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UNITED STATES OF
AMERICA
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 Form 10-Q þ
Quarterly Report pursuant to Section 13 OR 15 (d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2005 Commission file number:
001-31311LIN TV Corp.
    
    Commission file number:
000-25206LIN Television Corporation(Exact name of registrant as
    
    (Exact name of registrant asspecified in its charter)
    
    specified in its charter)Delaware
    
    Delaware(State or other jurisdiction of
    
    (State or other jurisdiction ofincorporation or organization)
    
    incorporation or organization)05-0501252
    
    13-3581627(I.R.S. Employer
    
    (I.R.S. EmployerIdentification No.)
    
    Identification No.)
 Four Richmond Square, Suite 200, Providence, Rhode Island 02906(Address of principal executive offices) (401) 454-2880(Registrants telephone number, including area code) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
the Exchange Act). Yes þ No o This combined Form 10-Q is separately filed by (i) LIN TV Corp. and (ii) LIN Television
Corporation. LIN Television Corporation meets the conditions set forth in general instruction H(1)
(a) and (b) of Form 10-Q and is, therefore, filing this form with the reduced disclosure format
permitted by such instruction. LIN TV Corp. Class A common stock, $0.01 par value, issued and outstanding at May 2, 2005:
27,203,840 shares . LIN TV Corp. Class B common stock, $0.01 par value, issued and outstanding at May 2, 2005:
23,502,059 shares. LIN TV Corp. Class C common stock, $0.01 par value, issued and outstanding at May 2, 2005: 2
shares. LIN Television Corporation common stock, $0.01 par value, issued and outstanding at May 1, 2005:
1,000 shares.




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Table of Contents Part I. Financial InformationItem 1. Financial StatementsLIN TV Corp.Condensed Consolidated Balance Sheets
    
    
    2Condensed Consolidated Statements of Operations
    
    
    3Condensed Consolidated Statements of Cash Flows
    
    
    4Notes to Condensed Consolidated Financial Statements
    
    
    5(See separate index for financial statements of LIN Television Corporation)
    
    
    28Item 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    15Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    24Item 4. Controls and Procedures
    
    
    24Part II. Other InformationItem 1. Legal Proceedings
    
    
    25Item 5.
Other Information
    
    
    25Item 6. Exhibits
    
    
    25Signature Page
    
    
    27Exhibit 10.1 Exchange and Registration Rights AgreementExhibit 10.7 Amended and Restated 2002 Stock PlanExhibit 10.8 Amended and Restated 2002 Non-Employee Director Stock PlanExhibit 31.1 Certification of CEO Pursuant to Section 302Exhibit 31.2 Certification of CFO Pursuant to Section 302Exhibit 31.3 Certification of CEO Pursuant to Section 302Exhibit 31.4 Certification of CFO Pursuant to Section 302Exhibit 32.1 Certification of CEO Pursuant to Section 906Exhibit 32.2 Certification of CFO Pursuant to Section 906




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PART I: FINANCIAL INFORMATION 
 Item 1. Financial Statements LIN TV CORP. 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 March 31,
    
    
    December 31,2005
    
    
    2004(Unaudited)(In thousands, except share data)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    3,219
    
    
    $
    14,797Accounts receivable, less allowance for doubtful accounts (2005 - $1,131; 2004 - $1,450)
    
    
    61,227
    
    
    
    70,639Program rights
    
    
    16,898
    
    
    
    17,312Other current assets
    
    
    5,100
    
    
    
    3,790Total current assets
    
    
    86,444
    
    
    
    106,538Property and equipment, net
    
    
    200,416
    
    
    
    197,565Deferred financing costs
    
    
    13,661
    
    
    
    11,060Equity investments
    
    
    63,004
    
    
    
    65,813Program rights
    
    
    12,556
    
    
    
    12,165Other assets
    
    
    16,582
    
    
    
    16,043Goodwill
    
    
    614,181
    
    
    
    583,105Broadcast licenses and other intangible assets, net
    
    
    1,131,270
    
    
    
    1,066,135Total assets
    
    $
    2,138,114
    
    
    $
    2,058,424LIABILITIES, PREFERRED STOCK
AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    4,250
    
    
    $
    6,573Accounts payable
    
    
    5,684
    
    
    
    7,774Accrued interest expense
    
    
    10,565
    
    
    
    8,118Accrued sales volume discount
    
    
    1,384
    
    
    
    6,462Other accrued expenses
    
    
    17,145
    
    
    
    13,483Program obligations
    
    
    27,019
    
    
    
    23,278Total current liabilities
    
    
    66,047
    
    
    
    65,688Long-term debt, excluding current portion
    
    
    702,588
    
    
    
    626,268Deferred income taxes, net
    
    
    428,690
    
    
    
    445,695Program obligations
    
    
    20,569
    
    
    
    12,008Other liabilities
    
    
    58,244
    
    
    
    38,344Total liabilities
    
    
    1,276,138
    
    
    
    1,188,003Preferred stock of Banks Broadcasting, Inc., $0.01 par value, 179,322 and
173,822 issued and outstanding at March 31, 2005 and December 31, 2004, respectively
    
    
    14,797
    
    
    
    14,458Stockholders equity:Class A common stock, $0.01 par value, 100,000,000 shares authorized,
27,107,146 shares at March 31, 2005 and 26,946,183 shares at December 31, 2004,
issued and outstanding
    
    
    271
    
    
    
    269Class B common stock, $0.01 par value, 50,000,000 shares authorized, 23,502,059
shares at March 31, 2005 and 23,508,119 shares at December 31, 2004,
issued and outstanding; convertible into an equal number of Class A or Class C
common stock
    
    
    235
    
    
    
    235Class C common stock, $0.01 par value, 50,000,000 shares authorized, 2 shares at
March 31, 2005 and December 31, 2004, issued and outstanding; convertible
into an equal number of Class A common stock
    
    
    
    
    
    
    Additional paid-in capital
    
    
    1,073,350
    
    
    
    1,071,816Accumulated deficit
    
    
    (212,087
    )
    
    
    (201,767
    )Accumulated other comprehensive loss
    
    
    (14,590
    )
    
    
    (14,590
    )Total stockholders equity
    
    
    847,179
    
    
    
    855,963Total liabilities, preferred stock and stockholders equity
    
    $
    2,138,114
    
    
    $
    2,058,424
 The accompanying notes are an integral part of the condensed consolidated financial statements. 2




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LIN TV CORP. 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (unaudited)
 Three MonthsEnded March 31,2005
    
    
    2004(In thousands, except per share information)Net revenues
    
    $
    78,439
    
    
    $
    79,844Operating costs and expenses:Direct operating (excluding depreciation of $7.8 million and $7.5 million for the three months
ended March 31, 2005 and 2004, respectively)
    
    
    26,011
    
    
    
    24,630Selling, general and administrative
    
    
    24,762
    
    
    
    22,500Amortization of program rights
    
    
    5,855
    
    
    
    5,724Corporate
    
    
    5,255
    
    
    
    4,098Depreciation and amortization of intangible assets
    
    
    8,039
    
    
    
    7,776Total operating costs and expenses
    
    
    69,922
    
    
    
    64,728Operating income
    
    
    8,517
    
    
    
    15,116Other (income) expense:Interest expense, net
    
    
    10,910
    
    
    
    11,654Share of income in equity investments
    
    
    (246
    )
    
    
    (167
    )Minority interest in loss of Banks Broadcasting, Inc.
    
    
    (212
    )
    
    
    Loss (gain) on derivative instruments
    
    
    501
    
    
    
    (990
    )Loss on early extinguishment of debt
    
    
    12,309
    
    
    
    2,937Other, net
    
    
    401
    
    
    
    (119
    )Total other expense, net
    
    
    23,663
    
    
    
    13,315(Loss) income from continuing operations before (benefit from) provision for
income taxes and cumulative effect of change in accounting principle
    
    
    (15,146
    )
    
    
    1,801(Benefit from) provision for income taxes
    
    
    (4,826
    )
    
    
    3,797Loss from continuing operations before cumulative effect of change in accounting principle
    
    
    (10,320
    )
    
    
    (1,996
    )Discontinued operations:Income from discontinued operations, net of tax provision of $206
    
    
    
    
    
    
    (69
    )Cumulative effect of change in accounting principle, net of a tax effect of $0
    
    
    
    
    
    
    (3,290
    )Net (loss) income
    
    $
    (10,320
    )
    
    $
    1,363Basic and diluted (loss) income per common share:Loss from continuing operations before cumulative
effect of change in accounting principle
    
    $
    (0.20
    )
    
    $
    (0.04
    )Cumulative effect of change in accounting principle, net of tax
    
    
    
    
    
    
    0.07Net (loss) income
    
    
    (0.20
    )
    
    
    0.03Weighted - average number of common shares outstanding
used in calculating basic and diluted (loss) income per common share
    
    
    50,512
    
    
    
    50,194
 The accompanying notes are an integral part of the condensed consolidated financial statements. 3




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LIN TV CORP. 
 CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS  (unaudited)
 Three months ended March 31,2005
    
    
    2004(in thousands)OPERATING ACTIVITIES:Net (loss) income
    
    $
    (10,320
    )
    
    $
    1,363Adjustment to reconcile net (loss) income to net cash provided by operating activities:Depreciation and amortization of intangible assets
    
    
    8,039
    
    
    
    7,776Amortization of financing costs and note discounts
    
    
    1,769
    
    
    
    2,033Amortization of program rights
    
    
    5,855
    
    
    
    5,724Program payments
    
    
    (6,346
    )
    
    
    (6,022
    )Loss on early extinguishment of debt
    
    
    12,309
    
    
    
    2,937Cumulative effect of change in accounting principle, net of tax impact
    
    
    
    
    
    
    (3,290
    )Loss (gain) on derivative instruments
    
    
    501
    
    
    
    (990
    )Share of income in equity investments
    
    
    (246
    )
    
    
    (167
    )Deferred income taxes, net
    
    
    (5,197
    )
    
    
    2,963Other, net
    
    
    1,613
    
    
    
    (580
    )Changes in operating assets and liabilities, net of acquisitions and disposals:Accounts receivable
    
    
    9,627
    
    
    
    11,834Program rights, net of program obligations
    
    
    639
    
    
    
    92Other assets
    
    
    (1,849
    )
    
    
    (347
    )Accounts payable
    
    
    (2,195
    )
    
    
    (2,423
    )Accrued interest expense
    
    
    2,447
    
    
    
    (406
    )Accrued sales volume discount
    
    
    (5,078
    )
    
    
    (4,830
    )Other accrued expenses
    
    
    1,136
    
    
    
    3,128Net cash provided by operating activities
    
    
    12,704
    
    
    
    18,795INVESTING ACTIVITIES:Capital expenditures
    
    
    (1,544
    )
    
    
    (1,740
    )Investment in equity investments
    
    
    
    
    
    
    (650
    )Capital contribution from minority interest in Banks Broadcasting, Inc.
    
