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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

(Mark one)

|      |  |                                                                                         
|----- |  | ----------------------------------------------------------------------------------------
|[X]   |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|      |  | For the fiscal year ended December 31, 2002.                                            
|      |  | 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 333-96619

Block Communications, Inc.
______________________________
(Exact name of registrant as specified in its charter)

|                                |  |                       
|------------------------------- |  | ----------------------
|Ohio                            |  | 34-4374555            
|                                |  |                       
|(State or other jurisdiction of |  | (I.R.S. Employer      
|incorporation or organization)  |  | Identification Number)

541 N. Superior Street, Toledo, Ohio 43660

__________________
(Address of principal executive offices)
(Zip code)

(419) 724-6257
__________________
(Registrants telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None

__________________

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 12 months (or for shorter periods that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for past 90 days.YES[X]NO[]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).

YES []NO [X]

There is no public market for the registrants common equity, all of which is
held by members of the Block family.

As of March 27, 2003, there were outstanding 29,400 shares of the registrant's Voting Common Stock and 427,786 shares of its Non-voting Common Stock.





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BLOCK COMMUNICATIONS, INC.

FORM 10-K

Year Ended December 31, 2002




TABLE OF CONTENTS



|                                                 |                                                                                                         |  |  |  |  |  |  | 
|------------------------------------------------ | ------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                          
|                                                 | Item 1. BUSINESS                                                                                       
|                                                 | Item 2. Properties                                                                                     
|                                                 | Item 3. Legal Proceedings                                                                              
|                                                 | Item 4. Submission of Matters to a Vote of Security Holders                                            
|PART II                                         
|                                                 | Item 5. Market for Registrants Common Stock and Related Stockholder Matters                           
|                                                 | Item 6. Selected Financial Data                                                                        
|                                                 | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations          
|                                                 | Item 7A. Quantitative and Qualitative Disclosures About Market Risk                                    
|                                                 | Item 8. Financial Statements and Supplementary Data                                                    
|                                                 | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure           
|PART III                                        
|                                                 | Item 10. Directors and Executive Officers of the Registrant                                            
|                                                 | Item 11. Executive Compensation                                                                        
|                                                 | Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|                                                 | Item 13. Relationships and Related Transactions                                                        
|                                                 | Item 14. Controls and Procedures                                                                       
|PART IV                                         
|                                                 | Item 15.  Exhibits, Financial Statement Schedules and Reports on Form 8-K                              
|SIGNATURES                                      
|Computation of Ratio of Earning to Fixed Charges
|906 Certification                               
|906 Certification                               



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Forward-Looking Statements

This Annual Report on Form 10-K includes forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. All
statements other than statements of historical fact, including statements
regarding industry prospects and future results of operations or financial
position, made in this Annual Report on Form 10-K are forward looking. We use
words such as anticipates, believes, expects, future, intends and similar
expressions to identify forward-looking statements. Forward-looking statements
reflect managements current expectations and are inherently uncertain. Our
actual results may differ significantly from managements expectations. Risks
and uncertainties that could cause our actual results to differ significantly
from managements expectations are described in greater detail in Factors That
Could Affect Future Results set forth in Managements Discussion and Analysis
of Financial Condition and Results of Operations in Item 7 in this report.

Industry and Market Data

In this report, we rely on and refer to information regarding the cable
television, newspaper publishing and television broadcasting industries and our
market share in the sectors in which we compete. We obtained this information
from various industry publications, other publicly available information,
market research and our own internal surveys and estimates. Industry
publications generally state that the information therein has been obtained
from sources believed to be reliable, but that the accuracy and completeness of
the information has not been independently verified and is not guaranteed.
Similarly, other publicly available information, market research and our own
internal surveys and estimates, while believed to be reliable, have not been
independently verified, and we make no representation as to the accuracy or
completeness of such information.

Throughout this document, circulation data for the Pittsburgh Post-Gazette
is based on average paid circulation for the twelve months ended March 31,
2000, 2001 and 2002, and circulation data for The Bladeis based on average
paid circulation for the twelve months ended September 30, 2000, 2001 and 2002,
in each case as set forth in the Audit Bureau of Circulations (ABC) Audit
Report for such period.

There are 210 generally recognized television markets, known as Designated
Market Areas, or DMAs, in the United States. DMAs are ranked in size according
to various factors based upon actual or potential audience. DMA rankings in
this report are from the Nielsen Media Research dated November 2002 as
estimated by the A.C. Nielsen Company.







PART I







Item 1. BUSINESS

We are a privately held diversified media company with our primary
operations in cable television, newspaper publishing and television
broadcasting. We provide cable television service to the greater Toledo, Ohio
metropolitan area (Buckeye CableSystem) and the Sandusky, Ohio area (Erie
County CableSystem). At December 31, 2002, we had approximately 152,000
subscribers. Our primary cable system located in the greater Toledo
metropolitan area serves approximately 133,000 subscribers. Excluding the
subscribers acquired in the March 29, 2002 exchange described below, this
system is 100% rebuilt to 870 MHz and is served by a single headend. Our
Toledo system is one of the largest privately owned urban cable systems in the
United States. We publish two daily metropolitan newspapers, the Pittsburgh
Post-Gazettein Pittsburgh, Pennsylvania and The Bladein Toledo, each of which
is the dominant publication in its market. The combined daily and Sunday
average paid circulation of our two newspapers is approximately 385,100 and
601,400, respectively. We also own and operate four television stations: two
in Louisville, Kentucky, and one each in Boise, Idaho and Lima, Ohio, and we
are a two-thirds owner of a television station in Decatur, Illinois. For the
year ended December 31, 2002, we had revenues, operating income, EBITDA and net
income of $425.2 million, $17.2 million, $65.7 million and $2.5 million,
respectively. See discussion of EBITDA set forth in Managements Discussion
and Analysis of Financial Condition and Results of Operations in Item 7 in
this report.

Our shareholders, the Block family, have been in the media business for
over 100 years. In 1926, the Block family acquired the first of the Companys
current holdings, The Blade,which was first published in 1835. We expanded
our portfolio of newspapers in 1927 when we became the publisher of the
Pittsburgh Post-Gazette. In 1965, we were





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awarded a franchise in Toledo to develop our cable system, which, with
over 36 years of operating history, is one of the oldest continuously owned
metropolitan cable systems in the United States. In 1972, we acquired the
first of our current television broadcasting stations when we purchased WLIO in
Lima.

We have an experienced management team and are focused on improving the
competitive position of our media properties as well as maximizing synergies
between our cable television and newspaper publishing segments. In particular,
we seek to capitalize upon our dominance of the cable and newspaper businesses
in Toledo  a unique cross-ownership position for an urban market. We make
extensive use of our newspaper and cable system to cross-promote our businesses
at very low incremental costs. We can also offer advertisers multiple-media
advertising strategies including newspaper, cable and Internet. The knowledge
of our customers and markets gained from our various businesses enables us to
identify our customers needs and tailor solutions to meet their business
objectives.

Our principal offices are located at 541 N. Superior Street, Toledo, Ohio
43660, and our telephone number is (419) 724-6257.

Copies of this filing may be obtained at no charge by contacting Jodi Miehls at the above address.

Cable Television

We provide cable television service to the greater Toledo metropolitan
area (Buckeye CableSystem) and the Sandusky, Ohio area (Erie County
CableSystem). We are the only significant cable operator in each of our
markets. In addition to traditional cable television service, we also provide
high-speed cable modem Internet access in both systems, and our Toledo system
provides digital cable service. Our cable television operations generated
revenues, operating income and EBITDA of $101.5 million, $10.1 million and
$37.3 million, respectively, in the year ended December 31, 2002.

In 1997, we began the rebuild of the Buckeye system from a one-way coaxial
cable plant to an 870 MHz hybrid fiber coaxial (HFC) two-way interactive
system. We have completed the rebuild of the cable systems distribution plant
and have converted Buckeyes cable customers to the new system, excluding a
small portion of customers acquired in the exchange described below. The
rebuild allows Buckeye to provide advanced cable services that we believe will
help us maintain our dominant position in the greater Toledo metropolitan area.
These services currently include up to 245 analog and digital video and
digital music channels, high-speed Internet and WorldGate interactive service.
Future offerings may include video-on-demand, subscription video-on-demand and
other services yet to be developed.

On March 29, 2002, we completed an asset exchange with Comcast involving
the exchange of our cable system in Monroe, Michigan, a lower growth area
approximately 15 miles north of Toledo, for Comcasts system in Bedford,
Michigan, a Toledo suburb, plus a cash payment to us of $12.1 million. The
exchange enables us to expand our subscriber base in a contiguous high-growth
suburban area we already partially served and increase the efficiency of our
cable cluster by reducing the number of our headends from three to two.

Cable Television Business Strategy

We are pursuing the following cable television strategies:

Operate Highly Advanced and Efficient Cable Networks.We invested
approximately $89 million to rebuild the Buckeye system to 870 MHz. Our
rebuilt system allows us to offer higher margin advanced services, such as
high-speed two-way cable modem and digital television. The rebuild also
increased channel capacity to our current 245 analog and digital video and
digital music channels, which can be significantly expanded by recapturing some
of our 93 analog channels and converting them to digital channels. While most
cable system operators have chosen to upgrade their systems to 750 MHz, we
invested in the increased bandwidth, which provides additional capacity for
future services.

Upon conversion of the acquired Comcast subscribers in Bedford,
approximately 88% of our total subscribers will be served by our advanced 870
MHz system from a single headend, which will reduce our operating costs. In
addition, our Toledo headend was designed, and includes the necessary fiber
interconnections, to serve our Erie County system as we begin our rebuild of
that system in 2003. This would enable us to serve 100% of our subscribers
from a single headend. While initially designed to support 500 homes per fiber
node, our cable system can easily be divided to an





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average of 125 homes per fiber node when demand warrants. This allows us
to efficiently increase subscribers and provide additional advanced services
without sacrificing system performance or reliability.

Utilize Significant Marketing Power.Buckeye CableSystem benefits from
our dominant position as a multi-media provider in the greater Toledo
metropolitan area. We believe we are the only urban cable operator in the
United States with cross-ownership of the primary newspaper in its market. The
Bladeprovides fill-in advertising space to market our cable services and to
promote our brand awareness at a very low incremental cost. Our cable
television business also includes our operation and ownership of WB TV5, a WB
affiliate exclusive to cable in Northwest Ohio. We advertise our services on
WB TV5 and on 34 other cable channels  over 10,000 spots per month in 2002 
providing us an additional low-cost advertising source. We use these marketing
resources to promote existing services, enhance the introduction and roll-out
of new services, and build a strong competitive barrier.

Roll-out Advanced Services.Our investment in Buckeyes state-of-the-art
cable network combined with our significant marketing power positions us to
successfully roll out advanced services and further increase our revenue per
subscriber. For example, we launched in the third quarter of 2002 a
comprehensive marketing campaign utilizing our advertising resources to advance
the growth of our recent rollout of digital cable service. Digital cable
customers exceeded 26,000 at December 31, 2002, a growth of nearly 18,000
customers during the twelve month period. In addition, we are evaluating new
services such as high definition television, video-on-demand and subscription
video-on-demand for future deployment.

Maintain Superior Customer Satisfaction.Our Service TV® brand embodies
our total commitment to providing superior cable television service, which has
resulted in high levels of customer satisfaction and retention. We strive to
provide exceptional programming and signal quality, and we continuously monitor
our fiber nodes and power supplies to maintain a highly reliable cable system.
We also operate a call center with customer relations representatives available
around the clock, maintain convenient customer service locations and offer next
day, two-hour appointment windows for installation or in-home repairs. We
believe our superior customer service, along with our state-of-the art cable
system, provide a significant defensive measure against direct broadcast
satellite (DBS) operators and have in part contributed to DBSs low penetration
rate in Toledo, which at approximately 8% is half the national average of
approximately 16%.

Cable Television Services

We offer our customers traditional cable television services and
programming as well as new and advanced high bandwidth services currently
consisting of high-speed Internet access and, in our Toledo system, digital
cable service. We plan to continue to enhance these services by adding new
programming and other advanced services as they are developed.

Core Cable Television Services

Our basic channel line-up and additional channel offerings for each system
are designed according to demographics, programming preferences, channel
capacity, competition and price sensitivity. Our core cable television service
offerings include the following:

Limited Basic Service.Our limited basic service includes, for a monthly
fee, local broadcast channels, including network and independent stations,
limited satellite-delivered programming, and local public, government,
home-shopping and leased access channels.

Expanded Basic Service.Our expanded basic service includes, for an
additional monthly fee, various satellite-delivered networks such as CNN, MTV,
USA Network, ESPN, Lifetime, Nickelodeon and TNT.

Premium Service.Our premium services are satellite-delivered channels
consisting principally of feature films, original programming, live sports
events, concerts and other special entertainment features, usually presented
without commercial interruption. HBO, Cinemax, Showtime and The Movie Channel
are typical examples. Such premium programming services are offered both on a
per-channel basis and as part of premium service packages designed to enhance
customer value.





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The significant expansion of bandwidth capacity resulting from the rebuild
of our Buckeye system will allow us to expand the use of multichannel packaging
strategies for marketing and promoting premium and niche programming services.
We believe that these packaging strategies will increase basic and premium
penetration as well as revenue per subscriber.

Pay-Per-View Service.Our pay-per-view services allow customers to pay to
view a single showing of a feature film, live sporting event, concert or other
special event, on an unedited, commercial-free basis.

Advanced Analog Services

Buckeye CableSystem offers advanced analog cable services to customers who
do not subscribe to the higher priced digital cable service. This service
utilizes a converter box that is substantially less expensive than a digital
box. Buckeyes advanced analog services include:



| |  |  | up to 93 analog video channels including 11 multiplexed premium
channels and six pay-per-view channels;                             
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | a new product tier consisting of nine basic-type video channels and
32 digital music channels; and                                  
|
| |  |  | an interactive on-screen program guide to help customers navigate
the program choices and receive information about the programming.

Digital Cable Services

Digital video technology offers significant advantages. Most importantly,
this technology allows us to greatly increase our channel offerings through the
use of compression, which converts one analog channel into six to 12 digital
channels. The implementation of digital technology has significantly enhanced
and expanded the video and other service offerings we provide to our customers.

Buckeyes customers currently have available digital cable programming services that include:



| |  |  | 74 analog video channels;                                                                                                               
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | up to 30 bundled digital basic channels;                                                                                                
|
| |  |  | up to 33 multiplexed premium channels;                                                                                                  
|
| |  |  | up to 63 pay-per-view movie and sports channels;                                                                                        
|
| |  |  | up to 45 digital music channels; and                                                                                                    
|
| |  |  | an interactive on-screen program guide to help customers navigate
the new digital choices and receive information about the programming.

Digital cable services are available on 98% of Buckeyes system,
representing approximately 86% of our total subscribers. When we rebuild our
Erie County system and complete the rebuild of the portion of the acquired
Bedford system not currently passed by Buckeyes system, 100% of our systems
will have full-featured digital offerings, creating an opportunity to increase
monthly revenue per subscriber.

High-Speed Internet Access

Our broadband cable networks enable data to be transmitted up to 35 times
faster than traditional telephone modem technologies. This high-speed
capability allows cable modem customers to receive and transmit large files
from the Internet in a fraction of the time required when using the traditional
telephone modem. It also allows much quicker response times when surfing the
Internet, providing a richer experience for the customer. In addition, the
two-way cable





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modem service offered by Buckeyes system eliminates the need for a
telephone line for Internet service, is always activated and does not require a
customer to dial into the Internet service provider and await authorization.

Two-way cable modem service is available on 98% of Buckeyes system,
representing approximately 86% of our total subscribers. Our Erie County
system employs a one-way telco-return cable modem. When we upgrade the Erie
County system, we will offer two-way cable modem service on that system.

Television Based Internet Access

Buckeye offers residential customers Internet access and email over the
television using a set-top box and a wireless keyboard. Buckeye offers
Internet over the television through WorldGate.

Advertising

We receive revenue from the sale of local advertising on
satellite-delivered channels such as CNN, MTV, USA Network, ESPN, Lifetime,
Nickelodeon and TNT. We have an in-house production facility and a sales force
covering our markets. Advertising sales accounted for 6.7% of our combined
cable revenue for the year ended December 31, 2002.

Future Services

Interactive Services.Buckeyes rebuilt cable network has the capacity to
deliver various interactive television services, such as the following:



| |  |  | Video-on-demand and subscription video-on-demand which provide
movies, programs, or special events on demand with the ability to fast
forward, pause and rewind a program at will. Companies providing
video-on-demand services include Concurrent Computer Corporation,
N-Cube, Sea Change International and others.                               
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Interactive viewing services enabled by middleware vendors such as
Open TV and ICTV that provide viewers options such as various camera
angles on sports broadcasts, access to ancillary programming, access to
customer account information on the television, and the ability to play
interactive games individually or against other subscribers.
|
| |  |  | Personal video recording that provides subscribers VCR-like
capabilities to one touch record programs, pause and replay live
television, and fast forward through commercials on recorded programs.
This service also permits a subscriber to search for and record
programming that matches the subscribers preferences.                          
|
| |  |  | Walled garden Internet access that provides restricted Internet
access to sites created for television delivery that may feature local
weather, news, or community events.                                                                                                                                                                          
|
| |  |  | Cable modem Internet protocol second line telephone service that
provides subscribers a non-lifeline phone line.                                                                                                                                                                                                                                    
|
| |  |  | Tailored advertising that could allow cable networks to transmit
advertisements tailored to several target audiences simultaneously
during a single program transmission.                                                                                                                                                                           
|
| |  |  | Enhanced programming information, interactive advertising and
impulse sales enabled by application providers such as Wink
Communications and Gemstar that allow subscribers to click on-screen
icons for ancillary program information and e-commerce transactions.                                                                                 

High Definition Television.In addition to interactive services, Buckeye
is also testing high definition television services. The availability of this
new programming format will keep us competitive with DBS. Buckeye CableSystem
intends to offer a package of both local and satellite-derived high definition
television channels for our high-end customers in 2003.





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Pricing of Our Services

Our cable revenues are derived primarily from the monthly fees our
customers pay for cable services. Our rates vary by the market served and by
the type of service selected and are usually adjusted annually. As of December
31, 2002, our monthly fees for expanded basic cable service were $34.24 for
Buckeye and $33.15 for Erie County. Effective January 1, 2003, we increased
our average monthly fees for expanded basic service to $36.99 for Buckeye and
$36.15 for Erie County. A one-time installation fee is charged to new
customers, but may be waived during certain promotions. We believe our rate
practices are in accordance with the FCC guidelines and are consistent with
industry practices.

Our service offerings vary by market because of differences in the
bandwidth of our cable networks and franchise requirements. The current
monthly price ranges for our cable services on a stand-alone basis are as
follows:

|                             |                                                  |             |                |                | 
|---------------------------- | ------------------------------------------------ | ----------- | -------------- | -------------- | 
|Service                      |                                                  | Price Range
|                             |                                                  |            
|Limited basic cable service  |                                                  | $           | 10.20 - $11.99 |               
|Expanded basic cable service |                                                  | $           | 29.95 - $36.99 |               
|Premium services             |                                                  | $           | 8.95 - $12.95  |               
|Pay-Per-View (per event)     |                                                  | $           | 3.95 - $49.95  |               
|Digital cable packages       |                                                  | $           | 43.94 - $85.99 |               
|High-speed cable modem:      |                                                  |             |                |               
|                             | Residential (cable subscriber)                   |             | $              | 39.99 - $44.99 | 
|                             | Residential (cable nonsubscriber  Buckeye only) |             |                | $54.99         | 
|                             | Commercial                                       |             |                | $79.99         | 
|WorldGate Internet service   |                                                  |             | $12.95         |               

We also offer packages of cable services at discounts from the stand-alone
rates for each individual service.





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Cable Systems

The following table sets forth selected financial, operating and technical
information regarding our cable systems:

|                                                  |                                     |         |   |             |      |             |   |                |       |        |   |       |   |  |   |         |      |  
|------------------------------------------------- | ----------------------------------- | ------- | - | ----------- | ---- | ----------- | - | -------------- | ----- | ------ | - | ----- | - |  | - | ------- | ---- | -
|                                                  |                                     |         |   | Buckeye     |      | Erie County |   | Monroe         |       |        |   |      
|                                                  |                                     |         |   | CableSystem |      | CableSystem |   | CableSytem (1) |       | Totals
|                                                  |                                     |         |   |             |      |             |   |                |       |       
|Financial Data:                                   |                                     |         |   |             |      |             |   |                |       |        |   |       |   |  |   |        
|Revenue (in thousands)                            |                                     |         |   |             |      |             |   |                |       |        |   |       |   |  |   |        
|                                                  | Year ended December 31, 2002        |         | $ | 89,885      |      |             | $ | 10,270         |       |        | $ | 1,319 |   |  | $ | 101,474 |     
|Average monthly revenue per
basic subscriber (2): |                                     |         |   |             |      |             |   |                |       |        |   |       |   |  |   |        
|                                                  | Year ended December 31, 2002        |         | $ | 56.62       |      |             | $ | 43.59          |       |        | $ | 43.06 |   |  | $ | 54.93   |     
|Cable Operating Data                              |                                     |         |   |             |      |             |   |                |       |        |   |       |   |  |   |        
|(as of December 31, 2002):                        |                                     |         |   |             |      |             |   |                |       |        |   |       |   |  |   |        
|Basic:                                            |                                     |         |   |             |      |             |   |                |       |        |   |       |   |  |   |        
|                                                  | Homes passed (3)                    |         |   | 217,489     |      |             |   | 29,057         |       |        |   |      |   |  |   | 246,546 |     
|                                                  | Subscribers                         |         |   | 133,377     |      |             |   | 19,015         |       |        |   |      |   |  |   | 152,392 |     
|                                                  | Penetration (4)                     |         |   | 61.3        | %    |             |   | 65.4           | %     |        |   |      |   |  |   | 61.8    | %   
|Premium:                                          |                                     |         |   |             |      |             |   |                |       |        |   |       |   |  |   |        
|                                                  | Units (5)                           |         |   | 66,055      |      |             |   | 4,105          |       |        |   |      |   |  |   | 70,160  |     
|                                                  | Penetration (6)                     |         |   | 49.5        | %    |             |   | 21.6           | %     |        |   |      |   |  |   | 46.0    | %   
|Digital:                                          |                                     |         |   |             |      |             |   |                |       |        |   |       |   |  |   |        
|                                                  | Digital-ready basic
subscribers (7) |         |   | 131,173     |      |             |   |               |       |        |   |      |   |  |   | 131,173 |     
|                                                  | Subscribers                         |         |   | 26,092      |      |             |   |               |       |        |   |      |   |  |   | 26,092  |     
|                                                  | Penetration (8)                     |         |   | 19.9        | %    |             |   |               |       |        |   |      |   |  |   | 19.9    | %   
|Cable Modem:                                      |                                     |         |   |             |      |             |   |                |       |        |   |       |   |  |   |        
|                                                  | Homes passed (3)                    |         |   | 217,489     |      |             |   | 29,057         |       |        |   |      |   |  |   | 246,546 |     
|                                                  | Subscribers                         |         |   | 22,066      |      |             |   | 499            |       |        |   |      |   |  |   | 22,565  |     
|                                                  | Penetration (4)                     |         |   | 10.1        | %    |             |   | 1.7            | %     |        |   |      |   |  |   | 9.2     | %   
|Cable Network Data:(9)                            |                                     |         |   |             |      |             |   |                |       |        |   |       |   |  |   |        
|                                                  | Miles of plant                      |         |   | 2,490       |      |             |   | 370            |       |        |   |      |   |  |   | 2,860   |     
|                                                  | Density                             |         |   | 87          |      |             |   | 79             |       |        |   |      |   |  |   | 86      |     
|                                                  | Plant bandwidth                     |         |   |             |      |             |   |                |       |        |   |       |   |  |   |         |     
|                                                  |                                     | 870 MHz |   |             | 95.9 | %           |   |                |      |        |   |       |  |  |   |         | 83.5 | %
|                                                  |                                     | 450 MHz |   |             | 4.1  | %           |   |                |      |        |   |       |  |  |   |         | 3.5  | %
|                                                  |                                     | 430 MHz |   |             |     |             |   |                | 100.0 | %      |   |       |  |  |   |         | 13.0 | %



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|(1) |  | On March 29, 2002, we completed the exchange of the assets of Monroe
CableSystem for the assets of Comcasts Bedford, Michigan cable system.
Cable operating data for Buckeye CableSystem includes the pre-existing
Bedford subscribers serviced by Buckeye CableSystem 5,004 new
subscribers acquired from Comcast, as adjusted to reflect the independent
appraisal report. The revenue information includes the acquired Bedford,
Michigan subscribers from March 29, 2002. The information for Monroe
CableSystem relates to the system disposed of in the exchange.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Represents average monthly revenues for the period divided by the average
number of basic subscribers throughout the period. Monroe CableSystem
represents the average monthly revenue for the period of January 1, 2002
through March 28, 2002.                                                                                                                                                                                                                                                                                                                        
|   
|(3) |  | Represents the number of living units, such as single residence homes,
apartments and condominiums, passed by the cable television distribution
network in a given cable system service area to which we offer the named
service.                                                                                                                                                                                                                                                                                                                                       
|   
|(4) |  | Represents subscribers to the named service as a percentage of homes
passed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            





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|(5) |  | Represents the number of subscriptions to premium services. A subscriber
may purchase more than one premium service, each of which is counted as a
separate premium service unit.           
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(6) |  | Represents premium service units as a percentage of basic subscribers.
This ratio may be greater than 100% if the average basic subscriber
subscribes to more than one premium service unit.
|   
|(7) |  | Represents basic subscribers to whom digital service is available.                                                                                                                          
|   
|(8) |  | Represents digital subscribers as a percentage of digital-ready basic
subscribers.                                                                                                          
|   
|(9) |  | Density represents homes passed divided by miles of plant. Plant
bandwidth represents the percentage of plant mileage within a system
served by the indicated plant bandwidth.              





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##### Table of Contents



Markets Served

Greater Toledo Metropolitan Area.As of December 31, 2002, Buckeyes
system passed approximately 217,500 homes and served approximately 133,000
basic subscribers. The 25 franchises served by Buckeye have a combined
population of approximately 554,000. With a population of 617,606, the
three-county Toledo Metropolitan Statistical Area is the 68th largest MSA in
the country. Toledos major non-governmental employers include ProMedica
Health Systems, Mercy Health Partners, Daimler-Chrysler, Bowling Green State
University, The University of Toledo, General Motors, Sauder Woodworking and
the Medical College of Ohio. Other significant Toledo-based companies include
Dana Corporation, Owens-Illinois and Pilkington Glass.

Sandusky, Ohio.As of December 31, 2002, our Erie County system passed
approximately 29,000 homes and served approximately 19,000 basic subscribers.
The 10 franchises served by our Erie County system have a combined population
of approximately 73,000. Sanduskys major non-governmental employers include
Cedar Fair/Cedar Point, Delphi Automotive System, Visteon Automotive Systems
and Firelands Community Hospital.

System Design

The architecture of Buckeyes 870 MHz HFC system consists of approximately
2,389 route miles, passing approximately 213,500 households and serving
approximately 131,000 customers. The system includes a single headend serving
all pre-existing Buckeye subscribers who have been converted to the new system
and will serve the acquired Bedford subscribers when converted. The new
headend was completed at the beginning of 1997 to coincide with the beginning
of the system rebuild. Thirteen hubs located throughout the greater Toledo
metropolitan area are connected by redundant fiber-optic cable rings back to
the master headend, thereby reducing the frequency and size of service outages.
From each of these thirteen hubs, fiber-optic cable extends to nodes, each
serving on average 500 homes. Coaxial cable connects the node to each
customers home or building.

The system was also designed to provide a clean migration path to future
system needs by allowing additional spectrum to be allocated to interactive
services as conditions require. The system provides for 12 strands of fiber to
each node with two strands activated and 10 strands reserved for future
services. Moreover, the 500-home fiber nodes can easily be divided to an
average of 125 homes per fiber node when demand warrants. As more
individualized services are offered, this additional bandwidth will reduce the
need for future construction and will provide great flexibility in our
provision of services to our customers.

The rebuilt system currently offers 93 analog video channels on our
advanced analog service and approximately 245 analog and digital video and
digital music channels on our digital cable service. The system offers the
ability to significantly increase channel capacity by recapturing some of the
analog channels and converting them to digital channels.

We monitor all of the fiber nodes and power supplies in Buckeyes cable
network 24 hours per day, seven days per week, providing reliable service and
high customer satisfaction. The cost of this monitoring is shared by our cable
and telephone operations. In addition, we have a supporting power system that
was built to provide battery backup for four to six hours in the event of a
local power outage. For more extended power outages, generators can be used to
provide power indefinitely. This is critical as always on services such as
cable modems and other two-way telecommunications services become more
prevalent.

Our Erie County system currently operates on a 430 MHz one-way coaxial
cable plant with approximately 370 route miles, including 33 route miles of
fiber-optic cable. We plan to rebuild our Erie County system to a 870 MHz
two-way interactive system, beginning in second quarter 2003. When this
occurs, our Erie County system, which currently operates primarily through its
own headend, will receive most of its programming and services through the
Toledo headend, thereby reducing operating costs.

Sales and Marketing

Buckeye markets its cable services through the use of our dominant
advertising resources in the greater Toledo metropolitan area. Because of our
advertising strength, most of Buckeyes cable television service sales result
from





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##### Table of Contents



customer and potential customer inquiries. We invest a significant amount
of time, effort and financial resources in the training and evaluation of our
marketing professionals and customer relations representatives. Our customer
sales representatives use their frequent contact with our customers as
opportunities to sell our new services. As a result, we can accelerate the
introduction of new services to our customers and achieve high success rates in
attracting and retaining customers. Buckeye also has its own telemarketing
staff for outbound sales calls and a door-to-door sales team utilizing in-house
and outsourced personnel. Erie County markets its cable services through use
of its advertising availability rights on its cable channels for spot
advertising, as well as through bill inserts, direct mail and radio and print
media advertising.

Programming

We believe that providing a large selection of conveniently scheduled
programming is an important factor influencing a customers decision to
subscribe to and retain our cable services. To appeal to both existing and
potential customers, we devote considerable resources to obtaining access to a
wide range of programming. We determine channel offerings in each of our
markets by reviewing market research and examining customer demographics and
local programming preferences. We contract with suppliers to obtain
programming for our systems, payment for which is typically based on a fixed
fee per customer per month. These contracts are typically for a fixed period
of time and are subject to negotiated renewal. We purchase the majority of our
cable programming through the National Cable Television Cooperative (NCTC).
This organization aggregates more than 10 million cable subscribers for the
purpose of obtaining programming at volume-based discounts. We also purchase
programming directly from suppliers who do not have agreements with the NCTC or
if they can provide better terms than through the NCTC.

Along with the rest of the cable industry, we have felt the impact of
increasing programming costs. Programming is our cable systems largest cash
operating expense. Our basic cable programming costs increased by 11.0% and
16.6% in 2002 and 2001, respectively. This is primarily due to increasing
costs for sports programming and our need for new channels to match satellite
competition. Because of our size, we are unable to negotiate the more
favorable rates that are granted to large national multiple system operators.
For 2002, the negative impact on our cable margins due to higher programming
costs was estimated to be 400 to 500 basis points.

In 1989, Buckeye launched TV5, a locally programmed channel that is run in
the same manner as a broadcast station  obtaining its own programming through
syndicators, arranging for coverage of local and regional sports contests and
doing its own independent marketing. TV5 was conceived to provide us with a
competitive advantage should an overbuilder become active in our service area.
In 1995, TV5 became the exclusive market affiliate for the WB network, the
first cable channel in the country to be so designated. Its popularity
continues to increase. Buckeye has contracted to provide WB TV5 to cable
operators in other cities in the Toledo DMA, which adds to its popularity and
provides more viewers for advertising. WB TV5 will be distributed to
approximately 225,000 cable households by mid-2003.

Buckeye also operates a Community Channel on which locally produced
programming is shown free of charge if it is deemed of sufficient interest. In
addition to programming provided by outsiders, Buckeye provides live coverage
of Toledo City Council meetings and produces about 25 high school football and
basketball games each year. These are shown once on the Community Channel and
once on WB TV5. We have also offered to cablecast a select number of council
and trustees meetings from other franchise areas.

Franchises

Cable television systems are constructed and operated under fixed-term,
non-exclusive franchises or other types of operating permits granted by local
governmental authorities. Franchises typically contain many conditions, such
as:



| |  |  | time limitations on commencement and completion of system
construction;                                       
| | - |  | --------------------------------------------------------------------------------------------------------------
|
| |  |  | conditions of service, including mix of programming required to
meet the needs and interests of the community;





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| |  |  | the provision of free service to schools and certain other public institutions;
| | - |  | -------------------------------------------------------------------------------
|
| |  |  | the maintenance of insurance and indemnity bonds; and                          
|
| |  |  | the payment of fees to communities.                                            

Certain provisions of these local franchises are subject to limits imposed
by federal law.

We hold a total of 35 franchises, including three acquired in the
Monroe-Bedford exchange. These franchises require the payment of fees to the
issuing authorities ranging from 3% to 5% of gross revenues (as defined by each
franchise agreement) from the related cable system. The Cable Communications
Policy Act of 1984 (1984 Cable Act) prohibits franchising authorities from
imposing annual franchise fees in excess of 5% of gross annual revenues and
permits the cable television system operator to seek renegotiation and
modification of franchise requirements if warranted by changed circumstances
that render performance commercially impracticable.

Buckeye has 25 franchises, most of which have 20 year terms and 99% of
Buckeyes subscribers are covered under agreements that expire after 2016.
Erie County has a total of 10 franchises and 98% of Erie Countys subscribers
are covered under agreements with expiration dates in 2011 or thereafter.

The 1984 Cable Act and the Cable Television Consumer Protection and
Competition Act of 1992 (1992 Cable Act) provide, among other things, for an
orderly franchise renewal process, which limits a franchising authoritys
ability to deny a franchise renewal if the incumbent operator follows
prescribed renewal procedures. In addition, the 1984 and 1992 Cable Acts
establish comprehensive renewal procedures, which require, when properly
elected by an operator, that an incumbent franchisees renewal application be
assessed on its own merits and not as part of a comparative process with
competing applications. Upon a franchise renewal request, however, a franchise
authority may seek to add new and more onerous requirements upon the cable
operator, such as significant upgrades in facilities and services or increased
franchise fees, as a condition of renewal. We believe that our relationships
with local franchise authorities are excellent.

Competition  Cable Television Services

Cable television systems face competition from alternative methods of
distributing video programming and from other sources of news, information and
entertainment. These include off-air television broadcast programming, direct
broadcast satellite, newspapers, movie theaters, live sporting events,
interactive online computer services and home video products, including VCRs
and DVDs. The extent to which a cable television system is competitive
depends, in part, upon that systems ability to provide, at a reasonable price
to customers, a greater variety of programming and other communications
services than those available off-air or through alternative delivery sources
and upon superior technical performance and customer service.

Off-Air Broadcast Television.Viewers who do not wish to pay for
television programming have the option of receiving broadcast signals directly
from local television broadcasting stations. The extent to which a cable
system competes with over-the-air broadcasting depends upon the quality and
quantity of the broadcast signals available by direct antenna reception
compared to the quality and quantity of such signals and alternative services
offered by the cable system. Viewers in the service area of Buckeyes system
are able to receive over-the-air signals of varying quality from up to 13
broadcast stations, and viewers in the service area of our Erie County system
are able to receive such signals from up to 16 broadcast stations.

Direct Broadcast Satellites.The fastest growing method of satellite
distribution is by high-powered direct broadcast satellites utilizing video
compression technology, which provides programming comparable to our digital
cable service. Direct broadcast satellite service can be received virtually
anywhere in the United States through small rooftop or side-mounted dish
antennae that are generally not subject to local restrictions on location and
use. Direct broadcast satellite service is presently being heavily marketed on
a nationwide basis by DirecTV and EchoStar. Both of these providers offer
service in the Toledo and Erie County markets. Direct broadcast satellite
systems offer multichannel video programming packages which are similar to our
packages of video services. However, they do not currently offer local
channels in the Toledo area and offer them in Erie County only at an additional
monthly cost. At





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December 31, 2002, the rate of penetration of direct broadcast satellite
nationally was 16%. At the same date, the penetration rate was approximately
8% in the zip codes in which Buckeye operates and approximately 11% in the zip
codes in which Erie County operates.

Competing Franchises.Cable television systems generally operate pursuant
to franchises granted on a non-exclusive basis. Franchising authorities may
not unreasonably deny requests for additional franchises and may operate cable
television systems themselves. Well-financed businesses from outside the cable
television industry (such as the public utilities that own the poles to which
cable is attached) may become competitors for franchises or providers of
competing services. In the Toledo market, Buckeye faces cable competition from
Adelphia in a few outlying areas where the two systems have overbuilt plant
passing approximately 6,600 homes, or less than 3% of the total homes passed by
our cable systems. We believe that the capital costs of matching Buckeyes
rebuilt system, together with our advertising dominance and our customer
service reputation, pose a formidable competitive barrier. In its market, Erie
County does not currently face competition from competing cable operators.

Satellite Master Antenna Television Systems (SMATV).Cable television
operators also face competition from private satellite master antenna
television systems that serve condominiums, apartment and office complexes and
private residential developments. As long as they do not use public
rights-of-way, satellite master antenna television systems can interconnect
non-commonly owned buildings without having to comply with many of the local,
state and federal regulations that are imposed on cable television systems. We
are aware of one SMATV operator, which has approximately 125 subscribers, in
the Toledo area. We are not aware of any SMATV operators in our Erie County
service area.

Local Multipoint Distribution Service.Local multipoint distribution
service, a new wireless service, can deliver over 100 channels of programming
directly to consumers homes. It is uncertain whether this spectrum will be
used to compete with franchised cable television systems.

Multichannel Multipoint Distribution Systems.Multichannel multipoint
distribution systems use low power microwave frequencies to transmit video
programming over the air to customers. Wireless distribution services provide
many of the same programming services as cable television systems, and digital
compression technology is likely to increase significantly the channel capacity
of their systems. We are aware of only one competitor offering this service at
this time.

Local Exchange Carriers.The Telecommunications Act of 1996 (1996
Telecom Act) allows local exchange carriers and others to compete with cable
television systems and other video services in their telephone service
territory, subject to certain regulatory requirements. Unlike cable television
systems, local exchange carriers are not required, under certain circumstances,
to obtain local franchises to deliver video services and are not subject to
certain obligations imposed under such franchises. Local exchange carriers use
a variety of distribution methods, including both broadband wire facilities and
wireless transmission facilities within and outside of their telephone service
areas. Local exchange carriers and other telephone companies have an existing
relationship with the households in their service areas and have substantial
financial resources. Local exchange carriers do not currently offer television
cable service in any of our markets, and we are not aware of any plans for such
service to be provided.

Other New Technologies.Other new technologies may compete with cable
television systems. Advances in communications technology, as well as changes
in the marketplace and the regulatory and legislative environments, are
constantly occurring. We are not, therefore, able to predict the effect that
current or future developments might have on the cable industry or on our
operations. See Forward-Looking Statements.

Competition  Internet Services

We first began to offer broadband Internet access in mid-1999. As of
December 31, 2002, we had approximately 22,500 broadband Internet subscribers,
primarily in the Toledo area. Competition for broadband Internet services in
our markets includes digital subscriber line services provided by or through
local telephone exchange carriers and wireless broadband Internet services
provided by wireless communications companies. Digital subscriber line
technology, known as DSL, allows Internet access to subscribers over
conventional telephone lines at data transmission speeds comparable to those of
cable modems, putting it in direct competition with cable modem service.





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Numerous companies, including telephone companies, have introduced DSL
service, and certain telephone companies are seeking to provide high-speed
broadband services, including interactive online services, without regard to
present service boundaries and other regulatory restrictions. DSL and wireless
broadband services are offered in some portions of our service area. We are
unable to predict the likelihood of success of these competing broadband
Internet services. However, we believe that our technology, local customer
service reputation and ability to package bundled video and Internet services
will provide us with competitive advantages.

Our broadband Internet services also compete for customers with
traditional slower-speed dial-up Internet service providers, commonly known as
ISPs. Traditional dial-up ISP services have the advantages of lower price,
earlier market entry, and in some cases nationwide marketing and proprietary
content. We believe that over time the rapid development of rich broadband
content will persuade more and more customers of the advantages of a broadband
connection.

The FCC has initiated a rulemaking proceeding into the appropriate
regulatory treatment of Internet offered on cable systems. We are unable to
predict the outcome of this proceeding or its effects upon our business.

Newspaper Publishing

Our two daily metropolitan newspapers, the Pittsburgh Post-Gazetteand The
Blade,are the dominant newspapers in their respective markets. Our newspapers
have a combined daily and Sunday average paid circulation of approximately
385,100 and 601,400, respectively. We believe the leading positions of our
newspapers result from our long standing presence, our commitment to high
standards of journalistic excellence and integrity, and our emphasis on local
news, local impacts of national and international news, and service to our
communities. Our newspapers have received many national and regional awards
for editorial excellence. Our newspaper publishing operations generated
revenues, operating income and EBITDA of $257.3 million, $8.1 million and $19.6
million, respectively, in the year ended December 31, 2002. We are pursuing
the following newspaper publishing strategies:

Produce the Highest Quality Newspaper in Our Markets.We believe our
reputation for producing high-quality publications is the foundation for our
publishing success. We are frequently recognized by our industry for the
quality of our journalism. Both newspapers have won numerous awards, including
Pulitzer Prizes for Photography awarded to the Post-Gazettein 1992 and 1998
and the Investigative Reporters and Editors Medal awarded to The Bladein 2000.
The Pennsylvania Newspaper Publishers Association named the Post-Gazetteas
Pennsylvanias Newspaper of the Year in 2002 and 2001. We maintain a highly
regarded staff of columnists and editors committed to excellence, and we are
continuously seeking to improve our publications.

Implement Cost Rationalization Initiatives.To improve cash flow at our
newspapers, we have embarked upon a comprehensive review of our cost structure,
including labor expenses and other significant operating costs. We are
currently reviewing staffing requirements for opportunities to realize labor
efficiencies. With respect to other operating costs, our newspapers coordinate
purchasing requirements and have achieved favorable terms on newsprint
purchases. In addition, we have reduced the page width at The Blade from 54 to
50 inches during the third quarter of 2002. We also plan to reduce the page
width at Post-Gazette from 54 inches to 50 inches by the end of
2004. We anticipate this will reduce our annual newsprint consumption by
approximately 7%. If this initiative had been completed by January 1, 2002, we
would have realized savings of approximately $1.9 million in newsprint costs
for the year ended December 31, 2002.

Strengthen our Brands by Focusing on Local News and Community Service.
Each of our newspapers is a leading local news and information source with
strong brand recognition in its market. We believe that maintaining our
position as a primary source of local news will continue to provide a powerful
platform upon which to serve the local communities and local advertisers. We
intend to continue to increase brand awareness and market penetration through
local marketing partnerships, creative subscriber campaigns, strong customer
service and the use of our two interactive online newspaper editions. Our two
Web sites, post-gazette.com and toledoblade.com, are the most frequently
visited local media sites in their respective markets according to an
independent research organization. These two leading sites increase our market
presence and provide an additional source of advertising revenue.

Pursue Circulation and Other Revenue Growth Opportunities.We are
continuously evaluating ways to expand circulation and increase revenues. We
are using new suburban zone coverage, customer service programs and targeted





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marketing campaigns to increase our circulation. We believe that through
the use of zoning (news and advertising directed to a particular local area),
research, and demographic studies, our marketing programs better meet the
unique needs of individual advertisers, thus maximizing advertising revenues.
Capitalizing on our high penetration, we have also launched in Toledo a broad
market coverage program in which we deliver preprinted advertising inserts to
all subscriber and non-subscriber households in areas targeted by the
advertiser. We also plan to grow our revenue by expanding our delivery
services for third-party publishers and increasing advertising on our Web
sites.

The Pittsburgh Post-Gazette

Founded in 1786, the Pittsburgh Post-Gazetteis the leading newspaper in
Pittsburgh and Western Pennsylvania and has a long history of service and
journalistic excellence. The Post-Gazettehas more than twice the circulation
of any other newspaper in the Pittsburgh Metropolitan Statistical Area (MSA).
The Post-Gazettehas a daily average paid circulation of approximately 245,000
and a Sunday average paid circulation of approximately 410,900, resulting in
penetration of approximately 40% daily and 60% Sunday in the Pittsburgh city
zone (Pittsburgh and nearby suburbs). Our dominant market position allows us
to capture advertising revenue significantly greater than that of any other
newspaper in this market.

The Post-Gazetteis a morning daily and Sunday newspaper covering 16
counties in Western Pennsylvania, Northern West Virginia and Western Maryland,
including the greater Pittsburgh metropolitan area. With a population of 2.4
million, the six-county Pittsburgh MSA is currently the 22nd largest MSA in the
United States. The population of the 16-county area served by the Post-Gazette
is approximately 2.9 million. Pittsburghs major non-governmental employers
include UPMC Health System, US Airways, West Penn Allegheny Health System, the
University of Pittsburgh, PNC Financial Services Group and United States Steel
Corporation. Other significant Pittsburgh-based companies include H.J. Heinz
Company, PPG Industries, Federated Investors, Alcoa and FreeMarkets.

