<PAGE>

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                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                               ----------------

                                   Form 10-K

                       FOR ANNUAL AND TRANSITION REPORTS
                    PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

(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, 1999
                                      or

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

   For the transition period from           to

                         Commission file number 0-2700

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

<TABLE>
    <S>                                                    <C>
                    Delaware                                   74-2717523
         (State or other jurisdiction of                    (I.R.S. Employer
         incorporation or organization)                    Identification No.)
               888 Seventh Avenue
                  New York, NY                                    10106
    (Address of principal executive Offices)                    (Zip code)
</TABLE>

      Registrant's telephone number, including area code: (212) 887-6800

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

<TABLE>
    <S>                               <C>
          Title of Each Class         Name of Each Exchange On Which Registered
          -------------------         -----------------------------------------
    Series A Common Stock, par value           New York Stock Exchange
             $.01 per share
</TABLE>

          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]

  The aggregate market value of the Registrant's voting stock held by
nonaffiliates on March 27, 2000, 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 $693,008,654.

  Shares of Common Stock outstanding as of March 27, 2000: 92,791,200 shares
(consisting of 51,492,552 shares of Series A Common Stock and 41,298,648
shares of Series B Common Stock).

  DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Company's Proxy
Statement relating to the 2000 Annual Meeting of Stockholders are incorporated
by reference into Part III (Items 10, 11, 12 and 13).

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<PAGE>

                          FORWARD-LOOKING STATEMENTS

  THE FORWARD-LOOKING STATEMENTS CONTAINED IN THIS REPORT, CONCERNING, AMONG
OTHER THINGS, INCREASES IN NET REVENUES AND BROADCAST CASH FLOW (AS DEFINED
HEREIN) AND REDUCTIONS IN OPERATING EXPENSES, INVOLVE RISKS AND UNCERTAINTIES,
AND ARE SUBJECT TO CHANGE BASED ON VARIOUS IMPORTANT FACTORS, INCLUDING THE
IMPACT OF CHANGES IN NATIONAL AND REGIONAL ECONOMIES, SUCCESSFUL INTEGRATION
OF ACQUIRED TELEVISION STATIONS (INCLUDING ACHIEVEMENT OF SYNERGIES AND COST
REDUCTIONS), PRICING FLUCTUATIONS IN LOCAL AND NATIONAL ADVERTISING AND
VOLATILITY IN PROGRAMMING COSTS.
                                    PART I

ITEM 1. BUSINESS

  As of March 27, 2000, Hearst-Argyle Television, Inc. (the "Company") owned
or managed 26 television stations that reached approximately 17.5% of U.S.
television households, and seven radio stations. The Company is one of the
country's largest independent, or non-network-owned, TV station groups. The
Company is also the largest ABC affiliate group and the second largest NBC
affiliate group.

  The Company was formed in 1994 as a Delaware corporation under the name
Argyle Television, Inc. ("Argyle"), and its business operations began in
January 1995 with the consummation of its acquisition of three television
stations. Pursuant to a merger transaction that was consummated on August 29,
1997 and effective September 1, 1997 (the "Hearst Transaction"), The Hearst
Corporation ("Hearst") contributed its television broadcast group and related
broadcast operations (the "Hearst Broadcast Group") to Argyle and merged a
wholly owned subsidiary of Hearst with and into Argyle, with Argyle as the
surviving corporation (renamed "Hearst-Argyle Television, Inc."). The merger,
however, was accounted for as a purchase of Argyle by Hearst in a reverse
acquisition.

  Effective June 1, 1998, the Company completed a tax-deferred exchange (the
"STC Swap") with STC Broadcasting, Inc. and certain related entities
(collectively, "STC") whereby the Company exchanged its television stations
WNAC-TV, Providence, Rhode Island, and WDTN-TV, Dayton, Ohio, for STC's
television stations KSBW-TV, Monterey-Salinas, California, and WPTZ-TV/WNNE-
TV, Plattsburgh, New York-- Burlington, Vermont. Divestiture of WNAC and WDTN
was required under the order of the Federal Communications Commission (the
"FCC") approving the Hearst Transaction.

  On January 5, 1999 (effective January 1, 1999 for accounting purposes) the
Company acquired, through a merger transaction (the "Kelly Merger") with Kelly
Broadcasting Co., a California limited partnership ("Kelly Broadcasting"),
television broadcast station KCRA-TV, Sacramento, California and the
programming rights under an existing Time Brokerage Agreement with Channel 58,
Inc., a California corporation ("Channel 58"), with respect to KQCA-TV,
Sacramento, California. In addition, the Company acquired substantially all of
the assets and certain of the liabilities of Kelleproductions, Inc., a
California corporation ("Kelleproductions" and together with the Kelly Merger,
the "Kelly Transactions").

  Further, on March 18, 1999, the Company acquired, through a merger
transaction (the "Pulitzer Merger") with Pulitzer Publishing Company, a
Delaware corporation ("Pulitzer"), television stations WESH-TV, Orlando,
Florida, WYFF-TV, Greenville, South Carolina, WDSU-TV, New Orleans, Louisiana,
WGAL-TV, Lancaster, Pennsylvania, WXII-TV, Greensboro, North Carolina, WLKY-
TV, Louisville, Kentucky, KOAT-TV, Albuquerque, New Mexico, KCCI-TV, Des
Moines, Iowa, and KETV-TV, Omaha, Nebraska; and radio stations KTAR-AM, KMVP-
AM and KKLT-FM, Phoenix, Arizona, WXII-AM, Greensboro, North Carolina, and
WLKY-AM, Louisville, Kentucky.

  In September 1999, the Company invested $2 million in Geocast Network
Systems, Inc. ("Geocast") in return for an equity interest in Geocast. Geocast
will use a portion of the Company's stations' digital broadcast spectrum as
part of a new digital network infrastructure to deliver a program service,
which includes the local stations' content and other national content and
services, to personal computer users. The Company has agreed to provide a
portion of this local station content to Geocast pursuant to an agreement
between the Company and Geocast.
<PAGE>

  In December 1999, the Company invested $20 million of cash in Internet
Broadcasting Systems, Inc. ("IBS") in exchange for an equity interest in IBS.
As of December 31, 1999, the Company had a 26% equivalent interest in IBS. The
Company and IBS have also formed a series of local partnerships for the
development and management of local news/information/entertainment portal
websites.

  As of March 27, 2000, 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 Series B Common Stock, par value $.01 per
share, of the Company (the "Series B Common Stock," and together with the
Series A Common Stock, par value $.01 per share, of the Company, the "Series A
Common Stock," the "Common Stock") and approximately 27.4% of the issued and
outstanding shares of the Series A Common Stock, representing in the aggregate
approximately 59.7% of the outstanding voting power of the Common Stock.
Through its ownership of the Series B Common Stock, Hearst Broadcasting is
entitled to elect as a class all but two members of the Board of Directors of
the Company (the "Board"). Holders of the Series A Common Stock, together with
the Company's 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 the Company's Board. In connection with Hearst's contribution
of its broadcast group to Argyle on August 29, 1997, Hearst agreed that, for
as long as it held any shares of Series B Common Stock and to the extent that
Hearst during such time also held any shares of Series A Common Stock, it
would vote its shares of Series A Common Stock with respect to the election of
directors only in the same proportion as the shares of Series A Common Stock
not held by Hearst are so voted. The Series A Common Stock is listed on the
NYSE under the symbol "HTV."

  The Company is organized under the laws of the State of Delaware and its
principal executive offices are located at 888 Seventh Avenue, New York, New
York 10106, (212) 887-6800.

Recent Developments

  Following is a brief description of the developments of the Company's
business since January 1, 2000:

  Acquisition of KQCA. On January 31, 2000, the Company acquired, pursuant to
a Stock Purchase Agreement, dated November 30, 1999, by and among the Company
and the shareholders of Channel 58, all of the outstanding shares of Channel
58 for $850,000. Channel 58 owned the television station KQCA-TV, to which the
Company had the right to provide programming since January 5, 1999, pursuant
to a Time Brokerage Agreement.

  Additional Investment in Geocast. On February 25, 2000, the Company invested
an additional $8 million of cash in Geocast in return for an additional equity
investment in Geocast.

  Investment in CFN. In March 2000, the Company invested $25 million in
Consumer Financial Network, Inc. ("CFN"). CFN, an online provider of consumer
financial information, will become a content provider and advertiser on the
Company's stations and local websites.

The Stations

  Of the 26 television stations the Company owns or manages, 19 are in the top
50 of the 211 generally recognized geographic designated market areas ("DMAs")
according to A.C. Nielsen Co. ("Nielsen") estimates for the 1999-2000
television broadcasting season. The Company owns 23 television stations and
five radio stations. In addition, the Company manages two television stations
(WMOR-TV in the Tampa, Florida market (formerly known as WWWB-TV) and WPBF-TV
in the West Palm Beach, Florida market) and two radio stations (WBAL(AM) and
WIYY(FM) in Baltimore, Maryland), that are owned by Hearst. The Company also
provides management services to Hearst in order to allow Hearst to fulfill its
obligations under a Program Service and

                                       2
<PAGE>

Time Brokerage Agreement between Hearst and the licensee of KCWE-TV in Kansas
City, Missouri (the "Missouri LMA"). Prior to the Company's purchase of all of
the outstanding stock of Channel 58 on January 31, 2000, the Company also
programmed and sold a portion of the air time on KQCA-TV (Sacramento, CA)
under a Time Brokerage Agreement with Channel 58, the then-licensee of KQCA-TV
(the "California LMA"). For the year ended December 31, 1999, on a pro forma
basis, the Company's total revenues and broadcast cash flow were $707.8
million and $323.3 million, respectively.

  The following table sets forth certain information for each of the Company's
owned and managed television stations:

<TABLE>
<CAPTION>
                                                                   Percentage
                                                                       of
                                                                      U.S.
                           Market  Television   Network            Television
         Market            Rank(1)  Station   Affiliation Channel Households(2)
         ------            ------  ---------- ----------- ------- ------------
<S>                        <C>     <C>        <C>         <C>     <C>
Boston, MA...............     6       WCVB        ABC          5      2.20%
Tampa, FL(3).............    13       WMOR        IND         32      1.47%
Sacramento, CA...........    19       KCRA        NBC          3      1.15%
Sacramento, CA...........    19       KQCA        WB          58        --
Pittsburgh, PA...........    20       WTAE        ABC          4      1.13%
Orlando, FL..............    22       WESH        NBC          2      1.09%
Baltimore, MD............    24       WBAL        NBC         11      1.00%
Kansas City, MO..........    31       KMBC        ABC          9      0.81%
Kansas City, MO(3).......    31       KCWE        UPN         29        --
Cincinnati, OH...........    32       WLWT        NBC          5      0.81%
Milwaukee, WI............    33       WISN        ABC         12      0.81%
Greenville, SC...........    35       WYFF        NBC          4      0.73%
New Orleans, LA..........    41       WDSU        NBC          6      0.63%
West Palm Beach, FL(3)...    43       WPBF        ABC         25      0.62%
Oklahoma City, OK........    45       KOCO        ABC          5      0.60%
Lancaster, PA............    46       WGAL        NBC          8      0.60%
Greensboro-Winston Salem,
 NC......................    47       WXII        NBC         12      0.59%
Louisville, KY...........    48       WLKY        CBS         32      0.57%
Albuquerque, NM..........    49       KOAT        ABC          7      0.57%
Des Moines, IA...........    70       KCCI        CBS          8      0.39%
Honolulu, HI.............    71       KITV        ABC          4      0.38%
Omaha, NE................    73       KETV        ABC          7      0.37%
Jackson, MS..............    89       WAPT        ABC         16      0.30%
Burlington,
 VT/Plattsburgh, NY......    91    WPTZ/WNNE      NBC       5/31      0.29%
Monterey-Salinas, CA.....   112       KSBW        NBC          8      0.22%
Ft. Smith/Fayetteville,
 AR......................   118    KHBS/KHOG    ABC/ABC    40/29      0.23%
                                                                     -----
   Total.................                                            17.56%
                                                                     =====
</TABLE>
--------
(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 211 generally recognized DMAs in the U.S.,
    based on Nielsen estimates for the 1999-2000 season.
(2) Based on Nielsen estimates for the 1999-2000 season.
(3) WMOR-TV and WPBF-TV television stations are managed by the Company under a
    management agreement with Hearst. In addition, the Company provides
    certain management services to Hearst in order to allow Hearst to fulfill
    its obligations under a Program Services and Time Brokerage Agreement
    between Hearst and the licensee of KCWE-TV in Kansas City, Missouri.

                                       3
<PAGE>

  The following table sets forth certain information for each of the Company's
owned and managed radio stations:

<TABLE>
<CAPTION>
                                           Market    Radio
                    Market                 Rank(1)  Station        Format
                    ------                 ------- --------- -------------------
     <S>                                   <C>     <C>       <C>
     Phoenix, AR..........................    15   KTAR-(AM)        News
                                                   KMVP-(AM)       Sports
                                                   KKLT-(FM)     Light Rock
     Baltimore, MD(2).....................    20   WBAL-(AM)        News
                                                   WIYY-(FM) Album Oriented Rock
     Greensboro-Winston Salem, NC.........    42   WXII-(AM)        News
     Louisville, KY.......................    53   WLKY-(AM)        News
</TABLE>
--------
(1) Market rank is based on Duncan's 1999 Radio Market Guide.
(2) WBAL-(AM) and WIYY-(FM) radio stations are managed by the Company under a
    management agreement with Hearst.

  The Company has an option to acquire WMOR-TV and Hearst's interests and
option with respect to KCWE-TV (together with WMOR-TV, the "Option
Properties"), as well as a right of first refusal until approximately August
2000 with respect to WPBF-TV (if such station is proposed by Hearst to be sold
to a third party). The option period for each Option Property commenced in
February 1999 and terminates in August 2000 and the purchase price is the fair
market value of the station as determined by the parties, or an independent
third-party appraisal, subject to certain specified parameters. If Hearst
elects to sell an Option Property prior to the commencement of, or during, the
option period, the Company will have a right of first refusal to acquire such
Option Property. The exercise of the option and the right of first refusal
will be by action of the independent directors of the Company, and any option
exercise may be withdrawn by the Company after receipt of the third-party
appraisal.

Network Affiliation Agreements and Relationship

  General. Each of the Company's owned or managed television stations
(collectively, the "Stations") is affiliated with one of the following major
networks pursuant to a network affiliation agreement: ABC, NBC, CBS, UPN and
WB (each, a "Network"), except WMOR-TV, in Tampa, Florida which is currently
operating as an independent station. Each affiliation agreement provides the
affiliated Station with the right to rebroadcast all programs transmitted by
the Network with which the Station is affiliated. In return, the Network has
the right to sell a substantial majority of the advertising time during such
broadcasts. Generally, in exchange for every hour that a Station broadcasts
network programming, the Network pays the Station a specified network
compensation payment, which varies with the time of day. Typically, prime-time
programming generates the highest hourly network compensation payments. Eleven
of the Stations have network affiliation agreements with ABC, 10 of the
Stations have agreements with NBC, two of the Stations have agreements with
CBS, one of the Stations has an agreement with WB and one of the Stations has
an agreement with UPN. In addition, three of the Company's radio stations have
affiliation agreements with networks that provide certain content (i.e., news,
sports, etc.) for such stations. The Company's radio stations are less
dependent on their affiliation agreements for programming. Although the
Company does not expect that its network affiliation agreements will be
terminated and expects to continue to be able to renew its network affiliation
agreements, no assurance can be given that such agreements will not be
terminated or that renewals will be obtained on as favorable terms or at all.

  ABC. Generally, the term of each affiliation agreement with ABC is two
years, renewable for successive two-year periods, and each affiliation
agreement is subject to cancellation by either party upon six months notice to
the other party. In the case of WTAE, the affiliation agreement is not subject
to cancellation on six months notice, and the term of the affiliation
agreement will be successively renewed unless either party gives the other
notice of non-renewal six months prior to the end of the then current term. In
the case of KITV, the affiliation agreement is not expressly renewable but is
effective through January 2005. In the case of WAPT, the affiliation

                                       4
<PAGE>

agreement is for a term of 10 years (through March 5, 2005). In the case of
WPBF, the affiliation agreement is for a term of 8 years (through August 30,
2003). In the case of KETV and KOAT, the affiliation agreements are each for a
term of 10 years (through November 1, 2004). In the case of KOCO, the term of
affiliation has been extended through December 31, 2004. In 1994 negotiations
commenced to renew the ABC affiliation agreements relating to the ABC
affiliates acquired in the Hearst Transaction to provide for, among other
things, 10-year terms and increased compensation. Such agreements are still in
the process of negotiation and documentation has not yet been finalized,
although the Company is receiving its increased compensation. In addition, the
Company has agreed to certain modifications in the compensation package with
ABC as a result of the Monday Night Football package.

  NBC. The term of the NBC affiliation agreement with WBAL is a period of
seven years (through January 1, 2003) and is subject to successive three-year
renewals unless either party gives the other notice of non-renewal 12 months
prior to the end of the then current term. The NBC affiliation agreement for
WLWT is for an initial term of six years (through August 28, 2000) and is
renewable for successive four-year terms unless either party gives notice of
intent not to renew at least six months prior to the end of the initial or any
successive term. The NBC affiliation agreement with KCRA is for an initial
term of six years (through January 1, 2001) and is subject to successive five
year renewals unless either party gives notice of intent not to renew at least
12 months prior to the end of the initial or any successive term. In order to
avoid automatic renewals, NBC has given the Company notice of non-renewal with
respect to the affiliation agreements for WBAL, WLWT and KCRA. The Company has
commenced discussions with NBC to renew these affiliation agreements. The NBC
affiliation agreements for WDSU, WYFF, WXII, WGAL and WESH are for an initial
term of 10 years (commencing January 1, 1995) and are subject to successive
five year renewals unless either party gives notice of intent not to renew at
least 12 months prior to the end of the initial or any successive term. The
NBC affiliation agreements with WPTZ and WNNE are for an initial term of seven
years (commencing January 1, 1995) and are subject to successive three year
renewals unless either party gives notice of intent not to renew at least 12
months prior to the end of the initial or any successive term. The term of the
NBC affiliation agreement with KSBW is from January 17, 1996 to December 31,
2005 and is subject to successive five year renewals unless either party gives
notice of intent not to renew at least 12 months prior to the end of the
initial or any successive term.

  CBS. The term of the CBS affiliation agreements with KCCI and WLKY are for
an initial term of 10 years (through June 30, 2005) and are subject to
successive five year renewals unless either party gives notice of intent not
to renew at least six months prior to the end of the initial or any successive
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 is
for a term of five years (through September 30, 2003). Unlike affiliates of
ABC or NBC, WB affiliates may be required to pay the network compensation
based upon ratings generated by the station in return for the broadcast rights
to the network's programming. Both UPN and WB have the right to terminate
their affiliation agreements in the event of a material breach of such
agreement by a station and in certain other circumstances.

The Commercial Television Broadcasting Industry

  General. Commercial television broadcasting began in the United States 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 FCC. Television stations
that broadcast over the VHF band (channels 2-13) of the spectrum generally
have some 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 and the expansion of cable television
systems, however, have reduced to some extent the VHF signal advantage.

  All television stations in the country are grouped by Nielsen, a national
audience measuring service, into 211 generally recognized television markets
that are ranked in size according to various formulae based upon actual or
potential audience. Each market is designated as an exclusive geographic area
consisting of all counties

                                       5
<PAGE>

in which the home-market commercial stations receive the greatest percentage
of total viewing hours. These specific geographic markets are referred to by
Nielsen as "designated market areas" ("DMAs"). Nielsen periodically publishes
data on estimated audiences for the television stations in the various markets
throughout the country. The estimates are expressed in terms of the percentage
of the total potential audience in the market viewing a station (the station's
"rating") and of the percentage of households using television actually
viewing the station (the station's "share"). Nielsen provides such data on the
basis of total television households and selected demographic groupings in the
market. Nielsen uses two methods of determining a station's ability to attract
viewers. In larger geographic markets, ratings are determined by a combination
of meters connected directly to selected television sets and weekly diaries of
television viewing, while in smaller markets only weekly diaries are utilized.

  Historically, three major broadcast networks--ABC, NBC and CBS--dominated
broadcast television. In recent years, however, Fox effectively has evolved
into the fourth major network, even though it produces seven hours less of
prime time programming than the other major networks. In addition, UPN, The WB
and, more recently, PaxTV have been launched as television networks. Stations
that operate without network affiliations are referred to as "independent"
stations. All of the Stations are affiliated with networks, except WMOR, which
became an independent station as of October 1, 1999. It is unclear as to how
certain proposed transactions involving ownership of networks (e.g. a proposed
CBS/Viacom transaction) would, if consummated, affect broadcast television.

  The affiliation by a station with one of the four major networks has a
significant impact on the composition of the station's programming, revenues,
expenses and operations. A typical affiliate of a major network receives the
majority of each day's programming from the network. This programming, along
with cash payments ("Network Compensation"), is provided to the affiliate by
the network in exchange for a substantial majority of the advertising time
sold during the airing of network programs. The network then sells this
advertising time for its own account. The affiliate retains the revenues from
time sold during breaks in and between network programs and during programs
produced by the affiliate or purchased from non-network sources. In acquiring
programming to supplement programming supplied by the affiliated network,
network affiliates compete primarily with other affiliates and independent
stations in their markets. Cable systems generally do not compete with local
stations for programming, although various national cable networks from time
to time have acquired programs that otherwise would have been offered to local
television stations. In addition, a television station may acquire programming
though barter arrangements. Under barter arrangements, a national program
distributor may receive advertising time in exchange for the programming it
supplies, with the station paying either a reduced fee or no fee for such
programming.

  A fully independent station, unlike a network-affiliated station, purchases
or produces all of the programming that it broadcasts, resulting in generally
higher programming costs. The independent station, however, may retain its
entire inventory of advertising time and all of the revenues obtained
therefrom.

  Television station revenues are derived primarily from local, regional and
national advertising and, to a much lesser extent, from Network Compensation
and revenues from studio or tower rental and commercial production activities.
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 broadcast 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 the 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

                                       6
<PAGE>

by candidates for political offices, and demand for advertising time in
Olympic broadcasts. From time to time, proposals have been advanced in the
U.S. Congress and at the FCC to require television broadcast stations to
provide advertising time to political candidates at no or reduced charge,
which would eliminate in whole or in part advertising revenues from political
candidates.

  Through the 1970s, network television broadcasting enjoyed virtual dominance
in viewership and television advertising revenues, because network-affiliated
stations competed only with each other in local markets. Beginning in the
1980s, this level of dominance began to change, as the FCC authorized more
local stations and marketplace choices expanded with the growth of independent
stations and cable television services. Cable television systems were first
installed in significant numbers in the 1970s and were initially used
primarily to retransmit broadcast television programming to paying subscribers
in areas with poor broadcast signal reception. In the aggregate, cable-
originated programming has emerged as a significant competitor for viewers of
broadcast television programming, although no single cable programming network
regularly attains audience levels equivalent to any of the major broadcast
networks and, collectively, the broadcast originated signals still constitute
the majority of viewing in most cable homes. The advertising share of cable
networks has increased during the 1970s, 1980s and 1990s as a result of the
growth in cable penetration (the percentage of television households that are
connected to a cable system). Notwithstanding such increases in cable
viewership and advertising, over-the-air broadcasting remains the dominant
distribution system for mass market television advertising.

  Competition. The television broadcast industry is highly competitive. Some
of the stations that compete with the Stations are owned and operated by large
national or regional companies that may have greater resources, including
financial resources, than the Company. Competition in the television industry
takes place on several levels: competition for audience, competition for
programming (including news) and competition for advertisers. Additional
factors material to a television station's competitive position include signal
coverage and assigned frequency.

  Further advances in technology may increase competition for household
audiences and advertisers. Video compression techniques, now in use with
direct broadcast satellites and, potentially soon, in development for 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 alter the competitive dynamics for advertising expenditures. The
Company is unable to predict the effect that technological changes will have
on the broadcast television industry or the future results of the Stations.

  The television broadcasting industry continually is faced with such
technological change and innovation, the possible rise in popularity of
competing entertainment and communications media and governmental restrictions
or actions of federal regulatory bodies, including the FCC and the Federal
Trade Commission, any of which could have a material effect on the Stations.
Technological innovation, and the resulting proliferation of programming
alternatives such as cable, direct satellite-to-home services, pay-per-view
and home video and entertainment systems have fractionalized television
viewing audiences and subjected television broadcast stations to new types of
competition. Over the past decade, cable television has captured an increasing
market share, while the aggregate viewership of the major television networks
has declined. In addition, the expansion of cable television and other
industry changes have increased, and may continue to increase, competitive
demand for programming. Such increased demand, together with rising production
costs, may in the future increase the Company's programming costs or impair
its ability to acquire programming.

  The Stations compete for audience on the basis of program popularity, which
has a direct effect on advertising rates. A majority of the daily programming
on the Stations is supplied by the network with which each such station is
affiliated. In time periods in which the network provides programming, the
Stations are

                                       7
<PAGE>

primarily dependent upon the performance of the network programs in attracting
viewers. Each Station competes in non-network time periods based on the
performance of its programming during such time periods, using a combination
of self-produced news, public affairs and other entertainment programming,
including news and syndicated programs, that such station believes will be
attractive to viewers.