    
    550
    
    
    
    Distributions from equity investments
    
    
    3,055
    
    
    
    1,630Acquisition of broadcast licenses
    
    
    
    
    
    
    (4,224
    )Payments for business combinations
    
    
    (85,000
    )
    
    
    Other, net
    
    
    13
    
    
    
    (270
    )Net cash used in investing activities
    
    
    (82,926
    )
    
    
    (5,254
    )FINANCING ACTIVITIES:Net proceeds on exercises of employee stock options and phantom stock
units and employee stock purchase plan issuances
    
    
    1,326
    
    
    
    804Proceeds from issuance of long-term debt
    
    
    345,000
    
    
    
    Long-term debt financing costs
    
    
    (5,655
    )
    
    
    (90
    )Net proceeds from revolver debt
    
    
    50,000
    
    
    
    17,000Principal payments on long-term debt
    
    
    (324,940
    )
    
    
    (26,265
    )Cash expenses associated with early extinguishment of debt
    
    
    (7,087
    )
    
    
    (1,973
    )Net cash provided by (used) in financing activities
    
    
    58,644
    
    
    
    (10,524
    )Net (decrease) increase in cash and cash equivalents
    
    
    (11,578
    )
    
    
    3,017Cash and cash equivalents at the beginning of the period
    
    
    14,797
    
    
    
    9,475Cash and cash equivalents at the end of the period
    
    $
    3,219
    
    
    $
    12,492
 The accompanying notes are an integral part of the condensed consolidated financial statements. 4




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LIN TV CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1  Basis of Presentation: LIN TV Corp., together with its subsidiaries, including LIN Television Corporation (LIN
Television) (together, the Company), is a television station group operator in the United States
and Puerto Rico. LIN TV Corp. and its subsidiaries are affiliates of Hicks, Muse, Tate & Furst
Incorporated (Hicks Muse). LIN TV Corp. guarantees all debt of LIN Television. All of the consolidated wholly-owned
subsidiaries of LIN Television fully and unconditionally guarantee all the Companys debt on a
joint and several basis. Certain reclassifications have been made to the prior period financial statements to conform to the
current period financial statement presentation. These condensed consolidated financial statements have been prepared without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such rules and
regulations. The Company filed audited financial statements for the year ended December 31, 2004 in
its Annual Report on Form 10-K, which includes all such information and disclosures. In the opinion of management, the accompanying unaudited interim financial statements contain all
adjustments necessary to summarize fairly the financial position, results of operations and cash
flows of the Company for the periods presented. The interim results of operations are not
necessarily indicative of the results to be expected for the full year. The Company owns preferred stock that represents a 50% non-voting interest in Banks Broadcasting,
Inc. (Banks Broadcasting), which owns and operates KWCV-TV, a WB affiliate in Wichita, Kansas and
KNIN-TV, a UPN affiliate in Boise, Idaho. The Company consolidates the results of operations and
financial condition of Banks Broadcasting in accordance with FIN 46R  Consolidation of Variable
Interest Entities (Revised December 2003)  an
Interpretation of ARB No. 51. All intercompany
transactions have been eliminated in consolidation. The resulting consolidated balance sheet of the
Company does not reflect any voting equity minority interest since Banks Broadcasting has incurred
cumulative losses and as such the minority interest would be in a deficit position at March 31,
2005. Hicks Muse has a substantial economic interest in 21st Century Group, LLC which owns 36%
of the preferred stock on the Banks Broadcasting balance sheet. The following presents the summarized balance sheet of Banks Broadcasting at March 31, 2004, the
date of initial consolidation (in thousands): 5




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LIN TV CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued) Assets
    
    
    
    
    
    Liabilities and EquityCash
    
    $
    97
    
    
    Accounts payable
    
    $
    396Accounts receivable
    
    
    899
    
    
    Program obligations, short-term
    
    
    793Program rights, short-term
    
    
    757
    
    
    Other accrued expenses
    
    
    404Other current assets
    
    
    46
    
    
    Program obligations, long-term
    
    
    525Property and equipment
    
    
    5,048
    
    
    Deferred income taxes, net
    
    
    4,805Program rights, long-term
    
    
    662
    
    
    Preferred stock
    
    
    34,764Broadcast licenses
    
    
    29,238Total assets
    
    $
    36,747
    
    
    Total liabilities and equity
    
    
    41,687Deficit
    
    $
    (4,940
    )
 The deficit of $4.9 million was allocated to the nonvoting preferred stock, and the
Companys ownership of such preferred stock has been eliminated on consolidation. The Companys preparation of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported amount of
assets and liabilities and disclosure of contingent assets and liabilities at the dates of the
financial statements and the reported amounts of revenues and expenses during the reported periods.
Estimates are used when accounting for the collectibility of accounts receivable, mark-to-market of
derivative instruments, valuation of intangible assets, deferred tax assets and net assets of
businesses acquired. Actual results could differ from these estimates. Note 2  Stock-Based Compensation: The Company accounts for its stock-based employee compensation plans under the recognition and
measurement principles of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock
Issued to Employees, and related interpretations. The following table illustrates the effect on net (loss) income and net (loss) income per share if
the Company had applied the fair value recognition provisions of Statement of Financial Accounting
Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, to stock-based employee
compensation (in thousands, except for per share data): Three Months EndedMarch 31,2005
    
    
    2004Net (loss) income, as reported
    
    $
    (10,320
    )
    
    $
    1,363Add: Stock-based employee compensation expense,
included in reported net (loss) income, net of related tax effect
    
    
    670
    
    
    
    124Deduct: Total stock-based employee compensation
expense determined under the fair value based
method for all awards, net of related tax effect
    
    
    (350
    )
    

    
    (761
    )Pro forma net (loss) income
    
    $
    (10,000
    )
    
    $
    726Basic and diluted net (loss) income per common share, as reported
    
    $
    (0.20
    )
    
    $
    0.03Basic and diluted net (loss) income per common share, pro forma
    
    $
    (0.20
    )
    
    $
    0.01
 The fair value of each option is estimated on the date of grant using the Black-Scholes
option-pricing model with the following assumptions during the three months ended March 31, 2004: 6




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LIN TV CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued) Volatility
    
    
    24
    %Risk-free interest rates
    
    
    2.0 - 4.4
    %Weighted average expected life
    
    3 - 10 yearsDividend yields
    
    
    0
    %
 There were no options granted during the three months ended March 31, 2005. Note 3  Acquisitions and Dispositions: On March 31, 2005, the Company acquired the broadcast licenses and certain operating assets and
liabilities of WNDY-TV, the UPN affiliate serving Indianapolis, Indiana and WWHO-TV, the UPN
affiliate serving Columbus, Ohio from Viacom, Inc. for $85.0 million and was funded by a combination of cash on hand and the revolving credit
facility. In addition to the $17.8 million of program obligations recorded by the Company in connection with
the acquisition of WNDY-TV and WWHO-TV, the Company recorded
$18.3 million in other liabilities related to estimated losses
on future program obligations and above market program contracts. These future program obligations are unrecorded in accordance with SFAS No. 63
Financial Reporting by Broadcasters. The Company has also recorded $2.7 million in connection with the
acquisition of WNDY-TV and WWHO-TV relating to employee severance costs and certain contractual
costs as a result of the Companys plans to centralize the master control operations of WNDY-TV and
WWHO-TV at the Companys transmission facility in Indianapolis, Indiana; and transaction costs
related to the acquisition of the two stations. The following table summarizes the estimated fair value of the assets acquired and liabilities
assumed at the date of acquisition. The Company is in the process of obtaining third-party
valuations of the assets acquired; thus the allocation of the purchase price is preliminary (in
thousands): WNDY-TV
    
    
    WWHO-TVAccounts receivable
    
    $
    437
    
    
    $
    87Program rights, short-term
    
    
    1,709
    
    
    
    1,925Property and equipment
    
    
    4,902
    
    
    
    4,589Program rights, long-term
    
    
    1,076
    
    
    
    908Broadcast licenses
    
    
    36,600
    
    
    
    28,800Goodwill
    
    
    20,282
    
    
    
    10,794Deferred tax assets
    
    
    8,037
    
    
    
    3,774Total assets
    
    $
    73,043
    
    
    $
    50,877Accounts payable
    
    
    105
    
    
    
    Other accrued expenses
    
    
    1,671
    
    
    
    1,069Program obligations, short-term
    
    
    4,375
    
    
    
    2,327Program obligations, long-term
    
    
    7,029
    
    
    
    4,068Other long-term liabilities
    
    
    12,363
    
    
    
    5,913Total liabilities
    
    $
    25,543
    
    
    $
    13,377Purchase Price
    
    $
    47,500
    
    
    $
    37,500
 The following table sets forth unaudited pro forma information of the Company as if the acquisition of WNDY-TV and
WWHO-TV had occurred on January 1, 2004: Three Months EndedMarch 31,2005
    
    
    2004Net revenues
    
    $
    83,095
    
    
    $
    84,866Operating income
    
    
    7,813
    
    
    
    15,139Net (loss) income
    
    
    (10,903
    )
    
    
    1,201Basic and diluted net (loss) income
per common share
    
    $
    (0.22
    )
    
    $
    0.02
 On May 14, 2004, the Company completed the sale of WEYI-TV, the NBC affiliate serving Flint,
Michigan, for $24.0 million. The operating results of this station for the three-month period
ended March 31, 2004 have 7




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LIN TV CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued) been excluded from continuing operations and included in discontinued
operations under the provisions of SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. During the three month period ended March 31, 2004, the Company recorded
income from discontinued operations of $69,000, net of a tax
provision of $206,000. The following table summarizes the net revenues and pre-tax income for WEYI-TV included in the historical results: Three MonthsEndedMarch 31, 2004Net revenues
    
    $
    
    2,027Operating income
    
    
    
    675Net income
    
    
    
    621
 On January 14, 2004, the Company purchased the broadcast license and certain assets of WIRS-TV
in Yauco, Puerto Rico from Marantha Christian Network for $4.5 million and
was funded by borrowings from the Companys former revolving credit facility. Note 4  Investments: The Company has investments in two ventures with third parties, through which it has an interest in
television stations. The following presents the Companys basis in these ventures (in thousands) : March 31,
    
    
    December 31,2005
    
    
    2004NBC joint venture
    
    $
    52,845
    
    
    $
    55,604WAND (TV) Partnership
    
    
    10,159
    
    
    
    10,209$
    63,004
    
    
    $
    65,813
 Joint Venture with NBC:The Company owns a 20.38% interest in a joint venture with NBC and
accounts for its interest using the equity method, as the Company does not have a controlling
interest. The Company received distributions of $3.1 million and $1.6 million from the joint
venture in the three months ended March 31, 2005 and 2004, respectively. The following presents the summarized financial information of the joint venture (in thousands): 8




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LIN TV CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued) Three Months EndedMarch 31,2005
    
    
    2004Revenue
    
    $
    18,306
    
    
    $
    18,441Other expense
    
    
    (16,854
    )
    
    
    (15,948
    )Net income
    
    
    1,452
    
    
    
    2,493
 March 31,
    
    
    December 31,2005
    
    
    2004Current assets
    
    $
    12,359
    
    
    $
    12,675Non-current assets
    
    
    230,296
    
    
    
    233,957Current liabilities
    
    
    1,269
    
    
    
    724Non-current liabilities
    
    
    815,500
    
    
    
    815,500
 WAND (TV) Partnership:The Company has a 33.33% interest in a partnership, WAND (TV)
Partnership, with Block Communications. The Company accounts for its interest using the equity
method, as the Company does not have a controlling interest. The Company has also entered into a
management services agreement with WAND (TV) Partnership to provide specified management,
engineering and related services for a fixed fee. Included in this agreement is a cash management
arrangement under which the Company incurs expenditures on behalf of WAND (TV) Partnership and is
periodically reimbursed. Amounts due to the Company under this arrangement were $206,000 and
$478,000 as of March 31, 2005 and December 31, 2004, respectively. The following presents the summarized financial information of the WAND (TV) Partnership (in
thousands): March 31,2005
    
    
    2004Net revenues
    
    $
    1,509
    
    
    $
    1,633Operating loss
    
    
    112
    
    
    
    (50
    )Net loss
    
    
    (149
    )
    
    
    (49
    )
 March 31,
    
    
    December 31,2005
    
    
    2004Current assets
    
    $
    3,136
    
    
    $
    3,317Non-current assets
    
    
    24,058
    
    
    
    24,283Current liabilities
    
    
    686
    
    
    
    917Non-current liabilities
    
    
    5
    
    
    
    32
 Note 5  Intangible Assets: The following table summarizes the carrying amount of each major class of intangible assets (in
thousands): 9




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LIN TV CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued) March 31,
    
    
    December 31,2005
    
    
    2004Amortized Intangible Assets:LMA purchase options
    
    $
    3,300
    
    
    $
    3,300Network affiliations
    
    
    173
    
    
    
    173Income leases
    
    
    393
    
    
    
    393Other intangible assets
    
    
    1,780
    
    
    
    1,780Accumulated amortization
    
    
    (3,041
    )
    
    
    (2,776
    )2,605
    
    
    
