| LIN TELEVISION CORP Item 1A Risk Factors: Risks Associated with Business Activities Our operating results are primarily dependent on advertising revenues and, as a result, we may be more vulnerable to economic downturns than businesses in other industries |
| Our operating results are primarily dependent on advertising revenues |
| The success of our operations depends in part upon factors beyond our control, such as: • national and local economic conditions; • the availability of high profile sporting events; • the relative popularity of the programming on our stations; • the demographic characteristics of our markets; and • the activities of our competitors |
| Our programming may not attract sufficient targeted viewership or we may not achieve favorable ratings |
| Our ratings depend partly upon unpredictable and volatile factors beyond our control, such as viewer preferences, competing programming and the availability of other entertainment activities |
| A shift in viewer preferences could cause our programming not to gain popularity or to decline in popularity, which could cause our advertising revenues to decline |
| In addition, we, and those on whom we rely for programming, may not be able to anticipate and react effectively to shifts in viewer tastes and interests in the markets |
| We are dependent to a significant degree on automotive advertising |
| Approximately 27prca, 27prca and 25prca of our total revenues for the years ended December 31, 2005, 2004 and 2003, respectively, consisted of automotive advertising |
| A significant decrease in these revenues in the future could materially and adversely affect our results of operations and cash flows, which could affect our ability to fund operations and service our debt obligations and affect the value of shares of our common stock |
| We have a substantial amount of debt, which could adversely affect our financial condition, liquidity and results of operations, reduce our operating flexibility and put us at greater risk for default and acceleration of our debt |
| As of December 31, 2005, we had approximately dlra981dtta7 million of consolidated indebtedness and approximately dlra828dtta9 million of consolidated stockholders’ equity |
| In addition, we may incur additional indebtedness in the future |
| Accordingly, we will continue to have significant debt service obligations |
| Our large amount of indebtedness could, for example: • require us to use a substantial portion of our cash flow from operations to pay indebtedness and reduce the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general corporate activities; • limit our ability to obtain additional financing in the future; • expose us to greater interest rate risk since the interest rates on our credit facility vary; and • impair our ability to successfully withstand a downturn in our business or the economy in general and place us at a disadvantage relative to our less leveraged competitors |
| Any of these consequences could have a material adverse effect on our business, liquidity and results of operations |
| In addition, our debt instruments require us to comply with covenants, including those that restrict the ability of certain of our subsidiaries to dispose of assets, incur additional 20 _________________________________________________________________ [88]Table of Contents indebtedness, pay dividends, make investments, make acquisitions, engage in mergers or consolidations and make capital expenditures, that will restrict the manner in which we conduct our business and may impact our operating results |
| Our failure to comply with these covenants could result in events of default, which, if not cured or waived, would permit acceleration of our indebtedness and acceleration of indebtedness under other instruments that contain cross-acceleration or cross-default provisions |
| In the past, we have obtained amendments with respect to compliance with financial ratio tests in our credit facility |
| Consents or amendments that may be required in the future may not be available on reasonable terms, if at all |
| We have a history of net losses and a substantial accumulated deficit |
| We had net losses of dlra26dtta1 million and dlra90dtta4 million for year ended December 31, 2005 and 2003, respectively, primarily as a result of amortization and impairment of goodwill and intangible assets and interest expense |
| In addition, as of December 31, 2005, we had an accumulated deficit of dlra227dtta9 million |
| We may not be able to generate sufficient cash flow to meet our debt service obligations, forcing us to refinance all or a portion of our indebtedness, sell assets or obtain additional financing |
| Our ability to make scheduled payments of the principal of, or to pay interest on, or to refinance our indebtedness, will depend on our future performance, which, to a certain extent, will be subject to economic, financial, competitive and other factors beyond our control |
| Our business may not continue to generate sufficient cash flow from operations in the future to pay our indebtedness or to fund our other liquidity needs |
| As a result, we may need to refinance all or a portion of our indebtedness, on or before maturity, sell assets or obtain additional financing |
| We may not be able to refinance any of our indebtedness on commercially reasonable terms, if at all |
| If we are unable to generate sufficient cash flow or refinance our indebtedness on commercially reasonable terms, we may have to seek to restructure our remaining debt obligations, which could have a material adverse effect on the price of our common stock and the market, if any, for our debt |
| We have a material amount of intangible assets, and if we are required to write down intangible assets in future periods, it would reduce net income, which in turn could materially and adversely affect the results of operations and the trading price of LIN TV Corp |
| ’s class A common stock |
