<PAGE>

================================================================================
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

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

                                   Form 10-K
                       FOR ANNUAL AND TRANSITION REPORTS
                    PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

(Mark One)

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

   For the fiscal year ended December 31, 2001

                                      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          (I.R.S. Employer
                   jurisdiction of         Identification No.)
                  incorporation or
                    organization)

                 888 Seventh Avenue
                    New York, NY                  10106
                (Address of principal          (Zip code)
                 executive Offices)

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

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

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

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

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

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

   The aggregate market value of the Registrant's voting stock held by
nonaffiliates on March 18, 2002, based on the closing price for the
Registrant's Series A Common Stock on such date as reported on the New York
Stock Exchange (the "NYSE"), was approximately $436,240,462.40.

   Shares of the Registrant's Common Stock outstanding as of March 18, 2002:
91,922,914 shares (consisting of 50,624,266 shares of Series A Common Stock and
41,298,648 shares of Series B Common Stock).

   DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Company's Proxy
Statement relating to the 2002 Annual Meeting of Stockholders are incorporated
by reference into Part III (Items 10, 11, 12 and 13).

================================================================================

<PAGE>

                          FORWARD-LOOKING STATEMENTS

   THIS REPORT INCLUDES OR INCORPORATES FORWARD-LOOKING STATEMENTS. WE HAVE
BASED THESE FORWARD-LOOKING STATEMENTS ON OUR CURRENT EXPECTATIONS AND
PROJECTIONS ABOUT FUTURE EVENTS. THE FORWARD-LOOKING STATEMENTS CONTAINED IN
THIS REPORT, CONCERNING, AMONG OTHER THINGS, INCREASES IN NET REVENUES AND
BROADCAST CASH FLOW AND REDUCTIONS IN OPERATING EXPENSES, INVOLVE RISKS AND
UNCERTAINTIES, AND ARE SUBJECT TO CHANGE BASED ON VARIOUS IMPORTANT FACTORS,
INCLUDING THE IMPACT OF CHANGES IN NATIONAL AND REGIONAL ECONOMIES, OUR ABILITY
TO SERVICE OUR OUTSTANDING DEBT, SUCCESSFUL INTEGRATION OF ACQUIRED TELEVISION
STATIONS (INCLUDING ACHIEVEMENT OF SYNERGIES AND COST REDUCTIONS), PRICING
FLUCTUATIONS IN LOCAL AND NATIONAL ADVERTISING, VOLATILITY IN PROGRAMMING COSTS
AND THE EFFECTS OF GOVERNMENTAL REGULATION OF BROADCASTING. OTHER MATTERS SET
FORTH IN THIS REPORT, OR IN THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE MAY
ALSO CAUSE ACTUAL RESULTS IN THE FUTURE TO DIFFER MATERIALLY FROM THOSE
DESCRIBED IN THE FORWARD-LOOKING STATEMENTS. WE UNDERTAKE NO OBLIGATION TO
UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW
INFORMATION, FUTURE EVENTS OR OTHERWISE. IN LIGHT OF THESE RISKS, UNCERTAINTIES
AND ASSUMPTIONS, THE FORWARD-LOOKING EVENTS DISCUSSED IN THIS REPORT MIGHT NOT
OCCUR.

                                    PART I

ITEM 1.  BUSINESS

   As of March 18, 2002, Hearst-Argyle Television, Inc. (the "Company") owned
or managed 27 television stations that reached approximately 17.5% of U.S.
television households, and two radio stations. The Company is one of the
country's largest independent, or non-network-owned, TV station groups. The
Company is also the largest ABC affiliate group and the second largest NBC
affiliate group.

General

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

   Hearst entered the broadcasting business in 1928 with its acquisition of
WSOE radio in Milwaukee, Wisconsin. In the 1930s, Hearst acquired radio station
WTAE in Pittsburgh, Pennsylvania, and radio station WBAL in Baltimore,
Maryland. In 1948, Hearst launched its first television station, WBAL-TV, in
Baltimore, Maryland, which was the nation's 19/th/ television station. That
same year, WLWT-TV, in Cincinnati, Ohio, later to become an Argyle station, was
launched as the nation's 20th television station. In the 1950s, television
licenses were granted to Hearst for WTAE-TV, Pittsburgh, Pennsylvania and
WISN-TV, Milwaukee, Wisconsin, whose predecessor radio station was WSOE. In the
1980s, Hearst acquired WDTN-TV, in Dayton, Ohio, KMBC-TV, in Kansas City,
Missouri, and WCVB-TV, in Boston, Massachusetts. (WDTN-TV was exchanged for
another television station in 1998 to comply with Federal Communications
Commission (FCC) ownership rules then in effect. See "Federal Regulation of
Television Broadcasting"). In the 1990s, Hearst acquired WTMV-TV (now WMOR-TV),
in Tampa, Florida, and WPBF-TV, in West Palm Beach, Florida, and launched
KCWB-TV (now KCWE-TV), in Kansas City, Missouri through a local marketing
agreement.

   Since the Hearst Transaction, the Company has acquired additional television
stations through certain asset purchase, asset exchange or merger transactions,
including, but not limited to, a merger transaction with Pulitzer Publishing
Company ("Pulitzer") on March 18, 1999, whereby the Company acquired Pulitzer's
nine television stations and five radio stations and a minor interest in the
Arizona Diamondbacks major league baseball team.

                                      2

<PAGE>

   The Company also holds certain equity investments in Internet Broadcasting
Systems, Inc. ("IBS"), ProAct Technologies Corp. ("ProAct") (formerly Consumer
Financial Network, Inc.), and NBC/Hearst-Argyle Syndication, LLC. The Company
and IBS have formed a series of local partnerships for the development and
management of local news/information/entertainment Web sites. ProAct provides
on-line human resources support to corporations. NBC/Hearst-Argyle Syndication,
LLC is a limited liability company formed by NBC Enterprises and the Company as
a joint venture to produce and syndicate first-run broadcast and
original-for-cable programming.

   As of March 18, 2002, Hearst owned, through its wholly-owned subsidiaries,
Hearst Holdings, Inc., a Delaware corporation ("Hearst Holdings"), and Hearst
Broadcasting, Inc., a Delaware corporation ("Hearst Broadcasting"), 100% of the
issued and outstanding shares of Series B Common Stock, par value $.01 per
share, of the Company (the "Series B Common Stock," and together with the
Series A Common Stock, par value $.01 per share, of the Company, the "Series A
Common Stock," the "Common Stock") and approximately 38.16% of the issued and
outstanding shares of the Series A Common Stock, representing in the aggregate
approximately 65.94% of the outstanding voting power of the Common Stock. On
March 18, 2002, Hearst Broadcasting also owned 300,000 7.5% Series A
Convertible Preferred Securities due 2016 (the "7.5% Series A Preferred
Securities") and 500,000 7.5% Series B Convertible Preferred Securities due
2021 (the "7.5% Series B Preferred Securities," and, together with the Series A
Preferred Securities, the "7.5% Preferred Securities") that were issued by
Hearst-Argyle Capital Trust, a wholly-owned subsidiary trust of the Company
(the "Capital Trust"). The securities were issued to Hearst Broadcasting under
the same terms and conditions applicable to other investors in the private
placement described below. Hearst Broadcasting may convert the 7.5% Series A
Preferred Securities for the Company's 7.5% Convertible Junior Subordinated
Deferrable Interest Debentures, Series A, due 2016 (the "Series A Subordinated
Debentures") and the 7.5% Series B Preferred Securities for the Company's 7.5%
Convertible Junior Subordinated Deferrable Interest Debentures, Series B, due
2021 (the "Series B Subordinated Debentures," and, together with the Series A
Subordinated Debentures, the "Subordinated Debentures"). Hearst Broadcasting is
currently entitled to convert a portion of the Subordinated Debentures into
shares of the Company's Series A Common Stock not representing more than 1% of
the total number of the Company's Series A Common Stock outstanding on December
21, 2001. After receiving the approval of the Company's stockholders, however,
the Subordinated Debentures will be convertible at Hearst Broadcasting's option
into 1,587,670 shares of the Company's Series A Common Stock, representing in
the aggregate approximately 1.70% of the outstanding voting power of the Common
Stock as of March 18, 2002.

   Through its ownership of the Series B Common Stock, Hearst Broadcasting is
entitled to elect as a class all but two members of the Board of Directors of
the Company (the "Board"). Holders of the Series A Common Stock, together with
the Company's Series A Preferred Stock, par value $.01 per share, and Series B
Preferred Stock, par value $.01 per share, are entitled to elect the remaining
two members of the Board. In connection with Hearst's contribution of its
broadcast group to Argyle on August 29, 1997, Hearst agreed that, for as long
as it held any shares of Series B Common Stock and to the extent that Hearst
during such time also held any shares of Series A Common Stock, it would vote
its shares of Series A Common Stock with respect to the election of directors
only in the same proportion as the shares of Series A Common Stock not held by
Hearst are so voted.

   The Company is organized under the laws of the State of Delaware and its
principal executive offices are located at 888 Seventh Avenue, New York, New
York 10106, and its telephone number is (212) 887-6800. The Series A Common
Stock is listed on the NYSE under the symbol "HTV."

Recent Developments

   On March 28, 2001, the Company exchanged its radio stations in Phoenix,
Arizona (KTAR-AM, KMVP-AM and KKLT-FM) (the "Phoenix Stations") for WMUR-TV,
the ABC affiliate serving Manchester, New Hampshire, in a tax-free exchange
(the "Phoenix/WMUR Swap"). The Phoenix Stations were sold to Emmis
Communication Corporation ("Emmis") for $160 million, less transaction
expenses, and an aggregate of $185 million, plus a working capital adjustment
of $3.5 million and transaction expenses, was paid to purchase

                                      3

<PAGE>

WMUR-TV (an Imes Communications television station) from WMUR-TV, Inc. Prior to
the Phoenix/WMUR Swap, Emmis had been managing the Phoenix Stations pursuant to
a Time Brokerage Agreement since August 8, 2000 and the Company had been
managing WMUR-TV pursuant to a Time Brokerage Agreement since January 8, 2001.

   In March 2001, the Company wrote down its equity investment in ProAct by
$18.8 million in order to approximate the investment's realizable value. The
Company receives revenue from ProAct relating to advertising sales.

   On April 30, 2001, pursuant to an Asset Purchase Agreement entered into with
WBOY-TV, Inc., the Company acquired WBOY-TV (an Imes Communications television
station), the NBC affiliate serving Clarksburg-Weston, West Virginia
("WBOY-TV") for $20 million, plus a working capital adjustment of $0.7 million
and transaction expenses.

   In May 2001, the Company invested an additional $6 million in cash for a
total investment of $26 million (currently representing an equity interest of
approximately 24%) in IBS. IBS provides Web site development and operating
services for the Company and other parties.

   In June 2001, the Company entered into Joint Sales Agreements with
affiliates or subsidiaries of Paxson Communications Corporation ("Paxson"),
pursuant to which Company stations serving Sacramento, California (KCRA-TV),
Orlando, Florida (WESH-TV), New Orleans, Louisiana (WDSU-TV) and Greensboro,
North Carolina (WXII-TV) would provide local advertising sales and related
services to the respective Paxson stations in those markets.

   On August 7, 2001, the Company contributed its production-and-distribution
unit to NBC/Hearst-Argyle Syndication, LLC in exchange for a 20% equity
interest in this entity.

   On September 27, 2001, the Company repaid (i) $13.4 million of its 7.5%
Senior Notes due November 15, 2027, at a discounted price of $12 million and
(ii) $1.3 million of its 7% Senior Notes due January 15, 2018, at a discounted
price of $1.1 million. These repayments were funded using the Company's credit
facility.

   On December 13, 2001, pursuant to an Asset Purchase Agreement entered into
with West Virginia Media Holdings, LLC, the Company sold WBOY-TV for $20
million, plus a working capital adjustment of $0.8 million.

   On December 20, 2001, the Company completed a private placement of $200
million principal amount of convertible trust preferred securities through the
Capital Trust. The investor group included Hearst Broadcasting, the Company's
majority stockholder. The securities issued are convertible, at the option of
the holder at any time, into shares of the Company's Series A Common Stock.
Proceeds of the issuance were used to pay down the Company's borrowings under
its credit facility.

   On December 21, 2001, the Company repaid $2.5 million of its 7.5% Senior
Notes due November 15, 2027, at a discounted price of $2.3 million. This
repayment was funded using the Company's credit facility.

The Stations

   Of the 27 television stations the Company owns or manages, 20 are in the top
50 of the 210 generally recognized geographic designated market areas ("DMAs")
according to A.C. Nielsen Co. ("Nielsen") estimates for the 2001-2002
television broadcasting season. The Company owns 24 television stations. In
addition, the Company manages three television stations (WMOR-TV in the Tampa,
Florida market, WPBF-TV in the West Palm Beach, Florida market and KCWE-TV in
the Kansas City, Missouri market) and two radio stations (WBAL (AM) and WIYY
(FM) in Baltimore, Maryland), all of which, except KCWE-TV, are owned by
Hearst. The Company's management of KCWE-TV allows Hearst to fulfill its
obligations under a Program Service and Time Brokerage Agreement between Hearst
and the licensee of KCWE-TV (the "Missouri LMA"). For the year ended December
31, 2001, on a pro forma basis, the Company's total revenues and broadcast cash
flow were $641.9 million and $261.0 million, respectively.

                                      4

<PAGE>

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

<TABLE>
<CAPTION>
                                                               Percentage of
                                                                   U.S.
                                   Market    Network   Analog   Television
    Station   Market               Rank(1) Affiliation Channel Households(2)
    -------   ------               ------- ----------- ------- -------------
    <S>       <C>                  <C>     <C>         <C>     <C>
    WCVB..... Boston, MA               6       ABC          5       2.20%
    WMUR..... Manchester, NH(3)        6       ABC          9         --
    WMOR..... Tampa, FL               14       IND         32       1.49%
    KCRA..... Sacramento, CA          19       NBC          3       1.16%
    KQCA..... Sacramento, CA          19       WB          58         --
    WESH..... Orlando, FL             20       NBC          2       1.12%
    WTAE..... Pittsburgh, PA          21       ABC          4       1.09%
    WBAL..... Baltimore, MD           24       NBC         11       0.97%
    KMBC..... Kansas City, MO         31       ABC          9       0.81%
    KCWE..... Kansas City, MO         31       UPN         29         --
    WLWT..... Cincinnati, OH          32       NBC          5       0.79%
    WISN..... Milwaukee, WI           33       ABC         12       0.79%
    WYFF..... Greenville, SC          36       NBC          4       0.73%
    WPBF..... West Palm Beach, FL     40       ABC         25       0.65%
    WDSU..... New Orleans, LA         43       NBC          6       0.62%
    WXII..... Greensboro, NC          44       NBC         12       0.60%
    KOCO..... Oklahoma City, OK       45       ABC          5       0.59%
    WGAL..... Lancaster, PA           46       NBC          8       0.59%
    KOAT..... Albuquerque, NM         48       ABC          7       0.58%
    WLKY..... Louisville, KY          50       CBS         32       0.57%
    KCCI..... Des Moines, IA          70       CBS          8       0.38%
    KITV..... Honolulu, HI            72       ABC          4       0.38%
    KETV..... Omaha, NE               75       ABC          7       0.37%
    WAPT..... Jackson, MS             88       ABC         16       0.30%
    WPTZ/WNNE Plattsburgh, NY/
              Burlington, VT          90       NBC       5/31       0.29%
    KHBS/KHOG Fort Smith/
              Fayetteville, AR       107       ABC      40/29       0.24%
    KSBW..... Monterey-Salinas, CA   118       NBC          8       0.22%
                                                                   -----
              Total                                                17.53%
                                                                   =====
</TABLE>
--------
(1) Market rank is based on the relative size of the DMAs (defined by Nielsen
    as geographic markets for the sale of national "spot" and local advertising
    time) among the 210 generally recognized DMAs in the U.S., based on Nielsen
    estimates for the 2001-2002 season.
(2) Based on Nielsen estimates for the 2001-2002 season.
(3) The Nielsen estimates group data for Manchester, NH is under the Boston DMA.

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

<TABLE>
<CAPTION>
                                  Market
                      Market      Rank(1)  Station    Format
                      ------      ------- --------- -----------
                 <S>              <C>     <C>       <C>
                 Baltimore, MD(2)   20    WBAL (AM)  News/Talk
                                          WIYY (FM) Active Rock
</TABLE>
--------
(1) Market rank is based on the relative size of the Metro Survey Area (defined
    by Arbitron as generally corresponding to the Metropolitan Statistical
    Areas, defined by the U.S. Office of Management and Budget) for Arbitron's
    Fall 2002 Radio Market Report.
(2) WBAL (AM) and WIYY (FM) radio stations are managed by the Company under a
    management agreement with Hearst.

                                      5

<PAGE>

   The Company has an option to acquire WMOR-TV and Hearst's interests and
option with respect to KCWE-TV (together with WMOR-TV, the "Option
Properties"), as well as a right of first refusal until approximately August
2003 with respect to WPBF-TV (if such station is proposed by Hearst to be sold
to a third party). The option period for each Option Property commenced in
February 1999 and terminates in August 2003 and the purchase price is the fair
market value of the station as determined by the parties, or an independent
third-party appraisal, subject to certain specified parameters. If Hearst
elects to sell an Option Property prior to the commencement of, or during, the
option period, the Company will have a right of first refusal to acquire such
Option Property. The exercise of the option and the right of first refusal will
be by action of the independent directors of the Company, and any option
exercise may be withdrawn by the Company after receipt of the third-party
appraisal.

Network Affiliation Agreements and Relationships

   General.  Each of the Company's owned or managed television stations
(collectively, the "Stations") is affiliated with one of the following networks
pursuant to a network affiliation agreement: ABC, NBC, CBS, UPN and WB (each, a
"Network"), except WMOR-TV in Tampa, Florida, which is currently operating as
an independent station. Each affiliation agreement provides the affiliated
Station with the right to rebroadcast all programs transmitted by the Network
with which the Station is affiliated. In return, the Network has the right to
sell a substantial majority of the advertising time during such broadcasts. The
long established networks (ABC, CBS and NBC) generally pay the station a
specified network compensation payment, which varies with the time of day in
exchange for every hour that a station broadcasts the network programming.
Typically, prime-time programming generates the highest hourly network
compensation payments. In the recent years, however, ABC, CBS and NBC have
begun to eliminate or sharply reduce compensation payments to stations for
clearance of network programming. In some cases, networks have undertaken to
cut compensation when a station is to be sold and the affiliation agreement is
to be assigned or transferred or when an old affiliation agreement has expired.
The Company's affiliation agreement with NBC referred to below provides for
compensation weighted toward the first part of the term and declines to zero by
the end of the term. The more recently established networks (FOX, UPN, WB and
PAX) generally pay little or no cash compensation for the clearance of network
programming. They tend, however, to offer the affiliated station more
advertising availabilities for local sale within network programming than do
the long established networks.

   Twelve of the Stations have network affiliation agreements with ABC, 10 of
the Stations have agreements with NBC, two of the Stations have agreements with
CBS, one of the Stations has an agreement with WB and one of the Stations has
an agreement with UPN. In addition, the Company's two radio stations have an
affiliation agreement with a network that provides certain content (i.e., news,
sports, etc.) for the stations. The Company's radio stations are less dependent
on their affiliation agreement for programming. Although the Company does not
expect that its network affiliation agreements will be terminated and expects
to continue to be able to renew its network affiliation agreements, no
assurance can be given that such agreements will not be terminated or that
renewals will be obtained on as favorable terms or at all.

   ABC.  The term of the ABC affiliation agreements for KMBC, WISN, WCVB and
WTAE is for two years, renewable for successive two-year periods unless notice
to cancel is given by either party to the other at least six months prior to
expiration of the then-existing term. In addition, each of the agreements,
except the agreement for WTAE, is subject to cancellation by either party upon
six months notice to the other. The date of expiration of the affiliation
agreement for each of the Company's other ABC affiliated stations is as
follows: KETV and KOAT-November 1, 2004; WAPT-March 6, 2005; KITV-January 2,
2005; WPBF-August 31, 2003; WMUR-August 7, 2005; KHBS/KHOG-August 29, 2004 and
KOCO-December 31, 2004. Negotiations are continuing with ABC for amendment of
each affiliation agreement to include, among other things, a common expiration
date. In addition, the Company has agreed to certain modifications in the
compensation package with ABC through July 2002 for the broadcast rights to
Monday Night Football.

                                      6

<PAGE>

   NBC.  The term of each affiliation agreement with NBC for its current roster
of NBC-affiliated stations--WBAL, WLWT, WYFF, WGAL, WXII, WPTZ/WNNE, KSBW,
KCRA, WESH and WDSU--is for a period of nine years, six months, terminating
December 31, 2009. In December 2000, the Company entered into a program
development and distribution arrangement with the NBC Owned and Operated
Stations and Gannett Broadcasting. That arrangement is in addition to the
NBC/Hearst-Argyle Syndication, LLC formed by NBC and the Company in 2001. In
addition, Internet Broadcasting Systems (IBS) provides Web site development and
operating services to the NBC Television Stations Division (as noted above, the
Company has an equity investment in IBS and IBS also provides similar services
to the Company).

   CBS.  The term of the CBS affiliation agreements with KCCI and WLKY are for
an initial term of 10 years (through June 30, 2005) and are subject to
successive five year renewals unless either party gives notice of intent not to
renew at least six months prior to the end of the initial or any successive
term.

   UPN and WB.  The UPN affiliation agreement with KCWE is for an initial
10-year term (through August 31, 2008). The WB affiliation agreement with KQCA
is for a term of five years (through September 30, 2003). Unlike affiliates of
ABC or NBC, WB affiliates may be required to pay the network compensation based
upon ratings generated by the station in return for the broadcast rights to the
network's programming. Both UPN and WB have the right to terminate their
affiliation agreements in the event of a material breach of such agreement by a
station and in certain other circumstances.

The Commercial Television Broadcasting Industry

   General.  Commercial television broadcasting began in the United States on a
regular basis in the 1940s. Currently, a limited number of channels are
available for broadcasting in any one geographic area, and a license to operate
a television station must be granted by the Federal Communications Commission
or FCC. Television stations that broadcast over the VHF band (channels 2-13) of
the spectrum generally have some competitive advantage over television stations
that broadcast over the UHF band (channels above 13) of the spectrum because
the former usually have better signal coverage and operate at a lower
transmission cost. The improvement of UHF transmitters and receivers, the
complete elimination from the marketplace of VHF-only receivers and the
expansion of cable television and satellite delivery systems, however, have
reduced to some extent the VHF signal advantage. The FCC reports that as of
September 30, 2001, there were 1,309 commercial television stations on the air
in the United States, of which 737 were UHF and 572 were VHF.

   All television stations in the country are grouped by Nielsen, a national
audience measuring service, into 210 generally recognized television markets
that are ranked in size according to various formulae based upon actual or
potential audience. Each market is designated as an exclusive geographic area
consisting of all counties in which the home-market commercial stations receive
the greatest percentage of total viewing hours. These specific geographic
markets are referred to by Nielsen as DMAs. Nielsen periodically publishes data
on estimated audiences for the television stations in the various markets
throughout the country. The estimates are expressed in terms of the percentage
of the total potential audience in the market viewing a station (the station's
"rating") and of the percentage of households using television actually viewing
the station (the station's "share"). Nielsen provides such data on the basis of
total television households and selected demographic groupings in the market.
Nielsen uses two methods of determining a station's ability to attract viewers.
In larger geographic markets, ratings are determined by a combination of meters
connected directly to selected television sets and weekly diaries of television
viewing, while in smaller markets only weekly diaries are utilized.

   Historically, three broadcast networks--ABC, NBC and CBS--dominated
broadcast television. Fox effectively has evolved into the fourth network, even
though it produces less of prime time programming than the other major
networks. In addition, UPN, WB and, more recently, PAX have been launched as
television

                                      7

<PAGE>

networks. Stations that operate without network affiliations are referred to as
"independent" stations. All of the Stations are affiliated with networks,
except WMOR-TV, which became an independent station as of October 1, 1999. The
acquisition of CBS by Viacom in May 2000 has resulted in the ownership of two
networks (CBS and UPN) by one company. Last year, the FCC waived the dual
network prohibition to permit Viacom's ownership of two networks and
subsequently modified the dual network rule to permit the older, established
networks (ABC, CBS, FOX and NBC) to own emerging new broadcast networks.

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

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

   Television station revenues are derived primarily from local, regional and
national advertising (particularly, in most cases, from local news advertising)
and, to a much lesser extent, from Network Compensation and revenues from
studio or tower rental and commercial production activities. As noted
previously, the Network Compensation component of station revenues is projected
to decline in the future. Advertising rates are set based upon a variety of
factors, including a program's popularity among the viewers an advertiser
wishes to attract, the number of advertisers competing for the available time,
the size and demographic makeup of the market served by the station and the
availability of alternative advertising media in the market area. Rates also
are determined by a station's overall ratings and share in its market, as well
as the station's ratings and share among particular demographic groups that an
advertiser may be targeting. Because broadcast television stations rely on
advertising revenues, they are sensitive to cyclical changes in the economy.
The size of advertisers' budgets, which are affected by broad economic trends,
affect the broadcast industry in general and the revenues of individual
broadcast television stations. The advertising revenues of the stations are
generally highest in the second and fourth quarters of each year, due in part
to increases in consumer advertising in the spring and retail advertising in
the period leading up to and including the holiday season. Additionally,
advertising revenues in even-numbered years benefit from advertising placed by
candidates for political offices, and demand for advertising time in Olympic
broadcasts. From time to time, including within the last twelve months,
proposals have been advanced in the U.S. Congress and at the FCC to require
television broadcast stations to provide advertising time to political
candidates at no or reduced charge. The Company cannot predict whether any such
legislation may ultimately be passed or, if passed, the impact on the Company.

