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UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 Form 10-Q x
    
    Quarterly Report pursuant to Section 13 OR 15 (d) of the Securities
Exchange Act of 1934
 For the quarterly period ended March 31, 2004 Commission file number: 001-31311
    
    Commission file number: 000-25206LIN TV Corp.(Exact name of registrant as
specified in its charter)
    
    LIN Television Corporation(Exact name of registrant as
specified in its charter)Delaware(State or other jurisdiction of
incorporation or organization)
    
    Delaware(State or other jurisdiction of
incorporation or organization)05-0501252(I.R.S. Employer
Identification No.)
    
    13-3581627(I.R.S. Employer
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 x No o Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes x 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 5, 2004:26,745,241 shares. LIN TV Corp. Class B common stock, $0.01 par value, issued and outstanding at
May 5, 2004: 23,510,137 shares. LIN TV Corp. Class C common stock, $0.01 par value, issued and outstanding at
May 5, 2004: 2 shares. LIN Television Corporation common stock, $0.01 par value, issued and
outstanding at May 5, 2004: 1,000 shares.




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Table of Contents Part I. Financial InformationItem 1. Financial StatementsLIN TV Corp.Condensed Consolidated Balance Sheets.Condensed Consolidated Statements of Operations.Condensed Consolidated Statements of Cash Flows.Notes to Condensed Consolidated Financial Statements.See separate index for financial statements of LIN Television Corporation.Item 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3. Quantitative and Qualitative Disclosures about Market Risk.Item 4. Controls and Procedures.Part II. Other InformationItem 1. Legal Proceedings.Item 6. Exhibits and Reports on Form 8-K.Signature Page.Ex-31.1 Certification of LIN TV Corp. CEO, Sec 302Ex-31.2 Certification of LIN TV Corp. ControllerEx-31.3 Certification of LIN TV Corp. TreasurerEx-31.4 Certification of LIN TV V.P. of FinanceEx-31.5 Certification of LIN Television CEOEx-31.6 Certification of LIN Television ControllerEx-31.7 Certification of LIN Television TreasurerEx-31.8 Certification of LIN Television VP of Fin.Ex-32.1 Cert. of LIN TV CEO & Financial OfficersEx-32.2 Section 906 Certification of CFO
 2




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Part I: Financial Information Item 1. Financial Statements LIN TV CORP.
Condensed Consolidated Balance Sheets(unaudited) March 31,
    
    December 31,2004
    
    2003(In thousands, except share data)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    12,492
    
    
    $
    9,475Accounts receivable, less allowance for doubtful accounts
(2004 - $1,235; 2003 - $1,698)
    
    
    60,650
    
    
    
    72,340Program rights
    
    
    13,031
    
    
    
    17,661Assets held for sale
    
    
    23,361
    
    
    
    Other current assets
    
    
    3,014
    
    
    
    3,216Total current assets
    
    
    112,548
    
    
    
    102,692Property and equipment, net
    
    
    196,460
    
    
    
    203,049Deferred financing costs
    
    
    13,294
    
    
    
    14,332Equity investments
    
    
    64,870
    
    
    
    77,305Program rights
    
    
    11,877
    
    
    
    11,444Goodwill
    
    
    583,077
    
    
    
    586,269Broadcast licenses
    
    
    1,118,942
    
    
    
    1,102,708Other intangible assets, net
    
    
    2,935
    
    
    
    3,289Other assets
    
    
    15,556
    
    
    
    14,822Total Assets
    
    $
    2,119,559
    
    
    $
    2,115,910LIABILITIES, PREFERRED STOCK
AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    46,000
    
    
    $
    7,000Accounts payable
    
    
    4,958
    
    
    
    7,169Accrued income taxes
    
    
    136
    
    
    
    320Accrued interest expense
    
    
    9,440
    
    
    
    9,846Accrued sales volume discount
    
    
    1,245
    
    
    
    6,075Other accrued expenses
    
    
    14,758
    
    
    
    13,423Liabilities held for sale
    
    
    694
    
    
    
    Program obligations
    
    
    18,494
    
    
    
    23,042Total current liabilities
    
    
    95,725
    
    
    
    66,875Long-term debt, excluding current portion
    
    
    646,971
    
    
    
    693,367Deferred income taxes, net
    
    
    534,666
    
    
    
    527,588Program obligations
    
    
    11,683
    
    
    
    11,640Other liabilities
    
    
    51,112
    
    
    
    54,306Total liabilities
    
    
    1,340,157
    
    
    
    1,353,776Preferred stock of Banks Broadcasting, Inc. $0.01 par value
173,822 issued and outstanding at March 31, 2004
    
    
    14,911
    
    
    
    Stockholders equity:Class A common stock, $0.01 par value, 100,000,000 shares authorized,
26,730,650 shares at March 31, 2004. and 26,652,060 shares at
December 31, 2003 issued and outstanding
    
    
    267
    
    
    
    266Class B common stock, $0.01 par value, 50,000,000 shares authorized,
23,510,137 shares at March 31, 2004 and December 31, 2003,
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, 2004 and December 31, 2003 issued and
outstanding; convertible into an equal number of Class A common stock
    
    
    
    
    
    
    Additional paid-in capital
    
    
    1,067,890
    
    
    
    1,066,897Accumulated deficit
    
    
    (293,442
    )
    
    
    (294,805
    )Accumulated other comprehensive loss
    
    
    (10,459
    )
    
    
    (10,459
    )Total stockholders equity
    
    
    764,491
    
    
    
    762,134Total liabilities, preferred stock and stockholders equity
    
    $
    2,119,559
    
    
    $
    2,115,910
 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 Operations(unaudited) Three Months Ended March 31,2004
    
    2003(In thousands, except per share data)Net revenues
    
    $
    79,844
    
    
    $
    73,627Operating costs and expenses:Direct operating (excluding depreciation of $7.5 million and
$7.7 million for the three months ended March 31, 2004
and 2003, respectively)
    
    
    24,630
    
    
    
    24,217Selling, general and administrative
    
    
    22,500
    
    
    
    20,753Amortization of program rights
    
    
    5,724
    
    
    
    5,200Corporate
    
    
    4,098
    
    
    
    3,920Depreciation and amortization of intangible assets
    
    
    7,776
    
    
    
    7,988Total operating costs and expenses
    
    
    64,728
    
    
    
    62,078Operating income
    
    
    15,116
    
    
    
    11,549Other (income) expense:Interest expense
    
    
    11,739
    
    
    
    20,521Investment income
    
    
    (85
    )
    
    
    (380
    )Share of (income) loss in equity investments
    
    
    (167
    )
    
    
    289Gain on derivative instruments
    
    
    (990
    )
    
    
    Loss on early extinguishment of debt
    
    
    2,937
    
    
    
    29,525Other, net
    
    
    (119
    )
    
    
    47Total other expense, net
    
    
    13,315
    
    
    
    50,002Income (loss) from continuing operations before provision for
income taxes and cumulative effect of change in accounting principle
    
    
    1,801
    
    
    
    (38,453
    )Provision for income taxes
    
    
    3,797
    
    
    
    2,422Loss from continuing operations before cumulative
effect of change in accounting principle
    
    
    (1,996
    )
    
    
    (40,875
    )Discontinued operations:Income from discontinued operations, net of tax provision of $206
for the three months ended March 31, 2004 and 2003
    
    
    (69
    )
    
    
    (8
    )Cumulative effect of change in accounting principle,
net of a tax effect of $0
    
    
    (3,290
    )
    
    
    Net income (loss)
    
    $
    1,363
    
    
    $
    (40,867
    )Basic and diluted income (loss) per common share:Loss from continuing operations before cumulative
effect of change in accounting principle
    
    $
    (0.04
    )
    
    $
    (0.82
    )Income from discontinued operations, net of tax
    
    
    
    
    
    
    Cumulative effect of change in accounting principle, net of tax
    
    
    0.07
    
    
    
    Net income (loss)
    
    
    0.03
    
    
    
    (0.82
    )Weighted  average number of common shares
outstanding used in calculating basic and diluted income
(loss) per common share
    
    
    50,194
    
    
    
    49,904
 The accompanying notes are an integral part of the condensed consolidated financial statements. 4




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LIN TV Corp.
Condensed Consolidated Statements of Cash Flows(unaudited) Three Months Ended March 31,2004
    
    2003(In thousands)Net cash provided by (used in) operating activities
    
    $
    18,795
    
    
    $
    (4,106
    )INVESTING ACTIVITIES:Capital expenditures
    
    
    (1,740
    )
    
    
    (6,096
    )Proceeds from disposals of property and equipment
    
    
    8
    
    
    
    22Investment in equity investments
    
    
    (650
    )
    
    
    Capital distributions from equity investments
    
    
    1,630
    
    
    
    1,630Acquisition of broadcast license
    
    
    (4,224
    )Other, investments and deposits
    
    
    (278
    )
    
    
    Proceeds from liquidation of short-term investments
    
    
    
    
    
    
    23,691Net cash (used in) provided by investing activities
    
    
    (5,254
    )
    
    
    19,247FINANCING ACTIVITIES:Net proceeds on exercises of employee stock options and phantom stock
units and employee stock purchase plan issuances
    
    
    804
    
    
    
    685Proceeds from Senior Credit Facilities
    
    
    
    
    
    
    175,000Financing costs associated with proceeds from previously issued long-term debt
    
    
    (90
    )
    
    
    Net proceeds from revolver debt
    
    
    17,000
    
    
    
    75,000Principal payments on long-term debt
    
    
    (26,265
    )
    
    
    (376,000
    )Cash expenses associated with early extinguishment of debt
    
    
    (1,973
    )
    
    
    (13,492
    )Net cash used in financing activities
    
    
    (10,524
    )
    
    
    (138,807
    )Net increase (decrease) in cash and cash equivalents
    
    
    3,017
    
    
    
    (123,666
    )Cash and cash equivalents at the beginning of the period
    
    
    9,475
    
    
    
    143,860Cash and cash equivalents at the end of the period
    
    $
    12,492
    
    
    $
    20,194
     The accompanying notes are an integral part of the condensed consolidated financial statements. 5




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LIN TV Corp.
Notes to Condensed Consolidated Financial Statements
(Unaudited) 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 except for its $180.5 million, 8% Senior Notes due 2008. All of the
consolidated 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, 2003 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 (consisting of normal
recurring adjustments and adjustments related to the application of
FASB Interpretation No. 46) 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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 and valuing intangible assets, deferred tax assets
and net assets of businesses acquired. Actual results could differ from these estimates. Certain prior period amounts have been
reclassified to conform to the current period presentation. 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 and net loss 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). 6




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Three Months Ended March 31,2004
    
    2003(In thousands, except share data)Net income (loss), as reported
    
    $
    1,363
    
    
    $
    (40,867
    )Add: Stock-based employee compensation expense,
as reported, net of related tax effect
    
    
    
    
    
    
    Deduct: Total stock-based employee compensation
expense determined under the fair value based method
for all awards, net of related tax effect
    
    
    (761
    )
    
    
    (778
    )Pro forma net income (loss)
    
    $
    602
    
    
    $
    (41,645
    )Basic and diluted net income (loss) per common share, as reported
    
    $
    0.03
    
    
    $
    (0.82
    )Basic and diluted net income (loss) per common share, pro forma
    
    $
    0.01
    
    
    $
    (0.83
    )
 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
    
    2003Volatility
    
    
    24
    %
    
    
    33
    %Risk-free interest rates
    
    
    2.0 - 4.4
    %
    
    
    1.5 - 3.25
    %Weighted average expected life
    
    3-10 years
    
    2-6 yearsDividend yields
    
    
    0
    %
    
    
    0
    %
 Note 2  Assets and Liabilities Held for Sale: On January 8, 2004, the Company signed an asset purchase agreement with Pilot TV Acquisition Corporation for the sale of WEYI-TV,
the NBC affiliate serving Flint, Michigan, for $24.0 million. This transaction received the Federal Communications Commissions
approval on April 26, 2004 and is expected to be completed during the second quarter of 2004. Accordingly, the financial results
of this station are accounted for as discontinued operations under the provisions of SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. The income of $69,000 and $8,000, net of tax, for the three months ended March 31, 2004 and 2003,
respectively, has been excluded from continuing operations and included in discontinued operations. The Company has classified the
assets and liabilities associated with this station as held for sale on its balance sheet as of March 31, 2004. 7




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The carrying amounts of the assets and liabilities of this station are as follows (in thousands): March 31, 2004Accounts receivable, net
    
    $
    1,358Program rights, short-term
    
    
    193Other current assets
    
    
    10Property and equipment, net
    
    
    5,875Broadcast license, net
    
    
    15,718Network affiliation, net
    
    
    73Program rights, long-term
    
    
    134Assets held for sale
    
    $
    23,361Current liabilities:Accounts payable
    
    $
    27Accrued income tax
    
    
    24Program obligations, short-term
    
    
    203Other accruals
    
    
    315Program obligations, long-term
    
    
    125Liabilities held for sale
    
    $
    694
 Note 3  Investments: The Company has investments in a number of ventures with third parties, through which it has an interest in television stations in locations throughout the
United States of America. The following presents the Companys basis in these ventures (in thousands): March 31,
    
    December 31,2004
    
    2003Banks Broadcasting, Inc.
    
