UNITED STATES
Securities and Exchange Commission

Form 10-K

For Annual and Transition Reports Pursuant to Sections 13 or 15(d) of the Securities Exchange Act of 1934

þ	Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2004

or

¨	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ______________ to ________________.

Four Richmond Square, Suite 200, Providence, Rhode Island 02906
(Address of principal executive offices)

(401) 454-2880
(Registrant’s telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Exchange Act:

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. þ

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes þ No o

The aggregate market value of the voting and non-voting common equity held by non-affiliates (based on the last reported sale price of the registrant’s class A common stock on June 30, 2004 on the New York Stock Exchange) was approximately $568.3 million.

NOTE:

This combined Form 10-K is separately filed by LIN TV Corp. and LIN Television Corporation. LIN Television Corporation meets the conditions set forth in general instruction I(1) (a) and (b) of Form 10-K 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 March 10, 2005: 27,075,663 shares.

Table of Contents

PART I

Item 1. Business:

Overview

We are an independent television station owner and operator with stations located in the United States and Puerto Rico. At December 31, 2004, our stations covered approximately 8.1% of U.S. television households including Puerto Rico, ranking us one of the largest broadcast television companies. We own or operate 23 stations, including two stations pursuant to local marketing agreements (see description of these agreements on page 8) and three low-power stations; in addition, we have equity investments in five other stations. Our stations are primarily located in the top 100 markets.

We provide free, over-the-air broadcasts of our programming 24 hours per day to the communities we are licensed to serve. We are committed to serve the public interest by providing free daily local news coverage, public service announcements and provide political advertising time to candidates.

We seek to have the largest local television presence in each of our local markets by combining strong network and syndicated programming with leading local news, and by using our multi-channel strategy. This multi-channel strategy enables us to increase our audience share by operating multiple stations in the same market. We currently operate multiple stations in seven of our local markets. Our focus is to continue to enhance our existing and acquired television stations by applying our expertise in technology, sales and news research.

All our stations in the United States are affiliated with one of the national television networks: ABC, CBS, NBC, FOX, UPN, WB, Telefutura or Univision. In Puerto Rico, our primary station broadcasts mostly locally-produced entertainment and news programming, and our second station broadcasts MTV Puerto Rico, which we jointly produce with MTV. We also utilize our locally-produced programming on WAPA America, a U.S. Spanish-language programming service we launched in 2004.

Our management team is recognized as an industry leader. Our senior management team, led by Gary Chapman, Chairman, President and Chief Executive Officer has, on average, more than 25 years of experience in the television industry. Our management team has successfully identified and implemented numerous innovative business strategies, including pioneering the multi-channel strategy, which has allowed us to expand our television viewing audience in our local markets.

LIN TV Corp. was incorporated on February 11, 1998, and LIN Television Corporation, a wholly-owned subsidiary of LIN TV Corp., was incorporated on June 18, 1990. Our corporate offices are at Four Richmond Square, Providence, Rhode Island.

History of losses

We had net losses of $90.4 million and $47.2 million for the years ended December 31, 2003 and 2002, respectively, primarily as a result of the amortization and impairment of intangible assets and debt service obligations. In addition, as of December 31, 2004, we had an accumulated deficit of $201.8 million. As of December 31, 2004, we had $632.8 million of total debt.

Development of Our Business

Ownership and Organizational Structure

LIN Television Corporation has owned and operated television stations since 1966. A group of investors, led by Hicks, Muse, Tate & Furst Incorporated (“Hicks Muse”), acquired LIN Television Corporation in March of 1998. On May 3, 2002, LIN TV Corp., the parent of LIN Television Corporation, completed its initial public offering and began trading its class A common stock on the New York Stock Exchange.

LIN TV Corp. amended its corporate charter to create three classes of common stock in connection with this initial public offering. The class A common stock and the class C common stock are both voting common stock with the class C common stock controlling 70% of LIN TV’s voting rights. The class B common stock has no voting rights, except that without consent of a majority of the class B common stock, we cannot enter into a wide range of corporate transactions.

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This equity structure allowed us to issue voting stock while preserving the pre-existing ownership structure in which the class B stockholders were not deemed to have an attributable ownership interest in our television broadcast licenses pursuant to the rules of the Federal Communications Commission (“FCC”).

The following diagram summarizes our organizational structure as of December 31, 2004:

All of the shares of LIN TV’s class B common stock are held by affiliates of Hicks Muse or former affiliates of Hicks Muse. The class B common stock is convertible into class A common stock or class C common stock in various circumstances. The class C common stock is also convertible into class A common stock in certain circumstances. If affiliates of Hicks Muse converted their shares of class B common stock into shares of class A common stock and the shares of class C common stock were converted to shares of class A common stock as of December 31, 2004, the holders of the converted shares of class C common stock would own less than 0.01% of the total outstanding shares of class A common stock and resulting voting power, and the affiliates of Hicks Muse would own 46.6% of the total outstanding shares of class A common stock and resulting voting power.

Hicks Muse has advised us that it has no current intention of converting its shares of class B common stock into shares of class A voting common stock or shares of class C voting common stock. Hicks Muse has further advised us that it currently believes it would consider converting its shares of class B common stock to shares of class A voting common stock if the legal requirements limiting ownership interests in broadcast businesses changed to permit Hicks Muse to convert its shares into shares of class A voting common stock or if Hicks Muse disposes of its other broadcast business interests that currently prevent them from converting its shares into shares of our class A voting common stock.

Our television stations

We operate 23 stations, including two stations pursuant to local marketing agreements and three low-power stations, and have equity investments in five other stations. The following table lists the stations that we either operate or in which we have an equity investment:

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We have a 33.3% interest in WAND (TV) Partnership with Block Communications, Inc., which owns and operates WAND-TV, an ABC affiliate in Decatur, Illinois. We provide ongoing management oversight to the partnership, including engineering and cash management services, pursuant to a management services agreement with the partnership for a fixed annual fee. During the year ended December 31, 2004, the partnership had $6.6 million in 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. (“Banks Broadcasting”), which owns and operates KWCV-TV, a WB affiliate in Wichita, Kansas, and KNIN-TV, a UPN affiliate in Boise,

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Idaho. 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 year ended December 31, 2004, Banks Broadcasting generated $4.8 million of revenue and did not distribute any cash to us. Effective March 31, 2004, we began accounting for our investment in Banks Broadcasting under FASB Interpretation No. 46 (“FIN 46R”) “Consolidation of Variable Interest Entities – an Interpretation of ARB No. 51,” which requires us to consolidate Banks Broadcasting in our financial statements.

We also have a 20% equity interest, and NBC Universal (“NBC”), a subsidiary of General Electric Company, holds the remaining 80% interest, in a joint venture, which is a limited partner in a venture that owns television stations KXAS-TV, an NBC affiliate in Dallas, Texas and KNSD-TV, an NBC affiliate in San Diego, California. NBC is the general partner of the venture and operates the two stations pursuant to a management agreement. General Electric Capital Corporation, another subsidiary of General Electric Company, provided debt financing for the joint venture in the form of an $815.5 million, 25-year non-amortizing senior secured note bearing an interest rate of 8.0% per annum (“GECC Note”). We expect that the interest payments on the GECC Note will be serviced solely by the cash flow of the joint venture. All cash generated by the joint venture and available for distribution will be distributed to us and NBC based on our respective equity interests. During the year ended December 31, 2004, the venture generated $104.3 million of revenue and $7.9 million of cash was distributed to us.

We own and operate 25 low-power broadcast television stations in various local markets. These low-power broadcast television stations are licensed by the FCC to provide service to substantially smaller areas than those of full-power stations. In three of our markets, we have affiliated our group of low-power broadcast television stations, which together cover substantially all of the local market, with a national television network and operate each of these station groups within a local market as if it was one station. Our remaining low-power television stations are used to extend the coverage of our network-affiliated full-power television stations.

Developments of business in 2004

WIRS-TV. On January 14, 2004, we acquired the broadcast license and certain assets of WIRS-TV, serving Yauco, Puerto Rico, for a total purchase price of $4.5 million.

WTIN-TV. On May 6, 2004, we acquired the broadcast license and certain assets of WTIN-TV, serving Ponce, Puerto Rico, for a total purchase price of $4.9 million.

WEYI-TV. On May 14, 2004, we completed the sale of the broadcast license and certain operating assets of WEYI-TV, the NBC affiliate serving Flint, Michigan, for $24.0 million. The loss on sale and operating results of this station are excluded from continuing operations and included in discontinued operations for all periods presented.

Subsequent Developments

WNDY-TV and WWHO-TV. On February 9, 2005, we entered into a definitive agreement to acquire WNDY, the UPN affiliate serving Indianapolis, Indiana, and WWHO, the UPN affiliate serving Columbus, Ohio from Viacom, Inc. for $85.0 million in cash, which will be funded by a combination of cash on hand and proceeds from our senior credit facility. We expect to complete the acquisition of these stations during the first half of 2005.

On January 28, 2005, we closed on an offering of $175 million in aggregate principal amount of 6¹/2% Senior Subordinated Notes due 2013. These notes were an add-on to an existing indenture we issued in May 2003 for $200 million in aggregate principal amount of 6¹/2% Senior Subordinated Notes due 2013. The proceeds from the January 2005 offering were used to retire $166.4 million principal amount of our 8% Senior Notes due 2008.

On March 11, 2005, we replaced our senior credit facility. Under this new facility, we obtained a $170.0 million term loan, the proceeds of which were used to repay the balance on our existing term loan and for general business purposes, and a $160.0 million revolving credit facility which will be used, in combination with cash on hand, to fund the purchase of WNDY-TV and WWHO-TV, during the first half of 2005. We are required to make mandatory payments on the new term loan of $4.3 million per quarter beginning March 31, 2006. The term loan and revolving credit facility expire on March 11, 2011 and March 11, 2010, respectively. The new facility contains covenants similar to that of the old facility.

