UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549



FORM 10-Q



QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2008

Commission file number: 0-25042

YOUNG BROADCASTING INC.(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction of incorporation or organization)

13-3339681(I.R.S. employer identification no.)599 Lexington Avenue
New York, New York 10022(Address of principal executive offices)


Registrant's
telephone number, including area code:(212) 754-7070



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 ý    No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o

Accelerated filer ý

Non-accelerated filer o (Do not check if a smaller reporting company)

Smaller reporting company o


Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes o    No ý

Number of shares of Common Stock outstanding as of July 31, 2008: 21,836,161 shares of Class A common stock, and 1,941,414 shares of Class B
common stock.



---





YOUNG BROADCASTING INC.        FORM 10-Q        Table of Contents

PagePart I Financial InformationItem 1.

Financial Statements (unaudited)Consolidated Balance Sheets as of December 31, 2007 and June 30, 2008


3Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2007 and 2008


4Consolidated Statements of Stockholders' Deficit for the Six Months Ended June 30, 2008


5Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2007 and 2008


6Notes to Consolidated Financial Statements


7Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations


19Item 3.

Quantitative and Qualitative Disclosure About Market Risk


33Item 4.

Controls and Procedures


34Part II Other InformationItem 1.

Legal Proceedings


35Item 1A.

Risk Factors


35Item 4.

Submission of Matters to a Vote of Security Holders


35Item 6.

Exhibits


35Signatures


36


See
accompanying notes to consolidated financial statements

2

---





Young Broadcasting Inc. and Subsidiaries        Consolidated Balance Sheets

Part I Financial Information

Item 1.Financial Statements

December 31,
2007

June 30,
2008(Unaudited)AssetsCurrent assets:Cash and cash equivalents

$
28,339,173

$
15,490,455Short term investments


34,603,430


20,877,022Trade accounts receivable, less allowance for doubtful accounts of $822,000 in 2007 and $862,000 in 2008


29,315,724


26,577,854Current portion of program license rights


6,434,575


2,167,648Prepaid expenses


2,270,921


1,295,842Assets held for sale


386,821,181


242,563,606Total current assets


487,785,004


308,972,427Property and equipment, less accumulated depreciation and amortization of $173,356,000 in 2007 and $175,961,000 in 2008


50,546,786


47,354,417Program license rights, excluding current portion


281,060


196,761Deposits and other assets


3,350,623


2,996,113Investments in unconsolidated subsidiaries


1,545,494


1,467,170Indefinite lived intangible assets


124,492,447


124,492,447Definite lived intangible assets, less accumulated amortization of $38,731,000 in 2007 and $40,214,000 in 2008


55,279,470


53,797,134Deferred charges, less accumulated amortization of $6,628,000 in 2007 and $7,443,000 in 2008


8,419,832


7,604,151Total assets

$
731,700,716

$
546,880,620Liabilities and stockholders' deficitCurrent liabilities:Trade accounts payable

$
4,071,103

$
2,186,947Accrued interest


19,272,726


20,599,083Accrued salaries and wages


4,890,716


3,451,131Accrued expenses


6,430,042


6,016,933Current installments of program license liability


6,078,232


2,153,860Current installment of long term debt


3,500,000


3,500,000Liabilities held for sale


23,677,966


13,544,466Total current liabilities


67,920,785


51,452,420Program license liability, excluding current installments


379,993


271,153Long-term debt, excluding current installments


824,258,277


822,218,651Deferred tax liability and other long-term tax liabilities


53,095,269


52,053,947Other liabilities


5,473,131


5,283,991Total liabilities

$
951,127,455

$
931,280,162Stockholders' deficit:Class A Common Stock, $.001 par value. Authorized 40,000,000 shares; issued and outstanding 20,931,068 shares at 2007 and 21,837,231 shares at 2008


20,931


21,837Class B Common Stock, $.001 par value. Authorized 20,000,000 shares; issued and outstanding 1,941,414 shares at 2007 and 2008


1,941


1,941Additional paid-in capital


395,357,682


398,412,900Accumulated other comprehensive loss


(2,374,639
)

(2,435,234
)Accumulated deficit


(612,432,654
)

(780,400,986
)Total stockholders' deficit


(219,426,739
)

(384,399,542
)Total liabilities and stockholders' deficit

$
731,700,716

$
546,880,620


3

---





Young Broadcasting Inc. and Subsidiaries        Consolidated Statements of Operations        (Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,2007

2008

2007

2008Net operating revenue

$
39,648,303

$
36,989,463

$
75,252,031

$
71,945,717Operating expenses, excluding depreciation expense


10,902,967


10,106,838


21,793,242


20,669,366Amortization of program license rights


2,273,088


2,228,609


4,527,513


4,451,439Selling, general and administrative expenses, excluding depreciation expense


14,311,958


13,533,479


28,287,345


26,735,621Depreciation and amortization


3,464,297


3,628,672


6,974,914


7,135,886Corporate overhead, excluding depreciation expense


3,097,403


3,225,532


6,770,116


6,859,294Operating income


5,598,590


4,266,333


6,898,901


6,094,111Interest expense, net


(17,250,699
)

(15,982,591
)

(34,291,013
)

(32,673,615
)Other expense, net


(261,626
)

(136,842
)

(55,734
)

(359,426
)(17,512,325
)

(16,119,433
)

(34,346,747
)

(33,033,041
)Loss from continuing operations before income taxes


(11,913,735
)

(11,853,100
)

(27,447,846
)

(26,938,930
)(Provision)/benefit for tax expense


(794,335
)

(607,185
)

(1,905,628
)

124,690Loss from continuing operations


(12,708,070
)

(12,460,285
)

(29,353,474
)

(26,814,240
)Loss from discontinued operations, net of taxes


(5,476,577
)

(140,535,808
)

(14,203,123
)

(141,154,092
)Net loss

$
(18,184,647
)
$
(152,996,093
)
$
(43,556,597
)
$
(167,968,332
)Basic and diluted net loss per common share:Loss from continuing operations

$
(0.62
)
$
(0.53
)
$
(1.45
)
$
(1.15
)Loss from discontinuing operations


(0.27
)

(5.94
)

(0.70
)

(6.05
)Net loss

$
(0.89
)
$
(6.47
)
$
(2.15
)
$
(7.20
)Weighted average sharesBasic and dilutive


20,359,243


23,640,859


20,234,468


23,329,871


See
accompanying notes to consolidated financial statements.

4

---





Young Broadcasting Inc. and Subsidiaries        Consolidated Statements of Stockholders' Deficit        (Unaudited)

Common StockAdditional
Paid-In
Capital

Accumulated
Deficit

Accumulated
Comprehensive
Loss

Total
Comprehensive
Loss

Total
Stockholders'
DeficitClass A

Class BBalance at December 31, 2007

$
20,931

$
1,941

$
395,357,682

$
(612,432,654
)
$
(2,374,639
)



$
(219,426,739
)Contribution of shares into Company's defined contribution plan


1,086





933,969











935,055Cancellations under restricted stock plan


(180
)




(102,190
)










(102,370
)Restricted stock plan compensation








2,223,439











2,223,439Net loss for the six months ended June 30, 2008.











(167,968,332
)




(167,968,332
)

(167,968,332
)Unrealized loss on derivative instrument














(60,595
)

(60,595
)

(60,595
)Total comprehensive loss

















(168,028,927
)Balance at June 30, 2008

$
21,837

$
1,941

$
398,412,900

$
(780,400,986
)
$
(2,435,234
)



$
(384,399,542
)


See accompanying notes to consolidated financial statements

5

---





Young Broadcasting Inc. and Subsidiaries        Consolidated Statements of Cash Flows        (Unaudited)

Six Months Ended June 30,2007

2008Operating activitiesNet loss

$
(43,556,597
)
$
(167,968,332
)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization of property and equipment


5,559,791


4,837,868Provision for uncollectible accounts


45,427


478,906Amortization of program license rights


12,637,746


11,335,307Amortization of intangibles and deferred charges


2,951,016


2,298,017Impairment of broadcast licenses and other intangible assets





139,063,447Non-cash compensation


3,195,402


2,595,099Income on unconsolidated subsidiaries, net of dividend


(9,201
)

(78,063
)Provision (benefit) for income taxes


12,609,162


(124,690
)Loss (gain) on sale of fixed assets


89,283


(57,663
)Unrealized appreciation on investments


(617,650
)

(298,533
)Realized appreciation on investments


(274,258
)

(71,558
)Payments on programming license liabilities


(13,689,593
)

(13,884,668
)Decrease in trade accounts receivable


1,420,088


1,898,226Decrease in prepaid expenses


785,908


340,172Decrease in trade accounts payable


(1,702,465
)

(1,955,642
)Decrease in accrued expenses and other liabilities


(1,834,598
)

(1,556,269
)Increase in other assets


(26,292
)

(267,024
)Net cash used in operating activities

$
(22,416,831
)
$
(23,415,400
)Investing activitiesCapital expenditures

$
(2,610,092
)
$
(1,811,946
)Purchase of short-term investments


(36,768,694
)

(6,903,500
)Maturities of short-term investments


40,000,000


21,000,000Proceeds from the disposal of fixed assets


37,502


32,128Net cash provided by investing activities

$
658,716

$
12,316,682Financing activitiesDeferred debt financing costs incurred


(4,208
)

Principal payments under capital lease obligations


(15,409
)

Principal payments on Credit Facility


(1,750,000
)

(1,750,000
)Net cash used in financing activities


(1,769,617
)

(1,750,000
)Net decrease in cash


(23,527,732
)

(12,848,718
)Cash and cash equivalents at beginning of year


66,545,612


28,339,173Cash and cash equivalents at June 30

$
43,017,880

$
15,490,455Supplemental disclosure of cash flow informationInterest paid

$
36,727,111

$
32,214,383Income tax payments, net

$
29,000

$
89,500


See
accompanying notes to consolidated financial statements.