    2,870Unamortized Intangible Assets:Broadcast licenses
    
    
    1,128,665
    
    
    
    1,063,265Total broadcast licenses and other intangible assets, net
    
    $
    1,131,270
    
    
    $
    1,066,135Goodwill
    
    
    614,181
    
    
    
    583,105Total intangible assets
    
    $
    1,745,451
    
    
    $
    1,649,240
 The increase in broadcast licenses and goodwill in the three month period ending March 31, 2005 is due to the acquisition of WNDY-TV and
WWHO-TV on March 31, 2005. The Company is in the process of obtaining third-party valuations of
all acquired intangible assets, including broadcast licenses and goodwill; thus,
the allocation of WNDY-TV and WWHO-TV is based on preliminary estimates. The following table summarizes the aggregate amortization expense for all periods presented as well
as the estimated amortization expense for the next five years (in thousands): Three Months Ended
    
    
    Estimated amortization expenseMarch 31,
    
    
    For the year ended December 31,2004
    
    
    2005
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009Amortization expense
    
    $
    278
    
    
    $
    266
    
    
    $
    1,864
    
    
    $
    1,006
    
    
    $
    
    
    
    $
    
    
    
    $
    
 10




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##### Table of Contents



LIN TV CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued) Note 6 -Debt: Debt consisted of the following (in thousands): March 31,
    
    
    December 31,2005
    
    
    2004Credit Facility
    
    $
    220,000
    
    
    $
    158,500$166,440, 8% Senior Notes due 2008 (net of discount of $2,884
at December 31, 2004)
    
    
    
    
    
    
    163,556$375,000 and
$200,000, 6 1/2% Senior Subordinated Notes due 2013 at March 31, 2005 and December 31, 2004,
respectively
    
    
    375,000
    
    
    
    200,000$125,000, 2.50% Exchangeable Senior Subordinated Debentures due
2033 (net of discount of $13,162 and $14,215 at March 31, 2005
and December 31, 2004, respectively)
    
    
    111,838
    
    
    
    110,785Total debt
    
    
    706,838
    
    
    
    632,841Less current portion
    
    
    4,250
    
    
    
    6,573Total long-term debt
    
    $
    702,588
    
    
    $
    626,268
 On January 28, 2005, the Company issued an additional $175.0 million aggregate principal
amount of its 6 1/2% Senior Subordinated Notes due 2013. The proceeds from the issuance of the 6 1/2%
Notes were used to repurchase $166.4 million principal amount of the 8%
Senior Notes due 2008. The Company consummated a new credit facility on March 11, 2005 that included a $170.0 million term
loan with a maturity date of March 11, 2011 and a $160.0 million revolving credit facility with a
maturity date of March 31, 2010. The proceeds of the term loan were used to repay the balance on
the existing term loan. The Company used $50.0 million of the revolving credit facility and
existing cash on hand to acquire WNDY-TV and WWHO-TV. The Company incurred charges of $12.3 million during the period ended March 31, 2005 related to the
write-off of unamortized discounts, deferred financing fees and associated costs as a result of the
early extinguishment of debt. Financing fees related to the 6 1/2% Notes and the credit facility of
$5.7 million were capitalized and are being amortized over the term of the related debt. The current portion of long-term debt includes $4.3 million of quarterly amortization of a term
loan under the credit facility beginning in March of 2006. Note 7  Related Party Transactions: Financial Advisory Agreement.The Company is party to an agreement with Hicks Muse Partners,
pursuant to which the Company reimburses Hicks Muse Partners, an affiliate of Hicks Muse, for
certain expenses incurred by it in connection with rendering services relating to acquisitions,
sales, mergers, exchange offers, recapitalization, restructuring or similar transactions allocable
to the Company. The Company incurred fees under this arrangement of $8,000 for the three months
ended March 31, 2005. The Company did not incur any fees for the three months ended March 31,
2004. Centennial Cable of Puerto RicoThe Company is party to an agreement with Centennial Cable of
Puerto Rico, which Hicks Muse has a substantial economic interest, in which Centennial provides the
Company advertising and promotional services. The Company incurred fees under this arrangement of
$29,000 and $20,000 for the three months ended March 31, 2005 and 2004, respectively. 11




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LIN TV CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued) Banks Broadcasting Inc.The Company has entered into a management services agreement with Banks
Broadcasting to provide specified management, engineering and related services for a fixed fee.
Hicks Muse has substantial economic interest in 21st Century Group, LLC which owns 18%
of Banks Broadcasting. Prior to the consolidation of Banks Broadcasting in accordance with FIN
46R, the Company received approximately $50,000 for the three months ended March 31, 2004 under the
management services agreement. Note 8  Contingencies: GECC Note.General Electric Capital Corporation (GECC) provided debt financing in connection with
the formation of the joint venture with NBC in the form of an $815.5 million 25-year non-amortizing
senior secured note bearing an initial interest rate of 8.0% per annum (the GECC note). During
the last five years, the joint
venture has produced cash flows to support the interest payments and to maintain minimum levels of
required working capital reserves. In addition, the joint venture has made cash distributions to
the Company and to NBC from the excess cash generated by the joint venture of approximately $34.5
million on average each year during the past three years. Accordingly, the Company expects that the
interest payments on the GECC note will be serviced solely by the cash flow of the joint venture.
The GECC note is not an obligation of the Company, however, the note is recourse to the joint
venture with NBC and is guaranteed by LIN TV Corp. If the joint venture were unable to pay
principal or interest on the GECC note and GECC could not otherwise recoup its principal from the
joint venture, GECC could require LIN TV Corp. to pay the shortfall of any outstanding amounts
under the GECC note. If this happened, the Company could experience material adverse consequences,
including:  
    GECC could force LIN TV Corp. to sell the stock of LIN Television held by LIN TV Corp. to
satisfy outstanding amounts under the GECC note;
    if more than 50% of the ownership of LIN Television had to be sold to satisfy the GECC
Note, it could cause an acceleration of the Companys credit facility and notes; and
    if the GECC note is prepaid because of an acceleration on default or otherwise, or if
the note is repaid at maturity, the Company may incur a substantial tax liability. The joint venture is approximately 80% owned by NBC, and NBC controls the operations of the
stations through a management contract. Therefore, the operation and profitability of those
stations and the likelihood of a default under the GECC note are primarily within NBCs control. Note 9  Retirement Plans: The Company has a number of noncontributory defined benefit retirement plans covering certain of
its employees in the United States and Puerto Rico. Contributions are based on periodic actuarial
valuations and are charged to operations on a systematic basis over the expected average remaining
service lives of current employees. The net pension expense is assessed in accordance with the
advice of professionally qualified actuaries. The benefits under the defined benefit plans are
based on years of service and compensation. The components of the net periodic benefit cost recognized are as follows (in thousands): 12




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LIN TV CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued) Three Months EndedMarch 31,2005
    
    
    2004Service cost
    
    $
    549
    
    
    $
    500Interest cost
    
    
    1,350
    
    
    
    1,401Expected return on plan assets
    
    
    (1,435
    )
    
    
    (1,450
    )Amortization of prior service cost
    
    
    30
    
    
    
    39Amortization of net loss
    
    
    241
    
    
    
    80Net periodic benefit cost
    
    $
    735
    
    
    $
    570
 The Company contributed $200,000 to the plan during the three months ended March 31, 2005 and
expects to contribute a total of $3.0 million during 2005. The Company also has a non-qualified,
unfunded Supplemental Excess Retirement Plan (SERP) of which the Company paid out to retired
employees a total of $66,000 during the three months ended March 31, 2005. Note 10  Earnings per Share: Basic and diluted (loss) income per common share are computed in accordance with SFAS No. 128,
Earnings per Share. Basic (loss) income per common share is computed by dividing net (loss)
income by the weighted average number of shares of common stock outstanding. There is no difference
between basic
and diluted (loss) income per common share for all periods presented since potential common shares
from the exercises of stock options and phantom units are anti-dilutive to loss from continuing
operations and are, therefore, excluded from the calculation. Options to purchase 3,898,387 and
4,383,000 shares of common stock and phantom units exercisable into 296,000 and 485,000 shares of
common stock were outstanding as of March 31, 2005 and 2004, respectively, but were not included in
the calculation of diluted earnings per share because the effect of their inclusion would have been
anti-dilutive. Note 11  Recent Accounting Pronouncements In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123R, Share-Based
Payment,which was to be effective for reporting periods beginning after June 15, 2005. In April
2005, the FASB announced that the effective date of SFAS 123(R), has been delayed until the first
quarter of 2006. SFAS No. 123R requires the Company to recognize the cost of employee services
received in exchange for the Companys equity instruments. Currently, in accordance with APB
Opinion 25, the Company records the intrinsic value of stock based compensation as expense.
Accordingly, no compensation expense is currently recognized for fixed stock option plans as the
exercise price equals the stock price on the date of grant. Under SFAS No. 123R, the Company will
be required to measure compensation expense over the vesting period of the options based on the
fair value of the stock options at the date the options are granted. SFAS No. 123R allows for the
use of the Black-Scholes or a lattice option-pricing model to value such options. As allowed by
SFAS No. 123R, the Company can elect either Modified Prospective Application, which applies the
Statement to new awards and modified awards after the effective date, and to any unvested awards as
service is rendered on or after the effective date, or Modified Retrospective Application which can
apply the effect of the statement to all prior years for which SFAS No. 123 was effective. The
Company is currently evaluating which valuation model and method of application will be used. In March 2005, the SEC staff issued a Staff Accounting Bulletin (SAB 107) which express views of
the staff regarding the interaction between SFAS No. 123R and certain
SEC rules and regulations and provide the staffs views
regarding the valuation of share-based payment arrangements for public companies. In particular,
SAB 107 provides guidance related to
share-based payment transactions with non-employees, the transition from nonpublic to public entity
status, valuation methods (including assumptions such as expected volatility and expected term),
the accounting for 13




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LIN TV CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued) certain redeemable financial instruments issued under share-based payment
arrangements, the classification of compensation expense, non-GAAP financial measures, first-time
adoption of SFAS No. 123R in an interim period, capitalization of compensation cost related to
share-based payment arrangements, the accounting for income tax effects of share-based payment
arrangements upon adoption of SFAS No. 123R, the modification of employee share options prior to
adoption of SFAS No. 123R and disclosures in Managements Discussion and Analysis
subsequent to adoption of SFAS No. 123R. In March 2005, the FASB issued FIN No. 47, Accounting for Conditional Asset Retirement Obligations
 an Interpretation of FASB Statement No. 143 (FIN 47), which is effective for all reporting
periods ending after December 15, 2005. FIN 47 requires that an entity shall recognize a liability
for the fair value of a conditional asset retirement obligation if the fair value of the liability
can be reasonable estimated, rather than when the obligation is incurred, generally upon
acquisition, construction, or development and/or through the normal operation of the asset as
required by SFAS No. 143. An asset retirement obligation would be reasonably estimable if (a) it
is evident that the fair value of the obligation is embodied in the acquisition price of the asset,
(b) an active market exists for the transfer of the obligation, or (c) sufficient information
exists to apply an expected present value technique. The provisions of FIN 47 are not expected to
have a material impact on the Companys consolidated financial statements. 14




