<PAGE>
 
                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D. C. 20549

                                  FORM 10-K/A
(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, 1997

                                       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)

          DELAWARE                                        74-2717523
(State or other jurisdiction of                           (I.R.S. Employer
incorporation or organization)                           Identification No.)
 
         888 Seventh Avenue                                    10106
            New York, NY                                     (Zip Code)
(Address of principal executive offices)

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

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

                                      NONE

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

                Series A Common Stock, par value $.01 per share
                                (Title of Class)

  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
                                                 ------     

  The aggregate market value of the Registrant's voting stock held by
  nonaffiliates on March 6, 1998, based on the closing price for the
  Registrant's Series A Common Stock on such date as reported on the Nasdaq
  National Market, was approximately $405,000,000.

  Shares of Common Stock outstanding at March 6, 1998: 53,839,252 shares
  (consisting of 12,540,604 shares of Series A Common Stock and 41,298,648
  shares of Series B Common Stock).

  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]

  DOCUMENTS INCORPORATED BY REFERENCE:  Portions of the Company's Proxy
  Statement relating to the 1998 Annual Meeting of Stockholders are incorporated
  by reference into Part III (Items 10, 11, 12 and 13), and Item 4 of the
  Company's Current Reports on Form 8-K filed with the Commission on October 17,
  1997 and October 20, 1997, is incorporated into Part II (Item 9).
<PAGE>
 
                         HEARST-ARGYLE TELEVISION, INC.

This amendment No.1 to Form 10-K amends and revises Part II: Items 6,7,8 and 14
of the Annual Report on Form 10-K for the fiscal year ended December 31, 1997 of
Hearst-Argyle Television, Inc. initially filed on March 31, 1998 with the
Securities and Exchange Commission. Unless otherwise indicated, capitalized
terms used herein shall have the respective meanings given such terms in the
Form 10-K.

                                      -2-
<PAGE>
 
ITEM 6. SELECTED FINANCIAL DATA
-------------------------------

           The selected financial data should be read in conjunction with the
historical and pro forma 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, Inc.) (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, has been revised to reflect the
consolidated financial statements of the Hearst Broadcast Group, the accounting
acquiror. The pro forma consolidated financial data for the year ended December
31, 1997 has been prepared as if the Gannett Swap and the Hearst Transaction had
been completed at the beginning of the year presented. Such pro forma data is
not necessarily indicative of the actual results that would have occurred nor of
results that may occur.

                                      -3-
<PAGE>
 
                        Hearst-Argyle Television, Inc.
                        -----------------------------
<TABLE> 
<CAPTION> 
                                                                Years Ended December 31,                         Pro Forma
                                                         (In thousands, except per share data)                 (In thousands)

                                             1993        1994         1995         1996       1997(a)             1997(b)
<S>                                       <C>         <C>          <C>          <C>          <C>               <C> 
Statement of operations data:
Total revenues                             $224,067    $259,459     $ 279,340    $283,971      $333,661         $387,782
Station operating expenses                  103,880     106,281       117,535     121,501       142,096          168,443
Amortization of program rights               37,087      40,266        38,619      40,297        40,129           42,978
Depreciation and amortization                26,008      23,071        22,134      16,971        22,924           36,240
                                             ------      ------        ------      ------        ------           ------
Station operating income                     57,092      89,841       101,052     105,202       128,512          140,121
Corporate expenses                            5,924       8,007         7,857       7,658         9,527           11,000
                                             ------      ------        ------      ------        ------           ------
Operating income                             51,168      81,834        93,195      97,544       118,985          129,121
Interest expense, net                        22,773      22,678        22,218      21,235        32,484           38,377
                                             ------      ------        ------      ------        ------           ------
Income  from continuing                                                                                       
  operations before income taxes                                                                              
  and extraordinary item                     28,395      59,156        70,977      76,309        86,501           90,744
Income taxes                                 17,123      25,265        30,182      31,907        35,363           37,732
                                             ------      ------        ------      ------        ------           ------
Income  from continuing operations
  before extraordinary item                  11,272      33,891        40,795      44,402        51,138           53,012
Extraordinary item(c)                                                                           (16,212)
                                             ------      ------        ------      ------        ------           ------
Net income                                   11,272      33,891        40,795      44,402        34,926           53,012
Less preferred stock dividends(d)                 -           -             -                      (711)          (1,422)
                                             ------      ------        ------      ------        ------           ------
Income applicable to common
  stockholders                              $11,272     $33,891       $40,795     $44,402       $34,215          $51,590
                                            =======     =======       =======     =======       =======          =======

Earnings per common share - basic:
    Income from continuing
      operations before extraordinary      
item                                          $0.27       $0.82         $0.99       $1.08         $1.13            $0.96
                                            =======     =======       =======     =======       =======          =======
    Income applicable to
common  stockholders                          $0.27       $0.82         $0.99       $1.08         $0.77            $0.96
                                            =======     =======       =======     =======       =======          =======
    Number of shares used in
the  calculation(k)                          41,299      41,299        41,299      41,299        44,632           53,828
                                            =======     =======       =======     =======       =======          =======
Earnings per common share - diluted:
    Income from continuing
      operations before extraordinary       
item                                          $0.27       $0.82         $0.99       $1.08         $1.13            $0.96
                                            =======     =======       =======     =======       =======          =======
    Income applicable to
common stockholders                           $0.27       $0.82         $0.99       $1.08         $0.77            $0.96
                                            =======     =======       =======     =======       =======          =======
   Number of shares used in the
     calculation(k)                          41,299      41,299        41,299      41,299        44,674           53,873
                                            =======     =======       =======     =======       =======          =======  
</TABLE>

                                      -4-
<PAGE>
 
                         Hearst-Argyle Television, Inc.
                         ------------------------------

<TABLE> 
<CAPTION> 
                                                                                                                The Company
                                                            Years Ended December 31,                             Pro Forma

                                           1993         1994         1995         1996         1997(a)             1997(b)
<S>                                     <C>          <C>          <C>          <C>           <C>                <C> 
Other data:
Broadcast cash flow(e)                    $82,626     $113,999     $123,038     $117,947      $150,972            $175,834
Broadcast cash flow margin(f)                36.9%        43.9%        44.0%        41.5%         45.2%               45.3%
Operating cash flow(g)                    $79,147     $108,749     $117,087     $109,457      $141,445            $164,834
Operating cash flow margin(h)                35.3%        41.9%        41.9%        38.5%         42.4%               42.5%
After-tax cash flow(i)                    $37,280      $56,962      $62,929      $61,373       $74,062            $ 89,252
Cash flow provided by operating
  activities                                N/A        $44,460      $61,185      $65,801       $67,689               N/A
Cash flow used in investing
  activities                                N/A        $(8,430)     $(8,621)     $(7,764)    $(131,973)              N/A
Cash flow provided by (used in)
   financing  activities                    N/A       $(33,584)    $(52,020)    $(58,145)      $74,161               N/A
Capital expenditures                       $4,879       $8,430       $8,621       $7,764       $21,897               N/A
Program payments                          $37,561      $39,179      $38,767      $44,523       $40,593            $ 43,505
Balance sheet data (at year end):
Cash and cash equivalents                   N/A         $2,446       $2,990       $2,882       $12,759             $12,759
Total assets                                N/A       $387,984     $385,406     $366,956    $1,044,109          $1,044,109
Total debt (including current portion)      N/A         N/A          N/A          N/A         $490,000            $500,000
Divisional/Stockholders' equity(j)          N/A       $283,988     $272,762     $259,020      $326,654            $326,654
</TABLE>

See footnotes on the following page.

                                      -5-
<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, 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 WWWB, WPBF, KCWE and WBAL-AM and WIYY-FM (the "Managed
           Stations") from September 1 through December 31, 1997.

(b)        Includes the results of operations of Argyle, Hearst Broadcast Group
           and the management fee derived by the Company from the Managed
           Stations, on a combined pro forma basis as if the Hearst Transaction
           and the definitive agreement with Gannett Co., Inc. to swap Argyle's
           WZZM and WGRZ for Gannett's WLWT and KOCO (the "Gannett Swap") had
           occurred at the beginning of the period presented.

(c)        Represents the write-offs of unamortized financing costs and premiums
           paid upon early extinguishment of debt for Hearst-Argyle. 

(d)        Gives effect to dividends on the Preferred Stock issued in connection
           with the acquisition of KHBS/KHOG.

(e)        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.
           Broadcast cash flow does not present a measure of operating results
           and does not purport to represent cash provided by operating
           activities. Broadcast cash flow should not be considered in isolation
           or as a substitute for measures of performance prepared in accordance
           with generally accepted accounting principles. This measure may not
           be comparable to similarly titled measures used by other companies.

(f)        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.

(g)        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
           expense. Operating cash flow is presented here not as a measure of
           operating results, but rather as a measure of debt service ability.
           Operating cash flow does not purport to represent cash provided by
           operating activities and should not be considered in isolation or as
           a substitute for measures of performance prepared in accordance with
           generally accepted accounting principles. This measure may not be
           comparable to similarly titled measures used by other companies.

(h)        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.

(i)        After-tax cash flow is defined as income before extraordinary item
           plus depreciation and amortization. After-tax cash flow does not
           present a measure of operating results and does not purport to
           represent cash provided by operating activities. After-tax cash flow
           should not be considered in isolation or as a substitute for measures
           of performance prepared in accordance with generally accepted
           accounting principles. This measure may not be comparable to
           similarly titled measures used by other companies.

(j)        Divisional equity includes net amounts due to Hearst and affiliates.
           Hearst-Argyle has not paid any dividends on its Series A Common Stock
           since inception.

(k)        The number of shares used in the per share calculation retroactively
           reflects approximately 41.3 million shares received by Hearst in the
           Hearst Transaction for all periods prior to September 1, 1997.

