**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,  D.C.  20549**

 

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**FORM 10-Q**

 

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**Quarterly Report Pursuant to Section 13 or 15 (d) of theSecurities Exchange Act of 1934**

 
| **For the  quarterly period ended  September 30, 2004**          | ** ** | **Commission  file number:  0-25042** |
|------------------------------------------------------------------|------------|---------------------------------------|
|                                                             |       |                                  |
| **YOUNG BROADCASTING INC.**                                      |
| (Exact name of  registrant as specified in its charter)          |
|                                                             |       |                                  |
| **Delaware**                                                     | ** ** | **13-3339681**                        |
| (State of other  jurisdiction of  incorporation or organization) |       | (I.R.S. employer  identification no.) |

 

**599Lexington AvenueNew York,  New York 10022**(Address of principal executive offices)

 

Registrant’s telephonenumber, including area code:      **(212)  754-7070**

 

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Indicate by check markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15 (d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.

 

Yes    ý      No  o

 

Indicate by check markwhether the registrant is an accelerated filer (as defined in Rule 12b-2 of theExchange Act).  Yes  ý    No  o

 

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Number of shares ofCommon Stock outstanding as of November 3, 2004: 17,846,467 shares of Class ACommon Stock and 2,078,233 shares of Class B Common Stock.

 

 

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**YOUNGBROADCASTING INC.**

 

**FORM 10-Q**

 

**Table ofContents**

 
| Part I     | Financial Information |                                                                                                    |
|------------|-----------------------|---------------------------------------------------------------------------------------------------------|
|       |                  |                                                                                                    |
|       | Item 1.               | Financial Statements  (unaudited)                                                                       |   |
|       |                  |                                                                                                    |   |
|       |                  | Consolidated Balance Sheets  as of December 31, 2003 and September 30, 2004                             |   |
|       |                  |                                                                                                    |   |
|       |                  | Consolidated  Statements of Operations for the Three and Nine Months Ended September 30,  2003 and 2004 |   |
|       |                  |                                                                                                    |   |
|       |                  | Consolidated  Statements of Stockholders’ Equity for the Nine Months Ended September 30,  2004     |   |
|       |                  |                                                                                                    |   |
|       |                  | Consolidated  Statements of Cash Flows for the Nine Months Ended September 30, 2003 and  2004           |   |
|       |                  |                                                                                                    |   |
|       |                  | Notes to  Consolidated Financial Statements                                                             |   |
|       |                  |                                                                                                    |   |
|       | Item  2.              | Management’s  Discussion and Analysis of Financial Condition and Results of Operations             |   |
|       |                  |                                                                                                    |   |
|       | Item  3.              | Quantitative  and Qualitative Disclosures About Market Risk                                             |   |
|       |                  |                                                                                                    |   |
|       | Item 4.               | Controls and  Procedures                                                                                |   |
|       |                  |                                                                                                    |   |
| Part II    |                  |                                                                                                    |   |
|       |                  |                                                                                                    |   |
|       | Item 1.               | Legal Proceedings                                                                                       |   |
|       |                  |                                                                                                    |   |
|       | Item 6.               | Exhibits.                                                                                               |   |
|       |                  |                                                                                                    |
| Signatures |                  |

 

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**Part I Financial Information**

**Item 1. *Financial Statements***

 

Young BroadcastingInc. and Subsidiaries

Consolidated BalanceSheets

 
| ** **                                                                                                                                            | ** ** | **December 31,  2003** | ** **    | **September 30,  2004** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------|---------------|-------------------------|------------|
| ** **                                                                                                                                            | ** ** | ** **             | ** **    | **(Unaudited)**         | ** ** |
| **Assets**                                                                                                                                            | ** ** | ** **             | ** **    | ** **              | ** ** |
| Current assets:                                                                                                                                       | ** ** | ** **             | ** **    | ** **              | ** ** |
| Cash and cash  equivalents                                                                                                                            |       | $                      | 331,150,335   | ** **              | **$**      | **73,908,222** | ** ** |
| Trade accounts  receivable, less allowance for doubtful accounts of $1,125,000 in 2003 and  $1,507,000 in 2004                                        |       | 43,287,278             | ** **    | **39,648,775**          | ** ** |
| Current portion  of program license rights                                                                                                            |       | 13,814,019             | ** **    | **21,070,942**          | ** ** |
| Prepaid expenses                                                                                                                                      |       | 3,147,901              | ** **    | **3,148,880**           | ** ** |
| Assets held for  sale                                                                                                                                 |       | 5,441,083              | ** **    | **5,052,495**           | ** ** |
| Total current  assets                                                                                                                                 |       | 396,840,616            | ** **    | **142,829,314**         | ** ** |
| ** **                                                                                                                                            | ** ** | ** **             | ** **    | ** **              | ** ** |
| Property and equipment,  less accumulated depreciation and amortization of $145,120,134 in 2003 and  $164,832,715 in 2004                             |       | 91,112,907             | ** **    | **87,222,942**          | ** ** |
| Program license  rights, excluding current portion                                                                                                    |       | 680,428                | ** **    | **577,999**             | ** ** |
| Deposits and  other assets                                                                                                                            |       | 7,454,872              | ** **    | **7,607,622**           | ** ** |
| Indefinite-lived  intangible assets                                                                                                                   |       | 475,928,822            | ** **    | **475,928,822**         | ** ** |
| Definite-lived  intangible assets, net                                                                                                                |       | 75,805,905             | ** **    | **71,881,887**          | ** ** |
| Deferred  charges, net                                                                                                                                |       | 13,840,698             | ** **    | **11,509,593**          | ** ** |
| **Total  Assets**                                                                                                                                     |       | $                      | 1,061,664,248 | ** **              | **$**      | **797,558,179** | ** ** |
| ** **                                                                                                                                            |       |                   | ** **    | ** **              | ** ** |
| **Liabilities  and stockholders’ equity**                                                                                                        | ** ** | ** **             | ** **    | ** **              | ** ** |
| Current  liabilities:                                                                                                                                 | ** ** | ** **             | ** **    | ** **              | ** ** |
| Trade accounts  payable                                                                                                                               |       | $                      | 8,725,654     | ** **              | **$**      | **9,288,218** | ** ** |
| Accrued interest                                                                                                                                      |       | 16,075,312             | ** **    | **11,484,674**          | ** ** |
| Accrued expenses                                                                                                                                      |       | 17,220,773             | ** **    | **16,592,853**          | ** ** |
| Current  installments of program license liability                                                                                                    |       | 13,204,548             | ** **    | **19,463,855**          | ** ** |
| Current  installments of long-term debt                                                                                                               |       | 223,811,000            | ** **    | **—**              | ** ** |
| Current  installments of obligations under capital leases                                                                                             |       | 1,026,959              | ** **    | **731,616**             | ** ** |
| Liabilities held  for sale                                                                                                                            |       | 220,536                | ** **    | **216,723**             | ** ** |
| Total current  liabilities                                                                                                                            |       | 280,284,782            | ** **    | **57,777,939**          | ** ** |
| Program license  liability, excluding current installments                                                                                            |       | 847,988                | ** **    | **631,849**             | ** ** |
| Long-term debt,  excluding current installments                                                                                                       |       | 741,559,285            | ** **    | **740,191,996**         | ** ** |
| Other  liabilities                                                                                                                                    |       | 10,408,276             | ** **    | **10,959,467**          | ** ** |
| Obligations  under capital leases, excluding current installments                                                                                     |       | 234,154                | ** **    | **42,833**              | ** ** |
| **Total  liabilities**                                                                                                                                |       | 1,033,334,485          | ** **    | **809,604,084**         | ** ** |
| Stockholders’  equity:                                                                                                                           | ** ** | ** **             | ** **    | ** **              | ** ** |
| Class A Common  Stock, $.001 par value. Authorized 40,000,000 shares; issued and outstanding  17,695,857 shares at 2003 and 17,816,435 shares at 2004 |       | 17,696                 | ** **    | **17,816**              | ** ** |
| Class B Common  Stock, $.001 par value. Authorized 20,000,000 shares; issued and outstanding  2,129,414 shares at 2003 and 2,081,533 at 2004          |       | 2,129                  | ** **    | **2,082**               | ** ** |
| Additional  paid-in capital                                                                                                                           |       | 377,802,562            | ** **    | **380,424,936**         | ** ** |
| Accumulated  other comprehensive loss                                                                                                                 |       | (2,082,402             | )             | **(2,082,402**          | **)**      |
| Accumulated  deficit                                                                                                                                  |       | (347,410,222           | )             | **(390,408,337**        | **)**      |
| Total  stockholders’ equity (deficit)                                                                                                            |       | 28,329,763             | ** **    | **(12,045,905**         | **)**      |
| **Total  liabilities and stockholders’ equity**                                                                                                  |       | $                      | 1,061,664,248 | ** **              | **$**      | **797,558,179** | ** ** |

** **

*See accompanying notes to consolidated financial statements*

 

2

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**Young Broadcasting Inc. andSubsidiaries**