    $
    
    
    
    $
    11,297NBC joint venture
    
    
    54,636
    
    
    
    55,758WAND (TV) Partnership
    
    
    10,234
    
    
    
    10,250$
    64,870
    
    
    $
    77,305
 Banks Broadcasting, Inc:The Company owns preferred stock that represents a 50% non-voting interest in Banks Broadcasting, Inc. (Banks), which owns and
operates KWCV-TV, a WB affiliate in Wichita, Kansas and KNIN-TV, a UPN affiliate in Boise, Idaho. The Company is able to exercise significant, but not
controlling, influence over the activities of Banks through representation on the Board of Directors. The Company has also entered into a management services
agreement with Banks 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 Banks and is periodically reimbursed. In accordance with FASB Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities  an Interpretation of ARB No. 51, Banks is considered
to be a variable interest entity. For purposes of determining the
primary beneficiary of Banks, the Company considered Hicks Muse & Co. Partners, L.P. (Hicks Muse Partners) 47% ownership in the Company and Hicks Muses substantial economic interest in 21st Century Group, LLC which owns 18% of Banks; and determined
for purposes of FIN 46 that the Company and 21st Century Group, LLC are related parties. 8




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Considering the Companys 50% ownership interest in Banks and the
Companys management agreement with Banks, the Company identified itself as the primary beneficiary of Banks under FIN 46. As the primary beneficiary of Banks,
the Company has consolidated Banks assets, liabilities and noncontrolling interests into the Companys financial statements as of March 31, 2004. Since the
Company and Banks are not under common control, as defined by EITF 02-5, Banks assets, liabilities and noncontrolling interests were measured at fair value as
of March 31, 2004. The difference between the value of the newly consolidated assets over the reported amount of any previously held interests and the value of
newly consolidated liabilities and non-controlling interests was recognized as a cumulative effect of an accounting change in the period ended March 31, 2004.
The resulting consolidated balance sheet of the Company does not reflect any voting equity minority interest since Banks has incurred cumulative losses and as
such the minority interest would be in a deficit position at March 31, 2004. The following presents the summarized balance sheet of Bank Broadcasting, Inc. at March 31, 2004: March 31,2004AssetsCash
    
    
    97Accounts receivable
    
    
    899Program rights, short-term
    
    
    757Other current assets
    
    
    46Property and equipment
    
    
    5,048Program rights, long-term
    
    
    662Broadcast licenses
    
    
    29,238Total Assets
    
    
    36,747Liabilities and Preferred StockAccounts payable
    
    
    396Program obligations, short-term
    
    
    793Other accrued expenses
    
    
    404Program obligations, long-term
    
    
    525Deferred income taxes, net
    
    
    4,805Preferred stock
    
    
    34,764Total Liabilities and Preferred Stock
    
    
    41,687(4,940
    )
 The deficit of $4.9 million has been allocated to the nonvoting preferred stock, and the Companys ownership of such preferred stock has been eliminated on
consolidation. Banks has authorized 390,625 shares of Series A Preferred Stock with a par
value of $0.01 per share. Key rights associated with the preferred stock include: (i) holders of the
preferred stock receive an 8% dividend, if declared; (ii) holders of the
preferred stock have the right to convert to common stock in the event of a
Triggering Event (discussed below); (iii) holders of the preferred stock have
no votes; (iv) while no holder of the preferred stock controls the board of
directors; there are certain rights to force the sale of Banks; holders of the
preferred stock would share pro rata in the sale proceeds. Upon liquidation, winding up, or dissolution, holders of the preferred stock
will receive the greater of $100 per share, plus all accrued but unpaid
dividends, or the amount such holder would receive upon liquidation and
assuming conversion to common stock. Triggering Events for conversion include: (1) the sale of all or substantially
all of the assets of Banks, (2) the closing of an underwritten public offering
resulting in (i) net cash proceeds to Banks of not less than $50.0 million and
(ii) a pre-money valuation of Banks of not less than two and one-half times the
aggregate purchase price for all shares of the Preferred Stock; or (3) any
merger or consolidation or other reorganization of Banks with or into another
corporation in which Banks is not the surviving entity. No dividends had been declared on the Series A Preferred Stock as of March 31,
2004. Hicks Muse has a substantial economic interest in 21st Century Group, LLC which
owns 36% of the preferred stock on the Companys balance sheet. 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 $1.6 million from the joint venture in the three months ended March 31, 2004 and
2003. The following presents the summarized financial information of the joint venture (in thousands): 9




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Three Months Ended March 31,2004
    
    2003Net revenues
    
    $
    35,209
    
    
    $
    32,921Operating income
    
    
    18,333
    
    
    
    16,664Net income
    
    
    2,493
    
    
    
    987
 March 31,
    
    December 31,2004
    
    2003Current assets
    
    $
    25,891
    
    
    $
    9,949Non-current assets
    
    
    231,968
    
    
    
    237,469Current liabilities
    
    
    16,672
    
    
    
    725Non-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 from WAND
(TV) Partnership under this arrangement were approximately $221,000 as of March 31, 2004. Amounts due from the Company to WAND (TV) Partnership under this
arrangement were approximately $64,000 as of December 31, 2003. The following presents the summarized financial information of the WAND (TV) Partnership (in
thousands): Three Months Ended March 31,2004
    
    2003Net revenues
    
    $
    1,633
    
    
    $
    1,489Operating loss
    
    
    (50
    )
    
    
    (126
    )Net loss
    
    
    (49
    )
    
    
    (126
    )
 March 31,
    
    December 31,2004
    
    2003Current assets
    
    $
    2,418
    
    
    $
    2,013Non-current assets
    
    
    24,912
    
    
    
    25,168Current liabilities
    
    
    604
    
    
    
    405
 Note 4  Intangible Assets: The following table summarizes the carrying amount of each major class of intangible assets (in thousands): 10




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March 31,
    
    December 31,2004
    
    2003Amortized Intangible Assets:LMA purchase options
    
    $
    2,388
    
    
    $
    2,388Network affiliations
    
    
    283
    
    
    
    377Income leases
    
    
    393
    
    
    
    393Other intangible assets
    
    
    2,022
    
    
    
    2,022Accumulated amortization
    
    
    (2,151
    )
    
    
    (1,891
    )2,935
    
    
    
    3,289Unamortized Intangible Assets:Broadcast licenses
    
    $
    1,118,942
    
    
    $
    1,102,708Goodwill
    
    
    583,077
    
    
    
    586,2691,702,019
    
    
    
    1,688,977Total intangible assets
    
    $
    1,704,954
    
    
    $
    1,692,266
 On January 14, 2004, the Company purchased the broadcast license and certain assets of WIRS-TV in Yauco, Puerto Rico from Marantha Christian Network. The total
purchase price of $4.5 million was funded by borrowings from our revolving credit facility. The application of FIN 46 increased broadcast licenses by $29.2 million for the consolidation of the Banks licenses as of March 31, 2004 (see Note 4). The broadcast license of WEYI-TV was classified to assets held for sale as of March 31, 2004 (see Note 2). Amortization expense was approximately $278,000 and $275,000 for the three
months ended March 31, 2004 and 2003, respectively. This includes
approximately $234,000 and $228,000 of amortization expense recorded on the
local marketing agreement (LMA) purchase option for the three months ended
March 31, 2004 and 2003, respectively. The Company expects that its remaining
LMA purchase option will be fully amortized in 2007. Also included in the amortization expense is
approximately $44,000 and $47,000 of amortization expense on network
affiliation agreements and income leases for the three months ended March 31,
2004 and 2003, respectively. The network affiliation agreements will be fully
amortized by their expiration dates, which range from August 29, 2004 to June
30, 2006, and the income leases will be fully amortized by November 2006. 11




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##### Table of Contents



Note 5 -Debt: Debt consisted of the following (in thousands): March 31,
    
    December 31,2004
    
    2003Senior Credit Facilities
    
    $
    208,750
    
    
    $
    193,500$180,485, 8% Senior Notes
due 2008
(net of discount of $3,890
and $4,706 at March 31,
2004 and December 31,
2003, respectively)
    
    
    176,595
    
    
    
    200,294$200,000, 6 1/2% Senior
Subordinated Notes due 2013
    
    
    200,000
    
    
    
    200,000$125,000, 2.50%
Exchangeable Senior
Subordinated Debentures due
2033
(net of discount of
$17,374 and $18,427 at
March 31, 2004 and
December 31, 2003,
respectively)
    
    
    107,626
    
    
    
    106,573Total debt
    
    
    692,971
    
    
    
    700,367Less current portion
    
    
    46,000
    
    
    
    7,000Total long-term debt
    
    $
    646,971
    
    
    $
    693,367
 In January 2004, the Company drew down funds from its revolving credit facility to repurchase $24.5 million of LIN Television
Corporations 8% Senior Notes due 2008 in a negotiated transaction with an institutional investor. The Company incurred a charge
of $2.9 million related to the write-off of unamortized discounts and associated costs as a result of the early extinguishment of
debt. The current portion of long-term debt includes, $7.0 million of annual amortization of the Term Loan B and $39.0 million borrowed
under the revolving credit facility which terminates March 31, 2005. Note 6  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 reimbursable 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 $15,000 for the three months ended
March 31, 2003. The Company did not incur any fees for the three months ended March 31, 2004. Local Marketing Agreement.The Company is party to a local marketing agreement with Super Towers, Inc., of which the President of
Super Towers, Inc. is related to a LIN TV Corp. executive. The Company has paid Super Towers, Inc. approximately $5,000 and
$15,000 for the three months ended March 31, 2004 and 2003, respectively, for various reimbursable expenses. Banks Broadcasting Inc. The Company has entered into a management services
agreement with Banks 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. The Company has received
approximately $50,000 for the three months ended March 31, 2004 and 2003 under
the management services agreement. Other Investment.The Companys Chief Executive Officer serves on the Board of Directors of an internet company in which the
Company has invested. The Company incurred fees for internet services provided by this company of $138,000 and $123,000 for the
three months ended March 31, 2004 and 2003, respectively. Note 7  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 $19.3 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, but is recourse to
the joint venture, the Companys equity interests therein and ultimately to LIN TV Corp., pursuant to a guarantee. If the joint
venture were unable to pay principal or interest on the GECC note and
GECC could not otherwise recoup 12




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##### Table of Contents



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 senior credit facilities and senior 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 8  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 is as follows (in thousands): Three Months Ended March 31,2004
    
    2003Service cost
    
    $
    500
    
    
    $
    457Interest cost
    
    
    1,401
    
    
    
    1,311Expected return on plan assets
    
    
    (1,450
    )
    
    
    (1,408
    )Amortization of prior service cost
    
    
    39
    
    
    
    41Amortization of net loss
    
    
    80
    
    
    
    63Net periodic benefit cost
    
    $
    570
    
    
    $
    464
 The Company has previously disclosed in its financial statements for the year ended December 31, 2003 that it expected to
contribute $1.2 million to its qualified pension plan in 2004. As of March 31, 2004, it has contributed $300,000 to the plan,
and expects to contribute a total of $1.2 million during 2004. The Company also has a non-qualified, unfunded Supplemental
Excess Retirement Plan (SERP). The timing of the payments under the SERP is determined by individual employees decisions to
retire and commence payments. Based on information currently known, the Company expects to fund approximately $415,000 of SERP
payments during 2004. Note 9  Earnings per Share: Basic and diluted income
(loss) per common share are computed in accordance with SFAS
No. 128, Earnings per Share. Basic income
(loss) per common share is computed by dividing net income
(loss) by the weighted average number of shares of common stock
outstanding. There is no difference between basic and diluted income
(loss) per common share since potential common shares from the
exercises of stock options and phantom units are anti-dilutive to
loss from continuing operations for all periods
presented and are, therefore, excluded from the calculation. Options
to purchase 4,383,000 and 2,979,000 shares of common stock, and phantom
units exercisable into 485,000 and 672,000 shares of common stock,
were outstanding at March 31, 2004 and 2003, respectively,  but were not included in the
calculation of diluted income (loss) per share because the effect of their inclusion would have been anti-dilutive. 13




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Note 10  Income Taxes: Prior to January 1, 2002, the Company recorded deferred tax liabilities relating to the difference in the book basis and tax
basis of goodwill and intangibles. The reversals of those deferred tax liabilities were utilized to support the recognition of
deferred tax assets (primarily consisting of net operating loss carryforwards) recorded by the Company. As a result of the
adoption of SFAS No. 142, those deferred tax liabilities will no longer reverse on a scheduled basis and can no longer be
utilized to support the realization of deferred tax assets. Accordingly, the Companys provision for income taxes is primarily
created by an increase in the valuation allowance against the increase in the net deferred tax assets position during the year.
This expense has no impact on the Companys cash flows. Note 11  Subsequent Events: On May 6, 2004, the Company completed the purchase of the broadcast license and certain assets of WTIN-TV in Ponce, Puerto Rico
from Laura Nicolau for a total purchase price of $5.0 million. 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 Our Business We are an owner and operator of television stations in 14 mid-sized markets in the United States. We
currently operate 24 stations and are headquartered in Providence, Rhode Island. Our operating
revenues are derived from 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 receive revenues for advertising time placed within and adjoining our locally originated
programming and within and adjoining our network and syndicated programming. Advertising rates for a
given station are set based upon a variety of factors, including the size and demographic makeup of
the market served by the station, the number of advertisers competing for the available time, the
availability of alternative advertising media in the stations market area, a stations overall
ability to attract viewers in its market area and the programs or stations ability to attract
viewers among particular demographic groups that an advertiser may be targeting. Our advertising rates
are also affected by our sales efforts in the local and national arenas and the development of
projects, features and programs that tie advertiser messages to programming. Approximately two-thirds
of our advertising time sales are generated within our local markets compared to one-third of
advertising time sales which are made to national advertisers. Our advertising revenues are seasonal and are generally lower in the first quarter of each fiscal
year, due in part to increases in retail advertising in the period leading up to and including the
holiday season and active advertising in the spring. In addition, advertising revenues are generally
higher during election years due to spending by political candidates. Political revenue increased
approximately $1.5 million during the first quarter of 2004 compared to the prior year. As a result,
the fluctuation in our operating results is generally related to fluctuations in the revenue cycle
within a year or on a year-to-year basis. The broadcast television industry is also cyclical in nature, being affected by prevailing economic
conditions. Since we rely on sales of advertising time for substantially all of our revenues, our
operating results are sensitive to general economic conditions and regional conditions in each of the
local market areas in which our stations operate. We are also dependent to a significant degree on automotive-related advertising. Approximately 28% and
23% of our total net revenues for the three months ended March 31, 2004 and 2003, respectively,
consisted of automotive advertising. A significant change in these advertising revenues in the future
could materially affect our results of operations. For a discussion of other factors that may affect
our business, see Risk Factors. Competition One of the biggest challenges facing our industry today is the increase in competition for household
audiences and advertisers. Advances in technology have offered audiences more choices for
entertainment and information including cable TV, satellite, video on demand, videocassette recorders,
personal video recorders, video games, Internet and DVDs. Advertisers are also presented with a
variety of media in which to promote themselves and we compete for advertising dollars not only with
local television stations in our market, but with other media including newspapers, radio, cable,
outdoor and the Internet. For national sales, we compete with television broadcast networks and cable
networks and print media. We believe that our investment in digital television (DTV) is one way that will assist us in
effectively competing with other media sources. Since DTV has the capacity for multiple channels, it
would allow us to broadcast a combination of different channels with varying degrees of visual and
sound quality, which would be of higher quality than present-day television. We could also provide
interactive data services on these same channels. During the first quarter of 2004 we have spent
approximately $552,000 in capital expenditures to complete our transition to digital and expect to
incur another $5.5 million during 2004. While, implementation of DTV will improve the technical
quality of our over-the-air broadcast 16




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##### Table of Contents



television it is possible that the conversion may reduce a
stations geographical coverage area. We cannot predict the precise effect that converting to DTV
will have on our business. Industry Trends Two significant industry-wide factors influenced our performance during 2003. Although historical
market trends would have dictated a slight increase in revenue for 2003, despite the loss of
substantial political revenue in 2002, the US advertising market experienced a significant slowdown
during 2003 as evidenced by a 2.3% decrease in market time sales for television as reported by the
Television Bureau of Advertising (TVB). This was primarily the result of the war in Iraq, which
began in the first quarter of 2003. During the first quarter of 2004, our net revenue has increased 8%
over the prior quarter as a result of the continued recovery in the advertising market which began
towards the end of 2003. These results are consistent with the overall market as evidenced by the
9.3% increase in market time sales for the first quarter of 2004 as reported by the TVB. Political revenue is a factor when comparing our results year over year. During an election year,
political revenue makes up a significant portion of the increase in revenue in that year. Since 2004
is a presidential election year and political revenues during a presidential election year are
generally higher than during a non-presidential election year, we expect a large percentage of our
revenue growth in 2004 to be attributable to political revenue. We experienced a slight increase in
political revenue during the first quarter of 2004 but expect the majority of political revenue to be
earned in the remainder of 2004. Significant Other Items In January 2004, we drew down funds from our revolving credit facility to repurchase $24.5 million of
LIN Television Corporations 8% Senior Notes due 2008 in a negotiated transaction with an
institutional investor. We incurred a charge of $2.9 million related to the write-off of unamortized
discounts and associated costs as a result of the early extinguishment of debt. On January 8, 2004, we signed an asset purchase agreement with Pilot TV Acquisition Corporation for
the sale of WEYI-TV, the NBC affiliate serving Flint, Michigan, for $24.0 million. This transaction
received the Federal Communications Commissions approval on April 26, 2004 and is expected to be
completed during the second quarter of 2004. Accordingly, we have classified the assets and
liabilities associated with this station as held for sale on our balance sheet. We have recognized a
gain of $69,000, net of a tax provision of $206,000, in discontinued operations in connection with
this station for the three months ended March 31, 2004. In accordance with FASB Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities
 an Interpretation of ARB No. 51, Banks is considered to be a variable interest entity. For
purposes of determining the primary beneficiary of Banks, we considered Hicks Muse Partners 47%
ownership in us and Hicks Muses substantial economic interest in 21st Century Group, LLC which owns
18% of Banks; and determined for purposes of FIN 46 that we and 21st Century Group, LLC are related
parties. Considering our fifty percent ownership interest in Banks and our management agreement with
Banks, we identified ourself as the primary beneficiary of Banks under FIN 46. As the primary
beneficiary of Banks, we have consolidated Banks assets, liabilities and noncontrolling interests
into our financial statements as of March 31, 2004. Since Banks and us are not under common control,
as defined by EITF 02-5, Banks assets, liabilities and noncontrolling interests were measured at fair
value as of March 31, 2004. The difference between the value of the newly consolidated assets over
the reported amount of any previously held interests and the value of newly consolidated liabilities
and non-controlling interests was recognized as a cumulative effect of an accounting change in the
period ended March 31, 2004. Our resulting consolidated balance sheet does not reflect any voting
equity minority interest since Banks has cumulative losses and as such the minority interest would be
in a deficit position at March 31, 2004. 17




