##### Table of Contents









UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




---

Form 10-K

|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark one) |  |                                                                                             
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR
    15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|          
|           |  | For the fiscal year ended December 31,
    2003.                                            
|          
|or        
|          
|o          |  | 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
    incorporation or organization) |  | (I.R.S. Employer
    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 þ     No o

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.  þ

Indicate by check
mark whether the registrant is an accelerated filer (as defined
in Exchange Act
Rule 12b-2).  Yes o     No þ

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 24, 2004, there were outstanding 29,400 shares
of the registrants Voting Common Stock and
428,613 shares of its Non-voting Common Stock.



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TABLE OF CONTENTS



|                               |                                                                                                         |                                                                       |  |  |  |  |  | 
|------------------------------ | ------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------- |  |  |  |  |  | 
|                               |                                                                                                         | Forward-Looking Statements                                           
|                               |                                                                                                         | Industry and Market Data                                             
|PART I                        
|                               | Item 1. Business                                                                                       
|                               |                                                                                                         | Cable Television                                                     
|                               |                                                                                                         | Newspaper Publishing                                                 
|                               |                                                                                                         | Other Operations                                                     
|                               |                                                                                                         | Regulation                                                           
|                               |                                                                                                         | Employees                                                            
|                               | Item 2. Properties                                                                                     
|                               |                                                                                                         | Cable Television                                                     
|                               |                                                                                                         | Publishing                                                           
|                               |                                                                                                         | Television Broadcasting                                              
|                               |                                                                                                         | Miscellaneous                                                        
|Item 3. Legal Proceedings     
|                               | Item 4. Submission of Matters to a Vote of Security Holders                                            
|PART II                       
|                               | Item 5. Market for Registrants Common Equity and Related Stockholder Matters                          
|                               | Item 6. Selected Financial Data                                                                        
|                               | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations          
|                               |                                                                                                         | Overview                                                             
|                               |                                                                                                         | Year Ended December 31, 2003 Compared to Year Ended December 31, 2002
|                               |                                                                                                         | Year Ended December 31, 2002 Compared to Year Ended December 31, 2001
|                               |                                                                                                         | Liquidity and Capital Resources                                      
|                               |                                                                                                         | Recent Accounting Pronouncements                                     
|                               |                                                                                                         | Critical Accounting Policies and Estimates                           
|                               |                                                                                                         | Pension and postretirement benefits                                  
|                               |                                                                                                         | Income Taxes                                                         
|                               |                                                                                                         | Broadcast Rights                                                     
|                               |                                                                                                         | Goodwill and other intangible assets                                 
|                               |                                                                                                         | Self-insurance liabilities                                           
|                               |                                                                                                         | Accounts receivable allowances                                       
|                               |                                                                                                         | Stock-based compensation                                             
|                               |                                                                                                         | Revenue Recognition                                                  
|                               |                                                                                                         | Factors That Could Affect Future Results                             
|                               |                                                                                                         | Risks Relating to Our Cable Television Business                      
|                               |                                                                                                         | Risks Related to Our Newspaper Publishing Business                   
|                               |                                                                                                         | Risks Related to Our Television Broadcasting Business                
|                               | 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           
|                               | Item 9A. Controls and Procedures                                                                       
|PART III                      
|                               | Item 11. Executive Compensation                                                                        
|                               | Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|                               | Item 13. Relationships and Related Transactions                                                        
|PART IV                       
|REPORT OF INDEPENDENT AUDITORS
|                               | CONSOLIDATED STATEMENTS OF INCOME                                                                      
|                               | CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY                                                         
|                               | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                             
|                               |                                                                                                         | 1. Significant Accounting Policies                                   
|                               |                                                                                                         | 2. Acquisitions                                                      
|                               |                                                                                                         | 3. Discontinued Operations                                           
|                               |                                                                                                         | 4. Income Taxes                                                      
|                               |                                                                                                         | 5. Goodwill and Other Intangibles                                    
|                               |                                                                                                         | 9. Postretirement Benefits other than Pensions                       
|                               |                                                                                                         | 10. Long-Term Debt and Credit Arrangements                           
|                               |                                                                                                         | 11. Commitments and Contingencies                                    
|                               |                                                                                                         | 13. Selected Quarterly Financial Data (unaudited)                    
|                               |                                                                                                         | 14. Supplemental Guarantor Information                               
|SIGNATURES                    
|INDEX TO EXHIBITS             
|Exhibit 4.11                  
|Exhibit 14.1                  
|Exhibit 31.1                  
|Exhibit 31.2                  
|Exhibit 32.1                  
|Exhibit 32.2                  



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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, 2001,
2002 and 2003, and circulation data for The Bladeis
based on average paid circulation for the twelve months ended
September 30, 2001, 2002 and 2003, 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
2003 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, 2003, we had approximately
149,000 subscribers. Our primary cable system located in the
greater Toledo metropolitan area serves approximately 131,000
subscribers. 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. It is also one of the largest urban cable systems not
owned or controlled by one of the biggest multiple system
operators. We publish two daily metropolitan newspapers, the
Pittsburgh Post-Gazette in Pittsburgh, Pennsylvania and The
Blade in 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 384,600 and
593,850, 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, 2003, we had revenues, operating income,
and a net loss of $420.1 million, $8.1 million, and
$40.6 million, respectively.

1



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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
awarded a franchise in Toledo to develop our cable system,
which, with over 37 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 or the
Toledo system) and the Sandusky, Ohio area (Erie County
CableSystem). In addition to traditional cable television
service, we also provide high-speed cable modem Internet access
and digital cable service in both systems. Our cable television
operations generated revenues and operating income of
$109.5 million and $9.0 million, respectively, in the
year ended December 31, 2003.

In 1997, we began the rebuild of Buckeye
CableSystem 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. 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 282
analog and digital video and digital music channels, high-speed
Internet and high-definition digital television service. In
2004, the systems will offer video-on-demand, subscription
video-on-demand, and digital video recording service.

On March 29, 2002, we completed an asset
exchange with Comcast Corp. 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 enabled 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 Toledo 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 282 analog and digital video and digital music channels,
which can be significantly expanded by recapturing some of our
91 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.

2



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All of our Toledo system subscribers are served
by our advanced 870 MHz system from a single headend. In
addition, our Toledo headend serves our Erie County system
through a fiber interconnection. A rebuild of our Erie County
system began in 2003 and approximately 26% of the subscribers
were converted as of year end. Completion of the Erie County
system rebuild will enable us to serve 100% of our subscribers
from a single headend. While these systems were initially
designed to support 500 homes per fiber node, our cable systems
can easily be divided to an 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.

Offer Local Cable Exclusive
Programming.Since 1989, Buckeye
CableSystem has provided its customers with a locally programmed
channel, TV5, which is run in the same manner as a broadcast
station- obtaining its own programming through syndications. In
1995, TV5 became the exclusive market affiliate for the WB
Network, the first cable channel in the country to be so
designated.

In January 2004, Buckeye launched Buckeye Cable
Sports Network (BCSN), a 24-hour per day, locally produced
channel for local sports. BCSN covers men and womens
high-school, college, professional and amateur sports, mainly
from the Northwest Ohio area on a live and tape-delayed basis.
Buckeye believes these locally controlled and programmed
channels offer a competitive advantage over other multichannel
video competitors.

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 Blade provides
fill-in advertising space to market our cable services and to
promote our brand awareness at a very low incremental cost. We
advertise our services on BCSN and 38 other cable
channels  over 10,000 spots per month in
2003  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 our cable
systems 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. Digital cable customers exceeded 38,000 at
December 31, 2003, a growth of nearly 12,000 customers
during the twelve month period. In addition, Buckeye CableSystem
launched high-definition digital television service in 2003 and
has launched video-on-demand and subscription video-on-demand
service in the first quarter of 2004.

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
relatively low penetration rate in Toledo.



| |                          
| | -------------------------
| | 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, digital cable service, and high-definition
digital television service. We plan to continue to enhance these
services by adding new programming, digital video recording
service, and other advanced services as they are developed, as
well as expansion of our video-on-demand and subscription
video-on-demand products.

3



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| |                               
| | ------------------------------
| | 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, local public, government, and leased access
channels. In addition, our Buckeye CableSystem offers BCSN and
WB TV5 as part of the limited basic service.

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, The Movie Channel and STARZ 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.

The significant expansion of bandwidth capacity
resulting from the rebuild of our systems allows us to expand
the use of multichannel packaging strategies for marketing and
promoting premium and niche programming services.

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 91 analog video channels including
    9 multiplexed premium channels and six pay-per-view
    channels;                              
|
| |  | a new product tier consisting of eight 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:



| |   |                                                                 
| | - | ----------------------------------------------------------------
| |  | 68 analog video channels;                                       
|
| |  | up to 51 bundled digital basic channels;                        
|
| |  | up to 47 multiplexed premium channels;                          
|
| |  | up to 64 pay-per-view movie and sports
    channels;            
|
| |  | up to 45 digital music channels;                                
|
| |  | up to seven high-definition digital television
    channels; and

4



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| |   |                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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 100% of
Buckeyes system, representing approximately 88% of our
total subscribers. When we complete the rebuild of our Erie
County system, 100% of our systems will have full-featured
digital offerings, creating an opportunity to increase monthly
revenue per subscriber. We expect this rebuild to be complete by
the end of the second quarter of 2004.



| |                           
| | --------------------------
| | High-Speed Internet Access

Our broadband cable networks enable data to be
transmitted up to 70 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
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 100%
of Buckeyes system, representing approximately 88% of our
total subscribers. Our Erie County system employs a one-way
telco-return cable modem on its non-rebuilt system and two-way
cable modem service on its rebuilt plant. As of
December 31, 2003, approximately 26% of Erie Countys
subscribers have been converted to the rebuilt system.



| |            
| | -----------
| | 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 also sell
advertising on our local channels, WB TV5 and BCSN. 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, 2003.



| |                
| | ---------------
| | Future Services

Interactive
Services.Our rebuilt cable networks
(Erie County to be completed by the end of the second quarter of
2004) have 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.
    This service was launched in the first quarter of 2004 on the
    Toledo system and will be launched in the second quarter of 2004
    on the Erie County system.        
|
| |  | 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.
|
| |  | Digital 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 telephone service
    that provides subscribers with local and long-distance calling.                                                                                                                                                                                                                                                     
|
| |  | Tailored advertising that could allow cable
    networks to transmit advertisements tailored to several target
    audiences simultaneously during a single program transmission.                                                                                                                                                                                       

5



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| |   |                                                                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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.



| |                        
| | -----------------------
| | 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, 2003,
our monthly fees for expanded basic cable service were $36.99
for Toledo (Buckeye) and $36.15 for Erie County. Effective
January 1, 2004, we increased our average monthly fees for
expanded basic service to $39.99 for Toledo (Buckeye) and $39.15
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      |                                   | $           | 10.70-$12.15 |             
|Expanded basic cable service     |                                   | $           | 39.15-$39.99 |             
|Premium services                 |                                   | $           | 8.95-$13.95  |             
|Pay-Per-View (per event)         |                                   | $           | 3.95-$49.95  |             
|Digital cable packages           |                                   | $           | 46.94-$88.99 |             
|High-definition programming tier |                                   | $           | 10.95        |             
|High-speed cable modem:          |                                   |             |              |             
|                                 | Residential (cable subscriber)    |             | $            | 39.99-$44.99 | 
|                                 | Residential (cable nonsubscriber) |             | $            | 49.99-$54.99 | 
|                                 | Commercial                        |             | $            | 79.99        | 

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

6



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| |              
| | -------------
| | Cable Systems

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

|                                                    |                                    |                  |   |             |       |        |   |        |      |   |   |         |      |  
|--------------------------------------------------- | ---------------------------------- | ---------------- | - | ----------- | ----- | ------ | - | ------ | ---- | - | - | ------- | ---- | -
|                                                    |                                    | Toledo (Buckeye) |   | Erie County |       |       
|                                                    |                                    | CableSystem      |   | CableSystem |       | Totals
|                                                    |                                    |                  |   |             |       |       
|Financial Data:                                     |                                    |                  |   |             |       |        |   |        |      |   |   |        
|Revenue (in thousands)                              |                                    |                  |   |             |       |        |   |        |      |   |   |        
|                                                    | Year ended December 31, 2003       |                  | $ | 98,973      |       |        | $ | 10,561 |      |   | $ | 109,534 |     
|Average monthly revenue per basic subscriber(1):    |                                    |                  |   |             |       |        |   |        |      |   |   |        
|                                                    | Year ended December 31, 2003       |                  | $ | 62.27       |       |        | $ | 46.86  |      |   | $ | 60.35   |     
|Cable Operating Data (as of December 31,
    2003): |                                    |                  |   |             |       |        |   |        |      |   |   |        
|Basic:                                              |                                    |                  |   |             |       |        |   |        |      |   |   |        
|                                                    | Homes passed(2)                    |                  |   | 220,724     |       |        |   | 29,155 |      |   |   | 249,879 |     
|                                                    | Subscribers                        |                  |   | 131,213     |       |        |   | 17,965 |      |   |   | 149,178 |     
|                                                    | Penetration(3)                     |                  |   | 59.4        | %     |        |   | 61.6   | %    |   |   | 59.7    | %   
|Premium:                                            |                                    |                  |   |             |       |        |   |        |      |   |   |        
|                                                    | Units(4)                           |                  |   | 58,277      |       |        |   | 3,181  |      |   |   | 61,458  |     
|                                                    | Penetration(5)                     |                  |   | 44.4        | %     |        |   | 17.7   | %    |   |   | 41.2    | %   
|Digital:                                            |                                    |                  |   |             |       |        |   |        |      |   |   |        
|                                                    | Digital-ready basic subscribers(6) |                  |   | 131,213     |       |        |   | 5,600  |      |   |   | 136,813 |     
|                                                    | Subscribers                        |                  |   | 36,721      |       |        |   | 1,352  |      |   |   | 38,073  |     
|                                                    | Penetration(7)                     |                  |   | 28.0        | %     |        |   | 24.1   | %    |   |   | 27.8    | %   
|Cable Modem:                                        |                                    |                  |   |             |       |        |   |        |      |   |   |        
|                                                    | Homes passed(2)                    |                  |   | 220,724     |       |        |   | 29,155 |      |   |   | 249,879 |     
|                                                    | Subscribers                        |                  |   | 28,726      |       |        |   | 1,081  |      |   |   | 29,807  |     
|                                                    | Penetration(3)                     |                  |   | 13.0        | %     |        |   | 3.7    | %    |   |   | 11.9    | %   
|Cable Network Data:                                 |                                    |                  |   |             |       |        |   |        |      |   |   |        
|                                                    | Miles of plant  coax              |                  |   | 2,160       |       |        |   | 345    |      |   |   | 2,505   |     
|                                                    | Miles of plant  fiber(8)          |                  |   | 2,256       |       |        |   | 145    |      |   |   | 2,401   |     
|                                                    | Density(9)                         |                  |   | 102         |       |        |   | 84     |      |   |   | 100     |     
|                                                    | Plant bandwidth(10)                |                  |   |             |       |        |   |        |      |   |   |         |     
|                                                    |                                    | 870 MHz          |   |             | 100.0 | %      |   |        | 31.0 | % |   |         | 92.0 | %
|                                                    |                                    | 430 MHz          |   |             |      |        |   |        | 69.0 | % |   |         | 8.0  | %



---



|    |                                                                                                                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Represents average monthly revenues for the
    period divided by the average number of basic subscribers
    throughout the period.                                                                                                         
|   
|(2) | 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.
|   
|(3) | Represents subscribers to the named service as a
    percentage of homes passed.                                                                                                                                                             
|   
|(4) | 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.                                                
|   
|(5) | 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.                                     
|   
|(6) | Represents basic subscribers to whom digital
    service is available.                                                                                                                                                                       
|   
|(7) | Represents digital subscribers as a percentage of
    digital-ready basic subscribers.                                                                                                                                                       

7



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##### Table of Contents





|    |                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------
|(8) | Fiber plant serves cable hubs and nodes as well
    as telecom customers served by Buckeye TeleSystem.
|   
|(9) | Density represents homes passed divided by miles
    of coaxial plant.                                



|     |                                                                                                                          
|---- | -------------------------------------------------------------------------------------------------------------------------
|(10) | Plant bandwidth represents the percentage of
    customers within the system served by the indicated plant
    bandwidth.



| |               
| | --------------
| | Markets Served

Greater Toledo Metropolitan
Area.As of December 31, 2003,
Toledos system passed approximately 221,000 homes and
served approximately 131,000 basic subscribers. The 25
franchises served by Buckeye have a combined population of
approximately 554,000. With a population of 618,203, the
three-county Toledo Metropolitan Statistical Area is the 69th
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, 2003, our Erie County system passed
approximately 29,000 homes and served approximately 18,000 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 Toledos 870 MHz
HFC system consists of approximately 2,160 miles of coaxial
cable and 2,256 miles of fiber optic cable, passing
approximately 221,000 households and serving approximately
131,000 customers. The system includes a single headend. 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
91 analog video channels on our advanced analog service and
approximately 282 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 Toledo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.

8



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##### Table of Contents



Our Erie County system is in the process of being
rebuilt. The non-rebuilt portion, which serves approximately 69%
of Eries subscribers at December 31, 2003, operates
on a 430 MHz one-way coaxial cable plant. The rebuilt
system is an 870 MHz two-way interactive system. When the
rebuild is complete, the Erie County system, which currently
operates primarily through its own headend, will receive
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
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 6.2% and
11.0% in 2003 and 2002, 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.

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 was 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 produced about 25 high school
football and basketball games in 2003. We have also offered to
cablecast a select number of council and trustees meetings from
other franchise areas.

In January 2004, the Toledo system launched BCSN,
a 24-hour per day, locally produced channel for local sports.
BCSN covers men and womens high school, college,
professional and amateur sports, mainly from the Northwest Ohio
area on a live and tape delayed basis. Buckeye believes local
programming such as BCSN offers a competitive advantage over
direct broadcast satellite competitors.

9



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##### Table of Contents



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;
|
| |  | 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. 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.

10



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##### Table of Contents



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,
and have recently entered into national agreements with
incumbent local exchange carriers, SBC and Verizon, to begin
reselling their services. 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.

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 15,500 homes,
or approximately 7% of the total homes passed by our Toledo
cable system. We believe that the capital costs of matching
Buckeyes rebuilt system, together with our advertising
dominance, exclusive locally produced sports channel (BCSN), 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. There are a few SMATV systems in the Toledo area
serving apartments and mobile home parks. 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.

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.

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.

11



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##### Table of Contents



Competition 
Internet Services

We first began to offer broadband Internet access
in mid-1999. As of December 31, 2003, we had approximately
29,800 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.

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.

A rulemaking proceeding is pending at the FCC
regarding the appropriate regulatory treatment of Internet
access offered by cable companies over cable plant. 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-Gazette and The Blade, are the dominant
newspapers in their respective markets. Our newspapers have a
combined daily and Sunday average paid circulation of
approximately 384,600 and 593,850, 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 and an
operating loss of $251.3 million and $1.5 million,
respectively, in the year ended December 31, 2003. 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-Gazette in 1992 and 1998. 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 the Post-Gazette initiative had been
    completed by January 1, 2003, we would have realized
    savings of approximately $1.5 million in newsprint costs
    for the year ended December 31, 2003.

12



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##### Table of Contents





| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 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 245,600 and a
Sunday average paid circulation of approximately 408,100,
resulting in penetration of approximately 40% daily and 61%
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-Gazetteis
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.

13



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##### Table of Contents



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

|                                              |                            |                |   |         |         |      |   |         |         |  |   |         |         | 
|--------------------------------------------- | -------------------------- | -------------- | - | ------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- | 
|                                              |                            | 2001           |   | 2002    |         | 2003
|                                              |                            |                |   |         |         |     
|Circulation(1):                               |                            |                |   |         |         |      |   |         |         |  |   |        
|                                              | Daily (excluding Saturday) |                |   | 241,827 |         |      |   | 244,969 |         |  |   | 245,624 |        
|                                              | Sunday                     |                |   | 412,691 |         |      |   | 410,879 |         |  |   | 408,102 |        
|Advertising lineage (in thousands of inches): |                            |                |   |         |         |      |   |         |         |  |   |        
|                                              | Retail                     |                |   | 613     |         |      |   | 564     |         |  |   | 512     |        
|                                              | National                   |                |   | 143     |         |      |   | 139     |         |  |   | 156     |        
|                                              | Classified                 |                |   | 671     |         |      |   | 646     |         |  |   | 620     |        
|                                              |                            |                |   |         |         |      |   |         |         |  |   |        
|                                              | Total                      |                |   | 1,427   |         |      |   | 1,349   |         |  |   | 1,288   |        
|                                              | Part run                   |                |   | 204     |         |      |   | 217     |         |  |   | 175     |        
|                                              |                            |                |   |         |         |      |   |         |         |  |   |        
|                                              |                            | Total inches   |   |         | 1,631   |      |   |         | 1,566   |  |   |         | 1,463   | 
|                                              |                            |                |   |         |         |      |   |         |         |  |   |        
|Operating revenues (in thousands):            |                            |                |   |         |         |      |   |         |         |  |   |        
|                                              | Third-party advertising    |                | $ | 147,735 |         |      | $ | 142,890 |         |  | $ | 137,354 |        
|                                              | Circulation                |                |   | 32,663  |         |      |   | 32,157  |         |  |   | 31,003  |        
|                                              | Other                      |                |   | 1,518   |         |      |   | 1,668   |         |  |   | 1,574   |        
|                                              |                            |                |   |         |         |      |   |         |         |  |   |        
|                                              |                            | Total revenues |   | $       | 181,916 |      |   | $       | 176,715 |  |   | $       | 169,931 | 
|                                              |                            |                |   |         |         |      |   |         |         |  |   |        



---



|    |                                                            
|--- | -----------------------------------------------------------
|(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 221
full-time and 40 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 prints all
of its newspapers at its facilities in downtown Pittsburgh, and
then utilizes 18 depots located throughout the greater
Pittsburgh area for distribution. Sophisticated computer systems
are used for writing, editing, composing and producing the
printing plates used in each edition. The Post-Gazettehas six 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. We are in the
process of a reconfiguration and renovation of our press lines
and mailroom that will be completed in 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 59% of
circulation for the Sunday edition during 2003. The newsstand
price is $0.50 for the daily paper and $1.50 for the Sunday
edition. Annual rates for direct payment subscriptions are
$143.00 (effective October 1, 2003) for daily and Sunday,
$96.20 for Friday, Saturday and Sunday, $78.00 for Sunday only
and $78.00 for Monday through Friday.

14



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| |          
| | ---------
| | 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 139,000 and a
Sunday average paid circulation of approximately 185,750,
resulting in penetration in the Toledo city zone (Toledo and
nearby suburbs) of approximately 50% daily and 63% 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 618,203, the
three-county Toledo MSA is currently the 69th largest MSA in the
United States. The combined population of the 14-county area
served by The Bladeis approximately 1,236,000.
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 Blade for the past three years:

|                                              |                            |                |   |         |        |      |   |         |        |  |   |         |        | 
|--------------------------------------------- | -------------------------- | -------------- | - | ------- | ------ | ---- | - | ------- | ------ |  | - | ------- | ------ | 
|                                              |                            | 2001           |   | 2002    |        | 2003
|                                              |                            |                |   |         |        |     
|Circulation(1):                               |                            |                |   |         |        |      |   |         |        |  |   |        
|                                              | Daily (including Saturday) |                |   | 138,819 |        |      |   | 140,101 |        |  |   | 138,976 |       
|                                              | Sunday                     |                |   | 190,794 |        |      |   | 190,526 |        |  |   | 185,781 |       
|Advertising lineage (in thousands of inches): |                            |                |   |         |        |      |   |         |        |  |   |        
|                                              | Retail                     |                |   | 484     |        |      |   | 450     |        |  |   | 396     |       
|                                              | National                   |                |   | 79      |        |      |   | 64      |        |  |   | 73      |       
|                                              | Classified                 |                |   | 395     |        |      |   | 402     |        |  |   | 423     |       
|                                              |                            |                |   |         |        |      |   |         |        |  |   |        
|                                              |                            | Total inches   |   |         | 958    |      |   |         | 916    |  |   |         | 892    | 
|                                              |                            |                |   |         |        |      |   |         |        |  |   |        
|Operating revenues (in thousands):            |                            |                |   |         |        |      |   |         |        |  |   |        
|                                              | Advertising                |                | $ | 69,431  |        |      | $ | 66,348  |        |  | $ | 67,034  |       
|                                              | Intercompany advertising   |                |   | (5,262  | )      |      |   | (3,752  | )      |  |   | (3,738  | )     
|                                              | Circulation                |                |   | 17,317  |        |      |   | 17,789  |        |  |   | 17,918  |       
|                                              | Other                      |                |   | 1,277   |        |      |   | 156     |        |  |   | 189     |       
|                                              |                            |                |   |         |        |      |   |         |        |  |   |        
|                                              |                            | Total revenues |   | $       | 82,763 |      |   | $       | 80,541 |  |   | $       | 81,403 | 
|                                              |                            |                |   |         |        |      |   |         |        |  |   |        



---



|    |                                                                
|--- | ---------------------------------------------------------------
|(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 21 part-time editors, reporters and
photographers on its staff. It draws upon the 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 Blade has 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.

15



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##### Table of Contents



The Bladeis
distributed primarily through independent home delivery carriers
and single-copy dealers. Home delivery accounted for
approximately 80% of circulation for the daily editions and
approximately 74% of circulation for the Sunday edition during
2003. 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, national, 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 department stores, realtors,
car dealerships, grocery stores and other local businesses. Our
largest single advertiser accounted for 3.6% of our publishing
segments total net advertising revenues in 2003.

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,
|                                     |                          |                        
|                                     |                          | 2001                    |   | 2002    |         | 2003
|                                     |                          |                         |   |         |         |     
|Advertising revenues (in thousands): |                          |                         |   |         |         |      |   |         |         |  |   |        
|                                     | Retail                   |                         | $ | 108,694 |         |      | $ | 108,425 |         |  | $ | 105,616 |        
|                                     | Classified               |                         |   | 78,944  |         |      |   | 73,259  |         |  |   | 68,763  |        
|                                     | National                 |                         |   | 29,528  |         |      |   | 27,554  |         |  |   | 30,009  |        
|                                     |                          |                         |   |         |         |      |   |         |         |  |   |        
|                                     |                          | Total                   |   |         | 217,166 |      |   |         | 209,238 |  |   |         | 204,388 | 
|                                     | Intercompany advertising |                         |   | (5,262  | )       |      |   | (3,752  | )       |  |   | (3,738  | )      
|                                     |                          |                         |   |         |         |      |   |         |         |  |   |        
|                                     |                          | Total net advertising   |   | $       | 211,904 |      |   | $       | 205,486 |  |   | $       | 200,650 | 
|                                     |                          |                         |   |         |         |      |   |         |         |  |   |        



| |                
| | ---------------
| | Online Editions

The Post-Gazettes Internet Web site,
post-gazette.com, reaches over a 1.6 million unique users
per month with over 24 million page views. The
Blades Internet Web site, toledoblade.com, reaches
over 290,000 unique users per month with over 3.4 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.



| |              
| | -------------
| | Raw Materials

Newsprint and ink are our newspaper publishing
segments largest expense after labor costs and accounted
for $30.5 million, or 12.1%, of the segments
operating expenses in 2003. During 2003, we used approximately
60,100 metric tons of newsprint in our production processes at
an estimated total cost for newsprint of approximately
$28.1 million, based on a weighted-average price per ton of
$467. 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.

16



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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 sole
supplier contract provides for discounted pricing.

In addition to maximizing layout efficiency and
minimizing waste, The Blade completed a page width
reduction project during the third quarter of 2002. We plan to
reduce our page width at the Post-Gazette by the end of
2004. The completion of both projects will reduce our estimated
annual newsprint consumption by approximately 7%. If the
Post-Gazette initiative had been completed by
January 1, 2003, we would have realized savings of
approximately $1.5 million in newsprint costs for the year
ended December 31, 2003.



| |            
| | -----------
| | 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, 2003, our television
broadcasting operations generated revenues and operating income
of $39.4 million and $2.7 million, respectively.

We own the following broadcast properties:

|        |  |         |    |        |  |         |                                        |             |  |             |     |  |  |  |     |  |  |  |   | 
|------- |  | ------- | -- | ------ |  | ------- | -------------------------------------- | ----------- |  | ----------- | --- |  |  |  | --- |  |  |  | - | 
|        |  | Analog  |    |        |  |         |                                        |             |  | Commercial 
|        |  | Channel |    |        |  | DMA     |                                        |             |  | Stations in
|Station |  | Number  |    | Market |  | 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                               |             |  |             | 185 |  |  |  | NBC |  |  |  | 4 | 



---



|    |                                                                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 2003 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.
|   
|(3) | Licensed to Salem, Indiana.                                                                                                                                                                                                                             
|   
|(4) | We have a two-thirds ownership interest and FCC
    control of WAND however the station is managed by LIN Television
    under the terms of a management services agreement.                                                                            
|   
|(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 believe
that with stronger revenue conditions and continued cost
reduction efforts, along with effective local programming, we
can increase operating margins.

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| |               
| | --------------
| | 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 2003 as estimated by the A.C. Nielsen
Company. All other information is based on 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
5:00 a.m. to 5:00 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 624,000 television
households. The average household income in the Louisville DMA
is approximately $46,300. Total market revenues in the
Louisville DMA in 2003 were approximately $98 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 local marketing
agreement. For the November 2003 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 Liberty Corporation, 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 954,300 and approximately
378,600 television households. The average household income
in this DMA is approximately $43,000. Total market revenues for
television in this DMA in 2003 were approximately
$40.3 million. Cable penetration in the market is estimated
to be 71%. 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 2003 ratings period, WAND ranked third in its market
with an audience share of 10%. 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 600,000 and
approximately 225,000 television households. The average
household income in the Boise DMA is approximately $44,500.
Total market revenues in the Boise DMA in 2003 were
approximately $32 million. Cable penetration in the market
is estimated to be 40%. For the November 2003 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 185th-largest DMA in the United
States, with a population of approximately 142,000 and
approximately 70,850 television households. The average
household income in the Lima DMA is approximately $39,700. Total
market revenues in the Lima DMA in 2003 were approximately
$9.6 million. Cable penetration in the market is estimated
to be 77%. For the November 2003 ratings period, WLIO ranked
first in its market with an audience share of 24%. There are
three other commercial television stations, a Fox low-power
affiliate and a UPN low-power affiliate both owned by Greg
Phipps, and a Christian television station licensed within the
Lima DMA.

18



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##### Table of Contents





| |         
| | --------
| | 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 population 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 the size and strength of 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 excluding barter, retaining the revenues
received from these sales. In 2003, approximately 96% of our
broadcasting revenues came from the sale of time to national,
local and regional, and political advertisers. Approximately 67%
of our broadcast revenues came from local and regional
advertising, 28% came from national advertising, 2% 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 and Regional
Sales.Local and regional 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, fast food franchisers
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 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 a significant portion 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 compensation payments. These
compensation payments will not continue under the same trend in
future periods.

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.

19



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##### Table of Contents





| |                   
| | ------------------
| | 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 possibly data transmissions. 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. Many of the Federal Communications
Commissions (FCC) deadlines relating to DTV may be
determined by the public acceptance and the penetration of
consumer sets to receive digital television, and are subject to
FCC periodic review.

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 and allowed temporary low power
operations in certain cases. WAND is operational at a full power
level and has met all FCC requirements. In March 2004, the FCC
allocated a digital channel to KTRV. As a result, KTRV will
begin construction of digital facilities this year.

In compliance with the FCCs order, the
three stations, WDRB, WFTE and WLIO, have completed a low power
service construction phase and these 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
build out and implementation. We expect that with the release of
the channel assignment for KTRV a similar temporary low power
solution will be utilized.

The FCC will periodically review the progress of
the DTV rollout and establish a deadline mandating when low
power systems must be upgraded to full power signals that
provide digital coverage to a broadcasters entire analog
coverage area. When such a deadline is established, we must
comply by upgrading our facilities. This is expected to occur
prior to 2006 unless delayed by periodic FCC review.