**ConsolidatedStatements of Operations**

(Unaudited)

 
| ** **                                                                    | ** ** | **Three Months Ended  September 30,** | ** **  | **Nine Months Ended  September 30,** | ** ** |
|-------------------------------------------------------------------------------|------------|---------------------------------------|-------------|--------------------------------------|------------|
| ** **                                                                    | ** ** | **2003**                              | ** **  | **2004**                             | ** ** | **2003** | ** ** | **2004** | ** ** |
| Net operating  revenue                                                        |       | $                                     | 50,047,097  | ** **                           | **$**      | **53,680,264** | ** ** | $ | 148,597,334 |   | **$** | **160,112,094** | ** ** |
| ** **                                                                    | ** ** | ** **                            |        | ** **                           | ** ** | ** ** |   | ** ** | ** ** |
| Operating  expenses, excluding depreciation expense                           |       | 18,685,481                            |        | **19,262,616**                       | ** ** | 54,884,939 |   | **55,083,348** | ** ** |
| Amortization of  program license rights                                       |       | 4,460,449                             |        | **4,765,045**                        | ** ** | 13,303,485 |   | **13,873,744** | ** ** |
| Selling, general  and administrative expenses, excluding depreciation expense |       | 13,694,954                            |        | **15,381,161**                       | ** ** | 42,600,301 |   | **46,062,911** | ** ** |
| Depreciation and  amortization                                                |       | 6,489,614                             |        | **6,941,951**                        | ** ** | 19,473,812 |   | **19,506,485** | ** ** |
| Corporate  overhead, excluding depreciation expense                           |       | 3,153,515                             |        | **4,294,547**                        | ** ** | 9,581,186 |   | **13,913,039** | ** ** |
| Operating income                                                              |       | 3,563,084                             |        | **3,034,944**                        | ** ** | 8,753,611 |   | **11,672,567** | ** ** |
| ** **                                                                    | ** ** | ** **                            |        | ** **                           | ** ** | ** ** |   | ** ** | ** ** |
| Interest  (expense), net                                                      |       | (15,956,501                           | )           | **(15,960,137**                      | **)**      | (47,874,569 | ) | **(48,816,932** | **)** |
| Non-cash change  on market valuation of swaps                                 |       | (3,176,678                            | )           | **1,215,173**                        | ** ** | (2,444,231 | ) | **(61,467** | **)** |
| Loss on  extinguishment of debt                                               |       | —                                |        | **—**                           | ** ** | — |   | **(5,323,375** | **)** |
| Other income  (expense), net                                                  |       | (42,928                               | )           | **(407,860**                         | **)**      | (173,884 | ) | **(565,433** | **)** |
|                                                                          | ** ** | (19,176,107                           | )           | **(15,152,824**                      | **)**      | (50,492,684 | ) | **(54,767,207** | **)** |
| ** **                                                                    | ** ** | ** **                            |        | ** **                           | ** ** | ** ** |   | ** ** | ** ** |
| Loss from  continuing operations before benefit from income tax               |       | (15,613,023                           | )           | **(12,117,880**                      | **)**      | (41,739,073 | ) | **(43,094,640** | **)** |
| Benefit from  income tax                                                      |       | 3,595,144                             |        | **—**                           | ** ** | 3,595,144 |   | **—** | ** ** |
| Loss from  continuing operations                                              |       | (12,017,879                           | )           | **(12,117,880**                      | **)**      | (38,143,929 | ) | **(43,094,640** | **)** |
| (Loss) income  from discontinued operations, net of taxes                     |       | (35,363                               | )           | **(13,851**                          | **)**      | 2,259,594 |   | **96,525** | ** ** |
| Net loss                                                                      |       | $                                     | (12,053,242 | )                                    | **$**      | **(12,131,731** | **)** | $ | (35,884,335 | ) | **$** | **(42,998,115** | **)** |
| ** **                                                                    | ** ** | ** **                            |        | ** **                           | ** ** | ** ** |   | ** ** | ** ** |
| Basic and  diluted net loss per common share:                                 | ** ** | ** **                            |        | ** **                           | ** ** | ** ** |   | ** ** | ** ** |
| Loss from  continuing operations                                              |       | $                                     | (0.61       | )                                    | **$**      | **(0.61** | **)** | $ |  (1.93 | ) | **$** | **(2.17** | **)** |
| Income (loss)  from discontinued operations                                   |       | —                                |        | **—**                           | ** ** | 0.11 |   | **0.01** | ** ** |
| Net loss per  common share                                                    |       | $                                     | (0.61       | )                                    | **$**      | **(0.61** | **)** | $ |  (1.82 | ) | **$** | **(2.16** | **)** |
| ** **                                                                    | ** ** | ** **                            |        | ** **                           | ** ** | ** ** |   | ** ** | ** ** |
| Weighted average  shares – Basic and dilutive                            |       | 19,803,188                            |        | **19,895,232**                       | ** ** | 19,771,377 |   | **19,867,789** | ** ** |
|                                                                               |            |                                       |             |                                      |            |  |  |  |  |  |  |  |  |  |  |  |

 

*See accompanying notes toconsolidated financial statements.*

 

3

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Young BroadcastingInc. and Subsidiaries

Consolidated Statementsof Stockholders’ Equity

(Unaudited)

 
| ** **                                                            | ** ** | ** **       | ** ** | ** **  | ** ** | **Additional**  | ** ** | ** **        | ** **  | **Accumulated**        | ** ** | **Total**    | ** ** |
|-----------------------------------------------------------------------|------------|------------------|------------|-------------|------------|-----------------|------------|-------------------|-------------|------------------------|------------|--------------|------------|
| ** **                                                            | ** ** | **Common Stock** | ** ** | **Paid-In** | ** ** | **Accumulated** | ** ** | **Comprehensive** | ** **  | **Stockholders’** | ** ** |
| ** **                                                            | ** ** | **Class A**      | ** ** | **Class B** | ** ** | **Capital**     | ** ** | **Deficit**       | ** **  | **Loss**               | ** ** | **Equity**   | ** ** |
| Balance at  December 31, 2003                                         |       | $                | 17,696     |        | $          | 2,129           |       | $                 | 377,802,562 |                   | $          | (347,410,222 | )          | $ | (2,082,402 | ) | $ | 28,329,763 |   |
|                                                                  |       |             |       |        |       |            |       |              |        |                   |       |         |       |
| Contribution of  shares into Company’s defined contribution plan |       | 50               |       |        |       | 822,214         |       |              |        |                   |       | 822,264      |       |
|                                                                  |       |             |       |        |       |            |       |              |        |                   |       |         |       |
| Conversion of  Class B Common Stock to Class A Common Stock           |       | 47               |       | (47         | )          |            |       |              |        |                   |       |         |       |
|                                                                  |       |             |       |        |       |            |       |              |        |                   |       |         |       |
| Restricted stock  issued                                              |       |             |       |        |       | 616,135         |       |              |        |                   |       | 616,135      |       |
|                                                                  |       |             |       |        |       |            |       |              |        |                   |       |         |       |
| Non-cash stock  compensation                                          |       |             |       |        |       | 830,250         |       |              |        |                   |       | 830,250      |       |
|                                                                  |       |             |       |        |       |            |       |              |        |                   |       |         |       |
| Employee stock  purchase plan                                         |       | 19               |       |        |       | 283,882         |       |              |        |                   |       | 283,901      |       |
|                                                                  |       |             |       |        |       |            |       |              |        |                   |       |         |       |
| Exercise of  stock options                                            |       | 4                |       |        |       | 69,893          |       |              |        |                   |       | 69,897       |       |
|                                                                  |       |             |       |        |       |            |       |              |        |                   |       |         |       |
| Net loss for the  nine months ended September 30, 2004                |       |             |       |        |       |            |       | (42,998,115       | )           |                   |       | (42,998,115  | )          |
|                                                                  |       |             |       |        |       |            |       |              |        |                   |       |         |       |
| Balance at  September 30, 2004                                        |       | $                | 17,816     |        | $          | 2,082           |       | $                 | 380,424,936 |                   | $          | (390,408,337 | )          | $ | (2,082,402 | ) | $ | (12,045,905 | ) |

 

*See accompanying notes toconsolidated financial statements*

 

4

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**YoungBroadcasting Inc. and Subsidiaries**

 