The following table sets forth certain circulation, advertising lineage
and operating revenue information for the Post-Gazettefor the past three
years:

|                                              |                            |                |   |         |         |      |   |         |         |  |   |         |         | 
|--------------------------------------------- | -------------------------- | -------------- | - | ------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- | 
|                                              |                            |                |   | 2000    |         | 2001 |   | 2002   
|                                              |                            |                |   |         |         |      |   |        
|Circulation (1):                              |                            |                |   |         |         |      |   |         |         |  |   |        
|                                              | Daily (excluding Saturday) |                |   | 241,524 |         |      |   | 241,827 |         |  |   | 244,969 |        
|                                              | Sunday                     |                |   | 417,815 |         |      |   | 412,691 |         |  |   | 410,879 |        
|Advertising lineage (in thousands of inches): |                            |                |   |         |         |      |   |         |         |  |   |        
|                                              | Retail                     |                |   | 670     |         |      |   | 613     |         |  |   | 564     |        
|                                              | General                    |                |   | 144     |         |      |   | 143     |         |  |   | 139     |        
|                                              | Classified                 |                |   | 787     |         |      |   | 671     |         |  |   | 646     |        
|                                              |                            |                |   |         |         |      |   |         |         |  |   |        
|                                              | Total                      |                |   | 1,601   |         |      |   | 1,427   |         |  |   | 1,349   |        
|                                              | Part run                   |                |   | 208     |         |      |   | 204     |         |  |   | 217     |        
|                                              |                            |                |   |         |         |      |   |         |         |  |   |        
|                                              |                            | Total inches   |   |         | 1,809   |      |   |         | 1,631   |  |   |         | 1,566   | 
|                                              |                            |                |   |         |         |      |   |         |         |  |   |        
|Operating revenues (in thousands):            |                            |                |   |         |         |      |   |         |         |  |   |        
|                                              | Third-party advertising    |                | $ | 160,611 |         |      | $ | 147,735 |         |  | $ | 142,890 |        
|                                              | Circulation                |                |   | 33,800  |         |      |   | 32,663  |         |  |   | 32,157  |        
|                                              | Other                      |                |   | 1,076   |         |      |   | 1,518   |         |  |   | 1,668   |        
|                                              |                            |                |   |         |         |      |   |         |         |  |   |        
|                                              |                            | Total revenues |   | $       | 195,487 |      |   | $       | 181,916 |  |   | $       | 176,715 | 
|                                              |                            |                |   |         |         |      |   |         |         |  |   |        



---

|(1) |  | From the ABC Audit Reports as of March 31 of each year.
|--- |  | -------------------------------------------------------

The Post-Gazetteconcentrates on local and regional news of Pittsburgh and
Western Pennsylvania and has 236 full-time and 45 part-time editors, reporters
and photographers on its staff. It draws upon the news reporting facilities of
the major wire services and, with The Blade, maintains a three-person bureau in
Washington, D.C. The Post-Gazettealso maintains a news bureau in Harrisburg,
Pennsylvania, the state capital, and five local news bureaus in the Pittsburgh
metropolitan area.

The Post-Gazettepublishes and distributes all of its newspapers from its
printing facilities in downtown Pittsburgh to 19 distribution centers located
throughout the greater Pittsburgh area. Sophisticated computer systems are
used for





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writing, editing, composing and producing the printing plates used in each
edition. The Post-Gazettehas seven letterpress presses with new color flexo
units on each press. The flexo units provide state-of-the-art color to the
fronts and backs of most sections. Daily inserts are assembled at our downtown
facility. Sunday inserts are assembled at a separate plant, five miles from
our downtown plant, and transported directly to our distribution centers. Our
five-year capital plan includes a reconfiguration and renovation of our press
lines and mailroom in 2003 and 2004.

The Post-Gazetteis distributed primarily through independent home
delivery carriers and single-copy dealers. Home delivery accounted for
approximately 76% of circulation for the daily editions and approximately 58%
of circulation for the Sunday edition during 2002. The newsstand price is
$0.50 for the daily paper and $1.50 for the Sunday edition. Annual rates for
direct payment subscriptions are $140.92 for daily and Sunday, $96.20 for
Friday, Saturday and Sunday, $78.00 for Sunday only and $78.00 for Monday
through Friday.

The Blade

Founded in 1835, The Bladeis the leading newspaper in Northwest Ohio by
average paid circulation and has a significant influence on the civic,
political, economic and cultural life of its subscribers and the communities it
serves. The Bladeis the oldest continuing business in Toledo and has no
significant newspaper competition. The Bladehas a daily average paid
circulation of approximately 140,100 and a Sunday average paid circulation of
approximately 190,500, resulting in penetration in the Toledo city zone (Toledo
and nearby suburbs) of approximately 51% daily and 65% Sunday, the highest
Sunday city zone penetration rate of any newspaper in Ohio. This combination
of high circulation and penetration is central to our success in attracting
advertising and maintaining our dominant share of market revenue.

The Bladeis a morning daily and Sunday newspaper covering 14 counties in
northwest Ohio and southeast Michigan, including the greater Toledo
metropolitan area. With a population of 617,606, the three-county Toledo MSA
is currently the 68th largest MSA in the United States. The combined
population of the 14-county area served by The Bladeis approximately
1,264,000. Toledos major non-governmental employers include ProMedica Health
Systems, Mercy Health Partners, Daimler-Chrysler, Bowling Green State
University, The University of Toledo, General Motors, Sauder Woodworking and
the Medical College of Ohio. Other significant Toledo-based companies include
Dana Corporation, Owens-Illinois, HCR ManorCare and Pilkington Glass.

The following table sets forth certain circulation, advertising lineage
and operating revenue information for The Bladefor the past three years:

|                                              |                            |                |   |         |        |      |   |         |        |  |   |         |        | 
|--------------------------------------------- | -------------------------- | -------------- | - | ------- | ------ | ---- | - | ------- | ------ |  | - | ------- | ------ | 
|                                              |                            |                |   | 2000    |        | 2001 |   | 2002   
|                                              |                            |                |   |         |        |      |   |        
|Circulation (1):                              |                            |                |   |         |        |      |   |         |        |  |   |        
|                                              | Daily (including Saturday) |                |   | 140,119 |        |      |   | 138,819 |        |  |   | 140,101 |       
|                                              | Sunday                     |                |   | 193,190 |        |      |   | 190,794 |        |  |   | 190,526 |       
|Advertising lineage (in thousands of inches): |                            |                |   |         |        |      |   |         |        |  |   |        
|                                              | Retail                     |                |   | 563     |        |      |   | 484     |        |  |   | 450     |       
|                                              | General                    |                |   | 80      |        |      |   | 79      |        |  |   | 64      |       
|                                              | Classified                 |                |   | 460     |        |      |   | 395     |        |  |   | 402     |       
|                                              |                            |                |   |         |        |      |   |         |        |  |   |        
|                                              |                            | Total inches   |   |         | 1,103  |      |   |         | 958    |  |   |         | 916    | 
|                                              |                            |                |   |         |        |      |   |         |        |  |   |        
|Operating revenues (in thousands):            |                            |                |   |         |        |      |   |         |        |  |   |        
|                                              | Advertising                |                | $ | 80,362  |        |      | $ | 69,431  |        |  | $ | 66,348  |       
|                                              | Intercompany advertising   |                |   | (6,913  | )      |      |   | (5,262  | )      |  |   | (3,752  | )     
|                                              | Circulation                |                |   | 16,873  |        |      |   | 17,317  |        |  |   | 17,789  |       
|                                              | Other                      |                |   | 908     |        |      |   | 1,277   |        |  |   | 156     |       
|                                              |                            |                |   |         |        |      |   |         |        |  |   |        
|                                              |                            | Total revenues |   | $       | 91,230 |      |   | $       | 82,763 |  |   | $       | 80,541 | 
|                                              |                            |                |   |         |        |      |   |         |        |  |   |        



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|(1) |  | From the ABC Audit Reports as of September 30 of each year.
|--- |  | -----------------------------------------------------------

The Bladeconcentrates on local and regional news of northwest Ohio, and
extensive coverage of state government. It has 147 full-time and 18 part-time
editors, reporters and photographers on its staff. It draws upon the





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##### Table of Contents



news reporting facilities of the major wire services and, with the
Post-Gazette, maintains a three-person bureau in Washington, D.C. The Blade
also maintains a news bureau in Columbus, Ohio, the state capital, and three
local news offices in the Toledo metropolitan area.

The Bladepublishes and distributes all of its newspapers from its
printing facility in downtown Toledo to eight distribution centers throughout
the metropolitan Toledo area. Sophisticated computer systems are used for
writing, editing, composing and producing each edition. The Bladehas three
color flexo presses, each with nine press units, which produce state-of-the-art
color, and clean, clear images. Daily and Sunday inserts are assembled at a
downtown facility near The Blades main production plant.

The Bladeis distributed primarily through independent home delivery
carriers and single-copy dealers. Home delivery accounted for approximately
82% of circulation for the daily editions and approximately 74% of circulation
for the Sunday edition during 2002. The newsstand price is $0.50 for the daily
paper and $1.50 for the Sunday edition. Annual subscription rates are $143.00
for daily and Sunday, $83.20 for Sunday only and $74.88 for daily only.

Advertising

Substantially all of our advertising revenues are derived from local and
national retailers and classified advertisers. Advertising rates and rate
structures vary between our newspapers and are based, among other things, on
advertising effectiveness, local market conditions, circulation, readership and
type of advertising (whether classified, national or retail). Our advertising
revenues are not reliant upon any one company or industry, but rather are
supported by a variety of companies and industries, including realtors, car
dealerships, grocery stores and other local businesses. Our largest single
advertiser accounted for 3.9% of our publishing segments total net advertising
revenues in 2002.

The contributions of retail, classified and national advertising to
third-party advertising revenues for the past three years were as follows:

|                                     |                          |                       |   |                         |         |      |   |         |         |  |   |         |         | 
|------------------------------------ | ------------------------ | --------------------- | - | ----------------------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- | 
|                                     |                          |                       |   | Year ended December 31,
|                                     |                          |                       |   |                        
|                                     |                          |                       |   | 2000                    |         | 2001 |   | 2002   
|                                     |                          |                       |   |                         |         |      |   |        
|Advertising revenues (in
thousands): |                          |                       |   |                         |         |      |   |         |         |  |   |        
|                                     | Retail                   |                       | $ | 116,504                 |         |      | $ | 108,694 |         |  | $ | 108,425 |        
|                                     | Classified               |                       |   | 94,943                  |         |      |   | 78,944  |         |  |   | 73,259  |        
|                                     | National                 |                       |   | 29,526                  |         |      |   | 29,528  |         |  |   | 27,554  |        
|                                     |                          |                       |   |                         |         |      |   |         |         |  |   |        
|                                     |                          | Total                 |   |                         | 240,973 |      |   |         | 217,166 |  |   |         | 209,238 | 
|                                     | Intercompany advertising |                       |   | (6,913                  | )       |      |   | (5,262  | )       |  |   | (3,752  | )      
|                                     |                          |                       |   |                         |         |      |   |         |         |  |   |        
|                                     |                          | Total net advertising |   | $                       | 234,060 |      |   | $       | 211,904 |  |   | $       | 205,486 | 
|                                     |                          |                       |   |                         |         |      |   |         |         |  |   |        

Online Editions

The Post-Gazettes Internet Web site, post-gazette.com, reaches over a
million unique users per month with over 20 million page views. The Blades
Internet Web site, toledoblade.com, reaches over 250,000 unique users per month
with over 4 million page views. Each site contains breaking news, summaries of
articles from the print editions, information produced specifically for the Web
site and portions of the classified advertising from the print editions. The
Web sites contribute to our revenues by expanding our classified marketplace
and providing new partnership and advertising opportunities for retailers.

Competition

We face competition for advertising revenue from television, radio, the
Internet and direct-mail programs, as well as competition for both advertising
and circulation from suburban neighborhood, local and national newspapers and
other publications. Competition for advertising is based on circulation
levels, readership demographics, advertising rates and advertiser results.
Competition for circulation is generally based upon content, journalistic
quality and price.





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##### Table of Contents



Raw Materials

Newsprint and ink are our newspaper publishing segments largest expense
after labor costs and accounted for $29.7 million, or 11.9%, of the segments
operating expenses in 2002. During 2002, we used approximately 62,400 metric
tons of newsprint in our production processes at an estimated total cost for
newsprint of approximately $27.6 million. In the last three years, our
weighted average cost per ton of newsprint has varied from a low of $443 per
metric ton in 2002 to a high of $572 per metric ton in 2001.

All of our newsprint is supplied under a long-term sole-supplier contract
expiring at the end of 2004. Pricing under the contract varies with market
prices. The contract provides for a discount as long as we use the contract
vendor as our sole supplier of newsprint.

In addition to maximizing layout efficiency and minimizing waste, The
Bladecompleted a page width reduction project during the third quarter of
2002. We plan to reduce our page width at the Post-Gazetteby the end of 2004.
Upon completion of both projects, we expect to recognize a reduction in annual
newsprint consumption by approximately 7%. If these initiatives had been
completed by January 1, 2002, we would have realized savings of approximately
$1.9 million in newsprint costs for the year ended December 31, 2002.

Seasonality

Newspaper companies tend to follow a distinct and recurring seasonal
pattern, with higher advertising revenues generally occurring in the second and
fourth quarters of each year as a result of increased advertising activity
during the Easter holiday and spring advertising season and during the
Thanksgiving and Christmas periods. The first quarter is historically the
weakest quarter for advertising revenues.

Television Broadcasting

We acquired the first of our current television broadcasting stations in
1972, when we purchased WLIO in Lima, and currently own and operate four
television stations. We are also a two-thirds owner of a fifth station, which
is managed by LIN Television under a management services agreement. Our
television stations are diverse in network affiliation with two Fox stations,
one NBC station, one ABC station and one UPN station. We have a duopoly in
Louisville, Kentucky (the 50th largest DMA) through our ownership of the Fox
and UPN stations. In the year ended December 31, 2002, our television
broadcasting operations generated revenues, operating income and EBITDA of
$40.0 million, $3.7 million and $7.2 million, respectively.

We own the following broadcast properties:

|         |  |         |    |        |  |                                                 |  |             |     |        |  |     |  |  |   |             |  |            |  | 
|-------- |  | ------- | -- | ------ |  | ----------------------------------------------- |  | ----------- | --- | ------ |  | --- |  |  | - | ----------- |  | ---------- |  | 
|         |  |         |    |        |  |                                                 |  |             |     |        |  |     |  |  |   |             |  | Commercial
|         |  | Channel |    |        |  |                                                 |  |             |     |        |  |     |  |  |   | Stations in
|Station  |  | Number  |    | Market |  | DMA Rank(1)                                     |  | Affiliation |     | DMA(2)
|         |  |         |    |        |  |                                                 |  |             |     |       
|WDRB     |  |         | 41 |        |  | Louisville,
          KY                        |  |             | 50  |        |  | Fox |  |  | 7 |            
|WFTE     |  |         | 58 |        |  | Louisville,
          KY (3)                    |  |             | 50  |        |  | UPN |  |  | 7 |            
|WAND (4) |  |         | 17 |        |  | Champaign-Springfield
          and Decatur, IL |  |             | 82  |        |  | ABC |  |  | 6 |            
|KTRV     |  |         | 12 |        |  | Boise, ID
          (5)                         |  |             | 123 |        |  | Fox |  |  | 5 |            
|WLIO     |  |         | 35 |        |  | Lima, OH                                        |  |             | 194 |        |  | NBC |  |  | 2 |            



---

|(1) |  | Ranking of DMA served by a station among all DMAs is measured by the
number of television households based within the DMA in the November 2002
Nielsen estimates.                                                                       
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | The term commercial station means a television broadcasting station and
does not include non-commercial television stations, cable program
services or networks, or stations that do not meet the minimum Nielsen
reporting standards.





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|(3) |  | Licensed to Salem, Indiana.                                                         
|--- |  | ------------------------------------------------------------------------------------
|   
|(4) |  | We have a two-thirds ownership interest in WAND, which is managed by LIN
Television.
|   
|(5) |  | Licensed to Nampa, Idaho.                                                           

We seek to maintain a distinct identity at each of our stations by
creating quality local programming, such as local news and sports coverage, and
by actively sponsoring and promoting community events. This focus positions us
to increase our share of local advertising revenues, which are generally more
stable than national advertising revenues and which we impact directly through
our own local sales force. We have reduced headcount at our broadcasting
operations and believe that through continued cost reduction efforts and
effective local programming, we can increase operating margins.

Markets Served

The following is a description of each of our stations and their markets.
In the description, information concerning estimates of population, audience
share and television households has been derived from the Nielsen Media
Research dated November 2002 as estimated by the A.C. Nielsen Company. All
other information is station estimates derived from local sources. In the
description, the term commercial station means a television broadcasting
station and does not include non-commercial television stations, cable program
services or networks, or stations that do not meet the minimum Nielsen
reporting standards and the term audience share means the audience share from
6:00 a.m. to 2:00 a.m. as reported in the Nielsen Media Research.

Louisville, Kentucky is the 50th-largest DMA in the United States, with a
population of approximately 1.5 million and approximately 612,000 television
households. The average household income in the Louisville DMA is
approximately $43,500. Total Market Revenues in the Louisville DMA in 2002
were approximately $113 million. Cable penetration in the market is estimated
to be 64%. In March 2001, we acquired from Kentuckiana Broadcasting, the
assets of WFTE, which we had previously operated under a joint-sales agreement.
For the November 2002 ratings period, WDRB ranked fourth in the Louisville DMA
with an audience share of 7%, and WFTE ranked fifth in the Louisville DMA with
an audience share of 3%. There are five other commercial television stations,
owned by Cosmos Broadcasting, Cascade Broadcasting, Word Broadcasting, Belo
Corp. and Hearst-Argyle TV, and three public television stations licensed
within the Louisville DMA.

Champaign-Springfield and Decatur, Illinois is the 82nd-largest DMA in the
United States, with a population of approximately 900,000 and approximately
371,000 television households. The average household income in this DMA is
approximately $45,000. Total Market Revenues for television in this DMA in
2002 were approximately $47 million. Cable penetration in the market is
estimated to be 70%. In March 2000, we acquired a two-thirds interest in WAND
from LIN Television. LIN continues to own a one-third interest in WAND and
provides management services. For the November 2002 ratings period, WAND
ranked third in its market with an audience share of 12%. There are five other
commercial television stations, owned by Nexstar Broadcasting Group, Sinclair
Broadcast Group, Acme Television and Bahakel Communications, and four public
television stations licensed within the Champaign-Springfield and Decatur DMA.

Boise, Idaho is the 123rd-largest DMA in the United States, with a
population of approximately 550,000 and approximately 223,000 television
households. The average household income in the Boise DMA is approximately
$44,500. Total Market Revenues in the Boise DMA in 2002 were approximately $37
million. Cable penetration in the market is estimated to be 46%. For the
November 2002 ratings period, KTRV ranked fourth in its market with an audience
share of 7%. There are four other commercial television stations, owned by
Fisher Broadcasting, Journal Broadcasting Group, Banks Broadcasting and Belo
Corp., and one public television station licensed within the Boise DMA.

Lima, Ohio is the 194th-largest DMA in the United States, with a
population of approximately 107,000 and approximately 57,500 television
households. The average household income in the Lima DMA is approximately
$39,700. Total Market Revenues in the Lima DMA in 2002 were approximately $9.4
million. Cable penetration in the market is estimated to be 76%. For the
November 2002 ratings period, WLIO ranked first in its market with an audience
share of 25%. There is one other commercial television station, owned by Greg
Phipps, and one public television station licensed within the Lima DMA.





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Industry

Television station revenues are primarily derived from local, regional and
national advertising and, to a lesser extent, from network compensation and
revenues from commercial production activities. Advertising rates are based
upon a variety of factors, including a programs popularity among the viewers
an advertiser wishes to attract, the number of advertisers competing for the
available time, the size and demographic makeup of the market served by the
station, the availability of alternative advertising media in the market area
and the effectiveness of the stations sales force. Rates are also determined
by a stations overall ratings and share in its market, as well as the
stations ratings and share among particular demographic groups which an
advertiser may be targeting. Advertising revenues are positively affected by
strong local economies, national and regional political election campaigns, and
certain events such as the Olympic Games or the Super Bowl. Because television
stations rely on advertising revenues, declines in advertising budgets,
particularly in recessionary periods, adversely affect the revenues of
television stations.

Advertising Sales

All network-affiliated stations are required to carry spot advertising
sold by their networks, which reduces the amount of advertising spots available
for sale by our stations. Our stations sell all of the remaining advertising
to be inserted in network programming and all of the advertising in non-network
programming, retaining the revenues received from these sales. In 2002,
approximately 97% of our broadcasting revenues came from the sale of time to
national, local and political advertisers. Approximately 63% of our broadcast
revenues came from local advertising, 28% came from national advertising, 6%
came from political advertising and our remaining revenues came from network
compensation payments under our network affiliate agreements and miscellaneous
sources. A national syndicated program distributor will often retain a portion
of the available advertising time for programming it supplies in exchange for
no fees or reduced fees charged to the stations for such programming. These
arrangements are called barter programming.

Local Sales.Local advertising time is sold by each stations local sales
staff who call upon advertising agencies and local businesses, which typically
include car dealerships, retail stores and restaurants. Compared to revenues
from national advertising accounts, revenues from local advertising are
generally more stable and more controllable. We seek to attract new
advertisers to television, and to increase the amount of advertising time sold
to existing local advertisers, by relying on experienced local sales forces
with strong community ties, producing news and other programming with local
advertising appeal and sponsoring or co-promoting local events and activities.

National Sales.National advertising time is sold through national sales
representative firms which call upon advertising agencies, whose clients
typically include automobile manufacturers and dealer groups,
telecommunications companies, fast food franchisers and national retailers
(some of which may advertise locally).

Network Affiliations

Whether or not a station is affiliated with one of the four major networks
(NBC, ABC, CBS or Fox) has a significant impact on the composition of the
stations revenues, expenses and operations. Except for Fox, a major network
affiliate receives the majority of its programming each day from the network.
Our stations are affiliated with their networks pursuant to an affiliation
agreement, with the exception of our Fox stations that are governed by
affiliation agreements that remain unsigned. WDRB and KTRV are affiliated with
Fox; WAND is affiliated with ABC; WLIO is affiliated with NBC; and WFTE is
affiliated with UPN.

Our affiliation agreements provide the affiliated station with the right
to broadcast all programs transmitted by the network with which it is
affiliated. In exchange, the network has the right to sell a substantial
majority of the advertising time during these broadcasts. In addition, for
each hour that the station elects to broadcast network programming, the network
pays the station a fee (with the exception of Fox and UPN), specified in the
affiliation agreement, which varies with the time of day. Typically,
prime-time programming generates the highest hourly rates.

Our ABC affiliation agreement for WAND expires on September 4, 2005. The
NBC affiliation agreement for WLIO expires on December 31, 2010. Our UPN
affiliation agreement for WFTE expires on January 12, 2008.





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Digital Television

The digital television, or DTV, transmission system delivers video and
audio signals of higher quality (including high definition television) than the
existing analog transmission system. DTV also has substantial capabilities for
multiplexing (the broadcast of several programs concurrently) and data
transmission. Digital television will require consumers to purchase new
televisions that are capable of receiving and displaying DTV signals or
adapters to receive DTV signals and convert them into analog signals for
display on existing receivers.

In April 1998, the FCC assigned each licensed television station a second
broadcast channel on which to provide DTV service. In general, the DTV
channels assigned to television stations are intended to allow stations to have
their DTV coverage area replicate their analog coverage area, although a number
of variables will ultimately determine the extent to which a stations DTV
operation will provide such replication.

By May 1, 2002, all commercial television station licensees were required
to complete construction and commence operating DTV facilities except to the
extent that the FCC extended the deadline in certain cases. WAND met the May
1, 2002 deadline. WFTE has until May 13, 2003 to comply due to FCC delays in
issuing the construction permit. KTRV is not required to construct digital
facilities until the FCC determines which digital channel KTRV will ultimately
utilize. Our remaining stations  WDRB and WLIO  requested waivers of the May
1, 2002 deadline. On June 14, 2002, the FCC denied those requests and ordered
WDRB and WLIO to construct digital television transmission systems no later
than December 1, 2002. The FCC also directed the stations to submit to the
FCC, by July 15, 2002, reports setting forth construction plans and a proposed
timetable for construction that would meet the December 1, 2002 deadline.
Finally, the FCC directed the stations to file by September 13, 2002 interim
progress reports regarding their digital construction efforts.

In compliance with the FCCs order, the two stations, WDRB and WLIO, have
completed the construction phase and both stations are on the air operating
under a Station Temporary Authorization, which permits low power operation.
The low power construction complies with FCC rules and policies regarding
digital television transmission. In addition, WFTE has completed the
construction phase, prior to the due date, and is also operating under a low
power Station Temporary Authorization. We anticipate the FCC will establish a
deadline by which such low power systems must be upgraded to full power systems
that provide coverage to a broader geographic area. When such deadline is
established, we will comply by upgrading our facilities. We estimate that
approximately $9.6 million of capital expenditures after December 31, 2002 will
be necessary to meet the DTV requirements for all of our stations.

Once a station begins broadcasting its DTV signal, it may broadcast both
its analog and DTV signals until December 31, 2006, after which, subject to
certain conditions described below, the FCC expects to reclaim one of the
channels and broadcasters will operate a single DTV channel allocation.
Starting April 1, 2003, commercial station operators must simulcast at least 50
percent of the video programming broadcast on their analog channel on their DTV
channel. The required simulcast percentage increases annually until April 1,
2005, when an operator must simulcast 100 percent of its programming on its
analog and DTV channels.

Competition

Television broadcasting stations face competition for advertising revenue,
audience share and programming. Our competitive position depends, in part, on
our signal coverage and assigned frequency and is materially affected by new
and changing technologies, regulations passed by federal agencies, including
the FCC and the Federal Trade Commission, and other entertainment and
communication industries.

Our stations compete for advertising revenues with other television
broadcasting stations in their respective markets and, to a lesser extent, with
other advertising media such as newspapers, radio stations, magazines, outdoor
advertising, yellow page directories, direct mail, and local cable systems
serving the same market. Competition for advertising dollars in the television
broadcasting industry occurs primarily within individual markets.

Stations compete for viewership generally against other leisure activities
in which one could choose to engage rather than watch television. Broadcast
stations compete for audience share specifically on the basis of program
popularity, which has a direct effect on advertising rates. A portion of our
broadcast programming is supplied by the





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network affiliated with our station and during that time period, our
ability to attract viewers is dependent on the performance of the network
programming. During non-network time periods, we broadcast a combination of
self-produced news, public affairs and other entertainment programming
including syndicated programs. The development of new methods of video
transmission, and in particular the growth of cable television, has
significantly altered competition for audience share in the television industry
by increasing the number of stations available to viewers. Home entertainment
systems such as VCRs, DVDs and television game devices also compete for
audience share. Future sources of competition include the transmission of
video programming over broadband Internet and specialized niche programming
targeted at very narrowly defined audiences.

In acquiring programming to supplement network programming, network
affiliates compete with other broadcasting stations in their markets.
Competition for programming involves negotiating with national program
distributors or syndicators that sell first-run and rerun packages of
programming. Our stations compete for exclusive access to off-network reruns
(such as Friends") and first-run products (such as Jeopardy") in their
respective markets. AOL/Time Warner, Viacom and News Corp., each of which has
a television network or cable broadcast stations, also own or control major
production studios, which are the primary source of programming for the
networks. It is uncertain whether in the future such programming, which is
generally subject to short-term agreements between the studios and the
networks, will be made available to broadcast stations not affiliated with the
studio. Television broadcasters also compete for non-network programming
unique to the markets they serve. As such, stations strive to provide
exclusive news stories, unique features such as investigative reporting and
coverage of community events, and to secure broadcast rights for regional and
local sporting events.

Other Operations

Buckeye TeleSystem, Inc. is a competitive local exchange carrier which
provides facilities-based business telephony primarily in the Toledo market
serviced by Buckeye CableSystem. Our telephony system offers services ranging
from business voice lines to high bandwidth data lines to mid- to large-size
businesses. Buckeye TeleSystem generated revenues, operating income and EBITDA
of $17.9 million, $2.5 million and $5.7 million, respectively, for the year
ended December 31, 2002.

Corporate Protection Services, based in Toledo, designs and installs
residential and light commercial security and fire alarm systems primarily in
Toledo but also in other locations throughout the country. From its Toledo
monitoring facility, CPS provides 24-hour monitoring services for security
systems in Toledo and elsewhere. For the year ended December 31, 2002, CPS
generated revenues, operating income and EBITDA of $8.1 million, $50,000 and
$835,000, respectively.

Community Communication Services, Inc. provides printing and door-to-door
delivery of advertising circulars in the greater Toledo metropolitan area. For
the year ended December 31, 2002, CCS generated revenues of $564,000, operating
loss of $1.1 million and negative EBITDA of $615,000. A reorganization of
operations and cost reductions are planned for 2003.

Regulation

Regulation of Cable Television

The cable television industry is regulated by the FCC, some state
governments and substantially all local governments. In addition, various
legislative and regulatory proposals under consideration from time to time by
the Congress and various federal agencies have in the past, and may in the
future, materially affect us and the cable television industry. The following
is a summary of federal laws and regulations materially affecting the growth
and operation of the cable television industry and a description of certain
state and local laws. We believe that the regulation of the cable television
industry remains a matter of interest to Congress, the FCC and other regulatory
authorities. There can be no assurance as to what, if any, future actions such
legislative and regulatory authorities may take or the effect thereof on us.





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Federal Legislation

The principal federal statute governing the cable television industry is
the Communications Act of 1934, as amended. As it affects the cable television
industry, the Communications Act has been significantly amended on three
occasions: by the 1984 Cable Act, the 1992 Cable Act and the 1996 Telecom Act.
The 1996 Telecom Act altered the regulatory structure governing the nations
telecommunications providers. It removed barriers to competition in both the
cable television market and the local telephone market. Among other things, it
also reduced the scope of cable rate regulation.

Federal Regulation

The FCC is the principal federal regulatory agency with jurisdiction over
cable television. It has adopted regulations covering such areas as
cross-ownership between cable television systems and other communications
businesses, carriage of television broadcast programming, cable rates, consumer
protection and customer service, leased access, indecent programming,
programmer access to cable television systems, programming agreements,
technical standards, consumer electronics equipment compatibility, ownership of
home wiring, program exclusivity, equal employment opportunity, consumer
education and lockbox enforcement, origination cablecasting and sponsorship
identification, political programming and advertising, advertising during
childrens programming, signal leakage and frequency use, maintenance of
various records, and antenna structure notification, marking and lighting. The
FCC has the authority to enforce these regulations through the imposition of
substantial fines, the issuance of cease and desist orders and/or the
imposition of other administrative sanctions, such as the revocation of FCC
licenses needed to operate certain transmission facilities often used in
connection with cable operations. A brief summary of certain of these federal
regulations as adopted to date follows.

Rate Regulation.Where a cable television system is not subject to
effective competition, the rates for the basic service tier (the lowest level
of cable programming service which must include local broadcast channels and
public access channels) may be regulated by the local franchising authority at
its option. Rates for cable programming service tiers, which generally include
programming other than the channels carried on the basic service tier, and for
programming offered on a per-channel or per-program basis, are not subject to
governmental regulations. If local franchising authorities choose to regulate
basic service rates, they may order reductions and, in certain circumstances,
refunds of existing monthly rates and charges for associated equipment. In
carrying out their rate regulatory authority, however, local officials are
subject to certain FCC standards such as the obligation to evaluate rates in
accordance with FCC approved benchmark formulas or cost-of-service showings.
Future rates of regulated cable systems may not exceed an inflation-indexed
amount, plus increases in certain costs beyond the cable operators control,
such as taxes, franchise fees and increased programming costs. Cost-based
adjustments to these capped rates also can be made in the event a cable
television operator adds or deletes channels. There is also a streamlined
cost-of-service methodology available to justify a rate increase for
significant system rebuilds or upgrades. With the exception of one franchise
covering 59 cable subscribers, we are currently not being regulated for basic
services, installation and equipment rates in any of our franchise areas.

In June 2002, the FCC initiated a new rulemaking proceeding that will
examine many issues related to its cable rate regulation rules and will
consider whether any existing regulations should be eliminated or revised in an
attempt to streamline the regulatory process while still providing protection
to consumers. We are unable to predict the outcome of this proceeding or its
effects upon our business.

Existing regulations require cable television systems to permit customers
to purchase video programming on a per channel or a per program basis without
the necessity of subscribing to any tier of service, other than the basic
service tier.

Carriage of Television Broadcasting Signals.The 1992 Cable Act contains
signal carriage requirements which allow full-power commercial television
broadcasting stations that are local to a cable television system (i.e., the
system is located in the stations designated market area) to elect every three
years whether to require the cable television system to carry the station,
subject to certain exceptions, or whether the cable television system will have
to negotiate for retransmission consent to carry the station. The next
election between must-carry and retransmission consent will occur October 1,
2005. A cable television system is generally required to devote up to
one-third of its activated channel capacity for the carriage of local
commercial television stations whether pursuant to the mandatory





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carriage requirements or retransmission consent requirements of the 1992
Cable Act. Local non-commercial television stations are also given mandatory
carriage rights, subject to certain exceptions, on cable systems with the
principal head-end located within the larger of: (i) a 50-mile radius from the
stations city of license or (ii) the stations Grade B contour (a measure of
signal strength). Unlike commercial stations, noncommercial stations are not
given the option to negotiate retransmission consent for the carriage of their
signal. In addition, cable television systems have to obtain retransmission
consent for the carriage of all distant commercial broadcast stations, except
for certain superstations (i.e., commercial satellite-delivered independent
stations such as WGN). To date, compliance with the retransmission consent
and must carry provisions of the 1992 Cable Act has not had a material effect
on us, although this result may change in the future depending on such factors
as market conditions, channel capacity and similar matters when such
arrangements are renegotiated. The FCC has initiated a rulemaking proceeding
on the carriage of television signals in high definition and digital formats.
The outcome of this proceeding could have a material effect on the number of
services that a cable operator will be required to carry.

Renewal of Franchises and Franchise Fees.The 1984 Cable Act established
renewal procedures and criteria designed to protect incumbent franchisees
against arbitrary denials of renewal. While these formal procedures are not
mandatory unless timely invoked by either the cable television operator or the
franchising authority, they can provide substantial protection to incumbent
franchisees. Even after the formal renewal procedures are invoked, franchising
authorities and cable television operators remain free to negotiate a renewal
outside the formal process. Nevertheless, renewal is by no means assured, as
the franchisee must meet certain statutory standards. Even if a franchise is
renewed, a franchising authority may impose new and more onerous requirements
such as upgrading cable-related facilities and equipment and complying with
voluntary commitments, although the municipality must take into account the
cost of meeting such requirements. In the case of franchises in effect prior
to the effective date of the 1984 Cable Act, franchising authorities may
enforce requirements contained in the franchise relating to facilities,
equipment and services, whether or not cable-related. The 1984 Cable Act,
under certain limited circumstances, permits a cable operator to obtain
modifications of franchise obligations. Franchises have generally been renewed
for cable television operators that have provided satisfactory services and
have complied with the terms of their franchises. Franchising authorities may
also consider the level of programming service provided by a cable television
operator in deciding whether to renew. For alleged franchise violations
occurring after December 29, 1984, franchising authorities have the right to
deny renewal because of an operators failure to substantially comply with the
material terms of the franchise even if the franchising authority has
effectively acquiesced to such past violations. The franchising authority
is, however, precluded from denying renewal unless the franchising authority
has provided the cable operator with notice and the opportunity to cure, or in
any case in which it is documented that the franchising authority has waived
its right to object, or in which the cable operator gives written notice of a
failure or inability to cure and the franchising authority fails to object
within a reasonable time. Courts may not reverse a denial of renewal based on
procedural violations found to be harmless error. Historically, we have not
experienced any material problems renewing our franchises for our cable
television systems. We are not aware of any current or past material failure
on our part to comply with our franchise agreements. We believe that we have
generally complied with the terms of our franchises and have provided quality
levels of service.

Franchising authorities may generally impose franchise fees of up to 5% of
a cable television systems annual gross revenues, excluding revenues derived
from telecommunications services. In addition, state and local governments may
also be able to exact some compensation for the use of public rights-of-way.
In March 2002, the FCC ruled that cable modem service, which provides
high-speed access to the Internet, is not a cable television service. Since
that initial ruling, the question of whether cable companies are legally
authorized to collect franchise fees on cable-modem service, and pass those
fees on to local governments, has been widely debated and has become the
subject of litigation. Several large cable operators around the nation have
stopped collecting these fees. We have not yet suspended our collection of
these franchise fees, but are actively considering our position in light of
various recent developments in the industry.

Channel Set-Asides.The 1984 Cable Act permits local franchising
authorities to require cable television operators to set aside certain
television channels for public, educational and governmental access
programming. The 1984 Cable Act further requires cable television systems with
thirty-six or more activated channels to designate a portion of their channel
capacity for commercial leased access by unaffiliated third parties to provide
programming that may compete with services offered by the cable television
operator. The 1992 Cable Act requires leased access rates to be set according
to a formula determined by the FCC.





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##### Table of Contents



Copyright Matters.Cable systems must obtain copyright licenses for
programming and television signals they carry. Copyright authority for
programming on non-broadcast networks typically is obtained from the networks
in question, and copyright authority for programming originated locally by the
cable system must be obtained directly from copyright holders. The Copyright
Act provides a blanket license for copyrighted material on television stations
whose signals a cable system retransmits. Cable operators can obtain this
license by filing semi-annual reports and paying a percentage of their revenues
as a royalty fee to the U.S. Copyright Office, which then distributes the
royalty pool to copyright holders. For larger cable systems, these payments
vary with the numbers and type of distant television stations the system
carries. From time to time, Congress considers proposals to alter the blanket
copyright license, some of which could make the license more costly.

Pole Attachments.The Communications Act requires the FCC to regulate the
rates, terms and conditions imposed by public utilities for use of utility
poles and conduit space unless state authorities have certified to the FCC that
they adequately regulate pole attachment rates, as is the case in Ohio and
Michigan where the Companys cable systems operate. In the absence of state
certification, the FCC regulates pole attachment rates, terms and conditions
only in response to a formal complaint. Where states such as Ohio and Michigan
regulate pole attachments, they generally do so by following the FCCs
substantive rules. The Communications Act also requires that a utility provide
cable systems and telecommunications carriers with nondiscriminatory access to
any pole, conduit or right-of-way controlled by the utility.

The FCCs pole attachment rate formulas govern the maximum rate certain
utilities may charge cable operators and telecommunications carriers for
attachments to the utilitys poles and conduits. Effective February 2001, a
formula now governs the maximum attachment rate for companies providing
telecommunications services, including cable operators, which results in a
higher maximum attachment rate for telecommunications services compared to
cable services. The increase in attachment rates applicable to
telecommunications services resulting from the FCCs new rate formula will be
phased in over a five-year period.

In early 2002, the U.S. Supreme Court affirmed that the FCCs authority to
regulate rates for attachments to utility poles extended to attachments by
cable operators and telecommunications carriers that are used to provide
Internet service or wireless telecommunication service. This development
protects cable television operators that also provide Internet access services
from facing more onerous rates, terms and conditions imposed by utilities for
pole attachments. But the FCC has also initiated a proceeding to determine
whether it should adjust certain elements of the current rate formula. If
adopted, these adjustments could increase rates for pole attachments and
conduit space.

In June 2002, a federal court of appeals struck down two FCC rules that
related to pole attachments. The court held that the Federal Pole Attachment
Act did not extend to electric transmission facilities and, therefore, struck
the FCCs rule that required electric utilities to provide access to that type
of facilities. The court also rejected an FCC rule that would require electric
utilities to expand facility capacity to meet the needs of attaching entities.
We do not believe that the courts ruling would have a material negative impact
on our business operations.

Local Television/Cable Cross-Ownership Rule.An FCC rule prohibits any
cable television system (including all parties under common control) from
carrying the signal of any television broadcasting station that has a predicted
service area that overlaps, in whole or in part, the cable systems service
area, if the cable system (or any of its attributable principals) has an
attributable interest in the television station. But in February 2002, the
Court of Appeals for the District of Columbia Circuit held that the FCCs
decision to retain this rule was unlawful and, therefore, vacated the rule. In
June 2002, the Court generally refused to reconsider its earlier ruling
overturning the FCCs rule, but did modify the standard the FCC must use should
it attempt to re-justify the rule. The Company cannot predict what steps, if
any, the FCC will take in response to these court decisions. While the FCC
considers these matters, the rule is not in effect.

Local Exchange Carriers/Cable Television Cross-Ownership.The 1996 Act
generally restricts local exchange carriers and cable operators from holding
more than a 10% financial interest or any management interest in the others
operations within their service area or from entering joint ventures or
partnerships with cable operators in the same market. These buy-out
restrictions are subject to four general exceptions, which include population
density and competitive market tests. The FCC may waive the buyout
restrictions if it determines that:





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| |  |  | the cable operator or LEC would be subject to undue economic
distress by enforcement of the restrictions;                                
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the cable system or LEC facilities would not be economically viable
if the provisions were enforced;                                     
|
| |  |  | the anti-competitive effects of the proposed transaction clearly
would be outweighed by the public interest in serving the community;
and
|
| |  |  | the local franchising authority approves the waiver.                                                                                     

General Ownership Limitations.The Communications Act generally prohibits
the Company from owning and/or operating a Satellite Master Antenna Television
System (SMATV) or a wireless cable system in any area where the Company
provides franchised cable service. However, the cable/SMATV and the
cable/wireless cable cross-ownership rules are inapplicable in any franchise
area where the operator faces effective competition, or where the cable
operator owned the SMATV system prior to the 1992 Cable Act. In addition, the
FCCs rules permit a cable operator to offer service through SMATV systems in
the operators existing franchise area so long as the service is offered
according to the terms and conditions of the cable operators local franchise
agreement.

Other Statutory Provisions.One of the underlying competitive policy
goals of the 1992 Cable Act is to limit the ability of vertically integrated
program suppliers to favor affiliated cable operators over unaffiliated program
distributors. Consequently, with certain limitations, federal law generally:



| |  |  | precludes any satellite video programmer affiliated with a cable
company, or with a common carrier providing video programming directly
to its subscribers, from favoring an affiliated company over
competitors;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | requires such programmers to sell their programming to other multichannel video distributors; and                                                                                                                
|
| |  |  | limits the ability of such programmers to offer exclusive programming arrangements to their affiliates.                                                                                                          

The Communications Act requires cable operators, upon the request of a
subscriber, to scramble or otherwise fully block any adult channel the
subscriber does not wish to receive. The Communications Act also contains
restrictions on the transmission by cable operators of obscene or indecent
programming. A three- judge federal district court determined that certain
statutory restrictions regarding channels primarily dedicated to sexually
oriented programming were unconstitutional, and the United States Supreme Court
recently affirmed the lower courts ruling.

The Communications Act and the FCCs rules also include provisions concerning, among other things:



| |  |  | customer service;                                                 
| | - |  | ------------------------------------------------------------------
|
| |  |  | subscriber privacy;                                               
|
| |  |  | marketing practices;                                              
|
| |  |  | equal employment opportunity; and                                 
|
| |  |  | the regulation of technical standards and equipment compatibility.

Inside Wiring Regulations.The FCC adopted cable inside wiring rules to
provide specific procedures for the disposition of residential home wiring and
internal building wiring where a subscriber terminates service or where an
incumbent cable operator is forced by a building owner to terminate service in
a multiple dwelling unit (MDU) building. The FCC is also considering
additional rules relating to inside wiring that, if adopted, may disadvantage
incumbent cable operators. Unless operators retain rights under state
statutory or common law to maintain ownership rights in the wiring, MDU owners
could use these new rules to pressure cable operators without MDU service
contracts to either





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sell, abandon or remove internal wiring carrying voice as well as video
communications and to terminate service to MDU subscribers.

Consumer Equipment.The FCC adopted regulations to implement provisions
of the 1992 Cable Act regarding compatibility between cable systems and
consumer electronics equipment. The 1996 Act directed the FCC to establish
only minimal standards regarding compatibility between television sets, video
cassette recorders and cable systems. Pursuant to this statutory mandate, the
FCC adopted rules to assure the competitive availability of customer premises
equipment, such as set-top converters or other navigation devices, which are
used to access services offered by cable systems and other multichannel video
programming distributors. The FCCs rules allow consumers to attach compatible
equipment to the Companys cable facilities, so long as the equipment does not
harm the Companys network, does not interfere with the services purchased by
other subscribers and is not used to receive unauthorized services. Effective
July 1, 2000, cable operators were required to separate security from
non-security functions in subscriber premises equipment by making available
modular security components that would function in set-top units purchased or
leased from retail outlets. The requirement to separate security and
non-security functions is inapplicable to equipment that uses only an analog
conditional access mechanism and that is incapable of providing access to any
digital transmission or other digital service. Effective January 1, 2005, the
Company will be prohibited from selling or leasing new navigation devices or
converter boxes that integrate both security and non-security functions. The
Company, however, will not be required to discontinue the leasing of older
converters that include integrated security functions if those converters were
provided to subscribers before January 1, 2005.

The FCC has also issued an order preempting state, local and private
restrictions on over-the-air reception antennas placed on rental properties in
areas where a tenant has exclusive use of the property, such as balconies or
patios. But tenants may not install such antennas on the common areas of
multiple-dwelling units, such as on roofs. This order limits the extent to
which multiple-dwelling unit owners can enforce certain aspects of
multiple-dwelling unit agreements that otherwise would prohibit, for example,
placement of direct broadcast satellite television-receiving antennas in
multiple-dwelling unit areas, such as apartment balconies or patios, under the
exclusive occupancy of the tenant.

Privacy

Federal statutes and regulations impose a number of restrictions on the
manner in which cable-television operators can collect and disclose data about
individual customers. The 1984 Cable Act requires that the system operator
periodically provide all customers with written information about its policies
regarding the collection and handling of data about customers, their privacy
rights under federal law, and their enforcement rights. If a cable television
operator was found to have violated these requirements, it could be required to
pay damages, attorney fees, and other costs. The 1992 Cable Act strengthened
certain of these requirements, and others were modified by the Electronic
Communications Privacy Act of 2001. We believe we are in compliance with all
applicable federal statutes and regulations regarding customer privacy.

State and Local Regulation

Cable television systems generally are operated pursuant to nonexclusive
franchises, permits or licenses granted by a municipality or other state or
local government entity. The terms and conditions of franchises vary
materially from jurisdiction to jurisdiction. Franchises generally contain
provisions governing fees to be paid to the franchising authority, length of
the franchise term, renewal, sale or transfer of the franchise, territory of
the franchise, design and technical performance of the system, use and
occupancy of public streets and number and types of cable television services
provided. The 1992 Cable Act prohibits exclusive franchises and allows
franchising authorities to regulate customer service and rates. States and
local franchising authorities may adopt certain restrictions on cable
television systems ownership.

Franchising authorities in Michigan may operate their own multichannel
video distribution system without a franchise. Ohio recently enacted
legislation placing many of the same restrictions on municipalities that
private cable systems operate under. The Ohio law includes provisions
outlining equal franchise agreements, restrictions on selling cable TV outside
the municipality, advance notice of building a municipal cable system, full
cost accounting language and establishment of an arbitration process for
private sector/governmental cable disputes.