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations  Special Note About Forward-Looking Statements This Quarterly Report on Form 10-Q contains certain forward-looking statements with respect to our
financial condition, results of operations and business, including statements under the captions
Managements Discussion and Analysis of Financial Condition and Results of Operations. All of these
forward-looking statements are based on estimates and assumptions made by our management which, although
we believe to be reasonable, are inherently uncertain. Therefore, you should not place undue reliance
upon such estimates and statements. We cannot assure you that any of such estimates or statements will
be realized and it is likely that actual results will differ materially from those contemplated by such
forward-looking statements. Factors that may cause such differences include:  
    volatility and changes in our advertising revenues;
    the outbreak and duration of hostilities or the occurrence of terrorist attacks and the duration and
extent of network preemption of regularly scheduled programming and decisions by advertisers to withdraw
or delay planned advertising expenditures as a result of military action or terrorist attacks;
    restrictions on our operations due to, and the effect of, our significant leverage;
    effects of complying with new accounting standards, including with respect to the treatment of our
intangible assets;
    inability to consummate acquisitions on attractive terms;
    increases in our cost of borrowings or inability or unavailability of additional debt or equity
capital;
    increased competition, including from newer forms of entertainment and entertainment media or changes
in the popularity or availability of programming;
    increased costs, including increased capital expenditures as a result of necessary technological
enhancements such as expenditures related to the transition to digital broadcasting, or acquisitions or
increased programming costs;
    effects of our control relationships, including the control that Hicks Muse and its affiliates have
with respect to corporate transactions and activities we undertake;
    adverse state or federal legislation or regulation or adverse determinations by regulators including
adverse changes in, or interpretations of, the exceptions to the FCC duopoly rule; and
    changes in general economic conditions in the markets in which we compete. Many of these factors are beyond our control. Forward-looking statements contained herein speak only as of
the date hereof. We undertake no obligation to publicly release the result of any revisions to these
forward-looking statements which may be made to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
 15




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##### Table of Contents



Executive Summary We are an owner and operator of 25 television stations in 15 mid-sized markets in the United States
and Puerto Rico. Our operating revenues are derived from the sale of advertising time to local and
national advertisers and, to a much lesser extent, from the networks for the broadcast of their
programming and from other broadcast-related activities. We recorded a net loss of $10.3 million in the three months ended March 31, 2005 compared with net
income of $1.4 million for the same period in the prior year. The following are some of our
operating highlights for the three months ended March 31, 2005:  
    We issued an additional $175.0 million in aggregate principal amount of our 6 1/2%
Senior Subordinated Notes.
    We issued our senior credit facility. Under our new facility, we obtained a
$170.0 million term loan, the proceeds of which were used to repay the balance on our
existing term loan and for general business purposes and a $160.0 million revolving
credit facility.
    We repurchased or redeemed all $166.4 million of our 8% Senior Notes.
    We acquired WNDY-TV, the UPN affiliate serving Indianapolis, Indiana, and WWHO-TV,
the UPN affiliate serving Columbus, Ohio, from Viacom, Inc. for $85.0 million in cash,
which was funded by a combination of cash on hand and proceeds from
our revolving credit
facility (see Note 3 of the unaudited condensed consolidated financial statements 
Acquisitions and Dispositions). Industry Trends The broadcast television industry is reliant primarily on advertising revenues and faces increased
competition largely from new technologies. The following summarizes certain of the competitive
forces and risks that may impact our future operating results.  
    Political revenues from elections and revenues from Olympic Games, which generally
occur on the even years, continue to create fluctuations in our operating results when
comparing first quarter of 2005 with the same period of 2004. U.S. television station
advertising decreased 3.0% in the first quarter of 2005 compared to an increase of
9.3% in the same period last year (source: Television Bureau of Advertising).
    We depend on automotive-related advertising that represents approximately 26% of our total net revenues for each of the three months ended March 31, 2005 and 2004. A significant change in these advertising revenues could materially
affect our future results of operations. Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations are based upon our
condensed consolidated financial statements that have been prepared in accordance with accounting
principles generally accepted in the United States of America. The preparation of our unaudited consolidated financial statements requires us to make estimates
and judgments that affect the reported amounts of assets, liabilities and equity and disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Areas where significant estimates are made
include valuation of long-lived assets 16




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##### Table of Contents



and intangible assets, network affiliations, deferred tax
assets, revenue recognition, stock-based compensation, allowance for doubtful accounts,
amortization of program rights, collectability of receivables, barter transactions and net assets
of businesses acquired. These estimates have a material impact on our financial statements. We
base our estimates on historical experience and on various other assumptions that we believe are
reasonable under the circumstances, the results of which form the basis for making judgments about
the carrying value of assets, liabilities and equity that are not readily apparent from other
sources. Actual results and outcomes could differ from these estimates and assumptions. For a
more detailed explanation of the judgments made in these areas and a discussion of our accounting
policies, refer to Critical Accounting Policies, Estimates and Recently Issued Accounting
Pronouncements included in Item 7
and Summary of Significant Accounting Policies (Note 1) included in Item 15 of our Annual Report
on Form 10-K for the year ended December 31, 2004. Since December 31, 2004, there have been no
significant changes to our critical accounting policies. Off-Balance Sheet Arrangements We do not have any contractual relationships with unconsolidated entities, including special
purpose entities or variable interest entities, for the purpose of facilitating off-balance sheet
arrangements. We do not have any off-balance sheet arrangements that have or are reasonably likely
to have a current or future material effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital
resources. Results of Operations Set forth below are significant factors that contributed to our operating results for the
three months ended March 31, 2005 and 2004, respectively. Three Months EndedMarch 31,
    
    
    %2005
    
    
    2004
    
    
    ChangeNational time sales (before agency commissions)
    
    $
    27,928
    
    
    $
    27,971
    
    
    
    0
    %Local time sales (before agency commissions)
    
    
    57,404
    
    
    
    57,460
    
    
    
    0
    %Political time sales (before agency commissions)
    
    
    284
    
    
    
    1,854
    
    
    
    -85
    %Agency commissions (related to time sales)
    
    
    (13,561
    )
    
    
    (14,101
    )
    
    
    -4
    %Network compensation
    
    
    2,415
    
    
    
    2,729
    
    
    
    -12
    %Barter revenue
    
    
    1,866
    
    
    
    2,308
    
    
    
    -19
    %Other revenue
    
    
    2,103
    
    
    
    1,623
    
    
    
    30
    %Net revenue
    
    
    78,439
    
    
    
    79,844
    
    
    
    -2
    %Operating costs and expenses:Direct operating (excluding $7.8 million
and $7.5 million of depreciation for the
three months ended March 31,
2005 and 2004, respectively)
    
    
    26,011
    
    
    
    24,630
    
    
    
    6
    %Selling, general and administrative
    
    
    24,762
    
    
    
    22,500
    
    
    
    10
    %Amortization of program rights
    
    
    5,855
    
    
    
    5,724
    
    
    
    2
    %Corporate
    
    
    5,255
    
    
    
    4,098
    
    
    
    28
    %Depreciation and amortization of
intangible assets
    
    
    8,039
    
    
    
    7,776
    
    
    
    3
    %Total operating costs and expenses
    
    
    69,922
    
    
    
    64,728
    
    
    
    8
    %Operating income
    
    $
    8,517
    
    
    $
    15,116
    
    
    
    -44
    %
 17




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##### Table of Contents



Net revenuesconsist primarily of national, local and political airtime sales, net of sales
adjustments and agency commissions. Additional, but less significant, amounts are generated from
network compensation, internet revenues, barter revenues, production revenues, tower rental income
and carriage or retransmission agreements. Net revenues decreased $1.4 million or 2% for the three months ended March 31, 2005 compared to the
same period last year. The decrease is primarily driven by decreased political revenues. We
expect political revenue to decrease substantially in 2005, as it is not an election year. Operating Costs and Expenses Direct operating expenses (excluding depreciation and amortization of intangible assets)consisting
primarily of news, engineering, programming and music licensing costs and excluding depreciation
and amortization expense increased $1.4 million or 6% for the three months ended March 31, 2005
compared to the same period last year. The increase is primarily due to general cost increases in
salary and related payroll taxes and the consolidation of Banks Broadcastings $0.3 million of such expenses for
the three months ended March 31, 2005. Selling, general and administrative expensesconsisting primarily of employee salaries, sales
commissions and other employee benefit costs, advertising and promotional expenses increased $2.3
million or 10% for the three months ended March 31, 2005 compared to the same period last year. The
increase is primarily due to increased expenses of $0.8 million for the three months ended March
31, 2005 attributable to the consolidation of Banks Broadcasting. The remaining increase is a
combination of a general cost increase in salary and related payroll taxes and retirement fund
expense of $0.6 million for the three months ended March 31, 2005. Amortization of program rightsrepresents costs associated with the acquisition of syndicated
programming, features and specials. Amortization of program rights increased $0.1 million or 2%
for the three months ended March 31, 2005 compared to the same period last year. Corporate expenses, consisting of costs associated with the centralized management of our stations,
increased $1.2 million for the three months ended March 31, 2005 compared to the same period last
year. The increase is primarily attributable to increased stock-based compensation of
$1.0 million for the three months ended March 31, 2005. Depreciation and amortization of intangible assetsincreased $0.3 million or 3% for the three
months ended March 31, 2005 compared to the same period last year. 18




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##### Table of Contents



Other (Income) Expense Interest expense The following table summarizes our total interest expense: Three Months EndedMarch 31,Components of interest expense, including discount and financing fee amortization
    
    2005
    
    
    2004Credit facility
    
    $
    2,344
    
    
    $
    2,357$375,000 and $200,000, 6 1/2% Senior Subordinated Notes, respectively
    
    
    5,407
    
    
    
    3,374$125,000
aggregate principal amount of 2.50% Exchangeable Senior Subordinated Debentures
    
    
    1,870
    
    
    
    1,869$0 and
$180,485 aggregate principal amount of 8% Senior Notes, respectively
    
    
    1,501
    
    
    
    4,139Interest income, net
    
    
    (212
    )
    
    
    (85
    )Total interest expense, net
    
    $
    10,910
    
    
    $
    11,654
 Interest expense, netdecreased $0.7 million or 6% for the three months ended March 31, 2005
compared to the same period last year, due to lower outstanding borrowings and a lower average
interest rate. Gain on derivative instrumentsconsists of mark-to-market adjustments of the embedded derivative
features contained in our 2.50% Exchangeable Senior Subordinated Debentures. Loss on derivative
instruments was $0.5 million for the three months ended March 31, 2005 compared to a gain of $1.0
million for the same period last year due to fluctuations in market interest rates. Other Items We recorded losses of $12.3 million and $2.9 million for the three months ended March 31, 2005 and
2004, respectively, related to the write-off of unamortized financing fees and discounts and
associated costs in connection with the early extinguishment of our 8% Senior Notes due 2008. Provision for Income Taxes We recorded a benefit from income taxes of $4.8 million for the three months ended March 31, 2005
compared to a provision from income taxes of $3.8 million for the same period prior year. The
benefit as of March 31, 2005 was primarily due to the discrete tax income benefit of $4.3 million
on the $12.3 million loss on extinguishment of debt. Our effective income tax rate was 42.1% for
the first quarter of 2005, excluding the $12.3 million loss on the extinguishment of debt. We used
the discrete method to calculate income tax expense for 2004. 19




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##### Table of Contents



Liquidity and Capital Resources Our principal sources of funds for working capital have historically been cash from operations, the
issuance of debt securities and borrowings under our credit facility. Description of Indebtedness On January 28, 2005, the Company issued an additional $175.0 million aggregate principal
amount of our 6 1/2% Senior Subordinated Notes due 2013. The proceeds from the sale of the 6 1/2%
Notes were used to repurchase or redeem $166.4 million principal amount of the 8% Senior Notes due
2008. We replaced our credit facility on March 11, 2005. Under the new facility, we obtained a $170.0
million term loan, the proceeds of which were used to repay the balance on our existing term loan
and for general business purposes, and a $160.0 million revolving credit facility, of which $50.0
million was used in combination with cash on hand to acquire WNDY-TV and WWHO-TV during the first
quarter of 2005. We are required to make mandatory payments on the new term loan of $4.3 million
per quarter beginning March 31, 2006. The revolving credit facility and term loan expire on March
11, 2010 and 2011, respectively. March 31,
    
    
    December 31,2005
    
    
    2004Credit Facility
    
    $
    220,000
    
    
    $
    158,500$166,440, 8% Senior Notes due 2008 (net of discount of $2,884
at December 31, 2004)
    
    
    
    
    
    
    163,556$375,000 and $200,000,
6 1/2% Senior Subordinated Notes due 2013 at March 31, 2005 and December 31, 2004, respectively
    
    
    375,000
    
    
    