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Description of Our Business

Strategy

We seek to increase our cash flow through increasing audience viewership of our television stations, increasing our share of advertising revenues and the continued implementation of effective cost controls. In addition, we seek growth through acquisitions and other initiatives. The principal components of this strategy are to:

	•	Create and Maintain Local News Franchises. We operate the number one or number two local news station in 91% of our markets and generated 34% of our advertising revenues from our local news programming in 2004. We have been recognized for our local news expertise and have won many awards, including the Radio-Television News Directors Association, Edward R. Murrow award for excellence in journalism and numerous local and regional awards such as Associated Press awards and Emmys. We believe that successful local news programming is an important element in attracting local advertising revenue. In addition, news audiences serve as strong lead-ins for other programming and help create a strong local station brand in the communities in which we operate.
	•	Expand our Multi-Channel Strategy to other Markets. As a pioneer in the multi-channel strategy, we have expanded our presence in our local markets through acquiring a second station, operating a second station through a local marketing agreement, acquiring low-power television stations, creating local cable weather channels or joint sales agreements. Our multi-channel strategy allows us to realize significant cost savings by consolidating engineering and back office functions.
	•	Capitalize on Strong Network Relationships and Programming to Diversify our Audience. We have stations affiliated with eight networks: NBC, CBS, ABC, FOX, WB, UPN, Telefutura and Univision. These network affiliations provide our stations with competitive entertainment programming, strong national news programming and high-profile sports events.
	•	Capture Revenue Share. We have generally captured revenue share greater than our audience share. Given our strong local news and sales expertise, we seek to continue to convert our audience share into a disproportionate share of advertising revenues. In 2004 we generated 76% of our advertising revenues from local sales.
	•	Expand our Regional Television Hubs. We operate regional television station hubs that have centralized engineering and back office operations for multiple stations at a single location. In Indianapolis, Indiana and Springfield, Massachusetts, we service nine stations and six stations, respectively.
	•	Maintain Strict Cost Controls. We have achieved operating efficiencies by applying scale in the purchase of programming, capital equipment and vendor services, and by reducing our workforce through the implementation of our regional hub strategy and automation efficiencies.
	•	Expand Through Selective Acquisitions. We seek to grow through acquisitions, mergers and station swaps. We target opportunities where we can leverage our ability to establish a leading news franchise, create additional multi-channel markets, add additional stations to one of our regional hubs and reduce costs. Overall, we have been successful in increasing operating results of acquired stations by applying our operating strategies.
	•	Develop New Business Initiatives. We continue to use our stations to create new revenue streams. We launched WAPA America in 2004, a national Spanish-language program service that is now carried by a satellite program provider and is expected to be carried by various cable systems in the United States. This service, which uses the news and entertainment programming produced by our Puerto Rico station, has the potential of reaching the entire US including approximately 1.4 million Puerto Rican television households in the United States.
		We also launched in 2004 MTV Puerto Rico on our second station in Puerto Rico. This program service is a joint program venture with MTV and targets a younger viewing audience that was under-served by other television stations in the Puerto Rico market.
		In addition, our stations continue to grow their local Internet presence by providing weather, news and information to each of our local markets.

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Principal sources of revenue

Time sales (television advertising)

Net time sales, advertising sold in our local news, network and syndicated programming, represent approximately 92% of our total net revenues for each of the years ended December 31, 2004, 2003 and 2002. Advertising rates are based upon a variety of factors, including:

	•	size and demographic makeup of the market served by the television station
	•	program’s popularity among television viewers
	•	number of advertisers competing for the available time
	•	availability of alternative advertising media in the station’s market area
	•	our station’s overall ability to attract viewers in its market area
	•	our station’s ability to attract viewers among particular demographic groups that an advertiser may be targeting
	•	effectiveness of our sales force

Local television markets are defined by A.C. Nielsen, an audience measurement service used by the television industry. Nielsen currently divides the United States into approximately 210 Designated Market Areas (“DMAs”) and samples television audience viewing using electronic viewing devices or meters and viewing diaries. Nielsen publishes an audience viewing report for each DMA for the months of February, May, July and November that includes the estimated television audiences for each local station and cable television networks. In addition, larger television markets, where the audience is measured by electronic meters, receive daily audience reports from Nielsen.

Network compensation

The three oldest networks, ABC, CBS and NBC, have historically made cash compensation payments for our carriage of their network programming. The newer networks, such as FOX, WB and UPN, provide less network programming, pay no network compensation and in some instances require us to pay network compensation. However, these newer networks provide the affiliated stations more advertising inventory to sell than traditional networks.

The traditional broadcast networks recently have renewed or extended many of their affiliation agreements contingent upon reduction or elimination of compensation payments because of increased cost of network programming as a result of competition from subscription-based cable networks.

Barter revenues

We occasionally barter our unsold advertising inventory for goods and services that are required to operate our television stations and acquire certain syndication programming by providing a portion of the available advertising inventory within the program, in lieu of cash payments.

Other revenues

We receive other revenues from sources such as selling advertising on our stations’ Internet websites, renting space on our television towers, renting our production facilities and providing television production services.

Sources and availability of programming

We program our television stations from the following program sources:

	•	Locally produced news and general entertainment programming that is produced by our local television stations.
	•	Network programming.
	•	Syndication programming: off-network programs, such as “Friends” or “Seinfeld”, and first-run programs, such as “Oprah” or “Wheel of Fortune”.
	•	Paid programming: third party arrangements where a third party pays our stations for a block of time, generally in one half or one hour time periods to air long-form advertising or “infomercials”.
	•	Local Weather Station: we program a local 24-hour weather channel to local cable systems in certain of our television markets.

Locally produced news and general entertainment programming

We produce 420 hours of local news programming per week across all of our stations and carry local news on all but three of our stations. We believe that successful local news programming is an important element

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in attracting local advertising revenues. In addition, news audiences have had historically high ratings and strong viewership, serve as strong lead-ins for other programming and creates a strong local station brand within the local community. Local news programming also allows us greater control over our programming costs.

We produce weekly 24 hours of local entertainment programs in addition to 47 hours of local news for our stations in Puerto Rico. These programs generate 31% of the station’s revenues and are number one to two in their time periods. In addition, these locally produced programs are key programs for WAPA America, which we launched in 2004.

Network programming

All our US stations are affiliated with one of the national television networks. The network affiliation agreements provide a local station exclusive rights and an obligation, subject to certain limited preemption rights, to carry the network programming. While the networks retain most of the advertising time within their programs for their own use, the local station has the right to sell a limited amount of advertising time within the network programs as well. Other time periods, which are not programmed by the networks, are programmed by the local station, for which the local station retains all of the advertising revenues.

The programming strength of a particular national television network may affect a local station’s competitive position. Our stations, however, are diversified among the major and emerging networks, reducing the potential impact of any one network’s performance. We believe that national television network affiliations remain an efficient means of obtaining competitive programming, both for established stations with strong local news franchises and for newer stations with greater programming needs.

Our stations generate on average 28% of their total revenue from the sale of advertising within network programming. Our stations that are affiliated with the traditional broadcast networks generate a higher percentage of revenue from the sale of advertising within network programming than stations affiliated with emerging networks.

Our affiliation agreements have terms of up to 10 years, with scheduled expiration dates ranging from September 4, 2005 to December 31, 2010. A chart listing the expiration dates of each of our network affiliation agreements is given below. Typically, these agreements either contain automatic extensions or are renewed upon their expiration dates. These agreements are subject to earlier termination by the networks under specified circumstances, including a change of control of our company, which would generally result from the acquisition of 50% of the voting rights of our company. For further information, see “Risks Related to Our Business: The loss of network affiliation agreements could materially and adversely affect the results of operations.”

Syndicated programming

We acquire the rights to programs for time periods in which we do not air our local news programs or network programs. These programs generally include reruns of current or former network programs, such as “Everybody Loves Raymond” or “Seinfeld”, and for first-run syndication programs, such as “Oprah”, “Judge Judy” or “Wheel of Fortune”. We pay cash for these programs or exchange advertising time within the program for the cost of the program rights. We compete with other local television stations to acquire these programs, which has caused the cost of program rights to increase over time. In addition, a television viewer can now choose to watch many of these programs on national cable networks or purchase these programs on DVDs, resulting in a further fragmentation of our local television audience.

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Distribution of programming

The programming broadcast on our television stations can reach the television audience by one or more of the following distribution systems:

	•	Full-power television stations
	•	Low-power television stations
	•	Cable television
	•	Direct broadcast satellite

Full-power television stations

We own and operate 8 VHF full-power television stations that operate on the over-the-air channels 2 through 13, and 15 UHF full-power television stations that operate on the over-the-air channels 14 through 69. Our full-power television stations generate 94% of our net revenue, including two stations operated under local marketing agreements that contribute 5% of our net revenue.

These two LMA stations are not owned by us and we are required to pay fixed annual fees to the owners of the FCC television licenses. We incur programming, operating costs and the capital expenditures related to the operation of these stations and retain all advertising revenues. In the two local markets where these stations are located, we own and operate another station. These local marketing agreement stations are an important part of our multi-channel strategy. We also have purchase options to acquire both these stations.

We have furthered our multi-channel strategy through joint sales agreements with two stations owned by Paxson Communications that are affiliated with the PAX network: WZPX-TV in Grand Rapids, Michigan, and WPXV-TV in Norfolk, Virginia. Under these agreements we provide primarily our sales and marketing expertise in exchange for reimbursement of certain costs and a share of the advertising revenues.

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See “Government Regulation of the Television Industry” for a discussion of regulatory issues facing the commercial television broadcasting industry. See “Our television stations” above for a listing of our full-power television stations.

