                                                                     |                         
|Fair value of plan assets at beginning
      of year                                       | $                      
|Employer contributions                                                                     | 558                     
|Benefits and administrative
      expenses paid                                            | (558                    
|                                                                                           |                         
|Fair value of plan assets end of year                                                      | $                      
|                                                                                           |                         
|                                                                                           |                         
|Reconciliation of funded status:                                                           |                         
|Funded status                                                                              | $(5,063                 
|Contributions paid during the fourth
      quarter                                         | 106                     
|Unrecognized actuarial loss (gain)                                                         | 729                     
|Unrecognized prior service cost                                                            | 130                     
|Unrecognized transition obligation                                                         | 147                     
|                                                                                           |                         
|Net amount recognized
      at end of year                                                 | $(3,951                 
|                                                                                           |                         
|Amounts recognized in the statement of 
          financial position (as of December 31,): |                         
|Other assets                                                                               | $                      
|Other liabilities                                                                          | (3,951                  
|                                                                                           |                         
|Net amount recognized
      at end of year                                                 | $(3,951                 
|                                                                                           |                         



|Contributions
|-------------

|During the year 2004, the Company
      expects to contribute approximately $1.7 million to the Pension Plans and
      approximately $0.5 million to the post-retirement benefit plan.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Assumptions
|-----------

|The weighted-average assumptions
      used for computing the projected benefit obligation for the Companys
      Pension Plans as of the measurement dates of September 30, 2003 and 2002
      were as follows:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                              | Pension Benefits
|----------------------------- | ----------------
|                              | 2003            
|Discount rate                 | 6.25%           
|Rate of compensation increase | 4.00%           



|The weighted-average assumptions
      used for computing the net periodic pension cost (benefit) for the Companys
      Pension Plans in the years ended December 31, 2003, 2002 and 2001 were as
      follows:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                       | Post-Retirement Benefits
|------------------------------------------------------ | ------------------------
|                                                       | 2003                    
|Discount rate                                          | 6.88%                   
|Expected long-term rate of return on plan
      assets | 8.00%                   
|Rate of compensation increase                          | 4.00%                   

| | 66 | 
| | -- | 



---





|HEARST-ARGYLE TELEVISION, INC.
|------------------------------



|Notes to Consolidated Financial Statements(Continued)
|------------------------------------------------------



|To develop the expected long-term
      rate of return on assets assumptions, the Company considered the current
      level of expected returns on risk free investments (primarily government
      bonds), the historical level of the risk premium associated with the other
      asset classes in which the portfolio is invested, and the expectations for
      future returns of each asset class. The expected return for each asset class
      was then weighted based on the aggregate target asset allocation to develop
      the expected long-term rate of return on assets assumption for the portfolio.
      The expected rate of return assumption is then adjusted to reflect investment
      and trading expenses. Since the Companys investment policy is to actively
      manage certain asset classes where the potential exists to outperform the
      broader market, the expected returns for those asset classes were adjusted
      to reflect the expected additional returns. The Company reviews the expected
      long-term rate of return on an annual basis and revises it as appropriate.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The weighted-average assumptions
      used for computing the projected benefit obligation for the Companys
      post-retirement benefit plan as of the measurement dates of September 30,
      2003 and 2002 are as follows:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                    | Post-Retirement
      Benefits
|------------------- | ------------------------------
|                    | 2003                          
|Discount
      rate | 6.25%                         

|The weighted-average assumptions
      used for computing the net periodic benefit cost for the Companys
      post-retirement benefit plan in the years ended December 31, 2003, 2002
      and 2001 are as follows:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                    | Pension Benefits
|------------------- | ----------------
|                    | 2003            
|Discount
      rate | 6.88%           