    200,000$125,000, 2.50% Exchangeable Senior Subordinated Debentures due
2033 (net of discount of $13,162 and $14,215 at March 31, 2005
and December 31, 2004, respectively)
    
    
    111,838
    
    
    
    110,785Total debt
    
    
    706,838
    
    
    
    632,841Less current portion
    
    
    4,250
    
    
    
    6,573Total long-term debt
    
    $
    702,588
    
    
    $
    626,268
 The revolving credit facility may be used for general corporate purposes, acquisitions of
certain assets and the redemption of our publicly traded securities not to exceed $50 million. The
credit facility permits us to prepay loans and to permanently reduce revolving credit commitments,
in whole or in part, at any time. We are required to make principal payments of our terms loans in
the amount of $4.3 million per quarter, starting on March 31, 2006, and additional prepayments
based on certain debt transactions or the disposal of certain assets. The credit facility contains covenants that, among other things, restrict the ability of our
subsidiaries to dispose of assets, incur additional indebtedness, incur guarantee obligations,
prepay other indebtedness or amend other debt instruments, pay dividends, create liens on assets,
enter into sale and leaseback transactions, make investments, loans or advances, make acquisitions,
engage in mergers or consolidations, change the business conducted by it, make capital
expenditures, or engage in certain transactions with affiliates and otherwise restrict certain
corporate activities. We are required, under the terms of the senior credit facility, to comply with specified financial ratios, including minimum interest coverage
ratio, maximum leverage ratio and minimum fixed charge coverage ratio. At March 31, 2005, the Company was in compliance with the covenants under the credit facility. 20




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##### Table of Contents



The credit facility also
contains provisions that prohibit any modification of the indentures
governing our senior subordinated notes in any manner adverse to the lenders and that limits our
ability to refinance or otherwise prepay our senior subordinated notes without the consent of such
lenders. Our 6 1/2%Senior Subordinated Notes bear interest at the rate of 6.5% per annum, payable
semi-annually in arrears, with a final maturity date of May 15, 2013. Our 2.5% Exchangeable
Senior Subordinated Debentures bear interest at the rate of 2.5% per annum, payable semi-annually
in arrears, with a final maturity date of May 15, 2033. However, the holders of our 2.50%
Exchangeable Senior Subordinated Debentures can require us to repurchase all or a portion of the
debentures on each of May 15, 2008, 2013, 2018, 2023 and 2028. The 6 1/2% Senior Subordinated Notes and the 2.50% Exchangeable Senior Subordinated Debentures are
unsecured and are subordinated in right of payment to all senior indebtedness, including our credit
facility. The indentures governing the 6 1/2% Senior Subordinated Notes and 2.50% Exchangeable Senior
Subordinated Debentures contain covenants limiting, among other things, the incurrence of
additional indebtedness and issuance of capital stock; layering of indebtedness; the payment of
dividends on, and redemption of, our capital stock; liens; mergers, consolidations and sales of all
or substantially all of our assets; asset sales; asset swaps; dividend and other payment
restrictions affecting restricted subsidiaries; and transactions with affiliates. The indentures
also have change of control provisions which may require us to purchase all or a portion of our 6
1/2% Senior Subordinated Notes at a price equal to 101% of the principal amount of the notes,
together with accrued and unpaid interest, and our 2.50% Exchangeable Senior Subordinated
Debentures at a price equal to 100% of the principal amount of the notes, together with accrued and
unpaid interest. Contractual Obligations The following table summarizes our estimated material contractual cash obligations at March
31, 2005 (in thousands ) April - December2005
    
    
    2006-2008
    
    
    2009-2010
    
    
    Thereafter
    
    
    TotalPrincipal payments and mandatory
redemptions on debt (1)
    
    $
    
    
    
    $
    51,000
    
    
    $
    84,000
    
    
    $
    585,000
    
    
    $
    720,000Cash interest on debt (2)
    
    
    27,152
    
    
    
    104,156
    
    
    
    65,635
    
    
    
    99,689
    
    
    
    296,632Program payments (3)
    
    
    26,815
    
    
    
    58,963
    
    
    
    14,440
    
    
    
    6,649
    
    
    
    106,867Operating leases (4)
    
    
    880
    
    
    
    2,131
    
    
    
    681
    
    
    
    3,398
    
    
    
    7,090Local marketing agreement payments (5)
    
    
    1,130
    
    
    
    1,073
    
    
    
    
    
    
    
    
    
    
    
    2,203Total
    
    $
    55,977
    
    
    $
    217,323
    
    
    $
    164,756
    
    
    $
    694,736
    
    
    $
    1,132,792
   (1)
    
    We are obligated to repay the revolving
portion of our credit facility in March 2010 and
the term loan in March 2011, our 6 1/2% Senior
Subordinated Notes in May 2013 and our 2.50%
Exchangeable Senior Subordinated Debentures in May
2033. However, the holders of our 2.50%
Exchangeable Senior Subordinated Debentures can
require us to purchase all or a portion of the
debentures on each of May 15, 2008, 2013, 2018,
2023 and 2028.(2)
    
    We have contractual obligations to pay cash
interest on our credit facility and our 6 1/2% Senior
Subordinated Notes through 2013, and our 2.50%
Exchangeable Senior Subordinated Debentures through
2033. We may pay contingent interest to holders of
the debentures during any six-month period
commencing May 15, 2008, if the average trading
price of the debentures for a five trading day
measurement period immediately preceding the first
day of the applicable six-month period equals 120%
or more of the principal amount of the debentures.
The contingent interest equals 0.25% per annum per
$1,000 principal amount of debentures. In
addition, we are obligated to pay commitment fees
of approximately 0.30% on the unused amount of the credit facility.(3)
    
    We have entered into commitments for future
syndicated news, entertainment, and sports
programming. We have recorded $47.6 million of
program obligations as of March 31, 2005 and have
unrecorded commitments of $59.3 million for
programming that is not available to air as of
March 31, 2005.(4)
    
    We lease land, buildings, vehicles and
equipment under non-cancelable operating lease
agreements.(5)
    
    We have entered into option agreements that
would enable us to purchase KNVA-TV and WNAC-TV for
a fixed amount under certain conditions. In
connection with these agreements, we are committed
to pay minimum future periodic fees totaling $2.2
million as of March 31, 2005. 21




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Net cash provided by operating activitiesdecreased $6.1 million to $12.7 million for the three
months ended March 31, 2005 compared to $18.8 million in the same period last year. The decrease
is the result of a decrease in our operating income for the three months ended March 31, 2005. Net cash used in investing activitieswas $82.9 million for the three months ended March 31, 2005
compared to $5.3 million in the same period last year. This change is primarily the result of our
acquisition of WNDY-TV and WWHO-TV in the three months ended March 31, 2005 for $85.0 million less
certain working capital adjustments. Net cash provided by financing activitiesincreased $69.1 million to $58.6 million for the three
months ended March 31, 2005 compared to net cash used in financing activities of $10.5 million for
the same period last year. This increase is the result of the proceeds from the issuance of our
long-term debt of $345.0 million, of which $170.0 is from our credit facility and an additional
$175.0 million principal amount of our 6 1/2% Senior Subordinated Notes. This was offset by an
increase in our principal payments on long-term debt of $324.9 million in the three months ended
March 31, 2005 compared to $26.3 million for the same period last year due to the repayment of
$166.4 million of 8% Senior Notes and $158.5 million of our old credit facility. Based on the current level of our operations and anticipated future growth, both internally
generated as well as through acquisition, we believe that our cash flows from operations, together
with available borrowings under our senior credit, will be sufficient to meet our anticipated
requirements for working capital, capital expenditures, interest payments and scheduled principal
payments for at least the next 12 months. Recent Accounting Pronouncements In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123R, Share-Based
Payment,which was to be effective for reporting periods beginning after June 15, 2005. In April
2005, the FASB announced that the effective date of SFAS 123(R), has been delayed until the first
quarter of 2006. SFAS No. 123R requires us to recognize the cost of employee services received in
exchange for the Companys equity instruments. Currently, in accordance with APB Opinion 25, we
record the intrinsic value of stock based compensation as expense. Accordingly, no compensation
expense is currently recognized for fixed stock option plans as the exercise price equals the stock
price on the date of grant. Under SFAS No. 123R, we will be required to measure compensation
expense over the vesting period of the options based on the fair value of the stock options at the
date the options are granted. SFAS No. 123R allows for the use of the Black-Scholes or a lattice
option-pricing model to value such options. As allowed by SFAS No. 123R, we can elect either
Modified Prospective Application, which applies the Statement to new awards and modified awards
after the effective date, and to any unvested awards as service is rendered on or after the
effective date, or Modified Retrospective Application which can apply the effect of the statement
to all prior years for which SFAS No. 123 was effective. We are currently evaluating which
valuation model and method of application will be used. In March 2005, the FASB issued FASB Interpretation No. 47, Accounting for Conditional Asset
Retirement Obligations  an Interpretation of FASB Statement No. 143 (FIN 47), which is
effective for all reporting periods ending after December 15, 2005. FIN 47 requires that an entity
shall recognize a liability for the fair value of a conditional asset retirement obligation if the
fair value of the liability can be reasonable estimated, rather than when the obligation is
incurred, generally upon acquisition, construction, or development and/or through the normal
operation of the asset as required by FASB Statement No. 143. An asset retirement obligation would
be reasonably estimable if (a) it is evident that the fair value of the obligation is embodied in
the acquisition price of the asset, (b) an active market exists for the transfer of the obligation,
or (c) sufficient information exists to apply an expected present value technique. The provisions
of FIN 47 are not expected to have a material impact on our consolidated financial statements. 22




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In March 2005, the SEC Staff issued a Staff Accounting Bulletin (SAB 107) which express views of
the staff regarding the interaction between SFAS No. 123R and certain
SEC rules and regulations and provide the staffs views
regarding the valuation of share-based payment arrangements for public companies. In particular,
SAB 107 provides guidance related to share-based payment transactions with non-employees, the transition from nonpublic to public entity
status, valuation methods (including assumptions such as expected volatility and expected term),
the accounting for certain redeemable financial instruments issued under share-based payment
arrangements, the classification of compensation expense, non-GAAP financial measures, first-time
adoption of SFAS No. 123R in an interim period, capitalization of compensation cost related to
share-based payment arrangements, the accounting for income tax effects of share-based payment
arrangements upon adoption of SFAS No. 123R, the modification of employee share options prior to
adoption of SFAS No. 123R and disclosures in Managements Discussion and Analysis (MD&A)
subsequent to adoption of SFAS No. 123R. 23




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk We are exposed to market risk from changes in interest rates principally with respect to our
credit facilities, which are priced based on certain variable interest rate alternatives. There was
$50.0 million outstanding as of March 31, 2005 under our revolving line of credit included in our
credit facility. Accordingly, we are exposed to potential losses related to increases in interest rates. A
hypothetical one percent increase in the floating rate used as the basis for the interest charged
on the credit facility as of March 31, 2005 would result in an estimated $0.5 million increase in
annualized interest expense assuming a constant balance outstanding of $50.0 million. Our 2.50% Exchangeable Senior Subordinated Debentures have certain embedded derivative features
that are required to be separately identified and recorded at fair value with a mark-to-market
adjustment required each quarter. The value of these features on issuance of the debentures was
$21.1 million and this amount was recorded as an original issue discount and is being accreted
through interest expense over the period to May 2008. The derivative features are recorded at fair
market value in the line item other liabilities. We have recorded a loss on derivative
instruments in connection with the mark-to-market of these derivative features of $0.5 million in
the three months ended March 31, 2005 compared to a gain of $1.0 million for the same period last
year. We are also exposed to market risk related to changes in the interest rates through our investing
activities. With respect to borrowings, our ability to finance future acquisition transactions may
be impacted if we are unable to obtain appropriate financing at acceptable rates. 
 Item 4. Controls and Procedures The Companys management, with the participation of the Companys chief executive officer and
chief financial officer, evaluated the effectiveness of the Companys disclosure controls and
procedures as of March 31, 2005. The term disclosure controls and procedures, as defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a
company that are designed to ensure that information required to be disclosed by a company in the
reports that it files or submits under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the SECs rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to ensure that information
required to be disclosed by a company in the reports that it files or submits under the Exchange
Act is accumulated and communicated to the companys management, including its principal executive
and principal financial officers, as appropriate to allow timely decisions regarding required
disclosure. Management recognizes that any controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving their objectives and management
necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls
and procedures. Based on the evaluation of the Companys disclosure controls and procedures as of
March 31, 2005, the Companys chief executive officer and chief financial officer concluded that,
as of such date, the Companys disclosure controls and procedures were effective at the reasonable
assurance level. No change in the Companys internal control over financial reporting (as defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended March 31, 2005 that
has materially affected, or is reasonably likely to materially affect, the Companys internal
control over financial reporting. 24