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The foregoing summarizes the material cable television industry
regulations with which we must comply. However, it does not purport to
describe all present and proposed federal, state and local regulations and
legislation relating to the cable television industry, some of which are
subject to judicial and legislative review and change, and their impact on the
cable television industry or us cannot be predicted at this time. In
particular, the FCC is constantly considering and reconsidering, and often
proposing to change, the entire body of regulations that apply to the cable
television industry. The status of the FCCs activity is therefore constantly
fluid, and can be definitively determined at any moment only by reviewing the
FCCs own records. The content and timing of any regulatory action the FCC may
take cannot be predicted.

Federal Regulation of Television Broadcasting

The following is a brief discussion of certain provisions of the
Communications Act of 1934, as amended, and the FCCs regulations and policies
that affect the business operations of television broadcasting stations. For
more information about the nature and extent of FCC regulation of television
broadcasting stations you should refer to the Communications Act of 1934 and
the FCCs rules, public notices, and rulings. Over the years Congress and the
FCC have added, amended and deleted statutory and regulatory requirements to
which station owners are subject. Some of these changes have a minimal
business impact, whereas others may significantly affect the business or
operation of individual stations or the broadcast industry as a whole. The
following discussion summarizes certain federal requirements concerning the
television broadcast industry that currently are in effect.

License Grant and Renewal.Television broadcasting licenses are granted
for a maximum term of eight years and are subject to renewal upon application
to the FCC. The FCC is required to grant an application for license renewal if
during the preceding term the station served the public interest, the licensee
did not commit any serious violations of the Communications Act or the FCCs
rules, and the licensee committed no other violations of the Communications Act
or the FCCs rules which, taken together, would constitute a pattern of abuse.
The vast majority of renewal applications are routinely renewed under this
standard. If a licensee fails to meet this standard, the FCC may still grant
renewal on terms and conditions that it deems appropriate, including a monetary
forfeiture or renewal for a term less than the normal eight-year period.

During certain limited periods after a renewal application is filed,
interested parties, including members of the public, may file petitions to deny
a renewal application, to which the licensee/renewal applicant is entitled to
respond. After reviewing the pleadings, if the FCC determines that there is a
substantial and material question of fact whether grant of the renewal
application would serve the public interest, the FCC is required to hold a
trial-type hearing on the issues presented. If, after the hearing, the FCC
determines that the renewal applicant has met the renewal standard, the FCC
must grant the renewal application. If the licensee/renewal applicant fails to
meet the renewal standard or show that there are mitigating factors entitling
it to renewal subject to appropriate sanctions, the FCC can deny the renewal
application. In the vast majority of cases where a petition to deny is filed
against a renewal, the FCC ultimately grants the renewal without a hearing.

No competing application for authority to operate a station and replace
the incumbent licensee may be filed against a renewal application unless the
FCC first determines that the incumbent licensee is not entitled to license
renewal.

In addition to considering rule violations in connection with a license
renewal application, the FCC may sanction a station licensee at any time during
the license term for failing to observe FCC rules and policies, including the
imposition of a monetary forfeiture.

The FCC prohibits the assignment or the transfer of control of a
broadcasting licensee without prior FCC approval.

Ownership Matters.

On September 23, 2002, the FCC released a notice of proposed rulemaking
that initiated a comprehensive review of its broadcast ownership rules. Almost
all of these rules have become unsettled in recent years as a result of FCC
rulemakings and judicial decisions reversing or vacating certain FCC ownership
rules. This comprehensive rulemaking is likely to dramatically change the
federal rules applicable to broadcast ownership. We cannot predict the outcome
of the proceeding or its effect on our businesses.





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Ownership Attribution. FCC rules establish limits on the ownership of
broadcast stations. The ownership limits apply only to attributable interests
in a station licensee that are held by an individual, corporation, partnership
or other entity. In the case of corporations, officers, directors and voting
stock interests of five percent or more (twenty percent or more in the case of
qualified investment companies, such as insurance companies and bank trust
departments) are considered attributable interests. For partnerships, all
general partners and non-insulated limited partners are attributable. Limited
liability companies are treated the same as partnerships. Under its
equity/debt plus rule, the FCC attributes otherwise non-attributable
interests held by a party who also provides over fifteen percent of a stations
total weekly broadcast programming or who has an attributable interest in a
radio station, television station, or daily newspaper in the same market.
Subject to the equity/debt plus rule, a minority voting interest in a media
property is not cognizable if there is a single holder of more than 50 percent
of that media propertys outstanding voting stock. Finally, the FCC attributes
(i.e., counts towards the local ownership limits) another in-market broadcast
station to the licensee of a broadcast station who provides more than 15
percent of the other stations weekly broadcast programming pursuant to a local
marketing agreement or a time brokerage agreement.

Local Ownership (Duopoly Rule).Prior to August 1999, no party could have
attributable interests in two television stations if those stations had
overlapping service areas (which generally meant one station per market),
although the FCC did not attribute local marketing agreements involving a
second station with an overlapping service area. In August 1999, the FCC
adopted new rules which allowed the ownership of two stations in a single
market (defined using Nielsen Media Researchs DMAs) if (1) the two stations do
not have overlapping service areas, or (2) after the combination there are at
least eight independently owned and operating full-power television stations
and one of the commonly owned stations is not ranked among the top four
stations in the DMA. The FCC will consider waivers of the rule to permit the
ownership of a second market station in cases where the second station is
failed, failing or unbuilt. Absent these circumstances, ownership of only one
television station in a market is permitted. Satellite stations were an
exception to the prior FCC local ownership/duopoly rules and remain an
exception under the new rules.

None of the markets in which we currently operate stations have the eight
or more independently owned television stations that allow a person to own two
stations in the market. We own two stations in the Louisville market under a
permanent waiver granted by the FCC. Under the current FCC
regulations, our duopoly in the Louisville market cannot be
transferred intact without an additional waiver.

In April 2002, the U.S. Court of Appeals for the District of Columbia
Circuit remanded the television local ownership rule to the FCC for further
consideration. The court held that the FCC had not adequately explained its
decision to consider as voices only television broadcast stations, while
excluding other media outlets such as newspapers and cable television. On
remand, the FCC may change its local television ownership rule to permit
consideration of other media outlets in addition to television stations for
purposes of a voices test, and/or it may change the number of independently
owned voices that must remain in a market after consolidation. The rule
remains in effect until the FCC proceeding is concluded.

National Ownership.There is no nationwide limit on the number of
television stations which a party may own. However, no party may have an
attributable interest in television stations which, in the aggregate, reach
more than 35% of all U.S. television households. In calculating the national
audience reach, ownership of a VHF station is counted as reaching 100% of the
households in such stations market, and ownership of a UHF station is counted
as 50% of the households in such stations market. The stations we own have a
combined national audience reach of approximately 1% of television households.
In February 2002, the U.S. Court of Appeals for the District of Columbia
Circuit determined that the FCCs statutorily required biennial review of its
national ownership rule had been arbitrary and capricious, and it, therefore,
remanded the rule to the FCC for its further review and consideration

Radio Television Cross-Ownership Rule.The one-to-a-market rule limits
the common ownership or control of radio and television stations in the same
market. In August 1999, the FCC amended its rules to increase the number of
stations that may be commonly owned, subject to standards based on the number
of independently owned media voices that would remain in the market after the
combination. In markets with at least twenty independently owned media
outlets, ownership of one television station and up to seven radio stations, or
two television stations (if allowed under the television duopoly rule) and six
radio stations is permitted. If the number of independently owned media
outlets is fewer than twenty but greater than or equal to ten, ownership of one
television station (or two if allowed) and four radio stations is permitted.
In markets with fewer than ten independent media voices, ownership of one
television station (or two if allowed) and one radio station is permitted. In
calculating the number of independent media voices, the FCC includes all radio
and television stations, independently owned cable systems (counted as one
voice if cable is generally





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available in the market), and independently owned daily newspapers which
have circulation that exceeds five percent of the households in the market.
This rule is subject to the FCCs pending comprehensive reconsideration of
ownership rules.

Local Television/Cable Cross-Ownership Rule.An FCC rule prohibits a
cable television system (including all parties under common control) from
carrying the signal of a television station that has a predicted Grade B
service area that overlaps, in whole or in part, the cable systems service
area, if the cable system (or any of its attributable principals) has an
attributable interest in the television station. But in February 2002, the
U.S. Court of Appeals for the District of Columbia Circuit held that the FCCs
decision to retain this rule was unlawful. The court vacated the rule because
it concluded that the FCC was unlikely to be able to justify the rule under any
circumstances. The rule is not in effect while the FCC conducts its
reconsideration of ownership issues.

Local Television/Newspaper Cross-Ownership Rule.The FCC prohibits any
party from having an attributable interest in a television station and a daily
newspaper if the television stations Grade A signal contour encompasses the
entire community in which the newspaper is published. A similar rule applies
to radio/newspaper combinations. In September 2001, the FCC launched a formal
proceeding examining whether to retain, modify or eliminate the
television/newspaper and radio/newspaper cross-interest rules.

Foreign Ownership Restrictions.The Communications Act restricts the
ability of foreign entities or individuals to own or hold certain interests in
broadcast licenses. As a holder of several broadcast licenses, we are
restricted from having more than one-fourth of our stock owned or voted
directly or indirectly by non-U.S. citizens or their representatives, foreign
governments, representatives of foreign governments, or foreign corporations.

Cable Must-Carry or Retransmission Consent Rights.Every three years,
television broadcasters are required to make an election whether they choose to
exercise their must-carry or retransmission consent rights in connection with
the carriage of their analog signal on cable television systems within their
DMA. The most recent election was made by October 1, 2002, and is effective
for the three-year period beginning January 1, 2003.

If a broadcaster chooses to exercise its must-carry rights, it may request
cable system carriage on its over-the-air channel or another channel on which
it was carried on the cable system as of a specified date. A cable system
generally must carry the stations signal in compliance with the stations
carriage request, and in a manner that makes the signal available to all cable
subscribers. However, must-carry rights are not absolute, and whether a cable
system is required to carry the station on its system, or in the specific
manner requested, depends on a number of variables such as the number of
activated channels of the cable system, the number of subscribers served by the
cable system, the strength of the stations signal at the cable systems
headend, the extent to which the stations programming duplicates the
programming of another station carried on the system, and other factors.

If a broadcaster chooses to exercise its retransmission consent rights, a
cable television system which is subject to that election may not carry the
stations signal without the broadcasters written consent. This generally
requires the cable system and television station operator to negotiate the
terms under which the television station will consent to the cable systems
carriage of the station. There is, however, a risk associated with a station
electing to exercise its retransmission consent rights in that a cable operator
may lawfully refuse to carry the broadcasters station on its cable system if
the parties cannot agree to the terms of such carriage. Our stations generally
have elected to exercise their retransmission consent status and have entered
into retransmission consent agreements with local cable operators.

Direct-to-Home Satellite Services and Must-Carry.In November 1999,
Congress enacted the Satellite Home Viewer Improvement Act of 1999, or SHVIA.
This statute authorizes providers of direct broadcast satellite services such
as Direct TV and EchoStar to carry the signals of local television stations
within such stations local markets (local-into-local service). In addition,
SHVIA imposes must-carry requirements on satellite providers with respect to
the markets in which they provide local-into-local service. Television
stations in such markets may elect between must-carry and retransmission
consent in a manner similar to that applicable in the cable context. At this
time, DirecTV and EchoStar are not providing local-into-local service in our
stations markets, and we cannot predict when or if such service will be
provided in the future.

Under federal copyright law, satellite providers may retransmit the signal
of an out-of-market broadcast network affiliate to unserved households. An
unserved household is one that cannot receive, using a conventional outdoor





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rooftop antenna, a Grade B or better signal of a local television
station affiliated with the same network as the out-of-market television
station. Satellite providers generally are not permitted to import distant
network signals to any subscribers other than those that qualify as unserved
residential households.

Network Affiliate Issues.FCC rules impose restrictions on network
affiliation agreements. Among other things, such rules prohibit a television
station from entering into any affiliation agreement that:



| |  |  | requires the station to clear time for network programming that the
station had previously scheduled for other use; or                                                                                                                                                                               
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | precludes the preemption of any network programs that the station
believes to be unsuitable for its audience or that precludes the
substitution of network programming with programming that the station
believes to be of greater local or national importance (this is the
right to reject rule).

The FCC is currently reviewing its rules governing the relationship
between television broadcasting networks and their affiliates under a
long-pending formal inquiry and a more recent petition filed by trade
associations representing affiliates of some of the broadcast networks. We are
unable to predict when and how the FCC will resolve these issues.

Other Regulations Affecting Broadcast Stations. General.The
Communications Act of 1934 requires broadcasters to serve the public
interest. Since the late 1970s, the FCC gradually has relaxed or eliminated
many of the more formalized procedures it had developed to promote the
broadcast of certain types of programming responsive to the needs of a
stations community of license. However, television station licensees are
still required to present programming that is responsive to community problems,
needs and interests and to maintain certain records demonstrating such
responsiveness. The FCC may consider complaints from viewers concerning
programming when it evaluates a stations license renewal application, although
viewer complaints also may be filed and considered by the FCC at any time.
There are other FCC rules and policies, and rules and policies of other federal
agencies, that regulate matters such as the ability of stations to obtain
exclusive rights to air syndicated programming, cable and satellite systems
carriage of syndicated and network programming on distant stations, political
advertising practices, application procedures and other areas affecting the
business or operations of broadcast stations.

Public Interest Programming.Broadcasters are required to air programming
addressing the needs and interests of their communities of license, and to
place quarterly issues/programs lists in their public inspection files
reporting such programming.

Childrens Television Programming.The Childrens Television Act of 1990
limits the permissible amount of commercial matter that may be broadcast during
childrens programming, and it requires each television station to present
educational and informational childrens programming. The FCC has adopted
license renewal processing guidelines effectively requiring television stations
to broadcast an average of three hours per week of childrens educational
programming.

Closed Captioning/Video Description.The FCC has adopted rules requiring
closed captioning of broadcast television programming. By January 1, 2006,
subject to certain exceptions, television broadcasters must provide closed
captioning for 100% of their programming.

Television Violence.Under the 1996 Telecommunications Act, the
television industry developed a voluntary program ratings system that the FCC
subsequently approved. In addition, the 1996 Telecommunications Act requires
that all television license renewal applications contain summaries of written
comments and suggestions concerning violent programming that were received by
the station during the license term.

Equal Employment Opportunity.In April 1998, the U.S. Court of Appeals
for the D.C. Circuit concluded that certain affirmative action requirements of
the FCCs Equal Employment Opportunity (EEO) regulations were
unconstitutional. The FCC responded to the courts ruling in September 1998 by
suspending certain reporting requirements and commencing a proceeding to
consider new rules that would not be subject to the courts constitutional
objections. The FCC did not suspend its general prohibition on employment
discrimination based on race, color, religion, national origin or sex. In
January 2000, the FCC adopted new EEO rules, but the same court struck down
these





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rules in January 2001. The FCC thereafter suspended its new rules. On
November 20, 2002, the FCC issued its Second Report and Order and Third Notice
of Proposed Rulemaking on the subject of EEO rules applicable to broadcasters,
which is the FCCs effort to craft constitutional rules in the aftermath of the
January 2001 court ruling. The FCCs new EEO rules became effective March 10,
2003. It is impossible to predict the effect of these Rules, or whether they will survive judicial challenge.

Restrictions on Broadcast Advertising.The advertising of cigarettes on
broadcast stations has been banned for many years. The broadcast advertising
of smokeless tobacco products has more recently been banned by Congress.
Certain Congressional committees have examined legislative proposals to
prohibit or severely restrict the advertising of beer, wine, and liquor. We
cannot predict whether any proposal will be enacted into law and, if so, what
the final form of such law might be. The elimination or restriction of
advertisements for beer and wine could have an adverse effect on our stations
revenues and operating profits.

Digital Television.The digital television, or DTV, transmission system
delivers video and audio signals of higher quality (including high definition
television) than the existing analog transmission system. DTV also has
substantial capabilities for multiplexing (the broadcast of several programs
concurrently) and data transmission. Digital television will require consumers
to purchase new televisions that are capable of receiving and displaying DTV
signals or adapters to receive DTV signals and convert them into analog signals
for display on existing receivers.

In April 1998, the FCC assigned each licensed television station a second
broadcast channel on which to provide DTV service. In general, the DTV
channels assigned to television stations are intended to allow stations to have
their DTV coverage area replicate their analog coverage area, although a number
of variables will ultimately determine the extent to which a stations DTV
operation will provide such replication.

By May 1, 2002, all commercial television station licensees were required
to complete construction and commence operating DTV facilities except to the
extent that the FCC extended the deadline in certain cases. Our stations are
in compliance with the deadlines applicable to them

We estimate that approximately $9.6 million of capital expenditures after
December 31, 2002 will be necessary to meet the DTV requirements for all of our
stations.

Once a station begins broadcasting its DTV signal, it may broadcast both
its analog and DTV signals until December 31, 2006, after which, subject to
certain conditions described below, the FCC expects to reclaim one of the
channels and broadcasters will operate a single DTV channel. Starting April 1,
2003, commercial station operators must simulcast at least 50 percent of the
video programming broadcast on their analog channel on their DTV channel. The
required simulcast percentage increases annually until April 1, 2005, when an
operator must simulcast 100 percent of its programming on its analog and DTV
channels.

Channels now used for analog broadcasts range from 2 through 69. The FCC
designated Channels 2 through 51 as the core channels which will be used for
DTV broadcasts. However, because of the limited number of core DTV channels
currently available, the FCC assigned many stations DTV channels above Channel
51 (Channels 52 through 69) for use during the transition period from
simultaneous digital and analog transmission to DTV only operation. At the end
of the transition period these stations will have to change their DTV operation
to one of the DTV core channels. This has created three categories of
television stations with respect to their analog and DTV channel assignments:
(1) stations with both their analog and DTV channels within the core
channels; (2) stations with either an analog or DTV channel inside the core and
the other outside the core; and (3) stations with both their analog and DTV
channels outside the core. All of our stations currently fall within the first
or second group; none of our stations have both analog and DTV channels outside
the core. Stations with both their analog and DTV channels inside the core
will be required to select which of the two channels they will use for
permanent DTV operation at the end of the transition period. The FCC has not
yet established the permanent DTV channel selection process for stations
(including one of our stations) that fall into the second group.

The Communications Act provides that under certain conditions the DTV
transition period may be extended beyond December 31, 2006. The transition is
to be extended in any market in which one of the following conditions is met:
(1) a station licensed to one of the four largest networks (ABC, CBS, NBC and
Fox) is not broadcasting a digital signal and that station has qualified for an
extension of the FCCs DTV construction deadline; (2) digital-to-analog





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converter technology is not generally available in the market; or (3)
fifteen percent or more of the television households in the market do not
subscribe to a multichannel video programming distributor (cable, direct
broadcast satellite) that carries the digital channel of each of the television
stations in the market broadcasting a DTV channel, and do not have at least one
television receiver capable of receiving DTV broadcasts or an analog television
receiver equipped with a digital-to-analog converter capable of receiving DTV
broadcasts. We cannot predict whether the DTV transition period will be
extended in any of our markets.

Television stations that are broadcasting both analog and DTV signals may
continue to elect either must-carry status or retransmission consent for their
analog signals, but they may only choose retransmission consent for their
digital signals. A television station may assert must-carry rights for its DTV
signal if it only operates a DTV signal or if it returns its analog channel to
the FCC and converts to DTV operations only.

The exercise of must-carry rights by a television station for its DTV
signal applies only to a single programming stream and other program-related
content. If a television station is concurrently broadcasting more than one
program stream on its DTV signal, it may select which program stream is subject
to its must-carry election. Cable systems are not required to carry Internet,
e-commerce or other ancillary services provided over DTV signals if those
services are not related to the stations primary video programming carried on
the cable system. The same DTV carriage rules are generally applicable to
satellite providers with respect to markets in which they provide
local-into-local service.

Television station operators may use their DTV signals to provide
ancillary services, such as computer software distribution, Internet,
interactive materials, e-commerce, paging services, audio signals, subscription
video, or data transmission services. To the extent a station provides such
ancillary services, it is subject to the same regulations as are applicable to
other analogous services under the FCCs rules and policies. Commercial
television stations also are required to pay the FCC five percent of the gross
revenue derived from all ancillary services provided over their DTV signal for
which the station received a fee in exchange for the service or received
compensation from a third party in exchange for transmission of material from
that third party, not including commercial advertisements used to support
broadcasting.

Proposed Legislation and Regulations.Congress and the FCC currently have
under consideration, and may in the future adopt, new laws, regulations and
policies regarding a wide variety of matters that could affect, directly or
indirectly, the operation and ownership of our stations. In addition to the
changes proposed and noted above, other matters that could affect our broadcast
properties include technological innovations affecting the mass communications
industry such as spectrum allocation matters (including assignment by the FCC
of channels for additional television stations), low power television stations,
and multichannel video program service providers (including cable television,
direct broadcast satellite and wireless cable systems).

The foregoing summarizes the material television broadcasting industry
regulations with which we must comply. However, it does not purport to
describe all present and proposed federal, state and local regulations and
legislation relating to the television broadcast industry, some of which are
subject to judicial and legislative review and change. The impact of any such
development on the television broadcast industry or on us cannot be predicted
at this time.

Employees

As of December 31, 2002, we had approximately 2,980 full- and part-time
employees. Of these, approximately 375 were employed in cable television,
2,090 in newspaper publishing, 275 in television broadcasting and 240 in other
operations and general corporate.

Substantially all non-management employees of our newspapers are
represented by various labor unions. The current labor agreements with the seven unions with a total of 13 bargaining units representing the employees of the Post-Gazetterun through December 31,
2006. Four unions with a total of eight bargaining units represent the employees of The Bladeunder labor agreements
that expired on March 21, 2003 and have been extended until April 11, 2003. We are currently involved in labor negotiations
with all the unions representing employees of The Blade. We are hopeful that
we will reach successor labor agreements with those unions, but can give no
assurance that such agreements will be reached. We do not anticipate a work
stoppage in connection with the negotiating process. We believe that our
relations with our newspaper employees are good.





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In addition to our newspaper employees, as of December 31, 2002 we had
approximately 150 employees in cable television and related services who were
represented by the Brotherhood of Teamsters under three separate collective
bargaining agreements that expire in October 2003, January 2004 and October
2004. We believe that overall our employee relations are good.







Item 2. Properties

Our principal executive offices are located at 541 N. Superior Street,
Toledo, Ohio.

The types of properties required to support cable television operations
include offices, operations centers and hub sites where signals are received
and distributed, and related warehouse space. The types of properties required
to support newspaper publishing include offices, facilities for printing
presses and production and storage, and depots for distribution. The types of
properties required to support television broadcasting stations include
offices, studios, transmitter sites and antennas sites. A stations studios
are generally housed with its offices. The transmitter sites and antenna are
generally located in elevated areas to provide optimal signal strength and
coverage.

The following table sets forth certain information regarding our
significant properties:

Cable Television

|                          |                |     |                             |        |        |      |           |          |                |   |            |  |  |  |  |  | 
|------------------------- | -------------- | --- | --------------------------- | ------ | ------ | ---- | --------- | -------- | -------------- | - | ---------- |  |  |  |  |  | 
|                          |                |     |                             |        |        |      | Owned or  |          | Approximate    |   | Expiration
|Company/Property Location |                | Use |                             | Leased |        | Size |           | of Lease
|                          |                |     |                             |        |        |      |           |         
|Buckeye CableSystem       |                |     |                             |        |        |      |           |          |                |   |            |  |  |  |  | 
|                          | Toledo, OH     |     | Office space                |        | Leased |      | 1,430 sf  |          | September 2005
|                          | Toledo, OH     |     | Office space                |        | Leased |      | 1,600 sf  |          | July 2005     
|                          | Toledo, OH     |     | Office space                |        | Owned  |      | 35,690 sf |          |                |  |           
|                          | Toledo, OH     |     | Operations center (headend) |        | Owned  |      | 36,000 sf |          |                |  |           
|                          | Temperance, MI |     | Bedford headend             |        | Leased |      | 375 sf    |          | March 2012    
|                          | Toledo, OH     |     | Operations center warehouse |        | Owned  |      | 9,200 sf  |          |                |  |           
|                          | Toledo, OH     |     | Hub site                    |        | Owned  |      | 800 sf    |          |                |  |           
|                          | Toledo, OH     |     | Hub site                    |        | Owned  |      | 720 sf    |          |                |  |           
|                          | Toledo, OH     |     | Hub site                    |        | Owned  |      | 300 sf    |          |                |  |           
|                          | Toledo, OH     |     | Hub site                    |        | Owned  |      | 160 sf    |          |                |  |           
|                          | Toledo, OH     |     | Hub site                    |        | Leased |      | 60 sf     |          | February 2023 
|                          | Toledo, OH     |     | Hub site                    |        | Leased |      | 60 sf     |          | November 2023 
|                          | Toledo, OH     |     | Hub site                    |        | Leased |      | 60 sf     |          | August 2022   
|                          | Toledo, OH     |     | Hub site                    |        | Leased |      | 60 sf     |          | August 2022   
|                          | Toledo, OH     |     | Hub site                    |        | Leased |      | 60 sf     |          | October 2022  
|                          | Toledo, OH     |     | Hub site                    |        | Leased |      | 60 sf     |          | April 2023    
|                          | Toledo, OH     |     | Hub site                    |        | Leased |      | 160 sf    |          | September 2022
|                          | Toledo, OH     |     | Hub site                    |        | Leased |      | 160 sf    |          | November 2022 
|                          | Toledo, OH     |     | Hub site                    |        | Leased |      | 160 sf    |          | February 2023 
|                          | Toledo, OH     |     | Hub site                    |        | Leased |      | 160 sf    |          | June 2022     
|                          | Toledo, OH     |     | Hub site                    |        | Leased |      | 120 sf    |          | June 2003     
|                          | Toledo, OH     |     | Hub site                    |        | Owned  |      | 240 sf    |          |                |  |           
|Erie County CableSystem   |                |     |                             |        |        |      |           |          |                |   |            |  |  |  |  | 
|                          | Sandusky, OH   |     | Office space                |        | Leased |      | 16,750 sf |          | June 2015     
|                          | Erie Co., OH   |     | Headend                     |        | Owned  |      | 2,823 sf  |          |                |  |           
|                          | Erie Co., OH   |     | Warehouse                   |        | Owned  |      | 1,536 sf  |          |                |  |           
|                          | Sandusky, OH   |     | Warehouse                   |        | Leased |      | 17,000 sf |          | August 2004   





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Publishing

|                          |                   |     |                                  |        |        |      |             |          |                |   |            |  |  |  |  |  | 
|------------------------- | ----------------- | --- | -------------------------------- | ------ | ------ | ---- | ----------- | -------- | -------------- | - | ---------- |  |  |  |  |  | 
|                          |                   |     |                                  |        |        |      | Owned or    |          | Approximate    |   | Expiration
|Company/Property Location |                   | Use |                                  | Leased |        | Size |             | of Lease
|                          |                   |     |                                  |        |        |      |             |         
|Pittsburgh Post-Gazette:  |                   |     |                                  |        |        |      |             |          |                |   |            |  |  |  |  | 
|                          | Pittsburgh, PA    |     | Printing plant/office            |        | Owned  |      | 230,400  sf |          |                |  |           
|                          | Pittsburgh, PA    |     | Office space                     |        | Leased |      | 360  sf     |          | March 2004    
|                          | Greensburg, PA    |     | Office space                     |        | Leased |      | 450  sf     |          | June 2003     
|                          | Pittsburgh, PA    |     | Inserting facility               |        | Owned  |      | 33,565  sf  |          |                |  |           
|                          | Pittsburgh, PA    |     | Garage                           |        | Owned  |      | 19,655  sf  |          |                |  |           
|                          | Bethel Park, PA   |     | Distribution center              |        | Leased |      | 10,000  sf  |          | July 2005     
|                          | Carnegie, PA      |     | Distribution center              |        | Leased |      | 10,300  sf  |          | May 2003      
|                          | Coraopolis, PA    |     | Distribution center              |        | Leased |      | 8,800  sf   |          | February 2004 
|                          | Cranberry, PA     |     | Distribution center              |        | Leased |      | 9,000  sf   |          | April 2004    
|                          | Donora, PA        |     | Distribution center              |        | Leased |      | 10,000  sf  |          | March 2004    
|                          | Gibsonia, PA      |     | Distribution center              |        | Leased |      | 10,000  sf  |          | February 2006 
|                          | Houston, PA       |     | Distribution center              |        | Leased |      | 10,000  sf  |          | June 2003     
|                          | Lawrence, PA      |     | Distribution center              |        | Leased |      | 10,200  sf  |          | September 2004
|                          | McKeesport, PA    |     | Distribution center              |        | Leased |      | 10,000  sf  |          | May 2004      
|                          | Monaca, PA        |     | Distribution center              |        | Leased |      | 7,500  sf   |          | August 2003   
|                          | Monroeville, PA   |     | Distribution center              |        | Leased |      | 10,600  sf  |          | July 2003     
|                          | Pittsburgh, PA    |     | Distribution center              |        | Leased |      | 14,700  sf  |          | March 2007    
|                          | Pittsburgh, PA    |     | Distribution center              |        | Leased |      | 12,000  sf  |          | Month to month
|                          | Pittsburgh, PA    |     | Distribution center              |        | Leased |      | 13,500  sf  |          | April 2003    
|                          | Pittsburgh, PA    |     | Distribution center              |        | Leased |      | 10,000  sf  |          | December 2003 
|                          | Sharpsburg, PA    |     | Distribution center              |        | Leased |      | 10,200  sf  |          | March 2006    
|                          | Tarentum, PA      |     | Distribution center              |        | Leased |      | 7,500  sf   |          | September 2003
|                          | West Mifflin, PA  |     | Distribution center              |        | Leased |      | 10,100  sf  |          | Month to month
|                          | Wilkinsburg, PA   |     | Distribution center              |        | Leased |      | 17,000  sf  |          | May 2005      
|The Blade:                |                   |     |                                  |        |        |      |             |          |                |   |            |  |  |  |  | 
|                          | Toledo, OH        |     | Main building and printing plant |        | Owned  |      | 160,000  sf |          |                |  |           
|                          | Toledo, OH        |     | Inserting facility               |        | Leased |      | 20,000  sf  |          | June 2009     
|                          | Holland, OH       |     | Distribution center              |        | Leased |      | 10,900  sf  |          | March 2012    
|                          | Northwood, OH     |     | Distribution center              |        | Leased |      | 9,800  sf   |          | January 2010  
|                          | Perrysburg, OH    |     | Distribution center              |        | Leased |      | 10,000  sf  |          | August 2008   
|                          | Sylvania Twp., OH |     | Distribution center              |        | Leased |      | 10,000  sf  |          | March 2008    
|                          | Toledo, OH        |     | Distribution center              |        | Leased |      | 11,920  sf  |          | January 2013  
|                          | Toledo, OH        |     | Distribution center              |        | Leased |      | 12,500  sf  |          | September 2005
|                          | Toledo, OH        |     | Distribution center              |        | Leased |      | 10,000  sf  |          | June 2009     
|                          | Toledo, OH        |     | Distribution center              |        | Leased |      | 9,800  sf   |          | April 2012    
|                          | Toledo, OH        |     | Circulation department           |        | Owned  |      | 1,300  sf   |          |                |  |           
|                          | Toledo, OH        |     | Office space                     |        | Owned  |      | 35,000  sf  |          |                |  |           





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##### Table of Contents



Television Broadcasting

|                             |                  |                         |                           |        |        |      |           |          |              |      |            |  |  |  |  |  | 
|---------------------------- | ---------------- | ----------------------- | ------------------------- | ------ | ------ | ---- | --------- | -------- | ------------ | ---- | ---------- |  |  |  |  |  | 
|                             |                  |                         |                           |        |        |      | Owned or  |          | Approximate  |      | Expiration
|Company/Property Location    |                  | Use                     |                           | Leased |        | Size |           | of Lease
|                             |                  |                         |                           |        |        |      |           |         
|Independence Television Co.  |                  |                         |                           |        |        |      |           |          |              |      |            |  |  |  |  | 
|                             | Louisville, KY   |                         | Office space              |        | Owned  |      | 35,000 sf |          |              |     |           
|                             | Floyd County, IN |                         | Tower                     |        | Owned  |      | 72 acres  |          |              |     |           
|                             | Floyd County, IN |                         | Satellite dish site       |        | Leased |      | 1 acre    |          |              | 2015 |           
|Idaho Independent Television |                  |                         |                           |        |        |      |           |          |              |      |            |  |  |  |  | 
|                             | Boise County, ID |                         | Tower site                |        | Leased |      | 200 sf    |          | July 2006   
|                             | Nampa, ID        |                         | Site for satellite dishes |        | Leased |      | 10,000 sf |          | October 2005
|                             | Nampa, ID        |                         | Office space and tower    |        | Owned  |      | 10,000 sf |          |              |     |           
|Lima Communications Corp.    |                  |                         |                           |        |        |      |           |          |              |      |            |  |  |  |  | 
|                             | Lima, OH         |                         | Office space and tower    |        | Owned  |      | 10,890 sf |          |              |     |           
|WLFI-TV, Inc. (WAND)         |                  |                         |                           |        |        |      |           |          |              |      |            |  |  |  |  | 
|                             | Decator, IL      |                         | Office space,             |        | Owned  |      | 18,500 sf |          |              |     |           
|                             |                  | entertainment and tower |                           |        |        |      |           |          |              |      |            |  |  | 
|                             | Argenta, IL      |                         | Tower                     |        | Owned  |      | 2,200 sf  |          |              |     |           
|                             | Danville, IL     |                         | Equipment                 |        | Leased |      | 240 sf    |          | March 2003  

Miscellaneous

|                                       |             |     |                            |        |        |      |           |          |               |   |            |  |  |  |  |  | 
|-------------------------------------- | ----------- | --- | -------------------------- | ------ | ------ | ---- | --------- | -------- | ------------- | - | ---------- |  |  |  |  |  | 
|                                       |             |     |                            |        |        |      | Owned or  |          | Approximate   |   | Expiration
|Company/Property Location              |             | Use |                            | Leased |        | Size |           | of Lease
|                                       |             |     |                            |        |        |      |           |         
|Block Communications, Inc.             |             |     |                            |        |        |      |           |          |               |   |            |  |  |  |  | 
|                                       | Toledo, OH  |     | Condominium                |        | Owned  |      | 1,500 sf  |          |               |  |           
|Corporate Protection
Service, Inc.     |             |     |                            |        |        |      |           |          |               |   |            |  |  |  |  | 
|                                       | Toledo, OH  |     | Office space               |        | Leased |      | 12,000 sf |          | December 2003
|                                       | Toledo, OH  |     | Office and warehouse space |        | Leased |      | 20,000 sf |          | June 2006    
|Community Communication
Services, Inc. |             |     |                            |        |        |      |           |          |               |   |            |  |  |  |  | 
|                                       | Holland, OH |     | Office and warehouse space |        | Leased |      | 22,000 sf |          | June 2004    

Many of these properties are subject to liens securing our senior credit
facilities.







Item 3. Legal Proceedings

In the ordinary course of our business, we are involved in a number of
lawsuits and administrative proceedings. While uncertainties are inherent in
the final outcome of these matters, management believes, after consultation
with legal counsel, that the disposition of these proceedings should not have a
material adverse effect on our financial position, results of operations or
liquidity.







Item 4. Submission of Matters to a Vote of Security Holders

None.





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##### Table of Contents









PART II







Item 5. Market for Registrants Common Stock and Related Stockholder Matters

Shares of our Class A and Voting and Non-voting Common Stock are owned
100% by members of the Block family and are not publicly traded. There are
four holders of our Voting Common Stock, 29 holders of our Non-voting Common
Stock and 12 holders of our Class A Stock.

We declare and pay cash dividends on our Class A and Common Stock. During
the years ended December 31, 2002 and 2001, we paid $63,000 and $32,000 of
dividends on Class A Stock, respectively, $82,000 and $35,000 of dividends on
Voting Common Stock, respectively, and $1.2 million and $516,000 of dividends
on Non-voting Common Stock, respectively. The frequency and amount of dividend
payments are determined by the Board of Directors and reviewed quarterly. The
covenants within our senior credit facilities limit the amount of annual cash
dividends to $1.5 million in 2002 and $2.0 million or 50% of excess cash flow,
which ever is higher but not greater than $3.0 million per year, thereafter.
Our future dividend policy will be determined by the Board of Directors on the
basis of various factors, including our results of operations, financial
performance, and capital requirements.





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##### Table of Contents









Item 6. Selected Financial Data

The following table sets forth our financial data and other operating
information. The financial data was derived from our consolidated financial
statements. The financial data and other operating information that follows is
qualified in its entirety by reference to, and should be read in conjunction
with, Managements Discussion and Analysis of Financial Condition and Results
of Operations and the financial statements and related notes included
elsewhere in this Annual Report on Form 10-K.





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##### Table of Contents



|                                           |                                                         |                                             |         |                                      |         |      |         |         |         |      |         |         |         |   |         |         |         |   |         |         |         |  
|------------------------------------------ | ------------------------------------------------------- | ------------------------------------------- | ------- | ------------------------------------ | ------- | ---- | ------- | ------- | ------- | ---- | ------- | ------- | ------- | - | ------- | ------- | ------- | - | ------- | ------- | ------- | -
|                                           |                                                         |                                             |         | Year ended December 31              
|                                           |                                                         |                                             |         |                                     
|                                           |                                                         |                                             |         | 1998                                 |         | 1999 |         | 2000    |         | 2001 |         | 2002   
|                                           |                                                         |                                             |         |                                      |         |      |         |         |         |      |         |        
|                                           |                                                         |                                             |         | (in thousands except operating data)
|Income Statement Data:                     |                                                         |                                             |         |                                      |         |      |         |         |         |      |         |         |         |   |         |         |         |   |         |        
|                                           | Revenue:                                                |                                             |         |                                      |         |      |         |         |         |      |         |         |         |   |         |         |         |   |         |         |        
|                                           |                                                         | Cable (1)                                   |         | $                                    | 71,846  |      |         | $       | 75,414  |      |         | $       | 82,110  |   |         | $       | 89,420  |   |         | $       | 101,474 |  
|                                           |                                                         | Publishing                                  |         |                                      | 272,107 |      |         |         | 275,827 |      |         |         | 286,717 |   |         |         | 264,679 |   |         |         | 257,256 |  
|                                           |                                                         | Broadcasting (2)                            |         |                                      | 36,686  |      |         |         | 36,293  |      |         |         | 42,531  |   |         |         | 35,184  |   |         |         | 39,964  |  
|                                           |                                                         | Other Communications                        |         |                                      | 3,023   |      |         |         | 8,682   |      |         |         | 14,299  |   |         |         | 25,282  |   |         |         | 26,499  |  
|                                           |                                                         |                                            
|                                           |                                                         |                                             | 383,662 |                                      |         |      | 396,216 |         |         |      | 425,657 |         |         |   | 414,565 |         |         |   | 425,193 |        
|                                           | Expense:                                                |                                             |         |                                      |         |      |         |         |         |      |         |         |         |   |         |         |         |   |         |         |        
|                                           |                                                         | Cable                                       |         |                                      | 52,765  |      |         |         | 62,846  |      |         |         | 74,536  |   |         |         | 84,578  |   |         |         | 91,404  |  
|                                           |                                                         | Publishing                                  |         |                                      | 267,489 |      |         |         | 263,951 |      |         |         | 277,312 |   |         |         | 262,799 |   |         |         | 249,187 |  
|                                           |                                                         | Broadcasting                                |         |                                      | 30,502  |      |         |         | 34,221  |      |         |         | 37,098  |   |         |         | 36,973  |   |         |         | 36,313  |  
|                                           |                                                         | Other Communications                        |         |                                      | 6,602   |      |         |         | 12,734  |      |         |         | 18,445  |   |         |         | 27,955  |   |         |         | 25,090  |  
|                                           |                                                         | Corporate general and administrative        |         |                                      | 1,928   |      |         |         | 1,524   |      |         |         | 4,152   |   |         |         | 2,705   |   |         |         | 6,046   |  
|                                           |                                                         |                                            
|                                           |                                                         |                                             | 359,286 |                                      |         |      | 375,276 |         |         |      | 411,543 |         |         |   | 415,010 |         |         |   | 408,040 |        
|                                           |                                                         |                                            
|                                           | Operating income (loss)                                 |                                             |         | 24,376                               |         |      |         | 20,940  |         |      |         | 14,114  |         |   |         | (445    | )       |   |         | 17,153  |        
|                                           | Nonoperating income (expense):                          |                                             |         |                                      |         |      |         |         |         |      |         |         |         |   |         |         |         |   |         |         |        
|                                           |                                                         | Interest expense, net                       |         |                                      | (10,316 | )    |         |         | (11,043 | )    |         |         | (14,069 | ) |         |         | (19,439 | ) |         |         | (22,826 | )
|                                           |                                                         | Gain on disposition of Monroe Cablevision   |         |                                      |        |      |         |         |        |      |         |         |        |   |         |         |        |   |         |         | 21,141  |  
|                                           |                                                         | Gain on disposition of WLFI-TV, Inc.        |         |                                      |        |      |         |         |        |      |         |         | 22,339  |   |         |         |        |   |         |         |        |  
|                                           |                                                         | Loss on early extinguishment of debt        |         |                                      |        |      |         |         |        |      |         |         |        |   |         |         |        |   |         |         | (8,990  | )
|                                           |                                                         | Change in fair value of interest rate swaps |         |                                      |        |      |         |         |        |      |         |         |        |   |         |         | (5,340  | ) |         |         | (733    | )
|                                           |                                                         |                                            
|                                           |                                                         |                                             | (10,316 | )                                    |         |      | (11,043 | )       |         |      | 8,270   |         |         |   | (24,779 | )       |         |   | (11,408 | )      
|                                           |                                                         |                                            
|                                           | Income (loss) before income taxes
and minority interest |                                             |         | 14,060                               |         |      |         | 9,897   |         |      |         | 22,384  |         |   |         | (25,224 | )       |   |         | 5,745   |        
|                                           | Provision (credit) for income taxes                     |                                             |         | 6,240                                |         |      |         | 4,556   |         |      |         | 9,176   |         |   |         | (7,132  | )       |   |         | 2,728   |        
|                                           |                                                         |                                            
|                                           | Income (loss) before minority interest                  |                                             |         | 7,820                                |         |      |         | 5,341   |         |      |         | 13,208  |         |   |         | (18,092 | )       |   |         | 3,017   |        
|                                           | Minority interest                                       |                                             |         |                                     |         |      |         |        |         |      |         | (427    | )       |   |         | 235     |         |   |         | (477    | )      
|                                           |                                                         |                                            
|                                           | Net income (loss)                                       |                                             | $       | 7,820                                |         |      | $       | 5,341   |         |      | $       | 12,781  |         |   | $       | (17,857 | )       |   | $       | 2,540   |        
|                                           |                                                         |                                            
|Other Data:                                |                                                         |                                             |         |                                      |         |      |         |         |         |      |         |         |         |   |         |         |         |   |         |        
|                                           | Cable cash flow (unaudited) (3)                         |                                             | $       | 27,833                               |         |      | $       | 28,200  |         |      | $       | 30,063  |         |   | $       | 32,130  |         |   | $       | 37,278  |        
|                                           | Publishing cash flow (unaudited) (3)                    |                                             |         | 18,016                               |         |      |         | 25,787  |         |      |         | 23,851  |         |   |         | 15,785  |         |   |         | 19,558  |        
|                                           | Broadcasting cash flow (unaudited) (3)                  |                                             |         | 7,839                                |         |      |         | 5,578   |         |      |         | 8,009   |         |   |         | 3,092   |         |   |         | 7,164   |        
|                                           | EBITDA (unaudited) (4)                                  |                                             |         | 49,251                               |         |      |         | 56,369  |         |      |         | 56,873  |         |   |         | 50,276  |         |   |         | 65,660  |        
|                                           | Depreciation and amortization                           |                                             |         | 28,164                               |         |      |         | 40,551  |         |      |         | 48,662  |         |   |         | 55,533  |         |   |         | 54,903  |        
|                                           | Capital expenditures                                    |                                             |         | 47,234                               |         |      |         | 66,702  |         |      |         | 80,340  |         |   |         | 62,154  |         |   |         | 32,031  |        
|                                           | Ratio of earnings to fixed charges (5)                  |                                             |         | 2.1x                                 |         |      |         | 1.7x    |         |      |         | 2.2x    |         |   |         |        |         |   |         | 1.2x    |        
|Balance Sheet Data:                        |                                                         |                                             |         |                                      |         |      |         |         |         |      |         |         |         |   |         |         |         |   |         |        
|                                           | Cash and cash equivalents                               |                                             | $       | 2,053                                |         |      | $       | 5,715   |         |      | $       | 4,213   |         |   | $       | 5,883   |         |   | $       | 9,782   |        
|                                           | Total assets                                            |                                             |         | 346,848                              |         |      |         | 388,302 |         |      |         | 464,190 |         |   |         | 485,554 |         |   |         | 511,725 |        
|                                           | Total funded debt (6)                                   |                                             |         | 127,706                              |         |      |         | 166,109 |         |      |         | 213,356 |         |   |         | 237,264 |         |   |         | 252,778 |        
|                                           | Stockholders equity                                    |                                             |         | 48,993                               |         |      |         | 51,198  |         |      |         | 61,390  |         |   |         | 37,583  |         |   |         | 20,646  |        
|Cable Operating Data (unaudited):          |                                                         |                                             |         |                                      |         |      |         |         |         |      |         |         |         |   |         |         |         |   |         |        
|                                           | Homes passed                                            |                                             |         | 249,668                              |         |      |         | 250,893 |         |      |         | 253,903 |         |   |         | 255,852 |         |   |         | 246,546 |        
|                                           | Basic subscribers                                       |                                             |         | 157,467                              |         |      |         | 159,294 |         |      |         | 158,537 |         |   |         | 157,341 |         |   |         | 152,392 |        
|                                           | Basic penetration                                       |                                             |         | 63.1                                 | %       |      |         | 63.5    | %       |      |         | 62.4    | %       |   |         | 61.5    | %       |   |         | 61.8    | %      
|                                           | Premium units                                           |                                             |         | 60,827                               |         |      |         | 62,362  |         |      |         | 69,649  |         |   |         | 70,909  |         |   |         | 70,160  |        
|                                           | Premium penetration                                     |                                             |         | 38.6                                 | %       |      |         | 39.1    | %       |      |         | 43.9    | %       |   |         | 45.1    | %       |   |         | 46.0    | %      
|                                           | Cable modem subscribers                                 |                                             |         |                                     |         |      |         | 1,484   |         |      |         | 7,022   |         |   |         | 15,221  |         |   |         | 22,565  |        
|                                           | Digital subscribers                                     |                                             |         |                                     |         |      |         |        |         |      |         |        |         |   |         | 7,846   |         |   |         | 26,092  |        
|                                           | Average monthly revenue per basic subscriber (7)        |                                             | $       | 37.94                                |         |      | $       | 39.48   |         |      | $       | 42.88   |         |   | $       | 47.11   |         |   | $       | 54.93   |        
|Publishing Operating Data (unaudited) (8): |                                                         |                                             |         |                                      |         |      |         |         |         |      |         |         |         |   |         |         |         |   |         |        
|                                           | Daily circulation                                       |                                             |         | 390,171                              |         |      |         | 389,737 |         |      |         | 381,643 |         |   |         | 380,646 |         |   |         | 385,070 |        
|                                           | Sunday circulation                                      |                                             |         | 631,740                              |         |      |         | 631,711 |         |      |         | 611,005 |         |   |         | 603,485 |         |   |         | 601,405 |        



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|(1) |  | Effective March 28, 2002 we consummated an asset exchange agreement
with Comcast Corp. which resulted in an exchange of 100% of the assets
of Monroe Cablevision for 100% of the assets of Comcasts Bedford,
Michigan operations and $12.1 million cash. Results of the acquired
system are included from the date of acquisition, and pro-forma amounts
are not material.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Effective April 1, 2000, we acquired a two-thirds interest WAND
Television, Inc. in exchange for the assets of WLFI-TV, Inc. On March
30, 2001, we purchased WFTE TV. Results of the acquired stations are
included from the date of acquisition, and pro-forma amounts are not
material.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|(3) |  | Cable, publishing and broadcasting cash flow represents each
segments EBITDA before the effect of corporate general and
administrative expenses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|(4) |  | EBITDA is defined as net income before provision for income taxes,
interest expense, depreciation and amortization (including amortization
of broadcast rights), other non-cash charges, gains or losses on
disposition of assets, and extraordinary items and after payments for
broadcast rights. EBITDA is not, and should not be used as, an
indicator of or alternative to operating income, net income or cash flow
as reflected in our financial statements, is not intended to represent
funds available for debt service, dividends or other discretionary uses,
is not a measure of financial performance under accounting principles
generally accepted in the United States and should not be considered in
isolation or as a substitute for measures of performance prepared in
accordance with accounting principles generally accepted in the United
States. See Managements Discussion and Analysis of Financial
Condition and Results of Operations  Overview  EBITDA.
|   
|(5) |  | For purposes of computing the ratio of earnings to fixed charges,
earnings consist of income (loss) before taxes and minority interest,
plus fixed charges, less interest capitalized during the year, plus
current year amortization of capitalized interest. Fixed charges
consist of interest expense, capitalized interest, the interest portion
of rent expenses and amortization of debt issuance costs. In 2001 our
earnings were insufficient to cover fixed charges by $25.8 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(6) |  | Total funded debt includes the balances outstanding under the
subordinated notes, senior credit facilities, and capital leases. The
$7.7 million adjustment to the carrying value of underlying debt
recorded as of December 31, 2002, in accordance with SFAS No. 133 is not
included in total funded debt.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|(7) |  | Represents average monthly revenues for the period divided by the
average number of basic subscribers throughout the period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|(8) |  | Circulation numbers are based on the average paid circulation for the
12 months ended March 31 of each year for the Post-Gazetteand for the
12 months ended September 30 of each year for The Blade, in each case
as set forth in the ABC Audit Report for such period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     







Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with Selected Financial
Data and our consolidated financial statements and the notes thereto included
elsewhere in this report.