**ConsolidatedStatements of Cash Flows**

**(Unaudited)**

 
| ** **                                                                                 | ** ** | **Nine Months Ended September 30,** | ** **  |
|--------------------------------------------------------------------------------------------|------------|-------------------------------------|-------------|
| ** **                                                                                 | ** ** | **2003**                            | ** **  | **2004** | ** ** |
| **Operating  activities**                                                                  | ** ** | ** **                          | ** **  | ** ** | ** ** |
| Net loss                                                                                   |       | $                                   | (35,884,335 | ) | **$** | **(42,998,115** | **)** |
| Adjustments to  reconcile net loss to net cash provided by (used in) operating activities: | ** ** | ** **                          |        | ** ** | ** ** |
| Gain on sale of  KCAL-TV                                                                   |       | (2,190,335                          | )           | **—** | ** ** |
| Benefit from  income tax                                                                   |       | (3,595,144                          | )           | **—** | ** ** |
| Depreciation and  amortization of property and equipment                                   |       | 15,938,805                          |        | **14,335,997** | ** ** |
| Amortization of  program license rights                                                    |       | 13,475,630                          |        | **14,087,027** | ** ** |
| Amortization of  intangibles and deferred charges                                          |       | 4,015,232                           |        | **5,690,212** | ** ** |
| Non-cash  compensation                                                                     |       | 876,168                             |        | **1,709,520** | ** ** |
| Restricted Stock  Awarded                                                                  |       | —                              |        | **616,135** | ** ** |
| Non-cash change  on market valuation of swap                                               |       | 2,444,231                           |        | **61,467** | ** ** |
| Loss on  extinguishment of debt                                                            |       | —                              |        | **1,305,790** | ** ** |
| Loss on sale of  fixed assets                                                              |       | 7,946                               |        | **13,055** | ** ** |
| Income from  escrow deposits                                                               |       | (87,866                             | )           | **—** | ** ** |
| Income tax  refund, net of estimated payment                                               |       | 27,000,000                          |        | **—** | ** ** |
| Interest  payments from escrow account                                                     |       | 6,667,825                           |        | **—** | ** ** |
| Payments on  programming license liabilities                                               |       | (13,789,943                         | )           | **(13,987,954** | **)** |
| Decrease in  trade accounts receivable                                                     |       | 4,072,264                           |        | **4,013,530** | ** ** |
| Decrease in  prepaid expenses                                                              |       | (331,771                            | )           | **(19,796** | **)** |
| Decrease in  trade accounts payable                                                        |       | (7,512,382                          | )           | **(385,241** | **)** |
| Decrease in  accrued expenses and other liabilities                                        |       | (11,548,732                         | )           | **(6,457,968** | **)** |
| Net cash used in  operating activities                                                     |       | (442,407                            | )           | **(22,016,341** | **)** |
| ** **                                                                                 | ** ** | ** **                          |        | ** ** | ** ** |
| **Investing  activities**                                                                  | ** ** | ** **                          |        | ** ** | ** ** |
| Capital expenditures                                                                       |       | (10,081,248                         | )           | **(10,248,446** | **)** |
| Increase in  deposits and other assets                                                     |       | (1,254,707                          | )           | **(109,267** | **)** |
| Net cash used in  investing activities                                                     |       | (11,335,955                         | )           | **(10,357,713** | **)** |
| ** **                                                                                 | ** ** | ** **                          |        | ** ** | ** ** |
| **Financing  activities**                                                                  | ** ** | ** **                          |        | ** ** | ** ** |
| Redemption of  senior subordinated notes                                                   |       | —                              |        | **(223,811,000** | **)** |
| Deferred debt  financing costs incurred                                                    |       | —                              |        | **(640,291** | **)** |
| Principal  payments under capital lease obligations                                        |       | (498,149                            | )           | **(486,665** | **)** |
| Proceeds from  exercise of stock options                                                   |       | 181,722                             |        | **69,897** | ** ** |
| Proceeds from  other financing activities                                                  |       | 3,311                               |        | **—** | ** ** |
| Net cash used in  financing activities                                                     |       | (313,116                            | )           | **(224,868,059** | **)** |
| ** **                                                                                 | ** ** | ** **                          |        | ** ** | ** ** |
| **Net  decrease in cash**                                                                  |       | (12,091,478                         | )           | **(257,242,113** | **)** |
| Cash and cash  equivalents at beginning of year                                            |       | 110,406,572                         |        | **331,150,335** | ** ** |
| **Cash  and cash equivalents at September 30**                                             |       | $                                   | 98,315,094  |   | **$** | **73,908,222** | ** ** |
| ** **                                                                                 | ** ** | ** **                          |        | ** ** | ** ** |
| **Supplemental  disclosure of cash flow information**                                      | ** ** | ** **                          |        | ** ** | ** ** |
| Interest paid                                                                              |       | $                                   | 52,842,367  |   | **$** | **55,428,979** | ** ** |
| Income tax  refund, net of estimated payment                                               |       | $                                   | 26,809,998  |   | **$** | **—** | ** ** |

 

*See accompanying notes toconsolidated financial statements.*

 

5

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**Young Broadcasting Inc. andSubsidiaries**

** **

**Notes to Consolidated FinancialStatements**

**(Unaudited)**

 

**1. Description of Business andBasis of Presentation**

 

The business operationsof Young Broadcasting Inc. and subsidiaries (the “Company”) consist of tennetwork affiliated stations (six with ABC, three with CBS, and one with NBC)and one independent commercial television broadcasting station. The marketsserved are located in Lansing, Michigan, Green Bay, Wisconsin, Lafayette,Louisiana, Rockford, Illinois, Nashville and Knoxville, Tennessee, Albany, NewYork, Richmond, Virginia, Davenport, Iowa, Sioux Falls, South Dakota and SanFrancisco, California. In addition, the accompanying condensed consolidatedfinancial statements include the Company’s wholly owned national televisionsales representation firm. Significant intercompany transactions and accountshave been eliminated.

 

The accompanyingcondensed consolidated financial statements have been prepared in accordancewith accounting principles generally accepted in the United States for interimfinancial statements and with the instructions to Form 10-Q and Article 10 ofRegulation S-X. The interim financial statements are unaudited but include alladjustments, which are of a normal recurring nature, that the Company considersnecessary for a fair presentation of the consolidated financial position andthe consolidated results of operations and cash flows for such period.

 

Operating results of interimperiods are not necessarily indicative of results for a full year.  For further information, refer to theconsolidated financial statements and footnotes included in the Company’sannual report on Form 10-K for the year ended December 31, 2003.

 

**2.  Stock-Based Compensation**

 

*RestrictedStock*

In May 2004, the Companyawarded 102,954 shares of restricted stock to certain officers and othereligible key employees under the 2004 Equity Incentive Plan.  The shares vest ratably in three equalinstallments beginning one year from the date of the grant.  During the vesting period, the participantshave no voting rights and have the right to receive any dividends, except asotherwise provided in the award program, but the shares may not be sold,assigned, transferred, pledged or otherwise encumbered until the shares areactually delivered at the end of the deferral period.  Additionally, granted but unvested shares areforfeited upon termination of employment, unless for reasons of death ordisability.

 

The fair value of therestricted shares on the date of the grant is amortized ratably over thevesting period and charged to the income statement as non-cash compensationexpense.

 

*DeferredStock*

In May 2004, the Companyawarded 109,100 deferred stock units to executive officers of the Company underthe 2004 Equity Incentive Plan.  Deferredstock awards are a right to receive shares at the end of specified deferralperiods. The deferred stock awards vest ratably in three equal installmentsbeginning one year from the date of the grant and upon vesting the recipientswill be credited with units equivalent to shares.  During the vesting period, the participantshave no voting or other rights associated with stock ownership unless and untilthe shares are actually delivered at the end of the deferral period. The end ofthe deferral period for the deferred stock awards will occur after thetermination of employment.  Additionally,granted but unvested shares are forfeited upon termination of employment,unless for reasons of death or disability.

 

The fair value of thedeferred stock awards on the date of the grant is amortized ratably over thevesting period and charged to the income statement as non-cash compensationexpense.

 

6

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*Stock Options*

TheCompany follows the provisions of FASB Statement No. 123, *Accounting for Stock-Based**Compensation* (“Statement 123”). Theprovisions of Statement 123 allow companies to either expense the estimatedfair value of stock options or to continue to follow the intrinsic value methodset forth in Accounting Principles Board Opinion No. 25, *Accounting for Stock Issued to Employees,*(“APB25”), but disclose the pro forma effects on net income (loss) had the fairvalue of the options been expensed. The Company has elected to continue toapply APB 25 in accounting for its stock option incentive plans.

 

Inaccordance with APB 25 and related interpretations, compensation expense forstock options is recognized in income based on the excess, if any, of thequoted market price of the stock at the grant date of the award or othermeasurement date over the amount an employee must pay to acquire the stock.Generally, the exercise price for stock options granted to employees equals orexceeds the fair market value of the Company’s common stock at the date ofgrant, thereby resulting in no recognition of compensation expense by theCompany. For awards that generate compensation expense as defined under APB 25,the Company calculates the amount of compensation expense and recognized theexpense over the vesting period of the award.

 

Thefollowing table illustrates the effect on net loss and earnings per share ifthe Company had applied the fair value recognition provisions of Statement 123.

 
| ** **                                                                                        | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|---------------------------------------------------------------------------------------------------|------------|---------------------------------------|------------|--------------------------------------|------------|
| **(dollars in thousands, except  per share data)**                                                | ** ** | **2004**                              | ** ** | **2003**                             | ** ** | **2004** | ** ** | **2003** | ** ** |
| Net loss-as  reported                                                                             |       | $                                     | (12,053    | )                                    | $          | (12,132 | ) | $ | (35,884 | ) | $ | (42,998 | ) |
| Add stock based  employee compensation expense included in reported net loss                      |       | —                                |       | —                               |       | — |   | 830 |   |
| Deduct total  stock-based employee compensation expense determined under fair value based  method |       | (1,273                                | )          | (935                                 | )          | (3,724 | ) | (2,785 | ) |
| Net loss-pro  forma                                                                               |       | $                                     | (13,326    | )                                    | $          | (13,067 | ) | $ | (39,608 | ) | $ | (44,953 | ) |
| Net loss per  basic common share-as reported                                                      |       | $                                     | (0.61      | )                                    | $          | (0.61 | ) | $ | (1.82 | ) | $ | (2.16 | ) |
| Net loss per  basic common share-pro forma                                                        |       | $                                     | (0.67      | )                                    | $          | (0.66 | ) | $ | (2.00 | ) | $ | (2.26 | ) |

 

**3.  Intangible Assets**

 

Intangible assets, whichinclude broadcasting licenses, network affiliation agreements, and otherintangibles, are carried on the basis of cost, less accumulated amortization.Cost is based upon appraisals performed at the time of acquisition. Broadcastlicenses are considered to have an indefinite life. Network affiliationagreements and other definite-lived intangible assets are amortized overperiods up to 25 years.

