NEW YORK (Map) - NEW YORK, Aug. 1 /PRNewswire-FirstCall/ -- Hearst-Argyle Television, Inc. (NYSE: HTV) today announced second quarter 2008 earnings per diluted share of $0.15 compared to $0.18 and $0.27 in second quarter 2007 and 2006, respectively.

Results for the Quarter Ended June 30, 2008

For the quarter ended June 30, 2008, total revenue of $182.1 million declined 5.6% compared to the quarter ended June 30, 2007. The change in total revenue primarily reflects:

-- a $16.6 million, or 10.0%, decrease in net ad sales, excluding political, to $148.7 million in a weak economy, attributable to:

-- continued softness in automotive advertising, our largest category, as well as decreases in the retail, consumer packaged goods, telecommunications, furniture, movies, restaurant, and health services categories, offset by -- gains in the home improvement, utilities, pharmaceutical and agriculture categories, among others; -- a $3.6 million increase in net political revenue to $8.5 million; -- a 13% increase in net digital media revenue to $5.7 million; and -- a 26% increase in retransmission consent revenue to $6.8 million.

Commenting on the announcement, David Barrett, President and Chief Executive Officer, stated, "Notwithstanding the strength of our local market stations and local digital media operations, our second quarter financial results reflect the reality of a very weak advertising economy, and the challenges evident in the domestic macro-economy. The recessionary effect caused by the housing slump, escalating energy prices, credit crisis, and resultant low consumer confidence levels certainly impacts our local media businesses. While a number of our mid-sized stations in less volatile Midwest markets are performing well, our larger stations in New England, Florida and California are particularly challenged. We've expectedly benefited from political spending, both for the presidential race and for specific state races, but reduced budgets from key ad categories and negative pricing pressure have caused overall ad revenues to decline in the period, adversely impacting net income. We continue to be very pleased with the competitive performance of many of our stations, and with the excellence of our local news efforts.

"Our focus on cost containment and reductions in capital spending enable us to continue generating strong free cash flow. On a trailing 12-month basis, the Company has reduced debt by $114 million, further strengthening our already strong balance sheet, while still supporting strategic investment in sales development efforts, and digital media initiatives.

"We are very well positioned to achieve top-line growth and strong incremental bottom-line improvement as economic conditions eventually stabilize and improve. In the coming months, we'll continue to benefit from accelerating political spending, but we foresee continued weakness from numerous key ad categories, which will limit our revenue upside.

"The local television medium, coupled with an aggressive local digital strategy, is far and away the most valuable advertising and marketing alternative for local businesses," Barrett added. "Television's superior reach and digital's local targeting capabilities are an ideal solution for advertisers, who must continue to market their products and services in a competitive and challenging economic environment. Our Company believes in the value of the television medium, and in the valuable business model that we have for today and tomorrow."

Broadcast Performance Metrics and Product Quality Local News Leadership In May 2008 Ratings Period

-- HTV stations are local news leaders with 77% of all HTV weekday newscasts ranked #1 or #2 in their time periods (A25-54);

-- Five HTV stations dominate their local news ratings race, ranking #1 in household ratings for all weekday newscasts: WBAL, Baltimore; WGAL, Lancaster; WXII, Greensboro; KCCI, Des Moines and KSBW, Monterey-Salinas;

-- HTV operates 5 of the top 10 late news stations among the largest (top 50) ABC markets: KMBC, Kansas City ranks #1; KOCO, Oklahoma City ranks #3; WISN, Milwaukee ranks #4; KOAT, Albuquerque ranks #5; WTAE, Pittsburgh ranks #7;

-- HTV stations lead the nation in news viewing among adults aged 25-54: -- KCCI in Des Moines delivered the highest late news ratings among top 100 markets; -- KETV in Omaha delivered the highest late news ratings among the top 100 ABC markets; -- KMBC in Kansas City delivered the highest late news ratings among the top 50 ABC markets. Prime Time Audience Delivery In May 2008 Ratings Period

-- 18 of 18 network-affiliated stations in top-50 markets over-indexed their networks;

-- HTV stations led the nation for their respective networks: -- KOCO, Oklahoma City: #1 ABC station (A25-54) in Top 50 Markets; -- WXII, Greensboro: #1 NBC station (A25-54) in Top 50 Markets; -- KCCI, Des Moines: #1 CBS station (A25-54) in Markets 51-100.