| Approximately dlra1dtta9 billion, or 80prca, of our total assets as of December 31, 2005 consists of unamortized intangible assets |
| Intangible assets principally include broadcast licenses and goodwill |
| SFAS Nodtta 142, “Goodwill and Other Intangible Assets,” requires, among other things, the impairment testing of goodwill and other intangible assets |
| If at any point in the future the value of these intangible assets decreased, we would be required to incur an impairment charge that could significantly adversely impact our reported results of operations and stockholders’ equity |
| We recorded an impairment of our goodwill for the year ended December 31, 2005 of dlra33dtta4 million and we recorded an impairment of our broadcast licenses for the year ended December 31, 2003 of dlra51dtta7 million |
| Our class A common stock currently trades at a price that results in a market capitalization less than our total stockholders’ equity as of December 31, 2005, and has done so since April 2005 |
| If we determine in a future period as part of our annual testing for impairments of intangible assets, that the fair market value of our intangible assets exceeded the book value of these assets, we would incur an impairment charge which could have a material adverse affect on our results of operations and the trading price of our class A common stock |
| 21 _________________________________________________________________ [89]Table of Contents Our strategy includes seeking growth through acquisitions of television stations, which could pose various risks and increase our leverage |
| We have pursued and intend to continue to pursue selective acquisitions of television stations with the goal of improving their operating performance by applying our management’s business and growth strategy |
| In 2005, we acquired six television stations and entered into a local marketing agreement to operate another television station |
| However, we may not be successful in identifying attractive acquisition targets nor have the financial capacity to complete additional station acquisitions |
| Acquisitions involve inherent risks, such as increasing leverage and debt service requirements and combining company cultures and facilities, which could have a material adverse effect on our operating results, particularly during the period immediately following any acquisitions |
| We may not be able to successfully implement effective cost controls, increase advertising revenues or increase audience share with respect to any acquired station |
| In addition, future acquisitions may result in our assumption of unexpected liabilities and may result in the diversion of management’s attention from the operation of our business |
| In addition, television station acquisitions are subject to the approval of the FCC and, potentially, other regulatory authorities |
| The need for FCC and other regulatory approvals could restrict our ability to consummate future transactions and potentially require us to divest some television stations if a regulatory authority believes that a proposed acquisition would result in excessive concentration in a market, even if the proposed combinations may otherwise comply with FCC ownership limitations |
| Broadcast interests of our affiliates, including Hicks Muse, may be attributable to us and may limit our ability to acquire television stations in particular markets, restricting our ability to execute our growth strategy |
| The number of television stations we may acquire in any market is limited by FCC rules and may vary depending upon whether the interests in other television stations or other media properties of individuals affiliated with us are attributable to those individuals under FCC rules |
| The FCC generally applies its ownership limits to “attributable” interests held by an individual, corporation, partnership or other association |
| The broadcast or other media interests of our officers, directors and 5prca or greater voting stockholders are generally attributable to us, which may limit our acquisition or ownership of television stations in particular markets while those officers, directors or stockholders are associated with us |
| In addition, the holder of an otherwise nonattributable equity or debt interest in a licensee which is in excess of 33prca of the total debt and equity of the licensee 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 or newspaper in the same market |
| As of December 31, 2005, affiliates of Hicks Muse owned 23cmam502cmam059 shares of LIN TV class B common stock, which represents 45dtta5prca of LIN TV’s capital stock |
| Pursuant to FCC rules and regulations, non-voting stock does not generally create an attributable interest |
| As a result, due to the fact that affiliates of Hicks Muse only own shares of LIN TV class B common stock, we believe that none of our stations will be attributed to Hicks Muse and that no stations attributed to Hicks Muse will be attributed to us |
| However, if affiliates of Hicks Muse elect to convert their shares of class B common stock into either class A common stock or class C common stock of LIN TV, under current FCC rules and regulations, broadcast stations or newspapers that are attributable to Hicks Muse would be attributed to us |
| In addition, 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 |
| 22 _________________________________________________________________ [90]Table of Contents Hicks Muse and its affiliates, whose interests may differ from your interests, have approval rights with respect to significant transactions and could convert their equity interests in LIN TV into a majority of its voting power, thereby reducing the voting power of other LIN TV shareholders |
