##### Table of Contents

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549



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FORM 10-Q



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(Mark One)

|x | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ---------------------------------------------------------------------------------------



For the quarterly period ended March 31, 2004



OR



| ̈ | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ----------------------------------------------------------------------------------------



For the transition period from
 to



Commission file number:



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NextMedia Operating, Inc.

(Exact
name of registrant as specified in its charter)



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|                                                                     |  |                                  
|-------------------------------------------------------------------- |  | ---------------------------------
|Delaware                                                             |  | 84-154397                        
|(State or other jurisdiction of incorporation or organization)       |  | (IRS Employer Identification No.)
|                                                                     | 
|6312 S. Fiddlers Green Circle Suite 360E Greenwood Village, Colorado |  | 80111                            
|(Address of principal executive offices)                             |  | (Zip Code)                       



(303) 694-9118

(Registrants telephone number, including area code)



Not Applicable

(Former name, former address and former fiscal year, if changed since last report)



---



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 such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.    Yes  x    No ̈



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



The total number of shares of common stock, par value $.01 per share, outstanding as of May 10, 2004 was 3,000. The Registrant has no other class of common stock outstanding.



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##### Table of Contents

TABLE OF CONTENTS



|        |  |         |  |                                                                                          |  |   
|------- |  | ------- |  | ---------------------------------------------------------------------------------------- |  | --
|PART I  |  |        
|        |  |         | 
|        |  | Item 1. |  | Unaudited Financial Statements                                                           |  |   
|        |  |         | 
|        |  |         |  | Consolidated Balance Sheets as of December 31, 2003 and March 31, 2004                   |  | 3 
|        |  |         | 
|        |  |         |  | Consolidated Statements of Operations for the three months ended March 31, 2003 and 2004 |  | 4 
|        |  |         | 
|        |  |         |  | Consolidated Statements of Cash Flows for the three months ended March 31, 2003 and 2004 |  | 5 
|        |  |         | 
|        |  |         |  | Notes to Consolidated Financial Statements                                               |  | 6 
|        |  |         | 
|        |  | Item 2. |  | Managements Discussion and Analysis of Financial Condition and Results of Operations    |  | 18
|        |  |         | 
|        |  | Item 3. |  | Quantitative and Qualitative Disclosure About Market Risk                                |  | 22
|        |  |         | 
|        |  | Item 4. |  | Controls and Procedures                                                                  |  | 22
|        | 
|PART II |  |        
|        |  |         | 
|        |  | Item 1. |  | Legal Proceedings                                                                        |  | 23
|        |  |         | 
|        |  | Item 2. |  | Changes in Securities                                                                    |  | 23
|        |  |         | 
|        |  | Item 3. |  | Defaults Upon Senior Securities                                                          |  | 23
|        |  |         | 
|        |  | Item 4. |  | Submission of Matters of a Vote of Security Holders                                      |  | 23
|        |  |         | 
|        |  | Item 5. |  | Other Information                                                                        |  | 23
|        |  |         | 
|        |  | Item 6. |  | Exhibits and Reports on Form 8-K                                                         |  | 23



2



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##### Table of Contents

NEXTMEDIA OPERATING INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)