Low-power television stations

We own and operate 25 low-power broadcast television stations in various local markets. These low-power broadcast television stations are licensed by the FCC to provide service to substantially smaller areas than those of full-power stations. In three of our markets, we have affiliated our group of low-power broadcast television stations, which together cover substantially all of the local market, with a national television network, and operate each of these station groups within a local market as if it was one station. Our remaining low-power television stations are used to extend the coverage of our network-affiliated full-power television stations.

Cable television and direct broadcast satellite

Cable systems and direct broadcast satellite providers currently provide program services to approximately 88% of total US television households with cable systems serving 68% and direct satellite serving 20% of total television households. As a result, cable and satellite systems are not only our primary competitors, but the primary way our television audience views our television stations. We have carriage agreements with over 1,000 cable systems and the two major direct broadcast satellite providers. These agreements fall into two different types of agreements: “must-carry retransmission agreements”, which are based on FCC rules that require cable and satellite systems to carry, without a fee, the signals of our local broadcast television stations within the local market; and “retransmission agreements” that provide carriage of the signal of our broadcast television stations in addition to other compensation such as cash payments for the primary television signal, cash payments for the carriage of a local weather cable channel provided by our stations, carriage of our low-power television stations, enhanced channel placement, advertising purchases, and joint promotional activities. The cash compensation received from these agreements is not material to our operating results. In a few instances, our stations have not been carried on one or more cable systems for periods ranging from a few days to two years.

We are required to make must-carry retransmission consent elections every three years, with the next election to be made by October 1, 2005, to become effective January 1, 2006

Seasonality of our business

Our advertising revenues are generally highest in the second and fourth quarters of each fiscal year, due generally to increases in retail advertising in the period leading up to and including the holiday season and active advertising in the spring. Our operating results are similarly affected by the fluctuations in our revenue cycle. In addition, advertising revenues are generally higher in even-numbered years (i.e., 2000, 2002, 2004) due to additional revenue associated with Olympic broadcasts and during election years due to spending by political candidates.

The broadcast television industry is 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.

Dependence on a single customer category

We are also dependent to a significant degree on automotive-related advertising. Approximately 27%, 25% and 22% of our total net revenues for the years ended December 31, 2004, 2003 and 2002, respectively, consisted of automotive advertising. A significant decrease in these advertising revenues in the future could materially and adversely affect our results of operations.

Digital transition of our stations

The industry, in the process of converting from analog to digital signal transmission, has been granted a second channel by the FCC on which to initiate digital operations because traditional television receivers cannot receive digital transmissions. In the next several years, Congress and the FCC are expected to determine the date on which analog transmissions will cease, with proposals ranging from 2006 to the indefinite future.

As of December 31, 2004, we have successfully converted all of our full-power stations which we own and operate to digital.

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Competitive conditions in the television industry

Competition in the television industry has increased significantly over the last ten years. The television broadcast industry has become highly competitive over the past ten years as a result of new technologies and new program distribution systems. Local cable systems now compete for advertising dollars, which were generally exclusive to local television stations, and offer television viewers hundreds of program choices. In some of our local markets, we compete directly against local broadcast stations and cable systems that are owned by one of the major media companies that have greater financial and programming resources than we do. The chart below illustrates some of the competitive forces that we face in terms of audience, programming and advertising revenues.

The television broadcast industry is undergoing a period of consolidation and significant technological change. Many of our current and potential competitors have significantly greater financial, marketing, programming and broadcasting resources than we do. We believe, however, that our local news programming, network affiliations and sales resource management have enabled us to compete effectively in our markets. Nonetheless, our strategy may not continue to be effective and the introduction of new competitors for television audiences could have a material effect on our financial performance.

Industry Involvement

Our management group is recognized as an industry leader and takes an active role in a wide range of industry organizations. Gary R. Chapman, our Chairman, President and Chief Executive Officer, is currently the chairman of the Association for Maximum Service Television, an organization that has a key role in the transition of our industry from analog to digital television. Mr. Chapman is also currently co-chairing an industry group to create a new broadcast indecency standard, an important issue confronting our industry. Mr. Chapman has served in the past as the chairman of the National Association of Broadcasters and has served on the boards of several other major television industry groups. Other members of our management group and station personnel are serving on various industry committees and network affiliation organizations and have won numerous awards for excellence in news and community-issue programming.

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Government Regulation of the Television Industry

Overview of Regulatory Issues

The ownership, operation and sale of television stations are subject to the jurisdiction of the FCC by authority granted it under the Communications Act. Matters subject to FCC oversight include, but are not limited to:

	•	allocating frequency bands to broadcast television, allotting specific channels (frequencies) to specific cities, and approving the location, operating power and types of transmission of each television station;
	•	establishing limits on the number of television stations which may be owned nationally and in each local market either separately or in conjunction with other media;
	•	establishing eligibility criteria for ownership of broadcast television station licenses and approving license renewals and transfers;
	•	enforcing various broadcast programming content laws or regulations including those barring or restricting obscene or indecent content, mandating children’s educational programming and regulating advertising directed at children;
	•	overseeing certain broadcast health and employment regulations; and
	•	imposing penalties, including fines or license revocations, upon a licensee of a television station for violations of the Communications Act and the FCC’s rules and regulations.

License renewal, assignment and transfer of broadcast licenses

Television broadcast licenses are granted for a maximum term of eight years and are subject to renewal upon application to the FCC. The FCC prohibits the assignment of a license or the transfer of control of a broadcast licensee without prior FCC approval. In determining whether to grant or renew a broadcast license, the FCC considers a number of factors pertaining to the applicant, including compliance with a variety of ownership limitations and compliance with character and technical standards. During certain limited periods when a renewal application is pending, petitions to deny a license renewal may be filed by interested parties, including members of the public. The FCC must grant the renewal application if it finds that the incumbent has served the public interest and has not committed any serious violation of FCC requirements. If the incumbent fails to meet that standard, and if it does not show other mitigating factors warranting a lesser sanction, the FCC has authority to deny the renewal application. We are in good standing with respect to each of our FCC licenses. Our licenses expire between 2004 and 2007 and we expect to renew each of these licenses but we make no assurance that we will be able to do so. Certain of our licenses have pending applications for renewal that we expect to be renewed during the first half of 2005.

Regulation of ownership of broadcast licenses

On a national level, FCC rules generally prevent an entity or individual from having an “attributable” interest in television stations with an aggregate audience reach in excess of 39% of all U.S. households. For this purpose only, 50% of the television households in a market are counted towards the 39% national restriction if the station in that market is a UHF station. The percentage of all U.S. households that our stations reach is below 10%.

On the local level, the FCC’s “duopoly” rule prohibits or restricts attributable interests in two or more television stations in the same local market. The rule permits ownership of two television stations in a local market under certain circumstances, primarily where a party is seeking to combine two stations if at least one of the stations is not among the top four in audience and there are at least eight post-merger independently owned television operations. Waivers of the rule are also available where one of the stations has failed, is failing or is unbuilt. Local marketing agreements are considered equivalent to ownership for purposes of the local ownership rules and thus permissible only where ownership is permissible. The FCC has grandfathered otherwise ineligible television local marketing agreements entered into prior to November 5, 1996, until at least after the conclusion of a rulemaking, to be initiated at a date yet to be determined, examining whether it would be in the public interest to permit such combinations to continue. Grandfathered political advertising and imposes significant reporting and other burdens on political advertising.

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local marketing agreements can be freely transferred during the grandfather period, but dual licenses may be transferred only where the two-station combination continues to qualify under the duopoly rule.

We have acquired three of the stations that we had operated previously through a local marketing agreement. Two markets, Grand Rapids-Kalamazoo-Battle Creek, Michigan and Norfolk-Portsmouth-Newport News, Virginia satisfied the requirement for a sufficient number of post-merger independently owned television stations and did not require waivers of the duopoly rule for conversion to ownership or subsequent transferability. The station in New Haven, Connecticut, applied for and was granted an unbuilt station duopoly waiver. A subsequent transfer of the duopoly in New Haven may require a waiver if no additional independent stations initiate operations. Eligibility for a waiver will depend upon the station’s future performance. In the event that the FCC determines that the grandfathered local marketing agreement in Austin, Texas, is ineligible for conversion to full ownership, we have the right to assign our purchase option to a third party and we believe we can arrange a suitable disposition, including alternative non-attributable operating arrangements with such a party, such as a more limited programming and services agreement or joint sales agreement, which will not be materially less favorable to us than the current local marketing agreement. However, the rules may not be implemented or interpreted in such a manner.

The FCC also limits the combined local ownership of a newspaper and a broadcast station and of a cable television system and a broadcast television station. In addition, it limits the number of radio stations that may be co-owned with a television station serving the same area.

On June 2, 2003, the FCC voted to revise substantially several of its national and local ownership rules. The FCC extended the national ownership limit to 45% of all U.S. households; however, Congress by statute subsequently fixed the limit at 39% of all U.S. households. The FCC revised the local ownership rule to permit ownership of three broadcast television stations in markets with at least 18 stations and to permit ownership of two broadcast television stations in markets with 17 or fewer stations, provided that no two stations in any market are among the top four stations in audience ranking at the time of the transfer. The FCC also modified its waiver standards under the local station ownership rule to make them somewhat more permissive, providing specifically for waivers of the top-four restriction under certain circumstances in mid to small markets. The FCC modified its newspaper and radio cross-ownership rules by adopting a new cross-media ownership rule. That rule specifies, among other things, that there is no restriction on cross-ownership of newspapers, radio and television stations in markets with 9 or more television broadcast stations and no cross-ownership permitted in markets with 3 or fewer television broadcast stations. In markets with four to eight television broadcast stations, any entity owning a newspaper may not own more than one television broadcast station. The FCC also determined that pre-existing non-conforming combinations or combinations which become non-conforming after transfer generally will not be required to be brought into compliance by the existing licensees, but will not be transferable absent a waiver or unless transferred to an eligible small business entity.