                                      -6-
<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 has been
revised to include the financial statements of the Hearst Broadcast Group. In
addition, the Company agreed to provide management services with respect to
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 Notes 3 and 12 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.

        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. Results of operations for the years ended
December 31, 1995 and 1996 include the Hearst Broadcast Group for the entire
period.

<TABLE>
<CAPTION>
                                                                                    Years Ended December 31,
                                                                -------------------------------------------------------------
                                                                        1995                  1996                 1997
                                                                -------------------------------------------------------------
                                                                                         (In thousands)
<S>                                                                 <C>                   <C>                  <C>     
Total revenues                                                       $279,340              $283,971             $333,661

Station operating expenses                                            117,535               121,501              142,096
Amortization of program rights                                         38,619                40,297               40,129

Depreciation and amortization of intangibles                           22,134                16,971               22,924
                                                                     --------              --------              -------        
Station operating income                                              101,052               105,202              128,512

Corporate general and administrative expenses                           7,857                 7,658                9,527
                                                                     --------              --------              -------        
Operating income                                                       93,195                97,544              118,985

Interest expense, net                                                  22,218                21,235               32,484
                                                                     --------              --------              -------        
Income before taxes and extraordinary item                             70,977                76,309               86,501
Income taxes                                                           30,182                31,907               35,363
                                                                     --------              --------              -------        
Income from continuing operations                                      40,795                44,402               51,138
Extraordinary item, early retirement of debt                                -                     -              (16,212)
                                                                     --------              --------              -------        
Net income                                                            $40,795               $44,402              $34,926
                                                                     ========              ========              =======
                                                                =============================================================
</TABLE>

                                      -7-
<PAGE>
 
             Set forth below are the principal types of television revenues and
related agency and national sales representative commissions for the Company's
twelve stations on a pro forma combined full-year basis for the periods
indicated and the percentage contribution of each to the total revenues. The
information included in the table below does not include certain pro forma
adjustments reflected in pro forma financial statements set forth elsewhere
herein.

<TABLE>
<CAPTION>
                                                     Pro Forma Combined
                                                  Year Ended December 31
                         ---------------------------------------------------------------------------------
                            1995            %            1996             %          1997            %
                                                             (In thousands)
<S>                      <C>            <C>         <C>               <C>        <C>              <C> 
Revenues:
Local/Regional(a)         $220,064         60.8%      $218,299          59.2%      $239,301          62.1%
National(b)                165,707         45.8        163,310          44.3        166,100          43.1
Network
  Compensation(c)           21,203          5.9         21,440           5.8         22,129           5.7
Political(d)                 3,580          1.0         18,995           5.1          3,022           0.8
Barter(e)                    7,987          2.2          7,338           2.0         12,891           3.4
Other                        8,587          2.4          7,192           1.9         10,757           2.8
Agency and Sales
   Representative
   Commissions(f)          (65,512)       (18.1)       (67,529)        (18.3)       (68,956)        (17.9)
                          --------     ---------      ---------      --------      ---------        ------
Total Revenues            $361,616          100%      $369,045           100%      $385,244           100%
                          ========     =========      =========      ========      =========        ======
</TABLE>

(a)  Represents sale of advertising time to local and regional advertisers.
(b)  Represents sale of advertising time to national advertisers.
(c)  Represents payment by the networks for broadcasting network programming.
(d)  Represents sale of advertising time to political advertisers.
(e)  Represents value of commercial time exchanged for syndicated programs
     and commercial time exchanged for goods and services (trade outs).
(f)  Represents commissions paid to local and national advertising
     agencies and to national sales representatives. Commissions are
     calculated as a percentage of gross revenue.


Year Ended December 31, 1997
Compared to Year Ended December 31, 1996

           Total revenues. Total revenues in the year ended December 31, 1997
were $333.7 million, as compared to $284 million in the year ended December 31,
1996, an increase of $49.7 million or 17.5%. The increase was primarily
attributable to the Hearst Transaction which added $33.5 million to 1997 total
revenues. In addition, certain Hearst Broadcast Group stations experienced: (i)
an increase in local and to a lesser degree national advertising which added
$13.9 million to the 1997 period and (ii) an increase in trade and barter
revenues, which added $2.4 million to the 1997 period.

           Station operating expenses. Station operating expenses in the year
ended December 31, 1997 were $142.1 million, as compared to $121.5 million in
the year ended December 31, 1996, an increase of $20.6 million or 17%. The
increase was primarily attributable to the Hearst Transaction, which added $17.2
million to station operating expenses during 1997. In addition, the Hearst
Broadcast Group experienced an increase in trade and barter expenses, which
added $2.4 million to the 1997 period.

           Amortization of program rights. Amortization of program rights in the
year ended December 31, 1997 was $40.1 million, as compared to $40.3 million in
the year ended December 31, 1996, a decrease of $0.2 million or 0.5%. The
decrease was primarily attributable to a decrease of $1.4 million in Hearst
Broadcast Group amortization of program rights due to: (i) the replacement of
certain programming at lower costs in multiple Hearst Broadcast Group markets
and (ii) the renegotiation of a certain programming contract at a lower rate.
This was offset by the Hearst Transaction, which added $1.3 million to
amortization of program rights during 1997.

                                      -8-
<PAGE>
 
           Depreciation and amortization. Depreciation and amortization of
intangible assets was $22.9 million in the year ended December 31, 1997, as
compared to $17 million in the year ended December 31, 1996, an increase of $5.9
million or 34.7%. The increase was primarily attributable to the Hearst
Transaction, which added $7.3 million to depreciation and amortization of
intangibles during 1997. This was offset by a decrease in amortization of $1.3
million due to a portion of intangible assets that became fully amortized during
1996.

           Station operating income. Station operating income in the year ended
December 31, 1997 was $128.5 million, as compared to $105.2 million in the year
ended December 31, 1996, an increase of $23.3 million or 22.1%. The station
operating income increase was due to the items discussed above.

           Corporate general and administrative expenses. Corporate general and
administrative expenses were $9.5 million for the year ended December 31, 1997,
as compared to $7.7 million for the year ended December 31, 1996, an increase of
$1.8 million or 23.4%. 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 $32.5 million in the
year ended December 31, 1997, as compared to $21.2 million in the year ended
December 31, 1996, an increase of $11.3 million or 53.3%. This increase in
interest expense was primarily attributable to a larger outstanding debt balance
in 1997 than in 1996, which was the result of the Hearst Transaction.

           Income taxes. Income tax expense was $35.4 million for the year ended
December 31, 1997, as compared to $31.9 million for the year ended December 31,
1996, an increase of $3.5 million or 11%. The effective rate was 40.9% for the
year ended December 31, 1997 as compared to 41.8% for the year ended December
31, 1996. This represents federal and state income taxes as calculated on the
Company's net income before taxes and extraordinary item for the year ended
December 31, 1997 and 1996. The decrease in the effective rate relates primarily
to the decrease in non-deductible amortization of intangible assets described
above.

           Extraordinary item. 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 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 was $34.9 million in the year ended December
31, 1997, as compared to $44.4 million in the year ended December 31, 1996, a
decrease of $9.5 million or 21.4%. This decrease was attributable primarily to
the extraordinary item, without which net income would have been $51.1 million,
an increase of $6.7 million or 15.1%. This increase was attributable to the
items discussed above.

           Broadcast Cash Flow. Broadcast cash flow was $151 million in the year
ended December 31, 1997, as compared to $117.9 million in the year ended
December 31, 1996, an increase of $33.1 million or 28.1%. The broadcast cash
flow increase resulted primarily from the Hearst Transaction, which added $14.5
million to broadcast cash flow during 1997. In addition, the increase was due to
an increase, at certain Hearst Broadcast Group stations, in local and to a
lesser degree national advertising. Broadcast cash flow margin increased to
45.2% in 1997 from 41.5% in 1996. Broadcast cash flow is defined as station
operating income, plus depreciation and amortization, plus amortization of
program rights, and minus program payments. Broadcast cash flow does not present
a measure of operating results and does not purport to represent cash provided
by operating activities. Broadcast cash flow should not be considered in
isolation or as a substitute for measures of performance prepared in accordance
with generally accepted accounting principles. This measure may not be
comparable to similarly titled measures used by other companies.

                                      -9-
<PAGE>
 
Year Ended December 31, 1996
Compared to Year Ended December 31, 1995

           Total Revenues. Total revenues for the year ended December 31, 1996
were $284 million, as compared to $279.3 million for the year ended December 31,
1995, an increase of $4.7 million or 1.7 %. The increase was primarily
attributable to an increase in political advertising which added $11.6 million
to total revenues during 1996. This was offset by a decrease of approximately 
$6.9 million in total advertising revenues at two stations due to soft overall
market conditions and some loss of market revenue shares.

           Station Operating Expenses. Station operating expenses in the year
ended December 31, 1996 were $121.5 million, as compared to $117.5 million in
the year ended December 31, 1995, an increase of $4 million or 3.4%. Station 
operating expenses were relatively comparable year to year. The increase
reflects recurring increased costs due to inflation. In addition, certain
stations experienced an increase in news department spending due to the
presidential convention and election coverage. This was offset by a decrease in
expenses of $1.9 million due to the completion of the Popular Mechanics
production for a cable channel during 1995.

           Amortization of Program Rights. Amortization of program rights in the
year ended December 31, 1996 was $40.3 million, as compared to $38.6 million in
the year ended December 31, 1995, an increase of $1.7 million or 4.4%. The
increase is due to the acquisition of replacement programming approximately one
year early, at two stations. This show began airing in the fall of 1995. The
full impact of amortization of program rights for this show did not occur until
the 1996 calendar year.

