10-Q 1 d10q.txt FORM 10-Q ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark one) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2001 or [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______ Commission File Number: 0-27000 HEARST-ARGYLE TELEVISION, INC. (Exact name of registrant as specified in its charter) DELAWARE 74-2717523 (State or other jurisdiction of incorporation (I.R.S. Employer or organization) Identification Number) 888 SEVENTH AVENUE (212) 887-6800 NEW YORK, NY 10106 (Registrant's telephone number, (Address of principal executive offices) including area code) ________________________________________________ (Former name, former address, and former fiscal year, if changed since last report) 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 [_] As of May 10, 2001, the Registrant had 91,763,491 shares of common stock outstanding. Consisting of 50,464,843 shares of Series A Common Stock, 41,298,648 shares of Series B Common Stock. ================================================================================ HEARST-ARGYLE TELEVISION, INC. Index

Page No. Part I Financial Information Item 1. Financial Statements Condensed Consolidated Balance Sheets as of March 31, 2001 and December 31, 2000 (unaudited)....... 1 Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2001 and 2000 (unaudited)................................................................ 3 Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2001 and 2000 (unaudited)................................................................ 4 Notes to Condensed Consolidated Financial Statements............................................... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.............. 9 Item 3. Quantitative and Qualitative Disclosures about Market Risk......................................... 12 Part II Other Information Item 6. Exhibits and reports on Form 8-K................................................................... 12 Signatures........................................................................................................ 13

Part I Financial Information Item 1. Financial Statements ------- -------------------- HEARST-ARGYLE TELEVISION, INC. Condensed Consolidated Balance Sheets

March 31, 2001 December 31, 2000 (Unaudited) ---------------------------------------- (In thousands) Assets Current assets: Cash and cash equivalents $ 6,876 $ 5,780 Accounts receivable, net 129,975 162,579 Program and barter rights 36,186 53,716 Deferred income taxes 3,339 3,339 Related party receivable 675 280 Other 7,255 6,591 ----------- ----------- Total current assets 184,306 232,285 ----------- ----------- Property, plant and equipment, net 335,628 334,417 ----------- ----------- Intangible assets, net 3,223,401 3,142,004 ----------- ----------- Other assets: Deferred acquisition and financing costs, net 23,308 24,692 Investments 28,445 53,811 Program and barter rights, noncurrent 2,521 2,403 Other 28,654 28,377 ----------- ----------- Total other assets 82,928 109,283 ----------- ----------- Total assets $ 3,826,263 $ 3,817,989 =========== ===========

See notes to condensed consolidated financial statements. 1 HEARST-ARGYLE TELEVISION, INC. Condensed Consolidated Balance Sheets (Continued)

March 31, 2001 December 31, 2000 (Unaudited) ---------------------------------------- (In thousands) Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 10,881 $ 15,874 Accrued liabilities 62,908 51,976 Program and barter rights payable 36,275 54,405 Other 864 1,493 ----------- ----------- Total current liabilities 110,928 123,748 ----------- ----------- Program and barter rights payable, noncurrent 2,780 2,339 Long-term debt 1,444,476 1,448,492 Deferred income taxes 787,229 777,929 Other liabilities 20,179 21,105 ----------- ----------- Total noncurrent liabilities 2,254,664 2,249,865 ----------- ----------- Stockholders' equity: Series A preferred stock 1 1 Series B preferred stock 1 1 Series A common stock 536 536 Series B common stock 413 413 Additional paid-in capital 1,274,710 1,274,257 Retained earnings 265,709 245,788 Treasury stock, at cost (80,699) (76,620) ----------- ----------- Total stockholders' equity 1,460,671 1,444,376 ----------- ----------- Total liabilities and stockholders' equity $ 3,826,263 $ 3,817,989 =========== ===========

See notes to condensed consolidated financial statements. 2 HEARST-ARGYLE TELEVISION, INC. Condensed Consolidated Statements of Income (Unaudited)