Various parties opposed to the FCC’s actions filed judicial appeals and on June 24, 2004, the United States Court of Appeals for the Third Circuit selected to hear the consolidated appeals, found virtually all of the rules liberalizing the local ownership rules to be without adequate support and remanded to the Commission for further deliberation. The court stayed the effectiveness of the new rules pending further appeals and the remand to the Commission. Various parties supporting the FCC’s actions, but not the FCC itself, have appealed the Third Circuit’s decision to the United States Supreme Court, which is expected to decide sometime in the second quarter of 2005 whether to hear the appeal.

The FCC generally applies its ownership limits only to “attributable” interests held by an individual, corporation, partnership or other association. In the case of corporations holding broadcast licenses, the interest of officers, directors and those who, directly or indirectly, have the right to vote 5% or more of the corporation’s voting stock, or 20% or more of such stock in the case of insurance companies, mutual funds, bank trust departments and certain other passive investors that are holding stock for investment purposes only, are generally deemed to be attributable, as are positions as an officer or director of a corporate parent of a broadcast licensee. Debt and non-voting stock are generally nonattributable interests. Moreover, pending completion of a court-ordered rulemaking, the FCC has restored an exemption to attribution of voting stock in any entity, which has a single shareholder with more than 50% of that entity’s voting stock. In any event, the holder of an otherwise nonattributable stock or debt interest in a licensee which is in excess of 33% of the total assets of the licensee (debt plus equity) 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. While intending to provide licensees and

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investors with clear attribution standards, 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.

Because of these multiple and cross-ownership rules, any person or entity that acquires an attributable interest in us may violate the FCC’s rules if that purchaser also has an attributable interest in other television or radio stations, or in daily newspapers, depending on the number and location of those radio or television stations or daily newspapers. Such person or entity also may be restricted in the companies in which it may invest to the extent that those investments give rise to an attributable interest. If the holder of an attributable interest violates any of these ownership rules or if a proposed acquisition by us would cause such a violation, we may be unable to obtain from the Commission one or more authorizations needed to conduct our television station business and may be unable to obtain the FCC’s consents for certain future acquisitions.

Regulatory issues involving alien ownership

The Communications Act restricts the ability of foreign entities or individuals to own or vote certain interests in broadcast licenses. No license may be held by a corporation more than 20% of which is owned by a foreign corporation or non-U.S. citizen. Also, no corporation may hold the capital stock of another corporation holding a broadcast license if more than 25% of the capital stock of such parent corporation is owned by a foreign corporation or non-U.S. citizen absent specific FCC authorization.

Regulatory issues involving programming and station operations

The Communications Act requires broadcasters to serve the “public interest.” Since the early 1980s, the FCC gradually has relaxed or eliminated many of the more formalized procedures it had developed to promote the broadcast of certain types of programming responsive to the needs of a station’s community of license. Broadcast station licensees continue, however, to be required to present programming that is responsive to community problems, needs and interests and to maintain certain records demonstrating such responsiveness. Complaints from viewers concerning a station’s programming may be considered by the FCC when it evaluates license renewal applications, although such complaints may be filed, and generally may be considered by the FCC, at any time. Stations also must follow various rules promulgated under the Communications Act that regulate, among other things, children’s television programming and advertising, political advertising, sponsorship identifications, contest and lottery advertising and programming rating guidelines.

The FCC is in the process of determining what, if any, additional public interest programming obligations will be imposed on digital broadcast transmissions. The FCC recently determined that broadcasters who carry multiple programs on their digital facilities must provide additional children’s educational programming.

The FCC is also charged with enforcing restrictions or prohibitions on the broadcast of obscene and indecent programs and in recent years has increased its enforcement activities in this area, issuing large fines against radio and television stations found to have carried such programming. Congress is considering legislation, which would substantially increase the potential monetary penalties for carriage of indecent programming and put the licenses of repeat offenders in jeopardy. We are unable to predict whether such legislation will be enacted or whether the enforcement of such regulations will have a material adverse effect on our ability to provide competitive programming.

The FCC also requires broadcast stations to comply with its own set of equal employment opportunity outreach rules and has adopted standards regulating the exposure of station employees and the public to potentially harmful radio frequency radiation emitted by our broadcast facilities.

Regulatory restrictions on broadcast advertising

The advertising of cigarettes and smokeless tobacco on broadcast stations is banned. Congressional committees have examined legislative proposals to eliminate or severely restrict the advertising of beer and wine. We cannot predict whether any or all of the present proposals will be enacted into law and, if so, what the final form of such law might be. The elimination of all beer and wine advertising could have an adverse effect on our stations’ revenues and operating profits as well as the revenues and operating profits of other stations that carry beer and wine advertising. Campaign finance legislation, which became effective in November 2002, restricts spending by candidates, political parties, independent groups and others on

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This legislation was upheld by the U.S. Supreme Court, but is subject to further interpretation by the Federal Elections Commission. The legislation has survived judicial appeals but is still subject to further restrictive interpretation by the Federal Election Commission, whose actions we cannot predict.

Regulatory issues involving cable must-carry or retransmission consent rights

The Cable Act of 1992 requires television broadcasters to make an election to exercise either must-carry or retransmission consent rights in connection with their carriage by cable television systems in the station’s local market. If a broadcaster chooses to exercise its must-carry rights, it may demand carriage on a specified channel on cable systems within its DMA. Must-carry rights are not absolute. Cable systems may decline carriage for a variety of reasons, including a lack of channel capacity for smaller systems, the inability of the station asserting must-carry rights to deliver a good quality signal to the cable headend or the presence of a more proximate duplicating affiliate of the same network. Stations asserting must-carry rights are not permitted to receive additional compensation from the cable systems carrying their stations. If a broadcaster chooses to exercise its retransmission consent rights, it may prohibit cable systems from carrying its signal, or permit carriage under a negotiated compensation arrangement.

Must-carry rights are limited to carriage within a station’s market and preclude a station from receiving anything other than limited carriage rights in exchange for the use of its programming. Must-carry is generally elected in instances where the broadcast station believes it is unlikely to obtain either cost-free carriage or additional compensation through negotiation. This is more likely to be the case with respect to stations which have disadvantaged signals or channel positions or which are without strong networks or local news operations and to systems in areas dominated by a single cable operator or where there are overlapping signals from stations in adjacent markets. Otherwise stations generally elect retransmission consent. Retransmission consent, by contrast, is generally elected where a station seeks not just carriage but the receipt of additional compensation. Retransmission consent is also required for carriage on systems outside a station’s DMA. Additional compensation may take the form of cash payments, enhanced channel position, or carriage of and payment for additional program services such as a local weather service or a second national network carried on a low-power station in the same market.

Regulatory issues involving direct broadcast satellite systems

There are currently in operation two full-service direct broadcast satellite systems that serve the US market: DirecTV, which is owned by News Corp., the parent company of Fox Broadcasting, and DISH Network, which is operated by EchoStar Communications Corporation. Direct broadcast satellite systems provide programming similar to that of cable systems on a subscription basis to those who have purchased and installed a satellite signal-receiving dish and associated decoder equipment.

Due to limitations in channel capacity and a copyright law restriction limiting distribution of network stations only to areas which could not get terrestrial broadcast signals, direct broadcast satellite systems did not carry local broadcast signals in the local areas served by those stations until recently. The extent to which the carriers transmitted and continue to transmit distant network affiliates into local markets in violation of copyright law remains the subject of on-going litigation between the carriers and local stations. Both DirecTV and EchoStar have substantially increased their channel capacity and Congress has amended the satellite compulsory license to permit the satellite carriers to provide local signals in their local markets; Congress recently reaffirmed this “local-into-local” provision and the prohibition on importation into local markets of stations from distant markets. As with cable carriage, broadcasters have been given the right to negotiate retransmission consent for these local transmissions for compensation or, where local service has been initiated, to demand carriage as a matter of right for no compensation.

Both DirecTV and EchoStar have now initiated carriage of local stations in larger markets. With respect to our stations, one or both of the carriers has initiated local carriage in Indianapolis, Indiana; Hartford-New Haven, Connecticut; Buffalo, New York; Norfolk, Virginia; Grand Rapids, Michigan and Providence, Rhode Island. We have reached retransmission consent agreements with both carriers and are receiving compensation for carriage of most of our stations in these markets. We are unable to predict when and if carriage will be initiated in our other markets and whether the revenues from such carriage will be significant. We are also unable to predict whether the results of any legislative activity or litigation and what, if any, impact they will have on the local television broadcasting business.

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Regulatory network affiliate issues

Several FCC rules impose restrictions on network affiliation agreements. Among other things, those rules prohibit a television station from entering into any affiliation agreement that:

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requires the station to clear time for network programming that the station had previously scheduled for other use; or

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precludes the preemption of any network programs that the station believes are unsuitable for its audience and the substitution of network programming with programming that it believes is of greater local or national importance.

The FCC is currently reviewing several of these rules governing the relationship between broadcast television networks and their affiliates. We are unable to predict when and how the FCC will resolve these proceedings.

Regulatory issues involving the transition to digital television

All US television stations broadcast signals using an analog transmission system first developed in the 1940s. The FCC has approved a new digital television, or DTV, technical standard to be used by television broadcasters, television set manufacturers, the computer industry and the motion picture industry. This DTV standard allows the simultaneous transmission of higher quality and/or multiple streams of video programming and data on the bandwidth presently used by a single analog channel. On the multiple channels allowed by DTV, it is possible to broadcast one high definition channel, with visual and sound quality substantially superior to present-day television; to transmit several standard definition channels, with digital sound and pictures of a quality varying from equivalent to somewhat better than present television; to provide interactive data services, including visual or audio transmission; or to provide some combination of these possibilities.