   Through the 1970s, network television broadcasting enjoyed virtual dominance
in viewership and television advertising revenues, because network-affiliated
stations competed only with each other in local markets. Beginning in the
1980s, this level of dominance began to change, as the FCC authorized more
local stations and marketplace choices expanded with the growth of independent
stations and cable television services. Cable television systems were first
installed in significant numbers in the 1970s and were initially used primarily
to

                                      8

<PAGE>

retransmit broadcast television programming to paying subscribers in areas with
poor broadcast signal reception. In the aggregate, cable-originated programming
has emerged as a significant competitor for viewers of broadcast television
programming, although no single cable programming network regularly attains
audience levels equivalent to any of the major broadcast networks and,
collectively, the broadcast originated signals still constitute the majority of
viewing in most cable homes. The advertising share of cable networks has
increased during the 1980s and 1990s as a result of the growth in cable
penetration (the percentage of television households that are connected to a
cable system), increases in made-for-cable programming and increases in cable
channels or networks. Notwithstanding such increases in cable viewership and
advertising, over-the-air broadcasting remains the dominant distribution system
for mass market television advertising.

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

   Further advances in technology may increase competition for household
audiences and advertisers. Video compression techniques, now in use with direct
broadcast satellites and, potentially soon, in development for cable and
wireless cable, are expected to permit greater numbers of channels to be
carried within existing bandwidth. These compression techniques, as well as
other technological developments, are applicable to all video delivery systems,
including over-the-air broadcasting, and have the potential to provide vastly
expanded programming to highly targeted audiences. Reduction in the cost of
creating additional channel capacity could lower entry barriers for new
channels and encourage the development of increasingly specialized niche
programming. This ability to reach very narrowly defined audiences is expected
to alter the competitive dynamics for advertising expenditures. The Company is
unable to predict the effect that technological changes will have on the
broadcast television industry or the future results of the Stations.

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

   The Stations compete for audience on the basis of program popularity, which
has a direct effect on advertising rates. A significant portion of the daily
programming on the Stations is supplied by the Network with which each such
Station is affiliated. In time periods in which the network provides
programming, the Stations are primarily dependent upon the performance of the
network programs in attracting viewers. Each Station competes in non-network
time periods based on the performance of its programming during such time
periods, using a combination of locally-produced news, public affairs and other
entertainment programming, including news and syndicated programs, that such
Station believes will be attractive to viewers.

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


                                      9

<PAGE>

   Other sources of competition for the Stations include home entertainment
systems (including video cassette recorder and playback systems, videodiscs and
television game devices), the Internet, multipoint distribution systems,
multichannel multipoint distribution systems or "wireless cable" satellite
master antenna television systems, some low power, in-home satellite services
and other sources of home entertainment. The Stations also face competition
from high-powered direct broadcast satellite services, such as EchoStar (DISH
Network) and DIRECTV, which transmit programming directly to homes equipped
with special receiving antennas. The Stations compete with these services both
on the basis of service and product performance (quality of reception and
number of channels that may be offered) and price (the relative cost to utilize
these systems compared to broadcast television viewing).

   Advertising rates are based upon the size of the market in which a station
operates, a program's popularity among the viewers an advertiser wishes to
attract, the number of advertisers competing for the available time, the
demographic makeup of the market served by the station, the availability of
alternative advertising media in the market area, the effectiveness of sales
forces and the development of projects, features and programs that tie
advertiser messages to programming. Advertising rates also are determined by a
station's overall ability to attract viewers in its market, as well as the
station's ability to attract viewers among particular demographic groups that
an advertiser may be targeting. Broadcast television stations compete for
advertising revenues with other broadcast television stations and with the
print media, radio stations, internet Web sites and cable system operators
serving the same market. Additional competitors for advertising revenues
include a variety of other media, including direct marketing. Since greater
amounts of advertising time are available for sale by independent stations,
independent stations typically achieve a greater proportion of television
market advertising revenues relative to their share of the market's audience.
Public broadcasting outlets in most communities compete with commercial
broadcasters for viewers but not generally for advertising dollars.

Federal Regulation of Television Broadcasting

   General.  Broadcasting is subject to the jurisdiction of the FCC under the
Communications Act of 1934, as amended (the "Communications Act"), most
recently amended further by the Telecommunications Act of 1996 (the
"Telecommunications Act"). The Communications Act prohibits the operation of
television broadcasting stations except under a license issued by the FCC and
empowers the FCC, among other actions, to issue, renew, revoke and modify
broadcasting licenses; assign frequency bands; determine stations' frequencies,
locations and power; regulate the equipment used by stations; adopt other
regulations to carry out the provisions of the Communications Act; impose
penalties for violation of such regulations; and, impose fees for processing
applications and other administrative functions. The Communications Act
prohibits the assignment of a license or the transfer of control of a licensee
without prior approval of the FCC. Under the Communications Act, the FCC also
regulates certain aspects of the operation of cable television systems and
other electronic media that compete with broadcast stations.

   License Renewals.  The process for renewal of broadcast station licenses as
set forth under the Communications Act has undergone significant change as a
result of the Telecommunications Act. Prior to the passage of the
Telecommunications Act, television broadcasting licenses generally were granted
or renewed for a period of five years upon a finding by the FCC that the
"public interest, convenience and necessity" would be served thereby. Under the
Telecommunications Act, the statutory restriction on the length of broadcast
licenses has been amended to allow the FCC to grant broadcast licenses for
terms of up to eight years. The Telecommunications Act requires renewal of a
broadcast license if the FCC finds that (i) the station has served the public
interest, convenience and necessity; (ii) there have been no serious violations
of either the Communications Act or the FCC's rules and regulations by the
licensee; and (iii) there have been no other serious violations that taken
together constitute a pattern of abuse. In making its determination, the FCC
may consider petitions to deny but cannot consider whether the public interest
would be better served by a person other than the renewal applicant. Under the
Telecommunications Act, competing applications for the same frequency may be
accepted only after the FCC has denied an incumbent's application for renewal
of license.

                                      10

<PAGE>

   The following table provides the expiration dates for the main station
licenses of the Company's owned and managed television stations:

<TABLE>
<CAPTION>
                                                           Expiration of
     Station                          Market               FCC License(1)
     -------                          ------               --------------
     <S>                              <C>                  <C>
     WCVB............................ Boston, MA           April 1, 2007
     WMUR............................ Manchester, NH       April 1, 2007
     WMOR............................ Tampa, Fl            February 1, 2005
     KCRA............................ Sacramento, CA       December 1, 2006
     KQCA............................ Sacramento, CA       December 1, 2006
     WESH............................ Orlando, FL          February 1, 2005
     WTAE............................ Pittsburgh, PA       August 1, 2007
     WBAL............................ Baltimore, MD        October 1, 2004
     KMBC............................ Kansas City, MO      February 1, 2006
     KCWE............................ Kansas City, MO      February 1, 2006
     WLWT............................ Cincinnati, OH       October 1, 2005
     WISN............................ Milwaukee, WI        December 1, 2005
     WYFF............................ Greenville, SC       December 1, 2004
     WPBF............................ West Palm Beach, FL  February 1, 2005
     WDSU............................ New Orleans, LA      June 1, 2005
     WXII............................ Greensboro, NC       December 1, 2004
     KOCO............................ Oklahoma City, OK    June 1, 2006
     WGAL............................ Lancaster, PA        August 1, 2007
     KOAT............................ Albuquerque, NM      October 1, 2006
     KOCT (satellite station of KOAT) Carlsbad, NM         October 1, 2006
     KOVT (satellite station of KOAT) Silver City, NM      October 1, 2006
     WLKY............................ Louisville, KY       August 1, 2005
     KCCI............................ Des Moines, IA       February 1, 2006
     KITV............................ Honolulu, HI         February 1, 2007
     KHVO (satellite station of KITV) Hilo, HI             February 1, 2007
     KMAU (satellite station of KITV) Wailuku, HI          February 1, 2007
     KETV............................ Omaha, NE            June 1, 2006
     WAPT............................ Jackson, MS          June 1, 2005
     WPTZ............................ Plattsburgh, NY      June 1, 2007
     WNNE (satellite station of WPTZ) Burlington, VT       April 1, 2007
     KHBS............................ Fort Smith, AR       June 1, 2005
     KHOG (satellite station of KHBS) Fayetteville, AR     June 1, 2005
     KSBW............................ Monterey-Salinas, CA December 1, 2006
</TABLE>
--------
(1) For more information, please refer to "Digital Television Service" below
    relating to the transition to digital television.

   Ownership Regulation.  The Communications Act, FCC rules and regulations and
the Telecommunications Act also regulate broadcast ownership. The FCC has
promulgated rules that, among other matters, limit the ability of individuals
and entities to own or have an official position or ownership interest above a
certain level (an "attributable" interest) in broadcast stations as well as
other specified mass media entities. As detailed below, in recent years, the
FCC substantially revised a number of its multiple ownership and attribution
rules. The FCC revised its rules regarding measurements of and limitations on
national television ownership, restrictions of local television ownership and
radio-television cross-ownership, and attribution of broadcast ownership
interests. In addition, recent court decisions are now compelling the FCC to
further reconsider certain of its ownership rules. The FCC's various broadcast
ownership rules, inclusive of the recent revisions and pending proceedings, are
summarized below:


                                      11

<PAGE>

   Local Radio Ownership.  With respect to radio licenses, the maximum
allowable number of stations that can be commonly owned in a market varies
depending on the number of radio stations within that market, as determined
using a contour-overlap method prescribed by the FCC. In markets with more than
45 stations, one company may own, operate or control eight stations, with no
more than five in any one service (AM or FM). In markets of 30-44 stations, one
company may own seven stations, with no more than four in any one service; in
markets of 15-29 stations, one entity may own six stations, with no more than
four in any one service. In markets with 14 commercial stations or less, one
company may own up to five stations or 50% of all of the stations, whichever is
less, with no more than three in any one service. The FCC is currently
evaluating, in a rule-making proceeding, whether to further refine its approach
to defining local radio markets by relying on Arbitron's definitions rather
than the contour-overlap method.

   Local Television Ownership.  The FCC's new local TV ownership rules permit
parties to own two television stations without regard to signal contour overlap
provided they are located in separate Nielsen DMAs. In addition, the new rules
permit parties in larger markets to own up to two TV stations in the same DMA
so long as at least eight independently owned and operating full-power
commercial and non-commercial television stations remain in the market at the
time of acquisition and at least one of the two stations is not among the top
four-ranked stations in the market based on audience share. In addition,
without regard to numbers of remaining or independently owned television
stations, the FCC will permit television duopolies within the same DMA so long
as certain signal contours of the stations involved do not overlap. Satellite
stations that simply rebroadcast the programming of a "parent" station will
continue to be exempt from the duopoly rule if located in the same DMA as the
"parent" station. The local ownership rule also applies to same-market local
marketing agreements ("LMAs") involving more than 15% of the brokered station's
program time, although current LMAs entered into prior to November 5, 1996 will
be exempt from the local television ownership rule for a limited period of time
of either two or five years, depending on the LMA's date of adoption. Further,
the FCC may grant a waiver of the local television ownership rule if one of the
two television stations is a "failed" or "failing" station, or the proposed
transaction would result in the construction of a new television station. The
legal propriety of the eight voice test and the constitutionality of the TV
duopoly rule are currently the subject of an appeal pending in the U.S. Court
of Appeals for the District of Columbia. The ultimate outcome of the case and
its impact on the TV ownership rules is unknown. The Company is currently in
full compliance with the FCC's local television ownership rule and the Missouri
LMA, pursuant to which programming is provided to KCWE in Kansas City,
Missouri, has been grandfathered until the conclusion of the FCC's biennial
review of its broadcast ownership rules in 2004.

   National Television Ownership Cap.  On the national level, the
Communications Act imposes a 35% national audience reach cap for television
ownership, under which one party may have an attributable interest in
television stations which reach no more than 35% of all U.S. television
households. The FCC discounts the audience reach of a UHF station for this
purpose by 50%. Under the FCC rules, for entities that have attributable
interests in two stations in the same market, the FCC counts the audience reach
of that market only once for national cap purposes. The constitutionality of
the national cap is being challenged in two cases pending in the United States
Court of Appeals for the District of Columbia. On February 19, 2002 the court
ruled that the FCC had acted arbitrarily in its decision to retain the 35%
national television ownership cap by failing to demonstrate the continued
necessity of the rule to serve the public interest in light of increasing
competition in the broadcasting industry. The court remanded the case to the
FCC for further proceedings. The FCC may elect to retain the rule or may modify
or eliminate it. The court rejected arguments that the rule was an
unconstitutional abridgement of the First Amendment. The court decision is
currently subject to rehearing or appeal. If the rule is eliminated, further
consolidation may occur in the broadcasting industry. This could, for example,
increase the Company's costs of securing programming. The Company cannot
predict what impact the court decision or subsequent proceedings may have on
its business.

   National Cable Ownership Cap.  On March 2, 2001, the U.S. Court of Appeals
for the District of Columbia held that the FCC's cap on cable ownership,
barring any cable operator from serving more than 30% of the multichannel video
programming audience nationwide, violated the First Amendment. The court ruled
that

                                      12

<PAGE>

the limit must either be justified by the FCC "as not burdening substantially
more speech than necessary," or rewritten by the FCC. In addition, the court
vacated on constitutional grounds the FCC rule limiting to 40% the number of
channels on which a cable operator can offer operator-affiliated programming.
The FCC decided not to appeal and issued a Further Notice of Proposed
Rulemaking on September 13, 2001, looking toward a modification of its
horizontal (30% of national audience reach) and vertical (40% of channels
showing operator-affiliated programming) limits and certain aspects of its
attribution rules as affected by the court's decision. Comments have been filed
and the matter is ripe for decision.

   Radio-Television Cross Ownership.  The so-called "one-to-a-market" rule has
until recently prohibited common ownership or control of a radio station,
whether AM, FM or both, and a television station in the same market, subject to
waivers in some circumstances (the common ownership of the Baltimore television
and radio properties was grandfathered at the inception of the rule). The FCC's
new radio-television cross-ownership rule embodies a graduated test based on
the number of independently owned media voices in the local market. In large
markets, i.e., markets with at least 20 independently owned media voices, a
single entity can own up to one television station and seven radio stations (if
8 full-power television stations would remain in the market post transaction)
or, if permissible under the new local television ownership rule, two
television stations and six radio stations. Waivers of the new radio-television
cross-ownership rule will be granted only under the failed station test. Unlike
under the local television ownership rule, the FCC will not waive the
radio-television cross-ownership rule in situations of failing or unbuilt
stations.

   Newspaper-Broadcast Cross-Ownership.  The FCC's rules prohibit the licensee
of an AM, FM, or TV station from directly or indirectly owning, operating, or
controlling a daily newspaper if the station's specified service contour
encompasses the entire community where the newspaper is published. A waiver of
the newspaper cross-ownership restriction may be obtained where application of
the rule would be "unduly harsh." On September 13, 2001, the FCC issued a
Notice of Proposed Rulemaking seeking comment on modification of its
newspaper/broadcast crossownership rule and waiver policies. The purpose was to
collect information to serve as a basis for the FCC to decide whether the
25-year-old rule should be kept, eliminated or modified to achieve its
objectives of promoting media competition and diversity. The comment period
closed on February 15, 2002 and the issue is now pending FCC action. The
Company cannot predict what action the FCC may take.

   Cable-Television Cross-Ownership.  The FCC's rules prohibit common control
of a television station and a cable television system that serves a community
encompassed in whole or in part by the television station's predicted Grade B
signal contour. On February 19, 2002, the U.S. Court of Appeals for the
District of Columbia vacated the FCC's rule prohibiting the ownership of a
television station and a cable system in a local market. The court held that
the FCC had failed to demonstrate that the rule was necessary to serve the
public interest in light of increasing competition. The court decision is not
final and is subject to rehearing or appeal. Moreover, at this point, it is
unclear what action the FCC (or Congress) may take in response to the court
decision. The elimination of the rule could permit the acquisition of a network
or group broadcaster by a cable MSO. The Company cannot predict what
implications this decision may have for its business.

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

  .   holders of 5% or more of the licensee's voting stock;

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

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

  .   any equity interest in a limited partnership or limited liability
      company, unless properly "insulated" from management activities; and

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

                                      13

<PAGE>

   Importantly, all non-conforming interests acquired before November 7, 1996
are permanently grandfathered and thus do not constitute attributable ownership
interests. It should also be noted that the single majority shareholder
exemption remains in effect, having been reinstated after a successful court
appeal.

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

   Local Marketing Agreements.  Under LMAs, also referred to as Time Brokerage
Agreements or TBAs, the licensee of one station provides the programming for
another licensee's station. Under the FCC's rules, an entity that owns a
television station and programs more than 15% of the broadcast time on another
television station in the same market is now required to count the LMA station
toward its television ownership limits even though it does not own the station.
Thus, in the future with respect to markets in which the Company owns
television stations, the Company generally will not be able to enter into an
LMA with another television station in the same market if it cannot acquire
that station under the revised local television ownership rule.

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

Other Regulations, Legislation and Recent Developments Affecting Broadcast
Stations

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

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

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

                                      14

<PAGE>

   Video Description.  In an effort to assist visually impaired viewers, the
FCC has adopted video description rules which require the insertion into a TV
program of narrated descriptions of settings and actions that are not otherwise
reflected in the dialogue, such as the movement of a person in the scene.
Currently, the FCC's rules require that for emergency information, all stations
must make the critical details accessible to people with visual disabilities.
Effective second quarter 2002, the FCC's rules will require television stations
in the top 25 markets that are affiliated with ABC, CBS, NBC and Fox to provide
a minimum of 50 hours per quarter of described prime time and/or children's
programming. Also, the rules will generally require all television stations to
pass through any video description received from a programming provider,
provided the station has the technical capability to do so. The FCC has
indicated that it will consider in the future whether and when to increase the
50 hour requirement and to include more stations under the rule.

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

   Equal Employment Opportunity.  On January 17, 2001, the U.S. Court of
Appeals for the D.C. Circuit concluded that the FCC's Equal Employment
Opportunity ("EEO") regulations were unconstitutional. On January 31, 2001, the
FCC suspended the effectiveness of the majority of the FCC's EEO rules. The
only requirements left in effect are the FCC's general requirements to afford
equal opportunity in employment and the FCC's prohibition on employment
discrimination. The FCC is presently conducting a rulemaking proceeding looking
toward the adoption of new EEO rules which will pass constitutional muster.

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

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

                                      15

<PAGE>

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

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

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

<TABLE>
<CAPTION>
                                                                          FCC
                                                                       Mandated
                                                                     Timetable For
                                Market    Network   Analog    DTV   Construction of
Station        Market           Rank(1) Affiliation Channel Channel DTV Facilities
-------        ------           ------- ----------- ------- ------- ---------------
<S>     <C>                     <C>     <C>         <C>     <C>     <C>
 WCVB.. Boston, MA(2)               6       ABC        5      20     May 1, 1999
 WMUR.. Manchester, NH(2)           6       ABC        9      59     May 1, 1999
 WMOR.. Tampa, FL(3)               14   Independent   32      19     May 1, 2002
 KCRA.. Sacramento, CA(2)          19       NBC        3      35     Nov. 1, 1999
 KQCA.. Sacramento, CA(4)          19       WB        58      46     May 1, 2002
 WESH.. Orlando, FL(2)             20       NBC        2      11     Nov. 1, 1999
 WTAE.. Pittsburgh, PA(2)          21       ABC        4      51     Nov. 1, 1999
 WBAL.. Baltimore, MD(2)           24       NBC       11      59     Nov. 1, 1999
 KMBC.. Kansas City, MO(3)         31       ABC        9      14     May 1, 2002
 KCWE.. Kansas City, MO(3)         31       UPN       29      31     May 1, 2002
 WLWT.. Cincinnati, OH(2)          32       NBC        5      35     Nov. 1, 1999
 WISN.. Milwaukee, WI(4)           33       ABC       12      34     May 1, 2002
 WYFF.. Greenville, SC(3)          36       NBC        4      59     May 1, 2002
 WPBF.. West Palm Beach, FL(3)     40       ABC       25      16     May 1, 2002
 WDSU.. New Orleans, LA(4)         43       NBC        6      43     May 1, 2002
 WXII.. Greensboro, NC(2)          44       NBC       12      31     May 1, 2002
 KOCO.. Oklahoma City, OK(4)       45       ABC        5      16     May 1, 2002
 WGAL.. Lancaster, PA(2)           46       NBC        8      58     May 1, 2002
 KOAT.. Albuquerque, NM(3)         48       ABC        7      21     May 1, 2002
 KOCT.. Carlsbad, NM(4)            48       ABC        6      19     May 1, 2002
 KOVT.. Silver City, NM(4)         48       ABC       10      12     May 1, 2002
 KOFT.. Farmington, NM(4)          48       ABC        3       8     May 1, 2002
 WLKY.. Louisville, KY(4)          50       CBS       32      26     May 1, 2002
 KCCI.. Des Moines, IA(3)          70       CBS        8      31     May 1, 2002
 KITV.. Honolulu, HI(2)            72       ABC        4      40     May 1, 2002
 KMAU.. Wailuku, HI(4)             72       ABC       12      29     May 1, 2002
 KHVO.. Hilo, HI(2)                72       ABC       13      18     May 1, 2002
 KETV.. Omaha, NE(4)               75       ABC        7      20     May 1, 2002
 WAPT.. Jackson, MS(4)             88       ABC       16      21     May 1, 2002
 WPTZ.. Plattsburgh, N(4)          90       NBC        5      14      May 1, 2002
 WNNE.. Burlington, VT(4)          90       NBC       31      25      May 1, 2002
 KHBS.. Fort Smith, AR(3)         107       ABC       40      21      May 1, 2002
 KHOG.. Fayetteville, AR(3)       107       ABC       29      15      May 1, 2002
 KSBW.. Monterey-Salinas, CA(4)   118       NBC        8      43      May 1, 2002
</TABLE>

                                      16

<PAGE>

--------
(1) Market rank is based on the relative size of the DMA among the 210
    generally recognized DMAs in the U.S., based on Nielsen estimates for the
    2001-2002 season.
(2) Station has completed construction of DTV facilities and is operating with
    a power level equal to or less than the maximum authorized power level.
(3) Station will likely complete construction of DTV facilities by May 1, 2002
    and will operate with a power level equal to or less than the maximum
    authorized power level. The Company has requested an extension of time to
    construct DTV facilities in the event that the deadline is missed.
(4) Station, because of federal, state or local government regulatory delays,
    equipment supply or construction delays, and/or capital allocation
    decisions, has not yet constructed DTV facilities. The Company has
    requested an extension of time to construct DTV facilities for all stations
    for which maximized DTV facilities have not been constructed.

   The FCC's plan calls for the digital television transition period to end in
the year 2006, at which time the FCC expects that television broadcasters will
cease non-digital broadcasting and return one of their two channels to the
government, allowing that spectrum to be recovered for other uses. Under the
Balanced Budget Act of 1997, however, the FCC is authorized to extend the
December 31, 2006 deadline for reclamation of a television station's
non-digital channel if, in any given market: (1) one or more television
stations affiliated with ABC, CBS, NBC or Fox is not broadcasting digitally,
and the FCC determines that such stations have "exercised due diligence" in
attempting to convert to digital broadcasting; (2) digital-to-analog converter
technology is not available in such market; or (3) 15% or more of the
television households in the market do not subscribe to a multichannel video
service that carries at least one digital channel from each of the local
stations in that market, and 15% or more of the television households in the
market cannot receive digital signals off the air using either a set-top
converter box for an analog television set or a new digital television set.

   In January 2001, the FCC took several actions affecting the digital
transition. The FCC ruled that:

  .   Stations with two channels in the DTV core spectrum (2-51) must elect
      their final channel by December 31, 2003 so that the FCC may make plans
      to repackage and auction the unused spectrum.

  .   While full DTV signal replication of existing Grade B NTSC signal
      coverage will not be required by 2004, a stronger signal of an as yet
      undetermined strength will be required by December 31, 2004.

  .   After December 31, 2004, stations that are not replicating their NTSC
      signal coverage with a DTV signal will lose interference protection.

  .   It would not adopt standards for the performance of DTV television sets.

  .   Stations may elect to have one of their signals, NTSC or DTV, carried by
      cable operators, but not both.

  .   Cable systems are required to carry only one broadcast television program
      stream and program-related content. Thus, ancillary services and
      multiplexed program or data streams are not required to be carried by
      cable systems.

   While the FCC's decision on dual must-carry was announced as "tentative,"
the effect of the decision is to require negotiations between broadcasters and
cable operators over carriage terms for ancillary services and multiplexed
programs or data streams.

   On October 11, 2001, notwithstanding prior "stay-the-course" statements, the
FCC Chairman announced the creation of an FCC DTV Task Force to assess and make
"mid-course corrections" in DTV transition deadlines and policies. The FCC
Chairman cited the "unrealistic expectations" underlying the 2006 target for
return of analog spectrum, and the September 11 tragic events, which require
consideration of their impact on consumer spending, on media companies and on
the needs of public safety and wireless services for additional spectrum.

                                      17

<PAGE>

   On November 8, 2001, the FCC made certain "mid-course corrections" to its
DTV transition rules. The FCC adopted an order reconsidering its DTV conversion
rules for television stations in several significant ways intended to get more
DTV stations on the air and encourage consumer purchase of DTV receivers. The
Commission:

  .   Temporarily deferred its requirement that commercial broadcasters
      replicate their entire current Grade B NTSC analog service area with
      their DTV signal by December 31, 2004 (or December 31, 2005 for
      noncommercial broadcasters) or lose interference protection to the
      unreplicated areas. Instead, stations can initially construct and operate
      facilities that offer DTV services to at least their community of
      license, while retaining interference protection to their allotted
      service areas. This will allow broadcasters to go on the air with
      lower-powered, less expensive facilities and to expand DTV coverage to
      their entire analog service area later.

  .   Temporarily deferred its requirement that stations granted construction
      permits for maximized DTV facilities construct them by the initial
      build-out date or lose interference protection to the full authorized
      facilities.

  .   Temporarily deferred its requirement that commercial stations with both
      analog and digital channel assignments within the DTV core (channels
      2-51) elect by December 31, 2003 (December 31, 2004 for noncommercial
      stations) which channel they will use as their post-transition digital
      channel.

  .   The FCC said that it will set new dates for replication, maximization and
      channel election in later periodic review of the DTV transition. These
      new deadlines will not be later than the end of 2006 or the date by which
      85% of the television households in a licensee's market can receive
      digital broadcast signals, whichever is later.

