Looking into the future of broadcast television $ 4 0 0 G rowth of Young $ 3 5 0 B ro a d c a s t i n g in millions $ 3 0 0 Net Revenue B roadcast Cash Flow $ 2 5 0 $ 2 0 0 YOUNG BROADCASTING INC. $ 1 5 0 ( N A S D A Q : Y BT V A ) was founded in 1986 b y Vincent and Adam Young to acquire $ 10 0 it first two broadcast television stations. T h rough an emphasis on targ e t e d $ 5 0 marketing, strong local presence in its 0 communities, aggressive cost contro l s , ‘ 9 6 ‘ 9 7 ‘ 9 8 ‘ 9 9 ‘ 0 0 and a disciplined acquisition stra t e g y, The Company has grown ra p i d l y. To d a y, The Company owns and operates twelve Market Prices of b roadcast television stations opera t i n g Common Stock in important Eastern, Midwestern and H i g h L o w Western growth regions of the United States and now reaches appro x i m a t e l y F iscal 2000 $ $ 11.3% of the nation. Six of these 1Q 5 0 . 0 0 1 9 . 0 0 stations are affiliated with the ABC 2Q $2 5 . 6 9 $1 8 . 3 8 Television Network, three are affiliated with the CBS Television Network, two 3Q $3 7 . 1 9 $2 6 . 0 6 a re affiliated with the NBC Te l e v i s i o n Network, and one is an independent. 4Q $3 5 . 9 4 $2 4 . 7 5 The largest of these is KRON-TV in S a n F rancisco. Curre n t l y, the only H i g h L o w unaffiliated station, KCAL-TV in Los Angeles, CA, is the largest independent F iscal 1 9 9 9 $ $ b roadcast television station in America 1Q 4 5 . 6 3 3 9 . 5 0 and the only independent VHF station 2Q $ $ o p e rating in the Los Angeles market. 4 4 . 3 8 3 7 . 7 5 Young Broadcasting currently achieves 3Q $6 5 . 0 0 $4 0 . 0 0 b roadcast cash flow margins that are among the highest in the country. 4Q $5 2 . 0 6 $3 8 . 6 3 Chairman’s Letter Letter to Shareholders 2 KRON-TV Overview We saw opportunity and seized it 6 Station Profiles C o n t e n ts Stations Report 10 Board of Directors 12 Financial Data Selected Financial Data 13 Management’s Discussion 14 Consolidated Statements 26 Notes to Financial Statements 32 Report of Independent Accountants 48 Corporate Information inside back cover 1 SHAREHOLDERS LETTER Dear Share h o l d e rs : n your behalf, the following interview was conducted with Vincent J.Young, Chairman of the OBoard and Chief Executive Officer. Now that Young Broadcasting Inc. is entering its third decade, how do you view the television industry? My attitude towards broadcast television is as positive as Vincent J. Yo u n g Adam Young ever. We started Young Broadcasting Inc. (YBI) because we Chairman & Tre a s u re r believed in the significant growth potential of television Chief Executive Officer broadcasting in America. That belief has been confirmed by the dramatic increase in the value of broadcast television stations over the years. Why do you believe broadcast television stations are so strongly positioned in today’s multimedia B roadcast Cash marketplace? Flow Composi t i o n Year ended 12/31 / 0 0 Br oadcast television remains the strongest existing medium by affiliation for both advertisers and prog ra m m e r s to reach the large s t audience. This remains true even given the prog re s s i v e 14.1% C B S er osion in total household viewership. Local stations tend to be the community’s strongest marketing platform — on e that constantly grows more creative and more effective in 34.5 % N B C the ability to connect local prog r amming and advertising with their desired audiences. Our local news prog ra m s 29.3% A B C continue to show strong positive rating trends in contras t to the erosion of the network audience that prime time pro g r amming is experiencing. 22.1% I n d e p e n d e n t 2 Prepared for what’s ahead. S h a re h o l d e rs Letter c o n t i n u e d . What role does local advertising play in your overall strategy? As a company, we have devoted our energies to localism in programming and localism in terms of our outreach to the advertising community. We have been very successful in following this strategy. We are also confident that local stations still remain the most efficient and effective vehicle to reaching target audiences for the marketers of products and services. How important is a station’s brand? We have devoted significant time and resources to the development and strengthening of the brands in the markets we serve. Although we have a number of network affiliations, the call letters of a station, its brand, resonates very strongly