The FCC has already allocated to every existing television broadcast station one additional channel to be used for DTV during the transition between present-day analog television and DTV, and has established a timetable by which every current station must initiate DTV operations. Broadcasters will not be required to pay for this new DTV channel, but will be required to relinquish one of their two channels when the transition to DTV is complete.

The FCC has declared its intention to place all DTV stations in a “core” broadcast band consisting of channels 2-51 at the end of the digital transition and to reallocate channels 52-69 to a variety of other uses, including advanced cellular telephone and public safety. In September 2002 and June 2003, the FCC auctioned off much of the spectrum now occupied by broadcast channels 54, 55 and 59. The channels can be used for any purpose other than analog television and cannot be used until vacated by any incumbent broadcasters. We participated in the auction and purchased this spectrum in several of our markets, including those markets where we have either an analog or a digital broadcast channel 54 or 59. The FCC intends to auction off the remaining spectrum some time before the cessation of analog transmissions. Analog transmissions under current law are to cease the later of December 31, 2006 or when 85% of the households have digital reception capability. Congress is considering legislation to adopt an unconditional conversion date coupled with a program to subsidize the digital conversion of remaining analog receivers. Federal budget proposals also propose to levy fees against broadcasters for continuing analog operations beyond 2006. We are unable to predict whether any of these measures will become law.

Broadcasters must also pay certain fees for nonbroadcast uses of their digital channels. In addition, the FCC recently determined that broadcasters who transmit multiple programs on their digital channels are required to carry additional children’s educational programming and is evaluating whether to impose further public interest programming requirements on digital broadcasters. The FCC also recently held that the “must carry” requirements applicable to cable and satellite carriage of analog broadcast signals will encompass only the “primary” digital program and then only upon the cessation of analog signals.

In some cases, conversion to DTV operations may reduce a station’s geographical coverage area. Moreover, some of our stations have channels that are in the spectrum to be cleared for resale by the FCC and there is no guarantee that the replacement channels will fully replicate existing service. In other instances, the digital service may exceed current service. In addition, the FCC’s current implementation plan would maintain the secondary status of low-power television stations with respect to DTV operations

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and many low-power television stations, particularly in major markets, will be displaced, including some of ours.

In addition, it is not yet clear:

	•	when and to what extent DTV or other digital technology will become available through the various media;
	•	whether and how television broadcast stations will be able to avail themselves of or profit by the transition to DTV;
	•	whether viewing audiences will make choices among services upon the basis of such differences;
	•	whether and how quickly the viewing public will embrace the cost of new DTV sets and monitors;
	•	to what extent the DTV standard will be compatible with the digital standards adopted by cable and other multi-channel video programming services;
	•	whether a satisfactory copy protection technology will be developed for broadcasting and whether that technology will be compatible with copy protection systems developed for cable and other media;
	•	whether cable systems will be required to carry DTV signals or, in the absence of such mandate, broadcasters will succeed in negotiating voluntary cable carriage arrangements;
	•	whether significant additional expensive equipment will be required for television stations to provide digital service, including high definition television and supplemental or ancillary data transmission services; or
	•	what additional public interest obligations digital broadcasters will be required to fulfill.

Pursuant to the Telecommunications Act, the FCC must conduct a ten-year evaluation regarding the public interest in advanced television, alternative uses for the spectrum and reduction of the amount of spectrum each licensee utilizes. Many segments of the industry are also intensely studying these advanced technologies. There can be no assurances as to the answers to these questions or the nature of future FCC regulation.

Recent regulatory developments, proposed legislation and regulation

Congress and the FCC currently have under consideration, and may in the future adopt, new laws, regulations and policies regarding a wide variety of matters that could affect, directly or indirectly, the operation and ownership of our stations. In addition to the changes and proposed changes noted above, these matters include, for example, spectrum use fees, political advertising rates and potential restrictions on the advertising of certain products like hard liquor, beer and wine. Other matters that could affect the stations include technological innovations and development generally affecting competition in the mass communications industry.

The foregoing does not purport to be a complete summary of all the provisions of the Communications Act, as amended by the Telecommunications Act or the Cable Act, or of the regulations and policies of the FCC under either act. Proposals for additional or revised regulations and requirements are pending before and are being considered by Congress and federal regulatory agencies from time to time. We are unable at this time to predict the outcome of any of the pending FCC rulemaking proceedings referenced above, the outcome of any reconsideration or appellate proceedings concerning any changes in FCC rules or policies noted above, the possible outcome of any proposed or pending Congressional legislation, or the impact of any of those changes on our stations.

Employees

As of December 31, 2004, we employed 1,803 full-time equivalent employees, 410 of which were represented by unions. We believe that our employee relations are generally good.

Available Information

We file annual, quarterly, and current reports, proxy statements, and other documents with the Securities and Exchange Commission (“SEC”) under the Securities Exchange Act of 1934 (the “Exchange Act”). The public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. The public may obtain information on the operation of the

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Public Reference Room by calling the SEC at 1-800-SEC-0330. Also, the SEC maintains an Internet website that contains reports, proxy and information statements, and other information regarding issuers, including our filings, that file electronically with the SEC. The public can obtain any documents that we file with the SEC at http://www.sec.gov.

We also make available free of charge through our Internet website at http://www.lintv.com our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and, if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish such material, to the SEC.

Item 2. Properties:

We maintain our corporate headquarters in Providence, Rhode Island. Each of our stations has facilities consisting of offices, studios, sales offices and transmitter and tower sites. Transmitter and tower sites are located in areas that provide optimal coverage to each of our markets.

We own substantially all of the offices where our stations are located and generally own the property where our towers and primary transmitters are located. We lease the remaining properties, consisting primarily of sales office locations and microwave transmitter sites. While none of the properties owned or leased by us are individually material to our operations, if we were required to relocate any of our towers, the cost could be significant because the number of sites in any geographic area that permit a tower of reasonable height to provide good coverage of the market is limited, and zoning and other land use restrictions, as well as Federal Aviation Administration and FCC regulations, limit the number of alternative sites or increase the cost of acquiring them for tower sites.

Item 3. 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 4. Submission of Matters to a Vote of Security Holders:

No matters were submitted to a vote of security holders in the fourth quarter of the fiscal year ended December 31, 2004.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities:

The class A common stock of LIN TV Corp. is listed on the New York Stock Exchange under the symbol “TVL”. The following table sets forth the high and low sales prices for the class A common stock for the periods indicated, as reported by the New York Stock Exchange.

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LIN TV Corp. has never declared or paid any cash dividends on its class A common stock and the terms of our indebtedness limit the payment of cash dividends. LIN TV Corp. does not anticipate paying any such dividends in the foreseeable future.

As of December 31, 2004, there were approximately 41 stockholders of record of LIN TV Corp.’s class A common stock, 24 stockholders of record of its class B common stock and two stockholders of record of its class C common stock.

The common stock of LIN Television Corporation has not been registered under the Exchange Act and is not listed on any national securities exchange. All of the outstanding common stock of LIN Television Corporation is directly held by LIN TV Corp.

Item 6. Selected Financial Data:

Set forth below is selected consolidated financial data of LIN TV Corp. for each of the five years in the period ended December 31, 2004. The selected financial data as of December 31, 2004 and 2003 and for the years ended December 31, 2004, 2003 and 2002 is derived from audited consolidated financial statements that appear elsewhere in this filing. The selected financial data as of December 31, 2002, 2001 and 2000 and for the years ended December 31, 2001 and 2000 is derived from audited consolidated financial statements that are not presented in this filing. The selected financial data should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical consolidated financial statements of LIN TV Corp. and the notes thereto. The historical results presented are not necessarily indicative of future results.

The selected consolidated financial data of LIN Television is identical to that of LIN TV Corp. with the exception of basic and diluted income (loss) per common share, which is not presented for LIN Television Corporation.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations:

SPECIAL NOTE ABOUT FORWARD LOOKING STATEMENTS

This filing 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”, and “Business”. 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;
	•	changes in general economic conditions in the markets in which we compete;
	•	restrictions on our operations due to, and the effect of, our significant leverage;
	•	increases in our cost of borrowings or inability or unavailability of additional debt or equity capital;
	•	effects of complying with new accounting standards, including with respect to the treatment of our intangible assets and stock-based compensation;
	•	inability to consummate acquisitions on attractive terms;
	•	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 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; and
	•	adverse state or federal legislation or regulation or adverse determinations by regulators including adverse changes in, or interpretations of, the exceptions to the Federal Communication Commission (“FCC”) “duopoly” rule.

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. For further information or other factors, which could affect our financial results and such forward-looking statements, see “Factors That May Affect Future Results”.

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Executive Summary

We are an owner and operator of 23 television stations in 13 mid-sized markets in the United States and Puerto Rico. Our operating revenues are derived from the sale of advertising time to local and national advertisers and, to a much lesser extent, from the networks for the broadcast of their programming and from other broadcast-related activities.

We recorded net income of $93.0 million in 2004 compared with net losses of $90.4 million and $47.2 million in 2003 and 2002, respectively. The following are some of our operating highlights and significant changes for 2004 compared to 2003:

	•	We increased our net revenues by $32.4 million largely due to political revenues and local revenue growth.
	•	We launched MTV Puerto Rico in the third quarter of 2004 on our second station in Puerto Rico.
	•	We launched a US Spanish-language programming service called WAPA America, using locally produced news and entertainment programming from our Puerto Rico stations.
	•	We decreased our net interest expense by $13.7 million by refinancing our debt.
	•	We paid $73.6 million on the principal amount of our outstanding debt.
	•	We reversed our federal tax valuation allowance, resulting in a benefit from income taxes of $19.0 million compared to a provision of $9.2 million in 2003. This reversal was based on the cumulative positive operating results of the last several years and on our future projections that reflects the expectation that we will be able to use of our federal net operating loss carryforwards.

