SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

Commission file number 1-14776

Hearst-Argyle Television, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

None

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

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

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12-b2).     Yes þ          No o

      The aggregate market value of the registrant’s voting common stock held by non-affiliates on June 30, 2004 based on the closing price for the registrant’s Series A Common Stock on such date as reported on the New York Stock Exchange (the “NYSE”), was approximately $734,770,397.

      Shares of the registrant’s Common Stock outstanding as of February 22, 2005: 92,896,612 shares (consisting of 51,597,964 shares of Series A Common Stock and 41,298,648 shares of Series B Common Stock).

      DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registrant’s Proxy Statement relating to the 2005 Annual Meeting of Stockholders are incorporated by reference into Part III (Items 10, 11, 12, 13 and 14).

FORWARD-LOOKING STATEMENTS

      This report includes or incorporates forward-looking statements. We based these forward-looking statements on our current expectations and projections about future events. These forward looking statements generally can be identified by the use of statements that include phrases such as “anticipate”, “will”, “likely”, “plan”, “believe”, “expect”, “intend”, “project” or other such similar words and/or phrases. For these statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The forward-looking statements contained in this report, concerning, among other things, trends and projections involving revenue, income, earnings, cash flow, operating expenses, capital expenditures, dividends and capital structure, involve risks and uncertainties, and are subject to change based on various important factors. Those factors include the impact on our operations from

      These and other matters we discuss in this report, or in the documents we incorporate by reference into this report, may cause actual results to differ from those we describe. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

HEARST-ARGYLE TELEVISION, INC.

2004 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

PART I

General

      Hearst-Argyle Television, Inc. (the “Company” or “we”) is one of the country’s largest independent, or non-network-owned, television station groups. Headquartered in New York City, we own or manage 28 television stations reaching approximately 18.2% of television households in the United States. Our 13 ABC-affiliated television stations, which cover 8.4% of U.S. television households, comprise the largest ABC affiliate group. Our 10 NBC-affiliated television stations, which cover 7.3% of U.S. television households, comprise the second largest NBC affiliate group. We own two CBS-affiliated television stations and one WB station, and manage one UPN station and one independent station. In addition, we maintain Internet Web sites for each of our stations, which provide supplemental news, weather, information and entertainment content, and are part of a nation-wide network of Web sites we have built with other partners in the media industry. Also, as part of our ongoing initiative to explore innovative uses of our excess digital spectrum, we participate in the joint venture that launched the NBC Weather Plus Network, the first ever 24/7, all digital national-local broadcast network which we broadcast in three of our markets on a multicast stream with our main digital channel. We also manage two radio stations.

      We provide, through our local television stations, free over-the-air programming to our communities’ television viewing audiences. Our programming includes three main components:

      In keeping with our commitment to serve the public interest of the local communities in which we operate, our television stations and Web sites also provide public service announcements and political coverage and sponsor community service projects and other public initiatives.

      Our primary source of revenue is the sale of commercial air time to advertisers. Our objectives are to meet the needs of our advertising customers and to increase our advertiser base by delivering mass audiences in key demographics, primarily in the top 100 U.S. markets. We seek to attract our television audience by providing leading local news programming and compelling network and syndicated programs at each of our stations, 20 of which are in the top 50 markets. In addition to offering advertising customers commercial air time, we offer a variety of marketing programs, including community events, sponsorships and advertising opportunities on our station’s Web sites.

      We believe that excellence in news coverage is the key to a station’s success, and consequently, the key to our operating success. Our corporate objective is therefore to consistently excel in the coverage of local and national issues, breaking news, accurate and timely monitoring of local weather conditions, and coverage of political issues, candidates, debates, and elections. We typically rank either first or second (in total household ratings and by share of demographic audience, adults aged 25-54) in local evening news in 21 of the 25 markets where we produce news. In addition, our television stations have been recognized with numerous local, state and national awards for outstanding news coverage. Our stations have received numerous honors in recent years, including the Walter Cronkite Award bestowed by the University of Southern California’s Annenberg School for Communication, Alfred I. duPont Columbia Awards, George Foster Peabody Awards, Edward R. Murrow Awards, National Headliner Awards, as well as numerous state and local Emmy and Associated Press honors.

      For the period ended December 31, 2004, we had revenue of $779.9 million, employed 3,333 full-time and part-time employees and operated in 25 U.S. markets. Information about our financial results is discussed under Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

beginning on page 25, and presented under Item 8 “Financial Statements and Supplementary Data” beginning on page 48.

      We are incorporated under the laws of the State of Delaware. Our principal executive offices are located at 888 Seventh Avenue, New York, New York 10106, and our main telephone number at that address is (212) 887-6800. Our Series A Common Stock is listed on the New York Stock Exchange under the ticker symbol “HTV”.

Company Background

      Hearst-Argyle Television, Inc. was formed in August 1997 when The Hearst Corporation (“Hearst”) combined its television broadcast group and related broadcast operations (the “Hearst Broadcast Group”) with those of Argyle Television, Inc. (“Argyle”).

      Founded by William Randolph Hearst, The Hearst Corporation entered the broadcasting business in 1928 with its acquisition of radio station WSOE in Milwaukee, Wisconsin. In 1948, Hearst launched its first television station, WBAL-TV, in Baltimore, Maryland, which was the nation’s 19^th television station. That same year, WLWT-TV, in Cincinnati, Ohio, later to become an Argyle station, was launched as the nation’s 20^th television station and WDSU-TV, in New Orleans, Louisiana, later to become a Pulitzer station, was launched as the nation’s 48^th television station. By 1997, when Hearst and Argyle combined their broadcast operations to form our company, they had a total of 15 owned and managed television stations and two managed radio stations.

      Since that time, we have acquired additional television stations through asset purchase, asset exchange or merger transactions, including merger transactions in 1999 with Pulitzer Publishing Company (“Pulitzer”), in which we acquired Pulitzer’s nine television stations and five radio stations, and with Kelly Broadcasting Company, in which we acquired our television stations in Sacramento, California, and a three-party asset exchange transaction in 2001 pursuant to which we sold three Phoenix radio stations and acquired WMUR-TV, Manchester, New Hampshire. In July 2004, we completed the purchase of an ABC affiliate, WMTW-TV, in Portland, Maine.

      We also have made strategic equity investments in Internet Broadcasting Systems, Inc. (“IBS”) and NBC/ Hearst-Argyle Syndication, LLC. Each of our stations has a corresponding Internet Web site hosted by IBS which provides supplemental news, weather, information and entertainment content. These Web sites are part of a nation-wide network of local Web sites that we and IBS have built with other partners in the media industry. The IBS network provides local Internet coverage of 58 markets, comprising 64% of U.S. households. NBC/ Hearst-Argyle Syndication, LLC is a limited liability company we formed with NBC Enterprises (now NBC Universal) as a joint venture to produce and syndicate first-run broadcast and original-for-cable programming. In addition, we have a minor interest in the Arizona Diamondbacks major league baseball team, which we acquired in the Pulitzer transaction. In December 2004, we sold our minority interest in ProAct Technologies Corporation as part of an overall plan by ProAct to liquidate its business. See Note 3 to the consolidated financial statements.

      As of February 22, 2005, Hearst owned, through its wholly-owned subsidiaries, Hearst Holdings, Inc., a Delaware corporation (“Hearst Holdings”), and Hearst Broadcasting, Inc., a Delaware corporation (“Hearst Broadcasting”), 100% of the issued and outstanding shares of our Series B Common Stock, par value $.01 per share, (the “Series B Common Stock,” and together with our Series A Common Stock, par value $.01 per share, the “Series A Common Stock,” the “Common Stock”) and approximately 42.32% of the issued and outstanding shares of our Series A Common Stock, representing in the aggregate approximately 67.96% of the outstanding voting power of our Common Stock (except with respect to the election of directors, which is discussed below). On February 22, 2005, Hearst Broadcasting also owned 500,000 Series B Redeemable Convertible Preferred Securities due 2021 that were issued by Hearst-Argyle Capital Trust, our wholly-owned subsidiary trust. Hearst Broadcasting may convert the Series B Redeemable Convertible Preferred Securities into securities that are convertible into 986,131 shares of our Series A Common Stock, representing in the aggregate approximately 1.06% of the outstanding voting power of our Common Stock as of February 22, 2005

(except with respect to the election of directors, which is discussed below). Because of Hearst’s ownership, we are considered a “controlled company” under New York Stock Exchange rules.