Overview

We are a privately held diversified media company with our primary
operations in cable television, newspaper publishing and television
broadcasting. We provide cable television service to the greater Toledo, Ohio
metropolitan area (Buckeye CableSystem) and the Sandusky, Ohio area (Erie
County CableSystem). At December 31, 2002, we had approximately 152,000
subscribers. We publish two daily metropolitan newspapers, the Pittsburgh
Post-Gazettein Pittsburgh, Pennsylvania, and The Bladein Toledo, Ohio, each
of which is the leading publication in its market. The aggregate average daily
and Sunday paid circulation of our two newspapers is approximately 385,100 and
601,400,respectively. We own and operate four television stations: two in
Louisville, Kentucky, and one each in Boise, Idaho and Lima, Ohio; and we are a
two-thirds owner of a television station in Decatur, Illinois. We also have
other





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##### Table of Contents



communication operations including a small telephony business, a home security
business and an alternative distribution advertising business.

For the year ended December 31, 2002, we had revenues, EBITDA, operating
income and net income of $425.2 million, $65.7 million, $17.2 million and $2.5
million, respectively.

Revenues

Most cable revenue is derived from monthly subscription fees for our cable
services, including basic and digital cable and high-speed data services,
installation and equipment rental charges, pay-per-view programming charges,
and the sale of available advertising spots on advertiser-supported
programming. Cable revenue is affected by the timing of subscriber rate
increases, the demand for advanced cable products, the amount of pay-per-view
programming available to us and the demand for that programming, and the demand
for advertising spots.

The majority of publishing revenue is derived from the sale of advertising
space and from subscription and single copy sales of our newspapers.
Advertising revenue was 81.6%, 80.1% and 79.9% of newspaper revenue for 2000,
2001 and 2002, respectively. Publishing revenue fluctuates with the general
condition of the local and national economy. Seasonal revenue fluctuations are
also common in the newspaper industry, due primarily to fluctuations in
expenditure levels by local and national advertisers.

The principal source of television broadcasting revenue is the sale of
broadcasting time on our stations for advertising. Broadcasting revenue
fluctuates with the general condition of the local and national economy.
Broadcasting revenue also fluctuates from year to year, due to political
advertising, and seasonally, due to fluctuations in expenditure levels by local
and national advertisers.

Other communications revenue consists of sales in our non-reportable
segments, including our telephony, home security and alarm monitoring and
alternative distribution advertising businesses.

Operating Expenses

Cable expenses include programming expenses, salaries and benefits of
technical personnel, depreciation and amortization, and selling, general and
administrative expenses. Selling, general and administrative expenses include
customer service functions, accounting and billing services, office
administration expenses, property taxes and corporate charges for support
functions. Basic cable programming expenses were 23.3%, 23.9% and 24.6% of
cable operating expense for 2000, 2001 and 2002, respectively. Depreciation
and amortization expense relates primarily to the capital expenditures
associated with the rebuild and expansion of our cable systems, along with the
deployment of advanced cable products, including digital and high-speed cable
modems.

Publishing expenses include employee salaries and benefits, newsprint and
ink expense, depreciation and amortization, and selling, general and
administrative expenses. Selling, general and administrative expenses include
corporate charges for support functions. Salaries and benefits are the largest
operating expense of our newspaper publishing segment. Newsprint, ink and
related costs are our second largest operating expense for this segment and
accounted for 14.1%,14.9% and 11.9% of newspaper operating expenses for 2000,
2001 and 2002, respectively. Newsprint prices fluctuate with the market, based
on the supply and demand for newsprint.

Television operating expenses consist of employee salaries and
commissions, depreciation and amortization, programming expenses, advertising
and promotion expenses, and selling, general and administrative expenses.
Depreciation and amortization primarily relates to the amortization of
broadcast rights. Selling, general and administrative expenses include office
administration and corporate charges for support functions.

Depreciation and Amortization

Depreciation and amortization relates primarily to the capital
expenditures associated with the rebuild and expansion of our cable systems,
publishing facilities and telephony facilities. As a result of our plan to
continue to invest in our cable systems, publishing properties and telephony
facilities and to convert our television stations to





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##### Table of Contents



digital-capable broadcasting, we expect to report higher levels of depreciation
and amortization than are reflected in our historical consolidated financial
statements.

EBITDA

We define EBITDA as net income before provision for income taxes, interest
expense, depreciation and amortization (including amortization of broadcast
rights), and other non-cash charges, gains or losses on disposition of assets,
and extraordinary items and after payments for broadcast rights. When we
present EBITDA for our business segments, we exclude certain expenses
consisting primarily of corporate general and administrative expenses that have
not been allocated to individual segments. Corporate general and
administrative expenses were $4.2 million, $2.7 million and $6.0 million for
2000, 2001 and 2002, respectively.

Other media companies may measure EBITDA in a different manner. We have
included EBITDA data because such data is commonly used as a measure of
performance for media companies and is also used by investors to measure a
companys ability to service debt. EBITDA is not, and should not be used as,
an indicator of or alternative to operating income, net income or cash flow as
reflected in our consolidated financial statements, is not intended to
represent funds available for debt service, dividends or other discretionary
uses, is not a measure of financial performance under accounting principles
generally accepted in the United States, and should not be considered in
isolation or as a substitute for measures of performance prepared in accordance
with accounting principles generally accepted in the United States. Refer to
our financial statements, including our statement of cash flows, which appear
elsewhere in this report. The following calculations of EBITDA are not
necessarily comparable to similarly titled amounts of other companies. For a
reconciliation of EBITDA to net income, see Results of Operations below.





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##### Table of Contents



Results of Operations

The following table summarizes our consolidated historical results of
operations and consolidated historical results of operations as a percentage of
revenue for the years ended December 31, 2002, 2001 and 2000. It also provides
a reconciliation of net income to EBITDA.

Block Communications, Inc. and Subsidiaries
Results of Operations

|                                                        |                                                   |   |                        |             |      |  |       |      |   |   |             |             |   |  |       |      |   |   |             |             |   |  |       |      |  
|------------------------------------------------------- | ------------------------------------------------- | - | ---------------------- | ----------- | ---- |  | ----- | ---- | - | - | ----------- | ----------- | - |  | ----- | ---- | - | - | ----------- | ----------- | - |  | ----- | ---- | -
|                                                        |                                                   |   | Year ended December 31
|                                                        |                                                   |   |                       
|                                                        |                                                   |   | 2002                   |             | 2001 |  | 2000 
|                                                        |                                                   |   |                        |             |      |  |      
|Revenue:                                                |                                                   |   |                        |             |      |  |       |      |   |   |             |             |   |  |       |      |   |   |             |             |   |  |       |     
|                                                        | Publishing                                        |   | $                      | 257,256,343 |      |  |       | 60.5 | % |   | $           | 264,678,678 |   |  |       | 63.8 | % |   | $           | 286,717,128 |   |  |       | 67.4 | %
|                                                        | Cable                                             |   |                        | 101,473,858 |      |  |       | 23.9 |   |   |             | 89,420,000  |   |  |       | 21.6 |   |   |             | 82,110,320  |   |  |       | 19.3 |  
|                                                        | Broadcasting                                      |   |                        | 39,964,031  |      |  |       | 9.4  |   |   |             | 35,183,897  |   |  |       | 8.5  |   |   |             | 42,531,103  |   |  |       | 10.0 |  
|                                                        | Other Communications                              |   |                        | 26,498,493  |      |  |       | 6.2  |   |   |             | 25,282,312  |   |  |       | 6.1  |   |   |             | 14,298,551  |   |  |       | 3.4  |  
|                                                        |                                                   |  
|                                                        |                                                   |   | 425,192,725            |             |      |  | 100.0 |      |   |   | 414,564,887 |             |   |  | 100.0 |      |   |   | 425,657,102 |             |   |  | 100.0 |     
|Expense:                                                |                                                   |   |                        |             |      |  |       |      |   |   |             |             |   |  |       |      |   |   |             |             |   |  |       |     
|                                                        | Publishing                                        |   |                        | 249,186,956 |      |  |       | 58.6 |   |   |             | 262,798,933 |   |  |       | 63.4 |   |   |             | 277,312,265 |   |  |       | 65.1 |  
|                                                        | Cable                                             |   |                        | 91,403,840  |      |  |       | 21.5 |   |   |             | 84,578,461  |   |  |       | 20.4 |   |   |             | 74,535,841  |   |  |       | 17.5 |  
|                                                        | Broadcasting                                      |   |                        | 36,312,941  |      |  |       | 8.5  |   |   |             | 36,972,664  |   |  |       | 8.9  |   |   |             | 37,098,498  |   |  |       | 8.7  |  
|                                                        | Other Communications                              |   |                        | 25,090,520  |      |  |       | 5.9  |   |   |             | 27,954,522  |   |  |       | 6.7  |   |   |             | 18,444,805  |   |  |       | 4.3  |  
|                                                        | Corporate general and administrative              |   |                        | 6,045,826   |      |  |       | 1.4  |   |   |             | 2,705,412   |   |  |       | 0.7  |   |   |             | 4,151,939   |   |  |       | 1.0  |  
|                                                        |                                                   |  
|                                                        |                                                   |   | 408,040,083            |             |      |  | 96.0  |      |   |   | 415,009,992 |             |   |  | 100.1 |      |   |   | 411,543,348 |             |   |  | 96.7  |     
|                                                        |                                                   |  
|Operating income (loss)                                 |                                                   |   | 17,152,642             |             |      |  | 4.0   | %    |   |   | (445,105    | )           |   |  | -0.1  | %    |   |   | 14,113,754  |             |   |  | 3.3   | %   
|Nonoperating income (expense):                          |                                                   |   |                        |             |      |  |       |      |   |   |             |             |   |  |       |      |   |   |             |             |   |  |       |     
|                                                        | Interest expense                                  |   |                        | (22,952,372 | )    |  |       |      |   |   |             | (19,486,186 | ) |  |       |      |   |   |             | (14,174,830 | ) |  |       |      |  
|                                                        | Gain on disposition of Monroe Cablevision         |   |                        | 21,140,829  |      |  |       |      |   |   |             |            |   |  |       |      |   |   |             |            |   |  |       |      |  
|                                                        | Gain on disposition of WLFI-T V                   |   |                        |            |      |  |       |      |   |   |             |            |   |  |       |      |   |   |             | 22,338,881  |   |  |       |      |  
|                                                        | Loss on early extinguishment of debt              |   |                        | (8,989,786  | )    |  |       |      |   |   |             |            |   |  |       |      |   |   |             |            |   |  |       |      |  
|                                                        | Change in fair value of interest rate swaps       |   |                        | (732,748    | )    |  |       |      |   |   |             | (5,340,046  | ) |  |       |      |   |   |             |            |   |  |       |      |  
|                                                        | Interest income                                   |   |                        | 126,221     |      |  |       |      |   |   |             | 47,452      |   |  |       |      |   |   |             | 105,897     |   |  |       |      |  
|                                                        |                                                   |  
|                                                        |                                                   |   | (11,407,856            | )           |      |  |       |      |   |   | (24,778,780 | )           |   |  |       |      |   |   | 8,269,948   |             |   |  |       |     
|                                                        |                                                   |  
|Income (loss) before income taxes
and minority interest |                                                   |   | 5,744,786              |             |      |  |       |      |   |   | (25,223,885 | )           |   |  |       |      |   |   | 22,383,702  |             |   |  |       |     
|Provision (credit) for income taxes:                    |                                                   |   | 2,727,500              |             |      |  |       |      |   |   | (7,132,400  | )           |   |  |       |      |   |   | 9,176,186   |             |   |  |       |     
|Minority interest                                       |                                                   |   | (476,840               | )           |      |  |       |      |   |   | 234,622     |             |   |  |       |      |   |   | (427,020    | )           |   |  |       |     
|                                                        |                                                   |  
|Net income (loss)                                       |                                                   |   | 2,540,446              |             |      |  |       |      |   |   | (17,856,863 | )           |   |  |       |      |   |   | 12,780,496  |             |   |  |       |     
|                                                       
|Add:                                                    |                                                   |   |                        |             |      |  |       |      |   |   |             |             |   |  |       |      |   |   |             |             |   |  |       |     
|                                                        | Interest expense                                  |   |                        | 22,952,372  |      |  |       |      |   |   |             | 19,486,186  |   |  |       |      |   |   |             | 14,174,830  |   |  |       |      |  
|                                                        | Provision for income taxes                        |   |                        | 2,727,500   |      |  |       |      |   |   |             | (7,132,400  | ) |  |       |      |   |   |             | 9,176,186   |   |  |       |      |  
|                                                        | Depreciation                                      |   |                        | 44,753,126  |      |  |       |      |   |   |             | 44,601,107  |   |  |       |      |   |   |             | 38,864,632  |   |  |       |      |  
|                                                        | Amortization of intangibles and deferred charges  |   |                        | 3,011,349   |      |  |       |      |   |   |             | 4,421,315   |   |  |       |      |   |   |             | 3,478,025   |   |  |       |      |  
|                                                        | Amortization of broadcast rights                  |   |                        | 7,138,102   |      |  |       |      |   |   |             | 6,510,196   |   |  |       |      |   |   |             | 6,318,878   |   |  |       |      |  
|                                                        | (Gain) loss on disposal of property and equipment |   |                        | (300,268    | )    |  |       |      |   |   |             | 23,117      |   |  |       |      |   |   |             | 303,434     |   |  |       |      |  
|                                                        | Change in fair value of interest rate swaps       |   |                        | 732,748     |      |  |       |      |   |   |             | 5,340,046   |   |  |       |      |   |   |             |            |   |  |       |      |  
|                                                        | Loss on early extinguishment of debt              |   |                        | 8,989,786   |      |  |       |      |   |   |             |            |   |  |       |      |   |   |             |            |   |  |       |      |  
|                                                        | (Gain) on disposal of Monroe Cablevision          |   |                        | (21,140,829 | )    |  |       |      |   |   |             |            |   |  |       |      |   |   |             |            |   |  |       |      |  
|                                                        | (Gain) on disposal of WLFI-TV, Inc                |   |                        |            |      |  |       |      |   |   |             |            |   |  |       |      |   |   |             | (22,338,881 | ) |  |       |      |  
|Less:                                                   |                                                   |   |                        |             |      |  |       |      |   |   |             |             |   |  |       |      |   |   |             |             |   |  |       |     
|                                                        | Payments on broadcast rights                      |   |                        | (5,744,461  | )    |  |       |      |   |   |             | (5,117,113  | ) |  |       |      |   |   |             | (5,884,612  | ) |  |       |      |  
|                                                        |                                                   |  
|EBITDA                                                  |                                                   | $ | 65,659,871             |             |      |  |       |      |   | $ | 50,275,591  |             |   |  |       |      |   | $ | 56,872,988  |             |   |  |       |     
|                                                        |                                                   |  





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Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

Revenues

Revenues increased $10.6 million, or 2.6%, from 2001 to 2002. The
increase in revenues was largely due to increased revenues in our cable,
broadcast and other communications. The increase was partially offset by
decreased advertising revenues in our publishing operations, resulting from the
continued weak economic environment.

Cable Television. Cable revenue increased $12.1 million, or 13.5%, from
2001 to 2002. The increase in cable revenue was principally a result of an
increase of $7.82, or 16.6%, to $54.93, in the average monthly revenue per
basic subscriber, based on the average number of subscribers throughout the
period. An increase in the monthly basic cable service charge and continued
rollout of new services drove the increase in average monthly revenue per
subscriber. Average monthly high-speed data revenue per customer throughout
2002 was $45.88, an increase of $1.47, or 3.3%, as compared to 2001. Since the
launch of the digital product in the fall of 2001, average monthly digital
revenue per customer has grown to $15.20, an increase of $2.93, or 23.9%, as
compared to the period ended December 31, 2001.

Revenue generating units increased in the digital and high-speed data
categories throughout 2002. Net digital additions totaled 18,246 for the year
ended December 31, 2002, resulting in 26,092 digital customers. Year-to-date
net high-speed data additions totaled 7,344, resulting in 22,565 high-speed
customers as of December 31, 2002. Basic subscribers at the end of the period
totaled 152,392, a decrease of 4,949 basic subscribers from December 31, 2001.
This is due to the decrease of 5,261 basic subscribers recognized upon
consummation of the March 2002 like-kind exchange of Monroe Cablevision, as
adjusted to reflect the independent appraisal report.The increase in cable
revenue also reflects certain dial-up Internet customers that began to be
serviced by our cable operations in 2002. During the year ended December 31,
2002, our cable segment reported $1.4 million of revenue relating to these
customers for whom 2001 revenues were included in the other communications
segment.

Newspaper Publishing. Publishing revenue decreased $7.4 million, or 2.8%,
from 2001 to 2002. The decrease in publishing revenue was composed mostly of a
$7.2 million, or 3.4% decrease in advertising revenue to $205.5 million in
2002. The reduction in advertising revenue was due to decreases in
local, national and classified sales of $4.0 million, or 3.6%, $2.0 million, or 6.6%, and $4.2 million or 5.4%, respectively, resulting from advertisers'
 reactions to the general economic conditions throughout 2002. These decreases were partially offset by increases in other advertising
revenues, including internet sales, of $3.4 million.
Circulation revenue decreased $267,000, or 0.5%, to $49.9 million in 2002.
Other revenue, which consists of third-party and total market delivery and
niche publications, was consistent with the same period of the prior year.

Television Broadcasting. Broadcasting revenue increased $4.8 million, or
13.6%, from 2001 to 2002. The increase in broadcasting revenue was primarily a
result of increased local, national, and political revenue of $1.5 million,
$1.9 million, and $2.8 million, respectively. These
increases were offset by an increase in agency commissions.

Other Communications. Other communications revenue increased $1.2
million, or 4.8%, from 2001 to 2002. Total telephony revenue was $17.9 million,
an increase of $4.2 million, or 30.8%, as compared to the same period of the
prior year. The increase resulted from growth in telephony switched services
revenue of $3.6 million (including an increase of $983,000 in reciprocal
compensation) resulting from growth in our telephony customer base. Since
December 31, 2001, 116 new business retail telephony customers have been added,
representing a 25.1% increase. The growth in telephony revenue was partially
offset by a reduction in revenue due to certain residential dial-up Internet
customers now being serviced by our cable operations. Other communications
results for the year ended December 31, 2001 included $1.3 million of revenue
relating to these Internet customers.

Operating Expenses

Operating expenses decreased $7.0 million, or 1.7%, from 2001 to 2002.
The decrease in operating expenses is primarily attributable to decreased
publishing, broadcast and other communications expenses, partially offset by
increased cable and corporate general and administrative expenses.

Cable Television. Cable operating expenses increased $6.8 million, or
8.1%, from 2001 to 2002. The increase was primarily due to a $2.2 million, or
11.0% increase in basic cable programming expenses to $22.5 million, resulting





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from price increases from programming suppliers and the purchase of additional
programming for new cable channels offered on our cable systems. General and
administrative expenses increased $2.8 million, or 32.5%, partially due to
increased personal property taxes associated with the rebuild of our Toledo
cable system. During the year ended December 31, 2002, the cable group
recognized $895,000 of expense related to servicing certain residential dial-up
Internet customers for whom 2001 expenses were included in the other
communications segment.

Newspaper Publishing. Publishing operating expenses decreased $13.6
million, or 5.2%, from 2001 to 2002. The decrease in publishing operating
expenses was partially due to a $9.6 million, or 24.5%, decrease in newsprint
and ink expense, resulting from a weighted-average price per ton decrease of
$128.86, or 22.5%, and a 4.3% decrease in consumption from the same period of
the prior year. Amortization expense decreased $2.1 million due to the effect
of the non-amortization provisions of SFAS No. 142, adopted during 2002.
Additional savings resulted from overall cost controls and headcount
reductions.

Television Broadcasting.Broadcasting operating expenses decreased
$660,000, or 1.8%, from 2001 to 2002. The decrease was due to a reduction in
the news department expenses of $467,000, or 8.4%, and amortization expense of
$764,000 due to the implementation of SFAS No. 142 in the current year. These
decreases were partially offset by an increase in broadcast rights amortization
of $686,000, or 11.2%. Additional savings resulted from overall cost controls
implemented to offset salary and inflationary costs.

Other Communications. Other communications operating expenses decreased
$2.9 million, or 10.2%, from 2001 to 2002. The decrease was partially due to a
$1.6 million, or 16.2%, decrease in operating expenses relating to security
alarm system sales and monitoring caused by a decrease in sales volumes, as
well as by cost control initiatives. Expenses also decreased due to certain
residential dial-up Internet customers now being serviced by our cable
operations. Other communications results for the year ended December 31, 2001
included $1.2 million of expense relating to these Internet customers.

Operating Income

Operating income increased $17.6 million. Cable operating income
increased $5.2 million primarily due to revenue growth generated from rate
increases and rollout of new services, partially offset by increases in basic
cable programming and general and administrative expenses. Publishing
operating income increased $6.2 million, primarily due to newsprint savings and
the implementation of an overall expense reduction program, partially offset by
a reduction of advertising revenue. Broadcasting operating income increased
$5.4 million due to revenue growth in all advertising categories and an overall
expense reduction program. Other communications operating income increased
$4.1 million due to revenue growth from increased telephony sales. Corporate
general and administrative expenses increased $3.3 million due primarily to
increases in salary expense, executive committee stock awards and amortization
of deferred financing costs.

Net Income

For the year ended December 31, 2002, the Company reported net income of
$2.5 million compared to a $17.9 million net loss reported for the year ended
December 31, 2001. The increase in net income is due to the increase in
operating income, a $21.1 million gain recognized on the like-kind exchange of
Monroe Cablevision, and a $4.6 million decrease in the expense attributable to
the change in fair value of interest rate swaps, partially offset by a $9.0
million loss related to the early extinguishment of debt and a $3.5 million
increase in interest expense.

Depreciation and Amortization

Depreciation and amortization decreased $630,000, or 1.1%, as compared to
2001, due to a decrease in amortization expense of $1.4 million as a result of
the non-amortization provisions of SFAS No. 142, adopted in the current year,
partially offset by a $628,000 increase in amortization of broadcast rights.

EBITDA

EBITDA increased $15.4 million, or 30.6%, as compared to the year ended
December 31, 2001. EBITDA is defined as net income before interest expense,
provision for income taxes, depreciation and amortization (including





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amortization of broadcast rights), other non-cash charges, gains or losses on
disposition of assets, other non-recurring charges, and extraordinary items and
after payments for broadcast rights. EBITDA as a percentage of revenue
increased to 15.4% during 2002, from 12.1% in 2001. The increase in EBITDA
margin was primarily due to basic cable rate increases, the continued rollout
of high margin advanced cable products, lower newsprint prices, continued
growth in our telephony customer base, and the implementation of overall
expense reduction programs.

Net Interest Expense

Net interest expense increased $3.4 million, or 17.4%, from 2001 to 2002.
The increase in net interest expense was due to the incurrence of additional
debt, primarily to fund the cable system capital expenditures and maintain
other operating assets.

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

Revenues

Revenues decreased $11.1 million, or 2.6%, from 2000 to 2001. The
decrease in revenues was largely due to decreased advertising revenues in both
our publishing and broadcasting operations attributable to a soft advertising
market, which was primarily the result of a weak overall economic environment.
The decrease was partially offset by increased revenues in our cable and other
communications operations.

Cable Television. Cable revenue increased $7.3 million, or 8.9%, from
2000 to 2001. The increase in cable revenue was principally a result of an
increase of $4.29, or 9.8%, in the average monthly revenue per basic
subscriber, partially offset by a slight decrease in basic subscribers. The
increase in the average monthly revenue per basic subscriber was primarily a
result of an increase in the basic cable service rate charged to subscribers
and growth in high-speed cable modem subscribers, as well as an increase in
digital cable and pay-per-view services.

Newspaper Publishing. Publishing revenue decreased $22.0 million, or
7.7%, from 2000 to 2001. The decrease in publishing revenue was due to a $22.2
million, or 9.5%, decrease in advertising revenue to $211.9 million in 2001.
This was a result of reduced advertising sales, primarily in classified
advertising as a result of a decrease in placement of help wanted advertising
due to the general economic slowdown, partially offset by advertising rate
increases for all categories of advertising. Circulation revenue decreased
$693,000, or 1.4%, to $50.0 million in 2001 due to decreased circulation sales.
Other revenue, which is composed of third-party and total market delivery and
niche publications, increased $1.4 million, or 101.9%, to $2.8 million.

Television Broadcasting. Broadcasting revenue decreased $7.3 million, or
17.3%, from 2000 to 2001. The decrease in broadcasting revenue was primarily a
result of lower local and national advertising as a result of the general
economic slowdown and greatly reduced political advertising demand due to the
lack of political races during 2001.

Other Communications. Other communications revenue increased $11.0
million, or 76.8%, from 2000 to 2001. The increase in other communication
revenue was primarily a result of a $6.3 million, or 85.2%, increase in
telephony services to $13.6 million in 2001, primarily due to increased
telephony subscribers and sales of additional services to existing customers.

Operating Expenses

Operating expenses increased $3.5 million, or 0.8%, from 2000 to 2001.
The increase in operating expenses was largely attributable to increased cable
and telephony expenses and partially offset by decreased publishing expenses.

Cable Television. Cable operating expenses increased $10.0 million, or
13.5%, from 2000 to 2001. The increase was primarily due to a $5.9 million, or
22.7%, increase in depreciation and amortization to $27.2 million in 2001,
attributable to capital expenditures associated with the rebuild and expansion
of our cable systems. Basic cable programming expenses increased $2.9 million,
or 16.6%, to $20.2 million, due to price increases from programming suppliers
and the purchase of additional programming for new cable channels offered on
our cable systems.





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##### Table of Contents



Newspaper Publishing. Publishing operating expenses decreased $14.5
million, or 5.2%, from 2000 to 2001. The decrease in publishing operating
expenses was composed of a $7.3 million decrease in general and administrative
expense to $19.8 million in 2001 primarily due to decreases in workers
compensation expense, LIFO inventory reserve, and legal and professional fees.
Sales and marketing expenses decreased by $6.9 million to $18.3 million due to
overall reduction of promotion and advertising campaigns.

Television Broadcasting. Broadcasting operating expenses were
substantially the same in 2000 and 2001.

Other Communications. Other communications operating expenses increased
$9.5 million, or 51.6%, from 2000 to 2001. The largest increase in other
communications operating expenses was an increase of $5.2 million, or 53.0%, in
telephony expenses resulting from providing telephony services to an expanded
customer base.

Operating Income

Operating income decreased $14.6 million, or 103.2%, from 2000 to 2001.
Cable operating income decreased $2.7 million, or 36.1%, from 2000 to 2001.
The decrease in cable operating income was primarily due to increased
depreciation expense as a result of our rebuilt cable system in Toledo, offset
by revenue growth generated by rate increases and the addition of new services.
Publishing operating income decreased $7.5 million, or 80.0%, from 2000 to
2001. The decrease in publishing operating income was due to reduced
advertising sales, primarily in classified advertising, and partially offset by
advertising rate increases. Broadcasting operating income decreased $7.2
million, or 133.0%, from 2000 to 2001. The decrease in broadcasting operating
income was primarily due to lower local, national and political advertising
demand in our markets.

Net Income

For the year ended December 31, 2001, the company reported a net loss of
$17.9 million compared to net income of $12.8 million for the year ended
December 31, 2000. The decrease in net income is due to a $14.6 million
decrease in operating income, $5.3 million of expense recognized in 2001
attributable to the change in fair value of interest rate swaps due to the
adoption of SFAS No. 133, a $5.3 million increase in interest expense and a
$22.3 million gain on disposition of WLFI-TV, Inc. recognized during 2000.

Depreciation and Amortization

Depreciation and amortization increased $6.9 million, or 14.1%, from 2000
to 2001. The increase in depreciation and amortization was primarily due to
our rebuilt cable system in Toledo and other capital expenditures to maintain
our operating assets.

EBITDA

EBITDA decreased $6.6 million, or 11.6%, from 2000 to 2001. EBITDA as a
percent of revenues decreased from 13.3% in 2000 to 12.1% in 2001. The
decrease in EBITDA and EBITDA margin from 2000 to 2001 was primarily due to
lower total revenues and higher operating costs as described above.

Net Interest Expense

Net interest expense increased $5.4 million, or 38.2%, from 2000 to 2001.
The increase in net interest expense was due to the incurrence of additional
debt, primarily to fund cable system capital expenditures.

Liquidity and Capital Resources

Historically, our primary sources of liquidity have been cash flow from
operations and borrowings under our senior credit facilities. The need for
liquidity arises primarily from capital expenditures and interest payable on
the senior subordinated notes and the senior credit facility.

Net cash provided by operating activities was $35.1 million and $37.3
million for the years ended December 31, 2002 and December 31, 2001,
respectively. The net cash provided by operating activities is determined by
adding





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##### Table of Contents



back depreciation and amortization, and adjusting for other non-cash items,
including, for the year 2002, a $733,000 loss resulting from the change in fair
value of interest rate swaps, a $21.1 million gain attributable to the exchange
of Monroe Cablevision, Inc., and a $2.7 million write off of deferred financing
costs related to extinguished debt. Net cash provided by operating activities
also reflects a $7.0 million contribution to the corporate pension plan. No
contribution was made during 2001. Cash used in investing activities was $32.4
million for the year ended December 31, 2002, compared to $57.8 million for the
prior year. Net cash used in investing activities for the year ended December
31, 2002 includes $12.7 million to payoff cash advances on life insurance
policies, offset by $12.1 million of proceeds received from Comcast Corp. in
the exchange of Monroe Cablevision, Inc.

Our capital expenditures have historically been financed with cash flow
from operations and borrowings under our senior credit facility. We made
capital expenditures, including capital leases, of $32.0 million and $62.2
million, for the years ended December 31, 2002 and December 31, 2001,
respectively. Capital expenditures for 2001 were primarily used to rebuild the
Toledo cable system and maintain other operating assets. Capital expenditures
for 2002 were primarily used to support our continued rollout of advanced cable
products, the plant rebuild of the system acquired from Comcast Corp., and
maintenance of our other operating assets.

For the year ended December 31, 2003, it is anticipated that we will spend
approximately $71.2 million on capital expenditures, including the rebuild of
Erie County CableSystems plant, expenditures required for success-based
deployment of advanced cable products, continued growth in the telephony
customer base, and various improvements to the Pittsburgh Post-Gazette
production facility.

Financing activities provided $1.2 million of cash for the year ended
December 31, 2002, compared to $22.1 million for the prior year. We have
concluded a number of financing transactions, which fully support our operating
plan. These transactions are detailed as follows:

During the first half of 2002, we refinanced all of our previous debt
outstanding, resulting in new proceeds of $250.0 million and $10.8 million of
deferred financing costs. In April 2002, we issued $175 million of 91/4%
senior subordinated notes. The proceeds were used to repay our existing senior
term loan and senior notes and to prepay a portion of our existing senior
revolving credit facility. In May 2002, we entered into new senior credit
facilities totaling $200.0 million, consisting of a $75 million term loan B, a
$40 million delay-draw term loan A, and an $85 million revolving credit
facility. The proceeds of the $75.0 million term loan B were used to refinance
the remaining balance of the existing senior revolving credit facility. The
revolver and term loan A will be used to fund future capital expenditures. The
new senior credit facilities are guaranteed by substantially all of our present
and future domestic subsidiaries and are collateralized by a pledge of
substantially all of our and the guarantor subsidiaries material assets.

At December 31, 2002, the balances outstanding and available under our new
senior credit facilities and subordinated notes were $249.6 million and $111.5
million, respectively, and the weighted-average interest rate on the balance
outstanding was 8.04% as adjusted for interest rate swaps in effect. At
December 31, 2001, the balances outstanding and available under our previous
senior credit facility and senior notes were $235.0 million and $51.0 million,
respectively, and the weighted-average interest rate on the balance outstanding
was 11.0% as adjusted for interest rate swaps in effect. Interest expense in
2002 increased $3.5 million due to the increase in outstanding debt offset by
the decrease in the effective interest rate.

We have a substantial amount of debt, and our high level of debt could
have important consequences for you. We believe that funds generated from
operations and the borrowing availability under our new senior credit
facilities will be sufficient to finance our current operations, our cash
obligations in connection with the planned capital expenditures, and our
current and future financial obligations.

The following summarizes our contractual obligations as of December 31,
2002, including periods in which the related payments are due (in 000s):





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|                                                     |  |      |        |      |  |      |       |      |  |      |       |            |  |       |       |  |  |   |       |  |  |   |         |  |  |   |         | 
|---------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ----- | ---- |  | ---- | ----- | ---------- |  | ----- | ----- |  |  | - | ----- |  |  | - | ------- |  |  | - | ------- | 
|                                                     |  | 2003 |        | 2004 |  | 2005 |       | 2006 |  | 2007 |       | Thereafter |  | Total
|                                                     |  |     
|Subordinated notes, as adjusted
for fair value hedge |  | $    |       |      |  | $    |      |      |  | $    |      |            |  | $     |      |  |  | $ |      |  |  | $ | 182,659 |  |  | $ | 182,659 | 
|Term loan                                            |  |      | 4,321  |      |  |      | 750   |      |  |      | 750   |            |  |       | 750   |  |  |   | 750   |  |  |   | 67,304  |  |  |   | 74,625  | 
|Capital leases                                       |  |      | 329    |      |  |      | 363   |      |  |      | 399   |            |  |       | 425   |  |  |   | 462   |  |  |   | 1,175   |  |  |   | 3,153   | 
|                                                     |  |     
|Total long-term debt                                 |  |      | 4,650  |      |  |      | 1,113 |      |  |      | 1,149 |            |  |       | 1,175 |  |  |   | 1,212 |  |  |   | 251,138 |  |  |   | 260,437 | 
|                                                    
|Broadcast rights payable                             |  |      | 5,850  |      |  |      | 3,561 |      |  |      | 2,471 |            |  |       | 935   |  |  |   | 363   |  |  |   |        |  |  |   | 13,180  | 
|Broadcast rights commitments                         |  |      | 467    |      |  |      | 967   |      |  |      | 987   |            |  |       | 656   |  |  |   | 371   |  |  |   | 238     |  |  |   | 3,686   | 
|                                                     |  |     
|Total broadcast rights                               |  |      | 6,317  |      |  |      | 4,528 |      |  |      | 3,458 |            |  |       | 1,591 |  |  |   | 734   |  |  |   | 238     |  |  |   | 16,866  | 
|                                                    
|Operating leases                                     |  |      | 3,044  |      |  |      | 2,010 |      |  |      | 1,393 |            |  |       | 963   |  |  |   | 398   |  |  |   | 1,599   |  |  |   | 9,407   | 
|                                                     |  |     
|Total contractual obligations                        |  | $    | 14,011 |      |  | $    | 7,651 |      |  | $    | 6,000 |            |  | $     | 3,729 |  |  | $ | 2,344 |  |  | $ | 252,975 |  |  | $ | 286,710 | 
|                                                     |  |     

At December 31, 2002, we have recorded recoverable Federal income tax of $8.7
million, which includes the effect of new Federal tax legislation that increases the carryback period for net operating losses.

Recent Accounting Pronouncements

Effective January 1, 2001, the Company adopted SFAS No. 133, Accounting
for Derivative Instruments and Hedging Activities, as amended by Statement Nos.
137 and 138, (collectively, SFAS No. 133), which requires the Company to record
all derivatives on the balance sheet at fair value and establishes criteria for
designation and effectiveness of hedging relationships. Upon adoption of SFAS
No. 133 on January 1, 2001, the Company recorded the cumulative effect of the
accounting change as a liability of $2,106,123 with an offset to other
comprehensive loss, net of $758,000 of deferred income taxes, which is being
amortized over the remaining life of the two swap agreements in effect at the
time of transition.

Effective January 1, 2002, the Company adopted SFAS No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. Purchased
goodwill and indefinite-lived intangible assets are no longer amortized but
reviewed annually for impairment, or more frequently if impairment indicators
arise. Intangible assets with lives restricted by contractual, legal or other
means continue to be amortized over their useful lives. As of January 1, 2002,
the Company performed the first of the required impairment tests of goodwill.
Additionally, the Company performed its annual impairment test in the fourth
quarter of 2002. No impairment was present upon performance of the 2002
impairment tests.

In June 2001, SFAS No. 143, Accounting for Asset Retirement Obligations,
was issued and is effective for fiscal years beginning after June 15, 2002.
The pronouncement requires legal obligations associated with the retirement of
long-lived assets to be recognized at their fair value at the time that the
obligations are incurred. Upon initial recognition of a liability, that cost
should be capitalized as part of the related long-lived asset and allocated to
expense over the estimated useful life of the asset. The Company does not
expect the adoption of this standard to significantly impact its financial
position or results of operations.

Effective January 1, 2002, the Company adopted SFAS No. 144, Accounting
for the Impairment or Disposal of Long-Lived Assets, which supersedes SFAS No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of, and provides a single accounting model for long-lived
assets to be disposed of. The carrying value of long-lived assets is tested for
recoverability whenever events or changes in circumstances indicate that its
carrying amount may not be recoverable. If various external factors or the
projected undiscounted cash flows generated by the asset over the remaining
amortization period indicate that the carrying value of the asset will not be
recoverable, the carrying value will be adjusted to the estimated fair value,
or the remaining useful life adjusted as necessary. For the year ended
December 31, 2002, the Company has not recognized any impairment charges for
long-lived assets included in the scope of SFAS No. 144.

In April 2002, SFAS No. In April 2002, SFAS No. 145, Rescission of FASB Statements No. 4, 44, and
64, Amendment of FASB Statement No. 13, and Technical Corrections,was issued
and requires a gain or loss related to the extinguishment of debt to no longer
be recorded as an extraordinary item. The Company has elected early adoption as
encouraged by SFAS No. 145, which would not otherwise require adoption until
fiscal year 2003. As a result, losses on





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extinguishment of debt totaling $9.0 million are included in income from
continuing operations for the year ended December 31, 2002.

In July 2002, SFAS No. 146, Accounting for Costs Associated with Exit or
Disposal Activities,was issued and applies to fiscal years beginning after
December 31, 2002. The pronouncement requires certain costs associated with a
restructuring, discontinued operation or plant closing to be recognized as
incurred rather than at the date of commitment to an exit or disposal plan.
The Company does not expect the adoption of this standard to significantly
impact its financial position or results of operations.

In December 2002, SFAS No. 148, Accounting for Stock-Based Compensation 
Transition and Disclosure,was issued and provides alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. The Company has previously adopted the
fair value method of accounting for stock-based employee compensation;
therefore all years presented reflect this method and no pro-forma disclosures
are required.

Critical Accounting Policies and Estimates

We prepare our consolidated financial statements in accordance with
accounting principles generally accepted in the United States. The preparation
of these consolidated financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and the related disclosures. We base our estimates and judgments on
historical experience and various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and liabilities that are
not readily apparent from other sources. We evaluate these estimates and
judgments on a continual basis. Actual results may differ from these estimates
and judgments.

We believe the following critical accounting policies affect our
significant estimates and judgments used in the preparation of the consolidated
financial statements. We maintain allowances for doubtful accounts for
estimated losses resulting from the inability of our customers to make required
payments. If the financial condition of our customers were to change,
resulting in an impairment of their ability to make payments, additional
allowances could be required. We maintain various employment related
liabilities, such as workers compensation and medical reserves, based on
historical performance and current trends. Actual results could differ from
estimates resulting in adjustments to the recorded liability. Actuarial
assumptions have a significant impact on the determination of net periodic
pension costs and credits and other post-employment benefits. If actual
experience differs from these assumptions, future periodic pension and
post-employment costs could be adversely affected.

Factors That Could Affect Future Results

We have substantial debt and have significant interest payment requirements,
which may adversely affect our financial health and our ability to react to
changes in our business.

We have a significant amount of indebtedness. At December 31, 2002, we
have total indebtedness of $260.4 million. In 2001, our earnings were
insufficient to cover fixed charges by $25.8 million.

Our substantial indebtedness could have important consequences to you.
For example, it could:



| |  |  | make it more difficult for us to satisfy our obligations with
respect to the senior credit facilities and subordinated notes;                                                                                                                                      
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | increase our vulnerability to general adverse economic and industry
conditions;                                                                                                                                                                                    
|
| |  |  | require us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, thereby reducing the
availability of our cash flow to fund working capital, capital
expenditures, acquisitions and other general corporate purposes;





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| |  |  | limit our flexibility in planning for, or reacting to, changes in
our business and the industries in which we operate;
| | - |  | ----------------------------------------------------------------------------------------------------------------------
|
| |  |  | place us at a disadvantage compared to competitors that have less debt; and                                           
|
| |  |  | limit our ability to borrow additional funds.                                                                         

In addition, the indenture and the agreements relating to our senior
credit facilities contain financial and other restrictive covenants that will
limit our ability to engage in activities that may be in our long-term best
interests. Our failure to comply with those covenants could result in an event
of default which, if not cured or waived, could result in the acceleration of
all of our debt.

Despite current indebtedness levels, we and our subsidiaries may still be able
to incur substantially more debt. This could further exacerbate the risks
associated with our substantial leverage.

We and our subsidiaries may be able to incur substantial additional
indebtedness in the future. The terms of the agreements
relating to our subordinated notes and senior credit facilities do not fully prohibit us or our
subsidiaries from doing so. As of December 31, 2002, we have approximately
$111.5 million available under our senior credit facilities. All borrowings
under our senior credit facilities are secured by substantially all of our
existing assets and rank senior to the subordinated notes and the subsidiary guarantees. If
new debt is added to our and our subsidiaries current debt levels, the
leverage-related risks described above could intensify.

To service our indebtedness, we will require a significant amount of cash. Our
ability to generate cash depends on many factors beyond our control.

Our ability to make payments on and to refinance our indebtedness, and to
fund planned capital expenditures will depend on our ability to generate cash
in the future. This, to a certain extent, is subject to general economic,
financial, competitive, legislative, regulatory and other factors that are
beyond our control. A portion of the indebtedness under our senior credit
facilities bears variable rates of interest, and we have entered into interest
rate swap agreements that have the effect of causing us to bear variable
interest rate risk with respect to a portion of the subordinated notes. See
Quantitative and Qualitative Disclosures about Market Risk.