  .   Provided that television stations may operate digitally at a reduced
      schedule by providing, at a minimum, a digital signal during prime time
      hours. This modified operating requirement does not affect DTV licensees'
      simulcast obligations. Starting April 1, 2003, a DTV station must provide
      a digital signal at least 50% of the time it transmits an analog signal;
      on April 1, 2004, 75%; and on April 1, 2005, 100%.

  .   Declined to modify deadlines (December 31, 2004 for commercial stations
      and 2005 for noncommercial stations) for stations to meet the increased
      city-grade signal strength requirements imposed in the periodic review
      order.

  .   Declined to issue a blanket extension of remaining DTV construction
      deadlines (May 1, 2002 for commercial stations, May 1, 2003 for
      noncommercial stations).

  .   Declined to modify its process for determining when two DTV applications
      are mutually exclusive, but clarified the relative treatment of DTV
      applications and new analog TV station applications. The FCC also
      clarified some DTV application processing procedures for determining
      unacceptable interference and maximum allowable power.

  .   Clarified that noncommercial television stations may provide commercial,
      for-profit ancillary services (such as paging and computer software
      distribution) on excess DTV channels not used for broadcast programming.
      The commission concluded that the statutory ban on commercial operation
      applies to broadcasting only, though noncommercial stations must devote a
      "substantial majority" of total digital capacity to nonprofit educational
      broadcast services. Public stations will also be subject to an annual fee
      of 5% of gross revenues from ancillary commercial services; that fee
      already applies to commercial television broadcasters.

   By March 4, 2002 commercial television stations which had not constructed
DTV facilities were required to have filed applications for extension of time
to construct. The Company has (i) stations which have completed construction of
DTV facilities; (ii) stations which are likely to have or will have completed
construction of DTV facilities by May 1, 2002; and (iii) stations which because
of federal, state or local government regulatory delays,

                                      18

<PAGE>

equipment supply or construction delays, and/or capital allocation decisions,
have not yet constructed DTV facilities. The Company has requested an extension
of time to construct for all stations for which maximized DTV facilities have
not been constructed. There can be no assurance that the FCC will grant such
extensions.

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

   In December 1999, the FCC commenced a proceeding seeking comment on the
public interest obligations of television broadcast licensees. Specifically,
the FCC is requesting information in four general areas: (1) the new
flexibility and capabilities of digital television, such as multiple channel
transmission; (2) service to local communities in terms of providing
information on public interest activities and disaster relief; (3) enhancing
access to the media by persons with disabilities and using digital television
to encourage diversity in the digital era; and (4) enhancing the quality of
political discourse. The FCC stated that it was not proposing new rules or
policies, but merely seeking to create a forum for public debate on how
broadcasters can best serve the public interest during and after the transition
to digital television. In January 2001, the FCC's Chairman issued a report to
Congress containing certain recommendations. The rulemaking proceeding remains
pending, however.

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

   Direct Broadcast Satellite Systems.  There are currently in operation
several direct broadcast satellite systems that serve the United States. Direct
broadcast satellite systems provide programming on a subscription basis to
those who have purchased and installed a satellite signal receiving dish and
associated decoder equipment. Direct broadcast satellite systems claim to
provide visual picture quality comparable to that found in movie theaters and
aural quality comparable to digital audio compact disks. The Company cannot
predict the impact of direct broadcast satellite systems on the Company's
business.

   In November 1999, Congress enacted the Satellite Home Viewer Improvement Act
of 1999 ("SHVIA"), which established a copyright licensing system for limited
distribution of television network programming to 16 DBS viewers and directed
the FCC to initiate rulemaking proceedings to implement the new system. Under
SHVIA, satellite carriers are permitted to retransmit local signals of
television broadcasters for a period of six months from the November 29, 1999
enactment of SHVIA, without receiving retransmission consent. After the
six-month period, satellite carriers will be required to enter into
retransmission consent agreements to allow for satellite carriage of local
television stations. The agreement between the Company and Lifetime also
applies to

                                      19

<PAGE>

the grant of DBS retransmission consent rights, for which Lifetime will also
compensate the Company. SHVIA also contemplates a market-specific requirement
for mandatory carriage of local television stations, similar to that applicable
to cable systems, for those markets in which a satellite carrier chooses to
provide any local signal, beginning January 1, 2002. In addition, SHVIA
extended the compulsory license allowing the satellite distribution of distant
network signals to unserved households (i.e., those that do not receive a Grade
B signal from a local network affiliate). Certain of the Company's stations are
currently distributed by satellite.

   EchoStar/DirecTV Merger.  In October 2001, EchoStar and DirecTV, the two
leading providers of direct-satellite-to-home multi-channel video programming
services announced their intention to merge. EchoStar would be the acquiring
company in the proposed transaction. The combination must first be approved by
both the FCC and the U.S. Department of Justice. The proposed merger would have
numerous implications for the video distribution marketplace. Some of such
implications could be negative for the Company's business. For example, the
Company currently negotiates with two competing DBS providers for payments for
retransmission consent rights to carry the signals of its television stations.
The Company cannot predict what the impact approval of the merger would have on
its business and prospects.

                                 *  *  *  *  *

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

Employees

   As of December 31, 2001, the Company had approximately 2,829 full-time
employees and 352 part-time employees. A total of approximately 875 of the
Company's employees are represented by five unions (the American Federation of
Television and Radio Artists, the International Brotherhood of Electrical
Workers, the International Alliance of Theatrical Stage Employees, the
Directors Guild of America, and the National Association of Broadcast
Electrical Technicians). The Company has not experienced any significant labor
problems, and it believes that its relations with its employees are
satisfactory.

ITEM 2.  PROPERTIES

   The Company's principal executive offices are located at 888 Seventh Avenue,
New York, New York 10106. The real property of each Station generally includes
owned or leased offices, studios, transmitters and tower sites. Typically,
offices and main studios are located together, while transmitters and tower
sites are in a separate location that is more suitable for optimizing signal
strength and coverage. Set forth below are the Stations' principal facilities
as of December 31, 2001. In addition to the property listed below, the Company
and the Stations also lease other property primarily for communications
equipment.

                                      20

<PAGE>

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

WCVB      Boston, MA        Office and studio             Owned    90,002 sq. ft.
                            Office and studio            Leased     3,617 sq. ft.
                            Tower and transmitter        Leased     1,600 sq. ft.

WMUR      Manchester, NH    Office and studio            Leased    67,440 sq. ft.
                            Office                       Leased     2,154 sq. ft.
                            Tower and transmitter        Leased         2.5 acres
                            Transmitter                  Leased         2.0 acres
                            Transmitter                  Leased       200 sq. ft.

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

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

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

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

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

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

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

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

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

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

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

WXII      Winston-Salem, NC Office and studio             Owned    38,027 sq. ft.
                            Tower and transmitter         Owned       223.6 acres
                            Office                       Leased       550 sq. ft.

WLKY      Louisville, KY    Office and studio             Owned    37,842 sq. ft.
                            Tower and transmitter         Owned        40.0 acres

KOAT      Albuquerque, NM   Office and studio             Owned    37,315 sq. ft.
                            Tower and transmitter         Owned       330.5 acres
</TABLE>

                                      21

<PAGE>

<TABLE>
<CAPTION>
                                                            Owned or  Approximate
 Station           Location                    Use           Leased      Size
 -------           --------                    ---          --------  -----------
<S>       <C>                         <C>                   <C>      <C>
KCCI      Des Moines, IA              Office and studio      Owned   52,000 sq. ft.
                                      Tower and transmitter  Owned      119.5 acres

KITV      Honolulu, HI                Office and studio      Owned   35,000 sq. ft.
                                      Tower and transmitter  Leased     130 sq. ft.
                                      Tower and transmitter  Leased     304 sq. ft.
                                      Tower and transmitter  Leased       2.7 acres

KETV      Omaha, NE                   Office and studio      Owned   39,798 sq. ft.
                                      Tower and transmitter  Owned       23.3 acres

WAPT      Jackson, MS                 Office and studio      Owned   10,600 sq. ft.
                                      Tower and transmitter  Owned         24 acres

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

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

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

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

ITEM 3.  LEGAL PROCEEDINGS

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

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

   Not applicable.

                                      22

<PAGE>

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

   The Company's Series A Common Stock is listed on the NYSE under the symbol
"HTV." The table below sets forth, for the calendar quarters indicated, the
reported high and low sales prices of the Series A Common Stock on the NYSE.

<TABLE>
<CAPTION>
                                          High     Low
                                         ------- --------
                      <S>                <C>     <C>
                      2000
                         First Quarter.. 29 1/4  20 1/4
                         Second Quarter. 24      18 11/16
                         Third Quarter.. 23 7/16 18 15/16
                         Fourth Quarter. 20 5/8  17 1/16
                      2001
                         First Quarter.. 24.25   19.85
                         Second Quarter. 23      18.55
                         Third Quarter.. 22.20   16.87
                         Fourth Quarter. 21.56   16.70
</TABLE>

   On March 18, 2002, the closing price for the Series A Common Stock on the
NYSE was $24.10, and the approximate number of shareholders of record of the
Series A Common Stock at the close of business on such date was 726.

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

   All of the outstanding shares of the Series B Common Stock are required to
be held by Hearst or a Permitted Transferee (as defined below). All such shares
are currently held by Hearst Broadcasting, a wholly-owned subsidiary of Hearst
Holdings, which is in turn a wholly-owned subsidiary of Hearst. No holder of
shares of the Series B Common Stock may transfer any such shares to any person
other than to (i) Hearst; (ii) any corporation into which Hearst is merged or
consolidated or to which all or substantially all of Hearst's assets are
transferred; or, (iii) any entity controlled by Hearst (each a "Permitted
Transferee"). The Series B Common Stock, however, may be converted at any time
into Series A Common Stock and freely transferred, subject to the terms and
conditions of the Company's Amended and Restated Certificate of Incorporation
and to applicable securities laws limitations. If at any time Hearst and the
Permitted Transferees first hold in the aggregate less than 20% of all shares
of the Common Stock that are then issued and outstanding, then each issued and
outstanding share of the Series B Common Stock automatically will be converted
into one fully paid and nonassessable share of Series A Common Stock, and the
Company will not be authorized to issue any additional shares of Series B
Common Stock. Notwithstanding any other provision to the contrary, no holder of
Series B Common Stock shall (i) transfer any shares of Series B Common Stock;
(ii) convert Series B Common Stock; or, (iii) be entitled to receive any cash,
stock, other securities or other property with respect to or in exchange for
any shares of Series B Common Stock in connection with any merger or
consolidation or sale or conveyance of all or substantially all of the property
or business of the Company as an entity, unless all necessary approvals of the
FCC as required by the Communications Act, and the rules and regulations
thereunder have been obtained or waived.

   On December 20, 2001, the Company completed a private placement of $200
million principal amount of convertible trust preferred securities through
Hearst-Argyle Capital Trust, a wholly-owned subsidiary trust of the Company.
Hearst-Argyle Capital Trust issued 1,400,000 shares of 7.5% Series A
Convertible Preferred Securities due 2016 for an aggregate of $70,000,000, and
2,600,000 shares of 7.5% Series B Convertible Preferred Securities due 2021 for
an aggregate of $130,000,000, to institutional investors, including Hearst
Broadcasting, the Company's majority stockholder.

                                      23

<PAGE>

   As part of the transaction, the Company issued and sold to Hearst-Argyle
Capital Trust, in exchange for the proceeds from the sale of the 7.5% Series A
Convertible Preferred Securities due 2016 and 7.5% Series B Convertible
Preferred Securities due 2021, $72,164,960 aggregate principal amount of 7.5%
Convertible Junior Subordinated Deferrable Interest Debentures, Series A, due
2016 and $134,020,640 aggregate principal amount of 7.5% Convertible Junior
Subordinated Deferrable Interest Debentures, Series B, due 2021. Proceeds of
the issuance were used to pay down the Company's borrowings under its existing
bank credit facility. The 7.5% Series A Convertible Preferred Securities due
2016 and 7.5% Series B Convertible Preferred Securities due 2021 are
convertible, at the option of the holder at any time, into shares of the
Company's Series A Common Stock through an exchange of such 7.5% Series A
Convertible Preferred Securities due 2016 and 7.5% Series B Convertible
Preferred Securities due 2021 for a portion of the Subordinated Debentures of
the corresponding series held by the Capital Trust. The 7.5% Convertible Junior
Subordinated Deferrable Interest Debentures, Series A, due 2016 are convertible
into Series A Common Stock at an initial rate of 2.005133 shares of Series A
Common Stock per $50 principal amount of 7.5% Convertible Junior Subordinated
Deferrable Interest Debentures, Series A, due 2016 (equivalent to a conversion
price of $24.9360 per share of Series A Common Stock) and the 7.5% Convertible
Junior Subordinated Deferrable Interest Debentures, Series B, due 2021 are
convertible into Series A Common Stock at an initial rate of 1.972262 shares of
Series A Common Stock per $50 principal amount of 7.5% Convertible Junior
Subordinated Deferrable Interest Debentures, Series B, due 2021 (equivalent to
a conversion price of $25.3516 per share of Series A Common Stock).

   The securities were sold pursuant to an exemption from registration
contained in Section 4(2) under the Securities Act of 1933, as amended, (the
"Securities Act") which provides an exemption from registration for
transactions not involving any public offering, and have not been registered
under the Securities Act.

ITEM 6.  SELECTED FINANCIAL DATA

   The selected financial data should be read in conjunction with the
historical financial statements and notes thereto included elsewhere herein and
in "Management's Discussion and Analysis of Financial Condition and Results of
Operations." As discussed herein and in the notes to the accompanying
consolidated financial statements, on August 29, 1997 (effective September 1,
1997 for accounting purposes) The Hearst Corporation ("Hearst") contributed its
television broadcast group and related broadcast operations, Hearst Broadcast
Group, to Argyle Television, Inc. ("Argyle") and merged the wholly-owned
subsidiary of Hearst with and into Argyle, with Argyle as the surviving
corporation (renamed Hearst-Argyle Television, Inc., "Hearst-Argyle" or the
"Company") (the "Hearst Transaction"). The merger was accounted for as a
purchase of Argyle by Hearst in a reverse acquisition. The presentation of the
historical consolidated financial statements prior to September 1, 1997
reflects the combined financial statements of the Hearst Broadcast Group, the
accounting acquirer. Effective June 1, 1998, the Company exchanged its WDTN and
WNAC/WPRI stations with STC Broadcasting, Inc. and certain related entities
(collectively "STC") for KSBW, the NBC affiliate serving the Monterey--Salinas,
CA, television market, and WPTZ/WNNE, the NBC affiliates serving the
Plattsburgh, NY--Burlington, VT, television market (the "STC Swap") (see Note 3
to the consolidated financial statements). On January 5, 1999 (effective
January 1, 1999 for accounting purposes) the Company acquired, through a merger
transaction, all of the partnership interests in Kelly Broadcasting Co., which
includes KCRA, the Sacramento station, and the related Time Brokerage Agreement
("TBA") for another station, KQCA, (the "Kelly Broadcasting Business"), and
Kelleproductions, Inc. (the "Kelly Transaction") (see Note 3 to the
consolidated financial statements). In connection with the Kelly Transaction,
the Company issued $450 million in senior notes to institutional investors, of
which $340 million was issued in December 1998 and $110 million was issued in
January 1999. See Note 6 to the consolidated financial statements. On March 18,
1999, the Company acquired the nine television and five radio stations
("Pulitzer Broadcasting Business") of Pulitzer Publishing Company ("Pulitzer")
in a merger transaction (the "Pulitzer Merger"). In connection with the
Pulitzer Merger, the Company issued approximately 37.1 million shares of the
Company's Series A Common Stock to the Pulitzer shareholders (the "Pulitzer
Issuance"). See Notes 3 and 10 to the consolidated financial statements.
Additionally, in connection with the Kelly Transaction and the Pulitzer Merger,
the Company drew down $725 million from the Revolving Credit Facility (the
"Financing") (see Note 6 to the consolidated financial statements). On June 30,
1999 the Company issued approximately 3.7 million shares of the Company's
Series A Common Stock to Hearst for $100

                                      24

<PAGE>

million (the "Hearst Issuance") (see Note 10 to the consolidated financial
statements). On January 31, 2000, the Company exercised its fixed-price option
to acquire the outstanding stock of Channel 58, Inc. (the license for KQCA-TV
which the Company previously operated under a TBA as discussed above) (the
"KQCA Acquisition"). On August 1, 2000, Emmis Communications Corp. ("Emmis")
began managing the Company's radio stations in Phoenix, Arizona (KTAR-AM,
KMVP-AM and KKLT-FM) (the "Phoenix Transaction") under a TBA for a period of up
to three years. On August 8, 2000, the Company sold two of its radio stations,
WXII-AM (Greensboro, NC) and WLKY-AM (Louisville, KY), to Truth Broadcasting
Corporation. On March 28, 2001, the Company exchanged its radio stations in
Phoenix, Arizona (KTAR-AM, KMVP-AM and KKLT-FM) (the "Phoenix Stations") for
WMUR-TV, the ABC affiliate serving the Manchester, NH television market, in a
three party swap (the "Phoenix/WMUR Swap"). See Note 3 to the consolidated
financial statements. On April 30, 2001, pursuant to an Asset Purchase
Agreement entered into with WBOY-TV, Inc., the Company acquired WBOY-TV, the
NBC affiliate serving the Clarksburg-Weston, WV television market. On August 7,
2001 (August 1, 2001 for accounting purposes), the Company contributed its
production and distribution unit to NBC/Hearst-Argyle Syndication, LLC in
exchange for a 20% equity interest in this entity. See Note 3 to the
consolidated financial statements. On December 13, 2001, the Company sold
WBOY-TV. See Note 3 to the consolidated financial statements. On December 20,
2001, the Company completed a private placement with institutional investors of
$200 million principal amount of convertible preferred securities (the "7.5%
Preferred Securities") through a subsidiary trust. See Note 9 to the
consolidated financial statements.

                                      25

<PAGE>

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

<TABLE>
<CAPTION>
                                                         Years Ended December 31,
                                       -----------------------------------------------------------
                                        2001(a)     2000(b)      1999(c)     1998(d)     1997(e)
                                       ----------  ----------  -----------  ----------  ----------
<S>                                    <C>         <C>         <C>          <C>         <C>
Statement of income data:
Total revenues........................ $  641,876  $  747,281  $   661,386  $  407,313  $  333,661
Station operating expenses............    323,520     325,736      300,420     173,880     142,096
Amortization of program rights........     57,676      58,460       60,009      42,344      40,129
Depreciation and amortization.........    129,420     125,207      108,039      36,420      22,924
                                       ----------  ----------  -----------  ----------  ----------
Station operating income..............    131,260     237,878      192,918     154,669     128,512
Corporate expenses....................     15,817      17,281       17,034      12,635       9,527
Special charge (f)....................         --      15,362           --          --          --
                                       ----------  ----------  -----------  ----------  ----------
Operating income......................    115,443     205,235      175,884     142,034     118,985
Interest expense, net.................     99,598     116,163      106,892      39,555      32,484
Trust preferred dividends (g).........        500          --           --          --          --
Other (income) expense, net (h).......    (48,778)      3,930           --          --          --
Equity in loss of affiliates (i)......      6,461       6,234          279          --          --
                                       ----------  ----------  -----------  ----------  ----------
Income before income taxes
  and extraordinary item..............     57,662      78,908       68,713     102,479      86,501
Income taxes..........................     27,101      36,438       33,311      42,796      35,363
                                       ----------  ----------  -----------  ----------  ----------
Income before extraordinary item......     30,561      42,470       35,402      59,683      51,138
Extraordinary item (j)................        526       2,455       (3,092)    (10,826)    (16,212)
                                       ----------  ----------  -----------  ----------  ----------
Net income............................     31,087      44,925       32,310      48,857      34,926
Less preferred stock dividends (k)....     (1,422)     (1,422)      (1,422)     (1,422)       (711)
                                       ----------  ----------  -----------  ----------  ----------
Income applicable to common
  stockholders........................ $   29,665  $   43,503  $    30,888  $   47,435  $   34,215
                                       ==========  ==========  ===========  ==========  ==========
Income per common share--basic:
Before extraordinary item............. $     0.32  $     0.44  $      0.41  $     1.09  $     1.13
                                       ==========  ==========  ===========  ==========  ==========
Net income............................ $     0.32  $     0.47  $      0.37  $     0.89  $     0.77
                                       ==========  ==========  ===========  ==========  ==========
Number of shares used in the
  calculation.........................     91,809      92,435       83,189      53,483      44,632
                                       ==========  ==========  ===========  ==========  ==========
Income per common share--diluted:
Before extraordinary item............. $     0.32  $     0.44  $      0.41  $     1.08  $     1.13
                                       ==========  ==========  ===========  ==========  ==========
Net income............................ $     0.32  $     0.47  $      0.37  $     0.88  $     0.77
                                       ==========  ==========  ===========  ==========  ==========
Number of shares used in the
  calculation.........................     92,000      92,457       83,229      53,699      44,674
                                       ==========  ==========  ===========  ==========  ==========
Other data:
Broadcast cash flow (l)............... $  260,971  $  362,748  $   304,564  $  190,486  $  150,972
Broadcast cash flow margin (m)........       40.7%       48.5%        46.0%       46.8%       45.2%
Operating cash flow (l)............... $  245,154  $  345,467  $   287,530  $  177,851  $  141,445
Operating cash flow margin (m)........       38.2%       46.2%        43.5%       43.7%       42.4%
Cash flow provided by operating
  activities.......................... $  165,853  $  189,311  $   138,914  $  133,638  $   67,689
Cash flow used in investing activities $  (73,017) $  (62,184) $(1,317,922) $  (47,531) $ (131,973)
Cash flow (used in) provided by
  financing activities................ $  (95,356) $ (126,979) $   803,660  $  282,114  $   74,161
Capital expenditures.................. $   32,331  $   32,001  $    52,402  $   22,722  $   21,897
Balance sheet data (at year end):
Cash and cash equivalents............. $    3,260  $    5,780  $     5,632  $  380,980  $   12,759
Total assets.......................... $3,779,705  $3,817,989  $ 3,913,227  $1,421,140  $1,044,482
Total debt (including current portion) $1,160,205  $1,448,492  $ 1,563,596  $  842,596  $  490,000
Convertible Preferred Securities...... $  200,000         N/A          N/A         N/A         N/A
Stockholders' equity.................. $1,466,614  $1,444,376  $ 1,416,791  $  324,390  $  326,654
</TABLE>

                       See notes on the following page.

                                      26

<PAGE>

                       Notes to Selected Financial Data

(a) Includes results from: (i) 23 of the Company's television stations which
    were owned for the entire period presented (which excludes WMUR and WBOY)
    and the management fees derived by the Company from WMOR (formerly WWWB),
    WPBF, KCWE and WBAL-AM and WIYY-FM (the "Managed Stations") for the entire
    period presented; (ii) the Time Brokerage Agreement ("TBA") for WMUR from
    January 1 through March 27, 2001 and the results of WMUR, after its
    acquisition by the Company from March 28 through December 31, 2001; (iii)
    the TBA for KTAR-AM, KMVP-AM and KKLT-FM (the "Phoenix Stations") from
    January 1 through March 27, 2001; and (iv) WBOY from May 1 through December
    13, 2001.
(b) Includes results from: (i) WAPT, KITV, KHBS/KHOG, WLWT, KOCO, WCVB, WTAE,
    WBAL, WISN, KMBC, WPTZ/WNNE, KSBW, KCRA, WESH, WYFF, WDSU, WGAL, WXII,
    WLKY, KOAT, KCCI, KETV, and fees derived by the Company from the Managed
    Stations for the entire period presented; (ii) the TBA for KQCA from
    January 1 through January 31, 2000 and the results of KQCA, after its
    acquisition by the Company, from February 1 through December 31, 2000;
    (iii) WLKY-AM and WXII-AM from January 1 through August 8, 2000; and (iv)
    The Phoenix Stations from January 1 through July 31, 2000 and the TBA for
    the Phoenix Stations from August 1 through December 31, 2000.
(c) Includes results from: (i) WAPT, KITV, KHBS/KHOG, WLWT, KOCO, WCVB, WTAE,
    WBAL, WISN, KMBC, KSBW, WPTZ/WNNE, the Kelly Broadcasting Business and fees
    derived by the Company from the Managed Stations for the entire period
    presented; and (ii) the Pulitzer Broadcasting Business from March 19
    through December 31, 1999.
(d) Includes results from: (i) WAPT, KITV, KHBS/KHOG, WLWT, KOCO, WCVB, WTAE,
    WBAL, WISN and KMBC, and fees derived by the Company from the Managed
    Stations for the entire period presented; (ii) WDTN and the Company's share
    of the 1996 Joint Marketing and Programming Agreement relating to the
    television station WNAC/WPRI with the owner of another television station
    in the same market, (the "Clear Channel Venture") from January 1 through
    May 31, 1998; and (iii) KSBW and WPTZ/WNNE from June 1 through December 31,
    1998 (the "STC Swap").
(e) 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 Clear Channel Venture from September 1
    through December 31, 1997; and (iii) management fees derived by the Company
    from the Managed Stations from September 1 through December 31, 1997.
(f) Represents the one-time charge resulting from the cost of the Company's
    early retirement program.
(g) Represents the dividends to be paid for the 7.5% Preferred Securities
    issued by Hearst-Argyle Capital Trust (a wholly-owned subsidiary of the
    Company) on December 20, 2001. See Note 9 to the consolidated financial
    statements.
(h) Includes the $72.6 million gain from the sale of the Phoenix Stations,
    partially offset by a $23.8 million write-down of the carrying value of a
    portion of the Company's investments for the year ended December 31, 2001.
    Includes the $5 million write-down of the carrying value of a portion of
    the Company's investments, partially offset by the $1.1 million gain from
    the sale of WXII-AM and WLKY-AM for the year ended December 31, 2000.
(i) Represents the Company's equity interest in the operating results of: (i)
    Internet Broadcasting Systems, Inc. from December 2, 1999 through December
    31, 2001; and (ii) NBC/Hearst-Argyle Syndication, LLC from August 1 through
    December 31, 2001. See Note 3 to the consolidated financial statements.
(j) Represents the discounts/premiums received/paid upon early extinguishment
    of the Company's debt and the related write-off of unamortized deferred
    financing costs.
(k) Represents dividends on the preferred stock issued in connection with the
    acquisition of KHBS/KHOG.
(l) 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. Operating cash
    flow, also known as EBITDA, is defined as broadcast cash flow less
    corporate general and administrative expenses. The Company has included
    these measures because management believes that such data are commonly used
    as a measure of performance among companies in the broadcast industry.
    These measures are also frequently used by investors, analysts, valuation
    firms and lenders. Broadcast cash flow and operating cash flow should not
    be considered in isolation or as an alternative to operating income (as
    determined in accordance with generally accepted accounting principles) as
    an indicator of the entity's operating performance, or to cash flow from
    operating activities (as determined in accordance with generally accepted
    accounting principles) as a measure of liquidity. These measures are
    believed to be, but may not be, comparable to similarly titled measures
    used by other companies.
(m) Broadcast cash flow margin and operating cash flow margin are broadcast
    cash flow and operating cash flow, respectively, divided by total revenues,
    expressed as a percentage. These measures may not be comparable to
    similarly titled measures used by other companies.