      Hearst Broadcasting’s ownership of our Series B Common Stock entitles it to elect as a class all but two members of our Board of Directors (the “Board”). The holders of our Series A Common Stock are entitled to elect the remaining two members of our Board. When Hearst combined the Hearst Broadcast Group with Argyle in August 1997, Hearst agreed that, for purposes of any vote to elect directors and for as long as it held any shares of our Series B Common Stock, it would vote any shares of Series A Common Stock that it owned only in the same proportion as the shares of Series A Common Stock not held by Hearst are voted in the election.

The Stations

      Of the 28 television stations we own or manage, 20 are in the top 50 of the 210 generally recognized geographic designated market areas (“DMAs”) according to Nielsen Media Research (“Nielsen”) estimates for the 2004-2005 television broadcasting season. We own 25 television stations. In addition, we manage three television stations (WMOR-TV in the Tampa, Florida market, WPBF-TV in the West Palm Beach, Florida market and KCWE-TV in the Kansas City, Missouri market) and two radio stations (WBAL-AM and WIYY-FM in Baltimore, Maryland), all of which, except KCWE-TV, are owned by Hearst. Our management of KCWE-TV allows Hearst to fulfill its obligations under a Program Service and Time Brokerage Agreement between Hearst and the licensee of KCWE-TV (the “Missouri LMA”).

      The following table sets forth certain information for each of our owned and managed television stations as of December 31, 2004:

      The following table sets forth certain information for each of our managed radio stations:

      We have an option to acquire WMOR-TV and Hearst’s interests and option with respect to KCWE-TV, which expires in December 2005. If Hearst elects to sell either station prior to, or during, the option period, we will have a right of first refusal to acquire it at its fair market value as determined by the parties, or by an

independent third-party appraisal, subject to certain specified parameters. We will exercise any option or right of first refusal related to these properties by action of our independent directors, and we may withdraw any option exercise after we receive the third-party appraisal. We also have a right of first refusal to purchase WPBF-TV if Hearst proposes to sell the station to a third party. That right of first refusal also expires in December 2005.

      On July 30, 2004, Hearst exercised its option to purchase KCWE-TV. Pursuant to the terms of the option agreement, the owners of the station elected to defer the closing of the sale until July 30, 2006.

Network Affiliations

      General. Twenty-seven of our 28 owned or managed television stations are affiliated with one of the following networks pursuant to a network affiliation agreement: ABC (13 stations), NBC (10 stations), CBS (two stations), UPN (one station) and WB (one station). WMOR-TV in Tampa, Florida currently operates as an independent station.

      Each affiliation agreement provides the affiliated station with the right to broadcast all programs transmitted by the applicable network. In return, the network has the right to sell a significant portion of the advertising time during those broadcasts. The duration of a majority of our stations’ affiliations with their networks has exceeded 40 years and, for certain stations, has continued for more than 50 years. Although we do not expect our network affiliation agreements to be terminated and expect to continue to be able to renew them, we can give no assurance they will not be terminated or that renewals will be obtained on as favorable terms. Our two radio stations also have an affiliation agreement with a network that provides certain content (i.e., news, sports, etc.) for the stations. However, our radio stations are less dependent on their affiliation agreements for programming.

      Network Compensation. Historically, the long-established networks have paid compensation to their affiliates in exchange for the broadcasting of network programming. In recent years, network compensation has been reduced and in the future may be eliminated. Our affiliation agreements with NBC provide for compensation that is weighted toward the first part of the term and declines to zero by the end of the term. In addition, the more recently established networks (FOX, UPN, WB and PAX) generally pay little or no cash compensation for the clearance of network programming.

      ABC. The expiration dates of the affiliation agreements for certain of our ABC-affiliated stations were as follows: KMBC, WISN, WCVB, WTAE and WPBF-August 28, 2004; KETV and KOAT-November 1, 2004; KHBS/ KHOG-August 29, 2004; KOCO-December 31, 2004; and KITV-January 2, 2005. The affiliation of each of those stations with ABC has continued since the expiration dates of the agreements with ABC’s consent. The terms of the affiliation agreements for the following ABC-affiliated stations expire as follows: WAPT and WMTW-March 6, 2005; and WMUR-August 7, 2005. We are in the process of negotiating with ABC for the renewal of the affiliation agreements for all of our ABC-affiliated stations. Although there can be no assurance that we will be able to renew the affiliation agreements on as favorable terms or at all, we believe that we will renew the affiliation agreements on mutually agreeable terms and the stations will continue to maintain their affiliations with ABC during the negotiation process.

      NBC. The term of each affiliation agreement for our NBC-affiliated stations — WBAL, WLWT, WYFF, WGAL, WXII, WPTZ/ WNNE, KSBW, KCRA, WESH and WDSU — is for a period of nine years, six months, expiring December 31, 2009. In addition, certain of our NBC stations have become affiliates of the NBC Weather Plus network. See “Digital Spectrum Initiatives.”

      CBS. The initial term of the affiliation agreements for our CBS-affiliated stations KCCI and WLKY is for 10 years through June 30, 2005. We are in the process of negotiating with CBS for the renewal of the affiliation agreements for both of our CBS-affiliated stations. Although there can be no assurance that we will be able to renew the affiliation agreements on as favorable terms or at all, we believe that we will renew the affiliation agreements on mutually agreeable terms.

      UPN and WB. The UPN affiliation agreement with KCWE is for an initial 10-year term (through August 31, 2008). The WB affiliation agreement with KQCA is for an initial term of three years, through

September 30, 2006. Unlike affiliates of ABC, CBS or NBC, KQCA may be required to pay compensation to WB (based upon ratings it generates) in exchange for the broadcast rights to WB’s programming.

Digital Spectrum Initiatives

      We actively seek opportunities to explore the potential of digital over-the-air broadcast technology, as well as opportunities to participate in joint ventures with our networks. In November 2004 NBC Universal and the NBC Television Affiliates Association formed NBC Weather Plus Network LLC, a 50/50 joint venture which launched the first ever 24/7, all digital national-local broadcast network. NBC-affiliated stations may participate in the venture by investing in a limited liability company called Weather Network Affiliates Company, LLC, one of the entities which invested in NBC Weather Plus Network LLC. Stations participating in the venture broadcast 24-hour national and local weather and related community information using their excess digital spectrum (as a multi-cast stream together with their main digital channel). We have launched NBC Weather Plus in three of our markets — Sacramento, Orlando and Winston-Salem — and expect to launch NBC Weather Plus in additional markets in the future. Terry Mackin, our Executive Vice President, is the Chairman of the Board of the NBC Television Affiliates Association, which is the managing member and the owner of certain ownership interests in Weather Network Affiliates Company, LLC.

      We have also entered into an arrangement with U.S. Digital Television, Inc. (“USDTV”) through which USDTV is utilizing a portion of the digital spectrum of our station in Albuquerque, New Mexico, to transmit an over-the-air subscription television service consisting of local television station signals combined with the most popular cable networks.

Internet

      We and other companies in the media industry have partnered with IBS to build a nation-wide network of local Web sites. The IBS network, which covers 58 markets and reaches 64% of U.S. households, drew on the average 25.9 million unique viewers per month during 2004. As part of this network we have Internet Web sites for each of our stations which are hosted by IBS and which provide news, weather, entertainment and other information that complement our stations’ programming and enable us to reach our viewers while they are away from their television sets, as well as to attract new viewers to our stations via the Internet. Our Web sites also provide opportunities to generate additional, Web-based advertising revenue. Links to each of these Web sites are provided from our corporate Web site, www.hearstargyle.com.

The Commercial Television Broadcasting Industry

      General. Commercial television broadcasting began on a regular basis in the 1940s. Currently a limited number of channels are available for over-the-air broadcasting in any one geographic area, and a license to operate a television station must be granted by the Federal Communications Commission (the “FCC”). All television stations in the country are grouped by Nielsen into 210 generally recognized television markets that are ranked in size based upon actual or potential audience. Each of these markets, called “Designated Market Areas” or “DMAs”, is designated as an exclusive geographic area consisting of all counties whose largest viewing share is given to stations of that same market area. Nielsen regularly publishes data on estimated audiences for the television stations in each DMA, which data is a significant factor in determining our advertising rates.