6

---





Notes To Consolidated Financial Statements

1. Basis of Presentation

The business operations of Young Broadcasting Inc. and subsidiaries (the "Company") consist of ten network affiliated stations (five with ABC, three with CBS, one with NBC and one
with MyNetworkTV). KRON-TV had been independent until March 16, 2006, when it entered into an affiliation agreement with MyNetworkTV. On March 28, 2006, KELO-TV,
KDLO-TV and KPLO-TV, our digital stations, also entered into an affiliation agreement with MyNetwork TV. The MyNetwork TV affiliation agreements are for a term of five years
commencing with the 2006-2007 broadcast season. MyNetworkTV started operations on September 5, 2006. The markets served by our stations are located in Lansing, Michigan, Green Bay,
Wisconsin, Lafayette, Louisiana, Nashville and Knoxville, Tennessee, Albany, New York, Richmond, Virginia, Davenport, Iowa, Sioux Falls, South Dakota and San Francisco, California. In addition, the
accompanying condensed consolidated financial statements include the Company's wholly owned national television sales representation firm. Significant intercompany transactions and accounts have been
eliminated.

On
November 7, 2007, the Board of Directors of the Company approved a process which is expected to lead to the eventual sale of the Company's San Francisco station,
KRON-TV. Accordingly, the results of KRON-TV have been recorded as a discontinued operation and assets and liabilities are classified as "held for sale." (See Note 3).

The
accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial statements and with
the instructions to Form 10-Q and Article 10 of Regulation S-X. The interim financial statements are unaudited but include all adjustments, which are of a
normal recurring nature, that the Company considers necessary for a fair presentation of the consolidated financial position and the consolidated results of operations and cash flows for such period.

Operating
results of interim periods are not necessarily indicative of results for a full year. For further information, refer to the Company's consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2007.

For
equity investments in which the Company owns between 20% and 50% of voting shares and has significant influence over operating and financial policies, the equity method of accounting
is used. Four of the Company's stations have equity-method investments in third parties that operate transmitting towers used by the Company. Accordingly, the Company's share in earnings and losses of
these unconsolidated subsidiaries are included in other income (expense), net in the accompanying Consolidated Statements of Operations of the Company, except the losses related to the equity
investment related to KRON-TV. The Company's share of unconsolidatedsubsidiary loss, for continuing operations, was approximately $101,000 and $102,000 for the six months
ended June 30, 2007 and 2008, respectively, and its share of unconsolidatedsubsidiary loss, for continuing operations was approximately $51,000 for both the three months ended
June 30, 2007 and 2008.

In
December 2007, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 141(R),Business
Combinationsand SFAS No. 160,Noncontrolling Interests in Consolidated Financial Statements, an amendment of Accounting
Research Bulletin No. 51 ("SFAS 160"). Changes for business combination transactions pursuant to SFAS No. 141(R) include, among others, expensing acquisition-related transaction
costs as incurred, the recognition of contingent consideration arrangements at their acquisition date fair value and capitalization of in-process research and development assets acquired
at their acquisition date fair value. Changes in accounting for noncontrolling (minority) interests pursuant to SFAS No. 160 include, among others, the classification of noncontrolling interest
as a component of consolidated stockholders'

7

---



Notes To Consolidated Financial Statements (Continued)

1. Basis of Presentation (Continued)

equity
and the elimination of "minority interest" accounting in results of operations. SFAS No. 141(R) and SFAS No. 160 are required to be adopted simultaneously and are effective for
fiscal years beginning on or after December 15, 2008. The adoption of SFAS No. 141(R) will affect the accounting for the Company's acquisitions that occur after the adoption date. Based
on the Company's current structure, the Company does not believe the adoption of SFAS No. 160 will have a material impact on the Company's financial statements.

In
March 2008, the FASB issued SFAS No. 161,Disclosures about Derivative Instruments and Hedging Activities. The new standard is
intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's
financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early
application encouraged. The Company is currently evaluating the impact of the adoption of SFAS No. 161, but does not anticipate it to have a material impact on the Company's financial
statements.

Reclassification

Certain amounts in previously issued financial statements have been reclassified to conform to the 2008 presentation, primarily the
reclassification of certain deferred tax liabilities to liability for income taxes. Furthermore, the operating results of KRON-TV for the three and six months ended June 30, 2007
have been reclassified to discontinued operations.

2. Stock-Based Compensation

On May 4, 2004, the stockholders of the Company approved the 2004 Equity Incentive Plan ("2004 Plan"). The 2004 Plan is a continuation of the 1995 Stock Option Plan and supplants
the 1995 Stock Option Plan, under which no further awards will be granted. On May 6, 2008, the stockholders of the Company approved an amendment to the 2004 Plan increasing the aggregate number
of shares of Common Stock for issuance under the 2004 Plan by 1,000,000 shares of common stock to 5,550,000 shares of common stock. The Plan is administered by the Compensation Committee of the Board
of Directors.

On
November 29, 2005, the Company entered into an exchange agreement with each of its executive officers (collectively, the "Exchange Agreements"). Pursuant to the Exchange
Agreements, options to purchase an aggregate of 2,198,375 shares of common stock of the Company, representing all of the outstanding and unexercised stock options held by such executive officers, were
cancelled and, in exchange for such cancelled options (which had a fair market value of approximately $182,000), the executive officers were awarded an aggregate of 318,791 deferred stock units (which
had an aggregate value of approximately $602,000) under the 2004 Plan. The compensation expense associated with the fair market value of the deferred stock units is being recognized ratably over the
three year vesting period.

On
November 30, 2005, the Company commenced an offer to all eligible employees to exchange all of their outstanding stock options. Under the terms of this offer, participating
employees had the ability to exchange their outstanding options with an exercise price of less than $30.44 per share for new restricted shares that vest over a period of three years. The number of
restricted shares to be received was based upon certain exchange ratios. In order to participate in this offer, employees were required to tender all of their options, regardless of when granted or
the exercise price. Pursuant to the

8

---



Notes To Consolidated Financial Statements (Continued)

2. Stock-Based Compensation (Continued)

terms
of the offer, tendered options with exercise prices of $30.44 or above were to be cancelled upon expiration of the offer, without the payment of any consideration. Options to purchase an
aggregate of 949,776 shares of common stock were eligible for participation in the offer. The offer expired on December 30, 2005, at which time the Company accepted for exchange and cancelled
options to purchase a total of 945,776 shares of common stock with a fair market value of approximately $181,000, and issued an aggregate of 158,992 restricted shares of Class A common stock,
under the 2004 Plan, for an aggregate value of approximately $401,000. The compensation expense associated with the fair market value of the restricted stock issued is being recognized ratably over
the three year vesting period.

In
June 2006 and June 2007, the Company awarded 636,700 and 602,968 deferred stock units, respectively, to executive officers of the Company under the 2004 Plan, with aggregate market
values at the date of grant of approximately $2.3 million and $2.3 million, respectively. Deferred stock awards represent the right to receive shares of Class B common stock at
the end of specified deferral periods. The deferred stock units vest ratably in three equal annual installments beginning one year from the date of the grant and, as they vest, are charged to the
income statement as non-cash compensation expense included in selling, general and administrative expenses. Upon vesting the recipients will be credited with units equivalent to shares.
During the deferral period, the participants have no voting or other rights associated with stock ownership unless and until the shares are actually delivered at the end of the deferral period. The
end of the deferral period for the deferred stock awards will occur after the termination of employment. Additionally, granted but unvested deferred stock units are forfeited upon termination of
employment, unless for reasons of death or disability.