|For measurement purposes, in
      determining the per capita cost of covered health care benefits, the Company
      assumed annual rates of increase of 9% to 10% for employees under age 65.
      These rates are assumed to decrease gradually to 5% by 2010 and remain at
      that level thereafter. For employees age 65 and over, the Company assumed
      annual rates of increase of 12%, decreasing gradually to 5% by 2013 and
      remaining at that level thereafter.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The assumed health care cost
      trend rates have a significant effect on the amounts reported for the health
      care plan. A one-percentage-point change in assumed health care cost trend
      rates would have the following effects:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                   | One- 
      Percentage- 
      Point 
      Increase | One- 
      Percentage- 
      Point 
      Decrease
|------------------------------------------------------------------ | ---------------------------------------------------- | ----------------------------------------------------
|                                                                   | (In
      thousands)                                
|Effect
      on total of service cost and interest cost components | $  43                                                |                                                     
|Effect
      on postretirement benefit obligation                  | $529                                                 |                                                     



|Savings Plans
|-------------



|The Companys qualified
      employees may contribute from 2% to 16% of their compensation up to certain
      dollar limits to self-directed 401(k) savings plans. In certain 401(k) savings
      plans, the Company matches in cash, one-half of the employee contribution
      up to 6% of the employees compensation. The assets in the 401(k) savings
      plans are invested in a variety of diversified mutual funds. The Company
      contributions to the 401(k) savings plans in the years ended December 31,
      2003, 2002 and 2001 were approximately $2.4 million, $2.4 million and $2.1
      million, respectively.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Multi-Employer Pension Plan
|---------------------------



|The Company participates in
      a multi-employer pension plan for providing retirement benefits to certain
      union employees. The Companys contributions to the multiemployer union
      pension plan in the years ended December 31, 2003, 2002 and 2001 were approximately
      $0.7 million each year. No information is available for each of the other
      contributing employers for this plan.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 67 | 
| | -- | 



---





|HEARST-ARGYLE TELEVISION, INC.
|------------------------------



|Notes to Consolidated Financial Statements(Continued)
|------------------------------------------------------



|17. Fair Value of Financial Instruments
|---------------------------------------



|The carrying amounts and the
      estimated fair values of the Companys financial instruments for which
      it is practicable to estimate fair value are as follows (in thousands):
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                    | December 31,
      2003 |  | December 31,
      2002
|----------------------------------- | ----------------------- |  | -----------------------
|                                    | Carrying Value          |  | Fair Value             
|Credit
      Facility               | $        
             |  | $        
            
|Senior
      Notes                  | $432,110                |  | $483,722               
|Private
      Placement Debt        | $450,000                |  | $511,989               
|Note
      Payable to Capital Trust | $206,186                |  | $239,529               



|The fair values of the Senior
      Notes were determined based on the quoted market prices. The fair values
      of the Credit Facility, the Private Placement Debt, and the Note Payable
      to Capital Trust were determined using discounted cash flow models.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|For instruments including cash
      and cash equivalents, accounts receivable, accounts payable and other debt
      the carrying amount approximates fair value because of the short maturity
      of these instruments. In accordance with the requirements of SFAS No. 107,
      Disclosures About Fair Value of Financial Instruments, the Company
      believes it is not practicable to estimate the current fair value of the
      related party receivables and related party payables because of the related
      party nature of the transactions.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|18. Quarterly Information (unaudited)
|-------------------------------------

|                                                                 | 1st Quarter | 2nd Quarter                                 | 3rd Quarter | 4th Quarter
|---------------------------------------------------------------- | ----------- | ------------------------------------------- | ----------- | -----------
|                                                                 | 2003        | 2002                                        | 2003        | 2002       
|                                                                 |             | (In thousands,
      except per share data)
|Total revenues                                                   | $           | 149,276                                     | $           | 154,922    
|Operating income                                                 | $           | 37,517                                      | $           | 46,416     
|Net income                                                       | $           | 10,057                                      | $           | 14,315     
|Income applicable to common 
          stockholders (a)          | $           | 9,739                                       | $           | 13,959     
|Income per common share basic:
      (b)                         |             |                                             |             |            
|Net income                                                       | $           | 0.11                                        | $           | 0.15       
|Number of common shares used
      
          in the calculation |             | 92,436                                      |             | 91,870     
|Income per common share diluted:
      (b)                       |             |                                             |             |            
|Net income                                                       | $           | 0.11                                        | $           | 0.15       
|Number of common shares used
      