|                                                                                                       |  |                   |         |   |                |   |         |  
|------------------------------------------------------------------------------------------------------ |  | ----------------- | ------- | - | -------------- | - | ------- | -
|                                                                                                       |  | December 31, 2003 |         |   | March 31, 2004 |  
|Assets                                                                                                 |  |                   |         |   |                |   |         |  
|Current assets:                                                                                        |  |                   |         |   |                |   |         |  
|Cash and cash equivalents                                                                              |  | $                 | 707     |   |                | $ | 991     |  
|Accounts receivable, net of allowance for doubtful accounts of $1,110 and $1,185, respectively         |  |                   | 16,452  |   |                |   | 13,869  |  
|Prepaid expenses and other current assets                                                              |  |                   | 3,209   |   |                |   | 5,142   |  
|                                                                                                       |  |                   |         |   |                |   |         |  
|Total current assets                                                                                   |  |                   | 20,368  |   |                |   | 20,002  |  
|Property and equipment, net                                                                            |  |                   | 58,016  |   |                |   | 76,518  |  
|Other assets                                                                                           |  |                   | 12,247  |   |                |   | 10,528  |  
|Goodwill, net                                                                                          |  |                   | 63,590  |   |                |   | 59,024  |  
|Other intangibles, net                                                                                 |  |                   | 389,156 |   |                |   | 393,264 |  
|                                                                                                       |  |                   |         |   |                |   |         |  
|Total assets                                                                                           |  | $                 | 543,377 |   |                | $ | 559,336 |  
|                                                                                                       |  |                   |         |   |                |   |         |  
|Liabilities and Stockholders Equity                                                                   |  |                   |         |   |                |   |         |  
|Current liabilities:                                                                                   |  |                   |         |   |                |   |         |  
|Accounts payable                                                                                       |  | $                 | 1,699   |   |                | $ | 2,891   |  
|Accrued expenses                                                                                       |  |                   | 17,484  |   |                |   | 11,190  |  
|Deferred revenue                                                                                       |  |                   | 516     |   |                |   | 1,173   |  
|Other                                                                                                  |  |                   | 1,825   |   |                |   | 102     |  
|                                                                                                       |  |                   |         |   |                |   |         |  
|Total current liabilities                                                                              |  |                   | 21,524  |   |                |   | 15,356  |  
|Long-term debt                                                                                         |  |                   | 199,634 |   |                |   | 220,713 |  
|Deferred tax liability                                                                                 |  |                   | 26,858  |   |                |   | 26,923  |  
|Other long-term liabilities                                                                            |  |                   | 1,306   |   |                |   | 1,243   |  
|                                                                                                       |  |                   |         |   |                |   |         |  
|Total liabilities                                                                                      |  | $                 | 249,322 |   |                | $ | 264,235 |  
|                                                                                                       |  |                   |         |   |                |   |         |  
|Commitments and contingencies (Note 8)                                                                 |  |                   |         |   |                |   |         |  
|                                                                                                       |  |                  
|Stockholders equity:                                                                                  |  |                   |         |   |                |   |         |  
|Common stock, par value $0.01 per share, 3,000 shares authorized, issued and outstanding, respectively |  | $                 | 1       |   |                | $ | 1       |  
|Additional paid-in capital                                                                             |  |                   | 352,615 |   |                |   | 352,635 |  
|Accumulated deficit                                                                                    |  |                   | (58,561 | ) |                |   | (57,535 | )
|                                                                                                       |  |                   |         |   |                |   |         |  
|Total stockholders equity                                                                             |  |                   | 294,055 |   |                |   | 295,101 |  
|                                                                                                       |  |                   |         |   |                |   |         |  
|Total liabilities and stockholders equity                                                             |  | $                 | 543,377 |   |                | $ | 559,336 |  
|                                                                                                       |  |                   |         |   |                |   |         |  



The accompanying
notes are an integral part of these consolidated financial statements.



3



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##### Table of Contents

NEXTMEDIA OPERATING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands)

(Unaudited)



|                                                                                         |  |                              |        |   |      |   |        |  
|---------------------------------------------------------------------------------------- |  | ---------------------------- | ------ | - | ---- | - | ------ | -
|                                                                                         |  | Three months ended March 31, |       
|                                                                                         |  | 2003                         |        |   | 2004 |  
|Gross revenue                                                                            |  | $                            | 25,438 |   |      | $ | 26,238 |  
|Less: agency commissions                                                                 |  |                              | 1,882  |   |      |   | 1,847  |  
|                                                                                         |  |                              |        |   |      |   |        |  
|Net revenue                                                                              |  |                              | 23,556 |   |      |   | 24,391 |  
|Market level expenses, exclusive of depreciation and amortization shown separately below |  |                              | 15,336 |   |      |   | 16,473 |  
|Corporate expenses                                                                       |  |                              | 1,938  |   |      |   | 1,929  |  
|Depreciation and amortization                                                            |  |                              | 2,349  |   |      |   | 3,387  |  
|Local marketing agreement fees                                                           |  |                              |       |   |      |   | 30     |  
|                                                                                         |  |                              |        |   |      |   |        |  
|Total operating expenses                                                                 |  |                              | 19,623 |   |      |   | 21,819 |  
|                                                                                         |  |                              |        |   |      |   |        |  
|Operating income                                                                         |  |                              | 3,933  |   |      |   | 2,572  |  
|Other (income) expense:                                                                  |  |                              |        |   |      |   |        |  
|Interest expense, net                                                                    |  |                              | 5,726  |   |      |   | 6,063  |  
|Other (income) expense                                                                   |  |                              | 488    |   |      |   | (3,822 | )
|                                                                                         |  |                              |        |   |      |   |        |  
|Income (loss) from continuing operations before income taxes                             |  |                              | (2,281 | ) |      |   | 331    |  
|(Benefit) provision for income taxes                                                     |  |                              | 2,880  |   |      |   | (695   | )
|                                                                                         |  |                              |        |   |      |   |        |  
|Income (loss) from continuing operations                                                 |  |                              | (5,161 | ) |      |   | 1,026  |  
|                                                                                         |  |                              |        |   |      |   |        |  
|Discontinued operations:                                                                 |  |                              |        |   |      |   |        |  
|Income from discontinued operations                                                      |  |                              | (1     | ) |      |   |       |  
|                                                                                         |  |                              |        |   |      |   |        |  
|Net income (loss)                                                                        |  | $                            | (5,160 | ) |      | $ | 1,026  |  
|                                                                                         |  |                              |        |   |      |   |        |  



The accompanying
notes are an integral part of these consolidated financial statements.