in the community. Brand identity is particu- larly important in Los Angeles and San Francisco where KCAL-TV and KRON-TV enjoy a high degree of loyalty and awareness. Do you expect digital television to be a positive change for stations and will it be costly? Although still largely in the formative stage, many stations are developing plans for utilizing digital band- width and launching an impressive range of e-commerce business applications. The potential returns on these projects are considerable. Yes, the initial expenditures may be steep, but we have good reason to believe the effort will pay off. We are simply looking to leverage cross-platform media opportu- nities through one of the strongest assets stations already possess: longstanding, strong ties to local advertisers and viewers. 4 “We can make our opinions heard and participate in rewriting the rules for the next century of broadcasting” Ar e you concerned that KRON-TV’s network affiliation research. These contributions are valuable to viewers, and agreement ends December 31, 2001? stations should be proud of their desirability and freedom to pursue such worthwhile goals. No. It has been stated from the beginning that YBI has always been pre p a red to operate the station as an How does the current state of relations between independent. We have every intention of maintaining and the networks and their affiliates influence your growing the audience that has been very loyal to KRON-TV. enthusiasm for the business? We do recognize that in order to achieve that, we must continue to offer our viewers compelling programming Well, my unwavering optimism comes from the realization which is of the greatest interest to them. This may result in that while the networks would like to change the rules of some increase in operating cost, but our goal is to offset the game, we don’t need to passively stand by and have the that occurrence with both traditional and innovative new new playbook handed to us. We can make our opinions means in which to increase revenue flow. We have been heard and participate in rewriting the rules for the next successful in this strategy with out Los Angeles station, century of broadcasting — if we as station owners can rise KCAL-TV, the largest independent in America. to this challenge. The process certainly won’t be smooth. Networks in general seem to have forgotten both their Is community outreach still an important component need for us and their need to work with us. But, they have of a station’s success? to be reminded that the broadcasting industry’s business culture is still deeply embedded in localism. Our station franchises — a phrase that I use to refer to the brand each of us has worked diligently to create in our The future for broadcasting? respective markets — are more in sync with our local communities than ever before. We have increased spending We believe that the premiere position commercial broad- to expand local news, weather and sports coverage, and we casting stations hold today will increase further — so we see have never done a better job. Our neighborhood philan- an even brighter picture for the future. thropic involvement has deepened. In many cities, stations are community leaders and terrific corporate citizens. They Sincerely, serve their areas through a variety of activities ranging from public service announcements or a televised town hall meetings, to running aggressive outreach programs for Vincent J. Young needy families or sponsoring fund ra i s e rs for cancer Chairman and Chief Executive Officer 5 KRON-TV Acquisi t i o n We saw opportunity. We seized it. Our station franchises are more in tune with o u r local communities than ever before . oung Broadcasting is committed to serving local communities with news, information, original Y programming and support of charitable endeavors. Paul Dinovitz This spirit of ‘localism’ is embraced at KRON-TV in San G e n e ral Manager of KRON-TV Francisco, which was acquired by Young Broadcasting from San Francisco, CA The Chronicle Publishing Company on June 26, 2000. KRON-TV is a perfect addition to the company’s family of stations. KRON-TV has successfully served the needs of the Bay area community for over 50 years. With the acquisition came certain key developments to make the station even Paul ‘Dino’ Dinovitz was hired as stronger and prepare it for growth in the years ahead.