          in the calculation |             | 92,750                                      |             | 92,118     
|Dividends per share                                              | $           |                                            | $           |           

|
|

|(a) |  | Net income applicable to common stockholders
      gives effect to dividends on the Preferred Stock issued in connection with
      the acquisition of KHBS-TV/KHOG-TV.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) |  | Per common share amounts for the quarters and
      the full years have each been calculated separately. Accordingly, quarterly
      amounts may not add to the annual amounts because of differences in the
      average common shares outstanding during each period and, with regard to
      diluted per common share amounts only, because of the inclusion of the effect
      of potentially dilutive securities only in the periods in which such effect
      would have been dilutive.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|19. Subsequent Event
|--------------------



|On January 23, 2004, the Company
      entered into an Asset Purchase Agreement with WMTW Broadcast Group, LLC
      to acquire WMTW-TV, Channel 8, the ABC affiliate serving the Portland-Auburn,
      Maine television market, for $37.5 million in cash. The transaction is conditioned
      on approval by the Federal Communications Commission and other customary
      closing conditions, and is expected to close in the second quarter of 2004.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 68 | 
| | -- | 



---







|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH
      ACCOUNTANTS ON ACCOUNTING
      AND FINANCIAL DISCLOSURE
|------- | ------------------------------------------------------------------------------------------------





|Not applicable.
|---------------



|ITEM 9A. CONTROLS AND PROCEDURES
|--------------------------------



|(a) Evaluation of Disclosure
      Controls and Procedures. We evaluated the effectiveness of the design
      and operation of our disclosure controls and procedures as of a date within
      90 days of the filing date of this annual report. Our disclosure controls
      and procedures are the controls and other procedures that have been designed
      to ensure that information required to be disclosed by us in the reports
      that are filed or submitted under the Securities Exchange Act of 1934 is
      recorded, processed, summarized and reported, within the time periods specified
      in the Securities and Exchange Commissions rules and forms. Based
      on this evaluation, David J. Barrett, our President and Chief Executive
      Officer, and Harry T. Hawks, our Executive Vice President and Chief Financial
      Officer, have concluded that these controls and procedures are effective.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) Changes in Internal
      Controls. There have been no significant changes in our internal controls
      or in other factors that could significantly affect these controls subsequent
      to the date of our evaluation, including any corrective actions with regard
      to significant deficiencies and material weaknesses.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|PART III
|--------



|ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
|-----------------------------------------------------------



|Information called for by Item
      10 is set forth under the headings Executive Officers of the Company,
      Election of Directors Proposal and Board of DirectorsGeneral
      Information in our Proxy Statement relating to the 2004 Annual Meeting
      of Stockholders (the 2004 Proxy Statement), which information
      we incorporate by reference into this report.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ITEM 11. EXECUTIVE COMPENSATION
|-------------------------------



|Information called for by Item
      11 is set forth under the heading Executive Compensation and Other
      Matters in the 2004 Proxy Statement, which information we incorporate
      by reference into this report.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
      OWNERS AND MANAGEMENT
      AND RELATED STOCKHOLDER MATTERS
|-------- | ----------------------------------------------------------------------------------------------------------





|Information called for by Item
      12 is set forth under the headings Equity Compensation Plans
      and Principal Stockholders in our 2004 Proxy Statement, which
      information we incorporate by reference into this report.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
|-------------------------------------------------------



|Information called for by Item
      13 is set forth under the heading Certain Relationships and Related
      Transactions in our 2004 Proxy Statement, which information we incorporate
      by reference into this report.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
|-----------------------------------------------



|Information called for by Item
      14 is set forth under the heading Independent Auditors Fees
      in the 2004 Proxy Statement, which information we incorporate by reference
      into this report.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|PART IV
|-------



|ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
      REPORTS ON FORM 8-K
|-------------------------------------------------------------------------------



|(a) Financial Statements,
      Schedules and Exhibits
|------------------------------------------------------



|(1) The financial statements
      listed in the Index for Item 8 hereof are filed as part of this report.
|----------------------------------------------------------------------------------------------------------



|(2) The financial statement
      schedules required by Regulation S-X are included as part of this report
      or are included in the information provided in the Notes to Consolidated
      Financial Statements, which are filed as part of this report.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 69 | 
| | -- | 