 

7

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The following table setsforth the additional disclosures related to intangible assets required underFASB Statement 142 *Goodwill and OtherIntangible*(“Statement 142”):

 

 
| ** **                           | ** ** | **As of December 31, 2003** | ** ** | **As of September 30, 2004**  | ** ** |
|--------------------------------------|------------|-----------------------------|------------|-------------------------------|------------|
| ** **                           | ** ** | **(dollars in thousands)**  | ** ** |
| ** **                           | ** ** | **Gross  Carrying  Amount** | ** ** | **Accumulated  Amortization** | ** ** | **Net  Carrying  Amount** | ** ** | **Gross  Carrying  Amount** | ** ** | **Accumulated  Amortization** | ** ** | **Net  Carrying  Amount** | ** ** |
| Indefinite-lived  intangible assets: |       |                        |       |                          |       |   |   |   |   |   |   |   |   |
| Broadcast  licenses                  |       | $                           | 475,929    |                          | —     |   | $ | 475,929 |   | $ | 475,929 |   | — |   | $ | 475,929 |   |
| Definite-lived  intangible assets:   |       |                        |       |                          |       |   |   |   |   |   |   |   |   |
| Network  Affiliations                |       | $                           | 91,164     |                          | $          | (25,176 | ) | $ | 65,988 |   | $ | 91,164 |   | $ | (27,329 | ) | $ | 63,835 |   |
| Other intangible  assets             |       | 14,045                      |       | (4,227                        | )          | 9,818 |   | 14,045 |   | (5,999 | ) | 8,046 |   |
|                                 |       | $                           | 105,209    |                          | $          | (29,403 | ) | $ | 75,806 |   | $ | 105,209 |   | $ | (33,328 | ) | $ | 71,881 |   |

 

Aggregate amortizationexpense for the nine months ended September 30, 2003 and 2004 was $4.7 millionand $4.0 million, respectively. Aggregate amortization expense for the three months ended September 30,2003 and 2004 was $1.6 million and $1.8 million, respectively.

 

It is the Company’spolicy to account for other definite-lived intangible assets at the lower ofamortized cost or estimated realizable value. As part of an ongoing review ofthe valuation and amortization of other intangible assets of the Company andits subsidiaries, management assesses the carrying value of otherdefinite-lived intangible assets if facts and circumstances suggest that theremay be impairment. If this review indicates that other definite-livedintangible assets will not be recoverable as determined by a non-discountedcash flow analysis of the operating assets over the remaining amortizationperiod, the carrying value of other intangible assets would be reduced toestimated fair value.

 

**4.  Sale of WTVO-TV**

 

OnOctober 4, 2004, the Company entered into an agreement with Mission Broadcastingto sell the assets of WTVO-TV in Rockford, Illinois for approximately $20.75million. A portion of the transaction closed on November 1, 2004 and theclosing of the balance is subject to regulatory approval. The Company hasreclassified the operating results of WTVO-TV to discontinued operations and,accordingly, the operating results of WTVO-TV are not included in the Company’sconsolidated results from continuing operations for the three and nine monthsor quarters ended September 30, 2003 and 2004. Net revenue of WTVO-TV for thenine months ended September 30, 2003 and 2004 was $3.9 million and $4.2million, respectively. Since this agreement meets all of the criteria for aqualifying plan of sale, the long-lived assets to be disposed of by this sale havebeen classified as “held for sale” on the balance sheets presented. The detailof classifications on the balance sheets as “held for sale” is as follows:

 
| ** **                                     | ** ** | **December 31, 2003**      | ** ** | **September 30, 2004** | ** ** |
|------------------------------------------------|------------|----------------------------|------------|------------------------|------------|
| ** **                                     | ** ** | **(dollars in thousands)** | ** ** |
| Assets:                                        |       |                       |       |                   |       |
| Prepaid expenses                               |       | $                          | 3          |                   | $          | 22 |   |
| Property and  equipment, net                   |       | 3,895                      |       | 3,527                  |       |
| Broadcast  licenses and other intangibles, net |       | 1,315                      |       | 1,274                  |       |
| Program license  rights                        |       | 228                        |       | 230                    |       |
| Assets held for  sale                          |       | $                          | 5,441      |                   | $          | 5,053 |   |
|                                           |       |                       |       |                   |       |
| Liabilities:                                   |       |                       |       |                   |       |
| Program license liabilities                    |       | $                          | 221        |                   | $          | 217 |   |
| Liabilities held  for sale                     |       | $                          | 221        |                   | $          | 217 |   |

 

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As a result of theWTVO-TV sale transaction, the Company recorded income from its discontinuedoperations of $96,525 and $69,259 for the nine months ended September 30, 2004and 2003, respectively, and a loss from its discontinued operations of $13,851and $35,363 for the three months ended September 30, 2004 and 2003,respectively. In addition, the Company classified assets held for sale atDecember 31, 2003 and September 30, 2004 of $5.4 million and $5.1 million,respectively, and liabilities held for sale at December 31, 2003 and September30, 2004 of $220,536 and $216,723, respectively (see above).

 

On May 15, 2002, theCompany completed the sale of KCAL-TV to Viacom Inc. for $650.0 million and recorded a gain on the sale ofapproximately $2.2 million, net of a provision for income taxes, for the ninemonths ended September 30, 2003 related to this sale.

 

**5.  Long -Term Debt**

 

On December 23, 2003, theCompany completed a private add-on offering of $90.0 million principal amountof its 81⁄2% Senior Notes due 2008 (the “Senior Notes Add-On”). The Senior NotesAdd-On were offered to qualified institutional buyers under Rule 144A and to personsoutside the United States under Regulation S. The Senior Notes Add-On was soldat a premium of approximately $6.2 million. On January 22, 2004, the Companyused the net proceeds of approximately $94.1 million to redeem all of theCompany’s 9% senior subordinated notes due 2006 plus accrued interest.  On July 1, 2004, the Company exchanged theSenior Notes Add-On for notes of the Company with substantially identical termsof the Senior Notes Add-On, except the new notes do not contain terms withrespect to transfer restrictions.

 

On December 23, 2003, theCompany completed a private offering of $140.0 million principal amount of its83⁄4% Senior Subordinated Notes due 2014 (the “December 2003 Notes”). TheDecember 2003 Notes were offered to qualified institutional buyers under Rule144A and to persons outside the United States under Regulation S. On January22, 2004, the Company used the net proceeds of approximately $136.5 million toredeem all of the Company’s 83⁄4% Senior Subordinated Notes due 2007, plus aredemption premium and accrued interest. On July 1, 2004, the Company exchangedthe December 2003 Notes for notes of the Company with substantially identicalterms of the December 2003 Notes, except the new notes do not contain termswith respect to transfer restrictions.

 

On December 22, 2003, theCompany amended and restated its senior credit facility (as amended, the “SeniorCredit Facility”). The Senior Credit Facility consists of a revolving creditfacility in the amount of $20.0 million that is currently available to theCompany and that matures in June 2008. At September 30, 2004, the Company hadno outstanding borrowings under the Senior Credit Facility.

 

Long-term debt atDecember 31, 2003 and September 30, 2004 consisted of the following:

 
| ** **                                   | ** ** | **12/31/03** | ** ** | **9/30/04** | ** ** |
|----------------------------------------------|------------|--------------|------------|-------------|------------|
| Senior Credit  Facility                      |       | $            | —     |        | $          | — |   |
| 81⁄2% Senior Notes  due 2008              |       | 253,109      | (1)        | 252,176     | (1)        |
| 83⁄4% Senior  Subordinated Notes due 2014 |       | 140,000      |       | 140,000     |       |
| 9% Senior  Subordinated Notes due 2006       |       | 86,081       | (2)        | —      |       |
| 83⁄4% Senior  Subordinated Notes due 2007 |       | 137,730      | (2)        | —      |       |
| 10% Senior  Subordinated Notes due 2011      |       | 348,450      | (3)        | 348,016     | (3)        |
| Total Debt  (excluding capital leases)       |       | $            | 965,370    |        | $          | 740,192 |   |

 

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(1)          Includes an unamortizedpremium balance of $6.2 million and $5.3 million as of December 31, 2003 andSeptember 30, 2004, respectively.

 

(2)          Redeemed in full onJanuary 22, 2004

 

(3)          Includes unamortizedpremium balances of $4.2 million and $3.7 million as of December 31, 2003 andSeptember 30, 2004, respectively.

 

**6. Income Taxes**

 

Notax benefit was recorded with respect to the loss for 2004, as the utilizationof such loss is not more likely than not to be realized. The Company provides avaluation allowance for deferred tax assets for which it does not considerrealization of such assets to be more likely than not. At December 31, 2003,the Company had net operating loss (“NOL”) carryforwards for tax purposes ofapproximately $160.4 million expiring at various dates through 2023, for whicha full valuation allowance has been provided.

 

**7. Employee Benefit Plans**

 

The Company’s definedbenefit pension plan covers the IBEW Local 45 of KRON-TV employees.

 

The Company contributedapproximately $420,000 to the benefit plan as of September 30, 2004 and is expectedto contribute an additional $70,000 to $100,000 in the fourth quarter of  2004.

 

Components of the netperiodic benefit (cost) were as follows:

 
| ** **                      | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|---------------------------------|------------|---------------------------------------|------------|--------------------------------------|------------|
| ** **                      | ** ** | **2003**                              | ** ** | **2004**                             | ** ** | **2003** | ** ** | **2004** | ** ** |
|                            |       |                                  |       |                                 |       |   |   |   |   |
| Expected return  of plan assets |       | $                                     | 166,027    |                                 | $          | 164,965 |   | $ | 498,080 |   | $ | 494,896 |   |
| Service cost                    |       | (86,906                               | )          | (102,096                             | )          | (260,718 | ) | (306,287 | ) |
| Interest cost                   |       | (144,559                              | )          | (151,060                             | )          | (433,678 | ) | (453,181 | ) |
| Recognized gains  or (loss)     |       | —                                |       | (20,765                              | )          | — |   | (62,295 | ) |
| Net amortization  and deferral  |       | (8,111                                | )          | (8,111                               | )          | (24,334 | ) | (24,334 | ) |
| Net periodic  benefit (cost)    |       | $                                     | (73,549    | )                                    | $          | (117,067 | ) | $ | (220,650 | ) | $ | (351,201 | ) |

 

**8. Earnings Per Share**

 

Theweighted average number of shares outstanding during the period has been usedto calculate earnings per share.   Thestock options outstanding have not been included in the computation of earningsper share because they would be anti-dilutive.