In
June 2006 and June 2007, the Company awarded 590,450 and 495,500 shares, respectively, of restricted stock to certain officers and other eligible key employees under the 2004 Plan,
with market values at the date of grant of approximately $2.1 million and $1.9 million, respectively. The restricted shares vest ratably in three equal annual installments beginning one
year from the date of the grant and, as they vest, are charged to the income statement as non cash compensation expense included in the selling, general and administrative expenses. During the vesting
period, the participants have voting rights and the right to receive any dividends paid with respect to such shares. Upon vesting, the restricted stock recipients will receive shares of unrestricted
Class A Common stock. Additionally, granted but unvested shares are forfeited upon termination of employment, unless for reasons of death or disability.



The Company has 518,017 and 509,925 stock options outstanding at December 31, 2007 and June 30, 2008, respectively.



The fair value of nonvested restricted shares and deferred stock units is determined based on the closing trading price of the
Company's Class A common stock on the grant date. The Company recorded non-cash compensation expense in connection with the issuance of the restricted shares and deferred stock
units of approximately $1.2 million and $1.1 million, respectively, for the three months ended June 30, 2007 and 2008, and $2.2 million and $2.1 million,
respectively, for the six months ended June 30, 2007 and 2008.

9

---



Notes To Consolidated Financial Statements (Continued)

2. Stock-Based Compensation (Continued)

There
were 2,245,147 and 1,225,594 shares of unvested restricted and deferred stock units at December 31, 2007 and June 30, 2008, respectively, with a weighted average
share price of $3.95 at both dates.

The
Company estimates recording additional compensation expense relating to previously issued restricted shares and deferred stock units of approximately $1.5 million for the
remainder of 2008 and approximately $1.9 million and $571,000 during 2009 and 2010, respectively.

The
Company adopted FASB Statement No. 123 (R),Share-Based Payment("SFAS 123R"), which requires companies to measure and
recognize compensation expense for all stock-based payments at fair value. The Company adopted SFAS 123R using the modified prospective method, and consequently has not retroactively adjusted
results from prior periods.

The
Company does not currently recognize tax benefits resulting from tax deductions in excess of the compensation costs recognized because of the federal and state net operating loss
carryforwards
available to offset future federal and state taxable income. Accordingly, the adoption of SFAS 123R did not have any impact on the Company's consolidated statements of cash flows.

3. Sale of Station

On November 7, 2007, the Board of Directors of the Company approved a process which is expected to lead to the eventual sale of the Company's San Francisco station,
KRON-TV. The Company assessed this transaction in accordance with FASB 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144") and has
determined that this process met the "held for sale" criteria of SFAS 144 at December 31, 2007 and continues to meet the criteria at June 30, 2008.

In
accordance with the provisions of SFAS No. 144, KRON's results of operations are presented as discontinued operations and its assets and liabilities are classified as "held for
sale" for all periods presented. The results of operations presented as discontinued operations and the assets and liabilities classified as "held for sale" are summarized below.

Three Months Ended
June 30,

Six Months Ended
June 30,2007

2008

2007

2008(dollars in thousands)Net revenues

$
12,305

$
10,457

$
23,549

$
21,463Operating expenses


13,084


11,986


25,723


23,703Impairment of intangible assets





139,063





139,063Net operating loss


(779
)

140,592


(2,174
)

(141,303
)Non-operating (expense) / income


(639
)

56


(1,326
)

149Pre-tax loss


(1,418
)

(140,536
)

(3,500
)

(141,154
)Income tax provision


(4,059
)




(10,703
)

Net loss

$
(5,477
)
$
(140,536
)
$
(14,203
)
$
(141,154
)


In
accordance with FASB 142,Goodwill and Other Intangible Assets,and FAS 144,Accounting for the
Impairment or Disposal of Long-Lived Assets, during the three month ended June 30, 2008, as a result of weaknesses in the general advertising market, and the
San Francisco market in particular, the Company determined that the broadcast license and other intangible assets for KRON-TV were

10

---



Notes To Consolidated Financial Statements (Continued)

3. Sale of Station (Continued)

impaired
resulting in an impairment loss of approximately $139.1 million which is included in the net loss from discontinued operations. After considering the impairment of the broadcasting
license and other intangible assets, KRON-TV is reflected in the accompanying financial statements at its carrying value which approximates the estimated fair value less cost to sell.

KRON-TV
recorded a deferred income tax provision of $4.1 million and $10.7 million for the three and six months ended June 30, 2007, with no such
provision recorded for the three and six months ended June 30, 2008. The 2007 income tax provision relates to a deferred tax liability of $4.1 million and $10.7 million for the
taxable temporary difference related to indefinite-lived intangible assets which continued to be amortized for tax purposes not expected to reverse during the net operating loss carryforward period.
Due to the planned sale of KRON-TV, temporary differences generated during the three and six months ended June 30, 2008 related to indefinite-lived intangible assets will be offset
by net operating losses.

KRON-TV
has an equity investment in a third party that operates a transmitting tower. The Company applies equity method accounting to this investment. KRON-TV's
share of unconsolidatedsubsidiary earnings, was approximately $202,000 and $176,000 for the six months ended June 30, 2007 and 2008, respectively, and its share of
unconsolidatedsubsidiary earnings, was approximately $105,000 and $80,000 for the three months ended June 30, 2007 and 2008.

December 31,
2007

June 30,
2008(dollars in thousands)Assets:Accounts receivable

$
7,417

$
7,778Current portion of program license rights


10,985


3,708Prepaid expenses


206


841Property and equipment, net


12,050


12,242Broadcast licenses and other intangibles, net


353,399


214,336Program license rights, excluding current portion


954


351Investments


1,810


3,308Assets held for sale

$
386,821

$
242,564Liabilities:Accounts payable


4,051


2,796Accrued salaries


1,224


1,112Accrued expenses


742


394Current installment of program license liabilities


13,488


5,565Program license rights, excluding current installments


2,277


637Other liabilities


1,896


3,040Liabilities held for sale

$
23,678

$
13,544


11

---



Notes To Consolidated Financial Statements (Continued)

4. Intangible Assets

Intangible assets, which include broadcasting licenses, network affiliation agreements, and other intangibles, are carried on the basis of cost, less any accumulated amortization. Cost
is based upon appraisals performed at the time of acquisition. Broadcast licenses are considered to have an indefinite life. Network affiliation agreements are amortized over 25 years, and
other definite lived intangible assets are amortized over 10 to 15 years.

The
following table sets forth the summarized disclosures related to intangible assets:

As of December 31, 2007

As of June 30, 2008Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount(dollars in thousands)Indefinite-lived intangible assets:Broadcast licenses

$
124,492




$
124,492

$
124,492




$
124,492Definite-lived intangible assets:Network Affiliations

$
91,164

$
(36,652
)
$
54,512

$
91,164

$
(38,087
)
$
53,077Other intangible assets

$
2,847

$
(2,079
)
$
768

$
2,847

$
(2,127
)
$
720$
94,011

$
(38,731
)
$
55,280

$
94,011

$
(40,214
)
$
53,797


Aggregate
amortization expense for both the six months ended June 30, 2007 and 2008 was $1.5 million. Aggregate amortization expense for the three months ended
June 30, 2007 and 2008 was $743,000 and $741,000, respectively.

It
is the Company's policy to account for Network Affiliations and other definite-lived intangible assets at the lower of amortized cost or estimated fair value. As part of an ongoing
review of the valuation and amortization of other intangible assets of the Company and its subsidiaries, management assesses the carrying value of Network Affiliations and other definite-lived
intangible assets if facts and circumstances suggest that there may be impairment. If this review indicates that Network Affiliations and other definite-lived intangible assets will not be recoverable
as determined by a non-discounted cash flow analysis of the operating assets over the remaining amortization period, the carrying value of other intangible assets would be reduced to
estimated fair value.

The
Company tests the broadcast licenses on an annual basis and more frequently if indicators of impairment exist, using a "Greenfield" income approach. Under this approach, the
broadcast license is valued by analyzing the estimated after-tax discounted future cash flows of the station. The assumptions used in the discounted cash flow models reflect historical
station performance, industry standards and trends in the respective markets. An analysis of the financial multiples for publicly-traded broadcasting companies, as well as a comparable sales analysis
of television station
sales, was also utilized to confirm the results of the income approach. The Company adopted this methodology to value broadcast licenses as the Company believes this methodology has, in recent years,
become the methodology generally used within the broadcast industry to value such licenses.

If
these estimates or related assumptions materially change in the future, the Company may be required to record impairment charges not previously recorded for these assets.