Three Months Ended March 31, 2001 2000 -------------------------------------------- (In thousands, except per share data) Total revenues $ 148,342 $ 169,930 Station operating expenses 79,502 81,073 Amortization of program rights 14,016 15,019 Depreciation and amortization 32,303 31,508 --------- --------- Station operating income 22,521 42,330 Corporate general and administrative expenses 3,696 4,035 --------- --------- Operating income 18,825 38,295 Other income, net 48,778 - --------- --------- 67,603 38,295 Other expenses Interest expense, net 28,492 28,966 Equity in loss of affiliate 1,561 907 --------- --------- Income before income taxes 37,550 8,422 Income taxes 17,273 3,866 --------- --------- Net income 20,277 4,556 Less preferred stock dividends (356) (356) --------- --------- Income applicable to common stockholders $ 19,921 $ 4,200 ========= ========= Income per common share - basic: $ 0.22 $ 0.05 ========= ========= Number of common shares used in the calculation 91,864 92,768 ========= ========= Income per common share - diluted: $ 0.22 $ 0.05 ========= ========= Number of common shares used in the calculation 92,133 92,790 ========= =========

See notes to condensed consolidated financial statements. 3 HEARST-ARGYLE TELEVISION, INC. Condensed Consolidated Statements of Cash Flows (Unaudited)

Three Months Ended March 31, 2001 2000 ----------------------------------------- (In thousands) Operating Activities Net income $ 20,277 $ 4,556 Adjustments to reconcile net income to net cash provided by operating activities: Other income, net (48,778) - Amortization of intangible assets 21,646 21,683 Amortization of program rights 14,016 15,019 Program payments (14,297) (14,905) Depreciation 10,657 9,825 Deferred income taxes 8,261 177 Equity in loss of affiliate 1,561 907 Amortization of deferred financing costs 738 862 Provision for doubtful accounts 408 478 Changes in operating assets and liabilities, net 37,683 26,257 ---------- ---------- Net cash provided by operating activities 52,172 64,859 ---------- ---------- Investing Activities WMUR-TV/Phoenix Radio Swap Transaction (34,019) - Investment in ProAct Technologies Corporation - (25,000) Investment in Geocast Network Systems, Inc. (37) (8,000) Other investing activities (19) (89) Purchases of property, plant, and equipment: Maintenance (3,174) (8,403) Special projects/towers (1,568) (1,630) Digital (4,277) (823) ---------- ---------- Net cash used in investing activities (43,094) (43,945) ---------- ---------- Financing Activities New Credit Facilities: Proceeds from issuance of long-term debt 262,000 101,000 Repayment of long-term debt (266,000) (122,000) Dividends paid on preferred stock (356) (356) Series A Common Stock repurchases (4,079) - Proceeds from employee stock purchase plan 453 691 Exercise of stock options - 100 ---------- ---------- Net cash used in financing activities (7,982) (20,565) ---------- ---------- Increase in cash and cash equivalents 1,096 349 Cash and cash equivalents at beginning of period 5,780 5,632 ---------- ---------- Cash and cash equivalents at end of period $ 6,876 $ 5,981 ========== ==========

See notes to condensed consolidated financial statements. 4 HEARST-ARGYLE TELEVISION, INC. Condensed Consolidated Statements of Cash Flows (continued) (Unaudited)

Three Months Ended March 31, 2001 2000 ---------------------------- (In thousands) Supplemental Cash Flow Information: Business acquired in purchase transaction: WMUR-TV/Phoenix Swap Fair market value of assets acquired, net $ 225,971 Fair market value of liabilities assumed, net (35,300) Fair market value of assets exchanged, net (188,383) Fair market value of liabilities exchanged, net 31,731 -------- Net cash paid for Swap $ 34,019 ======== Non-cash investing activity: Acquisition of Channel 58, Inc. $ 891 ======== Cash paid during the period for interest $ 17,712 $ 18,926 ======== ======== Cash paid during the period for taxes $ - $ 7,162 ======== ========