-- Among the top 50 ABC markets, HTV stations occupied 3 of the top 5 positions in primetime audience delivery: KOCO ranked #1; KMBC ranked #4 and WISN ranked #5;

-- WKCF in Orlando ranked among the top 5 CW affiliates in the Top 50 Markets in prime time (A18-49).

Journalism Awards During Quarter

-- HTV stations were recognized for quality journalism and community service during the quarter as follows:

-- 5 National Edward R. Murrow Awards to WBAL Radio, WBAL-TV, KCCI; -- Regional EMMY Award for "Conversations With Carlos Watson"; -- Peabody Award to WTAE in Pittsburgh; -- NAB Service to America Award to WYFF in Greenville. Digital Media Performance Metrics (in thousands) HTV Digital (source, company) Volume Percentage 2Q08 2Q07 Increase Increase Average Monthly Unique Visitors 17,805 9,787 8,018 82 % Quarterly Page Views 504,384 407,296 97,088 24 % Quarterly Video Streams 21,602 14,285 7,317 51 % HTV Wireless (source, company) Volume Percentage 2Q08 2Q07 Increase Increase Average Monthly Unique Visitors 239 60 179 298 % Quarterly Page Views 2,457 1,089 1,368 126 %

HTV's on-line audience continues to grow. During second quarter, average monthly unique visitors nearly doubled while quarterly page views and video streams increased a healthy 24% and 51%, respectively. We attribute this growth to:

-- Aggressive on-line coverage of breaking news, especially the devastating flooding in Iowa and the wildfires in California. Hearst-Argyle stations provided superior local coverage to our on-line users.

-- Upgraded weather presentations and products as part of our redesigned weather sections of WCVB, KCCI, KMBC, WMUR, WISN and WLKY. WCVB in particular experienced a 200% increase in page views following the upgrade.

-- A growing appetite from consumers to view broadband video, which we have satisfied through an investment in technology that made it easier and faster for our stations to upload video.

-- We have the #1 local television website in 13 of our 16 Nielsen/NetRatings measured markets, and even lead the local newspaper competition in 4 of those markets, according to the June Nielsen/NetRatings visitors report.

HTV is well positioned in Presidential Election swing states as follows: Electoral HTV-Owned State Votes Stations Florida 27 WESH, WKCF Iowa 7 KCCI Missouri 11 KMBC New Hampshire 4 WMUR New Mexico 5 KOAT Ohio 20 WLWT Pennsylvania 21 WTAE, WGAL Wisconsin 10 WISN Redemption of Capital Trust Convertible Preferred Securities

On June 23, 2008, the Company redeemed all $134.0 million of its 7.5% Series B Convertible Junior Subordinated Debentures ("Series B Debentures"), which were classified as Notes payable to Capital Trust on the Balance Sheet. This redemption in turn triggered a simultaneous redemption by the Capital Trust of all $130.0 million of its 7.5% Series B Convertible Preferred Securities (convertible into 5.1 million shares of the Company's Series A Common Stock) and HTV's $4.0 million investment in the Capital Trust. The redemption was funded by an advance under the Company's credit facility, which currently bears interest at approximately 3.3% per annum.

The Balance Sheet effect of the redemption includes a reduction of Notes payable to Capital Trust by $134.0 million to zero and a nearly comparable increase in our line of credit balance. On the asset side, Investments were reduced by $4.0 million.

The Income Statement effect of the redemption includes the recognition of a redemption premium paid by the Company of $3.9 million (included in Interest expense, net - Capital Trust), which reduced earnings per share by $0.03. Going forward, HTV expects to save approximately $4.8 million of annual interest expense, or approximately $0.01 per share per quarter, beginning in third quarter 2008.

Liquidity and Capital Resources

"In spite of the challenging economic environment and our continuing investment in new initiatives, free cash flow remains strong, allowing us to preserve a very strong financial position," said Harry Hawks, Executive Vice President and Chief Financial Officer. "At the same time, we are able to continue to use a portion of the significant cash flow generated by the business to return capital to investors and reduce debt.