4



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##### Table of Contents

NEXTMEDIA OPERATING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



|                                                                                     |  |                             |         |   |      |   |         |  
|------------------------------------------------------------------------------------ |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                     |  | Three months endedMarch 31, |        
|                                                                                     |  | 2003                        |         |   | 2004 |  
|Cash Flows From Operating Activities                                                 |  |                             |         |   |      |   |         |  
|Net income (loss)                                                                    |  | $                           | (5,160  | ) |      | $ | 1,026   |  
|Adjustments to reconcile net income (loss) to net cash used in operating activities: |  |                             |         |   |      |   |         |  
|Depreciation and amortization                                                        |  |                             | 2,349   |   |      |   | 3,387   |  
|Non-cash interest expense                                                            |  |                             | 303     |   |      |   | 328     |  
|Provision for bad debt expense                                                       |  |                             | 139     |   |      |   | 215     |  
|Non-cash compensation expense                                                        |  |                             | 20      |   |      |   | 20      |  
|Loss on interest rate swap                                                           |  |                             | 373     |   |      |   | 135     |  
|(Benefit) provision for deferred taxes                                               |  |                             | 2,880   |   |      |   | (695    | )
|Gain on asset dispositions                                                           |  |                             |        |   |      |   | (4,938  | )
|Changes in assets and liabilities, net of effect of acquisitions:                    |  |                             |         |   |      |   |         |  
|Accounts receivable                                                                  |  |                             | (38     | ) |      |   | 2,268   |  
|Prepaid expenses and other assets                                                    |  |                             | (562    | ) |      |   | 802     |  
|Accounts payable and accrued expenses                                                |  |                             | (6,946  | ) |      |   | (6,389  | )
|Deferred revenue                                                                     |  |                             | 69      |   |      |   | 368     |  
|Other current liabilities                                                            |  |                             | (66     | ) |      |   | 1       |  
|                                                                                     |  |                             |         |   |      |   |         |  
|Net cash used in operating activities                                                |  |                             | (6,639  | ) |      |   | (3,472  | )
|                                                                                     |  |                             |         |   |      |   |         |  
|Cash Flows From Investing Activities                                                 |  |                             |         |   |      |   |         |  
|Purchase of property and equipment                                                   |  |                             | (1,615  | ) |      |   | (2,064  | )
|Payments for acquisitions, net of cash acquired                                      |  |                             | (66,456 | ) |      |   | (16,526 | )
|Proceeds from sale of properties                                                     |  |                             | 5,411   |   |      |   | 217     |  
|Proceeds from termination of interest rate swaps                                     |  |                             |        |   |      | $ | 1,600   |  
|                                                                                     |  |                             |         |   |      |   |         |  
|Net cash used in investing activities                                                |  |                             | (62,660 | ) |      |   | (16,773 | )
|                                                                                     |  |                             |         |   |      |   |         |  
|Cash Flows From Financing Activities                                                 |  |                             |         |   |      |   |         |  
|Proceeds from revolving credit facilities                                            |  |                             | 34,000  |   |      |   | 25,000  |  
|Repayment of revolving credit facilities                                             |  |                             | (5,750  | ) |      |   | (4,000  | )
|Equity capital contributions from Parent, net                                        |  |                             | 27,100  |   |      |   |        |  
|Payments of financing related costs                                                  |  |                             | (18     | ) |      |   | (143    | )
|Other                                                                                |  |                             | 158     |   |      |   | (328    | )
|                                                                                     |  |                             |         |   |      |   |         |  
|Net cash provided by financing activities                                            |  |                             | 55,490  |   |      |   | 20,529  |  
|                                                                                     |  |                             |         |   |      |   |         |  
|Decrease in cash and cash equivalents                                                |  |                             | (13,809 | ) |      |   | 284     |  
|Cash and cash equivalents at beginning of period                                     |  |                             | 14,446  |   |      |   | 707     |  
|                                                                                     |  |                             |         |   |      |   |         |  
|Cash and cash equivalents at end of period                                           |  | $                           | 637     |   |      | $ | 991     |  
|                                                                                     |  |                             |         |   |      |   |         |  
|Supplemental Cash Flow Information                                                   |  |                             |         |   |      |   |         |  
|Cash payments during the period for:                                                 |  |                             |         |   |      |   |         |  
|Interest                                                                             |  | $                           | 11,083  |   |      | $ | 11,073  |  
|                                                                                     |  |                             |         |   |      |   |         |  
|Taxes                                                                                |  | $                           |        |   |      | $ |        |  
|                                                                                     |  |                             |         |   |      |   |         |  



The accompanying
notes are an integral part of these consolidated financial statements.