Industry Trends

The broadcast television industry is reliant primarily on advertising revenues and faces increased competition from existing and new technologies. The following summarizes certain of the competitive forces and risks that may impact our future operating results. For a discussion of other factors that may affect our business, see “Factors that May Affect Future Results”.

	•	The number of national program services has increased the competition for national advertising dollars resulting in a greater percentage of advertising revenues shifting from national advertisers to local advertisers. We received 76% of our revenues from local advertisers in 2004 compared to 68% in 2002. We expect this trend to continue.
	•	We no longer have exclusive rights to off-network programs for time periods where we do not air our local news or network programs. Many of these programs now air on national cable channels or can be purchased on DVDs by our television audience. These alternatives have created a further fragmentation of our television audience, making it more difficult to maintain or increase the rates we charge our advertisers.
	•	Our ability to internally grow our business is largely depended on the future conversion of analog to digital television receivers and the acceptance of digital television by our television audience. Congress and the FCC has not audiences from mandated a final conversion date.
	•	Political revenues from elections and revenues from Olympic Games, which occur on years ending in an even date, except for a small number of state and local odd-year elections, continue to create fluctuations in our operating results on a year-to-year comparison. In addition, the Television Bureau of Advertising reported that US television advertising decreased 2.3% in 2003 due to the impact of the war in Iraq and the loss of political revenue. US television advertising increased 10.3% in 2004 due largely to political advertising and the Olympic Games.
	•	We depend on automotive-related advertising, which represents approximately 27%, 25% and 22% of our total net revenues for the years ended December 31, 2004, 2003 and 2002, respectively. A significant change in these advertising revenues could materially affect our future results of operations.

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Business Transactions

We have developed our business through a combination of acquisitions, dispositions and organic growth. We have acquired or disposed of the following businesses and assets during the last three years:

Subsequent Developments

On January 28, 2005, we closed on an offering of $175.0 million in aggregate principal amount of 6¹/2% Senior Subordinated Notes due 2013. These notes were an add-on to an existing indenture we issued in May 2003 for $200 million in aggregate principle amount of 6¹/2% Senior Subordinated Notes due 2013. The proceeds from the January 2005 offering were used to retire all $166.4 million principal amount of our 8% Senior Notes due 2008 outstanding. This repayment will result in a loss on early extinguishment of debt of $9.9 million during the first quarter of 2005.

On February 9, 2005, we entered into a definitive agreement to acquire WNDY, the UPN affiliate serving Indianapolis, Indiana, and WWHO, the UPN affiliate serving Columbus, Ohio, from Viacom, Inc. for $85.0 million in cash, which will be funded by a combination of cash on hand and proceeds from our senior credit facility.

On March 11, 2005, we replaced our senior credit facility. Under this new facility, we obtained a $170.0 million term loan, the proceeds of which were used to repay the balance on our existing term loan and for general business purposes, and a $160.0 million revolving credit facility which will be used, in combination with cash on hand, to fund the purchase of WNDY-TV and WWHO-TV, during the first half of 2005. We are required to make mandatory payments on the new term loan of $4.3 million per quarter beginning March 31, 2006. The term loan and revolving credit facility expire on March 11, 2011 and March 11, 2010, respectively. The new facility contains covenants similar to that of the old facility.

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Critical accounting policies, estimates and recently issued accounting pronouncements

The preparation of consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent liabilities. On an on-going basis, we evaluate our estimates, including those related to intangible assets, bad debts, program rights, income taxes, pensions, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe that the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Valuation of long-lived assets and intangible assets

We have significant goodwill and intangible assets on our balance sheet. If the fair value of these assets is less than the carrying value, we are required to record an impairment charge.

We adopted SFAS No. 142, “Goodwill and Other Intangible Assets,” effective January 1, 2002. SFAS No. 142 requires, among other things, the discontinuance of the amortization of goodwill and indefinite life intangible assets and the introduction of impairment testing in its place.

We test the impairment of our broadcast licenses annually or whenever events or changes in circumstances indicate that such assets might be impaired. The impairment test consists of a comparison of the fair value of broadcast licenses with their carrying amount on a station-by-station basis using a discounted cash flow valuation method, assuming a hypothetical startup scenario that excludes network compensation payments.

We test the impairment of our goodwill annually or whenever events or changes in circumstances indicate that goodwill might be impaired. The first step of the goodwill impairment test compares the fair value of a station with its carrying amount, including goodwill. The fair value of a station is determined through the use of a discounted cash flow analysis. The valuation assumptions used in the discounted cash flow model reflect historical performance of the station and prevailing values in the markets for broadcasting properties. If the fair value of the station exceeds its carrying amount, goodwill is not considered impaired. If the carrying amount of the station exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of goodwill with the carrying amount of that goodwill. The implied fair value of goodwill is determined by performing an assumed purchase price allocation, using the station’s fair value (as determined in the first step described above) as the purchase price. If the carrying amount of goodwill exceeds the implied fair value, an impairment loss shall be recognized in an amount equal to that excess.

As required by SFAS No. 142, we completed a transitional impairment test for goodwill and broadcast licenses as of January 1, 2002. As a result of this test, an impairment of $47.2 million ($30.7 million, net of tax benefit) was recorded in the first quarter of 2002 to reflect the write-down of certain broadcast licenses to their fair value.

We completed annual tests for impairment of goodwill and broadcast licenses as of December 31, 2004, 2003 and 2002. As a result of these tests, no impairment was required as of December 31, 2002, an impairment of $51.7 million was recorded as of December 31, 2003 and no impairment charge was required as of December 31, 2004. The assumptions used in the valuation testing have certain subjective components including anticipated future operating results and cash flows based on our business plans and overall expectations as to market and economic considerations.

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Network Affiliations

Different broadcast companies may use different assumptions in valuing acquired broadcast licenses and their related network affiliations than those that we use. 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 between broadcast companies.

We believe that the value of a television station is derived primarily from the attributes of its broadcast license. These attributes have a significant impact on the audience for network programming in a local television market compared to the national viewing patterns of the same network programming. These attributes and their impact on audiences can include:

	•	The scarcity of broadcast licenses assigned by the FCC to a particular market determines how many television networks and other program sources are viewed in a particular market.
	•	The length of time the broadcast license has been broadcasting. Television stations that have been broadcasting since the late 1940s, generally channels two to thirteen, are viewed more often than newer television stations.
	•	VHF stations, (generally channels two to thirteen) are typically viewed more often than UHF stations (generally channels fourteen to sixty-nine) because these stations have been broadcasting longer than UHF stations and because of the inferior UHF signal in the early years of UHF stations.
	•	The quality of the broadcast signal and location of the broadcast station within a market (i.e. the value of being licensed in the smallest city within a tri-city market has less value than being licensed in the largest city within a tri-city market.)
	•	The audience acceptance of the broadcast licensee’s local news programming and community involvement. A local television station’s news programming that attracts the largest audience in a market generally will provide a larger audience for its network programming.
	•	The quality of the other non-network programming carried by the television station. A local television station’s syndication programming that attracts the largest audience in a market generally will provide larger audience lead-ins to its network programming.

A local television station can be the number one station in a market, regardless of the national ranking of its affiliated network, depending on the factors or attributes listed above. ABC, FOX, NBC, and CBS each have multiple affiliations with local television stations that have the largest prime time audience in the local market in which the station operates.

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.

In connection with our purchase of Sunrise Television Corp. in May 2002, we acquired broadcast licenses 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, we believe that these broadcasting companies 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.

If we were to assign higher values to acquired network affiliation agreements and, therefore, less value to broadcast licenses, it would have a significant impact on our operating results. The following chart reflects the hypothetical impact of the hypothetical reassignment of value from broadcast licenses to network affiliations and the resulting increase in amortization expense assuming a 15-year amortization period for the year ended December 31, 2004 (in thousands):

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In future acquisitions, the valuation of the broadcast licenses and network affiliations may differ from the Sunrise acquisition values due to different attributes of each station and the market in which it operates.

Valuation allowance for deferred tax assets

We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. While we have considered future taxable income and feasible tax planning strategies in assessing the need for a valuation allowance, in the event that we were to determine that we would not be able to realize all or part of our deferred tax assets in the future, an adjustment to the deferred tax asset would be charged to income in the period in which such a determination was made.

In the fourth quarter of 2004, we reversed our tax valuation allowance related to federal income taxes which resulted in a $50.1 million increase in our benefit from income taxes. We made the determination that it was likely that our deferred tax assets would be realized in the future based on the positive evidence of our historical performance over the last three years and on our projections of future results of operations. Lower interest rates and decreased debt levels were key factors in our determination.

Revenue recognition

We recognize broadcast revenue during the financial statement period in which advertising is aired. Barter revenue is accounted for at the fair value of the assets or services received, or the advertising time surrendered, whichever is more clearly evident. Barter revenue is recorded at the time the advertising is broadcast, and barter expense is recorded at the time the assets or services are used. We recognized barter revenue in the amounts of $10.1 million, $11.2 million and $12.4 million in the years ended December 31, 2004, 2003 and 2002, respectively. We incurred barter expense in the amounts of $9.9 million, $10.7 million and $12.3 million in the years ended December 31, 2004, 2003 and 2002, respectively.

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Accounting for stock-based compensation

We account for stock-based awards to employees using the intrinsic value method as prescribed by Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. Accordingly, no compensation expense is recorded for options issued to employees in fixed amounts and with fixed exercise prices at least equal to the fair market value of the underlying common stock at the date of grant. We adopted the provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” through disclosure only.