5. Long-Term Debt

On May 3, 2005, the Company amended and restated its senior credit facility (as amended, the "Senior Credit Facility"). The Senior Credit Facility consists of (i) a term
loan in the amount of

12

---



Notes To Consolidated Financial Statements (Continued)

5. Long-Term Debt (Continued)

$300.0 million
that matures in 2012 and (ii) a revolving credit facility in the amount of $20.0 million that matures in 2010. On May 3, 2005, the full $300.0 million
of the term loan was borrowed. Approximately $278.0 million of the proceeds of the term loan borrowing were used to finance the purchase by the Company of all of its $246.9 million
outstanding principal amount of 81/2% Senior Notes due 2008 pursuant to the cash tender offer and consent solicitation commenced on April 11, 2005. The balance of the term loan
borrowing will be used for working capital. The Company pays an annual commitment fee at the rate of 0.5% per annum of the undrawn amounts under the revolving credit portion of the Senior Credit
Facility. The Company capitalized approximately $6.0 million of fees associated with the new term loan and revolving credit facility.

On
May 3, 2005, the Company entered into an interest rate swap agreement for a notional amount of $71.0 million with a commercial bank who is also a lender under the Senior
Credit Facility. The Company accounted for this agreement as a cash flow hedge under FASB Statement No. 133,Accounting for Derivative Instruments and Hedging
Activities,and as such, the change in the fair value of the interest rate swap was reported as a component of other comprehensive income (loss). For the three and six months
ended June 30, 2008 income of approximately $90,000 and approximately $61,000,
respectively, was recorded in other comprehensive income (loss). The swap expired on May 8, 2008. Accordingly, the fair value of the swap was reduced to zero during the second quarter of 2008.

On
May 30, 2006, the Company entered into (i) the First Amendment (the "First Amendment") to the Senior Credit Facility and (ii) the Increase Joinder (the "Increase
Joinder") to the Senior Credit Facility. The First Amendment effected certain amendments to the Senior Credit Facility including, without limitation, (i) the reduction of the minimum amount of
cash the Company must maintain from $35.0 million to $10.0 million and (ii) an increase of 0.25% to each of the Base Rate Margin and the Eurodollar Margin (used in the calculation
of interest rates payable by the Company under the Senior Credit Facility). As a result of the margin increases, the Base Rate and the Eurodollar Rate margins are now equal to 1.50% and 2.50%,
respectively. The Increase Joinder provided for a $50.0 million incremental term loan under the Senior Credit Facility. The full $50.0 million of the incremental term loan was borrowed
by the Company on May 30, 2006. The proceeds of the incremental term loan borrowing will be used for working capital and to pay fees and expenses related to the incremental term loan and the
First Amendment. The Company capitalized approximately $1.4 million of fees associated with the incremental term loan and First Amendment.

At
June 30, 2008, approximately $339.9 million was outstanding under the term loan and the full $20.0 million was undrawn under the revolving facility. The Senior
Credit Facility provides, at the option of the Company, that borrowed funds bear interest based upon the London Interbank Offered Rate ("LIBOR") or "Base Rate." In addition to the index rate, the
Company pays a fixed incremental percentage at 1.50% with the Base Rate and 2.50% with LIBOR. At June 30, 2008, the Company was paying interest based on LIBOR, and the rate ranged from
approximately 5.00% and 5.25%. Each of the Company's subsidiaries has guaranteed the Company's obligations under the Senior Credit Facility. The Senior Credit Facility is secured by the pledge of all
the capital stock of the Company's subsidiaries and a first priority lien on all of the assets of the Company and its subsidiaries. The Senior Credit Facility requires the Company to maintain a cash
and short-term investment balance of at least $10.0 million. The other covenants contained in the Senior Credit Facility are substantially similar to the covenants contained in the
indentures governing the Company's senior subordinated notes. At June 30, 2008, the Company was in compliance with all covenants contained under the Senior Credit Facility.

13

---



Notes To Consolidated Financial Statements (Continued)

5. Long-Term Debt (Continued)

Long-term
debt at December 31, 2007 and June 30, 2008 consisted of the following:

December 31,
2007

June 30,
2008(in thousands)Senior Credit Facility

$
341,625

$
339,87583/4% Senior Subordinated Notes due 2014


140,000


140,00010% Senior Subordinated Notes due 2011


346,133
(1)

345,844
(1)Total Long Term Debt

$
827,758

$
825,719Less:Scheduled current maturities


(3,500
)

(3,500
)Long term debt excluding all current installments

$
824,258

$
822,219






The
Company's Senior Subordinated Notes are general unsecured obligations of the Company and subordinated in right of payment to all senior debt, including all indebtedness of the
Company under the Senior Credit Facility. The Senior Subordinated Notes are guaranteed, fully and unconditionally, and are guaranteed jointly and severally, on a senior subordinated unsecured basis by
all of the Company's wholly owned subsidiaries. The Company has no independent assets or operations, other than the equity in its subsidiaries.

6. Fair Value Measurements

In February 2007, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 159, "The Fair Value Options for Financial
Assets and Liabilities." The fair value options established by SFAS No. 159 permits, but does not require, all entities to choose to measure eligible items at fair value, as measured in
accordance with SFAS No. 157, at specified election dates. An entity would report unrealized gains and losses on items for which the fair value option has been elected in earnings at each
subsequent reporting date. SFAS No. 159 is effective as of the beginning of the Company's first fiscal year that begins after November 15, 2007. As the Company did not elect to measure
the fair value of any of its financial instruments under the provisions of SFAS No. 159, our adoption of this statement effective January 1, 2008 did not have any impact on our financial
statements.

In
September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements." SFAS No. 157 defines fair value, establishes a framework for measuring fair value under current
standards in U.S. generally accepted accounting principles, and requires additional disclosure about fair value measurements. The Statement applies to other accounting pronouncements that require or
permit fair value measurements and are effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. On February 12, 2008, the FASB issued
FASB Staff Position (FSP) 157-2 which delays the effective date of SFAS No. 157 for one year, for all non-financial assets and non-financial liabilities,
except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), until fiscal years beginning after November 11, 2008 and
interim periods within those fiscal years. The Company elected a partial deferral of SFAS No. 157 under the provisions of FSP 157-2 related to the measurement of fair value used
when evaluating broadcast licenses and other intangible and long-lived assets for impairment and valuing asset

14

---



Notes To Consolidated Financial Statements (Continued)

6. Fair Value Measurements (Continued)

retirement
obligations. The Company is currently evaluating the impact of FSP 157-2 on its financial statements.

As
of January 1, 2008, the Company has adopted FAS 157 for the fair value measurement of recurring items, including its marketable securities, deferred compensation
investment, deferred compensation liability and derivative liability. There was no material impact on the basis for which the fair value of these items was determined.

The
following table presents the balances of assets and liabilities measured at fair value on a recurring basis as of June 30, 2008:

Fair Value Measurements at Reporting Date UsingTotal

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable Inputs
(Level 3)(in thousands)AssetsMarketable securities(1)

$
20,857

$
3,005

$
17,852


Deferred compensation investment(2)


2,047


2,047





Total

$
22,904

$
5,052

$
17,852


LiabilitiesDeferred compensation liability(3)

$
2,047




$
2,047


Total

$
2,047




$
2,047





---

Marketable
securities include Unites States ("U.S") treasury bills (approximately 14% of the total) and short-term commercial paper (approximately 86% of the total.) The
Company measures the fair value of its $3.0 million treasury bills under a Level 1 input as defined by FAS 157 and the fair value of its $17.9 million
short-term commercial paper is measured under a Level 2 input as defined by FAS 157. For the six months ended June 30, 2008, the Company recorded approximately
$299,000, of unrealized gain on these marketable securities, which was recorded as part of interest expense, net in the consolidated statement of operations.

The
Company measures the fair value of its deferred compensation investments under a Level 1 input as defined by FAS 157. For the six months ended June 30, 2008, the
Company recorded approximately $171,000, of unrealized loss on these investments, which was recorded as part of other (income) expense, net in the consolidated statement of operations.

The
Company measures the fair value of its deferred compensation liability under a Level 2 input as defined by FAS 157. For the three and six months ended June 30,
2008, the deferred compensation
liability increased approximately $171,000, which was recorded as part of corporate overhead in the consolidated statement of operations.

15

---



Notes To Consolidated Financial Statements (Continued)

7. Income Taxes

The unrecognized tax benefits including interest and penalties and the effect of the reclassification discussed in Note 1, were $6.2 million and $5.6 million at
December 31, 2007 and June 30, 2008, respectively. Provisions for interest and penalties related to income tax liabilities are included in income tax expense. The Company had
approximately $1.8 million and $2.0 million accrued at December 31, 2007 and June 30, 2008, respectively, for the payment of interest and penalties. The Company settled its
New York State tax examinations for the tax years 2003 through 2005 in April, 2008 for approximately $837,000. The Company anticipates settlement of the New York City tax examination for tax years
2003 through 2005 in the next twelve months. Since the examination is on-going, there can be no assurance that the outcome from the examination will not have a significant impact on the
tax position of the Company.