           Depreciation and Amortization. Depreciation and amortization of
intangible assets was $17 million in the year ended December 31, 1996, as
compared to $22.1 million in the year ended December 31, 1995, a decrease of
approximately $5.1 million or 23.1%. This is due to a portion of the intangible
assets becoming fully amortized during the year ended December 31, 1995.

           Station Operating Income. Station operating income in the year ended
December 31, 1996 was $105.2 million, compared to $101.1 million in the same
period in 1995, an increase of $4.1 million or 4.1%, due to the items discussed
above.

           Corporate General and Administrative Expenses. Corporate and general
administrative expenses were $7.7 million in the year ended December 31, 1996,
compared to $7.9 million in the year December 31, 1995, a decrease of $0.2
million or 2.5%. Corporate general and administrative expenses were comparable
year to year.

           Income taxes.  Income tax expense was $31.9 million for the year 
ended December 31, 1996, as compared to $30.2 million for the year ended 
December 31, 1995, an increase of $1.7 million or 5.6%.  The effective rate was 
41.8% for the year ended December 31, 1996 as compared to 42.5% from the year
ended December 31, 1995. 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, 1996 and 1995. The decrease in the effective rate
relates primarily to the decrease in non-deductible amortization of intangible
assets described above.

           Net Income. Net income totaled $44.4 million in the year ending
December 31, 1996 compared to $40.8 million in the year ended December 31,1995
an increase of $3.6 million or 8.8%, due to the items discussed above.

           Broadcast Cash Flow. Broadcast cash flow totaled $117.9 million in
the year ended December 31, 1996 as compared to $123 million in the year ended
December 31, 1995, a decrease of $5.1 million or 4.1%. The decrease is due to
an increase in program payments. This increase is due to the acquisition of more
expensive programming and by continuing to make certain program payments in 1996
for replacement programming that was written-down in 1994. Broadcast cash flow
is defined as station operating income, plus depreciation and amortization, plus
amortization of program rights, and minus program payments. Broadcast cash flow
does not present a measure of operating results and does not purport to
represent cash provided by operating activities. Broadcast cash flow should not
be considered in isolation or as a substitute for measures of performance
prepared in accordance with generally accepted accounting principles. This
measure may not be comparable to similarly titled measures used by other
companies.



Liquidity and Capital Resources

                                      -10-
<PAGE>
 
Upon completion of the Hearst Transaction on August 29, 1997, the Company
retired its existing credit agreement (the "Old Agreement") and entered into a
$1 billion credit facility with Chase Manhattan Bank (the "Credit Facility"). As
of December 31, 1997, there was $85.0 million outstanding under the Credit
Facility. The Company may borrow amounts under the Credit Facility from time to
time for additional acquisitions, capital expenditures and working capital,
subject to the satisfaction of certain conditions on the date of borrowing.

On November 12, 1997 the Company sold 4,000,000 shares (plus 232,000 shares of
the underwriters' over-allotment option) of Series A Common Stock at $27 per
share. On November 13, 1997, the Company issued $125,000,000 aggregate principal
amount of 7.0% Senior Notes due 2007 and $175,000,000 aggregate principal amount
of 7.5% Senior Notes due 2027 (collectively, the "Senior Notes"). The Company
used the proceeds from the equity and debt offerings (collectively, the
"Offerings") to pay down existing debt.

During December 1997, the Company refinanced its $275.0 million Private
Placement Debt, assumed in the Hearst Transaction, using proceeds from the
Offerings and advances under the Credit Facility. In addition, the Company
refinanced $45.0 million of its Senior Subordinated Notes (the "Notes") pursuant
to provisions of the indenture during December 1997. This refinancing was funded
by advances under the Credit Facility. The Company will refinance the remaining
Notes during 1998. (See Note 18 to the consolidated financial statements).

Capital expenditures were $7.7 million in 1996 and $21.9 million in 1997. The
Company invested approximately $14.4 million in 1997 related to the construction
of a new all-digital studio and station facility for KITV. In addition, the
Company invested approximately $3.8 million in its new station facility at WLWT.

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

Impact on 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 has evaluated the potential impact of the situation commonly
referred to as the "Year 2000 problem." The Year 2000 problem, which is common
to most corporations, concerns the inability of information systems, primarily
computer software programs, to properly recognize and process date sensitive
information related to the year 2000. Preliminary assessment indicates that
solutions will involve a mix of modifying existing systems, retiring obsolete
systems and confirming vendor compliance. There can be no guarantee that the
systems of other companies on which the Company's systems rely will be timely
converted and would not have an adverse effect on the Company's systems. The
Company will utilize both internal and external resources to test and reprogram
or replace its software for Year 2000 compliance. The Company currently does not
anticipate any significant incremental capital expenditures associated with the
Year 2000 problem. However, Year 2000 assessments will continue and capital
expenditure estimates could change.


New Accounting Pronouncements

                                      -11-
<PAGE>
 
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS
131"), and SFAS No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 131
establishes standards for reporting certain financial and descriptive
information for reportable segments on the same basis that is used internally
for evaluating segment performance and the allocation of resources to segments.
SFAS 130 establishes standards for presenting nonshareholder related items that
are excluded from net income and reported as components of stockholders' equity,
such as foreign currency translation. These statements are effective for fiscal
years beginning after December 15, 1997. In February 1998, the Financial
Accounting Standards Board issued SFAS No. 132, "Employers' Disclosures About
Pensions and Other Postretirement Benefits", which becomes effective for the
Company's 1998 consolidated financial statements. SFAS No. 132 standardizes the
disclosure requirements for pensions and other postretirement benefits to the
extend practicable, requires additional information on changes in the benefit
obligations and fair values of plan assets that will facilitate financial
analysis, and eliminates certain previously required disclosures. The adoption
of these statements will not have a material effect on the Company's
consolidated financial statements.

                                      -12-
<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 .............................................................14
Consolidated Balance Sheets as of December 31, 1996 and 1997 ................................15
Consolidated Statements of Operations for the Years Ended                        
      December 31, 1995, 1996, and 1997 .....................................................17
Consolidated Statements of Divisional/Stockholders' Equity for the Years Ended   
      December 31, 1995, 1996, and 1997 .................................................... 18
Consolidated Statements of Cash Flows for the Years Ended                        
      December 31, 1995, 1996 and, 1997 .................................................... 19
Notes to Consolidated Financial Statements ................................................. 21
</TABLE>

                                      -13-
<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. (the "Company") as of December 31, 1997 and 1996, and the
related consolidated statements of operations, divisional/stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1997. Our audits also included the financial statement schedule listed in 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, 1997
and 1996, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1997, 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.



Deloitte & Touche LLP

New York, New York
February 26, 1998
(March 9, 1998 as to Note 18)

                                      -14-
<PAGE>
 
                         HEARST-ARGYLE TELEVISION, INC.

                           Consolidated Balance Sheets

<TABLE>
<CAPTION>

                                                             December 31, 1996       December 31, 1997
                                                             -----------------       -----------------
                                                                          In thousands)
<S>                                                         <C>                      <C> 
Assets
Current assets:
   Cash and cash equivalents                                    $     2,882              $    12,759
   Accounts receivable, net of allowance for                                       
     doubtful accounts of $1,693 and $2,204 in 1996 and 1997,                      
     respectively                                                    64,216                   89,988
   Program and barter rights                                         25,611                   35,737
   Deferred income taxes                                              3,013                    5,975
   Related party receivable                                              --                    3,695
   Other                                                              3,825                    7,070
   Net assets held for sale                                              --                   72,019
                                                                -----------              -----------
Total current assets                                                 99,547                  227,243
                                                                -----------              -----------
                                                                                   
Property, plant and equipment:                                                     
   Land, building and improvements                                   17,301                   31,901
   Broadcasting equipment                                           108,251                  120,747
   Office furniture, equipment and other                             12,298                   19,233
   Construction in progress                                             769                   16,128
                                                                -----------              -----------
                                                                    138,619                  188,009
   Less accumulated depreciation                                   (106,515)                 (90,205)
                                                                -----------              -----------
Property, plant and equipment, net                                   32,104                   97,804
                                                                -----------              -----------
                                                                                   
Intangible assets, net                                              233,411                  661,326
                                                                -----------              -----------
Other assets:                                                                      
   Deferred acquisition and financing costs,                                       
     net of accumulated amortization of $2,952 in 1997                             
                                                                         --                   27,796
   Program and barter rights, noncurrent                                483                    3,511
   Other                                                              1,411                   26,429
                                                                -----------              -----------
Total other assets                                                    1,894                   57,736
                                                                -----------              -----------
Total assets                                                    $   366,956              $ 1,044,109
                                                                ===========              ===========

</TABLE> 
See notes to consolidated financial statements.

                                      -15-
<PAGE>
 
                         HEARST-ARGYLE TELEVISION, INC.