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##### Table of Contents



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, which have been prepared in accordance with accounting
principles generally accepted in the United States. The preparation of our 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 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 and are discussed in detail
throughout our analysis of the results of operations as discussed below. 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 2) included in Item 15 of our Annual Report on Form
10-K for the year ended December 31, 2003. Since December 31, 2003, 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. 18




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##### Table of Contents



The following table lists the stations that we either operate or in which we have an equity investment: Market
    
    DMA Rank (1)
    
    Station
    
    
    
    
    
    Affiliation
    
    Channel
    
    Status (2)Owned and operated:Indianapolis, IN
    
    
    25
    
    
    WISH-TV
    
    
    
    
    
    CBS
    
    
    8
    
    
    
    O&OWIIH-CA
    
    
    
    
    
    Univision
    
    
    17
    
    
    
    O&OHartford-New Haven, CT
    
    
    27
    
    
    WTNH-TV
    
    
    
    
    
    ABC
    
    
    8
    
    
    
    O&OWCTX-TV
    
    
    
    
    
    UPN
    
    
    59
    
    
    
    O&OGrand Rapids-Kalamazoo-Battle Creek, MI
    
    
    38
    
    
    WOOD-TV
    
    
    
    
    
    NBC
    
    
    8
    
    
    
    O&OWOTV-TV
    
    
    
    
    
    ABC
    
    
    41
    
    
    
    O&OWXSP-CA
    
    
    
    
    
    UPN
    
    Various
    
    
    O&ONorfolk-Portsmouth-Newport News, VA
    
    
    41
    
    
    WAVY-TV
    
    
    
    
    
    NBC
    
    
    10
    
    
    
    O&OWVBT-TV
    
    
    
    
    
    FOX
    
    
    43
    
    
    
    O&OBuffalo, NY
    
    
    44
    
    
    WIVB-TV
    
    
    
    
    
    CBS
    
    
    4
    
    
    
    O&OWNLO-TV
    
    
    
    
    
    UPN
    
    
    23
    
    
    
    O&OProvidence, RI-New Bedford, MA
    
    
    48
    
    
    WPRI-TV
    
    
    
    
    
    CBS
    
    
    12
    
    
    
    O&OWNAC-TV
    
    
    
    
    
    FOX
    
    
    64
    
    
    LMAAustin, TX
    
    
    54
    
    
    KXAN-TV
    
    
    (3
    )
    
    NBC
    
    
    36
    
    
    
    O&OKNVA-TV
    
    
    
    
    
    WB
    
    
    54
    
    
    LMAKBVO-CA
    
    
    
    
    
    Telefutura
    
    Various
    
    
    O&ODayton, OH
    
    
    59
    
    
    WDTN-TV
    
    
    
    
    
    ABC
    
    
    2
    
    
    
    O&OFlint-Saginaw-Bay City, MI (4)
    
    
    64
    
    
    WEYI-TV
    
    
    (4
    )
    
    NBC
    
    
    25
    
    
    
    O&OToledo, OH
    
    
    69
    
    
    WUPW-TV
    
    
    
    
    
    FOX
    
    
    36
    
    
    
    O&OFort Wayne, IN
    
    
    105
    
    
    WANE-TV
    
    
    
    
    
    CBS
    
    
    15
    
    
    
    O&OSpringfield-Holyoke, MA
    
    
    106
    
    
    WWLP-TV
    
    
    
    
    
    NBC
    
    
    22
    
    
    
    O&OLafayette, IN
    
    
    189
    
    
    WLFI-TV
    
    
    
    
    
    CBS
    
    
    18
    
    
    
    O&OSan Juan, PR
    
    
    
    
    
    WAPA-TV
    
    
    (3
    )
    
    IND
    
    
    4
    
    
    
    O&OWJPX-TV
    
    
    (3
    )
    
    IND
    
    
    24
    
    
    
    O&OOperated by WAND (TV) PartnershipChampaign-Springfield-Decatur, IL
    
    
    82
    
    
    WAND-TV
    
    
    
    
    
    ABC
    
    
    17
    
    
    JVOperated by Banks Broadcasting, Inc.Wichita, KS
    
    
    67
    
    
    KWCV-TV
    
    
    
    
    
    WB
    
    
    33
    
    
    JVBoise, ID
    
    
    123
    
    
    KNIN-TV
    
    
    
    
    
    UPN
    
    
    9
    
    
    JVOperated Under NBC Joint VentureDallas-Fort Worth, TX
    
    
    7
    
    
    KXAS-TV
    
    
    
    
    
    NBC
    
    
    5
    
    
    JVSan Diego, CA
    
    
    26
    
    
    KNSD-TV
    
    
    
    
    
    NBC
    
    
    39
    
    
    JV
   (1)
    
    DMA rank estimates are taken from Nielsen Media Research Local Universe Estimates for the
2003-2004 Broadcast Season, September 22, 2003. The DMA rank lists the top DMA with #1 representing
the largest DMA market in terms of television households.(2)
    
    O&O indicates stations we own and operate. LMA indicates stations to which we provide
services under a local marketing agreement. An LMA is a programming agreement between two separately
owned television stations serving a common television market. Under an LMA agreement, the licensee of
one station provides substantial portions of the broadcast programming for airing on the other
licensees station, subject to ultimate programming and other controls being exercised by the second
licensee, and sells advertising time. JV indicates a station owned and operated by a joint venture
in which we are a party.(3)
    
    KXAN-TV includes a satellite station KXAM-TV. WAPA-TV includes two satellite stations, WTIN-TV
and WNJX-TV. WJPX-TV includes three satellite stations, WIRS-TV, WJWN-TV and WKPV-TV. Satellite
stations broadcast identical programming to the primary station. We own and operate all of these
satellite stations, except for WTIN-TV, which we operate pursuant to a local marketing agreement and
agreed to purchase on January 30, 2004 subject to FCC approval.(4)
    
    WEYI-TV is subject to an asset purchase agreement dated January 8, 2004. We have a 33.3% interest in WAND (TV) Partnership with Block Communications, which owns and operates
WAND-TV, an ABC affiliate in Decatur, Illinois. On April 1, 2000, we exchanged, with Block
Communications, Inc., a 66.7% interest held by us in certain assets of WAND-TV, including its FCC
license and network affiliation agreement, for substantially all of the assets and certain liabilities
of WLFI-TV, Inc. Immediately after the WAND-TV exchange, we and Block Communications contributed our
respective interests in the WAND-TV assets to a partnership, whereby we received a 33.3% interest in
the partnership and Block Communications received a 66.7% interest. We provide ongoing management 19




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oversight to the partnership, including engineering and cash management services, pursuant to a
management services agreement with the partnership. During the three months ended March 31, 2004, the
partnership generated $1.6 million of revenue and did not distribute any cash to us. During the year
ended December 31, 2003, the partnership generated $6.4 million of revenue and did not distribute any
cash to us. The partnership has no outstanding significant debt obligations and the partners have not
provided a guarantee to the partnership. We also hold a 50% non-voting equity interest in Banks Broadcasting, Inc., which owns and operates
KWCV-TV, a WB affiliate in Wichita, Kansas, and KNIN-TV, a UPN affiliate in Boise, Idaho. On August
15, 2000, we, 21st Century Group, L.L.C., an entity in which Hicks Muse has a substantial indirect
economic interest, and BancAmerica Capital Investors SBICI, L.P. formed Banks Broadcasting, Inc. We
contributed our interest in KWCV-TV, and we and 21st Century Group, L.L.C., both contributed our
respective interests in KNIN-TV, to Banks Broadcasting. We provide cash management, accounting and
engineering support services to Banks Broadcasting in exchange for a fixed annual fee pursuant to a
management services agreement with Banks Broadcasting. In addition, we provide 50% of the capital
contributions that are required to fund capital expenditures for property, plant and equipment and for
any working capital shortfalls that are incurred by Banks Broadcasting. During the three months ended
March 31, 2004, we have funded $650,000 to Banks Broadcasting, Inc. During the three months ended
March 31, 2004, Banks Broadcasting, Inc. generated $1.2 million of revenue and did not distribute any
cash to us. During the year ended December 31, 2003, Banks Broadcasting, Inc. generated $5.2 million
of revenue and did not distribute any cash to us. We also have an approximate 20% equity interest in a television station joint venture with NBC, which
owns all of the remaining interest. The joint venture, which we entered into with NBC on March 3,
1998, consists of television stations KXAS-TV, formerly our Dallas, Texas NBC affiliate, and KNSD-TV,
formerly NBCs San Diego NBC affiliate. A wholly owned subsidiary of NBC is the general partner of the
joint venture and NBC operates the stations owned by the joint venture pursuant to a management
agreement and has managerial control over the joint venture. GECC provided debt financing for the
joint venture 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 . We expect that the interest payments on the GECC Note will
be serviced solely by the cash flow of the joint venture. All cash of the joint venture available for
distribution will be distributed to us and the NBC general partner based on our respective equity
interests in the joint venture. During the three months ended March 31, 2004, the joint venture
generated $35.2 million of revenue and distributed $1.6 million of cash to us. During the year ended
December 31, 2003, the joint venture generated $158.2 million of revenue and distributed $7.5 million
of cash to us. We own and operate 27 additional low-power television stations, of which 21 received class A status.
In Grand Rapids, Michigan, Austin, Texas and Indianapolis, Indiana we have been able to program
multiple low power stations in a network covering the majority of the applicable market and
functioning like a full-power station. Our low power stations in these three markets are affiliated
with UPN, Univisions Telefutura Network and the Univision network, respectively. The remaining 11
low-power stations are used primarily to extend the coverage of the primary stations. In addition, we provide services under a joint sales agreement to two stations, WZPX-TV in Grand
Rapids, Michigan and WPXV-TV in Norfolk, Virginia that are owned by Paxson Communications Corporation.
Under these agreements we provide office space, sales personnel, some technical master control
services and limited programming, including the ability to repeat some of our local newscasts, in
exchange for reimbursement of some costs and a share of the advertising sales. These agreements give
our sales force the ability to sell additional advertising inventory with a different demographic
profile and allow us to extend our brand through the broadcast of our local programming on additional
stations. Dispositions and Acquisition of Broadcast Licenses  
    
    On January 8, 2004, we signed an asset purchase agreement with Pilot TV Acquisition
Corporation for the sale of WEYI-TV, the NBC affiliate serving Flint, Michigan, for $24.0
million. 20




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##### Table of Contents



This transaction received the Federal Communications Commissions approval on April
26, 2004 and is expected to be completed in the second quarter of 2004.  
    
    On January 14, 2004, we acquired the broadcast license and certain assets of WIRS-TV in Yauco,
Puerto Rico from Marantha Christian Network Corporation. The total purchase price of $4.5
million was funded by borrowings from our revolving credit facility.  
    
    On January 30, 2004, we signed an asset purchase agreement for the broadcast license and
certain assets of WTIN-TV in Ponce, Puerto Rico from Laura Nicolau for a total purchase price of
$5.0 million. This transaction received the Federal Communications Commissions approval on
April 27, 2004 and was completed on May 6, 2004. 21




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##### Table of Contents



Results of Operations Set forth below are significant factors that contributed to our operating results for the three months ended March 31, 2004 and 2003,
respectively. Three Months Ended March 31,2004
    
    2003
    
    % Change(Numbers are in thousands)National time sales (before agency commissions)
    
    $
    27,971
    
    
    $
    26,861
    
    
    
    4
    %Local time sales (before agency commissions)
    
    
    57,460
    
    
    
    52,472
    
    
    
    10
    %Political time sales (before agency commissions)
    
    
    1,854
    
    
    
    371
    
    
    
    400
    %Agency commissions (related to time sales)
    
    
    (14,101
    )
    
    
    (12,848
    )
    
    
    10
    %Network compensation
    
    
    2,729
    
    
    
    2,740
    
    
    
    0
    %Barter revenue
    
    
    2,308
    
    
    
    2,526
    
    
    
    -9
    %Other revenue
    
    
    1,623
    
    
    
    1,505
    
    
    
    8
    %Net revenues
    
    
    79,844
    
    
    
    73,627
    
    
    
    8
    %Operating costs and expenses:Direct operating (excluding $7.5 million and $7.7
million of depreciation for the three months
ended March 31, 2004 and 2003, respectively)
    
    
    24,630
    
    
    
    24,217
    
    
    
    2
    %Selling, general and administrative
    
    
    22,500
    
    
    
    20,753
    
    
    
    8
    %Amortization of program rights
    
    
    5,724
    
    
    
    5,200
    
    
    
    10
    %Corporate
    
    
    4,098
    
    
    
    3,920
    
    
    
    5
    %Depreciation and amortization of intangible assets
    
    
    7,776
    
    
    
    7,988
    
    
    
    -3
    %Total operating costs and expenses
    
    
    64,728
    
    
    
    62,078
    
    
    
    4
    %Operating income
    
    $
    15,116
    
    
    $
    11,549
    
    
    
    31
    %
 Net revenuesconsist primarily of national and local 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 increased $6.2 million or 8% for the three months ended March 31, 2004 compared to the same period last year. The first quarter
of 2003 reflects the beginning of the slowdown in the advertising market as a result of the outbreak of the war in Iraq. The increase during
the first quarter of 2004 is the result of the continued recovery being experienced in the advertising market that began at the end of 2003. Operating Costs and Expenses Direct operating expenses (excluding deprecation and amortization of intangible assets)consist primarily of news, engineering, programming
and music licensing costs and exclude depreciation and amortization expense. Selling, general and administrative expenses, which consists primarily of employee salaries, sales commissions and other employee benefit
costs, advertising and promotional expenses, increased $1.7 million or 8% for the three months ended March 31, 2004 compared to the same
period last year. The increase is primarily due to $975,000 of combined general cost increases in salary and related payroll taxes and
401(k) match expense, health insurance costs, utilities and insurance expense. Also a factor was an increase of $131,000 in property tax
expense related to a combination of the addition of digital 22