Once a station has began broadcasting its DTV
signal, it may continue to 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. The final retirement date on analog television will be
another periodic review decision made by the FCC. At this
mandated date the broadcaster must vacate one channel and return
it to the FCC for further assignment or auction.

Another aspect of digital implementation is that
the networks are now providing program content in not only
digital but in Digital High Definition format. Currently, only
WAND is providing High-Definition pass through. In order for our
other stations to pass the High Definition programming to our
viewers, we will have to upgrade our microwave and parts of our
digital transmitters and add additional equipment to our studios
to permit passage of this premium network programming. We may
have to begin implementation of the High Definition pass-through
options in mid-2004. This is driven by the network contracts and
public and business pressures.

We estimate that approximately $9.2 million
of capital expenditures after December 31, 2003 will be
necessary to meet the DTV requirements for all of our stations
discussed above.

20



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##### Table of Contents





| |            
| | -----------
| | 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, laws and regulations passed by Congress
and 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 radio stations, local cable systems, newspapers,
magazines, outdoor advertising, yellow page directories, and
direct mail operations serving the same market. We also
indirectly compete with national television networks for
national advertising.

Stations compete for viewership generally against
other 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 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 and DBS, has
significantly altered competition for audience share in the
television industry by increasing the number of channels
available to viewers. Home entertainment systems such as VCRs,
DVRs, 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. 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.

For more than a decade, our Louisville stations
had the local broadcast rights for the University of Louisville
football and mens basketball games. Our rights expire
after the 2004-2005 basketball season. Currently, we believe
these rights will not be renewed. In 2003, our Louisville
stations reported net revenues and operating income related to
the broadcast of University of Louisville events totaling
$2.0 million and $812,000, respectively.






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 telecom system offers services ranging from
business voice lines to high bandwidth data lines to mid- to
large-size businesses. Buckeye TeleSystem generated revenues and
operating income of $17.6 million and $2.9 million,
respectively, for the year ended December 31, 2003.

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Corporate Protection Services (CPS), 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, 2003, CPS generated revenues and an operating
loss from continuing operations of $2.2 million and
$535,000, respectively. The loss from discontinued operations of
$956,000, before tax, includes revenues of $3.1 million,
operating expenses of $3.7 million, and loss on disposal of
assets of $333,000, for the year ended December 31, 2003.

Community Communication Services, Inc.
provided printing and door-to-door delivery of advertising
circulars in the greater Toledo metropolitan area. For the year
ended December 31, 2003, the loss from discontinued
operations of $461,000 includes revenues of $151,000, operating
expenses of $377,000, and a loss on disposal of assets of
$236,000.

During 2003, we reorganized various operations
within the non-reportable other communications segment.
Effective May 31, 2003, we suspended the operations of
Community Communication Services, Inc. Effective
December 31, 2003, we sold the net assets of certain
divisions of Corporate Protection Services, Inc. and ceased
operating those divisions. The disposed divisions were
previously involved in the sale, installation, and testing of
commercial security and fire protection systems. CPS will
continue to provide sales, installation, and monitoring of
residential security and fire protection systems. We feel the
residential model complements the residential services offered
by our other companies. We do not expect this reorganization to
have a material impact on our liquidity, financial condition, or
continuing results of operations.




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.



| |                    
| | -------------------
| | 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.

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| |                   
| | ------------------
| | 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.

A rulemaking proceeding has been pending at the
FCC since June 2002, in which the FCC is examining many issues
related to its cable rate regulation rules and considering
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.

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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 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
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.

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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. Like virtually every
other cable company in the country, we have stopped collecting
these fees.

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.

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.

A series of federal appellate decisions on the
FCCs rate formulas and policies have provided more
certainty and clarity for cable operators as they negotiate with
utility companies.

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Local Television/ Cable Cross-Ownership
Rule.In February 2002, the Court of
Appeals for the District of Columbia Circuit vacated the
FCCs rule prohibiting 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. On remand, the FCC eliminated the rule.

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:



| |   |                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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.

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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. These rules are intended to facilitate
competition. 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 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.

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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.

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.

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The FCC prohibits the assignment or the transfer
of control of a broadcasting license 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.

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. Following remand, on
June 2, 2003 the FCC modified and somewhat loosened its
local-ownership rules. The new rules are on appeal to the
U.S. Court of Appeals for the Third Circuit, which has
stayed the new rules pending judicial review. The old rules
remain in effect pending that review.

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National Ownership.There is no nationwide limit on the number of television
stations that a party may own. But the FCC has maintained a rule
that 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. On remand, the FCC raised the aggregate limit
to 45%. But Congress then acted, in January 2004 passing a
statute that set the aggregate limit at 39%.

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 available in the market), and independently owned
daily newspapers which have circulation that exceeds five
percent of the households in the market. On June 2, 2003,
the FCC slightly modified its rule. The modified rule is on
appeal to the U.S. Court of Appeals for the Third Circuit,
which has stayed the new rule pending judicial review.

Local Television/Cable Cross-Ownership
Rule.In February 2002, the Court of
Appeals for the District of Columbia Circuit vacated the
FCCs rule prohibiting 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. On remand, the FCC eliminated the rule.

Local Television/Newspaper Cross-Ownership
Rule.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 prohibiting 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 June 2003, the FCC substantially modified its
rule to permit common ownership in most markets. The modified
rule is on appeal to the U.S. Court of Appeals for the
Third Circuit, which has stayed the new rule pending judicial
review.

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.

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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. The law
expires on December 31, 2004, but is widely expected to be
re-enacted.

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 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.

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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. In a pending proceeding, the FCC is
considering what requirements, if any, regarding childrens
programming should apply to digital television.

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.

Decency.Several
bills are pending in Congress that would increase the monetary
penalties, and also make license forfeiture a possible penalty,
for the broadcast of indecent material.

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 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.

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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. Our stations are in
compliance with the deadlines applicable to them.

We estimate that approximately $9.2 million
of capital expenditures after December 31, 2003 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 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.

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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, 2003, we had
approximately 2,900 full-time and part-time employees. Of
these, approximately 380 were employed in cable television,
2,080 in newspaper publishing, 250 in television broadcasting
and 190 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-Gazette run through December 31, 2006. Four
unions with a total of eight bargaining units represent the
employees of The Blade under labor agreements that run
through March 21, 2006. We believe that our relations with
our newspaper employees are good.

In addition to our newspaper employees, as of
December 31, 2003, we had approximately 140 employees in
our cable television and related companies who were represented
by the Brotherhood of Teamsters under four separate collective
bargaining agreements. Those four agreements expire,
respectively, in October 2004, January 2007, May 2007 and
October 2008. Our relations with each of these four units are
harmonious. We believe that overall our employee relations are
good.

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|        |           
|------- | ----------
|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    |            | December 2011 
|                          | 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 2023     
|                          | 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     |            | Month to month
|                          | Greensburg, PA    |     | Office space                     |          | Leased |             | 450 sf     |            | Month to month
|                          | 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  |            | Month to month
|                          | Coraopolis, PA    |     | Distribution center              |          | Leased |             | 8,800 sf   |            | Month to month
|                          | Cranberry, PA     |     | Distribution center              |          | Leased |             | 9,000 sf   |            | April 2004    
|                          | Donora, PA        |     | Distribution center              |          | Leased |             | 10,000 sf  |            | March 2005    
|                          | Gibsonia, PA      |     | Distribution center              |          | Leased |             | 10,000 sf  |            | February 2006 
|                          | Houston, PA       |     | Distribution center              |          | Leased |             | 10,000 sf  |            | Month to month
|                          | 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   |            | Month to month
|                          | Monroeville, PA   |     | Distribution center              |          | Leased |             | 10,600 sf  |            | February 2009 
|                          | Pittsburgh, PA    |     | Distribution center              |          | Leased |             | 14,700 sf  |            | March 2007    
|                          | Pittsburgh, PA    |     | Distribution center              |          | Leased |             | 13,500 sf  |            | Month to month
|                          | Pittsburgh, PA    |     | Distribution center              |          | Leased |             | 10,000 sf  |            | December 2008 
|                          | Sharpsburg, PA    |     | Distribution center              |          | Leased |             | 10,200 sf  |            | March 2006    
|                          | Tarentum, PA      |     | Distribution center              |          | Leased |             | 7,500 sf   |            | Month to month
|                          | 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  |            |              

36



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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                              |          | 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,
    entertainment and tower |          | Owned  |             | 18,500 sf |            |            
|                             | Argenta, IL      |     | Tower                                     |          | Owned  |             | 2,200 sf  |            |            
|                             | Danville, IL     |     | Equipment                                 |          | Leased |             | 240 sf    |            | March 2006  




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  |     | Central Station            |          | Leased |             | 2,000 sf  |            | Month to Month
|                                           | 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.

37



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##### Table of Contents






PART II






|        |                                                                          
|------- | -------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity
    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 13 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, 2003 and 2002, we paid $75,000 and $82,000 of
dividends on Voting Common Stock, respectively, and
$1.1 million and $1.2 million of dividends on
Non-voting Common Stock, respectively. We also paid $63,000 of
dividends on Class A Stock in each of the years ended
December 31, 2003 and 2002. 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
$2.0 million or 50% of excess cash flow, which ever is
higher but not greater than $3.0 million per year. 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.

In 2003, we issued 1,808 shares of our
Non-Voting Common Stock to members of our Executive Committee as
incentive compensation. The issuance of these shares to members
of the Executive Committee was exempt from registration as a
private placement under Section 4(2) of the Securities Act
of 1933.






|        |                        
|------- | -----------------------
|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.

38



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##### Table of Contents



BLOCK COMMUNICATIONS, INC. AND
SUBSIDIARIES

SELECTED CONSOLIDATED FINANCIAL DATA

|                                                                                       |                                                            |                                             |         |         |         |      |         |         |         |      |         |         |         |   |         |         |         |   |         |         |         |  
|-------------------------------------------------------------------------------------- | ---------------------------------------------------------- | ------------------------------------------- | ------- | ------- | ------- | ---- | ------- | ------- | ------- | ---- | ------- | ------- | ------- | - | ------- | ------- | ------- | - | ------- | ------- | ------- | -
|                                                                                       |                                                            |                                            
|                                                                                       |                                                            | Year Ended December 31,                    
|                                                                                       |                                                            |                                            
|                                                                                       |                                                            | 1999                                        |         | 2000    |         | 2001 |         | 2002    |         | 2003
|                                                                                       |                                                            |                                             |         |         |         |      |         |         |         |     
|                                                                                       |                                                            |                                            
|                                                                                       |                                                            | (in thousands except operating data)       
|Income Statement Data:                                                                 |                                                            |                                             |         |         |         |      |         |         |         |      |         |         |         |   |         |         |         |   |         |        
|                                                                                       | Revenue:                                                   |                                             |         |         |         |      |         |         |         |      |         |         |         |   |         |         |         |   |         |         |        
|                                                                                       |                                                            | Cable(1)                                    |         | $       | 75,414  |      |         | $       | 82,110  |      |         | $       | 89,420  |   |         | $       | 101,474 |   |         | $       | 109,534 |  
|                                                                                       |                                                            | Publishing                                  |         |         | 275,827 |      |         |         | 286,717 |      |         |         | 264,679 |   |         |         | 257,256 |   |         |         | 251,334 |  
|                                                                                       |                                                            | Broadcasting(2)                             |         |         | 36,293  |      |         |         | 42,531  |      |         |         | 35,184  |   |         |         | 39,964  |   |         |         | 39,406  |  
|                                                                                       |                                                            | Other Communications                        |         |         | 5,159   |      |         |         | 9,603   |      |         |         | 17,931  |   |         |         | 20,153  |   |         |         | 19,784  |  
|                                                                                       |                                                            |                                             |         |         |         |      |         |         |         |      |         |         |         |   |         |         |         |   |         |        
|                                                                                       |                                                            |                                             | 392,693 |         |         |      | 420,961 |         |         |      | 407,214 |         |         |   | 418,847 |         |         |   | 420,058 |        
|                                                                                       | Expense:                                                   |                                             |         |         |         |      |         |         |         |      |         |         |         |   |         |         |         |   |         |         |        
|                                                                                       |                                                            | Cable                                       |         |         | 62,846  |      |         |         | 74,535  |      |         |         | 84,578  |   |         |         | 91,404  |   |         |         | 100,508 |  
|                                                                                       |                                                            | Publishing                                  |         |         | 263,951 |      |         |         | 277,312 |      |         |         | 262,799 |   |         |         | 249,187 |   |         |         | 252,879 |  
|                                                                                       |                                                            | Broadcasting                                |         |         | 34,221  |      |         |         | 37,099  |      |         |         | 36,973  |   |         |         | 36,313  |   |         |         | 36,693  |  
|                                                                                       |                                                            | Other Communications                        |         |         | 8,997   |      |         |         | 12,614  |      |         |         | 18,855  |   |         |         | 17,699  |   |         |         | 17,452  |  
|                                                                                       |                                                            | Corporate general and administrative        |         |         | 1,524   |      |         |         | 4,152   |      |         |         | 2,705   |   |         |         | 6,046   |   |         |         | 4,398   |  
|                                                                                       |                                                            |                                             |         |         |         |      |         |         |         |      |         |         |         |   |         |         |         |   |         |        
|                                                                                       |                                                            |                                             | 371,539 |         |         |      | 405,712 |         |         |      | 405,910 |         |         |   | 400,649 |         |         |   | 411,930 |        
|                                                                                       |                                                            |                                             |         |         |         |      |         |         |         |      |         |         |         |   |         |         |         |   |         |        
|                                                                                       | Operating income                                           |                                             |         | 21,154  |         |      |         | 15,249  |         |      |         | 1,304   |         |   |         | 18,198  |         |   |         | 8,128   |        
|                                                                                       | Nonoperating income (expense):                             |                                             |         |         |         |      |         |         |         |      |         |         |         |   |         |         |         |   |         |         |        
|                                                                                       |                                                            | Interest expense                            |         |         | (11,243 | )    |         |         | (14,175 | )    |         |         | (19,486 | ) |         |         | (22,952 | ) |         |         | (19,633 | )
|                                                                                       |                                                            | 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  | ) |         |         |        |  
|                                                                                       |                                                            | Loss on impairment of intangible asset      |         |         |        |      |         |         |        |      |         |         |        |   |         |         |        |   |         |         | (8,378  | )
|                                                                                       |                                                            | Change in fair value of interest rate swaps |         |         |        |      |         |         |        |      |         |         | (5,340  | ) |         |         | (733    | ) |         |         | 3,908   |  
|                                                                                       |                                                            | Investment income                           |         |         | 200     |      |         |         | 106     |      |         |         | 47      |   |         |         | 126     |   |         |         | 1,110   |  
|                                                                                       |                                                            |                                             |         |         |         |      |         |         |         |      |         |         |         |   |         |         |         |   |         |        
|                                                                                       |                                                            |                                             | (11,043 | )       |         |      | 8,270   |         |         |      | (24,779 | )       |         |   | (11,408 | )       |         |   | (22,993 | )      
|                                                                                       |                                                            |                                             |         |         |         |      |         |         |         |      |         |         |         |   |         |         |         |   |         |        
|Income (loss) from continuing operations before
    income taxes and minority interest |                                                            |                                             | 10,111  |         |         |      | 23,519  |         |         |      | (23,475 | )       |         |   | 6,790   |         |         |   | (14,865 | )      
|                                                                                       | Provision (credit) for income taxes(3)                     |                                             |         | 4,626   |         |      |         | 9,540   |         |      |         | (6,596  | )       |   |         | 2,936   |         |   |         | 27,608  |        
|                                                                                       |                                                            |                                             |         |         |         |      |         |         |         |      |         |         |         |   |         |         |         |   |         |        
|                                                                                       | Income (loss) before minority interest                     |                                             |         | 5,485   |         |      |         | 13,979  |         |      |         | (16,879 | )       |   |         | 3,854   |         |   |         | (42,473 | )      
|                                                                                       | Minority interest                                          |                                             |         |        |         |      |         | (427    | )       |      |         | 235     |         |   |         | (477    | )       |   |         | 2,861   |        
|                                                                                       |                                                            |                                             |         |         |         |      |         |         |         |      |         |         |         |   |         |         |         |   |         |        
|                                                                                       | Net income (loss) from continuing operations               |                                             |         | 5,485   |         |      |         | 13,552  |         |      |         | (16,644 | )       |   |         | 3,377   |         |   |         | (39,612 | )      
|                                                                                       | Loss on discontinued operations, net of tax
    benefit(4) |                                             |         | (144    | )       |      |         | (771    | )       |      |         | (1,213  | )       |   |         | (837    | )       |   |         | (960    | )      
|                                                                                       |                                                            |                                             |         |         |         |      |         |         |         |      |         |         |         |   |         |         |         |   |         |        
|                                                                                       | Net income (loss)                                          |                                             | $       | 5,341   |         |      | $       | 12,781  |         |      | $       | (17,857 | )       |   | $       | 2,540   |         |   | $       | (40,572 | )      
|                                                                                       |                                                            |                                             |         |         |         |      |         |         |         |      |         |         |         |   |         |         |         |   |         |        
|Balance Sheet Data:                                                                    |                                                            |                                             |         |         |         |      |         |         |         |      |         |         |         |   |         |         |         |   |         |        
|                                                                                       | Cash and cash equivalents                                  |                                             | $       | 5,715   |         |      | $       | 4,213   |         |      | $       | 5,883   |         |   | $       | 9,782   |         |   | $       | 11,461  |        
|                                                                                       | Total assets                                               |                                             |         | 388,302 |         |      |         | 464,190 |         |      |         | 485,554 |         |   |         | 511,725 |         |   |         | 478,681 |        
|                                                                                       | Total funded debt(5)                                       |                                             |         | 166,109 |         |      |         | 213,356 |         |      |         | 237,264 |         |   |         | 252,778 |         |   |         | 268,165 |        
|                                                                                       | Stockholders equity (deficit)                             |                                             |         | 51,198  |         |      |         | 61,390  |         |      |         | 37,583  |         |   |         | 20,646  |         |   |         | (27,314 | )      
|Cable Operating Data (unaudited):                                                      |                                                            |                                             |         |         |         |      |         |         |         |      |         |         |         |   |         |         |         |   |         |        
|                                                                                       | Homes passed                                               |                                             |         | 250,893 |         |      |         | 253,903 |         |      |         | 255,852 |         |   |         | 246,546 |         |   |         | 249,879 |        
|                                                                                       | Basic subscribers                                          |                                             |         | 159,294 |         |      |         | 158,537 |         |      |         | 157,341 |         |   |         | 152,392 |         |   |         | 149,178 |        
|                                                                                       | Basic penetration                                          |                                             |         | 63.5    | %       |      |         | 62.4    | %       |      |         | 61.5    | %       |   |         | 61.8    | %       |   |         | 59.7    | %      
|                                                                                       | Premium units                                              |                                             |         | 62,362  |         |      |         | 69,649  |         |      |         | 70,909  |         |   |         | 70,160  |         |   |         | 61,458  |        
|                                                                                       | Premium penetration                                        |                                             |         | 39.1    | %       |      |         | 43.9    | %       |      |         | 45.1    | %       |   |         | 46.0    | %       |   |         | 41.2    | %      
|                                                                                       | Cable modem subscribers                                    |                                             |         | 1,484   |         |      |         | 7,022   |         |      |         | 15,221  |         |   |         | 22,656  |         |   |         | 29,807  |        
|                                                                                       | Digital subscribers                                        |                                             |         |        |         |      |         |        |         |      |         | 7,846   |         |   |         | 26,092  |         |   |         | 38,073  |        
|                                                                                       | Average monthly revenue per basic subscriber(6)            |                                             | $       | 39.48   |         |      | $       | 42.88   |         |      | $       | 47.11   |         |   | $       | 54.93   |         |   | $       | 60.35   |        
|Publishing Operating Data
    (unaudited):                                             |                                                            |                                             |         |         |         |      |         |         |         |      |         |         |         |   |         |         |         |   |         |        
|                                                                                       | Daily circulation(7)                                       |                                             |         | 389,737 |         |      |         | 381,643 |         |      |         | 380,646 |         |   |         | 385,070 |         |   |         | 384,600 |        
|                                                                                       | Sunday circulation(7)                                      |                                             |         | 631,711 |         |      |         | 611,005 |         |      |         | 603,485 |         |   |         | 601,405 |         |   |         | 593,883 |        
|Other Data:                                                                            |                                                            |                                             |         |         |         |      |         |         |         |      |         |         |         |   |         |         |         |   |         |        
|                                                                                       | Cable cash flow (unaudited)(8)                             |                                             | $       | 28,200  |         |      | $       | 30,063  |         |      | $       | 32,135  |         |   | $       | 37,278  |         |   | $       | 41,808  |        
|                                                                                       | Publishing cash flow (unaudited)(8)                        |                                             |         | 25,787  |         |      |         | 23,851  |         |      |         | 15,785  |         |   |         | 19,558  |         |   |         | 9,391   |        
|                                                                                       | Broadcasting cash flow (unaudited)(8)                      |                                             |         | 5,578   |         |      |         | 8,009   |         |      |         | 3,088   |         |   |         | 7,164   |         |   |         | 5,888   |        
|                                                                                       | Adjusted EBITDA (unaudited)(9)                             |                                             |         | 56,369  |         |      |         | 56,873  |         |      |         | 50,276  |         |   |         | 65,660  |         |   |         | 61,551  |        
|                                                                                       | Depreciation and amortization                              |                                             |         | 40,551  |         |      |         | 48,662  |         |      |         | 55,533  |         |   |         | 54,903  |         |   |         | 57,820  |        
|                                                                                       | Capital expenditures                                       |                                             |         | 66,702  |         |      |         | 80,340  |         |      |         | 62,154  |         |   |         | 32,031  |         |   |         | 55,070  |        

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---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Effective March 29, 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 plus a
    cash payment to us of $12.1 million. 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 in 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) | In 2003, the company recognized a
    $31.6 million charge to record a full valuation allowance
    against its deferred tax assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|(4) | Effective May 31, 2003, the Company
    suspended operations of Community Communication
    Services, Inc. (CCS). Effective December 31, 2003 the
    Company sold the net assets of certain divisions of Corporate
    Protection Services, Inc. (CPS) and ceased operating
    those divisions. In accordance with SFAS No. 144,
    Accounting for the Impairment or Disposal of Long-Lived Assets,
    the results of operations of CCS and the affected divisions of
    CPS are reported separately from results of continuing
    operations for all periods presented.                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|(5) | Total funded debt includes the balances
    outstanding under the subordinated notes, senior credit
    facilities, and capital leases. Total funded debt does not
    include the $4.1 million and $7.7 million adjustment
    to the carrying value of underlying debt recorded as of
    December 31, 2003 and December 31, 2002, respectively,
    in accordance with SFAS No. 133.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|(6) | Represents average monthly revenues for the
    period divided by the average number of basic subscribers
    throughout the period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|(7) | Circulation numbers are based on the average paid
    circulation for the 12 months ended March 31 of each
    year for the Post-Gazette and 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(8) | Cable, publishing and broadcasting cash flow
    represents each segments adjusted EBITDA. The individual
    segments net income does not include corporate general and
    administrative expenses. A reconciliation of adjusted EBITDA
    (cash flow) to net income by segment is provided below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|(9) | Adjusted 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.
    Adjusted 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. A reconciliation of adjusted EBITDA to net income is
    provided below.

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|                                              |                                       |                                                                |   |        |        |      |   |        |         |      |   |         |        |   |   |        |         |   |   |         |        |  
|--------------------------------------------- | ------------------------------------- | -------------------------------------------------------------- | - | ------ | ------ | ---- | - | ------ | ------- | ---- | - | ------- | ------ | - | - | ------ | ------- | - | - | ------- | ------ | -
|                                              |                                       |                                                               
|                                              |                                       | Year Ended December 31,                                       
|                                              |                                       |                                                               
|                                              |                                       | 1999                                                           |   | 2000   |        | 2001 |   | 2002   |         | 2003
|                                              |                                       |                                                                |   |        |        |      |   |        |         |     
|                                              |                                       |                                                               
|                                              |                                       | (in thousands)                                                
|Reconciliation of cable cash flow:            |                                       |                                                                |   |        |        |      |   |        |         |      |   |         |        |   |   |        |         |   |   |        
|                                              | Net income                            |                                                                | $ | 8,653  |        |      | $ | 5,464  |         |      | $ | 2,721   |        |   | $ | 7,003  |         |   | $ | 6,345   |       
|                                              | Adjustments to net income:            |                                                                |   |        |        |      |   |        |         |      |   |         |        |   |   |        |         |   |   |         |       
|                                              |                                       | Provision for income taxes                                     |   |        | 3,916  |      |   |        | 2,111   |      |   |         | 2,126  |   |   |        | 3,072   |   |   |         | 2,685  |  
|                                              |                                       | Depreciation                                                   |   |        | 15,282 |      |   |        | 22,123  |      |   |         | 27,166 |   |   |        | 26,681  |   |   |         | 30,010 |  
|                                              |                                       | Amortization of intangibles and deferred charges               |   |        | 46     |      |   |        | 46      |      |   |         | 44     |   |   |        | 559     |   |   |         | 739    |  
|                                              |                                       | Amortization of broadcast rights                               |   |        | 339    |      |   |        | 384     |      |   |         | 382    |   |   |        | 324     |   |   |         | 302    |  
|                                              |                                       | Film payments                                                  |   |        | (336   | )    |   |        | (362    | )    |   |         | (286   | ) |   |        | (223    | ) |   |         | (319   | )
|                                              |                                       | (Gain) loss on disposal of assets                              |   |        | 300    |      |   |        | 297     |      |   |         | (18    | ) |   |        | (138    | ) |   |         | 2,046  |  
|                                              |                                       |                                                                |   |        |        |      |   |        |         |      |   |         |        |   |   |        |         |   |   |        
|                                              | Cable cash flow (unaudited)(8)        |                                                                | $ | 28,200 |        |      | $ | 30,063 |         |      | $ | 32,135  |        |   | $ | 37,278 |         |   | $ | 41,808  |       
|                                              |                                       |                                                                |   |        |        |      |   |        |         |      |   |         |        |   |   |        |         |   |   |        
|Reconciliation of publishing cash
    flow:   |                                       |                                                                |   |        |        |      |   |        |         |      |   |         |        |   |   |        |         |   |   |        
|                                              | Net income (loss)                     |                                                                | $ | 3,582  |        |      | $ | 1,842  |         |      | $ | (2,211  | )      |   | $ | 2,345  |         |   | $ | (3,344  | )     
|                                              | Adjustments to net income:            |                                                                |   |        |        |      |   |        |         |      |   |         |        |   |   |        |         |   |   |         |       
|                                              |                                       | Interest expense                                               |   |        | 2,832  |      |   |        | 2,424   |      |   |         | 2,118  |   |   |        | 1,814   |   |   |         | 1,742  |  
|                                              |                                       | Provision for income taxes                                     |   |        | 5,462  |      |   |        | 5,139   |      |   |         | 1,973  |   |   |        | 3,911   |   |   |         | 58     |  
|                                              |                                       | Depreciation                                                   |   |        | 11,507 |      |   |        | 11,978  |      |   |         | 11,382 |   |   |        | 11,299  |   |   |         | 10,566 |  
|                                              |                                       | Amortization of intangibles and deferred charges               |   |        | 2,486  |      |   |        | 2,486   |      |   |         | 2,486  |   |   |        | 353     |   |   |         | 353    |  
|                                              |                                       | (Gain) loss on disposal of assets                              |   |        | (82    | )    |   |        | (18     | )    |   |         | 37     |   |   |        | (164    | ) |   |         | 16     |  
|                                              |                                       |                                                                |   |        |        |      |   |        |         |      |   |         |        |   |   |        |         |   |   |        
|                                              | Publishing cash flow (unaudited)(8)   |                                                                | $ | 25,787 |        |      | $ | 23,851 |         |      | $ | 15,785  |        |   | $ | 19,558 |         |   | $ | 9,391   |       
|                                              |                                       |                                                                |   |        |        |      |   |        |         |      |   |         |        |   |   |        |         |   |   |        
|Reconciliation of broadcasting cash
    flow: |                                       |                                                                |   |        |        |      |   |        |         |      |   |         |        |   |   |        |         |   |   |        
|                                              | Net income (loss)                     |                                                                | $ | 1,165  |        |      | $ | 3,532  |         |      | $ | (1,216  | )      |   | $ | 2,410  |         |   | $ | (3,889  | )     
|                                              | Adjustments to net income:            |                                                                |   |        |        |      |   |        |         |      |   |         |        |   |   |        |         |   |   |         |       
|                                              |                                       | Provision (credit)for income taxes                             |   |        | 906    |      |   |        | 1,474   |      |   |         | (302   | ) |   |        | 784     |   |   |         | 1,093  |  
|                                              |                                       | Depreciation                                                   |   |        | 1,739  |      |   |        | 1,973   |      |   |         | 2,528  |   |   |        | 2,660   |   |   |         | 2,874  |  
|                                              |                                       | Amortization of intangibles and deferred charges               |   |        | 44     |      |   |        | 594     |      |   |         | 781    |   |   |        | 17      |   |   |         | 17     |  
|                                              |                                       | Amortization of broadcast rights                               |   |        | 6,964  |      |   |        | 5,935   |      |   |         | 6,129  |   |   |        | 6,814   |   |   |         | 6,718  |  
|                                              |                                       | Film payments                                                  |   |        | (5,217 | )    |   |        | (5,523  | )    |   |         | (4,831 | ) |   |        | (5,521  | ) |   |         | (6,614 | )
|                                              |                                       | (Gain) loss on disposal of assets                              |   |        | (23    | )    |   |        | 24      |      |   |         | (1     | ) |   |        |        |   |   |         | 76     |  
|                                              |                                       | Loss on impairment of intangible, net of minority
    interest |   |        |       |      |   |        |        |      |   |         |       |   |   |        |        |   |   |         | 5,613  |  
|                                              |                                       |                                                                |   |        |        |      |   |        |         |      |   |         |        |   |   |        |         |   |   |        
|                                              | Broadcasting cash flow (unaudited)(8) |                                                                | $ | 5,578  |        |      | $ | 8,009  |         |      | $ | 3,088   |        |   | $ | 7,164  |         |   | $ | 5,888   |       
|                                              |                                       |                                                                |   |        |        |      |   |        |         |      |   |         |        |   |   |        |         |   |   |        
|Reconciliation of adjusted EBITDA:            |                                       |                                                                |   |        |        |      |   |        |         |      |   |         |        |   |   |        |         |   |   |        
|                                              | Net income (loss)                     |                                                                | $ | 5,341  |        |      | $ | 12,780 |         |      | $ | (17,857 | )      |   | $ | 2,540  |         |   | $ | (40,572 | )     
|                                              | Adjustments to net income:            |                                                                |   |        |        |      |   |        |         |      |   |         |        |   |   |        |         |   |   |         |       
|                                              |                                       | Interest expense                                               |   |        | 11,243 |      |   |        | 14,175  |      |   |         | 19,486 |   |   |        | 22,952  |   |   |         | 19,633 |  
|                                              |                                       | Provision (credit) for income taxes                            |   |        | 4,556  |      |   |        | 9,176   |      |   |         | (7,132 | ) |   |        | 2,728   |   |   |         | 27,151 |  
|                                              |                                       | Depreciation                                                   |   |        | 30,352 |      |   |        | 38,865  |      |   |         | 44,601 |   |   |        | 44,753  |   |   |         | 47,716 |  
|                                              |                                       | Amortization of intangibles and deferred charges               |   |        | 2,897  |      |   |        | 3,478   |      |   |         | 4,422  |   |   |        | 3,011   |   |   |         | 3,084  |  
|                                              |                                       | Amortization of broadcast rights                               |   |        | 7,302  |      |   |        | 6,319   |      |   |         | 6,510  |   |   |        | 7,138   |   |   |         | 7,020  |  
|                                              |                                       | Film payments                                                  |   |        | (5,552 | )    |   |        | (5,885  | )    |   |         | (5,117 | ) |   |        | (5,744  | ) |   |         | (6,933 | )
|                                              |                                       | (Gain) loss on disposal of assets                              |   |        | 230    |      |   |        | 304     |      |   |         | 23     |   |   |        | (300    | ) |   |         | 2,178  |  
|                                              |                                       | Change in fair value of derivatives                            |   |        |       |      |   |        |        |      |   |         | 5,340  |   |   |        | 733     |   |   |         | (3,908 | )
|                                              |                                       | Loss on early extinguishment of debt                           |   |        |       |      |   |        |        |      |   |         |       |   |   |        | 8,990   |   |   |         |       |  
|                                              |                                       | Gain on sale of WLFI-TV, Inc.                                  |   |        |       |      |   |        | (22,339 | )    |   |         |       |   |   |        |        |   |   |         |       |  
|                                              |                                       | Gain on sale of Monroe Cablevision                             |   |        |       |      |   |        |        |      |   |         |       |   |   |        | (21,141 | ) |   |         |       |  
|                                              |                                       | Loss on impairment of intangible, net of minority
    interest |   |        |       |      |   |        |        |      |   |         |       |   |   |        |        |   |   |         | 5,613  |  
|                                              |                                       | Loss on disposal of discontinued operations                    |   |        |       |      |   |        |        |      |   |         |       |   |   |        |        |   |   |         | 569    |  
|                                              |                                       |                                                                |   |        |        |      |   |        |         |      |   |         |        |   |   |        |         |   |   |        
|                                              | Adjusted EBITDA (unaudited)(9)        |                                                                | $ | 56,369 |        |      | $ | 56,873 |         |      | $ | 50,276  |        |   | $ | 65,660 |         |   | $ | 61,551  |       
|                                              |                                       |                                                                |   |        |        |      |   |        |         |      |   |         |        |   |   |        |         |   |   |        






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|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.

