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

Special Note about Forward-Looking Statements

This report contains certain forward-looking statements with respect to our financial condition, results of operations and business, including statements under this caption Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations". All of these forward-looking statements are based on estimates and assumptions made by our management, which, although we believe them to be reasonable, are inherently uncertain. Therefore, you should not place undue reliance upon such estimates and statements. We cannot assure you that any of such estimates or statements will be realized and actual results may differ materially from those contemplated by such forward-looking statements. Factors that may cause such differences include those discussed under the caption Item 1A. "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2011 ("10-K"). Many of these factors are beyond our control.

Forward-looking statements contained herein speak only as of the date hereof. We undertake no obligation to publicly release the result of any revisions to these forward-looking statements, which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Executive Summary

We operate or service 32 network-affiliates, more than 50 television and niche web sites, and a growing suite of mobile products in 15 U.S. markets, with multiple network-affiliates in 12 markets. Our operating revenues are primarily derived from the sale of advertising time to local, national and political advertisers. Additional, but less significant revenues are generated from our television station web sites, retransmission consent fees, interactive revenues and other revenues.

During the three and six months ended June 30, 2012, net revenues increased $20.1 million and $33.5 million, respectively, compared to the same periods in 2011, primarily driven by an increase in our local revenues and political advertising sales. During the three and six months ended June 30, 2012, local revenues, which include net local advertising sales, retransmission consent fees and television station web site revenues, increased $9.2 million and $18.6 million, respectively, compared to the same periods last year. Political advertising sales increased $5.8 million and $7.8 million for the three and six months ended June 30, 2012, respectively, compared to the same periods last year.

On January 20, 2012, we completed the redemption of $251 million, net of a discount of $1.2 million, of our 6½% Senior Subordinated Notes and our 6½% Senior Subordinated Notes - Class B ("Senior Subordinated Notes"), and as of that date, there were no Senior Subordinated Notes outstanding. We used proceeds from an incremental term loan under our senior secured credit facility and cash on hand to fund the aggregate redemption price.

During the three and six months ended June 30, 2012, we made shortfall loans in the principal amounts of $1.1 million and $1.7 million, respectively, to our joint venture with NBCUniversal Media, LLC ("NBCUniversal"). As of June 30, 2012, we have an accrued shortfall liability of $2.5 million for our approximate 20% share of debt service shortfalls that we expect to fund during the remainder of 2012 and into 2013. We believe that cash shortfalls beyond the amounts currently accrued are not probable. Actual cash shortfalls at the joint venture could vary from our current estimates.

On February 16, 2012, we completed the sale of substantially all of the assets of WWHO-TV in Columbus, OH to Manhan Media, Inc. On April 21, 2012, we completed the sale of substantially all of the assets of WUPW-TV in Toledo, OH to WUPW, LLC. For further information see Note 3 - "Discontinued Operations".

On May 4, 2012, LIN Television entered into an asset purchase agreement with affiliates and subsidiaries of New Vision Television, LLC ("New Vision") to acquire (the "Acquisition") certain broadcast and other related assets of 13 network-affiliates in eight markets for $330.4 million, subject to post-closing adjustments, and the assumption of $12.2 million of finance lease obligations. Concurrent with the Acquisition, Vaughan Acquisition LLC ("Vaughan"), a third-party licensee, will acquire certain assets of five separately owned network-affiliates in three markets for $4.6 million (the "Vaughan Acquired Stations") currently owned by PBC Broadcasting, LLC ("PBC") and operated by PBC with certain services from New Vision. Upon the closing of these transactions, which are conditioned on the consummation of each other, LIN Television agreed to provide certain services to the Vaughan Acquired Stations pursuant to services arrangements with Vaughan. We expect that Vaughan will be considered a VIE, of which we are the primary beneficiary, and that we will consolidate the assets, liabilities, and results of operations of Vaughan and its consolidated subsidiaries. The closing of these transactions, which is expected to occur in 2012, is subject to regulatory approvals and other closing conditions, including the approval of the FCC. For further information see Note 2 - "Acquisitions".