                           Consolidated Balance Sheets


<TABLE>
<CAPTION>
                                                                         December 31, 1996              December 31, 1997
                                                                         -----------------              -----------------
                                                                                   (In thousands, except share data)
<S>                                                                     <C>                            <C> 
Liabilities and Divisional/Stockholders' Equity 
Current liabilities:
   Accounts payable                                                          $    4,097                       $      616
   Accrued liabilities                                                           17,166                           31,579
   Program and barter rights payable                                             25,718                           35,769
   Other                                                                          1,415                            3,904
                                                                             ----------                       ----------
Total current liabilities                                                        48,396                           71,868
                                                                             ----------                       ----------
                                                                                                      
Program and barter rights payable                                                 1,508                            4,923
Long-term debt                                                                     --                            490,000
Deferred income taxes                                                            54,992                          150,274
Other liabilities                                                                 3,040                              390
                                                                             ----------                       ----------
Total noncurrent liabilities                                                     59,540                          645,587
                                                                             ----------                       ----------
                                                                                                      
Commitments and contingencies                                                                         
                                                                                                      
Divisional/Stockholders' equity:                                                                      
 Series A preferred stock, 10,938 shares issued and                                                   
    outstanding in 1997                                                              --                                1
 Series B preferred stock, 10,938 shares issued and                                                   
    outstanding in 1997                                                              --                                1
 Series A common stock, par value $.01 per share,                                                     
    100,000,000 shares authorized, 12,529,154                                                                         
    shares issued and outstanding in 1997                                            --                              125 
 Series B common stock, par value $.01 per                                                            
    share, 100,000,000 shares authorized,                                                             
    41,298,648 shares issued and outstanding in 1996
    and 1997                                                                        413                              413
   Additional paid-in capital                                                        --                          202,152
   Retained earnings/divisional equity                                          258,607                          123,962
                                                                             ----------                       ----------
Total divisional/stockholders' equity                                           259,020                          326,654
                                                                             ----------                       ----------
Total liabilities and divisional/stockholders' equity                        $  366,956                       $1,044,109
                                                                             ==========                       ==========
</TABLE>

See notes to consolidated financial statements.

                                      -16-
<PAGE>
 
                         HEARST-ARGYLE TELEVISION, INC.

                      Consolidated Statements of Operations

<TABLE>
<CAPTION>
                                                                                     Years Ended December 31,
                                                                               1995            1996           1997
                                                                         -----------------------------------------------
                                                                              (In thousands, except per share data)
<S>                                                                        <C>            <C>               <C> 
Total revenues                                                               $ 279,340       $ 283,971       $ 333,661
                                                                                                         
Station operating expenses                                                     117,535         121,501         142,096
Amortization of program rights                                                  38,619          40,297          40,129
Depreciation and amortization                                                   22,134          16,971          22,924
                                                                             ---------        --------       ---------
Station operating income                                                       101,052         105,202         128,512
                                                                                                         
Corporate general and administrative expenses                                    7,857           7,658           9,527
                                                                             ---------       ---------       ---------
Operating income                                                                93,195          97,544         118,985
                                                                                                         
Interest expense, net                                                           22,218          21,235          32,484
                                                                             ---------       ---------       ---------
Income before income taxes and extraordinary item                               70,977          76,309          86,501
Income taxes                                                                    30,182          31,907          35,363
                                                                             ---------       ---------       ---------
Income before extraordinary item                                                40,795          44,402          51,138
Extraordinary item, loss on early retirement  of debt,                                                   
   net of income tax benefit                                                        -                -         (16,212)
                                                                             ---------       ---------       ---------
Net income                                                                      40,795          44,402          34,926
Less preferred stock dividends                                                       -               -            (711)
                                                                             ---------       ---------       ---------
Earnings applicable to common stockholders                                   $  40,795       $  44,402       $  34,215
                                                                             =========       =========       =========
Earnings per common share - basic:                                                                       
  Before extraordinary item                                                  $    0.99       $    1.08           $1.13
  Extraordinary item                                                                 -               -           (0.36)
                                                                             ---------       ---------       ---------
  Net income                                                                 $    0.99       $    1.08           $0.77
                                                                             =========       =========       =========
  Number of common shares used in the calculation                               41,299          41,299          44,632
                                                                             =========       =========       =========
Earnings per common share - diluted:                                                                     
  Before extraordinary item                                                  $    0.99       $    1.08           $1.13
  Extraordinary item                                                                 -               -           (0.36)
                                                                             ---------       ---------       ---------
  Net income                                                                 $    0.99       $    1.08           $0.77
                                                                             =========       =========       =========
  Number of common shares used in the calculation                               41,299          41,299          44,674
                                                                             =========       =========       =========
</TABLE>

See notes to consolidated financial statements.

                                      -17-
<PAGE>
 
                        HEARST-ARGYLE TELEVISION, INC.

          Consolidated Statements of Divisional/Stockholders' Equity

<TABLE>
<CAPTION>

                                                                                                        Additional
                                                         Common Stock                 Preferred          Paid-In    
                                              Series A     Series B    Series C         Stock            Capital    
                                                                                                                    
                                            ------------------------------------------------------------------------
                                                                 (In thousands, except share data)      
<S>                                        <C>              <C>                      <C>              <C> 
Balances at January 1, 1995                   $     --      $    413        --          $    --         $     --    
                                                                 
Transfers to Hearst and affiliated                  --           --         --               --               --    
  companies, net                                                                                                      
Net income                                          --           --         --               --               --    
                                            ------------------------------------------------------------------------
Balances at December 31, 1995                       --           413        --               --               --     
Transfers to Hearst and affiliated                  --           --         --               --               --    
  companies, net                                                                                                      
Net income                                          --           --         --               --               --    
                                            ------------------------------------------------------------------------
Balances at December 31, 1996                       --           413       --                --               --     
Transfers to Hearst and affiliated                  --           --         --               --               --    
  companies, net                                                                                                      
Net income                                          --           --         --               --               --    
Shares issued in connection with the                                                                                
  Hearst  Transaction                               82           --         --                2           93,971    
Issuance of 4,252,100 shares of Series                                                                              
  A  common stock for cash                          43           --         --               --          108,181    
Dividends paid on preferred stock                   --           --         --               --               --    
                                            ========================================================================
Balances at December 31, 1997                 $    125      $   413     $   --          $     2         $202,152    
                                            ========================================================================

<CAPTION> 
                                             Retained
                                             Earnings/
                                             Divisional       Total
                                              Equity
                                          -----------------------------
<S>                                      <C>              <C>                                           
Balances at January 1, 1995                     $ 283,575   $  283,988              
                                              
Transfers to Hearst and affiliated                (52,021)     (52,021)
  companies, net                            
Net income                                         40,795       40,795
                                          -----------------------------
Balances at December 31, 1995                     272,349      272,762
Transfers to Hearst and affiliated                (58,144)     (58,144)
  companies, net                            
Net income                                         44,402       44,402
                                          -----------------------------
Balances at December 31, 1996                     258,607      259,020
Transfers to Hearst and affiliated               (168,860)    (168,860)
  companies, net                            
Net income                                         34,926       34,926
Shares issued in connection with the      
  Hearst  Transaction                                  --       94,055
Issuance of 4,252,100 shares of Series    
  A  common stock for cash                             --      108,224
Dividends paid on preferred stock                    (711)        (711)
                                          =============================
Balances at December 31, 1997                  $  123,962   $  326,654 
                                          =============================

</TABLE> 


See notes to consolidated financial statements.

                                      -18-
<PAGE>
 
                         HEARST-ARGYLE TELEVISION, INC.

                      Consolidated Statements of Cash Flows

<TABLE> 
<CAPTION> 
                                                                                         Years Ended December 31,
                                                                                   1995          1996         1997
                                                                                   ----          ----         ----
                                                                                              (In thousands)
<S>                                                                             <C>          <C>           <C> 
Operating Activities
Net income                                                                       $  40,795    $  44,402    $  34,926
Adjustments to reconcile net income to net 
cash provided by operating activities:

   Extraordinary item, loss on early retirement of debt                                  -            -       26,584
   Depreciation                                                                      6,271        6,677        8,405
   Amortization of intangible assets                                                15,863       10,294       14,519
   Amortization of deferred financing costs                                              -            -          635
   Amortization of program rights                                                   38,619       40,297       40,129
   Program payments                                                                (38,767)     (44,523)     (40,593)
   Other                                                                               373          331            -
   Deferred income taxes                                                              (112)         372       17,765
   Provisions for doubtful accounts                                                  1,130          989        1,316
   Changes in operating assets and liabilities:
     Accounts receivable                                                            (4,485)       4,920      (15,250)
     Other assets                                                                     (418)          76      (13,173)
     Accounts payable and accrued liabilities                                        1,985        3,197       (7,574)
     Other liabilities                                                                 (69)      (1,231)           -
                                                                                 ----------    ---------    ---------    

Net cash provided by operating activities                                           61,185       65,801       67,689
                                                                                 ----------    ---------    ---------    
Investing Activities
Payment relating to the Hearst Transaction                                                                  (110,076)
Purchases of property, plant, and equipment                                         (8,621)      (7,764)     (21,897)
                                                                                 ----------    ---------    ---------    

Net cash used in investing activities                                               (8,621)      (7,764)    (131,973)
                                                                                 ----------    ---------    ---------    
</TABLE> 

See notes to consolidated financial statements.

                                      -19-
<PAGE>
 
                         HEARST-ARGYLE TELEVISION, INC.

                      Consolidated Statements of Cash Flows


<TABLE> 
<CAPTION>                                                                              
                                                                            Years Ended December 31,

                                                                  1995                 1996                1997
                                                                  ----                 ----                ----
                                                                                   (In thousands)
<S>                                                              <C>              <C>               <C> 
Financing Activities                                           
Financing costs and other                                                                            $     (19,868)
Issuance of common stock, net                                                                              108,935
Issuance of Senior Notes                                                                                   300,000
Repayment of Private Placement Debt                                                                       (295,895)
Repayment of Senior Subordinated Notes                                                                     (49,388)
Dividends paid on preferred stock                                                                             (711)
Proceeds from issuance of long-term debt                                                                   185,000
Payment of long-term debt                                                                                 (155,000)
Due to Hearst                                                      $ (52,020)       $  (58,145)              1,088
                                                                     --------         ---------          ----------
Net cash provided by (used in) financing activities                  (52,020)          (58,145)             74,161
                                                                     --------         ---------          ----------
Increase (decrease) in cash and cash equivalents                         544              (108)              9,877
Cash and cash equivalents at beginning of period                       2,446             2,990               2,882
                                                                     --------         ---------          ----------
Cash and cash equivalents at end of period                           $  2,990         $  2,882           $  12,759
                                                                     ========         =========          ==========  
                                                               
Supplemental Cash Flow Information:                            
Business acquired in purchase transaction:                     
   Fair market value of assets acquired                                                                   $610,762
   Liabilities assumed                                                                                    (333,903)
   Issuance of common stock                                                                               (166,783)
                                                                                                         ----------
Net cash paid for acquisition                                                                            $ 110,076
                                                                                                         ==========
Non-cash investing and financing activities:                                                                      
   Purchase of pension fund assets                                                                       $  25,101
                                                                                                         ==========
   Assumption of Hearst Private Placement Debt                                                           $ 275,000
                                                                                                         ==========
</TABLE>                                                       


See notes to consolidated financial statements.