 

10

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**Item 2. *Management’s Discussionand Analysis of Financial Condition and Results of Operations.***

 

**FORWARD-LOOKINGSTATEMENTS**

 

**FORWARD LOOKING STATEMENTS AREALL STATEMENTS, OTHER THAN STATEMENTS OF HISTORICAL FACTS, INCLUDED IN THISREPORT. THE FORWARD LOOKING STATEMENTS CONTAINED IN THIS REPORT CONCERN, AMONGOTHER THINGS, CERTAIN STATEMENTS UNDER “MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS.” FORWARD LOOKING STATEMENTSINVOLVE RISKS AND UNCERTAINTIES, AND ARE SUBJECT TO CHANGE BASED ON VARIOUSIMPORTANT FACTORS, INCLUDING THE IMPACT OF CHANGES IN NATIONAL AND REGIONALECONOMIES, PRICING FLUCTUATIONS IN LOCAL AND NATIONAL ADVERTISING, VOLATILITYIN PROGRAMMING COSTS AND GEOPOLITICAL FACTORS.**

 

**Introduction**

 

The operating revenue ofthe Company’s stations is derived primarily from advertising revenue. Thestations’ primary operating expenses are for employee compensation,newsgathering, production, programming and promotion costs. A high proportionof the operating expenses of the stations are fixed.

 

Advertising is sold forplacement within and adjoining a station’s network and locally originatedprogramming.  Advertising is sold in timeincrements and is priced primarily on the basis of a program’s popularity amongthe specific audience an advertiser desires to reach, as measured principallyby periodic audience surveys.  Inaddition, advertising rates are affected by the number of advertisers competingfor the available time, the size and demographic makeup of the market served bythe station and the availability of alternative advertising media in the marketarea.  Rates are highest during the mostdesirable viewing hours, with corresponding reductions during other hours.  The ratings of a local station affiliatedwith a national television network can be affected by ratings of networkprogramming.

 

Most advertisingcontracts are short-term, and generally run only for a few weeks. Most of theCompany’s annual gross revenue is generated from local advertising, which issold by a station’s sales staff directly to local accounts. The remainder ofthe advertising revenue primarily represents national advertising, which issold by Adam Young Inc. (“AYI”), a wholly owned national advertising salesrepresentative. The stations generally pay commissions to advertising agencieson local, regional and national advertising.

 

The advertising revenueof the Company’s stations is generally highest in the second and fourthquarters of each year, due in part to increases in consumer advertising in thespring and retail advertising in the period leading up to and including theholiday season.  In addition, advertisingrevenue is generally higher during even numbered election years due to spendingby political candidates, which spending typically is heaviest during the fourthquarter.

 

**RecentDevelopments**

 

*Sale ofWTVO-TV. *On October 4, 2004, the Company entered intoan agreement with Mission Broadcasting, Inc. (“Mission”) to sell the assets ofWTVO-TV, its station in Rockford, Illinois, for an aggregate cash purchase priceof approximately $20.75 million. The agreement provides for the purchase andsale of WTVO assets to occur in two steps. On November 1, 2004 the first

 

11

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portion of the transaction was completed and the Company received $15.0million of the aggregate purchase price. Pending the closing of the secondportion of the transaction, which is subject to Federal CommunicationsCommission review and approval, the Company has retained the FCC license, theprogramming assets (network agreements, syndication contracts, etc.) andcertain other assets of the station and has entered into a time brokerageagreement with Mission with respect to the sale of advertising for thestation.  The Company anticipates thatthe second portion of the transaction will close in the first half of 2005. Theoperating results of WTVO-TV are not included in the Company’s consolidatedresults from continuing operations for the three and nine months endedSeptember 30, 2003 and 2004.

 

*DigitalUpgrades*.  The Company has completed the upgrade of itstelevision stations to enable them to broadcast with digital technology.  As of October 27, 2004, the FCC has notgranted the final DTV license for WTEN-TV (Albany) because the FCC and theCanadian government have to resolve certain interference issues. In July 2004,the FCC granted WTEN-TV’s request for special temporary authority (STA) tooperate under reduced power pending final approval of the DTV license.

 

*NetworkAffiliation Agreements. *TheCompany has renewed its affiliation with CBS with respect to WLNS and KLFY foreight years to expire on September 30, 2012. The Company has received notice from NBC with respect to KWQC and fromABC with respect to WKRN, WTEN, WRIC, WATE and WBAY, that the respectivenetwork will not renew the affiliation agreements currently in place and thatthe networks wish to negotiate new agreements. The agreement with NBC expiredon November 1, 2004 and the agreements with ABC expired on October 1, 2004.  Negotiations have commenced with both ABC andNBC. The Company is operating on extensions of the ABC and NBC affiliationagreements that are set to expire on December 15, 2004 and December 31, 2004,respectively. While the Company is unable to predict the terms of any newaffiliation agreements, the Company believes that these stations will haverenewed network affiliations in place by the end of 2004. The Company believesthat the compensation paid by the networks to the Company will significantlydecrease in future years. In the event, however, of the Company’s inability tosecure new affiliation agreements, the respective station may no longer be ableto carry programming of the relevant network. This loss of network programmingwould require the Company to obtain replacement programming, which may involvehigher costs and which may not be as attractive to audiences, resulting inreduced revenues.

 

**CriticalAccounting Policies**

 

The Company’s criticalaccounting policy for the impairment of property, equipment and intangibleassets is assessing the recoverability of the assets by making assumptionsregarding estimated future cash flows and other factors to determine the fairvalue of the respective assets. If these estimates or related assumptionsmaterially change in the future, the Company may be required to recordimpairment charges not previously recorded for these assets. At September 30,2004, the Company had $87.2 million in net property and equipment, $475.9million of indefinite-lived intangible assets and $71.9 million ofdefinite-lived intangible assets, net. The Company will perform its 2004 annualimpairment test of indefinite-lived intangible assets in the fourth quarter of2004.

 

12

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**Television Revenues**

 

Set forth below are theprincipal types of television revenues received by the Company’s stations,excluding WTVO-TV for the periods indicated, and the percentage contribution ofeach to the Company’s total revenue, as well as agency and national salesrepresentative commissions:

 
| ** **       | ** ** | **Three Months Ended September 30,** | ** ** | **Nine Months Ended September 30,** | ** ** |
|------------------|------------|--------------------------------------|------------|-------------------------------------|------------|
| ** **       | ** ** | **2003**                             | ** ** | **2004**                            | ** ** | **2003** | ** ** | **2004** | ** ** |
| ** **       | ** ** | **Amount**                           | ** ** | **%**                               | ** ** | **Amount** | ** ** | **%** | ** ** | **Amount** | ** ** | **%** | ** ** | **Amount** | ** ** | **%** | ** ** |
| ** **       | ** ** | **(dollars in thousands)**           | ** ** |
|             |       |                                 |       |                                |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenues         |       |                                 |       |                                |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Local            |       | $                                    | 32,973     |                                | 56.9       |   | $ | 32,857 |   | 52.7 |   | $ | 97,778 |   | 56.8 |   | $ | 99,451 |   | 53.4 |   |
| National         |       | 19,556                               |       | 33.7                                |       | 18,506 |   | 29.7 |   | 60,555 |   | 35.2 |   | 59,650 |   | 32.1 |   |
| Network          |       | 2,333                                |       | 4.0                                 |       | 2,162 |   | 3.5 |   | 7,059 |   | 4.1 |   | 6,878 |   | 3.7 |   |
| Political        |       | 2,159                                |       | 3.7                                 |       | 7,654 |   | 12.3 |   | 2,998 |   | 1.8 |   | 16,088 |   | 8.6 |   |
| Production/Other |       | 957                                  |       | 1.7                                 |       | 1,158 |   | 1.8 |   | 3,650 |   | 2.1 |   | 4,131 |   | 2.2 |   |
| Total            |       | 57,978                               |       | 100.0                               |       | 62,337 |   | 100.0 |   | 172,040 |   | 100.0 |   | 186,198 |   | 100.0 |   |
|             |       |                                 |       |                                |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Commissions      |       | (7,931                               | )          | (13.7                               | )          | (8,657 | ) | (13.9 | ) | (23,443 | ) | (13.6 | ) | (26,086 | ) | (14.0 | ) |
|             |       |                                 |       |                                |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Revenue      |       | $                                    | 50,047     |                                | 86.3       |   | $ | 53,680 |   | 86.1 |   | $ | 148,597 |   | 86.4 |   | $ | 160,112 |   | 86.0 |   |

 

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**Results of Operations**

 

*Three Months Ended September 30,2004 Compared to Three Months Ended September 30, 2003*

 

Theresults from continuing operations for the three months ended September 30,2004 and 2003 do not include the results of operations for WTVO-TV.  These results are reflected as discontinuedoperations.

 

Net revenue for the threemonths ended September 30, 2004 was $53.7 million, an increase of $3.7 million,or 7.4%, compared to $50.0 million for the three months ended September 30,2003. Political revenue for the three months ended September 30, 2004 was $7.7million, an increase of $5.5 million, compared to $2.2 million for the threemonths ended September 30, 2003. The increase in political revenue wasattributable to the existence of strongly contested local races in Iowa,California and South Dakota in 2004, as well as significant spending for thepresidential campaign, while the 2003 period had only limited state and localelections. The Company’s gross local revenues decreased slightly for the threemonths ended September 30, 2004 compared to the three months ended September30, 2003 and the national revenues decreased $1.0 million, or 5.4% compared tothe prior year period. Network compensation for the three months endedSeptember 30, 2004 was $2.2 million, a decrease of $171,000, or 7.3%, comparedto $2.3 million for the three months ended September 30, 2003.