  The Stations compete for television viewership share against local network-
affiliated and independent stations, as well as against cable and alternate
methods of television transmission. These other transmission methods can
increase competition for a station by bringing into its market distant
broadcasting signals not otherwise available to the station's audience and
also by serving as a distribution system for non-broadcast programming
originated on the cable system.

  Other sources of competition for the Stations include home entertainment
systems (including video cassette recorder and playback systems, videodiscs
and television game devices), the Internet, multipoint distribution systems,
multichannel multipoint distribution systems or "wireless cable" satellite
master antenna television systems and some low power, in-home satellite
services. The Stations also face competition from high-powered direct
broadcast satellite services, such as EchoStar and DIRECTV, which transmit
programming directly to homes equipped with special receiving antennas. The
Stations 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).

  Programming is a significant factor in determining the overall profitability
of any television broadcast station. Competition for non-network programming
involves negotiating with national program distributors or syndicators that
sell first-run and off-network packages of programming. The Stations compete
against in-market broadcast stations for exclusive access to off-network
reruns (such as Seinfeld) and first-run product (such as the Oprah Winfrey
Show). Cable systems generally do not compete with local stations for
programming, although various national cable networks from time to time have
acquired programs that otherwise would have been offered to local television
stations.

  Advertising rates are based upon the size of the market in which a station
operates, a program's popularity among the viewers an advertiser wishes to
attract, the number of advertisers competing for the available time, the
demographic makeup of the market served by the station, the availability of
alternative advertising media in the market area, the aggressiveness and
knowledgeability of sales forces and the development of projects, features and
programs that tie advertiser messages to programming. Advertising rates also
are determined by a station's overall ability to attract viewers in its
market, as well as the station's ability to attract viewers among particular
demographic groups that an advertiser may be targeting. Broadcast television
stations compete for advertising revenues with other broadcast television
stations and with the print media, radio stations and cable system operators
serving the same market. Additional competitors for advertising revenues
include a variety of other media, including direct marketing. 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 for advertising dollars.

Federal Regulation of Television Broadcasting

  General. Broadcasting is subject to the jurisdiction of the FCC under the
Communications Act of 1934, as amended (the "Communications Act"), most
recently amended further by the Telecommunications Act of 1996 (the
"Telecommunications Act"). The Communications Act prohibits the operation of
television broadcasting stations except under a license issued by the FCC and
empowers the FCC, among other actions, to issue, renew, revoke and modify
broadcasting licenses; assign frequency bands; determine stations'
frequencies, locations and power; regulate the equipment used by stations;
adopt other regulations to carry out the provisions of the Communications Act;
impose penalties for violation of such regulations; and, impose fees for
processing applications and other administrative functions. The Communications
Act prohibits the assignment of a license

                                       8
<PAGE>

or the transfer of control of a licensee without prior approval of the FCC.
Under the Communications Act, the FCC also regulates certain aspects of the
operation of cable television systems and other electronic media that compete
with broadcast stations.

  Pulitzer Merger. On March 18, 1999, pursuant to authority granted to it by
the FCC, the Company consummated its acquisition of the Pulitzer Stations.
Because the Company's acquisition of certain of the Pulitzer Stations was not
in compliance with the FCC's then-existing television duopoly rule, which
prohibited the common ownership of television broadcast stations with
overlapping Grade B signal contours, the FCC's consent to the Pulitzer
Transaction was subject to certain conditions.

  First, because WGAL(TV), Lancaster, Pennsylvania, and WBAL-TV, Baltimore,
Maryland, have overlapping Grade A signal contours, the FCC granted the
Company a six-month waiver of the then-current television duopoly rule to
allow for the temporary common ownership of WGAL and WBAL-TV. Accordingly,
absent a modification of the TV duopoly rule to permit the common ownership of
those stations or an extension of the temporary waiver period, the Company
would have been required to file an application with the FCC by September 18,
1999 to divest either WGAL or WBAL-TV. Second, certain of the other stations
acquired pursuant to the Pulitzer transaction have Grade B, but not Grade A,
signal contour overlap with other of the Company's stations. Because it had
initially proposed to change the duopoly rule standard to allow the common
ownership of such stations, the FCC granted the Company waivers, conditioned
upon the outcome of the FCC's then-pending rulemaking proceeding, of its then-
existing TV duopoly rule to enable the Company to commonly own: (a) WMOR-TV,
Lakeland, Florida (then WWWB-TV), and WESH-TV, Daytona Beach, Florida; and (b)
WLWT-TV, Cincinnati, Ohio, and WLKY-TV, Louisville, Kentucky.

  On August 5, 1999, the FCC adopted a Report and Order announcing certain
changes to its broadcast ownership rules. The rule changes, which became
effective on November 16, 1999, permit the common ownership of television
stations regardless of signal contour overlap provided that the stations are
in separate DMAs. On November 16, 1999, the Company filed with the FCC
showings demonstrating that the common ownership of WGAL and WBAL-TV, WMOR-TV
and WESH-TV, and WLWT-TV and WLKY-TV is permissible under the new ownership
rules. On February 29, 2000, the FCC confirmed that the Company's ownership of
all of these stations is in full compliance with the revised ownership rules.

  Kelly Transaction. The Company consummated its acquisition of KCRA-TV, and
the rights under the KQCA Time Brokerage Agreement, from Kelly Broadcasting on
January 5, 1999. Because the Grade A contour of KCRA-TV overlaps with the
Grade A contour of the Company's KSBW-TV, Salinas, California, the FCC's
consent to the acquisition of KCRA-TV was conditioned upon (a) the Company
completing, by October 5, 1999, a modification of the KSBW facilities that
would have eliminated the Grade A signal contour overlap between the stations;
and (b) the outcome of the FCC's then-pending rulemaking considering changes
to the TV duopoly rule that would allow the common ownership of KCRA-TV and
the modified KSBW-TV. Because KCRA-TV and KSBW-TV are located in separate
DMAs, their common ownership is permissible under the FCC's revised ownership
rules. Accordingly, in a November 16, 1999 filing with the FCC, the Company
demonstrated that the common ownership of the stations is in accord with the
new ownership rules. On February 29, 2000, the FCC confirmed that the
Company's ownership of KCRA-TV and KSBW-TV is in full compliance with the new
ownership rules.

  In addition, because the FCC's revised TV duopoly rule now permits the
ownership of two television stations in the same DMA if at least eight
independently owned and operating full-power television stations remain in the
market and at least one of the two stations is not among the top four-ranked
stations in the market based on audience share, the Company was able to
acquire KQCA(TV) which, along with the Company's KCRA-TV, is located in the
Sacramento, California, market. The KQCA acquisition was consummated on
January 31, 2000. As noted above, the Company had been providing programming
to KQCA(TV) pursuant to the KQCA Time Brokerage Agreement since January 5,
1999.

  License Renewals. The process for renewal of broadcast station licenses as
set forth under the Communications Act has undergone significant change as a
result of the Telecommunications Act. Prior to the

                                       9
<PAGE>

passage of the Telecommunications Act, television broadcasting licenses
generally were granted or renewed for a period of five years upon a finding by
the FCC that the "public interest, convenience and necessity" would be served
thereby. Under the Telecommunications Act, the statutory restriction on the
length of broadcast licenses has been amended to allow the FCC to grant
broadcast licenses for terms of up to eight years. The Telecommunications 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 a person other than the
renewal applicant. Under the Telecommunications Act, 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 main station
licenses of the Company's television stations:

<TABLE>
<CAPTION>
      Station                                          Expiration of FCC License
      -------                                          -------------------------
      <S>                                              <C>
      WCVB............................................     April 1, 2007
      WMOR............................................     February 1, 2005
      KCRA............................................     December 1, 2006
      KQCA............................................     December 1, 2006
      WTAE............................................     August 1, 2007
      WESH............................................     February 1, 2005
      WBAL............................................     October 1, 2004
      KMBC............................................     February 1, 2006
      KCWE*...........................................     February 1, 2006
      WLWT............................................     October 1, 2005
      WISN............................................     December 1, 2005
      WYFF............................................     December 1, 2004
      WDSU............................................     June 1, 2005
      WPBF............................................     February 1, 2005
      KOCO............................................     June 1, 2006
      WGAL............................................     August 1, 2007
      WXII............................................     December 1, 2004
      WLKY............................................     August 1, 2005
      KOAT............................................     October 1, 2006
      KOCT (satellite station of KOAT)................     October 1, 2006
      KOVT (satellite station of KOAT)................     October 1, 2006
      KCCI............................................     February 1, 2006
      KITV............................................     February 1, 2007
      KHVO (satellite station of KITV)................     February 1, 2007
      KMAU (satellite station of KITV)................     February 1, 2007
      KETV............................................     June 1, 2006
      WAPT............................................     June 1, 2005
      WPTZ............................................     June 1, 2007
      WNNE............................................     April 1, 2007
      KSBW............................................     December 1, 2006
      KHBS............................................     June 1, 2005
      KHOG (satellite station of KHBS)................     June 1, 2005
</TABLE>
--------
* The Company provides certain management services to Hearst pursuant to a
  Management Agreement which allows Hearst to fulfill its obligations under a
  certain Programming Services and Time Brokerage Agreement between Hearst and
  KCWE-TV, Inc., the licensee of KCWE.

                                      10
<PAGE>

  Ownership Regulation. The Communications Act, FCC rules and regulations and
the Telecommunications Act also regulate broadcast ownership. The FCC has
promulgated rules that, among other matters, limit 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 as well as
other specified mass media entities. As detailed below, in August 1999, the
FCC substantially revised a number of its multiple ownership and attribution
rules. In three separate orders, the FCC revised its rules regarding
measurements of and limitations on national television ownership, restrictions
of local television ownership and radio-television cross-ownership, and
attribution of broadcast ownership interests. The three orders, which resolve
a number of rulemaking proceedings launched at the beginning of the decade,
take into consideration mandates included in the Telecommunications Act, which
liberalized the radio ownership rules and directed the FCC to consider similar
deregulation for television. The FCC's various broadcast ownership rules,
inclusive of the recent revisions, are summarized below.

  Local Radio Ownership. With respect to radio licenses, 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 method
prescribed by the FCC. 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 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.

  Local Television Ownership. The FCC's new TV duopoly rule permits parties to
own two television stations without regard to signal contour overlap provided
they are located in separate DMAs. In addition, the new 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 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 numbers 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 simply rebroadcast
the programming of a "parent" station will continue to be exempt from the
duopoly rule if located in the same DMA as the "parent" station. The duopoly
rule also applies to same-market local marketing agreements ("LMAs") involving
more than 15% of the brokered station's program time, although current LMAs
will be exempt from the television duopoly rule for a limited period of time
of either two or five years, depending on the LMA's date of adoption. Further,
the FCC may grant a waiver of the television duopoly rule if one of the two
television stations is a "failed" or "failing" station, or the proposed
transaction would result in the construction of a new television station. The
Company is currently in full compliance with the FCC's television duopoly rule
and the Missouri LMA, pursuant to which programming is provided to KCWE in
Kansas City, Missouri has been grandfathered until the conclusion of the FCC's
biennial review of its broadcast ownership rules in 2004.

  National Television Ownership Cap. On the national level, the FCC imposes a
35% national audience reach cap for television ownership, under which one
party may have an attributable interest in television stations which reach no
more than 35% of all U.S. television households. The FCC discounts the
audience reach of a UHF station for this purpose by 50%. The FCC will consider
whether to change the national ownership cap and the "UHF Discount" as part of
the biennial review of its broadcast ownership rules initiated in 1998.
Additionally, under the new FCC rules, for entities that have attributable
interests in two stations in the same market, the FCC counts the audience
reach of that market only once for national cap purposes.

  Radio-Television Cross Ownership. The so-called "one-to-a-market" rule has
until recently prohibited common ownership or control of a radio station,
whether AM, FM or both, and a television station in the same market, subject
to waivers in some circumstances. The FCC's new radio-television cross-
ownership rule embodies 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 or, if permissible under the
new TV duopoly rule, two television stations and six radio stations.

                                      11
<PAGE>

  Waivers of the new radio-television cross-ownership rule will be granted
only under the failed station test. Unlike under the TV duopoly rule, the FCC
will not waive the radio-television cross-ownership rules in situations of
failing or unbuilt stations.

  Newspaper-Broadcast Cross-Ownership. The FCC's 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. A waiver of
the newspaper cross-ownership restriction may be obtained where application of
the rule would be "unduly harsh."

  In 1996, the FCC opened an inquiry to review specifically the
newspaper/radio waiver policy, and in 1997 the Newspaper Association of
America ("NAA") filed a Petition for Rulemaking, seeking complete elimination
of the newspaper cross-ownership restrictions. This rule is also part of the
FCC's broad 1998 biennial review of ownership rules. The FCC has not, however,
indicated a timetable for action in any of these proceedings. With all of
these proceedings still pending after the FCC has opened the door to numerous
media consolidations under the three August 1999 orders, NAA filed an
emergency petition in August 1999 seeking immediate action suspending
enforcement of the newspaper cross-ownership rule, or temporarily relaxing its
waiver policy.

  Cable-Television Cross-Ownership. The FCC's rules prohibit common control of
a television station and a cable television system that serves a community
encompassed in whole or in part by the television station's predicted Grade B
signal contour. These cross-ownership restrictions will be considered in the
FCC's biennial review. The FCC's revised attribution rules for broadcast
ownership (detailed below) also apply to the cable-television cross-ownership
provision.

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

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

  .  voting stock interests of at least 5% (however, equity interests up to
     49% are nonattributable if the licensee is controlled by a single
     majority shareholder and the interest holder is not otherwise
     attributable under the "equity/debt plus" standard set forth below);

  .  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.

  Importantly, all non-conforming interests acquired before November 7, 1996
are permanently grandfathered and thus do not constitute attributable
ownership interests.

  Alien Ownership. The Communications Act restricts the ability of foreign
entities or individuals to own or hold interests in broadcast licenses. Non-
U.S. citizens, collectively, may directly or indirectly own or vote up to 20%
of the capital stock of a corporate licensee. In addition, a broadcast license
may not be granted to or held by any corporation that is controlled, directly
or indirectly, by any other corporation more than one-fourth of whose capital
stock is owned or voted by non-U.S. citizens or their representatives, by
foreign governments or their representatives, or by non-U.S. corporations, if
the FCC finds that the public interest will be served by the refusal or
revocation of such license. The FCC has interpreted this provision of the
Communications Act to require an affirmative public interest finding before a
broadcast license may be granted to or held by any such corporation, and the
FCC has made such affirmative finding only in limited circumstances.

                                      12
<PAGE>

  Local Marketing Agreements. Under LMAs, the licensee of one station provides
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. Thus, in the future with respect to
markets in which the Company owns television stations, the Company generally
will not be able to enter into an LMA with another television station in the
same market if it cannot acquire that station under the revised television
duopoly rule.

  In adopting these new rules concerning television 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 at the time of the new
rules and were entered into before November 5, 1996, were allowed to continue
at least through 2004, when the FCC is scheduled to undertake a comprehensive
review and re-evaluation of its broadcast ownership rules. The Missouri LMA,
pursuant to which programming is provided to KCWE in Kansas City, Missouri has
been grandfathered until the conclusion of the FCC's biennial review of its
broadcast ownership rules in 2004.

Other Regulations, Legislation and Recent Developments Affecting Broadcast
Stations

  General. The FCC has reduced significantly its regulation of the programming
and other operations of broadcast stations, including elimination of formal
ascertainment requirements and guidelines concerning the amounts of certain
types of programming and commercial matter that may be broadcast. There are,
however, FCC rules and policies, and rules and policies of other federal
agencies, that regulate matters such as network-affiliate relations, cable
systems' carriage of syndicated and network programming on distant stations,
political advertising practices, obscene and indecent programming, application
procedures and other areas affecting the business or operations of broadcast
stations.

  Children's Television Programming. The FCC has also adopted rules to
implement the Children's Television Act of 1990, which, among other matters,
limit the permissible amount of commercial matter in children's programs and
require each television station to present "educational and informational"
children's programming. The FCC has adopted renewal processing guidelines that
effectively require television stations to broadcast an average of three hours
per week of children's educational programming.

  Closed Captioning. The FCC has adopted rules requiring closed captioning of
all broadcast television programming. The rules require generally that (i) 95%
of all new programming first published or exhibited on or after January 1,
1998 must be closed captioned within eight years, and (ii) 75% of "old"
programming which first aired prior to January 1, 1998 must be closed
captioned within 10 years, subject to certain exemptions.

  Television Violence. The Telecommunications Act contains a number of
provisions relating to television violence. First, pursuant to the
Telecommunications Act, the television industry has developed a ratings system
which the FCC has approved. Furthermore, also pursuant to the
Telecommunications Act, the FCC has adopted rules requiring certain television
sets to include the so-called "V-chip," a computer chip that allows blocking
of rated programming. Under these rules, all television receiver models with
picture screens 13 inches or greater were required to have the "V-chip" by
January 1, 2000. In addition, the Telecommunications Act requires that all
television license renewal applications filed after May 1, 1995 contain
summaries of written comments and suggestions received by the station from the
public regarding violent programming.

  Equal Employment Opportunity. In April 1998, the U.S. Court of Appeals for
the D.C. Circuit concluded that the FCC's Equal Employment Opportunity ("EEO")
regulations were unconstitutional. The FCC responded to the court's ruling in
September 1998 by suspending certain reporting requirements and commencing a
proceeding to consider new rules that would not be subject to the court's
constitutional objections. In January 2000, the FCC adopted new EEO rules,
which:

  .  require broadcast licensees to widely disseminate information about job
     openings to all segments of the community; and

                                      13
<PAGE>

  .  give broadcasters the choice of implementing two FCC-suggested
     supplemental recruitment measures or, alternatively, designing their own
     broad recruitment/outreach programs.

The FCC also reinstated its former requirement that broadcasters file annual
employment reports with the FCC. The new rules are the subject of appeals
which have been consolidated in the U.S. Court of Appeals for the D.C.
Circuit.

  The 1992 Cable Act. The FCC has adopted various regulations to implement
certain provisions of the Cable Television Consumer Protection and Competition
Act of 1992 ("1992 Cable Act") which, among other matters, includes provisions
respecting the carriage of television stations' signals by cable systems. The
signal carriage, or "must carry," provisions of the 1992 Cable Act 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 included a retransmission consent provision that prohibits
cable operators and other multi-channel video programming distributors from
carrying broadcast signals without obtaining the station's consent in certain
circumstances. 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. The Company
has entered into an agreement with Lifetime Entertainment Services
("Lifetime"), an entity owned 50% by an affiliate of Hearst and 50% by ABC,
whereby Lifetime has the right to negotiate the grant of retransmission
consent rights on behalf of the Company's owned and managed television
stations in return for compensation to be paid to the Company by Lifetime in
respect thereof.

  The Telecommunications Act amended the 1992 Cable Act in certain important
respects. Most notably, the Telecommunications Act repealed the cross-
ownership ban between cable and telephone entities, and established certain
means by which common carriers may enter into the video programming
marketplace (including common carriage of video traffic, as cable system
operators and as operators of open video systems). These actions, among other
regulatory developments, permit involvement by telephone companies and cable
companies in providing video services.

  Digital Television Service. The FCC has taken a number of steps to implement
digital television broadcasting service in the United States. The FCC has
adopted a digital television table of allotments that provides all authorized
television stations with a second channel on which to broadcast a digital
television signal. The FCC has attempted to provide digital television
coverage areas that are comparable to stations' existing service areas. The
FCC has ruled that television broadcast 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 has required affiliates of
ABC, NBC, CBS and Fox in the top 30 markets to begin digital broadcasting by
November 1, 1999, and all other broadcasters must follow suit by May 1, 2002.

                                      14
<PAGE>

  The Company's digital television implementation schedule is as follows:

<TABLE>
<CAPTION>
                                                                FCC Mandated
                                                                Timetable For
                                       Market  Analog    DTV   Construction of
           Station (Affiliation)       Rank(1) Channel Channel DTV Facilities
           ---------------------       ------- ------- ------- ---------------
     <S>                               <C>     <C>     <C>     <C>
     WCVB, Boston, MA (ABC)...........     6       5      20   May 1, 1999
     WMOR, Tampa, FL
      (Independent)(2)................    13      32      19   May 1, 2002
     KCRA, Sacramento, CA (NBC).......    19       3      35   Nov. 1, 1999
     KQCA, Sacramento, CA (WB)........    19      58      46   May 1, 2002
     WTAE, Pittsburgh, PA (ABC).......    20       4      51   Nov. 1, 1999
     WESH, Orlando, FL (NBC)(3).......    22       2      11   Nov. 1, 1999
     WBAL, Baltimore, MD (NBC)........    24      11      59   Nov. 1, 1999
     KMBC, Kansas City, MO (ABC)......    31       9      14   May 1, 2002
     KCWE, Kansas City, MO (WB)(2)....    31      29      31   May 1, 2002
     WLWT, Cincinnati, OH (NBC).......    32       5      35   Nov. 1, 1999
     WISN, Milwaukee, WI (ABC)........    33      12      34   May 1, 2002
     WYFF, Greenville, SC (NBC).......    35       4      59   May 1, 2002
     WDSU, New Orleans, LA (NBC)......    41       6      43   May 1, 2002
     WPBF, West Palm Beach, FL
      (ABC)(2)........................    43      25      16   May 1, 2002
     KOCO, Oklahoma City, OK (ABC)....    45       5      16   May 1, 2002
     WGAL, Lancaster, PA (NBC)........    46       8      58   May 1, 2002
     WXII, Winston-Salem, NC (NBC)....    47      12      31   May 1, 2002
     WLKY, Louisville, KY (CBS).......    48      32      26   May 1, 2002
     KOAT, Albuquerque, NM (ABC)......    49       7      21   May 1, 2002
     KOCT, Carlsbad, NM (ABC).........    49       6      19   May 1, 2002
     KOVT, Silver City, NM (ABC)......    49      10      12   May 1, 2002
     KOFT, Farmington, NM (ABC).......    49       3       8   May 1, 2002
     KCCI, Des Moines, IA (CBS).......    70       8      31   May 1, 2002
     KITV, Honolulu, HI (ABC).........    71       4      40   May 1, 2002
     KMAU, Wailuku, HI (ABC)..........    71      12      29   May 1, 2002
     KHVO, Hilo, HI (ABC).............    71      13      18   May 1, 2002
     KETV, Omaha, NE (ABC)............    73       7      20   May 1, 2002
     WAPT, Jackson, MS (ABC)..........    89      16      21   May 1, 2002
     WPTZ, Plattsburgh, NY (NBC)......    91       5      14   May 1, 2002
     WNNE, Hartford, VT (NBC).........    91      31      25   May 1, 2002
     KSBW, Monterey, CA (NBC).........   112       8      43   May 1, 2002
     KHBS, Fort Smith, AR (ABC).......   118      40      21   May 1, 2002
     KHOG, Fayetteville, AR (ABC).....   118      29      15   May 1, 2002
</TABLE>
--------
(1)  Market rank is based on the relative size of the DMA among the 211
     generally recognized DMAs in the U.S., based on Nielsen estimates for the
     1999-2000 season.
(2)  WMOR-TV and WPBF-TV are managed by the Company under the Management
     Agreement with Hearst. In addition, the Company provides certain
     management services to Hearst in order to allow Hearst to fulfill its
     obligations under Program Services and Time Brokerage Agreement with
     KCWE-TV, Inc., the licensee of KCWE-TV.
(3)  WESH-TV has not commenced digital broadcasting. The Company has obtained
     an extension from the FCC regarding the commencement of digital
     broadcasting at WESH-TV.

  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 non-digital broadcasting and return one of their two channels to the
government, allowing that spectrum to be recovered for other uses. Under the
Balanced Budget Act, 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 one or more television stations affiliated with ABC,
NBC, CBS and Fox is not broadcasting digitally, and the FCC determines that
such stations have "exercised due diligence" in attempting to convert to
digital broadcasting; or less than 85% of the television households in the

                                      15
<PAGE>

station's market subscribe to a multichannel video service that carries at
least one digital channel from each of the local stations in that market, and
less than 85% of the television households in the market can receive digital
signals off the air using either a set-top converter box for an analog
television set or a new digital television set.

  The FCC is currently considering whether cable television system operators
should be required to carry stations' digital television signals in addition
to the currently required carriage of stations' analog signals. In July 1998,
the FCC issued a Notice of Proposed Rulemaking posing several different
options for the carriage of digital signals and solicited comments from all
interested parties. The FCC has yet to issue a decision on this matter.

  The FCC also is considering the impact of low power television ("LPTV")
stations on digital broadcasting. Currently, stations in the LPTV service are
authorized with "secondary" frequency use status, and, as such, may not cause
interference to, and must accept interference from, full service television
stations. With the conversion to digital television now underway, LPTV
stations, which already were required to protect existing analog television
stations, are now required to protect the new digital television stations and
allotments as well. Thus, if an LPTV station causes interference to a new
digital television station, the LPTV station must either find a suitable
replacement channel or, if unable to do so, cease operating. In recognition of
the consequences the digital television transition could have on many LPTV
stations, Congress enacted a law in November 1999 creating a new "Class A"
LPTV service that will afford some measure of primary status (i.e.,
interference protection) to certain qualifying LPTV stations. Thus, in the
future, full service television stations will have to provide interference
protection to all LPTV stations certified as Class A. In accordance with the
recently enacted law, in January 2000, the FCC sought comment on proposed
rules for the new Class A television service. Congress has directed the FCC to
finalize its rules by March 28, 2000. The Company cannot predict the form of
the new rules or the impact of such rules on the Company's operation.