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##### Table of Contents






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, 2003, we had approximately
149,000 subscribers. We publish two daily metropolitan
newspapers, the Pittsburgh Post-Gazette in Pittsburgh,
Pennsylvania, and The Blade in 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 384,600 and 593,850, 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 communication
operations including a telephony business and a home security
business.

For the year ended December 31, 2003, we had
revenues, adjusted EBITDA, operating income and a net loss of
$420.1 million, $61.6 million, $8.1 million and
$40.6 million, respectively. During the fourth quarter of
2003, we recorded a valuation allowance on our deferred tax
assets of $31.6 million. A reconciliation of adjusted
EBITDA and related discussion is provided below.

During 2003, we reorganized various operations
within the non-reportable other communications segment.
Effective May 31, 2003, we suspended the operations of
Community Communication Services, Inc. (CCS), an
alternative advertising distribution company. Effective
December 31, 2003, we sold the net assets of certain
divisions of Corporate Protection Services, Inc.
(CPS) and ceased operating those divisions. The disposed
divisions were previously involved in the sale, installation,
and testing of commercial security and fire protection systems.
CPS will continue to provide sales, installation, and monitoring
of residential security and fire protection systems. We feel the
residential model compliments the residential services offered
by our other companies. We do not expect this reorganization to
have a material impact on our liquidity, financial condition, or
continuing results of operations.

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, subscriber fluctuations, 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
80.1%, 79.9%, and 79.8% of newspaper revenue for 2001, 2002, and
2003, 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 variations in
the amount of 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 telecom, and home
security and alarm monitoring businesses.

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##### Table of Contents





| |                   
| | ------------------
| | 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
23.9%, 24.6%, and 23.7% of cable operating expense for 2001,
2002, and 2003, 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. Depreciation expense has been
accelerated in various reporting periods to reflect the
anticipated completion dates of the rebuilds and the subsequent
write-off of assets.

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 accounting for 14.9%, 11.9%,
and 12.1% of newspaper operating expenses for 2001, 2002, and
2003, 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 full-power
digital-capable broadcasting, we expect to report higher levels
of depreciation and amortization than are reflected in our
historical consolidated financial statements.



| |                
| | ---------------
| | Adjusted EBITDA

We define adjusted 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 adjusted 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 $2.7 million,
$6.0 million, and $4.4 million for 2001, 2002, and
2003, respectively.

Other media companies may measure EBITDA in a
different manner. We have included adjusted 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. Adjusted 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 adjusted EBITDA are not
necessarily comparable to similarly titled amounts of other
companies. For a reconciliation of adjusted EBITDA to net
income, see item 6 Selected Financial Data above, or
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, 2003, 2002 and 2001. It also provides a
reconciliation of net income to adjusted EBITDA.

Block Communications, Inc. and
Subsidiaries

Results of Operations

|                                                                                       |                                                                      |                         |             |             |   |      |       |      |   |   |             |             |   |  |       |      |   |   |             |             |   |  |       |      |  
|-------------------------------------------------------------------------------------- | -------------------------------------------------------------------- | ----------------------- | ----------- | ----------- | - | ---- | ----- | ---- | - | - | ----------- | ----------- | - |  | ----- | ---- | - | - | ----------- | ----------- | - |  | ----- | ---- | -
|                                                                                       |                                                                      |                        
|                                                                                       |                                                                      | Year Ended December 31,
|                                                                                       |                                                                      |                        
|                                                                                       |                                                                      |                         |             |             |   |     
|                                                                                       |                                                                      | 2003                    |             | 2002        |   | 2001
|                                                                                       |                                                                      |                         |             |             |   |     
|                                                                                       |                                                                      |                         |             |             |   |      |       |      |   |  
|Revenue:                                                                               |                                                                      |                         |             |             |   |      |       |      |   |   |             |             |   |  |       |      |   |   |             |             |   |  |       |     
|                                                                                       | Publishing                                                           |                         | $           | 251,333,791 |   |      |       | 59.8 | % |   | $           | 257,256,343 |   |  |       | 61.4 | % |   | $           | 264,678,678 |   |  |       | 65.0 | %
|                                                                                       | Cable                                                                |                         |             | 109,533,677 |   |      |       | 26.1 |   |   |             | 101,473,858 |   |  |       | 24.2 |   |   |             | 89,420,000  |   |  |       | 22.0 |  
|                                                                                       | Broadcasting                                                         |                         |             | 39,406,282  |   |      |       | 9.4  |   |   |             | 39,964,031  |   |  |       | 9.5  |   |   |             | 35,183,897  |   |  |       | 8.6  |  
|                                                                                       | Other Communications                                                 |                         |             | 19,784,459  |   |      |       | 4.7  |   |   |             | 20,152,011  |   |  |       | 4.8  |   |   |             | 17,931,004  |   |  |       | 4.4  |  
|                                                                                       |                                                                      |                         |             |             |   |      |       |      |   |   |             |             |   |  |       |      |   |   |             |             |   |  |       |     
|                                                                                       |                                                                      |                         | 420,058,209 |             |   |      | 100.0 |      |   |   | 418,846,243 |             |   |  | 100.0 |      |   |   | 407,213,579 |             |   |  | 100.0 |     
|Expense:                                                                               |                                                                      |                         |             |             |   |      |       |      |   |   |             |             |   |  |       |      |   |   |             |             |   |  |       |     
|                                                                                       | Publishing                                                           |                         |             | 252,878,514 |   |      |       | 60.2 |   |   |             | 249,186,956 |   |  |       | 59.5 |   |   |             | 262,798,933 |   |  |       | 64.5 |  
|                                                                                       | Cable                                                                |                         |             | 100,508,243 |   |      |       | 23.9 |   |   |             | 91,403,840  |   |  |       | 21.8 |   |   |             | 84,578,461  |   |  |       | 20.8 |  
|                                                                                       | Broadcasting                                                         |                         |             | 36,693,290  |   |      |       | 8.7  |   |   |             | 36,312,941  |   |  |       | 8.7  |   |   |             | 36,972,664  |   |  |       | 9.1  |  
|                                                                                       | Other Communications                                                 |                         |             | 17,451,402  |   |      |       | 4.2  |   |   |             | 17,699,243  |   |  |       | 4.2  |   |   |             | 18,854,358  |   |  |       | 4.6  |  
|                                                                                       | Corporate general and administrative                                 |                         |             | 4,398,354   |   |      |       | 1.0  |   |   |             | 6,045,826   |   |  |       | 1.4  |   |   |             | 2,705,412   |   |  |       | 0.7  |  
|                                                                                       |                                                                      |                         |             |             |   |      |       |      |   |   |             |             |   |  |       |      |   |   |             |             |   |  |       |     
|                                                                                       |                                                                      |                         | 411,929,803 |             |   |      | 98.1  |      |   |   | 400,648,806 |             |   |  | 95.7  |      |   |   | 405,909,828 |             |   |  | 99.7  |     
|                                                                                       |                                                                      |                         |             |             |   |      |       |      |   |   |             |             |   |  |       |      |   |   |             |             |   |  |       |     
|Operating income                                                                       |                                                                      |                         | 8,128,406   |             |   |      | 1.9   | %    |   |   | 18,197,437  |             |   |  | 4.3   | %    |   |   | 1,303,751   |             |   |  | 0.3   | %   
|Nonoperating income (expense):                                                         |                                                                      |                         |             |             |   |      |       |      |   |   |             |             |   |  |       |      |   |   |             |             |   |  |       |     
|                                                                                       | Interest expense                                                     |                         |             | (19,633,266 | ) |      |       |      |   |   |             | (22,952,372 | ) |  |       |      |   |   |             | (19,486,186 | ) |  |       |      |  
|                                                                                       | Gain on disposition of Monroe Cablevision                            |                         |             |            |   |      |       |      |   |   |             | 21,140,829  |   |  |       |      |   |   |             |            |   |  |       |      |  
|                                                                                       | Change in fair value of interest rate swaps                          |                         |             | 3,908,162   |   |      |       |      |   |   |             | (732,748    | ) |  |       |      |   |   |             | (5,340,046  | ) |  |       |      |  
|                                                                                       | Loss on impairment of intangible asset                               |                         |             | (8,378,058  | ) |      |       |      |   |   |             |            |   |  |       |      |   |   |             |            |   |  |       |      |  
|                                                                                       | Loss on extinguishment of debt                                       |                         |             |            |   |      |       |      |   |   |             | (8,989,786  | ) |  |       |      |   |   |             |            |   |  |       |      |  
|                                                                                       | Investment income                                                    |                         |             | 1,110,158   |   |      |       |      |   |   |             | 126,221     |   |  |       |      |   |   |             | 47,452      |   |  |       |      |  
|                                                                                       |                                                                      |                         |             |             |   |      |       |      |   |   |             |             |   |  |       |      |   |   |             |             |   |  |       |     
|                                                                                       |                                                                      |                         | (22,993,004 | )           |   |      |       |      |   |   | (11,407,856 | )           |   |  |       |      |   |   | (24,778,780 | )           |   |  |       |     
|                                                                                       |                                                                      |                         |             |             |   |      |       |      |   |   |             |             |   |  |       |      |   |   |             |             |   |  |       |     
|Income (loss) from continuing operations before
    income taxes and minority interest |                                                                      |                         | (14,864,598 | )           |   |      |       |      |   |   | 6,789,581   |             |   |  |       |      |   |   | (23,475,029 | )           |   |  |       |     
|Provision (credit) for income taxes                                                    |                                                                      |                         | 27,607,585  |             |   |      |       |      |   |   | 2,934,948   |             |   |  |       |      |   |   | (6,596,410  | )           |   |  |       |     
|Minority interest                                                                      |                                                                      |                         | 2,860,804   |             |   |      |       |      |   |   | (476,840    | )           |   |  |       |      |   |   | 234,622     |             |   |  |       |     
|                                                                                       |                                                                      |                         |             |             |   |      |       |      |   |   |             |             |   |  |       |      |   |   |             |             |   |  |       |     
|Income (loss) from continuing operations                                               |                                                                      |                         | (39,611,379 | )           |   |      |       |      |   |   | 3,377,793   |             |   |  |       |      |   |   | (16,643,997 | )           |   |  |       |     
|Loss from discontinued operations, net of tax                                          |                                                                      |                         | (960,213    | )           |   |      |       |      |   |   | (837,347    | )           |   |  |       |      |   |   | (1,212,866  | )           |   |  |       |     
|                                                                                       |                                                                      |                         |             |             |   |      |       |      |   |   |             |             |   |  |       |      |   |   |             |             |   |  |       |     
|Net income (loss)                                                                      |                                                                      |                         | (40,571,592 | )           |   |      |       |      |   |   | 2,540,446   |             |   |  |       |      |   |   | (17,856,863 | )           |   |  |       |     
|Add:                                                                                   |                                                                      |                         |             |             |   |      |       |      |   |   |             |             |   |  |       |      |   |   |             |             |   |  |       |     
|                                                                                       | Interest expense                                                     |                         |             | 19,633,266  |   |      |       |      |   |   |             | 22,952,372  |   |  |       |      |   |   |             | 19,486,186  |   |  |       |      |  
|                                                                                       | Provision (credit) for income taxes                                  |                         |             | 27,150,700  |   |      |       |      |   |   |             | 2,727,500   |   |  |       |      |   |   |             | (7,132,400  | ) |  |       |      |  
|                                                                                       | Depreciation                                                         |                         |             | 47,715,423  |   |      |       |      |   |   |             | 44,753,126  |   |  |       |      |   |   |             | 44,601,108  |   |  |       |      |  
|                                                                                       | Amortization of intangibles and deferred charges                     |                         |             | 3,083,785   |   |      |       |      |   |   |             | 3,011,349   |   |  |       |      |   |   |             | 4,421,314   |   |  |       |      |  
|                                                                                       | Amortization of broadcast rights                                     |                         |             | 7,020,339   |   |      |       |      |   |   |             | 7,138,102   |   |  |       |      |   |   |             | 6,510,196   |   |  |       |      |  
|                                                                                       | (Gain) loss on disposal of property and equipment                    |                         |             | 2,177,810   |   |      |       |      |   |   |             | (300,268    | ) |  |       |      |   |   |             | 23,117      |   |  |       |      |  
|                                                                                       | Change in fair value of interest rate swaps                          |                         |             | (3,908,162  | ) |      |       |      |   |   |             | 732,748     |   |  |       |      |   |   |             | 5,340,046   |   |  |       |      |  
|                                                                                       | Loss on impairment of intangible asset, net of
    minority interest |                         |             | 5,613,299   |   |      |       |      |   |   |             |            |   |  |       |      |   |   |             |            |   |  |       |      |  
|                                                                                       | Loss on early extinguishment of debt                                 |                         |             |            |   |      |       |      |   |   |             | 8,989,786   |   |  |       |      |   |   |             |            |   |  |       |      |  
|                                                                                       | Loss on disposal of discontinued operations                          |                         |             | 569,015     |   |      |       |      |   |   |             |            |   |  |       |      |   |   |             |            |   |  |       |      |  
|                                                                                       | (Gain) on disposal of Monroe Cablevision                             |                         |             |            |   |      |       |      |   |   |             | (21,140,829 | ) |  |       |      |   |   |             |            |   |  |       |      |  
|Less:                                                                                  |                                                                      |                         |             |             |   |      |       |      |   |   |             |             |   |  |       |      |   |   |             |             |   |  |       |     
|                                                                                       | Payments on broadcast rights                                         |                         |             | (6,933,128  | ) |      |       |      |   |   |             | (5,744,461  | ) |  |       |      |   |   |             | (5,117,113  | ) |  |       |      |  
|                                                                                       |                                                                      |                         |             |             |   |      |       |      |   |   |             |             |   |  |       |      |   |   |             |             |   |  |       |     
|Adjusted EBITDA                                                                        |                                                                      | $                       | 61,550,755  |             |   |      |       |      |   | $ | 65,659,871  |             |   |  |       |      |   | $ | 50,275,591  |             |   |  |       |     
|                                                                                       |                                                                      |                         |             |             |   |      |       |      |   |   |             |             |   |  |       |      |   |   |             |             |   |  |       |     

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Year Ended December 31, 2003 Compared to
Year Ended December 31, 2002



| |         
| | --------
| | Revenues

Revenues increased $1.2 million, or 0.3%,
from 2002 to 2003. The increase in revenues was due to increased
cable revenues partially offset by decreased advertising
revenues in both our publishing and broadcasting operations. The
decreased revenues were attributable to a soft advertising
market, which was primarily the result of a weak overall
economic environment. Other communications revenue decreased
slightly due mainly to the reduction in telephony revenues
resulting from declining reciprocal compensation.

Cable Television.Cable revenue increased $8.1 million, or 7.9%, from 2002 to
2003. The increase in cable revenue was principally attributable
to an increase of $5.42, or 9.9%, in the average monthly revenue
per basic subscriber, partially offset by a decrease in basic
subscribers. The increase in the average monthly revenue per
basic subscriber was primarily attributable to an increase in
the basic cable service rate charged to subscribers and growth
in high-speed cable modem and digital cable subscribers.

Revenue generating units increased in the digital
and high-speed data categories throughout 2003. Net digital
additions totaled 11,981, or 45.9%, for the year ended
December 31, 2003, resulting in 38,073 digital revenue
generating units. Year-to-date net high-speed data additions
totaled 7,242, or 32.1%, resulting in 29,807 high-speed revenue
generating units as of December 31, 2003. Basic subscribers
at the end of the period totaled 149,178, a decrease of 3,214
basic subscribers from December 31, 2002. This is due to
the decrease of 2,164 basic subscribers in the Toledo system due
to an increase in non-pay disconnects and fewer installations
resulting from soft economic conditions within the Toledo
market, as well as competition from DBS. The Erie County system
recognized a decrease in basic subscribers of 1,050 due
primarily to the delay in system rebuild and the corresponding
delay in the roll-out of advanced services. This rebuild is
expected to be completed by the end of the second quarter of
2004.

Newspaper
Publishing.Publishing revenue
decreased $5.9 million, or 2.3%, from 2002 to 2003. The
decrease in publishing revenue was due primarily to a
$4.8 million, or 2.3%, decrease in advertising revenue to
$200.6 million in 2003. Total advertising revenue decreased
because of a reduction in retail and classified advertising of
$4.7 million, or 4.4%, and $4.5 million, or 6.1%,
respectively; these declines were partially offset by increases
in national and other advertising sources of $2.5 million
and $2.1 million, respectively. The reduction in classified
advertising was due primarily to the decrease in placement of
help wanted advertising.

Circulation revenue decreased $1.0 million,
or 2.0%, to $48.9 million in 2003 due to the economic
downturn causing losses in daily and Sunday net paid circulation
for both home delivery and single copy sales and corresponding
decreases in the average earned rate per copy. Other circulation
revenue, which is composed of third-party and total market
delivery and niche publications, was consistent with 2002.

Television
Broadcasting.Broadcasting revenue
decreased $558,000, or 1.4%, from 2002 to 2003. National and
political revenue decreased $359,000, or 2.7%, and
$2.0 million, or 68.6%, respectively, resulting from
greatly reduced political advertising demand due to the lack of
political races during 2003. The national and political revenue
declines were partially offset by an increase in local and trade
revenue of $1.2 million, or 4.7%, and $320,000, or 40.6%,
respectively, along with a reduction in agency commissions of
$282,000, or 3.8%.

For more than a decade, our Louisville stations
had the local broadcast rights for the University of Louisville
football and mens basketball games. Our rights expire
after the 2004-2005 basketball season. Currently, we believe
these rights will not be renewed. In 2003, our Louisville
stations reported net revenues and operating income related to
the broadcast of University of Louisville events totaling
$2.0 million and $812,000, respectively.

Other
Communications.Other communications
revenue decreased $368,000, or 1.8%, from 2002 to 2003. The
decrease in other communication revenue was primarily a result
of a $273,000, or 1.5%, decrease in telecom revenue to
$17.6 million in 2003.

45



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The decrease in telecom revenue was primarily due
to the reduction in reciprocal compensation revenue,
long-distance revenue and carrier access billings of
$1.2 million, or 51.0%, $634,000, or 21.1%, and $555,000 or
28.9%, respectively; these reductions were partially offset by
an increase in competitive access and local exchange revenues of
$798,000, or 22.8%, and $1.0 million, or 14.1%,
respectively, due primarily to the net addition of 94 telecom
customers, representing a 16.5% increase in the customer base.

Effective June 14, 2003, an incumbent
carrier invoked the FCC order on reciprocal compensation rate
reduction. Reciprocal compensation revenue for the year ended
December 31, 2003 was $1.2 million as compared to
$2.4 million for the same period of the prior year.

The revenue relating to residential security
alarm system sales and monitoring decreased $95,000, or 4.1%,
due to decreases in the number of system sales throughout 2003.



| |                   
| | ------------------
| | Operating Expenses

Operating expenses increased $11.3 million,
or 2.8%, from 2002 to 2003. The increase in operating expenses
was largely attributable to increased cable, publishing, and
broadcast expenses and partially offset by decreased corporate
general and administrative expenses.

Cable Television.Cable operating expenses increased $9.1 million, or 10.0%,
from 2002 to 2003. The increase was primarily due to a
$3.5 million, or 12.9%, increase in depreciation and
amortization to $30.7 million in 2003, attributable to the
capital expenditures associated with the rebuild of our Toledo
cable system and continued rollout of cable modems and digital
cable service. In addition, depreciation expense for the Erie
County system has been accelerated in anticipation of the
completion during the second quarter 2004 of our system rebuild.
Basic cable programming expenses increased $1.4 million, or
6.2%, to $23.8 million, due to price increases from
programming suppliers. Programming expense for the digital tier
increased $845,000, due to an increase in the number of digital
subscribers as compared to the prior year. Cable general and
administrative expenses increased $3.5 million, or 30.2%,
due to increases in personal property tax, workers
compensation expense, expense related to employee pension
benefits, an overall increase in property and casualty insurance
rates, and a loss on disposal of assets of $2.0 million
resulting from the rebuild of our Toledo and Erie County systems.

During 2003, the cable operations received
assessment notices from the Ohio Department of Taxation
(ODT) totaling $541,000 representing sales and use tax on
property and services purchased during the period of
January 1, 1999 through June 30, 2002 that were used
for the Companys cable modem and other internet services.
The cable operations maintain that these purchases are exempted
from sales and use tax pursuant to the used directly in
the rendition of a public utility service exemption, and
have appealed the states assessment. In light of prior
cable industry settlements with ODT concerning customer premise
equipment, we chose to accrue for these assessments. At
December 31, 2003, the cable operations have accrued
$571,000 to cover this exposure. The company, in cooperation
with others in the cable industry, continues to discuss with
senior ODT administrators a potential resolution to the disputed
legal issue. One possibility is that the appeal will be resolved
without any retrospective liability. It is also possible,
however, that the parties will not reach an agreement and the
appeal will continue. Our cable companies will continue to build
this reserve in 2004 until such time that we receive notice that
the assessment has been vacated by the ODT or a settlement is
reached with the ODT. If the assessment is vacated, the accrual
will be reversed in its entirety, and the amount will be
recorded as a reduction to 2004 sales tax expense.

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##### Table of Contents



Newspaper
Publishing.Publishing operating
expenses increased $3.7 million, or 1.5%, from 2002 to
2003. The increase was due to increases in circulation,
advertising and production expense of $272,000, $256,000 and
$830,000, respectively, primarily due to contractual wage
increases. Newsprint expense increased $815,000, or 2.8%,
resulting from a weighted-average price per ton increase of
$27.28, or 6.2%, partially offset by a 3.7% decrease in
consumption from the prior year. General and administrative
expenses, including pension and welfare costs, increased
$2.2 million, or 3.3%, as compared to the prior year. This
increase in expenses is partially due to contractual increases
in wages and increased expense related to employee pension
benefits. G&A expenses also increased from the year ended
December 31, 2002 due to a favorable variance in bad debt
expense recognized in the second quarter of 2002 resulting from
cash collections on a significant retail account, which had been
fully reserved.

Television
Broadcasting.Broadcasting operating
expenses increased $380,000, or 1.1%, from 2002 to 2003. The
increase results primarily from increases in programming, sales,
news, and depreciation expense of $474,000, $197,000, $176,000,
and $214,000, respectively, partially offset by decreases in
general and administrative expenses of $260,000. Other savings
resulted from overall cost control initiatives.

Other
Communications.Other communications
operating expenses decreased $248,000, or 1.4%, from 2002 to
2003. Telecom operating expenses decreased $688,000, or 4.5%,
due to a decrease of $626,000 in long-distance expense. The
operating expenses relating to residential security alarm system
sales and monitoring increased $440,000, or 19.1%, due primarily
to an increase in general and administrative expenses of
$316,000, resulting from an increase in bad debt expense and
employee benefits.



| |                 
| | ----------------
| | Operating Income

Operating income decreased $10.1 million, or
55.3%, from 2002 to 2003. Cable operating income decreased
$1.0 million, or 10.4%. The decrease in cable operating
income was primarily due to increased programming expenses and
depreciation expense, and a loss on the disposal of assets
resulting from the rebuild of our cable systems in Toledo and
Erie County; these declines were partially offset by revenue
growth generated by rate increases and the continued roll-out of
advances services. Publishing operating income decreased
$9.6 million, or 119.1%. The decrease in publishing
operating income was due to the continued reduction in
advertising sales, resulting from the continued economic
softness in the markets we serve. Broadcasting operating income
decreased $938,000, or 25.7%. The decrease in broadcasting
operating income was primarily due to lower national and
political advertising demand in our markets during 2003,
partially offset by increases in local advertising. Other
communications operating income from continuing operations
decreased $120,000. Corporate general and administrative
expenses decreased $1.6 million due to the reduction in
compensation expense relating to management bonuses and
executive committee stock awards earned in 2002.



| |           
| | ----------
| | Net Income

For the year ended December 31, 2003, the
company reported a net loss of $40.6 million compared to
net income of $2.5 million for the year ended
December 31, 2002. The decrease in net income is the result
of a $10.1 million decrease in operating income, a
$5.6 million non-cash impairment loss, net of minority
interest, a $31.6 million non-cash charge resulting from a
valuation allowance recorded against our deferred tax assets,
and a $21.1 million gain recognized on the like-kind
exchange of Monroe Cablevision during 2002. These variances
which produced the reduction of net income were partially offset
by a $3.3 million decrease in interest expense, an increase
in income of $4.6 million attributable to the change in
fair value of interest rate swaps, a $9.0 million loss
related to the early extinguishment of debt recognized in 2002,
and an increase in investment income of $984,000. The impairment
charge represents the excess of the carrying value over the
determined fair value of the FCC license held by the WAND-TV
Partnership. The impairment arises from a write-down of our FCC
license resulting from a discounted cash flow forecast that uses
industry averages to determine the fair value of the license.
The decrease in fair value is the result of the decline in the
advertising market during 2001 and 2003, which decreased
industry-wide station operating margins. See Critical
Accounting Policies and Estimates for a full discussion on
the deferred tax asset valuation allowance.

47



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##### Table of Contents





| |                              
| | -----------------------------
| | Depreciation and Amortization

Depreciation and amortization increased
$2.9 million, or 5.3%, from 2002 to 2003. The increase in
depreciation and amortization was primarily due to the rebuild
of our cable systems in Toledo and Erie County, accelerated
depreciation expense on the Erie County System in anticipation
of a 2004 completion, and other capital expenditures to maintain
our operating assets.



| |                
| | ---------------
| | Adjusted EBITDA

Adjusted EBITDA decreased $4.1 million, or
6.3%, from 2002 to 2003. Adjusted EBITDA as a percent of
revenues decreased from 15.7% in 2002 to 14.7% in 2003. A
reconciliation of adjusted EBITDA to net income is provided
above. The decrease in adjusted EBITDA as a percentage of
revenue was primarily due to the reduction in publishing
advertising revenue resulting from the economic conditions
during 2003; this reduction was partially offset by increased
revenue from the continued rollout of high margin advanced cable
products and the increase in cable service charges. Net loss as
a percentage of revenue was 9.7% for the year ended
December 31, 2003, as compared to net income as a
percentage of revenue at December 31, 2002 of 0.6%. As
discussed above, a $31.6 million valuation allowance
relating to deferred tax assets was recorded in the fourth
quarter of 2003, and the year ending December 31, 2002
included a $13.5 million gain, net of tax, related to the
like-kind exchange and a $5.8 million loss, net of tax, on
early extinguishment of debt.



| |                 
| | ----------------
| | Interest Expense

Interest expense decreased $3.3 million, or
14.5%, from 2002 to 2003. Interest expense in 2003 decreased due
to the decrease in the effective interest rate, partially offset
by the increase in outstanding debt.




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



| |         
| | --------
| | Revenues

Revenues increased $11.6 million, or 2.9%,
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. 2002 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.

48



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##### Table of Contents



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
$1.4 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 $2.2 million, or 12.4%, from 2001 to
2002, after reflecting the reclassification of discontinued
operations. 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. In 2002,
116 new business retail telephony customers were added,
representing a 25.1% increase in the customer base. 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 $5.3 million,
or 1.3%, from 2001 to 2002. The decrease in operating expenses
is primarily attributable to decreased publishing and broadcast
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 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.

49



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##### Table of Contents



Other
Communications.Other communications
operating expenses increased $1.2 million, or 6.1%, from
2001 to 2002, after reflecting the reclassification of
discontinued operations. Telecom operating expenses increased
$421,000, or 2.8%, due to an increase in depreciation expense of
$453,000. The operating expenses relating to residential
security alarm system sales and monitoring was consistent with
prior year. 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 $16.9 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 $3.4 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.



| |                
| | ---------------
| | Adjusted EBITDA

Adjusted EBITDA increased $15.4 million, or
30.6%, as compared to the year ended December 31, 2001. A
reconciliation of adjusted EBITDA to net income is provided
above. Adjusted EBITDA as a percentage of revenue increased to
15.7% during 2002, from 12.3% in 2001. The increase in adjusted
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 income as a percentage of revenue was
0.6% for the year ended December 31, 2002, as compared to
net loss as a percentage of revenue at December 31, 2001 of
4.4%. As discussed above, the year ending December 31, 2002
included a $13.5 million gain, net of tax, related to the
like-kind exchange and a $5.8 million loss, net of tax, on
early extinguishment of debt.



| |                 
| | ----------------
| | Interest Expense

Interest expense increased $3.5 million, or
17.8%, 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.

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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
$42.3 million and $35.1 million for the years ended
December 31, 2003 and December 31, 2002, respectively.
The net cash provided by operating activities is determined by
adding back depreciation and amortization, and adjusting for
other non-cash items, including, for the year 2003, a
$3.9 million gain resulting from the change in fair value
of interest rate swaps and $27.0 million of deferred income
taxes resulting principally from the valuation allowance. Net
cash provided by operating activities also reflects a
$7.0 million contribution to the corporate pension plan,
which is consistent with the $7.0 million contribution made
in 2002. Cash used in investing activities was
$54.9 million for the year ended December 31, 2003,
compared to $32.4 million for the prior year. Net cash used
in investing activities for the year ended December 31,
2003 includes proceeds of $2.0 million from the sale of our
investment in the Pittsburgh Pirates, along with the capital
expenditures discussed below.

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 $55.1 million and $32.0 million,
for the years ended December 31, 2003 and December 31,
2002, respectively. Capital expenditures for the year ended
December 31, 2003 were used primarily to begin the rebuild
of the Erie County cable system, complete the rebuild of the
Bedford, MI cable plant acquired from Comcast Corp. in the
like-kind exchange, begin the first stages of the Pittsburgh
Post-Gazette facility upgrade and maintain other operating
assets. Capital expenditures for 2002 were primarily used to
support our continued rollout of advanced cable products, the
rebuild of the plant acquired from Comcast Corp., and
maintenance of our other operating assets.

For the year ended December 31, 2004, it is
anticipated that we will spend approximately $55.9 million
on capital expenditures, including the continued rebuild of Erie
County cable systems plant, expenditures required for
success-based deployment of advanced cable products, continued
growth in the telecom customer base, and the completion of the
Pittsburgh Post-Gazette production facility improvement project.

Financing activities provided $14.4 million
of cash for the year ended December 31, 2003, compared to
$1.2 million for the prior year. The financing activities
of 2003 include two $10.0 million borrowings on the Term
Loan A and a $3.6 million mandatory pre-payment on the
senior credit facilities due to $7.1 million of excess cash
flow generated during the year ended December 31, 2002. The
expiration dates under Term Loan A required separate draws
of up to $20.0 million prior to June 30, 2003 and
December 31, 2003, therefore the unborrowed portions of
$10.0 million each ($20.0 million in total) were
cancelled on these dates.