Critical Accounting Policies and Estimates

Certain of our accounting policies, as well as estimates we make, are critical to the presentation of our financial condition and results of operations since they are particularly sensitive to our judgment. Some of these policies and estimates relate to matters that are inherently uncertain. The estimates and judgments we make affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent liabilities. On an on-going basis, we evaluate our estimates, including those used for allowance for doubtful accounts in receivables, valuation of goodwill and intangible assets, amortization and impairment of program rights and intangible assets, stock-based compensation and other long-term incentive compensation arrangements, pension costs, barter transactions, income taxes, employee medical insurance claims, useful lives of property and equipment, contingencies, including shortfall funding liabilities to our joint venture with NBCUniversal, litigation and net assets of businesses acquired. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, and it is possible that such differences could have a material impact on our consolidated financial statements.

Recent Accounting Pronouncements

In July 2012, there were revisions to the accounting standard for impairment tests of indefinite-lived intangible assets other than goodwill. Under the revised standard a company can first perform a qualitative assessment to determine whether further impairment testing of indefinite-lived intangible assets is necessary. A company can choose to perform the qualitative assessment on none, some, or all of its indefinite-lived intangible assets, and can also bypass the qualitative assessment and perform the quantitative impairment test for any indefinite-lived intangible in any period. The revised standard is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted during 2012 if a company has not yet performed its 2012 annual impairment test or issued its financial statements. We will adopt this guidance no later than January 1, 2013, and we do not expect it to have a material impact on our financial position or results of operations.

In September 2011, there were revisions to the accounting standard for goodwill impairment tests. A company has the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. The revisions are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. We adopted this guidance effective January 1, 2012, and the adoption did not have an impact on our financial position or results of operations.

In June 2011, there were revisions to the accounting standard for reporting comprehensive income, which require presentation of the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. We elected to present this information in a separate statement included within the primary financial statements following our consolidated statement of operations. The revisions are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, and should be applied retrospectively. We adopted this guidance effective January 1, 2012, and the adoption did not have an impact on our financial position or results of operations.

In May 2011, the fair value accounting standard was amended to change fair value measurement principles and disclosure requirements. The key changes in measurement principles include limiting the concepts of the highest and best use and valuation premise to nonfinancial assets, providing a framework for considering whether a premium or discount can be applied in a fair value measurement, and aligning the fair value measurement of instruments classified within an entity's stockholders' equity with the guidance for liabilities. Disclosures are required for all transfers between Levels 1 and 2 within the valuation hierarchy, the use of a nonfinancial asset measured at fair value if its use differs from its highest and best use, the level in the valuation hierarchy of assets and liabilities not recorded at fair value but for which fair value is required to be disclosed, and for Level 3 measurements, quantitative information about unobservable inputs used, a description of the valuation processes used, and qualitative discussion about the sensitivity of the measurements. We adopted this guidance effective January 1, 2012, and the adoption did not have an impact on our financial position or results of operations.

Results of Operations



Set forth below are key components that contributed to our operating results (in
thousands):



                          Three Months Ended June 30,          Six Months Ended June 30,
                          2012         2011      % Change     2012        2011      % Change
Local revenues         $   74,272    $  65,048     14%      $ 141,931   $ 123,309     15%
National advertising
sales                      25,402       23,840      7%         48,523      46,178      5%
Political
advertising sales           7,645        1,814     321%        10,581       2,772     282%
Interactive revenues       10,520        7,000     50%         17,506      11,957     46%
Other revenues              3,177        3,261     -3%          5,675       6,466     -12%
Net revenues              121,016      100,963     20%        224,216     190,682     18%