  In December 1999, the FCC commenced a proceeding seeking comment on the
public interest obligations of television broadcast licensees. Specifically,
the FCC is requesting information in four general areas: (1) the new
flexibility and capabilities of digital television, such as multiple channel
transmission; (2) service to local communities in terms of providing
information on public interest activities and disaster relief; (3) enhancing
access to the media by persons with disabilities and using digital television
to encourage diversity in the digital era; and (4) enhancing the quality of
political discourse. The FCC stated that it was not proposing new rules or
policies, but merely seeking to create a forum for public debate on how
broadcasters can best serve the public interest during and after the
transition to digital television.

  The implementation of digital television will also impose substantial
additional costs on television stations because of the need to replace
equipment and because some stations will need to operate at higher utility
cost. There can be no assurance that the Company's television stations will be
able to increase revenue to offset such costs. In addition, the
Telecommunications Act allows the FCC to charge a spectrum fee to broadcasters
who use the digital spectrum for purposes other than 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. The Company cannot predict what future actions the FCC might
take with respect to digital television, nor can the Company predict the
effect of the FCC's present digital television implementation plan or such
future actions on the Company's business. The Company will incur considerable
expense in the conversion of digital television and is 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 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. Direct broadcast satellite systems claim to
provide visual picture quality comparable to that found in movie theaters and
aural quality comparable to digital audio compact disks. The Company cannot
predict the impact of direct broadcast satellite systems on the Company's
business.

  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
<PAGE>

DBS viewers and directed the FCC to initiate rulemaking proceedings to
implement the new system. Under SHVIA, satellite carriers are permitted to
retransmit local signals of television broadcasters for a period of six months
from the November 29, 1999 enactment of SHVIA, without receiving
retransmission consent. After the six-month period, satellite carriers will be
required to enter into retransmission consent agreements to allow for
satellite carriage of local television stations. The agreement between the
Company and Lifetime also applies to the grant of DBS retransmission consent
rights, for which Lifetime will also compensate the Company. 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,
beginning January 1, 2002. 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).

  Digital Audio Radio Service. The FCC has authorized or is considering
various digital audio radio services ("DARS"). In January 1995, the FCC
adopted rules to allocate spectrum for satellite DARS. The FCC has issued two
authorizations to launch and operate satellite DARS service. The FCC also has
undertaken an inquiry into the terrestrial broadcast of DARS signals. On
November 1, 1999, the FCC issued a Notice of Proposed Rulemaking on the
subject which solicits comments or proposals to implement terrestrial DARS,
including a conversion to in-band on-channel transmissions by existing radio
broadcasters addressing, among other things, the need for spectrum outside the
existing FM band and the role of existing broadcasters. The Company cannot
predict the impact of either satellite DARS service or terrestrial DARS
service on its business.

  Low Power FM. In January 2000, the FCC created two new classes of
noncommercial low power FM radio stations ("LPFM"). One class (LP100) will
operate with a maximum power of 100 watts and a service radius of about 3.5
miles. The other class (LP10) will operate with a maximum power of 10 watts
and a service radius of about 1 to 2 miles. In establishing the new LPFM
service, the FCC said that its goal is to create a class of radio stations
designed "to serve very localized communities or underrepresented groups
within communities." The Company cannot predict the impact of low power FM
radio stations on our business.

  The foregoing does not purport to be a complete summary of all the
provisions of the Communications Act or the regulations and policies of the
FCC thereunder. Proposals for additional or revised regulations and
requirements are pending before and are considered by Congress and federal
regulatory agencies from time to time. The Company cannot predict the effect
of existing and proposed federal legislation, regulations and policies on its
broadcast business. Also, certain of the foregoing matters are now, or may
become, the subject of court litigation, and the Company cannot predict the
outcome of any such litigation or the impact on its broadcast business.

Employees

  As of December 31, 1999, the Company had approximately 3,018 full-time
employees and 348 part-time employees. A total of approximately 904 employees
are represented by four unions (the American Federation of Television and
Radio Artists, the International Brotherhood of Electrical Workers, the
International Alliance of Theatrical Stage Employees, and the Directors Guild
of America). The Company has not experienced any significant labor problems,
and it believes that its relations with its employees are satisfactory.

                                      17
<PAGE>

ITEM 2. PROPERTIES

  The Company's principal executive offices are located at 888 Seventh Avenue,
New York, New York 10106. Each Station's real properties generally include
owned or leased offices, studios, transmitter sites and antenna sites.
Typically, offices and main studios are located together, while transmitters
and antenna sites are in a separate location that is more suitable for
optimizing signal strength and coverage. Set forth below are the Stations'
principal facilities as of December 31, 1999. In addition to the property
listed below, the Company and the Stations also lease other property primarily
for communications equipment.

<TABLE>
<CAPTION>
 Station/Property                              Owned or    Approximate
     Location                 Use               Leased         Size
 ----------------             ---              --------    -----------
<S>                <C>                        <C>         <C>
Corporate          Washington D.C. Office       Leased     3,191 sq. ft.
                   New York Office              Leased    39,864 sq. ft.
                   San Antonio Office           Leased     2,547 sq. ft.


WCVB               Office and studio             Owned    90,002 sq. ft.
 Boston, MA        Office and studio            Leased     5,337 sq. ft.
                   Office and studio            Leased     8,600 sq. ft.


KCRA/KQCA          Office, studio and tower      Owned    75,000 sq. ft.
 Sacramento, CA    Tower and transmitter         Owned     2,400 sq. ft.
                   Tower and transmitter        Leased     1,200 sq. ft.
                   Office                       Leased     3,910 sq. ft.


WTAE               Office and studio             Owned    68,033 sq. ft.
 Pittsburgh, PA    Tower and transmitter         Owned          37 acres
                   Office                       Leased       609 sq. ft.


WESH               Studio, transmitter, tower    Owned    61,300 sq. ft.
 Orlando, FL       Office                       Leased     1,310 sq. ft.
 Daytona Beach, FL Studio and office             Owned    26,000 sq. ft.
                   Tower (under construction) Partnership      190 acres


WBAL               Office and studio             Owned    63,000 sq. ft.
 Baltimore, MD     Tower and transmitter      Partnership      3.5 acres


KMBC               Office and studio            Leased    58,514 sq. ft.
 Kansas City, MO   Tower and transmitter         Owned        11.6 acres


WLWT               Office and studio             Owned    54,000 sq. ft.
 Cincinnati, OH    Tower and transmitter         Owned         4.2 acres


WISN               Office and studio             Owned    88,000 sq. ft.
 Milwaukee, WI     Tower and transmitter         Owned         5.5 acres


WYFF               Office and studio             Owned    50,856 sq. ft.
 Greenville, SC    Tower and transmitter         Owned         1.5 acres


WDSU               Office and studio             Owned    50,525 sq. ft.
 New Orleans, LA   Transmitter                   Owned         8.3 acres


KOCO               Office and studio             Owned    28,000 sq. ft.
 Oklahoma City, OK Tower and transmitter         Owned          85 acres


WGAL               Studio and tower              Owned    58,900 sq. ft.
 Lancaster, PA     Office                       Leased     2,380 sq. ft.


WXII               Office and studio             Owned    38,027 sq. ft.
 Winston-Salem, NC Tower and transmitter         Owned     3,747 sq. ft.
                   Office                       Leased       550 sq. ft.
</TABLE>



                                      18
<PAGE>

<TABLE>
<CAPTION>
                                                   Owned or  Approximate
 Station/Property Location            Use           Leased       Size
 -------------------------            ---          --------  -----------
<S>                          <C>                   <C>      <C>
WLKY                         Office and studio      Owned   37,842 sq. ft.
 Louisville, KY              Tower and transmitter  Owned       57.4 acres


KOAT                         Office and studio      Owned   37,315 sq. ft.
 Albuquerque, NM             Tower and transmitter  Leased     330.5 acres


KCCI                         Office and studio      Owned   52,000 sq. ft.
 Des Moines, IO              Tower and transmitter  Owned      119.5 acres


KITV                         Office and studio      Owned   35,000 sq. ft.
 Honolulu, HI                Tower and trasmitter   Leased     130 sq. ft.
                             Tower and trasmitter   Leased       300 acres
                             Tower and trasmitter   Leased        13 acres


KETV                         Office and studio      Owned   35,231 sq. ft.
 Omaha, NE                   Tower and transmitter  Owned       23.3 acres


WAPT                         Office and studio      Owned    8,600 sq. ft.
 Jackson, MS                 Tower and transmitter  Owned         24 acres


WPTZ                         Office and studio      Owned   12,800 sq. ft.
 Plattsburgh, NY             Office                 Leased   3,900 sq. ft.
                             Tower and transmitter  Owned      13.25 acres


WNNE                         Office and studio      Leased   5,600 sq. ft.
 Burlington, VT              Tower and transmitter  Leased        --


KSBW                         Office and studio      Owned   85,726 sq. ft.
 Monterey-Salinas, CA        Tower and transmitter  Owned      160.2 acres
                             Office                 Leased   1,150 sq. ft.


KHBS/KHOG                    Office and studio      Owned   47,004 sq. ft.
 Fort Smith/Fayetteville, AR Office and studio      Leased   1,110 sq. ft.
                             Tower and transmitter  Leased       2.5 acres
                             Tower and transmitter  Owned       26.7 acres


KTAR-AM/KMVP-AM/             Office and studio      Owned   22,000 sq. ft.
 KKLT-FM                     Transmitter             Owned   1,450 sq. ft.
                             Studio                 Leased   1,130 sq. ft.
</TABLE>

ITEM 3. LEGAL PROCEEDINGS

  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.

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

  Not applicable.

                                      19
<PAGE>

                                    PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

  The Company's Series A Common Stock has been listed on the NYSE under the
symbol "HTV" since July 22, 1998. Prior to listing on NYSE the Series A Common
Stock was quoted on the Nasdaq National Market under the Symbol "HATV." The
table below sets forth, for the calendar quarters indicated, the reported high
and low sales prices of the Series A Common Stock on the Nasdaq National
Market or the NYSE, as the case may be.

<TABLE>
<CAPTION>
                                                                High      Low
                                                              -------- ---------
       <S>                                                    <C>      <C>
       1998
         First Quarter....................................... $38      $27 1/4
         Second Quarter......................................  41 1/4   32 5/8
         Third Quarter.......................................  40 1/4   31 5/8
         Fourth Quarter......................................  33 1/4   24
       1999
         First Quarter....................................... $35 1/4  $21
         Second Quarter......................................  29 1/2   22 1/16
         Third Quarter.......................................  27 3/8   20
         Fourth Quarter......................................  27 1/16  19 15/16
</TABLE>

  On March 27, 2000, the closing price for the Series A Common Stock on the
NYSE was $22 11/16, and the approximate number of shareholders of record of
the Series A Common Stock at the close of business on such date was 862.

  The Company has not paid any dividends on the Series A Common Stock or the
Series B Common Stock since inception and does not expect to pay any dividends
on either class in the immediate future. The Company's Credit Facilities with
The Chase Manhattan Bank limit the ability of the Company to pay dividends
under certain conditions.

  The Company issued 100% of the Series B Common Stock to Hearst in 1997 as
part of the Hearst Transaction and related transactions. Of the shares of the
Series B Common Stock, the Company issued 38,611,002 on August 29, 1997 and
2,687,646 shares on December 30, 1997. The Company issued the Series B Common
Stock pursuant to the exemption from registration contained in Section 4(2) of
the Securities Act of 1933, as amended. The Company issued the Series B Common
Stock to Hearst as consideration for the contribution of the assets and
properties of Hearst Broadcast Group and the assumption of $275 million of
Hearst's long-term debt. Each share of Series B Common Stock is immediately
convertible into one share of Series A Common Stock.

  All of the outstanding shares of the Series B Common Stock are required to
be held by Hearst or a Permitted Transferee (as defined below). All such
shares are currently held by Hearst Broadcasting, a wholly owned subsidiary of
Hearst Holdings, which is in turn a wholly owned subsidiary of Hearst. No
holder of shares of the 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 by Hearst (each a "Permitted
Transferee"). The 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 Amended and Restated Certificate of Incorporation
and to applicable securities laws limitations. If at any time the Permitted
Transferees first hold in the aggregate less than 20% of all shares of the
Common Stock that are then issued and outstanding, then each issued and
outstanding share of the Series B Common Stock automatically will be converted
into one fully paid and nonassessable share of Series A Common Stock, and the
Company will not be authorized to issue any additional shares of Series B
Common Stock. Notwithstanding any other provision to the contrary, no holder
of Series B Common Stock shall (i) transfer any

                                      20
<PAGE>

shares of Series B Common Stock; (ii) convert Series B Common Stock; or, (iii)
be entitled to receive any cash, stock, other securities or other property
with respect to or in exchange for any shares of Series B Common Stock in
connection with any merger or consolidation or sale or conveyance of all or
substantially all of the property or business of the Company as an entity,
unless all necessary approvals of the FCC as required by the Communications
Act, and the rules and regulations thereunder have been obtained or waived.

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 the
wholly-owned subsidiary of Hearst with and into Argyle, with Argyle as the
surviving corporation (renamed Hearst-Argyle Television, Inc., "Hearst-Argyle"
or the "Company") (the "Hearst Transaction"). The merger was accounted for as
a purchase of Argyle by Hearst in a reverse acquisition. The presentation of
the historical consolidated financial statements prior to September 1, 1997
reflects the combined financial statements of the Hearst Broadcast Group, the
accounting acquiror. Effective June 1, 1998, the Company exchanged its WDTN
and WNAC/WPRI stations with STC Broadcasting, Inc. and certain related
entities (collectively "STC") for KSBW, the NBC affiliate serving the
Monterey--Salinas, CA, television market, and WPTZ/WNNE, the NBC affiliates
serving the Plattsburgh, NY--Burlington, VT, television market (the "STC
Swap") (see Note 3 of the notes to the consolidated financial statements). On
January 5, 1999 (effective January 1, 1999 for accounting purposes) the
Company acquired, through a merger transaction, all of the partnership
interests in Kelly Broadcasting Co., which includes KCRA, the Sacramento
station, and the related time-brokerage agreement for another station, KQCA,
(the "Kelly Broadcasting Business"), and Kelleproductions, Inc. (the "Kelly
Transaction") (see Note 3 of the notes to the consolidated financial
statements). On March 18, 1999, the Company acquired the nine television and
five radio stations ("Pulitzer Broadcasting Company") of Pulitzer Publishing
Company ("Pulitzer") in a merger transaction (the "Pulitzer Merger"). In
connection with the Pulitzer Merger, the Company issued approximately 37.1
million shares of the Company's Series A Common Stock to the Pulitzer
shareholders (the "Pulitzer Issuance"). See Notes 3 and 9 of the notes to the
consolidated financial statements. Additionally, in connection with the Kelly
Transaction and the Pulitzer Merger, the Company drew-down $725 million from
the Revolving Credit Facility (the "Financing") (see Note 6 of the notes to
the consolidated financial statements). On June 30, 1999 the Company issued
approximately 3.7 million shares of the Company's Series A Common Stock to
Hearst for $100 million (the "Hearst Issuance") (see Note 9 of the notes to
the consolidated financial statements). The pro forma consolidated financial
data for the year ended December 31, 1999 has been prepared as if the Pulitzer
Merger, the Pulitzer Issuance, the Financing and the Hearst Issuance had been
completed as of January 1, 1999. Such pro forma data is not necessarily
indicative of the actual results that would have occurred nor of results that
may occur.

                                      21
<PAGE>

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

<TABLE>
<CAPTION>
                                                 Historical
                             -------------------------------------------------------
                                          Years Ended December 31,
                             -------------------------------------------------------  Pro Forma
                               1995      1996      1997(a)     1998(b)     1999(c)     1999(d)
                             --------  --------  ----------  ----------  -----------  ----------
<S>                          <C>       <C>       <C>         <C>         <C>          <C>
Statement of income data:
Total revenues.............  $279,340  $283,971  $  333,661  $  407,313  $   661,386  $  707,812
Station operating
 expenses..................   117,535   121,501     142,096     173,880      300,420     325,827
Amortization of program
 rights....................    38,619    40,297      40,129      42,344       60,009      62,687
Depreciation and
 amortization..............    22,134    16,971      22,924      36,420      108,039     122,026
                             --------  --------  ----------  ----------  -----------  ----------
Station operating income...   101,052   105,202     128,512     154,669      192,918     197,272
Corporate expenses.........     7,857     7,658       9,527      12,635       17,034      17,034
                             --------  --------  ----------  ----------  -----------  ----------
Operating income...........    93,195    97,544     118,985     142,034      175,884     180,238
Interest expense, net......    22,218    21,235      32,484      39,555      106,892     114,550
Equity in loss of affiliate
 (e).......................       --        --          --          --           279         279
                             --------  --------  ----------  ----------  -----------  ----------
Income before income taxes
 and extraordinary item....    70,977    76,309      86,501     102,479       68,713      65,409
Income taxes...............    30,182    31,907      35,363      42,796       33,311      33,358
                             --------  --------  ----------  ----------  -----------  ----------
Income before extraordinary
 item......................    40,795    44,402      51,138      59,683       35,402      32,051
Extraordinary item (f).....       --        --      (16,212)    (10,826)      (3,092)        --
                             --------  --------  ----------  ----------  -----------  ----------
Net income.................    40,795    44,402      34,926      48,857       32,310      32,051
Less preferred stock
 dividends (g).............       --        --         (711)     (1,422)      (1,422)     (1,422)
                             --------  --------  ----------  ----------  -----------  ----------
Income applicable to common
 stockholders..............  $ 40,795  $ 44,402  $   34,215  $   47,435  $    30,888  $   30,629
                             ========  ========  ==========  ==========  ===========  ==========
Income per common share--
 basic:
Before extraordinary item..  $   0.99  $   1.08  $     1.13  $     1.09  $      0.41  $     0.33
                             ========  ========  ==========  ==========  ===========  ==========
Net income.................  $   0.99  $   1.08  $     0.77  $     0.89  $      0.37  $     0.33
                             ========  ========  ==========  ==========  ===========  ==========
Number of shares used in
 the calculation (h).......... 41,299    41,299      44,632      53,483       83,189      92,832
                             ========  ========  ==========  ==========  ===========  ==========
Income per common share--
 diluted:
Before extraordinary item..  $   0.99  $   1.08  $     1.13  $     1.08  $      0.41  $     0.33
                             ========  ========  ==========  ==========  ===========  ==========
Net income.................  $   0.99  $   1.08  $     0.77  $     0.88  $      0.37  $     0.33
                             ========  ========  ==========  ==========  ===========  ==========
Number of shares used in
 the calculation (h)           41,299    41,299      44,674      53,699       83,229      92,871
                             ========  ========  ==========  ==========  ===========  ==========
Other data:
Broadcast cash flow (i)....  $123,038  $117,947  $  150,972  $  190,486  $   304,564  $  323,254
Broadcast cash flow margin
 (j).......................      44.0%     41.5%       45.2%       46.8%        46.0%       45.7%
Operating cash flow (k)....  $117,087  $109,457  $  141,445  $  177,851  $   287,530  $  306,220
Operating cash flow margin
 (l).......................      41.9%     38.5%       42.4%       43.7%        43.5%       43.3%
After-tax cash flow (m)....  $ 62,929  $ 61,373  $   74,062  $   96,103  $   143,441  $  154,077
Cash flow provided by
 operating activities......  $ 61,185  $ 65,801  $   67,689  $  133,638  $   138,914  $  138,933
Cash flow used in investing
 activities................  $ (8,621) $ (7,764) $ (131,973) $  (47,531) $(1,317,922)        (n)
Cash flow provided by (used
 in) financing activities..  $(52,020) $(58,145) $   74,161  $  282,114  $   803,660         (n)
Capital expenditures.......  $  8,621  $  7,764  $   21,897  $   22,722  $    52,402         N/A
Program payments...........  $ 38,767  $ 44,523  $   40,593  $   42,947  $    56,402  $   58,731

Balance sheet data (at year
 end):
Cash and cash equivalents..  $  2,990  $  2,882  $   12,759  $  380,980  $     5,632  $    5,632
Total assets...............  $385,406  $366,956  $1,044,482  $1,421,140  $ 3,913,227  $3,913,227
Total debt (including
 current portion)..........       N/A       N/A  $  490,000  $  842,596  $ 1,563,596  $1,563,596
Divisional/Stockholders'
 equity (o)................  $272,762  $259,020  $  326,654  $  324,390  $ 1,416,791  $1,416,791
</TABLE>

                       See notes on the following pages.

                                       22
<PAGE>

                       Notes to Selected Financial Data

(a)  The Hearst Transaction was consummated on August 29, 1997. The selected
     financial data includes results from (i) WCVB, WTAE, WBAL, WISN, KMBC and
     WDTN for the entire period presented; (ii) WAPT, KITV, KHBS/KHOG, WLWT,
     KOCO and the Company's share of the 1996 Joint Marketing and Programming
     Agreement relating to the television station WNAC/WPRI with the owner of
     another television station in the same market (the "Clear Channel
     Venture") from September 1 through December 31, 1997; and, (iii)
     management fees derived by the Company from WMOR (formerly WWWB), WPBF,
     KCWE and WBAL-AM and WIYY-FM (the "Managed Stations") from September 1
     through December 31, 1997.
(b)  Includes results from (i) WAPT, KITV, KHBS/KHOG, WLWT, KOCO, WCVB, WTAE,
     WBAL, WISN and KMBC for the entire period presented; (ii) fees derived by
     the Company from the Managed Stations for the entire period presented;
     and, (iii) WDTN and the Company's share of the Clear Channel Venture
     (WNAC/WPRI) from January 1 through May 31, 1998 and KSBW and WPTZ/WNNE
     from June 1 through December 31, 1998 (the "STC Swap").
(c)  Includes results from (i) WAPT, KITV, KHBS/KHOG, WLWT, KOCO, WCVB, WTAE,
     WBAL, WISN, KMBC, KSBW, WPTZ/WNNE for the entire period presented; (ii)
     fees derived by the Company from the Managed Stations for the entire
     period presented; (iii) the Kelly Broadcasting Business for the entire
     period presented; and, (iv) the Pulitzer Broadcasting Business which
     includes nine television stations and five radio stations from March 19
     through December 31, 1999.
(d)  Includes results of Argyle, the Hearst Broadcast Group, the management
     fees derived by the Company from the Managed Stations, the Kelly
     Broadcasting Business and Pulitzer Broadcasting Business on a combined
     pro forma basis, as if the Pulitzer Merger, the Pulitzer Issuance, the
     Financing and the Hearst Issuance had occurred at the beginning of the
     period presented.
(e)  Represents the Company's share of the loss of Internet Broadcasting
     Systems, Inc. for the Company's equity investment (see Note 3 of the
     notes to the consolidated financial statements).
(f)  Represents the write-off of unamortized financing costs and premiums paid
     upon early extinguishment of Hearst-Argyle debt.
(g)  Gives effect to dividends on the Preferred Stock issued in connection
     with the acquisition of KHBS/KHOG.
(h)  The number of shares used in the per share calculation reflects
     retroactively approximately 41.3 million shares received by Hearst in the
     Hearst Transaction for all periods prior to September 1, 1997.
(i)  Broadcast cash flow is defined as station operating income, plus
     depreciation and amortization and write-down of intangible assets plus
     amortization of program rights, minus program payments. The Company has
     included broadcast cash flow data because management believes that such
     data are commonly used as a measure of performance among companies in the
     broadcast industry. Broadcast cash flow is also frequently used by
     investors, analysts, valuation firms and lenders as one of the important
     determinants of underlying asset value. Broadcast cash flow should not be
     considered in isolation or as an alternative to operating income (as
     determined in accordance with generally accepted accounting principles)
     as an indicator of the entity's operating performance, or to cash flow
     from operating activities (as determined in accordance with generally
     accepted accounting principles) as a measure of liquidity. This measure
     is believed to be, but may not be, comparable to similarly titled
     measures used by other companies.
(j)  Broadcast cash flow margin is broadcast cash flow divided by total
     revenues, expressed as a percentage. This measure may not be comparable
     to similarly titled measures used by other companies.
(k)  Operating cash flow is defined as operating income, plus depreciation and
     amortization, write-down of intangible assets and amortization of program
     rights, minus program payments, plus non-cash compensation. The Company
     has included operating cash flow data, also known as EBITDA, because
     management believes that such data are commonly used as a measure of
     performance among companies in the broadcast industry. Operating cash
     flow is also used by investors, analysts, rating agencies and lenders to
     measure a company's ability to service debt. Operating cash flow should
     not be considered in isolation or as an alternative to operating income
     (as determined in accordance with generally accepted accounting
     principles) as an indicator of the entity's operating performance, or to
     cash flow from operating activities (as determined in accordance with
     generally accepted accounting principles) as a measure of liquidity. This
     measure is believed to be, but may not be, comparable to similarly titled
     measures used by other companies.

                                      23
<PAGE>

                 Notes to Selected Financial Data (Continued)

(l)  Operating cash flow margin is operating cash flow divided by total
     revenues, expressed as a percentage. This measure may not be comparable
     to similarly titled measures used by other companies.
(m)  After-tax cash flow is defined as income before extraordinary item plus
     depreciation and amortization. The Company has included after-tax cash
     flow data because management believes that such data are commonly used by
     investors, analysts, rating agencies and lenders to measure a company's
     ability to service debt and as an alternative determinant of enterprise
     value. After-tax cash flow should not be considered in isolation or as an
     alternative to operating income (as determined in accordance with
     generally accepted accounting principles) as an indicator of the entity's
     operating performance, or to cash flow from operating activities (as
     determined in accordance with generally accepted accounting principles)
     as a measure of liquidity. This measure is believed to be, but may not
     be, comparable to similarly titled measures used by other companies.
(n)  The cash flow data for investing activities and financing activities is
     not determinable for pro forma purposes.
(o)  Divisional / Stockholders' equity includes net amounts due to Hearst and
     affiliates for the periods prior to September 1, 1997. Hearst-Argyle has
     not paid any dividends on its Common Stock since inception.