 

Operating expenses,including selling, general and administrative expenses, for the three monthsended September 30, 2004 were $34.6 million, compared to $32.4 million for thethree months ended September 30, 2003, an increase of $2.2 million, or 6.8%.Approximately $185,000 of this increase is attributable to the increase inlocal sales commissions paid to employees of the Company’s network affiliatedstations because of the increase in their respective local revenues. TheCompany had increases to its health insurance and property and casualtyinsurance costs of approximately $171,000. Local production costs increased approximately $453,000 because one ofthe Company’s stations started producing their state’s weekly lottery drawingsand another station started producing shows specific to their local market toemphasize the Company’s commitment to localism. Severance costs for the Companyincreased $275,000 specifically relating to the retirement of several stationmanagement personnel. With significantly all of the stations required to bebroadcasting or have the capabilities to be broadcasting using their digitalspectrum, the Company had approximately $197,000 of increased utility costs.Included in the selling, general and administrative expenses is non-cashcompensation expense of $489,000 for the three months ended September 30, 2004relating to restricted and deferred stock awards. In addition, included in theselling, general and administrative expenses is non-cash compensation of$294,000 for the three months ended September 30, 2004, compared to non-cashcompensation of $273,000 for the three months ended September 30, 2003,relating to the Company’s matching contributions to eligible employees underits defined contribution plan.

 

Amortization of programlicense rights for the three months ended September 30, 2004 was $4.8 million,compared to $4.5 million for the three months ended September 30, 2003, anincrease of $305,000, or 6.8% The increase is primarily related to theincreased costs of Dr. Phil at KRON-TV.

 

Depreciation of propertyand equipment and amortization of intangible assets and deferred charges was$6.9 million for the three months ended September 30, 2004, compared with $6.5million for the comparable period in 2003, an increase of $452,000, or 7.0%.The increase is primarily related to the $10.2 million in fixed asset additionsfor 2004.

 

Corporate overhead forthe three months ended September 30, 2004 was $4.3 million, compared to $3.2million for the comparable period in 2003, an increase of $1.1 million or34.4%.

 

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Approximately $142,000 ofthis increase is attributable to higher costs of the directors and officers’liability insurance policy. The Company’s review of and compliance withcorporate governance legislation resulted in additional legal, professional andconsulting fees of approximately $842,000 in the third quarter of 2004.

 

Interest expense was $16.0million for the three months ended September 30, 2004 and 2003.  The Company received payments on its interestrate swaps of $352,000 and $692,000 for the three months ended September 30,2004 and 2003, respectively, which was recorded as a reduction of interestexpense.

 

The Company recorded a$1.2 million non-cash gain and $3.2 million non-cash loss in connection withthe change in the market value of interest rate swaps for the three monthsended September 30, 2004 and 2003, respectively (see “Liquidity and CapitalResources”).

 

OnOctober 4, 2004, the Company entered into an agreement with MissionBroadcasting to sell the assets of WTVO-TV in Rockford, Illinois in an all-cashtransaction valued at approximately $20.75 million. As a result of this agreementand the Company’s application of the rules on accounting for disposal oflong-lived assets, the Company recorded a loss from discontinued operations of$13,851 and $35,363 for the three months ended September 30, 2004 and 2003,respectively.

 

As a result of thefactors discussed above, the net loss for the Company was $12.1 million for thethree months ended September 30, 2004 and 2003.

 

*Nine Months Ended September 30,2004 Compared to Nine Months Ended September 30, 2003*

 

Theresults from continuing operations for the nine months ended September 30, 2004and 2003 do not include the results of operations for WTVO-TV.  These results are reflected as discontinuedoperations.

 

Net revenue for the ninemonths ended September 30, 2004 was $160.1 million, an increase of $11.5million, or 7.7%, compared to $148.6 million for the nine months endedSeptember 30, 2003. Political revenue for the nine months ended September 30,2004 was $16.1 million, an increase of $13.1 million, compared to $3.0 millionfor the nine months ended September 30, 2003. The increase in political revenuewas attributable to the existence of strongly contested local races in Iowa,California and South Dakota in 2004, the national Democratic primaries in thefirst quarter of 2004, as well as significant spending for the presidentialcampaign, while the 2003 period had only limited state and local elections. TheCompany’s gross local revenues increased 1.7% for the nine months endedSeptember 30, 2004 compared to the nine months ended September 30, 2003 and thenational revenues decreased 1.5% compared to the prior year period. Networkcompensation for the nine months ended September 30, 2004 was $6.9 million, adecrease of $181,000, or 2.6%, compared to $7.1 million for the nine months endedSeptember 30, 2003.

 

Operating expenses,including selling, general and administrative expenses, for the nine monthsended September 30, 2004 were $101.1 million, compared to $97.5 million for thenine months ended September 30, 2003, an increase of $3.6 million, or 3.7%.Approximately $617,000 of this increase is attributable to the increase inlocal sales commissions paid to employees of the Company’s network affiliatedstations because of the increase in local revenues.****The Company had increases to its health insurance andproperty and casualty insurance costs of approximately $547,000. The Companyrelocated several managers to fill positions within the station group the costof which was approximately $318,000. The Company had increases to its local programand production costs of approximately $298,000 associated with one of itsstations producing its state

 

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lottery. Severance costsfor the Company increased $307,000 specifically relating to the retirement ofseveral station management personnel. With significantly all of the stationsrequired to be broadcasting or have the capabilities to be broadcasting usingtheir digital spectrum, the Company had approximately $589,000 of increasedutility costs. Included in the selling, general and administrative expenses isnon-cash compensation expense of $489,000 for the nine months ended September30, 2004 relating to restricted and deferred stock awards. In addition,included in the selling, general and administrative expenses is non-cashcompensation of $879,000 for the nine months ended September 30, 2004, comparedto non-cash compensation of $876,000 for the nine months ended September 30,2003, relating to the Company’s matching contributions to eligible employeesunder its defined contribution plan.

 

Amortization of programlicense rights for the nine months ended September 30, 2004 was $13.9 million,compared to $13.3 million for the nine months ended September 30, 2003, anincrease of $571,000, or 4.3%.  Theincrease is primarily related to the increased costs of Dr. Phil at KRON-TV.

 

Depreciation of propertyand equipment and amortization of intangible assets was $19.5 million for thenine months ended September 30, 2004 and 2003.

 

Corporate overhead forthe nine months ended September 30, 2004 was $13.9 million, compared to $9.6million for the comparable period in 2003, an increase of $4.3 million or44.8%. Approximately $2.2 million of this increase related to the severancepackage provided to the Company’s former president, who retired on March 31,2004.  Approximately $125,000 of thisincrease was the result of additional personnel fees relating to the promotionof three station general managers to new corporate vice president positions inMay 2003.  The Company also experiencedincreases in the directors and officers’ liability insurance policy, whichaccounted for approximately $440,000 of this increase.  The Company’s review of and compliance withcorporate governance legislation resulted in additional legal, professional andconsulting fees of approximately $1.2 million in 2004.

 

Interest expense for thenine months ended September 30, 2004 was $48.8 million, compared to $47.9million for the same period in 2003, an increase of $942,000, or 2.0%.  The increase was primarily attributable tohigher debt levels for the first twenty-two days of 2004 associated with theCompany’s redemption on January 22, 2004 of its 9% senior subordinated notesdue 2006 and 83⁄4% senior subordinated notes due 2007.  The Company received less in payments on itsinterest rate swaps of $1.2 million compared to $1.9 million for the nine months ended September 30, 2004 and 2003,which was recorded as a reduction of interest expense.

 

The Company recorded a$61,467 and $2.4 million non-cash loss in connection with the change in themarket value of interest rate swaps for the nine months ended September 30,2004 and 2003, respectively that included $2.5 million of non-cash interestexpense for the nine months ended September 30, 2003 relating to theamortization of other comprehensive loss in connection with its swaptransactions entered into in 2000 and terminated in June 2001. The Company alsorecorded a mark-to-market non-cash gain of approximately $30,000 for the ninemonths ended September 30, 2003, for the change in fair value of itsoutstanding fair value economic hedges (see “Liquidity and Capital Resources”).

 

The Company recorded aloss on extinguishment of debt resulting from the write-off of related to theCompany’s unamortized deferred financing costs for the nine months endedSeptember 30, 2004 of $5.3 million.  Thisloss related to the Company’s redemption on January 22, 2004 of its 9% seniorsubordinated notes due 2006 and 83⁄4% senior subordinated notes due 2007 (see “Liquidityand Capital Resources”).

 

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OnOctober 4, 2004, the Company entered into an agreement with MissionBroadcasting to sell the assets of WTVO-TV in Rockford, Illinois in an all-cashtransaction valued at approximately $20.75 million. As a result of thisagreement and the Company’s application of the rules on accounting fordisposal of long-lived assets effective January 1, 2004, the Company recordedincome from discontinued operations of $96,525 and $69,259 for the nine monthsended September 30, 2004 and 2003. On May 15, 2002, the Company completed thesale of KCAL-TV to Viacom Inc. for $650.0 million and recorded a gain on the sale of approximately $2.2 million, net ofa provision for income taxes, for the nine months ended September 30, 2003related to this sale.

 

As a result of thefactors discussed above, the net loss for the Company was $43.0 million for thenine months ended September 30, 2004, compared with a net loss of $35.9 millionfor the nine months ended September 30, 2003, a change of $7.1 million.