Direct operating           37,245       32,137     16%         72,402      62,070     17%
Selling, general and
administrative             28,043       26,165      7%         56,426      51,699      9%
Amortization of
program rights              5,381        5,347      1%         10,600      10,675     -1%
Corporate                   8,219        7,339     12%         14,965      13,822      8%
Depreciation                6,651        6,359      5%         13,410      12,623      6%
Amortization of
intangible assets             478          287     67%            955         548     74%
Loss from asset
dispositions                    4          103     -96%             3         358     -99%
Total operating
expenses                   86,021       77,737     11%        168,761     151,795     11%
Operating income       $   34,995    $  23,226     51%      $  55,455   $  38,887     43%

Period Comparison

Revenues

Net revenues consist primarily of local revenues, which include net local advertising sales, retransmission consent fees and television station web site revenues, and net national and political advertising sales. Additional revenues include interactive revenues, barter revenues, network compensation, production revenues, tower rental income and station copyright royalties.

During the three months ended June 30, 2012, net revenues increased by $20.1 million, or 20%, compared to the same period in the prior year. The increase was primarily due to: (i) a $9.2 million increase in local revenues; (ii) a $5.8 million increase in political advertising sales; (iii) a $3.5 million increase in interactive revenues; and (iv) a $1.6 million increase in national advertising sales.

During the six months ended June 30, 2012, net revenues increased by $33.5 million, or 18%, compared to the same period in the prior year. The increase was primarily due to: (i) an $18.6 million increase in local revenues; (ii) a $7.8 million increase in political advertising sales; (iii) a $5.5 million increase in interactive revenues; and (iv) a $2.3 million increase in national advertising sales. These increases were partially offset by a $0.8 million decrease in other revenues.

The increase in local revenues during both periods is a result of growth in local advertising sales, growth in retransmission consent revenues as a result of contract renewals during 2011 and the first quarter of 2012 and contractual rate increases, and increased advertising on our television station web sites compared to the same period in the prior year. The increase in political advertising sales during both periods is due to the 2012 Presidential, Congressional, state and local elections. The increase in interactive revenues during both periods is a result of growth in advertising sales from RMM compared to the same period in the prior year and revenues generated by Nami Media, which we acquired during the fourth quarter of 2011.

During the three and six months ended June 30, 2012, the automotive category, which represented 26% of local and national advertising sales during both periods, increased by 25% and 19%, respectively, as compared to the three and six months ended June 30, 2011, during which the automotive category represented 21% and 22%, respectively, of local and national advertising sales. The increases were primarily the result of disruptions in the automotive supply chain during the same periods of 2011, resulting from the March 2011 Japan earthquake and tsunami.

Operating Expenses

Operating expenses increased $8.3 million and $17 million, or 11% and 11%, for the three and six months ended June 30, 2012, respectively, compared to the same periods last year. These increases are primarily due to increases in direct operating expenses and selling, general and administrative expenses. Direct operating expenses increased $5.1 million and $10.3 million during the three and six months ended June 30, 2012, respectively, compared to the same periods last year primarily as a result of an increase in fees pursuant to network affiliation agreements, employee compensation expense and higher cost of goods sold related to RMM. Selling, general and administrative expenses increased $1.9 million and $4.7 million during the three and six months ended June 30, 2012, respectively, primarily due to higher variable costs attributable to the growth in revenue compared to the same periods last year. The increase in selling, general and administrative expenses during the six months ended June 30, 2012 was also due to an increase in professional fees.

Other Expense



The following summarizes the components of other expense, net (in thousands):



                                         Three Months Ended June 30,         Six Months Ended June 30,
                                           2012              2011              2012             2011
Components of other expense, net:
Interest expense, net                  $       9,266    $        12,717    $      19,636    $      25,649
Share of loss in equity investments               62                554              153            1,167
Gain on derivative instruments                     -               (583 )              -           (1,203 )
Loss on extinguishment of debt                     -                 50            2,099              192
Other expense (income), net                      101                 (3 )             88               (2 )
Total other expense, net               $       9,429    $        12,735    $      21,976    $      25,803

Other expense, net decreased $3.3 million and $3.8 million, or 26% and 15%, during the three and six months ended June 30, 2012, respectively, compared to the same periods last year, primarily due to a decrease in interest expense as further described below. The decrease in other expense, net during the six months ended June 30, 2012 was partially offset by a $1.9 million increase in loss on extinguishment of debt, which was a result of the redemption of our Senior Subordinated Notes during the first quarter of 2012.