                                      24
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

Results of Operations

  On August 29, 1997, effective September 1, 1997 for accounting purposes, The
Hearst Corporation ("Hearst") contributed its television broadcast group and
related broadcast operations (the "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.") (the "Company"). The merger transaction is
referred to as the "Hearst Transaction". The merger was accounted for as a
purchase of Argyle by Hearst in a reverse acquisition. In a reverse
acquisition, the accounting treatment differs from the legal form of the
transaction, as the continuing legal parent company (Argyle), is not assumed
to be the acquiror and the historical financial statements of the entity
become those of the accounting acquiror (Hearst Broadcast Group).
Consequently, the presentation of the Company's consolidated financial
statements prior to September 1, 1997 reflects the financial statements of the
Hearst Broadcast Group. In addition, the Company agreed to provide management
services with respect to WMOR (formerly WWWB), WPBF, KCWE and WBAL-AM and
WIYY-FM (the "Managed Stations"), three of which stations are owned by Hearst
and the other of which Hearst provides certain services to under a local
marketing agreement, in exchange for a management fee. See Note 13 of the
notes to the consolidated financial statements.

  Effective June 1, 1998, the Company exchanged its WDTN and WNAC/WPRI
stations with STC Broadcasting, Inc. and certain related entities
(collectively "STC") for KSBW, the NBC affiliate serving the Monterey--
Salinas, CA, television market, and WPTZ/WNNE, the NBC affiliates serving the
Plattsburgh, NY-- Burlington, VT, television market (the "STC Swap"). See Note
3 of the notes to the consolidated financial statements.

  On January 5, 1999, effective January 1, 1999 for accounting purposes, the
Company acquired, through a merger transaction, all of the partnership
interests in Kelly Broadcasting Co., which includes KCRA, the Sacramento
station, and the related time-brokerage agreement for another station, KQCA,
(the "Kelly Broadcasting Business"), and Kelleproductions, Inc. (the "Kelly
Transaction") (see Note 3 of the notes to the consolidated financial
statements).

  On March 18, 1999, the Company acquired the nine television and five radio
stations ("Pulitzer Broadcasting Company") of Pulitzer Publishing Company
("Pulitzer") in a merger transaction (the "Pulitzer Merger"). In connection
with the Pulitzer Merger, the Company issued approximately 37.1 million shares
of the Company's Series A Common Stock to the Pulitzer shareholders (the
"Pulitzer Issuance"). See Notes 3 and 9 of the notes to the consolidated
financial statements. Additionally, in connection with the Kelly Transaction
and the Pulitzer Merger, the Company drew-down $725 million from the Revolving
Credit Facility (the "Financing") (see Note 6 of the notes to the consolidated
financial statements).

  On June 30, 1999 the Company issued approximately 3.7 million shares of the
Company's Series A Common Stock to Hearst for $100 million (the "Hearst
Issuance") (see Note 9 of the notes to the consolidated financial statements).

  The following discussion of results of operations does not include the full-
year pro forma effects of the Hearst Transaction (for 1997), the STC Swap (for
1997 and 1998), the Kelly Transaction (for 1997 and 1998), the Pulitzer Merger
and the related Pulitzer Issuance and Financing (for 1997, 1998 and 1999) or
the Hearst Issuance (for 1997, 1998 and 1999).

  Results of operations for the year ended December 31, 1999 include results
from (i) WCVB, WTAE, WBAL, WISN, KMBC, WAPT, KITV, KHBS/KHOG, WLWT, KOCO,
KSBW, WPTZ/WNNE and management fees derived by the Company from the Managed
Stations for the entire period; (ii) the Kelly Broadcasting Business for the
entire period presented; and, (iii) the Pulitzer Broadcasting Business which
includes nine television stations and five radio stations from March 19
through December 31, 1999. Results of operations for

                                      25
<PAGE>

the year ended December 31, 1998 include: (i) WCVB, WTAE, WBAL, WISN, KMBC,
WAPT, KITV, KHBS/KHOG, WLWT, KOCO and management fees derived by the Company
from the Managed Stations for the entire period; (ii) WDTN and the Company's
share of the Clear Channel Venture (WNAC/WPRI) from January 1 through May 31,
1998; and, (iii) KSBW and WPTZ/WNNE from June 1 through December 31, 1998.
Results of operations for the year ended December 31, 1997 include: (i) the
Hearst Broadcast Group for the entire period presented; and, (ii) WAPT, KITV,
KHBS/KHOG, WLWT, KOCO; the Company's share of the Clear Channel Venture and
management fees derived by the Company from the Managed Stations from
September 1 through December 31, 1997.

 Year Ended December 31, 1999
 Compared to Year Ended December 31, 1998

  Total revenues. Total revenues includes (i) cash and barter advertising
revenues, net of agency and national representatives' commissions, (ii)
network compensation and (iii) other revenues. Total revenues in the year
ended December 31, 1999 were $661.4 million, as compared to $407.3 million in
the year ended December 31, 1998, an increase of $254.1 million or 62.4%. The
increase was primarily attributable to the Pulitzer Merger and the Kelly
Transaction, which added $190.2 million and $69.8 million, respectively, to
1999 total revenues. This increase was offset by a decrease in political
advertising revenues of $18.3 million during 1999.

  Station operating expenses. Station operating expenses in the year ended
December 31, 1999 were $300.4 million, as compared to $173.9 million in the
year ended December 31, 1998, an increase of $126.5 million or 72.7%. The
increase was primarily attributable to the Pulitzer Merger and the Kelly
Transaction, which added $91.5 million and $29.6 million, respectively, to
1999 station operating expenses.

  Amortization of program rights. Amortization of program rights in the year
ended December 31, 1999 was $60 million, as compared to $42.3 million in the
year ended December 31, 1998, an increase of $17.7 million or 41.8%. The
increase was primarily attributable to the Kelly Transaction and the Pulitzer
Merger, which added $10 million and $9.5 million, respectively, to 1999
amortization of program rights. The increase was offset by a decrease in
amortization of program rights of (i) $1.4 million due to lower-cost
replacement programming in several markets and (ii) $0.6 million due to the
net effect of the STC Swap.

  Depreciation and amortization. Depreciation and amortization of intangible
assets was $108 million in the year ended December 31, 1999, as compared to
$36.4 million in the year ended December 31, 1998, an increase of
approximately $71.6 million or 196.7%. The increase was primarily attributable
to the Pulitzer Merger and the Kelly Transaction, which added $52.3 million
and $17.4 million, respectively, to 1999 depreciation and amortization of
intangible assets.

  Station operating income. Station operating income in the year ended
December 31, 1999 was $192.9 million, as compared to $154.7 million in the
year ended December 31, 1998, an increase of $38.2 million or 24.7%, due to
the items discussed above.

  Corporate general and administrative expenses. Corporate general and
administrative expenses were $17 million in the year ended December 31, 1999,
as compared to $12.6 million in the year ended December 31, 1998, an increase
of $4.4 million or 34.9%. The increase in corporate general and administrative
expenses was primarily attributable to the increase in corporate staff because
of the Pulitzer Merger and other costs associated with the Kelly Transaction
and the Pulitzer Merger.

  Interest expense, net. Interest expense, net, was $106.9 million in the year
ended December 31, 1999, as compared to $39.6 million in the year ended
December 31, 1998, an increase of $67.3 million or 169.9%. The increase in
interest expense, net, was primarily attributable to a larger outstanding debt
balance during the 1999 period due to the Kelly Transaction and the Pulitzer
Merger.

  Equity in loss of affiliate. The Company recorded an equity loss of
affiliate of $0.3 million in the year ended December 31, 1999. This loss
represents the Company's equity interest in Internet Broadcasting Systems,
Inc. ("IBS").


                                      26
<PAGE>

  Income taxes. Income tax expense was $33.3 million for the year ended
December 31, 1999, as compared to $42.8 million for the year ended December
31, 1998, a decrease of $9.5 million or 22.2%. The effective rate was 48.5%
for the year ended December 31, 1999, as compared to 41.8% for the year ended
December 31, 1998. This represents federal and state income taxes as
calculated on the Company's net income before taxes and extraordinary item for
the years ended December 31, 1999 and 1998. The increase in the effective rate
relates primarily to the non-tax-deductible goodwill amortization related to
the Pulitzer Merger. Management believes that the Company's effective rate
should decrease as future pre-tax income increases and the effect of such non-
deductible expenses decreases.

  Extraordinary item. The Company recorded an extraordinary item of $3.1
million, net of the related income tax benefit, in 1999. The 1999
extraordinary item, which resulted from the early retirement of the Company's
Revolving Credit Facility, includes the write-off of the unamortized deferred
financing costs associated with the Revolving Credit Facility. The Company
recorded an extraordinary item of $10.8 million, net of the related income tax
benefit, in 1998. This extraordinary item resulted from an early repayment of
$102.4 million of the Company's Senior Subordinated Notes. The 1998
extraordinary item includes the write-off of unamortized deferred financing
costs associated with the Senior Subordinated Notes, the payment of a premium
for the early repayment and the related expenses incurred.

  Net income. Net income totaled $32.3 million in the year ended December 31,
1999, as compared to $48.9 million in the year ended December 31, 1998, a
decrease of $16.6 million or 33.9%, due to the items discussed above.

  Broadcast Cash Flow. Broadcast cash flow totaled $304.6 million in the year
ended December 31, 1999, as compared to $190.5 million in the year ended
December 31, 1998, an increase of $114.1 million or 59.9%. The increase in
broadcast cash flow was primarily attributable to the Pulitzer Merger and the
Kelly Transaction, which added $89.8 million and $33.6 million, respectively,
to 1999 broadcast cash flow. This increase was offset by a decrease in
broadcast cash flow of $18.3 million primarily due to a decrease in 1999
political advertising revenues. Broadcast cash flow is defined as station
operating income, plus depreciation and amortization, plus amortization of
program rights, minus program payments. The Company has included broadcast
cash flow data because management believes that such data are commonly used as
a measure of performance among companies in the broadcast industry. Broadcast
cash flow is also frequently used by investors, analysts, valuation firms and
lenders as one of the important determinants of underlying asset value.
Broadcast cash flow should not be considered in isolation or as an alternative
to operating income (as determined in accordance with generally accepted
accounting principles) as an indicator of the entity's operating performance,
or to cash flow from operating activities (as determined in accordance with
generally accepted accounting principles) as a measure of liquidity. This
measure is believed to be, but may not be, comparable to similarly titled
measures used by other companies in the broadcast industry.

 Year Ended December 31, 1998
 Compared to Year Ended December 31, 1997

  Total revenues. Total revenues includes (i) cash and barter advertising
revenues, net of agency and national representatives' commissions, (ii)
network compensation and (iii) other revenues. Total revenues in the year
ended December 31, 1998 were $407.3 million, as compared to $333.7 million in
the year ended December 31, 1997, an increase of $73.6 million or 22.1%. The
increase was primarily attributable to (i) the Hearst Transaction and the net
effect of the STC Swap, which added $56.6 million and $3.1 million,
respectively, to 1998 total revenues and (ii) an increase in political
advertising revenues of $15.6 million, which was offset by a decrease in
national advertising revenues of $3.7 million.

  Station operating expenses. Station operating expenses in the year ended
December 31, 1998 were $173.9 million, as compared to $142.1 million in the
year ended December 31, 1997, an increase of $31.8 million or 22.4%. The
increase was primarily attributable to the Hearst Transaction and to the net
effect of the STC Swap, which added $28.4 million and $1.2 million,
respectively, to 1998 station operating expenses.

                                      27
<PAGE>

  Amortization of program rights. Amortization of program rights in the year
ended December 31, 1998 was $42.3 million, as compared to $40.1 million in the
year ended December 31, 1997, an increase of $2.2 million or 5.5%. The
increase is primarily attributable to (i) the Hearst Transaction and (ii) new
programs purchased for favorable time-slots (late fringe time periods) in
certain central time zone markets which added $3.3 million and $ 0.4 million,
respectively, to amortization of program rights during 1998. This increase was
offset by a decrease in amortization of program rights of (i) $0.7 million due
to the net effect of the STC Swap and (ii) $1 million due to lower-cost
replacement programming in several markets.

  Depreciation and amortization. Depreciation and amortization of intangible
assets was $36.4 million in the year ended December 31, 1998, as compared to
$22.9 million in the year ended December 31, 1997, an increase of
approximately $13.5 million or 59%. This increase is primarily attributable to
the Hearst Transaction, which added $12.8 million to 1998 depreciation and
amortization of intangible assets.

  Station operating income. Station operating income in the year ended
December 31, 1998 was $154.7 million, as compared to $128.5 million in the
year ended December 31, 1997, an increase of $26.2 million or 20.4%, due to
the items discussed above.

  Corporate general and administrative expenses. Corporate general and
administrative expenses were $12.6 million in the year ended December 31,
1998, as compared to $9.5 million in the year ended December 31, 1997, an
increase of $3.1 million or 32.6%. The increase was attributable to the
increase in corporate staff following the Hearst Transaction and other costs
associated with the Hearst Transaction.

  Interest expense, net. Interest expense, net, was $39.6 million in the year
ended December 31, 1998, as compared to $32.5 million in the year ended
December 31, 1997, an increase of $7.1 million or 21.8%. This increase in
interest expense, net, was attributable to a larger outstanding debt balance
in 1998 than in 1997, which was the result of the Hearst Transaction. In
addition, interest expense, net was decreased in the year ended December 31,
1998 due to approximately $0.9 million in interest income recorded relating to
the note receivable from the STC Swap. See Note 3 of the notes to the
consolidated financial statements.

  Income taxes. Income tax expense was $42.8 million for the year ended
December 31, 1998, as compared to $35.4 million for the year ended December
31, 1997, an increase of $7.4 million or 20.9%. The effective rate was 41.8%
for the year ended December 31, 1998 as compared to 40.9% for the year ended
December 31, 1997. This represents federal and state income taxes as
calculated on the Company's net income before taxes and extraordinary item for
the years ended December 31, 1998 and 1997. The increase in the effective rate
relates primarily to the non-tax-deductible goodwill amortization related to
the Hearst Transaction and the increase in the state and local income tax
provision.

  Extraordinary item. The Company recorded an extraordinary item of $10.8
million, net of the related income tax benefit, in 1998. This extraordinary
item resulted from an early repayment of $102.4 million of the Company's
Senior Subordinated Notes. The 1998 extraordinary item includes the write-off
of unamortized deferred financing costs associated with the Senior
Subordinated Notes, the payment of a premium for the early repayment and the
related expenses incurred. The Company recorded an extraordinary item of $16.2
million, net of the related income tax benefit, in 1997. This extraordinary
item resulted from a refinancing of the Company's $275 million private
placement debt (assumed in connection with the Hearst Transaction) and $45
million of the Company's Senior Subordinated Notes in December 1997. The 1997
extraordinary item includes the write-off of the pro rata portion of the
unamortized financing costs associated with the Senior Subordinated Notes and
the payment of a premium for both refinancings.

  Net income. Net income totaled $48.9 million in the year ended December 31,
1998, as compared to $34.9 million in the year ended December 31,1997, an
increase of $14 million or 40.1%, due to the items discussed above.

  Broadcast Cash Flow. Broadcast cash flow totaled $190.5 million in the year
ended December 31, 1998, as compared to $151 million in the year ended
December 31, 1997, an increase of $39.5 million or 26.2%. The

                                      28
<PAGE>

increase in broadcast cash flow resulted primarily from (i) the Hearst
Transaction and the STC Swap, which added $24.7 million and $2.6 million,
respectively, to broadcast cash flow during 1998 and (ii) an increase in
political advertising revenues of $15.6 million period to period which was
partially offset by a decrease in national advertising of $3.7 million period
to period. Broadcast cash flow margin increased to 46.8% in 1998 from 45.2% in
1997. Broadcast cash flow is defined as station operating income, plus
depreciation and amortization and write down of intangible assets plus
amortization of program rights, and minus program payments. The Company has
included broadcast cash flow data because management believes that such data
are commonly used as a measure of performance among companies in the broadcast
industry. Broadcast cash flow is also frequently used by investors, analysts,
valuation firms and lenders as one of the important determinants of underlying
asset value. Broadcast cash flow should not be considered in isolation or as
an alternative to operating income (as determined in accordance with generally
accepted accounting principles) as an indicator of the entity's operating
performance, or to cash flow from operating activities (as determined in
accordance with generally accepted accounting principles) as a measure of
liquidity. This measure is believed to be, but may not be, comparable to
similarly titled measures used by other companies.

Liquidity and Capital Resources

  Upon completion of the Hearst Transaction on August 29, 1997, the Company
entered into a $1 billion syndicated credit facility with the Chase Manhattan
Bank (the "Revolving Credit Facility"). On April 12, 1999, the Company retired
its Revolving Credit Facility and replaced it with two new revolving credit
facilities (the "New Credit Facilities") with the Chase Manhattan Bank as the
administrative agent for a consortium of banks. The New Credit Facilities of
$1 billion and $250 million will mature on April 12, 2004 and April 12, 2003,
respectively. The Company may borrow amounts under the New Credit Facilities
from time to time for additional acquisitions, capital expenditures and
working capital, subject to the satisfaction of certain conditions on the date
of borrowing. There was $611 million outstanding under the New Credit
Facilities as of December 31, 1999. See Note 6 of the notes to the
consolidated financial statements.

  In connection with the Kelly Transaction, the Company issued $340 million
and $110 million in senior notes ("Private Placement Debt") in December 1998
and January 1999, respectively. The remainder of the Kelly Transaction
purchase price was funded using a combination of borrowings under the
Revolving Credit Facility and available cash. See Notes 3 and 6 of the notes
to the consolidated financial statements.

  In connection with the Pulitzer Merger, the Company issued 37.1 million
shares of Series A Common Stock to Pulitzer shareholders, assumed $700 million
in debt and paid $5 million for the interest in the Arizona Diamondbacks. The
Company borrowed approximately $715 million under the Revolving Credit
Facility to refinance the assumed debt and pay related transaction expenses.
See Notes 3 and 6 of the notes to the consolidated financial statements.

  On June 30, 1999 the Company issued to The Hearst Corporation 3.7 million
shares of the Company's Series A Common Stock for $100 million (the "Hearst
Issuance"). The Company used the net proceeds of this $100 million equity
issuance to repay a portion of the outstanding balance under its New Credit
Facilities, thereby reducing the Company's overall debt leverage ratio and
future interest expense. See Note 9 of the notes to the consolidated financial
statements.

  In December 1999, the Company invested $20 million of cash in IBS for an
equity interest in IBS. In September 1999 and February 2000, the Company
invested $2 million and $8 million, respectively, in Geocast Network Systems,
Inc. ("Geocast") for an equity interest in Geocast. In March 2000, the Company
invested $25 million in Consumer Financial Network, Inc. ("CFN") for an equity
interest in CFN. See Notes 3 and 19 of the notes to the consolidated financial
statements. These equity investments were primarily funded through drawdowns
from the New Credit Facilities.

  Borrowings related to the Kelly Transaction and the Pulitzer Merger will
increase the Company's interest expense by approximately $78.3 million per
year based on the borrowings at the time of the transactions.

                                      29
<PAGE>

Borrowings related to the equity investments will increase the Company's
interest expense by approximately $3.7 million per year based on the
borrowings at the time of the investments. This increase in interest expense
will decrease as the debt balance is reduced by cash flows from operations.
Additionally, this increase will be offset by a decrease in interest expense
of $6.3 million per year due to the Hearst Issuance. The net increase in
interest expense will be funded from the increase in cash flow from operations
due to the Kelly Transaction and the Pulitzer Merger.

  The Company implemented an employee stock purchase plan (the "Stock Purchase
Plan") during April of 1999. The Stock Purchase Plan allows employees to
purchase shares of the Company's Series A Common Stock 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 82,555 shares for aggregate proceeds of
approximately $1.8 million through December 31, 1999. See Note 12 of the notes
to the consolidated financial statements. The Stock Purchase Plan is intended
to comply with the provisions of Section 423 of the Internal Revenue Code of
1986, as amended.

  Capital expenditures were $52.3 million and $22.7 million in 1999 and 1998,
respectively. The Company invested approximately $25.0 million in special
projects/buildings including its new station facilities at WCVB and WLWT,
approximately $19.1 million in maintenance projects and approximately $8.2
million in digital conversion projects at various stations during 1999. The
Company expects to spend approximately $38.9 million for the year ending
December 31, 2000, including approximately (i) $24.4 million in maintenance
projects, (ii) $9.2 million in digital projects and (iii) $5.3 million in
special projects.

  The Company anticipates that its primary sources of cash, those being,
current cash balances, operating cash flow and amounts available under the New
Credit Facilities, will be sufficient to finance the operating and working
capital requirements of its stations, the Company's debt service requirements
and anticipated capital expenditures of the Company for both the next 12
months and the foreseeable future thereafter.

Impact of Inflation

  The impact of inflation on the Company's 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 the Company's operating
results.

Forward-Looking Statements

  This report contains certain forward-looking statements concerning the
Company's operations, economic performance and financial condition. These
statements are based upon a number of assumptions and estimates, which are
inherently subject to uncertainties and contingencies, many of which are
beyond the control of the Company, and reflect future business decisions,
which are subject to change. Some of the assumptions may not materialize and
unanticipated events may occur which can affect the Company's results.

Year 2000

  The Company undertook various initiatives intended to ensure that its
information assets ("IT Assets") and non-IT Assets with embedded
microprocessors would function properly with respect to dates in the Year 2000
and thereafter. The Company implemented a comprehensive plan (the "Plan")
including the following phases: (i) the identification of mission-critical
operating systems and applications and the inventory of all hardware and
software at risk of being date sensitive to Year 2000 related problems
(collectively, "Year 2000 problems"); (ii) assessment and evaluation of these
systems including prioritization; (iii) modification, upgrading and
replacement of the affected systems; and, (iv) compliance testing of the
systems. The Plan's goal resulted in the certification of systems as Year 2000
compliant or determined and funded the correction of the affected systems. The
Company established Year 2000 teams that were responsible for analyzing the
Year 2000 impact on operations and for formulating appropriate strategies to
overcome and resolve the Year 2000 problems. There was no interruption or
disruption to the normal operation of the Company's operations and there has
been no evidence of suppliers or customers' ability to transact business.

                                      30
<PAGE>

  The majority of costs associated with the Company's Year 2000 problems were
for systems that were fully depreciated and obsolete and which were scheduled
for replacement prior to the Year 2000. These replacement systems were
installed to provide users with enhanced capabilities and functionality, not
solely to bring systems into Year 2000 compliance. Through December 31, 1999,
the Company has spent approximately $2.5 million on these replacement systems.
Through December 31, 1999, the Company has spent approximately $9 million for
systems with accelerated replacement schedules due to Year 2000 problems.
These costs have been included in the capital expenditure disclosure in the
Liquidity and Capital Resources section. The Company does not anticipate
making any additional Year 2000 expenditures after December 31, 1999.

  An assessment was made of the newly acquired Pulitzer Broadcasting Company
and Kelly Broadcasting Co. systems, and systems potentially affected by Year
2000 problems were identified (see Note 3 of the notes to the consolidated
financial statements). Included were systems that were fully depreciated,
obsolete and scheduled for replacement. From the date of the Kelly Transaction
and the Pulitzer Merger, respectively, through December 31, 1999, the Company
spent approximately $1.3 million on these replacement systems, approximately
$0.4 million for systems with accelerated replacement schedules due to Year
2000 problems and approximately $0.2 million for remediation of equipment and
systems with Year 2000 problems. The Company does not anticipate making any
additional Year 2000 expenditures after December 31, 1999. These costs are in
addition to the costs discussed above. However, these costs have been included
in the capital expenditure disclosure in the Liquidity and Capital Resources
section.

  The Company believes that the completed compliance modifications and
conversions of its internal systems and equipment have resulted in Year 2000
compliance. However, there can be no assurance that the Company's or its
suppliers' current systems do not contain undetected errors associated with
Year 2000 date functions. The failure of the systems or equipment of the
Company or third parties (which the Company believes is the most reasonably
likely worst case scenario) could effect the broadcast of advertisements and
programming and could have a material effect on the Company's business or
consolidated financial statements.

New Accounting Pronouncements

  In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"), which is effective for all quarters of all fiscal years beginning after
June 15, 1999. SFAS 133 requires that derivative instruments be measured at
fair value and recognized as assets or liabilities in a company's statement of
financial position. In June 1999, the FASB issued SFAS No. 137, "Accounting
for Derivative Instruments and Hedging Activities--Deferral of the Effective
Date of FASB Statement No. 133" ("SFAS 137"). SFAS 137 amended the effective
date for SFAS 133 from June 15, 1999 to June 15, 2000 which becomes effective
for the Company's consolidated financial statements for the year ending
December 31, 2001. Based on the Company's current use of derivative
instruments and hedging activities, the adoption of this statement will not
have a material effect on the Company's consolidated financial statements.