                                      27

<PAGE>

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

Introduction

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

Critical Accounting Policies and Estimates

   Our management's discussion and analysis of financial condition and results
of operations is based on our consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in
the United States of America. The preparation of our financial statements
requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues, and expenses, and related disclosure of
contingent assets and liabilities. On an ongoing basis, we evaluate our
estimates, including those related to allowances for doubtful accounts, program
rights, barter and trade transactions, useful lives of property, plant and
equipment, intangible assets, carrying value of investments, accrued
liabilities, contingent liabilities, income taxes, pension benefits and fair
value of financial instruments. We base our estimates on historical experience
and on various other assumptions, which we believe to be reasonable under the
circumstances. Had we used different assumptions in making our estimates, our
results may have varied.

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

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

   Accounts Receivable--The Company monitors advertisers' credit worthiness and
adjusts credit limits as deemed appropriate. The Company monitors collections
and maintains an allowance for estimated losses based upon the aging of such
receivables and specific collection issues that may be identified.
Concentration of credit risk with respect to accounts receivable is generally
limited due to the large number of geographically diverse customers,
individually small balances, and short payment terms.

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

   Barter and Trade Transactions--Barter transactions represent the exchange of
commercial airtime for programming. Trade transactions represent the exchange
of commercial airtime for merchandise or services. Barter transactions are
generally recorded at the fair market value of the commercial airtime
relinquished. Trade transactions are generally recorded at the fair market
value of the merchandise or services received. Revenue is recognized on barter
and trade transactions when the commercials are broadcast; expenses are
recorded when the merchandise or service is utilized.

                                      28

<PAGE>

   Intangible Assets--Intangible assets are recorded at cost and include FCC
licenses, network affiliation agreements, goodwill, and other intangible
assets, which are amortized over periods from 3 to 40 years. The carrying
values of intangible assets are evaluated quarterly for impairment. During the
three-year period ended December 31, 2001, there were no impairments of
intangible assets. See Note 2 to the consolidated financial statements for new
accounting pronouncements.

   Related Party Transactions--The Company has Management and Services
Agreements as well as a series of other related agreements with The Hearst
Corporation. Revenues and expenses recorded by the Company in connection with
such agreements amounted to less than 1% and 11/2% of the Company's total
revenues, and combined station operating and corporate expenses, respectively.
See Note 14 to the consolidated financial statements for more information on
this and other related party transactions.

   Off-Balance Sheet Financings and Liabilities--Other than lease commitments
and legal contingencies incurred in the normal course of business, agreements
for future barter and program rights not yet available for broadcast at
December 31, 2001, and employment contracts for key employees, all of which are
disclosed in Note 15 to the consolidated financial statements, the Company does
not have any off-balance sheet financings or liabilities. The Company does not
have any majority-owned subsidiaries that are not included in the consolidated
financial statements, nor does the Company have any interests in or
relationships with any "special-purpose entities" that are not reflected in the
consolidated financial statements.

Significant Business Transactions

   During the three-year period ended December 31, 2001, the Company was
involved in the following significant transactions:

  .   On January 5, 1999, effective January 1, 1999 for accounting purposes,
      the Company acquired, through a merger transaction, all of the
      partnership interests in Kelly Broadcasting Co., which includes KCRA,
      serving the Sacramento, California area, and the related Time Brokerage
      Agreement ("TBA") for another station, KQCA, (the "Kelly Broadcasting
      Business"), and Kelleproductions, Inc. (the "Kelly Transaction"). In
      connection with the Kelly Transaction, the Company issued $450 million in
      senior notes to institutional investors, of which $340 million was issued
      in December 1998 and $110 million was issued in January 1999. See Notes 3
      and 6 to the consolidated financial statements.

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

  .   On June 30, 1999, the Company issued approximately 3.7 million shares of
      the Company's Series A Common Stock to Hearst for $100 million (the
      "Hearst Issuance"). See Note 10 to the consolidated financial statements.

  .   On January 31, 2000, the Company exercised its fixed-price option to
      acquire the outstanding stock of Channel 58, Inc. (the license for
      KQCA-TV in Sacramento, California) (the "KQCA Acquisition"). The Company
      was previously programming and selling airtime of KQCA-TV under the TBA
      discussed above.

  .   On August 8, 2000, the Company sold two of its radio stations, WXII-AM
      (Greensboro, NC) and WLKY-AM (Louisville, KY), to Truth Broadcasting
      Corporation for $3.5 million. See Note 3 to the consolidated financial
      statements.


                                      29

<PAGE>

  .   On March 28, 2001, the Company exchanged its radio stations in Phoenix,
      Arizona (KTAR-AM, KMVP-AM, and KKLT-FM) (the "Phoenix Stations") for
      WMUR-TV, the ABC affiliate serving the Manchester, NH television market,
      in a three-party swap (the "Phoenix Transaction"). The Company sold the
      Phoenix Stations to Emmis Communications Corporation ("Emmis") and
      purchased WMUR-TV from WMUR-TV, Inc. Prior to the swap, Emmis had been
      managing the Phoenix Stations pursuant to a TBA since August 1, 2000 and
      the Company had been managing WMUR-TV pursuant to a TBA since January 8,
      2001 (effective January 1, 2001 for accounting purposes). See Note 3 to
      the consolidated financial statements.

  .   In May 2001, the Company invested an additional $6 million in Internet
      Broadcasting Systems ("IBS"), thereby increasing the Company's original
      $20 million investment in IBS made in December 1999 and bringing the
      Company's total investment in IBS to $26 million. With IBS, the Company
      and other broadcasters have invested in the development and management of
      local news/information/entertainment websites. As of December 31, 2001
      the Company had an approximate 24% equity interest in IBS.

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

  .   On December 13, 2001, the Company sold WBOY-TV, an NBC affiliate serving
      the Clarksburg-Weston, West Virginia television market for $20 million.
      This station was previously acquired on April 20, 2001 from WBOY-TV, Inc.
      for $20 million. See Note 3 to the consolidated financial statements.

  .   On December 20, 2001, a consolidated subsidiary trust of the Company
      completed a private placement of convertible trust preferred securities
      ("7.5% Preferred Securities") in the amount of $200 million (the "Trust
      Preferred Transaction"). Such proceeds were utilized by the Company to
      reduce outstanding debt. See Note 9 to the consolidated financial
      statements.

  .   During the years 2000 and 2001, the Company directly or indirectly
      entered into several strategic agreements with NBC, including:

      (i) On July 20, 2000, the NBC Television Network and the Company renewed
          for an additional ten years an affiliation agreement covering all ten
          of the NBC-affiliated stations owned by the Company. The agreement
          provides the affiliate stations with the right to rebroadcast
          programs transmitted by NBC.

     (ii) On December 6, 2000, the Company entered into a program development
          and distribution arrangement with the NBC Owned and Operated Stations
          and Gannett Broadcasting.

    (iii) On October 25, 2001, Internet Broadcasting Systems (IBS), in which
          the Company holds an equity interest of approximately 24%, and the
          NBC Television Stations Division (NBC TVSD) reached an agreement
          wherein IBS would provide Web site development and operating services
          to the NBC TVSD.

Results of Operations

   Results of operations for the year ended December 31, 2001 include: (i) the
results of 23 of the Company's television stations which were owned for the
entire period presented (which excludes WMUR and WBOY) and the management fees
derived by the Company from the Managed Stations for the entire period
presented; (ii) the TBA for WMUR from January 1 through March 27, 2001, and the
results of WMUR, after its acquisition by the Company, from March 28 through
December 31, 2001; (iii) the TBA for the Phoenix Stations from January 1
through March 27, 2001; and (iv) the results of WBOY after its acquisition by
the Company, from May 1 through December 13, 2001.

                                      30

<PAGE>

   Results of operations for the year ended December 31, 2000 include: (i) the
results of 22 of the Company's television stations which were owned for the
entire period presented (which excludes KQCA) and the management fees derived
by the Company from the Managed Stations for the entire period presented; (ii)
the TBA for KQCA from January 1 through January 31, 2000, and the results of
KQCA, after its acquisition by the Company, from February 1 through December
31, 2000; (iii) the results of the Phoenix Stations from January 1 through July
31, 2000, and the TBA for these stations from August 1 through December 31,
2000; and (iv) the results of WXII-AM and WLKY-AM from January 1 through August
8, 2000.

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

  Year Ended December 31, 2001
  Compared to Year Ended December 31, 2000

   Total revenues.  Total revenues includes (i) cash and barter advertising
revenues, net of agency and national representatives' commissions, (ii) network
compensation and (iii) other revenues, which represent less than 4% of total
revenues. Total revenues in the year ended December 31, 2001 were $641.9
million, as compared to $747.3 million in the year ended December 31, 2000, a
decrease of $105.4 million or 14.1%. This decrease was primarily attributable
to (i) the negative effects of the economic recession in the United States
during the year 2001 on total advertising expenditures, particularly impacting
categories such as automotive, Internet, telecommunications, consumer products,
financial institutions and fast foods during the year 2001; (ii) a decrease in
net political advertising revenues of approximately $44.5 million during the
year 2001; (iii) the absence during the year 2001 of incremental advertising
revenues resulting from the carriage of the Summer Olympics in Sydney,
Australia on the Company's ten owned NBC affiliates during the year 2000; (iv)
the absence during the year 2001 of incremental advertising revenues resulting
from the carriage of the Super Bowl on the Company's ten owned ABC affiliates
during the year 2000; and (v) the loss of advertising revenues during the week
of September 11, 2001 due to the suspension of advertising-supported commercial
programming in favor of around-the-clock news coverage of the events in New
York, Washington, D.C. and Pennsylvania.

   Station operating expenses.  Station operating expenses in the year ended
December 31, 2001 were $323.5 million, as compared to $325.7 million in the
year ended December 31, 2000, a decrease of $2.2 million or 0.7%. This decrease
was primarily attributable to cost savings initiatives implemented in 2001, and
it was partially offset by a net increase of approximately $3.5 million in the
allowance for doubtful accounts and by approximately $0.5 million of
incremental costs associated with the coverage of the events in New York,
Washington, D.C. and Pennsylvania during the week of September 11, 2001.

   Amortization of program rights.  Amortization of program rights in the year
ended December 31, 2001 was $57.7 million, as compared to $58.5 million in the
year ended December 31, 2000, a decrease of $0.8 million or 1.4%.

   Depreciation and amortization.  Depreciation and amortization of intangible
assets was $129.4 million in the year ended December 31, 2001, as compared to
$125.2 million in the year ended December 31, 2000, an increase of $4.2 million
or 3.4%. This increase was primarily attributable to (i) increased capital
expenditures in 2001 and 2000 related to digital conversions and (ii) increased
amortization expense from the exchange of the Phoenix Stations for WMUR and the
acquisition of WBOY.

   Station operating income.  Station operating income in the year ended
December 31, 2001 was $131.3 million, as compared to $237.9 million in the year
ended December 31, 2000, a decrease of $106.6 million or 44.8%. The decrease in
station operating income was attributable to the items discussed above.

                                      31

<PAGE>

   Corporate general and administrative expenses.  Corporate general and
administrative expenses were $15.8 million in the year ended December 31, 2001,
as compared to $17.3 million in the year ended December 31, 2000, a decrease of
$1.5 million or 8.7%. This decrease was primarily attributable to cost savings
initiatives implemented in 2001 and a decrease in incentive compensation
expense due to the Company's lower operating results in 2001 as compared to
2000.

   Special charge.  The Company recorded a special charge of $15.4 million in
the year ended December 31, 2000. This special charge represented a one-time
charge resulting from the cost of the Company's Incentive Retirement Program
(IRP). See Note 16 to the consolidated financial statements.

   Interest expense, net.  Interest expense, net, was $99.6 million in the year
ended December 31, 2001, as compared to $116.2 million in the year ended
December 31, 2000, a decrease of $16.6 million or 14.3%. This decrease in
interest expense, net, was primarily attributable to (i) a decrease in interest
rates, which impacted the variable rate portion of the Company's debt; (ii) a
lower average outstanding debt balance in the year 2001 than in the year 2000;
and (iii) the write-off of approximately $1.3 million of unamortized deferred
financing costs associated with management's election not to renew the $250
Million Facility on April 10, 2000. See Note 6 to the consolidated financial
statements.

   Other (income) expense, net.  In the year ended December 31, 2001, the
Company recorded a $72.6 million gain from the sale of the Phoenix Stations,
which was partially offset by a $5.1 million and $18.8 million write-down of
the carrying value of the Company's investments in Geocast Network Systems,
Inc. ("Geocast") and ProAct Technologies Corporation ("ProAct"), respectively.
In the year ended December 31, 2000, the Company recorded a $5 million
write-down of the carrying value of the Company's investment in Geocast, which
was partially offset by a $1.1 million gain from the sale of WXII-AM and
WLKY-AM.

   Equity in loss of affiliates.  The Company recorded equity losses of
affiliates of $6.5 million in the year ended December 31, 2001, as compared to
$6.2 million in the year ended December 31, 2000, an increase of $0.3 million
or 4.8%. This loss represents the Company's equity interests in the operating
results of (i) Internet Broadcasting Systems, Inc. ("IBS") and (ii)
NBC/Hearst-Argyle Syndication, LLC.

   Income taxes.  Income tax expense was $27.1 million in the year ended
December 31, 2001, as compared to $36.4 million in the year ended December 31,
2000, a decrease of $9.3 million or 25.5%. The effective tax rate was 47% for
the year ended December 31, 2001, as compared to 46.2% for the year ended
December 31, 2000. This represents federal and state income taxes as calculated
on the Company's net income before income taxes and extraordinary item.

   Extraordinary item.  The Company recorded an extraordinary item of $0.5
million, net of the related income tax expense, in 2001. The Company recorded
an extraordinary item of $2.5 million, net of the related income tax expense,
in 2000. Both the 2001 and 2000 extraordinary items represent the gains which
resulted from the repurchase of the Company's Senior Notes, partially offset by
the write-off of the unamortized deferred financing costs associated with these
Senior Notes. See Note 6 to the consolidated financial statements.

   Net income.  Net income was $31.1 million in the year ended December 31,
2001, as compared to net income of $44.9 million in the year ended December 31,
2000, a decrease of $13.8 million or 30.7%. This decrease in net income was
attributable to the items discussed above.

   Broadcast Cash Flow.  Broadcast cash flow totaled $261 million in the year
ended December 31, 2001, as compared to $362.7 million in the year ended
December 31, 2000, a decrease of $101.7 million or 28%. This decrease was
primarily attributable to (i) the negative effects of the economic recession in
the United States during the year 2001 on total advertising expenditures,
particularly impacting categories such as automotive, Internet,
telecommunications, consumer products, financial institutions and fast foods;
(ii) a decrease in net political advertising revenues of approximately $44.5
million during the year 2001; (iii) the absence in the year 2001 of incremental
advertising revenues resulting from the carriage of the Summer Olympics in
Sydney,

                                      32

<PAGE>

Australia on the Company's ten owned NBC affiliates during the year 2000; (iv)
the absence during the year 2001 of incremental advertising revenues resulting
from the carriage of the Super Bowl on the Company's ten owned ABC affiliates
during the year 2000; and (v) the loss of advertising revenues during the week
of September 11, 2001 due to the suspension of advertising-supported commercial
programming in favor of around-the-clock news coverage of the events in New
York, Washington, D.C. and Pennsylvania. Broadcast cash flow margin decreased
to 40.7% in the year ended December 31, 2001, from 48.5% in the year ended
December 31, 2000.

   Broadcast cash flow is defined as station operating income, plus
depreciation and amortization, plus amortization of program rights, minus
program payments. The Company has included broadcast cash flow data because
management believes that such data are commonly used as a measure of
performance among companies in the broadcast industry. Broadcast cash flow is
also frequently used by investors, analysts, valuation firms and lenders as one
of the important determinants of underlying asset value. Broadcast cash flow
should not be considered in isolation or as an alternative to operating income
(as determined in accordance with generally accepted accounting principles) as
an indicator of the entity's operating performance, or to cash flow from
operating activities (as determined in accordance with generally accepted
accounting principles) as a measure of liquidity. This measure is believed to
be, but may not be, comparable to similarly titled measures used by other
companies.

  Year Ended December 31, 2000
  Compared to Year Ended December 31, 1999

   Total revenues.  Total revenues includes (i) cash and barter advertising
revenues, net of agency and national representatives' commissions, (ii) network
compensation and (iii) other revenues. Total revenues in the year ended
December 31, 2000 were $747.3 million, as compared to $661.4 million in the
year ended December 31, 1999, an increase of $85.9 million or 13%. The increase
was primarily attributable to (i) the Pulitzer Merger which added $46 million
to 2000 total revenues; (ii) an increase in gross political advertising
revenues during the year 2000; (iii) an increase in advertising revenues
resulting from the carriage of the Super Bowl on the Company's ten owned ABC
affiliates; and (iv) an increase in advertising revenues resulting from the
carriage of the Olympics on the Company's ten owned NBC affiliates. This
increase was partially offset by the Phoenix Transaction, which reduced total
revenues by $5 million in the year 2000; however, this had no effect on
Broadcast Cash Flow.

   Station operating expenses.  Station operating expenses in the year ended
December 31, 2000 were $325.7 million, as compared to $300.4 million in the
year ended December 31, 1999, an increase of $25.3 million or 8.4%. The
increase was primarily attributable to the Pulitzer Merger which added $24.9
million to station operating expenses during 2000.

   Amortization of program rights.  Amortization of program rights in the year
ended December 31, 2000 was $58.5 million, as compared to $60 million in the
year ended December 31, 1999, a decrease of $1.5 million or 2.5%.

   Depreciation and amortization.  Depreciation and amortization of intangible
assets was $125.2 million in the year ended December 31, 2000, as compared to
$108 million in the year ended December 31, 1999, an increase of approximately
$17.2 million or 15.9%. This increase was primarily attributable to (i) the
Pulitzer Merger which added $14.7 million to depreciation and amortization of
intangible assets in the year ended December 31, 2000, and (ii) an increase in
capital expenditures in 2000 and 1999 related to digital conversions and
special projects.

   Station operating income.  Station operating income in the year ended
December 31, 2000 was $237.9 million, as compared to $192.9 million in the year
ended December 31, 1999, an increase of $45 million or 23.3%, due to the items
discussed above.

                                      33

<PAGE>

   Corporate general and administrative expenses.  Corporate general and
administrative expenses were $17.3 million in the year ended December 31, 2000,
as compared to $17 million in the year ended December 31, 1999, an increase of
$0.3 million or 1.8%.

   Special charge.  The Company recorded a special charge of $15.4 million in
the year ended December 31, 2000. This special charge represented a one-time
charge resulting from the cost of the Company's Incentive Retirement Program
(IRP). See Note 16 to the consolidated financial statements.

   Interest expense, net.  Interest expense, net, was $116.2 million in the
year ended December 31, 2000, as compared to $106.9 million in the year ended
December 31, 1999, an increase of $9.3 million or 8.7%. This increase was
primarily attributable to (i) a larger outstanding debt balance during the
first quarter of 2000 than in the first quarter of 1999, which was the result
of the Financing in connection with the Pulitzer Merger; (ii) an increase in
interest rates, which impacted the variable rate portion of the Company's debt;
and (iii) the write-off of approximately $1.3 million of unamortized deferred
financing costs associated with management's election not to renew the $250
Million Facility on April 10, 2000 (see Note 6 to the consolidated financial
statements). These increases were partially offset by a lower outstanding debt
balance in the third and fourth quarters of 2000 as compared to 1999.

   Other (income) expense, net.  The Company recorded a $5 million write-down
of the carrying value of Geocast included on the Company's balance sheet, which
was partially offset by a $1.1 million gain from the sale of WXII-AM and
WLKY-AM.

   Equity in loss of affiliates.  The Company recorded an equity loss of
affiliate of $6.2 million in the year ended December 31, 2000, as compared to
$0.3 million in the year ended December 31, 1999. This loss represents the
Company's equity interest in the operating results of IBS.

   Income taxes.  Income tax expense was $36.4 million for the year ended
December 31, 2000, as compared to $33.3 million for the year ended December 31,
1999, an increase of $3.1 million or 9.3%. The effective tax rate was 46.2% for
the year ended December 31, 2000, as compared to 48.5% for the year ended
December 31, 1999. This represents federal and state income taxes as calculated
on the Company's net income before taxes and extraordinary item. The decrease
in the effective rate relates primarily to the impact of the non-tax deductible
goodwill amortization related to the Pulitzer Merger. The effect of the non-tax
deductible goodwill amortization decreased as the pre-tax income increased in
2000 as compared to 1999.

   Extraordinary item.  The Company recorded an extraordinary item of $2.5
million, net of the related income tax expense, in the year ended December 31,
2000. This extraordinary item represents the gain which resulted from the
repurchase of the Company's Senior Notes, partially offset by the write-off of
the unamortized deferred financing costs associated with these Senior Notes.
The Company recorded an extraordinary item loss of $3.1 million, net of the
related income tax benefit, in the year ended December 31, 1999. This
extraordinary item represents the loss which resulted from the early retirement
of the Company's Revolving Credit Facility, including the write-off of the
unamortized deferred financing costs associated with the Revolving Credit
Facility. See Note 6 to the consolidated financial statements.

   Net income.  Net income totaled $44.9 million in the year ended December 31,
2000, as compared to $32.3 million in the year ended December 31, 1999, an
increase of $12.6 million or 39%, due to the items discussed above.

   Broadcast Cash Flow.  Broadcast cash flow totaled $362.7 million in the year
ended December 31, 2000, as compared to $304.6 million in the year ended
December 31, 1999, an increase of $58.1 million or 19.1%. This increase was
primarily attributable to (i) the Pulitzer Merger, which added $18.6 million to
broadcast cash flow during the year 2000; (ii) an increase in gross political
advertising revenues during the year 2000; (iii) an increase in advertising
revenues resulting from the carriage of the Super Bowl on the Company's ten
owned ABC affiliates; and (iv) an increase in advertising revenues resulting
from the carriage of the Olympics on the

                                      34

<PAGE>

Company's ten owned NBC affiliates. Broadcast cash flow margin increased to
48.5% in the year ended December 31, 2000, as compared to 46.0% in the year
ended December 31, 1999.

   Broadcast cash flow is defined as station operating income, plus
depreciation and amortization, plus amortization of program rights, minus
program payments. The Company has included broadcast cash flow data because
management believes that such data are commonly used as a measure of
performance among companies in the broadcast industry. Broadcast cash flow is
also frequently used by investors, analysts, valuation firms and lenders as one
of the important determinants of underlying asset value. Broadcast cash flow
should not be considered in isolation or as an alternative to operating income
(as determined in accordance with generally accepted accounting principles) as
an indicator of the entity's operating performance, or to cash flow from
operating activities (as determined in accordance with generally accepted
accounting principles) as a measure of liquidity. This measure is believed to
be, but may not be, comparable to similarly titled measures used by other
companies in the broadcast industry.

Liquidity and Capital Resources

   The Company's sources of liquidity are cash flows from operations, long-term
debt borrowings under bank credit facilities, private placement debt, the
issuance of notes, and the raising of additional equity.

   On December 20, 2001, a consolidated subsidiary trust of the Company
completed a private placement of convertible trust preferred securities ("7.5%
Preferred Securities") in the amount of $200 million (the "Trust Preferred
Transaction"). The net proceeds from the private placement were $195 million,
net of $5 million of issuance costs. The net proceeds were utilized by the
Company to reduce outstanding borrowings under the Credit Facility. See Note 9
to the consolidated financial statements.

   Cash flows provided from operations were $165.9 million, $189.3 million, and
$138.9 million for the years ended December 31, 2001, 2000, and 1999,
respectively.

   Long-term debt outstanding at December 31, 2001 and 2000 and their increases
(decreases) during the year ended December 31, 2001 were as follows (in
thousands):

<TABLE>
<CAPTION>
                                                             Private      Senior
                             Credit          Senior         Placement  Subordinated    Other
                            Facility         Notes            Debt        Notes        Debt        Total
                           ----------      ----------       ---------- ------------  ----------  ----------
<S>                        <C>             <C>              <C>        <C>           <C>         <C>
Balance 12/31/00.......... $  546,000      $  449,305       $  450,000  $    2,596   $      591  $1,448,492
Increases:
   IBS....................      6,028              --               --          --           --       6,028
   WMUR...................     34,019              --               --          --           --      34,019
   WBOY...................     20,774              --               --          --           --      20,774
   Repayment of Senior
     Notes................     15,432/(1)/         --               --          --           --      15,432
   PP & E.................     32,331              --               --          --           --      32,331
Decreases:
   Pay-down with net
     proceeds from 7.5%
     Preferred Securities.   (195,000)             --               --          --           --    (195,000)
   Pay-down with funds
     from operations......   (184,584)             --               --          --           --    (184,584)
   Repayments.............         --         (17,195)/(1)/         --          --          (92)    (17,287)
                           ----------      ----------       ----------  ----------   ----------  ----------
Balance 12/31/01.......... $  275,000      $  432,110       $  450,000  $    2,596   $      499  $1,160,205
                           ==========      ==========       ==========  ==========   ==========  ==========
</TABLE>
--------

(1) Difference between these two amounts represent discounts on early
    retirement of Senior Notes. See Note 6 to the consolidated financial
    statements.