"During second quarter we:

-- repaid $13.0 million of debt, bringing our total debt repayment over the past twelve months to $114.0 million;

-- the combination of debt reduction and redemption of the capital trust notes has reduced our average cost of debt by a full percentage point since second quarter 2007, which will result in a significant reduction in interest expense going forward; -- paid $6.6 million of dividends to common stockholders; and

-- invested $10.9 million in property, plant and equipment to support the transition to digital and high definition news production in our largest markets and to further the development of digital media.

"We finished second quarter with $9.2 million of cash on hand and $165.0 million available under our $500.0 million credit facility," Hawks added. "The combination of cash flow from operations and availability under the credit facility provides significant financial flexibility as we go forward."

Revised 2008 Expense Outlook ($'s in millions) As of As of 2/28/08 5/1/08 Revised Outlook Outlook Outlook Income Statement Items 2008 2008 2008 Salaries, Benefits and Other Operating Expense (SB&O) SB&O, excluding digital media and stock-based compensation $403.0 $401.5 $396.7 Digital media expense 23.0 21.0 20.1 Stock-based compensation expense 4.0 4.0 4.0 Total Salaries, Benefits and Other Operating Expense $430.0 $426.5 $420.8 Amortization of Program Rights 75.0 75.0 75.0 Depreciation & Amortization 55.0 55.0 55.5 Insurance Settlement NA 11.5 11.5 Corporate G&A Corporate G&A, excluding stock-based compensation 34.0 32.1 32.1 Stock-based compensation expense 4.0 4.0 4.0 Total Corporate G&A $38.0 $36.1 $36.1 Interest Expense, net $50.0 $48.2 $50.3 Interest Expense, net - Capital Trust $9.8 $9.8 $8.6 Effective Tax Rate 39.0 % 34.0 % 33.0 % Equity in (Income) loss of Affiliates, net of tax $2.0 $2.0 $2.7 Cash Flow Items Program Payments $74.0 $74.0 $74.0 Capital Expenditures $44.0 $40.0 $40.0

Salaries, Benefits and Other Operating Expense: For second quarter 2008, SB&O expenses were flat at $101.9 million. Continued investment in digital media news and sales, as well as local news coverage in an election year was offset by lower pension expense, a gain associated with a Nextel equipment exchange, lower sales commissions and reduced spending on all discretionary items. For the full year 2008, we have revised our SB&O expense estimate down to $420.8 million from $426.5 million in May and $430.0 million in February, reflecting ongoing expense reductions in a soft economy.

Amortization of Program Rights: For second quarter 2008, amortization of program rights decreased $0.8 million or 4% to $18.6 million. Program amortization was higher during second quarter 2007 due mainly to the write-off of an off-network syndicated program at one station. For the full year, we expect amortization of program rights expense to be $75.0 million, down slightly from 2007 and unchanged from prior estimates.

Depreciation and amortization: For second quarter 2008, depreciation and amortization expense increased less than 1% to $14.3 million. For the full year, depreciation and amortization is expected to be $55.5 million, substantially unchanged from 2007 and prior estimates.

Corporate, general and administrative expense: For second quarter, corporate, general and administrative expense increased $0.6 million or 7% to $9.5 million due mainly to higher personnel costs related to digital media, and higher legal and computer expenses, offset in part by lower travel and entertainment, accounting and business insurance expenses. For the full year, corporate expense is expected to be down 6% to $36.1 million reflecting the absence of banking, legal and other expenses associated with the tender offer in 2007, offset in part by continued investment in the growing digital media operation. The $36.1 million estimate is unchanged from guidance on May 1, 2008 and down from $38.0 million estimated as of February 22, 2008.

Interest expense: For second quarter 2008, interest expense decreased $3.7 million to $12.3 million, reflecting substantially lower debt balances. The Company repaid $125.0 million of 7% senior notes and $90.0 million 7.18% private placement notes during fourth quarter 2007.

Interest expense, net - Capital Trust: For second quarter 2008, interest expense, net - Capital Trust was $6.1 million, up from $2.4 million, reflecting a $3.9 million premium associated with the redemption in full of the Series B Debentures on June 23, 2008. The redemption eliminates interest payments in the amount of $2.4 million per quarter going forward. For the full year 2008, we forecast Interest expense, net-Capital Trust of $8.6 million (including the $3.9 million premium) revised downward from $9.8 million.