| Hicks Muse and its affiliates have the ability to convert shares of LIN TV’s nonvoting class B common stock into class A common stock, subject to the approval of the FCC If this occurs, affiliates of Hicks Muse would own approximately 45dtta5prca of our voting equity interests and will effectively have the ability to elect the entire board of directors and to approve or disapprove any corporate transaction or other matters submitted to LIN TV shareholders for approval, including the approval of mergers or other significant corporate transactions |
| Upon the conversion of the majority of the nonvoting class B common stock into class A common stock, the class C common stock will automatically convert into an equal number of shares of class A common stock |
| The interests of Hicks Muse and its affiliates may differ from the interests of LIN TV’s other stockholders and Hicks Muse and its affiliates could take actions or make decisions that are not in the best interests of LIN TV’s other stockholders |
| For example, Hicks Muse is in the business of making significant investments in existing or newly formed companies and may from time to time acquire and hold controlling or non-controlling interests in television broadcast assets that may directly or indirectly compete with LIN TV for advertising revenues |
| Hicks Muse and its affiliates may from time to time identify, pursue and consummate acquisitions of television stations or other broadcast related businesses that may be complementary to LIN TV’s business and therefore such acquisition opportunities may not be available to LIN TV Moreover, Royal W Carson, III and Randall S Fojtasek, two of LIN TV’s directors, together own all of LIN TV’s class C common stock and therefore possess 70prca of LIN TV’s combined voting power |
| Accordingly, Messrs |
| Carson and Fojtasek will have the power to elect the entire board of directors of LIN TV and through this control, to approve or disapprove any corporate transaction or other matter submitted to the LIN TV stockholders for approval, including the approval of mergers or other significant corporate transactions |
| Both of Messrs |
| Carson and Fojtasek have prior business relations with Hicks Muse |
| Carson is the President of Carson Private Capital Incorporated, an investment firm that sponsors funds-of-funds and dedicated funds that have invested substantially all of the net capital of these funds in investment funds sponsored by Hicks Muse or its affiliates |
| Carson also serves on an advisory board representing the interests of limited partners of Hicks, Muse, Tate & Furst Europe Fund, LP, which is sponsored by Hicks Muse |
| Hicks, Muse, Tate & Furst Europe Fund does not have an investment in us |
| Fojtasek was the Chief Executive Officer of Atrium Companies, Inc, which was principally owned by Hicks Muse and its affiliates |
| Affiliates of Hicks Muse have invested as limited partners in Brazos Investment Partners LLC, a private equity investment firm of which Mr |
| If we are unable to compete effectively, our revenue could decline |
| The entertainment industry, and particularly the television industry, is highly competitive and is undergoing a period of consolidation and significant change |
| Many of our current and potential competitors have greater financial, marketing, programming and broadcasting resources than we do |
| Technological innovation and the resulting proliferation of television entertainment, such as cable television, Internet services, wireless cable, satellite-to-home distribution services, pay-per-view, digital video recorders, DVDs and home video and entertainment systems and mobile video devices have fractionalized television viewing audiences and have subjected free over-the-air television broadcast stations to new types of competition |
| In addition, as a result of the Telecommunications Act, the legislative ban on telephone cable ownership has been repealed and telephone companies are now permitted to seek FCC approval to provide video services to homes |
| 23 _________________________________________________________________ [91]Table of Contents It will be difficult to take us over, which could adversely affect the trading price of our class A common stock |
| Affiliates of Hicks Muse effectively determine whether a change of control will occur because of their rights through their ownership of all of the shares of our class B common stock or through their voting power, if they convert their shares of class B common stock into class A common stock or class C common stock |
| Moreover, provisions of Delaware corporate law and our bylaws and certificate of incorporation, including the 70prca voting power rights of our class C common stock held by Messrs |
| Carson and Fojtasek, make it more difficult for a third party to acquire control of us, even if a change of control would benefit the holders of class A common stock |
| These provisions and controlling ownership by affiliates of Hicks Muse could also adversely affect the public trading price of our class A common stock |
| Our adoption of the Financial Accounting Standards Board’s SFAS Nodtta 123 (revised 2004), “Share-Based Payment,” and alternative incentive compensation plans that we could adopt, could result in our recognition of significant additional compensation expense |
| We adopted SFAS Nodtta 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”) in the fourth quarter of 2005, and we applied the modified prospective method, as permitted by SFAS 123R, whereby a company recognizes share-based employee costs from the beginning of the fiscal period in which the recognition provisions are first applied as if the fair-value-based accounting method had been used to account for all employee awards granted, modified, or settled after the effective date and to any awards that were not fully vested as of the effective date |
| SFAS 123R and the related accounting is described in more detail in Note 1 to our consolidated financial statements under the heading “Recently Issued Accounting Pronouncements |
| ” As a result of our adoption of SFAS 123R, we have incurred additional compensation expenses compared to prior periods and any new incentive compensation plans that involve equity, cash or other forms of incentive compensation may increase the absolute amount or volatility of our future compensation expense |