                                      35

<PAGE>

   The Credit Facility, which replaced a previous Revolving Credit Facility,
was originally structured as a $1 billion revolver (the "$1 Billion Facility")
and a $250 million revolver/term loan (the "$250 Million Facility"). The
Company elected not to renew the $250 Million Facility on April 10, 2000. On
August 15, 2001, the Company amended the Credit Facility to (i) reduce the
lender commitments from $1 billion to $750 million and (ii) extend the
applicable dates for the leverage ratio and the interest coverage ratio by
eighteen months. On December 20, 2001, the Company used the net proceeds of the
7.5% Preferred Securities ($195 million) to reduce the outstanding borrowings
under the Credit Facility. There was $275 million outstanding under the Credit
Facility as of December 31, 2001. See Note 6 to the consolidated financial
statements.

   In connection with the Kelly Transaction, the Company issued $450 million in
senior notes to institutional investors, of which $340 million was issued in
December 1998 and $110 million was issued in January 1999. The remainder of the
Kelly Transaction purchase price was funded using a combination of borrowings
under the Credit Facility and available cash. See Notes 3 and 6 to the
consolidated financial statements.

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

   On June 30, 1999, the Company issued to The Hearst Corporation 3.7 million
shares of the Company's Series A Common Stock for $100 million (the "Hearst
Issuance"). The Company used the net proceeds of this $100 million equity
issuance to repay a portion of the outstanding balance under its Credit
Facility, thereby reducing the Company's overall debt leverage ratio and future
interest expense. See Note 10 to the consolidated financial statements.

   In December 1999, the Company invested $20 million in Internet Broadcasting
Systems, Inc. ("IBS") for an equity interest. In May 2001, the Company invested
an additional $6 million for a total investment of $26 million in IBS. In
September 1999 and February 2000, the Company invested $2 million and $8
million, respectively, in Geocast Network Systems, Inc. ("Geocast") for an
equity interest in Geocast. In March 2000, the Company invested $25 million in
ProAct Technologies Corporation ("ProAct") (formerly Consumer Financial
Network, Inc.) for an equity interest. These equity investments were primarily
funded by available cash and through draw-downs from the Credit Facility. See
Note 3 to the consolidated financial statements for subsequent adjustments to
the carrying value of these investments.

   On March 28, 2001, the Company exchanged its radio stations in Phoenix,
Arizona (KTAR-AM, KMVP-AM, and KKLT-FM) (the "Phoenix Stations") for WMUR-TV,
the ABC affiliate serving the Manchester, NH television market, in a
three-party swap (the "Phoenix/WMUR Swap"). The Company sold The Phoenix
Stations to Emmis Communications Corporation ("Emmis") for $160 million, less
transaction expenses, and purchased WMUR-TV from WMUR-TV, Inc. for $185
million, plus a working capital adjustment of $3.5 million and transaction
expenses. The purchase price of WMUR-TV was funded through an intermediary by
approximately (i) $160 million from Emmis and (ii) $28.5 million plus the cost
of the transaction expenses from the Company's Credit Facility.

   On April 30, 2001, pursuant to an Asset Purchase Agreement entered into with
WBOY-TV, Inc. the Company acquired WBOY-TV, the NBC affiliate serving the
Clarksburg-Weston, WV television market for $20 million (the "WBOY
Acquisition"), plus a working capital adjustment of $0.7 million and
transaction expenses. On December 13, 2001, the Company subsequently sold
WBOY-TV for approximately $20 million. The original purchase price and the
eventual sales proceeds were funded and repaid using the Company's Credit
Facility.

                                      36

<PAGE>

   On December 20, 2001, the Company completed a private placement of $200
million principal amount of convertible trust preferred securities ("7.5%
Preferred Securities") through Hearst-Argyle Capital Trust, a subsidiary trust
(the "Capital Trust"). The Company used the net proceeds of the 7.5% Preferred
Securities to repay a portion of the outstanding balance under its Credit
Facility, thereby reducing the Company's overall debt leverage ratio and future
interest expense.

   The following table summarizes the Company's future cash obligations at
December 31, 2001 under existing debt repayment schedules, non-cancelable
leases, future payments for program rights, employment and talent contracts and
7.5% Preferred Securities.

<TABLE>
<CAPTION>
                            2002    2003     2004    2005    2006   Thereafter   Total
                          -------- ------- -------- ------- ------- ---------- ----------
                                                  (in thousands)
<S>                       <C>      <C>     <C>      <C>     <C>     <C>        <C>
Long-term debt........... $     -- $    -- $275,000 $ 2,596 $90,000 $  792,110 $1,159,706
Net non-cancelable
  operating lease
  obligations............    5,904   5,690    4,674   3,963   3,629      9,467     33,327
Program rights...........   58,748  50,876   31,926  10,467   2,865      4,841    159,723
Employee talent contracts   52,680  31,143   11,558   3,790   1,599        284    101,054
7.5% Preferred Securities       --      --       --      --      --    200,000    200,000
                          -------- ------- -------- ------- ------- ---------- ----------
                          $117,332 $87,709 $323,158 $20,816 $98,093 $1,006,702 $1,653,810
                          ======== ======= ======== ======= ======= ========== ==========
</TABLE>

   The above information does not include any dividend obligation for the
Company's Series A and Series B preferred stock. See Note 11 to the
consolidated financial statements.

   Capital expenditures were $32.3 million and $32.0 million in 2001 and 2000,
respectively. The Company invested approximately (i) $9.9 million in
maintenance projects, (ii) $18.6 million in digital conversion projects at
various stations, and (iii) $3.8 million in special projects during 2001. The
Company expects to spend approximately $30.9 million for the year ending
December 31, 2002, including approximately (i) $20.2 million in digital
projects, (ii) $4.7 million in maintenance projects, and (iii) $6.0 million in
special projects.

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

   The Company's debt obligations contain certain financial and other covenants
and restrictions on the Company. Such covenants and restrictions do not include
any triggers of default related to the Company's overall credit rating or stock
prices. At December 31, 2001, the Company is in compliance with all such
covenants and restrictions.

Impact of Inflation

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

Forward-Looking Statements

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

                                      37

<PAGE>

New Accounting Pronouncements

   Effective January 1, 2001, the Company adopted SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities ("SFAS 133"). SFAS 133 and
related amendments (SFAS No. 137 and SFAS No. 138) established accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and hedging activities. The adoption of
SFAS 133 did not impact the Company's consolidated financial statements since
the Company is not currently involved in any derivative financial instruments.
However, the Company may consider certain interest rate risk strategies in the
future.

   In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 141, Business Combinations ("SFAS 141"). SFAS 141 requires the purchase
method of accounting for business combinations initiated after June 30, 2001
and eliminates the pooling-of-interests method. The Company does not believe
that the adoption of this statement will have a material effect on the
Company's consolidated financial statements.

   In July 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets ("SFAS 142"), which is effective January 1, 2002. SFAS 142 requires,
among other things, that goodwill and other intangible assets with indefinite
useful lives no longer be amortized, but instead be tested for impairment at
least annually. While the Company has not completed a full assessment, the
Company estimates that the adoption of SFAS 142 will decrease the Company's
amortization expense related to goodwill and indefinite-lived intangibles by
approximately $88 million annually.

   In August 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations ("SFAS 143"), which is effective January 1, 2003. SFAS
143 requires the recording of the fair value of a liability for an asset
retirement obligation in the period in which it is incurred. The Company does
not believe that the adoption of this statement will have a material effect on
the Company's consolidated financial statements.

   In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets ("SFAS 144"), which is effective January 1,
2002. SFAS 144 supersedes existing accounting literature dealing with
impairment and disposal of long-lived assets, including discontinued
operations. The Company does not believe that the adoption of this statement
will have a material effect on the Company's consolidated financial statements.
However, if in the future, the Company were to sell or otherwise dispose any of
its broadcast operating units, under SFAS 144, such disposal may be required to
be reported as a discontinued operation.


                                      38

<PAGE>

Item 7a:  Quantitative and Qualitative Disclosures about Market Risk

   The Company has long-term debt obligations at December 31, 2001 that are
sensitive to changes in interest rates. See Notes 2 and 6 to the consolidated
financial statements.

   For long-term debt obligations, the following table presents the fair value
at December 31, 2001 and 2000 and the future cash flows by expected maturity
dates based on debt balances at December 31, 2001. See Note 17 to the
consolidated financial statements.

<TABLE>
<CAPTION>
                                                          December 31, 2001                              December 31, 2000
                                    --------------------------------------------------------------       -----------------
                                                      Expected Maturity
                                    -----------------------------------------------------
                                                                                                 Fair    Carrying  Fair
                                    2002-2003   2004       2005      2006   Thereafter  Total    Value    Value    Value
                                    --------- --------    ------    ------- ---------- -------- -------- -------- --------
                                                       (In thousands)
<S>                                 <C>       <C>         <C>       <C>     <C>        <C>      <C>      <C>      <C>
Long-term debt:
  Variable rate
   Credit Facility.................    --     $275,000        --         --        --  $275,000 $274,343 $546,000 $546,474
  Fixed rate
   Senior Notes....................    --           --        --         --  $432,110  $432,110 $397,206 $449,305 $442,535
   Senior Subordinated Notes.......    --           --    $2,596         --        --  $  2,596 $  2,718 $  2,956 $  2,710
   Private Placement Debt..........    --           --        --    $90,000  $360,000  $450,000 $453,613 $450,000 $435,429
Convertible Preferred Securities(1)    --           --        --         --  $200,000  $200,000 $200,000       --       --
</TABLE>
--------
(1) The convertible preferred securities have an underlying 7.5% fixed rate
    dividend requirement. See Note 9 to  the consolidated financial statements.

   The Company's annualized weighted average interest rate for variable rate
long-term debt for the years ended December 31, 2001 and 2000 is 5.3% and 7.5%,
respectively. The annualized weighted average interest rate for fixed rate
long-term debt is 7.2% for the years ended December 31, 2001 and 2000.

   The Company's debt obligations contain certain financial and other covenants
and restrictions on the Company. Such covenants and restrictions do not include
any triggers of default related to the Company's overall credit rating or stock
prices. At December 31, 2001, the Company is in compliance with all such
covenants and restrictions.

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

   The Company's Credit Facility is sensitive to interest rates. As of December
31, 2001, the Company is not involved in any derivative financial instruments.
However, the Company may consider certain interest rate risk strategies in the
future.

                                      39

<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....................................  41
    Consolidated Balance Sheets as of December 31, 2001 and 2000.......  42
    Consolidated Statements of Income for the Years Ended
      December 31, 2001, 2000 and 1999.................................  43
    Consolidated Statements of Stockholders' Equity for the Years Ended
      December 31, 2001, 2000 and 1999.................................  44
    Consolidated Statements of Cash Flows for the Years Ended
      December 31, 2001, 2000 and 1999.................................  45
    Notes to Consolidated Financial Statements.........................  47
</TABLE>


                                      40

<PAGE>

INDEPENDENT AUDITORS' REPORT

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

   We have audited the accompanying consolidated balance sheets of
Hearst-Argyle Television, Inc. and subsidiaries (the "Company") as of December
31, 2001 and 2000, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 2001. Our audits also included the financial statement
schedule listed in the Index at Item 14. These consolidated financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audits.

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

   In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company at December 31,
2001 and 2000, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 2001 in conformity with
accounting principles generally accepted in the United States of America. Also,
in our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly in all material respects the information set forth therein.

/s/ DELOITTE & TOUCHE LLP

New York, New York
February 6, 2002

                                      41

<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

                          Consolidated Balance Sheets
<TABLE>
<CAPTION>
                                                                                            December 31,       December 31,
                                                                                                2001               2000
                                                                                           ------------       ------------
                                                                                           (In thousands, except share data)
<S>                                                                                        <C>                <C>
Assets
Current assets:
    Cash and cash equivalents.............................................................  $    3,260         $    5,780
    Accounts receivable, net of allowance for doubtful accounts of $7,355 and
       $3,807 in 2001 and 2000, respectively..............................................     142,146            162,579
    Program and barter rights.............................................................      54,917             53,716
    Deferred income taxes.................................................................       3,733              3,339
    Receivable from The Hearst Corporation................................................          --                280
    Other.................................................................................       5,891              6,591
                                                                                            ----------         ----------
       Total current assets...............................................................     209,947            232,285
                                                                                            ----------         ----------
Property, plant and equipment:
    Land, building and improvements.......................................................     142,890            138,685
    Broadcasting equipment................................................................     299,889            281,503
    Office furniture, equipment and other.................................................      37,518             34,879
    Construction in progress..............................................................      10,367              4,091
                                                                                            ----------         ----------
                                                                                               490,664            459,158
    Less accumulated depreciation.........................................................    (162,407)          (124,741)
                                                                                            ----------         ----------
Property, plant and equipment, net........................................................     328,257            334,417
                                                                                            ----------         ----------
Intangible assets, net....................................................................   3,156,644          3,142,004
                                                                                            ----------         ----------
Other assets:
Deferred acquisition and financing costs, net of accumulated amortization of $14,814 and
  $10,986 in 2001 and 2000, respectively..................................................      20,259             24,692
    Investments...........................................................................      30,308             53,811
    Program and barter rights, noncurrent.................................................       3,272              2,403
    Other.................................................................................      31,018             28,377
                                                                                            ----------         ----------
       Total other assets.................................................................      84,857            109,283
                                                                                            ----------         ----------
       Total assets.......................................................................  $3,779,705         $3,817,989
                                                                                            ==========         ==========
Liabilities and Stockholders' Equity
Current liabilities:
    Accounts payable......................................................................  $   14,375         $   15,874
    Accrued liabilities...................................................................      59,565             51,976
    Program and barter rights payable.....................................................      53,930             54,405
    Payable to The Hearst Corporation.....................................................       2,612                 --
    Other.................................................................................       1,158              1,493
                                                                                            ----------         ----------
       Total current liabilities..........................................................     131,640            123,748
                                                                                            ----------         ----------
Program and barter rights payable, noncurrent.............................................       5,045              2,339
Long-term debt............................................................................   1,160,205          1,448,492
Deferred income taxes.....................................................................     792,327            777,929
Other liabilities.........................................................................      23,874             21,105
                                                                                            ----------         ----------
       Total noncurrent liabilities.......................................................   1,981,451          2,249,865
                                                                                            ----------         ----------
Convertible Preferred Securities..........................................................     200,000                 --
                                                                                            ----------         ----------
Commitments and contingencies
Stockholders' equity:
Series A preferred stock, 10,938 shares issued and outstanding in 2001 and 2000 (aggregate
 liquidation preference of $10,938).......................................................           1                  1
Series B preferred stock, 10,938 shares issued and outstanding in 2001 and 2000 (aggregate
 liquidation preference of $10,938).......................................................           1                  1
Series A common stock, par value $.01 per share, 200,000,000 shares authorized in 2001 and
 2000, and 53,726,060 and 53,624,254 shares issued in 2001 and 2000, respectively.........         537                536
Series B common stock, par value $.01 per share,100,000,000 shares authorized in 2001 and
 2000 and 41,298,648 shares issued and outstanding in 2001 and 2000, respectively.........         413                413
Additional paid-in capital................................................................   1,270,908          1,274,257
Retained earnings.........................................................................     275,453            245,788
Treasury stock, at cost, 3,197,152 and 2,997,115 shares of Series A common stock in 2001
 and 2000, respectively...................................................................     (80,699)           (76,620)
                                                                                            ----------         ----------
       Total stockholders' equity.........................................................   1,466,614          1,444,376
                                                                                            ----------         ----------
       Total liabilities and stockholders' equity.........................................  $3,779,705         $3,817,989
                                                                                            ==========         ==========
</TABLE>

                See notes to consolidated financial statements.

                                      42

<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

                       Consolidated Statements of Income

<TABLE>
<CAPTION>
                                                                                      Years Ended December 31,
                                                                               -------------------------------------
                                                                                  2001          2000        1999
                                                                                --------      --------    --------
                                                                               (In thousands, except per share data)
<S>                                                                            <C>           <C>         <C>
Total revenues................................................................ $641,876      $747,281    $661,386
Station operating expenses....................................................  323,520       325,736     300,420
Amortization of program rights................................................   57,676        58,460      60,009
Depreciation and amortization.................................................  129,420       125,207     108,039
                                                                                --------      --------    --------
Station operating income......................................................  131,260       237,878     192,918
Corporate general and administrative expenses.................................   15,817        17,281      17,034
Special charge................................................................       --        15,362          --
                                                                                --------      --------    --------
Operating income..............................................................  115,443       205,235     175,884
Interest expense, net.........................................................   99,598       116,163     106,892
Trust preferred dividends.....................................................      500            --          --
Other (income) expense, net...................................................  (48,778)        3,930          --
Equity in loss of affiliates..................................................    6,461         6,234         279
                                                                                --------      --------    --------
Income before income taxes and extraordinary item.............................   57,662        78,908      68,713
Income taxes..................................................................   27,101        36,438      33,311
                                                                                --------      --------    --------
Income before extraordinary item..............................................   30,561        42,470      35,402
Extraordinary item, gain/(loss) on early retirement of debt, net of income tax
  (expense)/benefit of ($347), ($1,622) and $2,041 in 2001, 2000 and 1999,
  respectively................................................................      526         2,455      (3,092)
                                                                                --------      --------    --------
Net income....................................................................   31,087        44,925      32,310
Less preferred stock dividends................................................   (1,422)       (1,422)     (1,422)
                                                                                --------      --------    --------
Income applicable to common stockholders...................................... $ 29,665      $ 43,503    $ 30,888
                                                                                ========      ========    ========
Income per common share--basic:
    Before extraordinary item................................................. $   0.32      $   0.44    $   0.41
   Extraordinary item.........................................................       --          0.03       (0.04)
                                                                                --------      --------    --------
   Net income................................................................. $   0.32      $   0.47    $   0.37
                                                                                ========      ========    ========
   Number of common shares used in the calculation............................   91,809        92,435      83,189
                                                                                ========      ========    ========
Income per common share--diluted:
   Before extraordinary item.................................................. $   0.32      $   0.44    $   0.41
   Extraordinary item.........................................................       --          0.03       (0.04)
                                                                                --------      --------    --------
   Net income................................................................. $   0.32      $   0.47    $   0.37
                                                                                ========      ========    ========
Number of common shares used in the calculation...............................   92,000        92,457      83,229
                                                                                ========      ========    ========
</TABLE>

                See notes to consolidated financial statements.

                                      43

<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

                Consolidated Statements of Stockholders' Equity

<TABLE>
<CAPTION>
                                                                 Additional
                                                       Preferred  Paid-In    Retained  Treasury
                                     Series A Series B   Stock    Capital    Earnings   Stock      Total
                                     -------- -------- --------- ----------  --------  --------  ----------
                                                        (In thousands, except share data)
<S>                                  <C>      <C>      <C>       <C>         <C>       <C>       <C>
Balances at January 1, 1999.........   $126     $413      $ 2    $  203,105  $171,397  $(50,653) $  324,390
Net income..........................     --       --       --            --    32,310        --      32,310
Shares issued in connection with the
  Pulitzer Merger...................    371       --       --       966,464        --        --     966,835
Issuance of 3,686,636 shares of
  Series A Common Stock to Hearst
  for cash..........................     37       --       --        99,432        --        --      99,469
Dividends paid on preferred stock...     --       --       --            --    (1,422)       --      (1,422)
Employee stock purchase plan
  proceeds..........................      1       --       --         1,783        --        --       1,784
Stock options exercised.............     --       --       --           882        --        --         882
Treasury stock purchased--
  Series A Common Stock
  (300,500 shares)..................     --       --       --            --        --    (7,457)     (7,457)
                                       ----     ----      ---    ----------  --------  --------  ----------
Balances at December 31, 1999.......    535      413        2     1,271,666   202,285   (58,110)  1,416,791
Net income..........................     --       --       --            --    44,925        --      44,925
Dividends paid on preferred stock...     --       --       --            --    (1,422)       --      (1,422)
Employee stock purchase plan
  proceeds..........................      1       --       --         2,253        --        --       2,254
Stock options exercised.............     --       --       --           138        --        --         138
Tax benefit from stock plans........     --       --       --           200        --        --         200
Treasury stock purchased--
  Series A Common Stock
  (960,100 shares)..................     --       --       --            --        --   (18,510)    (18,510)
                                       ----     ----      ---    ----------  --------  --------  ----------
Balances at December 31, 2000.......    536      413        2     1,274,257   245,788   (76,620)  1,444,376
Net income..........................     --       --       --            --    31,087        --      31,087
Issuance costs-Convertible Preferred
  Securities........................     --       --       --        (5,175)       --        --      (5,175)
Dividends paid on preferred stock...     --       --       --            --    (1,422)       --      (1,422)
Employee stock purchase plan
  proceeds..........................      1       --       --         1,639        --        --       1,640
Stock options exercised.............     --       --       --           112        --        --         112
Tax benefit from stock plans........     --       --       --            75        --        --          75
Treasury stock purchased--
  Series A Common Stock
  (200,037 shares)..................     --       --       --            --        --    (4,079)     (4,079)
                                       ----     ----      ---    ----------  --------  --------  ----------
Balances at December 31, 2001.......   $537     $413      $ 2    $1,270,908  $275,453  $(80,699) $1,466,614
                                       ====     ====      ===    ==========  ========  ========  ==========
</TABLE>

                See notes to consolidated financial statements.

                                      44

<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

                     Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                          Years Ended December 31,
                                                                      -------------------------------
                                                                        2001      2000       1999
                                                                      --------  --------  -----------
                                                                               (In thousands)
<S>                                                                   <C>       <C>       <C>
Operating Activities
Net income........................................................... $ 31,087  $ 44,925  $    32,310
Adjustments to reconcile net income to net cash provided by operating
  activities:
   Extraordinary item, (gain) loss on early retirement of debt.......     (873)   (4,077)       5,133
   Depreciation......................................................   40,727    38,452       32,520
   Amortization of intangible assets.................................   88,693    86,755       75,519
   Amortization of deferred financing costs..........................    2,938     4,401        3,200
   Amortization of program rights....................................   57,676    58,460       60,009
   Program payments..................................................  (57,385)  (58,797)     (56,402)
   Deferred income taxes.............................................   12,921    (7,944)       1,314
   Equity in loss of affiliates......................................    6,461     6,234          279
   Other (income) expense, net.......................................  (48,778)    3,930           --
   Provision for doubtful accounts...................................    5,702     2,852        1,563
   Changes in operating assets and liabilities:
       Accounts receivable...........................................   18,874    (6,907)     (17,255)
       Other assets..................................................      578    13,195       (9,838)
       Accounts payable and accrued liabilities......................    4,649    12,778        2,552
       Fair value adjustment interest rate protection agreement......       --        --         (321)
       Other liabilities.............................................    2,583    (4,946)       8,331
                                                                      --------  --------  -----------
Net cash provided by operating activities............................  165,853   189,311      138,914
                                                                      --------  --------  -----------
Investing Activities
Acquisition of Pulitzer Broadcasting Company.........................       --        --     (712,301)
Acquisition of Kelly Broadcasting Co. and Kelleproductions, Inc......       --        --     (530,073)
Phoenix/WMUR-TV Swap Transaction.....................................  (34,019)       --           --
Acquisition of WBOY-TV...............................................  (20,774)       --           --
Disposition of WBOY-TV...............................................   20,765        --           --
Investment in ProAct Technologies Corp...............................       --   (25,027)          --
Investment in Geocast Network Systems, Inc...........................      (37)   (8,005)      (2,052)
Investment in Internet Broadcasting Systems, Inc.....................   (6,028)       --      (20,101)
Investment in NBC/Hearst-Argyle Syndication, LLC.....................     (134)       --           --
Capital call--Arizona Diamondbacks...................................       --        --         (982)
Proceeds from disposition of assets..................................       --     3,473           --
Acquisition costs and other..........................................     (473)     (781)        (399)
Proceeds from sale of equipment......................................       14       157          388
Purchases of property, plant, and equipment:
   Maintenance.......................................................   (9,862)  (22,449)     (19,141)
   Digital...........................................................  (18,658)   (6,495)      (8,244)
   Special projects/buildings........................................   (3,811)   (3,057)     (25,017)
                                                                      --------  --------  -----------
Net cash used in investing activities................................  (73,017)  (62,184)  (1,317,922)
                                                                      --------  --------  -----------
</TABLE>

                See notes to consolidated financial statements.