                                      -20-
<PAGE>
 
                         HEARST-ARGYLE TELEVISION, INC.

                   Notes to Consolidated Financial Statements


1.    Nature of Operations

Hearst-Argyle Television, Inc. (the "Company") owns and operates twelve
network-affiliated television stations in geographically diverse markets in the
United States, and provides management services to three network-affiliated
television stations and two radio stations (the "Managed Stations"). Nine of the
stations are affiliates of the American Broadcasting Companies (ABC), two
stations are affiliates of the National Broadcasting Company, Inc. (NBC), and
one station is an affiliate of the Fox Broadcasting Company (Fox). The Company
operates in one main business segment, commercial television broadcasting. 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.

The merger 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 preliminary
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 has been
revised to reflect 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.

                                      -21-
<PAGE>
 
                         HEARST-ARGYLE TELEVISION, INC.

             Notes to Consolidated Financial Statements (Continued)


2.    Summary of Accounting Policies and Use of Estimates (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 operations. Such
reductions in unamortized costs for the years ended 1995, 1996 and 1997 were not
material. Costs of off network syndicated product, first run programming,
features 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, 1995, 1996 and 1997,
were approximately $3,871,000, $4,185,000 and $10,382,000, respectively, and are
included in total revenues. Barter and trade expenses for the years ended
December 31, 1995, 1996 and 1997, were $3,852,000, $4,143,000 and $10,315,000,
respectively, and are included in station operating expenses.

Property, Plant and Equipment

Property, plant and equipment is recorded at cost. Depreciation is calculated on
the straight-line method over the estimated useful lives as follows: buildings -
25 to 39 years; broadcasting equipment - five to seven years; office furniture,
equipment and other - five 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.

                                      -22-
<PAGE>
 
                         HEARST-ARGYLE TELEVISION, INC.

             Notes to Consolidated Financial Statements (Continued)


2.    Summary of Accounting Policies and Use of Estimates (continued)

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 3-40
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.

Income Taxes

The Company is included in the consolidated federal income tax return of Hearst.
The Company files separate income tax returns in states where a consolidated
return is not permitted. 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 are paid directly to Hearst. The
provision for income taxes in the accompanying 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

The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
128, Earnings Per Share ("SFAS 128") in 1997. SFAS 128 replaced primary earnings
per share ("EPS") with basic EPS and fully diluted EPS with diluted 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 dilutive EPS for all periods prior to September 1,
1997 represent the shares received by Hearst in the Hearst transaction,
approximately 41.3 millions shares. All per share amounts included in the
footnotes are the same for basic and diluted earnings per share unless otherwise
noted. The adoption of SFAS 128 did not have a material effect on the Company's
consolidated financial statements.

                                      -23-
<PAGE>
 
                         HEARST-ARGYLE TELEVISION, INC.

             Notes to Consolidated Financial Statements (Continued)


2.    Summary of Accounting Policies and Use of Estimates (Continued)

New Accounting Pronouncements

In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS
131"), and SFAS No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 131
establishes standards for reporting certain financial and descriptive
information for reportable segments on the same basis that is used internally
for evaluating segment performance and the allocation of resources to segments.
SFAS 130 establishes standards for presenting nonshareholder related items that
are excluded from net income and reported as components of stockholders' equity,
such as foreign currency translation. These statements are effective for fiscal
year beginning after December 15, 1997. In February 1998, the Financial
Accounting Standards Board issued SFAS No. 132, "Employers' Disclosures About
Pensions and Other Postretirement Benefits", which becomes effective for the
Company's 1998 consolidated financial statements. SFAS No. 132 standardizes the
disclosure requirements for pensions and other postretirement benefits to the
extent practicable, requires additional information on changes in the benefit
obligations and fair values of plan assets that will facilitate financial
analysis, and eliminates certain previously required disclosures. The adoption,
of these statements will not have a material effect on the Company's
consolidated financial statements.

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.

Interest Rate Agreements

The Company enters into interest-rate swap agreements to modify the interest
characteristics of its outstanding debt. Each interest-rate swap agreement is
designated with all or a portion of the principal balance and term of a specific
debt obligation. These agreements involve 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 accrued and 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. 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).

                                      -24-
<PAGE>
 
                         HEARST-ARGYLE TELEVISION, INC.

             Notes to Consolidated Financial Statements (Continued)


2.    Summary of Accounting Policies and Use of Estimates (Continued)

The Company purchases interest-rate cap agreements that are designed to limit
its exposure to increasing interest rates. The interest-rate cap of these
agreements exceeds the current market levels at the time they are entered into.
The interest rate indices specified by the agreements have been and are expected
to be highly correlated with the interest rates the Company incurs on its
borrowings. Payments to be received as a result of the specified interest rate
index exceeding the cap rate are accrued in other assets and are recognized as a
reduction to interest expense. The cost of these agreements is included in other
assets and amortized to interest expense ratably during the life of the
agreement. Upon termination of an interest-rate cap agreement, any gain is
deferred in other liabilities and amortized over the remaining term of the
original contractual life of the agreement as a reduction to interest expense.
Any notional amounts of agreements in excess of borrowings expected to be
outstanding during their terms would be marked to market, with changes in market
value recorded as an adjustment to interest expense.

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.

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.

3.    Acquisitions

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 preliminarily determined 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, network affiliation
agreements and goodwill. The final asset and liability fair values may differ
from those set forth in the accompanying consolidated balance sheet at December
31, 1997; however, the changes, if any, are not expected to have a material
effect on the consolidated financial statements of the Company. The consolidated
financial statements include the results of operations of Argyle since the date
of the acquisition.

                                      -25-
<PAGE>
 
                         HEARST-ARGYLE TELEVISION, INC.

             Notes to Consolidated Financial Statements (Continued)


3.    Acquisitions (Continued)

Giving effect to the above, unaudited pro forma results of operations reflect
combined historical results for WCVB, WTAE, WBAL, KMBC, WISN, WDTN, WAPT, KITV,
WLWT, KOCO, KHBS/KHOG and the Company's share of the combined broadcast cash
flows from the Clear Channel Venture and fees for providing management services
to the Managed Stations pursuant to a management agreement (See Note 13). As if
the acquisition of Argyle and financings (the Credit Facility and the Offerings)
occurred as of January 1, 1996, are as follows:

<TABLE>
<CAPTION>
                                                                                              Years Ended December 31,
                                                                                              1996                1997
                                                                                   ---------------------------------------------
                                                                                        (In thousands, except per share data)
<S>                                                                                   <C>                       <C> 
Total revenues                                                                                $370,249               $387,782
Earnings from continuing operations applicable to common stockholders                         $ 43,627               $ 51,590
Earnings per common share  -  basic                                                           $   0.81               $   0.96
                                                                                            ==========             ==========
                           -  diluted                                                         $   0.81               $   0.96
                                                                                            ==========             ========== 
Pro forma number of shares used in calculations     -  basic                                    53,828                 53,828
                                                                                            ==========             ========== 
                                                    -  diluted                                  53,863                 53,873
                                                                                            ==========             ========== 
</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.


4.     Intangible Assets

Intangible assets at December 31, 1996 and 1997 consisted of the following:

<TABLE> 
<CAPTION> 
                                                           1996          1997
                                                        ------------------------
                <S>                                     <C>           <C> 
                                                             (In thousands)

                 FCC Licenses                            $    --      $ 385,768
                 Cost in excess of net assets acquired     149,212      202,315
                 Network affiliation agreement              18,154       15,425
                 Advertiser client base asset              122,828      122,828
                 Favorable studio and office space          23,638       23,638
                 Other                                      29,258       24,228
                                                         ---------    ---------
                                                           343,090      774,202
                 Accumulated amortization                 (109,679)    (112,876)
                                                         ---------    ---------
                 Intangible assets, net                  $ 233,411    $ 661,326
                                                         =========    =========
</TABLE> 

                                      -26-
<PAGE>
 
                         HEARST-ARGYLE TELEVISION, INC.

             Notes to Consolidated Financial Statements (Continued)


5.    Accrued Liabilities

Accrued liabilities at December 31, 1996 and 1997 consist of the following:

<TABLE> 
<CAPTION> 
                                                                                          1996                    1997
                                                                                   ----------------------------------------------
                                                                                                   (In thousands)
<S>                                                                                     <C>                 <C> 
        Payroll and related costs                                                          $ 11,306            $  2,059
        Accrued payables                                                                          -              10,438
        Accrued interest                                                                          -               4,671
        Other income taxes payable                                                                -               6,303
        Other                                                                                 5,860               8,108
                                                                                           --------            --------
      Accrued liabilities                                                                  $ 17,166            $ 31,579
                                                                                           ========            ========
</TABLE> 


6.    Long-Term Debt

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

                                                            1997
                                                     ---------------------- 
                                                       (In thousands)
      Credit Facility dated August 29, 1997:        
           Revolving credit facility                          $  85,000
      Senior Notes                                              300,000
      Senior Subordinated Notes                                 105,000
                                                     ---------------------- 
       Long-term debt                                          $490,000
                                                     ======================

Credit Facility

Upon consummation of the Hearst Transaction, the Company entered into a $1
billion credit facility (the "Credit Facility") with the Chase Manhattan Bank
("Chase"). The Credit Facility will mature on December 31, 2004 (the "Maturity
Date"). On December 31, 1999 (the "Conversion Date"), outstanding principal
indebtedness under the Credit Facility up to $750 million will be converted into
a five-year term loan (the "Term Loan"). The outstanding principal balance of
the Term Loan on the Conversion Date (the "Initial Term Loan Balance") is to be
repaid in quarterly installments on the following schedule for the years
indicated: 2000-2.5% of the Initial Term Loan Balance per quarter; 2001-3.75% of
the Initial Term Loan Balance per quarter; 2002-5% of the Initial Term Loan
Balance per quarter; 2003-6.25% of the Initial Term Loan Balance per quarter;
and, 2004-7.5% of the Initial Term Loan Balance per quarter. On the Conversion
Date and through the Maturity Date, Chase will also provide a $250 million
revolving credit facility (the "Revolving Facility") to the Company. As of
December 31, 1997, the Company had $915 million available under the Credit
Facility.