Interest Expense



The following summarizes the components of interest expense, net (in thousands):



                                               Three Months Ended June 30,         Six Months Ended June 30,
                                                 2012              2011              2012             2011
Components of interest expense:
Senior secured credit facility               $       4,946    $           227    $       9,954    $         645
83/8% Senior Notes                                   4,301              4,301            8,648            8,647
61/2% Senior Subordinated Notes                          -              4,714              595            9,378
61/2% Senior Subordinated Notes - Class B                -              2,782              306            5,539
Other                                                   19                693              133            1,440
Total interest expense, net                  $       9,266    $        12,717    $      19,636    $      25,649

Interest expense, net decreased by $3.5 million and $6 million, or 27% and 23%, during the three and six months ended June 30, 2012, respectively, primarily as a result of the redemption of our Senior Subordinated Notes during the first quarter of 2012, partially offset by an increase in interest expense as a result of an increase in borrowings under our senior secured credit facility compared to the same period in the prior year.

Provision for Income Taxes

Provision for income taxes increased $0.5 million and $2.3 million for the three and six months ended June 30, 2012, respectively, compared to the same periods last year. The increase in the tax provision was primarily a result of the increase in income from operations before taxes as compared to the same period last year. Our effective income tax rate was 38.6% and 80.8% for the six months ended June 30, 2012 and June 30, 2011, respectively. The decrease in the effective income tax rate was primarily a result of state tax legislation enacted in Michigan in May 2011, which repealed the Michigan business tax ("MBT"), and implemented a corporate income tax instead, effective January 2012. As a result of the elimination of the MBT, certain future tax deductions, which were available to be utilized beginning in 2015, and had been recognized as deferred tax assets in our financial statements, will be not be deductible. Therefore, during the second quarter of 2011, we recognized incremental deferred income tax expense of $5.1 million, net of federal benefit, for the reversal of these previously established deferred tax assets.

Liquidity and Capital Resources

Our principal sources of funds for working capital have historically been cash from operations and borrowings under our senior secured credit facility. As of June 30, 2012, we had unrestricted cash and cash equivalents of $9 million, and a $75 million revolving credit facility, of which $65 million was available, subject to certain covenant restrictions.

Our total outstanding debt as of June 30, 2012 was $591.5 million. This excludes the contingent obligation associated with our guarantee of the $815.5 million GECC Note associated with our joint venture with NBCUniversal (see Note 11 - "Commitments and Contingencies" for further details).

Our operating plan for the next 12 months anticipates that we generate cash from operations, utilize available borrowings, make certain repayments of indebtedness, including mandatory repayments of term loans and incremental term loans under our senior secured credit facility and complete the New Vision acquisition as further described below. Our ability to borrow under our revolving credit facility is contingent on our compliance with certain financial covenants, which are measured, in part, by the level of earnings before interest expense, taxes, depreciation and amortization ("EBITDA") that we generate from our operations. As of June 30, 2012, we were in compliance with all financial and nonfinancial covenants under our senior secured credit facility.

Our future ability to generate cash from operations and from borrowings under our senior secured credit facility could be adversely affected by a number of risks, which are discussed in the Liquidity and Capital Resources section within Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" and in Item 1A. "Risk Factors" in our 10-K and elsewhere herein.

Our liquidity position during 2012 has been, and over the next 12 months and beyond will primarily be affected by, but is not limited to, the following:

† Continued growth in local and interactive revenues. During the three and six months ended June 30, 2012, our local revenues increased 14% and 15%, respectively, compared to the same periods in the prior year. Additionally, during the three and six months ended June 30, 2012, our interactive revenues increased 50% and 46%, respectively, compared to the same periods in the prior year. We expect further growth in our local revenues and interactive revenues, however, there can be no assurance that this will occur.