                                      45

<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

              Consolidated Statements of Cash Flows--(Continued)

<TABLE>
<CAPTION>
                                                        Years Ended December 31,
                                                    --------------------------------
                                                      2001       2000        1999
                                                    ---------  ---------  ----------
                                                             (In thousands)
<S>                                                 <C>        <C>        <C>
Financing Activities
Repayment of Senior Notes.......................... $ (15,432) $ (44,439) $       --
Issuance of Private Placement Debt.................        --         --     110,000
Credit Facility:
   Proceeds from issuance of long-term debt........   686,000    368,000   1,007,000
   Repayment of long-term debt.....................  (957,000)  (433,000)   (396,000)
Revolving Credit Facility:
   Proceeds from issuance of long-term debt........        --         --     912,000
   Repayment of long-term debt.....................        --         --    (912,000)
Issuance of Convertible Preferred Securities.......   200,000         --          --
Series A Common Stock:
   Issuances.......................................        --         --      99,469
   Repurchases.....................................    (4,079)   (18,510)     (7,457)
Financing costs and other..........................    (5,175)        --     (10,596)
Proceeds from employee stock purchase plan.........     1,640      2,254       1,784
Dividends paid on preferred stock..................    (1,422)    (1,422)     (1,422)
Exercise of stock options..........................       112        138         882
                                                    ---------  ---------  ----------
Net cash (used in) provided by financing activities   (95,356)  (126,979)    803,660
                                                    ---------  ---------  ----------
(Decrease) increase in cash and cash equivalents...    (2,520)       148    (375,348)
Cash and cash equivalents at beginning of period...     5,780      5,632     380,980
                                                    ---------  ---------  ----------
Cash and cash equivalents at end of period......... $   3,260  $   5,780  $    5,632
                                                    =========  =========  ==========
Supplemental Cash Flow Information:
Businesses acquired in purchase transaction:
Phoenix/WMUR-TV Swap
Fair market value of assets acquired, net.......... $ 225,971
Fair market value of liabilities assumed, net......   (35,300)
Fair market value of assets exchanged, net.........  (188,383)
Fair market value of liabilities exchanged, net....    31,731
                                                    ---------
Net cash paid for Phoenix/WMUR-TV Swap............. $  34,019
                                                    =========
Acquisition of WBOY-TV
Fair market value of assets acquired, net.......... $  21,298
Fair market value of liabilities assumed, net......      (524)
                                                    ---------
Net cash paid for WBOY-TV.......................... $  20,774
                                                    =========
Pulitzer Merger
Fair market value of assets acquired...............                       $2,323,096
Fair market value of liabilities assumed...........                         (643,960)
Issuance of Series A Common Stock..................                         (966,835)
                                                                          ----------
Net cash paid for acquisition......................                       $  712,301
                                                                          ==========
Kelly Transaction
Fair market value of assets acquired...............                       $  548,121
Fair market value of liabilities assumed...........                          (18,048)
                                                                          ----------
Net cash paid for acquisition......................                       $  530,073
                                                                          ==========
Cash paid during the year for:
Interest........................................... $  98,028  $ 115,460  $  105,189
                                                    =========  =========  ==========
Taxes.............................................. $   8,140  $  34,956  $   37,208
                                                    =========  =========  ==========
</TABLE>
                See notes to consolidated financial statements.

                                      46

<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

                  Notes to Consolidated Financial Statements

1.  Nature of Operations

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

2.  Summary of Accounting Policies and Use of Estimates

General

   The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. 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.

Accounts Receivable

   The Company monitors advertisers' credit worthiness and adjusts credit
limits as deemed appropriate. The Company monitors collections and maintains an
allowance for estimated losses based upon aging of such receivables and
specific collection issues that may be identified. Concentration of credit risk
with respect to accounts receivable is limited due to the large number of
geographically diverse customers, individually small balances and short payment
terms.

Program Rights

   Program rights and the corresponding contractual obligations are recorded
when the license period begins and the programs are available for use. Program
rights are carried at the lower of unamortized cost or estimated net realizable
value on a program by program basis and such amounts are not discounted. Any
reduction in unamortized costs to net realizable value is included in
amortization of program rights in the accompanying consolidated statements of
income. Such reductions in unamortized costs for the years ended December 31,
2001, 2000 and 1999 were not material. Costs of off-network syndicated
products, first run programming, feature films and cartoons are amortized on
the future number of showings on an accelerated basis contemplating the
estimated revenue to be earned per showing, but generally not exceeding five
years. Program rights and the corresponding contractual obligations are
classified as current or long-term based on estimated usage and payment terms,
respectively.

                                      47

<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements--(Continued)


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, 2001, 2000 and 1999,
were approximately $29,262,000, $28,366,000, and $26,260,000 respectively, and
are included in total revenues. Barter and trade expenses for the years ended
December 31, 2001, 2000 and 1999, were approximately $29,296,000, $28,109,000,
and $25,856,000 respectively, and are included in station operating expenses.

Property, Plant and Equipment

   Property, plant and equipment are recorded at cost. Depreciation is
calculated on the straight-line method over the estimated useful lives as
follows: buildings--40 years; broadcasting equipment--five to 20 years; office
furniture, equipment and other--three to eight years. Leasehold improvements
are amortized on the straight-line method over the shorter of the lease term or
the estimated useful life of the asset.

Intangible Assets

   Intangible assets are recorded at cost and include FCC licenses, network
affiliation agreements, goodwill, and other intangible assets, which are
amortized over periods from three to 40 years. The recoverability of the
carrying values of the excess of the purchase price over the net assets
acquired and intangible assets is evaluated quarterly to determine if an
impairment in value has occurred. An impairment in value will be considered to
have occurred when it is determined that the undiscounted future operating cash
flows generated by the acquired businesses are not sufficient to recover the
carrying values of such intangible assets. If it has been determined that an
impairment in value has occurred, the excess of the purchase price over the net
assets acquired and intangible assets would be written down to an amount which
will be equivalent to the present value of the estimated future operating cash
flows to be generated by the acquired businesses. At December 31, 2001, it was
determined that there had been no impairment of intangible assets.

Deferred Acquisition and Financing Costs

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

Investments

   Investments in 20% to 50% owned affiliates are accounted for under the
equity method and investments in less than 20% owned affiliates are accounted
for under the cost method. The Company evaluates its investments to determine
if an impairment has incurred. Carrying values are adjusted to reflect
realizable value, where necessary.

Revenue Recognition

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

                                      48

<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements--(Continued)


Income Taxes

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

   The Company and its subsidiaries file a consolidated U.S. federal income tax
return. Prior to the acquisition of Pulitzer Broadcasting Company on March 18,
1999 (see Note 3), the Company was included in the consolidated federal income
tax return of The Hearst Corporation ("Hearst"). Pursuant to the regulations
under the Internal Revenue Code, the Company's pro rata share of the
consolidated federal income tax liability of Hearst was allocated to the
Company on a separate return basis. Federal income taxes payable through March
18, 1999 were paid directly to Hearst via the Payable to The Hearst Corporation.

Earnings Per Share ("EPS")

   Basic EPS is calculated by dividing net income less preferred stock
dividends by the weighted average common shares outstanding. Diluted EPS is
calculated similarly, except that it includes the dilutive effect, if any, of
shares issuable under the Company's stock option plan or the conversion of the
Company's preferred stock or 7.5% preferred securities (see Note 7). All per
share amounts included in the notes are the same for basic and diluted earnings
per share unless otherwise noted.

Interest Rate Agreements

   The Company is not currently involved in any interest-rate agreements.
However, the Company previously entered into interest-rate swap agreements,
which expired during 1999, to modify the interest characteristics of its
outstanding debt. See Note 6.

Off-Balance Sheet Financings and Liabilities

   Other than lease commitments and legal contingencies incurred in the normal
course of business, agreements for future barter and program rights not yet
available for broadcast at December 31, 2001, and employment contracts for key
employees, all of which are disclosed in Note 15 to the consolidated financial
statements, the Company does not have any off-balance sheet financings or
liabilities. The Company does not have any majority-owned subsidiaries that are
not included in the consolidated financial statements, nor does the Company
have any interests in or relationships with any special-purpose entities that
are not reflected in the consolidated financial statements.

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. The Company
has adopted the disclosure-only provisions of the Statement of Financial
Accounting Standards ("SFAS") No. 123, Accounting for Stock-Based Compensation
("SFAS 123"). Pro forma disclosure of net income and earnings per share under
SFAS 123 is presented in Note 12.

                                      49

<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements--(Continued)


Use of Estimates

   The preparation of the consolidated financial statements, in conformity with
generally accepted accounting principles, requires management to make estimates
and assumptions that affect amounts reported in the consolidated financial
statements and accompanying notes. On an ongoing basis, the Company evaluates
its estimates, including those related to allowances for doubtful accounts,
program rights, barter and trade transactions, useful lives of property, plant
and equipment, intangible assets, carrying value of investments, accrued
liabilities, contingent liabilities, income taxes, pension benefits and fair
value of financial instruments. Actual results could differ from those
estimates.

New Accounting Pronouncements

   Effective January 1, 2001, the Company adopted SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities ("SFAS 133"). SFAS 133 and
related amendments (SFAS No. 137 and SFAS No. 138) established accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and hedging activities. The adoption of
SFAS 133 did not impact the Company's consolidated financial statements since
the Company is not currently involved in any derivative financial instruments.
However, the Company may consider certain interest rate risk strategies in the
future.

   In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 141, Business Combinations ("SFAS 141"). SFAS 141 requires the purchase
method of accounting for business combinations initiated after June 30, 2001
and eliminates the pooling-of-interests method. The Company does not believe
that the adoption of this statement will have a material effect on the
Company's consolidated financial statements.

   In July 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets ("SFAS 142"), which is effective January 1, 2002. SFAS 142 requires,
among other things, that goodwill and other intangible assets with indefinite
useful lives no longer be amortized, but instead be tested for impairment at
least annually. While the Company has not completed a full assessment, the
Company estimates that the adoption of SFAS 142 will decrease the Company's
amortization expense related to goodwill and indefinite-lived intangibles by
approximately $88 million annually.

   In August 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations ("SFAS 143"), which is effective January 1, 2003. SFAS
143 requires the recording of the fair value of a liability for an asset
retirement obligation in the period in which it is incurred. The Company does
not believe that the adoption of this statement will have a material effect on
the Company's consolidated financial statements.

   In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets ("SFAS 144"), which is effective January 1,
2002. SFAS 144 supersedes existing accounting literature dealing with
impairment and disposal of long-lived assets, including discontinued
operations. The Company does not believe that the adoption of this statement
will have a material effect on the Company's consolidated financial statements.
However, if in the future, the Company were to sell or otherwise dispose any of
its broadcast operating units, under SFAS 144, such disposal may be required to
be reported as a discontinued operation.

3. Acquisitions, Dispositions and Investments

   On August 29, 1997, effective September 1, 1997 for accounting purposes,
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".

                                      50

<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements--(Continued)


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

   On March 18, 1999, the Company acquired the nine television and five radio
stations ("Pulitzer Broadcasting Company") of Pulitzer Publishing Company and a
3.5% interest in the Arizona Diamondbacks in a merger transaction (the
"Pulitzer Merger"). In connection with the transaction, the Company issued 37.1
million shares of Series A Common Stock (quoted market value of $26.0625 on
March 18, 1999) to Pulitzer shareholders (the "Pulitzer Issuance") and assumed
$700 million in debt, which was repaid on the acquisition date using the
Company's Revolving Credit Facility (the "Financing"), and paid $5 million for
the interest in the Arizona Diamondbacks. The Company borrowed approximately
$715 million under the Credit Facility to refinance the assumed debt and pay
related transaction expenses. In addition, the transaction was subject to an
adjustment, which guaranteed the Company $41 million in working capital. The
Pulitzer Merger was accounted for under the purchase method of accounting and,
accordingly, the purchase price (including acquisition costs) of approximately
$1.7 billion has been allocated to the acquired assets and liabilities based
upon fair market values. The excess of the purchase price and acquisition costs
over the fair market value of the tangible assets acquired less the liabilities
assumed was allocated to FCC licenses.

   On January 31, 2000, the Company exercised its fixed-price option to acquire
the outstanding stock of Channel 58, Inc. (the license for KQCA-TV in
Sacramento, California) (the "KQCA Acquisition"). The Company was previously
programming and selling airtime of KQCA-TV under the TBA (discussed above). The
KQCA Acquisition was accounted for under the purchase method of accounting and,
accordingly, the purchase price (including acquisition costs) of approximately
$891,000 has been allocated to the acquired assets and liabilities based upon
their fair market values. The excess of the purchase price and acquisition
costs over the fair market value of the tangible assets acquired less the
liabilities assumed was allocated to FCC license.

   On August 8, 2000, the Company sold two of its radio stations, WXII-AM
(Greensboro, NC) and WLKY-AM (Louisville, KY), to Truth Broadcasting
Corporation for $3.5 million. This sale resulted in a $1.1 million gain which
is included in Other (income) expense, net in the accompanying consolidated
statement of income for the year ended December 31, 2000.

   On March 28, 2001, the Company exchanged its radio stations in Phoenix,
Arizona (KTAR-AM, KMVP-AM and KKLT-FM) (the "Phoenix Stations") for WMUR-TV,
the ABC affiliate serving the Manchester, NH television market, in a three
party swap (the "Phoenix/WMUR Swap"). The Company sold the Phoenix Stations to
Emmis Communications Corporation ("Emmis") for $160 million, less transaction
expenses, and purchased WMUR-TV from WMUR-TV, Inc. for $185 million, plus a
working capital adjustment of $3.5 million and transaction expenses. The
acquisition of WMUR-TV was accounted for under the purchase method of
accounting and accordingly, the purchase price and related transaction expenses
have been allocated to the acquired assets

                                      51

<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements--(Continued)

and liabilities based upon their preliminary determined fair market values. The
excess of the purchase price and transaction expenses over the fair market
value of the tangible assets acquired less the liabilities assumed was
allocated to FCC license. The final fair values may differ from those set forth
in the accompanying consolidated balance sheet at December 31, 2001; however,
the changes, if any, are not expected to have a material effect on the
consolidated financial statements. Prior to the Phoenix/WMUR Swap, Emmis had
been managing the Phoenix Stations pursuant to a TBA since August 1, 2000, and
the Company had been managing WMUR-TV pursuant to a TBA since January 8, 2001
(effective January 1, 2001 for accounting purposes). The purchase price of
WMUR-TV was funded through an intermediary by approximately (i) $160 million
from Emmis, and (ii) $28.5 million plus the cost of the transaction expenses
from the Company's credit facility. The Company realized a gain of $72.6
million on the sale of the Phoenix Stations which is recorded in Other (income)
expense, net in the accompanying consolidated statement of income for the year
ended December 31, 2001.

   On April 30, 2001, pursuant to an Asset Purchase Agreement entered into with
WBOY-TV, Inc., the Company acquired WBOY-TV, the NBC affiliate serving the
Clarksburg-Weston, WV television market, for $20 million (the "WBOY
Acquisition") plus a working capital adjustment of $0.7 million and transaction
expenses. The WBOY Acquisition was accounted for under the purchase method of
accounting and, accordingly, the purchase price and related transaction
expenses have been allocated to the acquired assets and liabilities based upon
their fair market values. The excess of the purchase price and transaction
expenses over the fair market value of the tangible assets acquired less the
liabilities assumed was allocated to FCC license.

   On December 13, 2001, the Company sold WBOY-TV, the NBC affiliate serving
the Clarksburg-Weston, WV television market for $20 million plus a working
capital adjustment of $0.8 million less transaction expenses.

   The following unaudited pro forma results of operations include (i) the
combined historical results of the Company's 23 owned television stations
(which excludes WMUR) and fees from the stations managed by the Company (see
Note 14) for both periods presented, adjusted to reflect the Phoenix/WMUR Swap
as if the transaction had occurred on January 1, 2000. In addition, the pro
forma results of operations reflect the WBOY acquisition and disposition as if
it never occurred; and the exclusion of special charge and Other (income)
expense, net.

<TABLE>
<CAPTION>
                                                                                 Years Ended
                                                                                December 31,
                                                                            ---------------------
                                                                               2001       2000
                                                                             --------   --------
                                                                            (In thousands, except
                                                                               per share data)
                                                                                 (Unaudited)
<S>                                                                         <C>        <C>
Total revenues............................................................. $632,593   $750,432
Income before extraordinary item........................................... $  3,997   $ 54,584
Income applicable to common stockholders................................... $  3,101   $ 55,617
Net income per common share--basic and diluted............................. $   0.03   $   0.60
Pro forma number of shares used in calculations--basic.....................   91,809     92,435
                                               --diluted...................   92,000     92,456
</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.

                                      52

<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements--(Continued)


   In September 1999 and February 2000, the Company invested $2 million and $8
million, respectively, in Geocast Network Systems, Inc. ("Geocast") in return
for an equity interest in Geocast. Geocast planned to deliver a program
service, which included the local stations' content and other national content
and services, to personal computer users. As this investment represented less
than a 10% interest, the investment was accounted for using the cost method. In
the fourth quarter of 2000, the Company wrote-down the investment in Geocast by
$5 million in order to approximate the investment's realizable value, pursuant
to the Company's assessment of various strategic alternatives available to
Geocast. In February 2001, the remaining $5.1 million of the Geocast investment
was written-off after Geocast's Board of Directors declined various strategic
alternatives and decided to liquidate the company. The write-downs are included
in Other (income) expense, net in the accompanying consolidated statements of
income for the years ended December 31, 2001 and 2000.

   In December 1999, the Company invested $20 million in Internet Broadcasting
Systems, Inc. ("IBS") in exchange for an equity interest in IBS. With IBS, the
Company and other broadcasters have invested in the development and management
of local news/information/entertainment websites. In May 2001, the Company
invested an additional $6 million for a total investment of $26 million in IBS.
As of December 31, 2001, 2000 and 1999, the Company had an equivalent equity
interest in IBS of 24%, 23% and 26%, respectively; therefore, this investment
is accounted for using the equity method. The Company's share in the results of
IBS is included in Equity in loss of affiliates in the accompanying
consolidated statements of income for the years ended December 31, 2001, 2000
and 1999.

   On March 22, 2000, the Company invested $25 million in ProAct Technologies
Corp. ("ProAct") (formerly Consumer Financial Network, Inc.) for an equity
interest in ProAct. ProAct is an online provider of human resources support to
corporations. As this investment represents less than a 10% interest in ProAct,
the investment is accounted for using the cost method. In March 2001, the
Company wrote-down its investment in ProAct by $18.8 million in order to
approximate the investment's realizable value. The write-down is included in
Other (income) expense, net in the accompanying consolidated statement of
income for the year ended December 31, 2001. The Company receives revenue from
ProAct relating to advertising sales. See Note 14.

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

                                      53

<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements--(Continued)


4.  Intangible Assets

   Intangible assets at December 31, 2001 and 2000 consist of the following:

<TABLE>
<CAPTION>
                                              2001        2000
                                           ----------  ----------
                                               (In thousands)
             <S>                           <C>         <C>
             FCC licenses................. $2,479,034  $2,380,078
             Goodwill.....................    957,625     959,400
             Network affiliation agreement     95,493      95,493
             Other........................        746         730
                                           ----------  ----------
                                            3,532,898   3,435,701
             Accumulated amortization.....   (376,254)   (293,697)
                                           ----------  ----------
             Total intangible assets, net. $3,156,644  $3,142,004
                                           ==========  ==========
</TABLE>

5.  Accrued Liabilities

   Accrued liabilities at December 31, 2001 and 2000 consist of the following:

<TABLE>
<CAPTION>
                                                   2001    2000
                                                  ------- -------
                                                  (In thousands)
              <S>                                 <C>     <C>
              Payroll, benefits and related costs $ 9,971 $14,769
              Accrued income taxes...............  20,177  10,867
              Accrued interest...................   9,583  10,377
              Accrued vacation...................   4,662   4,579
              Accrued payables...................   3,306   2,728
              Other taxes payable................   1,392   1,187
              Other accrued liabilities..........  10,474   7,469
                                                  ------- -------
              Total accrued liabilities.......... $59,565 $51,976
                                                  ======= =======
</TABLE>

6.  Long-Term Debt

   Long-term debt at December 31, 2001 and 2000 consists of the following:

<TABLE>
<CAPTION>
                                             2001       2000
                                          ---------- ----------
                                             (In thousands)
                <S>                       <C>        <C>
                Credit Facility.......... $  275,000 $  546,000
                Senior Notes.............    432,110    449,305
                Private Placement Debt...    450,000    450,000
                Senior Subordinated Notes      2,596      2,596
                Other Debt...............        499        591
                                          ---------- ----------
                Total long-term debt..... $1,160,205 $1,448,492
                                          ========== ==========
</TABLE>

                                      54

<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements--(Continued)


Credit Facility

   Upon consummation of the Hearst Transaction, the Company entered into a $1
billion credit facility (the "Revolving Credit Facility") with a consortium of
banks led by JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank)
("Chase") and Morgan Guaranty Trust Company of New York. For the year ended
December 31, 1999, the effective interest rate on borrowings from the Revolving
Credit Facility outstanding during the year was 5.3%.

   On April 12, 1999, the Company retired its Revolving Credit Facility and
replaced it with two new revolving credit facilities (the "New Credit
Facilities") with a consortium of banks led by Chase, Bank of New York, Toronto
Dominion and Bank of Montreal. The New Credit Facilities were structured as a
$1 billion revolver (the "$1 Billion Facility") and a $250 million
revolver/term loan (the "$250 Million Facility"). Management elected to cancel
the $250 Million Facility on April 10, 2000. On August 15, 2001, the Company
amended the $1 Billion Facility (the "Credit Facility") to reduce the lender
commitments from $1 billion to $750 million. The Credit Facility, which has an
outstanding balance of $275 million and $546 million at December 31, 2001 and
December 31, 2000, respectively, will mature on April 12, 2004. The deferred
financing fees relating to the Revolving Credit Facility, of approximately $5.1
million before income tax benefit, were classified as an extraordinary item in
the accompanying consolidated statement of income for the year ended December
31, 1999.

   Outstanding principal balances under the Credit Facility bear interest at
either, at the Company's option, LIBOR or the alternate base rate ("ABR"), plus
the "applicable margin". The "applicable margin" for ABR loans is zero. The
"applicable margin" for LIBOR loans varies between 0.75% and 1.25% depending on
the ratio of the Company's total debt to operating cash flow ("leverage
ratio"). The ABR is the higher of (i) Chase's prime rate; (ii) 1% plus the
secondary market rate for three month certificates of deposit; or, (iii) 0.5%
plus the rates on overnight federal funds transactions with members of the
Federal Reserve System. The Company is required to pay an annual commitment fee
based on the unused portion of the Credit Facility. The commitment fee ranges
from 0.2% to 0.3%. For the years ended December 31, 2001, and December 31,
2000, the effective interest rate on borrowings from the Credit Facility
outstanding during the year was 5.3% and 7.5%, respectively.

Private Placement Debt

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

   In connection with the Kelly Transaction, the Company issued $450 million in
senior notes to institutional investors (the "Private Placement Debt"). Of the
$450 million principal amount, $340 million was issued on December 15, 1998 and
$110 million was issued on January 14, 1999. The Private Placement Debt has a
maturity of 12 years, with an average life of 10 years and bears interest at
7.18% per annum. The Company used the proceeds from the Private Placement Debt
to partially fund the Kelly Transaction. $90 million of the Private Placement
Debt is due in 2006 and the remainder is due thereafter. See Note 3.

Senior Subordinated Notes

   In October 1995, Argyle issued $150 million of senior subordinated notes
(the "Notes"). During December 1997 and February 1998, the Company repaid $45
million and $102.4 million, respectively, of the Notes. The Notes are due in
2005 and bear interest at 9.75% payable semi-annually. The Notes are general
unsecured obligations of the Company. The outstanding balance of the Notes was
$2.6 million at December 31, 2001 and 2000.

                                      55

<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements--(Continued)


Senior Notes

   The Company issued $125 million principal amount of 7.0% senior notes due
2007, priced at 99.616% of par, and $175 million principal amount of 7.5%
debentures due 2027, priced at 98.823% of par, on November 7, 1997 and $200
million principal amount of 7.0% senior notes due 2018, priced at 98.887% of
par, on January 13, 1998 (collectively, the "Senior Notes"). The Senior Notes
are senior and unsecured obligations of the Company.

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

   During 2000, the Company repaid (i) $28 million of its 7.5% Senior Notes due
November 15, 2027, at a discounted price of $24.8 million, and (ii) $22.7
million of its 7.0% Senior Notes due January 15, 2018, at a discounted price of
$19.6 million. These repayments were funded by the Credit Facility. The Company
wrote-off the pro-rata share of deferred financing fees related to the Senior
Notes which were repaid. The discounts from the repayments, net of the
write-off of the deferred financing fees, resulted in a gain of approximately
$4.1 million, before income tax expense, which was classified as an
extraordinary item in the accompanying consolidated statement of income for the
year ended December 31, 2000.

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

Debt Covenants and Restrictions

   The Company's debt obligations contain certain financial and other covenants
and restrictions on the Company. Such covenants and restrictions do not include
any triggers of default related to the Company's overall credit rating or stock
prices. At December 31, 2001, the Company is in compliance with all such
covenants and restrictions.