Effective tax rate: For the second quarter 2008, the effective tax rate was 17.8% as compared to 41.3% in the second quarter 2007. The lower effective tax rate reflects a $4.6 million benefit resulting from the settlement of an open tax examination during the quarter. As previously indicated, compliance with FIN 48 could increase the variability of our tax provision from quarter to quarter. At this time, the estimated effective tax rate for the third quarter is approximately 32.0% compared to 17.0% in 2007, and for the fourth quarter is 39.0% compared to 36.1% in 2007. The estimated effective tax rate for the full year has been revised down to 33.0%, compared to 36.2% in 2007 and 37.3% in 2006.

Equity in (income) loss of affiliates, net of tax: For second quarter, equity in loss of affiliates, net of tax, was $1.9 million mainly reflecting our share of losses of Internet Broadcasting and Ripe Digital Entertainment. Both are entrepreneurial digital media companies that have incurred losses as they invest in their operations to pursue growth opportunities. For the full year 2008, we expect equity losses of approximately $2.7 million compared to $2.0 million previously forecast.

Program Payments: For second quarter 2008, program payments increased 1% to $18.1 million. For the full year, we expect program payments to be $74.0 million, unchanged from 2007 and prior estimates, reflecting normal contractual increases for first-run syndicated programming offset by lower off-network program payments at WKCF-TV, the CW affiliate in Orlando and KQCA- TV, the MyNetworkTV affiliate in Sacramento.

Capital Expenditures: During second quarter, we invested $10.9 million in station operations, a significant portion of which supports high definition news production in our largest markets. In 2008, capital expenditures are expected to be $40.0 million, unchanged from the prior estimate, but down significantly from $55.8 million in 2007 and $60.4 million in 2006.

Non-GAAP Measures

For a reconciliation of non-GAAP financial measurements contained in this news release and the accompanying income statements, please see the Supplemental Disclosures table at the end of this release.

About Hearst-Argyle

Hearst-Argyle Television, Inc. owns 26 television stations, and manages an additional three television and two radio stations owned by Hearst Corporation, in geographically diverse U.S. markets. The Company's television stations reach approximately 20 million households, or about 18% of U.S. television households, making it one of America's largest television station groups. Hearst-Argyle owns 12 and manages one ABC-affiliated station and is the largest ABC affiliate group. Hearst-Argyle owns 10 NBC affiliates, making it the second-largest NBC affiliate owner. Hearst-Argyle owns two CBS affiliates. Also, Hearst-Argyle owns more than 30 Websites and currently multicasts 18 digital weather channels and one digital multicast channel affiliated with the CW network. Hearst-Argyle Series A Common Stock trades on the New York Stock Exchange under the symbol "HTV." HTV debt is rated investment grade by Moody's (Baa3), Standard & Poor's (BBB-) and Fitch (BBB-). Hearst Corporation, Hearst-Argyle's majority owner, is an investor in Fitch's parent company. Hearst-Argyle's corporate Web address is www.hearstargyle.com.

In December 2007, Hearst Corporation disclosed that its board of directors had authorized it to acquire up to an additional 8 million shares of HTV Series A Common Stock in open-market and privately negotiated transactions in order to increase its ownership percentage to approximately 82% (on a fully- diluted basis), allowing for tax consolidation and other benefits. Pursuant to a Schedule 13-D Amendment filed July 21, 2008, as of July 17, 2008, Hearst owned an 81% interest in Hearst-Argyle Television, Inc. As of July 17, 2008, Hearst had acquired approximately 7.2 million shares under the December 2007 authorization. Effective as of July 1, 2008, HTV will file federal tax returns and (where permitted) state tax returns on a consolidated basis with Hearst as a result of Hearst's ownership of at least 80% of HTV common stock.

FORWARD-LOOKING STATEMENTS

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

-- Changes in national and regional economies; -- Changes in advertising trends and our advertisers' financial condition; -- Competition in the broadcast television markets we serve; -- Pricing fluctuations in local and national advertising;

-- Changes in Federal regulation of broadcasting, including changes in Federal communications laws or regulations;

-- Local regulatory actions and conditions in the areas in which our stations operate;

-- Our ability to obtain quality programming for our television stations;

-- Successful integration of television stations we acquire;

-- Our ability to service and refinance our outstanding debt;

-- Volatility in programming costs, industry consolidation, technological developments, and major world events.