                                      31
<PAGE>

ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

  The Company has long-term debt obligations at December 31, 1999 that are
sensitive to changes in interest rates. See Notes 2 and 6 of the notes to the
consolidated financial statements.

  For long-term debt obligations, the following table presents the fair value
at December 31, 1998 and 1999 and the future cash flows by expected maturity
dates based on debt balances at December 31, 1999.

<TABLE>
<CAPTION>
                         December 31, 1998                December 31, 1999
                         ----------------- -----------------------------------------------
                                                    Expected Maturities
                         Carrying   Fair   --------------------------------------   Fair
                          Value    Value   2000-2003   2004   Thereafter  Total    Value
                         -------- -------- --------- -------- ---------- -------- --------
                                                  (In thousands)
<S>                      <C>      <C>      <C>       <C>      <C>        <C>      <C>
Long-term debt:
 Variable rate
  New Credit
   Facilities...........      --       --     --     $611,000       --   $611,000 $649,401
 Fixed rate
  Senior Notes.......... $500,000 $516,842    --          --   $500,000  $500,000 $468,356
  Senior Subordinated
   Notes................ $  2,596 $  2,939    --          --   $  2,596  $  2,596 $  2,737
  Private Placement
   Debt................. $340,000 $350,531    --          --   $450,000  $450,000 $451,998
</TABLE>

  The Company's annualized weighted average interest rate for variable rate
long-term debt for the year ended December 31, 1999 is 6.5%. The annualized
weighted average interest rate for fixed rate long-term debt is 7.7% and 7.2%
for the years ended December 31, 1998 and 1999, respectively.

  The Company's New Credit Facilities are sensitive to interest rates. The
Company's interest-rate swap agreements expired in May and June of 1999. At
December 31, 1998, the estimated fair value of these interest-rate swap
agreements was $321,170. See Notes 2 and 6 of the notes to the consolidated
financial statements. As of December 31, 1999, the Company is not involved in
any derivative financial instruments. However, the Company may consider
certain interest rate risk strategies in the future.

                                      32
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                    INDEX TO HISTORICAL FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----
<S>                                                                        <C>
Hearst-Argyle Television, Inc.
Report of Deloitte & Touche LLP...........................................  34
Consolidated Balance Sheets as of December 31, 1998 and 1999..............  35
Consolidated Statements of Income for the Years Ended
 December 31, 1997, 1998 and 1999.........................................  36
Consolidated Statements of Divisional/Stockholders' Equity for the Years
 Ended
 December 31, 1997, 1998 and 1999.........................................  37
Consolidated Statements of Cash Flows for the Years Ended
 December 31, 1997, 1998 and 1999.........................................  38
Notes to Consolidated Financial Statements................................  41
</TABLE>

                                       33
<PAGE>

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, 1999 and
1998, and the related consolidated statements of income,
divisional/stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1999. Our audits also included the financial
statement schedule listed in the Index at Item 14. 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 generally accepted auditing
standards. 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, 1999
and 1998, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1999 in conformity with generally
accepted accounting principles. 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.

/s/ Deloitte & Touche LLP

New York, New York
February 25, 2000
(March 22, 2000 as to Note 19)

                                      34
<PAGE>

                         HEARST-ARGYLE TELEVISION, INC.

                          Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                      December 31, December 31,
                                                          1998         1999
                                                      ------------ ------------
                                                           (In thousands)
<S>                                                   <C>          <C>
Assets
Current assets:
 Cash and cash equivalents...........................  $  380,980   $    5,632
 Accounts receivable, net of allowance for doubtful
  accounts of $2,026 and $2,862 in 1998 and 1999,
  respectively.......................................      91,608      159,395
 Program and barter rights...........................      35,408       56,393
 Deferred income taxes...............................       2,166        3,905
 Other...............................................       5,087       11,809
                                                       ----------   ----------
   Total current assets..............................     515,249      237,134
                                                       ----------   ----------
Property, plant and equipment:
 Land, building and improvements.....................      43,325      137,545
 Broadcasting equipment..............................     154,013      251,484
 Office furniture, equipment and other...............      18,177       31,221
 Construction in progress............................      17,594       10,289
                                                       ----------   ----------
                                                          233,109      430,539
 Less accumulated depreciation.......................    (103,496)     (87,875)
                                                       ----------   ----------
Property, plant and equipment, net...................     129,613      342,664
                                                       ----------   ----------
Intangible assets, net...............................     711,409    3,230,842
                                                       ----------   ----------
Other assets:
 Deferred acquisition and financing costs, net of
  accumulated amortization of $2,843 and $4,591 in
  1998 and 1999, respectively........................      31,302       30,836
 Investments.........................................         --        29,938
 Program and barter rights, noncurrent...............       3,584        5,072
 Other...............................................      29,983       36,741
                                                       ----------   ----------
   Total other assets................................      64,869      102,587
                                                       ----------   ----------
   Total assets......................................  $1,421,140   $3,913,227
                                                       ==========   ==========
Liabilities and Stockholders' Equity
Current liabilities:
 Accounts payable....................................  $    5,094   $   16,289
 Accrued liabilities.................................      34,432       39,649
 Program and barter rights payable...................      35,411       56,715
 Related party payable...............................      12,218        9,343
 Other...............................................       1,692        1,669
                                                       ----------   ----------
   Total current liabilities.........................      88,847      123,665
                                                       ----------   ----------
Program and barter rights payable, noncurrent........       3,752        5,386
Long-term debt.......................................     842,596    1,563,596
Deferred income taxes................................     158,449      787,358
Other liabilities....................................       3,106       16,431
                                                       ----------   ----------
   Total noncurrent liabilities......................   1,007,903    2,372,771
                                                       ----------   ----------
Commitments and contingencies
Stockholders' equity:
Series A preferred stock, 10,938 shares issued and
 outstanding in 1998 and 1999 (aggregate liquidation
 preference of $10,938)..............................           1            1
Series B preferred stock, 10,938 shares issued and
 outstanding in 1998 and 1999 (aggregate liquidation
 preference of $10,938)..............................           1            1
Series A common stock, par value $.01 per share,
 100,000,000 and 200,000,000 shares authorized in
 1998 and 1999, respectively, and 12,574,872 and
 53,485,287 shares issued and outstanding in 1998 and
 1999, respectively..................................         126          535
Series B common stock, par value $.01 per share,
 100,000,000 shares authorized in 1998 and 1999 and
 41,298,648 shares issued and outstanding in 1998 and
 1999................................................         413          413
Additional paid-in capital...........................     203,105    1,271,666
Retained earnings....................................     171,397      202,285
Treasury stock, at cost, 1,736,515 and 2,037,015
 shares of Series A common stock in 1998 and 1999,
 respectively........................................     (50,653)     (58,110)
                                                       ----------   ----------
   Total stockholders' equity........................     324,390    1,416,791
                                                       ----------   ----------
   Total liabilities and stockholders' equity........  $1,421,140   $3,913,227
                                                       ==========   ==========
</TABLE>

                See notes to consolidated financial statements.

                                       35
<PAGE>

                         HEARST-ARGYLE TELEVISION, INC.

                       Consolidated Statements of Income

<TABLE>
<CAPTION>
                                                  Years Ended December 31,
                                                 ----------------------------
                                                   1997      1998      1999
                                                 --------  --------  --------
                                                 (In thousands, except per
                                                        share data)
<S>                                              <C>       <C>       <C>
Total revenues.................................. $333,661  $407,313  $661,386
Station operating expenses......................  142,096   173,880   300,420
Amortization of program rights..................   40,129    42,344    60,009
Depreciation and amortization...................   22,924    36,420   108,039
                                                 --------  --------  --------
Station operating income........................  128,512   154,669   192,918
Corporate general and administrative expenses...    9,527    12,635    17,034
                                                 --------  --------  --------
Operating income................................  118,985   142,034   175,884
Interest expense, net...........................   32,484    39,555   106,892
Equity in loss of affiliate.....................      --        --        279
                                                 --------  --------  --------
Income before income taxes and extraordinary
 item...........................................   86,501   102,479    68,713
Income taxes....................................   35,363    42,796    33,311
                                                 --------  --------  --------
Income before extraordinary item................   51,138    59,683    35,402
Extraordinary item, loss on early retirement of
 debt, net of income tax benefit of $10,372,
 $6,448 and $2,041 in 1997, 1998 and 1999,
 respectively                                     (16,212)  (10,826)   (3,092)
                                                 --------  --------  --------
Net income......................................   34,926    48,857    32,310
Less preferred stock dividends..................     (711)   (1,422)   (1,422)
                                                 --------  --------  --------
Income applicable to common stockholders........ $ 34,215  $ 47,435  $ 30,888
                                                 ========  ========  ========
Income per common share--basic:
  Before extraordinary item..................... $   1.13  $   1.09  $   0.41
  Extraordinary item............................    (0.36)    (0.20)    (0.04)
                                                 --------  --------  --------
  Net income.................................... $   0.77  $   0.89  $   0.37
                                                 ========  ========  ========
Number of common shares used in the
 calculation....................................   44,632    53,483    83,189
                                                 ========  ========  ========
Income per common share--diluted:
  Before extraordinary item..................... $   1.13  $   1.08  $   0.41
  Extraordinary item............................    (0.36)    (0.20)    (0.04)
                                                 --------  --------  --------
  Net income.................................... $   0.77  $   0.88  $   0.37
                                                 ========  ========  ========
Number of common shares used in the
 calculation....................................   44,674    53,699    83,229
                                                 ========  ========  ========
</TABLE>

                See notes to consolidated financial statements.

                                       36
<PAGE>

                         HEARST-ARGYLE TELEVISION, INC.

           Consolidated Statements of Divisional/Stockholders' Equity

<TABLE>
<CAPTION>
                            Common Stock
                          -----------------
                                                                  Retained
                                                      Additional Earnings/
                                            Preferred  Paid-In   Divisional Treasury
                          Series A Series B   Stock    Capital     Equity    Stock      Total
                          -------- -------- --------- ---------- ---------- --------  ----------
                                            (In thousands, except share data)

<S>                       <C>      <C>      <C>       <C>        <C>        <C>       <C>
Balances at January 1,
 1997...................    $--      $413     $--     $      --   $258,607  $    --   $  259,020
Transfers to Hearst and
 affiliated companies,
 net....................     --       --       --            --   (168,860)      --     (168,860)
Net income..............     --       --       --            --     34,926       --       34,926
Shares issued in
 connection with the
 Hearst Transaction.....      82      --         2        93,971       --        --       94,055
Issuance of 4,252,100
 shares of Series A
 Common Stock for cash..      43      --       --        108,181       --        --      108,224
Dividends paid on
 preferred stock........     --       --       --            --       (711)      --         (711)
                            ----     ----     ----    ----------  --------  --------  ----------
Balances at December 31,
 1997...................     125      413        2       202,152   123,962       --      326,654
Net income..............     --       --       --            --     48,857       --       48,857
Dividends paid on
 preferred stock........     --       --       --            --     (1,422)      --       (1,422)
Stock options
 exercised..............       1      --       --            897       --        --          898
Treasury stock
 purchased--Series A
 Common Stock (1,736,515
 shares)                     --       --       --            --        --    (50,653)    (50,653)
Other...................     --       --       --             56       --        --           56
                            ----     ----     ----    ----------  --------  --------  ----------
Balances at December 31,
 1998...................     126      413        2       203,105   171,397   (50,653)    324,390
Net income..............     --       --       --            --     32,310       --       32,310
Shares issued in
 connection with the
 Pulitzer Merger........     371      --       --        966,464       --        --      966,835
Issuance of 3,686,636
 shares of Series A
 Common Stock to Hearst
 for cash...............      37      --       --         99,432       --        --       99,469
Dividends paid on
 preferred stock........     --       --       --            --     (1,422)      --       (1,422)
Employee stock purchase
 plan proceeds..........       1      --       --          1,783       --        --        1,784
Stock options
 exercised..............     --       --       --            882       --        --          882
Treasury stock
 purchased--Series A
 Common Stock (300,500
 shares)................     --       --       --            --        --     (7,457)     (7,457)
                            ----     ----     ----    ----------  --------  --------  ----------
Balances at December 31,
 1999...................    $535     $413       $2    $1,271,666  $202,285  $(58,110) $1,416,791
                            ====     ====     ====    ==========  ========  ========  ==========
</TABLE>

                See notes to consolidated financial statements.

                                       37
<PAGE>

                         HEARST-ARGYLE TELEVISION, INC.

                     Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                 Years Ended December 31,
                                              --------------------------------
                                                1997       1998       1999
                                              ---------  --------  -----------
                                                      (In thousands)
<S>                                           <C>        <C>       <C>
Operating Activities
Net income..................................  $  34,926  $ 48,857  $    32,310
Adjustments to reconcile net income to net
 cash provided by operating activities:
  Extraordinary item, loss on early
   retirement of debt.......................     26,584    17,274        5,133
  Depreciation..............................      8,405    14,317       32,520
  Amortization of intangible assets.........     14,519    22,103       75,519
  Amortization of deferred financing costs..        635     2,416        3,200
  Amortization of program rights............     40,129    42,344       60,009
  Program payments..........................    (40,593)  (42,947)     (56,402)
  Deferred income taxes.....................     17,765     8,225        1,314
  Provision for doubtful accounts...........      1,316     1,119        1,563
  Equity in loss of affiliate...............        --        --           279
  Changes in operating assets and
   liabilities:
    Accounts receivable.....................    (15,250)     (149)     (17,255)
    Other assets............................    (13,173)    2,164       (9,838)
    Accounts payable and accrued
     liabilities............................     (7,574)    5,771        2,552
    Fair value adjustment interest rate
     protection agreement...................        --        321         (321)
    Other liabilities.......................        --     11,823        8,331
                                              ---------  --------  -----------
Net cash provided by operating activities...     67,689   133,638      138,914
                                              ---------  --------  -----------
Investing Activities
Acquisition of Pulitzer Broadcasting
 Company....................................        --        --      (712,301)
Acquisition of Kelly Broadcasting Co. and
 Kelleproductions, Inc......................        --        --      (530,073)
Merger with the Hearst Broadcast Group......   (110,076)      --           --
Swap Transaction with STC...................        --    (22,084)         --
Investment in Internet Broadcasting Systems,
 Inc........................................        --        --       (20,101)
Investment in Geocast Network Systems,
 Inc........................................        --        --        (2,052)
Capital call--Arizona Diamondbacks..........        --        --          (982)
Acquisition costs...........................        --     (3,115)        (399)
Issuance of STC note receivable.............        --    (70,500)         --
Repayment of STC note receivable............        --     70,500          --
Proceeds from sale of equipment.............        --        390          388
Purchases of property, plant, and equipment:
  Special projects / buildings..............    (16,816)   (8,831)     (25,017)
  Digital...................................        --     (3,892)      (8,244)
  Maintenance...............................     (5,081)   (9,999)     (19,141)
                                              ---------  --------  -----------
Net cash used in investing activities.......   (131,973)  (47,531)  (1,317,922)
                                              ---------  --------  -----------
</TABLE>

                See notes to consolidated financial statements.

                                       38
<PAGE>

                         HEARST-ARGYLE TELEVISION, INC.

                     Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                 Years Ended December 31,
                                              --------------------------------
                                                1997       1998        1999
                                              ---------  ---------  ----------
                                                      (In thousands)
<S>                                           <C>        <C>        <C>
Financing Activities
Issuance of Private Placement Debt..........  $     --   $ 340,000  $  110,000
Issuance of Senior Notes....................    300,000    200,000         --
Repayment of Hearst Private Placement Debt..   (295,895)       --          --
Repayment of Senior Subordinated Notes......    (49,388)  (116,705)        --
Revolving Credit Facility:
  Proceeds from issuance of long-term debt..    185,000     42,000     912,000
  Repayment of long-term debt...............   (155,000)  (127,000)   (912,000)
New Credit Facilities:
  Proceeds from issuance of long-term debt..        --         --    1,007,000
  Repayment of long-term debt...............        --         --     (396,000)
Series A Common Stock:
  Issuances.................................    108,935        --       99,469
  Repurchases...............................        --     (50,653)     (7,457)
Financing costs and other...................    (19,868)    (5,004)    (10,596)
Proceeds from employee stock purchase plan..        --         --        1,784
Dividends paid on preferred stock...........       (711)    (1,422)     (1,422)
Exercise of stock options...................        --         898         882
Due to Hearst...............................      1,088        --          --
                                              ---------  ---------  ----------
Net cash provided by financing activities...     74,161    282,114     803,660
                                              ---------  ---------  ----------
Increase (decrease) in cash and cash
 equivalents................................      9,877    368,221    (375,348)
Cash and cash equivalents at beginning of
 period.....................................      2,882     12,759     380,980
                                              ---------  ---------  ----------
Cash and cash equivalents at end of period..  $  12,759  $ 380,980  $    5,632
                                              =========  =========  ==========
Supplemental Cash Flow Information:
Businesses acquired in purchase transaction:
Hearst Transaction
Fair market value of assets acquired........  $ 610,762
Fair market value of liabilities assumed....   (333,903)
Issuance of Series A Common Stock...........   (166,783)
                                              ---------
Net cash paid for acquisition...............  $ 110,076
                                              =========
STC Swap
Fair market value of assets acquired, net...             $  83,131
Fair market value of liabilities assumed,
 net........................................                  (735)
Net carrying value of assets exchanged......               (60,312)
                                                         ---------
Net cash paid for acquisition...............             $  22,084
                                                         =========
Pulitzer Merger
Fair market value of assets acquired........                        $2,323,096
Fair market value of liabilities assumed....                          (643,960)
Issuance of Series A Common Stock...........                          (966,835)
                                                                    ----------
Net cash paid for acquisition...............                        $  712,301
                                                                    ==========
Kelly Transaction
Fair market value of assets acquired........                        $  548,121
Fair market value of liabilities assumed....                           (18,048)
                                                                    ----------
Net cash paid for acquisition...............                        $  530,073
                                                                    ==========
</TABLE>

                 See notes to consolidated financial statements

                                       39
<PAGE>

                         HEARST-ARGYLE TELEVISION, INC.

                     Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                      Years Ended December 31,
                                                      -------------------------
                                                        1997    1998     1999
                                                      -------- ------- --------
                                                           (In thousands)
<S>                                                   <C>      <C>     <C>
Non-cash investing and financing activities:
 Purchase of pension fund assets for stock........... $ 25,101
                                                      ========
 Assumption of Hearst Private Placement Debt......... $275,000
                                                      ========
 Net purchase price valuation adjustment affecting
  equipment, intangible assets, deferred income taxes
  and working capital                                          $12,736
                                                               =======
Cash paid during the year for:
 Interest............................................ $ 27,813 $33,848 $105,189
                                                      ======== ======= ========
</TABLE>



                See notes to consolidated financial statements.

                                       40
<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

                  Notes to Consolidated Financial Statements

1. Nature of Operations

  Hearst-Argyle Television, Inc. and subsidiaries (the "Company") owns and
operates 22 network-affiliated television stations and five radio stations in
geographically diverse markets in the United States. Ten of the stations are
affiliates of the National Broadcasting Company, Inc. (NBC), ten of the
stations are affiliates of the American Broadcasting Companies (ABC) and two
of the stations are affiliates of Columbia Broadcasting Systems (CBS).
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. See Notes 2 and 3.

2. Summary of Accounting Policies and Use of Estimates

Basis of Presentation

  On August 29, 1997, effective September 1, 1997 for accounting purposes, The
Hearst Corporation ("Hearst") contributed its television broadcast group and
related broadcast operations (the "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."). The merger transaction is referred to as
the "Hearst Transaction". As a result of the Hearst Transaction, Hearst owned
approximately 41.3 million shares of the Company's Series B Common Stock,
comprising approximately 77% of the total outstanding common stock of the
Company as of December 31, 1997. During 1998, Hearst purchased approximately
3.7 million shares of the Company's outstanding Series A Common Stock,
increasing its ownership to approximately 86% as of December 31, 1998. During
1999, Hearst purchased approximately 5.6 million outstanding shares and 3.7
million newly issued shares of the Company's Series A Common Stock (see Note
9). These 1999 purchases, offset by the issuance of approximately 37.1 million
shares of Series A Common Stock to Pulitzer Publishing Company ("Pulitzer")
shareholders in connection with the acquisition of Pulitzer Broadcasting
Company in 1999 (see Note 3 and Note 9), decreased Hearst's ownership of the
Company to approximately 58.5% as of December 31, 1999.

  The Hearst Transaction was accounted for as a purchase of Argyle by Hearst
in a reverse acquisition. The assets and liabilities of Argyle have been
adjusted to the extent acquired by Hearst to their estimated fair values based
upon purchase price allocations. The net assets of the Hearst Broadcast Group
have been reflected at their historical cost basis. In a reverse acquisition,
the accounting treatment differs from the legal form of the transaction, as
the continuing legal parent company (Argyle), is not assumed to be the
acquiror and the historical financial statements of the entity become those of
the accounting acquiror (Hearst Broadcast Group). Consequently, the
presentation of the Company's consolidated financial statements prior to
September 1, 1997 reflects the financial statements of the Hearst Broadcast
Group. In addition, the divisional equity of the Hearst Broadcast Group, which
includes net amounts due to Hearst and affiliates, has been reclassified
retroactively to reflect the par value of approximately 41.3 million shares
received by Hearst in the Hearst Transaction in the accompanying financial
statements for periods ending prior to September 1, 1997. See Note 3.

General

  The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany accounts have
been eliminated in consolidation.

Cash Equivalents

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

                                      41
<PAGE>

                        HEARST-ARGYLE TELEVISION. INC.

            Notes to Consolidated Financial Statements--(Continued)


Accounts Receivable

  Concentration of credit risk with respect to accounts receivable is 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
1997, 1998 and 1999 were not material. Costs of off-network syndicated
product, first run programming, 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 for the years ended December 31, 1997,
1998 and 1999, were approximately $10,382,000, $13,559,000, and $26,260,000
respectively, and are included in total revenues. Barter and trade expenses
for the years ended December 31, 1997, 1998 and 1999, were approximately
$10,315,000, $13,267,000, and $25,856,000 respectively, and are included in
station operating expenses.

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--25 to 40 years; broadcasting equipment--5 to 20 years;
office furniture, 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.

Intangible Assets

  Intangible assets are recorded at cost. Amortization is calculated on the
straight-line method over the estimated lives as follows: FCC licenses,
network affiliation agreements, and goodwill--40 years; other intangible
assets--3 to 40 years. The recoverability of the carrying values of the excess
of the purchase price over the net assets acquired and intangible assets is
evaluated quarterly to determine if an impairment in value has occurred. An
impairment in value will be considered to have occurred when it is determined
that the undiscounted future operating cash flows generated by the acquired
businesses are not sufficient to recover the carrying values of such
intangible assets. If it has been determined that an impairment in value has
occurred, the excess of the purchase price over the net assets acquired and
intangible assets would be written down to an amount which will be equivalent
to the present value of the estimated future operating cash flows to be
generated by the acquired businesses. At December 31, 1999, it was determined
that there had been no impairment of intangible assets.

                                      42
<PAGE>

                        HEARST-ARGYLE TELEVISION. INC.

            Notes to Consolidated Financial Statements--(Continued)


Deferred Acquisition and Financing Costs

  Acquisition costs are capitalized and will be 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

  Investments in 20% to 50% owned affiliates are accounted for under the
equity method and investments in less than 20% owned affiliates are accounted
for under the cost method.

Revenue Recognition

  Advertising revenues, net of agency and national representatives'
commissions, are recognized in the period during which the time spots are
aired. Total revenues includes (i) cash and barter advertising revenues, net
of agency and national representatives' commissions, (ii) network compensation
and (iii) other revenues.

Income Taxes

  Prior to the acquisition of Pulitzer Broadcasting Company on March 18, 1999
(see Note 3), the Company is included in the consolidated federal income tax
return of Hearst. Pursuant to the regulations under the Internal Revenue Code,
the Company's pro rata share of the consolidated federal income tax liability
of Hearst is allocated to the Company on a separate return basis. Federal
income taxes currently payable through March 18, 1999 are paid directly to
Hearst. Subsequent to March 18, 1999, the Company will file a stand-alone
federal income tax return, as Hearst's ownership percentage fell below the 80%
ownership threshold required to file a consolidated return. Federal income
taxes currently payable are paid directly to the Internal Revenue Service.
Federal and state income taxes for 1997 and federal income taxes for 1998 were
paid to Hearst via the related party payable. Cash payments for state income
taxes were $4.2 million and for federal and state income taxes were $37.2
million in 1998 and 1999, respectively. The Company files separate income tax
returns in states where a consolidated return is not permitted. The provision
for income taxes in the accompanying consolidated financial statements has
been determined on a stand-alone basis. In accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes",
deferred income tax assets and liabilities are measured based upon the
difference between the financial accounting and tax basis of assets and
liabilities.

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 of shares
issuable under the Company's stock option plan (see Note 11). The weighted
average common shares outstanding for basic EPS and diluted EPS for all
periods prior to September 1, 1997 represent the shares received by Hearst in
the Hearst Transaction, approximately 41.3 million shares. All per share
amounts included in the notes are the same for basic and diluted earnings per
share unless otherwise noted.

Interest Rate Agreements

  The Company is not currently involved in any interest-rate agreements.
However, the Company previously entered into interest-rate swap agreements,
which expired during 1999, to modify the interest characteristics of its
outstanding debt. These agreements involved the exchange of amounts based on a
fixed interest rate for amounts based on variable interest rates over the life
of the agreement without an exchange of the notional amount upon which the
payments are based. The differential to be paid or received as interest rates
change is

                                      43
<PAGE>

                        HEARST-ARGYLE TELEVISION. INC.