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

Interest Rate Risk Management

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

                                      56

<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements--(Continued)


   Interest expense, net for the years ended December 31, 2001, 2000 and 1999
consists of the following:

<TABLE>
<CAPTION>
                                                                 2001     2000     1999
                                                               -------- -------- --------
                                                                     (In thousands)
<S>                                                            <C>      <C>      <C>
Interest on borrowings:
   Revolving Credit Facility.................................. $     -- $     -- $  3,840
   Credit Facility............................................   32,765   45,926   32,271
   Senior Notes...............................................   31,899   35,264   35,875
   Private Placement Debt.....................................   32,310   32,310   32,025
   Senior Subordinated Notes..................................      253      253      253
   Amortization of deferred financings costs and other........    2,938    4,401    3,200
                                                               -------- -------- --------
                                                                100,165  118,154  107,464
Interest rate swap agreements:
   Changes in fair value for agreements with optional amounts
     in excess of outstanding borrowings......................       --       --        3
                                                               -------- -------- --------
       Total interest expense.................................  100,165  118,154  107,467
Interest income...............................................      567    1,991      575
                                                               -------- -------- --------
Total interest expense, net................................... $ 99,598 $116,163 $106,892
                                                               ======== ======== ========
</TABLE>

7.  Earnings Per Share

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

<TABLE>
<CAPTION>
                                                                       Year Ended December 31, 2001
                                                                   -------------------------------------
                                                                     Income         Shares     Per-Share
                                                                   (Numerator)   (Denominator)  Amount
                                                                   -----------   ------------- ---------
                                                                   (In thousands, except per share data)
<S>                                                                <C>           <C>           <C>
Income before extraordinary item..................................   $30,561
Less: Preferred stock dividends...................................    (1,422)
                                                                     -------
Basic EPS
Income before extraordinary item applicable to common
  stockholders....................................................   $29,139        91,809       $0.32
Effect of Dilutive Securities
Assumed exercise of stock options.................................        --           191
                                                                     -------        ------
Diluted EPS
Income before extraordinary item applicable to common stockholders
  plus assumed conversions........................................   $29,139        92,000       $0.32
                                                                     =======        ======       =====
</TABLE>

                                      57

<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements--(Continued)


<TABLE>
<CAPTION>
                                                          Year Ended December 31, 2000
                                                      -------------------------------------
                                                        Income         Shares     Per-Share
                                                      (Numerator)   (Denominator)  Amount
                                                      -----------   ------------- ---------
                                                      (In thousands, except per share data)

<S>                                                   <C>           <C>           <C>
Income before extraordinary item.....................   $42,470
Less: Preferred stock dividends......................    (1,422)
                                                        -------
Basic EPS
Income before extraordinary item applicable to common
  stockholders.......................................   $41,048        92,435       $0.44
Effect of Dilutive Securities
Assumed exercise of stock options....................        --            22
                                                        -------        ------
Diluted EPS
Income before extraordinary item applicable to common
  stockholders plus assumed conversions..............   $41,048        92,457       $0.44
                                                        =======        ======       =====
</TABLE>

<TABLE>
<CAPTION>
                                                          Year Ended December 31, 1999
                                                      -------------------------------------
                                                        Income         Shares     Per-Share
                                                      (Numerator)   (Denominator)  Amount
                                                      -----------   ------------- ---------
                                                      (In thousands, except per share data)

<S>                                                   <C>           <C>           <C>
Income before extraordinary item.....................   $35,402
Less: Preferred stock dividends......................    (1,422)
                                                        -------
Basic EPS
Income before extraordinary item applicable to common
  stockholders.......................................   $33,980        83,189       $0.41
Effect of Dilutive Securities
Assumed exercise of stock options....................        --            40
                                                        -------        ------
Diluted EPS
Income before extraordinary item applicable to common
  stockholders plus assumed conversions..............   $33,980        83,229       $0.41
                                                        =======        ======       =====
</TABLE>

   The (i) 10,938 shares of Series A Preferred Stock, outstanding at December
31, 2001, 2000 and 1999 and convertible into Series A Common Stock (see Note
11); (ii) 10,938 shares of Series B Preferred Stock, outstanding at December
31, 2001 (not convertible prior to 2001) and convertible into Series A Common
Stock (see Note 11); and (iii) 1,400,000 shares of Series A 7.5% Preferred
Securities and 2,600,000 shares of Series B 7.5% Preferred Securities (see Note
9), outstanding at December 31, 2001, were not included in the computation of
diluted EPS because to do so would have been antidilutive for the periods
presented. Common stock options for 3,367,821, 2,129,845 and 2,414,086 shares
of Series A Common Stock (before application of the treasury stock method),
outstanding as of December 31, 2001, 2000 and 1999, respectively, were not
included in the computation of diluted EPS because the exercise price was
greater than the average market price of the common shares during the
calculation period.

                                      58

<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, 2001, 2000 and 1999, consists of the following:

<TABLE>
<CAPTION>
                                         Years Ended December 31,
                                         ------------------------
                                          2001    2000     1999
                                         ------- -------  -------
                                              (In thousands)
              <S>                        <C>     <C>      <C>
              Current:
                 State and local........ $   541 $ 2,393  $ 1,539
                 Federal................  13,639  41,989   26,519
                                         ------- -------  -------
                                          14,180  44,382   28,058
                                         ------- -------  -------
              Deferred:
                 State and local........   4,004     (33)   2,999
                 Federal................   8,917  (7,911)   2,254
                                         ------- -------  -------
                                          12,921  (7,944)   5,253
                                         ------- -------  -------
              Provision for income taxes $27,101 $36,438  $33,311
                                         ======= =======  =======
</TABLE>

   The effective income tax rate for the years ended December 31, 2001, 2000
and 1999 varied from the statutory U.S. Federal income tax rate due to the
following:

<TABLE>
<CAPTION>
                                                       2001  2000  1999
                                                       ----  ----  ----
        <S>                                            <C>   <C>   <C>
        Statutory U. S. Federal income tax............ 35.0% 35.0% 35.0%
        State income taxes, net of Federal tax benefit  5.1   2.0   4.3
        Other non-deductible business expenses........  6.8   9.2   9.2
        Other adjustments.............................  0.1    --    --
                                                       ----  ----  ----
        Effective income tax rate..................... 47.0% 46.2% 48.5%
                                                       ====  ====  ====
</TABLE>

   Deferred income tax liabilities and assets at December 31, 2001 and 2000
consist of the following:

<TABLE>
<CAPTION>
                                                                 2001      2000
                                                               --------  --------
                                                                 (In thousands)
<S>                                                            <C>       <C>
Deferred income tax liabilities:
   Accelerated depreciation................................... $ 44,962  $ 52,643
   Accelerated funding of pension benefit obligation..........    5,453     4,499
   Difference between book and tax basis of intangible assets.  743,397   723,233
                                                               --------  --------
Total deferred income tax liabilities.........................  793,812   780,375
                                                               --------  --------
Deferred income tax assets:
   Accrued expenses and other.................................    5,218     5,785
   Operating loss carryforwards...............................   18,553    19,292
                                                               --------  --------
                                                                 23,771    25,077
Less: Valuation allowance.....................................  (18,553)  (19,292)
                                                               --------  --------
Total deferred income tax assets..............................    5,218     5,785
                                                               --------  --------
Net deferred income tax liabilities........................... $788,594  $774,590
                                                               ========  ========
</TABLE>

   The Company has net operating loss carryforwards for state income tax
purposes of approximately $233.8 million, which expire between 2002 and 2021.

   The valuation allowance is the result of an evaluation of the uncertainty
associated with the realization of certain deferred income tax assets.

                                      59

<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements--(Continued)


9.  Convertible Preferred Securities

   On December 20, 2001, the Company completed a private placement of $200
million principal amount of convertible trust preferred securities through
Hearst-Argyle Capital Trust, a subsidiary trust (the "Capital Trust"). The
Capital Trust issued 1,400,000 shares of 7.5% Series A Convertible Preferred
Securities due 2016 (liquidation preference $50 per convertible preferred
security) (the "Series A 7.5% Preferred Securities") for an aggregate of
$70,000,000, and 2,600,000 shares of 7.5% Series B Convertible Preferred
Securities due 2021 (liquidation preference $50 per convertible preferred
security) (the "Series B 7.5% Preferred Securities" and, together with the
Series A 7.5% Preferred Securities, the "7.5% Preferred Securities") for an
aggregate of $130,000,000, to institutional investors. The investor group
included Hearst. Hearst purchased an aggregate of 300,000 shares of the Series
A 7.5% Preferred Securities and an aggregate of 500,000 shares of the Series B
7.5% Preferred Securities for a total of $40 million. As part of the
transaction, the Company issued and sold to the Capital Trust, in exchange for
the proceeds from the sale of the 7.5% Preferred Securities, $72,164,960
aggregate principal amount of 7.5% convertible junior subordinated deferrable
interest debentures Series A, due 2016 (the "Series A Subordinated Debentures")
and $134,020,640 aggregate principal amount of 7.5% convertible junior
subordinated deferrable interest debentures Series B, due 2021 (the "Series B
Subordinated Debentures" and, together with the Series A Subordinated
Debentures, the "Subordinated Debentures"). The Company used the net proceeds
of the 7.5% Preferred Securities to repay a portion of the outstanding balance
under its Credit Facility, thereby reducing the Company's overall debt.

   The 7.5% Preferred Securities are effectively convertible, at the option of
the holder at any time, into shares of the Company's Series A Common Stock, par
value $.0l per share through an exchange of such 7.5% Preferred Securities for
a portion of the Subordinated Debentures of the corresponding series held by
the Capital Trust. The Series A Subordinated Debentures are convertible into
the Company's Common Stock at an initial rate of 2.005133 shares of the
Company's Common Stock per $50 principal amount of Series A Subordinated
Debentures (equivalent to a conversion price of $24.9360 per share of the
Company's Common Stock) and the Series B Subordinated Debentures are
convertible into the Company's Common Stock at an initial rate of 1.972262
shares of the Company's Common Stock per $50 principal amount of Series B
Subordinated Debentures (equivalent to a conversion price of $25.3516 per share
of the Company's Common Stock). The Series A 7.5% Preferred Securities mature
on December 31, 2016 with distributions payable thereon at a rate of 7.5% per
year. The Series B 7.5% Preferred Securities mature on December 31, 2021 with
distributions payable thereon at a rate of 7.5% per year.

   The Series A Subordinated Debentures mature on December 31, 2016 and bear
interest at a rate of 7.5% per year. The Series B Subordinated Debentures
mature on December 31, 2021 and bear interest at a rate of 7.5% per year. The
Company has the right to defer interest on the Subordinated Debentures (and
therefore distributions on the 7.5% Preferred Securities) by extending the
interest payment period from time to time in accordance with and subject to the
terms of the 7.5% Preferred Securities. Further, the Series A Subordinated
Debentures may be redeemed at the option of the Company (or at the direction of
Hearst) at any time on or after December 31, 2004 and the Series B Subordinated
Debentures may be redeemed at the option of the Company (or at the direction of
Hearst) at any time on or after December 31, 2006. The redemption prices (per
$50 principal amount) of the Series A Subordinated Debentures are as follows:
$52.625 in 2005, $52.250 in 2006, $51.875 in 2007, $51.500 in 2008, $51.125 in
2009, $50.750 in 2010, $50.375 in 2011 and $50 thereafter to maturity. The
redemption prices (per $50 principal amount) of the Series B Subordinated
Debentures are as follows: $51.875 in 2007, $51.50 in 2008, $51.125 in 2009,
$50.750 in 2010, $50.375 in 2011 and $50 thereafter to maturity.

                                      60

<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements--(Continued)


10.  Common Stock

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

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

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

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

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

   In May 2001, the Company's Board of Directors approved the amendment and
restatement of the Company's 1997 Stock Option Plan (the "Stock Option Plan").
The amendment increases the number of shares reserved for issuance under the
Stock Option Plan to 8.7 million shares of the Company's Series A Common Stock.
See Note 12.

   During the second quarter of 1998, the Company's Board of Directors
authorized the repurchase of up to $300 million of its outstanding Series A
Common Stock. The Company expects such repurchases to be effected from time to
time in the open market or in private transactions, subject to market
conditions and management considerations. As of December 31, 2001, the Company
has spent approximately $80.7 million to repurchase approximately 3.2 million
shares of Series A Common Stock at an average price of $25.24.

                                      61

<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements--(Continued)


   Hearst has also notified the Company and the Securities and Exchange
Commission of its intention to purchase up to 20 million shares of the
Company's Series A Common Stock from time to time in the open market, in
private transactions or otherwise. As of December 31, 2001, Hearst purchased
approximately 15.5 million shares of the Company's outstanding Series A Common
Stock. These purchases resulted in Hearst's ownership in the Company of 65.9%
and 64.8% as of December 31, 2001 and 2000, respectively.

11.  Preferred Stock

   The Company has one million shares of authorized preferred stock, par value
$.01 per share. Under the Company's Certificate of Incorporation, the Company
has two issued and outstanding series of preferred stock, Series A Preferred
Stock and Series B Preferred Stock (collectively, the "Preferred Stock"). Each
series of Preferred Stock has 10,938 shares issued and outstanding at December
31, 2001, 2000 and 1999. The Preferred Stock has a cash dividend feature
whereby each share accrues $65 per share annually, to be paid quarterly. The
Series A Preferred Stock is convertible at the option of the holders, at any
time, into Series A Common Stock at a conversion price of (i) on or before
December 31, 2000, $35; (ii) during the calendar year ended December 31, 2001,
$38.50; 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
on or 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 on or
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 at a price equal to $1,000 per share plus any accrued and
unpaid dividends.

12.  Stock Options

   1997 Stock Option Plan.

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

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

                                      62

<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements--(Continued)


   A summary of the status of the Company's Stock Option Plan as of December
31, 2001, 2000 and 1999, and changes for the years ended December 31, 2001,
2000 and 1999 is presented below:

<TABLE>
<CAPTION>
                                                          Weighted
                                                          Average
                                                          Exercise
                                                Options    Price
                                               ---------  --------
              <S>                              <C>        <C>
              Outstanding at December 31, 1998 2,097,780   $26.07
                 Granted......................   577,229   $26.48
                 Exercised....................   (44,450)  $23.13
                 Forfeited....................  (136,158)  $26.87
                                               ---------   ------
              Outstanding at December 31, 1999 2,494,401   $26.18
                 Granted...................... 3,015,075   $18.58
                 Exercised....................   (13,750)  $10.00
                 Forfeited....................  (311,470)  $26.43
                                               ---------   ------
              Outstanding at December 31, 2000 5,184,256   $21.79
                 Granted...................... 1,249,891   $21.02
                 Exercised....................    (8,100)  $13.81
                 Forfeited....................  (106,723)  $20.21
                                               ---------   ------
              Outstanding at December 31, 2001 6,319,324   $20.71
                                               =========   ======
              Exercisable at December 31, 1999   607,353   $24.62
                                               =========   ======
              Exercisable at December 31, 2000 1,679,224   $26.17
                                               =========   ======
              Exercisable at December 31, 2001 2,693,875   $23.52
                                               =========   ======
</TABLE>

   The following table summarizes information about stock options outstanding
and exercisable at December 31, 2001:

<TABLE>
<CAPTION>
                     Options Outstanding                         Options Exercisable
------------------------------------------------------------- --------------------------
                    Number    Weighted Average    Weighted      Number       Weighted
Range of Exercise Outstanding    Remaining        Average     Exercisable    Average
     Prices       at 12/31/01 Contractual Life Exercise Price At 12/31/01 Exercise Price
----------------- ----------- ---------------- -------------- ----------- --------------
<S>               <C>         <C>              <C>            <C>         <C>
  $10.00-$15.50       47,550     3.4 years         $10.00         38,050      $10.00
  $16.75-$21.32    4,187,841     9.4 years         $19.31        981,838      $18.54
  $22.75-$26.06      461,363     7.1 years         $25.97        295,875      $25.84
  $26.50-$29.00    1,602,855     5.9 years         $26.79      1,358,397      $26.80
  $35.25-$36.44       19,715     6.6 years         $36.33         19,715      $36.33
                   ---------                                   ---------
                   6,319,324                                   2,693,875
                   =========                                   =========
</TABLE>

                                      63

<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements--(Continued)


   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.

   Pro forma information regarding net income and earnings per share is
required by SFAS 123, and has been determined as if the Company had accounted
for its employee stock options under the fair value method of SFAS 123. The
fair value of these options was estimated at the date of grant using the
Black-Scholes option-pricing model for options granted in 2001, 2000 and 1999.
The weighted average fair value of options granted was $8.18, $7.79 and $12.48
in 2001, 2000 and 1999, respectively. The following assumptions were used for
the years ended December 31, 2001, 2000, and 1999:

<TABLE>
<CAPTION>
                                   2001          2000          1999
                               ------------  ------------  ------------
       <S>                     <C>           <C>           <C>
       Risk-free interest rate      4.6%          5.9%          5.3%
       Dividend yield.........      0.0%          0.0%          0.0%
       Volatility factor......     35.3%         36.3%         36.9%
       Expected life.......... 5 and 7 years 5 and 7 years 5 and 7 years
</TABLE>

   The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options, which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

   For purposes of SFAS 123 pro forma disclosures, the estimated fair value of
the options is amortized to expense over the option's vesting period.
Additionally, for purposes of this pro forma disclosure, the Company has
included the amount of compensation cost, that would have been recognized in
accordance with SFAS 123, for the discount related to shares purchased under
the employee stock purchase plan (see Note 13). The Company's pro forma
information is as follows:

<TABLE>
<CAPTION>
                                                       2001    2000    1999
                                                      ------- ------- -------
                                        (In thousands, except per share data)
   <S>                                                <C>     <C>     <C>
   Pro forma net income.............................. $23,336 $38,402 $26,317
   Pro forma income applicable to common stockholders $21,914 $36,980 $24,895
   Pro forma basic income per common share........... $  0.24 $  0.40 $  0.30
   Pro forma diluted income per common share......... $  0.24 $  0.40 $  0.30
</TABLE>

   The Company has reserved 2.3 million shares of common stock for future
issuances in connection with the Stock Option Plan at December 31, 2001.

13.  Stock Purchase Plan

   The Company implemented a non-compensatory employee stock purchase plan (the
"Stock Purchase Plan") during April 1999. The Stock Purchase Plan allows
employees to purchase shares of the Company's Series A Common Stock, at 85% of
its market price, through after-tax payroll deductions. The Company reserved
and made available for issuance and purchases under the Stock Purchase Plan
5,000,000 shares of Series A Common Stock. Employees purchased 93,706 and
125,327 shares for aggregate proceeds of approximately $1.6 million and $2.3
million for the years ended December 31, 2001 and 2000, respectively.

                                      64

<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements--(Continued)


14.  Related Party Transactions

   The Company has 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 prior to August 31, 2003); a Studio Lease Agreement (whereby
Hearst leases from the Company certain premises for Hearst's radio broadcast
stations); a Tax Sharing Agreement (whereby Hearst and the Company have
established the sharing of federal, state and local income taxes during the
time the Company was part of the consolidated income tax return of Hearst (see
Note 2)); a Name License Agreement (whereby Hearst permits the Company to use
the Hearst name in connection with the Hearst-Argyle name and operation of its
business); and a Services Agreement (whereby Hearst provides the Company
certain administrative services such as accounting, financial, legal, tax,
insurance, data processing and employee benefits). For the years ended December
31, 2001, 2000 and 1999, the Company recorded revenues of approximately
$2,351,000, $4,406,000 and $4,843,000, respectively, relating to the Management
Agreement and expenses of approximately $3,875,000, $3,791,000 and $3,330,000,
respectively, relating to the Services Agreement. The Company believes that the
terms of all these agreements are reasonable to both sides. There can be no
assurance, however, that more favorable terms would not be available from third
parties. In 2001, Hearst purchased $40 million of the Company's newly issued
7.5% Preferred Securities. See Note 9.

   The Company recorded net revenues of approximately $1,194,000 and $5,536,000
during the years ended December 31, 2001 and 2000, respectively, relating to
advertising sales to ProAct, one of the Company's equity interest investments
(which is accounted for using the cost method). See Note 3. Bob Marbut,
Chairman of the Board of Directors and former Co-Chief Executive Officer of the
Company, is a member of the Board of Directors of ProAct, from which he does
not receive compensation for his services.

   The Company has entered into an agreement with Lifetime Entertainment
Services ("Lifetime"), an entity owned 50% by an affiliate of Hearst and 50% by
ABC, whereby Lifetime has provided services to the Company in respect of the
negotiation of the Company's retransmission consent agreements and the Company
has assisted Lifetime in securing Lifetime Movie Channel distribution and
subscribers. The Company has recorded revenue of approximately $1,291,000 and
$236,000 from Lifetime in 2001 and 2000, respectively.

   The Company has a consulting agreement with Argyle Communications, Inc.
("ACI"), pursuant to which the Company has agreed to pay ACI $350,000 per year
beginning during fiscal year 2001 through 2002. Mr. Marbut, Chairman of the
Board of Directors and former Co-Chief Executive Officer of the Company, is the
sole stockholder of ACI. In addition, ACI has a separate consulting agreement
with Hearst Communications Inc., a wholly-owned subsidiary of Hearst.

   On August 7, 2001, the Company contributed its production-and-distribution
unit to NBC/Hearst-Argyle Syndication, LLC in exchange for a 20% equity
interest in this entity. NBC/Hearst-Argyle Syndication, LLC is a limited
liability company formed by NBC Enterprises and the Company to produce and
syndicate first-run broadcast and original-for-cable programming. This
investment is accounted for using the equity method. See Note 3. Emerson
Coleman, an officer of the Company, is a member of the Board of Directors of
NBC/Hearst-Argyle Syndication, LLC.

   In December 1999, the Company invested $20 million of cash in IBS in
exchange for an equity interest in IBS. In May 2001, the Company invested an
additional $6 million of cash for a total investment of $26 million in IBS. The
Company's share of the loss of IBS is included in "Equity in loss of
affiliates" in the accompanying

                                      65

<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements--(Continued)

consolidated statements of income for the years ended December 31, 2001, 2000
and 1999. See Note 3. In addition, IBS and the Company have formed a series of
local partnerships (the Company's share is 49.9% and IBS's share is 50.1%) and
have an operating agreement for the development of the Company's
news/information/entertainment websites. Under the operating agreement,
revenues and expenses are shared pro-rata, after the local partnerships become
profitable. David J. Barrett, President and Chief Executive Officer of the
Company, and Harry T. Hawks, Executive Vice President and Chief Financial
Officer of the Company, are members of the Board of Directors of IBS, from
which they do not receive compensation for their services. From December 2,
1999 through January 19, 2001, Bob Marbut, Chairman of the Board of Directors
and former Co-Chief Executive Officer of the Company, was a member of the Board
of Directors of IBS, from which he did not receive compensation for his
services.

15.  Other Commitments and Contingencies

   The Company has obligations to various program syndicators and distributors
in accordance with current contracts for the rights to broadcast programs.
Future payments and barter obligations as of December 31, 2001, scheduled under
contracts for programs available are as follows (in thousands):

<TABLE>
<CAPTION>
                                      Program Barter
                                      Rights  Rights
                                      ------- -------
                           <S>        <C>     <C>
                           2002...... $38,142 $15,788
                           2003......   1,510     507
                           2004......   1,339     122
                           2005......   1,163      30
                           2006......     303       6
                           Thereafter      --      65
                                      ------- -------
                                      $42,457 $16,518
                                      ======= =======
</TABLE>

   The Company has various agreements relating to non-cancelable operating
leases with an initial term of one year or more (some of which contain renewal
options), future barter and program rights not available for broadcast at
December 31, 2001, and employment contracts for key employees. Future minimum
payments and barter obligations under terms of these agreements as of December
31, 2001 are as follows:

<TABLE>
<CAPTION>
                          Deduct   Net Operating                  Employment
               Operating Operating     Lease     Program  Barter  and Talent
                Leases   Sublease   Commitments  Rights   Rights  Contracts
               --------- --------- ------------- -------- ------- ----------
                                      (In thousands)
    <S>        <C>       <C>       <C>           <C>      <C>     <C>
    2002......  $ 6,608    $704       $ 5,904    $ 20,606 $ 9,404  $ 52,680
    2003......    5,690      --         5,690      49,366  17,235    31,143
    2004......    4,674      --         4,674      30,587  11,337    11,558
    2005......    3,963      --         3,963       9,304   6,502     3,790
    2006......    3,629      --         3,629       2,562   2,727     1,599
    Thereafter    9,467      --         9,467       4,841   1,795       284
                -------    ----       -------    -------- -------  --------
                $34,031    $704       $33,327    $117,266 $49,000  $101,054
                =======    ====       =======    ======== =======  ========
</TABLE>

   Rent expense, net for operating leases was approximately $5,576,000,
$5,476,000 and $4,599,000 for the years ended December 31, 2001, 2000 and 1999,
respectively.

                                      66

<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements--(Continued)


   The Company has a consulting agreement with ACI, pursuant to which the
Company has agreed to pay ACI $350,000 per year beginning during fiscal year
2001 through 2002. Mr. Marbut, the Chairman of the Board of Directors and
former Co-Chief Executive Officer of the Company, is the sole stockholder of
ACI.

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

16.  Pension and Employee Savings Plans

   In connection with the Hearst Transaction, the Company assumed the
obligations of the Hearst Broadcast Group's noncontributory defined benefit
plan and Hearst's nonqualified retirement plan for non-union employees, and
Hearst's defined benefit plans for eligible employees covered by collective
bargaining agreements. These plans are collectively referred to as the "Pension
Plans". In addition, the Company purchased the excess of the fair value of the
plan's assets over the pension benefit obligation for shares of the Company's
Series B Common Stock. Beginning January 1, 1998, the Company began to provide
the noncontributory defined benefit plans to the Company's remaining non-union
employees who were not included in the Pension Plans at December 31, 1997.

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

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

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

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

   During 2000, the Company implemented a voluntary Incentive Retirement
Program ("IRP") to a group of employees who met certain criteria for age and
length of service. The 110 employees who elected to participate in the IRP
received an incentive retirement benefit, additional age and years of service
in calculating pension benefits, and post-retirement medical benefits. This
plan resulted in a one-time charge of $15.4 million, which is included in the
Special charge in the accompanying consolidated statement of income for the
year ended December 31, 2000. The net pension (benefit) cost for the
Hearst-Argyle Pension Plans for the years ended December 31, 2001, 2000 and
1999 in which the Company's employees participate are as follows:

                                      67

<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements--(Continued)


<TABLE>
<CAPTION>
                                                 Pension Benefits
                                           ---------------------------
                                             2001      2000     1999
                                           --------  --------  -------
                                                  (In thousands)
        <S>                                <C>       <C>       <C>
        Service cost...................... $  4,606  $  4,679  $ 4,852
        Interest cost.....................    5,669     4,442    3,933
        Expected return on plan assets....  (10,433)  (10,150)  (8,352)
        Amortization of prior service cost      438       442      442
        Amortization of transitional asset     (113)     (113)    (113)
        Recognized actuarial gain.........   (1,406)   (1,984)    (673)
                                           --------  --------  -------
           Net periodic (benefit) cost....   (1,239)   (2,684)      89
        Curtailment gain recognized.......       --      (113)    (155)
        Special termination benefit charge       --    12,604       --
                                           --------  --------  -------
           Net pension (benefit) cost..... $ (1,239) $  9,807  $   (66)
                                           ========  ========  =======
</TABLE>

   The following schedule presents the change in benefit obligation, change in
plan assets and a reconciliation of the funded status at December 31, 2001 and
2000:

<TABLE>
<CAPTION>
                                                          Pension Benefits
                                                         ------------------
                                                           2001      2000
                                                         --------  --------
                                                           (In thousands)
    <S>                                                  <C>       <C>
    Change in benefit obligation:
       Benefit obligation at beginning of year.......... $ 76,464  $ 54,819
           Service cost.................................    4,606     4,679
           Interest cost................................    5,669     4,442
           Participant contributions....................        8         7
           Plan amendments..............................      901        --
           Benefits paid................................   (7,926)   (1,187)
           Special termination benefit charge...........       --    12,604
           Curtailment loss.............................       --       741
           Actuarial loss...............................    5,950       359
                                                         --------  --------
       Benefit obligation at end of year................   85,672    76,464
    Change in plan assets:
       Fair value of plan assets at beginning of year...  120,579   114,114
           Actual (loss) return on plan assets, net.....  (20,081)    6,740
           Employer contributions.......................    1,778       907
           Participant contributions....................        8         7
           Benefits paid................................   (7,926)   (1,189)
                                                         --------  --------
       Fair value of plan assets end of year............   94,358   120,579
    Reconciliation of funded status:
       Funded status.................................... $  8,686  $ 44,115
       Contributions paid during the fourth quarter.....      258       227
       Unrecognized actuarial loss (gain)...............   10,267   (27,603)
       Unrecognized transition asset....................     (315)     (427)
       Unrecognized prior service cost..................    4,004     3,540
                                                         --------  --------
           Net amount recognized at end of year......... $ 22,900  $ 19,852
                                                         ========  ========
</TABLE>

                                      68

<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements--(Continued)


<TABLE>
<CAPTION>
                                                                   Pension Benefits
                                                                   ----------------
                                                                    2001     2000
                                                                   -------  -------
                                                                    (In thousands)
<S>                                                                <C>      <C>
Amounts recognized in the statement of
 financial position:
   Other assets................................................... $30,266  $27,358
   Other liabilities..............................................  (7,366)  (7,506)
                                                                   -------  -------
       Net amount recognized at end of year....................... $22,900  $19,852
                                                                   =======  =======
Additional year-end information for pension plans with accumulated
  benefit obligations in excess of plan assets:
   Projected benefit obligation................................... $15,110  $10,140
   Accumulated benefit obligation................................. $10,773  $ 6,899
   Fair value of plan assets...................................... $ 4,732  $ 2,023
</TABLE>

   The weighted-average assumptions used for computing the projected benefit
obligation at December 31, 2001 and 2000 are as follows:

<TABLE>
<CAPTION>
                                                         Pension Benefits
                                                         ---------------
                                                          2001      2000
                                                         ----      ----
        <S>                                              <C>       <C>
        Discount rate................................... 7.50%     8.00%
        Expected long-term rate of return on plan assets 9.00%     9.00%
</TABLE>

   The measurement dates for the above weighted-average assumptions were
September 30, 2001 and 2000. The rate of compensation increase is based on an
age-related table with assumed rates of increase in compensation ranging from
1.28% to 18.25%.