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##### Table of Contents

NEXTMEDIA OPERATING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(Dollars in thousands)



1. INTERIM FINANCIAL DATA AND SIGNIFICANT ACCOUNTING POLICIES



The accompanying consolidated unaudited interim financial statements have
been prepared in accordance with accounting principles generally accepted in the United States for interim financial information. Management believes that the Company has made all adjustments necessary for a fair presentation of results of the
interim periods and that these adjustments were of a normal and recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the
United States have been condensed or omitted. The interim results of operations and cash flows are not necessarily indicative of the results that can be expected for the fiscal year ending December 31, 2004, due to seasonality and other factors. You
should read the consolidated financial statements in conjunction with the consolidated financial statements of NextMedia Operating, Inc. and the notes thereto included in our annual report on Form 10-K, as filed with the Securities and Exchange
Commission on March 30, 2004. In this quarterly report on Form 10-Q, references to the Company, we, our and us refer to NextMedia Operating, Inc. and its subsidiaries, and the term
NextMedia refers only to NextMedia Operating, Inc.



2. Recent
Accounting Pronouncements



In January 2003, the Financial
Accounting Standards Board issued Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities. FIN 46 must be applied to interests in variable interest entities created before February 1, 2003 beginning in the first
interim or annual period beginning after March 15, 2004. For variable interest entities created after February 1, 2003, FIN 46 is effective for the first interim period after December 31, 2003. The adoption of FIN 46 has not had a material impact on
our financial statements.



3. Acquisitions and Dispositions



Part of the Companys operating strategy is to expand through
prudent acquisition of broadcasting, outdoor and indoor advertising properties. In seeking acquisition opportunities, the Company generally seeks: (i) assets in markets with a demographic propensity for growth (i.e., population growth above average,
above average growth in retail sales, etc.), (ii) markets where the Company believes it can assemble a group of assets generating over $1,000 in annual cash flow from operations, and (iii) assets in markets where the Company believes it can become a
leader in terms of ratings, revenue share, or number of advertising faces. Each of the Companys acquisitions meet at least one of these criteria.



In January 2004, in exchange for its outdoor advertising assets in New York, New York and Baltimore, Maryland, the Company acquired outdoor advertising
assets in Myrtle Beach, South Carolina valued at $43,600. As a result of the exchange, certain of the Companys taxable temporary differences reversed resulting in a $3,800 income tax benefit during the first quarter of 2004. This benefit was
offset by $3,100 of tax expense related to other activity in the quarter and the Companys projected tax expense for the year. Because we do not expect that our deferred tax liabilities will reverse within our net operating loss carry-forward
period, we record additional deferred tax expense throughout the year to establish a valuation allowance against net operating loss carry-forwards generated by amortization of goodwill and indefinite lived intangibles that is deductible for tax
purposes but is not amortized for book purposes.



In February
2004, the Company completed its previously announced acquisition of WCCQ-FM licensed to Crest Hill, Illinois for $14,000 in cash. The Company funded the acquisition with borrowings under its credit facility. While the Company has not finalized its
purchase accounting for the acquisition of these assets, it expects to allocate a significant portion of the acquisition cost to indefinite lived intangibles in the form of either FCC licenses or goodwill.



The following unaudited pro forma income statement information has been
prepared as if the acquisitions made during the year ended December 31, 2003 and the three months ended March 31, 2004 had occurred on January 1, 2003. The pro forma income statement information is not necessarily indicative of the results that
actually would have been achieved if these acquisitions had been consummated on January 1, 2003.



|               |  |                             |        |   |      |   |        |  
|-------------- |  | --------------------------- | ------ | - | ---- | - | ------ | -
|               |  | Three months endedMarch 31, |       
|               |  | 2003                        |        |   | 2004 |  
|Net revenues   |  | $                           | 24,286 |   |      | $ | 24,542 |  
|Total expenses |  |                             | 29,941 |   |      |   | 27,161 |  
|               |  |                             |        |   |      |   |        |  
|Net loss       |  | $                           | (5,655 | ) |      | $ | (2,619 | )
|               |  |                             |        |   |      |   |        |  