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##### Table of Contents



Part II: Other Information 
 Item 1.Legal Proceedings We are involved in various claims and lawsuits that are generally incidental to our business.
We are vigorously contesting all of these matters and believe that their ultimate resolution will
not have a material adverse effect on us. 
 Item 5.Other Information On May 4, 2005, the
stockholders of LIN TV Corp. approved the Amended and Restated 2002
Stock Plan, which (i) increased the number of shares of class A
common stock reserved for issuance under the plan from 2,700,000
shares to 6,300,000 shares, (ii) permits stock exchange programs
pursuant to which outstanding options could be exchanged for
restricted stock, and (iii) permits the repricing of stock option
grants under the plan. The stockholders of LIN TV
Corp. also approved the Amended and Restated 2002 Non-Employee
Director Stock Plan, which (i) increased the number of shares of
class A common stock reserved for issuance under the plan from
200,000 shares to 400,000 shares, (ii) increased the annual awards to
directors, and (iii) permits stock exchange programs pursuant to
which outstanding options could be exchanged for restricted stock. 
 Item 6.Exhibits Exhibits:10.1
    
    Exchange and Registration Rights Agreement, dated as of January 28, 2005, among LIN
Television Corporation, J.P. Morgan Securities Inc., Deutsche Bank Securities Inc., Banc of
America Securities LLC, Bear, Stearns & Co. Inc., Morgan Stanley & Co. Incorporated and Scotia
Capital (USA) Inc.10.2
    
    Supplemental Indenture, dated as of January 31, 2005, among LIN Television Corporation, the
Guarantors named therein and The Bank of New York (incorporated by reference from the Current
Report on Form 8-K of LIN TV Corp. and LIN Television Corporation (File Nos. 001-31311 and
000-25206) dated January 28, 2005 filed with the SEC on February 2, 2005).10.3
    
    Executive Officer Compensation Summary (incorporated by reference from Item 1.01 of the
Current Report on Form 8-K of LIN TV Corp. and LIN Television Corporation (File Nos. 001-31311
and 000-25206) dated February 4, 2005 filed with the SEC on February 10, 2005).10.4
    
    Summary of Non-Employee Director Compensation (incorporated by reference from Item 1.01 of
the Current Report on Form 8-K of LIN TV Corp. (File No. 001-31311) dated February 23, 2005
filed with the SEC on February 28, 2005).10.5
    
    Executive Officer Compensation Summary (incorporated by reference from Item 1.01 of the
Current Report on Form 8-K of LIN TV Corp. (File No. 001-31311) dated February 28, 2005 filed
with the SEC on March 3, 2005).10.6
    
    Credit Agreement, dated as of March 11, 2005, among LIN Television Corporation, as Borrower,
Televicentro of Puerto Rico, LLC as the Permitted Borrower, the Lenders party thereto, J.P.
Morgan Chase Bank, as Administrative Agent, as an Issuing Lender and as Swingline Lender, J.P.
Morgan Securities Inc., Deutsche Bank Securities Inc. as Joint Lead Arrangers and Joint
Bookrunners, Deutsche Bank Trust Company Americas as Syndication Agent and as an Issuing
Lender, and Bank of America, N.A., The Bank of Novia Scotia, and Wachovia Bank, National
Association as Documentation Agents and Suntrust Bank as Co-Documentation Agent (filed as
Exhibit 10.44 to the Annual Report on Form 10-K of LIN TV Corp. and LIN Television Corporation
(File Nos. 001-31311 and 000-25206) and incorporated herein by reference).10.7
    
    LIN TV Corp. Amended and Restated
2002 Stock Plan, dated as of May 4, 2005.10.8
    
    LIN TV Corp. Amended and Restated
2002 Non-Employee Director Stock Plan, dated as of May 4, 2005.
 25




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##### Table of Contents



31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of the Chief
Executive Officer of LIN TV Corp.31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of the Chief
Financial Officer of LIN TV Corp.31.3
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of the Chief
Executive Officer of LIN Television Corporation.31.4
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of the Chief
Financial Officer of LIN Television Corporation.32.1
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Chief
Executive Officer and Principal Financial Officers of LIN TV Corp.32.2
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Chief
Executive Officer and Principal Financial Officers of LIN Television Corporation
 26




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##### Table of Contents



SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, each of LIN TV Corp. and LIN Television Corporation, has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized. LIN TV CORP.LIN TELEVISION CORPORATIONDated: May 6, 2005
    
    By:
    
    /s/ Vincent L. SaduskyVincent L. SaduskyChief Financial Officer and TreasurerBy:
    
    /s/ William A. CunninghamWilliam A. CunninghamVice President and Controller(Principal Accounting Officer)
 27




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##### Table of Contents



Item 1. Financial Statements LIN Television Corporation Condensed Consolidated Balance Sheets
    
    
    29Condensed Consolidated Statements of Operations
    
    
    30Condensed Consolidated Statements of Cash Flows
    
    
    31Notes to Condensed Consolidated Financial Statements
    
    
    32
 28




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##### Table of Contents



LIN TELEVISION CORPORATION 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 March 31,
    
    
    December 31,2005
    
    
    2004(Unaudited)(In thousands, except share data)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    3,219
    
    
    $
    14,797Accounts receivable, less allowance for doubtful accounts (2005 - $1,131; 2004 - $1,450)
    
    
    61,227
    
    
    
    70,639Program rights
    
    
    16,898
    
    
    
    17,312Other current assets
    
    
    5,100
    
    
    
    3,790Total current assets
    
    
    86,444
    
    
    
    106,538Property and equipment, net
    
    
    200,416
    
    
    
    197,565Deferred financing costs
    
    
    13,661
    
    
    
    11,060Equity investments
    
    
    63,004
    
    
    
    65,813Program rights
    
    
    12,556
    
    
    
    12,165Other assets
    
    
    16,582
    
    
    
    16,043Goodwill
    
    
    614,181
    
    
    
    583,105Broadcast licenses and other intangible assets, net
    
    
    1,131,270
    
    
    
    1,066,135Total assets
    
    $
    2,138,114
    
    
    $
    2,058,424LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    4,250
    
    
    $
    6,573Accounts payable
    
    
    5,684
    
    
    
    7,774Accrued interest expense
    
    
    10,565
    
    
    
    8,118Accrued sales volume discount
    
    
    1,384
    
    
    
    6,462Other accrued expenses
    
    
    17,145
    
    
    
    13,483Program obligations
    
    
    27,019
    
    
    
    23,278Total current liabilities
    
    
    66,047
    
    
    
    65,688Long-term debt, excluding current portion
    
    
    702,588
    
    
    
    626,268Deferred income taxes, net
    
    
    428,690
    
    
    
    445,695Program obligations
    
    
    20,569
    
    
    
    12,008Other liabilities
    
    
    58,244
    
    
    
    38,344Total liabilities
    
    
    1,276,138
    
    
    
    1,188,003Preferred stock of Banks Broadcasting, Inc., $0.01 par value, 179,322 and
173,822 issued and outstanding at March 31, 2005 and December 31, 2004, respectively
    
    
    14,797
    
    
    
    14,458Stockholders equity:Common stock $0.01 par value: 1,000 authorized, issued and outstanding
    
    
    
    
    
    
    Additional paid-in capital
    
    
    1,073,856
    
    
    
    1,072,320Accumulated deficit
    
    
    (212,087
    )
    
    
    (201,767
    )Accumulated other comprehensive loss
    
    
    (14,590
    )
    
    
    (14,590
    )Total stockholders equity
    
    
    847,179
    
    
    
    855,963Total liabilities, preferred stock and stockholders equity
    
    $
    2,138,114
    
    
    $
    2,058,424
 The accompanying notes are an integral part of the condensed consolidated financial statements. 29




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##### Table of Contents



LIN TELEVISION CORPORATION 
 CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS  (unaudited)
 Three MonthsEnded March 31,2005
    
    
    2004(In thousands)Net revenues
    
    $
    78,439
    
    
    $
    79,844Operating costs and expenses:Direct operating (excluding depreciation of $7.8 million and $7.5 million for the three months
ended March 31, 2005 and 2004, respectively)
    
    
    26,011
    
    
    
    24,630Selling, general and administrative
    
    
    24,762
    
    
    
    22,500Amortization of program rights
    
    
    5,855
    
    
    
    5,724Corporate
    
    
    5,255
    
    
    
    4,098Depreciation and amortization of intangible assets
    
    
    8,039
    
    
    
    7,776Total operating costs and expenses
    
    
    69,922
    
    
    
    64,728Operating income
    
    
    8,517
    
    
    
    15,116Other (income) expense:Interest expense, net
    
    
    10,910
    
    
    
    11,654Share of income in equity investments
    
    
    (246
    )
    
    
    (167
    )Minority interest in loss of Banks Broadcasting, Inc.
    
    
    (212
    )
    
    
    Loss (gain) on derivative instruments
    
    
    501
    
    
    
    (990
    )Loss on early extinguishment of debt
    
    
    12,309
    
    
    
    2,937Other, net
    
    
    401
    
    
    
    (119
    )Total other expense, net
    
    
    23,663
    
    
    
    13,315(Loss) income from continuing operations before (benefit from) provision for
income taxes and cumulative effect of change in accounting principle
    
    
    (15,146
    )
    
    
    1,801(Benefit from) provision for income taxes
    
    
    (4,826
    )
    
    
    3,797Loss from continuing operations before cumulative effect of change in accounting principle
    
    
    (10,320
    )
    
    
    (1,996
    )Discontinued operations:Income from discontinued operations, net of tax provision of $206
    
    
    
    
    
    
    (69
    )Cumulative effect of change in accounting principle, net of a tax effect of $0
    
    
    
    
    
    
    (3,290
    )Net (loss) income
    
    $
    (10,320
    )
    
    $
    1,363
 The accompanying notes are an integral part of the condensed consolidated financial statements. 30




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LIN TELEVISION CORPORATION 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  (unaudited)
 Three months ended March 31,2005
    
    
    2004(in thousands)OPERATING ACTIVITIES:Net (loss) income
    
    $
    (10,320
    )
    
    $
    1,363Adjustment to reconcile net (loss) income to net cash provided by operating activities:Depreciation and amortization of intangible assets
    
    
    8,039
    
    
    
    7,776Amortization of financing costs and note discounts
    
    
    1,769
    
    
    
    2,033Amortization of program rights
    
    
    5,855
    
    
    
    5,724Program payments
    
    
    (6,346
    )
    
    
    (6,022
    )Loss on early extinguishment of debt
    
    
    12,309
    
    
    
    2,937Cumulative effect of change in accounting principle, net of tax impact
    
    
    
    
    
    
    (3,290
    )Loss (gain) on derivative instruments
    
    
    501
    
    
    
    (990
    )Share of income in equity investments
    
    
    (246
    )
    
    
    (167
    )Deferred income taxes, net
    
    
    (5,197
    )
    
    
    2,963Other, net
    
    
    1,613
    
    
    
    (580
    )Changes in operating assets and liabilities, net of acquisitions and disposals:Accounts receivable
    
    
    9,627
    
    
    
    11,834Program rights, net of program obligations
    
    
    639
    
    
    
    92Other assets
    
    
    (1,849
    )
    
    
    (347
    )Accounts payable
    
    
    (2,195
    )
    
    
    (2,423
    )Accrued interest expense
    
    
    2,447
    
    
    
    (406
    )Accrued sales volume discount
    
    
    (5,078
    )
    
    
    (4,830
    )Other accrued expenses
    
    
    1,136
    
    
    
    3,128Net cash provided by operating activities
    
    
    12,704
    
    
    
    18,795INVESTING ACTIVITIES:Capital expenditures
    
    
    (1,544
    )
    
    
    (1,740
    )Investment in equity investments
    
    
    
    
    
    
    (650
    )Capital contribution from minority interest in Banks Broadcasting, Inc.
    