| The loss of network affiliation agreements or changes in network affiliations could materially and adversely affect our results of operations if we are unable to quickly replace the network affiliation |
| The non-renewal or termination of a network affiliation agreement or a change in network affiliations could have a material adverse effect on us |
| Each of the networks generally provides our affiliated stations with up to 22 hours of prime time programming per week |
| In return, our stations broadcast network-inserted commercials during that programming and often receive cash payments from networks, although in some circumstances, we make cash payments to networks |
| In addition, some of our network affiliation agreements are subject to earlier termination by the networks under specified circumstances, including as a result of a change of control of our affiliated stations, which would generally result upon the acquisition of 50prca of our voting power |
| In the event that affiliates of Hicks Muse elect to convert the shares of LIN TV class B common stock held by them into shares of either class A common stock or class C common stock, such conversion may result in a change of control of our stations with network affiliation agreements |
| Some of the networks with which our stations are affiliated have required other broadcast groups, upon renewal of affiliation agreements, to reduce or eliminate network affiliation compensation and, in specific cases, to make cash payments to the network, and to accept other material modifications of existing affiliation agreements |
| Consequently, our affiliation agreements may not all remain in place and each network may not continue to provide programming or compensation to affiliates on the same basis as it currently provides programming or compensation |
| In addition, the UPN and WB Networks announced they would cease operating as a network and would no longer provide programming after September 20, 2006 |
| Seven of our stations are either UPN or WB affiliates, and some or all of these station may cease to be affiliated with a network after September 20, 2006 |
| We are currently in negotiations with FOX and Telefutura regarding affiliation agreements with their networks |
| If any of 24 _________________________________________________________________ [92]Table of Contents our stations cease to maintain affiliation agreements with networks for any reason, we would need to find alternative sources of programming, which may be less attractive and more expensive |
| A change in network affiliation in a given television market may have many short-term and long-term consequences, depending upon the circumstances surrounding the change |
| Potential short-term consequences include increased marketing costs and increased internal operating costs, which can vary widely depending on the amount of marketing required to educate the audience regarding the change and to maintain the station’s viewing audience, short term loss of market share or slower market growth due to advertiser uncertainty about the switch, costs of gearing up a news operation, if necessary, and the cost of the equipment needed to conform the station’s programming, equipment and logos to the new network affiliation |
| Long-term consequences are more difficult to assess, due to the cyclical nature of each of the major network’s share of the audience that changes from year to year with programs coming to the end of their production cycle and the audience acceptance of new programs in the future and the fact that national network averages are not necessarily indicative of how a network’s programming is accepted in an individual market |
| How well a particular network fares in the affiliation switch depends largely on the value of the broadcast license, which is influenced by the length of time the broadcast license has been broadcasting, whether it is a VHF or a UHF license, the quality and location of the license, the audience acceptance of the licensee’s local news programming and community involvement and the quality of the other non-network programming transmitted |
| In addition, the majority of the revenue earned by television stations is attributable to locally produced news programming and syndicated product, rather than to network affiliation payments and advertising sales related to network programming |
| The circumstances that may surround a network affiliation switch cause uncertainty as to the actual costs that will be incurred by us and, if these costs are significant, the switch could have a material adverse impact on the income we derive from the affected station |
| The use of an alternative method of valuing our network affiliations could have a significant adverse impact on our results of operations |
| Different broadcast companies may use different assumptions in valuing acquired broadcast licenses and their related network affiliations than those that are used by us |
| 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 among broadcast companies |
| We believe that the value of a television station is derived primarily from the attributes of its broadcast license |
| The attributes include: • The scarcity of broadcast licenses assigned by the FCC to a particular market; • The length of time that the broadcast license has been broadcasting; • Whether the station is a VHF station or a UHF station; • The quality of the broadcast signal and location of the broadcast station within the market; • The audience acceptance of the broadcast license’s local news programming and community involvement; and • The quality of non-network programming carried by a station |
| We generally have 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 is based on our evaluation of the broadcast licenses acquired and the characteristics of the markets in which they operated |