During 2002, we 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
9 1/4% 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 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.

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We have subsequently amended these facilities.
Effective September 30 2003, we amended our senior credit
facilities dated May 15, 2002. The amendment effectively
reduced the applicable margin on the Term Loan B facility
by 50 basis points. The amendment also converted the
$10.0 million outstanding under the Term Loan A
facility to loans under the Term Loan B facility. We
estimate the amendment will reduce our interest expense over the
twelve months following the amendment by approximately $377,000.
Effective March 19, 2004, we further amended our senior
credit facilities to restate various covenant levels and to
substitute the fixed charge coverage test with a debt service
coverage test. The amendment also places limits on capital
expenditures throughout the term of the credit agreement.

At December 31, 2003, the balances
outstanding and available under our new senior credit facilities
and subordinated notes were $265.3 million and
$70.9 million, respectively, and the weighted-average
interest rate on the balance outstanding was 6.50% as adjusted
for interest rate swaps in effect. At December 31, 2003,
our covenants on our senior credit facilities would allow
borrowing of up to $56.3 million based on our twelve month
trailing EBITDA of $61.6 million. At December 31,
2002, the balances outstanding and available under our previous
senior credit facility and senior 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. Interest expense in 2003
decreased $3.3 million due to the decrease in the effective
interest rate, partially offset by the increase in outstanding
debt.

We have a substantial amount of debt, and our
high level of debt could have important consequences. We believe
that funds generated from operations and the borrowing
availability under our 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, 2003, including periods in
which the related payments are due (in 000s):

|                                                         |  |      |        |      |  |      |        |      |  |      |        |            |  |       |        |  |  |   |        |  |  |   |         |  |  |   |         | 
|-------------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ | ---------- |  | ----- | ------ |  |  | - | ------ |  |  | - | ------- |  |  | - | ------- | 
|                                                         |  | 2004 |        | 2005 |  | 2006 |        | 2007 |  | 2008 |        | Thereafter |  | Total
|                                                         |  |      |        |      |  |      |        |      |  |      |        |            |  |      
|Subordinated notes, as adjusted for fair value
    hedge |  | $    |       |      |  | $    |       |      |  | $    |       |            |  | $     |       |  |  | $ |       |  |  | $ | 179,095 |  |  | $ | 179,095 | 
|Term loan A                                              |  |      | 250    |      |  |      | 1,000  |      |  |      | 2,000  |            |  |       | 2,625  |  |  |   | 2,750  |  |  |   | 1,375   |  |  |   | 10,000  | 
|Term loan B                                              |  |      | 850    |      |  |      | 850    |      |  |      | 850    |            |  |       | 850    |  |  |   | 850    |  |  |   | 76,029  |  |  |   | 80,279  | 
|Capital leases                                           |  |      | 381    |      |  |      | 418    |      |  |      | 446    |            |  |       | 473    |  |  |   | 443    |  |  |   | 725     |  |  |   | 2,886   | 
|                                                         |  |      |        |      |  |      |        |      |  |      |        |            |  |       |        |  |  |   |        |  |  |   |         |  |  |   |         | 
|Total long-term debt                                     |  |      | 1,481  |      |  |      | 2,268  |      |  |      | 3,296  |            |  |       | 3,948  |  |  |   | 4,043  |  |  |   | 257,224 |  |  |   | 272,260 | 
|                                                        
|Broadcast rights payable                                 |  |      | 5,313  |      |  |      | 3,193  |      |  |      | 1,739  |            |  |       | 731    |  |  |   | 388    |  |  |   |        |  |  |   | 11,364  | 
|Broadcast rights commitments                             |  |      | 467    |      |  |      | 967    |      |  |      | 987    |            |  |       | 656    |  |  |   | 371    |  |  |   | 238     |  |  |   | 3,686   | 
|                                                         |  |      |        |      |  |      |        |      |  |      |        |            |  |       |        |  |  |   |        |  |  |   |         |  |  |   |         | 
|Total broadcast rights                                   |  |      | 5,780  |      |  |      | 4,160  |      |  |      | 2,726  |            |  |       | 1,387  |  |  |   | 759    |  |  |   | 238     |  |  |   | 15,050  | 
|                                                        
|Pension obligations(1)                                   |  |      | 8,700  |      |  |      | 8,500  |      |  |      | 8,900  |            |  |       | 9,000  |  |  |   | 8,400  |  |  |   | 5,757   |  |  |   | 49,257  | 
|Post-retirement medical obligations(1)                   |  |      | 5,000  |      |  |      | 5,300  |      |  |      | 5,500  |            |  |       | 5,800  |  |  |   | 6,000  |  |  |   | 86,013  |  |  |   | 113,613 | 
|Operating leases                                         |  |      | 3,044  |      |  |      | 2,010  |      |  |      | 1,393  |            |  |       | 963    |  |  |   | 398    |  |  |   | 1,599   |  |  |   | 9,407   | 
|                                                         |  |      |        |      |  |      |        |      |  |      |        |            |  |       |        |  |  |   |        |  |  |   |         |  |  |   |         | 
|Total contractual obligations                            |  | $    | 24,005 |      |  | $    | 22,238 |      |  | $    | 21,815 |            |  | $     | 21,098 |  |  | $ | 19,600 |  |  | $ | 350,831 |  |  | $ | 459,587 | 
|                                                         |  |      |        |      |  |      |        |      |  |      |        |            |  |       |        |  |  |   |        |  |  |   |         |  |  |   |         | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The contractual obligations for pensions and
    post-retirement medical benefits reflect the actuarially
    determined accumulated benefit obligations, which differ from
    the amounts recorded in our financial statements. See
    Notes 8 and 9 to our consolidated financial statements for
    further information on pension and post-retirement medical
    obligations. Maturities presented here reflect projected
    contributions for these obligations over the next five years.
    Actual experience may differ from these estimates.

At December 31, 2003, we have recorded
recoverable Federal income tax of $10.2 million, which
includes the effect of new Federal tax legislation that
increases the carryback period for net operating losses.

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Recent Accounting Pronouncements

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 adoption of this standard has had no impact on the
Companys financial position or results of operations.

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 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 loss on
disposal recognized in conjunction with the discontinuation of
certain operations as discussed in Note 3 reflects the
adoption of this standard. See Note 3 for more discussion
of discontinued operations.




Critical Accounting Policies and
Estimates

We prepare our consolidated financial statements
in accordance with accounting principles generally accepted in
the United States and reflect practices appropriate to our
businesses. The preparation of these consolidated financial
statements requires management 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.
Management has discussed with the Board of Directors the
development, selection and disclosure of the critical accounting
policies and estimates and the application of these policies and
estimates. In addition, there are other items within the
financial statements that require estimation, but are not deemed
to be critical accounting policies and estimates. Changes in the
estimates used in these and other items could have a material
impact on the financial statements.




Pension and postretirement benefits

We provide defined benefit pension,
postretirement health care and life insurance benefits to
eligible employees under a variety of plans (see Notes 8
and 9 to our consolidated financial statements). Accounting for
pension and postretirement benefits requires the use of several
assumptions.

Weighted average assumptions used each year in
accounting for pension benefits and other postretirement
benefits are:

|                                                 |  |          |      |                |  |      |      |      |  |  |      |   |  |  |      |  
|------------------------------------------------ |  | -------- | ---- | -------------- |  | ---- | ---- | ---- |  |  | ---- | - |  |  | ---- | -
|                                                 |  |          |      |                |  |     
|                                                 |  |          |      | Other         
|                                                 |  | Pension  |      | Postretirement
|                                                 |  | Benefits |      | Benefits      
|                                                 |  |          |      |               
|                                                 |  | 2003     |      | 2002           |  | 2003 |      | 2002
|                                                 |  |          |      |                |  |      |      |     
|Discount rate for expense                        |  |          | 7.00 | %              |  |      | 7.23 | %    |  |  | 7.00 | % |  |  | 7.25 | %
|Discount rate for obligations                    |  |          | 6.25 | %              |  |      | 7.00 | %    |  |  | 6.25 | % |  |  | 7.00 | %
|Increase in future salary levels for expense     |  |          | 4.99 | %              |  |      | 4.99 | %    |  |  |     |   |  |  |     |  
|Increase in future salary levels for obligations |  |          | 4.62 | %              |  |      | 4.99 | %    |  |  |     |   |  |  |     |  
|Long-term rate of return on plans assets        |  |          | 8.78 | %              |  |      | 8.96 | %    |  |  |     |   |  |  |     |  

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We expect to use a weighted-average long-term
rate of return assumption of 8.16% in 2004, consistent with the
expected rate of return estimated in accordance with our
established investment policies. On a weighted average basis,
the investment policies call for an allocation that consists of
63% equity securities and 37% fixed income securities. The
long-term rate of return assumption is subject to change due to
the fluctuation of returns in the overall equity and debt
markets. As of the date of this report, a hypothetical one
hundred basis point decrease in our long-term rate of return
assumption would result in a $1.8 million increase in our
net pension expense. In 2003, the pension plans assets earned a
weighted-average return of approximately 13.9%, compared to a
loss of 5.2% in the prior year. We will use a discount rate of
6.25% for expense in 2004.

Our pension plan asset allocations at
December 31, 2003 and December 31, 2002, were as
follows (in thousands):

|                                             |  |                   |         |                   |  |  |       |   |  |   |         |  |  |  |       |  
|-------------------------------------------- |  | ----------------- | ------- | ----------------- |  |  | ----- | - |  | - | ------- |  |  |  | ----- | -
|                                             |  |                   |         |                  
|Asset Category                               |  | December 31, 2003 |         | December 31, 2002
|                                             |  |                   |         |                  
|                                             |  |                   |         |                   |  |  |       |  
|Equity securities                            |  | $                 | 99,466  |                   |  |  | 59.3  | % |  | $ | 74,456  |  |  |  | 51.1  | %
|Fixed income securities                      |  | $                 | 50,901  |                   |  |  | 30.4  | % |  | $ | 65,558  |  |  |  | 45.0  | %
|Other assets, including cash and equivalents |  | $                 | 17,270  |                   |  |  | 10.3  | % |  | $ | 5,690   |  |  |  | 3.9   | %
|Total                                        |  | $                 | 167,637 |                   |  |  | 100.0 | % |  | $ | 145,704 |  |  |  | 100.0 | %

Our current 2004 target allocation for pension
plans assets is a weighted-average of 63% in equity securities
and 37% in fixed income securities and other assets. As a result
of all the assumptions provided above, we expect to incur a net
periodic pension expense of $9.3 million in 2004 as
compared to net periodic pension expense of $7.7 million in
2003.

For purposes of measuring 2003 postretirement
health care costs, a 10% annual rate of increase in the per
capita cost of covered health care benefits was assumed for
2003. The annual rate of increase for 2004, 2005 and 2006 was
assumed to be 10%, 9%, and 8%, respectively. The rate was
assumed to decrease gradually to 5% through 2013 and remain at
that level thereafter. On December 8, 2003, the Medicare
Prescription Drug, Improvement and Modernization Act of
2003 (Act) was signed into law. Provisions of the
Act include a prescription drug benefit under Medicare (Medicare
Part D) as well as a federal subsidy to sponsors of retiree
health care benefit plans that provide a benefit that is at
least actuarially equivalent to Medicare Part D. We provide
a prescription drug benefit for certain groups of retirees;
however, we have not yet assessed our eligibility to receive a
subsidy under the Act, nor are we able to predict the impact of
the behavior of our retiree population in response to the
provisions of the Act. Accordingly, we have elected the deferral
allowed by FASB Staff Position FAS 106-1, Accounting
and Disclosure Requirements Related to the Medicare Prescription
Drug, Improvement Modernization Act of 2003. The
effects of the Act have not been reflected in the accumulated
other postretirement obligations or net periodic postretirement
benefit costs. Specific authoritative guidance on the accounting
for the federal subsidy is pending and that guidance, when
issued, could change previously reported obligations related to
postretirement benefits.

Assumed health care costs trend rates have a
significant effect on the amounts reported for health care
plans. As of the date of this report, a one hundred basis point
change in assumed health care cost trend rates would have the
following effect (in thousands):

|                                           |  |             |        |             |  |   |         |  
|------------------------------------------ |  | ----------- | ------ | ----------- |  | - | ------- | -
|                                           |  | 1% Increase |        | 1% Decrease
|                                           |  |             |        |            
|Net non-pension retirement benefit expense |  | $           | 1,964  |             |  | $ | (1,129  | )
|Benefit obligation                         |  | $           | 15,326 |             |  | $ | (12,729 | )

We plan to contribute approximately
$8.7 million to our union, non-union, and non-qualified
pension plans and approximately $5.0 million to our other
postretirement benefit plans in 2004. Various factors may cause
actual contributions to differ from this estimate.

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Income Taxes

In determining income (loss) for financial
statement purposes, we must make certain estimates and
judgments. These estimates and judgments occur in the
calculation of certain tax liabilities and in the determination
of the recoverability of certain of the deferred tax assets,
which arise from temporary differences between the tax and
financial statement recognition of revenue and expense.
SFAS No. 109 also requires that the deferred tax
assets be reduced by a valuation allowance, if based on the
weight of available evidence, it is more likely than not that
some portion or all of the recorded deferred tax assets will not
be realized in future periods.

In evaluating our ability to recover our deferred
tax assets, we consider all available positive and negative
evidence including our past operating results, the existence of
cumulative losses in the three most recent fiscal years and our
projections of future taxable income. In determining future
taxable income, we are responsible for assumptions utilized
including the amount of state and federal pre-tax operating
income, the reversal of temporary differences and the
implementation of feasible and prudent tax planning strategies.
These assumptions require significant judgment about the
projections of future taxable income and are consistent with the
plans and estimates we are using to manage our underlying
businesses.

In conjunction with the filing of our annual
report on Form 10-K, we were required to reassess all
significant estimates and judgments made in our financial
statements, considering any additional information available.
From the time we released our September 30, 2003, third
quarter results, to the filing of this Form 10-K we
determined that the underlying assumptions related to judgments
made in connection with our SFAS No. 109 analysis had
changed. In performing our updated analysis of the realizability
of our deferred tax assets, we considered the continued economic
softness and the impact the economy had on our lines of
business. Our projections for future periods were adjusted to
reflect the current economic status and the unanticipated
increases in related employee costs and benefits due to
continuing decreases in discount rates and plan asset rate of
returns. In light of the new projections and after considering
all available evidence, both positive and negative, we concluded
that a valuation allowance for our deferred tax assets was
required as of December 31, 2003. Accordingly, we have
recorded a non-cash charge in the fourth quarter of 2003 of
$31.6 million to record a full valuation allowance for our
deferred tax assets.

We intend to maintain this valuation allowance
until sufficient positive evidence exists to support reversal of
the valuation allowance. Our income tax expense recorded in the
future will be reduced to the extent of offsetting decreases in
our valuation allowance.




Broadcast Rights

Broadcast rights consist principally of rights to
broadcast syndicated programs, sports and feature films and are
stated at the lower of cost or estimated net realizable value.
The total cost of these rights is recorded as an asset and a
liability when the program becomes available for broadcast. We
amortize these broadcast rights assets on the straight-line
method over the number of estimated showings. At
December 31, 2003 we had a net broadcast rights liability
of $201,000, compared to a net broadcast right asset of $42,000
at December 31, 2002.

We periodically review our broadcast rights
inventory based on a program-by program review of our broadcast
plans to ensure the assets are recorded at the lower of cost or
estimated net realizable value. Any determined impairment is
written-off in the period identified. Actual write-offs in 2003
and 2002 were $324,000 and $421,000, respectively.

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Goodwill and other intangible assets

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.
Under SFAS No. 142, the impairment review of goodwill
and other intangible assets not subject to amortization must be
based generally on fair values. The estimated fair values of
these assets subject to the impairment review, which include
goodwill, FCC broadcast licenses, and other intangibles were
calculated as of December 31, 2003 and 2002 based on
projected future discounted cash flow analyses. The development
of cash flow projections used in the analyses requires the use
of assumptions regarding revenue and market growth. The analyses
used discount rates based on specific economic factors. Since
the estimated fair values of these assets used in the impairment
calculation are subject to change based on our financial results
and overall market conditions, future impairment charges are
possible.

As required by SFAS No. 142, the
Company performed its annual impairment analysis of
indefinite-lived intangibles during the fourth quarter of 2003.
Based upon the results of this analysis, the Company has
recognized an impairment loss of $5,613,299, net of minority
interest, for the year ended December 31, 2003. The total
loss, before minority interest, of $8,378,058 represents the
excess of the carrying value over the determined fair value of
the FCC license held by the WAND-TV Partnership. The impairment
arises from a write-down of our FCC license resulting from a
discounted cash flow forecast that uses industry averages to
determine the fair value of the license. The decrease in fair
value is the result of the decline in the advertising market
during 2001 and 2003, which decreased industry-wide station
operating margins. This loss is reported in the statement of
operations as a non-operating expense. The impaired asset is
reported in the broadcasting segment for purposes of segment
reporting.

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

|                          |  |          |            |              |  |          |           |              |  |   |            |  |  |   |           | 
|------------------------- |  | -------- | ---------- | ------------ |  | -------- | --------- | ------------ |  | - | ---------- |  |  | - | --------- | 
|                          |  |          |            |             
|                          |  | 2003     |            | 2002        
|                          |  |          |            |             
|                          |  | Gross    |            |              |  | Gross    |           |             
|                          |  | Carrying |            | Accumulated  |  | Carrying |           | Accumulated 
|                          |  | Value    |            | Amortization |  | Value    |           | Amortization
|                          |  |          |            |              |  |          |           |             
|Franchise agreements      |  | $        | 9,264,000  |              |  | $        | 1,294,235 |              |  | $ | 9,264,000  |  |  | $ | 554,672   | 
|Subscriber lists          |  |          | 4,000,000  |              |  |          | 3,666,667 |              |  |   | 4,000,000  |  |  |   | 3,333,334 | 
|Agreements not to compete |  |          | 1,355,000  |              |  |          | 1,103,445 |              |  |   | 1,355,000  |  |  |   | 667,500   | 
|Other intangibles         |  |          | 1,258,458  |              |  |          | 716,510   |              |  |   | 1,246,748  |  |  |   | 679,910   | 
|                          |  |          |            |              |  |          |           |              |  |   |            |  |  |   |           | 
|                          |  | $        | 15,877,458 |              |  | $        | 6,780,857 |              |  | $ | 15,865,748 |  |  | $ | 5,235,416 | 
|                          |  |          |            |              |  |          |           |              |  |   |            |  |  |   |           | 

Amortization expense recognized for the above
assets is expected to be $1,289,626 in 2004; $1,133,398 in 2005;
$785,079 in 2006, $781,500 in 2007 and $756,500 in 2008.

The following intangible assets have been
identified as non-amortizable based upon indefinite useful lives
and have not been amortized during the years ended
December 31, 2003 or 2002:

|                  |  |             |            |      |  |   |            | 
|----------------- |  | ----------- | ---------- | ---- |  | - | ---------- | 
|                  |  |            
|                  |  | December 31
|                  |  |            
|                  |  | 2003        |            | 2002
|                  |  |             |            |     
|Goodwill          |  | $           | 51,987,021 |      |  | $ | 51,987,021 | 
|FCC licenses      |  |             | 19,938,123 |      |  |   | 28,316,181 | 
|Other intangibles |  |             | 525,000    |      |  |   | 525,000    | 
|                  |  |             |            |      |  |   |            | 
|                  |  | $           | 72,450,144 |      |  | $ | 80,828,202 | 
|                  |  |             |            |      |  |   |            | 

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Our goodwill is allocated to reportable segments
as follows:

|                    |  |             |            |      |  |   |            | 
|------------------- |  | ----------- | ---------- | ---- |  | - | ---------- | 
|                    |  |            
|                    |  | December 31
|                    |  |            
|                    |  | 2003        |            | 2002
|                    |  |             |            |     
|Publishing          |  | $           | 48,080,123 |      |  | $ | 48,080,123 | 
|Cable               |  |             | 1,416,002  |      |  |   | 1,416,002  | 
|Broadcasting        |  |             | 809,078    |      |  |   | 809,078    | 
|Corporate and Other |  |             | 1,681,818  |      |  |   | 1,681,818  | 
|                    |  |             |            |      |  |   |            | 
|                    |  | $           | 51,987,021 |      |  | $ | 51,987,021 | 
|                    |  |             |            |      |  |   |            | 




Self-insurance liabilities

We self-insure for certain medical benefits,
workers compensation costs and automobile and general
liability claims. The recorded liabilities for self-insured
risks are calculated using actuarial methods, historical
experience, and current trends. The liabilities include amounts
for actual claims, claim growth and claims incurred but not
reported. Actual experience, including claim frequency and
severity as well as health care inflation, could result in
different liabilities than the amounts currently recorded. The
recorded liabilities for self-insured risks totaled
$9.1 million and $8.9 million at December 31,
2003 and 2002, respectively.




Accounts receivable allowances

Our accounts receivable are primarily due from
advertisers and customers receiving various services provided by
our newspapers, cable, telecom and security monitoring
operations. Credit is extended based on an evaluation of a
customers financial condition. We maintain an allowance
for doubtful accounts, rebates and volume discounts. At
December 31, 2003 and 2002, our allowance for accounts
receivable was $3.5 million and $3.6 million,
respectively.




Stock-based 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, we
recognized $1.5 million in compensation expense for
3600 shares earned in 2002. As a result, a total of 1,808
shares, net of taxes withheld, were issued in 2003. No shares
were earned in the years ended December 31, 2003 or
December 31, 2001. We account for our stock-based
compensation in accordance with SFAS No. 148,
Accounting for Stock-Based Compensation- Transition and
Disclosure, which provides that compensation cost is
measured at the grant date based on the estimated fair value of
the award and is recognized as compensation expense over the
vesting or service period. We previously adopted the fair value
method of accounting for stock-based compensation; therefore,
all years presented reflect this method.




Revenue Recognition

The Company recognizes revenue when it is
realized or realizable and has been earned. Sales are considered
earned when persuasive evidence of an arrangement exists,
services or products are delivered, the price to the customer is
fixed or determinable, and collectibility is reasonably assured.
Net sales for all segments are comprised of gross sales less
rebates, discounts and allowances. Net broadcasting sales is
also net of agency commissions and net publishing sales is net
of expense for barter transactions. Barter transactions in all
other segments are recorded separately in revenues and operating
expenses at the fair value of the services or assets exchanged.

We bill for certain products and services prior
to performance. Such services include newspaper subscriptions
and cable, telephony and security monitoring services. These
advance billings are included in deferred revenues and
recognized as revenue in the period in which the newspapers or
services are provided.

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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, 2003, we have total indebtedness of
$272.3 million. In 2003, our earnings were insufficient to
cover fixed charges by $16.0 million.

Our substantial indebtedness could have important
consequences to holders of our indebtedness. 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;
|
| |  | 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, 2003, we have
approximately $70.9 million available under our senior
credit facilities; however, our covenants on our senior credit
facilities would allow borrowing of up to $56.3 million
based on our twelve month trailing adjusted EBITDA of
$61.6 million. 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. See
Quantitative and Qualitative Disclosures about Market
Risk.

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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;                                   
|
| |  | 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 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.

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

As of December 31, 2003, we have recorded
$57.4 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.

Reductions in advertising could adversely
affect our results of operations.

A large majority of our revenue from newspaper
publishing and substantially all of our revenue from television
broadcasting are derived from many different classifications of
advertisers. Since the fourth quarter of 2000, there has been a
general slowdown in advertising. If this trend continues, our
results of operations will continue to be adversely affected.

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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, apart
from economic conditions, our advertisers were for any reason to
decide to reduce advertising expenditures, our results would be
adversely affected.

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.

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

Our cable 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;



| |   |                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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 addition, our cable systems face or may face
additional competition from new sources, including regional Bell
operating companies, other much larger cable television
companies, other multichannel video providers, other telephone
companies, public utility companies and other entities that are
in the process of entering the cable businesses 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.

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We will also 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. We also face competition from wireless
broadband Internet services. 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. Power utilities are attempting to
develop technology that would permit them to provide high-speed
Internet services over existing power lines.



| |                     
| | --------------------
| | 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.

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.

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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 likely will
not have a material adverse effect on the Companys
liquidity or financial position.

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

An accident at one of the nuclear power plants
near our largest operating facilities could adversely affect our
business operations.

Our newspaper and cable facilities are in the
vicinity of several nuclear power plants. The Fermi 2 Nuclear
Power Plant, operated by Detroit Edison, is in Newport,
Michigan, approximately 30 miles from Toledo. The Davis
Besse Nuclear Power Plant, operated by First Energy Corporation,
is in Oak Harbor, Ohio, approximately 30 miles from Toledo.
The Beaver Falls Nuclear Power Plant, operated by First Energy
Corporation, is in Shippingport, Pennsylvania, approximately
35 miles from Pittsburgh.

A serious accident at one of these plants,
involving the leak of radioactive or other toxic materials into
the surrounding environs to the extent it endangered life or
inhibited transportation or commerce, could adversely affect our
operations.




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 to obtain programming through
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.

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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 initiated a 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.

Our ability to provide residential telephony will
depend on our ability to obtain software at a cost that allows
us to provide those services at competitive prices. We can not
be certain that we will be able to do so.

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
three collective bargaining units represented by the Brotherhood
of Teamsters. One of these includes technicians responsible for
repair and ongoing maintenance of our cable plant; another
comprises the employees who program our cable converter boxes,
and the third includes employees responsible for construction
and installation. The current collective bargaining agreements
for these employees expire in 2008, 2004, and 2007, respectively.

Certain technical employees of Buckeye
TeleSystem, Inc., our telecom operation, are represented by
the Brotherhood of Teamsters. The current collective bargaining
agreement for these employees expires in 2007.

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.

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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, particularly ice 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 expense and, after labor costs, is the most
significant operating cost of our newspaper publishing
operations. Although we have a contract to supply newsprint for
our publishing operations, the contract expires at the end of
2004, and 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. The labor agreements with the eight
unions representing the employees of The Blade expire on
March 21, 2006.

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 or taking 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.

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The role of newspapers is threatened by
competing communications and entertainment
technologies.

For the past several decades, the introduction of
new communications and entertainment technologies has eroded the
once dominant position of newspapers as a source of news and
information. Americans, even those with post-secondary
education, are reading newspapers less than in the past and this
trend is even more pronounced in younger demographic age groups.
Indeed, these younger age groups appear to be less interested in
news generally. While we are making use of the Internet and
exploring other strategies to adapt to the future growth of
alternate communications and entertainment technologies, we
expect the future growth of the Internet and other new
technologies may cause this trend to continue. We are unable to
predict the extent to which these technologies may adversely
affect our newspaper publishing business.

We may be adversely affected by our inability
under collective-bargaining agreements to implement sound
economic and operational measures at our newspapers that allow
the newspapers to operate competitively in the changing
marketplace.

Our collective-bargaining agreements with our
newspaper employees impose stringent limitations on our ability
to manage the costs and operations of our papers. Many of these
limitations were developed decades ago, under markedly different
market conditions. As the nature of the newspaper business has
changed, as newspapers face wider and deeper competition from
other media and from other forms of advertising, and as the
general demand for print news has declined, these limitations
have become increasingly troublesome. They present real barriers
to our ability to meet the challenges we face with aggressive
and proven strategies for sales, customer retention, and the
development of new businesses. If we are unable to work with the
unions that represent our employees to overcome these
limitations, our ability to succeed in the newspaper business
will be negatively affected, to the point that our continued
ownership of the newspapers would be illogical.




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
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.

Emerging technologies may threaten our
broadcast revenues.

Emerging technologies that will allow viewers to
digitally record, store and play back television programming may
decrease viewership of commercials and, as a result, lower our
advertising revenues.

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.

65



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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
$9.2 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:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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.

Any natural disaster or extreme climatic event,
such as an ice storm, could result in the loss of our ability to
broadcast. Further, 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.

66



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|         |                                                               
|-------- | --------------------------------------------------------------
|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, 2003, our interest rate swap agreements
expire in varying amounts through April 2009.

The fair value of $90.3 million of our
long-term debt approximates its carrying value as it bears
interest at floating rates. As of December 31, 2003, the
estimated fair value of our interest rate swap agreements was a
liability of $869,000, 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 long-term obligations. Changes
in the fair value of derivative financial instruments are
recognized either in income or as an adjustment to the carrying
value of the underlying debt depending on whether the derivative
financial instruments qualify for hedge accounting. The fair
market value and carrying value of our 9 1/4% senior
subordinated notes were $200.5 million and
$179.1 million, as adjusted for the fair value hedge, as of
December 31, 2003, respectively.

As of December 31, 2003, we had entered into
interest rate swaps that approximated $241.0 million,
including the effect of any offsetting swaps, or 90.8%, 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 $175.0 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
outstanding borrowings and derivative instruments in effect
during the reporting period following the increase. Based on our
outstanding borrowings and interest rate swap agreements as of
December 31, 2003, a hypothetical 100 basis point
increase in interest rates along the entire interest rate yield
curve would increase our annual interest expense by
approximately $393,000.






|        |                                                
|------- | -----------------------------------------------
|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.






|         |                        
|-------- | -----------------------
|Item 9A. | 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 December 31, 2003, 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 changes in the Companys
internal control over financial reporting in connection with the
evaluation required by Rule 15d under the Exchange Act that
occurred during the quarter ended December 31, 2003 that
has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.

67



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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
|                     |  |     |    |          |  |                           
|Allan J. Block *     |  |     | 49 |          |  |                            | 1985 |  |  | Managing Director of the Company; Director                   
|William Block, Jr. * |  |     | 59 |          |  |                            | 1985 |  |  | Chairman of the Board of Directors                           
|John R. Block *      |  |     | 49 |          |  |                            | 1985 |  |  | Vice Chairman; Editorial Director; Director                  
|Diana E. Block *     |  |     | 31 |          |  |                            | 2002 |  |  | Director of Operations, Pittsburgh
    Post-Gazette; Director
|David G. Huey        |  |     | 56 |          |  |                            | 2002 |  |  | President; Director                                          
|Gary J. Blair        |  |     | 58 |          |  |                            | 1999 |  |  | Vice President and Chief Financial Officer;
    Director     
|Jodi L. Miehls       |  |     | 32 |          |  |                            |     |  |  | Treasurer; Principal Accounting Officer                      
|Fritz Byers          |  |     | 48 |          |  |                            | 1999 |  |  | Secretary; General Counsel; Director                         
|Karen D. Johnese     |  |     | 56 |          |  |                            | 1991 |  |  | Director                                                     
|Donald G. Block      |  |     | 50 |          |  |                            | 1985 |  |  | Director                                                     
|Mary G. Block        |  |     | 71 |          |  |                            | 1987 |  |  | Director                                                     
|Barbara B. Burney    |  |     | 54 |          |  |                            | 2003 |  |  | Director                                                     
|Cyrus P. Block       |  |     | 57 |          |  |                            | 1991 |  |  | Director                                                     
|Harold O. Davis      |  |     | 74 |          |  |                            | 2002 |  |  | Director                                                     



---



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

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.

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.

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
Gazette from 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-Gazette beginning in 1998.
Ms. Block also holds a B.A. from Yale University and a
masters degree from the University of Virginia.

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.

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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 D. Johneseis
a Director. She is the Executive Director of the Pittsburgh
Glass Center. Prior to September 2003 she held the position of
Director of Corporate Citizenship for Block
Communications, Inc. and prior to July 2002 she served as
Director of Community Affairs for the Pittsburgh
Post-Gazette from 1995. 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.

Barbara B. Burneywas appointed a Director in July 2003. Ms. Burney is a
teacher of music and drama and is working on her MFA degree.
Ms. Burney holds a B.A. from Point Park University.

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.



| |                    
| | -------------------
| | 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.
Mary G. Block is the step-mother of Allan J.,
John R. and Cyrus P. Block.

William Block, Jr., Karen D. Johnese,
Barbara B. Burney, and Donald G. Block are brothers
and sisters and are cousins of Allan J. Block, John R.
Block and Cyrus P. Block. Diana E. Block is the
daughter of William Block, Jr.