See notes to condensed consolidated financial statements. 5 HEARST-ARGYLE TELEVISION, INC. Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited) March 31, 2001 1. Summary of Accounting Policies General The condensed consolidated financial statements include the accounts of Hearst- Argyle Television, Inc. (the "Company") and its wholly-owned subsidiaries. All significant intercompany accounts have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three-month period ended March 31, 2001 and 2000 are not necessarily indicative of the results that may be expected for a full year. 2. Acquisitions, Dispositions and Investments On January 31, 2000, the Company exercised its fixed-price option to acquire the outstanding stock of Channel 58, Inc. (the licensee for KQCA-TV in Sacramento, California) (the "KQCA Acquisition"). The Company was previously programming and selling airtime of KQCA-TV under a Time Brokerage Agreement ("TBA"), which was acquired as part of the acquisition of Kelly Broadcasting Co. on January 5, 1999. The KQCA Acquisition was accounted for under the purchase method of accounting and, accordingly, the purchase price (including acquisition costs) of approximately $891,000 has been allocated to the acquired assets and liabilities based upon their fair market values. The excess of the purchase price and acquisition costs over the fair market value of the tangible assets acquired less the liabilities assumed was allocated to FCC license. On August 8, 2000, the Company sold two of its radio stations, WXII-AM (Greensboro, NC) and WLKY-AM (Louisville, KY) to Truth Broadcasting Corporation for $3.5 million. On March 28, 2001, the Company exchanged its radio stations in Phoenix, Arizona (KTAR-AM, KMVP-AM and KKLT-FM) ("Phoenix Radio") for WMUR-TV, the ABC affiliate serving the Manchester, NH television market, in a three party swap (the "Phoenix/WMUR Swap"). The Company sold Phoenix Radio to Emmis Communications Corporation ("Emmis") for $160 million, less transaction expenses, and purchased WMUR-TV from WMUR-TV, Inc. for $185 million, plus a working capital adjustment of $3.5 million and transaction expenses, on March 28, 2001. The acquisition of WMUR-TV was accounted for under the purchase method of accounting and, accordingly, the purchase price and related acquisition costs have been allocated to the acquired assets and liabilities based upon their preliminarily determined fair market values. The excess of the purchase price and acquisition costs over the fair market value of the tangible assets acquired less the liabilities assumed was allocated to FCC licenses. The final fair values may differ from those set forth in the accompanying condensed consolidated balance sheet at March 31, 2001; however, the changes, if any, are not expected to have a material effect on the condensed consolidated financial statements. Prior to the swap, Emmis had been managing Phoenix Radio pursuant to a TBA since August 1, 2000, and the Company had been managing WMUR-TV pursuant to a TBA since January 8, 2001 (effective January 1, 2001 for accounting purposes). The purchase price of WMUR-TV was funded through an intermediary by approximately (i) $160 million from Emmis, and (ii) $28.5 million plus the cost of the transaction expenses from the Company's revolving credit facility. The Company realized a gain of $72.6 million on the sale of Phoenix Radio which is recorded in Other income, net. The following unaudited pro forma results of operations include (i) the combined historical results of the Company's 22 owned television stations (which excludes KQCA and WMUR) and fees from the stations managed by the Company (see Note 4) for both periods presented, and (ii) the TBA for KQCA from January 1, 2000 through January 31, 2000, and the results of KQCA, after its 6 HEARST-ARGYLE TELEVISION, INC. Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited) March 31, 2001 2. Acquisitions, Dispositions and Investments (continued) acquisition by the Company, from February 1 to March 31, 2000, adjusted to reflect the Phoenix/WMUR Swap as if the transaction occurred on January 1, 2000; and, the exclusion of Other Income, net.

Three Months Ended March 31, 2001 2000 ------------------------------------- (unaudited) (In thousands, except per share data) Total revenues $ 146,770 $ 171,495 Net income (loss) $ (6,994) $ 4,887 Income (loss) applicable to common stockholders $ (7,350) $ 4,531 Income (loss) per common share - basic and diluted $ (0.08) $ 0.05 Pro forma number of shares used in calculations - basic 91,864 92,768 - diluted 91,864 92,790

The above unaudited pro forma results are presented in response to applicable accounting rules relating to business acquisitions and are not necessarily indicative of the actual results that would be achieved had each of the stations been acquired at the beginning of the periods presented, nor are they indicative of future results of operations. On February 23, 2001, the remaining $5.1 million of the Geocast Network Systems, Inc. ("Geocast") investment was written-off after Geocast's Board of Directors declined various strategic alternatives and decided to liquidate the company. In March 2001, the Company wrote-down the investment in ProAct Technologies Corporation. ("ProAct") by $18.8 million in order to approximate the investment's realizable value. 3. Long-Term Debt Long-term debt consists of the following:

March 31, December 31, 2001 2000 ------------------------------ (unaudited) (In thousands) New Credit Facility $ 542,000 $ 546,000 Senior Notes 449,305 449,305 Private Placement Debt 450,000 450,000 Senior Subordinated Notes 2,596 2,596 Other Debt 575 591 ---------- ---------- Total long-term debt $1,444,476 $1,448,492 ========== ==========