The following table illustrates the effect on net income (loss) if we had applied the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation”, to stock-based employee compensation (in thousands):

Amortization of program rights

We amortize program rights over the estimated broadcast period of the underlying programs. Program rights are analyzed by management on an ongoing basis through a review of ratings, program schedules and revenue projections, among other factors. If the projected future net revenues are less than the current carrying value of the program rights, we write-down the program rights to equal the amount of projected future net revenues. Our total program rights were $29.5 million, and $28.7 million at December 31, 2004 and 2003, respectively.

Retirement Plan Actuarial Assumptions

Our retirement benefit obligations and related costs are calculated using actuarial concepts, within the framework of Statement of Financial Accounting Standards No. 87 Employer’s Accounting for Pensions (“SFAS No. 87”). Two critical assumptions, the discount rate and the expected return on plan assets, are important elements of expense and/or liability measurement. We evaluate these critical assumptions annually. Other assumptions involve employee demographic factors such as retirement patterns, mortality, turnover and the rate of compensation increase.

The discount rate enables us to state expected future benefit payments as a present value on the measurement date. The guideline for setting this rate is a high-quality long-term corporate bond rate. A lower discount rate increases the present value of benefit obligations and increases pension expense. We decreased our discount rate to 5.75% in 2004 from 6.25% in 2003 to reflect market interest rate conditions.

To determine the expected long-term rate of return on the plan assets, we consider the current and expected asset allocation, as well as historical and expected returns on each plan asset class. A lower expected rate of return on pension plan assets will increase pension expense. Our long-term expected return on plan assets was 8.25% in both 2004 and 2003.

Recently issued accounting pronouncements

In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123R, “Share-Based Payment”, which is effective for reporting periods beginning after June 15, 2005. SFAS No. 123R requires us to recognize the cost of employee services received in exchange for the Company’s equity instruments. Currently, in accordance with APB Opinion 25, we record the intrinsic value of stock based compensation as expense. Accordingly, no compensation expense is generally recognized for our fixed stock option plans as the exercise price equals the stock price on the date of grant. Under SFAS 123R, we will be required to measure compensation expense over the options’ vesting period based on the stock options’ fair value at the date the options are granted.

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SFAS 123R allows for the use of the Black-Scholes or a lattice option-pricing model to value such options. As allowed by SFAS 123R, the Company can elect either Modified Prospective Application, which applies the Statement to new awards and modified awards after the effective date, and to any unvested awards as service is rendered on or after the effective date, or Modified Retrospective Application which can apply the effect of the statement to either all prior years for which SFAS 123 was effective or only to prior interim periods in the year of adoption. We are currently evaluating which method of valuation and application will be used.

In December 2004, the FASB issued FASB Statement 153, “Exchanges of Nonmonetary Assets — an amendment of APB Opinion No. 29” (“FAS 153”). FAS 153 eliminates the exception to account for nonmonetary exchanges of similar productive assets at carrying value and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance; otherwise, the exchange principal of fair value applies. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. FAS 153 is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The provisions of FAS 153 are not expected to have a material impact on the Company’s consolidated financial statements.

On February 11, 2005, the Emerging Issues Task Force issued EITF Issue No. 04-8, “The Effect of Contingently Convertible Debt on Diluted Earnings per Share (“EITF 04-8”)” which is effective for all reporting periods ending after December 15, 2004. EITF 04-8 requires contingently convertible instruments to be included in diluted earnings per share regardless of whether the market price trigger has been met. As a result, diluted income per share includes the effect of our contingently convertible debt on an “as-converted basis” for the year ended December 31, 2004.

Results of Operations

Set forth below are the significant factors that contributed to our operating results for the years ended December 31, 2004, 2003 and 2002. Our results of operations from year to year are significantly affected by the impact of our acquisition of Sunrise Television Corporation (“Sunrise”) in 2002 and the consolidation of Banks Broadcasting in accordance with FASB Interpretation No. 46 (“FIN 46R”) “Consolidation of Variable Interest Entities – An Interpretation of ARB No. 51” effective March 31, 2004, and as a result, our future reported financial results may not be comparable to the historical financial information and comparisons of any years may not be indicative of future financial performance. Our results of operations for the years ended December 31, 2004, 2003 and 2002 are as follows (in thousands):

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Three-Year Comparison

Net Revenues

Net revenues consist 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 9% or $32.4 million for the year ended December 31, 2004 compared to the prior year, which was driven by increased political and local revenue. Political revenue increased $22.9 million for the year ended December 31, 2004 compared to the prior year as a result of the 2004 presidential election cycle. We expect political revenue to decrease substantially in 2005, as it is not an election year.

Local airtime sales increased $15.9 million for the year ended December 31, 2004 compared to the prior year. We operate the number one or number two local news station in 91% of our markets and generated 34% of our advertising revenues from local news sales in 2004. Local advertising revenue has become increasingly important to our industry and is typically a more stable source of revenue than national time sales. As a result, we continued to emphasize growing our local business during 2004.

Net revenue attributable to Banks Broadcasting, which was consolidated in accordance with FIN 46R effective March 31, 2004, was $4.0 million for the year ended December 31, 2004.

Net revenues remained relatively flat at $342.4 million for the year ended December 31, 2003 compared to net revenue of $344.0 million for the prior year. The parity in net revenue was due largely to a decrease in political revenues of $20.8 million for the year ended December 31, 2003 as a result of the 2002 campaign election cycle and a reduction in advertising revenues due to the outbreak of war in Iraq. The decrease was offset by the May 2002 acquisition of the Sunrise television stations, which resulted in an additional $10.8 million of net revenue for the year ended December 31, 2003.

Operating Costs and Expenses

Direct operating expenses (excluding depreciation and amortization of intangible assets), consisting primarily of news, engineering, programming and music licensing costs, increased $2.5 million or 2% for the year ended December 31, 2004 compared to the prior year. The increase is primarily due to increased expenses of $1.0 million attributable to the consolidation of Banks Broadcasting and salary increases.

Direct operating expenses increased $4.7 million or 5% for the year ended December 31, 2003 compared to the prior year. The increase was primarily attributable to the May 2002 acquisition of the Sunrise television stations, which resulted in an additional $4.9 million of direct operating expenses. Our direct operating expenses (excluding depreciation and amortization of intangible assets) at our stations other than the Sunrise stations were relatively flat in 2003 as a result of savings associated with us centralizing our master control transmission facilities, which offset general cost increases.

Selling, general and administrative expenses, consisting primarily of employee salaries, sales commissions and other employee benefit costs, advertising and promotional expenses, increased $6.7 million or 8% for the year ended December 31, 2004, compared to the prior year. The increase was driven primarily by $2.1 million of expenses attributable to the consolidation of Banks Broadcasting, a $1.6 million or 9% increase in local sales commissions due to the increase in local airtime sales and a $1.0 million increase in compensation expense.

Selling, general and administrative expenses increased $10.1 million or 13% for the year ended December 31, 2003 compared to the prior year. The increase was driven by a $5.7 million increase as a result of the May 2002 acquisition of the Sunrise television stations. The remaining increase is primarily due to a $1.0 million increase in pension expense due to market conditions affecting our retirement funds, a $0.8 million increase in property tax expense due to a combination of the addition of digital equipment, and a general increase in property tax rates, an increase in insurance expense of $0.8 million and an increase of $0.7 million in legal expenses primarily due to labor negotiations at several of our stations.

Selling expenses as a percentage of net revenues were 3.6%, 3.7% and 3.2% for the years ended December 31, 2004, 2003 and 2002, respectively.

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Amortization of program rights represents costs associated with the acquisition of syndicated programming, features and specials. Amortization of program rights increased $0.9 million or 4% for the year ended December 31, 2004 compared to the prior year. The increase is the result a $0.7 million increase in the write-downs associated with several program rights due to lower projected revenue streams for those programs and $0.6 million attributable to the consolidation of Banks Broadcasting, offset by lower program costs at certain of our stations due to a combination of lower prices and nonrenewals of certain programming contracts.

Amortization of program rights increased $3.6 million or 19% for the year ended December 31, 2003 compared to the prior year. The increase is primarily due to the May 2002 acquisition of the Sunrise television stations, which resulted in an additional $1.8 million of amortization expense and $2.6 million as a result of writing down several program rights due to lower projected revenue streams for those programs.

Corporate expenses, related to costs associated with the centralized management of our stations, increased $2.4 million or 15% for the year ended December 31, 2004 compared to the prior year. Of the $2.4 million increase, $0.6 million is attributable to the consolidation of Banks Broadcasting. The remaining increase is primarily due to severance costs of $0.9 million related to the departure of a company executive and an increase in audit fees of $0.7 million related to corporate governance and related compliance activities.

Corporate expenses increased $3.6 million or 29% for the year ended December 31, 2003, compared to the prior year due to an increase in pension expense of approximately $0.7 million due to market conditions affecting our retirement funds, $0.4 million in directors and officers’ insurance expense, $1.4 million in due diligence related to potential acquisitions and professional fees as a result of increased activities related to corporate governance and related compliance activities and $0.9 million for severance pay and benefits related to centralizing the master control transmission facilities in Indianapolis, Indiana and Springfield, Massachusetts.

Depreciation and amortization of intangible assets remained relatively flat for the year ended December 31, 2004 compared to the prior year.

Depreciation and amortization of intangible assets increased $3.6 million or 13% for the year ended December 31, 2003, compared to the prior year. The increase is partially due to the May 2002 acquisition of the Sunrise television stations, which resulted in an additional $1.6 million of depreciation and amortization expense. The remaining increase is the result of increased capital additions related to the digital conversion and maximization efforts and the clustering of our master control transmission facilities.