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##### Table of Contents



equipment and a general increase in tax rates. Amortization of program rightsrepresents costs associated with the acquisition of syndicated programming, features and specials. Program
rights are amortized over the estimated broadcast period of the underlying programs. If the projected future net revenues from the
broadcast is less than the current carrying value of the program rights we would be required to write-down the program rights to equal the
amount of projected future net revenues. Amortization of program rights increased $524,000 or 10% for the three months ended March 31, 2004
compared to the same period last year. The increase is primarily due to additional amortization resulting from writing down $767,000 of
certain program rights to equal the amount of projected future net revenue. Corporate expenses, related to costs associated with the centralized management of our stations, increased $178,000 or 5% for the three
months ended March 31, 2004 compared to the same period last year. The increase is primarily due to increases in pension expense of
$240,000 due to market conditions affecting our retirement funds, other compensation of $215,000 resulting from an increase in the liability
for our deferred compensation plan and an increase in bonuses expense of $214,000 These increases are offset by a decrease in due diligence
expenses of $566,000 related to potential acquisitions in 2003 Other (Income) Expense Interest expense The following table summarizes our total interest expense: Three months ended March 31,2004
    
    2003Components
of interest expenseSenior Credit Facility
    
    $
    2,357
    
    
    $
    1,890$300,000, 8 3/8% Senior Subordinated Notes
    
    
    
    
    
    
    6,865$200,000, 6 1/2% Senior Subordinated Notes
    
    
    3,374
    
    
    
    $125,000, 2.50% Exchangeable Senior Subordinated Debentures
    
    
    1,869
    
    
    
    $180,485, 8% Senior Notes
    
    
    4,139
    
    
    
    4,674$276,000, 10% Senior Discount Notes
    
    
    
    
    
    
    4,973$100,000, 10% Senior Discount Notes
    
    
    
    
    
    
    2,119Total interest expense
    
    $
    11,739
    
    
    $
    20,521
 Interest expense decreased $8.8 million or 43% for the three months ended March 31, 2004 compared to the same period last year. The
decrease is due to the early repayment of LIN Televisions 8 3/8% Senior Subordinated Notes and the remaining outstanding $276.0 million
aggregate principal amount of 10% Senior Discount Notes due 2008 and $100.0 million aggregate principal amount of 10% Senior Discount Add-On
Notes due 2008. This decrease was partially offset by interest obligations resulting from the issuance in May 2003 of the 6 1/2% Senior
Subordinated Notes due 2013 and the 2.50% Exchangeable Senior Subordinated Debentures due 2033 Investment income, consisting of investment income earned on cash balances decreased $295,000 or 78% for the three months ended March 31,
2004 compared to the same period last year. The decrease is a result of the elimination of significant cash balances from the same period
last year. Share of (income) loss in equity investmentsincreased $456,000 to income of $167,000 for the three months ended March 31, 2004 compared to
a loss of $289,000 for the same period last year. This decrease was primarily the result of the operating performance of the stations
included in our joint venture with NBC. 23




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##### Table of Contents



The Gain on derivative instrumentsconsists of mark-to-market adjustments of the embedded derivative features contained in our 2.50%
Exchangeable Senior Subordinated Debentures. The gain on derivative instruments was $990,000 for the three months ended March 31, 2004 and
was due to fluctuations in market interest rates. We did not have any derivative instruments in the three months ended March 31, 2003. We recorded a loss of $2.9 million for the three months ended March 31, 2004 related to the write-off of unamortized financing fees and
discounts and associated costs in connection with the early extinguishment of $24.5 million of the 8% Senior Notes due 2008. We recorded a
loss of $29.5 million for the three months ended March 31, 2003 in connection with the early extinguishment of debt, consisting of $276.0
million aggregate principal amount of 10% Senior Discount Notes due 2008 and $100.0 million aggregate principal amount of 10% Senior
Discount Add-On Notes due 2008. Provision for Income Taxes LIN TV Corp.s provision for income taxes increased to approximately $3.8 million for the three-month period ended March 31, 2004, from $2.4
million for the same period in the prior year. The provision for income taxes is primarily created by an increase in the valuation allowance
against the increase in the Companys net deferred tax position during the year. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of
the deferred tax assets will be realized. Prior to January 1, 2002, the Company recorded deferred tax liabilities relating to the difference
in the book and tax basis of goodwill and intangibles. The reversals of those deferred tax liabilities were utilized to support the
recognition of the deferred tax assets recorded by the Company. As a result of the adoption of SFAS No. 142, those deferred tax liabilities
will no longer reverse on a scheduled basis and can no longer be utilized to support the realization of deferred tax assets. LIN TV Corp.
uses a discrete period provision in order to more accurately calculate its provision for income taxes. Liquidity and Capital Resources Our principal sources of funds for working capital have historically been cash from operations and borrowings under our senior credit
facilities. At March 31, 2004, we had cash of $12.5 million and a $191.9 million committed revolving credit facility of which $39.0 million
is outstanding at March 31, 2004, leaving $152.9 million committed, but undrawn. We have the ability to increase the revolving credit
commitments up to $235.0 million. 24




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##### Table of Contents



Contractual Obligations The following table summarizes our estimated material contractual cash obligations at March 31, 2004 (in thousands): AprilDecember2004
    
    2005-2007
    
    2008-2009
    
    Thereafter
    
    TotalPrincipal payments and mandatory
redemptions on debt (1)
    
    $
    5,250
    
    
    $
    203,500
    
    
    $
    180,485
    
    
    $
    325,000
    
    
    $
    714,235Cash interest on debt (2)
    
    
    27,981
    
    
    
    98,449
    
    
    
    33,211
    
    
    
    117,102
    
    
    
    276,743Program payments (3)
    
    
    17,650
    
    
    
    38,932
    
    
    
    3,221
    
    
    
    1,261
    
    
    
    61,064Operating leases (4)
    
    
    837
    
    
    
    2,124
    
    
    
    691
    
    
    
    3,709
    
    
    
    7,361Local marketing agreement payments (5)
    
    
    1,122
    
    
    
    2,204
    
    
    
    
    
    
    
    
    
    
    
    3,326Acquisitions of broadcast licenses
and operating assets (6)
    
    
    5,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,000Total
    
    $
    57,840
    
    
    $
    345,209
    
    
    $
    217,608
    
    
    $
    447,072
    
    
    $
    1,067,729
  25




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##### Table of Contents



(1)
    
    We are obligated to repay the revolving portion of our Senior Credit Facility in March 2005 and the remaining balance in December
2007, our 8% Senior Notes in June 2008, our 6 1/2% Senior
Subordinated Notes in May 2013, our 2.50% Exchangeable Senior Subordinated Debentures in May 2033 and our revolving credit facility . 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 Senior Credit Facility, as well as commitment fees of approximately
0.50% on our Senior Credit Facility through 2007, on our 8% Senior Notes through 2008, on 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.(3)
    
    We have entered into commitments for future syndicated news, entertainment, and sports programming. We have recorded $30.2 million
of program obligations as of March 31, 2004 and have unrecorded commitments of $30.9 million for programming that is not available to
air as of March 31, 2004.(4)
    
    We lease land, buildings, vehicles and equipment under non-cancelable operating lease agreements.(5)
    
    We have entered into options agreements that would enable us to purchase KNVA-TV and WNAC-TV for a fixed amount under certain
conditions. In connection with WNAC-TV and KNVA-TV, we are committed to pay minimum future periodic fees totaling $3.3 million as of
March 31, 2004.(6)
    
    We have entered into an agreement to purchase the broadcast license and certain operating assets of WTIN-TV in Ponce, Puerto Rico
from Laura Nicolau for a total purchase price of $5.0 million. This transaction received the Federal Communications Commissions
approval on April 27, 2004 and was completed on May 6, 2004. Net cash provided by operating activitieswas $18.8 million for the three months ended March 31, 2004 compared to net cash used in operating
activities of $4.1 million in the same period last year. The increase is the result of an increase in our operating income for the first
quarter 2004 compared to the same period last year combined with better working capital management. Net cash used in investing activitieswas $5.3 million for the three months ended March 31, 2004 compared to net cash provided by investing
activities of $19.2 million in the same period last year. This change is primarily the result of the liquidation of our short-term
investments during the first quarter of 2003. Net cash used in financing activitiesdecreased $128.3 million to $10.5 million for the three months ended March 31, 2004 compared to $138.8
million in the same period last year. This decrease is the result of the retirement of $376.0 million aggregate principle amount of 10%
Senior Discount Notes and 10% Senior Discount Add-On Notes in the first quarter of 2003. This debt retirement was funded by proceeds from
the $175.0 million term loan entered into during the first quarter of 2003, the $75 million 26




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drawdown on our existing revolving credit
facility and cash on hand. 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 facilities, will be sufficient to
meet our anticipated requirements for working capital, capital expenditures, interest payments and scheduled principal payments for the next
12 months and for the foreseeable future. Description of Indebtedness The following is a summary of our outstanding indebtedness (in thousands): March 31,2004
    
    December 31,2003Senior
Credit Facilities
    
    $
    208,750
    
    
    $
    193,500$180,485, 8%
Senior Notes due 2008 (net of discount of $3,890 and $4,706 at
March 31, 2004 and December 31, 2003,
    
    
    176,595
    
    
    
    200,294$200,000, 6
1/2% Senior Subordinated Notes due 2013
    
    
    200,000
    
    
    
    200,000$125,000,
2.50% Exchangeable Senior Subordinated Debentures due 2033 (net of
discount of $17,374 and $18,427 at March 31, 2004 and
December 31, 2003,
    
    
    107,626
    
    
    
    106,573Total debt
    
    
    692,971
    
    
    
    700,367Less current
portion
    
    
    46,000
    
    
    
    7,000Total
long-term debt
    
    $
    646,971
    
    
    $
    693,367
 The following table is a summary of interest expense that is recorded during the period, which is paid in cash during the period or
subsequent periods, and the interest expense related to amortization of discount and deferred financing fees (in thousands): Three months ended March 31,2004
    
    2003Components of interest expenseSenior Credit Facility
    
    $
    1,957
    
    
    $
    1,537$180,485, 8% Senior Notes
    
    
    3,719
    
    
    
    4,200$200,000, 6 1/2% Senior Subordinated Notes
    
    
    3,250
    
    
    
    $125,000, 2.50% Exchangeable Senior Subordinated Debentures
    
    
    781
    
    
    
    $300,000, 8 3/8% Senior Subordinated Notes
    
    
    
    
    
    
    6,281$276,000, 10% Senior Discount Notes
    
    
    
    
    
    
    330$100,000, 10% Senior Discount Notes
    
    
    
    
    
    
    195Interest
expense before amortization of discount and deferred financing fees
    
    
    9,707
    
    
    
    12,543Amortization of discount and deferred financing fees
    
    
    2,032
    
    
    
    7,978Total interest expense
    
    $
    11,739
    
    
    $
    20,521
 27




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Senior Credit Facility On February 7, 2003, we obtained a $175.0 million term loan, as part of an amendment
to our existing credit facility. In connection with this amendment we recorded
approximately $1.2 million of deferred financing costs. In March 2003, we used the
proceeds from the loan, a drawdown of $75.0 million from our existing revolving credit
facility and cash on hand to retire the debt consisting of $276.0 million aggregate
principal amount of 10% Senior Discount Notes due 2008 and $100.0 million aggregate
principal amount of 10% Senior Discount Add-On Notes due 2008. We incurred a charge of
approximately $29.5 million related to the write-off of unamortized financing fees and
discounts and associated costs as a result of the early extinguishment of debt. The repayment of the term loan began on September 30, 2003 with $1.75 million to be
repaid each quarter until final maturity on December 31, 2007. The revolving credit
facility is available until the scheduled termination date of
March 31, 2005. Borrowings under the senior credit facilities bear interest at a rate based, at our
option, on an adjusted LIBOR rate, plus an applicable margin range of 2.00% to 2.25%
for the term loan and 1.50% to 2.75% for the revolving credit facility depending on
whether we have met ratios specified in the senior credit agreement. We are required
to pay quarterly commitment fees ranging from 0.375% to 0.750%, based upon our
leverage ratio for that particular quarter, on the unused portion of the senior credit
facilities, in addition to annual agency and other administration fees. The revolving credit facility may be used for general corporate purposes including,
without limitation, permitted acquisitions and redemptions of our publicly traded
securities not to exceed $50.0 million in the aggregate of our common stock and/or our
subsidiaries publicly-traded indebtedness and we may from time to time request the
lenders to increase the aggregate amount of the commitments under the revolving credit
facility up to a total of $235.0 million. Prepayments The senior credit facility permits us to prepay loans and to permanently reduce
revolving credit commitments, in whole or in part, at any time. In addition, we are
required to make mandatory prepayments of term loans, and thereafter mandatory
reductions of our revolving credit commitment, subject to certain exceptions and
subject to a reduction to zero based upon our financial performance, in amounts equal
to 50% of the net cash proceeds of certain issuances of debt or equity of certain of
our subsidiaries; and 100% of the net cash proceeds of certain dispositions of assets. Mandatory and optional prepayments of the term loans are allocated pro rata between
the term loans as applicable, and applied ratably based on the number of remaining
installments under each. Any prepayment of adjusted LIBOR loans other than at the end
of an interest period will be subject to reimbursement of breakage costs. Covenants The senior credit facilities contain 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. In addition, under the senior credit facilities, we are required
to comply with specified financial ratios, including minimum interest coverage ratios,
maximum leverage ratios and minimum fixed charge coverage ratios. The senior credit facilities also contain provisions that prohibit any modification of
the indentures governing our senior subordinated notes and senior notes in any manner
adverse to the lenders and that limits our 28




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##### Table of Contents



ability to refinance or otherwise prepay
our senior subordinated notes or senior notes without the consent of such lenders. Events of Default The senior credit facilities contain customary events of default, including payment
defaults, breach of representations and warranties, covenant defaults, cross-defaults
to certain other indebtedness, certain events of bankruptcy and insolvency, ERISA
events, judgment defaults, actual or asserted invalidity of any security interest and
change of control. 6 1/2% Senior Subordinated Notes In May 2003, we issued $200.0 million aggregate principal amount at maturity of 6
1/2% Senior Subordinated Notes due in 2013 in a private placement. We filed a
registration statement with the Securities and Exchange Commission in January 2004 to
register an exchange offer allowing holders of the 6 1/2% Senior Subordinated Notes to
exchange their notes for notes with essentially identical terms. The registered
exchange offer closed in February of 2004 and all outstanding notes were exchanged at
closing. We incurred $160,000 in penalty fees in connection with the delay in this
registration statement being declared effective and these penalties are to be paid on
May 15, 2004. The 6 1/2% Senior Subordinated Notes are unsecured and are
subordinated in right of payment to all of our existing and future senior
indebtedness, including our senior credit facilities and 8% Senior Notes due in 2008,
and rank on parity in right of payment with all of our senior subordinated
indebtedness, including our 2.50% Exchangeable Senior Subordinated Debentures due in
2033. The 6 1/2% Senior Subordinated Notes are guaranteed, jointly and severally, on
an unsecured senior subordinated basis by LIN TV Corp. and LIN Televisions direct and
indirect, existing and future, domestic restricted subsidiaries. Financing costs of
$4.9 million were incurred in connection with the issuance and are being amortized
over the term of the debt. Cash interest on the 6 1/2% Senior Subordinated Notes
accrues at 6 1/2% per annum and is payable semi-annually in arrears commencing on
November 15, 2003. We may redeem the 6 1/2% Senior Subordinated Notes at any time on
or after May 15, 2008 at the redemption prices set forth below, (if redeemed during
the 12 month period beginning on May 15 of each of the years set forth below): Year
    