The Credit Facility is unsecured, but the Company provided a negative pledge
that it will not grant to any third party a security interest in its assets and
the stock of its subsidiaries.

                                      -27-
<PAGE>
 
                         HEARST-ARGYLE TELEVISION, INC.

             Notes to Consolidated Financial Statements (Continued)


6.    Long-Term Debt  (continued)

Outstanding principal balances under the Credit Facility (including, after the
Conversion Date, borrowings under the Term Loan and the Revolving Facility) will
bear interest at the "applicable margin" plus either, at the Company's option,
LIBOR or the "alternate base rate." The "applicable margin" will vary depending
on the ratio of the Company's total debt to operating cash flow ("leverage
ratio"). The "alternate base rate" 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 will also be required to pay an
annual commitment fee based on the unused portion of the Credit Facility and the
applicable margin ranging from 0.1875% to 0.1250% (but after the Conversion
Date, only on the unused portion of the Revolving Facility).

The Credit Facility contains 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, 1999; 5.0 from December 31, 1999 through December 30, 2000; 4.5
from December 31, 2000 through December 30, 2001; and 4.0 from December 31, 2001
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 December
31, 1999, 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 1.15; (iv) restrict the amount of operating cash flow from
businesses other than the broadcast business to 25% or less of the Company's
total operating cash flow; and, (v) 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 and the repurchase of stock to the sum of (x) $100 million; (y)
proceeds from future stock issuances; and, (z) one-third of cash provided by
operations in excess of fixed charges.

The Credit Facility will also provide 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.

On August 29, 1997, Argyle's Old Credit Agreement was retired and related
deferred financing fees were written-off and included as a cost of the Hearst
Transaction.

Private Placement Debt

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

                                      -28-
<PAGE>
 
                         HEARST-ARGYLE TELEVISION, INC.

             Notes to Consolidated Financial Statements (Continued)


6.    Long-Term Debt  (continued)

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 3/4 % 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 Private Placement Debt and the premium relating to
the Notes, aggregating approximately $26.6 million pre-tax, were classified as
an extraordinary item in the accompanying statement of operations for the period
ended December 31, 1997.

Senior Notes

On November 7, 1997 the Company issued $125 million principal amount of 7.00%
Senior Notes Due 2007, priced at 99.616% of par, and $175 million principal
amount of 7.50% Debentures Due 2027, priced at 98.823% of par (collectively,
"the Senior Notes"). The Senior Notes are unsubordinated 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 offering were used to repay existing indebtedness
of the Company. See Private Placement Debt and Senior Subordinated Notes, above.

Interest Rate Risk Management

Under the terms of the Old Credit Agreement, the Company was required to enter
into interest rate protection agreements to modify the interest characteristics
of a portion (approximately 50%) of its outstanding borrowings thereunder from a
floating rate to a fixed rate.

Argyle wrote two options that gave the option holder the right to enter into two
interest rate swap agreements with the Company during May and June 1996.
Premiums for these two options were $1,000,477. The option holder exercised
these options in May and June 1996, effectively fixing Argyle's interest rate at
approximately 7% on $35 million of its borrowings until June 1999.

                                      -29-
<PAGE>
 
                         HEARST-ARGYLE TELEVISION, INC.

             Notes to Consolidated Financial Statements (Continued)


6.    Long-Term Debt (continued)

Additional information regarding these interest rate protection agreements in
effect at December 31, 1997 follows:

<TABLE>
<CAPTION>


                                           Notional Amount             Average               Average          Estimated Fair Value
                                                                    Receive Rate             Pay Rate
                                        --------------------------------------------------------------------------------------------
<S>                                         <C>                       <C>                       <C>                <C>    
Interest rate swap agreements:
     Fixed rate agreement                     $ 20,000,000                LIBOR                 7.01%                $ (339,135)
     Fixed rate agreement                     $ 15,000,000                LIBOR                 6.98%                $ (254,122)

</TABLE>

        The Company is exposed to credit risk in the event of nonperformance by
counterparties to its interest rate swap agreements. Credit risk is limited by
entering into such agreements with primary dealers only; therefore, the Company
does not anticipate that nonperformance by counterparties will occur.
Notwithstanding this, the Company's treasury department monitors counterparty
credit ratings at least quarterly through reviewing independent credit agency
reports. Both current and potential exposure are evaluated, as necessary, by
obtaining replacement cost information from alternative dealers. Potential loss
to the Company from credit risk on these agreements is limited to amounts
receivable, if any. The Company enters into these agreements solely to hedge its
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, 1995, 1996 and 1997
consists of the following:

<TABLE> 
<CAPTION> 
                                                                                  1995               1996              1997
                                                                             ----------------------------------------------------
<S>                                                                           <C>                 <C>              <C> 
Interest on borrowings:                                                                                           
   Bank credit agreements                                                       $         -         $         -     $     2,089
   Senior Subordinated Notes                                                                                              4,851
   Private Placement Debt                                                                                                 7,325
   Senior Notes                                                                                                           2,917
   Amortization of deferred financings costs and other                                                                      635
                                                                                -----------         -----------     -----------
                                                                                          -                   -          17,817
                                                                                                                  
Due to Hearst (See Note 13)                                                          22,218              21,235          16,654
                                                                                                                  
Interest rate swap agreements:                                                                                    
   Changes in fair value for agreements with optional amounts in excess of                                        
          Outstanding borrowings                                                                                            176
                                                                                -----------         -----------     -----------
              Total interest expense                                                 22,218              21,235          34,647
Interest income                                                                           -                   -           2,163
                                                                                -----------         -----------     -----------
Total interest expense, net                                                     $    22,218         $    21,235     $    32,484
                                                                                ===========         ===========     ===========
</TABLE> 

                                      -30-
<PAGE>
 
                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements (Continued)


7.    Earnings Per Share ("EPS")

<TABLE> 
<CAPTION> 
                                                                               Year Ended December 31, 1995
                                                                               ----------------------------
                                                                          (In thousands, except per share data)

                                                                 Income                      Shares                  Per-Share
                                                               (Numerator)                (Denominator)               Amount
                                                               -----------                -------------               ------
<S>                                                         <C>                         <C>                        <C> 
Basic EPS
Earnings applicable to common stockholders                    $    40,795                      41,299                $    0.99
                                                                                                                     =========  

Effect of Dilutive Securities
Assumed exercise of stock options                                   -                           -
                                                               ----------                   ---------

Diluted EPS
Earnings applicable to common 
stockholders plus assumed conversions                         $    40,795                      41,299                $    0.99
                                                              ===========                   =========                =========
<CAPTION>

                                                                              Year Ended December 31, 1996
                                                                              (In thousands, except per share data)

                                                                 Income                      Shares                  Per-Share
                                                               (Numerator)                (Denominator)               Amount
Basic EPS
Earnings applicable to common stockholders                    $    44,402                      41,299                $    1.08
                                                                                                                     =========  

Effect of Dilutive Securities
Assumed exercise of stock options                                   -                           -
                                                               ----------                   ---------
Diluted EPS
Earnings applicable to common stockholders
 plus assumed conversions
                                                              $    44,402                      41,299                $    1.08
                                                              ===========                   =========                =========
</TABLE>

                                      -31-
<PAGE>
 
                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements (Continued)


7.    Earnings Per Share ("EPS") (continued)

<TABLE>
<CAPTION>
                                                                                 Year Ended December 31, 1997
                                                                                 ----------------------------    
                                                                            (In thousands, except per share data)
                                                             
                                                                Income                      Shares                  Per-Share
                                                              (Numerator)                (Denominator)               Amount
                                                              -----------                -------------               ------
<S>                                                          <C>                           <C>                  <C> 
Income before extraordinary item                                $    51,138
Less:  Preferred stock dividends                                       (711)
                                                                 -----------
Basic EPS                                                    
Earnings 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                                                  
Earnings before extraordinary item applicable to common      
   stockholders plus assumed conversions                     
                                                                 $   50,427                      44,674          $       1.13
                                                                 ==========                ============          ============
</TABLE>

The Series A Preferred Stock convertible into Series A Common Stock at a
conversion price of $35 per share, and certain common stock options, were
outstanding as of December 31, 1997 but 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.

                                      -32-
<PAGE>
 
                         HEARST-ARGYLE TELEVISION, INC.