 

**Liquidity and Capital Resources**

 

Cash used in operationsfor the nine months ended September 30, 2004 and 2003 was $22.0 million and$442,000, respectively.  Trade accountspayable decreased $385,000 and $7.5 million for the nine months ended September30, 2004 and 2003, respectively. At December 31, 2002, the Company hadapproximately $3.0 million in accounts payable relating to the reorganizationplan at KRON-TV, which were paid in January 2003.  Accrued expenses decreased $6.5 million and $11.5 million for the ninemonths ended September 30, 2004 and 2003, respectively. Accountsreceivable decreased by $4.0 million and $4.1 million for the nine months endedSeptember 30, 2004 and 2003, respectively. In the first quarter of 2003, theCompany received $27.0 million in income tax refunds, net of estimatedpayments, because of overpayments in 2002.

 

The performance ofKRON-TV has a large proportionate impact on the Company’s operating results.Consequently, the Company is particularly susceptible to economic conditions inthe San Francisco advertising market. While revenues in the first nine monthsof 2004 at KRON-TV were stronger than those in the first nine months of 2003,the continuing uncertain economic climate in San Francisco makes the outlookunclear.

 

Cash used in investingactivities was $10.4 million and $11.3 million for the nine months endedSeptember 30, 2004 and 2003, respectively. Capital expenditures for the ninemonths ended September 30, 2004 and 2003 were $10.2 million and $10.1 million,respectively. Deposits and other assets for the Company increased $109,000 and$1.3 million for the nine months ended September 30, 2004 and 2003,respectively.

 

Cash used in financingactivities was $224.9 million and $313,000 for the nine months ended September30, 2004 and 2003, respectively. On December 23, 2003, the Company received theproceeds from the sale of the December 2003 Notes (as defined) of $140.0million principal amount (see below). On January 22, 2004, the Company used thenet proceeds of approximately $136.5 million to redeem the 83⁄4% SeniorSubordinated Notes due 2007, plus a redemption premium and accruedinterest.  In addition, on December 23,2003, the Company received the proceeds from the sale of the Senior NotesAdd-On (as defined) of $90.0 million principal amount and a premium ofapproximately $6.2 million (see below). On January 22, 2004, the Company usedall of the net proceeds of approximately $94.1 million to redeem all of theCompany’s 9% Senior Subordinated Notes due 2006 plus accrued interest (seebelow). In connection with the December 2003 Notes and the Senior Notes Add-On,the Company recorded approximately $640,000 of deferred debt financing coststhat will be amortized over the lives of the respective notes. In January 2004,upon the redemption of the 83⁄4% Senior Subordinated Notes due 2007 and the 9%Senior Subordinated Notes due 2006, the Company wrote off all the

 

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remaining related deferred debt financing costs, net of accumulatedamortization, of approximately $1.3 million and recorded it as a loss onextinguishment of debt.  The Company made payments under capital leaseobligations of $487,000 and $498,000 for the nine months ended September 30,2004 and 2003, respectively. The Company received proceeds from the exercise ofstock options of $70,000 and $182,000 for the nine months ended September 30,2004 and 2003, respectively.

 

As of September 30, 2004,the Company had $73.9 million of cash-on-hand available for general corporatepurposes. All of these funds were invested in short-term, risk-averseinvestments, in accordance with the indentures.

 

On December 22, 2003, theCompany amended and restated its senior credit facility (as amended, the “SeniorCredit Facility”). The Senior Credit Facility consists of a revolving creditfacility in the amount of $20.0 million that is currently available to theCompany and that matures in June 2008. Pursuant to the Senior Credit Facility,the Company is prohibited from making investments or advances to third partiesexceeding $15.0 million unless the third party becomes a guarantor of theCompany’s obligation. In addition, the Company may utilize the undrawn amountsunder the Senior Credit Facility to retire or prepay subordinated debt, subjectto the limitations set forth in the indentures.

 

The Senior CreditFacility provides, at the option of the Company, that borrowed funds bearinterest based upon the London Interbank Offered Rate (LIBOR), the customary “CDRate” or “Base Rate.”  In addition to theindex rate, the Company pays a fixed incremental percentage at 2.25% with theBase Rate and 3.25% with LIBOR. Each of the Company’s subsidiaries hasguaranteed the Company’s obligations under the Senior Credit Facility. TheSenior Credit Facility is secured by the pledge of all the stock of the Company’ssubsidiaries and a first priority lien on all of the assets of the Company andits subsidiaries. The Senior Credit Facility requires the Company to maintain asenior secured debt to operating cash flow ratio of not more than 1.75x (net ofcash up to $50.0 million).  The Companyis also required to maintain a cash and short-term investment balance of atleast $50.0 million.  As of September 30,2004, the Company was in compliance with all Senior Credit Facility covenants.

 

At September 30, 2004,the Company had no outstanding borrowings under the Senior Credit Facility. TheCompany pays an annual commitment fee tied to the Company’s ratio of total debtto operating cash flow, ranging from 1.0%, if the ratio is greater than orequal to 7.0x; 0.75% if the ratio is greater than or equal to 5.0x and lessthan 7.0x; and 0.50% per annum at any time that the ratio is less than 5.0x ofthe unused available borrowings under the Senior Credit Facility.

 

On December 23, 2003, theCompany completed a private add-on offering of $90.0 million principal amountof its 81⁄2% Senior Notes due 2008 (the “Senior Notes Add-On”). The Senior NotesAdd-on were offered to qualified institutional buyers under Rule 144A and topersons outside the United States under Regulation S. The Senior Notes Add-Onwas sold at a premium of approximately $6.2 million. On January 22, 2004, theCompany used the net proceeds of approximately $94.1 million to redeem all ofthe Company’s 9% senior subordinated notes due 2006 plus accrued interest. OnJuly 1, 2004, the Company exchanged the Senior Notes Add-On for notes of theCompany with substantially identical terms of the Senior Notes Add-On, exceptthe new notes do not contain terms with respect to transfer restrictions.

 

On December 23, 2003, theCompany completed a private offering of $140.0 million principal amount of its83⁄4 % Senior Subordinated Notes due 2014 (the “December 2003 Notes”). TheDecember 2003 Notes were offered to qualified institutional buyers under Rule144A and to persons outside the United States under Regulation S. On January22, 2004, the Company used the net proceeds of approximately $136.5 million to redeemall of the Company’s 83⁄4% Senior

 

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Subordinated Notes due2007, plus a redemption premium and accrued interest. On July 1, 2004, theCompany exchanged the December 2003 Notes for notes of the Company withsubstantially identical terms of the December 2003 Notes, except the new notesdo not contain terms with respect to transfer restrictions.

 

Debtamounts outstanding at December 31, 2003 and September 30, 2004 were as follows(dollars in thousands):

 
| ** **                                    | ** ** | **12/31/03** | ** ** | **9/30/04** | ** ** | **Annualized  Interest Payments**(1) | ** ** |
|-----------------------------------------------|------------|--------------|------------|-------------|------------|--------------------------------------|------------|
| Senior Credit  Facility                       |       | $            | —     |        | $          | —                               |       | $ | — |   |
| 81⁄2% Senior Notes  due 2008               |       | 253,109      | (2)        | 252,176     | (2)        | 20,986                               |       |
| 8 3⁄4% Senior  Subordinated Notes due 2014 |       | 140,000      |       | 140,000     |       | 12,250                               |       |
| 9% Senior  Subordinated Notes due 2006        |       | 86,081       | (3)        | —      |       | —                               |       |
| 83⁄4% Senior  Subordinated Notes due 2007  |       | 137,730      | (3)        | —      |       | —                               |       |
| 10% Senior  Subordinated Notes due 2011       |       | 348,450      | (4)        | 348,016     | (4)        | 34,430                               |       |
| Total Debt  (excluding capital leases)        |       | $            | 965,370    |        | $          | 740,192                              |       | $ | 67,666 |   |
|                                               |            |              |            |             |            |                                      |            |  |  |  |  |  |  |

 

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(1)          The annualizedinterest payments are calculated based on the outstanding principal amounts atSeptember 30, 2004, multiplied by the interest rates of the related notes.

(2)          Includes anunamortized premium balance of $6.2 million and $5.3 million as of December 31,2003 and September 30, 2004, respectively.

(3)          Redeemed in fullon January 22, 2004

(4)          Includesunamortized premium balances of $4.2 million and $3.7 million as of December31, 2003 and September 30, 2004, respectively.

 

The Company’s total debtat September 30, 2004 was approximately $741.0 million, consisting of $484.3million of Senior Subordinated Notes, $246.9 million of Senior Notes, $9.0million of bond premiums and $774,000 of capital leases. In addition, atSeptember 30, 2004, the Company had an additional $20.0 million of unusedavailable borrowings under the Senior Credit Facility.

 

Management believes thatcash and cash equivalents, cash flows from operations and funds available underthe Senior Credit Facility will be sufficient to fund the working capital,capital expenditures, debt service and other liquidity needs of the Company forthe foreseeable future.

 

**Income Taxes**

 

The Company files aconsolidated federal income tax return and such state or local tax returns asare required. For the year endedDecember 31, 2003, the Company recorded a $3.6 million benefit from incometaxes related to the reversal of prior year overprovision for state taxes. Notax benefit was recorded with respect to the loss for 2004, as its utilizationis not more likely than not to be realized. The Company provides a valuationallowance for deferred tax assets for which it does not consider realization ofsuch assets to be more likely than not. At December 31, 2003, the Company hadnet operating loss (“NOL”) carryforwards for tax purposes of approximately$160.4 million expiring at various dates through 2023, for which a fullvaluation allowance has been provided.