---







|SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
|---------------------------------------------



|HEARST-ARGYLE TELEVISION, INC.
|------------------------------

|Description                          | Balance at 
      Beginning of 
      Year |  | Additions 
      Charged to 
      Costs and 
      Expenses |  | Deductions   |      | Balance at 
      End of 
      Year
|------------------------------------ | ------------------------------------------ |  | ------------------------------------------------------------ |  | ------------ | ---- | ------------------------------------
|Year Ended December 31, 2001:        |                                            |  |                                                              |  |              |      |                                     
|Allowance for uncollectible accounts | $3,807,000                                 |  | $5,702,000                                                   |  | $(2,154,000  | )(1) |                                     
|Year Ended December 31, 2002:        |                                            |  |                                                              |  |              |      |                                     
|Allowance for uncollectible accounts | $7,355,000                                 |  | $3,864,000                                                   |  | $(6,517,000  | )(1) |                                     
|Year Ended December 31, 2003:        |                                            |  |                                                              |  |              |      |                                     
|Allowance for uncollectible accounts | $4,702,000                                 |  | $   298,000                                                  |  | $   (891,000 | )(1) |                                     

|
|

|(1) | Net write-off
      of accounts receivable.
|--- | -------------------------------------------



|(3) The following exhibits
      are filed as a part of this report:
|--------------------------------------------------------------------



| | Exhibit 
      No. |  | Description
| | ------------------ |  | -----------

| | 21.1 |  | List of subsidiaries of the Company.
| | ---- |  | ------------------------------------



| | 23.1 |  | Consent of Deloitte & Touche LLP.
| | ---- |  | ---------------------------------



| | 24.1 |  | Powers of Attorney (contained on signature page
      hereto).
| | ---- |  | --------------------------------------------------------------



| | 31.1 |  | Certification by David J. Barrett, President
      and Chief Executive Officer, pursuant to Section 302 of the Sarbanes Oxley
      Act of 2002.
| | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------



| | 31.2 |  | Certification by Harry T. Hawks, Executive Vice
      President and Chief Financial Officer, pursuant to Section 302 of the Sarbanes
      Oxley Act of 2002.
| | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 32.1 |  | Certification by David J. Barrett, President
      and Chief Executive Officer, and Harry T. Hawks, Executive Vice President
      and Chief Financial Officer, pursuant to Section 906 of the Sarbanes Oxley
      Act of 2002.
| | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) Reports on Form 8-K
|-----------------------



|We furnished the following
      reports on Form 8-K during the fourth quarter of 2003:
|---------------------------------------------------------------------------------------



| | (1) | On October 16, 2003, we furnished a Current Report
      on Form 8-K reporting the issuance of a press release providing earnings
      guidance for our quarterly period ending September 30, 2003.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | On October 29, 2003, we furnished a Current
      Report on Form 8-K reporting the issuance of a press release relating to
      financial results and earnings for our quarterly period ending September
      30, 2003.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | On December 10, 2003, we furnished a Current
      Report on Form 8-K reporting the filing of presentation materials to be
      used at media investment conferences.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(c) Exhibits
|------------



|The following documents are
      filed or incorporated by reference as exhibits to this report.
|------------------------------------------------------------------------------------------------

| | 70 | 
| | -- | 



---





|EXHIBITS
|--------



| | Exhibit
      No. |  | Description                                                                                                                                                                                                                                                                                                                                          
| | ----------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2.1               |  | Amended and Restated Agreement and Plan of Merger,
      dated as of March 26, 1997, among The Hearst Corporation, HAT Merger Sub,
      Inc., HAT Contribution Sub, Inc. and Argyle (incorporated by reference to
      Appendix A of the proxy statement/prospectus included in our Registration
      Statement on Form S-4 (File No. 333-32487)).