      Revenue. Television station revenue is derived primarily from local, regional and national advertising and, to a much lesser extent, from network compensation and other sources. Advertising rates are set based upon a variety of factors, including

      Also, advertising rates are determined by a station’s ratings and audience share among particular demographic groups. Because television stations rely on advertising revenue, they are sensitive to cyclical changes in the economy. The size of advertisers’ budgets, which are affected by broad economic trends, affect the broadcast industry in general and the revenue of individual broadcast television stations. The advertising revenue of our stations are generally highest in the second and fourth quarters of each year, due in part to increases in consumer advertising in the spring and retail advertising in the period leading up to and including the holiday season. Additionally, advertising revenue in even-numbered years benefits from advertising placed by candidates for political offices, and demand for advertising time in Olympic broadcasts. While political and Olympic advertising cycles have been a normal pattern for our industry for decades, the variability has become more pronounced in recent years as these respective categories of revenue have grown significantly in size.

Competition

      General. The television broadcast industry is highly competitive. Some of the stations that compete with ours are owned and operated by large national or regional companies that may have greater resources, including financial resources, than we do. Competition in the television industry takes place on three primary levels:

      Additional factors material to a television station’s competitive position include signal strength and coverage within a geographic area and assigned frequency or channel position. Television stations that broadcast over the VHF band (channels 2-13) of the spectrum historically have had a competitive advantage over television stations that broadcast over the UHF band (channels above 13) of the spectrum because the former usually have better signal coverage and operate at a lower transmission cost. However, the improvement of UHF transmitters and receivers, the complete elimination from the marketplace of VHF-only receivers, the expansion of cable television and satellite delivery systems and the commencement of digital broadcasting have reduced the VHF signal’s competitive advantage. Notwithstanding, approximately 21 million homes in the United States currently receive over-the-air television broadcasts by antenna only.

      Audience. We compete for audience on the basis of program popularity, which consists not only of our locally-produced news, public affairs and entertainment programming, but syndicated and network programming as well. The popularity of our programming has a direct effect on the rates we can charge our advertisers. Due to our significant commitment to the ABC and NBC networks, our Company’s performance can be impacted by the performance of those networks, particularly in prime time.

      In addition, although the commercial television broadcast industry historically has been dominated by the broadcast networks ABC, NBC, CBS (with which the majority of our stations are affiliated) and FOX, newer networks WB and UPN, as well as programming originated to air solely on subscription systems such as cable and satellite systems, have become significant competitors for the broadcast television audience. Currently, broadcast-originated programming accounts for about half of all television viewing.

      Advances in technology, such as increasing use of local-cable advertising “interconnects,” which allow for easier insertion of advertising on local cable systems, have also increased competition for advertisers. Video compression techniques permit greater numbers of channels to be carried within existing bandwidth on cable, satellite and other television distribution systems. These compression techniques, as well as other technological developments, are applicable to all video delivery systems, including digital over-the-air broadcasting, and have the potential to provide vastly expanded programming to highly targeted audiences. Reduction in the cost of creating additional channel capacity could lower entry barriers for new channels and encourage the development of increasingly specialized niche programming on cable, satellite and other television distribution systems. This ability to reach very narrowly defined audiences is expected to increase competition both for audience and for advertising revenue. We cannot predict the effect that technological changes will have on the broadcast television industry or the future results of our stations.

      Other sources of competition for audience include

      Programming. Competition for non-network programming involves negotiating with national program distributors or syndicators that sell first-run and off-network packages of programming. Our stations compete against other local broadcast stations for exclusive local access to first-run product (such as The Oprah Winfrey Show). To a lesser extent, we compete for exclusive local access to off-network reruns (such as Seinfeld). Cable and satellite systems also compete with local stations for programming, and various national cable and satellite networks from time to time have acquired programs that otherwise would have been offered to local television stations.

      Advertising. Broadcast television stations compete for advertising revenue and marketing sponsorship with other broadcast television stations and a station’s competitive edge is in large part determined by the success of its programming. Broadcast television stations also compete for advertising revenue with a variety of other media, such as radio stations, Internet Web sites, print media, direct marketing and cable and satellite system operators serving the same market. Since greater amounts of advertising time are available for sale by independent stations, independent stations typically achieve a greater proportion of television market advertising revenue relative to their share of the market’s audience. Public broadcasting outlets in most communities compete with commercial broadcasters for viewers but not generally for significant advertising revenue, as public broadcasting outlets generally operate on a not-for-profit basis and therefore do not generally solicit commercial advertising.

Federal Regulation of Television Broadcasting

      General. Broadcasting is subject to the jurisdiction of the FCC under the Communications Act of 1934, as amended, and most recently amended comprehensively by the Telecommunications Act of 1996 (the “Communications Act”). The Communications Act requires the FCC to regulate broadcasting so as to serve “the public interest, convenience and necessity.” The Communications Act prohibits the operation of television broadcasting stations except pursuant to licenses issued by the FCC and empowers the FCC, among other things, to

      The Communications Act prohibits the assignment of a license or the transfer of control of a licensee without the FCC’s prior approval. The FCC also regulates certain aspects of the operation of cable television systems, direct broadcast satellite (“DBS”) systems and other electronic media that compete with broadcast stations. In addition, although the FCC has reduced significantly its regulation of broadcast stations, the FCC continues to regulate matters such as network-affiliate relations, cable and DBS systems’ carriage of television station signals, carriage of syndicated and network programming on distant stations, political advertising

practices and obscene and indecent programming. In particular, since January 2004 the FCC has increased its regulatory focus on indecency, which may impact certain of our programming decisions.

      License Renewals. Under the Communications Act, the FCC may grant broadcast licenses for terms of eight years. The Communications Act requires renewal of a broadcast license if the FCC finds that (i) the station has served the public interest, convenience and necessity; (ii) there have been no serious violations of either the Communications Act or the FCC’s rules and regulations by the licensee; and (iii) there have been no other serious violations that taken together constitute a pattern of abuse. In making its determination, the FCC may consider petitions to deny but cannot consider whether the public interest would be better served by issuing the license to a person other than the renewal applicant. In addition, competing applications for the same frequency may be accepted only after the FCC has denied an incumbent’s application for renewal of license.

      The following table provides the expiration dates for the full power station licenses of our owned and managed television stations:

      Ownership Regulation. The Communications Act and FCC rules restrict the ownership of broadcast stations. The FCC limits the ability of individuals and entities to own or have an official position or ownership interest above a certain level (an “attributable” interest) in broadcast stations. Both Hearst and Pulitzer have attributable interests in our company that restrict our ability to acquire stations in areas in which they own newspapers. The FCC is required by law to evaluate its ownership rules every four years to determine whether they remain necessary in light of competition. The Commission’s next quadrennial review is scheduled to take place in 2006. On June 2, 2003, the FCC issued an order substantially revising its rules. This order was the culmination of the most comprehensive review of media ownership regulation in the agency’s history, spanning 20 months and encompassing a public record of more than 520,000 comments. On June 24, 2004, the United States Court of Appeals for the Third Circuit issued its decision regarding the FCC’s rule changes. The Court affirmed certain of the rules, but rejected those affecting ownership of television stations in local markets as well as the rule regarding ownership of newspapers and broadcast stations and remanded the matter to the FCC. The Department of Justice has elected not to seek review of the decision by the Supreme Court. However, review is being sought by various parties, including the National Association of Broadcasters, ABC, NBC, CBS, FOX and Tribune. During the pendency of further proceedings in the courts and before the FCC, the FCC’s prior ownership rules remain in effect. We cannot predict what actions the Supreme Court or the FCC will take in the future or how changes in the rules will impact our business. The FCC’s current ownership rules that are material to our operations are summarized below:

      Local Market Television Ownership. Under the currently effective rules, a party may own two television stations without regard to signal contour overlap provided they are located in separate Nielsen DMAs. In addition, the rules permit parties in larger markets to own up to two TV stations in the same DMA so long as at least eight independently owned and operating full-power commercial and non-commercial television stations remain in the market at the time of acquisition and at least one of the two stations is not among the top four-ranked stations in the market based on audience share. In addition, without regard to the number of remaining or independently owned television stations, the FCC will permit television duopolies within the same DMA so long as certain signal contours of the stations involved do not overlap. “Satellite stations” that rebroadcast the programming of a “parent” station will continue to be exempt from the rule if located in the same DMA as the “parent” station. The FCC may grant a waiver of the local television ownership rule under specified circumstances. We are currently in compliance with the local television ownership rule.