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NEXTMEDIA OPERATING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(Dollars in thousands)



4. Property and Equipment



Property and equipment consist of the following:



|                              |  |                 |  |                         |         |   |                      |   |         |  
|----------------------------- |  | --------------- |  | ----------------------- | ------- | - | -------------------- | - | ------- | -
|                              |  | DepreciableLife |  | As of December 31, 2003 |         |   | As of March 31, 2004 |  
|Land and improvements         |  |                |  | $                       | 5,729   |   |                      | $ | 7,097   |  
|Construction in progress      |  |                |  |                         | 870     |   |                      |   | 1,154   |  
|Buildings and improvements    |  | 20              |  |                         | 9,893   |   |                      |   | 10,496  |  
|Leasehold improvements        |  | 10              |  |                         | 1,833   |   |                      |   | 1,692   |  
|Broadcast equipment           |  | 5  20          |  |                         | 8,445   |   |                      |   | 8,734   |  
|Office equipment              |  | 7               |  |                         | 1,814   |   |                      |   | 1,930   |  
|Computer software and systems |  | 3  5           |  |                         | 1,930   |   |                      |   | 2,017   |  
|Tower and antennae            |  | 5  20          |  |                         | 4,931   |   |                      |   | 5,200   |  
|Vehicles                      |  | 3               |  |                         | 1,734   |   |                      |   | 2,217   |  
|Furniture and fixtures        |  | 7               |  |                         | 1,319   |   |                      |   | 1,397   |  
|Advertising displays          |  | 3  15          |  |                         | 34,654  |   |                      |   | 50,786  |  
|                              |  |                 |  |                         |         |   |                      |   |         |  
|                              |  |                 |  |                         | 73,152  |   |                      |   | 92,720  |  
|Less accumulated depreciation |  |                 |  |                         | (15,136 | ) |                      |   | (16,202 | )
|                              |  |                 |  |                         |         |   |                      |   |         |  
|                              |  |                 |  | $                       | 58,016  |   |                      | $ | 76,518  |  
|                              |  |                 |  |                         |         |   |                      |   |         |  



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NEXTMEDIA OPERATING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(Dollars in thousands)



5. Intangible Assets



Intangible assets consist of the following:



|                                                                               |  |                      |  |                       |         |   |                    |   |         |  
|------------------------------------------------------------------------------ |  | -------------------- |  | --------------------- | ------- | - | ------------------ | - | ------- | -
|                                                                               |  | EstimatedUseful Life |  | As ofDecember 31,2003 |         |   | As ofMarch 31,2004 |  
|Gross:                                                                         |  |                      |  |                       |         |   |                    |   |         |  
|FCC licenses                                                                   |  |                     |  | $                     | 285,755 |   |                    | $ | 299,743 |  
|Goodwill                                                                       |  |                     |  |                       | 64,434  |   |                    |   | 59,868  |  
|Advertising permits                                                            |  |                      |  |                       | 103,555 |   |                    |   | 79,756  |  
|Easements                                                                      |  |                      |  |                       | 2,595   |   |                    |   | 2,759   |  
|Definite-lived intangibles, primarily customer base and non-compete agreements |  | 1-15                 |  |                       | 11,441  |   |                    |   | 26,703  |  
|                                                                               |  |                      |  |                       |         |   |                    |   |         |  
|                                                                               |  |                      |  | $                     | 467,862 |   |                    | $ | 468,829 |  
|                                                                               |  |                      |  |                       |         |   |                    |   |         |  
|Less, accumulated amortization:                                                |  |                      |  |                       |         |   |                    |   |         |  
|FCC licenses                                                                   |  |                     |  | $                     | (8,758  | ) |                    | $ | (8,758  | )
|Goodwill                                                                       |  |                     |  |                       | (844    | ) |                    |   | (844    | )
|Advertising permits                                                            |  |                      |  |                       |        |   |                    |   |        |  
|Easements                                                                      |  |                      |  |                       |        |   |                    |   |        |  
|Definite-lived intangibles, primarily customer base and non-compete agreements |  |                      |  |                       | (5,432  | ) |                    |   | (6,939  | )
|                                                                               |  |                      |  |                       |         |   |                    |   |         |  
|                                                                               |  |                      |  | $                     | (15,116 | ) |                    | $ | (16,541 | )
|                                                                               |  |                      |  |                       |         |   |                    |   |         |  
|Net:                                                                           |  |                      |  |                       |         |   |                    |   |         |  
|FCC licenses                                                                   |  |                      |  | $                     | 276,997 |   |                    | $ | 290,985 |  
|Goodwill                                                                       |  |                      |  |                       | 63,590  |   |                    |   | 59,024  |  
|Advertising permits                                                            |  |                      |  |                       | 103,555 |   |                    |   | 79,756  |  
|Easements                                                                      |  |                      |  |                       | 2,595   |   |                    |   | 2,759   |  
|Definite-lived intangibles, primarily customer base and non-compete agreements |  |                      |  |                       | 6,009   |   |                    |   | 19,764  |  
|                                                                               |  |                      |  |                       |         |   |                    |   |         |  
|                                                                               |  |                      |  | $                     | 452,746 |   |                    | $ | 452,288 |  
|                                                                               |  |                      |  |                       |         |   |                    |   |         |  