    Price (as a percentage of outstanding principal amount)2008
    
    
    103.250
    %2009
    
    
    102.167
    %2010
    
    
    101.083
    %2011 and thereafter
    
    
    100.000
    %
 We may also redeem up to 35% of the 6 1/2% Senior Subordinated Notes using proceeds
of certain equity offerings completed before May 15, 2006 at 106.5% of the outstanding
principal amount thereof plus accrued and unpaid interest to the redemption date. The 6 1/2% Senior Subordinated Notes are also subject to early redemption provisions
in the event of a change of control, which may require us to repurchase the 6 1/2%
Senior Subordinated Notes at a price equal to 101% of the principal amount of the
note, together with accrued and unpaid interest. The indenture governing the 6 1/2%
Senior Subordinated Notes limits, 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. 29




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##### Table of Contents



2.50 % Exchangeable Senior Subordinated Debentures In May 2003, we issued $125.0 million aggregate principal amount at maturity of 2.50%
Exchangeable Senior Subordinated Debentures due in 2033 in a private placement. The
resale of the debentures and the shares of Class A common stock issuable upon
conversion of the debentures were registered with the Securities Exchange Commission
pursuant to a Registration statement which became effective on January 16, 2004. We
incurred $96,000 of penalty fees in connection with the delay in this registration
statement being declared effective and these penalties are to be paid on May 15, 2004.
The debentures are unsecured and subordinated in right of payment to all of our
existing and future senior indebtedness including its senior credit facilities and 8%
Senior Notes due in 2008, and rank on a parity in right of payment with all of its
senior subordinated indebtedness, including the 6 1/2% Senior Subordinated Notes due
in 2013. The debentures are guaranteed, jointly and severally, on an unsecured senior
subordinated basis by LIN TV Corp., and LIN Televisions direct and indirect, existing
and future, domestic restricted subsidiaries. Financing costs of $4.2 million were
incurred in connection with the issuance and are being amortized over the term of the
debt. Cash interest on the debentures accrues at 2.50% per annum and is payable
semi-annually in arrears commencing on November 15, 2003. We may redeem for cash all
or a portion of the debentures at any time on or after May 20, 2008 at a price equal
to 100% of the principal amount of the debentures to be redeemed plus accrued and
unpaid interest. Holders of the debentures may require us to purchase all or a portion
of their debentures on May 15, 2008, 2013, 2018, 2023 or 2028 at 100% of the principal
amount, plus accrued and unpaid interest. The debentures are subject to early
redemption provisions in the event of a fundamental change in which LIN TV Corp.s
common stock is exchanged for or converted into consideration that is not all or
substantially all common stock that is listed on a national securities exchange or
quoted on Nasdaq. In addition, the indenture governing the debentures limits, among
other things; the incurrence of additional indebtedness and issuance of capital stock;
the payment of dividends on, and redemption of capital stock of certain of our
subsidiaries; liens; mergers, consolidations and sales of all or substantially all of
the assets of certain of our subsidiaries; asset sales; asset swaps; restricted
payments and transactions with affiliates. Contingent Interest.We will pay contingent interest to holders of the debentures
during any six-month period from and including an interest payment date to but
excluding the next interest payment date, commencing with the six-month period
beginning May 15, 2008, if the average trading price of the debentures for a five
trading day measurement period immediately preceding the beginning of the applicable
six-month period equals 120% or more of the principal amount. The contingent interest
payable per $1,000 principal amount of debentures is 0.25% per annum. Any contingent
interest will be payable on the interest payment date at the end of the relevant
six-month period. Exchange Rights.A holder may exchange each debenture for a number of shares of LIN TV
Corp. class A common stock, equal to the exchange rate under the following conditions:  
    
    during any fiscal quarter, if the closing sale price of LIN TV Corp.
common stock for at least 20 trading days in a period of 30 consecutive
trading days ending on the last trading day of the preceding fiscal
quarter is more than 120% of the base exchange price (initially 120% of
$37.28, or $44.7360);  
    
    during any period in which the credit rating assigned to the debentures
by Standard & Poors Rate Services (S&P) is below B-, or the credit
rating assigned to the debentures by Moodys Investors Services
(Moodys) is below B3, or either S&P or Moodys does not assign a rating
to the debentures;  
    
    during the five business-day period after any five consecutive
trading-day period in which the trading price per debenture for each day
of that period was less than 98% of the product of the closing sale price
of LIN TV Corp. common stock and the exchange rate of each such day;  
    
    if such debentures have been called for redemption; or  
    
    upon the occurrence of certain corporate transactions, such as a
consolidation, merger or 30




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binding share exchange pursuant to which shares
of LIN TV Corp. common stock would be converted into cash, securities or
other property. Exchange Rates.Prior to May 15, 2008, the exchange rate will be determined as follows:  
    
    if the applicable stock price is less than or equal to the base exchange
price, the exchange rate will be the base exchange rate; and  
    
    if the applicable stock price is greater than the base exchange price,
the exchange rate will be determined in accordance with the following
formula; provided, however, in no event will the exchange rate exceed
46.2748, subject to the same proportional adjustment as the base exchange
rate: (EQUATION) On May 15, 2008, the exchange rate will be fixed at the exchange rate then in effect. The base exchange rate is 26.8240, subject to adjustments, and the base exchange
price is a dollar amount (initially $37.28) derived by dividing the principal amount
per debenture by the base exchange rate. The incremental share factor is 23.6051,
subject to the same proportional adjustment as the base exchange rate. The applicable
stock price is equal to the average of the closing sale prices of LIN TV Corp.s
common stock over the five trading-day period starting the third trading day following
the exchange date of the debentures. Embedded Derivative Features. The 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 other liabilities. We have recorded a gain on
derivative instruments in connection with the mark-to-market of these derivative
features of $990,000 for the three months ended March 31, 2004. 8% Senior Notes LIN Television Corporation has outstanding $180.5 million in aggregate principal
amount of 8% Senior Notes due January 15, 2008. Interest on these notes accrues at a
rate of 8% and is payable semi-annually on January 15 and July 15 of each year. LIN
Television Corporation may redeem some or all of these notes at any time on or after
January 15, 2005. These senior notes are general unsecured obligations and rank equally in right of
payment with all LIN Television Corporations existing and future senior indebtedness
and senior in right of payment to all LIN Television Corporations existing and future
subordinated indebtedness. Each of LIN Television Corporations direct and indirect,
existing and future, domestic subsidiaries guarantee the senior notes on a senior
basis. The indenture governing the senior notes contains a change of control provision
which states, among other things, that upon a change of control the holders of these
notes may require LIN Television Corporation to purchase all or a portion of their
notes at a cash purchase price equal to 101% of the principal amount thereof plus
accrued and unpaid interest, if any, to the date of purchase. In addition, the
indenture governing the senior notes limits, among other things; the incurrence of
additional indebtedness and issuance of capital stock; the payment of dividends on,
and redemption of capital stock 31




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of certain of LIN Television Corporations
subsidiaries; liens; mergers, consolidations and sales of all or substantially all of
the assets of certain of LIN Television Corporations subsidiaries; asset sales; asset
swaps; restricted payments and transactions with affiliates. In January 2004 we drew down funds from our revolving credit facility to repurchase
$24.5 million of LIN Television Corporations 8% Senior Notes due 2008 in a negotiated
transaction with an institutional investor. We incurred a charge of $2.9 million
related to the write-off of unamortized discounts and associated costs as a result of
the early extinguishment of debt. GECC Note GECC provided debt financing in connection with the formation of our 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. 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 us and to NBC from the excess cash generated by the
joint venture of approximately $32.3 million on average each year during the past
three years. Accordingly, we expect 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 our
obligation, but is recourse to the joint venture, our equity interests therein and to
LIN TV Corp., pursuant to a guarantee. If the joint venture were unable to pay
principal or interest on the GECC note and GECC could not otherwise get its money back
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, we 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 our senior credit facilities
and other outstanding indebtedness; or  
    
    if the GECC note is prepaid because of an acceleration on default or
otherwise, or if the note is repaid at maturity, we 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. FACTORS THAT MAY AFFECT FUTURE RESULTS  Risks Associated with Business ActivitiesOur operating results are primarily dependent on advertising revenues and, as a
result, we may be more vulnerable to economic downturns than businesses in other
industries.Our operating results are primarily dependent on advertising revenues. The success of
our operations depends in part upon factors beyond our control, such as:  
    
    national and local economic conditions;  
    
    the availability of high profile sporting events; 32




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
    
    the relative popularity of the programming on our stations;
    
    the demographic characteristics of our markets; and
    
    the activities of our competitors. Our programming may not attract sufficient targeted viewership or we may not achieve favorable
ratings. Our ratings depend partly upon unpredictable and volatile factors beyond our control,
such as viewer preferences, competing programming and the availability of other entertainment
activities. A shift in viewer preferences could cause our programming not to gain popularity or to
decline in popularity, which could cause our advertising revenues to decline. In addition, we and
those that we rely on for programming may not be able to anticipate and react effectively to
shifts in viewer tastes and interests in the markets. We are dependent to a significant degree on automotive advertising. Approximately 28%, 25%, 22% and 21% of our total revenues for the three months ended March 31,
2004 and for the years ended December 31, 2003, 2002 and 2001, respectively, consisted of
automotive advertising. A significant decrease in these revenues in the future could materially
and adversely affect our results of operations and cash flows, which could affect our ability to
fund operations and service our debt obligations and affect the value of shares of our common
stock. We have a substantial amount of debt, which could adversely affect our financial condition,
liquidity and results of operations, reduce our operating flexibility and put us at greater risk
for default and acceleration of our debt. As of March 31, 2004, we had approximately $693.0 million of consolidated indebtedness and
approximately $764.5 million of consolidated stockholders equity. In addition, we may incur
additional indebtedness in the future. Accordingly, we will continue to have significant debt
service obligations. Our large amount of indebtedness could, for example:  
    
    require us to use a substantial portion of our cash flow from operations to pay
indebtedness and reduce the availability of our cash flow to fund working capital, capital
expenditures, acquisitions and other general corporate activities;
    
    limit our ability to obtain additional financing in the future;
    
    expose us to greater interest rate risk since the interest rates on certain of our
borrowings, including amounts borrowed under our senior credit facilities, vary; and
    
    impair our ability to successfully withstand a downturn in our business or the economy in
general and place us at a disadvantage relative to our less leveraged competitors. Any of these consequences could have a material adverse effect on our business, liquidity and
results of operations. In addition, our debt instruments require us to comply with covenants,
including those that restrict the ability of certain of our subsidiaries to dispose of assets,
incur additional indebtedness, pay dividends, make investments, make acquisitions, engage in
mergers or consolidations and make capital expenditures, that will restrict the manner in which we
conduct our business and may impact our operating results. Our failure to comply with these
covenants could result in events of default, which, if not cured or waived, would permit
acceleration of our indebtedness and acceleration of indebtedness under other instruments that
contain cross-acceleration or cross-default provisions. In the past, we have obtained amendments
with respect to compliance with financial ratio tests in our senior credit facilities. Consents or
amendments that may be required in the future may not be available on reasonable terms, if at all. 33




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We have a history of net losses and a substantial accumulated deficit. We had net income of $1.4 million for
the three months ended March 31, 2004, and net losses of $90.4 million, $47.2 million,
and $61.7 million and for years ended December 31, 2003, 2002 and 2001,
respectively, primarily as a result of amortization and impairment of intangible assets, debt
service obligations and extinguishment costs. In addition, as of March 31, 2004, we had an
accumulated deficit of $293.4 million. We may not be able to achieve or maintain profitability. We may not be able to generate sufficient cash flow to meet our debt service obligations, forcing
us to refinance all or a portion of our indebtedness, sell assets or obtain additional financing. Our ability to make scheduled payments of the principal of, or to pay interest on, or to refinance
our indebtedness, will depend on our future performance, which, to a certain extent, will be
subject to economic, financial, competitive and other factors beyond our control. Our business may
not continue to generate sufficient cash flow from operations in the future to pay our
indebtedness or to fund our other liquidity needs. As a result, we may need to refinance all or a
portion of our indebtedness, on or before maturity, sell assets or obtain additional financing. We
may not be able to refinance any of our indebtedness on commercially reasonable terms, if at all.
If we are unable to generate sufficient cash flow or refinance our indebtedness on commercially
reasonable terms, we may have to seek to restructure our remaining debt obligations, which could
have a material adverse effect on the price of our common stock and the market, if any, for our
debt. We have a material amount of intangible assets, and if we are required to write down intangible
assets in future periods, it would reduce net income, which in turn could materially and adversely
affect the results of operations and the trading price of LIN TV Corp.s class A common stock. Approximately $1.7 billion, or 80%, of our total assets as of March 31, 2004 consists of
unamortized intangible assets. Intangible assets principally include broadcast licenses and
goodwill. SFAS No. 142 requires, among other things, the discontinuance of the amortization of
goodwill and broadcast licenses, and the introduction of impairment testing in its place. If at
any point in the future the value of these intangible assets decreased, we may be required to
incur an impairment charge that could significantly adversely impact our reported results of
operations and stockholders equity. For example, we recorded an impairment of our broadcast
licenses at December 31, 2003 of $51.7 million. Our strategy includes seeking growth through acquisitions of television stations, which could pose
various risks and increase our leverage. We intend to pursue selective acquisitions of television stations with the goal of improving their
operating performance by applying our managements business and growth strategy. However, we may
not be successful in identifying attractive acquisition targets. Future acquisitions involve
inherent risks, such as increasing leverage and debt service requirements and combining company
cultures and facilities that could have a material adverse effect on our operating results,
particularly during the period immediately following any acquisitions. We may not be able to
successfully implement effective cost controls, increase advertising revenues or increase audience
share with respect to any acquired station. In addition, our future acquisitions may result in our
assumption of unexpected liabilities and may result in the diversion of managements attention
from the operation of our business. In addition, television station acquisitions are subject to the approval of the Federal
Communications Commission (FCC or the Commission) and, potentially, other regulatory
authorities. The need for FCC and other regulatory approvals could restrict our ability to
consummate future transactions and potentially require us to divest some television stations if
the FCC believes that a proposed acquisition would result in excessive concentration in a market,
even if the proposed combinations may otherwise comply with FCC ownership limitations. 34