      The FCC’s 2003 rules, which are currently not effective and remain pending before the courts and the FCC, would permit parties to own two stations in markets with five or more TV stations so long as both of the two stations are not among the top four-ranked stations in the markets based on audience share. Further, in markets with 18 or more TV stations a party would be able to own three stations, but only one of these stations could be among the top-four ranked stations in the market. Under the 2003 rules, the FCC has said that it would also consider, on a case-by-case basis, requests to waive the top four-ranked restriction in markets with 11 or fewer television stations. This rule was rejected by the Third Circuit and is still the subject of further judicial and administrative proceedings.

      National Television Ownership Cap. The national television ownership rule limits the number of television stations one entity may own nationally. Under the FCC’s old rules, no entity was permitted to have an attributable interest in television stations whose audience reach, in the aggregate, exceeded 35% of all U.S. television households. The FCC’s 2003 rules increased the 35% cap to 45%. However, Congress later passed, and President Bush signed, a bill into law on January 23, 2004 that fixed the cap at 39%. We are in compliance with this statutorily-mandated national ownership cap.

      The FCC currently discounts the audience reach of a UHF station by 50%. Further, for entities that have attributable interests in two stations in the same market, the FCC counts the audience reach of the station in that market only once for national cap purposes. The FCC is currently studying the UHF discount. The propriety of the UHF discount will be the subject of further administrative proceedings, but the rule remains in effect.

      Dual Network Rule. The dual network rule prohibits a merger between or among four major broadcast television networks — ABC, CBS, FOX and NBC.

      Local Radio Ownership. With respect to radio, the maximum allowable number of stations that can be commonly owned in a market varies depending on the number of radio stations within that market, as determined using a contour-overlap method. In markets with more than 45 stations, one company may own, operate or control eight stations, with no more than five in any one service (AM or FM). In markets of 30-44 stations, one company may own seven stations, with no more than four in any one service; in markets of 15-29 stations, one entity may own six stations, with no more than four in any one service. In markets with 14 commercial stations or less, one company may own up to five stations or 50% of all of the stations, whichever is less, with no more than three in any one service. The FCC’s 2003 rules changed the radio market definition from the contour-overlap method to a more restrictive definition using Arbitron markets. The new market definition rule was affirmed by the Third Circuit, and has become effective, but is the subject of further judicial and administrative proceedings.

      Media Cross-Ownership. The FCC’s currently effective rules prohibit the licensee of an AM, FM, or TV station from directly or indirectly owning, operating, or controlling a daily newspaper if the station’s specified service contour encompasses the entire community where the newspaper is published. The rules also permit cross ownership of radio and television stations under a graduated test based on the number of independently owned media voices in the local market. In large markets, i.e., markets with at least 20 independently owned media voices, a single entity can own up to one television station and seven radio stations or, if permissible under the local television ownership rule (if eight full-power television stations would remain in the market post transaction), two television stations and six radio stations.

      The FCC’s 2003 rules, which are currently not effective and are pending before the courts and the FCC, would replace the broadcast-newspaper and the radio-television cross-ownership rules with the following “cross-media limits”:

      This rule is still the subject of further administrative and judicial proceedings.

      Cable-Television Cross-Ownership. In January 2003, the FCC repealed its rule that had prohibited common control of a television station and a cable television system in the same local market. The elimination of the rule would permit the ownership of a cable system and a television station in the same local market.

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

      All non-conforming interests acquired before November 7, 1996 are permanently grandfathered and thus do not constitute attributable ownership interests. There is also an exemption from attribution for voting stock interests of minority shareholders in a corporation in which a single shareholder owns more than 50% of the voting stock. These minority interests are not attributable unless the minority shareholder’s financial interest amounts to over 33% of the company’s total asset value (equity plus debt) and the majority shareholder is either a major program supplier to the company or a same-market media entity. Thus, in our case, where Hearst is the single majority shareholder, ownership of minority stock interests of up to 33% would not be attributable absent other factors. A proceeding remains open at the FCC considering the elimination of the single majority shareholder exception.

      Alien Ownership. The Communications Act of 1934 restricts the ability of foreign entities or individuals to own or control broadcast licenses. Non-U.S. citizens, collectively, may directly or indirectly own or vote up to 20% of the voting stock of a corporate licensee.

      Local Marketing Agreements. Through an LMA (sometimes also referred to as a Time Brokerage Agreement or TBA) the licensee of one station may provide the programming for another licensee’s station. Under the FCC’s rules, an entity that owns a television station and programs more than 15% of the broadcast time on another television station in the same market is now required to count the LMA station toward its television ownership limits even though it does not own the station. Consequently, we cannot enter into an LMA with another television station in the same market in which we own a television station if we would not be permitted to acquire that station under the local television ownership rule.

      In adopting these rules concerning LMAs, however, the FCC provided grandfathering relief for LMAs that were in effect at the time of the rule change. Television LMAs that were in place before November 5, 1996, were allowed to continue at least through the FCC’s next comprehensive review and re-evaluation of its broadcast ownership rules, which is not currently scheduled to commence until at least 2006. The Missouri LMA, pursuant to which programming is provided to KCWE in Kansas City, Missouri, is grandfathered for this period.

      Joint Sales Agreements. The FCC is considering whether to make attributable agreements by one television station in a market to sell the advertising inventory of another station in the same market. Such agreements, known as “JSAs”, are presently not attributable for purposes of the local market television ownership rules. We have JSAs with stations owned by Paxson Communications in three markets — Sacramento, New Orleans and Winston-Salem. If the FCC were to make JSAs attributable, we might be required to terminate such sales arrangements. Although we believe that JSAs are consistent with the public interest and have so informed the FCC, we cannot predict what action the FCC will take in the future.

Other Regulations, Legislation and Recent Developments Affecting Broadcast Stations

      The 1992 Cable Act. The FCC has adopted various regulations to implement provisions of the Cable Television Consumer Protection and Competition Act of 1992 (“1992 Cable Act”) which includes provisions respecting the carriage of television stations’ signals by cable systems. These so-called “must carry” provisions generally require cable operators to devote up to one-third of their activated channel capacity to the carriage of local commercial television stations. The 1992 Cable Act also prohibits cable operators and other multi-channel video programming distributors from carrying broadcast signals without obtaining the station’s consent. The “must carry” and retransmission consent provisions are related in that a local television broadcaster, on a cable system-by-cable system basis, must make a choice once every three years whether to proceed under the “must carry” rules or to waive the right to mandatory but uncompensated carriage and negotiate a grant of retransmission consent to permit the cable system to carry the station’s signal, in most cases in exchange for some form of consideration from the cable operator. We have agreements with Lifetime Entertainment Services, an entity owned 50% by an affiliate of Hearst and 50% by ABC, whereby (i) we assist Lifetime in securing distribution and subscribers for the Lifetime Television, Lifetime Movie Network and/or Lifetime Real Women programming services; and (ii) Lifetime acts as our agent with respect to the negotiation of our agreements with cable, satellite and certain other multi-channel video programming distributors. See Note 14 to the consolidated financial statements.

      The FCC has ruled that cable systems are required under the FCC’s “must carry” rules to carry only one analog broadcast television program stream and program-related content. Thus, digital services and multiplexed program or data streams are not required to be carried by cable systems. On February 10, 2005, the FCC affirmed these prior rulings.