| | 2.2 |  | Amended and Restated Agreement and Plan of Merger,
      dated as of May 25, 1998, by and among Pulitzer Publishing Company, Pulitzer
      Inc. and the Company (incorporated by reference to Annex I to our Registration
      Statement on Form S-4 (File No. 333-72207)).
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3.1 |  | Amended and Restated Certificate of Incorporation
      of the Company (incorporated by reference to Appendix C of the proxy statement/prospectus
      included in our Registration Statement on Form S-4 (File No. 333-32487)).
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3.2 |  | Amended and Restated Bylaws of the Company (incorporated
      by reference to Exhibit 3.2 of our Form S-4 (File No. 333-72207)).
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------



| | 3.3 |  | Amendment No. 1 to the Amended and Restated
      Certificate of Incorporation of the Company (incorporated by reference to
      Exhibit 3.3 of our Form 10-K for the fiscal year ended December 31, 1998).
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.1 |  | Indenture, dated as of November 13, 1997, between
      the Company and Bank of Montreal Trust Company, as trustee (incorporated
      by reference to Exhibit 4.1 of our Current Report on Form 8-K dated November
      12, 1997 (File No. 000-27000)).
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.2 |  | First Supplemental Indenture, dated as of November
      13, 1997, between the Company and Bank of Montreal Trust Company, as trustee
      (incorporated by reference to Exhibit 4.2 of our Current Report on Form
      8-K dated November 12, 1997 (File No. 000-27000)).
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.3 |  | Global Note representing $125,000,000 of 7%
      Senior Notes Due November 15, 2007 (incorporated by reference to Exhibit
      4.3 of our Current Report on Form 8-K dated November 12, 1997 (File No.
      000-27000)).
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.4 |  | Global Note representing $175,000,000 of 7 1/2%
      Debentures Due November 15, 2027 (incorporated by reference to Exhibit 4.4
      of our Current Report on Form 8-K dated November 12, 1997 (File No. 000-27000)).
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.5 |  | Second Supplemental Indenture, dated as of January
      13, 1998, between the Company and Bank of Montreal Trust Company, as trustee
      (incorporated by reference to Exhibit 4.3 of our Current Report on Form
      8-K dated January 13, 1998 (File No. 000-27000)).
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.6 |  | Specimen of the stock certificate for the Companys
      Series A Common Stock, $.01 par value per share (incorporated by reference
      to Exhibit 4.11 of our Form 10-K for the fiscal year ended December 31,
      1998).
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.7 |  | Form of Registration Rights Agreement among
      the Company and the Holders (incorporated by reference to Exhibit B to Exhibit
      2.1 of our Schedule 13D/A, filed on September 5, 1997 (File No. 005-45627)).
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.8 |  | Form of Note Purchase Agreement, dated December
      1, 1998, by and among the Company, as issuer of the notes to be purchased
      thereunder and the note purchasers named therein (including form of note
      attached as an exhibit thereto) (incorporated by reference to Exhibit 4.13
      of our Registration Statement on Form S-4 (File No. 333-72207)).
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.9 |  | Amended and Restated Declaration of Trust of
      Hearst-Argyle Capital Trust (incorporated by reference to Exhibit 99.1 of
      our Current Report on Form 8-K dated December 20, 2001).
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 71 | 
| | -- | 



---







| | Exhibit
      No. |  | Description                                                                                                                                                                                                                                               
| | ----------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 4.10              |  | Terms of 7.5% Series A and Series B Convertible
      Preferred Securities and 7.5% Series A and Series B Convertible Common Securities
      (incorporated by reference to Exhibit 99.2 of our Current Report on Form
      8-K dated December 20, 2001).