   The Hearst-Argyle Pension Plans' assets consist primarily of stocks, bonds
and cash equivalents. In connection with the Hearst Transaction, the Company
was allocated the pension costs that were contributed by the Hearst Broadcast
Group to multiemployer union pension plans. No information is available for
each contributing employer for this plan. The Company's contributions to the
multiemployer union pension plans for the years ended December 31, 2001, 2000
and 1999 were approximately $664,000, $646,000 and $630,000, respectively.

   The Company's qualified employees may contribute from 2% to 16% of their
compensation up to certain dollar limits to a self-directed 401(k) savings
plan. The Company matches in cash, one-half of the employee contribution up to
6% of the employee's compensation. The 401(k) savings plan assets are invested
in a variety of diversified mutual funds. The Company contributions to this
plan for the years ended December 31, 2001, 2000 and 1999 were approximately
$2,019,000, $2,133,000 and $2,182,000, respectively.

17.  Fair Value of Financial Instruments

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

<TABLE>
<CAPTION>
                                       December 31, 2001 December 31, 2000
                                       ----------------- -----------------
                                       Carrying  Fair    Carrying  Fair
                                        Value    Value    Value    Value
                                       -------- -------- -------- --------
      <S>                              <C>      <C>      <C>      <C>
      Credit Facility................. $275,000 $274,343 $546,000 $546,474
      Senior Subordinated Notes.......    2,596    2,718    2,596    2,710
      Senior Notes....................  432,110  397,206  449,305  442,535
      Private Placement Debt..........  450,000  453,613  450,000  435,429
      Convertible Preferred Securities  200,000  200,000       --       --
</TABLE>

                                      69

<PAGE>

                        HEARST-ARGYLE TELEVISION, INC.

            Notes to Consolidated Financial Statements--(Continued)


   The fair values of the Senior Subordinated Notes and the Senior Notes were
determined based on the quoted market prices. The fair values of the Credit
Facility, the Private Placement Debt, and the Convertible Preferred Securities
(the "7.5% Preferred Securities") were determined using discounted cash flow
models.

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

18.  Quarterly Information (unaudited)

<TABLE>
<CAPTION>
                                           1st Quarter       2nd Quarter       3rd Quarter        4th Quarter
                                        ----------------- ----------------- ------------------ -----------------
                                          2001     2000     2001     2000     2001      2000     2001     2000
                                        -------- -------- -------- -------- --------  -------- -------- --------
                                                         (In thousands, except per share data)
<S>                                     <C>      <C>      <C>      <C>      <C>       <C>      <C>      <C>
Total revenues......................... $148,342 $169,930 $176,368 $196,546 $145,188  $178,404 $171,978 $202,401
Station operating income...............   22,521   42,330   48,257   66,636   18,348    52,011   42,134   76,901
Income (loss) before extraordinary item   20,277    4,556    9,703   16,349   (6,905)    9,433    7,486   12,132
Net income (loss) (a)..................   20,277    4,556    9,703   16,349   (6,442)    9,433    7,549   14,587
Income (loss) applicable
 to common stockholders (b)............   19,921    4,200    9,348   15,994   (6,797)    9,078    7,193   14,231
Income (loss) per
 common share basic: (c)
Income (loss) before extraordinary item $   0.22 $   0.05 $   0.10 $   0.17 $  (0.08) $   0.10 $   0.08 $   0.12
Net income (loss)...................... $   0.22 $   0.05 $   0.10 $   0.17 $  (0.07) $   0.10 $   0.08 $   0.15
Number of common shares used in the
 calculation...........................   91,864   92,768   91,767   92,617   91,792    92,308   91,815   92,052
Income (loss) per
 common share diluted: (c)
Income (loss) before extraordinary item $   0.22 $   0.05 $   0.10 $   0.17 $  (0.08) $   0.10 $   0.08 $   0.12
Net income (loss)...................... $   0.22 $   0.05 $   0.10 $   0.17 $  (0.07) $   0.10 $   0.08 $   0.15
Number of common shares used in the
 calculation...........................   92,133   92,790   91,976   92,634   91,792    92,325   91,912   92,082
</TABLE>
--------
(a) Net income for the third and fourth quarter of 2001 and the fourth quarter
    of 2000 includes an extraordinary item representing premiums paid or
    discounts received, including (net of) write-off of unamortized financing
    costs upon early extinguishment of the Company's debt. See Note 6.
(b) Net income applicable to common stockholders gives effect to dividends on
    the Preferred Stock issued in connection with the acquisition of KHBS/KHOG.
(c) Per common share amounts for the quarters and the full years have each been
    calculated separately. Accordingly, quarterly amounts may not add to the
    annual amounts because of differences in the average common shares
    outstanding during each period and, with regard to diluted per common share
    amounts only, because of the inclusion of the effect of potentially
    dilutive securities only in the periods in which such effect would have
    been dilutive.

                                      70

<PAGE>

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

   Not applicable.

                                   PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

   Information called for by Item 10 is set forth under the headings "Executive
Officers of the Company" and "Election of Directors Proposal" in the Company's
Proxy Statement relating to the 2002 Annual Meeting of Stockholders (the "2002
Proxy Statement"), which is incorporated herein by reference.

ITEM 11.  EXECUTIVE COMPENSATION

   Information called for by Item 11 is set forth under the heading "Executive
Compensation and Other Matters" in the 2002 Proxy Statement, which is
incorporated herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

   Information called for by Item 12 is set forth under the heading "Principal
Stockholders" in the 2002 Proxy Statement, which is incorporated herein by
reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

   Information called for by Item 13 is set forth under the heading "Certain
Relationships and Related Transactions" in the 2002 Proxy Statement, which is
incorporated herein by reference.

                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K

   (a) Financial Statements, Schedules and Exhibits

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

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

                                      71

<PAGE>

                 SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS

                        HEARST-ARGYLE TELEVISION, INC.

<TABLE>
<CAPTION>
                                                      Additions
                                          Balance at  Charged to                 Balance at
                                         Beginning of Costs and                    End of
              Description                    Year      Expenses  Deductions         Year
              -----------                ------------ ---------- -----------     ----------
<S>                                      <C>          <C>        <C>             <C>
Year Ended December 31, 1999:
   Allowance for uncollectable accounts.  $2,026,000  $2,820,000 $(1,984,000)(1) $2,862,000
Year Ended December 31, 2000:
   Allowance for uncollectable accounts.  $2,862,000  $2,852,000 $(1,907,000)(1) $3,807,000
Year Ended December 31, 2001:
   Allowance for uncollectable accounts.  $3,807,000  $5,702,000 $(2,154,000)(1) $7,355,000
</TABLE>
--------
(1) Net write-off of accounts receivable.

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

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

 10.18  Amendment No. 2, dated as of December 19, 2001, in respect of the Five-Year Credit Agreement
          dated as of April 12, 1999.

 10.19  Employment Agreement, dated as of June 1, 2001, between the Company and David J. Barrett.

 10.25  Amended and Restated 1997 Stock Option Plan.

  21.1  List of Subsidiaries of the Company.

  23.1  Consent of Deloitte & Touche LLP.

  24.1  Powers of Attorney (contained on signature page hereto).
</TABLE>

(b)  Reports on Form 8-K

   On December 20, 2001, the Company filed a Current Report on Form 8-K
reporting the completion of a private placement with institutional investors of
$200 million principal amount of convertible preferred securities through a
subsidiary trust of the Company.

(c)  Exhibits

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

                                      72

<PAGE>

                                   EXHIBITS

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

    2.1       Amended and Restated Agreement and Plan of Merger, dated as of March 26, 1997, among The
              Hearst Corporation, HAT Merger Sub, Inc., HAT Contribution Sub, Inc. and Argyle (incorporated
              by reference to Appendix A of the Company's Registration Statement on Form S-4 (File No. 333-
              32487)).

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

    3.1       Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to
              Appendix C of the Company's Registration Statement on Form S-4 (File No. 333-32487)).

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

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

    4.1       Form of Indenture relating to the Senior Subordinated Notes due 2005 (including form of
              security) (incorporated by reference to Exhibit 10.6 of the Company's Registration Statement on
              Form S-1 (File No. 33-96026)).

    4.2       First Supplemental Indenture, dated as of June 1, 1996, among KHBS Argyle Television, Inc,
              Arkansas Argyle Television, Inc. and United States Trust Company of New York, as trustee
              (incorporated by reference to Exhibit 4.3 of Argyle's Current Report on Form 8-K dated June 11,
              1996).

    4.3       Second Supplemental Indenture dated as of August 29, 1997 among KMBC Hearst-Argyle
              Company Television, Inc., WBAL Hearst-Argyle Television, Inc., WCVB Hearst-Argyle
              Television, Inc., WISN Hearst-Argyle Television, Inc., WTAE Hearst-Argyle Television, Inc and
              United States Trust Company of New York (incorporated by reference to Exhibit 4.8 of the
              Company's Registration Statement on Form S-3 (File No. 333-36659)).

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

    4.5       Form of Note for Senior Subordinated Notes due 2005 (incorporated by reference to Exhibit A to
              Exhibit 10.6 of the Company's Registration Statement on Form S-1 (File No. 33-96026)).

    4.6       Indenture, dated as of November 13, 1997, between the Company and Bank of Montreal Trust
              Company, as trustee (incorporated by reference to Exhibit 4.1 of the Company's Current Report
              on Form 8-K dated November 12, 1997).

    4.7       First Supplemental Indenture, dated as of November 13, 1997, between the Company and Bank of
              Montreal Trust Company, as trustee (incorporated by reference to Exhibit 4.2 of the Company's
              Current Report on Form 8-K dated November 12, 1997).

    4.8       Global Note representing $125,000,000 of 7% Senior Notes Due November 15, 2007
              (incorporated by reference to Exhibit 4.3 of the Company's Current Report on Form 8-K dated
              November 12, 1997).
</TABLE>

                                      73

<PAGE>

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

     4.9      Global Note representing $175,000,000 of 71/2% Debentures Due November 15, 2027
              (incorporated by reference to Exhibit 4.4 of the Company's Current Report on Form 8-K dated
              November 12, 1997).

    4.10      Second Supplemental Indenture, dated as of January 13, 1998, between the Company and Bank
              of Montreal Trust Company, as trustee (incorporated by reference to Exhibit 4.3 of the
              Company's Current Report on Form 8-K dated January 13, 1998).

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

    4.12      Form of Registration Rights Agreement among the Company and the Holders (incorporated by
              reference to Exhibit B to Exhibit 2.1 of the Company's Schedule 13D/A, filed on September 5,
              1997).

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

    4.14      Amended and Restated Declaration of Trust of Hearst-Argyle Capital Trust (incorporated by
              reference to Exhibit 99.1 of the Company's Current Report on Form 8-K dated December 20,
              2001).

    4.15      Terms of 7.5% Series A and Series B Convertible Preferred Securities and 7.5% Series A and
              Series B Convertible Common Securities (incorporated by reference to Exhibit 99.2 of the
              Company's Current Report on Form 8-K dated December 20, 2001).

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

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

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

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

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

    10.4      Primary Television Affiliation Agreement for television Station KMBC, dated April 26, 1988,
              by and between Capital Cities/ABC, Inc. and The Hearst Corporation (incorporated by
              reference to Exhibit 10.1 of the Company's Quarterly Report for the quarter ended September
              30, 1997).

    10.5      Primary Television Affiliation Agreement for television Station WCVB, dated November 21,
              1989, by and between Capital Cities/ABC, Inc. and The Hearst Corporation (incorporated by
              reference to Exhibit 10.2 of the Company's Quarterly Report for the quarter ended September
              30, 1997).
</TABLE>

                                      74

<PAGE>

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

    10.6      Primary Television Affiliation Agreement for television Station WISN, dated November 2,
              1990, by and between Capital Cities/ABC, Inc. and The Hearst Corporation (incorporated by
              reference to Exhibit 10.3 of the Company's Quarterly Report for the quarter ended September
              30, 1997).

    10.7      Primary Television Affiliation Agreement for Television Station WTAE, dated July 14, 1989,
              by and between Capital Cities/ABC, Inc. and The Hearst Corporation (incorporated by
              reference to Exhibit 10.4 of the Company's Quarterly Report for the quarter ended September
              30, 1997).

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

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

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

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

   10.12...   Asset Exchange Agreement between Hearst-Argyle Stations, Inc., STC Broadcasting, Inc., STC
              Broadcasting of Vermont, Inc., STC License Company and STC Broadcasting of Vermont
              Subsidiary, Inc., dated February 18, 1998 (incorporated by reference to Exhibit 10.27 of the
              Company's Form 10-K for the fiscal year ended December 31, 1997).

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

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

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

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

   10.17...   Amendment No. 1, dated as of August 1, 2001, in respect of the Five-Year Credit Agreement
              dated as of April 12, 1999 (incorporated by reference to Exhibit 10.1 of the Company's
              Quarterly Report for the quarter ended September 20, 2001).

   10.18...   Amendment No. 2, dated as of December 19, 2001, in respect of the Five-Year Credit
              Agreement dated as of April 12, 1999.

   10.19...   Employment Agreement, dated as of June 1, 2001, between the Company and David J. Barrett.

   10.20...   Option Agreement, dated as of June 5, 2000, between Hearst-Argyle Properties, Inc. and Emmis
              Communications Corporation (incorporated by reference to Exhibit 10.1 of the Company's
              Quarterly Report for the quarter ended June 30, 2000).
</TABLE>

                                      75

<PAGE>

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

   10.21...   Asset Purchase Agreement among the Company, Hearst-Argyle Properties, Inc. and WMUR-
              TV, Inc. dated September 7, 2000 (incorporated by reference to Exhibit 10.1 of the Company's
              Quarterly Report for the quarter ended September 30, 2000).

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

   10.23...   Employment Agreement, dated December 1, 2000, between the Company and Philip M. Stolz
              (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report for the quarter
              ended March 31, 2001).

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

   10.25...   Amended and Restated 1997 Stock Option Plan.

    16.1      Letter from Ernst & Young LLP to the Securities and Exchange Commission, dated October 20,
              1997, pursuant to Item 304(a)(3) of Reg. S-K (incorporated by reference to Exhibit 16.1 of the
              Company's Current Report on Form 8-K/A dated August 29, 1997).

    21.1      List of Subsidiaries of the Company.

    23.1      Consent of Deloitte & Touche LLP.

    24.1      Powers of Attorney (contained on signature page hereto).
</TABLE>

                                      76

<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/  Jonathan C. Mintzer
                                             ----------------------------------
                                         Name: Jonathan C. Mintzer
                                        Title:  Vice President, Secretary
                                                 and General Counsel

                                          Dated:            March 27, 2002
                                                -------------------------------

                               POWER OF ATTORNEY


   Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the Company
in the capacities indicated on March 27, 2002.

         Signatures                         Title                     Date
         ----------                         -----                     ----

    /s/  David J. Barrett        President, Chief Executive      March 27, 2002
-----------------------------        Officer and Director
      David J. Barrett          (Principal Executive Officer)

     /s/  Harry T. Hawks      Executive Vice President and Chief March 27, 2002
-----------------------------         Financial Officer
       Harry T. Hawks           (Principal Financial Officer)

      /s/  Debra Delman            Vice President-Finance        March 27, 2002
-----------------------------   (Principal Accounting Officer)
        Debra Delman

       /s/  Bob Marbut
-----------------------------       Chairman of the Board        March 27, 2002
         Bob Marbut

 /s/  Frank A. Bennack, Jr.
-----------------------------             Director               March 27, 2002
    Frank A. Bennack, Jr.

   /s/  John G. Conomikes
-----------------------------             Director               March 27, 2002
      John G. Conomikes

     /s/  Ken J. Elkins
-----------------------------             Director               March 27, 2002
        Ken J. Elkins

    /s/  Victor F. Ganzi
-----------------------------             Director               March 27, 2002
       Victor F. Ganzi

    /s/  George R. Hearst
-----------------------------             Director               March 27, 2002
      George R. Hearst

                                      77

<PAGE>

         Signatures                       Title                  Date
         ----------                       -----                  ----

  /s/ William R. Hearst III
-----------------------------           Director            March 27, 2002
    William R. Hearst III

    /s/ Gilbert C. Maurer
-----------------------------           Director            March 27, 2002
      Gilbert C. Maurer

   /s/ Michael E. Pulitzer
-----------------------------           Director            March 27, 2002
     Michael E. Pulitzer

      /s/ David Pulver
-----------------------------           Director            March 27, 2002
        David Pulver

    /s/ Virginia H. Randt
-----------------------------           Director            March 27, 2002
      Virginia H. Randt

  /s/ Caroline L. Williams
-----------------------------           Director            March 27, 2002
    Caroline L. Williams

                                      78

<PAGE>

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit No.                                           Description
-----------                                           -----------
<C>         <S>
    2.1     Amended and Restated Agreement and Plan of Merger, dated as of March 26, 1997, among The
            Hearst Corporation, HAT Merger Sub, Inc., HAT Contribution Sub, Inc. and Argyle
            (incorporated by reference to Appendix A of the Company's Registration Statement on Form S-4
            (File No. 333-32487)).

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

    3.1     Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to
            Appendix C of the Company's Registration Statement on Form S-4 (File No. 333-32487)).

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

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

    4.1     Form of Indenture relating to the Senior Subordinated Notes due 2005 (including form of
            security) (incorporated by reference to Exhibit 10.6 of the Company's Registration Statement on
            Form S-1 (File No. 33-96026)).

    4.2     First Supplemental Indenture, dated as of June 1, 1996, among KHBS Argyle Television, Inc,
            Arkansas Argyle Television, Inc. and United States Trust Company of New York, as trustee
            (incorporated by reference to Exhibit 4.3 of Argyle's Current Report on Form 8-K dated June 11,
            1996).

    4.3     Second Supplemental Indenture dated as of August 29, 1997 among KMBC Hearst-Argyle
            Company Television, Inc., WBAL Hearst-Argyle Television, Inc., WCVB Hearst-Argyle
            Television, Inc., WISN Hearst-Argyle Television, Inc., WTAE Hearst-Argyle Television, Inc.
            and United States Trust Company of New York (incorporated by reference to Exhibit 4.8 of the
            Company's Registration Statement on Form S-3 (File No. 333-36659).

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

    4.5     Form of Note for Senior Subordinated Notes due 2005 (incorporated by reference to Exhibit A to
            Exhibit 10.6 of the Company's Registration Statement on Form S-1 (File No. 33-96026)).

    4.6     Indenture, dated as of November 13, 1997, between the Company and Bank of Montreal Trust
            Company, as trustee (incorporated by reference to Exhibit 4.1 of the Company's Current Report
            on Form 8-K dated November 12, 1997).

    4.7     First Supplemental Indenture, dated as of November 13, 1997, between the Company and Bank
            of Montreal Trust Company, as trustee (incorporated by reference to Exhibit 4.2 of the
            Company's Current Report on Form 8-K dated November 12, 1997).

    4.8     Global Note representing $125,000,000 of 7% Senior Notes Due November 15, 2007
            (incorporated by reference to Exhibit 4.3 of the Company's Current Report on Form 8-K dated
            November 12, 1997).
</TABLE>

                                      79

<PAGE>

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

    4.9     Global Note representing $175,000,000 of 71/2% Debentures Due November 15, 2027
            (incorporated by reference to Exhibit 4.4 of the Company's Current Report on Form 8-K dated
            November 12, 1997).

    4.10    Second Supplemental Indenture, dated as of January 13, 1998, between the Company and Bank of
            Montreal Trust Company, as trustee (incorporated by reference to Exhibit 4.3 of the Company's
            Current Report on Form 8-K dated January 13, 1998).

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

    4.12    Form of Registration Rights Agreement among the Company and the Holders (incorporated by
            reference to Exhibit B to Exhibit 2.1 of the Company's Schedule 13D/A, filed on September 5,
            1997).

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

    4.14    Amended and Restated Declaration of Trust of Hearst-Argyle Capital Trust (incorporated by
            reference to Exhibit 99.1 of the Company's Current Report on Form 8-K dated December 20,
            2001).

    4.15    Terms of 7.5% Series A and Series B Convertible Preferred Securities and 7.5% Series A and
            Series B Convertible Common Securities (incorporated by reference to Exhibit 99.2 of the
            Company's Current Report on Form 8-K dated December 20, 2001).

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

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

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

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

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

   10.4     Primary Television Affiliation Agreement for television Station KMBC, dated April 26, 1988, by
            and between Capital Cities/ABC, Inc. and The Hearst Corporation (incorporated by reference to
            Exhibit 10.1 of the Company's Quarterly Report for the quarter ended September 30, 1997).

   10.5     Primary Television Affiliation Agreement for television Station WCVB, dated November 21,
            1989, by and between Capital Cities/ABC, Inc. and The Hearst Corporation (incorporated by
            reference to Exhibit 10.2 of the Company's Quarterly Report for the quarter ended September 30,
            1997)
</TABLE>

                                      80

<PAGE>

<TABLE>
<CAPTION>
Exhibit No.                                            Description
-----------                                            -----------
<C>         <S>
   10.6     Primary Television Affiliation Agreement for television Station WISN, dated November 2, 1990,
            by and between Capital Cities/ABC, Inc. and The Hearst Corporation (incorporated by reference
            to Exhibit 10.3 of the Company's Quarterly Report for the quarter ended September 30, 1997).

   10.7     Primary Television Affiliation Agreement for Television Station WTAE, dated July 14, 1989, by
            and between Capital Cities/ABC, Inc. and The Hearst Corporation (incorporated by reference to
            Exhibit 10.4 of the Company's Quarterly Report for the quarter ended September 30, 1997).

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

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

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

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

   10.12    Asset Exchange Agreement between Hearst-Argyle Stations, Inc., STC Broadcasting, Inc., STC
            Broadcasting of Vermont, Inc., STC License Company and STC Broadcasting of Vermont
            Subsidiary, Inc., dated February 18, 1998 (incorporated by reference to Exhibit 10.27 of the
            Company's Form 10-K for the fiscal year ended December 31, 1997).

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

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

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

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

   10.17    Amendment No. 1, dated as of August 1, 2001, in respect of the Five-Year Credit Agreement
            dated as of April 12, 1999 (incorporated by reference to Exhibit 10.1 of the Company's Quarterly
            Report for the quarter ended September 20, 2001).

   10.18    Amendment No. 2, dated as of December 19, 2001, in respect of the Five-Year Credit Agreement
            dated as of April 12, 1999.

   10.19    Employment Agreement, dated as of June 1, 2001, between the Company and David J. Barrett.

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

   10.21    Asset Purchase Agreement among the Company, Hearst-Argyle Properties, Inc. and WMUR-TV,
            Inc. dated September 7, 2000 (incorporated by reference to Exhibit 10.1 of the Company's
            Quarterly Report for the quarter ended September 30, 2000).
</TABLE>

                                      81

<PAGE>

<TABLE>
<CAPTION>
Exhibit No.                                            Description
-----------                                            -----------
<S>             <C>
10.22           Letter Agreement between the Company and NBC Television Network dated June 30, 2000
                (incorporated by reference to Exhibit 10.2 of the Company's Quarterly Report for the quarter
                ended September 30, 2000).
10.23           Employment Agreement, dated December 1, 2000, between the Company and Philip M. Stolz
                (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report for the quarter
                ended March 31, 2001).
10.24           Consulting Agreement, dated January 1, 2001, between the Company and Argyle Communications,
                Inc. (incorporated by reference to Exhibit 10.2 of the Company's Quarterly Report for the quarter
                ended March 31, 2001).
10.25           Amended and Restated 1997 Stock Option Plan.
16.1            Letter from Ernst & Young LLP to the Securities and Exchange Commission, dated October 20,
                1997, pursuant to Item 304(a)(3) of Reg. S-K (incorporated by reference to Exhibit 16.1 of the
                Company's Current Report on Form 8-K/A dated August 29, 1997).
21.1            List of Subsidiaries of the Company.
23.1            Consent of Deloitte & Touche LLP.
24.1            Powers of Attorney (contained on signature page hereto).
</TABLE>


                                      82