While
the Company does not anticipate any significant changes to the total amount of income tax liabilities within the next twelve months, there can be no assurance that the outcomes
from examinations will not have a significant impact on individual tax positions of the Company.

With
limited exceptions, the Company is no longer subject to U.S. federal and state and local income tax audits by taxing authorities for years through December 31, 2003.

At
December 31, 2007, the Company had net operating loss ("NOL") carryforwards for federal tax purposes of approximately $526.9 million expiring at various
dates through 2027. Of the total NOL carryforwards approximately $415.5 million relate to KRON-TV.

In
accordance with SFAS No.142 the Company no longer amortizes the book basis in the indefinite-lived intangibles, but continues to amortize these intangibles for tax purposes. The
Company will have deferred tax liabilities that will arise each quarter because the taxable temporary differences related to the amortization of these assets is not expected to reverse prior to the
expiration period of the Company's deductible temporary differences unless the related assets are sold or an impairment of the assets is recorded. The deferred tax liability for the three months ended
June 30, 2007 and 2008 increased $732,000 and $545,000, respectively, due to this effect. The Company expects that it will record a total of approximately $1.3 million to increase
deferred tax liabilities during the remaining six months of 2008. Additionally, during the six months ended June 30, 2008, the increase in deferred tax liabilities discussed above was offset by
the effect of a revision to the Company's computation of the taxable temporary differences related to indefinite-lived assets.

8. Employee Benefit Plans

The Company's defined benefit pension plan covers the IBEW Local 45 of KRON-TV employees.

The
Company expects to contribute approximately $761,000 to the benefit plan in 2008. To date approximately $587,000 has been contributed.

16

---



Notes To Consolidated Financial Statements (Continued)

8. Employee Benefit Plans (Continued)

Components
of the net periodic benefit (cost) were as follows:

Three Months Ended
June 30,

Six Months Ended
June 30,2007

2008

2007

2008Service cost

$
10,575

$
10,600

$
21,150

$
21,200Interest cost


153,648


156,100


307,295


312,200Expected return of plan assets


(177,566
)

(192,025
)

(355,131
)

(384,050
)Amortization of the unrecognized obligation or transition asset


34,153


28,525


68,306


57,050Net periodic cost

$
20,810

$
3,200

$
41,620

$
6,400


9. Commitments and Contingencies



Each of the Company's stations is affiliated with its network pursuant to an affiliation agreement. The following chart provides
details concerning the affiliation of our stations and the dates of expiration of the respective affiliation agreements.

Station

Network Affiliation

Expiration DateWKRN-TV (Nashville, TN)

ABC

December 31, 2009WTEN-TV (Albany, NY)

ABC

December 31, 2009WRIC-TV (Richmond, VA)

ABC

December 31, 2009WATE-TV (Knoxville, TN)

ABC

December 31, 2009WBAY-TV (Green Bay, WI)

ABC

December 31, 2009KWQC (Quad Cities, IA)

NBC

January 1, 2015WLNS (Lansing, MI)

CBS

September 15, 2012KELO (Sioux Falls, SD)

CBS(1)

April 2, 2015KLFY (Lafayette, LA)

CBS

September 30, 2012KRON (San Francisco, CA)

MyNetworkTV

September 5, 2011


---

17

---



Notes To Consolidated Financial Statements (Continued)

9. Commitments and Contingencies (Continued)



In February 2008, the Company implemented an expense reduction plan that is expected to reduce expenses by approximately
$15.0 million on an annualized basis. When complete, the workforce will be reduced by approximately 11%. The implementation of this plan is expected to reduce expenses by approximately
$13.0 million in 2008. As a result of the personnel changes, the Company has incurred approximately $2.1 million in severance costs in 2008, of which approximately $1.0 million
will be paid out subsequent to June 30, 2008. Severance expense is included in selling, general and administrative expenses, excluding depreciation expense, in the Consolidated Statement of
Operations.

10. Earnings Per Share

The weighted average number of shares outstanding during the period has been used to calculate earnings per share. The outstanding stock options and deferred stock units have not been
included in the computation of earnings per share because they would be anti-dilutive.

For
the three and six months ended June 30, 2008, common stock equivalents, consisting of 428,094 and 385,976 shares of common stock underlying outstanding deferred stock units,
have been excluded in the computation as they are anti-dilutive on the loss per share. For the three and six months ended June 30, 2007, common stock equivalents, consisting of 830,982 and
721,110 shares of common stock underlying outstanding deferred stock units, have been excluded in the computation as they are anti-dilutive on the loss per share. For all periods, all
shares underlying outstanding stock options are excluded for the computation of diluted earnings per share, since the exercise price of all previously granted stock options that remain outstanding was
greater than the average market price of the common shares.

18

---





Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations.

Introduction

Management's discussion and analysis of financial condition and results of operations ("MD&A") is provided as a supplement to the
accompanying consolidated financial statements and footnotes to help provide an understanding of the Company's financial condition, changes in financial condition and results of operations. In
addition, reference should be made to the Company's audited consolidated financial statements and accompanying footnotes thereto and related Management's Discussion and Analysis of Financial Condition
and Results of Operations included in the Company's Annual Report on Form 10-K for the year ended December 31, 2007. MD&A is organized as follows:

Overview of our BusinessThis section provides a general description of the Company's business, as well as recent developments that have occurred during 2008 that
the Company believes are important in understanding its results of operations and financial condition or to anticipate future trends.

Results of OperationsThis section provides an analysis of the Company's results of operations for the three and six months ended June 30, 2008 and 2007.
This analysis is presented on a consolidated basis. In addition, this section provides a brief description of significant transactions and events that impact the comparability of the results being
analyzed.

Liquidity and Capital ResourcesThis section provides an analysis of the Company's cash flows for the six months ended June 30, 2008 and 2007. Included in
the discussion of outstanding debt is a discussion of the amount of financial capacity available to fund the Company's future commitments and obligations, as well as a discussion of other financing
arrangements.

Overview of our Business

The operating revenue of the Company's stations is derived primarily from advertising revenue and, to a much lesser extent, from
retransmission revenues from cable and satellite operators and compensation paid by the networks to its affiliated stations for broadcasting network programming.

Advertising
is sold for placement within and adjoining a station's network and locally originated programming. Advertising is sold in time increments and is priced primarily on the basis
of a program's popularity among the specific audience an advertiser desires to reach, as measured principally by periodic audience surveys. In addition, advertising rates are affected by 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 are
highest during the most desirable viewing hours, with corresponding reductions during other hours. The ratings of a local station affiliated with a national television network can be affected by
ratings of network programming.

Most
advertising contracts are short-term, and generally run only for a few weeks. Approximately 68% of the gross revenue of the Company's stations during the quarter ended
June 30, 2008 was generated from local advertising, which is sold by a station's sales staff directly to local accounts. The remainder of the gross revenue is primarily comprised of revenues
from national advertising, which is sold by the Company's wholly owned subsidiary, Adam Young Inc. ("AYI"), a national advertising sales representative. The stations generally pay commissions
to advertising agencies on local, regional and national advertising.

Expenditures
by advertisers tend to be cyclical, reflecting overall economic conditions, as well as budgeting and buying patterns. A decline in the economic prospects of advertisers or
the economy in general could alter current or prospective advertisers' spending priorities. This could cause our revenues or operating results to decline significantly in any given period.

The
advertising revenue of the Company's 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

19

---



advertising
in the period leading up to, and including, the holiday season. In addition, advertising revenue is generally higher during even numbered election years due to spending by political
candidates, which spending typically is heaviest during the fourth quarter.

The
stations' primary operating expenses are for employee compensation, news-gathering, production, programming and promotion costs. A high proportion of the operating
expenses of the stations are fixed.