† Cyclical fluctuations. We experience significant fluctuations in our political advertising revenues since advertising revenues are generally higher in even-numbered years due to additional revenues associated with political advertising related to local and national elections. During the three and six months ended June 30, 2012, our net political advertising sales increased $5.8 million and $7.8 million, respectively, compared to the same periods in the prior year. We anticipate increased advertising revenues during the remainder of 2012 as a result of these cyclical fluctuations. Additionally, the U.S. Supreme Court's ruling in 2010 that allowed for unlimited independent political expenditures from corporations and unions may further increase political advertising spending in even numbered years.

† Asset Purchase Agreement with New Vision. On May 4, 2012, LIN Television entered into an asset purchase agreement with affiliates and subsidiaries of New Vision to acquire certain broadcast and other related assets of 13 network-affiliates in eight markets for $330.4 million and the assumption of $12.2 million of finance lease obligations. Concurrent with the Acquisition, Vaughan will acquire certain assets of five separately owned network-affiliates in three markets for $4.6 million. The aggregate purchase for these transactions is $335 million. Pursuant to the terms of the purchase agreement, on May 4, 2012, we deposited $33.5 million into an escrow account, which will be applied to the payment of the purchase price at closing. The remaining purchase price due at closing will be funded with a combination of a draw against LIN Television's revolving credit facility, newly incurred debt and cash on hand. The closing of these transactions, which is expected to occur in 2012, is subject to

regulatory approvals and other closing conditions, including the approval of the FCC. For further information see Note 2 - "Acquisitions".

† Senior Subordinated Notes Due 2013. On January 20, 2012, we completed the redemption of $251 million, net of a discount of $1.2 million, of our Senior Subordinated Notes. We used proceeds from an incremental term loan under our senior secured credit facility and cash on hand to fund the aggregate redemption price.

† Cash requirements related to the NBCUniversal joint venture. During the three and six months ended June 30, 2012, we made shortfall loans in aggregate principal amounts of $1.1 million and $1.7 million, respectively. As of June 30, 2012, we have an accrued shortfall liability of $2.5 million for our approximate 20% share of debt service shortfalls that we expect to fund during the remainder of 2012 and into 2013. We believe that cash shortfalls beyond the amounts currently accrued are not probable. Actual cash shortfalls at the joint venture could vary from our current estimates.

† Cash requirements related to the acquisition of RMM. In connection with our acquisition of RMM, we entered into an incentive compensation arrangement with certain key members of management. The arrangement provides payments to those employees based on a computation of EBIDTA generated by RMM during 2012. Our liability under this arrangement could range from zero to $24 million, and is payable in 2013. As of June 30, 2012, we have recognized a current liability of $5.9 million related to this incentive compensation arrangement.

† Sale of assets. During the six months ended June 30, 2012, we received net cash proceeds of $6.3 million and $23.2 million related to the divestiture of substantially all of the assets of WWHO-TV in Columbus, OH and WUPW-TV in Toledo, OH, respectively.

† Stock repurchase program. During the six months ended June 30, 2012, pursuant to our Board authorized stock repurchase program, we repurchased approximately 1.9 million shares of our class A common stock on the open market for an aggregate purchase price of $6.5 million.

† Employee benefit contributions. Our employee benefit plan contributions include contributions to our pension plan and the 401(k) Plan. Volatility in the equity markets impacts the fair value of our pension plan assets and ultimately the cash funding requirements of our pension plan. We expect to contribute $7.5 million to our pension plan and $4 million to our
401(k) Plan during 2012.

† Other investments. In connection with our acquisition of Nami Media, we may be required to purchase the remaining outstanding shares of Nami Media in 2014, with a purchase price based on multiples of Nami Media's 2013 net revenue . . .