      Each of our television licensees has been required to make an election, in February 2005, as to which current channel assignment, the analog channel assignment or the digital channel assignment, each station prefers to operate its digital television facilities on after the transition to digital television service is complete and, in certain circumstances, is providing those stations for which both current channel assignments are problematic an opportunity to obtain a different channel assignment at a later date. All of our stations have made elections for one of the two channels currently assigned to them, except for WYFF, Greenville, South Carolina, which has elected to attempt to obtain a different channel assignment at a later date. Despite this election process, we cannot predict with certainty what channel the FCC will ultimately assign for final operation of our digital television facilities, and changes in channel assignments are likely to require us to incur additional capital expenditures the extent of which we cannot estimate at this time.

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

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

      We have constructed and commenced DTV broadcast operations at all of our stations, except WPTZ and one of our satellite stations (KMAU), which have obtained extensions of time from the FCC to complete construction or are otherwise not required by the FCC to have completed construction at the present time. Because of unique local regulatory requirements relating to land use, further extensions of time may be required. While we believe that we possess good cause to justify extensions for WPTZ and KMAU, we cannot be certain that such extensions can be secured from the FCC. Additional construction or investment in equipment will be required at 21 stations (including satellite stations) to bring them up to full maximum

authorized power. From 1997 through December 31, 2004, we have invested approximately $61 million in capital expenditures related to the digital conversion of our stations. In general, by July 1, 2005, stations affiliated with the top four networks in markets 1-100 must be operating at maximum authorized power, and all other stations must be operating at maximum authorized power by July 1, 2006.

      Current statutory and regulatory plans call for the digital television transition period to end in the year 2006, at which time the FCC expects that television broadcasters will cease analog broadcasting and return their analog channel to the government, allowing that spectrum to be recovered for other uses. Under the Balanced Budget Act of 1997, however, the FCC is authorized to extend the December 31, 2006 deadline for reclamation of a television station’s non-digital channel if, in any given market: (i) one or more television stations affiliated with ABC, CBS, NBC or Fox is not broadcasting digitally, and the FCC determines that such stations have “exercised due diligence” in attempting to convert to digital broadcasting; (ii) digital-to-analog converter technology is not available in such market; or (iii) 15% or more of the television households in the market do not subscribe to a multichannel video service that carries at least one digital channel from each of the local stations in that market, and 15% or more of the television households in the market cannot receive digital signals off the air using either a set-top converter box for an analog television set or a new digital television set. Congress is currently considering whether the transition period should be extended and, if so, for what length of time.

      The implementation of digital television has and will impose substantial additional costs on television stations because of the need to replace analog equipment and because some stations will need to operate at higher utility cost. We can give no assurance that our stations will be able to increase revenue to offset these costs. In addition, the Telecommunications Act of 1996 allows the FCC to charge a spectrum fee to broadcasters who use the digital spectrum for purposes other than free, over-the-air broadcasting. The FCC has adopted rules that require broadcasters to pay a fee of 5% of gross revenue received from ancillary or supplementary uses of the digital spectrum for which they charge subscription fees, excluding revenue from the sale of commercial time. We cannot predict what future actions the FCC might take with respect to digital television, nor can we predict the effect of the FCC’s present digital television implementation plan or such future actions on our business. We have incurred considerable expense in the conversion of digital television and are unable to predict the extent or timing of consumer demand for any such digital television services.

      To develop business models for use of the digital spectrum our stations possess, we have entered into a joint venture with NBC Universal to launch the first ever 24/7, all digital national-local broadcast network, NBC Weather Plus, at certain of our stations, and have an agreement with USDTV through which USDTV uses a portion of our spectrum to transmit an over-the-air subscription television service at one of our stations. See “Digital Spectrum Initiatives.”

      Direct Broadcast Satellite Systems. There are currently in operation several DBS systems that serve the United States. DBS systems provide programming on a subscription basis to those who have purchased and installed a satellite signal receiving dish and associated decoder equipment, in competition with our broadcast stations.

      In November 1999, Congress enacted the Satellite Home Viewer Improvement Act of 1999 (“SHVIA”), which established a compulsory copyright licensing system for the satellite distribution of local television station signals to DBS viewers in each DMA. Under SHVIA, a satellite carrier is required to retransmit the signals of all local television stations in a DMA (with minor exceptions that do not apply to our stations) if the satellite carrier chooses to retransmit the signal of even one local television station in that DMA. Similar to the cable “must carry/retransmission consent” regime, television station licensees can opt for mandatory carriage or for retransmission consent. Our agreements with Lifetime also apply to the grant of DBS retransmission consent. All of our stations are currently distributed by at least one DBS system.

      In December 2004, Congress enacted the Satellite Home Viewer Extension and Reauthorization Act of 2004 (“SHVERA”). SHVERA, as had SHVIA before it, extended the separate compulsory copyright license that permits satellite carriers to retransmit distant network signals to unserved households (i.e., those households that do not receive a signal of Grade B intensity from a local network affiliate); this extension is until December 31, 2009. SHVERA also created a compulsory copyright license that permits satellite carriers

to retransmit the out-of-market signal of a station that is significantly viewed in the local DMA under certain circumstances. In addition, SHVERA established a framework to govern the satellite retransmission of digital television signals. Finally, SHVERA also contained provisions that may increase the satellite distribution of our stations in New Hampshire (WMUR), Vermont (WNNE) and Hawaii (KITV).

Employees

      As of December 31, 2004, we had approximately 2,957 full-time employees and 376 part-time employees. A total of approximately 928 of our employees are represented by five unions (the American Federation of Television and Radio Artists, the International Brotherhood of Electrical Workers, the International Alliance of Theatrical Stage Employees, the Directors Guild of America, and the National Association of Broadcast Electrical Technicians). We have not experienced any significant labor problems, and believe that our relations with our employees are satisfactory.

Available Information

      We maintain an Internet Web site at www.hearstargyle.com. We make available, free of charge, on our Web site, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we electronically file those materials with, or furnish them to, the SEC.

      Our Code of Business Conduct and Ethics, our Corporate Governance Guidelines, our Audit Committee Charter and our Compensation Committee Charter are also posted to the corporate governance section of our Web site. In addition, you may obtain a free copy of our Code of Business Conduct and Ethics, our Corporate Governance Guidelines, or our Board committee charters that we file on our Web site by writing to us at Hearst-Argyle Television, Inc., 888 Seventh Avenue, New York, New York 10106, Attention: Corporate Secretary.

      We also make available on our Web site news releases, earnings releases, archived audio Web casts, forthcoming corporate events and lists of equity and debt securities analysts who follow our company.

      Our principal executive offices are located at 888 Seventh Avenue, New York, New York 10106. The real property of each of our stations generally includes owned or leased offices, studios, transmitters and tower sites. Typically, offices and main studios are located together, while transmitters and tower sites are in separate locations that are more suitable for optimizing signal strength and coverage. Set forth below are our stations’ principal facilities as of December 31, 2004. In addition to the property listed below, we and the stations also lease other property primarily for communications equipment.

      From time to time, we become involved in various claims and lawsuits that are incidental to our business. In our opinion, there are no legal proceedings pending against us or any of our subsidiaries that are reasonably expected to have a material adverse effect on our consolidated financial condition or results of operations.

      Not applicable.

PART II

      (a) Market Performance of Common Stock and Dividends on Common Stock. Our Series A Common Stock is listed on the NYSE under the ticker symbol “HTV.” All of the outstanding shares of our Series B Common Stock are currently held by Hearst Broadcasting, a wholly-owned subsidiary of Hearst Holdings, which is in turn a wholly-owned subsidiary of Hearst. Our Series B Common Stock is not publicly traded. The table below sets forth, for the calendar quarters indicated, the reported high and low sales prices of our Series A Common Stock on the NYSE and the dividends declared on our Series A and Series B Common Stock:

      On February 22, 2005, the closing price for our Series A Common Stock was $25.42, and there were approximately 638 Series A Common Stock shareholders of record.

      In December 2004, we declared a quarterly cash dividend of $0.07 per share on our Series A Common Stock and our Series B Common Stock (up $0.01 from the $0.06 per share we declared for each of the previous four quarters), which we paid on January 15, 2005 to holders of record on January 5, 2005, for a total of $6.5 million. During 2004, we paid a total of $22.3 million in dividends. See Note 10 to the consolidated financial statements.