69



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| |                
| | ---------------
| | Audit Committee

Our audit committee consists of one member,
Harold O. Davis. Our board of directors has determined that
Mr. Davis is an independent director, as defined in the
listing standards of the NASDAQ Stock Exchange. We do not
however believe Mr. Davis meets the definition of an
audit committee financial expert as that term is
defined in Item 401(h) of SEC Regulation S-K. The
board is satisfied Mr. Davis meets all of the relevant
criteria to ensure his independence, competence, integrity, and
honesty in the discharge of his functions as the audit
committee. Mr. Davis served as Chief Financial Officer of
the company (and its predecessor companies) from 1972 until his
retirement in 1990; prior to that he was an auditor with
Ernst & Ernst. The board of directors believes that
Mr. Davis background in public accounting as well as
his substantial experience with the company significantly
qualifies him to understand and oversee our financial reporting.
Among other matters, the committee hires and replaces
independent auditors as appropriate; evaluates performance of,
independence of and pre-approves the non-audit services provided
by independent auditors; discusses with management, internal
auditors and the external auditors the quality of our accounting
policies, procedures, and financial reporting; and finally,
oversees the internal auditing functions and controls.



| |               
| | --------------
| | Code of Ethics

In October 2003, we adopted a Code of Ethics for
our Managing Director and Senior Financial Officers. The Code of
Ethics is filed as Exhibit 14.1 to this Form 10-K.

70



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|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation

The following table sets forth information
concerning the compensation paid for 2003, 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                |      |                        |          |           |  |                 |  |         |  |  |   |       
|                                                                  | 2003 |                        | $        | 480,808   |  |                 |  |        |  |  | $ | 15,798 | 
|                                                                  | 2002 |                        |          | 468,964   |  |                 |  | 467,176 |  |  |   | 14,798 | 
|                                                                  | 2001 |                        |          | 455,000   |  |                 |  |        |  |  |   | 14,343 | 
|William Block, Jr.,
    Chairman of the Board of Directors        |      |                        |          |           |  |                 |  |         |  |  |   |       
|                                                                  | 2003 |                        |          | 480,808   |  |                 |  |        |  |  |   | 84,128 | 
|                                                                  | 2002 |                        |          | 468,964   |  |                 |  | 467,173 |  |  |   | 83,128 | 
|                                                                  | 2001 |                        |          | 455,000   |  |                 |  |        |  |  |   | 49,103 | 
|John R. Block,
    Vice Chairman, Editorial Director and Director |      |                        |          |           |  |                 |  |         |  |  |   |       
|                                                                  | 2003 |                        |          | 480,808   |  |                 |  |        |  |  |   | 35,586 | 
|                                                                  | 2002 |                        |          | 468,964   |  |                 |  | 467,173 |  |  |   | 34,586 | 
|                                                                  | 2001 |                        |          | 455,000   |  |                 |  |        |  |  |   | 34,131 | 
|Diana E. Block,
    Director of Operations of the Post-Gazetteand |      |                        | Director |           |  |                 |  |         |  |  |   |       
|                                                                  | 2003 |                        |          | 439,616   |  |                 |  |        |  |  |   | 18,820 | 
|                                                                  | 2002 |                        |          | 287,196   |  |                 |  | 467,173 |  |  |   | 14,195 | 
|                                                                  | 2001 |                        |          | 41,556    |  |                 |  |        |  |  |   | 2,493  | 
|David G. Huey,
    President and Director                         |      |                        |          |           |  |                 |  |         |  |  |   |       
|                                                                  | 2003 |                        |          | 356,313   |  |                 |  | 99,000  |  |  |   | 47,041 | 
|                                                                  | 2002 |                        |          | 325,000   |  |                 |  | 128,700 |  |  |   | 40,468 | 
|                                                                  | 2001 |                        |          | 285,000   |  |                 |  | 102,600 |  |  |   | 23,430 | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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) | The amounts reported in this column include the
    value of non-voting common stock of the company that was issued
    as part of the Executive Committees compensation package
    for 2002. The assigned per share 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. Of the
    900 shares, 448 shares were retained by the company to
    cover the individuals taxes on the total shares awarded.
    The remaining 452 shares each were issued to the
    individuals.
|   
|(3) | The 2003 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, $6,820 for Diana E. Block and $18,646 for Mr. Huey
    and (2) employer contributions to a 401(k) plan and a
    supplemental deferred compensation plan of $12,000 for Allan J.
    Block, $12,000 for William Block, Jr., $12,000 for John R.
    Block, $12,000 for Diana E. Block and $35,041 for Mr. Huey.                                                                            

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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
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 2003, 2002 or
2001. As of December 31, 2003, the most recent valuation
date, the book value of the phantom stock units held by
Mr. Huey was $354,000.



| |                 
| | ----------------
| | 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  |                             |  | $        | 23,000  |          |  | $        | 34,500  |          |  | $ | 46,000  |  |  | $ | 57,500  |  |  | $ | 69,000  | 
|         | 10 |                             |  |          | 48,000  |          |  |          | 72,000  |          |  |   | 96,000  |  |  |   | 120,000 |  |  |   | 144,000 | 
|         | 15 |                             |  |          | 73,000  |          |  |          | 109,500 |          |  |   | 146,000 |  |  |   | 182,500 |  |  |   | 219,000 | 
|         | 20 |                             |  |          | 98,000  |          |  |          | 147,000 |          |  |   | 196,000 |  |  |   | 245,000 |  |  |   | 294,000 | 
|         | 25 |                             |  |          | 123,000 |          |  |          | 184,500 |          |  |   | 246,000 |  |  |   | 307,500 |  |  |   | 369,000 | 
|         | 30 |                             |  |          | 148,000 |          |  |          | 222,000 |          |  |   | 296,000 |  |  |   | 370,000 |  |  |   | 444,000 | 

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, 2003,
Mr. Huey had 18.8 years of credited service under
these plans.



| |                          
| | -------------------------
| | Compensation of Directors

Except for the General Counsel, Directors who are
not employees receive a payment of $2,000 for each Board of
Directors meeting attended and an annual Directors Service Fee
of $5,000.

Cyrus P. Block and Karen D. Johnese, both
directors, are each paid a fee of $50,000 per year for
certain consulting services.

72



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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 March 15,
2004 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    |      |         |  | Amount and   |         |        
|                                                                 |  | Nature of           |        | Percent      |  | Nature of     |      | Percent |  | Nature of    |         | Percent
|                                                                 |  | Beneficial          |        | of           |  | Beneficial    |      | of      |  | Beneficial   |         | of     
|Name                                                             |  | Ownership(1)        |        | Class        |  | Ownership(1)  |      | Class   |  | Ownership(1) |         | Class  
|                                                                 |  |                     |        |              |  |               |      |         |  |              |         |        
|Allan J. Block(3)                                                |  |                     | 7,350  |              |  |               | 25.0 | %       |  |              | 102,640 | (2)     |  |  | 23.9 | % |  |  | 1,537  |  |  |  | 12.2 | %
|William Block, Jr.(3)                                            |  |                     | 7,350  |              |  |               | 25.0 | %       |  |              | 37,873  |         |  |  | 8.8  | % |  |  | 1,300  |  |  |  | 10.3 | %
|John R. Block(3)                                                 |  |                     | 7,350  |              |  |               | 25.0 | %       |  |              | 102,640 | (2)     |  |  | 23.9 | % |  |  | 1,537  |  |  |  | 12.2 | %
|Diana E. Block                                                   |  |                     |       |              |  |               |     |         |  |              | 1,928   |         |  |  | 0.4  | % |  |  | 320    |  |  |  | 2.5  | %
|David G. Huey                                                    |  |                     |       |              |  |               |     |         |  |              |        |         |  |  |     |   |  |  |       |  |  |  |     |  
|Gary J. Blair                                                    |  |                     |       |              |  |               |     |         |  |              |        |         |  |  |     |   |  |  |       |  |  |  |     |  
|Fritz Byers                                                      |  |                     |       |              |  |               |     |         |  |              |        |         |  |  |     |   |  |  |       |  |  |  |     |  
|Karen D. Johnese                                                 |  |                     |       |              |  |               |     |         |  |              | 495     |         |  |  | 0.1  | % |  |  |       |  |  |  |     |  
|Donald G. Block                                                  |  |                     |       |              |  |               |     |         |  |              | 6,700   |         |  |  | 1.6  | % |  |  | 1,660  |  |  |  | 13.2 | %
|Mary G. Block                                                    |  |                     |       |              |  |               |     |         |  |              | 8,221   |         |  |  | 1.9  | % |  |  | 1,297  |  |  |  | 10.3 | %
|Cyrus P. Block                                                   |  |                     |       |              |  |               |     |         |  |              | 72,885  | (2)     |  |  | 17.0 | % |  |  | 2,970  |  |  |  | 23.5 | %
|Harold O. Davis                                                  |  |                     |       |              |  |               |     |         |  |              |        |         |  |  |     |   |  |  |       |  |  |  |     |  
|Barbara B. Burney                                                |  |                     |       |              |  |               |     |         |  |              | 3,991   |         |  |  | 0.9  | % |  |  | 800    |  |  |  | 6.3  | %
|William Block(3)                                                 |  |                     | 7,350  |              |  |               | 25.0 | %       |  |              | 225,294 |         |  |  | 52.6 | % |  |  |       |  |  |  |     |  
|                                                                 |  |                     |        |              |  |               |      |         |  |              |         |         |  |  |      |   |  |  |        |  |  |  |      |  
|All directors and executive officers as a group
    (14 persons) |  |                     | 22,050 |              |  |               | 75.0 | %       |  |              | 192,123 |         |  |  | 44.8 | % |  |  | 11,421 |  |  |  | 90.5 | %
|                                                                 |  |                     |        |              |  |               |      |         |  |              |         |         |  |  |      |   |  |  |        |  |  |  |      |  



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 72,625 shares as to which Allan J.
    Block, John R. Block and Cyrus P. Block share voting and
    investment power.                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|(3) | The business address of each 5% beneficial owner
    of the Companys Voting Common Stock is
    541 N. Superior Street, Toledo, OH 43660.                                                                                                                                                                                                                                                                                                                                                                                                                       

73



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##### Table of Contents



Equity Compensation Plan Information

|                           |                              |                   |  |                   |      |                          |  |   |   |  |  |       |       |    
|-------------------------- | ---------------------------- | ----------------- |  | ----------------- | ---- | ------------------------ |  | - | - |  |  | ----- | ----- | ---
|                           |                              | Number of         |  |                   |      | Number of               
|                           |                              | securities to be  |  |                   |      | securities remaining    
|                           |                              | issued upon       |  | Weighted average  |      | available for future    
|                           |                              | exercise of       |  | exercise price of |      | issuance under equity   
|                           |                              | outstanding       |  | outstanding       |      | compensation plans      
|                           |                              | options, warrants |  | options, warrants |      | (excluding securities   
|                           |                              | and rights        |  | and rights        |      | reflected in column (a))
|                           |                              |                   |  |                   |      |                         
|                           |                              | (a)               |  | (b)               |      | (c)                     
|Equity Compensation Plans: |                              |                   |  |                   |      |                          |  |   |   |  |  |      
|                           | Approved by shareholders     |                   |  | None              |      |                          |  |  |   |  |  | 2,000 | (1)  
|                           | Not approved by shareholders |                   |  | None              |      |                          |  |  |   |  |  | None  |      
|                           |                              | Total             |  |                   | None |                          |  |   |  |  |  |       | 2,000 | (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 2004 adjusted 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 adjusted EBITDA
    budget and is limited to a maximum of 500 shares per
    Executive Committee member.






|         |                                           
|-------- | ------------------------------------------
|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
$46.2 million, of which $23.6 million is on the life
of William Block, $11.3 million on the life of
Mrs. Block and $11.3 million on their joint lives.

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.

74



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##### Table of Contents





| |                          
| | -------------------------
| | Related Party Transaction

In 1996, Karen D. 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 $46,400 of the principal amount.
Principal in the amount of $53,600, together with accrued
interest in the current amount of approximately $65,000 remain
outstanding and are overdue. The largest outstanding principal
balance during 2003 was $58,400.



|         |                                           
|-------- | ------------------------------------------
|Item 14. | Principal Accountant Fees and
    Services

The following table sets forth the fees billed to
the Company by Ernst & Young LLP for professional
services rendered for 2003 and 2002:

|                      |  |      |         |      |  |   |         | 
|--------------------- |  | ---- | ------- | ---- |  | - | ------- | 
|                      |  | 2003 |         | 2002
|                      |  |      |         |     
|Audit Fees            |  | $    | 306,500 |      |  | $ | 278,000 | 
|Audit-Related Fees(1) |  | $    | 8,111   |      |  | $ | 165,664 | 
|Tax Fees(2)           |  | $    | 107,618 |      |  | $ | 100,581 | 
|All Other Fees(3)     |  | $    | 1,500   |      |  | $ | 1,500   | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Audit-related services during 2003 consisted of
    assistance regarding compliance with Sarbanes-Oxley Act
    section 404. Audit-related services during 2002 consisted
    of accounting and reporting consultation, assistance with the
    issuance of the senior subordinated notes, and the subsequent
    Form S-4 registration of the senior subordinated notes.
|   
|(2) | Tax services consisted of preparation of various
    federal, state and local tax returns, estate planning regarding
    William Block Sr., and assistance with various state and local
    tax issues.                                                                                                                                                                  
|   
|(3) | The services in this category consisted of an
    annual fee paid for an audit, tax and accounting research tool
    sponsored by Ernst & Young, LLP.                                                                                                                                                                                                                    

For 2003, the percentages of non-audit services
pre-approved by the Audit Committee were as follows: audit
related fees, 1.9%; tax fees, 25.4%; and all other fees, 0.4%.
The charter of the Audit Committee requires that the Audit
Committee approve in advance all audit and non-audit services to
be performed by the Companys independent auditors, subject
to the statutory exception for de minimus non-audit
services.




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, 2003 and 2002                                         |  |      | F-2 | 
|Consolidated Statements of Income for the years
    ended December 31, 2003, 2002 and 2001               |  |      | F-4 | 
|Consolidated Statements of Stockholders
    Equity for the years ended December 31, 2003, 2002 and 2001 |  |      | F-5 | 
|Consolidated Statements of Cash Flows for the
    years ended December 31, 2003, 2002 and 2001           |  |      | F-6 | 
|Notes to Consolidated Financial Statements                                                               |  |      | F-7 | 

75



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##### Table of Contents



2.The following financial statement
schedule is included in item 15(d):



| |                                                                                                                                                                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Schedule II  Valuation and
    Qualifying Accounts for the years ended December 2003, 2002 and
    2001 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:

An Exhibit Index listing the exhibits filed or
incorporated by reference with this report appears immediately
following signature page to this report.

(b)Reports on Form 8-K:

Form 8-K filed on November 12,
2003  The Company issued a press release announcing
earnings results for the quarter ended September 30, 2003.

(c)Exhibits

The exhibits listed in the Exhibit Index
referred to 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.

76



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##### 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, 2003 and 2002, and the
related consolidated statements of income, stockholders
equity and cash flows for each of the three years in the period
ended December 31, 2003. Our audits also included the
financial statement schedule listed in 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,
2003 and 2002, and the consolidated results of their operations
and their cash flows for each of the three years in the period
ended December 31, 2003 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 5 to the consolidated
financial statements, in 2002, the Company changed its method of
accounting for goodwill and other intangible assets.



| |                  
| | -----------------
| | ERNST & YOUNG LLP

March 5, 2004

Toledo, Ohio


F-1



---



##### Table of Contents



BLOCK COMMUNICATIONS, INC. AND
SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

|                                                  |                                                                                                                 |             |             |             |  |   |             |             | 
|------------------------------------------------- | --------------------------------------------------------------------------------------------------------------- | ----------- | ----------- | ----------- |  | - | ----------- | ----------- | 
|                                                  |                                                                                                                 |            
|                                                  |                                                                                                                 | December 31
|                                                  |                                                                                                                 |            
|                                                  |                                                                                                                 | 2003        |             | 2002       
|                                                  |                                                                                                                 |             |             |            
|Assets                                            |                                                                                                                 |             |             |             |  |   |             |            
|Current assets:                                   |                                                                                                                 |             |             |             |  |   |             |            
|                                                  | Cash and cash equivalents                                                                                       |             | $           | 11,461,283  |  |   | $           | 9,781,645   | 
|                                                  | Receivables, less allowances for doubtful
    accounts and discounts of $3,548,000 and $3,552,000, respectively |             |             | 43,956,593  |  |   |             | 45,454,639  | 
|                                                  | Recoverable income taxes                                                                                        |             |             | 11,115,152  |  |   |             | 9,029,371   | 
|                                                  | Inventories                                                                                                     |             |             | 6,642,095   |  |   |             | 7,032,626   | 
|                                                  | Prepaid expenses                                                                                                |             |             | 5,884,309   |  |   |             | 4,498,401   | 
|                                                  | Broadcast rights                                                                                                |             |             | 6,870,822   |  |   |             | 6,546,678   | 
|                                                  | Deferred income taxes                                                                                           |             |             |            |  |   |             | 9,271,000   | 
|                                                  |                                                                                                                 |             |             |             |  |   |             |            
|Total current assets                              |                                                                                                                 |             | 85,930,254  |             |  |   | 91,614,360  |            
|Property, plant and equipment:                    |                                                                                                                 |             |             |             |  |   |             |            
|                                                  | Land and land improvements                                                                                      |             |             | 12,561,091  |  |   |             | 12,255,696  | 
|                                                  | Buildings and leasehold improvements                                                                            |             |             | 43,109,468  |  |   |             | 41,483,466  | 
|                                                  | Machinery and equipment                                                                                         |             |             | 226,659,605 |  |   |             | 215,180,502 | 
|                                                  | Cable television distribution systems and
    equipment                                                         |             |             | 224,958,491 |  |   |             | 195,399,291 | 
|                                                  | Security alarm and video systems installation
    costs                                                         |             |             | 7,123,115   |  |   |             | 6,591,940   | 
|                                                  | Construction in progress                                                                                        |             |             | 16,646,671  |  |   |             | 13,777,267  | 
|                                                  |                                                                                                                 |             |             |             |  |   |             |            
|                                                  |                                                                                                                 |             | 531,058,441 |             |  |   | 484,688,162 |            
|Less allowances for depreciation and amortization |                                                                                                                 |             | 277,333,636 |             |  |   | 235,410,950 |            
|                                                  |                                                                                                                 |             |             |             |  |   |             |            
|                                                  |                                                                                                                 |             | 253,724,805 |             |  |   | 249,277,212 |            
|Other assets:                                     |                                                                                                                 |             |             |             |  |   |             |            
|                                                  | Goodwill                                                                                                        |             |             | 51,987,021  |  |   |             | 51,987,021  | 
|                                                  | Other intangibles, net of accumulated amortization                                                              |             |             | 29,559,724  |  |   |             | 39,471,513  | 
|                                                  | Cash value of life insurance                                                                                    |             |             | 27,703,741  |  |   |             | 25,594,543  | 
|                                                  | Deferred income taxes                                                                                           |             |             |            |  |   |             | 16,659,000  | 
|                                                  | Pension intangibles                                                                                             |             |             | 11,812,858  |  |   |             | 11,931,764  | 
|                                                  | Prepaid pension costs                                                                                           |             |             | 2,778,300   |  |   |             | 2,437,798   | 
|                                                  | Deferred financing costs                                                                                        |             |             | 10,133,255  |  |   |             | 12,099,099  | 
|                                                  | Broadcast rights, less current portion                                                                          |             |             | 4,292,528   |  |   |             | 6,676,317   | 
|                                                  | Other                                                                                                           |             |             | 758,144     |  |   |             | 3,976,050   | 
|                                                  |                                                                                                                 |             |             |             |  |   |             |            
|                                                  |                                                                                                                 |             | 139,025,571 |             |  |   | 170,833,105 |            
|                                                  |                                                                                                                 |             |             |             |  |   |             |            
|                                                  |                                                                                                                 | $           | 478,680,630 |             |  | $ | 511,724,677 |            
|                                                  |                                                                                                                 |             |             |             |  |   |             |            

See accompanying notes.

F-2



---



##### Table of Contents



BLOCK COMMUNICATIONS, INC. AND
SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(continued)

|                                                   |                                                                                                                                                                                                                                |             |             |             |   |   |             |             |  
|-------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------- | ----------- | ----------- | - | - | ----------- | ----------- | -
|                                                   |                                                                                                                                                                                                                                |            
|                                                   |                                                                                                                                                                                                                                | December 31
|                                                   |                                                                                                                                                                                                                                |            
|                                                   |                                                                                                                                                                                                                                | 2003        |             | 2002       
|                                                   |                                                                                                                                                                                                                                |             |             |            
|Liabilities and stockholders equity
    (deficit) |                                                                                                                                                                                                                                |             |             |             |   |   |             |            
|Current liabilities:                               |                                                                                                                                                                                                                                |             |             |             |   |   |             |            
|                                                   | Accounts payable                                                                                                                                                                                                               |             | $           | 15,076,769  |   |   | $           | 13,831,059  |  
|                                                   | Salaries, wages and payroll taxes                                                                                                                                                                                              |             |             | 15,181,990  |   |   |             | 19,046,005  |  
|                                                   | Workers compensation and medical reserves                                                                                                                                                                                     |             |             | 9,381,579   |   |   |             | 8,863,918   |  
|                                                   | Other accrued liabilities                                                                                                                                                                                                      |             |             | 31,150,605  |   |   |             | 32,846,215  |  
|                                                   | Current maturities of long-term debt                                                                                                                                                                                           |             |             | 1,481,143   |   |   |             | 4,649,871   |  
|                                                   |                                                                                                                                                                                                                                |             |             |             |   |   |             |            
|Total current liabilities                          |                                                                                                                                                                                                                                |             | 72,272,086  |             |   |   | 79,237,068  |            
|Long-term debt, less current maturities            |                                                                                                                                                                                                                                |             | 270,779,168 |             |   |   | 255,786,939 |            
|Other long-term obligations                        |                                                                                                                                                                                                                                |             | 153,862,651 |             |   |   | 144,113,551 |            
|Minority interest                                  |                                                                                                                                                                                                                                |             | 9,080,434   |             |   |   | 11,941,238  |            
|Stockholders equity (deficit):                    |                                                                                                                                                                                                                                |             |             |             |   |   |             |            
|                                                   | 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 shares authorized, issued and outstanding                                                                                                                                                     |             |             | 2,940       |   |   |             | 2,940       |  
|                                                   | Non-voting Common Stock 
    588,000 shares authorized; 428,613 and 427,786 shares
    issued and outstanding                                                                                                                 |             |             | 42,861      |   |   |             | 42,779      |  
|                                                   | Accumulated other comprehensive loss                                                                                                                                                                                           |             |             | (29,303,806 | ) |   |             | (22,860,033 | )
|                                                   | Additional paid-in capital                                                                                                                                                                                                     |             |             | 1,058,687   |   |   |             | 771,274     |  
|                                                   | Retained earnings (deficit)                                                                                                                                                                                                    |             |             | (376,391    | ) |   |             | 41,426,921  |  
|                                                   |                                                                                                                                                                                                                                |             |             |             |   |   |             |            
|                                                   |                                                                                                                                                                                                                                |             | (27,313,709 | )           |   |   | 20,645,881  |            
|                                                   |                                                                                                                                                                                                                                |             |             |             |   |   |             |            
|                                                   |                                                                                                                                                                                                                                | $           | 478,680,630 |             |   | $ | 511,724,677 |            
|                                                   |                                                                                                                                                                                                                                |             |             |             |   |   |             |            

See accompanying notes.

F-3



---



##### Table of Contents



BLOCK COMMUNICATIONS, INC. AND
SUBSIDIARIES






CONSOLIDATED STATEMENTS OF INCOME


|                                                                                       |                                             |                        |             |             |            |      |             |             |            |   |             |             |            |  
|-------------------------------------------------------------------------------------- | ------------------------------------------- | ---------------------- | ----------- | ----------- | ---------- | ---- | ----------- | ----------- | ---------- | - | ----------- | ----------- | ---------- | -
|                                                                                       |                                             |                       
|                                                                                       |                                             | Year Ended December 31
|                                                                                       |                                             |                       
|                                                                                       |                                             | 2003                   |             | 2002        |            | 2001
|                                                                                       |                                             |                        |             |             |            |     
|Revenue:                                                                               |                                             |                        |             |             |            |      |             |             |            |   |             |            
|                                                                                       | Publishing                                  |                        | $           | 251,333,791 |            |      | $           | 257,256,343 |            |   | $           | 264,678,678 |           
|                                                                                       | Cable                                       |                        |             | 109,533,677 |            |      |             | 101,473,858 |            |   |             | 89,420,000  |           
|                                                                                       | Broadcasting                                |                        |             | 39,406,282  |            |      |             | 39,964,031  |            |   |             | 35,183,897  |           
|                                                                                       | Other Communications                        |                        |             | 19,784,459  |            |      |             | 20,152,011  |            |   |             | 17,931,004  |           
|                                                                                       |                                             |                        |             |             |            |      |             |             |            |   |             |            
|                                                                                       |                                             |                        | 420,058,209 |             |            |      | 418,846,243 |             |            |   | 407,213,579 |            
|Expense:                                                                               |                                             |                        |             |             |            |      |             |             |            |   |             |            
|                                                                                       | Publishing                                  |                        |             | 252,878,514 |            |      |             | 249,186,956 |            |   |             | 262,798,933 |           
|                                                                                       | Cable                                       |                        |             | 100,508,243 |            |      |             | 91,403,840  |            |   |             | 84,578,461  |           
|                                                                                       | Broadcasting                                |                        |             | 36,693,290  |            |      |             | 36,312,941  |            |   |             | 36,972,664  |           
|                                                                                       | Other Communications                        |                        |             | 17,451,402  |            |      |             | 17,699,243  |            |   |             | 18,854,358  |           
|                                                                                       | Corporate general and administrative        |                        |             | 4,398,354   |            |      |             | 6,045,826   |            |   |             | 2,705,412   |           
|                                                                                       |                                             |                        |             |             |            |      |             |             |            |   |             |            
|                                                                                       |                                             |                        | 411,929,803 |             |            |      | 400,648,806 |             |            |   | 405,909,828 |            
|                                                                                       |                                             |                        |             |             |            |      |             |             |            |   |             |            
|Operating income                                                                       |                                             |                        | 8,128,406   |             |            |      | 18,197,437  |             |            |   | 1,303,751   |            
|Nonoperating income (expense):                                                         |                                             |                        |             |             |            |      |             |             |            |   |             |            
|                                                                                       | Interest expense                            |                        |             | (19,633,266 | )          |      |             | (22,952,372 | )          |   |             | (19,486,186 | )         
|                                                                                       | Gain on disposition of Monroe Cablevision   |                        |             |            |            |      |             | 21,140,829  |            |   |             |            |           
|                                                                                       | Change in fair value of interest rate swaps |                        |             | 3,908,162   |            |      |             | (732,748    | )          |   |             | (5,340,046  | )         
|                                                                                       | Loss on impairment of intangible asset      |                        |             | (8,378,058  | )          |      |             |            |            |   |             |            |           
|                                                                                       | Loss on extinguishment of debt              |                        |             |            |            |      |             | (8,989,786  | )          |   |             |            |           
|                                                                                       | Investment income                           |                        |             | 1,110,158   |            |      |             | 126,221     |            |   |             | 47,452      |           
|                                                                                       |                                             |                        |             |             |            |      |             |             |            |   |             |            
|                                                                                       |                                             |                        | (22,993,004 | )           |            |      | (11,407,856 | )           |            |   | (24,778,780 | )          
|                                                                                       |                                             |                        |             |             |            |      |             |             |            |   |             |            
|Income (loss) from continuing operations before
    income taxes and minority interest |                                             |                        | (14,864,598 | )           |            |      | 6,789,581   |             |            |   | (23,475,029 | )          
|Provision (credit) for income taxes:                                                   |                                             |                        |             |             |            |      |             |             |            |   |             |            
|                                                                                       | Federal:                                    |                        |             |             |            |      |             |             |            |   |             |             |           
|                                                                                       |                                             | Current                |             |             |           |      |             |             | (2,707,248 | ) |             |             | (3,680,000 | )
|                                                                                       |                                             | Deferred               |             |             | 27,428,585 |      |             |             | 4,899,196  |   |             |             | (3,273,410 | )
|                                                                                       |                                             |                        |             |             |            |      |             |             |            |   |             |            
|                                                                                       |                                             |                        | 27,428,585  |             |            |      | 2,191,948   |             |            |   | (6,953,410  | )          
|                                                                                       | State and local                             |                        |             | 179,000     |            |      |             | 743,000     |            |   |             | 357,000     |           
|                                                                                       |                                             |                        |             |             |            |      |             |             |            |   |             |            
|                                                                                       |                                             |                        | 27,607,585  |             |            |      | 2,934,948   |             |            |   | (6,596,410  | )          
|                                                                                       |                                             |                        |             |             |            |      |             |             |            |   |             |            
|Income (loss) from continuing operations before
    minority interest                  |                                             |                        | (42,472,183 | )           |            |      | 3,854,633   |             |            |   | (16,878,619 | )          
|Minority interest                                                                      |                                             |                        | 2,860,804   |             |            |      | (476,840    | )           |            |   | 234,622     |            
|                                                                                       |                                             |                        |             |             |            |      |             |             |            |   |             |            
|Income (loss) from continuing operations                                               |                                             |                        | (39,611,379 | )           |            |      | 3,377,793   |             |            |   | (16,643,997 | )          
|Loss from discontinued operations (including loss
    on disposal of $569,015 in 2003) |                                             |                        | (1,417,098  | )           |            |      | (1,044,795  | )           |            |   | (1,748,856  | )          
|Income tax benefit                                                                     |                                             |                        | (456,885    | )           |            |      | (207,448    | )           |            |   | (535,990    | )          
|                                                                                       |                                             |                        |             |             |            |      |             |             |            |   |             |            
|Loss on discontinued operations                                                        |                                             |                        | (960,213    | )           |            |      | (837,347    | )           |            |   | (1,212,866  | )          
|                                                                                       |                                             |                        |             |             |            |      |             |             |            |   |             |            
|                                                                                       | Net income (loss)                           |                        | $           | (40,571,592 | )          |      | $           | 2,540,446   |            |   | $           | (17,856,863 | )         
|                                                                                       |                                             |                        |             |             |            |      |             |             |            |   |             |            

See accompanying notes.

