839621--3/31/2006--GRANITE_BROADCASTING

related topics

{capital, credit, financial}

{debt, indebtedness, cash}

{control, financial, internal}

{operation, natural, condition}

{customer, product, revenue}

{product, market, service}

{condition, economic, financial}

{personnel, key, retain}

{acquisition, growth, future}

{regulation, change, law}

We have limited sources of liquidity and no working capital facility or other credit facility and therefore will not be able to service all of our obligations, absent changes in our operations or capital structure. Our principal strategy, seeking growth through acquisitions of television stations and operating arrangements with in-market television stations, may not be achievable absent dispositions of certain of our television stations. The FCC could reverse, rescind or otherwise modify the Media Bureau s consent to the assignment of the license of KDLH-TV to Malara Broadcast Group. FCC ownership rules and policies may limit our ability to create or maintain arrangements with in-market television stations, which would impair our strategy. Current FCC ownership rules or revised FCC ownership rules, whether revised through FCC action, judicial review or federal legislation, may limit our acquisition strategy. The Indenture, which governs our Notes, contains various covenants that limit our management s discretion in the operation of our business. Each of Malara Broadcast Group and Four Seasons Broadcast Company may make decisions regarding the operation of its station that could reduce the amount of cash we might receive under our local services agreements with each of Malara Broadcast Group and Four Seasons Broadcast Company. A default by Malara Broadcast Group under its Senior Credit Facility (i) gives the lenders thereunder holding the Tranche B Term Loan or the Revolving Loan the right to enforce the Granite Guaranty, and (ii) triggers a default on the Indenture if the lenders thereunder accelerate the related debt. A default by Malara Broadcast Group under its Senior Credit Facility prevents payments to the Company under the local services agreements and would permit the lenders under the Senior Credit Facility to foreclose and sell the stations owned by Malara Broadcast Group, which causes the automatic termination of the local services agreements. If Malara Broadcast Group were to enter bankruptcy, a bankruptcy court could reject the local services agreements between the Company and Malara Broadcast Group. 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. Because a high percentage of our operating expenses are fixed, a relatively small decrease in advertising revenue could have a significant negative impact on our results of operations. We are dependent to a significant degree on automotive advertising. We have a history of net losses and a substantial accumulated deficit. Our strategy of seeking growth through acquisitions of television stations could pose various risks and increase our leverage. If we are unable to compete effectively, our revenue could decline. Our revenue and profitability are affected by political campaigns and the Olympics. The revenue generated by stations we operate or provide services to could decline substantially if they fail to maintain or renew their network affiliation agreements on favorable terms, or at all. While we are engaged in dialogue with potential buyers of our two stations affiliated with the WB Network, we must prepare to operate the stations as independents following the WB Network s September 2006 cessation of operations, requiring that we find alternative sources of programming, which may be less attractive and more expensive. Our industry is subject to significant syndicated and other programming costs, and increased programming costs could adversely affect our operating results. Any extraordinary, newsworthy event, including hostilities or terrorist attacks, may affect our revenues and results of operations. We are dependent on key personnel. The industry-wide mandatory conversion to digital television requires us to make significant capital expenditures for which we might not see a return on our investment. If direct broadcast satellite companies do not carry the stations that we own and operate or provide services to, we could lose revenue and audience share. The FCC can sanction us for programming on our stations which it finds to be indecent. There are inherent limitations in all control systems, and misstatements due to error or fraud may occur and not be detected, which may adversely impact our business and operating results.

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839621--3/31/2006--GRANITE_BROADCASTING_CORP