We cannot assure you that our business will generate sufficient cash flow
from operations, that currently anticipated cost savings and operating
improvements will be realized on schedule or that future borrowings will be
available to us under our senior credit facilities in an amount sufficient to
enable us to pay our indebtedness, or to fund our other liquidity needs. The
ability to borrow funds in the future under our senior credit facilities will
depend on our meeting the financial covenants in the agreement governing those
facilities. We may need to refinance all or a portion of our indebtedness,
 on or before maturity. We cannot assure you that we will
be able to refinance any of our indebtedness, including our senior credit
facilities and the subordinated notes, on commercially reasonable terms or at all.

The indenture for the subordinated notes and the credit agreement governing our senior
credit facilities contain various covenants that limit our managements
discretion in the operation of our businesses.

The indenture governing the subordinated notes and the credit agreement
governing our senior credit facilities contain various provisions that limit
our managements discretion by restricting our ability to:



| |  |  | incur additional debt and issue preferred stock;
| | - |  | ------------------------------------------------
|
| |  |  | pay dividends and make other distributions;     
|
| |  |  | make investments and other restricted payments; 
|
| |  |  | create liens;                                   

Changes in the funded status of our consolidated pension plans could affect our liquidity
 or financial position.

As of December 31, 2002, we have recorded $47.0 million of additional
minimum pension liability due to a consolidated accumulated benefit obligation in excess of the fair value of plan assets.
 The uncertainty of financial markets could cause historical trends to not be indicative of future pension contributions
and net periodic pension costs.





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| |  |  | sell assets; and                                
| | - |  | ------------------------------------------------
|
| |  |  | enter into certain transactions with affiliates.

These restrictions on our managements ability to operate our businesses
in accordance with its discretion could have a material adverse effect on our
business. In addition, our senior credit facilities require us to meet certain
financial ratios in order to draw funds.

If we default under any financing agreements, our lenders could:



| |  |  | elect to declare all amounts borrowed to be immediately due and
payable, together with accrued and unpaid interest; and/or
| | - |  | --------------------------------------------------------------------------------------------------------------------------
|
| |  |  | terminate their commitments, if any, to make further extensions of
credit.                                                

If we are unable to pay our obligations to our senior secured lenders,
they could proceed against any or all of the collateral securing our
indebtedness to them. The collateral under our senior credit facilities
consists of substantially all of our existing assets. In addition, a breach of
certain of these restrictions or covenants, or an acceleration by our senior
lenders of our obligations to them, would cause a default under the subordinated notes. We
may not have, or be able to obtain, sufficient funds to make accelerated
payments, including payments on the subordinated notes, or to repay the subordinated notes in full after
we pay our senior lenders.

Reductions in advertising could adversely affect our results of operations.

Substantially all of our revenues in our newspaper publishing and
television broadcasting businesses are derived from advertisers in many
different industries. Since the fourth quarter of 2000, there has been a
general slowdown in the advertising industry. If these trends continue, our
results of operations will continue to be adversely affected.

A recession or downturn in the United States economy or the economy of an
individual geographic market in which we operate would likely adversely affect
our advertising revenues and, therefore, our results of operations.

If a significant amount of newspaper or television advertising were to
shift to other communications media as a result of changes in technology,
changes in consumer preferences, cost differentials or for other reasons, our
businesses could be adversely affected.

Our newspaper and television content may attract fewer readers and viewers,
limiting our ability to generate advertising and circulation revenues.

The success of each of our newspapers and television stations is primarily
dependent upon its share of the overall advertising revenues within its market.
The ability of newspapers and television stations to generate advertising
revenues depends to a significant degree upon audience acceptance. Audience
acceptance is influenced by many factors, including the content offered, shifts
in population, demographics, general economic conditions, public tastes
generally, reviews by critics, promotions, the quality and acceptance of other
competing content in the marketplace at or near the same time, the availability
of alternative forms of entertainment and other intangible factors. All of
these factors could change rapidly, and many are beyond our control.

In our television broadcasting business, technological innovations have
fragmented television viewing audiences and subjected television broadcasting
stations to new types of competition. During the past decade, cable television
and independent stations have captured an increasing market share and overall
viewership of broadcast network television has declined.

Our advertising revenues will suffer if any of our newspapers or stations
cannot maintain its audience ratings or market share or cannot continue to
command the advertising rates that we anticipate.





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Our businesses operate in highly competitive industries.

Our businesses operate in a very competitive environment and are subject
to actual and potential competition from various sources.

Cable Television

Our cable television systems face competition from:



| |  |  | alternative methods of receiving and distributing video programming, including:
| | - |  | -------------------------------------------------------------------------------



| |  |  | over-the-air television broadcast stations;                                                                                                                                                             
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | direct broadcast satellite (DBS);                                                                                                                                                                       
|
| |  |  | satellite master antenna television systems, which use one
central antenna to receive and deliver television programming to a
concentrated group of viewers, such as in apartments, hotels or
hospitals;
|
| |  |  | multichannel multipoint distribution systems, which use low
power microwave frequencies with increased channel capacity to
transmit video programming over the air to customers;                        



| |  |  | data transmission and Internet service providers; and                                                                                                                                      
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | other sources of news, information and entertainment such as
newspapers, movie theaters, live sporting events, other entertainment
events and home video products, including VCRs and DVDs.

In the future, our cable systems may face additional competition from new
sources, including regional Bell operating companies, other cable television
companies, other telephone companies, public utility companies and other
entities that are in the process of entering the cable television business in
other parts of the country; and broadcast digital television, which can deliver
high definition television pictures, digital-quality programs and CD-quality
audio programming.

Newspaper Publishing

The newspaper publishing industry depends primarily upon the sale of
advertising and paid subscriptions to generate revenues. Competition for
advertising, subscribers, readers and distribution is intense and comes from
local, regional and national newspapers; television broadcasting stations and
networks and cable channels; radio; the Internet; direct mail; and other
information and advertising media that operate in our newspaper publishing
markets.

Television Broadcasting

Our television stations face competition for audience and advertising
revenues from other television broadcasters. Our competitors also include
cable television operators, wireless cable systems, direct broadcast satellite
systems, telephone company video systems, radio broadcasters and other media,
including newspapers, magazines, computer on-line services, movies, direct
mail, compact discs, VCRs, DVDs, music videos, the Internet, outdoor
advertising and other forms of entertainment and advertising.





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We may not remain competitive if we do not respond to the rapid changes in
technology, standards and services that characterize the media industry and
which may require us to invest a significant amount of capital to address
continued technological development.

Our need to comply with comprehensive, complex and sometimes unpredictable
federal, state and/or local regulations could have an adverse effect on our
businesses.

The cable and television broadcasting industries are subject to extensive
legislation and regulation at the federal, state and local levels. The rules
and regulations governing our businesses have at times had a material adverse
effect on our businesses. Federal, state and local regulations have increased
the administrative and operational expenses of our businesses. In addition,
Congress and the FCC may in the future adopt new laws or modify existing laws
and regulations and policies regarding a wide variety of matters. Compliance
with these regulations and policies could increase costs. As we continue to
introduce additional communications services, we may be required to obtain
federal, state and local licenses or other authorizations to offer such
services. We may not be able to obtain and retain all necessary governmental
authorizations and permits in a timely manner, or at all, or conditions could
be imposed upon such authorizations and permits that may not be favorable to us
or with which we may not be able to comply. Failure to do so could negatively
affect our existing operations and could delay or prevent our proposed
operations. We may be required to modify our business plans or operations as
new regulations arise. We cannot assure you that we will be able to do so in a
cost-effective manner, or at all. The adoption of various measures or the
elimination of various existing restrictions could accelerate the existing
trend toward vertical integration in the media and home entertainment
industries and could cause us to face more formidable competition in the
future.

We are obligated to redeem stock from the estates of our principal shareholders
to the extent required to pay death taxes. In certain circumstances, these
obligations could have significant adverse effects on our liquidity and
financial position.

The Company and all shareholders are parties to an agreement which
requires the Company to redeem shares of our non-voting common stock from the
estate of a deceased shareholder to the extent such redemption qualifies for
sale treatment, rather than dividend treatment, under Section 303 of the
Internal Revenue Code. See Stock Redemption Agreement in Item 13.

Although we are unable to determine with any certainty the amounts we may
be required to pay under the agreement, we believe that based on the amount of
life insurance in force for our major shareholders, combined with our ability
to defer redemptions over a 15-year period, the amounts the Company will be
required to pay under the agreement will not have a material adverse effect on
the Companys liquidity or financial position. In certain circumstances,
however, the making of these payments might result in a violation of the fixed
charge coverage requirements of our new senior credit facilities. If this were
to occur, the effect on the Companys liquidity could be material.

A terrorist attack or war could have a severe adverse effect on our financial
position.

Risks Relating to Our Cable Television Business

If our programming costs continue to increase and we cannot pass them along to
our customers, our cash flow will decrease.

In recent years, the cable industry has experienced a rapid escalation in
the cost of programming, particularly sports programming. This escalation may
continue. Because of our size, we are unable to negotiate the more favorable
rates that are granted to large national multiple system operators. For
competitive reasons, we may not be able to pass programming cost increases on
to our subscribers. Exclusive arrangements negotiated by other larger
programming outlets may prevent us from offering certain desirable programming.

We purchase the majority of our cable programming through the National
Cable Television Cooperative. We achieve significant savings through
participation in this cooperative, as compared to programming rates we could
negotiate on our own, thereby lowering our costs of program acquisition. If
for any reason we were unable to continue





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to obtain programming though such buying cooperatives, and we were unable to
pass the increase in programming costs on to our subscribers, our results of
operations and cash flow would be adversely affected.

Copyright law changes could increase the costs of the licenses we need to
operate our cable systems.

Cable systems must obtain copyright licenses for the programming they
carry. For over-the-air broadcast channels we carry on our systems, we obtain
copyrights under a system established by the Copyright Act of 1976, which
provides a blanket license for copyrighted material on television stations
whose signals a cable system retransmits. From time to time, Congress
considers proposals to alter the blanket copyright license system, some of
which could make the license more costly.

We will face competition from providers of alternatives to our high-speed
Internet services.

Competitors, including telephone companies, have introduced digital
subscriber line technology (also known as DSL), which allows Internet access
over traditional phone lines at data transmission speeds greater than those
available by a standard telephone modem. Competition from wireless broadband
Internet services is also being introduced in our service areas. We cannot
predict the impact these competing broadband technologies will have on our
Internet access services or on our operations. Our high-speed Internet
services will also continue to face competition from traditional lower speed
dial-up Internet service providers, which have the advantage of lower price and
in some cases proprietary content and nationwide marketing.

We may be required to provide access to our networks to other Internet service
providers, which could significantly increase our competition and adversely
affect our ability to provide new services.

Cable modem services have been subject to only light regulation by the
FCC. The FCC has ruled that broadband services should exist in a minimal
regulatory environment. Congress and the FCC have been asked to require cable
operators to provide open access over their cable systems to other Internet
service providers. To date, Congress and the FCC have declined to impose these
requirements, although the FCC has recently initiated a new rulemaking
proceeding on this matter. This same open access issue is also being
considered by some local franchising authorities and is being actively
litigated in the courts. If we are required to provide open access or face
other forms of increased regulation, it could adversely impact our anticipated
revenues from high-speed Internet access services and complicate marketing and
technical issues associated with the introduction of these services.

If we are unable to procure the necessary software and equipment, our ability
to offer our services could be impaired.

We depend on vendors to supply our cable electronic equipment, such as the
set-top converter boxes, fiber and other equipment, as well as the enabling
software for analog and digital cable services. This equipment is available
from a limited number of suppliers. We typically purchase equipment under
purchase orders placed from time to time and do not carry significant
inventories of equipment. If there are delays in obtaining software or if
demand for equipment exceeds our inventories and we are unable to obtain
required software and equipment on a timely basis and at an acceptable cost,
our ability to recognize additional revenues and to add additional subscribers
from these services could be delayed or impaired. In addition, if there are no
suppliers who are able to provide converter devices that comply with evolving
Internet and telecommunications standards or that are compatible with other
products or components we use, our business may be materially impaired.

The computer system and software used by our cable systems for billing and
customer service are outdated. While we have budgeted for and scheduled the
replacement of this system, in the event of delays or difficulties in procuring
or converting to the new computer system, our ability to launch and track new
cable services could be adversely affected.





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As we introduce new cable services, a failure to predict and react to consumer
demand or successfully integrate new technology could adversely affect our
business.

We may be adversely affected by strikes and other labor protests.

The employees of our Toledo cable system include two collective bargaining
units represented by the Brotherhood of Teamsters. One of these includes the
technicians responsible for cable service installation and repair and for
ongoing maintenance of our cable plant; the other comprises the employees who
program our cable converter boxes. The current collective bargaining
agreements for these employees expire in 2003 and 2004, respectively. If we
were to experience a strike or work stoppage, it might be difficult for us to
find a sufficient number of willing employees with the necessary skills to replace
these employees in handling outages and service calls. Any resulting
disruptions in service could cause us to lose revenues and customers and might
have permanent adverse effects on our business.

The employees of our cable construction subsidiary are also represented by
the Brotherhood of Teamsters under a collective bargaining agreement which
expires in early 2004.

We may be adversely affected by changes in the law or economics relating to our
physical plant.

Our cable systems depend on physical facilities, including transmission
equipment and miles of fiber and coaxial cable. Significant portions of those
physical facilities occupy public rights-of-way according to terms of local
ordinances. Other portions occupy private property under the terms of express
or implied easements. And many miles of the cable are attached to utility
poles according to terms of pole-attachment agreements we have with the
utilities that own the poles. All of this is subject to governmental
regulation, as well as the common law of real property. No assurances can be
given that we will be able to maintain and use our facilities in their current
locations at the current costs. Changes in governmental regulation of these
matters, or changes in the economics of the relationships, could have a
material adverse effect on our business and our results of operations.

Our cable systems may experience disruptions as a result of technical failures,
storms or natural disasters.

The transmission of programming signals to our headends, our receipt of
these signals at our headends and our distribution of the signals to our
customers via our cable networks are each exposed to potential disruptions due
to technical failures, storms, fires or other natural disasters. Any
disruption in our receipt or distribution of programming can cause loss of
revenues and increases in operating expenses and have an adverse effect on
customer satisfaction. A significant and extended disruption could materially
and adversely affect our business, financial condition or results of
operations.

Risks Related to Our Newspaper Publishing Business

We may be adversely affected by variations in the cost of newsprint.

Newsprint and ink expense represents our largest raw material expenses
and, after labor costs, is the most significant operating cost of our newspaper
publishing operations. Although we have a long-term contract to supply
newsprint for our publishing operations, pricing under the contract varies with
market conditions. Newsprint costs vary widely from time to time, and price
changes in newsprint can significantly affect the overall earnings of our
newspaper publishing operations. We cannot assure you that our publishing
operations will not be exposed in the future to volatile or increased newsprint
costs, which could have a material adverse effect on our business and results
of operations.

We may be adversely affected by strikes and other labor protests.

Substantially all non-management employees of our newspaper publishing
operations are represented by various unions. The labor agreements with the 10
unions representing our Pittsburgh newspaper employees currently run through
December 31, 2006. Eight unions represent the employees of The Bladeunder
labor agreements that expire on March 21, 2003. We are currently involved in
labor negotiations with all the unions representing employees of The Blade. We
are hopeful that we will reach successor labor agreements with those unions,
but can give no assurance that such agreements will be reached. We do not
anticipate a work stoppage in connection with the negotiating process.





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If we were to experience a strike or work stoppage at one or both of our
papers, any resulting disruptions in operations could cause us to lose
subscribers and advertisers and might have permanent adverse effects on our
business.

Reporting of or the taking of editorial positions on controversial issues could
adversely affect our business.

Our newspapers report and take editorial positions on issues that are
sometimes controversial and that may arouse passions in affected individuals or
segments of our communities. This can involve risks of offending advertisers
or subscribers, which can result in loss of advertising and subscription
revenues, or can on occasion lead to demonstrations and protests, adverse
community reaction, boycotts or lawsuits.

The role of newspapers is threatened by competing communications technologies.

For the past several decades, the introduction of new communications
technologies has eroded the once dominant position of newspapers as a source of
news and information. While we are making use of the Internet and exploring
other strategies to adapt to the future growth of alternate communications
technologies, we are unable to predict the extent to which these technologies
may adversely affect our newspaper publishing business.

Risks Related to Our Television Broadcasting Business

Our television broadcasting operations could be adversely affected if we fail
to renew or continue on favorable terms, if at all, our network affiliations.

We have one affiliation agreement with NBC, one with ABC and one with UPN.
The affiliation agreements governing the relationship between Fox and our two
Fox-affiliated stations are unsigned. Our network affiliation agreements are
subject to termination by the networks under certain circumstances. We believe
that we enjoy a good relationship with NBC, ABC, Fox and UPN. However, we
cannot assure you that our affiliation agreements will be renewed, that Fox
will continue its relationship with us or that each network will continue to
provide programming or compensation to affiliates on the same basis as it
currently provides programming or compensation. The non-renewal or termination
of a network affiliation could adversely affect our business.

The success of our television stations depends on the success of the network
each station carries.

The ratings of each of the television networks, which are based in large
part on their programming, vary from year to year, and this variation can
significantly impact a stations revenues. There can be no assurance as to the
future success of any network or its programming.

The planned industry conversion to digital television could adversely affect
our broadcast business.

Under current FCC guidelines, all commercial television stations in the
United States must be broadcasting in digital format unless there are
extenuating circumstances. The government plans to abandon the present analog
format by December 31, 2006, provided that 85% of households within the
relevant DMA have the capability to receive a digital signal.

Four of our five television broadcasting stations are meeting the FCC
requirement to be broadcasting in digital. KTRV is not required to construct digital facilities
until the FCC determines which digital channel KTRV will ultimately utilize.
Three of the four stations broadcasting in the digital format are operating at
reduced power and antenna heights under an FCC temporary station authorization.
The FCC will, at some undisclosed future date, require these stations to
increase power and antenna height to the presently licensed maximum values.
This future build-out and conversion of our fourth station will result in capital expenditures estimated at $9.6 million. Failure to complete the
build-out, when required by the FCC, could result in fines, penalties and loss
of the FCC license.

The implementation of these regulations will expose our business to the
following additional risks:





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| |  |  | The digital technology may allow us and our competitors to
broadcast multiple channels, compared to only one today. We do not
know what impact this will have on the competitive landscape or on our
results of operations. We cannot predict whether or at what cost we
will be able to obtain programming for the additional channels.
Increased revenues from the additional channels may not make up for the
conversion cost and additional programming expenses. Also, multiple
channels programmed by other stations could increase competition in our
markets.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The geographic coverage and power disparities related to digital
signals could put us at a disadvantage to at least some of our
competitors in certain markets. Furthermore, the higher power required
to operate our analog VHF channel that was assigned a UHF digital
channel with comparable geographic signal coverage may translate into
higher electricity costs for this station.                                                                                                                                                                            
|
| |  |  | In some cases, when we convert a station to digital television, the
signal may not be received in as large a coverage area, or it may
suffer from additional interference.                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  |  | While the FCC ruled that cable companies are required to carry the
signals of digital-only television stations, the agency has tentatively
concluded, subject to additional inquiry, that cable companies should
not be required to carry both the analog and digital signals of
stations during the transition period when stations will be
broadcasting in both modes. If the FCC does not require this, cable
customers in our broadcast markets may not receive our digital signal,
which could negatively impact our stations.                                  

We may be adversely affected by disruptions in our ability to receive or
transmit programming.

Our stations receive network broadcast feeds by satellite. Satellites are
subject to significant risks that may prevent or impair proper commercial
operations, including satellite defects, launch failure, destruction and damage
and incorrect orbital placement. There can be no assurance that disruptions of
transmissions will not occur in the future or that other comparable satellites
will be available, or if available, whether a lease agreement with respect to
such other satellites could be obtained on favorable terms. The operation of
the satellite is outside our control and a disruption of the transmissions
could prevent us from receiving our programming content. The transmission of
programming is also subject to other risks of equipment failure, including
natural disasters, power losses, software errors or telecommunications errors.

We own or lease antenna and transmitter space for each of our stations.
If we were to lose any of our antenna tower leases, we cannot assure you that
we would be able to secure replacement leases on commercially reasonable terms,
or at all, which could also prevent us from transmitting our programs.
Disruptions in our ability to receive or transmit our programming broadcasts
could have a material adverse effect on our audience levels, advertising
revenues and future results of operations.

Programming costs may negatively impact our operating results.

One of the most significant operating cost components of our television
broadcasting operations is programming. There can be no assurance that we will
be able to obtain programming in the future, and that we will not be exposed in
the future to increased programming costs which may adversely affect our
operating results.







Item 7A.   Quantitative and Qualitative Disclosures About Market Risk

Our revolving credit and term loan agreements bear interest at floating
rates. Accordingly, we are exposed to potential losses related to changes in
interest rates. We do not enter into derivatives or other financial
instruments for trading or speculative purposes; however, in order to manage
our interest rate risk, we have entered into interest rate swaps. As of
December 31, 2002, our interest rate swap agreements expire in varying amounts
through April 2009.

The fair market value
and carrying value of our 91/4% senior notes were
$204.6 million and $182.7 million, as adjusted for the fair value hedge, as of
December 31, 2002. The fair market value of our credit facility borrowing of
$74.6 million approximates its carrying value as it bears interest at floating
rates. As of December 31, 2002, the





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##### Table of Contents



estimated fair value of our interest rate swap agreements was $893,000, which
represents the amount required to enter into offsetting contracts with similar
remaining maturities based on quoted market prices. This is reflected in our
financial statements as other non-current assets. Changes in the fair value of
derivative financial instruments are recognized either in income or as an
adjustment to carrying value of the underlying debt depending on whether the
derivative financial instruments qualify for hedge accounting.

As of December 31, 2002, we had entered into interest rate swaps that
approximated $221.0 million, or 88.5%, of our borrowings under all of our
credit facilities. The interest rate swaps consist of $121.0 million relating
to our revolving credit and term loan agreements, and $100.0 million principal
amount of the senior subordinated notes. In addition, we had entered into an
interest rate swap agreement that has the economic effect of substantially
offsetting $55.0 million of the swap agreements totaling $121.0 million. In
the event of an increase in market interest rates, the change in interest
expense would be dependent upon the weighted average of outstanding borrowings
and derivative instruments in effect during the reporting period following the
increase. Based on our current outstanding borrowings and interest rate swap
agreements, our exposure to interest rate risk is not material. A hypothetical
100 basis point increase in interest rates along the entire interest rate yield
curve would increase our annual interest expense by approximately $86,000.







Item 8.   Financial Statements and Supplementary Data

Reference is made to our consolidated financial statements beginning on
page F-1 of this Annual Report on Form 10-K.







Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.







PART III







Item 10.   Directors and Executive Officers of the Registrant

The table below sets forth information about our executive officers and
Board of Directors:

|                     |  |     |    |       |  |                            |      |  |  |                                                          
|-------------------- |  | --- | -- | ----- |  | -------------------------- | ---- |  |  | ---------------------------------------------------------
|                     |  |     |    |       |  | Director                   |      | 
|                     |  | Age |    | Since |  | Positions With the Company
|                     |  |     |    |       |  |                           
|William Block, Jr. * |  |     | 58 |       |  |                            | 1985 |  |  | Chairman of the Board of Directors                       
|Allan J. Block *     |  |     | 48 |       |  |                            | 1985 |  |  | Managing Director of the Company; Director               
|John R. Block *      |  |     | 48 |       |  |                            | 1985 |  |  | Vice Chairman, Editorial Director; Director              
|Diana E. Block *     |  |     | 30 |       |  |                            | 2002 |  |  | Director of Operations, Pittsburgh Post-Gazette; Director
|William Block        |  |     | 87 |       |  |                            | 1940 |  |  | Retired Chairman of the Company; Director                
|David G. Huey        |  |     | 55 |       |  |                            | 2002 |  |  | President; Director                                      
|Gary J. Blair        |  |     | 57 |       |  |                            | 1999 |  |  | Vice President and Chief Financial Officer; Director     
|Jodi L. Miehls       |  |     | 31 |       |  |                            |     |  |  | Treasurer; Principal Accounting Officer                  
|Fritz Byers          |  |     | 47 |       |  |                            | 1999 |  |  | Secretary; General Counsel; Director                     
|Karen D. Johnese     |  |     | 55 |       |  |                            | 1991 |  |  | Director of Corporate Citizenship; Director              
|Donald G. Block      |  |     | 49 |       |  |                            | 1985 |  |  | Director                                                 
|Mary G. Block        |  |     | 70 |       |  |                            | 1987 |  |  | Director                                                 
|Cyrus P. Block       |  |     | 56 |       |  |                            | 1991 |  |  | Director                                                 
|Harold O. Davis      |  |     | 73 |       |  |                            | 2002 |  |  | Director                                                 





---



##### Table of Contents





---

|* |  | Denotes members of the Executive Committee
|- |  | ------------------------------------------

William Block, Jr., is a Director and member of the Executive Committee
and was appointed Chairman of the Board and Chairman of the Executive Committee
effective January 1, 2002. He served as President of the Company from 1987
through 2001. Mr. Block holds a B.A. degree from Trinity College and a J.D.
from Washington and Lee University.

Allan J. Blockis a Director and member of the Executive Committee and was
appointed Managing Director effective January 1, 2002. Prior to becoming
Managing Director, he directed our cable and broadcast divisions from 1989
through 2001. Mr. Block holds a B.A. degree from the University of
Pennsylvania.

John R. Blockis a Director and member of the Executive Committee and was
appointed Vice Chairman of the Board and publisher of our two newspapers
effective January 1, 2002. Prior to that he directed the news and editorial
functions of our two newspapers from 1989 through 2001. Mr. Block holds a B.A.
from Yale University.

Diana E. Blockwas appointed a Director and member of the Executive
Committee in 2002 and in March 2003 was appointed Director of Operations for
the Pittsburgh-Post Gazette. Previously she served as the Director of Systems
and Technology for the Pittsburgh-Post Gazettesince January 2002. She
attended Carnegie Mellon University from 2000 to 2001, where she received her
masters degree. Previously, she held several positions with the Pittsburgh
Post-Gazettebeginning in 1998 and before that taught high school English. Ms.
Block also holds a B.A. from Yale University and a masters degree from the
University of Virginia.

William Block, a Director, served as co-publisher of our two newspapers
from 1941 to 1989, and as Chairman of the Board from 1987 to 2001. Mr. Block
holds a B.A. degree from Yale University.

David G. Hueywas promoted to President and a Director effective January
1, 2002. Prior to that, he served as President of our cable operations since
1990. Mr. Huey holds a B.S. degree from the University of Toledo.

Gary J. Blairhas served as Vice President and Chief Financial Officer
since 1990 and is a Director. Prior to that he served as Finance Director.
Mr. Blair holds a B.S. degree and an M.B.A. from Bowling Green State
University.

Jodi L. Miehlswas appointed Treasurer in April 2002. Prior to that she
served as Assistant Treasurer and Director of Finance. Ms. Miehls holds a
B.S.B.A. degree from The Ohio State University.

Fritz Byershas served as Secretary since 1990 and is a Director. He has
also served as Corporate Counsel since 1990. Mr. Byers holds a B.A. degree
from Duke University and a J.D. from Harvard University.

Karen Block Johneseis a Director and was appointed Director of Corporate
Citizenship in July 2002. She served as Director of Community Affairs for the
Pittsburgh Post-Gazettefrom 1995. Before that, she held a similar position
with the Monterey Herald. Ms. Johnese holds a B.A. from the University of
Rochester, and a M.S.W. and an M.E.D. from the University of Pittsburgh.

Donald G. Blockis a Director. He is the Executive Director of the
Greater Pittsburgh Literacy Council. Mr. Block holds a B.A. degree from Yale
University and an M.A. from Indiana University.

Mary G. Blockis a Director and is the widow of Paul Block, Jr., who
served as Chairman of the Board from 1942-1987.

Cyrus P. Blockis a Director. He is a cinematographer with a long resume
of well-known movies, television programs, and related work. Mr. Block holds a
B.A. from Lewis and Clark College.

Harold O. Daviswas appointed a Director in October 2002. Mr. Davis has
previously served as a director and served as Chief Financial Officer from 1972
to 1990. Mr. Davis holds a B.S. degree from Bowling Green State University.





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##### Table of Contents



Executive Committee

Under our Close Corporation Operating Agreement, a four-member Executive
Committee, comprised of two representatives of the families of each of the two
sons of the Companys founder, functions as chief executive officer and, except
for certain powers specifically reserved to the Board of Directors, also
exercises the powers normally exercised by a board of directors. Decisions of
the Executive Committee are made by majority vote. In the event of a tie, the
agreement provides for the deciding vote to be cast by Charles T. Brumback,
former Chairman and Chief Executive Officer of the Tribune Corporation,
Chicago, Illinois.

Family Relationships

Allan J. Block and John R. Block are brothers, and Cyrus P. Block is their
half-brother. Their father, Paul Block, Jr., was the brother of William Block.
Mary G. Block, the widow of Paul Block, Jr., is the step-mother of Allan J.,
John R. and Cyrus P. Block.

William Block is the father of William Block, Jr., Karen D. Johnese and
Donald G. Block, who are brothers and sister. Diana E. Block is the daughter
of William Block, Jr.







Item 11.   Executive Compensation

The following table sets forth information concerning the compensation
paid for 2002 and 2001, to our five most highly compensated executive officers
(the named officers):

|                                                                     |  |                        |         |           |  |                 |         |  |  |   |        | 
|-------------------------------------------------------------------- |  | ---------------------- | ------- | --------- |  | --------------- | ------- |  |  | - | ------ | 
|                                                                     |  | Annual Compensation(1) |         | All Other
|                                                                     |  |                        |         |          
|Name and Principal Positions Held                                    |  | Salary                 |         | Bonus (2) |  | Compensation(3)
|                                                                     |  |                        |         |           |  |                
|Allan J. Block, Managing
Director and Director
2002                  |  | $                      | 468,964 |           |  | $               | 467,173 |  |  | $ | 14,798 | 
|2001                                                                 |  |                        | 455,000 |           |  |                 |        |  |  |   | 14,343 | 
|William Block, Jr., Chairman of
the Board of Directors
2002          |  |                        | 468,964 |           |  |                 | 467,173 |  |  |   | 83,128 | 
|2001                                                                 |  |                        | 455,000 |           |  |                 |        |  |  |   | 49,103 | 
|John R. Block, Vice Chairman,
Editorial Director and Director
2002   |  |                        | 468,964 |           |  |                 | 467,173 |  |  |   | 34,586 | 
|2001                                                                 |  |                        | 455,000 |           |  |                 |        |  |  |   | 34,131 | 
|David G. Huey, President and
Director
2002                           |  |                        | 325,000 |           |  |                 | 128,700 |  |  |   | 40,468 | 
|2001                                                                 |  |                        | 285,000 |           |  |                 | 102,600 |  |  |   | 23,430 | 
|Diana E. Block, Director and
Post-GazetteDirector of
Operations
2002 |  |                        | 287,196 |           |  |                 | 467,173 |  |  |   | 14,195 | 
|2001                                                                 |  |                        | 41,556  |           |  |                 |        |  |  |   | 2,493  | 



---

|(1) |  | The incremental cost of personal benefits provided to any named officer
did not exceed the lesser of $50,000 or 10% of aggregate salary and bonus.                                                                                           
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) |  | Except for Mr. Huey, the amounts reported in this column consist of a $100,000 cash bonus and
the value of non-voting common stock of the Company to be issued as part
of the Executive Committee members 2002 bonus. The assigned per share





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##### Table of Contents



|    |  | value of the non-voting common stock was $407.97. Each member of the
Executive Committee was awarded 900 shares of non-voting common stock, which
will be issued in 2003.                                                                                                                                                                                                                                                                                               
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) |  | The 2002 amounts reported in this column consist of (1) life insurance
premiums of $3,798 for Allan J. Block, $72,128 for William Block, Jr.,
$23,586 for John R. Block, $14,812 for Mr. Huey and $3,195 for Diana E.
Block and (2) employer contributions to a 401(k) plan and a supplemental
deferred compensation plan of $11,000 for Allan J. Block, $11,000 for
William Block, Jr., $11,000 for John R. Block, $25,656 for Mr. Huey and
$11,000 for Diana E. Block.

Mr. Huey participates in a Phantom Stock Plan under which the Executive
Committee may award to key employees phantom stock units representing values
determined by the Company of a hypothetical percentage interest in one of our
divisions or subsidiaries. Phantom stock unit awards vest in increments of 25%
for each year of employment after the date of the award and are payable in cash
after eight years from the date of the award based on the value of the units at
that time. No dividends or dividend equivalents are paid on phantom stock
awards. No phantom stock awards were made to Mr. Huey in 2002 or 2001. As of
December 31, 2002, the most recent valuation date, the book value of the
phantom stock units held by Mr. Huey was $265,500.

Retirement Plans

A member of the Executive Committee who is a full-time employee of the
Company and who retires at age 60 or later after at least ten years of service,
or at an earlier age after at least thirty years of service, will receive an
annual pension benefit equal to 70% of the average of his or her total annual
compensation for the last five years of employment.

We have a defined benefit pension plan and supplemental retirement plan in
which our other executive officers participate. The following table shows the
estimated annual benefits payable under these plans upon normal retirement at
age 65 to participating employees, including certain executive officers, in
selected compensation and years-of-service categories:

|                 |  |                             |         |          |  |          |         |          |  |          |         |  |  |   |         |  |  |   |         | 
|---------------- |  | --------------------------- | ------- | -------- |  | -------- | ------- | -------- |  | -------- | ------- |  |  | - | ------- |  |  | - | ------- | 
|                 |  | 5-Year Average Compensation
|                 |  |                            
|Years of Service |  | $200,000                    |         | $300,000 |  | $400,000 |         | $500,000 |  | $600,000
|                 |  |                             |         |          |  |          |         |          |  |         
|5                |  | $                           | 24,000  |          |  | $        | 36,000  |          |  | $        | 48,000  |  |  | $ | 60,000  |  |  | $ | 72,000  | 
|10               |  |                             | 49,000  |          |  |          | 73,500  |          |  |          | 98,000  |  |  |   | 122,500 |  |  |   | 147,000 | 
|15               |  |                             | 74,000  |          |  |          | 111,000 |          |  |          | 148,000 |  |  |   | 185,000 |  |  |   | 222,000 | 
|20               |  |                             | 99,000  |          |  |          | 148,500 |          |  |          | 198,000 |  |  |   | 247,500 |  |  |   | 397,000 | 
|25               |  |                             | 124,000 |          |  |          | 186,000 |          |  |          | 248,000 |  |  |   | 310,000 |  |  |   | 372,000 | 
|30               |  |                             | 149,000 |          |  |          | 223,500 |          |  |          | 298,000 |  |  |   | 372,500 |  |  |   | 447,000 | 

The amounts shown in the table are straight-life annuity amounts, assuming
no election of any available survivorship option, and are subject to offset for
social security benefits. Benefits under the plans are based on the average of
the participants covered compensation for the five years preceding retirement,
with covered compensation consisting of salary and bonus. As of December 31,
2002, Mr. Huey had 17.8 years and Mr. Blair had 22.8 years of credited service
under these plans.

Compensation of Directors

Except for the General Counsel, Directors who are not employees receive a
payment of $1,000 for each Board of Directors meeting attended.

Cyrus P. Block, a director, is paid a fee of $50,000 per year for certain
consulting services.





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##### Table of Contents









Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table shows as of December 31, 2002 the amount and nature of
beneficial ownership of each class of our outstanding capital stock by (1) each
director (2) each executive officer named in the above Summary Compensation
Table, (3) each beneficial owner of 5% or more of our Voting Common Stock and
(4) all directors and executive officers as a group:

|                                                             |  |                     |        |              |  |                      |       |         |  |              |         |         |  |  |      |            |  |  |       |  |  |  |      |  
|------------------------------------------------------------ |  | ------------------- | ------ | ------------ |  | -------------------- | ----- | ------- |  | ------------ | ------- | ------- |  |  | ---- | ---------- |  |  | ----- |  |  |  | ---- | -
|                                                             |  |                     |        |              |  |                      |       |         |  | Non-Voting   |         |         |  |  |      |            |  | 
|                                                             |  | Voting Common Stock |        | Common Stock |  | Class A Stock       
|                                                             |  |                     |        |              |  |                     
|                                                             |  | Amount and          |        |              |  |                      |       |         |  |              |         |         |  |  |      | Amount and |  |  |       | 
|                                                             |  | Nature of           |        | Percent      |  | Amount and Nature of |       | Percent |  | Nature of    |         | Percent
|                                                             |  | Beneficial          |        | of           |  | Beneficial           |       | of      |  | Beneficial   |         | of     
|Name                                                         |  | Ownership(1)        |        | Class        |  | Ownership(1)         |       | Class   |  | Ownership(1) |         | Class  
|                                                             |  |                     |        |              |  |                      |       |         |  |              |         |        
|William Block, Jr.                                           |  |                     | 7,350  |              |  |                      | 25.0  | %       |  |              | 37,085  |         |  |  | 8.7  | %          |  |  | 1,300 |  |  |  | 10.3 | %
|Allan J. Block                                               |  |                     | 7,350  |              |  |                      | 25.0  | %       |  |              | 127,042 | (2)     |  |  | 29.7 | %          |  |  | 515   |  |  |  | 4.1  | %
|John R. Block                                                |  |                     | 7,350  |              |  |                      | 25.0  | %       |  |              | 127,042 | (2)     |  |  | 29.7 | %          |  |  | 515   |  |  |  | 4.1  | %
|Diana E. Block                                               |  |                     |       |              |  |                      |      |         |  |              | 1,382   |         |  |  | 0.3  | %          |  |  | 320   |  |  |  | 2.5  | %
|William Block                                                |  |                     | 7,350  |              |  |                      | 25.0  | %       |  |              | 228,026 |         |  |  | 53.3 | %          |  |  |      |  |  |  |     |  
|David G. Huey                                                |  |                     |       |              |  |                      |      |         |  |              |        |         |  |  |     |            |  |  |      |  |  |  |     |  
|Gary J. Blair                                                |  |                     |       |              |  |                      |      |         |  |              |        |         |  |  |     |            |  |  |      |  |  |  |     |  
|Jodi L. Miehls                                               |  |                     |       |              |  |                      |      |         |  |              |        |         |  |  |     |            |  |  |      |  |  |  |     |  
|Fritz Byers                                                  |  |                     |       |              |  |                      |      |         |  |              |        |         |  |  |     |            |  |  |      |  |  |  |     |  
|Karen D. Johnese                                             |  |                     |       |              |  |                      |      |         |  |              | 362     |         |  |  | (3   | )          |  |  |      |  |  |  |     |  
|Donald G. Block                                              |  |                     |       |              |  |                      |      |         |  |              | 6,563   |         |  |  | 1.5  | %          |  |  | 1,660 |  |  |  | 13.2 | %
|Mary G. Block                                                |  |                     |       |              |  |                      |      |         |  |              | 8,330   |         |  |  | 1.9  | %          |  |  | 1,297 |  |  |  | 10.3 | %
|Cyrus P. Block                                               |  |                     |       |              |  |                      |      |         |  |              | 122,484 | (2)     |  |  | 28.6 | %          |  |  | 2,970 |  |  |  | 23.5 | %
|Harold O
Davis                                               |  |                     |       |              |  |                      |      |         |  |              |        |         |  |  |     |            |  |  |      |  |  |  |     |  
|All directors and
executive officers
as a group (14
persons) |  |                     | 29,400 |              |  |                      | 100.0 | %       |  |              | 413,686 |         |  |  | 96.7 | %          |  |  | 8,577 |  |  |  | 68.0 | %



---

|(1) |  | Under regulations of the Securities and Exchange Commission, a person is
considered the beneficial owner of a security if the person has or
shares with others the power to vote the security (voting power) or the
power to dispose of the security (investment power). In the table,
beneficial ownership of our stock is determined in accordance with these
regulations and does not necessarily indicate that the person listed as a
beneficial owner has an economic interest in the shares listed as
beneficially owned.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Includes 122,224 shares as to which Allan J. Block, John R. Block and
Cyrus P. Block share voting and investment power.                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|(3) |  | Less than 0.1% of the outstanding shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        





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##### Table of Contents



Equity Compensation Plan
Information

|                             |  |                   |  |                   |   |                     |  |                     |    |                     |  | 
|---------------------------- |  | ----------------- |  | ----------------- | - | ------------------- |  | ------------------- | -- | ------------------- |  | 
|                             |  |                   |  |                   |   |                     |  |                     |    | Number of          
|                             |  |                   |  |                   |   |                     |  |                     |    | securities         
|                             |  |                   |  |                   |   |                     |  |                     |    | remaining available
|                             |  | Number of         |  |                   |   |                     |  | for future issuance
|                             |  | securities to be  |  |                   |   |                     |  | under equity       
|                             |  | issued upon       |  | Weighted average  |   | compensation plans 
|                             |  | exercise of       |  | exercise price of |   | (excluding         
|                             |  | outstanding       |  | outstanding       |   | securities         
|                             |  | options, warrants |  | options, warrants |   | reflected in column
|                             |  | and rights (a)    |  | and rights (b)    |   | (a)) (c)           
|                             |  |                   |  |                   |   |                    
|Equity Compensation
Plans:   |  |                   |  |                   |   |                     |  |                     |    |                     |  | 
|Approved by shareholders     |  | None              |  |                   |  |                     |  |                     | (1 | )                  
|                             |  |                   |  |                   |   |                     |  |                     |    |                     |  | 
|Not approved by
shareholders |  | None              |  |                   |  |                     |  | None               
|                            
|Total                        |  | None              |  |                   |  |                     |  |                     | (1 | )                  



| | (1) |  | The holders of the Companys voting common stock have approved a
resolution under which members of the Executive Committee may receive
bonuses payable in shares of the Companys non-voting common stock if
the Company exceeds its 2003 EBITDA budget by specified amounts. The
number of shares which can be earned is determined by a formula based on
the amount by which the Company exceeds the EBITDA budget and is not
subject to an upper limit.
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







Item 13.   Relationships and Related Transactions

Stock Redemption Agreement

The Company and the members of the Block family are parties to an
agreement which requires the Company to redeem shares of our Non-Voting Common
Stock from the estate of a deceased shareholder to the extent such redemption
qualifies for sale treatment, rather than dividend treatment, under Section 303
of the Internal Revenue Code (the Code). In general, Section 303 allows sale
treatment where (1) the value for Federal estate tax purposes of all stock of
the Company included in determining the value of the decedents gross estate
exceeds 35% of the excess of the value of the gross estate over certain
allowable deductions and (2) the amount paid to redeem the stock does not
exceed the sum of all federal and state death taxes (including
generation-skipping taxes), plus funeral and administration expenses allowable
as deductions for federal estate tax purposes. The initial redemption price
under the agreement is the value of the shares for federal estate-tax purposes
in the deceased shareholders estate. In order to qualify for redemption of
stock under the agreement, the estate of the deceased shareholder must elect
under Section 6166 of the Code to pay the federal estate tax in deferred
installments over a period of up to 15 years. In return, the estate is given
an option to purchase for $1 per share a number of shares equal to any
additional shares required to be redeemed as a result of the deferral election.
The Company is also required to pay cash to cover the income tax consequences
resulting from the redemption and the option.

The amounts the Company might be required to pay under the agreement and
the timing of such payments will depend upon the year of death of the
shareholders and the value of the stock and the estate tax laws in effect at
that time. To satisfy part of its obligation under the agreement, the Company
has purchased life insurance on lives of certain shareholders who own
significant amounts of our non-voting common stock. The vast majority of the
life insurance in force is on the lives of William Block (our major
shareholder) and his wife. The amount of the death benefit for Mr. and Mrs.
Block is $46.1 million, of which $24.1 million is on the life of William Block,
$11.2 million on the life of Mrs. Block and $10.8 million on their joint lives.





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##### Table of Contents



Although we are unable to determine with any certainty the amounts we may
be required to pay under the agreement, we believe that based on the amount of
life insurance in force for our major shareholders, combined with our ability
to defer redemptions over a 15-year period, the amounts the Company will be
required to pay under the agreement will not have a material adverse effect on
the Companys liquidity or financial position. In certain circumstances,
however, the making of these payments might result in a violation of the fixed
charge coverage requirements of our new senior credit facilities. If this were
to occur, the effect on the Companys liquidity could be material.

Related Party Transaction

In 1996, Karen Block Johnese, a director of the Company, borrowed $100,000
from the Company under a promissory note bearing interest at the rate of 8% per
annum. Ms. Johnese has repaid $40,000 of the principal amount. Sixty thousand
dollars in principal, together with accrued interest in the current amount of
approximately $60,000, remain outstanding and are overdue, which amounts are
the largest amounts outstanding at any time since January 1, 2002.







Item 14.   Controls and Procedures

The Managing Director and the Chief Financial Officer of the Company (its
principal executive officer and principal financial officer, respectively) have
concluded, based on their evaluation as of a date within 90 days prior to the
date of the filing of this Report, that the Companys disclosure controls and
procedures are effective to ensure that information required to be disclosed by
the Company in the reports filed or submitted by it under the Securities
Exchange Act of 1934, as amended, is recorded, processed, summarized and
reported within the time periods specified in the SECs rules and forms, and
include controls and procedures designed to ensure that information required to
be disclosed by the Company in such reports is accumulated and communicated to
the Companys management, including the Managing Director and Chief Financial
Officer, as appropriate to allow timely decisions regarding required
disclosure.

There were no significant changes in the Companys internal controls or in
other factors that could significantly affect these controls subsequent to the
date of such evaluation.