Television Revenues

Set forth below are the principal types of television revenues received by the Company's stations for the periods indicated and the
percentage contribution of each to the Company's total revenue, as well as agency and national sales representative commissions:

Three Months Ended June 30,

Six Months Ended June 30,2007

2008

2007

2008Amount

%

Amount

%

Amount

%

Amount

%(dollars in thousands)RevenuesLocal

$
30,525


67.1
%
$
28,613


67.8
%
$
58,599


67.5
%
$
55,176


66.9
%National


11,232


24.7


9,910


23.5


20,703


23.9


18,814


22.8Network


684


1.5


730


1.7


1,266


1.5


1,327


1.6Political


1,000


2.2


899


2.1


1,497


1.7


2,722


3.3Barter


420


0.9


362


0.9


774


0.9


679


0.8Production/Other


1,653


3.6


1,702


4.0


3,921


4.5


3,776


4.6Total

$
45,514


100.0

$
42,216


100.0

$
86,760


100.0


82,494


100.0Commissions


(5,866
)

(12.9
)

(5,226
)

(12.4
)

(11,508
)

(13.3
)

(10,548
)

(12.8
)Net Revenue

$
39,648


87.1
%
$
36,990


87.6
%
$
75,252


86.7
%
$
71,946


87.2
%


Results of Operations

Three Months Ended June 30, 2008 Compared to Three Months Ended June 30, 2007

The following table sets forth the Company's operating results for the three months ended June 30, 2008 as compared to the three
months ended June 30, 2007.

For the three months ended June 30,2007

2008

Change

% Change(in thousands, except per share data)Net revenue

$
39,648

$
36,990

$
(2,658
)

(6.7
)%Operating expenses, including SG&A


25,215


23,640


(1,575
)

(6.2
)Amortization of program license rights


2,273


2,229


(44
)

(1.9
)Depreciation and amortization


3,464


3,629


165


4.8Corporate overhead, excluding depreciation expense


3,097


3,226


129


4.2Operating income


5,599


4,266


(1,333
)

(23.8
)Interest expense, net


(17,251
)

(15,982
)

(1,269
)

(7.4
)Other expense


(262
)

(137
)

(125
)

(47.7
)(17,513
)

(16,119
)

(1,394
)

(8.0
)Loss from operations before income taxes


(11,914
)

(11,853
)

61


0.5Income tax provision


(794
)

(607
)

187


23.6Loss from continuing operations


(12,708
)

(12,460
)

248


2.0Loss from discontinued operations


(5,477
)

(140,536
)

(135,059
)

(2,466.0
)Net loss

$
(18,185
)
$
(152,996
)
$
(134,811
)

(741.3
)%


20

---



Net
revenue includes: (i) cash and barter advertising revenues, net of agency commissions; (ii) network compensation; and (iii) other revenues which
represent approximately 4.0% of total net revenue. Net
revenue for the three months ended June 30, 2008 was $37.0 million, as compared to $39.6 million for the three months ended June 30, 2007, a decrease of $2.7 million
or 6.7%. The major components of, and changes to, net revenue were as follows:



Operating
expenses, including selling, general and administrative expenses, for the three months ended June 30, 2008 were $23.6 million as compared to $25.2 million
for the three months ended June 30, 2007, a decrease of $1.6 million, or 6.2%. The major causes of the decreases in operating expenses were as
follows:



Amortization
of program license rights for the three months ended June 30, 2008 was $2.2 million, compared to $2.3 million for the three months ended June 30,
2007, a decrease of $44,000, or 1.9%. This decrease is mainly due to the non-renewal of a programming contract at one of the Company's stations.

Depreciation
of property and equipment and amortization of intangible assets was $3.6 million for the three months ended June 30, 2008 as compared to $3.5 million
for the three months ended June 30, 2007, an increase of approximately $165,000 or 4.8%. Depreciation expense increased for the three months ended June 30, 2008, due to various software
upgrades made during the second half of 2007 and first half of 2008.

21

---



Corporate
overhead for the three months ended June 30, 2008 was $3.2 million, compared to $3.1 million for the three months ended June 30, 2007, an increase
of $129,000, or 4.2%. The increase is due to the following:



The
following acted to offset the increase:



Interest
expense for the three months ended June 30, 2008 was $16.0 million, compared to $17.3 million for the same period in 2007, a net decrease of
$1.3 million, or 7.4%. Interest expense decreased approximately $2.1 million as a result of the combination of lower interest rates on the Company's floating rate debt year over year
(ranging from 5.00% to 5.25% at June 30, 2008 as compared to 7.88% at June 30, 2007) coupled with reduced floating rate debt due to quarterly principal payments. Slightly offsetting this
decrease was a decrease in interest income of approximately $802,000, due to the combination of lower interest rates on the Company's investments, combined with lower cash levels quarter over quarter.

Other
expense for the three months ended June 30, 2008 was $137,000 as compared to $262,000 for the three months ended June 30, 2007 a decrease of $125,000, or 47.7%. This
relates primarily to the loss recorded by the Company of approximately $4,000 during the second quarter of 2008 for the mark to market of the executive deferred compensation plan, as compared to a
gain on the mark to market of the deferred compensation plan of approximately $80,000 for the three months ended June 30, 2007.

The
Company recorded an income tax provision of $607,000 and $794,000 for the three months ended June 30, 2008 and 2007, respectively. The 2008 benefit includes a net deferred tax
expense of approximately $545,000 for the taxable temporary difference related to indefinite-lived intangible assets. The 2007 income tax expense includes a deferred tax expense of $732,000 for the
taxable temporary difference related to indefinite-lived intangible assets.

On
November 7, 2007, the Board of Directors of the Company approved a process which is expected to lead to the eventual sale of the Company's San Francisco station,
KRON-TV. Our consolidated financial statements reflect the operations of KRON-TV as discontinued and assets and liabilities as "held for sale", under the provisions of SFAS
No. 144 for all periods presented. (See Note 3) The Company recorded a loss from discontinued operations of $140.5 million and $5.5 million for the three months ended
June 30, 2008 and 2007, respectively, an increase of
approximately $135.1 million. The increase in the loss from discontinued operations was due to the following:



22

---





As
a result of the above-discussed factors, the net loss for the Company was $153.0 million for the three months ended June 30, 2008, compared to a net loss of
$18.2 million for the three months ended June 30, 2007, a change of $134.8 million, or 741.3%.

23

---



Six Months Ended June 30, 2008 Compared to Six Months Ended June 30, 2007

The following table sets forth the Company's operating results for the six months ended June 30, 2008 as compared to the six
months ended June 30, 2007.

For the six months ended June 30,2007

2008

Change

% Change(in thousands, except per share data)Net revenue

$
75,252

$
71,946

$
(3,306
)

(4.4
)%Operating expenses, including SG&A


50,080


47,405


(2,675
)

(5.3
)Amortization of program license rights


4,528


4,452


(76
)

(1.7
)Depreciation and amortization


6,975


7,136


161


2.3Corporate overhead, excluding depreciation expense


6,770


6,859


89


1.3Operating loss


6,899


6,094


(805
)

(11.7
)Interest expense, net


(34,291
)

(32,674
)

(1,617
)

(4.7
)Other expense


(56
)

(359
)

303


541.1(34,347
)

(33,033
)

1,314


3.8Loss from operations before income taxes


(27,448
)

(26,939
)

509


1.9Income tax (provision)/benefit


(1,906
)

125


2,031


106.6Loss from continuing operations


(29,354
)

(26,814
)

2,540


8.7Loss from discontinued operations


(14,203
)

(141,154
)

(126,951
)

893.8Net loss

$
(43,557
)
$
(167,968
)
$
(124,411
)

285.6
%


Net
revenue for the six months ended June 30, 2008 was $71.9 million, as compared to $75.3 million for the six months ended June 30, 2007, a decrease of
$3.3 million or 4.4%. The major components of, and changes to, net revenue were as follows:



Operating
expenses, including selling, general and administrative expenses, for the six months ended June 30, 2008 were $47.4 million as compared to $50.1 million
for the six months ended June 30,

24

---



2007,
a decrease of $2.7 million, or 5.3%. The major components and changes in operating expenses were as follows:



Amortization
of program license rights was $4.5 million for the six months ended June 30, 2008 and June 30, 2007, respectively.

Depreciation
of property and equipment and amortization of intangible assets was $7.1 million for the six months ended June 30, 2008 as compared to $7.0 million for
the six months ended June 30, 2007, an increase of $161,000, or 2.3%. Depreciation expense increased for the six months ended June 30, 2008, due to various software upgrades made during
the second half of 2007 and first half of 2008.

Corporate
overhead was $6.9 million for the six months ended June 30, 2008 compared to $6.8 million for the six months ended June 30, 2007, an increase of
approximately $89,000, or 1.3%. The major components of corporate expenses were as follows:



25

---





The
following acted to offset the decrease:



Interest
expense for the six months ended June 30, 2008 was $32.7 million, compared to $34.3 million for the same period in 2007, a decrease of $1.6 million,
or 4.7%. Interest expense decreased approximately $3.2 million as a result of the combination of lower interest rates on the Company's floating rate debt year over year (ranging from 5.00% to
5.25% at June 30, 2008 as compared to 7.88% at June 30, 2007) coupled with reduced debt levels resulting from quarterly principal payments. Offsetting this decrease was a decrease in
interest income of approximately $1.5 million, due to the combination of lower interest rates on the Company's investments, combined with lower cash levels quarter over quarter.