These and other matters may cause actual results to differ from those we describe. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Hearst-Argyle Television, Inc. Condensed Consolidated Statements of Income Three Months Ended June 30, 2008 (1) 2007 (1) 2006 (1) (In thousands, except per share data) Total revenue (2) $182,123 $193,019 $193,964 Station operating expenses: Salaries, benefits and other operating costs 101,946 102,168 97,654 Amortization of program rights 18,606 19,422 15,951 Depreciation and amortization 14,267 14,185 16,080 Insurance settlement - - - Corporate, general and administrative expenses 9,477 8,887 7,626 Operating income 37,827 48,357 56,653 Interest expense 12,295 16,028 16,050 Interest income (10) (407) (1,943) Interest expense, net - Capital Trust 6,148 2,438 2,438 Other expense - - 2,501 Income before income taxes 19,394 30,298 37,607 Income tax expense 3,443 12,525 12,729 Equity in loss (income) of affiliates, net of tax (3) 1,858 752 (139) Net income $14,093 $17,021 $25,017 Net income per net share-basic $0.15 $0.18 $0.27 Number of common shares used in the calculation 93,556 93,547 92,733 Net income per net share-diluted $0.15 $0.18 $0.27 Number of common shares used in the calculation (4) 94,083 94,508 93,197 Dividends per common share declared $0.07 $0.07 $0.07 Supplemental Financial Data: Net ad sales (excluding political) $148,666 $165,274 $161,866 Net political revenue 8,477 4,867 12,917 Net digital media revenue 5,674 5,012 3,377 Network compensation 2,333 2,625 2,253 Retransmission consent revenue 6,813 5,422 4,020 Other revenue 10,160 9,819 9,531 Supplemental Non-GAAP Data (*): Adjusted EBITDA (A) $52,094 $62,542 $72,733 Free cash flow $14,037 $9,309 $37,770 Six Months Ended June 30, 2008 (1) 2007 (1) 2006 (1) (In thousands, except per share data) Total revenue (2) $347,176 $362,402 $367,981 Station operating expenses: Salaries, benefits and other operating costs 206,074 203,242 194,441 Amortization of program rights 37,318 38,650 31,283 Depreciation and amortization 28,319 29,181 31,468 Insurance settlement (11,549) - - Corporate, general and administrative expenses 18,193 16,668 14,899 Operating income 68,821 74,661 95,890 Interest expense 25,177 31,917 32,512 Interest income (28) (752) (3,244) Interest expense, net - Capital Trust 8,585 4,875 4,875 Other expense - - 2,501 Income before income taxes 35,087 38,621 59,246 Income tax expense 7,733 16,517 21,277 Equity in loss (income) of affiliates, net of tax (3) 3,220 831 (65) Net income $24,134 $21,273 $38,034 Net income per net share-basic $0.26 $0.23 $0.41 Number of common shares used in the calculation 93,556 93,366 92,694 Net income per net share-diluted $0.26 $0.23 $0.41 Number of common shares used in the calculation (4) 94,093 94,306 93,185 Dividends per common share declared $0.14 $0.14 $0.14 Supplemental Financial Data: Net ad sales (excluding political) $281,541 $311,892 $314,805 Net political revenue 18,080 6,402 15,061 Net digital media revenue 10,566 9,036 6,550 Network compensation 4,509 5,114 4,258 Retransmission consent revenue 13,089 10,587 8,629 Other revenue 19,391 19,371 18,678 Supplemental Non-GAAP Data (*) : Adjusted EBITDA (A) $97,140 $103,842 $127,358 Free cash flow $50,854 $20,853 $68,230 (*) See Supplemental Disclosures Regarding Non-GAAP Financial Information at the end of this news release. See accompanying notes on the following pages. Hearst-Argyle Television, Inc. Condensed Consolidated Balance Sheets June 30, December 31, 2008 2007 (In thousands) Assets Current assets: Cash and cash equivalents $9,195 $5,964 Accounts receivable, net 146,619 164,764 Program and barter rights 22,731 65,097 Deferred income tax asset 4,794 4,794 Other 