---



##### Table of Contents






PART IV




Item 15.   Exhibits, Financial Statements and Reports on 8-K



|(a) | 1. |  | Financial Statements:                                                                                                                                                                   
|--- | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |    |  | Our financial statements, as indicated by the Index to Consolidated
Financial Statements set forth below, begin on page F-1 of this
Form 10-K, and are hereby incorporated by reference.

|                                                                                                     |  |      |     | 
|---------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                     |  | Page
|                                                                                                     |  |     
|Report of Independent Auditors                                                                       |  |      | F-1 | 
|Consolidated Balance Sheets as of December 31, 2002 and 2001                                         |  |      | F-2 | 
|Consolidated Statements of Income for the years ended December 31, 2002, 2001 and 2000               |  |      | F-4 | 
|Consolidated Statements of Stockholders Equity for the years ended December 31, 2002,
2001 and 2000 |  |      | F-5 | 
|Consolidated Statements of Cash Flows for the years ended December 31, 2002, 2001
and 2000           |  |      | F-6 | 
|Notes to Consolidated Financial Statements                                                           |  |      | F-7 | 



| | 2. |  | The following financial statement schedule is included in item 15(d):                                                                                                                                                                 
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |    |  | Schedule II  Valuation and Qualifying Accounts for the years ended
December 2002, 2001 and 2000                                                                                                                                      
|
| |    |  | All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and
therefore have been omitted.
|
| | 3. |  | Exhibit Index:                                                                                                                                                                                                                        



| | 3.1  |  | Articles of Incorporation of Block Communications, Inc. (the Company),
as amended to date, incorporated by reference to exhibit 3.1 of the
Companys registration statement on form S-4 #333-96619.                                                                                                                         
| | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 3.2  |  | Code of Regulations of the Company, incorporated by reference to exhibit
3.2 of the Companys registration statement on form S-4 #333-96619.                                                                                                                                                                                  
|
| | 3.3  |  | Close Corporation Operating Agreement, dated December 12, 1988, by and
among the Company (f/n/a Blade Communications, Inc.) and the holders of all
of its issued and outstanding stock, incorporated by reference to exhibit
3.3 of the Companys registration statement on form S-4 #333-96619.                              
|
| | 3.4  |  | Agreement to Amend and Extend Close Corporation Operating
Agreement, dated October 15, 1994, by and among the Company (f/n/a Blade
Communications, Inc.) and the holders of all of its issued and outstanding
stock, incorporated by reference to exhibit 3.4 of the Companys
registration statement on form S-4 #333-96619. 
|
| | 4.1  |  | Indenture, dated as of April 18, 2002, among the Company, the Guarantors
and Wells Fargo Bank Minnesota, National Association, as trustee,
incorporated by reference to exhibit 4.1 of the Companys registration
statement on form S-4 #333-96619.                                                                           
|
| | 4.2  |  | Credit Agreement, dated as of May 15, 2002, by and among the
Company and Bank of America, N.A., as Administrative Agent,
incorporated by reference to exhibit 10.1 of the Companys registration
statement on form S-4 #333-96619.                                                                                            
|
| | 4.3  |  | Guaranty Agreement, dated as of May 15, 2002, by and among each of the
Guarantors and Bank of America, N.A., as Administrative Agent,
incorporated by reference to exhibit 10.2 of the Companys registration
statement on form S-4 #333-96619.                                                                               
|
| | 4.4  |  | Security Agreement, dated as of May 15, 2002, by and among the Company,
each of the Guarantors and Bank of America, N.A., as Administrative Agent,
incorporated by reference to exhibit 10.3 of the Companys registration
statement on form S-4 #333-96619.                                                                  
|
| | 4.5  |  | Intellectual Property Security Agreement, dated as of May 15, 2002, by and
among the Company, each of the Guarantors and Bank of America, N.A., as
Administrative Agent, incorporated by reference to exhibit 10.4 of the
Companys registration statement on form S-4 #333-96619.                                            
|
| | 4.6  |  | Assignment of Patents, Trademarks and Copyrights, updated, by and among
the Company, each of the Guarantors and Bank of America, N.A., as
Administrative Agent, incorporated by reference to exhibit 10.5 of the
Companys registration statement on form S-4 #333-96619.                                                     
|
| | 4.7  |  | Securities Pledge Agreement, by and among the Company, each Guarantor
that owns Subsidiary Securities, and Bank of America, N.A., as
Administrative Agent, incorporated by reference to exhibit 10.6 of the
Companys registration statement on form S-4 #333-96619.                                                          
|
| | 4.8  |  | Mortgage, dated May 15, 2002, between Block Communication, Inc, and Bank
of America, N.A., as Agent, incorporated by reference to exhibit 10.7 of
the Companys registration statement on form S-4 #333-96619.                                                                                                                
|
| | 4.9  |  | Amendment No. 1 dated September 12, 2002 to the Credit Agreement dated as
of May 15, 2002, by and among the Company and Bank of America, N.A., as
Administrative Agent, incorporated by reference to exhibit 10.1 of the
Companys quarterly report on form 10-Q #333-96619 for the quarterly period
ended September 30, 2002.
|
| | 10.1 |  | Phantom Stock Plan, dated December 13, 1999, for Block Communications,
Inc. (f/n/a Blade Communications, Inc.), incorporated by reference to
exhibit 10.8 of the Companys registration statement on form S-4
#333-96619.                                                                                                     
|
| | 10.2 |  | Incentive Compensation Plan, dated January 1, 1991, for Block
Communications, Inc. (f/n/a Blade Communications, Inc.), incorporated by
reference to exhibit 10.9 of the Companys registration statement on form
S-4 #333-96619.                                                                                              
|
| | 10.3 |  | Amendment to and Restatement of Stock Redemption Agreement, dated December
12, 1991, incorporated by reference to exhibit 10.10 of the Companys
registration statement on form S-4 #333-96619.                                                                                                                               
|
| | 10.4 |  | Shareholders Agreement, incorporated by reference to exhibit 10.11 of the
Companys registration statement on form S-4 #333-96619.                                                                                                                                                                                           
|
| | 12.1 |  | Statement re computation of ratios.                                                                                                                                                                                                                                                                                           
|
| | 21.1 |  | Subsidiaries of the Company, incorporated by reference to exhibit 21.1 of
the Companys registration statement on form S-4 #333-96619.                                                                                                                                                                                        
|
| | 99.1 |  | Certification of the Managing Director pursuant to 18 U.S.C. Sec. 1350.                                                                                                                                                                                                                                                       
|
| | 99.2 |  | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Sec. 1350.                                                                                                                                                                                                                                                 



|(b) |  | Reports on Form 8-K:                                                                                                                                                          
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | None.                                                                                                                                                                         
|   
|(c) |  | Exhibits                                                                                                                                                                      
|   
|    |  | The exhibits listed in item 15(a)(3) above are either filed with this form
10-K or incorporated by reference in accordance with rule 12b-32 of the
Exchange Act.              
|   
|(d) |  | Financial Statement Schedule                                                                                                                                                  
|   
|    |  | The financial statement schedule listed in item 15(a)(2) above is filed at
page S-1 and should be read in conjunction with the financial statements
included elsewhere herein.





---



##### Table of Contents



Report of Independent Auditors

Board of Directors
Block Communications, Inc.

We have audited the accompanying consolidated balance sheets of Block
Communications, Inc. (the Company) and subsidiaries as of December 31, 2002 and
2001, and the related consolidated statements of income, stockholders equity
and cash flows for each of the three years in the period ended December 31,
2002. Our audits also included the financial statement schedule listed in the
index at Item 15(a). These financial statements and schedule are the
responsibility of the Companys management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Block
Communications, Inc. and subsidiaries at December 31, 2002 and 2001, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2002 in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

As discussed in Note 4 to the consolidated financial statements, in 2002, the
Company changed its method of accounting for goodwill and other intangible
assets.



| | /s/  ERNST & YOUNG LLP
| | ----------------------

Toledo, Ohio
March 7, 2003

F-1



---



##### Table of Contents



Block Communications, Inc. and Subsidiaries

Consolidated Balance Sheets

|                               |                                                                                                             |   |             |             |      |   |             |             | 
|------------------------------ | ----------------------------------------------------------------------------------------------------------- | - | ----------- | ----------- | ---- | - | ----------- | ----------- | 
|                               |                                                                                                             |   | December 31
|                               |                                                                                                             |   | 2002        |             | 2001
|                               |                                                                                                             |   |             |             |     
|Assets                         |                                                                                                             |   |             |             |      |   |             |            
|Current assets:                |                                                                                                             |   |             |             |      |   |             |            
|Cash and cash equivalents      |                                                                                                             | $ | 9,781,645   |             |      | $ | 5,882,732   |            
|                               | Receivables, less allowances for doubtful accounts
and discounts of $3,552,000 and $4,861,000,
respectively |   |             | 45,454,639  |      |   |             | 45,892,946  | 
|                               | Recoverable income taxes                                                                                    |   |             | 9,029,371   |      |   |             | 4,483,300   | 
|                               | Inventories                                                                                                 |   |             | 7,032,626   |      |   |             | 5,548,784   | 
|                               | Prepaid expenses                                                                                            |   |             | 4,498,401   |      |   |             | 3,703,756   | 
|                               | Broadcast rights                                                                                            |   |             | 6,546,678   |      |   |             | 6,083,782   | 
|                               | Deferred income taxes                                                                                       |   |             | 9,271,000   |      |   |             | 9,803,800   | 
|                               |                                                                                                             |   |             |             |      |   |             |            
|Total current assets           |                                                                                                             |   | 91,614,360  |             |      |   | 81,399,100  |            
|Property, plant and equipment: |                                                                                                             |   |             |             |      |   |             |            
|                               | Land and land improvements                                                                                  |   |             | 12,255,696  |      |   |             | 12,194,446  | 
|                               | Buildings and leasehold improvements                                                                        |   |             | 41,483,466  |      |   |             | 41,186,933  | 
|                               | Machinery and equipment                                                                                     |   |             | 215,180,502 |      |   |             | 209,196,143 | 
|                               | Cable television distribution systems and equipment                                                         |   |             | 195,399,291 |      |   |             | 187,804,505 | 
|                               | Security alarm and video systems installation costs                                                         |   |             | 6,591,940   |      |   |             | 5,923,280   | 
|                               | Construction in progress                                                                                    |   |             | 13,777,267  |      |   |             | 11,495,916  | 
|                               |                                                                                                             |   |             |             |      |   |             |            
|                               |                                                                                                             |   | 484,688,162 |             |      |   | 467,801,223 |            
|                               | Less allowances for depreciation and amortization                                                           |   |             | 235,410,950 |      |   |             | 204,605,517 | 
|                               |                                                                                                             |   |             |             |      |   |             |            
|                               |                                                                                                             |   | 249,277,212 |             |      |   | 263,195,706 |            
|Other assets:                  |                                                                                                             |   |             |             |      |   |             |            
|                               | Goodwill                                                                                                    |   |             | 51,987,021  |      |   |             | 52,461,687  | 
|                               | Other intangibles, net of accumulated amortization                                                          |   |             | 39,471,513  |      |   |             | 31,451,414  | 
|                               | Cash value of life insurance, net of policy loans
of $12,735,560 in 2001                                    |   |             | 25,594,543  |      |   |             | 10,691,105  | 
|                               | Deferred income taxes                                                                                       |   |             | 16,659,000  |      |   |             | 12,946,900  | 
|                               | Pension intangibles                                                                                         |   |             | 11,931,764  |      |   |             | 7,230,030   | 
|                               | Prepaid pension costs                                                                                       |   |             | 2,437,798   |      |   |             | 11,145,446  | 
|                               | Deferred financing costs                                                                                    |   |             | 12,099,099  |      |   |             | 5,676,725   | 
|                               | Broadcast rights, less current portion                                                                      |   |             | 6,676,317   |      |   |             | 6,217,880   | 
|                               | Other                                                                                                       |   |             | 3,976,050   |      |   |             | 3,138,246   | 
|                               |                                                                                                             |   |             |             |      |   |             |            
|                               |                                                                                                             |   | 170,833,105 |             |      |   | 140,959,433 |            
|                               |                                                                                                             |   |             |             |      |   |             |            
|                               |                                                                                                             | $ | 511,724,677 |             |      | $ | 485,554,239 |            
|                               |                                                                                                             |   |             |             |      |   |             |            

F-2



---



##### Table of Contents



Block Communications, Inc. and Subsidiaries

Consolidated Balance Sheets (continued)

|                                        |                                                                                                                                                                                                               |   |             |             |      |   |             |            |  
|--------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ----------- | ----------- | ---- | - | ----------- | ---------- | -
|                                        |                                                                                                                                                                                                               |   | December 31
|                                        |                                                                                                                                                                                                               |   | 2002        |             | 2001
|                                        |                                                                                                                                                                                                               |   |             |             |     
|Liabilities and stockholders equity    |                                                                                                                                                                                                               |   |             |             |      |   |             |           
|Current liabilities:                    |                                                                                                                                                                                                               |   |             |             |      |   |             |           
|                                        | Accounts payable                                                                                                                                                                                              |   | $           | 13,831,059  |      |   | $           | 12,355,122 |  
|                                        | Salaries, wages and payroll taxes                                                                                                                                                                             |   |             | 19,046,005  |      |   |             | 16,321,468 |  
|                                        | Workers compensation and medical reserves                                                                                                                                                                    |   |             | 8,863,918   |      |   |             | 9,184,074  |  
|                                        | Other accrued liabilities                                                                                                                                                                                     |   |             | 32,846,215  |      |   |             | 33,946,679 |  
|                                        | Current maturities of long-term debt                                                                                                                                                                          |   |             | 4,649,871   |      |   |             | 9,908,334  |  
|                                        |                                                                                                                                                                                                               |   |             |             |      |   |             |           
|Total current liabilities               |                                                                                                                                                                                                               |   | 79,237,068  |             |      |   | 81,715,677  |           
|Long-term debt, less current maturities |                                                                                                                                                                                                               |   | 255,786,939 |             |      |   | 227,355,513 |           
|Other long-term obligations             |                                                                                                                                                                                                               |   | 144,113,551 |             |      |   | 126,635,551 |           
|Minority interest                       |                                                                                                                                                                                                               |   | 11,941,238  |             |      |   | 12,264,398  |           
|Stockholders equity:                   |                                                                                                                                                                                                               |   |             |             |      |   |             |           
|                                        | 5% Non-cumulative, non-voting Class A Stock,
par value $100 a share (entitled in liquidation to
$100 per share in priority over Common Stock)
15,680 shares authorized; 12,620 shares issued
and outstanding |   |             | 1,262,000   |      |   |             | 1,262,000  |  
|Common Stock, par value $.10 a share:   |                                                                                                                                                                                                               |   |             |             |      |   |             |           
|                                        | Voting Common Stock29,400 sharesauthorized, issued and outstanding                                                                                                                                           |   |             | 2,940       |      |   |             | 2,940      |  
|                                        | Non-voting Common Stock588,000 shares
authorized; 427,786 shares issued
and outstanding                                                                                                                      |   |             | 42,779      |      |   |             | 42,779     |  
|                                        | Accumulated other comprehensive loss                                                                                                                                                                          |   |             | (22,860,033 | )    |   |             | (4,725,589 | )
|                                        | Additional paid-in capital                                                                                                                                                                                    |   |             | 771,274     |      |   |             | 771,274    |  
|                                        | Retained earnings                                                                                                                                                                                             |   |             | 41,426,921  |      |   |             | 40,229,696 |  
|                                        |                                                                                                                                                                                                               |   |             |             |      |   |             |           
|                                        |                                                                                                                                                                                                               |   | 20,645,881  |             |      |   | 37,583,100  |           
|                                        |                                                                                                                                                                                                               |   |             |             |      |   |             |           
|                                        |                                                                                                                                                                                                               | $ | 511,724,677 |             |      | $ | 485,554,239 |           
|                                        |                                                                                                                                                                                                               |   |             |             |      |   |             |           

F-3



---



##### Table of Contents



Block Communications, Inc. and Subsidiaries

Consolidated Statements of Income

|                                                        |                                             |          |             |                        |           |      |             |             |            |   |             |             |           | 
|------------------------------------------------------- | ------------------------------------------- | -------- | ----------- | ---------------------- | --------- | ---- | ----------- | ----------- | ---------- | - | ----------- | ----------- | --------- | 
|                                                        |                                             |          |             | Year ended December 31
|                                                        |                                             |          |             | 2002                   |           | 2001 |             | 2000       
|                                                        |                                             |          |             |                        |           |      |             |            
|Revenue:                                                |                                             |          |             |                        |           |      |             |             |            |   |             |            
|                                                        | Publishing                                  |          | $           | 257,256,343            |           |      | $           | 264,678,678 |            |   | $           | 286,717,128 |          
|                                                        | Cable                                       |          |             | 101,473,858            |           |      |             | 89,420,000  |            |   |             | 82,110,320  |          
|                                                        | Broadcasting                                |          |             | 39,964,031             |           |      |             | 35,183,897  |            |   |             | 42,531,103  |          
|                                                        | Other Communications                        |          |             | 26,498,493             |           |      |             | 25,282,312  |            |   |             | 14,298,551  |          
|                                                        |                                             |          |             |                        |           |      |             |             |            |   |             |             |          
|                                                        |                                             |          | 425,192,725 |                        |           |      | 414,564,887 |             |            |   | 425,657,102 |            
|Expense:                                                |                                             |          |             |                        |           |      |             |             |            |   |             |            
|                                                        | Publishing                                  |          |             | 249,186,956            |           |      |             | 262,798,933 |            |   |             | 277,312,265 |          
|                                                        | Cable                                       |          |             | 91,403,840             |           |      |             | 84,578,461  |            |   |             | 74,535,841  |          
|                                                        | Broadcasting                                |          |             | 36,312,941             |           |      |             | 36,972,664  |            |   |             | 37,098,498  |          
|                                                        | Other Communications                        |          |             | 25,090,520             |           |      |             | 27,954,522  |            |   |             | 18,444,805  |          
|                                                        | Corporate general and administrative        |          |             | 6,045,826              |           |      |             | 2,705,412   |            |   |             | 4,151,939   |          
|                                                        |                                             |          |             |                        |           |      |             |             |            |   |             |             |          
|                                                        |                                             |          | 408,040,083 |                        |           |      | 415,009,992 |             |            |   | 411,543,348 |            
|                                                        |                                             |          |             |                        |           |      |             |             |            |   |             |             |          
|Operating income (loss)                                 |                                             |          | 17,152,642  |                        |           |      | (445,105    | )           |            |   | 14,113,754  |            
|Nonoperating income (expense):                          |                                             |          |             |                        |           |      |             |             |            |   |             |            
|                                                        | Interest expense                            |          |             | (22,952,372            | )         |      |             | (19,486,186 | )          |   |             | (14,174,830 | )        
|                                                        | Gain on disposition of Monroe Cablevision   |          |             | 21,140,829             |           |      |             |            |            |   |             |            |          
|                                                        | Gain on disposition of WLFI-TV, Inc.        |          |             |                       |           |      |             |            |            |   |             | 22,338,881  |          
|                                                        | Loss on early extinguishment of debt        |          |             | (8,989,786             | )         |      |             |            |            |   |             |            |          
|                                                        | Change in fair value of interest rate swaps |          |             | (732,748               | )         |      |             | (5,340,046  | )          |   |             |            |          
|                                                        | Interest income                             |          |             | 126,221                |           |      |             | 47,452      |            |   |             | 105,897     |          
|                                                        |                                             |          |             |                        |           |      |             |             |            |   |             |             |          
|                                                        |                                             |          | (11,407,856 | )                      |           |      | (24,778,780 | )           |            |   | 8,269,948   |            
|                                                        |                                             |          |             |                        |           |      |             |             |            |   |             |             |          
|Income (loss) before income taxes
and minority interest |                                             |          | 5,744,786   |                        |           |      | (25,223,885 | )           |            |   | 22,383,702  |            
|Provision (credit) for income taxes:                    |                                             |          |             |                        |           |      |             |             |            |   |             |            
|                                                        | Federal:                                    |          |             |                        |           |      |             |             |            |   |             |             |          
|                                                        |                                             | Current  |             |                        |          |      |             |             | (3,680,000 | ) |             |             | 445,000   | 
|                                                        |                                             | Deferred |             |                        | 1,984,500 |      |             |             | (3,809,400 | ) |             |             | 8,029,500 | 
|                                                        |                                             |          |             |                        |           |      |             |             |            |   |             |             |          
|                                                        |                                             |          | 1,984,500   |                        |           |      | (7,489,400  | )           |            |   | 8,474,500   |            
|                                                        | State and local                             |          |             | 743,000                |           |      |             | 357,000     |            |   |             | 701,686     |          
|                                                        |                                             |          |             |                        |           |      |             |             |            |   |             |             |          
|                                                        |                                             |          | 2,727,500   |                        |           |      | (7,132,400  | )           |            |   | 9,176,186   |            
|                                                        |                                             |          |             |                        |           |      |             |             |            |   |             |             |          
|Income (loss) before minority interest                  |                                             |          | 3,017,286   |                        |           |      | (18,091,485 | )           |            |   | 13,207,516  |            
|Minority interest                                       |                                             |          | (476,840    | )                      |           |      | 234,622     |             |            |   | (427,020    | )          
|                                                        |                                             |          |             |                        |           |      |             |             |            |   |             |             |          
|Net income (loss)                                       |                                             | $        | 2,540,446   |                        |           | $    | (17,856,863 | )           |            | $ | 12,780,496  |            
|                                                        |                                             |          |             |                        |           |      |             |             |            |   |             |             |          

F-4



---



##### Table of Contents



Block Communications, Inc. and Subsidiaries

Consolidated Statement of Stockholders Equity

Three years ended December 31, 2002

|                                                                                       |                                                                                                                                     |                               |                            |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  |         |        |          |   |        |      |   |   |             |             |   |   |         |   |  |   |            |             |         |            |            |             |         |            |  
|-------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------- | ----------------------------- | -------------------------- |  | ------- | - | ------------- |  | ---------- |  | -------- |  | ---------- | - | ------ |  | ------------ |  | ------- | ------ | -------- | - | ------ | ---- | - | - | ----------- | ----------- | - | - | ------- | - |  | - | ---------- | ----------- | ------- | ---------- | ---------- | ----------- | ------- | ---------- | -
|                                                                                       |                                                                                                                                     |                               |                            |  |         |   |               |  |            |  |          |  |            |   |        |  | Common Stock |  |         |        |          |   |        |      |   |   |             |             |  
|                                                                                       |                                                                                                                                     |                               |                            |  |         |   |               |  |            |  |          |  |            |   |        |  | Accumulated  |  |         |        |          |   |       
|                                                                                       |                                                                                                                                     |                               |                            |  | Class A |   | Voting        |  | Non-Voting |  | Other    |  | Additional |   |        |  |              |  |        
|                                                                                       |                                                                                                                                     |                               |                            |  |         |   | Comprehensive |  | Paid-in    |  | Retained |  |            |   |       
|                                                                                       |                                                                                                                                     |                               |                            |  | Shares  |   | Amount        |  | Shares     |  | Amount   |  | Shares     |   | Amount |  | Loss         |  | Capital |        | Earnings |   | Total 
|                                                                                       |                                                                                                                                     |                               |                            |  |        
|Balances at January 1, 2000                                                            |                                                                                                                                     |                               | 12,620                     |  |         | $ | 1,262,000     |  |            |  | 29,400   |  |            | $ | 2,940  |  |              |  | 432,310 |        |          | $ | 43,231 |      |   | $ | (518,321    | )           |   | $ | 697,843 |   |  | $ | 49,710,547 |             |         | $          | 51,198,240 |            
|                                                                                       | Net income                                                                                                                          |                               |                            |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  |         |        |          |   |        |      |   |   |             |             |   |   |         |   |  |   |            | 12,780,496  |         |            |            | 12,780,496  |        
|                                                                                       | Change in net minimum pension liability (net of $2,000
of deferred income taxes)                                                    |                               |                            |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  |         |        |          |   |        |      |   |   |             | (3,621      | ) |   |         |   |  |   |            |             |         |            |            | (3,621      | )      
|                                                                                       |                                                                                                                                     |                               |                            |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  |         |        |          |   |        |      |   |   |             |             |   |   |         |   |  |   |            |             |         |            |            |            
|                                                                                       | Total comprehensive income                                                                                                          |                               |                            |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  |         |        |          |   |        |      |   |   |             |             |   |   |         |   |  |   |            |             |         |            |            | 12,776,875  |        
|                                                                                       | Cash dividends declared:                                                                                                            |                               |                            |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  |         |        |          |   |        |      |   |   |             |             |   |   |         |   |  |   |            |             |         |            |            |             |        
|                                                                                       |                                                                                                                                     | Class A stock$5.00 per share |                            |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  |         |        |          |   |        |      |   |   |             |             |   |   |         |   |  |   |            |             | (63,100 | )          |            |             | (63,100 | )         
|                                                                                       |                                                                                                                                     | Common Stock:                 |                            |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  |         |        |          |   |        |      |   |   |             |             |   |   |         |   |  |   |            |             |         |            |            |             |         |           
|                                                                                       |                                                                                                                                     |                               | Voting$3.00 per share     |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  |         |        |          |   |        |      |   |   |             |             |   |   |         |   |  |   |            |             |         | (88,200    | )          |             |         | (88,200    | )
|                                                                                       |                                                                                                                                     |                               | Non-voting$3.00 per share |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  |         |        |          |   |        |      |   |   |             |             |   |   |         |   |  |   |            |             |         | (1,297,371 | )          |             |         | (1,297,371 | )
|                                                                                       |                                                                                                                                     |                               |                            |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  |         |        |          |   |        |      |   |   |             |             |   |   |         |   |  |   |           
|                                                                                       |                                                                                                                                     |                               |                            |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  |         |        |          |   |        |      |   |   |             |             |   |   |         |   |  |   | (1,448,671 | )           |         |            | (1,448,671 | )          
|Executive stock incentives at $494.58 per share                                        |                                                                                                                                     |                               |                            |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  | 300     |        |          |   | 30     |      |   |   |             |             |   |   | 148,344 |   |  |   |            |             |         |            | 148,374    |            
|Redemption of non-voting common shares at weighted-
average price per share of $517.11 |                                                                                                                                     |                               |                            |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  | (2,487  | )      |          |   | (249   | )    |   |   |             |             |   |   | (74,913 | ) |  |   | (1,210,156 | )           |         |            | (1,285,318 | )          
|                                                                                       |                                                                                                                                     |                               |                            |  |        
|Balances at December 31, 2000                                                          |                                                                                                                                     |                               | 12,620                     |  |         |   | 1,262,000     |  |            |  | 29,400   |  |            |   | 2,940  |  |              |  | 430,123 |        |          |   | 43,012 |      |   |   | (521,942    | )           |   |   | 771,274 |   |  |   | 59,832,216 |             |         |            | 61,389,500 |            
|                                                                                       | Net income                                                                                                                          |                               |                            |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  |         |        |          |   |        |      |   |   |             |             |   |   |         |   |  |   |            | (17,856,863 | )       |            |            | (17,856,863 | )      
|                                                                                       | Change in net minimum pension liability (net
of $1,860,500 of deferred income taxes)                                                |                               |                            |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  |         |        |          |   |        |      |   |   |             | (3,307,662  | ) |   |         |   |  |   |            |             |         |            |            | (3,307,662  | )      
|                                                                                       | Fair value of interest rate swaps at January 1, 2001, less
accumulated amortization of $706,638 (net of deferred
taxes of $503,500) |                               |                            |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  |         |        |          |   |        |      |   |   |             | (895,985    | ) |   |         |   |  |   |            |             |         |            |            | (895,985    | )      
|                                                                                       |                                                                                                                                     |                               |                            |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  |         |        |          |   |        |      |   |   |             |             |   |   |         |   |  |   |            |             |         |            |            |            
|                                                                                       | Total comprehensive income                                                                                                          |                               |                            |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  |         |        |          |   |        |      |   |   |             |             |   |   |         |   |  |   |            |             |         |            |            | (22,060,510 | )      
|                                                                                       | Cash dividends declared:                                                                                                            |                               |                            |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  |         |        |          |   |        |      |   |   |             |             |   |   |         |   |  |   |            |             |         |            |            |             |        
|                                                                                       |                                                                                                                                     | Class A stock$2.50 per share |                            |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  |         |        |          |   |        |      |   |   |             |             |   |   |         |   |  |   |            |             | (31,550 | )          |            |             | (31,550 | )         
|                                                                                       |                                                                                                                                     | Common Stock:                 |                            |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  |         |        |          |   |        |      |   |   |             |             |   |   |         |   |  |   |            |             |         |            |            |             |         |           
|                                                                                       |                                                                                                                                     |                               | Voting$1.20 per share     |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  |         |        |          |   |        |      |   |   |             |             |   |   |         |   |  |   |            |             |         | (35,280    | )          |             |         | (35,280    | )
|                                                                                       |                                                                                                                                     |                               | Non-voting$1.20 per share |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  |         |        |          |   |        |      |   |   |             |             |   |   |         |   |  |   |            |             |         | (516,147   | )          |             |         | (516,147   | )
|                                                                                       |                                                                                                                                     |                               |                            |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  |         |        |          |   |        |      |   |   |             |             |   |   |         |   |  |   |           
|                                                                                       |                                                                                                                                     |                               |                            |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  |         |        |          |   |        |      |   |   |             |             |   |   |         |   |  |   | (582,977   | )           |         |            | (582,977   | )          
|                                                                                       | Redemption of non-voting common shares
at $497.61 per share                                                                         |                               |                            |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  |         | (2,337 | )        |   |        | (233 | ) |   |             |             |   |   |         |   |  |   |            | (1,162,680  | )       |            |            | (1,162,913  | )      
|                                                                                       |                                                                                                                                     |                               |                            |  |        
|Balances at December 31, 2001                                                          |                                                                                                                                     |                               | 12,620                     |  |         |   | 1,262,000     |  |            |  | 29,400   |  |            |   | 2,940  |  |              |  | 427,786 |        |          |   | 42,779 |      |   |   | (4,725,589  | )           |   |   | 771,274 |   |  |   | 40,229,696 |             |         |            | 37,583,100 |            
|                                                                                       | Net income                                                                                                                          |                               |                            |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  |         |        |          |   |        |      |   |   |             |             |   |   |         |   |  |   |            | 2,540,446   |         |            |            | 2,540,446   |        
|                                                                                       | Change in net minimum pension liability (net of
$10,452,982 of deferred income taxes)                                               |                               |                            |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  |         |        |          |   |        |      |   |   |             | (18,586,582 | ) |   |         |   |  |   |            |             |         |            |            | (18,586,582 | )      
|                                                                                       | Amortization of fair value of interest rate swaps at
January 1, 2001 (net of $254,500 of deferred
income taxes)                     |                               |                            |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  |         |        |          |   |        |      |   |   |             | 452,138     |   |   |         |   |  |   |            |             |         |            |            | 452,138     |        
|                                                                                       |                                                                                                                                     |                               |                            |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  |         |        |          |   |        |      |   |   |             |             |   |   |         |   |  |   |            |             |         |            |            |            
|                                                                                       | Total comprehensive income                                                                                                          |                               |                            |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  |         |        |          |   |        |      |   |   |             |             |   |   |         |   |  |   |            |             |         |            |            | (15,593,998 | )      
|                                                                                       | Cash dividends declared:                                                                                                            |                               |                            |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  |         |        |          |   |        |      |   |   |             |             |   |   |         |   |  |   |            |             |         |            |            |             |        
|                                                                                       |                                                                                                                                     | Class A stock$5.00 per share |                            |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  |         |        |          |   |        |      |   |   |             |             |   |   |         |   |  |   |            |             | (63,100 | )          |            |             | (63,100 | )         
|                                                                                       |                                                                                                                                     | Common Stock:                 |                            |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  |         |        |          |   |        |      |   |   |             |             |   |   |         |   |  |   |            |             |         |            |            |             |         |           
|                                                                                       |                                                                                                                                     |                               | Voting$2.80 per share     |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  |         |        |          |   |        |      |   |   |             |             |   |   |         |   |  |   |            |             |         | (82,320    | )          |             |         | (82,320    | )
|                                                                                       |                                                                                                                                     |                               | Non-voting$2.80 per share |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  |         |        |          |   |        |      |   |   |             |             |   |   |         |   |  |   |            |             |         | (1,197,801 | )          |             |         | (1,197,801 | )
|                                                                                       |                                                                                                                                     |                               |                            |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  |         |        |          |   |        |      |   |   |             |             |   |   |         |   |  |   |           
|                                                                                       |                                                                                                                                     |                               |                            |  |         |   |               |  |            |  |          |  |            |   |        |  |              |  |         |        |          |   |        |      |   |   |             |             |   |   |         |   |  |   | (1,343,221 | )           |         |            | (1,343,221 | )          
|                                                                                       |                                                                                                                                     |                               |                            |  |        
|Balances at December 31, 2002                                                          |                                                                                                                                     |                               | 12,620                     |  |         | $ | 1,262,000     |  |            |  | 29,400   |  |            | $ | 2,940  |  |              |  | 427,786 |        |          | $ | 42,779 |      |   | $ | (22,860,033 | )           |   | $ | 771,274 |   |  | $ | 41,426,921 |             |         | $          | 20,645,881 |            
|                                                                                       |                                                                                                                                     |                               |                            |  |        



F-5



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##### Table of Contents



Block Communications, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

|                                                                                         |                                                            |                                                              |             |                        |            |      |             |            |            |   |             |             |            |  
|---------------------------------------------------------------------------------------- | ---------------------------------------------------------- | ------------------------------------------------------------ | ----------- | ---------------------- | ---------- | ---- | ----------- | ---------- | ---------- | - | ----------- | ----------- | ---------- | -
|                                                                                         |                                                            |                                                              |             | Year ended December 31
|                                                                                         |                                                            |                                                              |             | 2002                   |            | 2001 |             | 2000      
|                                                                                         |                                                            |                                                              |             |                        |            |      |             |           
|Operating activities                                                                     |                                                            |                                                              |             |                        |            |      |             |            |            |   |             |            
|Net income (loss)                                                                        |                                                            | $                                                            | 2,540,446   |                        |            | $    | (17,856,863 | )          |            | $ | 12,780,496  |            
|Adjustments to reconcile net income (loss) to net cash
provided by operating activities: |                                                            |                                                              |             |                        |            |      |             |            |            |   |             |            
|                                                                                         | Depreciation                                               |                                                              |             | 44,753,126             |            |      |             | 44,601,107 |            |   |             | 38,864,632  |           
|                                                                                         | Amortization of intangibles and deferred charges           |                                                              |             | 3,011,349              |            |      |             | 4,421,315  |            |   |             | 3,478,025   |           
|                                                                                         | Amortization of broadcast rights                           |                                                              |             | 7,138,102              |            |      |             | 6,510,196  |            |   |             | 6,318,878   |           
|                                                                                         | Payments for broadcast rights                              |                                                              |             | (5,744,461             | )          |      |             | (5,117,113 | )          |   |             | (5,884,612  | )         
|                                                                                         | Gain on sale of Monroe Cablevision                         |                                                              |             | (21,140,829            | )          |      |             |           |            |   |             |            |           
|                                                                                         | Gain on sale of WLFI-TV                                    |                                                              |             |                       |            |      |             |           |            |   |             | (22,338,881 | )         
|                                                                                         | Deferred income taxes (credit)                             |                                                              |             | 1,984,500              |            |      |             | (3,809,400 | )          |   |             | 8,029,500   |           
|                                                                                         | Provision for bad debts                                    |                                                              |             | 2,891,075              |            |      |             | 5,065,784  |            |   |             | 2,286,533   |           
|                                                                                         | Minority interest                                          |                                                              |             | 476,840                |            |      |             | (234,622   | )          |   |             | 427,020     |           
|                                                                                         | Change in fair value of interest rate swaps                |                                                              |             | 732,748                |            |      |             | 5,340,046  |            |   |             |            |           
|                                                                                         | (Gain) loss on disposal of property and equipment          |                                                              |             | (300,268               | )          |      |             | 23,117     |            |   |             | 303,434     |           
|                                                                                         | Write off of deferred charges related to extinguished
debt |                                                              |             | 2,697,784              |            |      |             |           |            |   |             |            |           
|                                                                                         | Changes in operating assets and liabilities:               |                                                              |             |                        |            |      |             |            |            |   |             |             |           
|                                                                                         |                                                            | Receivables                                                  |             |                        | (4,151,483 | )    |             |            | (367,929   | ) |             |             | (8,782,363 | )
|                                                                                         |                                                            | Inventories                                                  |             |                        | (1,526,280 | )    |             |            | 4,895,147  |   |             |             | (3,683,991 | )
|                                                                                         |                                                            | Prepaid expenses                                             |             |                        | (931,248   | )    |             |            | (626,695   | ) |             |             | (341,126   | )
|                                                                                         |                                                            | Accounts payable                                             |             |                        | 1,468,530  |      |             |            | (8,958,999 | ) |             |             | 4,419,035  |  
|                                                                                         |                                                            | Salaries, wages, payroll taxes and other
accrued liabilities |             |                        | 1,887,007  |      |             |            | 2,678,519  |   |             |             | 2,611,953  |  
|                                                                                         |                                                            | Other assets                                                 |             |                        | (432,895   | )    |             |            | (7,580,118 | ) |             |             | (1,288,464 | )
|                                                                                         |                                                            | Postretirement benefits and other long-term
obligations      |             |                        | (288,316   | )    |             |            | 8,296,980  |   |             |             | 1,465,690  |  
|                                                                                         |                                                            |                                                              |             |                        |            |      |             |            |            |   |             |            
|Net cash provided by operating activities                                                |                                                            |                                                              | 35,065,727  |                        |            |      | 37,280,472  |            |            |   | 38,665,759  |            
|Investing activities                                                                     |                                                            |                                                              |             |                        |            |      |             |            |            |   |             |            
|Additions to property, plant and equipment                                               |                                                            |                                                              | (30,670,261 | )                      |            |      | (62,153,533 | )          |            |   | (80,340,116 | )          
|Change in cash value of life insurance                                                   |                                                            |                                                              | (2,167,877  | )                      |            |      | (1,408,960  | )          |            |   | (2,244,465  | )          
|Borrowings against cash value of life insurance                                          |                                                            |                                                              |            |                        |            |      | 7,393,834   |            |            |   |            |            
|Repayments of cash value of life insurance                                               |                                                            |                                                              | (12,735,560 | )                      |            |      |            |            |            |   |            |            
|Payments for acquisitions                                                                |                                                            |                                                              |            |                        |            |      | (1,640,000  | )          |            |   | (200,000    | )          
|Proceeds from sale of Monroe Cablevision                                                 |                                                            |                                                              | 12,059,115  |                        |            |      |            |            |            |   |            |            
|Proceeds from disposal of property and equipment                                         |                                                            |                                                              | 1,105,557   |                        |            |      | 50,499      |            |            |   | 83,678      |            
|                                                                                         |                                                            |                                                              |             |                        |            |      |             |            |            |   |             |            
|Net cash used in investing activities                                                    |                                                            |                                                              | (32,409,026 | )                      |            |      | (57,758,160 | )          |            |   | (82,700,903 | )          
|Financing activities                                                                     |                                                            |                                                              |             |                        |            |      |             |            |            |   |             |            
|Issuance of senior subordinated notes                                                    |                                                            |                                                              | 175,000,000 |                        |            |      |            |            |            |   |            |            
|Borrowings on term loan                                                                  |                                                            |                                                              | 75,000,000  |                        |            |      | 62,500,000  |            |            |   | 12,500,000  |            
|Payments on senior notes                                                                 |                                                            |                                                              | (67,499,000 | )                      |            |      | (12,667,000 | )          |            |   | (6,167,000  | )          
|Payments on term loans                                                                   |                                                            |                                                              | (75,375,000 | )                      |            |      |            |            |            |   |            |            
|Borrowings (payments) on long-term revolver                                              |                                                            |                                                              | (92,500,000 | )                      |            |      | (23,000,000 | )          |            |   | 41,500,000  |            
|Net payments on short-term revolver                                                      |                                                            |                                                              |            |                        |            |      | (2,620,229  | )          |            |   | (2,062,771  | )          
|Financing costs deferred                                                                 |                                                            |                                                              | (10,768,413 | )                      |            |      |            |            |            |   |            |            
|Cash dividends paid                                                                      |                                                            |                                                              | (1,343,221  | )                      |            |      | (582,977    | )          |            |   | (1,448,671  | )          
|Distribution to minority partner                                                         |                                                            |                                                              | (800,000    | )                      |            |      |            |            |            |   |            |            
|Payments on notes payable and capital leases                                             |                                                            |                                                              | (472,154    | )                      |            |      | (319,431    | )          |            |   | (578,185    | )          
|Payments on redemption of shares                                                         |                                                            |                                                              |            |                        |            |      | (1,162,913  | )          |            |   | (1,210,390  | )          
|                                                                                         |                                                            |                                                              |             |                        |            |      |             |            |            |   |             |            
|Net cash provided by financing activities                                                |                                                            |                                                              | 1,242,212   |                        |            |      | 22,147,450  |            |            |   | 42,532,983  |            
|                                                                                         |                                                            |                                                              |             |                        |            |      |             |            |            |   |             |            
|Increase (decrease) in cash and cash equivalents                                         |                                                            |                                                              | 3,898,913   |                        |            |      | 1,669,762   |            |            |   | (1,502,161  | )          
|Cash and cash equivalents at beginning of period                                         |                                                            |                                                              | 5,882,732   |                        |            |      | 4,212,970   |            |            |   | 5,715,131   |            
|                                                                                         |                                                            |                                                              |             |                        |            |      |             |            |            |   |             |            
|Cash and cash equivalents at end of period                                               |                                                            | $                                                            | 9,781,645   |                        |            | $    | 5,882,732   |            |            | $ | 4,212,970   |            
|                                                                                         |                                                            |                                                              |             |                        |            |      |             |            |            |   |             |            
|Non-cash borrowings for equipment under capital lease                                    |                                                            | $                                                            | 1,360,402   |                        |            | $    |            |            |            | $ |            |            
|                                                                                         |                                                            |                                                              |             |                        |            |      |             |            |            |   |             |            

F-6



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##### Table of Contents



Block Communications, Inc.

Notes to Consolidated Financial Statements

December 31, 2002

1.  Significant Accounting Policies

Basis of Presentation

Block Communications, Inc. (the Company) operates primarily in the publishing,
cable and broadcasting industries through its newspapers, cable systems and
television stations located primarily in the midwest. The consolidated
financial statements include the accounts of the Company and its subsidiaries.
All material intercompany accounts and transactions have been eliminated. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reported period. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents consist of commercial accounts and interest-bearing
bank deposits and are carried at cost, which approximates current value. Items
are considered to be cash equivalents if the original maturity is three months
or less.

Trade Receivables

Trade receivables are held until maturity, or payoff, and are therefore
reported in the balance sheet at outstanding principal, adjusted for any
write-offs or allowances for doubtful accounts. The Company provides an
allowance for doubtful accounts equivalent to an estimation of uncollectible
amounts, which is calculated based on a combination of specific identification
of questionable accounts and historical collection experience. In addition to
these factors, the Company has considered the state of the industries in which
it operates, as well as the general state of the economy and the financial
strength of the customer base. Accounts are considered past due when payment
has not been received within the credit terms established, which vary by
customer and industry. Trade receivables are typically written off when sent
to a collection agency. Recoveries, net of collection fees, are recorded as a
reduction in bad debt expense. None of the Companys receivables at December
31, 2002 are held for sale. The Company does not accrue interest on past-due
receivables.

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Block Communications, Inc.

Notes to Consolidated Financial Statements (continued)

1.  Significant Accounting Policies (continued)

Inventories

Inventories principally relate to newsprint and security alarm system
components and are stated at the lower of cost or market. Costs are determined
by either the first-in, first-out (FIFO) or last-in, first-out (LIFO) method.
Inventories valued on the LIFO method (newsprint inventories) comprise
approximately 73% and 64% of total inventories at December 31, 2002 and 2001,
respectively. If the FIFO method had been used, such inventories would have
been approximately $625,000 and $914,000 higher than reported at December 31,
2002 and 2001, respectively.

Broadcast Rights

Broadcast rights represent the cost of the rights to broadcast films and
syndicated programming for specified periods of time. Such costs are
capitalized and amortized on the straight-line method over the number of
estimated showings. Broadcast rights payable represent the related liabilities
under these long-term, non-interest bearing contracts. Additions to the
broadcast rights were $7,712,000 and $9,630,000 for the years ended December
31, 2002 and 2001, respectively.

Property, Plant and Equipment

Property, plant and equipment are recorded on the basis of cost. Assets under
capital leases are recorded at the present value of the future minimum lease
payments. Expenditures for additions and improvements that add materially to
productive capacity or extend the useful life of an asset are capitalized, and
expenditures for maintenance and repairs are charged to earnings. The Company
capitalizes certain costs associated with installation of cable and alarm
systems in accordance with Statement of Financial Accounting Standards (SFAS)
No. 51, Financial Reporting by Cable Television Companies, which include direct
installation labor, equipment and allocated indirect costs. When properties are
retired or otherwise disposed of, the related accounts for cost and
depreciation are relieved, and any gain or loss resulting from the disposal is
included in operations. Depreciation is computed by the straight-line and
declining-balance methods. The cost of buildings and leasehold improvements is
depreciated over 7 to 40 years, machinery and equipment over 3 to 11 years and
cable television and security alarm systems over 8 to 12.5 years. Assets under
capital lease are amortized over the initial term of the lease, with
amortization included in depreciation expense.

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Block Communications, Inc.

Notes to Consolidated Financial Statements (continued)

1.  Significant Accounting Policies (continued)

Long-Lived Assets

Effective January 1, 2002, the Company adopted SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which supersedes SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of, and provides a single accounting model for long-lived assets to
be disposed of. The carrying value of long-lived assets is tested for
recoverability whenever events or changes in circumstances indicate that its
carrying amount may not be recoverable. If various external factors or the
projected undiscounted cash flows generated by the asset over the remaining
amortization period indicate that the carrying value of the asset will not be
recoverable, the carrying value will be adjusted to the estimated fair value,
or the remaining useful life adjusted as necessary. For the year ended
December 31, 2002, the Company has not recognized any impairment charges for
long-lived assets included in the scope of SFAS No. 144.

Derivative Financial Instruments

The Company is exposed to market risk arising from changes in interest rates
and therefore participates in interest-rate swap contracts as it deems
necessary to minimize interest expense while stabilizing cash flows. Effective
January 1, 2001, the Company adopted SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended by Statement Nos. 137 and 138,
(collectively, SFAS No. 133), which requires the Company to record all
derivatives on the balance sheet at fair value and establishes criteria for
designation and effectiveness of hedging relationships. Upon adoption of SFAS
No. 133 on January 1, 2001, the Company recorded the cumulative effect of the
accounting change as a liability of $2,106,123 with an offset to other
comprehensive loss, net of $758,000 of deferred income taxes, which is being
amortized over the remaining life of the two swap agreements in effect at the
time of transition.