F-4



---



##### Table of Contents



BLOCK COMMUNICATIONS, INC. AND
SUBSIDIARIES






CONSOLIDATED STATEMENT OF STOCKHOLDERS
EQUITY


Three years ended December 31,
2003


|                                                                                                                                            |                                     |                              |        |        |  |              |           |               |  |            |        |          |  |      |       |         |  |          |         |       |  |   |        |   |  |   |             |   |  |   |           |   |  |   |             |         |            |   |             |         |            |  
|------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------- | ---------------------------- | ------ | ------ |  | ------------ | --------- | ------------- |  | ---------- | ------ | -------- |  | ---- | ----- | ------- |  | -------- | ------- | ----- |  | - | ------ | - |  | - | ----------- | - |  | - | --------- | - |  | - | ----------- | ------- | ---------- | - | ----------- | ------- | ---------- | -
|                                                                                                                                            |                                     |                              |        |        |  |              |           |               |  |            |        |          |  |     
|                                                                                                                                            |                                     |                              |        |        |  | Common Stock |           |               |  |            |        |          |  |     
|                                                                                                                                            |                                     |                              |        |        |  |              |           |               |  |            |        |          |  |     
|                                                                                                                                            |                                     |                              |        |        |  |              |           | Accumulated   |  |            |        |          |  |     
|                                                                                                                                            |                                     | Class A Stock                |        | Voting |  | Non-Voting   |           | Other         |  | Additional |        |          |  |     
|                                                                                                                                            |                                     |                              |        |        |  |              |           | Comprehensive |  | Paid-in    |        | Retained |  |     
|                                                                                                                                            |                                     | Shares                       |        | Amount |  | Shares       |           | Amount        |  | Shares     |        | Amount   |  | Loss |       | Capital |  | Earnings |         | Total
|                                                                                                                                            |                                     |                              |        |        |  |              |           |               |  |            |        |          |  |      |       |         |  |          |         |      
|Balances at January 1, 2001                                                                                                                 |                                     |                              | 12,620 |        |  | $            | 1,262,000 |               |  |            | 29,400 |          |  | $    | 2,940 |         |  |          | 430,123 |       |  | $ | 43,012 |   |  | $ | (521,942    | ) |  | $ | 771,274   |   |  | $ | 59,832,216  |         |            | $ | 61,389,500  |        
|Net loss                                                                                                                                    |                                     |                              |        |        |  |              |           |               |  |            |        |          |  |      |       |         |  |          |         |       |  |   |        |   |  |   |             |   |  |   |           |   |  |   | (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 loss                                                                                                                    |                                     |                              |        |        |  |              |           |               |  |            |        |          |  |      |       |         |  |          |         |       |  |   |        |   |  |   |             |   |  |   |           |   |  |   |             |         |            |   | (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 loss                                                                                                                    |                                     |                              |        |        |  |              |           |               |  |            |        |          |  |      |       |         |  |          |         |       |  |   |        |   |  |   |             |   |  |   |           |   |  |   |             |         |            |   | (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  |        
|Net loss                                                                                                                                    |                                     |                              |        |        |  |              |           |               |  |            |        |          |  |      |       |         |  |          |         |       |  |   |        |   |  |   |             |   |  |   |           |   |  |   | (40,571,592 | )       |            |   | (40,571,592 | )      
|Change in net minimum pension liability (net of
    $3,790,511 of deferred income taxes)                                                    |                                     |                              |        |        |  |              |           |               |  |            |        |          |  |      |       |         |  |          |         |       |  |   |        |   |  |   | (6,736,029  | ) |  |   |           |   |  |   |             |         |            |   | (6,736,029  | )      
|Amortization of fair value of interest rate swaps
    at January 1, 2001 (net of $163,800 of deferred income
    taxes)                     |                                     |                              |        |        |  |              |           |               |  |            |        |          |  |      |       |         |  |          |         |       |  |   |        |   |  |   | 292,256     |   |  |   |           |   |  |   |             |         |            |   | 292,256     |        
|                                                                                                                                            |                                     |                              |        |        |  |              |           |               |  |            |        |          |  |      |       |         |  |          |         |       |  |   |        |   |  |   |             |   |  |   |           |   |  |   |             |         |            |   |             |        
|Total comprehensive loss                                                                                                                    |                                     |                              |        |        |  |              |           |               |  |            |        |          |  |      |       |         |  |          |         |       |  |   |        |   |  |   |             |   |  |   |           |   |  |   |             |         |            |   | (47,015,365 | )      
|Cash dividends declared:                                                                                                                    |                                     |                              |        |        |  |              |           |               |  |            |        |          |  |      |       |         |  |          |         |       |  |   |        |   |  |   |             |   |  |   |           |   |  |   |             |         |            |   |             |        
|                                                                                                                                            | Class A stock  $5.00 per
    share |                              |        |        |  |              |           |               |  |            |        |          |  |      |       |         |  |          |         |       |  |   |        |   |  |   |             |   |  |   |           |   |  |   |             | (63,100 | )          |   |             | (63,100 | )         
|                                                                                                                                            | Common Stock:                       |                              |        |        |  |              |           |               |  |            |        |          |  |      |       |         |  |          |         |       |  |   |        |   |  |   |             |   |  |   |           |   |  |   |             |         |            |   |             |         |           
|                                                                                                                                            |                                     | Voting  $2.55 per share     |        |        |  |              |           |               |  |            |        |          |  |      |       |         |  |          |         |       |  |   |        |   |  |   |             |   |  |   |           |   |  |   |             |         | (74,970    | ) |             |         | (74,970    | )
|                                                                                                                                            |                                     | Non-voting  $2.55 per share |        |        |  |              |           |               |  |            |        |          |  |      |       |         |  |          |         |       |  |   |        |   |  |   |             |   |  |   |           |   |  |   |             |         | (1,093,650 | ) |             |         | (1,093,650 | )
|                                                                                                                                            |                                     |                              |        |        |  |              |           |               |  |            |        |          |  |      |       |         |  |          |         |       |  |   |        |   |  |   |             |   |  |   |           |   |  |   |             |         |            |   |             |        
|                                                                                                                                            |                                     |                              |        |        |  |              |           |               |  |            |        |          |  |      |       |         |  |          |         |       |  |   |        |   |  |   |             |   |  |   |           |   |  |   | (1,231,720  | )       |            |   | (1,231,720  | )      
|Executive stock incentives issued at
    $407.97 per share                                                                                  |                                     |                              |        |        |  |              |           |               |  |            |        |          |  |      |       |         |  |          | 1,808   |       |  |   | 180    |   |  |   |             |   |  |   | 737,103   |   |  |   |             |         |            |   | 737,283     |        
|Redemption of non-voting common shares at
    $458.50 per share                                                                             |                                     |                              |        |        |  |              |           |               |  |            |        |          |  |      |       |         |  |          | (981    | )     |  |   | (98    | ) |  |   |             |   |  |   | (449,690  | ) |  |   |             |         |            |   | (449,788    | )      
|                                                                                                                                            |                                     |                              |        |        |  |              |           |               |  |            |        |          |  |      |       |         |  |          |         |       |  |   |        |   |  |   |             |   |  |   |           |   |  |   |             |         |            |   |             |        
|Balances at December 31, 2003                                                                                                               |                                     |                              | 12,620 |        |  | $            | 1,262,000 |               |  |            | 29,400 |          |  | $    | 2,940 |         |  |          | 428,613 |       |  | $ | 42,861 |   |  | $ | (29,303,806 | ) |  | $ | 1,058,687 |   |  | $ | (376,391    | )       |            | $ | (27,313,709 | )      
|                                                                                                                                            |                                     |                              |        |        |  |              |           |               |  |            |        |          |  |      |       |         |  |          |         |       |  |   |        |   |  |   |             |   |  |   |           |   |  |   |             |         |            |   |             |        

See accompanying notes.

F-5



---



##### Table of Contents



BLOCK COMMUNICATIONS, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS

|                                                                                             |                                                                |                                                                  |             |            |            |      |             |             |            |   |             |            |            |  
|-------------------------------------------------------------------------------------------- | -------------------------------------------------------------- | ---------------------------------------------------------------- | ----------- | ---------- | ---------- | ---- | ----------- | ----------- | ---------- | - | ----------- | ---------- | ---------- | -
|                                                                                             |                                                                |                                                                 
|                                                                                             |                                                                | Year Ended December 31,                                         
|                                                                                             |                                                                |                                                                 
|                                                                                             |                                                                | 2003                                                             |             | 2002       |            | 2001
|                                                                                             |                                                                |                                                                  |             |            |            |     
|Operating activities                                                                         |                                                                |                                                                  |             |            |            |      |             |             |            |   |             |           
|Net income (loss)                                                                            |                                                                | $                                                                | (40,571,592 | )          |            | $    | 2,540,446   |             |            | $ | (17,856,863 | )         
|Adjustments to reconcile net income (loss) to net
    cash provided by operating activities: |                                                                |                                                                  |             |            |            |      |             |             |            |   |             |           
|                                                                                             | Depreciation                                                   |                                                                  |             | 47,715,423 |            |      |             | 44,753,126  |            |   |             | 44,601,107 |           
|                                                                                             | Amortization of intangibles and deferred charges               |                                                                  |             | 3,083,785  |            |      |             | 3,011,349   |            |   |             | 4,421,315  |           
|                                                                                             | Amortization of broadcast rights                               |                                                                  |             | 7,020,339  |            |      |             | 7,138,102   |            |   |             | 6,510,196  |           
|                                                                                             | Payments for broadcast rights                                  |                                                                  |             | (6,933,128 | )          |      |             | (5,744,461  | )          |   |             | (5,117,113 | )         
|                                                                                             | Gain on sale of Monroe Cablevision                             |                                                                  |             |           |            |      |             | (21,140,829 | )          |   |             |           |           
|                                                                                             | Loss on disposal of discontinued operation                     |                                                                  |             | 569,015    |            |      |             |            |            |   |             |           |           
|                                                                                             | Loss on impairment of intangible asset                         |                                                                  |             | 8,378,058  |            |      |             |            |            |   |             |           |           
|                                                                                             | Deferred income taxes (credit)                                 |                                                                  |             | 26,971,700 |            |      |             | 4,691,748   |            |   |             | (3,809,400 | )         
|                                                                                             | Provision for bad debts                                        |                                                                  |             | 3,815,313  |            |      |             | 2,891,075   |            |   |             | 5,065,784  |           
|                                                                                             | Minority interest                                              |                                                                  |             | (2,860,804 | )          |      |             | 476,840     |            |   |             | (234,622   | )         
|                                                                                             | Change in fair value of interest rate swaps                    |                                                                  |             | (3,908,162 | )          |      |             | 732,748     |            |   |             | 5,340,046  |           
|                                                                                             | (Gain) loss on disposal of property and equipment              |                                                                  |             | 2,177,810  |            |      |             | (300,268    | )          |   |             | 23,117     |           
|                                                                                             | Write-off of deferred charges related to
    extinguished debt |                                                                  |             |           |            |      |             | 2,697,784   |            |   |             |           |           
|                                                                                             | Changes in operating assets and liabilities:                   |                                                                  |             |            |            |      |             |             |            |   |             |            |           
|                                                                                             |                                                                | Receivables                                                      |             |            | (1,587,254 | )    |             |             | (4,151,483 | ) |             |            | (367,929   | )
|                                                                                             |                                                                | Inventories                                                      |             |            | 375,595    |      |             |             | (1,526,280 | ) |             |            | 4,895,147  |  
|                                                                                             |                                                                | Prepaid expenses                                                 |             |            | (1,387,091 | )    |             |             | (931,248   | ) |             |            | (626,695   | )
|                                                                                             |                                                                | Accounts payable                                                 |             |            | 654,700    |      |             |             | 1,468,530  |   |             |            | (8,958,999 | )
|                                                                                             |                                                                | Salaries, wages, payroll taxes and other accrued
    liabilities |             |            | (5,571,103 | )    |             |             | 1,887,007  |   |             |            | 2,678,519  |  
|                                                                                             |                                                                | Other assets                                                     |             |            | 4,232,521  |      |             |             | (3,140,143 | ) |             |            | (7,580,118 | )
|                                                                                             |                                                                | Postretirement benefits and other long-term
    obligations      |             |            | 84,936     |      |             |             | (288,316   | ) |             |            | 8,296,980  |  
|                                                                                             |                                                                |                                                                  |             |            |            |      |             |             |            |   |             |           
|Net cash provided by operating activities                                                    |                                                                |                                                                  | 42,260,061  |            |            |      | 35,065,727  |             |            |   | 37,280,472  |           
|Investing activities                                                                         |                                                                |                                                                  |             |            |            |      |             |             |            |   |             |           
|Additions to property, plant and equipment                                                   |                                                                |                                                                  | (54,992,717 | )          |            |      | (30,670,261 | )           |            |   | (62,153,533 | )         
|Change in cash value of life insurance                                                       |                                                                |                                                                  | (2,109,198  | )          |            |      | (2,167,877  | )           |            |   | (1,408,960  | )         
|Borrowings against cash value of life insurance                                              |                                                                |                                                                  |            |            |            |      |            |             |            |   | 7,393,834   |           
|Repayments of cash value of life insurance                                                   |                                                                |                                                                  |            |            |            |      | (12,735,560 | )           |            |   |            |           
|Proceeds from sale of Monroe Cablevision                                                     |                                                                |                                                                  |            |            |            |      | 12,059,115  |             |            |   |            |           
|Proceeds from sale of investment                                                             |                                                                |                                                                  | 2,000,000   |            |            |      |            |             |            |   |            |           
|Payments for acquisitions                                                                    |                                                                |                                                                  |            |            |            |      |            |             |            |   | (1,640,000  | )         
|Proceeds from disposal of property and equipment                                             |                                                                |                                                                  | 155,343     |            |            |      | 1,105,557   |             |            |   | 50,499      |           
|                                                                                             |                                                                |                                                                  |             |            |            |      |             |             |            |   |             |           
|Net cash used in investing activities                                                        |                                                                |                                                                  | (54,946,572 | )          |            |      | (32,409,026 | )           |            |   | (57,758,160 | )         
|Financing activities                                                                         |                                                                |                                                                  |             |            |            |      |             |             |            |   |             |           
|Borrowings on term loan                                                                      |                                                                |                                                                  | 20,000,000  |            |            |      | 75,000,000  |             |            |   | 62,500,000  |           
|Payments on term loan                                                                        |                                                                |                                                                  | (4,346,000  | )          |            |      | (75,375,000 | )           |            |   |            |           
|Issuance of subordinated notes                                                               |                                                                |                                                                  |            |            |            |      | 175,000,000 |             |            |   |            |           
|Payments on long-term revolver                                                               |                                                                |                                                                  |            |            |            |      | (92,500,000 | )           |            |   | (23,000,000 | )         
|Payments on senior notes                                                                     |                                                                |                                                                  |            |            |            |      | (67,499,000 | )           |            |   | (12,667,000 | )         
|Net payments on short-term revolver                                                          |                                                                |                                                                  |            |            |            |      |            |             |            |   | (2,620,229  | )         
|Financing costs deferred                                                                     |                                                                |                                                                  |            |            |            |      | (10,768,413 | )           |            |   |            |           
|Proceeds from issuance of common stock                                                       |                                                                |                                                                  | 737,283     |            |            |      |            |             |            |   |            |           
|Payments on redemption of shares                                                             |                                                                |                                                                  | (449,788    | )          |            |      |            |             |            |   | (1,162,913  | )         
|Cash dividends paid                                                                          |                                                                |                                                                  | (1,231,720  | )          |            |      | (1,343,221  | )           |            |   | (582,977    | )         
|Distribution to minority partner                                                             |                                                                |                                                                  |            |            |            |      | (800,000    | )           |            |   |            |           
|Payments on notes payable and capital leases                                                 |                                                                |                                                                  | (343,626    | )          |            |      | (472,154    | )           |            |   | (319,431    | )         
|                                                                                             |                                                                |                                                                  |             |            |            |      |             |             |            |   |             |           
|Net cash provided by financing activities                                                    |                                                                |                                                                  | 14,366,149  |            |            |      | 1,242,212   |             |            |   | 22,147,450  |           
|                                                                                             |                                                                |                                                                  |             |            |            |      |             |             |            |   |             |           
|Increase in cash and cash equivalents                                                        |                                                                |                                                                  | 1,679,638   |            |            |      | 3,898,913   |             |            |   | 1,669,762   |           
|Cash and cash equivalents at beginning of period                                             |                                                                |                                                                  | 9,781,645   |            |            |      | 5,882,732   |             |            |   | 4,212,970   |           
|                                                                                             |                                                                |                                                                  |             |            |            |      |             |             |            |   |             |           
|Cash and cash equivalents at end of period                                                   |                                                                | $                                                                | 11,461,283  |            |            | $    | 9,781,645   |             |            | $ | 5,882,732   |           
|                                                                                             |                                                                |                                                                  |             |            |            |      |             |             |            |   |             |           
|Non-cash borrowings for equipment under capital
    lease                                    |                                                                | $                                                                | 76,856      |            |            | $    | 1,360,402   |             |            | $ |            |           
|                                                                                             |                                                                |                                                                  |             |            |            |      |             |             |            |   |             |           

See accompanying notes.

F-6



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##### Table of Contents



BLOCK COMMUNICATIONS, INC.






NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS


December 31, 2003








|   |                                    
|-- | -----------------------------------
|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, 2003 are held for sale. The
Company does not accrue interest on past-due receivables, nor
does it require collateral to establish trade credit.

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 76% and 73% of total inventories at
December 31, 2003 and 2002, respectively. If the FIFO
method had been used, such inventories would have been
approximately $1,190,000 and $625,000 higher than reported at
December 31, 2003 and 2002, 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 $5,102,000 and $7,712,000 for the
years ended December 31, 2003 and 2002, respectively.

F-7



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##### Table of Contents



BLOCK COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)



|   |                                                
|-- | -----------------------------------------------
|1. | Significant Accounting Policies
    (continued)

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.

Long-Lived Assets

Effective January 1, 2002, the Company
adopted SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets, which requires the
carrying value of long-lived assets to be 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 years ended December 31, 2003 and 2002,
the Company has not recognized any impairment charges for
long-lived assets under 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, 2003, the Company
participates in fifteen interest-rate swap contracts relating to
its long-term debt. Two of these contracts are accounted for as
fair value hedges; therefore, changes in the fair value of the
derivative have no impact on the Companys results of
operations. These hedge contracts qualified for the short-cut
method of evaluating effectiveness at the inception of the
contracts; therefore, continuing assessments of their
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, the Company
has recognized a derivative valuation gain of $3,908,162 for the
year ended December 31, 2003 and a derivative valuation
loss of $732,748 and $5,340,046 for the years ended
December 31, 2002 and 2001, respectively. The fair value of
the interest rate swaps at December 31, 2003 of $869,436 is
recorded in other long-term obligations. The fair value at
December 31, 2002 of $893,073 is recorded in other
non-current assets.

F-8



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##### Table of Contents



BLOCK COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)



|   |                                                
|-- | -----------------------------------------------
|1. | Significant Accounting Policies
    (continued)

Revenue Recognition

The Company recognizes revenue when it is
realized or realizable and has been earned. Sales are considered
earned when persuasive evidence of an arrangement exists,
services or products are delivered, the price to the customer is
fixed or determinable, and collectibility is reasonably assured.
Net sales for all segments are comprised of gross sales less
rebates, discounts and allowances. Net broadcasting sales is
also net of agency commissions and net publishing sales is net
of expense for barter transactions. Barter transactions in all
other segments are recorded separately in revenues and operating
expenses at the fair value of the services or assets exchanged.

We bill for certain products and services prior
to performance. Such services include newspaper subscriptions
and cable, telephony and security monitoring services. These
advance billings are included in deferred revenues and
recognized as revenue in the period in which the newspapers or
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 recognized $1,468,692 in compensation expense for
3600 shares earned in 2002. As a result, a total of
1808 shares, net of taxes withheld, were issued in 2003. No
shares were earned in the years ended December 31, 2003 or
December 31, 2001.

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 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
$29,303,806 at December 31, 2003 includes net minimum
pension liability of $29,152,215 and net unamortized
SFAS 133 transition amount of $151,591. 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.

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 adoption of this standard has had no impact on the
Companys financial position or results of operations.

F-9



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##### Table of Contents



BLOCK COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)



|   |                                                
|-- | -----------------------------------------------
|1. | Significant Accounting Policies
    (continued)

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 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
loss on disposal recognized in connection with the
discontinuation of certain operations as discussed in
Note 3 reflects the adoption of this standard.






|   |             
|-- | ------------
|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.

F-10



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##### Table of Contents



BLOCK COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)








|   |                        
|-- | -----------------------
|3. | Discontinued Operations

Effective May 31, 2003, the Company
suspended operations of Community Communication
Services, Inc. (CCS), an alternative advertising
distribution company. Effective December 31, 2003 the
Company sold the net assets of certain divisions of Corporate
Protection Services, Inc. (CPS) and ceased operations
of those divisions, which were previously involved in the sale,
installation, and testing of commercial security and fire
protection systems. In accordance with SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets, the results of operations of CCS and the affected
divisions of CPS are reported separately from results of
continuing operations for all periods presented. The reported
loss from discontinued operations includes revenues of
$3,207,000, $6,346,000, and $7,351,000 for the years ended
December 31, 2003, 2002, and 2001, respectively. Results
for the year ended December 31, 2003 include a loss on
disposal of the discontinued operations of $569,015. Previously,
results of operations of CCS and the affected divisions of CPS
were included in the Other Communications category for purposes
of segment reporting.






|   |             
|-- | ------------
|4. | Income Taxes

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

|                                              |  |                         |            |      |  |      |           |   |  |   |            |  
|--------------------------------------------- |  | ----------------------- | ---------- | ---- |  | ---- | --------- | - |  | - | ---------- | -
|                                              |  |                        
|                                              |  | Years Ended December 31
|                                              |  |                        
|                                              |  | 2003                    |            | 2002 |  | 2001
|                                              |  |                         |            |      |  |     
|Federal statutory rate                        |  | $                       | (5,202,600 | )    |  | $    | 2,010,700 |   |  | $ | (8,828,400 | )
|Minority interest                             |  |                         | 1,001,300  |      |  |      | (166,900  | ) |  |   | 82,100     |  
|State and local taxes, net of federal benefit |  |                         | 116,400    |      |  |      | 483,000   |   |  |   | 232,100    |  
|Amortization of intangibles                   |  |                         | 1,000      |      |  |      | 163,000   |   |  |   | 785,400    |  
|Valuation allowance                           |  |                         | 31,597,000 |      |  |      | 157,900   |   |  |   | 586,800    |  
|Other                                         |  |                         | 94,485     |      |  |      | 79,800    |   |  |   | 9,600      |  
|                                              |  |                         |            |      |  |      |           |   |  |   |            |  
|Provision (credit) for income taxes           |  | $                       | 27,607,585 |      |  | $    | 2,727,500 |   |  | $ | (7,132,400 | )
|                                              |  |                         |            |      |  |      |           |   |  |   |            |  

Total income taxes paid amounted to $749,000,
$492,000 and $802,000 in 2003, 2002 and 2001, respectively.

F-11



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##### Table of Contents



BLOCK COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)



|   |                         
|-- | ------------------------
|4. | 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,
|                          |                                             |             
|                          |                                             | 2003         |            | 2002       
|                          |                                             |              |            |            
|Deferred tax assets:      |                                             |              |            |             |   |   |            |           
|                          | Postretirement benefits other than pensions |              | $          | 31,186,000  |   |   | $          | 30,011,000 |  
|                          | Tax loss and credit carryforwards           |              |            | 8,914,550   |   |   |            | 8,552,000  |  
|                          | Net pension costs                           |              |            | 7,561,000   |   |   |            | 5,784,000  |  
|                          | Deferred compensation and severance         |              |            | 5,995,000   |   |   |            | 5,550,000  |  
|                          | Insurance                                   |              |            | 3,261,000   |   |   |            | 3,197,000  |  
|                          | Vacation pay                                |              |            | 3,121,000   |   |   |            | 3,016,000  |  
|                          | Fair value of interest rate swaps           |              |            | 1,787,000   |   |   |            | 2,436,000  |  
|                          | Other                                       |              |            | 2,759,500   |   |   |            | 2,829,000  |  
|                          |                                             |              |            |             |   |   |            |           
|                          |                                             |              | 64,585,050 |             |   |   | 61,375,000 |           
|                          | Valuation allowance                         |              |            | (32,342,050 | ) |   |            | (745,000   | )
|                          |                                             |              |            |             |   |   |            |           
|                          |                                             |              | 32,243,000 |             |   |   | 60,630,000 |           
|Deferred tax liabilities: |                                             |              |            |             |   |   |            |           
|                          | Tax over book depreciation and amortization |              |            | 23,950,000  |   |   |            | 24,311,000 |  
|                          | Basis difference on like-kind exchanges     |              |            | 8,293,000   |   |   |            | 10,389,000 |  
|                          |                                             |              |            |             |   |   |            |           
|                          |                                             |              | 32,243,000 |             |   |   | 34,700,000 |           
|                          |                                             |              |            |             |   |   |            |           
|Net deferred tax assets   |                                             | $            |           |             |   | $ | 25,930,000 |           
|                          |                                             |              |            |             |   |   |            |           

At December 31, 2003, the Company has unused
alternative minimum tax (AMT) credits of $5,422,300. In addition
the Company has net operating loss and charitable contribution
carryforwards of $8,650,000 and $2,706,000, 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 believes that, based on a number of
factors, the available objective evidence creates sufficient
uncertainty regarding the realization of the net deferred tax
asset balance such that a full valuation allowance is warranted.
Factors considered include the existence of cumulative losses in
the most recent fiscal years, the length of time over which
temporary differences are expected to reverse, and the
availability of prudent and feasible tax strategies.






|   |                                   
|-- | ----------------------------------
|5. | 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.

F-12



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##### Table of Contents



BLOCK COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)



|   |                                           
|-- | ------------------------------------------
|5. | Goodwill and Other Intangibles (continued)

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 year
ended December 31, 2001 had been adjusted to reflect those
provisions, the following results would have been reported:

|                                                                                |  |   |             |  
|------------------------------------------------------------------------------- |  | - | ----------- | -
|Net income as reported                                                          |  | $ | (17,856,863 | )
|Effect of non-amortization provisions of
    SFAS No. 142 applied retroactively |  |   | 3,407,107   |  
|                                                                                |  |   |             |  
|Pro-forma net income                                                            |  | $ | (14,449,756 | )
|                                                                                |  |   |             |  

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

|                          |  |          |            |              |  |          |           |              |  |   |            |  |  |   |           | 
|------------------------- |  | -------- | ---------- | ------------ |  | -------- | --------- | ------------ |  | - | ---------- |  |  | - | --------- | 
|                          |  |          |            |             
|                          |  | 2003     |            | 2002        
|                          |  |          |            |             
|                          |  | Gross    |            |              |  | Gross    |           |             
|                          |  | Carrying |            | Accumulated  |  | Carrying |           | Accumulated 
|                          |  | Value    |            | Amortization |  | Value    |           | Amortization
|                          |  |          |            |              |  |          |           |             
|Franchise agreements      |  | $        | 9,264,000  |              |  | $        | 1,294,235 |              |  | $ | 9,264,000  |  |  | $ | 554,672   | 
|Subscriber lists          |  |          | 4,000,000  |              |  |          | 3,666,667 |              |  |   | 4,000,000  |  |  |   | 3,333,334 | 
|Agreements not to compete |  |          | 1,355,000  |              |  |          | 1,103,445 |              |  |   | 1,355,000  |  |  |   | 667,500   | 
|Other intangibles         |  |          | 1,258,458  |              |  |          | 716,510   |              |  |   | 1,246,748  |  |  |   | 679,910   | 
|                          |  |          |            |              |  |          |           |              |  |   |            |  |  |   |           | 
|                          |  | $        | 15,877,458 |              |  | $        | 6,780,857 |              |  | $ | 15,865,748 |  |  | $ | 5,235,416 | 
|                          |  |          |            |              |  |          |           |              |  |   |            |  |  |   |           | 

Amortization expense recognized for the above
assets is expected to be $1,289,626 in 2004; $1,133,398 in 2005;
$785,079 in 2006, $781,500 in 2007 and $756,500 in 2008.

The following intangible assets have been
identified as non-amortizable based upon indefinite useful lives
and have not been amortized during the years ended
December 31, 2003 or 2002:

|                  |  |              |            |      |  |   |            | 
|----------------- |  | ------------ | ---------- | ---- |  | - | ---------- | 
|                  |  |             
|                  |  | December 31,
|                  |  |             
|                  |  | 2003         |            | 2002
|                  |  |              |            |     
|Goodwill          |  | $            | 51,987,021 |      |  | $ | 51,987,021 | 
|FCC licenses      |  |              | 19,938,123 |      |  |   | 28,316,181 | 
|Other intangibles |  |              | 525,000    |      |  |   | 525,000    | 
|                  |  |              |            |      |  |   |            | 
|                  |  | $            | 72,450,144 |      |  | $ | 80,828,202 | 
|                  |  |              |            |      |  |   |            | 

Our goodwill is allocated to reportable segments
as follows:

|                    |  |              |            |      |  |   |            | 
|------------------- |  | ------------ | ---------- | ---- |  | - | ---------- | 
|                    |  |             
|                    |  | December 31,
|                    |  |             
|                    |  | 2003         |            | 2002
|                    |  |              |            |     
|Publishing          |  | $            | 48,080,123 |      |  | $ | 48,080,123 | 
|Cable               |  |              | 1,416,002  |      |  |   | 1,416,002  | 
|Broadcasting        |  |              | 809,078    |      |  |   | 809,078    | 
|Corporate and Other |  |              | 1,681,818  |      |  |   | 1,681,818  | 
|                    |  |              |            |      |  |   |            | 
|                    |  | $            | 51,987,021 |      |  | $ | 51,987,021 | 
|                    |  |              |            |      |  |   |            | 

F-13



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##### Table of Contents



BLOCK COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)



|   |                                           
|-- | ------------------------------------------
|5. | Goodwill and Other Intangibles (continued)

As required by SFAS No. 142, the
Company performed its annual impairment analysis of
indefinite-lived intangibles during the fourth quarter of 2003.
Fair values of reporting units used in the impairment analysis
are determined through the use of a discounted cash flow
valuation method. Based upon the results of this analysis, the
Company has recognized an impairment loss of $5,613,299, net of
minority interest, for the year ended December 31, 2003.
The total loss, before minority interest, of $8,378,058
represents the excess of the carrying value over the determined
fair value of the FCC license held by the WAND-TV Partnership.
The impairment arises from a write-down of our FCC license
resulting from a discounted cash flow forecast that uses
industry averages to determine the fair value of the license.
The decrease in fair value is the result of the decline in the
advertising market during 2001 and 2003, which decreased
industry-wide station operating margins. This loss is reported
in the statement of operations as a non-operating expense. The
impaired asset is reported in the broadcasting segment for
purposes of segment reporting.



|   |                          
|-- | -------------------------
|6. | Other Accrued Liabilities

Other accrued liabilities consist of the
following:

|                         |  |              |            |      |  |   |            | 
|------------------------ |  | ------------ | ---------- | ---- |  | - | ---------- | 
|                         |  |             
|                         |  | December 31,
|                         |  |             
|                         |  | 2003         |            | 2002
|                         |  |              |            |     
|Deferred revenue         |  | $            | 8,250,847  |      |  | $ | 7,409,616  | 
|Local taxes              |  |              | 5,367,554  |      |  |   | 5,381,128  | 
|Broadcast rights payable |  |              | 5,312,805  |      |  |   | 5,850,146  | 
|Interest payable         |  |              | 2,884,976  |      |  |   | 3,938,061  | 
|Carriage fees            |  |              | 2,842,531  |      |  |   | 2,899,178  | 
|Other                    |  |              | 6,491,892  |      |  |   | 7,368,086  | 
|                         |  |              |            |      |  |   |            | 
|                         |  | $            | 31,150,605 |      |  | $ | 32,846,215 | 
|                         |  |              |            |      |  |   |            | 



|   |                            
|-- | ---------------------------
|7. | Other Long-Term Obligations

Other long-term obligations consist of the
following:

|                                  |  |              |             |      |  |   |             | 
|--------------------------------- |  | ------------ | ----------- | ---- |  | - | ----------- | 
|                                  |  |             
|                                  |  | December 31,
|                                  |  |             
|                                  |  | 2003         |             | 2002
|                                  |  |              |             |     
|Other post-retirement benefits    |  | $            | 86,606,000  |      |  | $ | 83,365,000  | 
|Pension liabilities               |  |              | 49,602,966  |      |  |   | 36,171,121  | 
|Deferred compensation obligations |  |              | 8,544,121   |      |  |   | 14,360,574  | 
|Broadcast rights payable          |  |              | 6,051,156   |      |  |   | 7,330,489   | 
|Other                             |  |              | 3,058,408   |      |  |   | 2,886,367   | 
|                                  |  |              |             |      |  |   |             | 
|                                  |  | $            | 153,862,651 |      |  | $ | 144,113,551 | 
|                                  |  |              |             |      |  |   |             | 



|   |                             
|-- | ----------------------------
|8. | 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 and 2003, the
liabilities for certain participants in non-qualified defined
benefit plans previously characterized as deferred compensation
have been reclassified and included in the disclosures below.