4. Related Party Transactions The Company recorded revenues of approximately $565,000 and $935,000 relating to the Management Agreement (whereby the Company provides certain management services, such as sales, news, programming and financial and accounting management services, with respect to certain Hearst owned or operated television and radio stations); and expenses of approximately $979,000 and $892,000 relating to the Services Agreement (whereby Hearst provides the Company certain administrative services such as accounting, financial, legal, tax, insurance, data processing and employee benefits), during the three months ended March 31, 2001 and 2000, respectively. The Company believes that the terms of all these agreements are reasonable to both sides; however, there can be no assurance that more favorable terms would not be available from third parties. 7 HEARST-ARGYLE TELEVISION, INC. Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited) March 31, 2001 5. Stock Options In February 2001, the Company's Board of Directors approved the amendment and restatement of the Company's 1997 Stock Option Plan (the "Stock Option Plan"). The amendment increases the number of shares reserved for issuance under the Stock Option Plan to 8.7 million shares of the Company's Series A Common Stock. 6. Subsequent Events On April 30, 2001, pursuant to an Asset Purchase Agreement entered into with WBOY-TV, Inc., the Company acquired WBOY-TV, the NBC affiliate serving the Clarksburg-Weston, WV, television market for $20 million. The purchase price plus the cost of the transaction expenses were funded using the Company's revolving credit facility. 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results ------- ----------------------------------------------------------------------- of Operations -------------- Results of Operations Hearst-Argyle Television, Inc. and subsidiaries (the "Company") owns and operates 24 network-affiliated television stations. Additionally, the Company provides management services to two network-affiliated and one independent television stations and two radio stations (the "Managed Stations") in exchange for a management fee. See Note 4 of the notes to the condensed consolidated financial statements. On January 31, 2000, the Company exercised its fixed-price option to acquire the outstanding stock of Channel 58, Inc. (the licensee for KQCA-TV in Sacramento, California) (the "KQCA Acquisition"). The Company was previously programming and selling airtime of KQCA-TV pursuant to a Time Brokerage Agreement ("TBA"). See Note 2 of the notes to the condensed consolidated financial statements. On August 8, 2000, the Company sold two of its radio stations, WXII-AM (Greensboro, NC) and WLKY-AM (Louisville, KY) to Truth Broadcasting Corporation. See Note 2 of the notes to the condensed consolidated financial statements. On March 28, 2001, the Company exchanged its radio stations in Phoenix, Arizona (KTAR-AM, KMVP-AM and KKLT-FM) ("Phoenix Radio") for WMUR-TV, the ABC affiliate serving the Manchester, NH television market, in a three party swap. The Company sold Phoenix Radio to Emmis Communications Corporation ("Emmis") and purchased WMUR-TV from WMUR-TV, Inc. on March 28, 2001. Prior to the swap, Emmis had been managing Phoenix Radio pursuant to a TBA since August 1, 2000, and the Company had been managing WMUR-TV pursuant to a TBA since January 8, 2001 (effective January 1, 2001 for accounting purposes). See Note 2 of the notes to the condensed consolidated financial statements. Results of operations for the three months ended March 31, 2001 include: (i) the Company's 23 owned television stations (which excludes WMUR) and fees from the three television and two radio stations managed by the Company for the entire period presented, (ii) the TBA for WMUR from January 1 to March 27, 2001 and the results of WMUR, after its acquisition by the Company, from March 28 to March 31, 2001; and, (iii) the TBA for Phoenix Radio from January 1 to March 27, 2001. Results of operations for the three months ended March 31, 2000 include: (i) the Company's 22 owned television stations (which excludes KQCA and WMUR), five previously owned radio stations and fees from the Managed Stations for the entire period; and, (ii) the TBA for KQCA from January 1 to January 31, 2000 and the results of KQCA, after its acquisition by the Company, from February 1 to March 31, 2000. Three Months Ended March 31, 2001 Compared to Three Months Ended March 31, 2000 Total revenues. Total revenues includes (i) cash and barter advertising revenues, net of agency and national representatives' commissions, (ii) network compensation and (iii) other revenues. Total revenues in the three months ended March 31, 2001 were $148.3 million, as compared to $169.9 million in the three months ended March 31, 2000, a decrease of $21.6 million or 12.7%. The decrease was primarily attributable