HEARST ARGYLE TELEVISION INC - 10-Q Quarterly Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

HEARST-ARGYLE TELEVISION, INC.
(Exact name of registrant as specified in its charter)

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 twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_|

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

As of April 27, 2004, the registrant had 93,035,226 shares of common stock outstanding, consisting of 51,736,578 shares of Series A Common Stock, and 41,298,648 shares of Series B Common Stock.

HEARST-ARGYLE TELEVISION, INC.

Index


Part I	Financial Information	Page No.


Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of March 31, 2004 (unaudited) and December 31, 2003	1
	Condensed Consolidated Statements of Income for the Three Months Ended
	March 31, 2004 and 2003 (unaudited)	3
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended
	March 31, 2004 and 2003 (unaudited)	4
	Notes to Condensed Consolidated Financial Statements	5


Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14


Item 3.	Quantitative and Qualitative Disclosures about Market Risk	18


Item 4.	Controls and Procedures	18


Part II	Other Information


Item 6.	Exhibits and Reports on Form 8-K	19

Signatures		20

Exhibit Index				21

Certifications				22

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

HEARST-ARGYLE TELEVISION, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

		March 31, 2004 (Unaudited)		December 31, 2003
		(In thousands)
Assets
Current assets:
	Cash and cash equivalents		$ 116,704		$ 71,528
	Accounts receivable, net		129,518		147,455
	Program and barter rights		35,808		54,725
	Deferred income taxes		5,178		5,178
	Other		6,493		5,786

	Total current assets		293,701		284,672


Property, plant and equipment, net			283,858		288,290


Intangible assets, net			2,410,572		2,412,071

Goodwill			732,217		732,217


Other noncurrent assets:
	Deferred financing and acquisition costs, net		13,973		14,592
	Investments		32,925		34,059
	Program and barter rights		1,644		2,562
	Other		29,306		30,624

	Total other noncurrent assets		77,848		81,837


	Total assets		$ 3,798,196		$ 3,799,087

(continued)

HEARST-ARGYLE TELEVISION, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended March 31,
	2004	2003
	(Unaudited)
	(In thousands, except per share data)

Total revenues	$ 166,864	$ 149,276

Station operating expenses:
Salaries, benefits and other operating costs	84,594	79,833
Amortization of program rights	15,311	16,092
Depreciation and amortization	12,495	10,960
Corporate, general and administrative expenses	5,589	4,874

Operating income	48,875	37,517

Interest expense, net	16,416	17,409
Interest expense, net – Capital Trust	3,750	3,750
Equity in income (loss) of affiliates	199	(136)


Income before income taxes	28,908	16,222

Income taxes	11,014	6,165

Net income	17,894	10,057

Less preferred stock dividends	272	318

Income applicable to common stockholders	$ 17,622	$ 9,739


Income per common share – basic	$ 0.19	$ 0.11

Number of common shares used in the calculation	92,902	92,436


Income per common share – diluted	$ 0.19	$ 0.11

Number of common shares used in the calculation	93,615	92,750


Dividends per common share declared	$ 0.06	$ —

See notes to condensed consolidated financial statements.

HEARST-ARGYLE TELEVISION, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three Months Ended March 31,
	2004		2003
	(Unaudited)
	(In thousands)
Operating Activities
Net income	$ 17,894		$ 10,057
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	10,996		10,343
Amortization of program rights	15,311		16,092
Program payments	(15,320	)	(15,638	)
Amortization of intangible assets	1,499		617
Amortization of deferred financing costs	728		728
Deferred income taxes	3,116		2,320
Provision for doubtful accounts	(467	)	143
Dividends received from affiliates	1,330		—
Equity in (income) loss of affiliates	(199	)	136
(Gain) on disposal of fixed assets	—		(83	)
Changes in operating assets and liabilities:
Accounts receivable	18,294		16,688
Other assets	611		(19	)
Accounts payable and accrued liabilities	3,475		(4,591	)
Other liabilities	(3,015	)	(1,355	)

Net cash provided by operating activities	54,253		35,438


Investing Activities
Purchases of property, plant, and equipment:
Maintenance	(3,204	)	(1,572	)
Special projects and towers	(3,117	)	(2,572	)
Digital	(209	)	(1,961	)

Other, net	4		38

Net cash used in investing activities	(6,526	)	(6,067	)


Financing Activities
Dividends paid on common stock	(5,566	)	—
Dividends paid on preferred stock	(272	)	(318	)
Redemption of preferred stock	(1,600	)	—
Proceeds from stock option exercises	4,446		783
Proceeds from employee stock purchase plan	481		585
Borrowings from Credit Facility	—		91,000
Repayments to Credit Facility	—		(120,000	)
Principal payments on capital lease obligations	(40	)	(29	)

Net cash used in financing activities	(2,551	)	(27,979	)

Increase in cash and cash equivalents	45,176

Delaware		74-2717523
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)

888 Seventh Avenue		(212) 887-6800
New York, NY 10106		(Registrant’s telephone number, including area code)
(Address of principal executive offices)

	March 31, 2004 (Unaudited)			December 31, 2003
	(In thousands)
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		$ 10,028			$ 9,834
Accrued liabilities		54,259			50,833
Program and barter rights payable		37,058			55,741
Payable to The Hearst Corporation		3,432			5,925
Other		7,046			8,085

Total current liabilities		111,823			130,418


Noncurrent liabilities:
Program and barter rights payable		2,978			4,141
Long-term debt		882,369			882,409
Note payable to Capital Trust		206,186			206,186
Deferred income taxes		885,214			882,098
Other liabilities		21,985			21,453

Total noncurrent liabilities		1,998,732			1,996,287


Stockholders’ equity:
Series A preferred stock		1			1
Series B preferred stock		1			1
Series A common stock		549			547
Series B common stock		413			413
Additional paid-in capital		1,291,047			1,287,831
Retained earnings		481,578			469,537
Accumulated other comprehensive loss, net		(5,249	)		(5,249	)
Treasury stock, at cost		(80,699	)		(80,699	)

Total stockholders’ equity		1,687,641			1,672,382


Total liabilities and stockholders’ equity		$ 3,798,196			$ 3,799,087

Financial Information