Other
expense for the six months ended June 30, 2008 was $359,000 as compared to $56,000 for the six months ended June 30, 2007 an increase of $303,000, or 541.1%. This
relates primarily to the loss recorded by the Company of approximately $171,000 during the six months ended June 30, 2008 for the mark to market of the executive deferred compensation plan, as
compared to a gain on the mark to
market of the deferred compensation plan of approximately $171,000 for the six months ended June 30, 2007.

The
Company recorded an income tax benefit of $125,000 and an income tax provision of $1.9 million for the six months ended June 30, 2008 and 2007, respectively. The 2008
income tax benefit includes a net deferred tax benefit of approximately $424,000, primarily related to the refinement of the taxable temporary difference related to indefinite-lived intangible assets
which continue to be amortized for tax purposes, offset by the tax effect of the difference between the book and tax basis of the intangible assets not expected to reverse during the net operating
loss carryforward period. The 2007 income tax expense includes a deferred tax expense of $1.9 million for the taxable temporary difference related to indefinite-lived intangible assets.

On
November 7, 2007, the Board of Directors of the Company approved a process which is expected to lead to the eventual sale of the Company's San Francisco station,
KRON-TV. Our consolidated financial statements reflect the operations of KRON-TV as discontinued and assets and liabilities as "held for sale", under the provisions of SFAS
No. 144 for all periods presented. (See Note 3) The Company recorded a loss from discontinued operations of $141.2 million and $14.2 million for the six months ended
June 30, 2008 and 2007, respectively, an increase of approximately $127.0 million, or 893.8%. The increase in the loss from discontinued operations was due to the
following:



26

---





As
a result of the above-discussed factors, the net loss for the Company was $168.0 million for the six months ended June 30, 2008 compared to a net loss of
$43.6 million for the six months ended June 30, 2007, a change of $124.4 million, or 285.6%.

27

---



Liquidity and Capital Resources

Current Financial Condition

The following tables present certain data that the Company believes is helpful in evaluating the Company's liquidity and capital
resources (dollars in thousands).

Six Months Ended June 30,2007

2008Net cash (used in) provided by:Operating activities

$
(22,417
)
$
(23,415
)Investing activities


659


12,317Financing activities


(1,770
)

(1,750
)Net decrease in cash and cash equivalents

$
(23,528
)
$
(12,848
)




December 31,
2007

June 30,
2008Cash and cash equivalents

$
28,339

$
15,490Short-term investments

$
34,603

$
20,877Long-term debt, including current portion

$
827,758

$
825,719Undrawn amount under senior credit agreement

$
20,000

$
20,000


The
Company's cash flow is highly dependent upon the state of the advertising market and public acceptance of television programming. Any significant decline in the advertising market or
performance of television programming could adversely impact the Company's cash flow from operations.

The
Company has renewed its affiliations with ABC with respect to WKRN-TV, WTEN-TV, WRIC-TV, WATE-TV and WBAY-TV, with CBS
with respect to WLNS-TV, KLFY-TV and KELO-TV and its satellite stations (KCLO-TV, KDLO-TV and KPLO-TV) and with NBC with respect
to KWQC-TV. The renewed ABC affiliations expire on December 31, 2009, the renewed CBS affiliations for WLNS-TV and KLFY-TV expire on September 12,
2012, the renewed CBS affiliation for KELO-TV and its satellite stations expire on April 2, 2015 and the renewed NBC affiliation expires on January 1, 2015. Under the renewed
ABC, CBS and NBC affiliations, the Company will be receiving significantly less network compensation than it received from ABC, CBS and NBC under the prior agreements.

The
principal uses of cash that affect the Company's liquidity position include the following: the acquisition of and payments under programming rights for entertainment and sporting
events, capital and operational expenditures and interest payments on the Company's debt. The Company is required to make scheduled principal payments under the term loan portion of the senior credit
agreement, on a quarterly basis, equal to 0.25% of the initial aggregate amount of the term loan.

28

---



Sources and Uses of Cash



Net cash used in operating activities for the six months ended June 30, 2008 and 2007 was $23.4 million and
$22.4 million, respectively. The reduction of cash from operating activities for the six months ended June 30, 2008 was due primarily to the following
items:



The
following items acted to offset these changes:





Cash provided by investing activities for the six months ended June 30, 2008 was $12.3 million, compared to cash provided
by investing activities for the six months ended June 30, 2007 of $659,000. The increase of cash from investing activities for the six months ended June 30, 2008 was due primarily to the
following:





Cash used in financing activities for the six months ended June 30, 2008 and 2007 was $1.8 million, respectively. The
Company made principal repayments of $1.8 million on its Senior Credit Facility during the six months ended June 30, 2008 and 2007.

29

---



Debt Instruments, Guarantees and Related Covenants

On May 3, 2005, the Company amended and restated its senior credit facility (as amended, the "Senior Credit Facility"). The
Senior Credit Facility consists of (i) a term loan in the amount of $300.0 million that matures in 2012 and (ii) a revolving credit facility in the amount of $20.0 million
that matures in 2010. On May 3, 2005, the full $300.0 million of the term loan was borrowed. Approximately $278.0 million of the proceeds of the term loan borrowing were used to
finance the purchase by the Company of all of its $246.9 million outstanding principal amount of 81/2% Senior Notes due 2008 pursuant to the cash tender offer and consent
solicitation commenced on April 11, 2005. The balance of the term loan borrowing will be used for working capital. The Company pays an annual commitment fee at the rate of 0.5% per annum of the
undrawn amount under the revolving credit portion of the Senior Credit Facility. The Company capitalized approximately $6.0 million of fees associated with the new term loan and revolving
credit facility.

On
May 3, 2005, the Company entered into an interest rate swap agreement for a notional amount of $71.0 million with a commercial bank who is also a lender under the Senior
Credit Facility. The Company accounted for this agreement as a cash flow hedge under FASB Statement No. 133,Accounting for Derivative Instruments and Hedging
Activities,and as such, the change in the fair value of the interest rate swap was reported as a component of other comprehensive income (loss). For the three and six months
ended June 30, 2008 income of approximately $90,000 and approximately $61,000, respectively, was recorded in other comprehensive income (loss). The swap expired on May 8, 2008.
Accordingly, the fair value of the swap was reduced to zero during the second quarter of 2008.

On
May 30, 2006, the Company entered into (i) the First Amendment (the "First Amendment") to the Senior Credit Facility and (ii) the Increase Joinder (the "Increase
Joinder") to the Senior Credit Facility. The First Amendment effected certain amendments to the Senior Credit Facility including,
without limitation, (i) the reduction of the minimum amount of cash the Company must maintain from $35.0 million to $10.0 million and (ii) an increase of 0.25% to each of
the Base Rate Margin and the Eurodollar Margin (used in the calculation of interest rates payable by the Company under the Senior Credit Facility). As a result of the margin increases, the Base Rate
and the Eurodollar Rate margins are now equal to 1.50% and 2.50%, respectively. The Increase Joinder provided for a $50.0 million incremental term loan under the Senior Credit Facility. The
full $50.0 million of the incremental term loan was borrowed by the Company on May 30, 2006. The proceeds of the incremental term loan borrowing will be used for working capital and to
pay fees and expenses related to the incremental term loan and the First Amendment. The Company capitalized approximately $1.4 million of fees associated with the incremental term loan and
First Amendment.

At
June 30, 2008, approximately $339.9 million was outstanding under the term loan and the full $20.0 million was undrawn under the revolving facility. The Senior
Credit Facility provides, at the option of the Company, that borrowed funds bear interest based upon the London Interbank Offered Rate ("LIBOR") or "Base Rate." In addition to the index rate, the
Company pays a fixed incremental percentage at 1.50% with the Base Rate and 2.50% with LIBOR. At June 30, 2008, the Company was paying interest based on LIBOR, and the rate ranged from
approximately 5.00% and 5.25%. Each of the Company's subsidiaries has guaranteed the Company's obligations under the Senior Credit Facility. The Senior Credit Facility is secured by the pledge of all
the capital stock of the Company's subsidiaries and a first priority lien on all of the assets of the Company and its subsidiaries. The Senior Credit Facility requires the Company to maintain a cash
and short-term investment balance of at least $10.0 million. The other covenants contained in the Senior Credit Facility are substantially similar to the covenants contained in the
indentures governing the Company's senior subordinated notes. At June 30, 2008, the Company was in compliance with all covenants contained under the Senior Credit Facility.