At December 31, 2002, the Company participates in eight interest-rate swap
contracts relating to its long-term debt. One of these contracts is accounted
for as a fair value hedge; therefore, changes in the fair value of the
derivative have no impact on the Companys results of operations. This hedge
contract qualified for the short-cut method of evaluating effectiveness at the
inception of the contract; therefore, continuing assessments of its
effectiveness are not performed. The remaining contracts either do not qualify
for hedge accounting or the Company has not elected to implement hedge
accounting. Accordingly, a non-cash derivative valuation loss of $732,748 and
$5,340,046 has been recognized for the years ended December 31, 2002 and 2001,
respectively. The fair value of the interest rate swaps at December 31, 2002
of $893,073 is recorded in other non-current assets.

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Block Communications, Inc.

Notes to Consolidated Financial Statements (continued)

1.  Significant Accounting Policies (continued)

Revenue Recognition

The Company recognizes revenue primarily from advertising, newspaper
subscriptions and cable and other services. Advertising revenue is recorded
when the related advertisements are published by the newspapers or are provided
by broadcast or cable services. Newspaper subscriptions and cable and other
services are either (1) billed to customers in advance and recognized as
revenue over the period of the newspaper subscriptions and services provided,
or (2) billed to customers and recognized as revenue when the newspapers and
services are provided.

Stock-Based Employee Compensation

Executive Committee members are entitled to receive incentive compensation
payable in shares of non-voting common stock. During the year ended December
31, 2002, the Company has recognized $1,468,692 in compensation expense for
3,600 shares earned in 2002 that will be issued in 2003. The Company issued 300
shares in 2000, and the related cost of $148,374 was earned and expensed during
the year ended December 31, 1999. No shares were earned in the years ended
December 31, 2001 and 2000.

In December 2002, SFAS No. 148, Accounting for Stock-Based Compensation 
Transition and Disclosure,was issued and provides alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. The Company has previously adopted the
fair value method of accounting for stock-based employee compensation,
therefore all years presented reflect this method and no pro-forma disclosures
are required.

Other Comprehensive Income (Loss)

The Companys comprehensive income (loss) is defined as net income (loss)
adjusted for the change in net minimum pension liability and the cumulative
effect of the change in accounting standards recorded upon implementation of
SFAS No. 133. Accumulated other comprehensive loss of $22,860,033 at December
31, 2002 includes net minimum pension liability of $22,416,186 and net
unamortized SFAS No. 133 transition amount of $443,847. Accumulated other
comprehensive loss of $4,725,589 at December 31, 2001 includes net minimum
pension liability of $3,829,604 and net unamortized SFAS 133 transition amount
of $895,985.

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##### Table of Contents



Block Communications, Inc.

Notes to Consolidated Financial Statements (continued)

1.  Significant Accounting Policies (continued)

Reclassifications

Certain balances in prior years have been reclassified to conform to the
presentation adopted in the current year.

New Accounting Standards

In June 2001, SFAS No. 143, Accounting for Asset Retirement Obligations,was
issued and is effective for fiscal years beginning after June 15, 2002. The
pronouncement requires legal obligations associated with the retirement of
long-lived assets to be recognized at their fair value at the time that the
obligations are incurred. Upon initial recognition of a liability, that cost
should be capitalized as part of the related long-lived asset and allocated to
expense over the estimated useful life of the asset. The Company does not
expect the adoption of this standard to significantly impact its financial
position or results of operations.

In April 2002, SFAS No. In April 2002, SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical Corrections,was issued and
requires a gain or loss related to the extinguishment of debt to no longer be
recorded as extraordinary item. The Company has elected early adoption of SFAS
No. 145. As a result, a loss on early extinguishment of debt of $9.0 million is
included in income from continuing operations for the year ended December 31,
2002.

In July 2002, SFAS No. 146, Accounting for Costs Associated with Exit or
Disposal Activities,was issued and applies to fiscal years beginning after
December 31, 2002. SFAS No. 146 requires certain costs associated with a
restructuring, discontinued operation or plant closing to be recognized as
incurred rather than at the date of commitment to an exit or disposal plan.
The Company does not expect the adoption of this standard to significantly
impact its financial position or results of operations.

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Block Communications, Inc.

Notes to Consolidated Financial Statements (continued)

2.  Acquisitions

Effective March 29, 2002, the Company consummated an asset exchange agreement
with Comcast Corporation which resulted in an exchange of 100% of the assets of
Monroe Cablevision for 100% of the assets of Comcasts Bedford, Michigan
operations and $12.1 million cash. The Company recorded a $21.1 million gain
on the disposition of Monroe Cablevision resulting from the difference in fair
value versus the net book value of assets exchanged. For tax reporting, the
transaction has been treated as a like kind exchange, and the amount of the
gain in excess of the cash received has been deferred. The operations of
Monroe Cablevision are included in the Companys consolidated financial
statements through March 28, 2002 and were not material.

The net assets of the Bedford system were recorded at their fair value and
primarily relate to property and equipment of $1.6 million, goodwill of
$130,000 and amortizable intangibles of $9.3 million. Amortizable intangibles
consist of franchise agreements and are being amortized over a weighted average
amortization period of 13.5 years. The operations of the Bedford system are
included in the Companys consolidated financial statements beginning March 29,
2002 and pro-forma amounts are not material.

Effective March 30, 2001, the Company purchased the broadcast license for WFTE
and other assets of Kentuckiana Broadcasting, Inc. for $400,000. The Company
previously had an operating agreement to manage WFTE.

Effective January 1, 2001, the Company purchased the remaining membership
interest of Access Toledo, Ltd. for $990,000 in cash. The net assets were
recorded at fair value and related primarily to goodwill and other intangibles.
The Company also obtained agreements not to compete from the former members and
recorded additional intangibles and related obligations of $1,355,000. This
acquisition has been accounted for as a purchase, and results of operations are
included from the date of acquisition.

Effective April 1, 2000, the Company consummated an asset exchange agreement
and a general partnership agreement with LIN Television Corporation (LIN) which
resulted in an exchange of 100% of the assets of WLFI-TV, Inc. (WLFI), a wholly
owned subsidiary of the Company, for an equal value of assets of WAND
Television, Inc. (WAND), a wholly owned subsidiary of LIN. The Company and LIN
contributed their respective assets to a general partnership, WAND (TV)
Partnership (WAND TV), which owns and operates 100% of the assets of the
station.

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##### Table of Contents



Block Communications, Inc.

Notes to Consolidated Financial Statements (continued)

2.  Acquisitions (continued)

The Company recorded a $22.3 million gain on the disposition of WLFI resulting
from the difference between the fair value and the net book value of the assets
exchanged. For tax reporting, the transaction has been treated as a like-kind
exchange, and the gain has been deferred. The operations of WLFI are included
in the Companys financial statements through March 31, 2000. The Company is a
66% owner of the general partnership and has controlling interest of the Board
of Representatives; therefore, WAND TV has been consolidated for financial
statement purposes with the appropriate minority interest recorded since April
1, 2000. The net assets of WAND TV were recorded at their fair value and
primarily relate to property and equipment of $6.5 million and intangibles of
$29.3 million, offset by minority interest of $12.1 million.

3.  Income Taxes

A reconciliation of the federal statutory rate to the Companys effective tax
rate follows:

|                                                  |  |                         |           |      |  |      |            |   |  |   |           | 
|------------------------------------------------- |  | ----------------------- | --------- | ---- |  | ---- | ---------- | - |  | - | --------- | 
|                                                  |  | Years ended December 31
|                                                  |  |                        
|                                                  |  | 2002                    |           | 2001 |  | 2000
|                                                  |  |                         |           |      |  |     
|Federal statutory rate                            |  | $                       | 2,010,700 |      |  | $    | (8,828,400 | ) |  | $ | 7,834,300 | 
|State and local taxes, net of
federal tax benefit |  |                         | 483,000   |      |  |      | 232,000    |   |  |   | 456,100   | 
|Amortization of intangibles                       |  |                         | 163,000   |      |  |      | 785,400    |   |  |   | 784,400   | 
|Valuation allowance                               |  |                         | 157,900   |      |  |      | 586,800    |   |  |   |          | 
|Other                                             |  |                         | (87,100   | )    |  |      | 91,800     |   |  |   | 101,386   | 
|                                                  |  |                         |           |      |  |      |            |   |  |   |           | 
|Provision (credit) for income taxes               |  | $                       | 2,727,500 |      |  | $    | (7,132,400 | ) |  | $ | 9,176,186 | 
|                                                  |  |                         |           |      |  |      |            |   |  |   |           | 

Total income taxes paid amounted to $492,000, $802,000 and $1,955,150 in 2002,
2001 and 2000, respectively.

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##### Table of Contents



Block Communications, Inc.

Notes to Consolidated Financial Statements (continued)

3.  Income Taxes (continued)

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and amounts used for income tax purposes. Significant components of
the Companys deferred tax assets and liabilities are as follows:

|                          |                                             |   |             |            |      |   |            |            |  
|------------------------- | ------------------------------------------- | - | ----------- | ---------- | ---- | - | ---------- | ---------- | -
|                          |                                             |   | December 31
|                          |                                             |   |            
|                          |                                             |   | 2002        |            | 2001
|                          |                                             |   |             |            |     
|Deferred tax assets:      |                                             |   |             |            |      |   |            |           
|                          | Postretirement benefits other than pensions |   | $           | 30,011,000 |      |   | $          | 28,879,000 |  
|                          | Tax loss and credit carryforwards           |   |             | 8,552,000  |      |   |            | 7,616,000  |  
|                          | Net pension costs                           |   |             | 5,784,000  |      |   |            |           |  
|                          | Deferred compensation and severance         |   |             | 5,550,000  |      |   |            | 5,210,000  |  
|                          | Insurance                                   |   |             | 3,197,000  |      |   |            | 3,470,000  |  
|                          | Vacation pay                                |   |             | 3,016,000  |      |   |            | 3,083,000  |  
|                          | Fair value of interest rate swaps           |   |             | 2,436,000  |      |   |            | 2,426,000  |  
|                          | Other                                       |   |             | 3,732,000  |      |   |            | 2,032,700  |  
|                          |                                             |   |             |            |      |   |            |           
|                          |                                             |   | 62,278,000  |            |      |   | 52,716,700 |           
|                          | Valuation allowance                         |   |             | (745,000   | )    |   |            | (587,000   | )
|                          |                                             |   |             |            |      |   |            |           
|                          |                                             |   | 61,533,000  |            |      |   | 52,129,700 |           
|                          |                                             |   |             |            |      |   |            |           
|Deferred tax liabilities: |                                             |   |             |            |      |   |            |           
|                          | Tax over book depreciation and amortization |   |             | 24,311,000 |      |   |            | 19,944,000 |  
|                          | Deferred gains                              |   |             | 11,292,000 |      |   |            | 7,296,000  |  
|                          | Net pension costs                           |   |             |           |      |   |            | 2,139,000  |  
|                          |                                             |   |             |            |      |   |            |           
|                          |                                             |   | 35,603,000  |            |      |   | 29,379,000 |           
|                          |                                             |   |             |            |      |   |            |           
|Net deferred tax assets   |                                             | $ | 25,930,000  |            |      | $ | 22,750,700 |           
|                          |                                             |   |             |            |      |   |            |           

At December 31, 2002, the Company has unused alternative minimum tax (AMT)
credits of $1,579,000. In addition the Company has net operating loss and
charitable contribution carryforwards of $19,371,000 and $2,069,000,
respectively. These credits have been recognized in computing deferred income
taxes. The AMT credits are available indefinitely to offset regular income tax
in excess of AMT. The Company has recorded a valuation allowance of $745,000 to
recognize the uncertainty of realizing the deferred tax asset related to
charitable contribution carryforwards.

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Block Communications, Inc.

Notes to Consolidated Financial Statements (continued)

4.  Goodwill and Other Intangibles

Intangible assets primarily include licenses, network affiliation agreements,
subscriber lists, agreements not to compete, and purchased goodwill and,
through December 31, 2001, have been amortized using the straight-line method
over their estimated useful lives, which range from 10 to 40 years, excluding
intangibles acquired prior to October 31, 1970. Effective January 1, 2002, the
Company adopted SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill
and Other Intangible Assets. Purchased goodwill and indefinite lived intangible
assets are no longer amortized but reviewed annually for impairment, or more
frequently if impairment indicators arise. Intangible assets with lives
restricted by contractual, legal or other means continue to be amortized over
their useful lives. As of January 1, 2002, the Company performed the first of
the required impairment tests of goodwill. Additionally, the Company performed
its annual impairment test in the fourth quarter of 2002. No impairment was
present upon performance of the 2002 impairment tests.

In accordance with SFAS No. 142, the Company has not retroactively adjusted
prior periods to reflect the non-amortization provisions of the statement. If
the prior years had been adjusted to reflect those provisions, the following
results would have been reported:

|                                                                           |  |                        |             |      |  |   |            | 
|-------------------------------------------------------------------------- |  | ---------------------- | ----------- | ---- |  | - | ---------- | 
|                                                                           |  | Year ended December 31
|                                                                           |  |                       
|                                                                           |  | 2001                   |             | 2000
|                                                                           |  |                        |             |     
|Net income as reported                                                     |  | $                      | (17,856,863 | )    |  | $ | 12,780,496 | 
|Effect of non-amortization provisions of SFAS No
142 applied retroactively |  |                        | 3,407,107   |      |  |   | 3,058,252  | 
|                                                                           |  |                        |             |      |  |   |            | 
|Pro-forma net income                                                       |  | $                      | (14,449,756 | )    |  | $ | 15,838,748 | 
|                                                                           |  |                        |             |      |  |   |            | 

The Company classifies the following intangible assets as amortizable under the
provisions of SFAS No. 142 based upon definite lives:

|                          |  |          |            |              |  |          |           |              |  |   |           |  |  |   |           | 
|------------------------- |  | -------- | ---------- | ------------ |  | -------- | --------- | ------------ |  | - | --------- |  |  | - | --------- | 
|                          |  | 2002     |            | 2001        
|                          |  |          |            |             
|                          |  | Gross    |            |              |  |          |           | Gross        |  |   |           | 
|                          |  | Carrying |            | Accumulated  |  | Carrying |           | Accumulated 
|                          |  | Value    |            | Amortization |  | Value    |           | Amortization
|                          |  |          |            |              |  |          |           |             
|Franchise agreements      |  | $        | 9,264,000  |              |  | $        | 554,672   |              |  | $ |          |  |  | $ |          | 
|Subscriber lists          |  |          | 4,000,000  |              |  |          | 3,333,334 |              |  |   | 4,064,371 |  |  |   | 3,034,999 | 
|Agreements not to compete |  |          | 1,355,000  |              |  |          | 667,500   |              |  |   | 1,355,000 |  |  |   | 377,250   | 
|Other intangibles         |  |          | 1,246,748  |              |  |          | 679,910   |              |  |   | 1,246,748 |  |  |   | 643,637   | 
|                          |  |          |            |              |  |          |           |              |  |   |           |  |  |   |           | 
|                          |  | $        | 15,865,748 |              |  | $        | 5,235,416 |              |  | $ | 6,666,119 |  |  | $ | 4,055,886 | 
|                          |  |          |            |              |  |          |           |              |  |   |           |  |  |   |           | 

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##### Table of Contents



Block Communications, Inc.

Notes to Consolidated Financial Statements (continued)

4. Goodwill and Other Intangibles (continued)

Amortization expense recognized for the above assets is expected to be
$1,524,000 in 2003; $1,381,000 in 2004; $1,104,000 in 2005 and $757,000 in 2006
and 2007.

The following intangible assets have been identified as non-amortizable based
upon indefinite useful lives and have not been amortized during the year ended
December 31, 2002:

|                               |  |             |            |      |  |   |            | 
|------------------------------ |  | ----------- | ---------- | ---- |  | - | ---------- | 
|                               |  | December 31
|                               |  |            
|                               |  | 2002        |            | 2001
|                               |  |             |            |     
|Goodwill                       |  | $           | 51,987,021 |      |  | $ | 52,461,687 | 
|FCC licenses                   |  |             | 14,017,767 |      |  |   | 14,017,767 | 
|Network affiliation agreements |  |             | 13,196,771 |      |  |   | 13,196,771 | 
|Other intangibles              |  |             | 1,626,643  |      |  |   | 1,626,643  | 
|                               |  |             |            |      |  |   |            | 
|                               |  | $           | 80,828,202 |      |  | $ | 81,302,868 | 
|                               |  |             |            |      |  |   |            | 

Our goodwill is allocated to reportable segments as follows:

|
|
|
|
|
|
|
|
|
|
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Block Communications, Inc.

Notes to Consolidated Financial Statements (continued)

5.  Other Accrued Liabilities

Other accrued liabilities consist of the following:

|                         |  |             |            |      |  |   |            | 
|------------------------ |  | ----------- | ---------- | ---- |  | - | ---------- | 
|                         |  | December 31
|                         |  |            
|                         |  | 2002        |            | 2001
|                         |  |             |            |     
|Deferred revenue         |  | $           | 7,409,616  |      |  | $ | 8,199,311  | 
|Broadcast rights payable |  |             | 5,850,146  |      |  |   | 4,766,956  | 
|Local taxes              |  |             | 5,381,128  |      |  |   | 4,298,879  | 
|Interest payable         |  |             | 3,938,061  |      |  |   | 4,485,814  | 
|Carriage fees            |  |             | 2,899,178  |      |  |   | 2,750,014  | 
|Other                    |  |             | 7,368,086  |      |  |   | 9,445,705  | 
|                         |  |             |            |      |  |   |            | 
|                         |  | $           | 32,846,215 |      |  | $ | 33,946,679 | 
|                         |  |             |            |      |  |   |            | 

6.  Other Long-Term Obligations

Other long-term obligations consist of the following:

|                                  |  |             |             |      |  |   |             | 
|--------------------------------- |  | ----------- | ----------- | ---- |  | - | ----------- | 
|                                  |  | December 31
|                                  |  |            
|                                  |  | 2002        |             | 2001
|                                  |  |             |             |     
|Other post-retirement benefits    |  | $           | 83,365,000  |      |  | $ | 80,824,000  | 
|Pension liabilities               |  |             | 36,171,121  |      |  |   | 17,412,753  | 
|Deferred compensation obligations |  |             | 14,360,574  |      |  |   | 13,594,736  | 
|Broadcast rights payable          |  |             | 7,330,489   |      |  |   | 6,446,520   | 
|Interest rate swap liability      |  |             |            |      |  |   | 6,739,531   | 
|Other                             |  |             | 2,886,367   |      |  |   | 1,618,011   | 
|                                  |  |             |             |      |  |   |             | 
|                                  |  | $           | 144,113,551 |      |  | $ | 126,635,551 | 
|                                  |  |             |             |      |  |   |             | 

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Block Communications, Inc.

Notes to Consolidated Financial Statements (continued)

7.  Retirement and Pension Plans

The Company and certain subsidiaries have several defined benefit pension plans
covering substantially all active and retired employees. Benefits are
generally based on compensation and length of service. In 2002, the liability
for a small number of participants in a non-qualified defined benefit plan
previously characterized as deferred compensation has been reclassified and
included in the disclosures below.

The components of the benefit obligation, plan assets and funded status of the
defined benefit pension plans are as follows:

|                                 |                                              |  |             |             |      |  |   |             |  
|-------------------------------- | -------------------------------------------- |  | ----------- | ----------- | ---- |  | - | ----------- | -
|                                 |                                              |  | December 31
|                                 |                                              |  |            
|                                 |                                              |  | 2002        |             | 2001
|                                 |                                              |  |             |             |     
|Change in benefit obligation:    |                                              |  |             |             |      |  |   |            
|                                 | Benefit obligation, beginning of year        |  | $           | 184,565,001 |      |  | $ | 167,287,400 |  
|                                 | Reclassification of non-qualified plan       |  |             | 1,296,406   |      |  |   |            |  
|                                 | Service cost                                 |  |             | 5,337,581   |      |  |   | 4,919,777   |  
|                                 | Interest cost                                |  |             | 13,187,906  |      |  |   | 12,380,775  |  
|                                 | Plan amendments                              |  |             | 3,717,857   |      |  |   |            |  
|                                 | Actuarial loss (gain)                        |  |             | 8,722,294   |      |  |   | 10,723,581  |  
|                                 | Benefits paid                                |  |             | (11,181,032 | )    |  |   | (10,746,532 | )
|                                 |                                              |  |             |             |      |  |   |            
|                                 | Benefit obligation, end of year              |  | $           | 205,646,013 |      |  | $ | 184,565,001 |  
|                                 |                                              |  |             |             |      |  |   |            
|Change in plan assets:           |                                              |  |             |             |      |  |   |            
|                                 | Fair value of plan assets, beginning of year |  | $           | 153,834,964 |      |  | $ | 176,527,565 |  
|                                 | Contributions                                |  |             | 11,699,030  |      |  |   | 4,626,900   |  
|                                 | Actual return on plan assets                 |  |             | (8,649,193  | )    |  |   | (16,572,969 | )
|                                 | Benefits paid                                |  |             | (11,181,032 | )    |  |   | (10,746,532 | )
|                                 |                                              |  |             |             |      |  |   |            
|                                 | Fair value of plan assets, end of year       |  | $           | 145,703,769 |      |  | $ | 153,834,964 |  
|                                 |                                              |  |             |             |      |  |   |            
|Reconciliation of funded status: |                                              |  |             |             |      |  |   |            
|                                 | Funded status of the plans                   |  | $           | (59,942,244 | )    |  | $ | (30,730,037 | )
|                                 | Unrecognized net loss                        |  |             | 60,887,567  |      |  |   | 28,295,476  |  
|                                 | Unrecognized prior year service cost         |  |             | 12,310,308  |      |  |   | 9,479,138   |  
|                                 | Unrecognized net transition asset            |  |             | (34,022     | )    |  |   | (98,250     | )
|                                 |                                              |  |             |             |      |  |   |            
|                                 | Net amount recognized                        |  | $           | 13,221,609  |      |  | $ | 6,946,327   |  
|                                 |                                              |  |             |             |      |  |   |            

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Block Communications, Inc.

Notes to Consolidated Financial Statements (continued)

7.  Retirement and Pension Plans (continued)

The net amount recognized above is recorded in the consolidated balance sheets
as follows:

|                                       |  |             |             |      |  |   |             |  
|-------------------------------------- |  | ----------- | ----------- | ---- |  | - | ----------- | -
|                                       |  | December 31
|                                       |  |            
|                                       |  | 2002        |             | 2001
|                                       |  |             |             |     
|Prepaid pension costs                  |  | $           | 2,437,798   |      |  | $ | 11,145,446  |  
|Pension liabilities                    |  |             | (36,171,121 | )    |  |   | (17,412,753 | )
|Intangible pension asset               |  |             | 11,931,764  |      |  |   | 7,230,030   |  
|Accumulated other comprehensive income |  |             | 35,023,168  |      |  |   | 5,983,604   |  
|                                       |  |             |             |      |  |   |             |  
|                                       |  | $           | 13,221,609  |      |  | $ | 6,946,327   |  
|                                       |  |             |             |      |  |   |             |  

The weighted-average assumptions used at December 31, 2002 and 2001 are
discount rate of 7.0% and 7.2%, respectively, expected return on plan assets of
8.8% and 9.0%, respectively, and rate of compensation increase of 5.0%.

Certain defined benefit pension plans have a projected benefit obligation that
exceeds the fair value of plan assets. The aggregate projected benefit
obligation and fair value of plan assets for these plans are $200,103,920 and
$139,897,438, respectively, at December 31, 2002 and $159,491,252 and
$127,045,311, respectively, at December 31 2001. Certain plans have an
accumulated benefit obligation that exceeds the fair value of plan assets. The
aggregate accumulated benefit obligation and fair value of plan assets for
these plans are $176,068,559 and $139,897,438, respectively, at December 31,
2002 and $127,706,510 and $115,349,390, respectively, at December 31, 2001.

The components of the net periodic pension cost are as follows:

|                                   |  |                         |             |      |  |      |             |   |  |   |             |  
|---------------------------------- |  | ----------------------- | ----------- | ---- |  | ---- | ----------- | - |  | - | ----------- | -
|                                   |  | Years ended December 31
|                                   |  |                        
|                                   |  | 2002                    |             | 2001 |  | 2000
|                                   |  |                         |             |      |  |     
|Service cost                       |  | $                       | 5,337,581   |      |  | $    | 4,919,777   |   |  | $ | 4,487,612   |  
|Interest cost                      |  |                         | 13,187,906  |      |  |      | 12,380,775  |   |  |   | 11,542,029  |  
|Expected return on plan assets     |  |                         | (15,526,468 | )    |  |      | (15,312,255 | ) |  |   | (14,258,254 | )
|Amortization of transition amount  |  |                         | (64,228     | )    |  |      | (64,228     | ) |  |   | (64,228     | )
|Amortization of prior service cost |  |                         | 1,582,384   |      |  |      | 1,307,393   |   |  |   | 1,292,092   |  
|Actuarial loss (gain) recognized   |  |                         | 306,166     |      |  |      | (365,980    | ) |  |   | (313,468    | )
|                                   |  |                         |             |      |  |      |             |   |  |   |             |  
|Net periodic pension cost          |  | $                       | 4,823,341   |      |  | $    | 2,865,482   |   |  | $ | 2,685,783   |  
|                                   |  |                         |             |      |  |      |             |   |  |   |             |  

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##### Table of Contents



Block Communications, Inc.

Notes to Consolidated Financial Statements (continued)

7.  Retirement and Pension Plans (continued)

The Company and certain subsidiaries also sponsor defined contribution plans
and participate in several multi-employer and jointly-trusteed defined benefit
pension plans. Total payments to the defined contribution and multi-employer
and jointly-trusteed defined benefit plans were approximately $5,315,400,
$5,404,300 and $5,373,900 in 2002, 2001 and 2000, respectively. The portions of
plan assets and benefit obligations for the multi-employer and jointly-trusteed
plans, which are applicable to employees of the Company and its subsidiaries,
have not been determined.

In addition to the above, the Company has obligations under several individual
defined-benefit agreements to provide post-retirement compensation to certain
individuals or their spouses. These individual agreements do not constitute a
retirement plan and have not been included in the pension disclosures above.
The Company has recognized a deferred compensation liability in other long-term
obligations equal to the accumulated benefit obligation of these agreements of
$7,853,078 and $7,004,964 at December 31, 2002 and 2001, respectively.

8.  Postretirement Benefits other than Pensions

The Company and certain subsidiaries provide access to health care benefits for
certain active and retired employees. The components of the non-pension
retirement benefit obligation and amounts accrued are as follows:

|                                                         |                                       |   |             |            |      |   |             |            |  
|-------------------------------------------------------- | ------------------------------------- | - | ----------- | ---------- | ---- | - | ----------- | ---------- | -
|                                                         |                                       |   | December 31
|                                                         |                                       |   |            
|                                                         |                                       |   | 2002        |            | 2001
|                                                         |                                       |   |             |            |     
|Change in accumulated postretirement
benefit obligation: |                                       |   |             |            |      |   |             |           
|                                                         | Benefit obligation, beginning of year |   | $           | 87,602,000 |      |   | $           | 71,915,000 |  
|                                                         | Service cost                          |   |             | 1,915,000  |      |   |             | 1,474,000  |  
|                                                         | Interest cost                         |   |             | 6,012,000  |      |   |             | 5,246,000  |  
|                                                         | Actuarial loss (gain)                 |   |             | (78,000    | )    |   |             | 13,395,000 |  
|                                                         | Benefits paid                         |   |             | (5,186,000 | )    |   |             | (4,428,000 | )
|                                                         |                                       |   |             |            |      |   |             |           
|                                                         | Benefit obligation, end of year       |   | $           | 90,265,000 |      |   | $           | 87,602,000 |  
|                                                         |                                       |   |             |            |      |   |             |           
|Funded status of plan                                    |                                       | $ | (90,265,000 | )          |      | $ | (87,602,000 | )         
|Unrecognized actuarial loss                              |                                       |   | 6,900,000   |            |      |   | 6,778,000   |           
|                                                         |                                       |   |             |            |      |   |             |           
|Accrued benefit cost                                     |                                       | $ | (83,365,000 | )          |      | $ | (80,824,000 | )         
|                                                         |                                       |   |             |            |      |   |             |           

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##### Table of Contents



Block Communications, Inc.

Notes to Consolidated Financial Statements (continued)

8.  Postretirement Benefits other than Pensions (continued)

The components of the non-pension retirement benefit expense are as follows:

|                                           |  |                         |           |      |  |      |           |   |  |   |           |  
|------------------------------------------ |  | ----------------------- | --------- | ---- |  | ---- | --------- | - |  | - | --------- | -
|                                           |  | Years ended December 31
|                                           |  |                        
|                                           |  | 2002                    |           | 2001 |  | 2000
|                                           |  |                         |           |      |  |     
|Service cost                               |  | $                       | 1,915,000 |      |  | $    | 1,474,000 |   |  | $ | 1,334,000 |  
|Interest cost                              |  |                         | 6,012,000 |      |  |      | 5,240,000 |   |  |   | 5,060,000 |  
|Actuarial gain recognized                  |  |                         | (7,000    | )    |  |      | (119,000  | ) |  |   | (12,000   | )
|                                           |  |                         |           |      |  |      |           |   |  |   |           |  
|Net non-pension retirement benefit
expense |  | $                       | 7,920,000 |      |  | $    | 6,595,000 |   |  | $ | 6,382,000 |  
|                                           |  |                         |           |      |  |      |           |   |  |   |           |  

For measurement purposes, the annual rate of increase in the per capita cost of
covered health care benefits for 2003, 2004 and 2005 was assumed to be 10%, 9%
and 8%, respectively. The rate was assumed to decrease gradually to 5% for 2012
and remain at that level thereafter. A 1% increase in these rates would have
increased the net non-pension retirement benefit expense by $1,867,000 and the
benefit obligation by $11,416,000. A 1% decrease in these rates would have
decreased the net non-pension retirement expense by $996,000 and the benefit
obligation by $9,503,000. The weighted-average discount rate used in
determining the accumulated non-pension retirement benefit obligation was 7.00%
in 2002 and 7.25% in 2001.

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Block Communications, Inc.

Notes to Consolidated Financial Statements (continued)

9.  Long-Term Debt and Credit Arrangements

The amounts recorded as long-term debt are as follows:

|                                            |                  |   |             |           |      |   |             |           | 
|------------------------------------------- | ---------------- | - | ----------- | --------- | ---- | - | ----------- | --------- | 
|                                            |                  |   | December 31
|                                            |                  |   |            
|                                            |                  |   | 2002        |           | 2001
|                                            |                  |   |             |           |     
|Senior subordinated notes                   |                  | $ | 175,000,000 |           |      | $ |            |          
|Senior term loan B                          |                  |   | 74,625,000  |           |      |   |            |          
|Fair value adjustment of subordinated notes |                  |   | 7,658,715   |           |      |   |            |          
|Capital leases                              |                  |   | 3,153,095   |           |      |   | 2,264,847   |          
|Long-term revolver                          |                  |   |            |           |      |   | 92,500,000  |          
|Senior term loan                            |                  |   |            |           |      |   | 75,000,000  |          
|Senior notes                                |                  |   |            |           |      |   | 67,499,000  |          
|                                            |                  |   |             |           |      |   |             |          
|                                            |                  |   | 260,436,810 |           |      |   | 237,263,847 |          
|                                            |                  |   |             |           |      |   |             |          
|Less current maturities:                    |                  |   |             |           |      |   |             |          
|                                            | Senior term loan |   |             | 4,321,000 |      |   |             | 3,750,000 | 
|                                            | Senior notes     |   |             |          |      |   |             | 5,833,334 | 
|                                            | Capital leases   |   |             | 328,871   |      |   |             | 325,000   | 
|                                            |                  |   |             |           |      |   |             |          
|                                            |                  |   | 4,649,871   |           |      |   | 9,908,334   |          
|                                            |                  |   |             |           |      |   |             |          
|                                            |                  | $ | 255,786,939 |           |      | $ | 227,355,513 |          
|                                            |                  |   |             |           |      |   |             |          

Maturities of long-term obligations for five years subsequent to December 31,
2002 are: 2003$4,649,871; 2004$1,112,577; 2005$1,148,670; 2006$1,175,290;
2007$1,211,669; and thereafter $251,138,733.

In April 2002, the Company issued $175 million of 91/4% senior subordinated
notes, the proceeds of which where used to pay off the existing senior term
loan and senior notes and a portion of the balance outstanding under the
revolving credit agreement. The subordinated notes mature April 15, 2009, with
interest payable semi-annually. The company may redeem the notes on or after
April 15, 2006 at their principal amount, plus, if redeemed prior to April 15,
2008, a redemption premium based on the time of the prepayment.

On May 15, 2002, the Company refinanced the remainder of its senior credit
facilities. The new senior credit facilities include a $40 million delayed
draw term loan A, a $75 million term loan B, and an $85 million revolver.

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Block Communications, Inc.

Notes to Consolidated Financial Statements (continued)

9.  Long-Term Debt and Credit Arrangements (continued)

The Company may borrow up to $40,000,000 under term loan A at the banks prime
rate of interest plus applicable margin range from 0.75% to 2.00% or LIBOR plus
applicable margin ranging from 1.75% to 3.00%. The agreement provides for the
payment of a commitment fee on the unborrowed portion ranging from 0.50% to
0.75% per annum. Scheduled reductions of the credit committed begin in
September 2004, with final maturity on May 15, 2009. The availability is also
reduced if required withdrawals are not made ($20 million by June 30, 2003 and
$20 million by December 31, 2003). Principal payments will be due at
quarter-end, to the extent that total borrowings outstanding at the quarter-end
exceeds the reduced credit committed. There are no amounts outstanding related
to this agreement at December 31, 2002.

The Company may borrow up to $75,000,000 under term loan B at the banks prime
rate of interest plus applicable margin of 2.25% or LIBOR plus applicable
margin of 3.25%. The agreement requires quarterly principal payments of
$187,500 through maturity at November 15, 2009. The outstanding debt relating
to this agreement is $74,625,000 at December 31, 2002, at a weighted average
interest rate of 4.67%.

The Company may borrow up to $85,000,000 under the new revolving credit
agreement at the banks prime rate of interest plus applicable margin range
from 0.75% to 2.00% or LIBOR plus applicable margin ranging from 1.75% to
3.00%. The agreement provides for the payment of a commitment fee on the
unborrowed portion ranging from 0.50% to 0.75% per annum. Scheduled reductions
of the credit committed begin in September 2004, with final maturity on May 15,
2009. Principal payments will be due at quarter-end, to the extent that total
borrowings outstanding at the quarter-end exceeds the reduced credit committed.
There are no amounts outstanding related to this agreement at December 31,
2002.

The new credit facilities are guaranteed jointly and severally by all of the
Companys wholly owned subsidiaries (collectively, the Guarantors). Such
guarantees are full and unconditional. WAND (TV) Partnership, a partially owned
subsidiary of the Company is not a guarantor of the new credit facilities.

In conjunction with the refinancing, the Company recognized a loss of $9.0
million consisting of premiums paid to the existing noteholders and unamortized
deferred financing costs relating to the refinanced debt

During 2002, the Company entered into several additional swap contracts related
to the new debt and existing swaps. One of these is a cancelable swap that
effectively converts a portion of the Companys fixed rate senior subordinated
notes to a variable rate based on LIBOR. This contract has been accounted for
as a fair value hedge, resulting in the recognition of a swap asset with an
offsetting adjustment to the carrying value of the underlying debt.

The terms of the debt agreements include covenants, which provide, among other
things, restrictions on total and senior leverage and indebtedness, and
minimums on earnings before interest, taxes, depreciation and amortization and
maximums on capital expenditures.

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##### Table of Contents



Block Communications, Inc.

Notes to Consolidated Financial Statements (continued)

9.  Long-Term Debt and Credit Arrangements (continued)

The carrying amounts of the revolving credit agreements, term loan and
derivative contracts approximate their fair value. The fair values of the
senior notes and senior subordinated notes are estimated using discounted cash
flows analyses based on the Companys current incremental borrowing rates for
new long-term debt. The fair values of such fixed obligations are as follows:

|                                                 |            |            |             |          |  |       |             |          |  |       |            |            |            |   |            |           |            | 
|------------------------------------------------ | ---------- | ---------- | ----------- | -------- |  | ----- | ----------- | -------- |  | ----- | ---------- | ---------- | ---------- | - | ---------- | --------- | ---------- | 
|                                                 |            |            |             | 2002     |  | 2001 
|                                                 |            |            |             |          |  |      
|                                                 |            |            |             | Recorded |  | Fair  |             | Recorded |  | Fair 
|                                                 |            |            |             | Value    |  | Value |             | Value    |  | Value
|                                                 |            |            |             |          |  |       |             |          |  |      
|Subordinated notes                               |            | $          | 182,658,715 |          |  | $     | 204,576,617 |          |  |       |            |            |            |   |            |          
|TIAA senior notes:                               |            |            |             |          |  |       |             |          |  |       |            |            |            |   |            |          
|                                                 | 1996 issue |            |             |          |  |       |             |          |  |       | $          | 10,000,000 |            |   | $          | 9,953,146 |           
|                                                 | 1994 issue |            |             |          |  |       |             |          |  |       |            | 4,999,000  |            |   |            | 5,084,729 |           
|                                                 | 1993 issue |            |             |          |  |       |             |          |  |       |            | 9,000,000  |            |   |            | 9,432,308 |           
|                                                 | 1991 issue |            |             |          |  |       |             |          |  |       |            | 8,000,000  |            |   |            | 8,463,445 |           
|Massachusetts Mutual
Life senior note1996
issue |            |            |             |          |  |       |             |          |  |       | 15,000,000 |            |            |   | 14,981,373 |          
|                                                 |            |            |             |          |  |       |             |          |  |       |            |            |            |   |            |          
|Travelers senior notes:                          |            |            |             |          |  |       |             |          |  |       |            |            |            |   |            |          
|                                                 |            | 1996 issue |             |          |  |       |             |          |  |       |            |            | 10,000,000 |   |            |           | 9,953,146  | 
|                                                 |            | 1993 issue |             |          |  |       |             |          |  |       |            |            | 10,500,000 |   |            |           | 11,004,359 | 
|                                                 |            |            |             |          |  |       |             |          |  |       |            |            |            |   |            |           |           
|                                                 |            | $          | 182,658,715 |          |  | $     | 204,576,617 |          |  | $     | 67,499,000 |            |            | $ | 68,872,506 |          
|                                                 |            |            |             |          |  |       |             |          |  |       |            |            |            |   |            |          

Total interest paid was $22,013,876, $19,197,316 and $13,361,000 in 2002, 2001
and 2000, respectively. The Company capitalized $985,000 and $1,490,000 of
interest in 2001 and 2000, respectively. No interest was capitalized during
the year ended December 31, 2002.

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##### Table of Contents



Block Communications, Inc.

Notes to Consolidated Financial Statements (continued)

10.  Commitments and Contingencies

On March 15, 1987, a shareholder owning 50 percent of the Companys outstanding
voting common stock died. The Company had an agreement with the shareholder
which provided that upon his death, the estate of the deceased shareholder (the
Estate) could require the Company to redeem shares owned by such shareholder to
the extent necessary to provide his estate with funds to pay estate taxes. In
2001 and 2000, the Company made payments of $1,162,913 and $1,210,390 to redeem
2,337 and 2,334 non-voting shares based on a per share value of $497.61 and
$518.59, respectively. The Estate did not redeem additional shares during 2002,
nor does the Company expect the Estate to redeem additional shares subsequent
to December 31, 2002. Through December 31, 2002, the Company has redeemed
153,694 non-voting shares for approximately $45.0 million. The Company has the
same agreement with all other shareholders, pending qualification under the
Internal Revenue Code.

The Company is involved in matters associated with several libel lawsuits and
other legal matters arising out of the normal course of business. Management of
the Company believes, based upon information now known, that the ultimate
liability of the Company relating to these matters will not have a material
adverse effect on its financial position and results of operations. The Company
intends to vigorously defend these matters; however, the ultimate outcome of
the actions cannot be predicted with certainty at the present time.

The Company has outstanding irrevocable letters of credit from a bank totaling
$13,550,000, with annual fees ranging from 1.125% to 2.00%.

Two subsidiaries of the Company have entered into agreements for future
broadcast rights, which become available in 2002 or later. Maturities of
unrecorded broadcast rights commitments are as follows: 2003$467,000;
2004$966,600; 2005$987,350; 2006$655,633; 2007 and thereafter$609,266.

The Company and its subsidiaries incurred rental expense of approximately
$3,999,000, $4,064,000 and $3,529,000 for 2002, 2001 and 2000, respectively.
Future rental commitments subsequent to December 31, 2002 are:
2003$3,044,314; 2004$2,009,946; 2005$1,392,936; 2006$963,154; 2007 and
thereafter$1,997,738.

The Company has several subsidiaries for which varying portions of the labor
force are represented by labor unions. On a combined basis, 67% of the
Companys total labor force at December 31, 2002 is subject to collective
bargaining agreements. Certain employees of our publishing, cable and other
communications segments are subject to collective bargaining agreements which
expire prior to December 31, 2003. These employees represent 25% of the
Companys total labor force at December 31, 2002.

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##### Table of Contents



Block Communications, Inc.

Notes to Consolidated Financial Statements (continued)

11.  Business Segment Information

The Company has three reportable segmentspublishing, cable and broadcasting.
The publishing segment operates two daily newspapers located in Ohio and
Pennsylvania. The cable segment includes two cable companies operating in Ohio
and Michigan. The broadcasting segment has five television stations located in
Idaho, Illinois, Indiana, Kentucky, and Ohio. The Other Communications
category includes non-reportable segments and corporate items. The
non-reportable segments provide services such as telephony, security systems
and monitoring, cable plant construction and distributed advertising services.

The accounting policies of the reportable segments are consistent with those
policies described in Note 1. Revenues are mostly from external customers with
some intersegment revenues, primarily due to newspaper advertising, as shown in
the intersegment amount under revenues. Operating income (loss) represents
gross revenues before intersegment eliminations, less operating expenses.
Operating expenses are mostly from external vendors with some intersegment
expenses, primarily due to newspaper advertising and telephony services. The
intersegment operating income (loss) is the net of the intersegment revenues
and intersegment expenses. Certain corporate general and administrative
expenses are included in operating income (loss) and are not allocated to
individual segments. Nonoperating income (expense) includes interest expense
and income, change in fair value of interest rate swaps and gain on sales of
Monroe Cablevision and WLFI-TV and are not allocated to segments. Current year
amortization of intangibles and deferred charges in all segments reflects the
implementation of the non-amortization provisions of SFAS No. 142. In the
cable segment and other category, this decrease is offset by the amortization
of franchise agreements acquired in the current year and deferred charges
related to the debt refinancing, respectively. The following tables present
certain financial information for the three reportable segments and the other
category.

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##### Table of Contents



Block Communications, Inc.

Notes to Consolidated Financial Statements (continued)

11.  Business Segment Information (continued)

|                                                        |                     |   |                        |             |      |   |             |             |   |   |             |             |  
|------------------------------------------------------- | ------------------- | - | ---------------------- | ----------- | ---- | - | ----------- | ----------- | - | - | ----------- | ----------- | -
|                                                        |                     |   | Year ended December 31
|                                                        |                     |   |                       
|                                                        |                     |   | 2002                   |             | 2001 |   | 2000       
|                                                        |                     |   |                        |             |      |   |            
|Revenues:                                               |                     |   |                        |             |      |   |             |             |   |   |             |            
|                                                        | Publishing          |   | $                      | 261,008,750 |      |   | $           | 269,940,958 |   |   | $           | 293,630,370 |  
|                                                        | Intersegment        |   |                        | (3,752,407  | )    |   |             | (5,262,280  | ) |   |             | (6,913,242  | )
|                                                        |                     |   |                        |             |      |   |             |             |   |   |             |            
|                                                        | External Publishing |   |                        | 257,256,343 |      |   |             | 264,678,678 |   |   |             | 286,717,128 |  
|                                                        |                     |   |                        |             |      |   |             |             |   |   |             |            
|                                                        | Cable               |   |                        | 101,562,492 |      |   |             | 89,420,000  |   |   |             | 82,110,320  |  
|                                                        | Intersegment        |   |                        | (88,634     | )    |   |             |            |   |   |             |            |  
|                                                        |                     |   |                        |             |      |   |             |             |   |   |             |            
|                                                        | External Cable      |   |                        | 101,473,858 |      |   |             | 89,420,000  |   |   |             | 82,110,320  |  
|                                                        |                     |   |                        |             |      |   |             |             |   |   |             |            
|                                                        | Broadcasting        |   |                        | 39,964,031  |      |   |             | 35,183,897  |   |   |             | 42,531,103  |  
|                                                        | Other               |   |                        | 26,498,493  |      |   |             | 25,282,312  |   |   |             | 14,298,551  |  
|                                                        |                     |   |                        |             |      |   |             |             |   |   |             |            
|                                                        |                     | $ | 425,192,725            |             |      | $ | 414,564,887 |             |   | $ | 425,657,102 |            
|                                                        |                     |   |                        |             |      |   |             |             |   |   |             |            
|                                                        |                     |   |                        |             |      |   |             |             |   |   |             |            
|Operating income (loss):                                |                     |   |                        |             |      |   |             |             |   |   |             |            
|                                                        | Publishing          |   | $                      | 11,579,680  |      |   | $           | 6,009,107   |   |   | $           | 14,512,223  |  
|                                                        | Intersegment        |   |                        | (3,510,293  | )    |   |             | (4,129,362  | ) |   |             | (5,107,360  | )
|                                                        |                     |   |                        |             |      |   |             |             |   |   |             |            
|                                                        | Net Publishing      |   |                        | 8,069,387   |      |   |             | 1,879,745   |   |   |             | 9,404,863   |  
|                                                        |                     |   |                        |             |      |   |             |             |   |   |             |            
|                                                        | Cable               |   |                        | 6,188,202   |      |   |             | 509,415     |   |   |             | 2,064,005   |  
|                                                        | Intersegment        |   |                        | 3,881,816   |      |   |             | 4,332,124   |   |   |             | 5,510,474   |  
|                                                        |                     |   |                        |             |      |   |             |             |   |   |             |            
|                                                        | Net Cable           |   |                        | 10,070,018  |      |   |             | 4,841,539   |   |   |             | 7,574,479   |  
|                                                        |                     |   |                        |             |      |   |             |             |   |   |             |            
|                                                        | Broadcasting        |   |                        | 3,651,090   |      |   |             | (1,788,767  | ) |   |             | 5,432,605   |  
|                                                        | Corporate expenses  |   |                        | (6,045,826  | )    |   |             | (2,705,412  | ) |   |             | (4,151,939  | )
|                                                        | Other               |   |                        | 1,407,973   |      |   |             | (2,672,210  | ) |   |             | (4,146,254  | )
|                                                        |                     |   |                        |             |      |   |             |             |   |   |             |            
|Operating income (loss)                                 |                     |   | 17,152,642             |             |      |   | (445,105    | )           |   |   | 14,113,754  |            
|                                                        |                     |   |                        |             |      |   |             |             |   |   |             |            
|Nonoperating income (expense)                           |                     |   | (11,407,856            | )           |      |   | (24,778,780 | )           |   |   | 8,269,948   |            
|                                                        |                     |   |                        |             |      |   |             |             |   |   |             |            
|Income (loss) before income
taxes and minority
interest |                     | $ | 5,744,786              |             |      | $ | (25,223,885 | )           |   | $ | 22,383,702  |            
|                                                        |                     |   |                        |             |      |   |             |             |   |   |             |            

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##### Table of Contents



Block Communications, Inc.