6,745 5,698 Total current assets 190,084 246,317 Property, plant and equipment, net 300,351 305,971 Intangible assets, net 2,510,363 2,513,340 Goodwill 816,728 816,728 Other assets: Deferred financing costs, net 7,563 8,000 Investments 36,792 41,948 Program and barter rights, noncurrent 9,800 8,399 Other assets 14,671 18,273 Total other assets 68,826 76,620 Total assets $3,886,352 $3,958,976 Liabilities and Stockholders' Equity Current liabilities: Current portion of long-term debt $90,000 $90,016 Accounts payable 8,883 15,103 Accrued liabilities 46,164 48,376 Program and barter rights payable 22,696 64,687 Payable to Hearst Corporation, net 5,492 5,747 Other 4,686 6,482 Total current liabilities 177,921 230,411 Program and barter rights payable, noncurrent 17,632 15,587 Long-term debt 797,110 703,110 Note payable to Capital Trust - 134,021 Deferred income tax liability 863,501 856,790 Other liabilities 61,520 66,658 Total noncurrent liabilities 1,739,763 1,776,166 Commitments and contingencies Stockholders' equity: Preferred Stock - - Series A common stock 574 573 Series B common stock 413 413 Additional paid-in capital 1,343,154 1,336,786 Retained earnings 754,255 743,264 Accumulated other comprehensive loss, net (12,580) (12,580) Treasury stock, at cost (117,148) (116,057) Total stockholders' equity 1,968,668 1,952,399 Total liabilities and stockholders' equity $3,886,352 $3,958,976 Hearst-Argyle Television, Inc. Condensed Consolidated Statements of Cash Flows Six months ended June 30, 2008 2007 (In thousands) Operating Activities Net income $24,134 $21,273 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 25,343 25,646 Amortization of intangible assets 2,976 3,535 Amortization of deferred financing costs 437 896 Amortization of program rights 37,318 38,650 Deferred income taxes 7,121 3,442 Equity in loss (income) of affiliates, net 3,220 831 Provision for doubtful accounts 734 617 Stock-based compensation expense 4,135 4,120 Insurance settlement (11,549) - Business interruption insurance proceeds 8,659 - (Gain) or loss on disposition of assets (557) (4) Program payments (36,299) (36,284) Changes in operating assets and liabilities: Decrease (increase) in Accounts receivable 17,411 2,786 Decrease (increase) in Other assets 2,655 (1,650) (Decrease) increase in Accounts payable and accrued liabilities (9,565) (21,946) (Decrease) increase in Other liabilities (7,193) 7,705 Net cash provided by operating activities $68,980 $49,617 Investing Activities Purchases of property, plant and equipment, net (18,126) (28,764) Proceeds from redemption of Capital Trust 4,021 - Cash proceeds from insurance recoveries 2,890 1,000 Investment in affiliates and other, net (2,500) (1,875) Net cash used in investing activities $(13,715) $(29,639) Financing Activities Dividends paid on common stock (13,140) (13,069) Redemption of Notes Payable to Capital Trust (134,021) - Borrowings (Payments) on credit facility, net 94,000 - Series A Common Stock repurchases (1,091) - Proceeds from employee stock purchase plan & stock option exercises 2,234 14,306 Principal payments on capital lease obligations (16) (12) Net cash (used in) provided by financing activities $(52,034) $1,225 Increase in cash and cash equivalents 3,231 21,203 Cash and cash equivalents at beginning of period 5,964 18,610 Cash and cash equivalents at end of period $9,195 $39,813 Supplemental Cash Flow Information: Cash paid during the period for: Interest $25,062 $30,551 Interest on Note payable to Capital Trust $8,586 $2,438 Taxes, net of refunds $6,545 $23,537 Non-cash investing and financing activities: Accrued property, plant & equipment purchases $1,133 $747 Notes to Consolidated Statements of Income