    
    550
    
    
    
    Distributions from equity investments
    
    
    3,055
    
    
    
    1,630Acquisition of broadcast licenses
    
    
    
    
    
    
    (4,224
    )Payments for business combinations
    
    
    (85,000
    )
    
    
    Other, net
    
    
    13
    
    
    
    (270
    )Net cash used in investing activities
    
    
    (82,926
    )
    
    
    (5,254
    )FINANCING ACTIVITIES:Net proceeds on exercises of employee stock options and phantom stock
units and employee stock purchase plan issuances
    
    
    1,326
    
    
    
    804Proceeds from issuance of long-term debt
    
    
    345,000
    
    
    
    Long-term debt financing costs
    
    
    (5,655
    )
    
    
    (90
    )Net proceeds from revolver debt
    
    
    50,000
    
    
    
    17,000Principal payments on long-term debt
    
    
    (324,940
    )
    
    
    (26,265
    )Cash expenses associated with early extinguishment of debt
    
    
    (7,087
    )
    
    
    (1,973
    )Net cash provided by (used) in financing activities
    
    
    58,644
    
    
    
    (10,524
    )Net (decrease) increase in cash and cash equivalents
    
    
    (11,578
    )
    
    
    3,017Cash and cash equivalents at the beginning of the period
    
    
    14,797
    
    
    
    9,475Cash and cash equivalents at the end of the period
    
    $
    3,219
    
    
    $
    12,492
 The accompanying notes are an integral part of the condensed consolidated financial
statements. 31




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LIN TELEVISION CORPORATION 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Note 1  Basis of Presentation: LIN TV Corp., together with its subsidiaries, including LIN Television Corporation (LIN
Television) (together, the Company), is a television station group operator in the United States
and Puerto Rico. LIN TV Corp. and its subsidiaries are affiliates of Hicks, Muse, Tate & Furst
Incorporated (Hicks Muse). LIN TV Corp. guarantees all debt of LIN Television Corporation. All of the consolidated wholly-owned subsidiaries of LIN Television
Corporation fully and unconditionally guarantee all the Companys debt on a joint and several
basis. Certain reclassifications have been made to the prior period financial statements to conform to the
current period financial statement presentation. These condensed consolidated financial statements have been prepared without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such rules and
regulations. The Company filed audited financial statements for the
year ended December 31, 2004 in
its Annual Report on Form 10-K, which includes all such information and disclosures. In the opinion of management, the accompanying unaudited interim financial statements contain all
adjustments necessary to summarize fairly the financial position, results of operations and cash
flows of the Company for the periods presented. The interim results of operations are not
necessarily indicative of the results to be expected for the full year. The Company owns preferred stock that represents a 50% non-voting interest in Banks Broadcasting,
Inc. (Banks Broadcasting), which owns and operates KWCV-TV, a WB affiliate in Wichita, Kansas and
KNIN-TV, a UPN affiliate in Boise, Idaho. The Company consolidates the results of operations and
financial condition of Banks Broadcasting in accordance with FIN 46R  Consolidation of Variable
Interest Entities (Revised December 2003)  an
Interpretation of ARB No. 51. All intercompany
transactions have been eliminated in consolidation. The resulting consolidated balance sheet of the
Company does not reflect any voting equity minority interest since Banks Broadcasting has incurred
cumulative losses and as such the minority interest would be in a deficit position at March 31,
2005. Hicks Muse has a substantial economic interest in 21st Century Group, LLC which owns 36%
of the preferred stock on the Banks Broadcasting balance sheet. The following presents the summarized balance sheet of Banks Broadcasting at March 31, 2004, the
date of initial consolidation (in thousands): 32




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LIN TELEVISION CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued) Assets
    
    
    
    
    
    Liabilities and EquityCash
    
    $
    97
    
    
    Accounts payable
    
    $
    396Accounts receivable
    
    
    899
    
    
    Program obligations, short-term
    
    
    793Program rights, short-term
    
    
    757
    
    
    Other accrued expenses
    
    
    404Other current assets
    
    
    46
    
    
    Program obligations, long-term
    
    
    525Property and equipment
    
    
    5,048
    
    
    Deferred income taxes, net
    
    
    4,805Program rights, long-term
    
    
    662
    
    
    Preferred stock
    
    
    34,764Broadcast licenses
    
    
    29,238Total assets
    
    $
    36,747
    
    
    Total liabilities and equity
    
    
    41,687Deficit
    
    $
    (4,940
    )
 The deficit of $4.9 million was allocated to the nonvoting preferred stock, and the
Companys ownership of such preferred stock has been eliminated on consolidation. The Companys preparation of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported amount of
assets and liabilities and disclosure of contingent assets and liabilities at the dates of the
financial statements and the reported amounts of revenues and expenses during the reported periods.
Estimates are used when accounting for the collectibility of accounts receivable, mark-to-market of
derivative instruments, valuation of intangible assets, deferred tax assets and net assets of
businesses acquired. Actual results could differ from these estimates. Note 2  Stock-Based
Compensation The Company accounts for its stock-based employee compensation plans under the recognition and
measurement principles of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock
Issued to Employees, and related interpretations. The following table illustrates the effect on net (loss) income if
the Company had applied the fair value recognition provisions of Statement of Financial Accounting
Standards (SFAS) No. 123, Accounting for
Stock-Based Compensation, to stock-based employee
compensation (in thousands): Three Months EndedMarch 31,2005
    
    
    2004Net (loss) income, as reported
    
    $
    (10,320
    )
    
    $
    1,363Add: Stock-based employee compensation expense,
included in reported net (loss) income, net of related tax effect
    
    
    670
    
    
    
    124Deduct: Total stock-based employee compensation
expense determined under the fair value based
method for all awards, net of related tax effect
    
    
    (350
    )
    
    
    (761
    )Pro forma net (loss) income
    
    $
    (10,000
    )
    
    $
    726
 The fair value of each option is estimated on the date of grant using the Black-Scholes
option-pricing model with the following assumptions during the three months ended March 31, 2004: Volatility
    
    
    24
    %Risk-free interest rates
    
    
    2.0 - 4.4
    %Weighted average expected life
    
    3 - 10 yearsDividend yields
    
    
    0
    %
 33




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\

LIN TELEVISION CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued) There were no options granted during the three months ended March 31, 2005. Note 3  Acquisitions and Dispositions: On March 31, 2005, the Company acquired the broadcast licenses and certain operating assets and
liabilities of WNDY-TV, the UPN affiliate serving Indianapolis, Indiana and WWHO-TV, the UPN
affiliate serving Columbus, Ohio from Viacom, Inc. for $85.0 million and was funded by a combination of cash on hand and the revolving credit
facility. In addition to the $17.8 million of program obligations recorded by the Company in connection with
the acquisition of WNDY-TV and WWHO-TV, the Company recorded
$18.3 million in other liabilities related to estimated losses on future program obligations
and above market program contracts. These future program obligations are unrecorded in accordance with SFAS No. 63
Financial Reporting by Broadcasters. The Company has also recorded $2.7 million in connection with the
acquisition of WNDY-TV and WWHO-TV relating to employee severance costs and certain contractual
costs as a result of the Companys plans to centralize the master control operations of WNDY-TV and
WWHO-TV at the Companys transmission facility in Indianapolis, Indiana; and transaction costs
related to the acquisition of the two stations. The following table summarizes the estimated fair value of the assets acquired and liabilities
assumed at the date of acquisition. The Company is in the process of obtaining third-party
valuations of the assets acquired; thus the allocation of the purchase price is preliminary (in
thousands): WNDY-TV
    
    
    WWHO-TVAccounts receivable
    
    $
    437
    
    
    $
    87Program rights, short-term
    
    
    1,709
    
    
    
    1,925Property and equipment
    
    
    4,902
    
    
    
    4,589Program rights, long-term
    
    
    1,076
    
    
    
    908Broadcast licenses
    
    
    36,600
    
    
    
    28,800Goodwill
    
    
    20,282
    
    
    
    10,794Deferred tax assets
    
    
    8,037
    
    
    
    3,774Total assets
    
    $
    73,043
    
    
    $
    50,877Accounts payable
    
    
    105
    
    
    
    Other accrued expenses
    
    
    1,671
    
    
    
    1,069Program obligations, short-term
    
    
    4,375
    
    
    
    2,327Program obligations, long-term
    
    
    7,029
    
    
    
    4,068Other long-term liabilities
    
    
    12,363
    
    
    
    5,913Total liabilities
    
    $
    25,543
    
    
    $
    13,377Purchase Price
    
    $
    47,500
    
    
    $
    37,500
 The following table sets
forth unaudited pro forma information of the Company as if the acquisition of WNDY-TV and WWHO-TV
had occurred on January 1, 2004: Three
Months EndedMarch 31,2005
    
    
    2004Net revenues
    
    $
    83,095
    
    
    $
    84,866Operating (loss) income
    
    
    7,813
    
    
    
    15,139Net loss
    
    
    (10,903
    )
    
    
    1,201
 34




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LIN TELEVISION CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued) On May 14, 2004, the Company completed the sale of WEYI-TV, the NBC affiliate serving Flint,
Michigan, for $24.0 million. The operating results of this station for the three-month period
ended March 31, 2004 have been excluded from continuing operations and included in discontinued
operations under the provisions of SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. During the three month period ended March 31, 2004, the Company recorded
income from discontinued operations of $69,000, net of a tax
provision of $206,000. The following table summarizes the net revenues and pre-tax income for WEYI-TV included in the historical results: Three Months EndedMarch
31, 2004Net revenues
    
    $
    2,027Operating income
    
    
    675Net income
    
    
    621
 On January 14, 2004, the Company purchased the broadcast license and certain assets of WIRS-TV
in Yauco, Puerto Rico from Marantha Christian Network for
$4.5 million and was funded by borrowings from the
Companys former revolving credit facility. Note 4  Investments: The Company has investments in two ventures with third parties, through which it has an interest in
television stations. The following presents the Companys basis in these ventures (in thousands) : March 31,
    
    
    December 31,2005
    
    
    2004NBC joint venture
    
    $
    52,845
    
    
    $
    55,604WAND (TV) Partnership
    
    
    10,159
    
    
    
    10,209$
    63,004
    
    
    $
    65,813
 Joint Venture with NBC:The Company owns a 20.38% interest in a joint venture with NBC and
accounts for its interest using the equity method, as the Company does not have a controlling
interest. The Company received distributions of $3.1 million and $1.6 million from the joint
venture in the three months ended March 31, 2005 and 2004, respectively. The following presents the summarized financial information of the joint venture (in thousands): 35




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LIN TELEVISION CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued) Three Months EndedMarch 31,2005
    
    
    2004Revenue
    
    $
    18,306
    
    
    $
    18,441Other expense
    
    
    (16,854
    )
    
    
    (15,948
    )Net income
    
    
    1,452
    
    
    
    2,493
 March 31,
    
    
    December 31,2005
    
    
    2004Current assets
    
    $
    12,359
    
    
    $
    12,675Non-current assets
    
    
    230,296
    
    
    
    233,957Current liabilities
    
    
    1,269
    
    
    
    724Non-current liabilities
    
    
    815,500
    
    
    