            Notes to Consolidated Financial Statements--(Continued)

recognized as an adjustment to interest expense related to the debt. The
related amount payable to or receivable from counterparties is included in
other liabilities or assets in 1998. Gains and losses on terminations of
interest-rate swap agreements are deferred as an adjustment to the carrying
amount of the outstanding debt and amortized as an adjustment to interest
expense related to the debt over the remaining term of the original contract
life of the terminated swap agreement. In the event of the early
extinguishment of a designated debt obligation, any realized or unrealized
gain or loss from the swap would be recognized in income coincident with the
extinguishment. Any swap agreements that are not designated with outstanding
debt or notional amounts of interest-rate swap agreements in excess of the
principal amounts of the underlying debt obligations are recorded as an asset
or liability at fair value, with changes in fair value recorded as an
adjustment to interest expense. See Note 6.

Stock-Based Compensation

  The Company accounts for employee stock-based compensation under APB No. 25
and related interpretations. Under APB No. 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.

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. Actual results could differ from those
estimates.

New Accounting Pronouncements

  In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"), which is effective for all quarters of all fiscal years beginning after
June 15, 1999. SFAS 133 requires that derivative instruments be measured at
fair value and recognized as assets or liabilities in a company's statement of
financial position. In June 1999, the FASB issued SFAS No. 137, "Accounting
for Derivative Instruments and Hedging Activities--Deferral of the Effective
Date of FASB Statement No. 133" ("SFAS 137"). SFAS 137 amended the effective
date for SFAS 133 from June 15, 1999 to June 15, 2000 which becomes effective
for the Company's consolidated financial statements for the year ending
December 31, 2001. Based on the Company's current use of derivative
instruments and hedging activities, the adoption of this statement will not
have a material effect on the Company's consolidated financial statements.

Prior Year Reclassifications

  Certain reclassifications have been made to conform to current year
presentation.

3. Acquisitions and Investments

  The acquisition of Argyle was accounted for as a purchase and, accordingly,
the purchase price and related acquisition costs have been allocated to the
acquired assets and liabilities based upon their fair market values. The
excess of the purchase price over the net fair market value of the tangible
assets acquired and the liabilities assumed was allocated to identifiable
intangible assets, including FCC licenses and network affiliation agreements,
and goodwill. The consolidated financial statements include the results of
operations of Argyle since the date of the acquisition.


                                      44
<PAGE>

                        HEARST-ARGYLE TELEVISION. INC.

            Notes to Consolidated Financial Statements--(Continued)

  On April 24, 1998, the Company loaned STC Broadcasting, Inc. ("STC") $70.5
million ("STC Note Receivable"). The loan bore interest at 7.75% per year and
was collateralized by the stock of the STC subsidiary that owned the assets
comprising WPTZ/WNNE. On July 2, 1998, STC repaid this $70.5 million loan
along with accrued interest.

  Effective June 1, 1998, the Company exchanged its WDTN and WNAC stations
(the "Exchanged Stations") with STC for KSBW, the NBC affiliate serving the
Monterey--Salinas, CA, television market, and WPTZ/WNNE, the NBC affiliates
serving the Plattsburgh, NY--Burlington, VT, television market (the "Acquired
Stations") and cash of approximately $20.5 million (the "STC Swap"), net of a
working capital adjustment which totaled approximately $1.4 million. The STC
Swap was accounted for under the purchase method of accounting and,
accordingly, the purchase consideration and related acquisition costs of
approximately $1.6 million have been allocated to the acquired assets and
liabilities based upon their fair market values. The excess of the cash and
the Company's carrying value of the Exchanged Stations over the net fair
market value of the tangible assets acquired and liabilities assumed of the
Acquired Stations was allocated to identifiable intangible assets, including
FCC licenses and network affiliation agreements, and goodwill.

  On January 5, 1999, effective January 1, 1999, for accounting purposes, the
Company acquired through a merger transaction all of the partnership interests
in Kelly Broadcasting Co., in exchange for approximately $520.4 million in
cash, including a working capital adjustment of $0.4 million. As a result of
this transaction, the Company acquired television broadcast station KCRA-TV,
Sacramento, California and the programming rights under an existing Time
Brokerage Agreement, with respect to KQCA-TV, Sacramento, California. In
addition, the Company acquired substantially all of the assets and certain of
the liabilities of Kelleproductions, Inc., for approximately $10 million in
cash. The merger and acquisition are collectively referred to as the "Kelly
Transaction". The Kelly Transaction was accounted for under the purchase
method of accounting and, accordingly, the purchase price and related
acquisition costs of approximately $1.1 million have been allocated to the
acquired assets and liabilities based upon their preliminarily determined fair
market values. The excess of the purchase price and acquisition costs over the
fair market value of the tangible assets acquired less the liabilities assumed
was allocated to FCC licenses and goodwill.

  On March 18, 1999, the Company acquired the nine television and five radio
stations ("Pulitzer Broadcasting Company") of Pulitzer and a 3.5% interest in
the Arizona Diamondbacks in a merger transaction (the "Pulitzer Merger"). In
connection with the transaction, the Company issued 37.1 million shares of
Series A Common Stock (quoted market value of $26.0625 on March 18, 1999) to
Pulitzer shareholders (the "Pulitzer Issuance") and assumed $700 million in
debt, which was repaid on the acquisition date using the Company's Revolving
Credit Facility (the "Financing"), and paid $5 million for the interest in the
Arizona Diamondbacks. In addition, the transaction was subject to an
adjustment, which guaranteed the Company $41 million in working capital. The
Pulitzer Merger was accounted for under the purchase method of accounting and,
accordingly, the purchase price (including acquisition costs) of approximately
$1.7 billion has been allocated to the acquired assets and liabilities based
upon their preliminarily determined fair market values. The excess of the
purchase price and acquisition costs over the fair market value of the
tangible assets acquired less the liabilities assumed was allocated to FCC
licenses. The final fair values may differ from those set forth in the
accompanying consolidated balance sheet at December 31, 1999; however, the
changes, if any, are not expected to have a material effect on the
consolidated financial statements of the Company.

  Giving effect to the STC Swap, the Kelly Transaction, the Pulitzer Merger,
the Pulitzer Issuance, the Financing and the issuance of 3.7 million shares of
Series A Common Stock to Hearst for $100 million (see Note 9), unaudited pro
forma results of operations reflecting combined historical results for the
Company's 22 owned television stations, five radio stations and fees for
providing management services to the Company's

                                      45
<PAGE>

                        HEARST-ARGYLE TELEVISION. INC.

            Notes to Consolidated Financial Statements--(Continued)

Managed Stations WMOR (formerly WWWB), KCWE, WPBF, WBAL-AM and WIYY-FM
pursuant to a management agreement (See Note 13), as if all acquisitions
occurred as of January 1, 1998, are as follows.

<TABLE>
<CAPTION>
                                                                   Years Ended
                                                                  December 31,
                                                              ---------------------
                                                                 1998       1999
                                                              ---------- ----------
                                                              (In thousands, except
                                                                 per share data)
                                                                   (Unaudited)
     <S>                                                      <C>        <C>
     Total revenues.......................................... $  727,939 $  707,812
     Income before extraordinary item........................ $   45,475 $   32,051
     Income applicable to common stockholders................ $   33,227 $   27,537
     Net income per common share--basic and diluted.......... $     0.36 $     0.30
     Pro forma number of shares used in calculations
                --basic......................................     92,832     92,832
                --diluted....................................     92,871     92,871
</TABLE>

  The above unaudited pro forma results are presented in response to
applicable accounting rules relating to business acquisitions and are not
necessarily indicative of the actual results that would be achieved had each
of the stations been acquired at the beginning of the periods presented, nor
are they indicative of future results of operations.

  In September 1999, the Company invested $2 million of cash in Geocast
Network Systems, Inc. ("Geocast") in return for an equity interest in Geocast.
Geocast will use a portion of the Company's stations' digital broadcast
spectrum as part of a new digital network infrastructure to deliver a program
service, which includes the local stations' content and other national content
and services, to personal computer users. As this investment represents less
than a 10% interest, the investment is accounted for using the cost method.
See Note 19.

  In December 1999, the Company invested $20 million of cash in Internet
Broadcasting Systems, Inc. ("IBS") in exchange for an equity interest in IBS.
The Company and IBS will form a series of local partnerships for the
development and management of local news/information/entertainment portal
websites. As of December 31, 1999, the Company has a 26% equivalent interest
in IBS, therefore, this investment is accounted for using the equity method.
The Company's share of the loss of IBS is included in Equity in loss of
affiliate in the accompanying consolidated statement of income for the year
ended December 31, 1999.

4. Intangible Assets

  Intangible assets at December 31, 1998 and 1999 consist of the following:

<TABLE>
<CAPTION>
                                                            1998        1999
                                                            ----        ----
                                                             (In thousands)
      <S>                                                 <C>        <C>
      FCC licenses....................................... $ 403,463  $2,381,616
      Cost in excess of net assets acquired..............   166,294     791,833
      Network affiliation agreement......................    95,301      95,493
      Advertiser client base asset.......................   122,828     122,828
      Favorable studio and office space..................    23,638      23,638
      Other..............................................    24,868      22,420
                                                          ---------  ----------
                                                            836,392   3,437,828
      Accumulated amortization...........................  (124,983)   (206,986)
                                                          ---------  ----------
      Total intangible assets, net....................... $ 711,409  $3,230,842
                                                          =========  ==========
</TABLE>


                                      46
<PAGE>

                        HEARST-ARGYLE TELEVISION. INC.

            Notes to Consolidated Financial Statements--(Continued)

5. Accrued Liabilities

  Accrued liabilities at December 31, 1998 and 1999 consist of the following:

<TABLE>
<CAPTION>
                                                                 1998    1999
                                                                 ----    ----
                                                                (In thousands)
      <S>                                                       <C>     <C>
      Accrued interest......................................... $10,378 $12,081
      Payroll, benefits and related costs......................   6,913   9,729
      Accrued vacation.........................................   2,360   5,242
      Accrued payables.........................................   1,452   1,753
      Other taxes payable......................................   2,149   1,258
      Other accrued liabilities................................  11,180   9,586
                                                                ------- -------
        Total accrued liabilities.............................. $34,432 $39,649
                                                                ======= =======
</TABLE>

6. Long-Term Debt

  Long-term debt at December 31, 1998 and 1999 consists of the following:

<TABLE>
<CAPTION>
                                                              1998      1999
                                                            -------- ----------
                                                              (In thousands)
      <S>                                                   <C>      <C>
      Revolving Credit Facility............................ $    --  $      --
      New Credit Facilities................................      --     611,000
      Senior Notes.........................................  500,000    500,000
      Private Placement Debt...............................  340,000    450,000
      Senior Subordinated Notes............................    2,596      2,596
                                                            -------- ----------
        Total long-term debt............................... $842,596 $1,563,596
                                                            ======== ==========
</TABLE>

Credit Facility

  Upon consummation of the Hearst Transaction, the Company entered into a $1
billion credit facility (the "Revolving Credit Facility") with the Chase
Manhattan Bank ("Chase"). For the years ended December 31, 1997, 1998 and
1999, the effective interest rate on borrowings from the Revolving Credit
Facility outstanding during the year was 6.2%, 6.9% and 5.3%, respectively.

  On April 12, 1999, the Company retired its Revolving Credit Facility and
replaced it with two new revolving credit facilities (the "New Credit
Facilities") with Chase, as the administrative agent for a consortium of
banks. The deferred financing fees relating to the Revolving Credit Facility,
of approximately $5.1 million before income tax benefit, were classified as an
extraordinary item in the accompanying consolidated statement of income for
the year ended December 31, 1999.

  The New Credit Facilities of $1 billion (the "$1 Billion Facility") and $250
million (the "$250 Million Facility") mature on April 12, 2004 and April 12,
2003, respectively. There was $611 million outstanding under the New Credit
Facilities at December 31, 1999.

  Outstanding principal balances under the New Credit Facilities 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 New Credit Facilities.

                                      47
<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements--(Continued)

The commitment fee ranges from 0.2% to 0.3% and from .15% to .25% for the $1
Billion Facility and the $250 Million Facility, respectively. For the year
ended December 31, 1999, the effective interest rate on borrowings from the
New Credit Facilities outstanding during the year was 6.5%.

  The New Credit Facilities contain certain financial and other covenants and
restrictions on the Company that, among other things, (i) limit the Company's
ratio of total debt to operating cash flow to not greater than 5.5 through
December 30, 2001; 5.0 from December 31, 2001 through December 30, 2002; 4.5
from December 31, 2002 through December 30, 2003; and 4.0 from December 31,
2003 through the Maturity Date; (ii) require the Company to maintain a ratio
of operating cash flow to interest expense of not less than 2.0 through
September 30, 2001, and not less than 2.5 thereafter; (iii) require the
Company to maintain a ratio of operating cash flow to "fixed charges"
(generally, interest expense, scheduled repayments of principal, taxes and
capital expenditures) of not less than 1.1; (iv) at such times when the ratio
of total debt to operating cash flow is greater than or equal to 4.0, restrict
the payment of dividends, the repurchase of stock and the purchase of
ownership interests (investments) to the sum of (x) $150 million; (y) proceeds
from future stock issuances; and, (z) one-third of cash provided by operations
in excess of fixed charges; and, (v) require the Company to maintain a
consolidated net worth of the sum of (x) $249,259,000; (y) 75% of the amount
the consolidated net worth increased upon the consummations of both the Kelly
Transaction and the Pulitzer Merger (see Note 3); and, (z) 25% of consolidated
net income for each fiscal year beginning with the year ended December 31,
1999. As of December 31, 1999, the Company is in compliance with the
aforementioned financial and other covenants and restrictions.

  The New Credit Facilities also provides 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.

Private Placement Debt

  As part of the Hearst Transaction, the Company assumed $275 million of debt
(the "Hearst Private Placement Debt"). The Company repaid the Hearst Private
Placement Debt and a related "make-whole" premium of approximately $20.9
million during December 1997.

  On December 15, 1998 and January 14, 1999, the Company issued $340 million
and $110 million, respectively, principal amount of senior notes to
institutional investors (collectively, the "Private Placement Debt"). The
Private Placement Debt has a maturity of 12 years, with an average life of 10
years and bears interest at 7.18% per annum. The Company used the proceeds
from the Private Placement Debt to partially fund the Kelly Transaction. See
Note 3.

Senior Subordinated Notes

  In October 1995, Argyle issued $150,000,000 of senior subordinated notes
(the "Notes"). The Notes are due in 2005 and bear interest at 9.75% payable
semi-annually. The Notes are general unsecured obligations of the Company. In
addition, the indenture governing the Notes imposes various conditions,
restrictions and limitations on the Company and its subsidiaries. During
December 1997, the Company repaid $45 million of the Notes at a premium of
approximately $4.4 million using proceeds from the Senior Notes offering. In
addition, the Company wrote-off the pro-rata share of deferred financing fees
related to the Notes which were repaid.

  The write-off of deferred financing fees relating to the Notes and the make-
whole premium relating to the Hearst Private Placement Debt and the premium
relating to the Notes, aggregated approximately $26.6 million before income
tax benefit, were classified as an extraordinary item in the accompanying
consolidated statement of income for the year ended December 31, 1997.

                                      48
<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements--(Continued)


  During February 1998, the Company repaid $102.4 million of the Notes at a
premium of approximately $13.9 million. In addition, the Company wrote-off the
remaining deferred financing fees related to the Notes and incurred expenses
related to the repayment of the Notes. The premium paid, the deferred
financing fees relating to the Notes and the expenses incurred, aggregated
approximately $17.3 million before income tax benefit, were classified as an
extraordinary item in the accompanying consolidated statement of income for
the year ended December 31, 1998. The outstanding balance of the Notes was
$2.6 million at December 31, 1999.

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. In addition, the
indenture governing the Senior Notes imposes various conditions, restrictions
and limitations on the Company and its subsidiaries.

  Proceeds from the Senior Notes offerings were used to repay existing
indebtedness of the Company. See Private Placement Debt and Senior
Subordinated Notes, above.

Interest Rate Risk Management

  The Company had two interest-rate protection agreements which expired in May
and June of 1999. These interest-rate protection agreements effectively fixed
the Company's interest rate at approximately 7% on $35 million of its
borrowings under the Revolving Credit Facility and the New Credit Facilities.
The Company entered into these agreements solely to hedge its floating
interest rate risk.

  The Company entered into various forward treasury lock agreements ("Treasury
Lock Agreements") during August 1997 in connection with the offering of $300
million Senior Notes. The Treasury Lock Agreements were settled simultaneous
with the closing of the Senior Notes on November 12, 1997. The average coupon
rate and treasury yield was 6.375% and 6.648%, respectively. The Company paid
the related institutions approximately $13.0 million, which was capitalized in
Deferred Acquisition and Financing Costs in the consolidated balance sheet,
and is being amortized over the life of the Senior Notes.

  Interest expense, net for the years ended December 31, 1997, 1998 and 1999
consists of the following:

<TABLE>
<CAPTION>
                                                        1997    1998     1999
                                                       ------- ------- --------
     <S>                                               <C>     <C>     <C>
     Interest on borrowings:
       Revolving Credit Facility...................... $ 2,089 $ 2,262 $  3,840
       New Credit Facilities..........................      --      --   32,271
       Senior Notes...................................   2,917  35,409   35,875
       Private Placement Debt.........................   7,325   1,084   32,025
       Senior Subordinated Notes......................   4,851   2,250      253
       Amortization of deferred financings costs and
        other.........................................     635   2,416    3,200
                                                       ------- ------- --------
                                                        17,817  43,421  107,464
     Due to Hearst (See Note 13)......................  16,654     --       --
     Interest rate swap agreements:
       Changes in fair value for agreements with
        optional amounts in excess of outstanding
        borrowings....................................     176     778        3
                                                       ------- ------- --------
         Total interest expense.......................  34,647  44,199  107,467
     Interest income..................................   2,163   4,644      575
                                                       ------- ------- --------
     Total interest expense, net...................... $32,484 $39,555 $106,892
                                                       ======= ======= ========
</TABLE>


                                      49
<PAGE>

                         HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements--(Continued)

7. Earnings Per Share

  The following tables set forth a reconciliation between basic EPS and diluted
EPS in accordance with SFAS 128. See Note 2.

<TABLE>
<CAPTION>
                                               Year Ended December 31, 1997
                                            -----------------------------------
                                              Income       Shares     Per-Share
                                            (Numerator) (Denominator)  Amount
                                            ----------- ------------  ---------
                                             (In thousands, except per share
                                                          data)
     <S>                                    <C>         <C>           <C>
     Income before extraordinary item......   $51,138
     Less: Preferred stock dividends.......      (711)
                                              -------
     Basic EPS
     Income before extraordinary item
      applicable to common stockholders....   $50,427      44,632       $1.13
     Effect of Dilutive Securities
     Assumed exercise of stock options.....       --           42
                                              -------      ------
     Diluted EPS
     Income before extraordinary item
      applicable to common stockholders
      plus assumed conversions.............   $50,427      44,674       $1.13
                                              =======      ======       =====
<CAPTION>
                                               Year Ended December 31, 1998
                                            -----------------------------------
                                              Income       Shares     Per-Share
                                            (Numerator) (Denominator)  Amount
                                            ----------- ------------  ---------
                                             (In thousands, except per share
                                                          data)
     <S>                                    <C>         <C>           <C>
     Income before extraordinary item......   $59,683
     Less: Preferred stock dividends.......    (1,422)
                                              -------
     Basic EPS
     Income before extraordinary item
      applicable to common stockholders       $58,261      53,483       $1.09
     Effect of Dilutive Securities
     Assumed exercise of stock options.....       --          216
                                              -------      ------
     Diluted EPS
     Income before extraordinary item
      applicable to common stockholders
      plus assumed conversions.............   $58,261      53,699       $1.08
                                              =======      ======       =====
<CAPTION>
                                               Year Ended December 31, 1999
                                            -----------------------------------
                                              Income       Shares     Per-Share
                                            (Numerator) (Denominator)  Amount
                                            ----------- ------------  ---------
                                             (In thousands, except per share
                                                          data)
     <S>                                    <C>         <C>           <C>
     Income before extraordinary item......   $35,402
     Less: Preferred stock dividends.......    (1,422)
                                              -------      ------
     Basic EPS
     Income before extraordinary item
      applicable to common stockholders....   $33,980      83,189       $0.41
     Effect of Dilutive Securities
     Assumed exercise of stock options.....       --           40
                                              -------      ------
     Diluted EPS
     Income before extraordinary item
      applicable to common stockholders
      plus assumed conversions.............   $33,980      83,229       $0.41
                                              =======      ======       =====
</TABLE>


                                       50
<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements--(Continued)

  The (i) 10,938 shares of Series A Preferred Stock, outstanding at December
31, 1997, 1998 and 1999 and convertible into Series A Common Stock at a
conversion price of $35 per share, and (ii) common stock options for 205,615,
224,976 and 2,414,086 shares of Series A Common Stock, outstanding as of
December 31, 1997, 1998 and 1999, respectively, were not included in the
computation of diluted EPS because the conversion price or exercise price was
greater than the average market price of the common shares during the
calculation period. The shares for the common stock options are before the
application of the treasury stock method.

8. Income Taxes

  The provision for income taxes relating to income before extraordinary item
for the years ended December 31, 1997, 1998 and 1999, consists of the
following:

<TABLE>
<CAPTION>
                                                        1997    1998     1999
                                                       ------- -------  -------
                                                           (In thousands)
     <S>                                               <C>     <C>      <C>
     Current:
       State and local................................ $ 5,924 $ 8,034  $ 1,539
       Federal........................................  11,674  26,537   26,519
                                                       ------- -------  -------
                                                        17,598  34,571   28,058
                                                       ------- -------  -------
     Deferred:
       State and local................................     --     (869)   2,999
       Federal........................................  17,765   9,094    2,254
                                                       ------- -------  -------
                                                        17,765   8,225    5,253
                                                       ------- -------  -------
     Provision for income taxes....................... $35,363 $42,796  $33,311
                                                       ======= =======  =======
</TABLE>

  The effective income tax rate for the years ended December 31, 1997, 1998
and 1999 varied from the statutory U.S. Federal income tax rate due to the
following:

<TABLE>
<CAPTION>
                                                               1997  1998  1999
                                                               ----  ----  ----
     <S>                                                       <C>   <C>   <C>
     Statutory U.S. Federal income tax........................ 35.0% 35.0% 35.0%
     State income taxes, net of Federal tax benefit...........  4.5   4.6   4.3
     Other non-deductible business expenses...................  1.4   2.2   9.2
                                                               ----  ----  ----
     Effective income tax rate................................ 40.9% 41.8% 48.5%
                                                               ====  ====  ====
</TABLE>

  Deferred income tax liabilities and assets at December 31, 1998 and 1999
consist of the following:

<TABLE>
<CAPTION>
                                                          1998      1999
                                                        --------  --------
                                                           (In thousands)
     <S>                                                <C>       <C>       <C>
     Deferred income tax liabilities:
       Accelerated depreciation.......................  $ 10,624  $ 49,809
       Accelerated funding of pension benefit
        obligation....................................     9,585    10,503
       Difference between book and tax basis of
        intangible assets.............................   138,240   725,253
                                                        --------  --------
     Total deferred income tax liabilities............   158,449   785,565
                                                        --------  --------
     Deferred income tax assets:
       Accrued expenses and other.....................     1,871     1,927
       Operating loss carryforwards...................     5,957    12,220
                                                        --------  --------
                                                           7,828    14,147
     Less: Valuation allowance........................    (5,662)  (12,035)
                                                        --------  --------
         Total deferred income tax assets.............     2,166     2,112
                                                        --------  --------
     Net deferred income tax liabilities..............  $156,283  $783,453
                                                        ========  ========
</TABLE>


                                      51
<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements--(Continued)

  The Company has net operating loss carryforwards for state income tax
purposes of approximately $154.9 million, which expire between 2000 and 2019.

  The valuation allowance is the result of an evaluation of the uncertainty
associated with the realization of certain deferred income tax assets. The
valuation allowance is maintained in deferred income tax assets for certain
unused state net operating loss carryforwards.

9. 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 was increased from 50 million to 200
million shares; (ii) Series B Common Stock was authorized and thereafter
issued to Hearst in connection with the transaction; (iii) the Series B Common
Stock issued to Hearst was reclassified retroactively to represent the
divisional equity of Hearst Broadcast Group (see Note 2); and, (iv) the
Company's existing Series A Preferred Stock and Series B Preferred Stock
received voting rights.

  As of December 31, 1998, the Company had 200 million shares of authorized
common stock, par value $.01 per share, with 100 million shares designated as
Series A Common Stock and 100 million shares designated Series B Common Stock.
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.

  On November 12, 1997, the Company sold an aggregate of 4 million shares of
Series A Common Stock, par value $.01 per share at $27 per share. In
connection with the offering, the underwriters exercised an over-allotment
option and were sold another 232,000 shares at $27 per share. The aggregate
proceeds from the offering net of expenses was $108.0 million.

  On December 29, 1997, the Company issued approximately 2.7 million shares of
Series B Common Stock to Hearst (the "Adjustment Shares") in connection with
the Hearst Transaction relating to net working capital at the date of
acquisition (in excess of $30 million for the Hearst Broadcast Group) and the
purchase of surplus pension fund assets. See Note 16.