| We believed that in substantially all our 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 substantially all our markets we operate in beyond the cost of negotiating a new agreement with another network and the value of 25 _________________________________________________________________ [93]Table of Contents 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 |
| 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 |
| If we were to adopt this alternative method for valuing these network affiliations, the value of our broadcast licenses and goodwill as reported on our balance sheet would be reduced and the value of our other intangibles assets would be proportionately increased |
| As a result, our expenses relating to the depreciation and amortization of intangible assets could increase significantly as more value would be assigned to an amortizing asset and this increase could materially reduce our operating income and materially increase our net loss |
| In future acquisitions, the valuation of the broadcast licenses and network affiliations may differ from those attributable to our existing stations due to different attributes of each station and the market in which it operates |
| The General Electric Capital Corporation note could result in significant liabilities and could trigger a change of control under our existing indebtedness, causing our indebtedness to become immediately due and payable |
| GECC, a subsidiary of General Electric Company, provided debt financing for a joint venture between us and NBC Universal Inc, another subsidiary of General Electric Company, in the form of an dlra815dtta5 million, non-amortizing senior secured note due 2023 |
| In the event that such note is not extended or otherwise refinanced when the note matures in 2023, we expect that, assuming current federal marginal tax rates remain in effect; our tax liability related to the joint venture transaction will be approximately dlra255dtta0 million |
| The formation of the joint venture was intended to be tax-free to us |
| However, any early repayment of the note will accelerate this tax liability, which could have a material adverse effect on us |
| In addition, if an event of default occurs under the note, and GECC is unable to collect all amounts owed to it after exhausting all commercially reasonable remedies against the joint venture, including during the pendency of any bankruptcy involving the joint venture, GECC may proceed against LIN TV to collect any deficiency, including by foreclosing on our stock and other LIN TV subsidiaries, which could trigger the change of control provisions under our existing indebtedness |
| Annual cash interest payments on the note are approximately dlra66dtta1 million |
| There are no scheduled payments of principal due prior to 2023, the stated maturity of the note |
| The obligations under the note were assumed by the joint venture, and the proceeds of the note were used to finance a portion of the cost of Hicks Muse’s acquisition of us |
| The note is not our obligation nor the obligation of any of LIN TV’s subsidiaries and is recourse only to the joint venture, our equity interest in the joint venture and, after exhausting all remedies against the assets of the joint venture and the other equity interest in the joint venture, to LIN TV pursuant to a guarantee |
| An event of default under the note will occur if the joint venture fails to make any scheduled payment of interest, within 90 days of the date due and payable, or principal of the note on the maturity date |
| The joint venture has established a cash reserve of dlra15 million, which was waived for 2005, for the purpose of making interest payments on the note when due |
| Both NBC and us have the right to make a shortfall loan to the joint venture to cover any interest payment |
| However, if the joint venture fails to pay principal or interest on the note, and neither NBC nor us make a shortfall loan to cover the interest payment, an 26 _________________________________________________________________ [94]Table of Contents event of default would occur under the note and GECC could accelerate the maturity of the entire amount due under the note |
| Other than the acceleration of the principal amount of the note upon an event of default, prepayment of the principal of the note is prohibited prior to its stated maturity |
| Risks Related to Our Industry Any potential hostilities or terrorist attacks may affect our revenues and results of operations |
| During each of the three month periods ended March 31, 2003 and June 30, 2003, we experienced a loss of advertising revenue and incurred additional broadcasting expenses due to the initiation of military action in Iraq |
| The military action disrupted our television stations’ regularly scheduled programming and some of our clients rescheduled or delayed advertising campaigns to avoid being associated with war coverage |
| We expect that if the United States engages in other foreign hostilities or there is a terrorist attack against the United States, we may lose additional advertising revenue and incur increased broadcasting expenses due to further pre-emption, delay or cancellation of advertising campaigns and the increased costs of providing coverage of such events |
| We cannot predict the extent and duration of any future, disruption to our programming schedule, the amount of advertising revenue that would be lost or delayed or the amount by which our broadcasting expenses would increase as a result |
| The loss of revenue and increased expenses has negatively affected, and could negatively affect in the future, our results of operations |
| Our industry is subject to significant syndicated and other programming costs, and increased programming costs could adversely affect our operating results |
| Our industry is subject to significant syndicated and other programming costs |