30

---





The following is a summary of our outstanding indebtedness (in thousands) and related annualized interest payments that is recorded during the period. Debt amounts outstanding at
December 31, 2007 and June 30, 2008 were as follows:

December 31,
2007

June 30,
2008

Annualized
Interest
Payments(1)Senior Credit Facility

$
341,625

$
339,875

$
17,66683/4% Senior Subordinated Notes due 2014


140,000


140,000


12,25010% Senior Subordinated Notes due 2011


346,133
(2)

345,844
(2)

34,430Total Debt (excluding capital leases)

$
827,758

$
825,719

$
64,346






The
Company's total debt at June 30, 2008 was approximately $825.7 million, consisting of $339.9 million under the term loan portion of the Senior Credit Facility,
$484.3 million of Senior Subordinated Notes and $1.5 million of bond premiums. In addition, at June 30, 2008, the Company had an additional $20.0 million of undrawn amount
under the Senior Credit Facility.

The
Company anticipates that it will be able to meet its working capital needs, scheduled principal and interest payments under the Company's Senior Credit Facility and Senior
Subordinated Notes and capital expenditures, from cash on hand and cash flow from operations.

Upon
the completion of the sale of KRON-TV, the net cash proceeds are anticipated to be used primarily to pay down debt. This reduction in borrowings will reduce interest
costs and increase liquidity.

Contractual Obligations and Commercial Commitments

As of June 30, 2008, there were no significant changes to our outstanding contractual obligations and commercial commitments as
disclosed in our Annual Report on Form 10-K for the year ended December 31, 2007.

Impact of Recently Issued Accounting Standards

In December 2007, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS")
No. 141(R),Business Combinationsand SFAS No. 160,Noncontrolling Interests in Consolidated Financial
Statements, an amendment of Accounting Research Bulletin No. 51 ("SFAS 160"). Changes for business combination transactions pursuant to SFAS No. 141(R)
include, among others, expensing acquisition-related transaction costs as incurred, the recognition of contingent consideration arrangements at their acquisition date fair value and capitalization of
in-process research and development assets acquired at their acquisition date fair value. Changes in accounting for noncontrolling (minority) interests pursuant to SFAS No. 160
include, among others, the classification of noncontrolling interest as a component of consolidated stockholders' equity and the elimination of "minority interest" accounting in results of operations.
SFAS No. 141(R) and SFAS No. 160 are required to be adopted simultaneously and are effective for fiscal years beginning on or after December 15, 2008. The adoption of SFAS
No. 141(R) will affect the accounting for the Company's acquisitions that occur after the adoption date. Based on the Company's current

31

---



structure,
the Company does not believe the adoption of SFAS No. 160 will have a material impact on the Company's financial statements.

In
March, 2008, the FASB issued SFAS No. 161,Disclosures about Derivative Instruments and Hedging Activities. The new standard is
intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's
financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early
application encouraged. The Company is currently evaluating the impact of the adoption of SFAS No. 161, but does not anticipate it to have a material impact on the Company's financial
statements

Forward Looking Statements

Our business, financial condition, results of operations, cash flows and prospects, and the prevailing market price and performance of
our common stock, may be adversely affected by a number of factors, including the matters discussed below. Certain statements and information set forth in this Quarterly Report on
Form 10-Q, as well as other written or oral statements made from time to time by us or by our authorized executive officers on our behalf, constitute "forward-looking statements"
within the meaning of the Federal Private Securities Litigation Reform Act of 1995. We intend for our forward-looking statements to be covered by the safe harbor provisions for forward-looking
statements contained in the Private Securities Litigation Reform Act of
1995, and we set forth this statement and these risk factors in order to comply with such safe harbor provisions. You should note that our forward-looking statements speak only as of the date of this
Quarterly Report on Form 10-Q or when made and we undertake no duty or obligation to update or revise our forward-looking statements, whether as a result of new information, future
events or otherwise. Although we believe that the expectations, plans, intentions and projections reflected in our forward-looking statements are reasonable, such statements are subject to known and
unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed
or implied by the forward-looking statements. The risks, uncertainties and other factors that our stockholders and prospective investors should consider include, but are not limited to, the
following:



32

---





Item 3.Quantitative and Qualitative Disclosure About Market Risk.

The Company's Senior Credit Facility, with $339.9 million outstanding as of June 30, 2008, bears interest at floating
rates. Accordingly, to the extent there are amounts outstanding under the Senior Credit Facility, we are exposed to potential losses related to changes in interest rates.

The
Company's Senior Subordinated Notes of approximately $484.3 million outstanding principal amount as of June 30, 2008 are general unsecured obligations of the Company
and are subordinated in right of payment to all senior debt, including all indebtedness of the Company under the Senior Credit Facility. The 83/4% Senior Subordinated Notes,
$140.0 million of which is outstanding, mature in 2014. The 10% Senior Subordinated Notes, $344.3 million of which is outstanding, mature in 2011. The annualized interest expense on the
outstanding Senior Subordinated Notes is approximately $46.7 million.

A
hypothetical increase of 100 basis points in interest rates would result in an increase in the pre-tax loss from continuing operations of approximately $3.4 million
annually based on borrowings at June 30, 2008. The same basis point increase if applied to the Company's cash and investments would result in an offsetting decrease to the pre-tax
loss from continuing operations of approximately $269,000 annually. This hypothetical change assumes no change in the principal or investment balance.

The
Company does not enter into derivatives or other financial instruments for trading or speculative purposes; however, in order to manage its exposure to interest rate risk, the
Company enters into derivative financial instruments. On May 3, 2005, the Company entered into an interest rate swap agreement for a notional amount of $71.0 million. The Company
accounted for this agreement using hedge accounting under FAS 133, and as such the change in the fair value of the interest rate swap is reported as a component of other comprehensive income
(loss). The swap expired on May 8, 2008.

33

---



Item 4.Controls and Procedures.

Under the supervision and with participation of our management, including our Chief Executive Officer and Chief Financial Officer, the
Company conducted an evaluation of its disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as of the end of the period covered by this quarterly report. Based on this evaluation our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls
and procedures were effective as of June 30, 2008.

During
the quarter ended June 30, 2008, the Company continued the implementation of a centralized accounting department which will be shared across all locations (with the
exception of KRON-TV which is presented as discontinued operations). While the implementation of the centralized accounting department will enhance our existing controls over financial
reporting, we do not believe the centralization will materially affect, or is reasonably likely to materially affect, our internal controls over financial reporting.

There
has not been any change in the Company's internal control over financial reporting (as defined in Rule 13(a)-15(f) under the Exchange Act) during the quarter
ended June 30, 2008 that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.

34

---





PART II. OTHER INFORMATION

Item 1.Legal Proceedings.

The
Company is involved in legal proceedings and litigation arising in the ordinary course of business. In the Company's opinion, the outcome of such
proceedings and litigation currently pending will not materially affect the Company's financial condition or results of operations.

Item 1A.Risk Factors.

There
have been no material changes in the Company's risk factors from those disclosed in the Company's Annual Report on Form 10-K for the
year ended December 31, 2007.

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

This
item is answered in respect of the Annual Meeting of Stockholders held on May 6, 2008 (the "Annual Meeting"). At the Annual Meeting, the following
number of votes were cast with respect to each matter voted upon:

1.     Proposal
to approve management's nominees for director:

Votes For

Votes WithheldJeffrey S. Amling


32,320,456


936,083Alfred J. Hickey, Jr.


32,013,675


1,242,864Richard Lowe


29,309,378


3,847,161Alexander T. Mason


32,311,054


945,485Deborah A. McDermott


31,464,665


1,791,874James A. Morgan


29,685,672


3,570,867Reid Murray


32,288,595


967,944Vincent J. Young


29,616,600


3,639,939


Such
individuals were elected to serve as directors until the next annual meeting. Other than Jeffrey S. Amling, such individuals constituted the entire Board of Directors and served as
directors of the Company immediately preceding the meeting.

2.     Proposal
to approve an amendment to the Young Broadcasting Inc. 2004 Equity Incentive Plan to increase the aggregate number of common stock for issuance under the
plan by 1,000,000 shares of common stock to 5,550,000 shares of common stock:

For

Against

Abstain

Broker
Non-Votes19,898,067


8,937,579


698,136


3,722,757


Item 6.Exhibits

Exhibit
Number

Exhibit Description10.1

Amendment to the Young Broadcasting Inc. 2004 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K dated May 6, 2008)11

Statement Re Computation of Per Share Earnings31

Rule 13a-14(a)/15d-14(a) Certifications32

Section 1350 Certifications


35

---





SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.

YOUNG BROADCASTING INC.Date: August 14, 2008

By:

/s/VINCENT J. YOUNGVincent J. Young Chairman and Chief Executive OfficerDate: August 14, 2008

By:

/s/JAMES A. MORGANJames A. Morgan Chief Financial Officer
(principal financial officer)


36

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