                                      52
<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements--(Continued)

  During the second quarter of 1998, the Company's Board of Directors
authorized the repurchase of up to $300 million of its outstanding Series A
Common Stock. The Company expects such repurchases to be effected from time to
time in the open market or in private transactions, subject to market
conditions. During the year ended December 31, 1998, the Company spent
approximately $50.7 million to repurchase approximately 1.7 million shares, of
Series A Common Stock at an average price of $29.17. During the year ended
December 31, 1999, the Company spent approximately $7.5 million to repurchase
approximately 0.3 million shares, of Series A Common Stock at an average price
of $24.81. Hearst has also notified the Company and the Securities and
Exchange Commission of its intention to purchase up to 15 million shares of
the Company's Series A Common Stock from time to time in the open market, in
private transactions or otherwise. See Note 2.

  In connection with the Pulitzer Merger, the Company issued 37.1 million
shares of Series A Common Stock (quoted market value of $26.0625 on March 18,
1999) to Pulitzer shareholders. See Note 3.

  On June 30, 1999 the Company issued to Hearst 3.7 million shares of the
Company's Series A Common Stock for $100 million (the "Hearst Issuance"). The
Company used the net proceeds of this $100 million equity issuance to repay a
portion of the outstanding balance under its New Credit Facilities, thereby
reducing the Company's overall debt leverage ratio and future interest
expense.

10. 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"). Each
series of Preferred Stock has 10,938 shares issued and outstanding at December
31, 1997, 1998 and 1999. 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 of (i) on or before
December 31, 2000, $35; (ii) during the calendar year ended December 31, 2001,
the product of 1.1 times $35; and, (iii) during each calendar year after
December 31, 2001, the product of 1.1 times the preceding year's conversion
price. The Company has the option to redeem all or a portion of the Series A
Preferred Stock at any time after June 11, 2001 at a price equal to $1,000 per
share plus any accrued and unpaid dividends.

  The holders of Series B Preferred Stock have the option to convert such
Series B Preferred Stock into shares of Series A Common Stock at any time
after June 11, 2001 at 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 on or after June 11, 2001, at a price equal to
$1,000 per share plus any accrued and unpaid dividends.

11. Stock Options

1997 Stock Option Plan

  The Company's 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 "Option Plan"). The
amendment increases the number of shares reserved for issuance under the
Option Plan to 3 million shares of Series A Common Stock. The stock options
are granted with exercise prices at quoted market value at time of issuance.
Options cliff-vest after three years commencing on the effective date of the
grant and a portion of the options vest either after nine years or in one-
third increments upon attainment of certain market price goals of the
Company's stock. All options granted pursuant to the Option Plan will expire
no later than ten years from the date of grant.

                                      53
<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements--(Continued)


  A summary of the status of the Company's Option Plan as of December 31,
1997, 1998 and 1999, and changes for the period from September 1 to December
31, 1997 and for the years ended December 31, 1998 and 1999 is presented
below:
<TABLE>
<CAPTION>
                                                                Weighted Average
                                                     Options     Exercise Price
                                                    ----------  ----------------
     <S>                                            <C>         <C>
     Outstanding at September 1, 1997..............  1,341,172       $12.77
      Granted......................................  1,843,215       $26.75
      Exercised....................................    (20,150)      $10.45
      Cancelled.................................... (1,168,247)      $12.35
      Forfeited....................................     (2,250)      $10.00
                                                    ----------       ------
     Outstanding at December 31, 1997..............  1,993,740       $25.85
      Granted......................................    178,190       $27.22
      Exercised....................................    (45,668)      $19.65
      Forfeited....................................    (27,567)      $28.03
                                                    ----------       ------
     Outstanding at December 31, 1998..............  2,098,695       $26.07
      Granted......................................    577,229       $26.48
      Exercised....................................    (44,450)      $23.13
      Forfeited....................................   (135,613)      $26.84
                                                    ----------       ------
     Outstanding at December 31, 1999..............  2,495,861       $26.18
                                                    ==========       ======
     Exercisable at December 31, 1997..............    210,125       $17.89
                                                    ==========       ======
     Exercisable at December 31, 1998..............    693,637       $24.40
                                                    ==========       ======
     Exercisable at December 31, 1999..............    607,353       $24.62
                                                    ==========       ======
</TABLE>

The following table summarizes information about stock options outstanding and
exercisable at December 31, 1999:

<TABLE>
<CAPTION>
                 Options Outstanding                      Options Exercisable
 ----------------------------------------------------- --------------------------
                                              Weighted
                   Number    Weighted Average Average    Number       Weighted
   Range of      Outstanding    Remaining     Exercise Exercisable    Average
Exercise Prices  at 12/31/99 Contractual Life  Price   At 12/31/99 Exercise Price
---------------  ----------- ---------------- -------- ----------- --------------
<S>              <C>         <C>              <C>      <C>         <C>
$10.00--
 $17.63              86,375     5.4 years      $11.72     75,075       $11.82
$22.75--
 $25.94             194,375     8.7 years      $25.82     29,000       $24.19
$26.50--
 $29.00           2,193,801     8.0 years      $26.68    503,278       $26.55
$35.25--
 $36.44              21,310     8.5 years      $36.25        --           --
                  ---------                              -------
                  2,495,861                              607,353
                  =========                              =======
</TABLE>

  The Company accounts for employee stock-based compensation under APB No. 25
and related interpretations. Under APB No. 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.

                                      54
<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements--(Continued)


  Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of SFAS
No. 123. The fair value of these options was estimated at the date of grant
using the Black-Scholes option-pricing model for options granted in 1997, 1998
and 1999. The weighted average fair value of options granted was $9.55, $9.55
and $12.48 in 1997, 1998 and 1999, respectively. The following assumptions
were used for the period from September 1 to December 31, 1997 and for the
years ended December 31, 1998 and 1999:

<TABLE>
<CAPTION>
                                           1997          1998          1999
                                           ----          ----          ----
     <S>                               <C>           <C>           <C>
     Risk-free interest rate..........      5.5%          5.2%          5.3%
     Dividend yield...................      0.0%          0.0%          0.0%
     Volatility factor................     27.0%         30.0%         36.9%
     Expected life.................... 5 and 7 years 5 and 7 years 5 and 7 years
</TABLE>

  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 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.

  For purposes of SFAS No. 123 pro forma disclosures, the estimated fair value
of the options is amortized to expense over the option's vesting period.
Additionally, for purposes of this pro forma disclosure, the Company has
included the amount of compensation cost, that would have been recognized in
accordance with SFAS No. 123, for the discount related to shares purchased
under the employee stock purchase plan (see Note 12). The Company's pro forma
information is as follows:

<TABLE>
<CAPTION>
                                             1997         1998         1999
                                         ------------ ------------ ------------
                                         (In thousands, except per share data)
     <S>                                 <C>          <C>          <C>
     Pro forma net income..............  $     33,862 $     43,014 $     26,317
     Pro forma income applicable to
      common stockholders..............  $     33,151 $     41,592 $     24,895
     Pro forma basic income per common
      share............................  $       0.74 $       0.78 $       0.30
     Pro forma diluted income per
      common share.....................  $       0.74 $       0.77 $       0.30
</TABLE>

  The Company has reserved 5.8 million shares of common stock for future
issuance's in connection with the Option Plan at December 31, 1999.

12. Stock Purchase Plan

  The Company implemented a non-compensatory employee stock purchase plan (the
"Stock Purchase Plan") during April of 1999. The Stock Purchase Plan 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 82,555 shares
for aggregate proceeds of approximately $1.8 million through December 31,
1999.

13. Related Party Transactions

  Prior to September 1, 1997, Hearst provided certain management services to
the Company. Such services include data processing, legal, tax, treasury,
internal audit, risk management, and other support services. The

                                      55
<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements--(Continued)

Company was allocated expenses for the period January 1 to August 31, 1997 of
$1,331,000, related to these services. In addition, Hearst allocated interest
expense to the Company which was based on the average balance of divisional
equity at an interest rate of 8% per annum. Allocated expenses are based on
Hearst's estimate of expenses related to the services provided to the Company
in relation to those provided to other divisions or subsidiaries of Hearst.
Management believes that these allocations were made on a reasonable basis.
However, the allocations are not necessarily indicative of the level of
expenses that might have been incurred had the Company contracted directly
with third parties. In addition, certain costs (principally salaries, fringe
benefits and incentive compensation) were incurred by the Company, paid by
Hearst and charged to the Company for the period January 1 to August 31, 1997
in the amount of $5,219,000.

  Subsequent to September 1, 1997, the Company has entered into a series of
agreements with Hearst including a Management Agreement (whereby 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); an Option Agreement (whereby
Hearst has granted the Company an option to acquire certain Hearst owned or
operated television stations, as well as a right of first refusal with respect
to another television station if Hearst proposes to sell such station within
36 months of its acquisition); a Studio Lease Agreement (whereby Hearst leases
from the Company certain premises for Hearst's radio broadcast stations); a
Tax Sharing Agreement (whereby Hearst and the Company have established the
sharing of federal, state and local income taxes during the time the Company
is part of the consolidated income tax return of Hearst (see Note 2)); a Name
License Agreement (whereby Hearst permits the Company to use the Hearst name
in connection with the Hearst-Argyle name and operation of its business); and
a Services Agreement (whereby Hearst provides the Company certain
administrative services such as accounting, financial, legal, tax, insurance,
data processing and employee benefits). For the period September 1 to December
31, 1997, and the years ended December 31, 1998, and 1999, the Company
recorded revenues of approximately $700,000, $3,273,000,and $4,843,000,
respectively, relating to the Management Agreement and expenses of
approximately $900,000, $2,144,000, and $3,330,000 respectively, relating to
the Services Agreement. The Company believes that the terms of all these
agreements are reasonable to both sides; there can be no assurance, however,
that more favorable terms would not be available from third parties.

14. 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, 1999, scheduled
under contracts for programs available are as follows (in thousands):

<TABLE>
       <S>                                                               <C>
       2000............................................................. $56,715
       2001.............................................................   4,764
       2002.............................................................     484
       2003.............................................................      96
       2004.............................................................      42
       Thereafter.......................................................     --
                                                                         -------
                                                                         $62,101
                                                                         =======
</TABLE>

                                      56
<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements--(Continued)


  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, 1999, and employment contracts for key employees. Future minimum
payments and barter obligations under terms of these agreements as of December
31, 1999 are as follows:

<TABLE>
<CAPTION>
                                    Deduct   Net Operating Barter and Employment
                         Operating Operating     Lease      Program   and Talent
                          Leases   Sublease   Commitments    Rights   Contracts
                         --------- --------- ------------- ---------- ----------
                                             (In thousands)
<S>                      <C>       <C>       <C>           <C>        <C>
2000....................  $ 3,910   $  740      $ 3,170     $ 24,246   $45,163
2001....................    3,652      889        2,763       63,002    25,302
2002....................    3,216      704        2,512       42,430    10,435
2003....................    2,932      --         2,932        9,999     3,034
2004....................    3,048      --         3,048        9,162       801
Thereafter..............   15,929      --        15,929        7,415       --
                          -------   ------      -------     --------   -------
                          $32,687   $2,333      $30,354     $156,254   $84,735
                          =======   ======      =======     ========   =======
</TABLE>

  Rent expense, net for operating leases was approximately $3,461,000,
$4,239,000 and $4,599,000 for the years ended December 31, 1997, 1998 and
1999, 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.

15. Incentive Compensation Plans

  Hearst has a long-term incentive compensation plan that covered 13 employees
of the Hearst Broadcast Group who were considered by management to be making
substantial contributions to the growth and profitability of the Hearst
Broadcast Group and Hearst. Grants awarded under this plan cover three-year
operating cycles, with cash payouts made after the close of each three-year
cycle based upon growth in operating performance. The annual amount charged to
expense, which amounted to approximately $2,528,000, for the period January 1
to August 31, 1997, is determined by estimating the aggregate expense for each
open three-year cycle; actual cash payouts related to the 1994--1996 cycle
(paid in 1997) and to the 1995--1997 cycle (paid in 1998) resulted in
disbursements (pretax) of $4,621,437 and $3,315,390, respectively.

  Hearst also has a short-term incentive compensation plan that covered the
most senior key executives of the Hearst Broadcast Group who had the most
impact on overall corporate policy, and are therefore those executives largely
responsible for the growth and profitability of the Hearst Broadcast Group and
Hearst's achieving specified financial performance objectives. Annual expense
for the Hearst Broadcast Group amounted to approximately $259,000 for the
period January 1 to August 31, 1997.

  Effective August 29, 1997, the Company's employees (formerly Hearst
Broadcast Group employees) are no longer participants in such plans.

16. Pension and Employee Savings Plans

  Prior to September 1, 1997, the Hearst Broadcast Group had certain non-union
employees that were eligible for participation in Hearst's noncontributory
defined benefit plan (the "Retirement Plan") and Hearst's nonqualified
retirement plan. Hearst also had defined benefit plans for eligible employees
covered by collective

                                      57
<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements--(Continued)

bargaining agreements. The costs of this plan were generally accrued and paid
in accordance with the related agreements. These plans are collectively
referred to as the "Pension Plans". In addition, the Hearst Broadcast Group
contributed to a multiemployer union pension plan, for which no information
for each contributing employer is available. The Hearst Broadcast Group's
pension costs for these plans were allocated to the Company through divisional
equity. The cost for such plans were approximately $1,583,000 for the period
January 1 to August 31, 1997.

  Subsequent to September 1, 1997, the Company assumed the obligations of the
Pension Plans of the non-union and certain union employees of the Hearst
Broadcast Group and purchased the excess of the fair value of the plan's
assets over the pension benefit obligation for shares of the Company's Series
B Common Stock (see Note 9). Beginning January 1, 1998, the Company began to
provide the noncontributory defined benefit plans to the Company's remaining
non-union employees who were not included in the Pension Plans at December 31,
1997.

  On January 1, 1999, the Company adopted the final plan design of a
supplemental retirement plan. In previous years, the Company has recorded
estimated expenses for potential liabilities based on a proposed plan design.
The disclosure presentation below includes the actual liabilities and expense
based on the final plan design. The actual liabilities and expenses are not
materially different from recorded estimated expenses for potential
liabilities and are not expected to have a material effect on the consolidated
financial statements of the Company.

  On March 18, 1999, the Company assumed liabilities for the retirement
benefits of the transferring Pulitzer Broadcasting Company employees from the
Pulitzer Merger (see Note 3). Immediately following the Pulitzer Merger, the
Company began to provide the Retirement Plan to the Pulitzer Broadcasting
Company non-union employees. Eligible transferring union employees began
participation in a new defined benefit plan. As a result of the Pulitzer
Merger, the Company remeasured the 1999 pension expense for the Retirement
Plan using a 7.25% discount rate for the period March 19 to December 31, 1999.
For the period January 1 to March 18, 1999, the 1999 pension expense was
calculated based on a 6.75% discount rate.

  The plans described above are collectively referred to as the "Hearst-Argyle
Pension Plans".

  Benefits under the Hearst-Argyle Pension Plans are generally based on years
of credited service, age at retirement and average of the highest five
consecutive year's compensation. The cost of the Hearst-Argyle 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.

  The net pension benefit for the Hearst-Argyle Pension Plans and for the
period from September 1 to December 31, 1997 and the years ended December 31,
1998 and 1999 in which the Company's employees participate are as follows:

<TABLE>
<CAPTION>
                                                        Pension Benefits
                                                     -------------------------
                                                      1997     1998     1999
                                                      ----     ----     ----
                                                         (In thousands)
     <S>                                             <C>      <C>      <C>
     Service cost..................................  $   679  $ 3,141  $ 4,852
     Interest cost.................................      830    2,644    3,933
     Expected return on plan assets................   (1,937)  (6,455)  (8,352)
     Amortization of prior service cost............       71      213      442
     Amortization of transitional asset............      (38)    (113)    (113)
     Recognized actuarial gain.....................     (183)    (432)    (673)
                                                     -------  -------  -------
       Net periodic (benefit)/cost.................     (578)  (1,002)      89
     Curtailment gain recognized...................      --       --      (155)
                                                     -------  -------  -------
       Net pension benefit.........................  $  (578) $(1,002) $   (66)
                                                     =======  =======  =======
</TABLE>

                                      58
<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements--(Continued)


  The following schedule presents the change in benefit obligation, change in
plan assets and a reconciliation of the funded status at December 31, 1998 and
1999:
<TABLE>
<CAPTION>
                                                              Pension Benefits
                                                              -----------------
                                                               1998      1999
                                                               ----      ----
                                                               (In thousands)
     <S>                                                      <C>      <C>
     Change in benefit obligation:
       Benefit obligation at beginning of year............... $38,571  $ 44,933
         Service cost........................................   3,141     4,852
         Interest cost.......................................   2,644     3,933
         Participant contributions...........................      13        12
         Plan amendments.....................................      --     2,581
         Acquisitions/divestitures...........................       8    15,757
         Benefits paid.......................................    (853)   (1,373)
         Curtailment gain....................................      --      (389)
         Actuarial (gain)/loss...............................   1,409   (15,487)
                                                              -------  --------
       Benefit obligation at end of year.....................  44,933    54,819
</TABLE>

<TABLE>
     <S>                                                       <C>     <C>
     Change in plan assets:
       Fair value of plan assets at beginning of year......... 72,551    81,294
         Actual return on plan assets, net....................  8,651    17,286
         Acquisitions/divestitures............................      3    15,641
         Employer contributions...............................    927     1,254
         Participant contributions............................     13        12
         Benefits paid........................................   (853)   (1,373)
                                                               ------  --------
       Fair value of plan assets end of year.................. 81,292   114,114
</TABLE>

<TABLE>
     <S>                                                     <C>      <C>
     Reconciliation of funded status:
       Funded status.......................................  $36,359  $ 59,295
       Unrecognized actuarial gain.........................   (9,976)  (34,381)
       Unrecognized transition asset.......................     (653)     (540)
       Unrecognized prior service cost.....................    2,140     4,044
                                                             -------  --------
         Net amount recognized at end of year..............  $27,870  $ 28,418
                                                             =======  ========
     Amounts recognized in the statement of financial
      position:
       Other assets........................................  $28,827  $ 32,798
       Other liabilities...................................     (957)   (4,380)
                                                             -------  --------
         Net amount recognized at end of year..............  $27,870  $ 28,418
                                                             =======  ========
     Additional year-end information for pension plans with
      accumulated benefit obligations in excess of plan
      assets:
       Projected benefit obligation........................  $ 3,473  $  6,353
       Accumulated benefit obligation......................  $   738  $  2,970
       Fair value of plan assets...........................  $   421  $  1,101
</TABLE>

                                      59
<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements--(Continued)


  The weighted-average assumptions used for computing the projected benefit
obligation at December 31, 1998 and 1999 are as follows:

<TABLE>
<CAPTION>
                                                             Pension Benefits
                                                             ------------------
                                                               1998      1999
                                                             --------  --------
     <S>                                                     <C>       <C>
     Discount rate..........................................     6.75%     8.25%
     Expected long-term rate of return on plan assets.......     9.00      9.00
     Rate of compensation increase..........................     5.50      5.50
</TABLE>

  The Hearst-Argyle Pension Plans' assets consist primarily of stocks, bonds
and cash equivalents.

  The Company's contributions to the multiemployer union pension plan for the
period from September 1 to December 31, 1997 and the years ended December 31,
1998 and 1999 were approximately $150,000, $466,000 and $470,000,
respectively.

  The Company's qualified employees may contribute from 2% to 16% of their
compensation up to certain dollar limits to a 401(k) savings plan. The Company
matches one-half of the employee contribution up to 6% of the employee's
compensation. The Company contributions to this plan for the years ended
December 31, 1997, 1998 and 1999 were approximately $807,000, $1,185,000 and
$2,182,000, respectively.

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):

<TABLE>
<CAPTION>
                                            December 31, 1998 December 31, 1999
                                            ----------------- -----------------
                                            Carrying   Fair   Carrying   Fair
                                             Value    Value    Value    Value
                                            -------- -------- -------- --------
     <S>                                    <C>      <C>      <C>      <C>
     Revolving Credit Facility............. $    --  $    --  $    --  $    --
     New Credit Facilities.................      --       --   611,000  649,401
     Senior Subordinated Notes.............    2,596    2,939    2,596    2,737
     Senior Notes..........................  500,000  516,842  500,000  468,356
     Private Placement Debt................  340,000  350,531  450,000  451,998
     Interest rate swaps...................      321      321      --       --
</TABLE>

  The fair values of the Senior Subordinated Notes and the Senior Notes were
determined based on the quoted market prices. The fair values of the New
Credit Facilities, Private Placement Debt and the interest rate swap
agreements were determined using discounted cash flow models.

  For instruments including cash and cash equivalents, accounts receivable and
accounts payable 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.

                                      60
<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements--(Continued)


18. Quarterly Information (unaudited)

<TABLE>
<CAPTION>
                            1st Quarter        2nd Quarter      3rd Quarter       4th Quarter
                          ----------------- ----------------- ---------------- -----------------
                           1998      1999     1998     1999    1998     1999     1998     1999
                           ----      ----     ----     ----    ----     ----     ----     ----
                                          (In thousands, except per share data)
<S>                       <C>      <C>      <C>      <C>      <C>     <C>      <C>      <C>
Total revenues..........  $87,252  $113,424 $109,713 $186,054 $95,045 $166,731 $115,303 $195,177
Station operating
 income.................   25,146    28,426   48,561   58,834  32,003   39,670   48,959   65,988
Income before
 extraordinary item.....    5,835     2,829   21,262   13,481  10,905    3,337   21,681   15,755
Net income (loss) (a)...   (4,134)    2,829   20,454   10,389  10,856    3,337   21,681   15,755
Income (loss) applicable
 to common
 stockholders (b).......   (4,490)    2,473   20,099   10,034  10,501    2,982   21,325   15,399
Income (loss) per common
 share--basic: (c)
Income before
 extraordinary item.....  $  0.10  $   0.04 $   0.39 $   0.15 $  0.20 $   0.03 $   0.40 $   0.17
Net income (loss).......  $ (0.09) $   0.04 $   0.37 $   0.11 $  0.20 $   0.03 $   0.40 $   0.17
Number of common shares
 used in the
 calculation               53,833    57,419   53,798   89,197  53,409   92,883   52,904   92,758
Income (loss) per common
 share--diluted: (c)
Income before
 extraordinary item.....  $  0.10  $   0.04 $   0.39 $   0.15 $  0.20 $   0.03 $   0.40 $   0.17
Net income (loss).......  $ (0.08) $   0.04 $   0.37 $   0.11 $  0.20 $   0.03 $   0.40 $   0.17
Number of common shares
 used in the
 calculation............   54,043    57,517   54,095   89,229  53,690   92,910   52,978   92,783
</TABLE>
--------
(a) Net income (loss) for the each of the first, second and third quarters of
    1998 and the second quarter of 1999 includes an extraordinary item
    representing the write-off of unamortized financing costs and premiums
    paid upon early extinguishment of Hearst-Argyle Television, Inc. debt. See
    Note 6.
(b) Net income (loss) applicable to common stockholders gives effect to
    dividends on the Preferred Stock issued in connection with the acquisition
    of KHBS/KHOG.
(c) 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 Events

  On January 31, 2000 the Company exercised its fixed-price option to acquire
KQCA-TV for $850,000. The Company was previously programming and selling
airtime of KQCA-TV under a Time Brokerage Agreement, which was acquired as
part of the Kelly Transaction.

  On February 25, 2000, the Company invested an additional $8 million of cash
in Geocast in return for an additional equity interest in Geocast. See Note 3.
This investment will continue to be accounted for under the cost method. See
Note 2.

  On March 22, 2000, the Company invested $25 million in Consumer Financial
Network, Inc. ("CFN") for an equity interest in CFN.

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

  Not applicable.

                                      61
<PAGE>

                                   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" and "Directors Election Proposal" in the Company's
Proxy Statement relating to the 2000 Annual Meeting of Stockholders (the "2000
Proxy Statement"), which is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

  Information called for by Item 11 is set forth under the heading "Executive
Compensation and Other Matters" in the 2000 Proxy Statement, which is
incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

  Information called for by Item 12 is set forth under the heading "Principal
Stockholders" in the 2000 Proxy Statement, which is incorporated herein by
reference.

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 the 2000 Proxy Statement, which is
incorporated herein by reference.

                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, 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.

                                      62
<PAGE>

                 SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS

                         HEARST-ARGYLE TELEVISION, INC.

<TABLE>
<CAPTION>
                                          Additions  Deductions
                                          ---------- -----------
                               Balance at
                               Beginning  Charged to                 Balance at
                                   of     Costs and  Deductions        End of
         Description             Period    Expenses   Describe         Period
         -----------           ---------- ---------- -----------     ----------
<S>                            <C>        <C>        <C>             <C>
Year Ended December 31, 1997:
  Allowance for uncollectable
   accounts................... $1,693,000 $1,316,000 $  (805,000)(1) $2,204,000
Year Ended December 31, 1998:
  Allowance for uncollectable
   accounts................... $2,204,000 $1,119,000 $(1,297,000)(1) $2,026,000
Year Ended December 31, 1999:
  Allowance for uncollectable
   accounts................... $2,026,000 $2,820,000 $(1,984,000)(1) $2,862,000
</TABLE>
--------
(1)  Net write-off of accounts receivable.