             Notes to Consolidated Financial Statements (Continued)


8.    Income Taxes

The provision for income taxes relating to income before extraordinary item for
the years ended December 31, 1995, 1996, and 1997, consists of the following:

<TABLE> 
<CAPTION> 
                                          Years Ended December 31,
                                              (In thousands)

                                    1995           1996           1997
                                    ----           ----           ----
<S>                              <C>           <C>            <C> 
Current:                                                 
  State and local                $  5,592       $  5,821       $  5,924
  Federal                          24,702         25,714         11,674
                                 --------       --------       --------
                                   30,294         31,535         17,598
                                 --------       --------       --------
Deferred:                                                
  State and local                     (21)            69           --
  Federal                             (91)           303         17,765
                                 --------       --------       --------
                                     (112)           372         17,765
                                 --------       --------       --------
                                                         
Provision for income taxes                               
                                 $ 30,182       $ 31,907       $ 35,363
                                 ========       ========       ========
</TABLE> 

The effective income tax rate for the years ended December 31, 1995, 1996 and
1997 varied from the statutory U.S. Federal income tax rate due to the
following:

<TABLE>
<CAPTION>
                                                                 1995          1996        1997
                                                                 ----          ----        ----
<S>                                                             <C>           <C>         <C> 
     Statutory U.S. Federal income tax                           35.0%         35.0%       35.0%
     State income taxes, net of Federal tax benefit               5.1           5.0         4.5
     Other non-deductible business expenses                       2.4           1.8         1.4
                                                                 ----          ----        ----
     Effective income tax rate                                   42.5%         41.8%       40.9%
                                                                 ====          =====       =====
</TABLE>

                                      -33-
<PAGE>
 
                         HEARST-ARGYLE TELEVISION, INC.

             Notes to Consolidated Financial Statements (Continued)


8.    Income Taxes (Continued)

Deferred tax liabilities and assets at December 31, 1996 and 1997 consist of the
following:
<TABLE>
<CAPTION>

                                                                              1996                           1997
                                                                         -------------------------------------------------
                                                                                          (In thousands)
<S>                                                                       <C>                              <C> 
Deferred tax liabilities:
  Accelerated depreciation                                                    $5,151                         $ 8,937
  Accelerated funding of pension benefit obligation                                                           10,578
  Other                                                                                                        2,086
  Difference between book and tax basis of intangible assets                  49,982                         142,812
                                                                         -------------------------------------------------

Total deferred tax liabilities                                                55,133                         164,413
                                                                         -------------------------------------------------

Deferred tax assets:
  Allowance for doubtful accounts, not currently deductible                    3,013                           1,721
  Accrued expenses                                                                                             4,254
  Other                                                                          141                           5,962
  Operating loss carryforwards                                                                                 8,177
                                                                         -------------------------------------------------

Total deferred tax assets                                                      3,154                          20,114
                                                                         -------------------------------------------------

Net deferred tax liabilities                                                $ 51,979                       $ 144,299
                                                                         =================================================

</TABLE>

The Company has a net operating loss carryforward for federal income tax
purposes of approximately $19,438,000, which expires in 2010.

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) the Company's existing Series B Common Stock and Series C
Common Stock was reclassified as and changed into an equal number of shares of
Series A Common Stock; (iii) a Series B Common Stock was authorized and
thereafter issued to Hearst in connection with the transaction; and, (iv) the
Company's existing Series A Preferred Stock and Series B Preferred Stock
received voting rights.

                                      -34-
<PAGE>
 
                         HEARST-ARGYLE TELEVISION, INC.

             Notes to Consolidated Financial Statements (Continued)


9.    Common Stock (Continued)

The Company has 200 million shares of authorized common stock, par value $.01
per shares, with 100 million shares designated as Series A Common Stock and 100
million shares designated Series B Common Stock. 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,
(iii) 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.

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.
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.

                                      -35-
<PAGE>
 
                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements (Continued)


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 "Plan"). The amendment
increases the number of shares reserved for issuance under the 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 3
years commencing on the effective date of the grant and a portion of the options
vest either after 9 years or in one-third increments upon attainment of certain
market price goals of the Company's stock. All options granted pursuant to the
Plan will expire no later than 10 years from the date of grant.

A summary of the status of the Company's Plan as of December 31, 1997, and
changes for the period September 1 to December 31, 1997 is presented below:

                                                         1997
                                                         ----
                                                               Weighted
                                                                 Avg.
                                                               Exercise
                                           Options              Price

Outstanding - September 1, 1997           1,338,172             $12.74
  Granted                                 1,843,215             $26.75
  Exercised                                 (20,150)            $10.45
  Cancelled                              (1,168,247)            $12.35
  Forfeited                                  (2,250)            $10.00
                                          ---------             ------
Outstanding   -  December 31, 1997        1,990,740             $25.85
                                          =========             ======
Exercisable   -  December  31, 1997         207,125             $17.77
                                            =======             ======
    

The following table summarizes information about stock options outstanding at
December 31, 1997:

<TABLE> 
<CAPTION> 

     Range of         Number Outstanding          Weighted Average            Weighted Average
  Exercise Prices        at 12/31/97         Remaining Contractual Life        Exercise Price
  ---------------        -----------         --------------------------        --------------
<S>                 <C>                         <C>                         <C> 
   $10.00-$29.00          1,990,740                  9.5 years                     $17.77
</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.

                                      -36-
<PAGE>
 
                         HEARST-ARGYLE TELEVISION, INC.

             Notes to Consolidated Financial Statements (Continued)


11.   Stock Options (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 1995, 1996 and 1997.
The following assumptions were used for the period September 1 to December 31,
1997: risk-free interest rates of 5.5%, dividend yields of 0.0%, volatility
factors of the expected market price of the Company's common stock of 27%, and
the expected life of the option of 5 and 7 years. The range of fair value of
options granted during the period September 1 to December 31, 1997 were
$9.26-$12.34.

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. The
Company's pro forma information is as follows:

<TABLE> 
<CAPTION> 
                                                                                          1997
                                                                                          ----
                      (In thousands, except per share data)
<S>                                                                                    <C> 
Pro forma net income................................................................     $ 33,862

Pro forma earnings applicable to common stockholders................................     $ 33,151

Pro forma basic and diluted earnings per common share...............................     $   0.74
</TABLE>

The Company has reserved $3.0 million shares of common stock for future
issuances in connection with the Plan at December 31, 1997.

12.   Net Assets Held for Sale

Upon completion of the Hearst Transaction, the Company owns television stations
in two areas (Boston and Providence, and Dayton and Cincinnati) with overlapping
service contours in violation of the FCC's local ownership rules. The FCC's
rules prohibit the ownership of two stations in the same geographic area whose
service contours overlap. To comply with these rules, the Company will be
required to divest one station in each of the aforementioned areas. Included in
the caption Net Assets Held for Sale on the accompanying audited consolidated
balance sheet as of December 31, 1997, are the net assets of the stations
located in Providence and Dayton at their carrying values. The Company expects
to complete the exchange of these assets during the third quarter of 1998. See
Note 18.

                                      -37-
<PAGE>
 
                         HEARST-ARGYLE TELEVISION, INC.

             Notes to Consolidated Financial Statements (Continued)


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 Company was allocated
expenses for years ended December 31, 1995 and 1996 and for the period January 1
to August 31, 1997 of $1,614,000, $1,875,000, and $1,331,000 respectively,
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 the 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 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 years ended December 31, 1995 and 1996 and for the period
January 1 to August 31, 1997 in the amounts of $6,710,000, $6,203,000, and
$5,219,000, respectively.

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 taxes after the Company became part of the
consolidated tax return of Hearst); 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). The
Company recorded revenues of approximately $700,000 relating to the Management
Agreement and expenses of approximately $900,000 relating to the Services
Agreement, for the period September 1 to December 31, 1997. 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

The Company has obligations to various program syndicators and distributors in
accordance with current contracts for the rights to broadcast programs. Future
payments as of December 31, 1997, scheduled under contracts for programs
available are as follows (in thousands):

             1998                    $35,769
             1999                      3,417
             2000                      1,112
             2001                        394
                            -----------------
                                     $40,692
                            =================

                                      -38-
<PAGE>
 
                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements (Continued)


14.   Commitments (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 program rights not available for broadcast at December 31,
1997, and employment contracts for key employees. Future minimum payments under
terms of these agreements as of December 31, 1997 are as follows:

                                              Employment
                     Operating    Program     and Talent
                      Leases      Rights       Contracts
                      -----------------------------------
                               (In thousands)
                                            
1998                  $ 2,357       $20,427       $24,983
1999                    1,711        44,110        18,011
2000                    1,555        20,715         7,891
2001                    1,351         3,877         2,573
2002 and thereafter     3,643           908           968
                      -----------------------------------

                      $10,617       $90,037       $54,426
                      ===================================

Rent expense for operating leases was approximately $2,755,000, $2,975,000 and
$3,461,000 for the years ended December 31, 1995, 1996 and 1997, respectively.

In the normal course of business, the Company is subject to various claims and
lawsuits. In the opinion of the Company's management, liabilities, if any,
arising from these matters will not have a significant effect on the Company's
consolidated financial statements.

15.   Incentive Compensation Plans

Hearst has a long-term incentive compensation plan that covers 13 employees of
the Company who are considered by management to be making substantial
contributions to the growth and profitability of the Company 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 $3,732,000 in 1995, $2,965,000 in 1996 and $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 1993
- 1995 cycle (paid in 1996), to the 1994 - 1996 cycle (paid in 1997) and to the
1995 - 1997 (paid in 1998) resulted in disbursements (pretax) of $3,796,530,
$4,621,437 and $3,315,390, respectively.

Hearst also has a short-term incentive compensation plan that covers the most
senior key executives of the Company who have the most impact on overall
corporate policy, and are therefore those executives largely responsible for the
growth and profitability of the Company and Hearst's achieving specified
financial performance objectives. Annual expense for the Company amounted to
approximately $389,000 in 1995 and 1996 and $259,000 for the period January 1 to
August 31, 1997. 

Effective August 29, 1997, the Company's employees are no longer participants in
such plans.

                                      -39-
<PAGE>
 
                         HEARST-ARGYLE TELEVISION, INC.