| We may be exposed in the future to increased programming costs, which may adversely affect our operating results |
| We often acquire program rights two or three years in advance, making it difficult for us to accurately predict how a program will perform |
| In some instances, we may have to replace programs before their costs have been fully amortized, resulting in write-offs that increase station operating costs |
| In addition, we are committed to purchasing all future network seasons of certain programming, irrespective of financial performance |
| Our industry is subject to a government-mandated analog-digital conversion process which may cause us to lose viewership and advertising revenues |
| Federal legislation now requires us to cease all analog transmissions by February 17, 2009 |
| Over 15prca of all television households now receive television exclusively by means of over-the-air transmissions such as those transmitted by our stations and millions of additional households who subscribe to cable or satellite also have additional receivers which receive over-the-air transmissions |
| Households without satellite or cable service are substantially greater viewers of local stations such as ours than satellite or cable households |
| The federal government has created a subsidy for households with analog over-the-air receivers to receive free digital converters |
| The subsidy may not be large enough to cover all households with over-the-air receivers and a significant percentage of such households may not learn of or choose to take advantage of the subsidy |
| As a result, the transition to digital may cause some households to lose service and induce others to subscribe to satellite or cable service, reducing our viewership and advertising revenues |
| Implementation of digital television improves the technical quality of over-the-air broadcast television |
| However, conversion to digital operations may reduce a station’s geographical coverage area |
| We believe that digital television is essential to our long-term viability and the broadcast industry, but we cannot predict the precise effect digital television might have on our business |
| The FCC has levied fees on broadcasters with respect to non-broadcast uses of digital channels, including data transmissions or subscriber services |
| Further advances in technology may also increase competition for household audiences and advertisers |
| We are unable to predict the effect that technological changes will have on the broadcast television industry or the future results of our operations |
| 27 _________________________________________________________________ [95]Table of Contents Changes in FCC ownership rules through Commission action, judicial review or federal legislation may limit our ability to continue operating stations under local marketing agreements, may prevent us from obtaining ownership of the stations we currently operate under local marketing agreements and/or may preclude us from obtaining the full economic value of one or more of our two-station operations upon a sale, merger or other similar transaction transferring ownership of such station or stations |
| FCC ownership rules currently impose significant limitations on the ability of broadcast licensees to have attributable interests in multiple media properties |
| In addition, federal law prohibits one company from owning broadcast television stations with service areas encompassing more than an aggregate 39prca share of national television households |
| Ownership restrictions under FCC rules also include a variety of local limits on media ownership |
| The restrictions include an ownership limit of one television station in most medium and smaller television markets and two stations in most larger markets, known as the television duopoly rule |
| The regulations also include a prohibition on the common ownership of a newspaper and television station in the same market (newspaper-television cross-ownership), limits on common ownership of radio and television stations in the same market (radio-television station ownership) and limits on radio ownership of four to eight radio stations in a local market |
| In 2003, the FCC voted to revise and in most cases liberalize substantially several of its national and local ownership rules |
| In 2004, the United States Court of Appeals found virtually all of these actions to be without adequate support and remanded to the Commission for further deliberation |
| In 2005, the United States Supreme Court declined to hear an appeal of the Court of Appeals decision |
| The FCC is expected in 2006 to issue one or more further rulemakings reexamining the ownership rules in light of the court decision |
| We unable to predict the timing or outcome of any FCC deliberations |
| Should the FCC’s amended rules ultimately become effective, attractive opportunities may arise for additional television station and other media acquisitions |
| But these changes also create additional competition for us from other entities, such as national broadcast networks, large station groups, newspaper chains and cable operators who may be better positioned to take advantage of such changes and benefit from the resulting operating synergies both nationally and in specific markets |
| Should the television duopoly rule become relaxed, we may be able to acquire the ownership of one or both of the stations in Austin, Texas, and Providence, Rhode Island, which we currently operate under local marketing agreements and which are subject to purchase option agreements entered into by our subsidiaries |
| Should we be unable to do so, there is no assurance that the grandfathering of our local marketing agreements will be permitted beyond conclusion of a future rulemaking which could be initiated as early as 2005 but no later than 2006 |
| During the year ended December 31, 2005 we had net revenues of dlra20dtta2 million, or 5dtta3prca, of our total net revenues, attributable to those local marketing agreements |