| | 4.11 |  | Indenture, dated as of December 20, 2001, by
      Hearst-Argyle Television, Inc. to Wilmington Trust Company, as Trustee (incorporated
      by reference to Exhibit 99.3 of our Current Report on Form 8-K dated December
      20, 2001).
| | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.12 |  | Registration Rights Agreement, by and among
      Hearst-Argyle Television, Inc. and the purchasers of the Trust Preferred
      Securities (incorporated by reference to Exhibit 99.4 of our Current Report
      on Form 8-K dated December 20, 2001).
| | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.1 |  | Affiliation Agreement between combined Communications
      Corporation of Oklahoma, Inc. (re: KOCO) and ABC (incorporated by reference
      to Exhibit 10.8(b) of our Form 10-K for the fiscal year ending December
      31, 1996 (File No. 000-27000)).
| | ---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.2 |  | Affiliation Agreement between Tak Communications,
      Inc. (re: KITV) and ABC, dated November 4, 1994 and Satellite Television
      Affiliation Agreements, dated December 5, 1994 (incorporated by reference
      to Exhibit 10.5(d) of our Registration Statement on Form S-1 (File No. 33-96026)).
| | ---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.3 |  | Form of Affiliation Agreement between Northstar
      Television of Jackson, Inc. (re: WAPT) and ABC, dated April 10, 1997 (incorporated
      by reference to Exhibit 10.5(e) of our Registration Statement on Form S-1
      (File No. 33-96026)).
| | ---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.4 |  | Primary Television Affiliation Agreement for
      television Station KMBC, dated April 26, 1988, by and between Capital Cities/ABC,
      Inc. and The Hearst Corporation (incorporated by reference to Exhibit 10.1
      of our Quarterly Report for the quarter ended September 30, 1997 (File No.
      000-27000)).
| | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.5 |  | Primary Television Affiliation Agreement for
      television Station WCVB, dated November 21, 1989, by and between Capital
      Cities/ABC, Inc. and The Hearst Corporation (incorporated by reference to
      Exhibit 10.2 of our Quarterly Report for the quarter ended September 30,
      1997 (File No. 000-27000)).
| | ---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.6 |  | Primary Television Affiliation Agreement for
      television Station WISN, dated November 2, 1990, by and between Capital
      Cities/ABC, Inc. and The Hearst Corporation (incorporated by reference to
      Exhibit 10.3 of our Quarterly Report for the quarter ended September 30,
      1997 (File No. 000-27000)).
| | ---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.7 |  | Primary Television Affiliation Agreement for
      Television Station WTAE, dated July 14, 1989, by and between Capital Cities/ABC,
      Inc. and The Hearst Corporation (incorporated by reference to Exhibit 10.4
      of our Quarterly Report for the quarter ended September 30, 1997 (File No.
      000-27000)).
| | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.8 |  | Form of Services Agreement between The Hearst
      Corporation and the Company (incorporated by reference to Exhibit 10.5 of
      our Current Report on Form 8-K dated August 29, 1997 (File No. 000-27000)).
| | ---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.9 |  | Asset Exchange Agreement between Hearst-Argyle
      Stations, Inc., STC Broadcasting, Inc., STC Broadcasting of Vermont, Inc.,
      STC License Company and STC Broadcasting of Vermont Subsidiary, Inc., dated
      February 18, 1998 (incorporated by reference to Exhibit 10.27 of our Form
      10-K for the fiscal year ended December 31, 1997 (File No. 000-27000)).
| | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.10 |  | Guaranty, given as of February 18, 1998 by the
      Company to STC Broadcasting Inc., STC Broadcasting of Vermont, Inc., STC
      License Company and STC Broadcasting of Vermont Subsidiary, Inc. (incorporated
      by reference to Exhibit 10.28 of our Form 10-K for the fiscal year ended
      December 31, 1997 (File No. 000-27000)).
| | ----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 72 | 
| | -- | 



---





| | Exhibit
      No. |  | Description                                                                                                                                        
| | ----------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.11             |  | Employee Stock Purchase Plan (incorporated by
      reference to Exhibit 10.34 of our Form 10-K for the fiscal year ended December
      31, 1998).