             Notes to Consolidated Financial Statements (Continued)


16.   Pension and Employee Savings Plans

Prior to September 1, 1997, the Company has certain non-union employees that are
eligible for participation in Hearst's noncontributory defined benefit plan and
Hearst's nonqualified retirement plan. Hearst also has a defined benefit plan
for eligible employees covered by collective bargaining agreements. The costs of
this plan is generally accrued and paid in accordance with the related
agreements. In addition, the Company contributes to a multiemployer union
pension plan, for which no information for each contributing employer is
available (collectively the "Pension Plans"). The Company's pension costs for
these plans are allocated to the Company through divisional equity. The cost for
such plans was approximately $1,679,000 in 1995, $2,479,000 in 1996 and
$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 plans, fair values of pension
plans assets for shares of the Company's Series B common stock (see Note 9).
Benefits under the 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 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. Beginning January 1, 1998,
the Company plans to provide a noncontributory defined benefit plan to the
Company's remaining non-union employees who are not included in the Pension
Plans at December 31, 1997.

The net pension cost (benefit) for the Company's Pension Plans for the period
September 1 to December 31, 1997 in which the Company's non-union employees
participate are as follows:

                                                         1997
                                                         ----
                                                    (In thousands)
Service cost                                        $       736
Interest cost                                               891
Return on plan assets:                              
     Actual                                              (3,179)
     Deferred                                             1,234
Amortization of the unrecognized net asset                  (40)
Other                                                       (57)
                                                    ------------
Net pension benefit                                 $      (415)
                                                    ============

                                      -40-
<PAGE>
 
                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements (Continued)


16.   Pension and Employee Savings Plans (continued)


The following schedule presents a reconciliation of the funded status at
December 31, 1997:

<TABLE>
<CAPTION>
                                                                                               1997
                                                                   -------------------------------------------------------------
                                                                         Assets Exceed                 Accumulated Benefits
                                                                            Accumulated                   Exceed Assets
                                                                              Benefits
                                                                                              (In thousands)
<S>                                                                             <C>                        <C> 
Actuarial present value of benefit obligation:
     Vested                                                                       $(27,235)                  $ (1,216)
     Nonvested                                                                      (1,359)                       (51)
                                                                                  --------                   --------
Accumulated benefit obligation                                                    $(28,594)                  $ (1,267)
                                                                                  ========                   ========
                                                                                                     
Plan assets at fair value                                                         $ 72,532                   $    362
Projected benefit obligation                                                       (36,227)                    (5,155)
                                                                                  --------                   --------
Plan assets in excess of (less than) the projected benefit obligation               36,305                     (4,793)
                                                                                                     
Unrecognized net asset                                                                (766)                       (22)
Unrecognized net (gain) loss                                                        (9,879)                     1,250
Unrecognized minimum liability                                                         505                      2,461
                                                                                  --------                   --------
Deferred (accrued) pension cost                                                   $ 26,165                   $ (1,104)
                                                                                  ========                   ========
</TABLE>

The deferred pension costs are included in Other Assets on the accompanying
consolidated balance sheet at December 31, 1997 

Assumptions used for computing the projected benefit obligation at December 31,
1997 are as follows:
                                                  
Discount rate                                       7.00%
Rate of compensation                                5.50%
Long-term rate of return on plan assets             9.00%

The various plans' assets consist primarily of stocks, bonds and cash
equivalents 

The Company's qualified employees may contribute from 1% to 18% of their
compensation up to certain dollar limits to a 401(k) savings plan. The Company
matches one-quarter of the employee contribution up to 6% of the employee's
compensation. The Company contributions to this plan for the years ended
December 31, 1995, 1996, and 1997 were approximately $636,000, $648,000, and
$807,000, respectively. During February 1997, the Company's compensation
committee approved an increase in the Company's match. The match increased from
one-quarter to one-half of the employee contributions up to 6% of each
employee's compensation, effective July 1, 1997.

                                      -41-
<PAGE>
 
                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements (Continued)


17.   Fair Value of Financial Instruments

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


                                                      December 31, 1997
                                             Carrying Value         Fair Value
                                             --------------         ----------
Credit Facility dated August 29, 1997:  
   Revolving credit facility                 $   85,000             $  83,557
Senior Subordinated Notes                       105,000               126,475
Senior Notes                                    300,000               311,551
Series A Preferred Stock                         10,938                12,371
Series B Preferred Stock                         10,938                10,019
Interest rate swaps                               __                     (593)


The fair values of the senior notes and preferred stock were determined based on
the quoted market prices, the revolving credit facility was estimated using
discounted cash flow analysis based on current incremental borrowing rates for
similar types of borrowing arrangements. The fair value of the interest rate
swap agreements was 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 amounts
due to Hearst because of the related party nature of the transactions.

18.        Subsequent Events

On January 13, 1998, the Company issued $200,000,000 aggregate principal amount
of 7.0% Senior Notes due 2018. The net proceeds from this issuance will be used
to reduce borrowings under the Credit Facility and fund the tender offer to
repurchase $105,000,000 of the Notes outstanding at December 31, 1997, as
discussed below.

On February 10, 1998, the Company commenced a tender offer and consent
solicitation for its Notes. The total consideration for each $1,000 principal
amount of Notes tendered pursuant to the offer will be the price that would
result from a yield to November 1, 2000, the earliest stated redemption date,
equal to the sum of (i) the yield on the U.S. Treasury Note due October 31, 2000
plus (ii) 25 basis points. On March 9, 1998, the Company announced the price
will be $1,115.53 per $1,000 principal amount of Notes (or $117,130,650 for all
the Notes). This includes accrued and unpaid interest through the expected date
of payment, March 13, 1998.

On February 19, 1998, the Company announced that it agreed to exchange its WDTN
and WNAC stations with STC Broadcasting, Inc. for KSBW, the NBC affiliate
serving the Monterey - Salinas, CA, television market, and WPTZ/WNNE, the NBC
affiliates serving the Burlington, VT - Plattsburgh, NY, television market. In
addition, the Company will pay STC Broadcasting, Inc. approximately $20 million.
The Company anticipates the transaction will close during the third quarter of
1998.

                                      -42-
<PAGE>
 
                                     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 Table of Contents 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.

                SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                        HEARST-ARGYLE TELEVISION, INC.
                                (In thousands)

<TABLE>
<CAPTION>

-------------------------------------------- ---------------- --------------------------------- ----------------- ----------------
                  Description                                              Additions
-------------------------------------------- ---------------- ---------------- ---------------- ----------------- ----------------
                                                                                             
                                               Balance at       Charged to       Charged to                         Balance at
                                              Beginning of       Costs and     Other Accounts      Deductions         End of
                                                 Period          Expenses         Describe          Describe          Period
-------------------------------------------- ---------------- --------------------------------- ----------------- ----------------
<S>                                             <C>              <C>              <C>                <C>             <C> 
Year Ended December 31, 1995:                                                                                (1)
Allowance for uncollectable accounts              $1,474,000       $1,130,000       $      ___        $(978,000)       $1,626,000

-------------------------------------------- ---------------- --------------------------------- ----------------- ----------------
Year Ended December 31, 1996:                                                                                (1)
Allowance for uncollectable accounts              $1,626,000         $989,000       $      ___        $(922,000)       $1,693,000

-------------------------------------------- ---------------- --------------------------------- ----------------- ----------------
Year Ended December 31, 1997:                                                                                (1)
Allowance for uncollectable accounts              $1,693,000       $1,316,000       $      ___        $(805,000)       $2,204,000

-------------------------------------------- ---------------- --------------------------------- ----------------- ----------------
(1)    Net write-offs of accounts receivable.

----------------------------------------------------------------------------------------------------------------------------------
Note:    The required information regarding the valuation allowance for deferred tax assets is included
         in Note 6 to the Company's Consolidated Financial Statements.

==================================================================================================================================
</TABLE> 


                                     -43-
<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/  Dean H. Blythe
                                       ----------------------------------
                                    Name:   Dean H. Blythe
                                    Title:  Secretary




                                     -44-
<PAGE>
 
     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 December 16, 1998.

                               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 Dean
H. Blythe and Harry T. Hawks, or either 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.



<TABLE>
<CAPTION>
Name                                         Title
----                                         -----
<S>                                          <C>
/s/ Bob Marbut                               Co-Chief Executive Officer and Chairman of the Board
------------------------------------------
Bob Marbut                                   (principal executive officer)

 
/s/ John G. Conomikes                        President, Co-Chief Executive Officer and Director
------------------------------------------
John G. Conomikes                            (principal executive officer)


/s/ David J. Barrett                         Executive Vice President, Chief Operating Officer and
------------------------------------------
David J. Barrett                             Director

 
/s/ Harry T. Hawks                           Senior Vice President and Chief Financial Officer
------------------------------------------
Harry T. Hawks                               (principal financial officer)


/s/ Teresa Lopez                             Vice President and Controller (principal accounting
------------------------------------------
Teresa Lopez                                 officer)


/s/ Frank A. Bennack, Jr.                    Director
------------------------------------------
Frank A. Bennack, Jr.


/s/ Victor F. Ganzi                          Director
------------------------------------------
Victor F. Ganzi


/s/ George R. Hearst                         Director
------------------------------------------
George R. Hearst


/s/ William R. Hearst III                    Director
------------------------------------------
William R. Hearst III


/s/ Gilbert C. Maurer                        Director
------------------------------------------
Gilbert C. Maurer


/s/ David Pulver                             Director
------------------------------------------
David Pulver


/s/ Virginia H. Randt                        Director
-----------------------------------------
Virginia H. Randt


/s/ Caroline L. Williams                     Director
-----------------------------------------
Caroline L. Williams
</TABLE> 

                                      -45-