      (b) Equity Compensation Plans. The following table summarizes our equity compensation plans as of December 31, 2004:

      (c) Purchase of Equity Securities by the Issuer and Affiliated Purchasers. The following table reflects purchases made during the quarter of our Series A Common Stock by Hearst Broadcasting, Inc. (“Hearst Broadcasting”), an indirect wholly-owned subsidiary of The Hearst Corporation (“Hearst”):

      As of December 31, 2004, Hearst owned approximately 41.6% of the Company’s outstanding Series A Common Stock and 100% of the Company’s Series B Common Stock.

      The Company made no repurchases of its Series A Common Stock or Series B Common Stock during the quarter.

      The selected financial data should be read in conjunction with the historical financial statements and notes thereto included elsewhere herein and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

      As discussed herein and in the notes to the accompanying consolidated financial statements:

Hearst-Argyle Television, Inc.

See accompanying notes.

Notes to Selected Financial Data

Organization of Information

      Management’s Discussion and Analysis provides a narrative on our financial performance and condition that should be read in conjunction with the accompanying consolidated financial statements. It includes the following sections:

Executive Summary

      Hearst-Argyle Television, Inc. and subsidiaries (hereafter “we” or the “Company”) owns and operates 25 network-affiliated television stations. Additionally, we provide management services to two network-affiliated stations and one independent television station, and two radio stations (the “Managed Stations”) in exchange for a management fee. See Note 14 to the consolidated financial statements.

Critical Accounting Policies and Estimates

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

      Revenue Recognition — Our primary source of revenue is television advertising. Other sources include network compensation and other revenue. Advertising revenue and network compensation together represented approximately 98% of our total revenue in each of the years ended December 31, 2004, 2003 and 2002.

      Accounts Receivable — We extend credit based upon our evaluation of a customer’s credit worthiness and financial condition. For certain advertisers, we do not extend credit and require cash payment in advance. We monitor the collection of receivables and we maintain an allowance for estimated losses based upon the aging of such receivables and specific collection issues that may be identified. Concentration of credit risk with respect to accounts receivable is generally limited due to the large number of geographically diverse customers, individually small balances, and short payment terms.

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

      Barter and Trade Transactions — Barter transactions represent the exchange of commercial air time for programming. Trade transactions represent the exchange of commercial air time for merchandise or services. Barter transactions are generally recorded at the fair market value of the commercial airtime relinquished. Trade transactions are generally recorded at the fair market value of the merchandise or services received.

Barter program rights and payables are recorded for barter transactions based upon the availability of the broadcast property. Revenue is recognized on barter and trade transactions when the commercials are broadcast; expenses are recorded when the merchandise or service received is utilized.

      Intangible Assets — Intangible assets are recorded at cost and include FCC licenses, network affiliations, goodwill, and other intangible assets such as advertiser client base and favorable leases. On January 1, 2002, we adopted SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS 142”). As a result, we no longer amortize goodwill and intangible assets with indefinite useful lives (FCC licenses), but instead perform a review for impairment annually, or earlier if indicators of potential impairment exist. In connection with the adoption of SFAS 142, amortization expense related to goodwill and indefinite-lived intangibles decreased by approximately $82.7 million annually. See Note 4 to the consolidated financial statements. Upon adoption of SFAS 142 on January 1, 2002 and again in the fourth quarters of 2004, 2003 and 2002, we completed an impairment review and found no impairment to the carrying value of goodwill or FCC licenses. Had we used different assumptions in developing our estimates, our reported results may have varied. We consider the assumptions used in our estimates to be reasonable. We amortize intangible assets with determinable useful lives over their respective estimated useful lives to their estimated residual values. Upon adoption of SFAS 142 on January 1, 2002, we determined the remaining useful life of our network affiliation intangible assets to be approximately 28.5 years and the remaining useful life of our advertiser client base intangible asset to be approximately 19 years. We amortize favorable lease intangible assets over the respective terms of each lease. In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long Lived Assets, we evaluate the remaining useful life of our intangible assets with determinable lives each reporting period to determine whether events or circumstances warrant a revision to the remaining period of amortization.

      Prior to the adoption of SFAS 142 on January 1, 2002, we amortized goodwill and intangible assets over periods ranging from three to 40 years. The recoverability of the carrying values of goodwill and intangible assets was evaluated quarterly to determine if an impairment in value had occurred. Pursuant to SFAS No. 121, Accounting for the Impairment of Long-lived Assets, an impairment in value was considered to have occurred when it had been determined that the undiscounted future operating cash flows generated by the acquired business were not sufficient to recover the carrying value of an intangible asset. If it had been determined that an impairment in value had occurred, goodwill and intangible assets would have been written down to an amount equivalent to the present value of the estimated undiscounted future operating cash flows to be generated by the acquired business. As of December 31, 2001, it was determined that there had been no impairment of intangible assets.

      Income Taxes — Income taxes are accounted for in accordance with SFAS No. 109, Accounting for Income Taxes (“SFAS 109”), which requires that deferred tax assets and liabilities be recognized for the differences in the book and tax bases of certain assets and liabilities using enacted tax rates. SFAS 109 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not, that some portion or all of the deferred tax assets will not be realized. Income tax expense was $76.4 million or 38.1% of pre-tax income in our Consolidated Statement of Income for the year ended December 31, 2004. Deferred tax assets were approximately $5.0 million and deferred tax liabilities were approximately $839.7 million as of December 31, 2004. Our estimates of income taxes and the significant items giving rise to the deferred assets and liabilities are set forth in Note 9 to the consolidated financial statements. These estimates reflect our assessment of actual future taxes to be paid on items reflected in the consolidated financial statements, giving consideration to both timing and probability. Actual income taxes could vary from such estimates as a result of future changes in income tax law or reviews by the Internal Revenue Service or other tax authorities. The deferred tax liability primarily relates to differences between book and tax basis of our FCC licenses. In accordance with the adoption of SFAS 142 on January 1, 2002, we no longer amortize our FCC licenses, but instead test them for impairment annually. As the tax basis in our FCC licenses continues to amortize, our

deferred tax liability will increase over time. We do not expect the significant portion of our deferred tax liability to reverse over time unless

      Related Party Transactions — We have Management and Services Agreements as well as a series of other related agreements with Hearst. Revenue and expenses recorded by us in connection with such agreements amounted to less than 1% of our total revenue and less than 1% of our total operating expenses in each of the years ended December 2004, 2003 and 2002. See Note 14 to the consolidated financial statements for more information on these and other related party transactions. We believe that the terms of the Management and Services Agreements are reasonable to both parties; however, there can be no assurance that more favorable terms would not be available from third parties.

      Purchase Accounting — When allocating the purchase price in a purchase transaction to the acquired assets (tangible and intangible) and assumed liabilities, it is necessary to develop estimates of fair value. We utilize the services of an independent valuation consulting firm for the purpose of estimating fair values. The specialized tangible assets in use at a broadcasting business are typically valued on the basis of the replacement cost of a new asset less observed depreciation. The appraisal of other fixed assets, such as furnishings, vehicles, and office machines, is based upon a comparable market approach. Identified intangible assets, including FCC licenses, are valued at estimated fair value. FCC licenses are valued using a direct approach. The direct approach measures the economic benefits that the FCC license brings to its holder. The fair market value of the FCC license is determined by discounting these future benefits utilizing discounted cash flows. The key assumptions used in the discounted cash flow analysis include initial and subsequent capital costs, network affiliation, VHF or UHF status, market revenue growth and station market share projections, operating profit margins, discount rates and terminal value estimates.

      Off-Balance Sheet Financings and Liabilities — Other than agreements for future barter and program rights not yet available for broadcast as of December 31, 2004, and employment contracts for key employees, which are disclosed in Note 15 to the consolidated financial statements, and contractual commitments and other legal contingencies incurred in the normal course of business, we do not have any off-balance sheet financings or liabilities. The intercompany debt between the Company and the Capital Trust, a wholly-owned unconsolidated subsidiary trust would otherwise eliminate in consolidation and the preferred stock would be included in our Consolidated Balance Sheet. See Note 2 to the consolidated financial statements under “New Accounting Pronouncements”. We do not have any majority-owned subsidiaries that are not included in the consolidated financial statements, nor do we have any interests in or relationships with any special-purpose entities that are not reflected in our consolidated financial statements.

      Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to allowances for doubtful accounts; program rights, barter and trade transactions; useful lives of property, plant and equipment; intangible assets; carrying value of investments; accrued liabilities; contingent liabilities; income taxes; pension benefits; and fair value of financial instruments and stock options. We base our estimates on historical experience and on various other assumptions, which we believe to be reasonable under the circumstances. Had we used different assumptions in determining our estimates, our reported results may have varied. The different types of estimates that are required to be made by us in the preparation of our consolidated financial statements vary significantly in the level of subjectivity involved in their determination. We have identified the estimates below as those which contain a relatively

high level of subjectivity in their determination and therefore could have a more material effect upon our reported results if different assumptions were used.

      Impairment Testing of Intangible Assets — In performing our annual impairment testing of goodwill and FCC licenses, which are both considered to be intangible assets with indefinite useful lives, we must make a significant number of assumptions and estimates in applying a fair value based test. To assist in this process, we utilize the services of an independent valuation consulting firm. See Note 4 to the consolidated financial statements. The assumptions and estimates required under the impairment testing of goodwill and FCC licenses included future market revenue growth, operating profit margins, cash flow multiples, market revenue share, and weighted-average cost of capital, among others. Upon adoption of SFAS 142 on January 1, 2002 and again in the fourth quarters of 2004, 2003 and 2002, we completed an impairment review and found no impairment to the carrying value of goodwill or FCC licenses. Had we utilized either a different valuation technique or different assumptions or estimates, the carrying values of goodwill and FCC licenses as of January 1, 2002, December 31, 2002, December 31, 2003 and December 31, 2004 may have been different. We consider the assumptions used in our impairment testing of intangible assets to be reasonable.

      Investment Carrying Values — We have investments in unconsolidated affiliates, which are accounted for under the equity method if our equity interest is from 20% to 50%, and under the cost method if our equity interest is less than 20% and we do not exercise significant influence over operating and financial policies. We review the carrying value of investments on an ongoing basis and adjust them to reflect net realizable value, where necessary. See Note 3 to the consolidated financial statements. As part of our analysis and determination of the net realizable value of investments, we must make assumptions and estimates regarding expected future cash flows, which involves assessing the financial results, forecasts, and strategic direction of the investee companies. In addition, we must make assumptions regarding discount rates, market growth rates, comparable company valuations and other factors, and the types of assumptions we must make differ according to the type of investment to be valued. Had we utilized different assumptions and estimates in our assessment of the net realizable value of investments, the carrying values of our investments as of December 31, 2004 may have been different. We consider the assumptions used in our determination of investment carrying values to be reasonable.

      Pension Assumptions — In computing projected benefit obligations and the resulting pension expense, we are required to make a number of assumptions. To assist in this process, we use the services of an independent consulting firm. See Note 16 to the consolidated financial statements. To compute our projected benefit obligations as of the measurement date of September 30, 2004, we used the discount rate of 6.0% and a rate of compensation increase of 4.0%. In determining the discount rate assumption of 6.0%, we used a measurement date of September 30, 2004 and constructed a portfolio of bonds to match the benefit payment stream that is projected to be paid from the Company’s pension plans. The benefit payment stream is assumed to be funded from bond coupons and maturities as well as interest on the excess cash flows from the bond portfolio. To compute our pension expense in the year ended December 31, 2004, we used a discount rate of 6.25%, an expected long-term rate of return on plan assets of 7.75%, and a rate of compensation increase of 4.0%. To determine the discount rate assumption of 6.25%, we used the measurement date of September 30, 2003 and used the same methodology to construct a portfolio of bonds to match the projected benefit payment. The expected long-term rate of return on plan assets assumption of 7.75% is based on the weighted average expected long-term returns for the target allocation of plan assets as of the measurement date of September 30, 2003. See Note 16 to the consolidated financial statements for further discussion on management’s methodology for developing the expected long-term rate of return assumption. In calculating our pension expense for the year ending December 31, 2005, we anticipate using an assumed expected long-term rate of return of 7.75%. We consider the assumptions used in our determination of our projected benefit obligations and pension expense to be reasonable.

      The weighted-average assumptions used in computing our net pension expense and projected benefit obligation have a significant effect on the amounts reported. A one-percentage point change in each of the assumptions below would have the following effects upon net pension expense (benefit) and projected benefit obligation, respectively, in the year ended and as of December 31, 2004:

Significant Business Transactions

      During the three-year period ended December 31, 2004, we were involved in the following significant transactions:

Results of Operations

      Results of operations for the years ended December 31, 2004, 2003 and 2002 include (i) the results of our 24 television stations, which were owned for the entire period presented, and the management fees derived by the three television and two radio stations managed by us for the entire period presented; and (ii) the results of operations of WMTW-TV, after our acquisition of the station, from July 1, 2004 through December 31, 2004.

      Total revenue includes:

      See “Revenue Recognition” under Note 2 to the consolidated financial statements.

      Total revenue in the year ended December 31, 2004 was $779.9 million, as compared to $686.8 million in the year ended December 31, 2003, an increase of $93.1 million or 13.6%. This increase was primarily attributable to the following factors:

      Salaries, benefits and other operating costs were $355.6 million in the year ended December 31, 2004, as compared to $330.5 million in the year ended December 31, 2003, an increase of $25.1 million or 7.6%. This increase was primarily due to:

      Amortization of program rights was $63.8 million in the year ended December 31, 2004, as compared to $62.8 million in the year ended December 31, 2003, an increase of $1.0 million or 1.6%. This increase was primarily due to:

      Depreciation and amortization was $50.4 million in the year ended December 31, 2004, as compared to $55.5 million in the year ended December 31, 2003, a decrease of $5.1 million or 9.2%. Depreciation expense was $44.4 million in the year ended December 31, 2004, as compared to $45.9 million in the year ended December 31, 2003, a decrease of $1.5 million or 3.4%. This decrease was primarily due to:

      Management reviews, on a continuing basis, the financial statement carrying value of property, plant and equipment for impairment. If events or changes in circumstances indicate a reduction in an asset’s useful life, the remaining net book value of the asset is depreciated on a straight-line basis over its revised useful life.

      Amortization was $6.0 million in the year ended December 31, 2004, as compared to $9.5 million in the year ended December 31, 2003, a decrease of $3.5 million, principally resulting from amortization related to a separately identified intangible asset, advertiser client base. In December 2001, we had reclassified the remaining net book value of the advertiser client base to goodwill in the consolidated balance sheet and ceased amortization. In December 2003, we determined the advertiser client base should continue to be separately identified from goodwill and, as an intangible asset with a finite useful life under SFAS 142, be amortized over its estimated useful life. Accordingly, the Company recorded a catch-up to amortization expense on the

advertiser client base of $7.1 million in the fourth quarter of 2003. See Note 4 to the consolidated financial statements.

      Corporate, general and administrative expenses were $25.3 million in the year ended December 31, 2004, as compared to $19.1 million in the year ended December 31, 2003, an increase of $6.1 million or 32.1%. The increase was primarily due to:

      Operating income was $284.8 million in the year ended December 31, 2004, as compared to $218.8 million in the year ended December 31, 2003, an increase of $65.9 million or 30.1%. This net increase in operating income was due to the items discussed above.

      Interest expense, net of interest income, was $63.7 million in the year ended December 31, 2004, as compared to $68.2 million in the year ended December 31, 2003, a decrease of $4.5 million or 6.6%. This decrease was primarily due to

      Interest expense, net, to the Capital Trust, was $18.7 million in the year ended December 31, 2004, compared to $15.0 million in the year ended December 31, 2003. The increase results from a $3.7 million premium paid for the redemption of the $72.2 million Series A Debentures. Interest expense, net — Capital Trust primarily represents interest expense we incurred on the $206.2 million of subordinated debentures issued by us and outstanding for all of both years, as the redemption of the Series A Debentures occurred on December 31, 2004. Interest paid by us to the Capital Trust is utilized by the Capital Trust to make dividend payments to the holders of the $200.0 million of Redeemable Convertible Preferred Securities issued by the Capital Trust in December 2001. In accordance with FIN 46(R), we do not consolidate the accounts of the Capital Trust in our consolidated financial statements. We use the equity method of accounting to record the Company’s equity interest in the earnings of the Capital Trust and, accordingly, we have included such earnings of $0.5 million in Interest Expense, net — Capital Trust in the years ended December 31, 2004 and 2003. See Note 7 to the consolidated financial statements. The redemption of the Series A Debentures will reduce Interest expense, net –Capital Trust by $5.3 million per year starting in 2005 and removes the potential dilution of 2.8 million shares.