As a result of our annual impairment test for goodwill and broadcast license, we recorded a non-cash impairment charge of $51.7 million reflected in operating expenses for the year ended December 31, 2003. This charge reflects the write-down of certain broadcast licenses resulting from a discounted cash flow forecast that uses industry averages to determine the fair value of the licenses. The decrease in fair value was the result of the decline in the advertising market during 2001 and 2003, which decreased industry station operating margins and therefore the value of our broadcast licenses.

Other (Income) Expense

The following table summarizes our total net interest expense:

Interest expense, net decreased $13.7 million or 23% for the year ended December 31, 2004 and $33.2 million or 36% for the year ended December 31, 2003 when compared to the year ended December 31, 2003 and 2002, respectively, due to lower outstanding borrowings and lower average interest rates.

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Share of income in equity investments increased to $7.4 million for the year ended December 31, 2004 compared to the prior year. This increase was primarily the result of improved operating performance of the stations included in our joint venture with NBC and the WAND (TV) Partnership. Share of income in equity investments decreased to $0.5 million for the year ended December 31, 2003 from $6.3 million for the year ended December 31, 2002. This decrease was primarily the result of the operating performance of the stations included in our joint venture with Banks Broadcasting and the WAND (TV) Partnership.

The gain on derivative instruments, derived from the mark-to-market of such instruments, increased to $15.2 million for the year ended December 31, 2004 compared to the prior year. This increase was due to fluctuations in market interest rates. Gain on derivative instruments decreased to $2.6 million for the year ended December 31, 2003 compared to $5.6 million for the prior period. Our derivative instruments during 2004 and 2003 consisted of the embedded derivatives within our 2.50% Exchangeable Senior Subordinated Debentures and in 2002 consisted of interest rate collars and cap and swap arrangements. The 2003 decrease in gain on derivative instruments was due to fluctuations in market interest rates.

Other items

We recorded a loss of $4.4 million for the year ended December 31, 2004, related to the write-off of unamortized financing fees, discounts and associated costs in connection with the early extinguishment of $38.6 million of 8% Senior Notes due 2008. We recorded a loss of $53.6 million for the year ended December 31, 2003, related to the write-off of unamortized financing fees, discounts and associated costs in connection with the early redemption of all of our 10% Senior Discount Notes and 8^3/8% Senior Subordinated Notes and the repurchase of $5.0 million principal amount of the 8% Senior Notes due 2008.

We incurred a $16.0 million expense in 2002 related to the termination of the monitoring and oversight agreement with Hicks Muse and the amendment of the financial advisory agreement with Hicks Muse to eliminate the terms requiring the payment of transaction fees.

We recorded a loss of $2.8 million related to an investment in an Internet company in the second quarter of 2002 and $0.3 million in the second quarter of 2003. This amount reflected an impairment of our initial investment as a result of a reduction in the value of the Internet company, which in the opinion of management, was other than temporary.

Income Taxes

Our benefit from income taxes increased to $19.0 million for the year ended December 31, 2004, from a provision of $9.2 million for the prior year. In 2004, based on all available evidence, we determined that a substantial portion of our deferred tax assets would be realized. As a result of this determination, our 2004 income tax benefit includes the benefit of $50.1 million from the reduction of the valuation allowance. This was offset by an increased tax provision related to recording increased income from continuing operations for the year ended December 31, 2004 compared to the prior period.

Our provision for income taxes decreased to $9.2 million for the year ended December 31, 2003 from a provision of $25.5 million for the prior year. The federal and state provisions for the year ended December 31, 2003 were primarily created by an increase in the valuation allowance against the increase in our net deferred tax asset position during the year. The foreign provision for the year ended December 31, 2003 was primarily created as a result of foreign operating income for the year ended December 31, 2003. The provision for the year ended December 31, 2002 was primarily attributed to book income for the year and a charge of $17.1 million to initially establish a valuation allowance against our net deferred tax asset position.

Liquidity and Capital Resources

Our principal sources of funds for working capital have historically been cash from operations and borrowings under our senior credit facility as well as funds from our initial public offering in May 2002. At December 31, 2004, we had cash of $14.8 million and an undrawn, but committed $191.9 million revolving credit facility, all of which was available as of December 31, 2004.

On March 11, 2005, we replaced our senior credit facility. Under this new facility, we obtained a $170.0 million term loan, the proceeds of which were used to repay the balance on our existing term loan and for general business purposes, and a $160.0 million revolving credit facility which will be used, in combination with cash on hand, to fund the purchase of WNDY-TV and WWHO-TV, during the first half of 2005. We are required to make mandatory payments on the new term loan of $4.3 million per quarter beginning March 31, 2006. The term loan and revolving credit facility expire on March 11, 2011 and March 11, 2010, respectively.

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Contractual Obligations

The following table summarizes our estimated material contractual cash obligations at December 31, 2004 (in thousands):

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The following table sets forth the components of our net cash provided by operating activities (in thousands):

Net cash provided by operating activities increased $35.3 million to $87.8 million for the year ended December 31, 2004 compared to $52.5 million for the prior year. This increase is the result of an increase in cash collected from customers of $14.7 million, which is the result of increased net revenue; a decrease in cash paid for interest of $12.8 million, resulting from lower average borrowing levels and interest rates during 2004; and a decrease in cash paid for all other operating expenses of $6.9 million related to the timing of certain operating expenses.

Net cash provided by operating activities decreased $22.5 million to $52.5 million for the year ended December 31, 2003 compared to $75.0 million for the prior year. This decrease is the result of an increase in employees compensation and benefits of $24.7 million, which is the result of $5.2 million related to the Sunrise acquisition, $11.5 million related to the timing of salary and bonus payments and $8.0 million due to a general market increase in the rates of compensation and benefits. Also contributing to the decrease in operating cash flow is an increase in cash paid for other operating expenses of $5.8 million, which is primarily the result of the Sunrise acquisition. Offsetting these was an increase in cash collected from customers of $13.2 million, which was the result of improved collections on our accounts receivable.

Net cash used in investing activities was $7.6 million for the year ended December 31, 2004 compared to net cash provided by investing activities of $9.7 million for the prior year. This change was primarily the result of the liquidation of our short-term investments during 2003.

Net cash provided by investing activities decreased $23.4 million to $9.7 million for the year ended December 31, 2003 compared to $33.4 million for the prior year. This decrease is primarily the result of the sale of the North Dakota stations during 2002, which resulted in proceeds of $36.0 million and proceeds of $60.8 million from the redemption of our preferred units in Southwest Sports Group during 2002. These items were offset by $23.7 million of additional proceeds in 2003 resulting from the redemption of our short-term investments.

Net cash used in financing activities decreased $121.8 million to $74.9 million for the year ended December 31, 2004 compared to $196.7 million for the prior 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 during 2003. This debt retirement was funded by proceeds from the $175.0 million term loan entered into during 2003, a $75.0 million drawdown on our existing revolving credit facility and cash on hand.

Net cash provided by financing activities was $196.7 million for the year ended December 31, 2003 compared to net cash provided by financing activities of $18.2 million for the prior year. This change was principally the result of the principal payments on the LIN Television 8 ^3/8% Senior Subordinated Notes due in 2008 in the aggregate principal amount of $300.0 million, the LIN Holdings 10% Senior Discount Notes due 2008 in the aggregate principal amount of $276.0 million and the LIN Holdings 10% Senior Add-on Discount Notes due 2008 in the aggregate principal amount of $100.0 million, offset by $500.0 million of proceeds from the combination of the issuance of the 6 1/2 % Senior Subordinated Notes due 2013, the issuance of the 2.50% Exchangeable Senior Subordinated Debentures due 2033 and draw downs under our Senior Credit Facility.

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The change was also affected by the issuance of our initial public offering of common stock in 2002, which resulted in net proceeds of $399.9 million.

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 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 as of (in thousands):

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):

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The following table summarizes the material terms of our debt agreements:

Senior Credit Facility

The revolving credit facility may be used for general corporate purposes, acquisitions of certain assets and the redemption of our publicly traded securities not to exceed $50 million. The senior credit facility permits us to prepay loans and to permanently reduce revolving credit commitments, in whole or in part, at any time. We are required to make mandatory prepayments of our terms loans in the amount of $1.6 million per quarter and additional prepayments based on certain debt transactions or the disposal of certain assets.

The senior credit facility contains covenants that, among other things, restrict the ability of our subsidiaries to dispose of assets, incur additional indebtedness, incur guarantee obligations, prepay other indebtedness or amend other debt instruments, pay dividends, create liens on assets, enter into sale and leaseback transactions, make investments, loans or advances, make acquisitions, engage in mergers or consolidations, change the business conducted by it, make capital expenditures, or engage in certain transactions with affiliates and otherwise restrict certain corporate activities. We are required, under the terms of the senior credit facility, to comply with specified financial ratios, including minimum interest coverage ratio, maximum leverage ratio and minimum fixed charge coverage ratio.

The senior credit facility 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 ability to refinance or otherwise prepay our senior subordinated notes or senior notes without the consent of such lenders.

On March 11, 2005, we replaced our senior credit facility. Under this new facility, we obtained a $170.0 million term loan, the proceeds of which were used to repay the balance on our existing term loan and for general business purposes, and a $160.0 million revolving credit facility which will be used, in combination with cash on hand, to fund the purchase of WNDY-TV and WWHO-TV, during the first half of 2005. We are required to make mandatory payments on the new term loan of $4.3 million per quarter beginning March 31, 2006. The term loan and revolving credit facility expire on March 11, 2011 and March 11, 2010, respectively. The new facility contains covenants similar to that of the old facility.

6 ^1/2% Senior Subordinated Notes, 2.50% Exchangeable Senior Subordinated Debentures and 8% Senior Notes