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Broadcast interests of our affiliates, including Hicks Muse, may be attributable to us and may
limit our ability to acquire television stations in particular markets, restricting our ability to
execute our growth strategy. The number of television stations we may acquire in any market is limited by FCC rules and may
vary depending upon whether the interests in other television stations or other media properties
of individuals affiliated with us are attributable to those individuals under FCC rules. The FCC
generally applies its ownership limits to attributable interests held by an individual,
corporation, partnership or other association. The broadcast or other media interests of our
officers, directors and 5% or greater voting stockholders are generally attributable to us, which
may limit our acquisition or ownership of television stations in particular markets while those
officers, directors or stockholders are associated with us. In addition, the holder of an
otherwise nonattributable equity or debt interest in a licensee which is in excess of 33% of the
total debt and equity of the licensee will nonetheless be attributable where the holder is either
a major program supplier to that licensee or the holder has an attributable interest in another
broadcast station, cable system or newspaper in the same market. As of March 31, 2004, affiliates
of Hicks Muse own 23,510,137 shares of LIN TV Corp. class B common stock, which represents 46.8%
of LIN TV Corps capital stock. Pursuant to FCC rules and regulations, non-voting stock does not
generally create an attributable interest. As a result, due to the fact that affiliates of Hicks
Muse only own shares of LIN TV Corp. class B common stock, we believe that none of our stations
will be attributed to Hicks Muse and that no stations attributed to Hicks Muse will be attributed
to us. However, if affiliates of Hicks Muse elect to convert their shares of class B common stock
into either class A common stock or class C common stock of LIN TV Corp., under current FCC rules
and regulations, the stations that are attributable to Hicks Muse would be attributed to us. In
addition, the FCC has stated that it reserves the authority, in an appropriate case, to declare as
being attributable an unusual combination of otherwise nonattributable interests. Hicks Muse and its affiliates, whose interests may differ from your interests, have approval
rights with respect to significant transactions and could convert their equity interests in LIN TV
Corp. into a majority of its voting power, thereby reducing the voting power of other LIN TV Corp.
shareholders. Hicks Muse and its affiliates have the ability to convert shares of LIN TV Corp.s nonvoting class
B common stock into class A common stock, subject to the approval of the FCC. If this occurs,
affiliates of Hicks Muse would own approximately 46.8% of our voting equity interests in LIN TV
Corp. and will effectively have the ability to elect the entire board of directors and to approve
or disapprove any corporate transaction or other matters submitted to LIN TV Corp. shareholders
for approval, including the approval of mergers or other significant corporate transactions. Upon
the conversion of the majority of the nonvoting class B common stock into class A common stock,
the class C common stock will automatically convert into an equal number of shares of class A
common stock. The interests of Hicks Muse and its affiliates may differ from the interests of LIN
TV Corp.s other stockholders and Hicks Muse and its affiliates could take actions or make
decisions that are not in the best interests of other shareholders. For example, Hicks Muse is in the business of making significant investments in existing or newly
formed companies and may from time to time acquire and hold controlling or non-controlling
interests in television broadcast assets, such as its existing investment in businesses like Clear
Channel Communications, Inc., that may directly or indirectly compete with LIN TV Corp. for
advertising revenues. Hicks Muse and its affiliates may from time to time identify, pursue and
consummate acquisitions of television stations or other broadcast related businesses that may be
complementary to LIN TV Corp.s business and therefore such acquisition opportunities may not be
available to LIN TV Corp. In addition, affiliates of Hicks Muse as the holders of LIN TV Corp.s class B common stock, have
the right to approve, among other things, the issuance or repurchase of any of LIN TV Corp.s
securities, the sale or acquisition of any asset or the incurrence of any indebtedness with a
value of 10% or more of the fair market value of our common equity securities of LIN TV Corp.s ,
the merger or consolidation of LIN TV 35




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Corp. with another company or any transaction that is not in
the ordinary course of business. Hicks Muse also has an assignable right, under certain
conditions, to acquire the outstanding shares of LIN TV Corp.s class C common stock. Moreover, Royal W. Carson, III and Randall S. Fojtasek, two of LIN TVs directors, together own
all of LIN TV Corp.s class C common stock and therefore possess 70% of LIN TVs combined voting
power. Accordingly, Messrs. Carson and Fojtasek will have the power to elect the entire board of
directors of LIN TV Corp. and through this control, to approve or disapprove any corporate
transaction or other matter submitted to the LIN TV Corp. stockholders for approval, including the
approval of mergers or other significant corporate transactions. Both of Messrs. Carson and
Fojtasek have prior business relations with Hicks Muse. Mr. Carson is the President of Carson
Private Capital Incorporated, an investment firm that sponsors funds-of-funds and dedicated funds
that have invested substantially all of the net capital of these funds in investment funds
sponsored by Hicks Muse or its affiliates. Mr. Carson also serves on an advisory board
representing the interests of limited partners of Hicks Muse, Tate & Furst Europe Fund, L.P.,
which is sponsored by Hicks Muse. Hicks, Muse, Tate & Furst Europe Fund does not have an
investment in us. Until its sale in 1999, Mr. Fojtasek was the Chief Executive Officer of Atrium
Companies, Inc., which was principally owned by Hicks Muse and its affiliates. Affiliates of Hicks
Muse have invested as limited partners in Brazos Investment Partners LLC, a private equity
investment firm of which Mr. Fojtasek is a founding member. If we are unable to compete effectively, our revenue could decline. The entertainment industry, and particularly the television industry, is highly competitive and is
undergoing a period of consolidation and significant change. Many of our current and potential
competitors have greater financial, marketing, programming and broadcasting resources than we do.
Technological innovation and the resulting proliferation of television entertainment, such as
cable television, Internet services, wireless cable, satellite-to-home distribution services,
pay-per-view, digital video recorders, DVDs and home video and entertainment systems, have
fractionalized television viewing audiences and have subjected free over-the-air television
broadcast stations to new types of competition. In addition, as a result of the Telecommunications
Act of 1996, the legislative ban on telephone cable ownership has been repealed and telephone
companies are now permitted to seek FCC approval to provide video services to homes. It will be difficult to take us over, which could adversely affect the trading price of our class
A common stock. Affiliates of Hicks Muse effectively determine whether a change of control will occur because of
their rights through their ownership of all of the shares of our class B common stock or through
their voting power, if they convert their shares of class B common stock into class A common stock
or class C common stock. Moreover, provision of Delaware corporate law and our bylaws and
certificate of incorporation, including the 70% voting power rights of our class C common stock
held by Messrs. Carson and Fojtasek, make it more difficult for a third party to acquire control
of us, even if a change of control would benefit the holders of class A common stock. These
provisions and controlling ownership by affiliates of Hicks Muse could also adversely affect the
public trading price of our class A common stock. The loss of network affiliation agreements or changes in network affiliations could materially and
adversely affect our results of operations if we are unable to quickly replace the network
affiliation. The non-renewal or termination of a network affiliation agreement or a change in network
affiliations could have a material adverse effect on us. Each of the networks generally provides
our affiliated stations with up to 22 hours of prime time programming per week. In return, our
stations broadcast network-inserted commercials during that programming and often receive cash
payments from networks, although in some circumstances, we make cash payments to networks. In addition, some of our network affiliation agreements are subject to earlier termination by the
networks 36




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under specified circumstances, including as a result of a change of control of our
affiliated stations, which would generally result upon the acquisition of 50% of our voting power.
In the event that affiliates of Hicks Muse elect to convert the shares of LIN TV Corp. class B
common stock held by them into shares of either class A common stock or class C common stock, such
conversion may result in a change of control of our stations with network affiliation agreements.
Some of the networks with which our stations are affiliated have required other broadcast groups,
upon renewal of affiliation agreements, to reduce or eliminate network affiliation compensation
and, in specific cases, to make cash payments to the network, and to accept other material
modifications of existing affiliation agreements. Consequently, our affiliation agreements may not
all remain in place and each network may not continue to provide programming or compensation to
affiliates on the same basis as it currently provides programming or compensation. If this occurs,
we would need to find alternative sources of programming, which may be less attractive and more
expensive. A change in network affiliation in a given television market may have many short-term and
long-term consequences, depending upon the circumstances surrounding the change. Potential
short-term consequences include increased marketing costs and increased internal operating costs,
which can vary widely depending on the amount of marketing required to educate the audience
regarding the change and to maintain the stations viewing audience, short term loss of market
share or slower market growth due to advertiser uncertainty about the switch, costs of gearing up
a news operation, if necessary, and the cost of the equipment needed to conform the stations
programming, equipment and logos to the new network affiliation. Long-term consequences are more
difficult to assess, due to the cyclical nature of each of the major networks share of the
audience that changes from year to year with programs coming to the end of their production cycle
and the audience acceptance of new programs in the future and the fact that national network
averages are not necessarily indicative of how a networks programming is accepted in an
individual market. How well a particular network fares in the affiliation switch depends largely
on the value of the broadcast license, which is influenced by the length of time the broadcast
license has been broadcasting, whether it is a VFH or a UHF license, the quality and location of
the license, the audience acceptance of the licensees local news programming and community
involvement and the quality of the other non-network programming transmitted. In addition, most of
the revenue earned by television stations is attributable to locally produced news programming and
syndicated product, rather than to network affiliation payments and advertising sales related to
network programming. The circumstances that may surround a network affiliation switch cause
uncertainty as to the actual costs that will be incurred by us and, if these costs are
significant, the switch could have a material adverse impact on the income we derive from the
affected station. The use of an alternative method of valuing our network affiliations could have a significant
adverse impact on our results of operations. Different broadcast companies may use different assumptions in valuing acquired broadcast licenses
and their related network affiliations than those that are used by us. These different
assumptions may result in the use of different valuation methods that can result in significant
variances in the amount of purchase price allocated to these assets among broadcast companies. We believe that the value of a television station is derived primarily from the attributes of its
broadcast license. The attributes include:  
    
    The scarcity of broadcast licenses assigned by the Federal Communication Commission to a
particular market;
    
    The length of time that the broadcast license has been broadcasting;
    
    Whether the station is a VHF station or a UHF station;
    
    The quality of the broadcast signal and location of the broadcast station within the
market;
    
    The audience acceptance of the broadcast licenses local news programming and community
involvement; and
    
    The quality of non-network programming carried by a station. In connection with our purchase of Sunrise Television Corp. in May 2002, we acquired broadcast
licenses 37




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in markets with a number of commercial television stations equal to or less than the
number of television networks seeking affiliates. The methodology we used in connection with the
valuation of the stations acquired in the Sunrise transaction was based on our evaluation of the
broadcast licenses acquired and the characteristics of the markets in which they operated. We
believed that in these specific markets we would be able to replace a network affiliation
agreement with little or no economic loss to the television station. As a result of this
assumption, we ascribed no incremental value to the incumbent network affiliation in each market
beyond the cost of negotiating a new agreement with another network and the value of any terms
that were more favorable or unfavorable than those generally prevailing in the market. Other
broadcasting companies have valued network affiliations on the basis that it is the affiliation
and not the other attributes of the station, including its broadcast license, which contributes to
the operating performance of that station. As a result, these broadcasting companies look beyond
the specific contract value and include in their network affiliation valuation amounts related to
attributes that we believe are more appropriately reflected in the value of the broadcast license
or goodwill. Other broadcasting companies believe that network affiliations are an important component of the
value of a station. These companies believe that VHF stations are popular because they have been
affiliating with networks from the inception of network broadcasts, stations with network
affiliations have the most successful local news programming and the network affiliation
relationship enhances the audience for local syndicated programming. As a result, these
broadcasting companies allocate a significant portion of the purchase price for any station that
they may acquire to the network affiliation relationship. If we were to adopt this alternative
method for valuing these network affiliations, the value of our broadcast licenses and goodwill as
reported on our balance sheet would be reduced and the value of our other intangibles assets would
be proportionately increased. As a result, our expenses relating to the depreciation and
amortization of intangible assets could increase significantly as more value would be assigned to
an amortizing asset and this increase could materially reduce our operating income and materially
increase our net loss. In future acquisitions, the valuation of the broadcast licenses and network affiliations may
differ from our prior acquisition values due to different attributes of each station and the
market in which it operates. The GECC note could result in significant liabilities and could trigger a change of control under
our existing indebtedness, causing our indebtedness to become immediately due and payable. GECC provided debt financing for a joint venture between us and NBC, a sister corporation of GECC,
in the form of an $815.5 million, non-amortizing senior secured note due 2023. In the event that
such note is not extended or otherwise refinanced when the note matures in 2023, we expect that,
assuming current federal marginal tax rates remain in effect, our tax liability related to the
joint venture transaction will be approximately $255.0 million. The formation of the joint venture
was intended to be tax-free to us. However, any early repayment of the note will accelerate this
tax liability, which could have a material adverse effect on us. In addition, if an event of
default occurs under the note, and GECC is unable to collect all amounts owed to it after
exhausting all commercially reasonable remedies against the joint venture, including during the
pendency of any bankruptcy involving the joint venture, GECC may proceed against LIN TV Corp. to
collect any deficiency, including by foreclosing on our stock and other LIN TV Corp. subsidiaries,
which could trigger the change of control provisions under our existing indebtedness. Annual cash interest payments on the note are approximately $66.2 million. There are no scheduled
payments of principal due prior to 2023, the stated maturity of the note. The obligations under
the note were assumed by the joint venture, and the proceeds of the note were used to finance a
portion of the cost of Hicks Muses acquisition of us. The note is not our obligation nor the
obligation of any of LIN TV Corp.s subsidiaries and is recourse only to the joint venture, our
equity interest in the joint venture and, after exhausting all remedies against the assets of the
joint venture and the other equity interest in the joint venture, to LIN TV Corp. pursuant to a
guarantee. An event of default under the note will occur if the joint venture fails to make any
scheduled payment of interest, within 90 days of the date due and payable, or principal of the
note on the maturity date. The joint venture has established a cash reserve of $15.0 million for
the purpose of making interest payments on the note when due. Both NBC and LIN TV Corp. have the 38




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right to make a shortfall loan to the joint venture to cover any interest payment. However, if the
joint venture fails to pay principal or interest on the note, and neither NBC nor LIN TV Corp.
make a shortfall loan to cover the interest payment, an event of default would occur under the
note and GECC could accelerate the maturity of the entire amount due under the note. Other than
the acceleration of the principal amount of the note upon an event of default, prepayment of the
principal of the note is prohibited prior to its stated maturity. We may be required to pay substantial penalties to the holders of our 2.50% Exchangeable Senior
Subordinated Debentures in the future if we are unable to maintain an effective registration
statment. In accordance with the terms of the registration rights agreements relating to the issuance of our
2.50% Exchangeable Senior Subordinated Debentures, we are required to pay substantial penalties to
a holder of these debt instruments under specified circumstances, including, the failure to
maintain an effective registration statement relating to the resale of the debentures or the
shares of Class A common stock issuable upon conversion of the debentures for more than brief
intervals. These penalties are generally paid based on a percentage of the outstanding principal amount of
the indebtedness or a percentage of the value of the underlying Class A common stock. Risks Related to Our Industry Any potential hostilities or terrorist attacks may affect our revenues and results of operations. During each of the three month periods ended March 31, 2003 and June 30, 2003, we experienced a
loss of advertising revenue and incurred additional broadcasting expenses due to the initiation of
military action in Iraq. The military action disrupted our television stations regularly
scheduled programming and some of our clients rescheduled or delayed advertising campaigns to
avoid being associated with war coverage. We expect that if the United States of America engages
in other foreign hostilities or there is a terrorist attack against the United States of America,
we may lose additional advertising revenue and incur increased broadcasting expenses due to
further pre-emption, delay or cancellation of advertising campaigns and the increased costs of
providing coverage of such events. We cannot predict the extent and duration of any future,
disruption to our programming schedule, the amount of advertising revenue that would be lost or
delayed or the amount by which our broadcasting expenses would increase as a result. The loss of
revenue and increased expenses has negatively affected, and could negatively affect in the future,
our results of operations. Our industry is subject to significant syndicated and other programming costs, and increased
programming costs could adversely affect our operating results. Our industry is subject to significant syndicated and other programming costs. We may be exposed
in the future to increased programming costs which may adversely affect our operating results. We
often acquire program rights two or three years in advance, making it difficult for us to
accurately predict how a program will perform. In some instances, we may have to replace programs
before their costs have been fully amortized, resulting in write-offs that increase station
operating costs. Recently-enacted campaign finance legislation and pending election law reform proposals may
substantially limit political advertising, upon which we heavily rely. Recently-enacted campaign finance legislation restricts spending by candidates, political parties,
independent groups and others on political advertising and imposes significant reporting and other
burdens on political advertising. The legislation became effective in November 2002. The
legislation could have the effect of diminishing the amount of advertising spent on broadcast
television stations and altering the timing of those expenditures. We are unable to predict the
impact on our business of the new 39