      Other (income) expense, net was $3.7 million in the year ended December 31, 2004, as compared to zero in the year ended December 31, 2003. The $3.7 million represents the write-down of the Company’s investment in ProAct. During 2004, ProAct sold its operating assets as part of an overall plan of liquidation. The write-down represents the difference between the carrying value of the investment and the distribution expected to be received as a result of the sale of the asset. See Note 3 to the consolidated financial statements.

      Equity in (income) loss of affiliates was $1.6 million of income in the year ended December 31, 2004, as compared to $0.9 million of income in the year ended December 31, 2003, an increase of $0.7 million. See Note 3 to the consolidated financial statements. This increase was primarily due to the improved operating results of Internet Broadcasting Systems, Inc. (“IBS”) and related Web sites. Our share in the financial results of IBS entities was $1.6 million in the year ended December 31, 2004, as compared to $1.0 million in the year ended December 31, 2003. Our recorded share of the loss in the financial results of NBC/ Hearst-Argyle Syndication, LLC was zero in the year ended December 31, 2004, as the Company has no book basis remaining in the initial investment in the entity, and a net loss of approximately $0.1 million in 2003. Our capital commitment to the investment in NBC/ Hearst-Argyle Syndication, LLC is limited to $2.0 million.

      Income tax expense was $76.4 million in the year ended December 31, 2004, as compared to $42.3 million in the year ended December 31, 2003, an increase of $34.1 million or 80.5%. This increase in income tax expense was primarily due to

      We expect our effective tax rate for the year ending December 31, 2005 to be approximately 39.0%.

      The current and deferred portions of our income tax (benefit) provision were $56.2 million and $20.1 million, respectively, in the year ended December 31, 2004, compared to $(0.9) million and $43.2 million, respectively, in the year ended December 31, 2003. In the years ended December 31, 2004 and 2003, the current and deferred portions of our income tax expense were affected by increases in current tax expense and decreases in deferred tax expense of $57.1 million and $23.1 million, respectively, as well as cash tax payments, due to deductions of income tax basis associated with certain of our prior acquisitions. We received approval from the Internal Revenue Service regarding the methodology for determining these deductions. See Note 9 to the consolidated financial statements.

      Our noncurrent deferred tax liability was $839.7 million and $820.4 million as of December 31, 2004 and 2003, respectively. The deferred tax liability primarily relates to differences between book and tax basis of our FCC licenses. In accordance with the adoption of SFAS 142 on January 1, 2002, we no longer amortize our FCC licenses, but instead test them for impairment annually. As the tax basis in our FCC licenses continues to amortize, our deferred tax liability will increase over time. We do not expect the significant portion of our deferred tax liability to reverse over time unless

      Net income was $123.9 million in the year ended December 31, 2004, as compared to $94.2 million in the year ended December 31, 2003, an increase of $29.7 million or 31.5%. This increase was due to the items discussed above, primarily:

      Total revenue includes

      See “Revenue Recognition” under Note 2 to the consolidated financial statements.

      Total revenue in the year ended December 31, 2003 was $686.8 million, as compared to $721.3 million in the year ended December 31, 2002, a decrease of $34.5 million or 4.8%. This net decrease was primarily attributable to the following factors:

      Salaries, benefits and other operating costs were $330.5 million in the year ended December 31, 2003, as compared to $331.6 million in the year ended December 31, 2002, a decrease of $1.1 million or 0.3%. This decrease was primarily due to

      Amortization of program rights was $62.8 million in the year ended December 31, 2003, as compared to $60.8 million in the year ended December 31, 2002, an increase of $2.0 million or 3.3%. This increase was primarily due to new program rights acquisitions in September 2002 at our television stations in the Sacramento, California and the Winston-Salem/ Greensboro, North Carolina markets.

      Depreciation and amortization was $55.5 million in the year ended December 31, 2003, as compared to $43.6 million in the year ended December 31, 2002, an increase of $11.9 million or 27.3%. Depreciation expense was $46.0 million in the year ended December 31, 2003, as compared to $41.1 million in the year ended December 31, 2002, an increase of $4.9 million or 11.9%. This increase was primarily due to the recording of approximately $4.6 million of accelerated depreciation in the year ended December 31, 2003 on certain broadcasting equipment which we determined to be obsolete. We review, on a continuing basis, the financial statement carrying value of property, plant and equipment for impairment. If events or changes in circumstances indicate that an asset carrying value may not be recoverable, the carrying value is written down through accelerated depreciation. Amortization was $9.5 million in the year ended December 31, 2003, as compared to $2.5 million in the year ended December 31, 2002, an increase of $7.0 million, principally resulting from a catch-up to amortization related to a separately identified intangible asset, advertiser client base. In December 2003, we reversed a reclassification we had made in December 2001 related to this separately identified intangible asset. In December 2003, we determined that the advertiser client base should continue to be separately identified from goodwill and, as an intangible asset with a determinable useful life under SFAS 142, be amortized over its estimated useful life. Accordingly, we resumed amortization and recorded a catch-up to amortization expense on the advertiser client base of $7.1 million in the fourth quarter of 2003. See Note 4 to the consolidated financial statements.

      Corporate, general and administrative expenses were $19.1 million in the year ended December 31, 2003, as compared to $19.7 million in the year ended December 31, 2002, a decrease of $0.6 million or 3.0%. This decrease was primarily due to

      Operating income was $218.8 million in the year ended December 31, 2003, as compared to $265.6 million in the year ended December 31, 2002, a decrease of $46.8 million or 17.6%. This net decrease in operating income was due to the items discussed above.

      Interest expense, net of interest income, was $68.2 million in the year ended December 31, 2003, as compared to $73.4 million in the year ended December 31, 2002, a decrease of $5.2 million or 7.1%. This decrease was primarily due to a lower outstanding debt balance in the year ended December 31, 2003 as compared to the same period in 2002. Our outstanding long-term debt balance as of December 31, 2003 was $882.4 million, as compared to $973.4 million as of December 31, 2002. Interest expense, net, included approximately $0.5 million of interest income in the year ended December 31, 2003 and approximately $0.7 million in the year ended December 31, 2002. See Note 6 to the consolidated financial statements.

      Interest expense, net, to our wholly-owned, unconsolidated subsidiary trust (the Capital Trust) was $15.0 million in both the years ended December 31, 2003 and 2002. Interest expense, net — Capital Trust represents interest expense incurred by the Company on the $206.2 million of Subordinated Debentures issued by the Company. Interest paid by the Company to the Capital Trust was then utilized by the Capital Trust to make dividend payments to the holders of the $200.0 million of redeemable convertible preferred securities issued by the Capital Trust in December 2001. In accordance with FIN 46(R), the Company does not consolidate the accounts of the Capital Trust in its consolidated financial statements. The Company uses the equity method of accounting to record the parent company’s equity interest in the earnings of the Capital Trust and accordingly has included such earnings of $0.5 million in Interest Expense, net — Capital Trust in both the years ended December 31, 2003 and 2002. See Note 7 to the consolidated financial statements.

      There was no Other (income) expense, net recorded in the year ended December 31, 2003. Other (income) expense, net, recorded in the year ended December 31, 2002, represented a supplemental closing fee paid to us by Emmis in connection with the Phoenix/ WMUR Swap transaction, which occurred in March 2001.

      Equity in (income) loss of affiliates was $0.9 million of income in the year ended December 31, 2003, as compared to $3.3 million of loss in the year ended December 31, 2002, an increase of $4.2 million. See Note 3 to the consolidated financial statements. This increase was primarily due to the improved operating results of IBS. Our share in the financial results of IBS entities was net income of approximately $1.0 million in the year ended December 31, 2003, as compared to a net loss of approximately $1.4 million in the year ended December 31, 2002. Our share in the financial results of NBC/ Hearst-Argyle Syndication, LLC was a net loss