    815,500
 WAND (TV) Partnership:The Company has a 33.33% interest in a partnership, WAND (TV)
Partnership, with Block Communications. The Company accounts for its interest using the equity
method, as the Company does not have a controlling interest. The Company has also entered into a
management services agreement with WAND (TV) Partnership to provide specified management,
engineering and related services for a fixed fee. Included in this agreement is a cash management
arrangement under which the Company incurs expenditures on behalf of WAND (TV) Partnership and is
periodically reimbursed. Amounts due to the Company under this arrangement were $206,000 and
$478,000 as of March 31, 2005 and December 31, 2004, respectively. The following presents the summarized financial information of the WAND (TV) Partnership (in
thousands): March 31,2005
    
    
    2004Net revenues
    
    $
    1,509
    
    
    $
    1,633Operating loss
    
    
    112
    
    
    
    (50
    )Net loss
    
    
    (149
    )
    
    
    (49
    )
 March 31,
    
    
    December 31,2005
    
    
    2004Current assets
    
    $
    3,136
    
    
    $
    3,317Non-current assets
    
    
    24,058
    
    
    
    24,283Current liabilities
    
    
    686
    
    
    
    917Non-current liabilities
    
    
    5
    
    
    
    32
 36




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LIN TELEVISION CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued) Note 5  Intangible Assets: The following table summarizes the carrying amount of each major class of intangible assets (in
thousands): March 31,
    
    
    December 31,2005
    
    
    2004Amortized Intangible Assets:LMA purchase options
    
    $
    3,300
    
    
    $
    3,300Network affiliations
    
    
    173
    
    
    
    173Income leases
    
    
    393
    
    
    
    393Other intangible assets
    
    
    1,780
    
    
    
    1,780Accumulated amortization
    
    
    (3,041
    )
    
    
    (2,776
    )2,605
    
    
    
    2,870Unamortized Intangible Assets:Broadcast licenses
    
    
    1,128,665
    
    
    
    1,063,265Total broadcast licenses and other intangible assets, net
    
    $
    1,131,270
    
    
    $
    1,066,135Goodwill
    
    
    614,181
    
    
    
    583,105Total intangible assets
    
    $
    1,745,451
    
    
    $
    1,649,240
 The increase in broadcast
licenses and goodwill in the three month period ending March 31, 2005 is due to the acquisition of WNDY-TV and
WWHO-TV on March 31, 2005. The Company is in the process of obtaining third-party valuations of
all acquired intangible assets, including broadcast licenses and goodwill; thus,
the allocation of WNDY-TV and WWHO-TV is based on preliminary estimates. The following table summarizes the aggregate amortization expense for all periods presented as well
as the estimated amortization expense for the next five years (in thousands): Three Months Ended
    
    
    Estimated amortization expenseMarch 31,
    
    
    For the year ended December 31,2004
    
    
    2005
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009Amortization expense
    
    $
    278
    
    
    $
    266
    
    
    $
    1,864
    
    
    $
    1,006
    
    
    $
    
    
    
    $
    
    
    
    $
    
 Note 6 -Debt: Debt consisted of the following (in thousands): 37




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LIN TELEVISION CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued) March 31,
    
    
    December 31,2005
    
    
    2004Credit Facility
    
    $
    220,000
    
    
    $
    158,500$166,440, 8% Senior Notes due 2008 (net of discount of $2,884
at December 31, 2004)
    
    
    
    
    
    
    163,556$375,000 and
$200,000, 6 1/2% Senior Subordinated Notes due 2013 at March 31, 2005 and December 31, 2004,
respectively,
    
    
    375,000
    
    
    
    200,000$125,000, 2.50% Exchangeable Senior Subordinated Debentures due
2033 (net of discount of $13,162 and $14,215 at March 31, 2005
and December 31, 2004, respectively)
    
    
    111,838
    
    
    
    110,785Total debt
    
    
    706,838
    
    
    
    632,841Less current portion
    
    
    4,250
    
    
    
    6,573Total long-term debt
    
    $
    702,588
    
    
    $
    626,268
 On January 28, 2005, the Company issued an additional $175.0 million aggregate principal
amount of its 6 1/2% Senior Subordinated Notes due 2013. The proceeds from the issuance of the 6 1/2%
Notes were used to repurchase or redeem $166.4 million principal amount of the 8%
Senior Notes due 2008. The Company consummated a new credit facility on March 11, 2005 that included a $170.0 million term
loan with a maturity date of March 11, 2011 and a $160.0 million revolving credit facility with a
maturity date of March 31, 2010. The proceeds of the term loan were used to repay the balance on
the existing term loan. The
Company used $50.0 million of the revolving credit facility and existing cash on hand to acquire
WNDY-TV and WWHO-TV. The Company incurred charges of $12.3 million during the period ended March 31, 2005 related to the
write-off of unamortized discounts, deferred financing fees and associated costs as a result of the
early extinguishment of debt. Financing fees related to the 6 1/2% Notes and the credit facility of
$5.7 million were capitalized and are being amortized over the term of the related debt. The current portion of long-term debt includes $4.3 million of quarterly amortization of a term
loan under the credit facility beginning in March of 2006. Note 7  Related Party Transactions: Financial Advisory Agreement.The Company is party to an agreement with Hicks Muse Partners,
pursuant to which the Company reimburses Hicks Muse Partners, an affiliate of Hicks Muse, for
certain expenses incurred by it in connection with rendering services relating to acquisitions,
sales, mergers, exchange offers, recapitalization, restructuring or similar transactions allocable
to the Company. The Company incurred fees under this arrangement of $8,000 for the three months
ended March 31, 2005. The Company did not incur any fees for the three months ended March 31,
2004. Centennial Cable of Puerto RicoThe Company is party to an agreement with Centennial Cable of
Puerto Rico, which Hicks Muse has a substantial interest, in which
Centennial provides the Company
advertising and promotional services. The Company incurred fees under this arrangement of $29,000
and $20,000 for the three months ended March 31, 2005 and 2004, respectively. Banks Broadcasting Inc.The Company has entered into a management services agreement with Banks
Broadcasting to provide specified management, engineering and related services for a fixed fee.
Hicks Muse has substantial economic interest in 21 st Century Group, LLC which owns 18%
of Banks Broadcasting. Prior 38




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LIN TELEVISION CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued) to the consolidation of Banks Broadcasting in accordance with FIN
46R, the Company received approximately $50,000 for the three months ended March 31, 2004 under the
management services agreement. Note 8  Contingencies: GECC Note.General Electric Capital Corporation (GECC) provided debt financing in connection with
the formation of the joint venture with NBC in the form of an $815.5 million 25-year non-amortizing
senior secured note bearing an initial interest rate of 8.0% per annum (the GECC note). During
the last five years, the joint venture has produced cash flows to support the interest payments and
to maintain minimum levels of required working capital reserves. In addition, the joint venture has
made cash distributions to the Company and to NBC from the excess cash generated by the joint
venture of approximately $34.5 million on average each year during the past three years.
Accordingly, the Company expects that the interest payments on the GECC note will be serviced
solely by the cash flow of the joint venture. The GECC note is not an obligation of the Company,
however, the note is recourse to the joint venture with NBC and is guaranteed by LIN TV Corp. If
the joint venture were unable to pay principal or interest on the GECC note and GECC could not
otherwise recoup its principal from the joint venture, GECC could require LIN TV Corp. to pay the
shortfall of any outstanding amounts under the GECC note. If this happened, the Company could
experience material adverse consequences, including:  
    GECC could force LIN TV Corp. to sell the stock of LIN Television held by LIN TV Corp. to
satisfy outstanding amounts under the GECC note;
    if more than 50% of the ownership of LIN Television had to be sold to satisfy the GECC
Note, it could cause an acceleration of the Companys credit facility and notes; and
    if the GECC note is prepaid because of an acceleration on default or otherwise, or if
the note is repaid at maturity, the Company may incur a substantial tax liability. The joint venture is approximately 80% owned by NBC, and NBC controls the operations of the
stations through a management contract. Therefore, the operation and profitability of those
stations and the likelihood of a default under the GECC note are primarily within NBCs control. Note 9  Retirement Plans: The Company has a number of noncontributory defined benefit retirement plans covering certain of
its employees in the United States and Puerto Rico. Contributions are based on periodic actuarial
valuations and are charged to operations on a systematic basis over the expected average remaining
service lives of current employees. The net pension expense is assessed in accordance with the
advice of professionally qualified actuaries. The benefits under the defined benefit plans are
based on years of service and compensation. The components of the net periodic benefit cost recognized are as follows (in thousands): Three Months EndedMarch 31,2005
    
    
    2004Service cost
    
    $
    549
    
    
    $
    500Interest cost
    
    
    1,350
    
    
    
    1,401Expected return on plan assets
    
    
    (1,435
    )
    
    
    (1,450
    )Amortization of prior service cost
    
    
    30
    
    
    
    39Amortization of net loss
    
    
    241
    
    
    
    80Net periodic benefit cost
    
    $
    735
    
    
    $
    570
 39




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LIN TELEVISION CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued) The Company contributed $200,000 to the plan during the three months ended March 31, 2005 and
expects to contribute a total of $3.0 million during 2005. The Company also has a non-qualified,
unfunded Supplemental Excess Retirement Plan (SERP) of which the Company paid out to retired
employees a total of $66,000 during the three months ended March 31, 2005. Note 10  Recent Accounting Pronouncements In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123R, Share-Based
Payment,which was to be effective for reporting periods beginning after June 15, 2005. In April
2005, the FASB announced that the effective date of SFAS 123(R), has been delayed until the first
quarter of 2006. SFAS No. 123R requires the Company to recognize the cost of employee services
received in exchange for the Companys equity instruments. Currently, in accordance with APB
Opinion 25, the Company records the intrinsic value of stock based compensation as expense.
Accordingly, no compensation expense is currently recognized for fixed stock option plans as the
exercise price equals the stock price on the date of grant. Under SFAS No. 123R, the Company will
be required to measure compensation expense over the vesting period of the options based on the
fair value of the stock options at the date the options are granted. SFAS No. 123R allows for the
use of the Black-Scholes or a lattice option-pricing model to value such options. As allowed by
SFAS No. 123R, the Company can elect either Modified Prospective Application, which applies the
Statement to new awards and modified awards after the effective date, and to any unvested awards as
service is rendered on or after the effective date, or Modified Retrospective Application which can
apply the effect of the statement to all prior years for which SFAS No. 123 was effective. The
Company is currently evaluating which valuation model and method of application will be used. In March 2005, the SEC staff issued a Staff Accounting Bulletin
(SAB 107) which express views of
the staff regarding the interaction between SFAS No. 123R and certain
SEC rules and regulations and provide the staffs views regarding the valuation of
share-based payment arrangements for public companies. In particular, SAB 107 provides guidance
related to share-based payment transactions with non-employees, the transition from nonpublic to public entity
status, valuation methods (including assumptions such as expected volatility and expected term),
the accounting for certain redeemable financial instruments issued under share-based payment
arrangements, the classification of compensation expense, non-GAAP financial measures, first-time
adoption of SFAS No. 123R in an interim period, capitalization of compensation cost related to
share-based payment arrangements, the accounting for income tax effects of share-based payment
arrangements upon adoption of SFAS No. 123R, the modification
of employee share options prior to adoption of SFAS No. 123R and disclosures in Managements
Discussion and Analysis subsequent to adoption of SFAS No. 123R. In March 2005, the FASB issued FIN No. 47, Accounting for Conditional Asset Retirement Obligations
 an Interpretation of FASB Statement No. 143 (FIN 47), which is effective for all reporting
periods ending after December 15, 2005. FIN 47 requires that an entity shall recognize a liability
for the fair value of a conditional asset retirement obligation if the fair value of the liability
can be reasonable estimated, rather than when the obligation is incurred, generally upon
acquisition, construction, or development and/or through the normal operation of the asset as
required by SFAS No. 143. An asset retirement obligation would be reasonably estimable if (a) it
is evident that the fair value of the obligation is embodied in the acquisition price of the asset,
(b) an active market exists for the transfer of the obligation, or (c) sufficient information
exists to apply an expected present value technique. The provisions of FIN 47 are not expected to
have a material impact on the Companys consolidated financial statements. 40