(1) Results of operations for the three and six months ended June 30, 2008, 2007 and 2006 include (i) the results of our 25 television stations, which were owned for the entire period presented, and the management fees derived by the three television and two radio stations managed by us for the entire period presented; and (ii) the results of operations of WKCF-TV, after our acquisition of the station on August 31, 2006.

(2) Total revenue includes local & national, digital media and political advertising revenue net of agency commission expense, network compensation, retransmission consent revenue and other revenue consisting primarily of trade and barter revenue.

(3) Primarily represents the Company's equity interests in the operating results of Internet Broadcasting, Ripe Digital Entertainment and other investments.

(4) On June 23, 2008, the Company redeemed it's 7.5% Series B Convertible Junior Subordinated Debentures which triggered a simultaneous redemption by its wholly-owned unconsolidated subsidiary trust ("the Capital Trust") of its 7.5% Series B Convertible Preferred Securities. For the three and six month periods ended June 30, 2007 and 2006, diluted shares do not include 5,127,881 common shares underlying the 7.5% Series B Convertible Preferred Securities because to do so would have been antidilutive. When the securities related to the Capital Trust were dilutive, the interest, net of tax, related to the Capital Trust was added back to Income applicable to common stockholders for purposes of the diluted EPS calculation.

Hearst-Argyle Television, Inc. Supplemental Disclosures Regarding Non-GAAP Financial Information Adjusted EBITDA

In order to evaluate the operating performance of our business, we use certain financial measures, some of which are calculated in accordance with accounting principles generally accepted in the United States of America ("GAAP"), such as net income, and some of which are not, such as adjusted earnings before interest, taxes, depreciation and amortization ("adjusted EBITDA"). In order to calculate the non-GAAP measure adjusted EBITDA, we exclude from net income the financial items that we believe are less integral to the day-to-day operation of our business. We have outlined below the type and scope of these exclusions and the limitations on the use of the adjusted EBITDA measure as a result of these exclusions. Adjusted EBITDA is not an alternative to net income, operating income, or net cash provided by operating activities, as calculated and presented in accordance with GAAP. Investors and potential investors in our securities should not rely on adjusted EBITDA as a substitute for any GAAP financial measure. In addition, our calculation of adjusted EBITDA may or may not be consistent with that of other companies. We strongly urge investors and potential investors in our securities to review the reconciliation presented in the table below of adjusted EBITDA to net income, the most directly comparable GAAP financial measure.

We use the adjusted EBITDA measure as a supplemental financial metric to evaluate the performance of our business that, when viewed together with our GAAP results and the accompanying reconciliations, we believe provides a more complete understanding of the factors and trends affecting our business than the GAAP results alone. Adjusted EBITDA is a common alternative measure of financial performance used by investors, financial analysts, and rating agencies. These groups use adjusted EBITDA, along with other measures, to estimate the value of a company, compare the operating performance of a company to others in its industry, and evaluate a company's ability to meet its debt service requirements. In addition, adjusted EBITDA is a key financial measure for the Company's stockholders and financial lenders, since the Company's current debt financing agreements require the measurement of adjusted EBITDA, along with other measures, in connection with the Company's compliance with debt covenants.

We define adjusted EBITDA as net income adjusted to exclude the following line items presented in our consolidated statements of income: interest expense; interest income, interest expense, net - Capital Trust; income taxes; depreciation and amortization; equity in income or loss of affiliates; other income and expense; and non-recurring special charges. Set forth below are descriptions of each of the financial items that have been excluded from net income in order to calculate adjusted EBITDA as well as the material limitations associated with using adjusted EBITDA rather than net income, the most directly comparable GAAP financial measure, when evaluating the operating performance of our core operations.

-- Interest expense, Interest income and Interest expense, net - Capital Trust. By excluding these expenses, we are better able to compare our core operating results with other companies that have different financing arrangements and capital structures. Nevertheless, the amount of interest we are required to pay does reduce the amount of funds otherwise available for use in our core business and therefore may be useful for an investor to consider.

-- Income tax expense. By excluding income taxes, we are better able to compare our core operating results with other companies that have different income tax rates. Nevertheless, the amount of income taxes we incur does reduce the amount of funds otherwise available for use in our core business and therefore may be useful for an investor to consider.

-- Depreciation and amortization. By excluding these non-cash charges, we are better able to compare our core operating results with other companies that have different histories of acquiring other businesses. Nevertheless, depreciation and amortization are important expenses for investors to consider, even though they are non-cash charges, because they represent generally the wear and tear on our property, plant and equipment and the gradual decline in value over time of our intangible assets with finite lives. Furthermore, depreciation expense is affected by the level of capital expenditures we make to support our core business and therefore may be useful for an investor to consider.