F-14



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##### Table of Contents



BLOCK COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)



|   |                                         
|-- | ----------------------------------------
|8. | Retirement and Pension Plans (continued)

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

|                                 |                                              |              |   |             |   |  |   |             |  
|-------------------------------- | -------------------------------------------- | ------------ | - | ----------- | - |  | - | ----------- | -
|                                 |                                              |             
|                                 |                                              | December 31,
|                                 |                                              |             
|                                 |                                              | 2003         |   | 2002       
|                                 |                                              |              |   |            
|Change in benefit obligation:    |                                              |              |   |             |   |  |   |            
|                                 | Benefit obligation, beginning of year        |              | $ | 205,646,013 |   |  | $ | 184,565,001 |  
|                                 | Reclassification of non-qualified plan       |              |   | 11,322,235  |   |  |   | 1,296,406   |  
|                                 | Service cost                                 |              |   | 5,282,047   |   |  |   | 5,337,581   |  
|                                 | Interest cost                                |              |   | 14,748,299  |   |  |   | 13,187,906  |  
|                                 | Plan amendments                              |              |   | 239,533     |   |  |   | 3,717,857   |  
|                                 | Actuarial loss                               |              |   | 19,373,796  |   |  |   | 8,722,294   |  
|                                 | Benefits paid                                |              |   | (12,663,974 | ) |  |   | (11,181,032 | )
|                                 |                                              |              |   |             |   |  |   |            
|                                 | Benefit obligation, end of year              |              | $ | 243,947,949 |   |  | $ | 205,646,013 |  
|                                 |                                              |              |   |             |   |  |   |            
|Change in plan assets:           |                                              |              |   |             |   |  |   |            
|                                 | Fair value of plan assets, beginning of year |              | $ | 145,703,769 |   |  | $ | 153,834,964 |  
|                                 | Contributions                                |              |   | 12,878,324  |   |  |   | 11,699,030  |  
|                                 | Actual return on plan assets                 |              |   | 21,718,743  |   |  |   | (8,649,193  | )
|                                 | Benefits paid                                |              |   | (12,663,974 | ) |  |   | (11,181,032 | )
|                                 |                                              |              |   |             |   |  |   |            
|                                 | Fair value of plan assets, end of year       |              | $ | 167,636,862 |   |  | $ | 145,703,769 |  
|                                 |                                              |              |   |             |   |  |   |            
|Reconciliation of funded status: |                                              |              |   |             |   |  |   |            
|                                 | Funded status of the plans                   |              | $ | (76,311,087 | ) |  | $ | (59,942,244 | )
|                                 | Unrecognized net loss                        |              |   | 72,681,167  |   |  |   | 60,887,567  |  
|                                 | Unrecognized prior year service cost         |              |   | 14,167,820  |   |  |   | 12,310,308  |  
|                                 | Unrecognized net transition asset            |              |   |            |   |  |   | (34,022     | )
|                                 |                                              |              |   |             |   |  |   |            
|                                 | Net amount recognized                        |              | $ | 10,537,900  |   |  | $ | 13,221,609  |  
|                                 |                                              |              |   |             |   |  |   |            

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

|                                       |  |             |             |      |  |   |             |  
|-------------------------------------- |  | ----------- | ----------- | ---- |  | - | ----------- | -
|                                       |  |            
|                                       |  | December 31
|                                       |  |            
|                                       |  | 2003        |             | 2002
|                                       |  |             |             |     
|Prepaid pension costs                  |  | $           | 2,778,300   |      |  | $ | 2,437,798   |  
|Pension liabilities                    |  |             | (49,602,966 | )    |  |   | (36,171,121 | )
|Intangible pension asset               |  |             | 11,812,858  |      |  |   | 11,931,764  |  
|Accumulated other comprehensive income |  |             | 45,549,708  |      |  |   | 35,023,168  |  
|                                       |  |             |             |      |  |   |             |  
|                                       |  | $           | 10,537,900  |      |  | $ | 13,221,609  |  
|                                       |  |             |             |      |  |   |             |  

The benefit obligation presented above is the
combined projected benefit obligation for the defined benefit
plans. The combined accumulated benefit obligation was
$216,893,527 and $181,610,652 for the fiscal years ended
December 31, 2003 and 2002, respectively

F-15



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##### Table of Contents



BLOCK COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)



|   |                                         
|-- | ----------------------------------------
|8. | Retirement and Pension Plans (continued)

The measurement dates used for determination of
plan assets and obligations for the fiscal years ended
December 31, 2003 and 2002 were September 30, 2003 and
September 30, 2002, respectively. Assumptions used in the
determination of the benefit obligation and the net periodic
pension cost are as follows, on a weighted average basis:

|                                                 |  |              |      |              |  |      |      |      |  |      |      |   |  |  |      |   |  |  |      |  
|------------------------------------------------ |  | ------------ | ---- | ------------ |  | ---- | ---- | ---- |  | ---- | ---- | - |  |  | ---- | - |  |  | ---- | -
|                                                 |  |              |      |             
|                                                 |  | Benefit      |      | Pension Cost
|                                                 |  | Obligation   |      | Year Ended  
|                                                 |  | December 31, |      | December 31,
|                                                 |  |              |      |             
|                                                 |  | 2003         |      | 2002         |  | 2003 |      | 2002 |  | 2001
|                                                 |  |              |      |              |  |      |      |      |  |     
|Discount rate                                    |  |              | 6.25 | %            |  |      | 7.00 | %    |  |      | 7.00 | % |  |  | 7.23 | % |  |  | 7.65 | %
|Rate of compensation increases                   |  |              | 4.62 | %            |  |      | 4.99 | %    |  |      | 4.99 | % |  |  | 4.99 | % |  |  | 4.61 | %
|Expected long-term rate of return on plan assets |  |              |      |              |  |      |      |      |  |      | 8.78 | % |  |  | 8.96 | % |  |  | 8.95 | %

The discount rates reflect the rate of return on
high quality fixed income securities, which have decreased over
the past three years. Certain plans have been subject to cost of
living adjustments which increase benefits for eligible
retirees. Based upon past practice, a cost of living adjustment
assumption has been applied where appropriate in determination
of the benefit obligation.

All plan assets presented above are managed in
accordance with an established investment policy. On a weighted
average basis, the investment policies call for an allocation
that consists of 63% equity securities and 37% fixed income
securities. The expected long-term rate of return assumption
above is reflective of this target allocation. Although periodic
rebalancing occurs, actual allocations may vary due to
investment performance and the need to maintain sufficient
liquidity to service required benefit payments. Actual
allocations of plan assets as of the measurement dates for the
fiscal years ended December 31, 2003 and 2002 are as
follows:

|                                             |  |              |     |      |  |  |     |  
|-------------------------------------------- |  | ------------ | --- | ---- |  |  | --- | -
|                                             |  |             
|                                             |  | December 31,
|                                             |  |             
|                                             |  | 2003         |     | 2002
|                                             |  |              |     |     
|Equity securities                            |  |              | 59  | %    |  |  | 51  | %
|Fixed income securities                      |  |              | 31  | %    |  |  | 45  | %
|Other assets, including cash and equivalents |  |              | 10  | %    |  |  | 4   | %
|                                             |  |              |     |      |  |  |     |  
|                                             |  |              | 100 | %    |  |  | 100 | %
|                                             |  |              |     |      |  |  |     |  

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 $238,535,639 and
$161,878,251, respectively, at December 31, 2003 and
$200,103,920 and $139,897,438, respectively, at
December 31, 2002. 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 $211,481,217 and $161,878,251,
respectively, at December 31, 2003 and $176,068,559 and
$139,897,438, respectively, at December 31, 2002.

F-16



---



##### Table of Contents



BLOCK COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)



|   |                                         
|-- | ----------------------------------------
|8. | Retirement and Pension Plans (continued)

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

|                                   |  |                          |             |      |  |      |             |   |  |   |             |  
|---------------------------------- |  | ------------------------ | ----------- | ---- |  | ---- | ----------- | - |  | - | ----------- | -
|                                   |  |                         
|                                   |  | Years Ended December 31,
|                                   |  |                         
|                                   |  | 2003                     |             | 2002 |  | 2001
|                                   |  |                          |             |      |  |     
|Service cost                       |  | $                        | 5,282,047   |      |  | $    | 5,337,581   |   |  | $ | 4,919,777   |  
|Interest cost                      |  |                          | 14,748,299  |      |  |      | 13,187,906  |   |  |   | 12,380,775  |  
|Expected return on plan assets     |  |                          | (15,367,200 | )    |  |      | (15,526,468 | ) |  |   | (15,312,255 | )
|Amortization of transition amount  |  |                          | (34,022     | )    |  |      | (64,228     | ) |  |   | (64,228     | )
|Amortization of prior service cost |  |                          | 1,851,178   |      |  |      | 1,582,384   |   |  |   | 1,307,393   |  
|Actuarial loss (gain) recognized   |  |                          | 1,228,653   |      |  |      | 306,166     |   |  |   | (365,980    | )
|                                   |  |                          |             |      |  |      |             |   |  |   |             |  
|Net periodic pension cost          |  | $                        | 7,708,955   |      |  | $    | 4,823,341   |   |  | $ | 2,865,482   |  
|                                   |  |                          |             |      |  |      |             |   |  |   |             |  

The Company expects to contribute approximately
$8,700,000 to these plans in 2004. Various factors may cause
actual contributions to differ from this estimate. 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 $5,281,500, $5,315,400, and
$5,404,300 in 2003, 2002, and 2001, 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.






|   |                                                
|-- | -----------------------------------------------
|9. | Postretirement Benefits other than
    Pensions

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

|                                                                               |                                 |              |              |             |   |   |             |            |  
|------------------------------------------------------------------------------ | ------------------------------- | ------------ | ------------ | ----------- | - | - | ----------- | ---------- | -
|                                                                               |                                 |             
|                                                                               |                                 | December 31,
|                                                                               |                                 |             
|                                                                               |                                 | 2003         |              | 2002       
|                                                                               |                                 |              |              |            
|Change in accumulated postretirement benefit
    obligation, beginning of year |                                 | $            | 90,265,000   |             |   | $ | 87,602,000  |           
|                                                                               | Service cost                    |              |              | 2,290,000   |   |   |             | 1,915,000  |  
|                                                                               | Interest cost                   |              |              | 6,009,000   |   |   |             | 6,012,000  |  
|                                                                               | Actuarial loss (gain)           |              |              | 20,159,000  |   |   |             | (78,000    | )
|                                                                               | Benefits paid                   |              |              | (5,110,000  | ) |   |             | (5,186,000 | )
|                                                                               |                                 |              |              |             |   |   |             |           
|                                                                               | Benefit obligation, end of year |              | $            | 113,613,000 |   |   | $           | 90,265,000 |  
|                                                                               |                                 |              |              |             |   |   |             |           
|Funded status of plan                                                          |                                 | $            | (113,613,000 | )           |   | $ | (90,265,000 | )         
|Unrecognized actuarial loss                                                    |                                 |              | 27,007,000   |             |   |   | 6,900,000   |           
|                                                                               |                                 |              |              |             |   |   |             |           
|Accrued benefit cost                                                           |                                 | $            | (86,606,000  | )           |   | $ | (83,365,000 | )         
|                                                                               |                                 |              |              |             |   |   |             |           

F-17



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##### Table of Contents



BLOCK COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)



|   |                                                            
|-- | -----------------------------------------------------------
|9. | Postretirement Benefits other than Pensions
    (continued)

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

|                                        |  |                          |           |      |  |      |           |   |  |   |           |  
|--------------------------------------- |  | ------------------------ | --------- | ---- |  | ---- | --------- | - |  | - | --------- | -
|                                        |  |                         
|                                        |  | Years Ended December 31,
|                                        |  |                         
|                                        |  | 2003                     |           | 2002 |  | 2001
|                                        |  |                          |           |      |  |     
|Service cost                            |  | $                        | 2,290,000 |      |  | $    | 1,915,000 |   |  | $ | 1,474,000 |  
|Interest cost                           |  |                          | 6,009,000 |      |  |      | 6,012,000 |   |  |   | 5,240,000 |  
|Actuarial (gain) loss recognized        |  |                          | 52,000    |      |  |      | (7,000    | ) |  |   | (119,000  | )
|                                        |  |                          |           |      |  |      |           |   |  |   |           |  
|Net non-pension retirement benefit cost |  | $                        | 8,351,000 |      |  | $    | 7,920,000 |   |  | $ | 6,595,000 |  
|                                        |  |                          |           |      |  |      |           |   |  |   |           |  

The measurement date used for determination of
plan obligations for the fiscal years ended December 31,
2003 and 2002 was the last day of the fiscal period. For
measurement purposes, the annual rate of increase in the per
capita cost of covered health care benefits for 2004, 2005 and
2006 was assumed to be 10%, 9% and 8%, respectively. The rate
was assumed to decrease gradually to 5% for 2013 and remain at
that level thereafter. A 1% increase in these rates would have
increased the net non-pension retirement benefit expense by
$1,964,000 and the benefit obligation by $15,326,000. A 1%
decrease in these rates would have decreased the net non-pension
retirement expense by $1,129,000 and the benefit obligation by
$12,729,000. Discount rate assumptions used in the determination
of the benefit obligation and the net periodic pension cost are
as follows, on a weighted average basis:

|              |  |              |      |              |  |      |      |      |  |      |      |   |  |  |      |   |  |  |      |  
|------------- |  | ------------ | ---- | ------------ |  | ---- | ---- | ---- |  | ---- | ---- | - |  |  | ---- | - |  |  | ---- | -
|              |  |              |      |              |  |     
|              |  |              |      | Non-Pension 
|              |  | Benefit      |      | Benefit Cost
|              |  | Obligation   |      | Year ended  
|              |  | December 31, |      | December 31,
|              |  |              |      |             
|              |  | 2003         |      | 2002         |  | 2003 |      | 2002 |  | 2001
|              |  |              |      |              |  |      |      |      |  |     
|Discount rate |  |              | 6.25 | %            |  |      | 7.00 | %    |  |      | 7.00 | % |  |  | 7.25 | % |  |  | 7.75 | %

These plans are unfunded, with the Company
contributing to the plans in amounts equal to benefits
distributed. The Company expects to contribute approximately
$5,000,000 to these plans in 2004. Various factors may cause
actual contributions to differ from this estimate.

On December 8, 2003, the Medicare
Prescription Drug, Improvement and Modernization Act of 2003
(the Act) was enacted. Provisions of the Act include a
prescription drug benefit under Medicare (Medicare Part D)
as well as a federal subsidy to sponsors of retiree health care
benefit plans that provide a benefit that is at least
actuarially equivalent to Medicare Part D. The Company
provides a prescription drug benefit for certain groups of
retirees, however the Company has not yet assessed its
eligibility to receive a subsidy under the Act, nor is it able
to predict the impact of the behavior of its retiree population
in response to the provisions of the Act. Accordingly, the
Company has elected to defer recognition of the effects of the
Act in accordance with Financial Accounting Standards Board
Staff Position No. FAS 106-1, Accounting and
Disclosure Requirements Related to the Medicare Prescription
Drug, Improvement and Modernization Act of 2003 (FSP
FAS 106-1). Therefore, measures of the accumulated
post-retirement benefit obligation and net periodic
post-retirement benefit cost presented above do not reflect the
effects of the Act on the plans. Under the deferral provisions
of FSP FAS 106-1, the effects of the Act will be recognized
when authoritative guidance on the accounting for the federal
subsidy is issued or earlier, if the deferral expires due to a
significant event that would ordinarily call for remeasurement
of a plans assets and obligations. Authoritative guidance,
when issued, could require a change to previously reported
information.

F-18



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##### Table of Contents



BLOCK COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)








|    |                                           
|--- | ------------------------------------------
|10. | Long-Term Debt and Credit
    Arrangements

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

|                                            |                   |              |             |           |  |   |             |           | 
|------------------------------------------- | ----------------- | ------------ | ----------- | --------- |  | - | ----------- | --------- | 
|                                            |                   |             
|                                            |                   | December 31,
|                                            |                   |             
|                                            |                   | 2003         |             | 2002     
|                                            |                   |              |             |          
|Senior subordinated notes                   |                   | $            | 175,000,000 |           |  | $ | 175,000,000 |          
|Fair value adjustment of subordinated notes |                   |              | 4,094,987   |           |  |   | 7,658,715   |          
|                                            |                   |              |             |           |  |   |             |          
|                                            |                   |              | 179,094,987 |           |  |   | 182,658,715 |          
|Senior term loan B                          |                   |              | 80,279,000  |           |  |   | 74,625,000  |          
|Senior term loan A                          |                   |              | 10,000,000  |           |  |   |            |          
|Capital leases                              |                   |              | 2,886,324   |           |  |   | 3,153,095   |          
|                                            |                   |              |             |           |  |   |             |          
|                                            |                   |              | 272,260,311 |           |  |   | 260,436,810 |          
|Less current maturities:                    |                   |              |             |           |  |   |             |          
|                                            | Senior term loans |              |             | 1,100,000 |  |   |             | 4,321,000 | 
|                                            | Capital leases    |              |             | 381,143   |  |   |             | 328,871   | 
|                                            |                   |              |             |           |  |   |             |          
|                                            |                   |              | 1,481,143   |           |  |   | 4,649,871   |          
|                                            |                   |              |             |           |  |   |             |          
|                                            |                   | $            | 270,779,168 |           |  | $ | 255,786,939 |          
|                                            |                   |              |             |           |  |   |             |          

Maturities of long-term obligations for five
years subsequent to December 31, 2003 are: 2004 
$1,481,143; 2005  $2,268,166; 2006 
$3,295,763; 2007  $3,948,263; 2008 
$4,043,181; and thereafter  $257,223,795.

In April 2002, the Company issued
$175 million of 9 1/4% 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 included a $40 million delayed draw term
loan A, a $75 million term loan B, and an
$85 million revolver.

The Company borrowed $20,000,000 of the
$40,000,000 available under term loan A during 2003,
allowing the remaining availability to expire under the terms of
the credit agreement, which required withdrawals of $20,000,000
by June 30, 2003 and $20,000,000 by December 31, 2003.
The credit agreement was amended as of September 30, 2003
to transfer $10,000,000 of borrowings under term loan A to
term loan B. The remaining outstanding balance of term
loan A incurs interest 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. The outstanding debt relating to this
agreement is $10,000,000 at December 31, 2003, at a
weighted average interest rate of 4.14%.

F-19



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##### Table of Contents



BLOCK COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)



|    |                                                       
|--- | ------------------------------------------------------
|10. | Long-Term Debt and Credit Arrangements
    (continued)

The Company borrowed the $75,000,000 initially
available under term loan B, which incurs interest at the
banks prime rate of interest plus applicable margin of
1.75% or LIBOR plus applicable margin of 2.75%. As discussed
above, the credit agreement was amended to transfer $10,000,000
of outstanding borrowings under term loan A to term
loan B. The amended agreement requires quarterly principal
payments of $212,500 through maturity at November 15, 2009.
The outstanding debt relating to this agreement is $80,279,000
at December 31, 2003, at a weighted average interest rate
of 3.92%.

The Company may borrow up to $85,000,000 under a
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, 2003.

The 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 in 2002 consisting of
premiums paid to the existing noteholders and unamortized
deferred financing costs relating to the refinanced debt.

The Company participates in several interest-rate
swap contracts related to its outstanding debt. See Note 1
for discussion of the Companys accounting for these
contracts.

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.

The Companys revolving credit agreements
and senior term loans bear interest at variable rates, thus the
carrying values of these contracts approximate their fair value.
The fair values of the 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:

|                   |  |                |             |            |  |                |             |            |  |   |             |  |  |   |             | 
|------------------ |  | -------------- | ----------- | ---------- |  | -------------- | ----------- | ---------- |  | - | ----------- |  |  | - | ----------- | 
|                   |  |                |             |           
|                   |  | 2003           |             | 2002      
|                   |  |                |             |           
|                   |  | Recorded Value |             | Fair Value |  | Recorded Value |             | Fair Value
|                   |  |                |             |            |  |                |             |           
|Subordinated notes |  | $              | 179,094,987 |            |  | $              | 200,495,110 |            |  | $ | 182,658,715 |  |  | $ | 204,576,617 | 
|                   |  |                |             |            |  |                |             |            |  |   |             |  |  |   |             | 
|                   |  | $              | 179,094,987 |            |  | $              | 200,495,110 |            |  | $ | 182,658,715 |  |  | $ | 204,576,617 | 
|                   |  |                |             |            |  |                |             |            |  |   |             |  |  |   |             | 

Total interest paid was $20,597,898, $22,013,876,
and $19,197,316 in 2003, 2002, and 2001, respectively. The
Company capitalized $355,000, and $985,000 of interest in 2003
and 2001, respectively. No interest was capitalized in 2002.

F-20



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##### Table of Contents



BLOCK COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)








|    |                              
|--- | -----------------------------
|11. | 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, the
Company made payments of $1,162,913 to redeem 2,337 non-voting
shares based on a per share value of $497.61. The Estate did not
redeem additional shares during 2002 or 2003, nor does the
Company expect the Estate to redeem additional shares subsequent
to December 31, 2003. Through December 31, 2003, 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 $14,100,000, with annual fees of
3.125%.

Two subsidiaries of the Company have entered into
agreements for future broadcast rights, which become available
in 2004 or later. Maturities of unrecorded broadcast rights
commitments are as follows: 2004  $591,436;
2005  $1,182,629; 2006  $1,250,428;
2007  $1,001,247; 2008 and thereafter 
$1,334,877.

The Company and its subsidiaries incurred rental
expense of approximately $3,555,000, $3,999,000, and $4,064,000
for 2003, 2002, and 2001, respectively. Future rental
commitments subsequent to December 31, 2003 are:
2004  $2,815,650; 2005  $2,202,344;
2006  $872,824; 2007  $320,520; 2008 and
thereafter  $1,782,631.

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, 2003 is subject to collective
bargaining agreements. Certain employees of our cable and other
communications segments are subject to collective bargaining
agreements which expire prior to December 31, 2004, and
represent 3% of the Companys total labor force at
December 31, 2003.



|    |                             
|--- | ----------------------------
|12. | 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, and cable plant construction.
In prior years, the Other Communications category has included
the results of operations of Community Communications
Service, Inc (CCS) and Corporate Protection
Services, Inc. (CPS). As previously discussed, operations
of CCS and certain divisions of CPS were discontinued in during
2003. Results of operations for CCS and the affected divisions
of CPS have been reclassified to discontinued operations for all
years presented.

F-21



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##### Table of Contents



BLOCK COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)



|    |                                         
|--- | ----------------------------------------
|12. | Business Segment Information (continued)

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 gains on the sales of Monroe Cablevision and WLFI-TV and are
not allocated to segments. Amortization of intangibles and
deferred charges for all segments reflects the 2002
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 2002 and deferred charges related to the
prior year debt refinancing, respectively. The following tables
present certain financial information for the three reportable
segments and the other category.

|                                                                                       |                     |                         |             |             |   |      |             |             |   |   |             |             |  
|-------------------------------------------------------------------------------------- | ------------------- | ----------------------- | ----------- | ----------- | - | ---- | ----------- | ----------- | - | - | ----------- | ----------- | -
|                                                                                       |                     |                        
|                                                                                       |                     | Year Ended December 31,
|                                                                                       |                     |                        
|                                                                                       |                     | 2003                    |             | 2002        |   | 2001
|                                                                                       |                     |                         |             |             |   |     
|Revenues:                                                                              |                     |                         |             |             |   |      |             |             |   |   |             |            
|                                                                                       | Publishing          |                         | $           | 255,072,667 |   |      | $           | 261,008,750 |   |   | $           | 269,940,958 |  
|                                                                                       | Intersegment        |                         |             | (3,738,876  | ) |      |             | (3,752,407  | ) |   |             | (5,262,280  | )
|                                                                                       |                     |                         |             |             |   |      |             |             |   |   |             |            
|                                                                                       | External Publishing |                         |             | 251,333,791 |   |      |             | 257,256,343 |   |   |             | 264,678,678 |  
|                                                                                       | Cable               |                         |             | 109,638,385 |   |      |             | 101,562,492 |   |   |             | 90,246,800  |  
|                                                                                       | Intersegment        |                         |             | (104,708    | ) |      |             | (88,634     | ) |   |             | (826,800    | )
|                                                                                       |                     |                         |             |             |   |      |             |             |   |   |             |            
|                                                                                       | External Cable      |                         |             | 109,533,677 |   |      |             | 101,473,858 |   |   |             | 89,420,000  |  
|                                                                                       | Broadcasting        |                         |             | 39,406,282  |   |      |             | 39,964,031  |   |   |             | 35,183,897  |  
|                                                                                       | Other               |                         |             | 19,784,459  |   |      |             | 20,152,011  |   |   |             | 17,931,003  |  
|                                                                                       |                     |                         |             |             |   |      |             |             |   |   |             |            
|                                                                                       |                     | $                       | 420,058,209 |             |   | $    | 418,846,243 |             |   | $ | 407,213,578 |            
|                                                                                       |                     |                         |             |             |   |      |             |             |   |   |             |            
|Operating income (loss):                                                               |                     |                         |             |             |   |      |             |             |   |   |             |            
|                                                                                       | Publishing          |                         |             | 1,951,028   |   |      |             | 11,579,680  |   |   |             | 6,009,107   |  
|                                                                                       | Intersegment        |                         |             | (3,495,751  | ) |      |             | (3,510,293  | ) |   |             | (4,129,362  | )
|                                                                                       |                     |                         |             |             |   |      |             |             |   |   |             |            
|                                                                                       | Net Publishing      |                         |             | (1,544,723  | ) |      |             | 8,069,387   |   |   |             | 1,879,745   |  
|                                                                                       | Cable               |                         |             | 5,423,545   |   |      |             | 6,188,202   |   |   |             | 509,415     |  
|                                                                                       | Intersegment        |                         |             | 3,601,889   |   |      |             | 3,881,816   |   |   |             | 4,332,124   |  
|                                                                                       |                     |                         |             |             |   |      |             |             |   |   |             |            
|                                                                                       | Net Cable           |                         |             | 9,025,434   |   |      |             | 10,070,018  |   |   |             | 4,841,539   |  
|                                                                                       | Broadcasting        |                         |             | 2,712,992   |   |      |             | 3,651,090   |   |   |             | (1,788,767  | )
|                                                                                       | Corporate expenses  |                         |             | (4,398,354  | ) |      |             | (6,045,826  | ) |   |             | (2,705,412  | )
|                                                                                       | Other               |                         |             | 2,333,057   |   |      |             | 2,452,768   |   |   |             | (923,354    | )
|                                                                                       |                     |                         |             |             |   |      |             |             |   |   |             |            
|                                                                                       |                     |                         | 8,128,406   |             |   |      | 18,197,437  |             |   |   | 1,303,751   |            
|Nonoperating income (expense), net                                                     |                     |                         | (22,993,004 | )           |   |      | 11,407,856  |             |   |   | 24,778,780  |            
|                                                                                       |                     |                         |             |             |   |      |             |             |   |   |             |            
|Income (loss) from continuing operations before
    income taxes and minority interest |                     | $                       | (14,864,598 | )           |   | $    | 6,789,581   |             |   | $ | (23,475,029 | )          
|                                                                                       |                     |                         |             |             |   |      |             |             |   |   |             |            

F-22



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##### Table of Contents



BLOCK COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)



|    |                                         
|--- | ----------------------------------------
|12. | Business Segment Information (continued)

|                                                  |              |                         |            |            |  |      |            |            |  |   |            |            | 
|------------------------------------------------- | ------------ | ----------------------- | ---------- | ---------- |  | ---- | ---------- | ---------- |  | - | ---------- | ---------- | 
|                                                  |              |                        
|                                                  |              | Year Ended December 31,
|                                                  |              |                        
|                                                  |              | 2003                    |            | 2002       |  | 2001
|                                                  |              |                         |            |            |  |     
|Depreciation:                                     |              |                         |            |            |  |      |            |            |  |   |            |           
|                                                  | Publishing   |                         | $          | 10,565,824 |  |      | $          | 11,299,600 |  |   | $          | 11,381,856 | 
|                                                  | Cable        |                         |            | 30,009,614 |  |      |            | 26,681,076 |  |   |            | 27,211,618 | 
|                                                  | Broadcasting |                         |            | 2,874,373  |  |      |            | 2,659,875  |  |   |            | 2,528,464  | 
|                                                  | Other        |                         |            | 4,265,612  |  |      |            | 4,112,575  |  |   |            | 3,479,170  | 
|                                                  |              |                         |            |            |  |      |            |            |  |   |            |           
|                                                  |              | $                       | 47,715,423 |            |  | $    | 44,753,126 |            |  | $ | 44,601,108 |           
|                                                  |              |                         |            |            |  |      |            |            |  |   |            |           
|Amortization of intangibles and deferred charges: |              |                         |            |            |  |      |            |            |  |   |            |           
|                                                  | Publishing   |                         | $          | 352,993    |  |      | $          | 352,668    |  |   | $          | 2,485,915  | 
|                                                  | Cable        |                         |            | 739,563    |  |      |            | 559,597    |  |   |            | 179,903    | 
|                                                  | Broadcasting |                         |            | 16,940     |  |      |            | 16,940     |  |   |            | 780,734    | 
|                                                  | Other        |                         |            | 1,974,289  |  |      |            | 2,082,144  |  |   |            | 974,762    | 
|                                                  |              |                         |            |            |  |      |            |            |  |   |            |           
|                                                  |              | $                       | 3,083,785  |            |  | $    | 3,011,349  |            |  | $ | 4,421,314  |           
|                                                  |              |                         |            |            |  |      |            |            |  |   |            |           
|Capital expenditures:                             |              |                         |            |            |  |      |            |            |  |   |            |           
|                                                  | Publishing   |                         | $          | 17,654,960 |  |      | $          | 4,786,521  |  |   | $          | 4,294,832  | 
|                                                  | Cable        |                         |            | 33,332,550 |  |      |            | 21,118,022 |  |   |            | 52,548,163 | 
|                                                  | Broadcasting |                         |            | 1,356,185  |  |      |            | 3,263,438  |  |   |            | 1,268,908  | 
|                                                  | Other        |                         |            | 2,725,878  |  |      |            | 2,862,682  |  |   |            | 4,041,630  | 
|                                                  |              |                         |            |            |  |      |            |            |  |   |            |           
|                                                  |              | $                       | 55,069,573 |            |  | $    | 32,030,663 |            |  | $ | 62,153,533 |           
|                                                  |              |                         |            |            |  |      |            |            |  |   |            |           

|        |              |              |             |             |  |      |             |             |  |   |             |             | 
|------- | ------------ | ------------ | ----------- | ----------- |  | ---- | ----------- | ----------- |  | - | ----------- | ----------- | 
|        |              |             
|        |              | December 31,
|        |              |             
|        |              | 2003         |             | 2002        |  | 2001
|        |              |              |             |             |  |     
|Assets: |              |              |             |             |  |      |             |             |  |   |             |            
|        | Publishing   |              | $           | 203,593,402 |  |      | $           | 190,091,233 |  |   | $           | 174,713,665 | 
|        | Cable        |              |             | 158,462,203 |  |      |             | 158,749,105 |  |   |             | 166,223,678 | 
|        | Broadcasting |              |             | 53,182,373  |  |      |             | 64,535,074  |  |   |             | 64,662,625  | 
|        | Other        |              |             | 63,442,652  |  |      |             | 98,349,265  |  |   |             | 79,954,271  | 
|        |              |              |             |             |  |      |             |             |  |   |             |            
|        |              | $            | 478,680,630 |             |  | $    | 511,724,677 |             |  | $ | 485,554,239 |            
|        |              |              |             |             |  |      |             |             |  |   |             |            