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

<TABLE>
<CAPTION>
   Exhibit
     No.                              Description
   -------                            -----------
   <C>     <S>
   10.31   Employment Agreement, dated as of January 1, 1999, between the
           Company and David J. Barrett.
   10.32   Employment Agreement, dated as of January 1, 1999, between the
           Company and Anthony J. Vinciquerra.
   10.33   Employment Agreement, dated as of February 15, 1999, between the
           Company and Terry Mackin.
   10.34   Employment Agreement, dated as of January 1, 1999, between the
           Company and Philip Stolz.
   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).
   27.1    Financial Data Schedule.
</TABLE>

(b) Reports on Form 8-K

    No reports on Form 8-K were filed during the fourth quarter of 1999.

                                       63
<PAGE>

(c) Exhibits

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

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
 Exhibit
   No.                                 Description
 -------                               -----------
 <C>     <S>
 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
         Exhibit 2.1 of the Company's 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 Appendix A to the Company's
         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 Company's 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 the Company's 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
         for the Company's 10-K for the fiscal year ended December 31, 1998).

 4.1     Form of Indenture relating to the Senior Subordinated Notes due 2005
         (including form of security) (incorporated by reference to Exhibit 4.1
         of Argyle's Form 10-K for the fiscal year ending December 31, 1996).

 4.2     First Supplemental Indenture, dated as of June 1, 1996, among KHBS
         Argyle Television, Inc, Arkansas Argyle Television, Inc. and United
         States Trust Company of New York (incorporated by reference to
         Argyle's Current Report on Form 8-K dated June 11, 1996).

 4.3     Second Supplemental Indenture dated as of August 29, 1997 among KMBC
         Hearst-Argyle Company Television, Inc., WBAL Hearst-Argyle Television,
         Inc., WCVB Hearst-Argyle Television, Inc., WISN Hearst-Argyle
         Television, Inc., WTAE Hearst-Argyle Television, Inc. and United
         States Trust Company of New York (incorporated by reference to Exhibit
         4.8 of the Company's Registration Statement on Form S-3 (File No. 333-
         32487)).

 4.4     Third Supplemental Indenture, dated as of February 26, 1998, among the
         Company, Hearst-Argyle Television Stations, Inc., KMBC Hearst-Argyle
         Television, Inc., WBAL Hearst-Argyle Television, Inc., WCVB Hearst-
         Argyle Television, Inc., WISN Hearst-Argyle Television, Inc., WTAE
         Hearst-Argyle Television, Inc., WAPT Hearst-Argyle Television, Inc.,
         KITV Hearst-Argyle Television, Inc., KHBS Hearst-Argyle Television,
         Inc., Ohio/Oklahoma Hearst-Argyle Television, Inc., Jackson Hearst-
         Argyle Television, Inc., Hawaii Hearst-Argyle Television, Inc.,
         Arkansas Hearst-Argyle Television, Inc. and United States Trust
         Company of New York (incorporated by reference to Exhibit 4.4 of the
         Company's Form 10-K for the fiscal year ending December 31, 1997).

 4.5     Form of Note for Senior Subordinated Notes due 2005 (incorporated by
         reference to Exhibit 4.1 of Argyle's Form 10-K for the fiscal year
         ending December 31, 1996).

 4.6     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 the Company's Current Report on Form 8-K dated November
         13, 1997).

 4.7     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 the Company's Current
         Report on Form 8-K dated November 13, 1997).
</TABLE>

                                       64
<PAGE>

<TABLE>
<CAPTION>
 Exhibit
   No.                                 Description
 -------                               -----------
 <C>     <S>
 4.8     Global Note representing $125,000,000 of 7% Senior Notes Due November
         15, 2007 (incorporated by reference to Exhibit 4.3 of the Company's
         Current Report on Form 8-K dated November 13, 1997).

 4.9     Global Note representing $175,000,000 of 7% Debentures Due November
         15, 2027 (incorporated by reference to Exhibit 4.4 of the Company's
         Current Report on Form 8-K dated January 13, 1998).

 4.10    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 the Company's Current
         Report on Form 8-K dated January 13, 1998).

 4.11    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 the Company's 10-K for the fiscal year ended December 31,
         1998).

 4.12    Form of Registration Rights Agreement among the Company and the
         Holders (incorporated by reference to Exhibit B to Exhibit 2.1 of the
         Company's Registration Statement on Form S-4 (File No. 333-32487)).

 4.13    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 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 the Company's Form S-4 (File No. 333-
         72207)).

 10.1    Amended and Restated Employment Agreement of Harry T. Hawks
         (incorporated by reference to Exhibit 10.3(d) of Argyle's Registration
         Statement on Form S-1 (File No. 33-96029)).

 10.2    1997 Stock Option Plan (incorporated by reference to Appendix E of the
         Company's Registration Statement on Form S-4 (File No. 333-22487)).

 10.3    Affiliation Agreement among Multimedia, Inc., Multimedia
         Entertainment, Inc. (re: WLWT) and NBC (incorporated by reference to
         Exhibit 10.8(a) of the Company's Form 10-K for the fiscal year ending
         December 31, 1996).

 10.4    Affiliation Agreement between combined Communications Corporation of
         Oklahoma, Inc. (re: KOCO) and ABC (incorporated by reference to
         Exhibit 10.8(b) of the Company's Form 10-K for the fiscal year ending
         December 31, 1996).

 10.5    Affiliation Agreement between Tak Communications, Inc. (re: KITV) and
         ABC, dated November 4, 1994 and Satellite Television Affiliation
         Agreements, dated November 9, 1994 (incorporated by reference to
         Exhibit 10.5(d) of the Company's Registration Statement on Form S-1
         (File No. 33-96029)).

 10.6    Form of Affiliation Agreement between Jackson Argyle Television, Inc.
         (re: WAPT) and ABC (incorporated by reference to Exhibit 10.5(e) of
         the Company's Registration Statement on Form S-1 (File No. 33-96029)).

 10.7    Affiliation Agreements between Sigma Broadcasting, Inc. (re: KHBS and
         KHOG) and ABC (incorporated by reference to the Company's Current
         Report on Form 8-K dated June 11, 1996).

 10.8    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 the
         Company's Quarterly Report for the quarter ended September 30, 1997).

 10.9    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
         the Company's Quarterly Report for the quarter ended September 30,
         1997).
</TABLE>

                                       65
<PAGE>

<TABLE>
<CAPTION>
 Exhibit
   No.                                 Description
 -------                               -----------
 <C>     <S>
 10.10   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
         the Company's Quarterly Report for the quarter ended September 30,
         1997).

 10.11   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 the
         Company's Quarterly Report for the quarter ended September 30, 1997).

 10.12   Television Affiliation Agreement for Television Broadcasting Station
         WBAL-TV, dated January 2, 1995, by and between National Broadcasting
         Company, Inc. and The Hearst Corporation (incorporated by reference to
         Exhibit 10.5 of the Company's Quarterly Report for the quarter ended
         September 30, 1997).

 10.13   Amendment to the Television Affiliation Agreement for Television
         Broadcasting Station WBAL-TV, dated January 2, 1995, by and between
         National Broadcasting Company, Inc. and The Hearst Corporation
         (incorporated by reference to Exhibit 10.6 of the Company's Quarterly
         Report for the quarter ended September 30, 1997).

 10.14   Form of Amended and Restated Tax Sharing Agreement (incorporated by
         reference to Exhibit 10.10 of the Company's Form 10-K for the fiscal
         year ending December 31, 1996).

 10.15   Employment Agreement, dated as of August 12, 1997, between the Company
         and Bob Marbut (incorporated by reference to Exhibit 10.1 of the
         Company's Current Report on Form 8-K filed October 17, 1997).

 10.16   Management Services Agreement, dated as of August 29, 1997, between
         The Hearst Corporation and the Company (incorporated by reference to
         Exhibit 10.2 of Company's Current Report on Form 8-K filed October 17,
         1997).

 10.17   Option Agreement, dated as of August 29, 1997, between The Hearst
         Corporation and the Company (incorporated by reference to Exhibit 10.3
         of Company's Current Report on Form 8-K filed October 17, 1997).

 10.18   Studio Lease Agreement, dated as of August 29, 1997, between The
         Hearst Corporation and the Company (incorporated by reference to
         Exhibit 10.4 of the Company's Current Report on Form 8-K filed October
         17, 1997).

 10.19   Services Agreement, dated as of August 29, 1997, between The Hearst
         Corporation and the Company (incorporated by reference to Exhibit 10.5
         of the Company's Current Report on Form 8-K filed October 17, 1997).

 10.20   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 the
         Company's Form 10-K for the fiscal year ending December 31, 1997).

 10.21   Guaranty, given as of February 18, 1998 by the Company to STC
         Broadcasting of Vermont, Inc., STC License Company and STC
         Broadcasting of Vermont Subsidiary, Inc. (incorporated by reference to
         Exhibit 10.28 of the Company's Form 10-K for the fiscal year ending
         December 31, 1997).

 10.22   Board Representation Agreement, dated as of May 25, 1998, by and among
         the Company, Hearst Broadcasting, Inc. and Emily Raugh Pulitzer,
         Michael E. Pulitzer and David E. Moore (incorporated by reference to
         Exhibit 10.4 of the Company's Current Report on Form 8-K dated May 26,
         1998).

 10.23   Affiliation Agreement between Smith Television of Salinas Monterey
         License, L.P. (re: KSBW) and the National Broadcasting Company, Inc.,
         dated March 20, 1996 (incorporated by reference to Exhibit 10.1 of the
         Company's Quarterly Report for the quarter ended June 30, 1998).
</TABLE>

                                       66
<PAGE>

<TABLE>
<CAPTION>
 Exhibit
   No.                                 Description
 -------                               -----------
 <C>     <S>
 10.24   Affiliation Agreement between Heritage Media Corp. (re: WPTZ) and the
         National Broadcasting Company, Inc., dated August 28, 1995
         (incorporated by reference to Exhibit 10.2 of the Company's Quarterly
         Report for the quarter ended June 30, 1998).

 10.25   Amendment to Affiliation Agreement between Heritage Media Corp. (re:
         WPTZ) and the National Broadcasting Company, Inc., dated January 1,
         1996 (incorporated by reference to Exhibit 10.3 of the Company's
         Quarterly Report for the quarter ended June 30, 1998).

 10.26   Affiliation Agreement between Heritage Media Corp. (re: WNNE) and the
         National Broadcasting Company, Inc., dated August 28, 1995
         (incorporated by reference to Exhibit 10.4 of the Company's Quarterly
         Report for the quarter ended June 30, 1998).

 10.27   Amendment to Affiliation Agreement between Heritage Media Corp. (re:
         WNNE) and the National Broadcasting Company, Inc., dated January 1,
         1996 (incorporated by reference to Exhibit 10.5 of the Company's
         Quarterly Report for the quarter ended June 30, 1998).

 10.28   Employee Stock Purchase Plan (incorporated by reference to Exhibit
         10.34 of the Company's 10-K for the fiscal year ended December 31,
         1998).

 10.29   Form of 364-Day 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 10.1 of the Company's Quarterly Report for the quarter ended
         March 31, 1999).

 10.30   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 the Company's Quarterly Report for the
         quarter ended March 31, 1999).

 10.31   Employment Agreement, dated as of January 1, 1999, between the Company
         and David J. Barrett.

 10.32   Employment Agreement, dated as of January 1, 1999, between the Company
         and Anthony J. Vinciquerra.

 10.33   Employment Agreement, dated as of February 15, 1999, between the
         Company and Terry Mackin.

 10.34   Employment Agreement, dated as of January 1, 1999, between the Company
         and Philip Stolz.

 16.1    Letter from Ernst & Young LLP to the Securities and Exchange
         Commission pursuant to Item 304(a)(3) of Reg. S-K (incorporated by
         reference to Exhibit 16.1 of the Company's Current Report on 8-K/A,
         dated October 20, 1997).

 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).

 27.1    Financial Data Schedule.
</TABLE>

                                       67
<PAGE>

                                  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/ Harry T. Hawks
                                             ----------------------------------
                                             Name:Harry T. Hawks
                                             Title:Executive Vice President
                                             and Chief
                                             Financial Officer

                                          Dated: March 30, 2000

                               POWER OF ATTORNEY

  KNOW ALL MEN BY THESE PRESENTS that each of the undersigned directors and
officers of Hearst-Argyle Television, Inc. hereby constitutes and appoints Bob
Marbut, David J. Barrett and Harry T. Hawks, 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 such amendment to
this Report, with all exhibits thereto, 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 on March 30, 2000.

<TABLE>
<CAPTION>
                 Signature                            Title                  Date
                 ---------                            -----                  ----

<S>                                         <C>                        <C>
              /s/ Bob Marbut                Co-Chief Executive Officer  March 30, 2000
___________________________________________  and Chairman of the Board
                Bob Marbut                   (Principal Executive
                                             Officer)

           /s/ David J. Barrett             President, Co-Chief         March 30, 2000
___________________________________________  Executive Officer and
             David J. Barrett                Director (Principal
                                             Executive Officer)

            /s/ Harry T. Hawks              Executive Vice President    March 30, 2000
___________________________________________  and Chief Financial
              Harry T. Hawks                 Officer (Principal
                                             Financial and Accounting
                                             Officer)

         /s/ Frank A. Bennack, Jr.          Director                    March 30, 2000
___________________________________________
           Frank A. Bennack, Jr.

</TABLE>


                                      68
<PAGE>

<TABLE>
<CAPTION>
                 Signature                            Title                  Date
                 ---------                            -----                  ----

<S>                                         <C>                        <C>
           /s/ John G. Conomikes            Director                    March 30, 2000
___________________________________________
             John G. Conomikes

                                            Director                    March 30, 2000
___________________________________________
               Ken J. Elkins

            /s/ Victor F. Ganzi             Director                    March 30, 2000
___________________________________________
              Victor F. Ganzi

           /s/ George R. Hearst             Director                    March 30, 2000
___________________________________________
             George R. Hearst

         /s/ William R. Hearst III          Director                    March 30, 2000
___________________________________________
           William R. Hearst III

           /s/ Gilbert C. Maurer            Director                    March 30, 2000
___________________________________________
             Gilbert C. Maurer

          /s/ Michael E. Pulitzer           Director                    March 30, 2000
___________________________________________
            Michael E. Pulitzer

             /s/ David Pulver               Director                    March 30, 2000
___________________________________________
               David Pulver

           /s/ Virginia H. Randt            Director                    March 30, 2000
___________________________________________
             Virginia H. Randt

         /s/ Caroline L. Williams           Director                    March 30, 2000
___________________________________________
           Caroline L. Williams

</TABLE>

                                       69
<PAGE>

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
 Exhibit
   No.                                 Description
 -------                               -----------
 <C>     <S>
  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
         Exhibit 2.1 of the Company's 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 Appendix A to the Company's
         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 Company's 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 the Company's 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 the Company's Form 10-K for the fiscal year ended December 31,
         1998).

  4.1    Form of Indenture relating to the Senior Subordinated Notes due 2005
         (including form of security) (incorporated by reference to Exhibit 4.1
         of Argyle's Form 10-K for the fiscal year ending December 31, 1996).

  4.2    First Supplemental Indenture, dated as of June 1, 1996, among KHBS
         Argyle Television, Inc, Arkansas Argyle Television, Inc. and United
         States Trust Company of New York (incorporated by reference to
         Argyle's Current Report on Form 8-K dated June 11, 1996).

  4.3    Second Supplemental Indenture dated as of August 29, 1997 among KMBC
         Hearst-Argyle Company Television, Inc., WBAL Hearst-Argyle Television,
         Inc., WCVB Hearst-Argyle Television, Inc., WISN Hearst-Argyle
         Television, Inc., WTAE Hearst-Argyle Television, Inc. and United
         States Trust Company of New York (incorporated by reference to Exhibit
         4.8 of the Company's Registration Statement on Form S-3 (File No. 333-
         32487)).

  4.4    Third Supplemental Indenture, dated as of February 26, 1998, among the
         Company, Hearst-Argyle Television Stations, Inc., KMBC Hearst-Argyle
         Television, Inc., WBAL Hearst-Argyle Television, Inc., WCVB Hearst-
         Argyle Television, Inc., WISN Hearst-Argyle Television, Inc., WTAE
         Hearst-Argyle Television, Inc., WAPT Hearst-Argyle Television, Inc.,
         KITV Hearst-Argyle Television, Inc., KHBS Hearst-Argyle Television,
         Inc., Ohio/Oklahoma Hearst-Argyle Television, Inc., Jackson Hearst-
         Argyle Television, Inc., Hawaii Hearst-Argyle Television, Inc.,
         Arkansas Hearst-Argyle Television, Inc. and United States Trust
         Company of New York (incorporated by reference to Exhibit 4.4 of the
         Company's Form 10-K for the fiscal year ending December 31, 1997).

  4.5    Form of Note for Senior Subordinated Notes due 2005 (incorporated by
         reference to Exhibit 4.1 of Argyle's Form 10-K for the fiscal year
         ending December 31, 1996).

  4.6    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 the Company's Current Report on Form 8-K dated November
         13, 1997).

  4.7    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 the Company's Current
         Report on Form 8-K dated November 13, 1997).

  4.8    Global Note representing $125,000,000 of 7% Senior Notes Due November
         15, 2007 (incorporated by reference to Exhibit 4.3 of the Company's
         Current Report on Form 8-K dated November 13, 1997).

  4.9    Global Note representing $175,000,000 of 7% Debentures Due November
         15, 2027 (incorporated by reference to Exhibit 4.4 of the Company's
         Current Report on Form 8-K dated January 13, 1998).
</TABLE>

                                       70
<PAGE>

<TABLE>
<CAPTION>
 Exhibit
 No.                                   Description
 -------                               -----------
 <C>     <S>
  4.10   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 the Company's Current
         Report on Form 8-K dated January 13, 1998).

  4.11   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 the Company's Form 10-K for the fiscal year ended December 31,
         1998).

  4.12   Form of Registration Rights Agreement among the Company and the
         Holders (incorporated by reference to Exhibit B to Exhibit 2.1 of the
         Company's Registration Statement on Form S-4 (File No. 333-32487)).

  4.13   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 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 the Company's Form S-4 (File No. 333-
         72207)).


 10.1    Amended and Restated Employment Agreement of Harry T. Hawks
         (incorporated by reference to Exhibit 10.3(d) of Argyle's Registration
         Statement on Form S-1 (File No. 33-96029)).

 10.2    1997 Stock Option Plan (incorporated by reference to Appendix E of the
         Company's Registration Statement on Form S-4 (File No. 333-22487)).

 10.3    Affiliation Agreement among Multimedia, Inc., Multimedia
         Entertainment, Inc. (re: WLWT) and NBC (incorporated by reference to
         Exhibit 10.8(a) of the Company's Form 10-K for the fiscal year ending
         December 31, 1996).

 10.4    Affiliation Agreement between combined Communications Corporation of
         Oklahoma, Inc. (re: KOCO) and ABC (incorporated by reference to
         Exhibit 10.8(b) of the Company's Form 10-K for the fiscal year ending
         December 31, 1996).

 10.5    Affiliation Agreement between Tak Communications, Inc. (re: KITV) and
         ABC, dated November 4, 1994 and Satellite Television Affiliation
         Agreements, dated November 9, 1994 (incorporated by reference to
         Exhibit 10.5(d) of the Company's Registration Statement on Form S-1
         (File No. 33-96029)).

 10.6    Form of Affiliation Agreement between Jackson Argyle Television, Inc.
         (re: WAPT) and ABC (incorporated by reference to Exhibit 10.5(e) of
         the Company's Registration Statement on Form S-1 (File No. 33-96029)).

 10.7    Affiliation Agreements between Sigma Broadcasting, Inc. (re: KHBS and
         KHOG) and ABC (incorporated by reference to the Company's Current
         Report on Form 8-K dated June 11, 1996).

 10.8    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 the
         Company's Quarterly Report for the quarter ended September 30, 1997).

 10.9    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
         the Company's Quarterly Report for the quarter ended September 30,
         1997).

 10.10   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
         the Company's Quarterly Report for the quarter ended September 30,
         1997).

 10.11   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 the
         Company's Quarterly Report for the quarter ended September 30, 1997).
</TABLE>

                                       71
<PAGE>

<TABLE>
<CAPTION>
 Exhibit
   No.                                 Description
 -------                               -----------
 <C>     <S>
 10.12   Television Affiliation Agreement for Television Broadcasting Station
         WBAL-TV, dated January 2, 1995, by and between National Broadcasting
         Company, Inc. and The Hearst Corporation (incorporated by reference to
         Exhibit 10.5 of the Company's Quarterly Report for the quarter ended
         September 30, 1997).

 10.13   Amendment to the Television Affiliation Agreement for Television
         Broadcasting Station WBAL-TV, dated January 2, 1995, by and between
         National Broadcasting Company, Inc. and The Hearst Corporation
         (incorporated by reference to Exhibit 10.6 of the Company's Quarterly
         Report for the quarter ended September 30, 1997).

 10.14   Form of Amended and Restated Tax Sharing Agreement (incorporated by
         reference to Exhibit 10.10 of the Company's Form 10-K for the fiscal
         year ending December 31, 1996).

 10.15   Employment Agreement, dated as of August 12, 1997, between the Company
         and Bob Marbut (incorporated by reference to Exhibit 10.1 of the
         Company's Current Report on Form 8-K filed October 17, 1997).

 10.16   Management Services Agreement, dated as of August 29, 1997, between
         The Hearst Corporation and the Company (incorporated by reference to
         Exhibit 10.2 of Company's Current Report on Form 8-K filed October 17,
         1997).

 10.17   Option Agreement, dated as of August 29, 1997, between The Hearst
         Corporation and the Company (incorporated by reference to Exhibit 10.3
         of Company's Current Report on Form 8-K filed October 17, 1997).

 10.18   Studio Lease Agreement, dated as of August 29, 1997, between The
         Hearst Corporation and the Company (incorporated by reference to
         Exhibit 10.4 of the Company's Current Report on Form 8-K filed October
         17, 1997).

 10.19   Services Agreement, dated as of August 29, 1997, between The Hearst
         Corporation and the Company (incorporated by reference to Exhibit 10.5
         of the Company's Current Report on Form 8-K filed October 17, 1997).

 10.20   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 the
         Company's Form 10-K for the fiscal year ending December 31, 1997).

 10.21   Guaranty, given as of February 18, 1998 by the Company to STC
         Broadcasting of Vermont, Inc., STC License Company and STC
         Broadcasting of Vermont Subsidiary, Inc. (incorporated by reference to
         Exhibit 10.28 of the Company's Form 10-K for the fiscal year ending
         December 31, 1997).

 10.22   Board Representation Agreement, dated as of May 25, 1998, by and among
         the Company, Hearst Broadcasting, Inc. and Emily Raugh Pulitzer,
         Michael E. Pulitzer and David E. Moore (incorporated by reference to
         Exhibit 10.4 of the Company's Current Report on Form 8-K dated May 26,
         1998).

 10.23   Affiliation Agreement between Smith Television of Salinas Monterey
         License, L.P. (re: KSBW) and the National Broadcasting Company, Inc.,
         dated March 20, 1996 (incorporated by reference to Exhibit 10.1 of the
         Company's Quarterly Report for the quarter ended June 30, 1998).

 10.24   Affiliation Agreement between Heritage Media Corp. (re: WPTZ) and the
         National Broadcasting Company, Inc., dated August 28, 1995
         (incorporated by reference to Exhibit 10.2 of the Company's Quarterly
         Report for the quarter ended June 30, 1998).

 10.25   Amendment to Affiliation Agreement between Heritage Media Corp. (re:
         WPTZ) and the National Broadcasting Company, Inc., dated January 1,
         1996 (incorporated by reference to Exhibit 10.3 of the Company's
         Quarterly Report for the quarter ended June 30, 1998).

 10.26   Affiliation Agreement between Heritage Media Corp. (re: WNNE) and the
         National Broadcasting Company, Inc., dated August 28, 1995
         (incorporated by reference to Exhibit 10.4 of the Company's Quarterly
         Report for the quarter ended June 30, 1998).
</TABLE>

                                       72
<PAGE>

<TABLE>
<CAPTION>
 Exhibit
   No.                                 Description
 -------                               -----------

 <C>     <S>
 10.27   Amendment to Affiliation Agreement between Heritage Media Corp. (re:
         WNNE) and the National Broadcasting Company, Inc., dated January 1,
         1996 (incorporated by reference to Exhibit 10.5 of the Company's
         Quarterly Report for the quarter ended June 30, 1998).

 10.28   Employee Stock Purchase Plan (incorporated by reference to Exhibit
         10.34 of the Company's 10-K for the fiscal year ended December 31,
         1998).

 10.29   Form of 364-Day 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 10.1 of the Company's Quarterly Report for the quarter ended
         March 31, 1999).

 10.30   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 the Company's Quarterly Report for the
         quarter ended March 31, 1999).

 10.31   Employment Agreement, dated as of January 1, 1999, between the Company
         and David J. Barrett.

 10.32   Employment Agreement, dated as of January 1, 1999, between the Company
         and Anthony J. Vinciquerra.

 10.33   Employment Agreement, dated as of February 15, 1999, between the
         Company and Terry Mackin.

 10.34   Employment Agreement, dated as of January 1, 1999, between the Company
         and Philip Stolz.

 16.1    Letter from Ernst & Young LLP to the Securities and Exchange
         Commission pursuant to Item 304(a)(3) of Reg. S-K (incorporated by
         reference to Exhibit 16.1 of the Company's Current Report on 8-K/A,
         dated October 20, 1997).

 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).

 27.1    Financial Data Schedule.
</TABLE>

                                       73