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##### Table of Contents



legislation or the timing or outcome of any Federal Election
Commission determinations. Changes in Federal Communication Commission ownership rules throughFCC action, judicial review or
federal legislation may limit our ability to continue operating stations under local marketing
agreements, may prevent us from obtaining ownership of the stations we currently operate under
local marketing agreements and/or may preclude us from obtaining the full economic value of one or
more of our two-station operations upon a sale, merger or other similar transaction transferring
ownership of such station or stations. FCC ownership rules currently impose significant limitations on the ability of broadcast licensees
to have attributable interests in multiple media properties. These restrictions include a rule
prohibiting one company from owning broadcast television stations with service areas encompassing
more than an aggregate 35% share of national television households. The restrictions also include
a variety of local limits on media ownership. The restrictions include an ownership limit of one
television station in medium and smaller markets and two stations in larger markets, known as the
television duopoly rule. The regulations also include a prohibition on the common ownership of a
newspaper and television station in the same market (newspaper-television cross-ownership), limits
on common ownership of radio and television stations in the same market (radio-television station
ownership) and limits on radio ownership of four to eight radio stations in a local market. In two recent decisions, the United States Court of Appeals for the District of Columbia Circuit
found three of the FCCs decisions with respect to three of its ownership rules, including the 35%
national television ownership cap, the television duopoly rule and a prohibition on ownership of
television broadcast stations and cable systems in the same market to be arbitrary and capricious.
The court vacated the cable-television cross-ownership rule and remanded the national cap and
television duopoly rule to the Commission for further action. On June 2, 2003, the FCC voted
substantially to amend many of its ownership rules. The FCC raised the national television
ownership limit from 35% to 45%. The television duopoly rule was relaxed to permit ownership of up
to three stations in certain large markets and two stations in many mid-sized markets, provided
that no more than one of the co-owned stations can be among the top four in audience share in the
market. In addition, the newspaper-television cross-ownership prohibition was restricted to
smaller markets (those with fewer than four television stations). A new local cross-ownership
regulation was adopted which precludes ownership of certain combinations of television and radio
stations and newspapers in markets with fewer than nine television stations. With respect to the television duopoly rule, the Commission declared that it would grant waivers
of the top-four restriction under certain circumstances. It also held that two-station
combinations which were not in conformance with the amended rule, e.g., where both stations were
among the top four stations in the local markets in audience share, would not have to be divested.
However, the Commission also determined that a non-conforming combination could not be transferred
jointly either as a separate asset or through the transfer of control of the licensee, except by
obtaining a waiver of the rule upon each transfer or by sale to certain eligible small business
entities. The Commission also determined that it would continue to grandfather local marketing
agreements entered into prior to November 5, 1996, such as our local marketing agreements in
Austin, Texas, and Providence, Rhode Island, until the conclusion of a further ownership review
rulemaking to be initiated later in 2004, which would address the question of whether and under
what circumstances the agreements would be permitted to continue. The amended rules were to become effective in September 4, 2003, but at the request of various
parties which filed judicial appeals challenging the Commissions actions, a three-judge panel of
the United States Court of Appeals for the Third Circuit, which has been selected as the appellate
court to hear the consolidated appeals, stayed the effectiveness of the new rules until it has
issued a decision. We are unable to predict the timing or outcome of that decision or whether the
decision will be subject to further judicial appeals. In addition, several parties, including the
Company, filed petitions for reconsideration with the Commission asking for a variety of
amendments to the amended rules, e.g., eliminating the non-transferability of grandfathered
cross-ownership interests. Finally, on January 23, 2004 President Bush signed an omnibus
appropriation bill which provides that the national ownership cap would be fixed by 40




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statute at an
aggregate reach of 39% of U.S. households. We are unable to predict the outcome of these regulatory, judicial or legislative proceedings.
Should the new rules become effective, attractive opportunities may arise for additional
television station and other media acquisitions. But these changes also create additional
competition for us from other entities, such as national broadcast networks, large station groups,
newspaper chains and cable operators who may be better positioned to take advantage of such
changes and benefit from the resulting operating synergies both nationally and in specific
markets. Should the new television duopoly rule become effective, we may be able to acquire the ownership
of one or both of the stations in Austin, Texas, and Providence, Rhode Island, which we currently
operate under local marketing agreements and which are subject to purchase option agreements
entered into by our subsidiaries. Any such acquisition would be subject to the amended duopoly
rules restriction on ownership of more than one top-four station in a market. Should we have to
seek a waiver of the new rule in either case because the second station is among the top four in
audience share, there is no assurance that we will be successful in obtaining it. Should a waiver
be required and obtained, or should we succeed in elevating to top-four audience status the second
station in any of the other markets in which we currently have two stations, we will be unable to
transfer that two-station combination, either through an asset transfer or a transfer of control
of us (or the applicable licensee subsidiary), without grant of another waiver or sale to an
eligible small business entity. Moreover, should we be unable to obtain a waiver, there is no
assurance that the grandfathering of our local marketing agreements will be permitted beyond the
conclusion of the 2004 rulemaking. In 2003 we had net revenues of $20.6 million, or 5.9%, of our
total net revenues, attributable to those local marketing agreements. Changes in technology may impact our long-term success and ability to compete. The Federal Communications Commission has adopted rules for implementing advanced television,
commonly referred to as digital television, in the United States of America. Our conversion to
digital television requires additional capital expenditures, which we anticipate will be
approximately $6.0 million in 2004, and operating costs. Implementation of digital television will
improve the technical quality of over-the-air broadcast television. It is possible, however, that
conversion to digital operations may reduce a stations geographical coverage area. We believe
that digital television is essential to our long-term viability and the broadcast industry, but we
cannot predict the precise effect digital television might have on our business. The FCC has
levied fees on broadcasters with respect to non-broadcast uses of digital channels, including data
transmissions or subscriber services. Further advances in technology may also increase competition
for household audiences and advertisers. We are unable to predict the effect that technological
changes will have on the broadcast television industry or the future results of our operations. 
 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
senior credit facilities, which are priced based on certain variable interest rate alternatives.
There was approximately $208.8 million outstanding as of March 31, 2004 under our senior credit
facilities. 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 senior credit facility as of March 31, 2004 would result in an estimated $2.1 million
increase in annualized interest expense assuming a constant balance outstanding of $208.8 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 gain on derivative
instruments in connection with the mark-to-market 41




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of these derivative features of $990,000 for the
three months ended March 31, 2004. We are also exposed to market risk related to changes in the interest rates through our investing
activities and our floating rate credit arrangements. 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. 42




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##### Table of Contents



Item 4. Controls and Procedures Evaluation of disclosure controls and procedures.Based on their evaluation of
our disclosure controls and procedures (as defined in Rules 13a-14(c) and
15d-14(c) under the Securities Exchange Act of 1934) as of March 31, 2004, our
chief executive officer and persons performing the functions of a chief
financial officer have concluded that our disclosure controls and procedures
are designed to ensure that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SECs rules
and forms and are operating in an effective manner. Changes in internal controls.There were no significant changes in our
internal controls or in other factors that could significantly affect these
controls during the quarter ended March 31, 2004. 
 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 6. Exhibits and Reports on Form 8-K Exhibits: 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 Controller of LIN TV Corp.31.3
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of the Treasurer of LIN TV Corp.31.4
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of the Vice President of Finance of LIN TV Corp.31.5
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of the Chief Executive Officer of LIN Television Corporation.31.6
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of the Controller of LIN Television Corporation.31.7
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of the Treasurer of LIN Television Corporation.31.8
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of the Vice President of Finance 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 Financial Officer and Principal Financial Officers of LIN
Television Corporation.
 43




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##### Table of Contents



Reports onForm 8-K: On February 10, 2004, the Company furnished a Current Report on Form 8-K dated
February 10, 2004 under Item 12, in connection with the announcement of the
Companys financial results for the fourth quarter and fiscal year ended
December 31, 2003. On February 11, 2004, the Company furnished a Current Report on Form 8-K dated
February 10, 2004 under Item 5, in connection with the announcement of the
Companys financial results for the fourth quarter and fiscal year ended
December 31, 2003. 44




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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 10, 2004
    
    By:
    
    /s/ William A. CunninghamWilliam A. Cunningham
Vice President and Controller
(Principal Accounting Officer)
 45




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##### Table of Contents



Item 1. Financial Statements LIN Television Corporation
    
    
    47Condensed Consolidated Balance Sheets
    
    
    47Condensed Consolidated Statements of Operations
    
    
    48Condensed Consolidated Statements of Cash Flows
    
    
    49Notes to Condensed Consolidated Financial Statements
    
    
    50
 46




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LIN TELEVISION CORPORATION
Consolidated Condensed Balance Sheets(unaudited) March 31,
    
    December 31,2004
    
    2003(In thousands, except share data)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    12,492
    
    
    $
    9,475Accounts receivable, less allowance for doubtful accounts
(2004 - $1,235; 2003 - $1,698)
    
    
    60,650
    
    
    
    72,340Program rights
    
    
    13,031
    
    
    
    17,661Assets held for sale
    
    
    23,361
    
    
    
    Other current assets
    
    
    3,014
    
    
    
    3,216Total current assets
    
    
    112,548
    
    
    
    102,692Property and equipment, net
    
    
    196,460
    
    
    
    203,049Deferred financing costs
    
    
    13,294
    
    
    
    14,332Equity investments
    
    
    64,870
    
    
    
    77,305Program rights
    
    
    11,877
    
    
    
    11,444Goodwill
    
    
    583,077
    
    
    
    586,269Broadcast licenses
    
    
    1,118,942
    
    
    
    1,102,708Other intangible assets, net
    
    
    2,935
    
    
    
    3,289Other assets
    
    
    15,556
    
    
    
    14,822Total Assets
    
    $
    2,119,559
    
    
    $
    2,115,910LIABILITIES, PREFERRED STOCK
AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    46,000
    
    
    $
    7,000Accounts payable
    
    
    4,958
    
    
    
    7,169Accrued income taxes
    
    
    136
    
    
    
    320Accrued interest expense
    
    
    9,440
    
    
    
    9,846Accrued sales volume discount
    
    
    1,245
    
    
    
    6,075Other accrued expenses
    
    
    14,758
    
    
    
    13,423Liabilities held for sale
    
    
    694.00
    
    
    
    Program obligations
    
    
    18,494
    
    
    
    23,042Total current liabilities
    
    
    95,725
    
    
    
    66,875Long-term debt, excluding current portion
    
    
    646,971
    
    
    
    693,367Deferred income taxes, net
    
    
    534,666
    
    
    
    527,588Program obligations
    
    
    11,683
    
    
    
    11,640Other liabilities
    
    
    51,112
    
    
    
    54,306Total liabilities
    
    
    1,340,157
    
    
    
    1,353,776Preferred stock of Banks Broadcasting, Inc. $0.01 par value
173,822 issued and outstanding at March 31, 2004
    
    
    14,911
    
    
    
    Stockholders equity:Common stock, $0.01 par value: 1,000 shares authorized,
issued and outstanding
    
    
    
    
    
    
    Additional paid-in capital
    
    
    1,068,392
    
    
    
    1,067,398Accumulated deficit
    
    
    (293,442
    )
    
    
    (294,805
    )Accumulated other comprehensive loss
    
    
    (10,459
    )
    
    
    (10,459
    )Total stockholders equity
    
    
    764,491
    
    
    
    762,134Total liabilities, preferred stock and stockholders equity
    
    $
    2,119,559
    
    
    $
    2,115,910
 The accompanying notes are an integral part of the condensed consolidated financial statements. 47




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LIN Television Corporation
Condensed Consolidated Statements of Operations(unaudited) Three Months Ended March 31,2004
    
    2003(In thousands, except per share data)Net revenues
    
    $
    79,844
    
    
    $
    73,627Operating costs and expenses:Direct operating (excluding depreciation of $7.5 million and
$7.7 million for the three months ended March 31, 2004
and 2003, respectively)
    
    
    24,630
    
    
    
    24,217Selling, general and administrative
    
    
    22,500
    
    
    
    20,753Amortization of program rights
    
    
    5,724
    
    
    
    5,200Corporate
    
    
    4,098
    
    
    
    3,920Depreciation and amortization of intangible assets
    
    
    7,776
    
    
    
    7,988Total operating costs and expenses
    
    
    64,728
    
    
    
    62,078Operating income
    
    
    15,116
    
    
    
    11,549Other (income) expense:Interest expense
    
    
    11,739
    
    
    
    20,521Investment income
    
    
    (85
    )
    
    
    (380
    )Share of (income) loss in equity investments
    
    
    (167
    )
    
    
    289Gain on derivative instruments
    
    
    (990
    )
    
    
    Loss on early extinguishment of debt
    
    
    2,937
    
    
    
    29,525Other, net
    
    
    (119
    )
    
    
    47Total other expense, net
    
    
    13,315
    
    
    
    50,002Income (loss) from continuing operations before provision for
income taxes and cumulative effect of change in accounting principle
    
    
    1,801
    
    
    
    (38,453
    )Provision for income taxes
    
    
    3,797
    
    
    
    2,422Loss from continuing operations before cumulative
effect of change in accounting principle
    
    
    (1,996
    )
    
    
    (40,875
    )Discontinued operations:Income from discontinued operations, net of tax provision of $206
for the three months ended March 31, 2004 and 2003
    
    
    (69
    )
    
    
    (8
    )Cumulative effect of change in accounting principle,
net of a tax effect of $0
    
    
    (3,290
    )
    
    
    Net income (loss)
    
    $
    1,363
    
    
    $
    (40,867
    )
    The accompanying notes are an integral part of the condensed consolidated financial statements. 48




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LIN Television Corporation
Condensed Consolidated Statements of Cash Flows(unaudited) Three Months Ended March 31,2004
    
    2003(In thousands)Net cash provided by (used in) operating activities
    
    $
    18,795
    
    
    $
    (4,106
    )INVESTING ACTIVITIES:Capital expenditures
    
    
    (1,740
    )
    
    
    (6,096
    )Proceeds from disposals of property and equipment
    
    
    8
    
    
    
    22Investment in equity investments
    
    
    (650
    )
    
    
    Capital distributions from equity investments
    
    
    1,630
    
    
    
    1,630Acquisition of broadcast license
    
    
    (4,224
    )Other, investments and deposits
    
    
    (278
    )
    
    
    Proceeds from liquidation of short-term investments
    
    
    
    
    
    
    23,691Net cash (used in) provided by investing activities
    
    
    (5,254
    )
    
    
    19,247FINANCING ACTIVITIES:Net proceeds on exercises of employee stock options and phantom stock
units and employee stock purchase plan issuances
    
    
    804
    
    
    
    685Proceeds from Senior Credit Facilities
    
    
    
    
    
    
    175,000Financing costs associated with proceeds from long-term debt
    
    
    (90
    )
    
    
    Net proceeds from revolver debt
    
    
    17,000
    
    
    
    75,000Principal payments on long-term debt
    
    
    (26,265
    )
    
    
    (376,000
    )Cash expenses associated with early extinguishment of debt
    
    
    (1,973
    )
    
    
    (13,492
    )Net cash used in financing activities
    
    
    (10,524
    )
    
    
    (138,807
    )Net increase (decrease) in cash and cash equivalents
    
    
    3,017
    
    
    