 

**ContractualObligations and Other Commercial Commitments**

 

The Company hasobligations and commitments under its long-term debt agreements and instrumentsto make future payments of principal and interest. The Company also hasobligations and commitments under certain contractual arrangements to makefuture payments for goods and services. These arrangements secure the futurerights to various assets and services to be used in the normal course ofoperations. Under generally accepted accounting principles, certain of thesearrangements (i.e., programming contracts that 

are currently availablefor airing) are recorded as

 

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liabilities on theCompany’s consolidated balance sheet, while others (i.e., operating leasearrangements and programming not currently available) are not reflected asliabilities.

 

The following tablessummarize separately the Company’s material obligations and commitments atSeptember 30, 2004 and the timing of payments required in connection therewithand the effect that such payments are expected to have on the Company’sliquidity and cash flow in future periods. The Company expects to fund these obligations with cash and cashequivalents, cash flow from operations and funds available under its SeniorCredit Facility.

 
| ** **                             | ** ** | ** **                 | ** ** | **Payments Due by Period** | ** ** |
|----------------------------------------|------------|----------------------------|------------|----------------------------|------------|
| **Contractual Obligations**            | ** ** | **Total**                  | ** ** | **Less than  1 year**      | ** ** | **1 – 3 years** | ** ** | **4 – 5 years** | ** ** | **After 5  years** | ** ** |
| ** **                             | ** ** | **(dollars in thousands)** | ** ** |
| Long-Term Debt  (principal only)       |       | $                          | 731,189    |                       | $          | — |   | $ | — |   | $ | 246,890 |   | $ | 484,299 |   |
| Capital Lease  Obligations             |       | 774                        |       | 732                        |       | 42 |   | — |   | — |   |
| Operating Leases                       |       | 6,163                      |       | 1,291                      |       | 3,159 |   | 925 |   | 788 |   |
| Unconditional  Purchase Obligations(1) |       | 20,096                     |       | 19,464                     |       | 632 |   | — |   | — |   |
| Other Long-Term  Obligations(2)        |       | 66,220                     |       | 23,453                     |       | 37,572 |   | 4,653 |   | 542 |   |
| Total  Contractual Cash Obligations    |       | $                          | 824,442    |                       | $          | 44,940 |   | $ | 41,405 |   | $ | 252,468 |   | $ | 485,629 |   |

 

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(1)          Unpaid program licenseliability reflected on the September 30, 2004 balance sheet.

(2)          Obligations forprogramming that has been contracted for but not recorded on the September 30, 2004Balance Sheet because the  programs were not currently available forairing.

 

**Impact of Recently IssuedAccounting Standards**

 

In January 2003, the FASB issued FASB Interpretation No. 46, *Consolidation of Variable Interest Entities*(“FIN 46”), which requires variable interest entities (commonly referred to asSPEs) to be consolidated by the primary beneficiary of the entity if certaincriteria are met. FIN 46 is effective immediately for all new variable interestentities created or acquired after January 31, 2003. For variable interestentities created or acquired prior to February 1, 2003, the provision of FIN 46become effective for the Company during the third quarter of 2003.  For variable interest entities acquired priorto February 1, 2003, any difference between the net amount added to the balancesheet and the amount of any previously recognized interest in the variableinterest entity would be recognized as a cumulative effect of an accountingchange.  In December 2003, the FASBdelayed the implementation date of FIN 46 until March 31, 2004 for entitiesthat are not “special purpose entities” under existing GAAP. The Company’sequity investments do not qualify as SPE’s, therefore, management elected todefer adoption of FIN 46 until March 31, 2004. The Company’s adoption of this new standard did not have a materialimpact on the results of operating and financial position.

 

**Item 3**. ***Quantitativeand Qualitative Disclosures About Market Risk.***

 

The Company’s SeniorCredit Facility, with no amounts outstanding as of September 30, 2004, bearsinterest at floating rates. Accordingly, to the extent there are amountsoutstanding under the Senior Credit Facility, we are exposed to potentiallosses related to changes in interest rates.

 

The Company’s SeniorSubordinated Notes of approximately $484.3 million outstanding principal as ofSeptember 30, 2004 are general unsecured obligations of the Company and aresubordinated in right of payment to all senior debt, including all indebtednessof the Company under the Senior Credit Facility and the Senior Notes. TheSenior Subordinated Notes have fixed rates of interest ranging from 83⁄4% to 10%and are ten-year notes maturing in various years commencing 2011.

 

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The annualized interestexpense on the outstanding Senior Subordinated Notes is approximately $46.7million.

 

The Company’s SeniorNotes of approximately $246.9 million outstanding principal as of September 30,2004 have a fixed rate of interest of 81⁄2% and mature in 2008. The annualizedinterest expense on the outstanding Senior Notes is approximately $21.0million.

 

The Company does notenter into derivatives or other financial instruments for trading orspeculative purposes; however, in order to manage its exposure to interest raterisk, the Company entered into a derivative financial instrument in June 2001.The derivative financial instrument is an interest rate swap agreement thatexpires in 2011. The Company does not apply hedge accounting to theseinstruments.

 

**Item 4. *Controlsand Procedures*.**

 

The Company’s managementcarried out an evaluation, with the participation of the Company’s ChiefExecutive Officer and Chief Financial Officer, of the effectiveness of theCompany’s disclosure controls and procedures as of September 30, 2004. Basedupon that evaluation, the Company’s Chief Executive Officer and Chief FinancialOfficer concluded that the Company’s disclosure controls and procedures wereeffective to ensure that information required to be disclosed by the Company inreports that it files or submits under the Securities Exchange Act of 1934 isrecorded, processed, summarized and reported, within the time periods specifiedin the rules and forms of the Securities and Exchange Commission.

 

There has not been any change in the Company’sinternal control over financial reporting in connection with the evaluationrequired by Rule 13a-15(d) under the Exchange Act that occurred during thequarter ended September 30, 2004 that has materially affected, or is reasonablylikely to materially affect, the Company’s internal control over financialreporting.

 

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**PART II. OTHER INFORMATION**

 

**Item 1.  *LegalProceedings.***

 

The Company is involvedin legal proceedings and litigation arising in the ordinary course of business.In the Company’s opinion, the outcome of such proceedings and litigationcurrently pending will not materially affect the Company’s financial conditionor results of operations.

 

**Item 6. * Exhibits.***

 
| **Exhibit  Number** | ** ** | **Exhibit Description**                                                                                                                                                                                                                                        |
|---------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                |       |                                                                                                                                                                                                                                                           |
| 10.1                |       | Indenture Supplement  No. 1 dated as of August 27, 2004, to the Indenture, dated March 1, 2001, by  and among the Company, the Subsidiary Guarantors and Wachovia Bank, National  Association, relating to the 10% Senior Subordinated Notes due 2011.         |
| 10.2                |       | Indenture Supplement  No. 1, dated as of August 27, 2004, to the Indenture, dated December 7, 2001,  by and among the Company, the Subsidiary Guarantors and Wachovia Bank,  National Association, relating to the 81⁄2% Senior Notes due 2008.             |
| 10.3                |       | Indenture Supplement  No. 1, dated as of August 27, 2004, to the Indenture, dated December 7, 2001,  by and among the Company, the Subsidiary Guarantors and Wachovia Bank,  National Association, relating to the 83⁄4% Senior Subordinated Notes due 2014 |
| 10.4                |       | Letter Agreement, dated  September 30, 2004, between the Company and CBS, extending the expiration  date of the affiliation agreements relating to KLFY-TV and WLNS-TV                                                                                         |
| 10.5                |       | Letter Agreement, dated  October 6, 2004, between the Company and CBS, extending the expiration date  of the affiliation agreements relating to KLFY-TV and WLNS-TV                                                                                            |
| 10.6                |       | Agreement, dated as of  September 29, 2004, between the Company and CBS, amending the affiliation  agreement KLFY-TV, Lafayette, Louisiana*                                                                                                                    |
| 10.7                |       | Agreement, dated as of  September 29, 2004, between the Company and CBS, amending the affiliation  agreement WLNS-TV, Lansing, Michigan*                                                                                                                       |
| 10.8                |       | Letter Agreement, dated  September 30, 2004, between the Company and ABC, extending the expiration  date of the affiliation agreements relating to WKRN-TV, WATE-TV, WBAY-TV,  WRIC-TV and WTEN-TV                                                             |
| 10.9                |       | Letter Agreement, dated  October 22, 2004, between the Company and ABC, extending the expiration date  of the affiliation agreements relating to WKRN-TV, WATE-TV, WBAY-TV, WRIC-TV  and WTEN-TV                                                               |
| 10.10               |       | Letter Agreement, dated  October 26, 2004, between the Company and NBC, extending the expiration date  of the affiliation agreement relating to KWQC-TV                                                                                                        |
| 11                  |       | Statement Re  Computation of Per Share Earnings.                                                                                                                                                                                                               |
| 31                  |       | Rule  13a-14(a)/15d-14(a) Certifications                                                                                                                                                                                                                       |
| 32                  |       | Section 1350  Certifications                                                                                                                                                                                                                                   |

 

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|   |   | * Portions have been  omitted pursuant to a request for confidential treatment |
|--------|--------|--------------------------------------------------------------------------------|

 

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**SIGNATURES**

 

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized.

 
|   | YOUNG BROADCASTING INC.                                                               |
|--------|---------------------------------------------------------------------------------------|
|   |                                                                                  |
|   |                                                                                  |
| Date:  | November 9, 2004                                                                      |   | By: | /s/ Vincent J. Young |   |
|   | Vincent J. Young                                                                      |
|   | Chairman and Chief  Executive Officer                                                 |
|   |                                                                                  |
|   |                                                                                  |
| Date:  | November 9, 2004                                                                      |   | By: | /s/ James A. Morgan |   |
|   | James A. Morgan                                                                       |
|   | Executive Vice  President and  Chief Financial Officer  (principal financial officer) |
|        |                                                                                       |  |  |  |  |  |

 

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