| | 10.12 |  | Form of Five-Year Credit Agreement, dated as
      of April 12, 1999, between Hearst-Argyle Television, Inc., the Lenders party
      thereto, The Chase Manhattan Bank, Chase Securities Inc., The Bank of Montreal,
      The Bank of New York and TD Securities (USA) Inc. (incorporated by reference
      to Exhibit 10.2 of our Quarterly Report for the quarter ended March 31,
      1999).
| | ----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.13 |  | Amendment No. 1, dated as of August 1, 2001,
      in respect of the Five-Year Credit Agreement dated as of April 12, 1999
      (incorporated by reference to Exhibit 10.1 of our Quarterly Report for the
      quarter ended September 30, 2001).
| | ----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.14 |  | Amendment No. 2, dated as of December 19, 2001,
      in respect of the Five-Year Credit Agreement dated as of April 12, 1999
      (incorporated by reference to Exhibit 10.18 of our Form 10-K for the fiscal
      year ended December 31, 2001).
| | ----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.15 |  | Employment Agreement, dated as of June 1, 2001,
      between the Company and David J. Barrett (incorporated by reference to Exhibit
      10.19 of our Form 10-K for the fiscal year ended December 31, 2001).
| | ----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.16 |  | Option Agreement, dated as of June 5, 2000,
      between Hearst-Argyle Properties, Inc. and Emmis Communications Corporation
      (incorporated by reference to Exhibit 10.1 of our Quarterly Report for the
      quarter ended June 30, 2000).
| | ----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.17 |  | Letter Agreement between the Company and NBC
      Television Network dated June 30, 2000 (incorporated by reference to Exhibit
      10.2 of our Quarterly Report for the quarter ended September 30, 2000).
| | ----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.18 |  | Consulting Agreement, dated January 1, 2001,
      between the Company and Argyle Communications, Inc. (incorporated by reference
      to Exhibit 10.2 of our Quarterly Report for the quarter ended March 31,
      2001).
| | ----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.19 |  | Employment Agreement, dated January 1, 2003,
      between the Company and Philip M. Stolz (incorporated by reference to Exhibit
      10.20 of our Annual Report on 10-K for the year ended December 31, 2002).
| | ----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.20 |  | Amended and Restated 1997 Stock Option Plan
      (incorporated by reference to Exhibit 10.21 of our Annual Report on 10-K
      for the year ended December 31, 2002).
| | ----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.21 |  | 2003 Incentive Compensation Plan (incorporated
      by reference to Exhibit 10.22 of our Annual Report on 10-K for the year
      ended December 31, 2002).
| | ----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------





| | 21.1 |  | List of Subsidiaries of the Company.
| | ---- |  | ------------------------------------



| | 23.1 |  | Consent of Deloitte & Touche LLP.
| | ---- |  | ---------------------------------



| | 24.1 |  | Powers of Attorney (contained on signature page).
| | ---- |  | -------------------------------------------------



| | 31.1 |  | Certification by David J. Barrett, President
      and Chief Executive Officer, pursuant to Section 302 of the Sarbanes Oxley
      Act of 2002.
| | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------



| | 31.2 |  | Certification by Harry T. Hawks, Executive Vice
      President and Chief Financial Officer, pursuant to Section 302 of the Sarbanes
      Oxley Act of 2002.
| | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 32.1 |  | Certification by David J. Barrett, President
      and Chief Executive Officer, and Harry T. Hawks, Executive Vice President
      and Chief Financial Officer, pursuant to Section 906 of the Sarbanes Oxley
      Act of 2002.
| | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 73 | 
| | -- | 



---





|SIGNATURES
|----------



|Pursuant to the requirements
      of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company
      has duly caused this report to be signed on its behalf by the undersigned,
      thereunto duly authorized.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|    |  | HEARST-ARGYLE TELEVISION, INC.                                                                            
|--- |  | ----------------------------------------------------------------------------------------------------------
|    |  |                                                                                                           
|By: |  | /s/
      JONATHAN C. MINTZER                                                                             
|    |  | Name: Jonathan C. Mintzer 
      Title: Vice President, Secretary and General CounselDated: March 12, 2004