    (123,666
    )Cash and cash equivalents at the beginning of the period
    
    
    9,475
    
    
    
    143,860Cash and cash equivalents at the end of the period
    
    $
    12,492
    
    
    $
    20,194
 The accompanying notes are an integral part of the condensed consolidated financial statements. 49




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LIN Television Corporation
Notes to Condensed Consolidated Financial Statements(Unaudited) 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 except for its $180.5 million, 8% Senior Notes due 2008. All of the consolidated 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, 2003 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 (consisting of normal recurring adjustments and
adjustments related to the application of FASB Interpretation
No. 46) 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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 and valuing
intangible assets, deferred tax assets and net assets of businesses acquired. Actual results could differ from these estimates. Certain prior period amounts have
been reclassified to conform to the current period presentation. 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 and net loss per share if
the Company had applied the fair value recognition provisions of Statement of Financial Accounting Standards (SFAS), Accounting for
Stock-Based Compensation, to stock-based employee compensation (in thousands, except for per share data). 50




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Three Months Ended March 31,2004
    
    2003(In thousands, except share data)Net income (loss), as reported
    
    $
    1,363
    
    
    $
    (40,867
    )Add: Stock-based employee compensation expense,
as reported, net of related tax effect
    
    
    
    
    
    
    Deduct: Total stock-based employee compensation
expense determined under the fair value based method
for all awards, net of related tax effect
    
    
    (761
    )
    
    
    (778
    )Pro forma net income (loss)
    
    $
    602
    
    
    $
    (41,645
    )
 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
    
    2003Volatility
    
    
    24
    %
    
    
    33
    %Risk-free interest rates
    
    
    2.0 - 4.4
    %
    
    
    1.5 - 3.25
    %Weighted average expected life
    
    3-10 years
    
    2 - 6 yearsDividend yields
    
    
    0
    %
    
    
    0
    %
 Note 2  Assets and Liabilities Held for Sale: On January 8, 2004, the Company signed an asset purchase agreement with Pilot TV Acquisition Corporation for the sale of WEYI-TV, the NBC affiliate serving Flint,
Michigan, for $24.0 million. This transaction received the Federal Communications Commissions approval on April 26, 2004 and is expected to be completed during
the second quarter of 2004. Accordingly, the financial results of this station are accounted for as discontinued operations under the provisions of SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets. The income of $69,000 and $8,000, net of tax, for the three months ended March 31, 2004 and 2003,
respectively, has been excluded from continuing operations and included in discontinued operations. The Company has classified the assets and liabilities
associated with this station as held for sale on its balance sheet as of March 31, 2004. 51




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The carrying amounts of the assets and liabilities of this station are as follows (in thousands): March 31,2004Accounts receivable, net
    
    $
    1,358Program rights, short-term
    
    
    193Other current assets
    
    
    10Property and equipment, net
    
    
    5,875Broadcast license, net
    
    
    15,718Network affiliation, net
    
    
    73Program rights, long-term
    
    
    134Assets held for sale
    
    $
    23,361Current liabilities:Accounts payable
    
    $
    27Accrued income tax
    
    
    24Program obligations, short-term
    
    
    203Other accruals
    
    
    315Program obligations, long-term
    
    
    125Liabilities held for sale
    
    $
    694
 Note 3  Investments: The Company has investments in a number of ventures with third parties, through which it has an interest in television stations in locations throughout the United States of America. The
following presents the Companys basis in these ventures (in thousands): March 31,
    
    December 31,2004
    
    2003Banks Broadcasting, Inc.
    
    $
    
    
    
    $
    11,297NBC joint venture
    
    
    54,636
    
    
    
    55,758WAND (TV) Partnership
    
    
    10,234
    
    
    
    10,250$
    64,870
    
    
    $
    77,305
 Banks Broadcasting, Inc:The Company owns preferred stock that represents a 50% non-voting interest in Banks Broadcasting, Inc. (Banks), which owns and operates KWCV-TV, a WB
affiliate in Wichita, Kansas and KNIN-TV, a UPN affiliate in Boise, Idaho. The Company is able to exercise significant, but not controlling, influence over the activities of Banks
through representation on the Board of Directors. The Company has also entered into a management services agreement with Banks 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 Banks and is periodically reimbursed. In accordance with FASB Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities  an Interpretation of ARB No. 51, Banks is considered to be a variable interest
entity. For purposes of 52




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##### Table of Contents



determining the primary beneficiary of Banks, the Company considered Hicks Muse & Co. Partners, L.P. (Hicks Muse Partners) 47% ownership in the Company and
Hicks Muses substantial economic interest in 21st Century Group, LLC which owns 18% of Banks; and determined for purposes of FIN 46 that the Company and 21st Century Group, LLC are
related parties. Considering the Companys 50% ownership interest in Banks and the Companys management agreement with Banks, the Company identified itself as the primary beneficiary of
Banks under FIN 46. As the primary beneficiary of Banks, the Company has consolidated Banks assets, liabilities and noncontrolling interests into the Companys financial statements as
of March 31, 2004. Since the Company and Banks are not under common control, as defined by EITF 02-5, Banks assets, liabilities and noncontrolling interests were measured at fair
value as of March 31, 2004. The difference between the value of the newly consolidated assets over the reported amount of any previously held interests and the value of newly
consolidated liabilities and non-controlling interests was recognized as a cumulative effect of an accounting change in the period ended March 31, 2004. The resulting consolidated
balance sheet of the Company does not reflect any voting equity minority interest since Banks has incurred cumulative losses and as such the minority interest would be in a deficit
position at March 31, 2004. The following presents the summarized balance sheet of Bank Broadcasting, Inc. at March 31, 2004: March 31,2004AssetsCash
    
    
    97Accounts receivable
    
    
    899Program rights, short-term
    
    
    757Other current assets
    
    
    46Property and equipment
    
    
    5,048Program rights, long-term
    
    
    662Broadcast licenses
    
    
    29,238Total Assets
    
    
    36,747Liabilities and Preferred StockAccounts payable
    
    
    396Program obligations, short-term
    
    
    793Other accrued expenses
    
    
    404Program obligations, long-term
    
    
    525Deferred income taxes, net
    
    
    4,805Preferred stock
    
    
    34,764Total Liabilities and Preferred Stock
    
    
    41,687(4,940
    )
 The deficit of $4.9 million has been allocated to the nonvoting preferred stock, and the Companys ownership of such preferred stock has been eliminated on consolidation. Banks has authorized 390,625 shares of Series A Preferred Stock with a par
value of $0.01 per share. Key rights associated with the preferred stock include: (i) holders of the
preferred stock receive an 8% dividend, if declared; (ii) holders of the
preferred stock have the right to convert to common stock in the event of a
Triggering Event (discussed below); (iii) holders of the preferred stock have
no votes; (iv) while no holder of the preferred stock controls the board of
directors; there are certain rights to force the sale of Banks; holders of the
preferred stock would share pro rata in the sale proceeds. Upon liquidation, winding up, or dissolution, holders of the preferred stock
will receive the greater of $100 per share, plus all accrued but unpaid
dividends, or the amount such holder would receive upon liquidation and
assuming conversion to common stock. Triggering Events for conversion include: (1) the sale of all or substantially
all of the assets of Banks, (2) the closing of an underwritten public offering
resulting in (i) net cash proceeds to Banks of not less than $50.0 million and
(ii) a pre-money valuation of Banks of not less than two and one-half times the
aggregate purchase price for all shares of the Preferred Stock; or (3) any
merger or consolidation or other reorganization of Banks with or into another
corporation in which Banks is not the surviving entity. No dividends had been declared on the Series A Preferred Stock as of March 31,
2004. Hicks Muse has a substantial
economic interest in 21st Century Group, LLC which
owns 36% of the preferred stock on the Companys balance sheet. 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 $1.6 million from the joint venture in the three months ended March 31, 2004 and 2003. The following presents the summarized financial
information of the joint venture (in thousands): 53




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Three Months Ended March 31,2004
    
    2003Net revenues
    
    $
    35,209
    
    
    $
    32,921Operating income
    
    
    18,333
    
    
    
    16,664Net income
    
    
    2,493
    
    
    
    987
 March 31,
    
    December 31,2004
    
    2003Current assets
    
    $
    25,891
    
    
    $
    9,949Non-current assets
    
    
    231,968
    
    
    
    237,469Current liabilities
    
    
    16,672
    
    
    
    725Non-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 from WAND (TV) Partnership under this arrangement were approximately $221,000 as of March 31, 2004. Amounts
due from the Company to WAND (TV) Partnership under this arrangement were approximately $64,000 as of December 31, 2003. The following presents the summarized financial information of
the WAND (TV) Partnership (in thousands): Three Months Ended March 31,2004
    
    2003Net revenues
    
    $
    1,633
    
    
    $
    1,489Operating loss
    
    
    (50
    )
    
    
    (126
    )Net loss
    
    
    (49
    )
    
    
    (126
    )
 March 31,
    
    December 31,2004
    
    2003Current assets
    
    $
    2,418
    
    
    $
    2,013Non-current assets
    
    
    24,912
    
    
    
    25,168Current liabilities
    
    
    604
    
    
    
    405
 Note 4  Intangible Assets: The following table summarizes the carrying amount of each major class of intangible assets (in thousands): 54




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March 31,
    
    December 31,2004
    
    2003Amortized Intangible Assets:LMA purchase options
    
    $
    2,388
    
    
    $
    2,388Network affiliations
    
    
    283
    
    
    
    377Income leases
    
    
    393
    
    
    
    393Other intangible assets
    
    
    2,022
    
    
    
    2,022Accumulated amortization
    
    
    (2,151
    )
    
    
    (1,891
    )2,935
    
    
    
    3,289Unamortized Intangible Assets:Broadcast licenses
    
    $
    1,118,942
    
    
    $
    1,102,708Goodwill
    
    
    583,077
    
    
    
    586,2691,702,019
    
    
    
    1,688,977Total intangible assets
    
    $
    1,704,954
    
    
    $
    1,692,266
 On January 14, 2004, the Company purchased the broadcast license and certain assets of WIRS-TV in Yauco, Puerto Rico from Marantha Christian Network. The total purchase price of $4.5
million was funded by borrowings from our revolving credit facility. The application of FIN 46 increased broadcast licenses by $29.2 million for the consolidation of the Banks licenses as of March 31, 2004 (see Note 4). The broadcast license of WEYI-TV was classified to assets held for sale as of March 31, 2004 (see Note 2). Amortization expense was approximately $278,000 and $275,000 for the three months ended March 31, 2004 and 2003, respectively. This includes approximately $234,000 and $228,000 of
amortization expense recorded on the local marketing agreement (LMA) purchase option for the three months ended March 31, 2004 and 2003, respectively. The Company expects that its
remaining LMA purchase option will be fully amortized in 2007. Also included in the amortization expense is approximately $44,000 and $47,000 of amortization expense on network affiliation agreements and
income leases for the three months ended March 31, 2004 and 2003, respectively. The network affiliation agreements will be fully amortized by their expiration dates, which range from
August 29, 2004 to June 30, 2006, and the income leases will be fully amortized by November 2006. 55




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Note 5 -Debt: Debt consisted of the following (in thousands): March 31,
    
    December 31,2004
    
    2003Senior Credit Facilities
    
    $
    208,750
    
    
    $
    193,500$180,485, 8%
Senior Notes due 2008
(net of discount of $3,890 and $4,706 at March 31, 2004 and December 31, 2003,
respectively)
    
    
    176,595
    
    
    
    200,294$200,000, 6 1/2% Senior
Subordinated Notes due 2013
    
    
    200,000
    
    
    
    200,000$125,000, 2.50% Exchangeable Senior Subordinated Debentures due 2033
(net of discount of $17,374 and $18,427 at March 31, 2004 and December 31, 2003,
respectively)
    
    
    107,626
    
    
    
    106,573Total debt
    
    
    692,971
    
    
    
    700,367Less current portion
    
    
    46,000
    
    
    
    7,000Total long-term debt
    
    $
    646,971
    
    
    $
    693,367
 In January 2004, the Company drew down funds from its revolving credit facility to repurchase $24.5 million of LIN Television
Corporations 8% Senior Notes due 2008 in a negotiated transaction with an institutional investor. The Company incurred a charge
of $2.9 million related to the write-off of unamortized discounts and associated costs as a result of the early extinguishment of
debt. The current portion of long-term debt includes, $7.0 million of annual amortization of the Term Loan B and $39.0 million borrowed
under the revolving credit facility which terminates March 31, 2005. Note 6  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 reimbursable 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 $15,000 for the three months ended March
31, 2003. The Company did not incur any fees for the three months ended March 31, 2004. Local Marketing Agreement.The Company is party to a local marketing agreement with Super Towers, Inc., of which the President of
Super Towers, Inc. is related to a LIN TV Corp. executive. The Company has paid Super Towers, Inc. approximately $5,000 and $15,000
for the three months ended March 31, 2004 and 2003, respectively, for various reimbursable expenses. Banks Broadcasting Inc. The Company has entered into a management services
agreement with Banks 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. The Company has received
approximately $50,000 for the three months ended March 31, 2004 and 2003 under
the management services agreement. Other Investment.The Companys Chief Executive Officer serves on the Board of Directors of an internet company in which the
Company has invested. The Company incurred fees for internet services provided by this company of $138,000 and $123,000 for the
three months ended March 31, 2004 and 2003, respectively. Note 7  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 $19.3 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, but is recourse to the
joint venture, the Companys equity interests therein and ultimately to LIN TV Corp., pursuant to a guarantee. If the joint 56




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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 senior credit facilities and senior 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. Note 8  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 is as follows (in thousands): Three Months Ended March 31,2004
    
    2003Service cost
    
    $
    500
    
    
    $
    457Interest cost
    
    
    1,401
    
    
    
    1,311Expected return on plan assets
    
    
    (1,450
    )
    
    
    (1,408
    )Amortization of prior service cost
    
    
    39
    
    
    
    41Amortization of net loss
    
    
    80
    
    
    
    63Net periodic benefit cost
    
    $
    570
    
    
    $
    464
 The Company has previously disclosed in its financial statements for the year ended December 31, 2003 that it expected to
contribute $1.2 million to its qualified pension plan in 2004. As of March 31, 2004, it has contributed $300,000 to the plan, and
expects to contribute a total of $1.2 million during 2004. The Company also has a non-qualified, unfunded Supplemental Excess
Retirement Plan (SERP). The timing of the payments under the SERP is determined by individual employees decisions to retire and
commence payments. Based on information currently known, the Company expects to fund approximately $415,000 of SERP payments
during 2004. 57




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Note
9  Income Taxes: Prior to January 1, 2002, the Company recorded deferred tax liabilities relating to the difference in the book basis and tax basis
of goodwill and intangibles. The reversals of those deferred tax liabilities were utilized to support the recognition of deferred
tax assets (primarily consisting of net operating loss carryforwards) recorded by the Company. As a result of the adoption of SFAS
No. 142, those deferred tax liabilities will no longer reverse on a scheduled basis and can no longer be utilized to support the
realization of deferred tax assets. Accordingly, the Companys provision for income taxes is primarily created by an increase in
the valuation allowance against the increase in the net deferred tax assets position during the year. This expense has no impact on
the Companys cash flows. Note 10  Subsequent Events: On May 6, 2004, the Company completed the purchase of the broadcast license and certain assets of WTIN-TV in Ponce, Puerto Rico
from Laura Nicolau for a total purchase price of $5.0 million. 58