The aggregate change
in goodwill, advertising permits and FCC licenses in the period from December 31, 2003 to March 31, 2004 resulted entirely from the Companys acquisitions and dispositions of radio and outdoor assets. There were no impairment losses recognized
during the period and no reporting units were disposed of.



Definite-lived
Intangibles



The Company has definite-lived intangible
assets that continue to be amortized in accordance with SFAS 142. These assets consist primarily of customer relationships and non-compete agreements which are amortized over their lives.



Total amortization expense from definite-lived intangible assets for the three months ended March 31, 2004 was approximately
$1,507. The following table presents the Companys estimate of amortization expense for each of the five succeeding fiscal years for definite-lived intangibles as of December 31, 2003:



|     |  |   |      
|---- |  | - | -----
|2004 |  | $ | 4,379
|2005 |  |   | 3,909
|2006 |  |   | 2,765
|2007 |  |   | 2,025
|2008 |  |   | 1,510



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NEXTMEDIA OPERATING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(Dollars in thousands)



6. Accrued Expenses



Accrued expenses consist of the following:



|                                 |  |                       |        |                    |   |       
|-------------------------------- |  | --------------------- | ------ | ------------------ | - | ------
|                                 |  | As ofDecember 31,2003 |        | As ofMarch 31,2004
|Accrued compensation and bonuses |  | $                     | 1,198  |                    | $ | 1,133 
|Accrued commissions              |  |                       | 839    |                    |   | 776   
|Accrued interest                 |  |                       | 10,753 |                    |   | 5,382 
|Accrued property taxes           |  |                       | 352    |                    |   | 483   
|Accrued rents                    |  |                       | 643    |                    |   | 480   
|Unfavorable leases               |  |                       | 347    |                    |   | 347   
|Accrued franchise taxes          |  |                       | 331    |                    |   | 117   
|Accrued legal and professional   |  |                       | 1,044  |                    |   | 902   
|Accrued insurance costs          |  |                       | 550    |                    |   | 360   
|Accrued music license fees       |  |                       | 572    |                    |   | 156   
|Other                            |  |                       | 855    |                    |   | 1,054 
|                                 |  |                       |        |                    |   |       
|                                 |  | $                     | 17,484 |                    | $ | 11,190
|                                 |  |                       |        |                    |   |       



7. Long-Term Debt



Long-term debt consists of the following:



|                          |  |                       |         |   |                     |   |         |  
|------------------------- |  | --------------------- | ------- | - | ------------------- | - | ------- | -
|                          |  | As ofDecember 31,2003 |         |   | As ofMarch 31, 2004 |  
|Senior Credit Facility    |  | $                     | 2,000   |   |                     | $ | 23,000  |  
|Senior Subordinated Notes |  |                       | 200,000 |   |                     |   | 200,000 |  
|Unamortized discount      |  |                       | (2,366  | ) |                     |   | (2,287  | )
|                          |  |                       |         |   |                     |   |         |  
|Total long-term debt      |  | $                     | 199,634 |   |                     | $ | 220,713 |  
|                          |  |                       |         |   |                     |   |         |  



On April 9, 2004, the
Company terminated its existing senior credit facility and entered into a new $75,000 senior credit facility maturing in five years. The Companys new senior credit facility contains customary restrictive covenants that, among other things,
limit the Companys ability to incur additional indebtedness and liens in connection therewith, pay dividends and make capital expenditures above specified limits. Under the new senior credit facility, the Company must satisfy specified
financial covenants, such as a maximum total leverage ratio, a maximum senior leverage ratio and a minimum ratio of consolidated EBITDA to consolidated net cash interest expense. As of March 31, 2004, the Company was in compliance with all of these
covenants. After taking into account these restrictive covenants, as of March 31, 2004, the Company had approximately $52,000 of borrowing capacity under its senior credit facility. As a result of the termination of its existing credit facility, the
Company expects to record a charge in the second quarter of 2004 to write off the associated deferred financing costs.