Notes to Consolidated Financial Statements (continued)

11.  Business Segment Information (continued)

|                                                  |              |              |            |                        |           |      |            |            |           |   |            |            |           | 
|------------------------------------------------- | ------------ | ------------ | ---------- | ---------------------- | --------- | ---- | ---------- | ---------- | --------- | - | ---------- | ---------- | --------- | 
|                                                  |              |              |            | Year ended December 31
|                                                  |              |              |            |                       
|                                                  |              |              |            | 2002                   |           | 2001 |            | 2000      
|                                                  |              |              |            |                        |           |      |            |           
|Depreciation:                                     |              |              |            |                        |           |      |            |            |           |   |            |           
|                                                  | Publishing   |              | $          | 11,299,600             |           |      | $          | 11,381,856 |           |   | $          | 11,978,341 |          
|                                                  | Cable        |              |            | 26,681,076             |           |      |            | 27,165,658 |           |   |            | 22,123,154 |          
|                                                  | Broadcasting |              |            | 2,659,875              |           |      |            | 2,528,464  |           |   |            | 1,927,714  |          
|                                                  | Other        |              |            | 4,112,575              |           |      |            | 3,525,129  |           |   |            | 2,835,423  |          
|                                                  |              |              |            |                        |           |      |            |            |           |   |            |           
|                                                  |              | $            | 44,753,126 |                        |           | $    | 44,601,107 |            |           | $ | 38,864,632 |           
|                                                  |              |              |            |                        |           |      |            |            |           |   |            |           
|                                                  |              |              |            |                        |           |      |            |            |           |   |            |           
|Amortization of intangibles
and deferred charges: |              |              |            |                        |           |      |            |            |           |   |            |           
|                                                  |              | Publishing   |            | $                      | 352,668   |      |            | $          | 2,485,915 |   |            | $          | 2,485,947 | 
|                                                  |              | Cable        |            |                        | 559,597   |      |            |            | 44,047    |   |            |            | 45,894    | 
|                                                  |              | Broadcasting |            |                        | 16,940    |      |            |            | 780,734   |   |            |            | 598,102   | 
|                                                  |              | Other        |            |                        | 2,082,144 |      |            |            | 1,110,619 |   |            |            | 348,082   | 
|                                                  |              |              |            |                        |           |      |            |            |           |   |            |           
|                                                  |              | $            | 3,011,349  |                        |           | $    | 4,421,315  |            |           | $ | 3,478,025  |           
|                                                  |              |              |            |                        |           |      |            |            |           |   |            |           
|                                                  |              |              |            |                        |           |      |            |            |           |   |            |           
|Capital expenditures:                             |              |              |            |                        |           |      |            |            |           |   |            |           
|                                                  | Publishing   |              | $          | 4,786,521              |           |      | $          | 4,294,832  |           |   | $          | 4,792,075  |          
|                                                  | Cable        |              |            | 21,118,022             |           |      |            | 52,548,163 |           |   |            | 62,898,219 |          
|                                                  | Broadcasting |              |            | 3,263,438              |           |      |            | 1,268,908  |           |   |            | 2,222,327  |          
|                                                  | Other        |              |            | 2,862,682              |           |      |            | 4,041,630  |           |   |            | 10,427,495 |          
|                                                  |              |              |            |                        |           |      |            |            |           |   |            |           
|                                                  |              | $            | 32,030,663 |                        |           | $    | 62,153,533 |            |           | $ | 80,340,116 |           
|                                                  |              |              |            |                        |           |      |            |            |           |   |            |           

|        |              |   |             |             |      |   |             |             |  |   |             |             | 
|------- | ------------ | - | ----------- | ----------- | ---- | - | ----------- | ----------- |  | - | ----------- | ----------- | 
|        |              |   | December 31
|        |              |   |            
|        |              |   | 2002        |             | 2001 |   | 2000       
|        |              |   |             |             |      |   |            
|Assets: |              |   |             |             |      |   |             |             |  |   |             |            
|        | Publishing   |   | $           | 190,091,233 |      |   | $           | 174,713,665 |  |   | $           | 188,967,117 | 
|        | Cable        |   |             | 158,749,105 |      |   |             | 166,223,678 |  |   |             | 140,530,843 | 
|        | Broadcasting |   |             | 64,535,074  |      |   |             | 64,662,625  |  |   |             | 62,634,898  | 
|        | Other        |   |             | 98,349,265  |      |   |             | 79,954,271  |  |   |             | 72,057,322  | 
|        |              |   |             |             |      |   |             |             |  |   |             |            
|        |              | $ | 511,724,677 |             |      | $ | 485,554,239 |             |  | $ | 464,190,180 |            
|        |              |   |             |             |      |   |             |             |  |   |             |            

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##### Table of Contents



Block Communications, Inc.

Notes to Consolidated Financial Statements (continued)

12.  Selected Quarterly Financial Data (unaudited)

The following is a summary of the unaudited quarterly results of operations of
the Company for the years ended December 31, 2002 and 2001(in thousands):

|                              |                  |  |         |         |         |  |         |         |         |  |   |         |   |  |   |         |  
|----------------------------- | ---------------- |  | ------- | ------- | ------- |  | ------- | ------- | ------- |  | - | ------- | - |  | - | ------- | -
|                              |                  |  | First   |         | Second  |  | Third   |         | Fourth 
|                              |                  |  | Quarter |         | Quarter |  | Quarter |         | Quarter
|                              |                  |  |         |         |         |  |         |         |        
|Year ended December 31, 2002: |                  |  |         |         |         |  |         |         |         |  |   |         |   |  |   |        
|                              | Revenue          |  | $       | 102,013 |         |  | $       | 106,226 |         |  | $ | 103,379 |   |  | $ | 113,575 |  
|                              | Operating Income |  |         | 1,430   |         |  |         | 6,511   |         |  |   | 3,769   |   |  |   | 5,443   |  
|                              | Net Income       |  |         | 12,953  |         |  |         | (6,898  | )       |  |   | (3,373  | ) |  |   | (142    | )
|                              |                  |  |         |         |         |  |         |         |         |  |   |         |   |  |   |        
|Year ended December 31, 2001: |                  |  |         |         |         |  |         |         |         |  |   |         |   |  |   |        
|                              | Revenue          |  | $       | 96,878  |         |  | $       | 105,344 |         |  | $ | 101,858 |   |  | $ | 110,485 |  
|                              | Operating Income |  |         | (2,938  | )       |  |         | 4,202   |         |  |   | 1,016   |   |  |   | (2,725  | )
|                              | Net Income       |  |         | (6,532  | )       |  |         | 134     |         |  |   | (6,359  | ) |  |   | (5,100  | )

Quarterly net income presented for the year ended December 31, 2002 reflects
the non-amortization provisions of SFAS No. 142, a first quarter gain on the
exchange of Monroe Cablevision, discussed in Note 2 above, as well as a second
quarter loss on early extinguishment of debt, discussed in Note 9 above. In
addition, fluctuations in the non-cash gain or loss recorded on interest-rate
swap contracts contribute to variability in quarterly net income for both
years.

13.  Supplemental Guarantor Information

During 2002, the Company refinanced the entirety of its outstanding debt. The
new credit facilities are guaranteed jointly and severally by all of the
Companys wholly owned subsidiaries (collectively, the Guarantors). Such
guarantees are full and unconditional. WAND (TV) Partnership, a partially owned
subsidiary of the Company is not a guarantor of the new credit facilities.

Supplemental consolidating financial information of the Company, specifically
including such information for the Guarantors, is presented below. Financial
information for the Parent Company includes both the Holding Company and its
one division, The Toledo Blade Company. Investments in subsidiaries are
presented using the cost method of accounting and eliminated. Separate
financial statements of the Guarantors are not provided as the consolidating
financial information contained herein provides a more meaningful disclosure to
allow investors to determine the nature of assets held and the operations of
the combined groups.

F-29



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##### Table of Contents



Block Communications, Inc.

Notes to Consolidated Financial Statements (continued)

13.  Supplemental Guarantor Information (continued)

CONSOLIDATING CONDENSED BALANCE SHEEET

December 31, 2002

|                                      |  |                |             |              |  |               |             |              |  |              |            |  |  |   |              |   |  |   |             | 
|------------------------------------- |  | -------------- | ----------- | ------------ |  | ------------- | ----------- | ------------ |  | ------------ | ---------- |  |  | - | ------------ | - |  | - | ----------- | 
|                                      |  | Unconsolidated |             |              |  |               |             |              |  |             
|                                      |  |                |             |              |  |               |             |              |  |             
|                                      |  | Parent         |             | Guarantor    |  | Non-Guarantor |             |              |  |              |            |  |  |  
|                                      |  | Company        |             | Subsidiaries |  | Subsidiary    |             | Eliminations |  | Consolidated
|                                      |  |                |             |              |  |               |             |              |  |             
|Assets:                               |  |                |             |              |  |               |             |              |  |              |            |  |  |   |              |   |  |   |             | 
|Current assets                        |  | $              | 31,824,209  |              |  | $             | 57,565,103  |              |  | $            | 2,136,861  |  |  | $ | 88,187       |   |  | $ | 91,614,360  | 
|Property, plant and equipment, net    |  |                | 26,920,217  |              |  |               | 215,990,124 |              |  |              | 5,994,444  |  |  |   | 372,427      |   |  |   | 249,277,212 | 
|Intangibles, net                      |  |                | 4,494,448   |              |  |               | 58,696,639  |              |  |              | 28,068,958 |  |  |   | 198,489      |   |  |   | 91,458,534  | 
|Cash value of life insurance, net     |  |                | 25,369,465  |              |  |               | 225,078     |              |  |              |           |  |  |   |             |   |  |   | 25,594,543  | 
|Prepaid pension costs                 |  |                |            |              |  |               | 2,437,798   |              |  |              |           |  |  |   |             |   |  |   | 2,437,798   | 
|Pension intangibles                   |  |                | 1,442,550   |              |  |               | 10,489,214  |              |  |              |           |  |  |   |             |   |  |   | 11,931,764  | 
|Investments in subsidiaries           |  |                | 178,302,804 |              |  |               |            |              |  |              |           |  |  |   | (178,302,804 | ) |  |   |            | 
|Other                                 |  |                | 18,618,079  |              |  |               | 20,792,387  |              |  |              |           |  |  |   |             |   |  |   | 39,410,466  | 
|                                      |  |                |             |              |  |               |             |              |  |              |            |  |  |   |              |   |  |   |             | 
|                                      |  | $              | 286,971,772 |              |  | $             | 366,196,343 |              |  | $            | 36,200,263 |  |  | $ | (177,643,701 | ) |  | $ | 511,724,677 | 
|                                      |  |                |             |              |  |               |             |              |  |              |            |  |  |   |              |   |  |   |             | 
|                                      |  |                |             |              |  |               |             |              |  |              |            |  |  |   |              |   |  |   |             | 
|Liabilities and stockholders equity: |  |                |             |              |  |               |             |              |  |              |            |  |  |   |              |   |  |   |             | 
|Current liabilities                   |  | $              | 23,530,460  |              |  | $             | 54,864,676  |              |  | $            | 756,010    |  |  | $ | 85,992       |   |  | $ | 79,237,068  | 
|Long-term debt                        |  |                | 255,786,939 |              |  |               |            |              |  |              |           |  |  |   |             |   |  |   | 255,786,939 | 
|Other long-term obligations           |  |                | 11,310,112  |              |  |               | 238,274,771 |              |  |              |           |  |  |   | (105,471,332 | ) |  |   | 144,113,551 | 
|Minority interest                     |  |                |            |              |  |               |            |              |  |              |           |  |  |   | 11,941,238   |   |  |   | 11,941,238  | 
|Stockholders equity                  |  |                | (3,655,739  | )            |  |               | 73,056,896  |              |  |              | 35,444,253 |  |  |   | (84,199,529  | ) |  |   | 20,645,881  | 
|                                      |  |                |             |              |  |               |             |              |  |              |            |  |  |   |              |   |  |   |             | 
|                                      |  | $              | 286,971,772 |              |  | $             | 366,196,343 |              |  | $            | 36,200,263 |  |  | $ | (177,643,701 | ) |  | $ | 511,724,677 | 
|                                      |  |                |             |              |  |               |             |              |  |              |            |  |  |   |              |   |  |   |             | 

F-30



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##### Table of Contents



Block Communications, Inc.

Notes to Consolidated Financial Statements (continued)

13.  Supplemental Guarantor Information (continued)

CONSOLIDATING CONDENSED BALANCE SHEEET

December 31, 2001

|                                      |  |                |             |              |  |               |             |              |  |              |            |  |  |   |              |   |  |   |             | 
|------------------------------------- |  | -------------- | ----------- | ------------ |  | ------------- | ----------- | ------------ |  | ------------ | ---------- |  |  | - | ------------ | - |  | - | ----------- | 
|                                      |  | Unconsolidated |             |              |  |               |             |              |  |             
|                                      |  |                |             |              |  |               |             |              |  |             
|                                      |  | Parent         |             | Guarantor    |  | Non-Guarantor |             |              |  |              |            |  |  |  
|                                      |  | Company        |             | Subsidiaries |  | Subsidiary    |             | Eliminations |  | Consolidated
|                                      |  |                |             |              |  |               |             |              |  |             
|Assets:                               |  |                |             |              |  |               |             |              |  |              |            |  |  |   |              |   |  |   |             | 
|Current assets                        |  | $              | 15,717,915  |              |  | $             | 57,636,621  |              |  | $            | 4,138,933  |  |  | $ | 3,905,631    |   |  | $ | 81,399,100  | 
|Property, plant and equipment, net    |  |                | 28,992,144  |              |  |               | 228,208,431 |              |  |              | 5,962,544  |  |  |   | 32,587       |   |  |   | 263,195,706 | 
|Intangibles, net                      |  |                | 4,784,698   |              |  |               | 50,860,955  |              |  |              | 28,068,959 |  |  |   | 198,489      |   |  |   | 83,913,101  | 
|Cash value of life insurance, net     |  |                | 10,486,057  |              |  |               | 205,048     |              |  |              |           |  |  |   |             |   |  |   | 10,691,105  | 
|Prepaid pension costs                 |  |                | 1,852,686   |              |  |               | 9,276,267   |              |  |              |           |  |  |   | 16,493       |   |  |   | 11,145,446  | 
|Pension intangibles                   |  |                | 645,495     |              |  |               | 6,584,535   |              |  |              |           |  |  |   |             |   |  |   | 7,230,030   | 
|Investments in subsidiaries           |  |                | 211,745,229 |              |  |               |            |              |  |              |           |  |  |   | (211,745,229 | ) |  |   |            | 
|Other                                 |  |                | 10,366,210  |              |  |               | 17,627,480  |              |  |              | 2,554      |  |  |   | (16,493      | ) |  |   | 27,979,751  | 
|                                      |  |                |             |              |  |               |             |              |  |              |            |  |  |   |              |   |  |   |             | 
|                                      |  | $              | 284,590,434 |              |  | $             | 370,399,337 |              |  | $            | 38,172,990 |  |  | $ | (207,608,522 | ) |  | $ | 485,554,239 | 
|                                      |  |                |             |              |  |               |             |              |  |              |            |  |  |   |              |   |  |   |             | 
|                                      |  |                |             |              |  |               |             |              |  |              |            |  |  |   |              |   |  |   |             | 
|Liabilities and stockholders equity: |  |                |             |              |  |               |             |              |  |              |            |  |  |   |              |   |  |   |             | 
|Current liabilities                   |  | $              | 24,017,694  |              |  | $             | 52,111,863  |              |  | $            | 1,773,706  |  |  | $ | 3,812,414    |   |  | $ | 81,715,677  | 
|Long-term debt                        |  |                | 227,355,513 |              |  |               |            |              |  |              |           |  |  |   |             |   |  |   | 227,355,513 | 
|Other long-term obligations           |  |                | 21,238,306  |              |  |               | 242,620,050 |              |  |              |           |  |  |   | (137,222,805 | ) |  |   | 126,635,551 | 
|Minority interest                     |  |                |            |              |  |               |            |              |  |              |           |  |  |   | 12,264,398   |   |  |   | 12,264,398  | 
|Stockholders equity                  |  |                | 11,978,921  |              |  |               | 75,667,424  |              |  |              | 36,399,284 |  |  |   | (86,462,529  | ) |  |   | 37,583,100  | 
|                                      |  |                |             |              |  |               |             |              |  |              |            |  |  |   |              |   |  |   |             | 
|                                      |  | $              | 284,590,434 |              |  | $             | 370,399,337 |              |  | $            | 38,172,990 |  |  | $ | (207,608,522 | ) |  | $ | 485,554,239 | 
|                                      |  |                |             |              |  |               |             |              |  |              |            |  |  |   |              |   |  |   |             | 

F-31



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##### Table of Contents



Block Communications, Inc.

Notes to Consolidated Financial Statements (continued)

13.  Supplemental Guarantor Information (continued)

CONSOLIDATING CONDENSED STATEMENT OF INCOME

Year ended December 31, 2002

|                                                        |  |                |             |              |  |               |             |              |  |              |           |  |  |   |             |   |  |   |             |  
|------------------------------------------------------- |  | -------------- | ----------- | ------------ |  | ------------- | ----------- | ------------ |  | ------------ | --------- |  |  | - | ----------- | - |  | - | ----------- | -
|                                                        |  | Unconsolidated |             |              |  |               |             |              |  |             
|                                                        |  |                |             |              |  |               |             |              |  |             
|                                                        |  | Parent         |             | Guarantor    |  | Non-Guarantor |             |              |  |              |           |  |  |  
|                                                        |  | Company        |             | Subsidiaries |  | Subsidiary    |             | Eliminations |  | Consolidated
|                                                        |  |                |             |              |  |               |             |              |  |             
|Revenue                                                 |  | $              | 84,293,867  |              |  | $             | 343,272,828 |              |  | $            | 8,087,156 |  |  | $ | (10,461,126 | ) |  | $ | 425,192,725 |  
|Expenses                                                |  |                | 86,934,454  |              |  |               | 325,245,423 |              |  |              | 6,661,172 |  |  |   | (10,800,966 | ) |  |   | 408,040,083 |  
|                                                        |  |                |             |              |  |               |             |              |  |              |           |  |  |   |             |   |  |   |             |  
|Operating income (loss)                                 |  |                | (2,640,587  | )            |  |               | 18,027,405  |              |  |              | 1,425,984 |  |  |   | 339,840     |   |  |   | 17,152,642  |  
|Nonoperating income (expense)                           |  |                | (9,791,057  | )            |  |               | (1,635,784  | )            |  |              | 18,985    |  |  |   |            |   |  |   | (11,407,856 | )
|                                                        |  |                |             |              |  |               |             |              |  |              |           |  |  |   |             |   |  |   |             |  
|Income (loss) before income taxes
and minority interest |  |                | (12,431,644 | )            |  |               | 16,391,621  |              |  |              | 1,444,969 |  |  |   | 339,840     |   |  |   | 5,744,786   |  
|Provision (credit) for income taxes                     |  |                | (3,656,350  | )            |  |               | 6,383,850   |              |  |              |          |  |  |   |            |   |  |   | 2,727,500   |  
|                                                        |  |                |             |              |  |               |             |              |  |              |           |  |  |   |             |   |  |   |             |  
|Income (loss) before minority interest                  |  |                | (8,775,294  | )            |  |               | 10,007,771  |              |  |              | 1,444,969 |  |  |   | 339,840     |   |  |   | 3,017,286   |  
|Minority interest                                       |  |                |            |              |  |               |            |              |  |              |          |  |  |   | (476,840    | ) |  |   | (476,840    | )
|                                                        |  |                |             |              |  |               |             |              |  |              |           |  |  |   |             |   |  |   |             |  
|Net income (loss)                                       |  | $              | (8,775,294  | )            |  | $             | 10,007,771  |              |  | $            | 1,444,969 |  |  | $ | (137,000    | ) |  | $ | 2,540,446   |  
|                                                        |  |                |             |              |  |               |             |              |  |              |           |  |  |   |             |   |  |   |             |  

CONSOLIDATING CONDENSED STATEMENT OF INCOME

Year ended December 31, 2001

|                                                        |  |                |             |              |  |               |             |              |  |              |           |   |  |   |             |   |  |   |             |  
|------------------------------------------------------- |  | -------------- | ----------- | ------------ |  | ------------- | ----------- | ------------ |  | ------------ | --------- | - |  | - | ----------- | - |  | - | ----------- | -
|                                                        |  | Unconsolidated |             |              |  |               |             |              |  |             
|                                                        |  |                |             |              |  |               |             |              |  |             
|                                                        |  | Parent         |             | Guarantor    |  | Non-Guarantor |             |              |  |              |           |   |  |  
|                                                        |  | Company        |             | Subsidiaries |  | Subsidiary    |             | Eliminations |  | Consolidated
|                                                        |  |                |             |              |  |               |             |              |  |             
|Revenue                                                 |  | $              | 88,025,044  |              |  | $             | 335,123,103 |              |  | $            | 6,088,943 |   |  | $ | (14,672,203 | ) |  | $ | 414,564,887 |  
|Expenses                                                |  |                | 88,035,944  |              |  |               | 333,724,744 |              |  |              | 6,836,328 |   |  |   | (13,587,024 | ) |  |   | 415,009,992 |  
|                                                        |  |                |             |              |  |               |             |              |  |              |           |   |  |   |             |   |  |   |             |  
|Operating income (loss)                                 |  |                | (10,900     | )            |  |               | 1,398,359   |              |  |              | (747,385  | ) |  |   | (1,085,179  | ) |  |   | (445,105    | )
|Nonoperating income (expense)                           |  |                | (23,684,342 | )            |  |               | (1,130,848  | )            |  |              | 36,410    |   |  |   |            |   |  |   | (24,778,780 | )
|                                                        |  |                |             |              |  |               |             |              |  |              |           |   |  |   |             |   |  |   |             |  
|Income (loss) before income taxes
and minority interest |  |                | (23,695,242 | )            |  |               | 267,511     |              |  |              | (710,975  | ) |  |   | (1,085,179  | ) |  |   | (25,223,885 | )
|Provision (credit) for income taxes                     |  |                | (7,818,800  | )            |  |               | 686,400     |              |  |              |          |   |  |   |            |   |  |   | (7,132,400  | )
|                                                        |  |                |             |              |  |               |             |              |  |              |           |   |  |   |             |   |  |   |             |  
|Income (loss) before minority interest                  |  |                | (15,876,442 | )            |  |               | (418,889    | )            |  |              | (710,975  | ) |  |   | (1,085,179  | ) |  |   | (18,091,485 | )
|Minority interest                                       |  |                |            |              |  |               |            |              |  |              |          |   |  |   | 234,622     |   |  |   | 234,622     |  
|                                                        |  |                |             |              |  |               |             |              |  |              |           |   |  |   |             |   |  |   |             |  
|Net income (loss)                                       |  | $              | (15,876,442 | )            |  | $             | (418,889    | )            |  | $            | (710,975  | ) |  | $ | (850,557    | ) |  | $ | (17,856,863 | )
|                                                        |  |                |             |              |  |               |             |              |  |              |           |   |  |   |             |   |  |   |             |  

F-32



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##### Table of Contents



Block Communications, Inc.

Notes to Consolidated Financial Statements (continued)

13.  Supplemental Guarantor Information (continued)

CONSOLIDATING CONDENSED STATEMENT OF INCOME

Year ended December 31, 2000

|                                                        |  |                |            |              |  |               |             |              |  |              |           |  |  |   |             |   |  |   |             |  
|------------------------------------------------------- |  | -------------- | ---------- | ------------ |  | ------------- | ----------- | ------------ |  | ------------ | --------- |  |  | - | ----------- | - |  | - | ----------- | -
|                                                        |  | Unconsolidated |            |              |  |               |             |              |  |             
|                                                        |  |                |            |              |  |               |             |              |  |             
|                                                        |  | Parent         |            | Guarantor    |  | Non-Guarantor |             |              |  |              |           |  |  |  
|                                                        |  | Company        |            | Subsidiaries |  | Subsidiary    |             | Eliminations |  | Consolidated
|                                                        |  |                |            |              |  |               |             |              |  |             
|Revenue                                                 |  | $              | 98,142,356 |              |  | $             | 334,949,406 |              |  | $            | 6,363,000 |  |  | $ | (13,797,660 | ) |  | $ | 425,657,102 |  
|Expenses                                                |  |                | 95,322,378 |              |  |               | 329,511,832 |              |  |              | 5,069,000 |  |  |   | (18,359,862 | ) |  |   | 411,543,348 |  
|                                                        |  |                |            |              |  |               |             |              |  |              |           |  |  |   |             |   |  |   |             |  
|Operating income (loss)                                 |  |                | 2,819,978  |              |  |               | 5,437,574   |              |  |              | 1,294,000 |  |  |   | 4,562,202   |   |  |   | 14,113,754  |  
|Nonoperating income (expense)                           |  |                | 10,429,240 |              |  |               | 2,067,508   |              |  |              |          |  |  |   | (4,226,800  | ) |  |   | 8,269,948   |  
|                                                        |  |                |            |              |  |               |             |              |  |              |           |  |  |   |             |   |  |   |             |  
|Income (loss) before income taxes
and minority interest |  |                | 13,249,218 |              |  |               | 7,505,082   |              |  |              | 1,294,000 |  |  |   | 335,402     |   |  |   | 22,383,702  |  
|Provision (credit) for income taxes                     |  |                | 5,301,986  |              |  |               | 3,874,200   |              |  |              |          |  |  |   |            |   |  |   | 9,176,186   |  
|                                                        |  |                |            |              |  |               |             |              |  |              |           |  |  |   |             |   |  |   |             |  
|Income (loss) before minority interest                  |  |                | 7,947,232  |              |  |               | 3,630,882   |              |  |              | 1,294,000 |  |  |   | 335,402     |   |  |   | 13,207,516  |  
|Minority interest                                       |  |                |           |              |  |               |            |              |  |              |          |  |  |   | (427,020    | ) |  |   | (427,020    | )
|                                                        |  |                |            |              |  |               |             |              |  |              |           |  |  |   |             |   |  |   |             |  
|Net income (loss)                                       |  | $              | 7,947,232  |              |  | $             | 3,630,882   |              |  | $            | 1,294,000 |  |  | $ | (91,618     | ) |  | $ | 12,780,496  |  
|                                                        |  |                |            |              |  |               |             |              |  |              |           |  |  |   |             |   |  |   |             |  

F-33



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##### Table of Contents



Block Communications, Inc.

Notes to Consolidated Financial Statements (continued)

13.  Supplemental Guarantor Information (continued)

CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS

Year ended December 31, 2002

|                                            |  |                |              |              |  |               |             |              |  |              |            |   |  |   |          |   |  |   |              |  
|------------------------------------------- |  | -------------- | ------------ | ------------ |  | ------------- | ----------- | ------------ |  | ------------ | ---------- | - |  | - | -------- | - |  | - | ------------ | -
|                                            |  | Unconsolidated |              |              |  |               |             |              |  |             
|                                            |  |                |              |              |  |               |             |              |  |             
|                                            |  | Parent         |              | Guarantor    |  | Non-Guarantor |             |              |  |              |            |   |  |  
|                                            |  | Company        |              | Subsidiaries |  | Subsidiary    |             | Eliminations |  | Consolidated
|                                            |  |                |              |              |  |               |             |              |  |             
|Net cash provided by operating activities   |  | $              | (28,987,131  | )            |  | $             | 62,449,424  |              |  | $            | 1,172,642  |   |  | $ | 430,792  |   |  | $ | 35,065,727   |  
|Additions to property, plant and equipment  |  |                | (1,011,528   | )            |  |               | (28,255,872 | )            |  |              | (1,063,021 | ) |  |   | (339,840 | ) |  |   | (30,670,261  | )
|Other investing activities                  |  |                | (2,623,606   | )            |  |               | 884,841     |              |  |              |           |   |  |   |         |   |  |   | (1,738,765   | )
|                                            |  |                |              |              |  |               |             |              |  |              |            |   |  |   |          |   |  |   |              |  
|Net cash used in investing activities       |  |                | (3,635,134   | )            |  |               | (27,371,031 | )            |  |              | (1,063,021 | ) |  |   | (339,840 | ) |  |   | (32,409,026  | )
|Issuance of subordinated debt               |  |                | 175,000,000  |              |  |               |            |              |  |              |           |   |  |   |         |   |  |   | 175,000,000  |  
|Borrowings on long term debt                |  |                | 75,000,000   |              |  |               |            |              |  |              |           |   |  |   |         |   |  |   | 75,000,000   |  
|Payments on long term debt                  |  |                | (142,874,000 | )            |  |               |            |              |  |              |           |   |  |   |         |   |  |   | (142,874,000 | )
|Payments on revolving credit agreements     |  |                | (92,500,000  | )            |  |               |            |              |  |              |           |   |  |   |         |   |  |   | (92,500,000  | )
|Other financing activities                  |  |                | 23,664,987   |              |  |               | (34,557,823 | )            |  |              | (2,400,000 | ) |  |   | (90,952  | ) |  |   | (13,383,788  | )
|                                            |  |                |              |              |  |               |             |              |  |              |            |   |  |   |          |   |  |   |              |  
|Net cash provided by financing activities   |  |                | 38,290,987   |              |  |               | (34,557,823 | )            |  |              | (2,400,000 | ) |  |   | (90,952  | ) |  |   | 1,242,212    |  
|                                            |  |                |              |              |  |               |             |              |  |              |            |   |  |   |          |   |  |   |              |  
|Increase (decrease) in cash and equivalents |  |                | 5,668,722    |              |  |               | 520,570     |              |  |              | (2,290,379 | ) |  |   |         |   |  |   | 3,898,913    |  
|Cash and equivalents at beginning of year   |  |                | 3,186,078    |              |  |               | (64,937     | )            |  |              | 2,761,591  |   |  |   |         |   |  |   | 5,882,732    |  
|                                            |  |                |              |              |  |               |             |              |  |              |            |   |  |   |          |   |  |   |              |  
|Cash and equivalents at end of year         |  | $              | 8,854,800    |              |  | $             | 455,633     |              |  | $            | 471,212    |   |  | $ |         |   |  | $ | 9,781,645    |  
|                                            |  |                |              |              |  |               |             |              |  |              |            |   |  |   |          |   |  |   |              |  

F-34



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##### Table of Contents



Block Communications, Inc.

Notes to Consolidated Financial Statements (continued)

13.  Supplemental Guarantor Information (continued)

CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS

Year ended December 31, 2001

|                                            |  |                |             |              |  |               |             |              |  |              |           |   |  |   |            |   |  |   |             |  
|------------------------------------------- |  | -------------- | ----------- | ------------ |  | ------------- | ----------- | ------------ |  | ------------ | --------- | - |  | - | ---------- | - |  | - | ----------- | -
|                                            |  | Unconsolidated |             |              |  |               |             |              |  |             
|                                            |  |                |             |              |  |               |             |              |  |             
|                                            |  | Parent         |             | Guarantor    |  | Non-Guarantor |             |              |  |              |           |   |  |  
|                                            |  | Company        |             | Subsidiaries |  | Subsidiary    |             | Eliminations |  | Consolidated
|                                            |  |                |             |              |  |               |             |              |  |             
|Net cash provided by operating activities   |  | $              | (12,562,185 | )            |  | $             | 48,669,183  |              |  | $            | 2,446,601 |   |  | $ | (1,273,127 | ) |  | $ | 37,280,472  |  
|Additions to property, plant and equipment  |  |                | (2,826,823  | )            |  |               | (59,784,679 | )            |  |              | (586,010  | ) |  |   | 1,043,979  |   |  |   | (62,153,533 | )
|Other investing activities                  |  |                | 5,975,472   |              |  |               | (1,580,099  | )            |  |              |          |   |  |   |           |   |  |   | 4,395,373   |  
|                                            |  |                |             |              |  |               |             |              |  |              |           |   |  |   |            |   |  |   |             |  
|Net cash used in investing activities       |  |                | 3,148,649   |              |  |               | (61,364,778 | )            |  |              | (586,010  | ) |  |   | 1,043,979  |   |  |   | (57,758,160 | )
|Borrowing on term loan agreement            |  |                | 49,833,000  |              |  |               |            |              |  |              |          |   |  |   |           |   |  |   | 49,833,000  |  
|Payments on revolving credit agreements     |  |                | (25,620,229 | )            |  |               |            |              |  |              |          |   |  |   |           |   |  |   | (25,620,229 | )
|Cash dividends paid                         |  |                | (582,977    | )            |  |               |            |              |  |              |          |   |  |   |           |   |  |   | (582,977    | )
|Other financing activities                  |  |                | (13,052,080 | )            |  |               | 11,340,588  |              |  |              |          |   |  |   | 229,148    |   |  |   | (1,482,344  | )
|                                            |  |                |             |              |  |               |             |              |  |              |           |   |  |   |            |   |  |   |             |  
|Net cash provided by financing activities   |  |                | 10,577,714  |              |  |               | 11,340,588  |              |  |              |          |   |  |   | 229,148    |   |  |   | 22,147,450  |  
|                                            |  |                |             |              |  |               |             |              |  |              |           |   |  |   |            |   |  |   |             |  
|Increase (decrease) in cash and equivalents |  |                | 1,164,178   |              |  |               | (1,355,007  | )            |  |              | 1,861,591 |   |  |   |           |   |  |   | 1,669,762   |  
|Cash and equivalents at beginning of year   |  |                | 2,021,900   |              |  |               | 1,290,070   |              |  |              | 901,000   |   |  |   |           |   |  |   | 4,212,970   |  
|                                            |  |                |             |              |  |               |             |              |  |              |           |   |  |   |            |   |  |   |             |  
|Cash and equivalents at end of year         |  | $              | 3,186,078   |              |  | $             | (64,937     | )            |  | $            | 2,761,591 |   |  | $ |           |   |  | $ | 5,882,732   |  
|                                            |  |                |             |              |  |               |             |              |  |              |           |   |  |   |            |   |  |   |             |  

F-35



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##### Table of Contents



Block Communications, Inc.

Notes to Consolidated Financial Statements (continued)

13.  Supplemental Guarantor Information (continued)

CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS

Year ended December 31, 2000

|                                            |  |                |             |              |  |               |             |              |  |              |           |   |  |   |          |   |  |   |             |  
|------------------------------------------- |  | -------------- | ----------- | ------------ |  | ------------- | ----------- | ------------ |  | ------------ | --------- | - |  | - | -------- | - |  | - | ----------- | -
|                                            |  | Unconsolidated |             |              |  |               |             |              |  |             
|                                            |  |                |             |              |  |               |             |              |  |             
|                                            |  | Parent         |             | Guarantor    |  | Non-Guarantor |             |              |  |              |           |   |  |  
|                                            |  | Company        |             | Subsidiaries |  | Subsidiary    |             | Eliminations |  | Consolidated
|                                            |  |                |             |              |  |               |             |              |  |             
|Net cash provided by operating activities   |  | $              | (6,274,442  | )            |  | $             | 43,244,477  |              |  | $            | 1,319,000 |   |  | $ | 376,724  |   |  | $ | 38,665,759  |  
|Additions to property, plant and equipment  |  |                | (2,948,550  | )            |  |               | (76,757,964 | )            |  |              | (257,000  | ) |  |   | (376,602 | ) |  |   | (80,340,116 | )
|Other investing activities                  |  |                |            |              |  |               | (2,360,787  | )            |  |              |          |   |  |   |         |   |  |   | (2,360,787  | )
|                                            |  |                |             |              |  |               |             |              |  |              |           |   |  |   |          |   |  |   |             |  
|Net cash used in investing activities       |  |                | (2,948,550  | )            |  |               | (79,118,751 | )            |  |              | (257,000  | ) |  |   | (376,602 | ) |  |   | (82,700,903 | )
|Net borrowings on long-term debt            |  |                | 6,333,000   |              |  |               |            |              |  |              |          |   |  |   |         |   |  |   | 6,333,000   |  
|Payments on revolving credit agreements     |  |                | 39,120,229  |              |  |               |            |              |  |              |          |   |  |   | 317,000  |   |  |   | 39,437,229  |  
|Cash dividends paid                         |  |                | (1,448,671  | )            |  |               |            |              |  |              |          |   |  |   |         |   |  |   | (1,448,671  | )
|Other financing activities                  |  |                | (33,635,423 | )            |  |               | 32,007,970  |              |  |              | (161,000  | ) |  |   | (122     | ) |  |   | (1,788,575  | )
|                                            |  |                |             |              |  |               |             |              |  |              |           |   |  |   |          |   |  |   |             |  
|Net cash provided by financing activities   |  |                | 10,369,135  |              |  |               | 32,007,970  |              |  |              | (161,000  | ) |  |   | 316,878  |   |  |   | 42,532,983  |  
|                                            |  |                |             |              |  |               |             |              |  |              |           |   |  |   |          |   |  |   |             |  
|Increase (decrease) in cash and equivalents |  |                | 1,146,143   |              |  |               | (3,866,304  | )            |  |              | 901,000   |   |  |   | 317,000  |   |  |   | (1,502,161  | )
|Cash and equivalents at beginning of year   |  |                | 875,757     |              |  |               | 5,156,374   |              |  |              |          |   |  |   | (317,000 | ) |  |   | 5,715,131   |  
|                                            |  |                |             |              |  |               |             |              |  |              |           |   |  |   |          |   |  |   |             |  
|Cash and equivalents at end of year         |  | $              | 2,021,900   |              |  | $             | 1,290,070   |              |  | $            | 901,000   |   |  | $ |         |   |  | $ | 4,212,970   |  
|                                            |  |                |             |              |  |               |             |              |  |              |           |   |  |   |          |   |  |   |             |  

F-36



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##### Table of Contents



|                                               
|-----------------------------------------------
|Block Communications, Inc. and Subsidiaries    
|Schedule II - Valuation and Qualifying Accounts
|Three years ended December 31, 2002            
|(in thousands)                                 

|                                                 |  |                 |       |                    |  |               |       |                   |  |            |       |  |  |   |       | 
|------------------------------------------------ |  | --------------- | ----- | ------------------ |  | ------------- | ----- | ----------------- |  | ---------- | ----- |  |  | - | ----- | 
|                                                 |  | Balance at      |       | Charged to         |  |               |       |                   |  | Balance at
|                                                 |  | January 1, 2002 |       | costs and expenses |  | Deductions(1) |       | December 31, 2002
|                                                 |  |                 |       |                    |  |               |       |                  
|Allowance for Doubtful Receivables
and discounts |  | $               | 4,861 |                    |  | $             | 2,891 |                   |  | $          | 4,200 |  |  | $ | 3,552 | 
|Deferred Tax Valuation Allowance                 |  |                 | 587   |                    |  |               | 158   |                   |  |            |      |  |  |   | 745   | 

|                                                 |  |                 |       |                    |  |               |       |                   |  |            |       |  |  |   |       | 
|------------------------------------------------ |  | --------------- | ----- | ------------------ |  | ------------- | ----- | ----------------- |  | ---------- | ----- |  |  | - | ----- | 
|                                                 |  | Balance at      |       | Charged to         |  |               |       |                   |  | Balance at
|                                                 |  | January 1, 2001 |       | costs and expenses |  | Deductions(1) |       | December 31, 2001
|                                                 |  |                 |       |                    |  |               |       |                  
|Allowance for Doubtful Receivables
and discounts |  | $               | 4,674 |                    |  | $             | 5,066 |                   |  | $          | 4,879 |  |  | $ | 4,861 | 
|Deferred Tax Valuation Allowance                 |  |                 |      |                    |  |               | 587   |                   |  |            |      |  |  |   | 587   | 

|                                                 |  |                 |       |                    |  |               |       |                   |  |            |       |  |  |   |       | 
|------------------------------------------------ |  | --------------- | ----- | ------------------ |  | ------------- | ----- | ----------------- |  | ---------- | ----- |  |  | - | ----- | 
|                                                 |  | Balance at      |       | Charged to         |  |               |       |                   |  | Balance at
|                                                 |  | January 1, 2000 |       | costs and expenses |  | Deductions(1) |       | December 31, 2000
|                                                 |  |                 |       |                    |  |               |       |                  
|Allowance for Doubtful Receivables
and discounts |  | $               | 3,695 |                    |  | $             | 2,287 |                   |  | $          | 1,308 |  |  | $ | 4,674 | 



---

|(1) |  | Deductions represent accounts receivable written off as uncollectible or
credits given.
|--- |  | ---------------------------------------------------------------------------------------

S-1



---



##### Table of Contents









SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Block Communications, Inc. (the Registrant) has duly
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

|                     |  |     |  |                                                                              
|-------------------- |  | --- |  | -----------------------------------------------------------------------------
|                     |  |     |  | BLOCK COMMUNICATIONS, INC.                                                   
|                    
|Date: March 27, 2003 |  | By: |  | /s/ Allan Block

Allan Block, Managing Director
(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:

|                                         |  |                                                                |  |               
|---------------------------------------- |  | -------------------------------------------------------------- |  | --------------
|Signatures                               |  | Title                                                          |  | Date          
|                                         |  |                                                                |  |               
|                                         |  |                                                                |  |               
|                                        
|/s/ William Block, Jr.William Block, Jr. |  | Chairman                                                       |  | March 27, 2003
|                                        
|/s/ Allan BlockAllan Block               |  | Managing Director
(Principal Executive
Officer)                |  | March 27, 2003
|                                        
|/s/ David G. HueyDavid G. Huey           |  | President and Director                                         |  | March 27, 2003
|                                        
|/s/ Gary J. BlairGary J. Blair           |  | Executive Vice President/
Chief Financial Officer and
Director |  | March 27, 2003
|                                        
|/s/ Jodi L. MiehlsJodi L. Miehls         |  | Treasurer/Chief
Accounting Officer                             |  | March 27, 2003
|                                        
|William Block                            |  | Director                                                       |  | March 27, 2003
|                                        
|/s/ John R. BlockJohn R. Block           |  | Director                                                       |  | March 27, 2003
|                                        
|/s/ Donald
G. BlockDonald G. Block       |  | Director                                                       |  | March 27, 2003
|                                        
|Mary G. Block                            |  | Director                                                       |  | March 27, 2003





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##### Table of Contents



|                                     |  |                              |  |               
|------------------------------------ |  | ---------------------------- |  | --------------
|/s/ Karen D. JohneseKaren D. Johnese |  | Director                     |  | March 27, 2003
|                                    
|Cyrus P. Block                       |  | Director                     |  | March 27, 2003
|                                    
|/s/ Fritz ByersFritz Byers           |  | General Counsel and
Director |  | March 27, 2003
|                                    
|/s/ Diana BlockDiana Block           |  | Director                     |  | March 27, 2003
|                                    
|/s/ Harold O. DavisHarold O. Davis   |  | Director                     |  | March 27, 2003





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##### Table of Contents



Certification of the Managing Director

I, Allan Block, certify that:



| | 1. |  | I have reviewed this annual report on Form 10-K of Block
Communications, Inc.;                                                                                                                                                                                                                                          
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
|
| | 3. |  | Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;                   
|
| | 4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:                                                                                               



| | a. |  | designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this annual report is being prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b. |  | evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this annual report (the Evaluation
Date); and                                                                                                  
| | c. |  | presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;                                                                                                                        
|

| | 5. |  | The registrants other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrants auditors and
the audit committee of the registrants board of directors (or persons
performing the equivalent functions):
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a. |  | all significant deficiencies in the design or operation
of internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data
and have identified for the registrants auditors any material
weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b. |  | any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                        
|

| | 6. |  | The registrants other certifying officers and I have indicated in
this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

/s/  Allan BlockName:       Allan Block
Title:      Managing Director
Date:       March 27, 2003




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##### Table of Contents



Certification of the Chief Financial Officer

I, Gary Blair, certify that:



| | 1. |  | I have reviewed this annual report on Form 10-K of Block Communications,
Inc.;                                                                                                                                                                                                                                          
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
|
| | 3. |  | Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;                   
|
| | 4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:                                                                                               



| | a. |  | designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this annual report is being prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b. |  | evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this annual report (the Evaluation
Date); and                                                                                                  
| | c. |  | presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;                                                                                                                        
|

| | 5. |  | The registrants other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrants auditors and
the audit committee of the registrants board of directors (or persons
performing the equivalent functions):
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|

| | a. |  | all significant deficiencies in the design or operation
of internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data
and have identified for the registrants auditors any material
weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b. |  | any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                        



| | 6. |  | The registrants other certifying officers and I have indicated in
this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

/s/   Gary BlairName:       Gary Blair
Title:      Executive Vice-President / Chief Financial Officer
Date:       March 27, 2003


Supplemental Information to be
Furnished With Reports Filed Pursuant to Section 15(d) of the
Act by Registrants Which Have Not Registered Securities Pursuant to
Section 12 of the Act

No proxy statement,
form of proxy or other proxy soliciting material has been, and it is
not currently anticipated that any such material will be, sent to
more than ten of the registrants security holders with respect
any annual or other meeting of security holders in 2003.

No annual report to
security holders covering the registrants fiscal year ended
December 31, 2002 has previously been sent to security holders,
and it is not currently anticipated that any such report other than
this Annual Report on Form 10-K will be sent to the Registrants
security holders.