|POWER OF ATTORNEY
|-----------------



|KNOW ALL MEN AND WOMEN BY THESE
      PRESENTS that each of the undersigned directors and officers of Hearst-Argyle
      Television, Inc. constitutes and appoints David J. Barrett, Harry T. Hawks
      and Jonathan C. Mintzer or any of them, his or her true and lawful attorney-in-fact
      and agent, for him or her and in his or her name, place and stead, in any
      and all capacities, with full power to act alone, to sign any and all amendments
      to this report, and to file each amendment to this report, with all exhibits,
      and any and all other documents in connection therewith, with the Securities
      and Exchange Commission, hereby granting unto said attorney-in-fact and
      agent full power and authority to do and perform any and all acts and things
      requisite and necessary to be done in and about the premises as fully to
      all intents and purposes as he or she might or could do in person, hereby
      ratifying and confirming all that said attorney-in-fact and agent may lawfully
      do or cause to be done by virtue hereof.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Pursuant to the requirements
      of the Securities Exchange Act of 1934, this report has been signed below
      by the following persons on behalf of the Company in the capacities indicated.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                             |  |                                                                                                         |  |               
| | --------------------------- |  | ------------------------------------------------------------------------------------------------------- |  | --------------
| | Signatures                  |  | Title                                                                                                   |  | Date          
| |                             |  |                                                                                                         |  |               
| | /S/ DAVID J. BARRETT        |  | President(Principal Executive
           Officer and Director
            (Principal Executive Officer) |  | March 12, 2004
| | David J. Barrett            |  |                                                                                                         | 
| |                             |  |                                                                                                         |  |               
| | /S/ HARRY T. HAWKS          |  | Executive Vice President and 
      Chief Financial Officer 
      (Principal Financial Officer)        |  | March 12, 2004
| | Harry T. Hawks              |  |                                                                                                         | 
| |                             |  |                                                                                                         |  |               
| | /S/ J. BRADFORD HINCKLEY    |  | Corporate Controller
      (Principal Accounting Officer)                                               |  | March 12, 2004
| | J. Bradford
      Hinckley  |  |                                                                                                         |  |               
| |                             |  |                                                                                                         |  |               
| | /S/ VICTOR F. GANZI         |  | Chairman of the
      Board                                                                             |  | March 12, 2004
| | Victor F. Ganzi             |  |                                                                                                         |  |               
| |                             |  |                                                                                                         |  |               
| | /S/ FRANK A. BENNACK, JR.   |  | Director                                                                                                |  | March 12, 2004
| | Frank A. Bennack,
      Jr. |  |                                                                                                         |  |               
| |                             |  |                                                                                                         |  |               
| | /S/ JOHN G. CONOMIKES       |  | Director                                                                                                |  | March 12, 2004
| | John G. Conomikes           |  |                                                                                                         |  |               
| |                             |  |                                                                                                         |  |               
| | /S/ KEN J. ELKINS           |  | Director                                                                                                |  | March 12, 2004
| | Ken J. Elkins               |  |                                                                                                         |  |               
| |                             |  |                                                                                                         |  |               

| | 74 | 
| | -- | 



---



| |                            |  |          |  |               
| | -------------------------- |  | -------- |  | --------------
| | Signatures                 |  | Title    |  | Date          
| |                            |  |          |  |               
| | /S/ GEORGE R. HEARST       |  | Director |  | March 12, 2004
| | George R. Hearst           |  |          | 
| |                            |  |          |  |               
| | /S/ WILLIAM R. HEARST III  |  | Director |  | March 12, 2004
| | William R. Hearst III      |  |          | 
| |                            |  |          |  |               
| | /S/ BOB MARBUT             |  | Director |  | March 12, 2004
| | Bob
      Marbut           |  |          |  |               
| |                            |  |          |  |               
| | /S/ GILBERT C. MAURER      |  | Director |  | March 12, 2004
| | Gilbert
      C. Maurer    |  |          |  |               
| |                            |  |          |  |               
| | /S/ MICHAEL E. PULITZER    |  | Director |  | March 12, 2004
| | Michael
      E. Pulitzer  |  |          |  |               
| |                            |  |          |  |               
| | /S/ DAVID PULVER           |  | Director |  | March 12, 2004
| | David Pulver               |  |          |  |               
| |                            |  |          |  |               
| | /S/ VIRGINIA H. RANDT      |  | Director |  | March 12, 2004
| | Virginia
      H. Randt    |  |          |  |               
| |                            |  |          |  |               
| | /S/ CAROLINE L. WILLIAMS   |  | Director |  | March 12, 2004
| | Caroline
      L. Williams |  |          |  |               
| |                            |  |          |  |               

| | 75 | 
| | -- |