The Companys 10.75% senior subordinated notes due 2011 require the Company to make semi-annual interest payments of approximately $10,800 on January
1 and July 1 of each year. The indenture governing the notes contains certain restrictive covenants that, among other things, limit the Companys ability to incur additional indebtedness and pay dividends. As of March 31, 2004, the Company was
in compliance with these covenants.



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NEXTMEDIA OPERATING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(Dollars in thousands)



8. Commitments and Contingencies



As of May 10, 2004, the Company had $354 in letters of credit outstanding as deposits to secure obligations.



In March 2004, the arbitration panel on the Companys previously
disclosed dispute with PNE Media, LLC delivered an award that was favorable to the Company and, after certain set-offs, resulted in a net recovery of approximately $3.6 million and a gain of approximately $3,000 which is recorded in other (income)
expense in the first quarter of 2004. The arbitration award has been fully implemented.



From time to time, the Company is subject to routine litigation incident to its business. Management does not expect these matters to have a material adverse effect upon the Companys liquidity, results of
operations or financial position.



The Company has no direct or
indirect guarantees of indebtedness of others.



9. Segment Data



The Company has determined that two reportable operating
segmentsradio broadcasting and outdoor advertisingbest reflect the Companys current management and operations.



The radio broadcasting segment is comprised of radio stations and networks for which the Company is the licensee or for which the Company programs and
sells on-air advertising time under local marketing agreements. At March 31, 2004, the radio broadcasting segment included 60 radio stations owned and operated by the Company. All of these stations operate in domestic markets. The radio broadcasting
segment also operates various radio networks.



The outdoor
advertising segment includes traditional outdoor advertising displays, such as roadside bulletins, posters and transit displays that the Company owns or operates under lease arrangements, as well as advertising displays that the Company installs in
public locations, including restaurants, health clubs, retail stores and entertainment venues. At March 31, 2004, the outdoor advertising segment owned or operated over 7,000 outdoor displays and indoor advertising display faces in more than 3,000
retail locations across the United States. All of these displays are located in domestic markets.



The accounting policies of the segments are the same as those described in the summary of significant accounting policies in Note 1 to the Companys
audited consolidated financial statements contained in the Companys annual report on Form 10-K as filed with the SEC on March 30, 2004. There are no intersegment sales or transfers.



There are no customers that comprise greater than 10% of the consolidated revenues of the Company for the periods presented.



|                                                                                          |  |                              |        |      |   |       
|----------------------------------------------------------------------------------------- |  | ---------------------------- | ------ | ---- | - | ------
|                                                                                          |  | Three months ended March 31,
|                                                                                          |  | 2003                         |        | 2004
|Net revenue:                                                                              |  |                              |        |      |   |       
|Radio Broadcasting                                                                        |  | $                            | 15,905 |      | $ | 16,401
|Outdoor Advertising                                                                       |  |                              | 7,651  |      |   | 7,990 
|                                                                                          |  |                              |        |      |   |       
|Consolidated                                                                              |  |                              | 23,556 |      |   | 24,391
|                                                                                          |  |                              |        |      |   |       
|Market level expenses, exclusive of depreciation and amortization shown separately below: |  |                              |        |      |   |       
|Radio Broadcasting                                                                        |  |                              | 10,223 |      |   | 10,826
|Outdoor Advertising                                                                       |  |                              | 5,113  |      |   | 5,647 
|                                                                                          |  |                              |        |      |   |       
|Consolidated                                                                              |  |                              | 15,336 |      |   | 16,473
|                                                                                          |  |                              |        |      |   |       



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NEXTMEDIA OPERATING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(Dollars in thousands)