to (i) a decrease in net political advertising revenues of approximately $6.6 million during the 2001 period; (ii) decreased demand for advertising by national and local advertisers principally in the automotive, corporations and internet categories during the 2001 period; (iii) a decrease in advertising revenues resulting from the carriage of the Super Bowl on the Company's ten owned ABC affiliates during the 2000 period; and, (iv) a decrease in total revenues due to the Phoenix Transaction which reduced total revenues by $3.4 million in the 2001 period, however, did not effect Broadcast Cash Flow. Station operating expenses. Station operating expenses in the three months ended March 31, 2001 were $79.5 million, as compared to $81.1 million in the three months ended March 31, 2000, a decrease of $1.6 million or 2%. The decrease was primarily attributable to cost savings initiatives implemented in 2001. Amortization of program rights. Amortization of program rights in the three months ended March 31, 2001 was $14 million, as compared to $15 million in the three months ended March 31, 2000, a decrease of $1 million or 6.7%. Depreciation and amortization. Depreciation and amortization of intangible assets was $32.3 million in the three months ended March 31, 2001, as compared to $31.5 million in the three months ended March 31, 2000, an increase of $0.8 million or 2.5%. 9 Station operating income. Station operating income in the three months ended March 31, 2001 was $22.5 million, as compared to $42.3 million in the three months ended March 31, 2000, a decrease of $19.8 million or 46.8%. The decrease in station operating income was attributable to the items discussed above. Corporate general and administrative expenses. Corporate general and administrative expenses were $3.7 million for the three months ended March 31, 2001 as compared to $4 million in the three months ended March 31, 2000, a decrease of $0.3 million or 7.5%. Interest expense, net. Interest expense, net was $28.5 million in the three months ended March 31, 2001, as compared to $29 million in the three months ended March 31, 2000, a decrease of $0.5 million or 1.7%. Other income, net. The Company recorded a $72.6 million gain from the sale of Phoenix Radio. This gain was partially offset by a $5.1 million and $18.8 million write-down of the carrying value of the Company's investments in Geocast Network Systems, Inc. ("Geocast") and ProAct Technologies Corporation, respectively. Equity in loss of affiliate. The Company recorded an equity in loss of affiliate of $1.6 million in the three months ended March 31, 2001, as compared to $0.9 million in the three months ended March 31, 2000, an increase of $0.7 million or 77.8%. This loss represents the Company's equity interest in the operating results of Internet Broadcasting Systems, Inc. ("IBS"). Income taxes. Income tax expense was $17.3 million in the three months ended March 31, 2001, as compared to $3.9 million in the three months ended March 31, 2000, an increase of $13.4 million or 344%. This increase is primarily due to the gain on the sale of Phoenix Radio, discussed above. The effective rate was 46% for the three months ended March 31, 2001 as compared to 45.9% for the three months ended March 31, 2000. This represents federal and state income taxes as calculated on the Company's income before income taxes. Net income. Net income was $20.3 million in the three months ended March 31, 2001, as compared to net income of $4.6 million in the three months ended March 31, 2000, an increase of $15.7 million or 341%. This increase in net income was primarily attributable to the gain on the sale of Phoenix Radio, as well as, the other items discussed above. Broadcast Cash Flow. Broadcast cash flow was $54.5 million in the three months ended March 31, 2001, as compared to $74 million in the three months ended March 31, 2000, a decrease of $19.5 million or 26.4%. The decrease was primarily attributable to (i) a decrease in net political advertising revenues of approximately $6.6 million during the 2001 period; (ii) decreased demand for advertising by national and local advertisers principally in the automotive, corporations and internet categories during the 2001 period; and, (iii) a decrease in advertising revenues resulting from the carriage of the Super Bowl on the Company's ten owned ABC affiliates during the 2000 period. Broadcast cash flow margin decreased to 36.8% for the three months ended March 31, 2001 from 43.5% for the three months ended March 31, 2000. Broadcast cash flow is defined as station operating income, plus depreciation and amortization, plus amortization of program rights, minus program payments. The Company has included broadcast cash flow data because management believes that such data are commonly used as a measure of performance among companies in the broadcast industry. Broadcast cash flow is also frequently