F-23



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##### Table of Contents



BLOCK COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)








|    |                                                  
|--- | -------------------------------------------------
|13. | 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, 2003 and 2002 (in thousands):

|                                                          |  |           |         |           |  |           |         |           |  |   |         |   |  |   |         |  
|--------------------------------------------------------- |  | --------- | ------- | --------- |  | --------- | ------- | --------- |  | - | ------- | - |  | - | ------- | -
|                                                          |  |          
|                                                          |  | 2003     
|                                                          |  |          
|                                                          |  | Quarter 1 |         | Quarter 2 |  | Quarter 3 |         | Quarter 4
|                                                          |  |           |         |           |  |           |         |          
|Revenue, as reported                                      |  | $         | 101,424 |           |  | $         | 107,804 |           |  | $ | 101,882 |   |  |   |         |  
|Reclassify CCS discontinued operations                    |  |           | (83     | )         |  |           |        |           |  |   |        |   |  |   |         |  
|Reclassify CPS discontinued operations                    |  |           | (959    | )         |  |           | (904    | )         |  |   | (811    | ) |  |   |         |  
|                                                          |  |           |         |           |  |           |         |           |  |   |         |   |  |   |         |  
|Revenue, as restated                                      |  | $         | 100,382 |           |  | $         | 106,900 |           |  | $ | 101,071 |   |  | $ | 111,705 |  
|                                                          |  |           |         |           |  |           |         |           |  |   |         |   |  |   |         |  
|Operating income, as reported                             |  | $         | 86      |           |  | $         | 5,780   |           |  | $ | (2,279  | ) |  |   |         |  
|Reclassify CCS discontinued operations                    |  |           | 115     |           |  |           |        |           |  |   |        |   |  |   |         |  
|Reclassify CPS discontinued operations                    |  |           | 84      |           |  |           | 87      |           |  |   | 11      |   |  |   |         |  
|                                                          |  |           |         |           |  |           |         |           |  |   |         |   |  |   |         |  
|Operating income, as restated                             |  | $         | 285     |           |  | $         | 5,867   |           |  | $ | (2,268  | ) |  | $ | 4,244   |  
|                                                          |  |           |         |           |  |           |         |           |  |   |         |   |  |   |         |  
|Income (loss) from continuing operations, as
    reported |  | $         | (4,188  | )         |  | $         | (682    | )         |  | $ | (1,455  | ) |  |   |         |  
|Reclassify CCS discontinued operations                    |  |           | 76      |           |  |           |        |           |  |   |         |   |  |   |         |  
|Reclassify CPS discontinued operations                    |  |           | 36      |           |  |           | 37      |           |  |   | 48      |   |  |   |         |  
|                                                          |  |           |         |           |  |           |         |           |  |   |         |   |  |   |         |  
|Income (loss) from continuing operations, as
    restated |  | $         | (4,076  | )         |  | $         | (645    | )         |  | $ | (1,407  | ) |  | $ | (33,483 | )
|                                                          |  |           |         |           |  |           |         |           |  |   |         |   |  |   |         |  
|Net income                                                |  | $         | (4,188  | )         |  | $         | (898    | )         |  | $ | (1,455  | ) |  | $ | (34,031 | )
|                                                          |  |           |         |           |  |           |         |           |  |   |         |   |  |   |         |  

|                                                          |  |           |         |           |  |           |         |           |  |   |         |   |  |   |         |  
|--------------------------------------------------------- |  | --------- | ------- | --------- |  | --------- | ------- | --------- |  | - | ------- | - |  | - | ------- | -
|                                                          |  |          
|                                                          |  | 2002     
|                                                          |  |          
|                                                          |  | Quarter 1 |         | Quarter 2 |  | Quarter 3 |         | Quarter 4
|                                                          |  |           |         |           |  |           |         |          
|Revenue, as reported                                      |  | $         | 102,013 |           |  | $         | 106,063 |           |  | $ | 103,244 |   |  |   |         |  
|Reclassify CCS discontinued operations                    |  |           | (122    | )         |  |           |        |           |  |   |        |   |  |   |         |  
|Reclassify CPS discontinued operations                    |  |           | (1,484  | )         |  |           | (1,306  | )         |  |   | (1,455  | ) |  |   |         |  
|                                                          |  |           |         |           |  |           |         |           |  |   |         |   |  |   |         |  
|Revenue, as restated                                      |  | $         | 100,407 |           |  | $         | 104,757 |           |  | $ | 101,789 |   |  | $ | 111,893 |  
|                                                          |  |           |         |           |  |           |         |           |  |   |         |   |  |   |         |  
|Operating income, as reported                             |  |           | 1,430   |           |  |           | 7,083   |           |  |   | 3,956   |   |  |   |         |  
|Reclassify CCS discontinued operations                    |  |           | 170     |           |  |           |        |           |  |   |        |   |  |   |         |  
|Reclassify CPS discontinued operations                    |  |           | 76      |           |  |           | (91     | )         |  |   | 15      |   |  |   |         |  
|                                                          |  |           |         |           |  |           |         |           |  |   |         |   |  |   |         |  
|Operating income, as restated                             |  | $         | 1,676   |           |  | $         | 6,992   |           |  | $ | 3,971   |   |  | $ | 5,558   |  
|                                                          |  |           |         |           |  |           |         |           |  |   |         |   |  |   |         |  
|Income (loss) from continuing operations, as
    reported |  |           | 12,953  |           |  |           | (6,571  | )         |  |   | (3,263  | ) |  |   |         |  
|Reclassify CCS discontinued operations                    |  |           | 110     |           |  |           |        |           |  |   |        |   |  |   |         |  
|Reclassify CPS discontinued operations                    |  |           | 49      |           |  |           | (59     | )         |  |   | 8       |   |  |   |         |  
|                                                          |  |           |         |           |  |           |         |           |  |   |         |   |  |   |         |  
|Income (loss) from continuing operations, as
    restated |  | $         | 13,112  |           |  | $         | (6,630  | )         |  | $ | (3,255  | ) |  | $ | 151     |  
|                                                          |  |           |         |           |  |           |         |           |  |   |         |   |  |   |         |  
|Net income                                                |  | $         | 12,953  |           |  | $         | (6,898  | )         |  | $ | (3,373  | ) |  | $ | (142    | )
|                                                          |  |           |         |           |  |           |         |           |  |   |         |   |  |   |         |  

F-24



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##### Table of Contents



BLOCK COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)



|    |                                                              
|--- | -------------------------------------------------------------
|13. | Selected Quarterly Financial Data (unaudited)
    (continued)

The quarterly results of operations presented
above reflect the reclassification of the results of
discontinued operations of CCS and certain divisions of CPS, as
previously discussed. Net income for the fourth quarter of 2003
reflects an income tax charge for a full valuation allowance on
deferred tax assets as discussed Note 4. Quarterly net
income presented for the year ended December 31, 2002
reflects a first quarter gain on the exchange of Monroe
Cablevision, discussed in Note 2, as well as a second
quarter loss on early extinguishment of debt, discussed in
Note 9. 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.






|    |                                       
|--- | --------------------------------------
|14. | Supplemental Guarantor
    Information

The Companys 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-25



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##### Table of Contents



BLOCK COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)



|    |                                               
|--- | ----------------------------------------------
|14. | Supplemental Guarantor Information (continued)

CONSOLIDATING CONDENSED BALANCE
SHEET

December 31, 2003

|                                          |                                    |                |             |              |   |               |             |              |  |              |            |            |  |   |              |              |   |   |             |             |  
|----------------------------------------- | ---------------------------------- | -------------- | ----------- | ------------ | - | ------------- | ----------- | ------------ |  | ------------ | ---------- | ---------- |  | - | ------------ | ------------ | - | - | ----------- | ----------- | -
|                                          |                                    |                |             |              |   |              
|                                          |                                    | Unconsolidated |             |              |   |              
|                                          |                                    |                |             |              |   |              
|                                          |                                    | Parent         |             | Guarantor    |   | Non-Guarantor |             |              |  |             
|                                          |                                    | Company        |             | Subsidiaries |   | Subsidiary    |             | Eliminations |  | Consolidated
|                                          |                                    |                |             |              |   |               |             |              |  |             
|Assets:                                   |                                    |                |             |              |   |               |             |              |  |              |            |            |  |   |              |              |   |   |             |            
|                                          | Current assets                     |                | $           | 25,790,099   |   |               | $           | 57,688,341   |  |              | $          | 2,013,029  |  |   | $            | 438,785      |   |   | $           | 85,930,254  |  
|                                          | Property, plant and equipment, net |                |             | 24,430,830   |   |               |             | 224,727,950  |  |              |            | 5,476,277  |  |   |              | (910,252     | ) |   |             | 253,724,805 |  
|                                          | Intangibles, net                   |                |             | 4,069,888    |   |               |             | 57,587,468   |  |              |            | 19,690,900 |  |   |              | 198,489      |   |   |             | 81,546,745  |  
|                                          | Cash value of life insurance, net  |                |             | 27,466,424   |   |               |             | 237,317      |  |              |            |           |  |   |              |             |   |   |             | 27,703,741  |  
|                                          | Prepaid pension costs              |                |             |             |   |               |             | 2,778,300    |  |              |            |           |  |   |              |             |   |   |             | 2,778,300   |  
|                                          | Pension intangibles                |                |             | 2,695,373    |   |               |             | 9,117,485    |  |              |            |           |  |   |              |             |   |   |             | 11,812,858  |  
|                                          | Investments in subsidiaries        |                |             | 173,607,302  |   |               |             |             |  |              |            |           |  |   |              | (173,607,302 | ) |   |             |            |  
|                                          | Other                              |                |             | (6,914,956   | ) |               |             | 22,098,883   |  |              |            |           |  |   |              |             |   |   |             | 15,183,927  |  
|                                          |                                    |                |             |              |   |               |             |              |  |              |            |            |  |   |              |              |   |   |             |            
|                                          |                                    | $              | 251,144,960 |              |   | $             | 374,235,744 |              |  | $            | 27,180,206 |            |  | $ | (173,880,280 | )            |   | $ | 478,680,630 |            
|                                          |                                    |                |             |              |   |               |             |              |  |              |            |            |  |   |              |              |   |   |             |            
|Liabilities and stockholders
    equity: |                                    |                |             |              |   |               |             |              |  |              |            |            |  |   |              |              |   |   |             |            
|                                          | Current liabilities                |                | $           | 17,061,841   |   |               | $           | 54,367,604   |  |              | $          | 405,057    |  |   | $            | 437,584      |   |   | $           | 72,272,086  |  
|                                          | Long-term debt                     |                |             | 270,779,168  |   |               |             |             |  |              |            |           |  |   |              |             |   |   |             | 270,779,168 |  
|                                          | Other long-term obligations        |                |             | 8,911,722    |   |               |             | 245,727,823  |  |              |            |           |  |   |              | (100,776,894 | ) |   |             | 153,862,651 |  
|                                          | Minority interest                  |                |             |             |   |               |             |             |  |              |            |           |  |   |              | 9,080,434    |   |   |             | 9,080,434   |  
|                                          | Stockholders equity               |                |             | (45,607,771  | ) |               |             | 74,140,317   |  |              |            | 26,775,149 |  |   |              | (82,621,404  | ) |   |             | (27,313,709 | )
|                                          |                                    |                |             |              |   |               |             |              |  |              |            |            |  |   |              |              |   |   |             |            
|                                          |                                    | $              | 251,144,960 |              |   | $             | 374,235,744 |              |  | $            | 27,180,206 |            |  | $ | (173,880,280 | )            |   | $ | 478,680,630 |            
|                                          |                                    |                |             |              |   |               |             |              |  |              |            |            |  |   |              |              |   |   |             |            

F-26



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##### Table of Contents



BLOCK COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)



|    |                                               
|--- | ----------------------------------------------
|14. | Supplemental Guarantor Information (continued)

CONSOLIDATING CONDENSED BALANCE
SHEET

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 stockholders
    equity: |                                    |                |             |              |   |               |             |              |  |              |            |            |  |   |              |              |   |   |             |            
|                                          | Current liabilities                |                | $           | 23,530,460   |   |               | $           | 54,864,676   |  |              | $          | 756,010    |  |   | $            | 85,922       |   |   | $           | 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-27



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##### Table of Contents



BLOCK COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)



|    |                                               
|--- | ----------------------------------------------
|14. | Supplemental Guarantor Information (continued)

CONSOLIDATING CONDENSED STATEMENT OF
INCOME

Year Ended December 31, 2003

|                                                                                       |  |                |             |              |  |               |             |              |  |              |            |   |  |   |             |   |  |   |             |  
|-------------------------------------------------------------------------------------- |  | -------------- | ----------- | ------------ |  | ------------- | ----------- | ------------ |  | ------------ | ---------- | - |  | - | ----------- | - |  | - | ----------- | -
|                                                                                       |  |                |             |              |  |              
|                                                                                       |  | Unconsolidated |             |              |  |              
|                                                                                       |  |                |             |              |  |              
|                                                                                       |  | Parent         |             | Guarantor    |  | Non-Guarantor |             |              |  |             
|                                                                                       |  | Company        |             | Subsidiaries |  | Subsidiary    |             | Eliminations |  | Consolidated
|                                                                                       |  |                |             |              |  |               |             |              |  |             
|Revenue                                                                                |  | $              | 85,141,867  |              |  | $             | 343,149,150 |              |  | $            | 6,359,922  |   |  | $ | (14,592,730 | ) |  | $ | 420,058,209 |  
|Expenses                                                                               |  |                | 87,162,950  |              |  |               | 331,426,292 |              |  |              | 6,650,612  |   |  |   | (13,310,051 | ) |  |   | 411,929,803 |  
|                                                                                       |  |                |             |              |  |               |             |              |  |              |            |   |  |   |             |   |  |   |             |  
|Operating income (loss)                                                                |  |                | (2,021,083  | )            |  |               | 11,722,858  |              |  |              | (290,690   | ) |  |   | (1,282,679  | ) |  |   | 8,128,406   |  
|Nonoperating income (expense)                                                          |  |                | (13,070,589 | )            |  |               | (1,544,001  | )            |  |              | (8,378,414 | ) |  |   |            |   |  |   | (22,993,004 | )
|                                                                                       |  |                |             |              |  |               |             |              |  |              |            |   |  |   |             |   |  |   |             |  
|Income (loss) from continuing operations before
    income taxes and minority interest |  |                | (15,091,672 | )            |  |               | 10,178,857  |              |  |              | (8,669,104 | ) |  |   | (1,282,679  | ) |  |   | (14,864,598 | )
|Provision for income taxes                                                             |  |                | 24,460,550  |              |  |               | 3,147,035   |              |  |              |           |   |  |   |            |   |  |   | 27,607,585  |  
|                                                                                       |  |                |             |              |  |               |             |              |  |              |            |   |  |   |             |   |  |   |             |  
|Income (loss) from continuing operations before
    minority interest                  |  |                | (39,552,222 | )            |  |               | 7,031,822   |              |  |              | (8,669,104 | ) |  |   | (1,282,679  | ) |  |   | (42,472,183 | )
|Minority interest                                                                      |  |                |            |              |  |               |            |              |  |              |           |   |  |   | 2,860,804   |   |  |   | 2,860,804   |  
|                                                                                       |  |                |             |              |  |               |             |              |  |              |            |   |  |   |             |   |  |   |             |  
|Income (loss) from continuing operations                                               |  |                | (39,552,222 | )            |  |               | 7,031,822   |              |  |              | (8,669,104 | ) |  |   | 1,578,125   |   |  |   | (39,611,379 | )
|Loss on discontinued operations, net of tax                                            |  |                |            |              |  |               | (960,213    | )            |  |              |           |   |  |   |            |   |  |   | (960,213    | )
|                                                                                       |  |                |             |              |  |               |             |              |  |              |            |   |  |   |             |   |  |   |             |  
|Net income (loss)                                                                      |  | $              | (39,552,222 | )            |  | $             | 6,071,609   |              |  | $            | (8,669,104 | ) |  | $ | 1,578,125   |   |  | $ | (40,571,592 | )
|                                                                                       |  |                |             |              |  |               |             |              |  |              |            |   |  |   |             |   |  |   |             |  

F-28



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##### Table of Contents



BLOCK COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)



|    |                                               
|--- | ----------------------------------------------
|14. | 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  |              |  | $             | 336,926,346 |              |  | $            | 8,087,156 |  |  | $ | (10,461,126 | ) |  | $ | 418,846,243 |  
|Expenses                                                                               |  |                | 86,934,454  |              |  |               | 317,854,146 |              |  |              | 6,661,172 |  |  |   | (10,800,966 | ) |  |   | 400,648,806 |  
|                                                                                       |  |                |             |              |  |               |             |              |  |              |           |  |  |   |             |   |  |   |             |  
|Operating income (loss)                                                                |  |                | (2,640,587  | )            |  |               | 19,072,200  |              |  |              | 1,425,984 |  |  |   | 339,840     |   |  |   | 18,197,437  |  
|Nonoperating income (expense)                                                          |  |                | (9,791,057  | )            |  |               | (1,635,784  | )            |  |              | 18,985    |  |  |   |            |   |  |   | (11,407,856 | )
|                                                                                       |  |                |             |              |  |               |             |              |  |              |           |  |  |   |             |   |  |   |             |  
|Income (loss) from continuing operations before
    income taxes and minority interest |  |                | (12,431,644 | )            |  |               | 17,436,416  |              |  |              | 1,444,969 |  |  |   | 339,840     |   |  |   | 6,789,581   |  
|Provision (credit) for income taxes                                                    |  |                | (3,656,350  | )            |  |               | 6,591,298   |              |  |              |          |  |  |   |            |   |  |   | 2,934,948   |  
|                                                                                       |  |                |             |              |  |               |             |              |  |              |           |  |  |   |             |   |  |   |             |  
|Income (loss) from continuing operations before
    minority interest                  |  |                | (8,775,294  | )            |  |               | 10,845,118  |              |  |              | 1,444,969 |  |  |   | 339,840     |   |  |   | 3,854,633   |  
|Minority interest                                                                      |  |                |            |              |  |               |            |              |  |              |          |  |  |   | (476,840    | ) |  |   | (476,840    | )
|                                                                                       |  |                |             |              |  |               |             |              |  |              |           |  |  |   |             |   |  |   |             |  
|Income (loss) from continuing operations                                               |  |                | (8,775,294  | )            |  |               | 10,845,118  |              |  |              | 1,444,969 |  |  |   | (137,000    | ) |  |   | 3,377,793   |  
|Loss on discontinued operations, net of tax                                            |  |                |            |              |  |               | (837,347    | )            |  |              |          |  |  |   |            |   |  |   | (837,347    | )
|                                                                                       |  |                |             |              |  |               |             |              |  |              |           |  |  |   |             |   |  |   |             |  
|Net income (loss)                                                                      |  | $              | (8,775,294  | )            |  | $             | 10,007,771  |              |  | $            | 1,444,969 |  |  | $ | (137,000    | ) |  | $ | 2,540,446   |  
|                                                                                       |  |                |             |              |  |               |             |              |  |              |           |  |  |   |             |   |  |   |             |  

F-29



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##### Table of Contents



BLOCK COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)



|    |                                               
|--- | ----------------------------------------------
|14. | Supplemental Guarantor Information (continued)

CONSOLIDATING CONDENSED STATEMENT OF
INCOME

Year Ended December 31, 2001

|                                                                                       |  |                |             |              |  |               |             |              |  |              |           |   |  |   |             |   |  |   |             |  
|-------------------------------------------------------------------------------------- |  | -------------- | ----------- | ------------ |  | ------------- | ----------- | ------------ |  | ------------ | --------- | - |  | - | ----------- | - |  | - | ----------- | -
|                                                                                       |  |                |             |              |  |              
|                                                                                       |  | Unconsolidated |             |              |  |              
|                                                                                       |  |                |             |              |  |              
|                                                                                       |  | Parent         |             | Guarantor    |  | Non-Guarantor |             |              |  |             
|                                                                                       |  | Company        |             | Subsidiaries |  | Subsidiary    |             | Eliminations |  | Consolidated
|                                                                                       |  |                |             |              |  |               |             |              |  |             
|Revenue                                                                                |  | $              | 88,025,044  |              |  | $             | 328,598,591 |              |  | $            | 6,088,943 |   |  | $ | (15,499,000 | ) |  | $ | 407,213,578 |  
|Expenses                                                                               |  |                | 88,862,744  |              |  |               | 324,624,576 |              |  |              | 6,836,328 |   |  |   | (14,413,821 | ) |  |   | 405,909,827 |  
|                                                                                       |  |                |             |              |  |               |             |              |  |              |           |   |  |   |             |   |  |   |             |  
|Operating income (loss)                                                                |  |                | (837,700    | )            |  |               | 3,974,015   |              |  |              | (747,385  | ) |  |   | (1,085,179  | ) |  |   | 1,303,751   |  
|Nonoperating income (expense)                                                          |  |                | (22,857,542 | )            |  |               | (1,957,648  | )            |  |              | 36,410    |   |  |   |            |   |  |   | (24,778,780 | )
|                                                                                       |  |                |             |              |  |               |             |              |  |              |           |   |  |   |             |   |  |   |             |  
|Income (loss) from continuing operations before
    income taxes and minority interest |  |                | (23,695,242 | )            |  |               | 2,016,367   |              |  |              | (710,975  | ) |  |   | (1,085,179  | ) |  |   | (23,475,029 | )
|Provision (credit) for income taxes                                                    |  |                | (7,818,800  | )            |  |               | 891,496     |              |  |              |          |   |  |   |            |   |  |   | (6,927,304  | )
|                                                                                       |  |                |             |              |  |               |             |              |  |              |           |   |  |   |             |   |  |   |             |  
|Income (loss) from continuing operations before
    minority interest                  |  |                | (15,876,442 | )            |  |               | 1,124,871   |              |  |              | (710,975  | ) |  |   | (1,085,179  | ) |  |   | (16,547,725 | )
|Minority interest                                                                      |  |                |            |              |  |               |            |              |  |              |          |   |  |   | 234,622     |   |  |   | 234,622     |  
|                                                                                       |  |                |             |              |  |               |             |              |  |              |           |   |  |   |             |   |  |   |             |  
|Income (loss) from continuing operations                                               |  |                | (15,876,442 | )            |  |               | 1,124,871   |              |  |              | (710,975  | ) |  |   | (850,557    | ) |  |   | (16,313,103 | )
|Loss on discontinued operations                                                        |  |                |            |              |  |               | (1,543,760  | )            |  |              |          |   |  |   |            |   |  |   | (1,543,760  | )
|                                                                                       |  |                |             |              |  |               |             |              |  |              |           |   |  |   |             |   |  |   |             |  
|Net loss                                                                               |  | $              | (15,876,442 | )            |  | $             | (418,889    | )            |  | $            | (710,975  | ) |  | $ | (850,557    | ) |  | $ | (17,856,863 | )
|                                                                                       |  |                |             |              |  |               |             |              |  |              |           |   |  |   |             |   |  |   |             |  

F-30



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##### Table of Contents



BLOCK COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)



|    |                                               
|--- | ----------------------------------------------
|14. | Supplemental Guarantor Information (continued)

CONSOLIDATING CONDENSED STATEMENT OF CASH
FLOWS

Year Ended December 31, 2003

|                                                        |  |                |             |              |  |               |             |              |  |              |          |   |  |   |            |   |  |   |             |  
|------------------------------------------------------- |  | -------------- | ----------- | ------------ |  | ------------- | ----------- | ------------ |  | ------------ | -------- | - |  | - | ---------- | - |  | - | ----------- | -
|                                                        |  |                |             |              |  |              
|                                                        |  | Unconsolidated |             |              |  |              
|                                                        |  |                |             |              |  |              
|                                                        |  | Parent         |             | Guarantor    |  | Non-Guarantor |             |              |  |             
|                                                        |  | Company        |             | Subsidiaries |  | Subsidiary    |             | Eliminations |  | Consolidated
|                                                        |  |                |             |              |  |               |             |              |  |             
|Net cash provided by (used in) operating
    activities |  | $              | (11,722,227 | )            |  | $             | 54,534,373  |              |  | $            | 729,530  |   |  | $ | (1,281,615 | ) |  | $ | 42,260,061  |  
|Additions to property, plant and equipment              |  |                | (1,543,943  | )            |  |               | (54,073,330 | )            |  |              | (658,123 | ) |  |   | 1,282,679  |   |  |   | (54,992,717 | )
|Other investing activities                              |  |                | (87,619     | )            |  |               | 133,764     |              |  |              |         |   |  |   |           |   |  |   | 46,145      |  
|                                                        |  |                |             |              |  |               |             |              |  |              |          |   |  |   |            |   |  |   |             |  
|Net cash used in investing activities                   |  |                | (1,631,562  | )            |  |               | (53,939,566 | )            |  |              | (658,123 | ) |  |   | 1,282,679  |   |  |   | (54,946,572 | )
|Borrowings on term loan                                 |  |                | 20,000,000  |              |  |               |            |              |  |              |         |   |  |   |           |   |  |   | 20,000,000  |  
|Payments on long-term debt                              |  |                | (4,346,000  | )            |  |               |            |              |  |              |         |   |  |   |           |   |  |   | (4,346,000  | )
|Other financing activities                              |  |                | (326,099    | )            |  |               | (960,688    | )            |  |              |         |   |  |   | (1,064     | ) |  |   | (1,287,851  | )
|                                                        |  |                |             |              |  |               |             |              |  |              |          |   |  |   |            |   |  |   |             |  
|Net cash provided by financing activities               |  |                | 15,327,901  |              |  |               | (960,688    | )            |  |              |         |   |  |   | (1,064     | ) |  |   | 14,366,149  |  
|                                                        |  |                |             |              |  |               |             |              |  |              |          |   |  |   |            |   |  |   |             |  
|Increase (decrease) in cash and equivalents             |  |                | 1,974,112   |              |  |               | (365,881    | )            |  |              | 71,407   |   |  |   |           |   |  |   | 1,679,638   |  
|Cash and equivalents at beginning of year               |  |                | 8,854,800   |              |  |               | 455,633     |              |  |              | 471,212  |   |  |   |           |   |  |   | 9,781,645   |  
|                                                        |  |                |             |              |  |               |             |              |  |              |          |   |  |   |            |   |  |   |             |  
|Cash and equivalents at end of year                     |  | $              | 10,828,912  |              |  | $             | 89,752      |              |  | $            | 542,619  |   |  | $ |           |   |  | $ | 11,461,283  |  
|                                                        |  |                |             |              |  |               |             |              |  |              |          |   |  |   |            |   |  |   |             |  

F-31



---



##### Table of Contents



BLOCK COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)



|    |                                               
|--- | ----------------------------------------------
|14. | 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 (used in) 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 note                           |  |                | 175,000,000  |              |  |               |            |              |  |              |           |   |  |   |         |   |  |   | 175,000,000  |  
|Borrowings on term loan                                 |  |                | 75,000,000   |              |  |               |            |              |  |              |           |   |  |   |         |   |  |   | 75,000,000   |  
|Payments on long-term debt                              |  |                | (142,874,000 | )            |  |               |            |              |  |              |           |   |  |   |         |   |  |   | (142,874,000 | )
|Payments on long-term revolver                          |  |                | (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 (used in) 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-32



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##### Table of Contents



BLOCK COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)



|    |                                               
|--- | ----------------------------------------------
|14. | 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 (used in) 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 provided by (used in) investing
    activities |  |                | 3,148,649   |              |  |               | (61,364,778 | )            |  |              | (586,010  | ) |  |   | 1,043,979  |   |  |   | (57,758,160 | )
|Borrowing on term loan                                  |  |                | 49,833,000  |              |  |               |            |              |  |              |          |   |  |   |           |   |  |   | 49,833,000  |  
|Payments on revolving credit agreements                 |  |                | (25,620,229 | )            |  |               |            |              |  |              |          |   |  |   |           |   |  |   | (25,620,229 | )
|Other financing activities                              |  |                | (13,635,057 | )            |  |               | 11,340,588  |              |  |              |          |   |  |   | 229,148    |   |  |   | (2,065,321  | )
|                                                        |  |                |             |              |  |               |             |              |  |              |           |   |  |   |            |   |  |   |             |  
|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-33



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##### Table of Contents



BLOCK COMMUNICATIONS, INC. AND
SUBSIDIARIES

SCHEDULE II  VALUATION AND
QUALIFYING ACCOUNTS

Three Years Ended December 31,
2003

|                                                 |  |                 |       |                  |  |               |        |                   |  |   |       |  |  |   |        | 
|------------------------------------------------ |  | --------------- | ----- | ---------------- |  | ------------- | ------ | ----------------- |  | - | ----- |  |  | - | ------ | 
|                                                 |  | Balance at      |       | Charged to costs |  |               |        | Balance at       
|                                                 |  | January 1, 2003 |       | and expenses     |  | Deductions(1) |        | December 31, 2003
|                                                 |  |                 |       |                  |  |               |        |                  
|                                                 |  |                
|                                                 |  | (in thousands) 
|Allowance for doubtful receivables and discounts |  | $               | 3,552 |                  |  | $             | 3,815  |                   |  | $ | 3,819 |  |  | $ | 3,548  | 
|Deferred tax valuation allowance                 |  |                 | 745   |                  |  |               | 31,597 |                   |  |   |      |  |  |   | 32,342 | 

|                                                 |  |                 |       |                  |  |               |       |                   |  |   |       |  |  |   |       | 
|------------------------------------------------ |  | --------------- | ----- | ---------------- |  | ------------- | ----- | ----------------- |  | - | ----- |  |  | - | ----- | 
|                                                 |  | Balance at      |       | Charged to costs |  |               |       | Balance at       
|                                                 |  | January 1, 2002 |       | 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 costs |  |               |       | Balance at       
|                                                 |  | January 1, 2001 |       | 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   | 



---



|    |                                                                                            
|--- | -------------------------------------------------------------------------------------------
|(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.

Date: March 23, 2004

| |                           
| | --------------------------
| | BLOCK COMMUNICATIONS, INC.



| |     |                
| | --- | ---------------
| | 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 23, 2004
|                                        
|/s/ ALLAN BLOCKAllan Block               |  | Managing Director
    (Principal Executive Officer)                |  | March 23, 2004
|                                        
|/s/ DAVID G. HUEYDavid G. Huey           |  | President and Director                                             |  | March 23, 2004
|                                        
|/s/ GARY J. BLAIRGary J. Blair           |  | Executive Vice President/
    Chief Financial Officer and Director |  | March 23, 2004
|                                        
|/s/ JODI L. MIEHLSJodi L. Miehls         |  | Treasurer/Chief Accounting Officer                                 |  | March 23, 2004
|                                        
|/s/ BARBARA BURNEYBarbara Burney         |  | Director                                                           |  | March 23, 2004
|                                        
|/s/ JOHN R. BLOCKJohn R. Block           |  | Director                                                           |  | March 23, 2004
|                                        
|/s/ DONALD G. BLOCKDonald G. Block       |  | Director                                                           |  | March 23, 2004
|                                        
|Mary G. Block                            |  | Director                                                           |  |               
|                                        
|/s/ KAREN D. JOHNESEKaren D. Johnese     |  | Director                                                           |  | March 23, 2004
|                                        
|Cyrus P. Block                           |  | Director                                                           |  |               
|                                        
|/s/ FRITZ BYERSFritz Byers               |  | General Counsel and Director                                       |  | March 23, 2004



---



##### Table of Contents



|                                   |  |          |  |                |  | 
|---------------------------------- |  | -------- |  | -------------- |  | 
|                                   |  |          |  |               
|Signatures                         |  | Title    |  | Date          
|                                   |  |          |  |               
|                                  
|/s/ DIANA BLOCKDiana Block         |  | Director |  | March 23, 2004
|                                  
|/s/ HAROLD O. DAVISHarold O. Davis |  | Director |  | March 23, 2004



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##### Table of Contents






INDEX TO EXHIBITS

| |    |     |  |                                                                                                                                                                                                                                                                                                                                                       
| | -- | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3  | .1  |  | Articles of Incorporation of Block
    Communications, Inc. (the Company), as amended
    to date, incorporate 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.
| | 4  | .10 |  | Amendment No. 2 dated September 30,
    2003 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, 2003.
| | 4  | .11 |  | Amendment No. 3 dated March 19, 2004 to
    the Credit Agreement dated as of May 15, 2002, by and among
    the Company and Bank of America, N.A., as Administrative Agent.                                                                                                                                                                           
| | 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, 2004, for Block Communications, Inc.                                                                                                                                                                                                                                                                



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##### Table of Contents



| |    |    |  |                                                                                                                                                                                                            
| | -- | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.                                                                
| | 14 | .1 |  | Code of Ethics                                                                                                                                                                                             
| | 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.                                                             
| | 31 | .1 |  | Certification of the Managing Director pursuant
    to Rule 15d-14(a)                                                                                                                                      
| | 31 | .2 |  | Certification of the Chief Financial Officer
    pursuant to Rule 15d-14(a)                                                                                                                                
| | 32 | .1 |  | Certification of the Managing Director pursuant
    to 18 U.S.C. Sec. 1350                                                                                                                                 
| | 32 | .2 |  | Certification of the Chief Financial Officer
    pursuant to 18 U.S.C. Sec. 1350