-- Impairment Loss. The impairment loss is a non-recurring, non-cash item resulting from the write down of intangibles and goodwill as part of our routine FAS 142 analysis. Excluding the impairment loss provides investors with more comparable information about our Company's operating performance.

-- Equity in loss (income) of affiliates, net. This is a non-cash item which represents our proportionate share of income or loss from affiliates in which we hold minority interests. As we do not control these affiliates, we believe it is more appropriate to evaluate the performance of our core business by excluding their results. However, as we make investments in affiliates for purposes which are strategic to the Company, the financial results of such affiliates may be useful for an investor to consider.

-- Other expense and special charges. These are non-recurring items which are unrelated to the operations of our core business and, when they do occur, can fluctuate significantly from one period to the next. By excluding these items, we are better able to compare the operating results of our underlying, recurring core business from one reporting period to the next. Nevertheless, the amounts and the nature of these items may be useful for an investor to consider, as they can be material and can sometimes increase or decrease the amount of funds otherwise available for use in our core business.

The following tables provide a reconciliation of net income to adjusted EBITDA in each of the periods presented:

Three Months Ended June 30, 2008 2007 2006 (In thousands) Net income $14,093 $17,021 $25,017 Add: Income tax expense 3,443 12,525 12,729 Add: Equity in loss (income) of affiliates, net of tax 1,858 752 (139) Add: Interest expense, net - Capital Trust 6,148 2,438 2,438 Add: Interest expense 12,295 16,028 16,050 Less: Interest income (10) (407) (1,943) Add: Other expense - - 2,501 Operating income 37,827 48,357 56,653 Add: Depreciation and amortization 14,267 14,185 16,080 Adjusted EBITDA $52,094 $62,542 $72,733 Six Months Ended June 30, 2008 2007 2006 (In thousands) Net income $24,134 $21,273 $38,034 Add: Income tax expense 7,733 16,517 21,277 Add: Equity in loss (income) of affiliates, net of tax 3,220 831 (65) Add: Interest expense, net - Capital Trust 8,585 4,875 4,875 Add: Interest expense 25,177 31,917 32,512 Less: Interest income (28) (752) (3,244) Add: Other expense - - 2,501 Operating income 68,821 74,661 95,890 Add: Depreciation and amortization 28,319 29,181 31,468 Adjusted EBITDA $97,140 $103,842 $127,358 Hearst-Argyle Television, Inc.

Supplemental Disclosures Regarding Non-GAAP Financial Information (continued)

Free Cash Flow

In order to evaluate the operating performance of our business, we use the non-GAAP measure free cash flow. Free cash flow reflects our net cash flow from operating activities less capital expenditures. Free cash flow is a primary measure used not only internally by our management, but externally by our investors, analysts and peers in our industry, to value our operating performance and compare our performance to other companies in our peer group. Our management believes that free cash flow provides investors with useful information concerning cash available to allow us to make strategic acquisitions and investments, service debt, pay dividends, meet tax obligations, and fund ongoing operations and working capital needs. Free cash flow is also an important measure because it allows investors to assess our performance in the same manner that our management assesses our performance.

However, free cash flow is not an alternative to net cash flow provided by operating activities, as calculated and presented in accordance with GAAP, and should not be relied upon as such. Specifically, because free cash flow deducts capital expenditures from net cash flow provided by operating activities, investors and potential investors should consider the types of events and transactions which are not reflected in free cash flow. In addition, our calculation of free cash flow may or may not be consistent with that of other companies. We strongly urge investors and potential investors in our securities to review the reconciliation presented in the table below of free cash flow to net cash flow provided by operating activities, the most directly comparable GAAP financial measure.

The following table provides a reconciliation of net cash flow provided by operating activities to free cash flow in each of the periods presented:

Three Months Ended June 30, 2008 2007 2006 (In thousands) Net cash provided by operating activities $24,973 $28,101 $51,342 Less capital expenditures 10,936 18,792 13,572 Free cash flow $14,037 $9,309 $37,770 Six Months Ended June 30, 2008 2007 2006 (In thousands) Net cash provided by operating activities $68,980 $49,617 $88,829 Less capital expenditures 18,126 28,764 20,599 Free cash flow $50,854 $20,853 $68,230