used by investors, analysts, valuation firms and lenders as one of the important determinants of underlying asset value. Broadcast cash flow should not be considered in isolation or as an alternative to operating income (as determined in accordance with generally accepted accounting principles) as an indicator of the entity's operating performance, or to cash flow from operating activities (as determined in accordance with generally accepted accounting principles) as a measure of liquidity. This measure is believed to be, but may not be, comparable to similarly titled measures used by other companies. Liquidity and Capital Resources On March 28, 2001, the Company exchanged its radio stations in Phoenix, Arizona (KTAR-AM, KMVP-AM and KKLT-FM) ("Phoenix Radio") for WMUR-TV, the ABC affiliate serving the Manchester, NH television market, in a three party swap. The Company sold Phoenix Radio to Emmis Communications Corporation ("Emmis") for $160 million, less transaction expenses, and purchased WMUR-TV from WMUR-TV, Inc. for $185 million, plus a working capital adjustment of $3.5 million and transaction expenses, on March 28, 2001. Prior to the swap, Emmis had been managing Phoenix Radio pursuant to a TBA since August 1, 2000, and the Company had been managing WMUR-TV pursuant to a TBA since January 8, 2001 (effective January 1, 2001 for accounting purposes). See Note 2 of the notes to the condensed consolidated financial statements. The purchase price of WMUR-TV was funded through an intermediary by approximately (i) $160 million from Emmis, and (ii) $28.5 million plus the cost of the transaction expenses from the Company's revolving credit facility. See Note 2 of the notes to the condensed consolidated financial statements. 10 On April 30, 2001, pursuant to an Asset Purchase Agreement entered into with WBOY-TV, Inc., the Company acquired WBOY-TV, the NBC affiliate serving the Clarksburg-Weston, WV, television market for $20 million. The purchase price plus the cost of the transaction expenses were funded using the Company's revolving credit facility. See Note 6 of the notes to the condensed consolidated financial statements. Borrowings related to the purchase of WMUR-TV and WBOY-TV will increase the Company's interest expense by approximately $3.1 million per year based on the borrowings at the time of the transactions. The increase in interest expense will be funded from the increase in cash flow from operations due to the acquisitions of WMUR-TV and WBOY-TV. Capital expenditures were $32 million in 2000 and $9 million during the three months ended March 31, 2001. The Company invested approximately $4.3 million in digital conversion projects at various stations, $3.1 million in maintenance projects and $1.6 million in special projects during the 2001 period. The Company expects to spend approximately $40.8 million for the year ended December 31, 2001 including approximately (i) $23 million in digital projects, (ii) $14.8 million in maintenance projects, and (iii) $3 million in special projects. The Company anticipates that its primary sources of cash, those being, current cash balances, operating cash flow and amounts available under the Company's revolving credit facility, will be sufficient to finance the operating and working capital requirements of its stations, the Company's debt service requirements and anticipated capital expenditures of the Company for both the next 12 months and the foreseeable future thereafter. 11 Item 3. Quantitative and Qualitative Disclosures About Market Risk ------ ---------------------------------------------------------- The Company's Credit Facilities are sensitive to changes in interest rates. As of March 31, 2001, the Company is not involved in any derivative financial instruments. However, the Company may consider certain interest-rate risk strategies in the future. Part II Other Information Item 6. Exhibits and reports on Form 8-K ------- -------------------------------- (a) Exhibits: --------- Exhibit No. ----------- 10.1 Employment Agreement, dated December 1, 2000, between the Company and Philip M. Stolz. 10.2 Consulting Agreement dated January 1, 2001, between the Company and Argyle Communications, Inc. 10.3 Hearst-Argyle Television, Inc. Amended and Restated 1997 Stock Option Plan. (b) Reports on Form 8-K: -------------------- The Company did not file any reports on Form 8-K in the quarter ended March 31, 2001. 12 Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Hearst-Argyle Television, Inc. ------------------------------ Registrant May 15, 2001 By: /s/ Harry T. Hawks -------------------------- -------------------------- Date Harry T. Hawks, Executive Vice President and Chief Financial Officer, (Principal Financial Officer) May 15, 2001 By: /s/ Leslie E. Jacobson -------------------------- --------------------------- Date Leslie E. Jacobson, Controller, (Principal Accounting Officer) 13