|                                                             |  |                              |         |   |      |   |         |  
|------------------------------------------------------------ |  | ---------------------------- | ------- | - | ---- | - | ------- | -
|                                                             |  | Three months ended March 31, |        
|                                                             |  | 2003                         |         |   | 2004 |  
|Depreciation and amortization:                               |  |                              |         |   |      |   |         |  
|Radio Broadcasting                                           |  | $                            | 1,547   |   |      | $ | 1,191   |  
|Outdoor Advertising                                          |  |                              | 802     |   |      |   | 2,196   |  
|                                                             |  |                              |         |   |      |   |         |  
|Consolidated                                                 |  | $                            | 2,349   |   |      | $ | 3,387   |  
|                                                             |  |                              |         |   |      |   |         |  
|                                                             |  |                             
|Other segment costs:                                         |  |                              |         |   |      |   |         |  
|Local marketing agreement fees-radio broadcasting            |  | $                            |        |   |      | $ | 30      |  
|                                                             |  |                             
|Segment profit:                                              |  |                              |         |   |      |   |         |  
|Radio Broadcasting                                           |  | $                            | 4,135   |   |      | $ | 4,354   |  
|Outdoor Advertising                                          |  |                              | 1,736   |   |      |   | 147     |  
|                                                             |  |                              |         |   |      |   |         |  
|Sub-total:                                                   |  | $                            | 5,871   |   |      | $ | 4,501   |  
|                                                             |  |                             
|Corporate expenses                                           |  |                              | 1,938   |   |      |   | 1,929   |  
|Operating income (loss)                                      |  |                              | 3,933   |   |      |   | 2,572   |  
|Interest expense, net                                        |  |                              | 5,726   |   |      |   | 6,063   |  
|Other (income) expense                                       |  |                              | 488     |   |      |   | (3,822  | )
|                                                             |  |                              |         |   |      |   |         |  
|Income (loss) from continuing operations before income taxes |  | $                            | (2,281  | ) |      | $ | 331     |  
|                                                             |  |                              |         |   |      |   |         |  
|Total identifiable assets:                                   |  |                              |         |   |      |   |         |  
|Radio Broadcasting                                           |  | $                            | 364,701 |   |      | $ | 370,184 |  
|Outdoor Advertising                                          |  |                              | 174,978 |   |      |   | 189,752 |  
|                                                             |  |                              |         |   |      |   |         |  
|Consolidated                                                 |  | $                            | 539,679 |   |      | $ | 559,336 |  
|                                                             |  |                              |         |   |      |   |         |  
|Goodwill, net:                                               |  |                              |         |   |      |   |         |  
|Radio Broadcasting                                           |  | $                            | 25,855  |   |      | $ | 26,628  |  
|Outdoor Advertising                                          |  |                              | 36,908  |   |      |   | 32,396  |  
|                                                             |  |                              |         |   |      |   |         |  
|Consolidated                                                 |  | $                            | 62,763  |   |      | $ | 59,024  |  
|                                                             |  |                              |         |   |      |   |         |  
|Additions to long lived assets:                              |  |                              |         |   |      |   |         |  
|Radio Broadcasting                                           |  | $                            | 61,995  |   |      | $ | 16,077  |  
|Outdoor Advertising                                          |  |                              | 6,359   |   |      |   | 47,086  |  
|                                                             |  |                              |         |   |      |   |         |  
|Consolidated                                                 |  | $                            | 68,354  |   |      | $ | 63,163  |  
|                                                             |  |                              |         |   |      |   |         |  



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NEXTMEDIA OPERATING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(Dollars in thousands)



10. Supplemental Guarantor Information



The Companys senior subordinated notes are guaranteed on a senior subordinated basis, jointly and severally, by all of
the Companys subsidiaries (the Guarantor Subsidiaries). The Company has collateralized its revolving credit facility by granting a first priority-perfected pledge of its assets including, without limitation, the capital stock of
the Company and its subsidiaries.



NextMedia Operating, Inc.

Supplemental Combining Balance Sheet

December 31, 2003



|                                                                 |  |                          |         |                       |   |         |                     |  |   |          |   |  |   |        
|---------------------------------------------------------------- |  | ------------------------ | ------- | --------------------- | - | ------- | ------------------- |  | - | -------- | - |  | - | -------
|                                                                 |  | NextMedia Operating,Inc. |         | GuarantorSubsidiaries |   |         | Eliminating Entries |  |   | Total   
|Assets                                                           |  |                          |         |                       |   |         |                     |  |   |          |   |  |   |        
|Current assets:                                                  |  |                          |         |                       |   |         |                     |  |   |          |   |  |   |        
|Cash and cash equivalents                                        |  | $                        | 1,138   |                       | $ | (431    | )                   |  | $ |         |   |  | $ | 707    
|Accounts receivable, net                                         |  |                          | 11,181  |                       |   | 5,271   |                     |  |   |         |   |  |   | 16,452 
|Prepaid and other current assets                                 |  |                          | 1,665   |                       |   | 1,544   |                     |  |   |         |   |  |   | 3,209  
|                                                                 |  |                          |         |                       |   |         |                     |  |   |          |   |  |   |        
|Total current assets                                             |  |                          | 13,984  |                       |   | 6,384   |                     |  |   |         |   |  |   | 20,368 
|Property and equipment, net                                      |  |                          | 25,924  |                       |   | 32,092  |                     |  |   |         |   |  |   | 58,016 
|Intangibles, net                                                 |  |                          | 30,569  |                       |   | 422,177 |                     |  |   |         |   |  |   | 452,746
|Other assets                                                     |  |                          | 6,632   |                       |   | 807     |                     |  |   | 4,808    |   |  |   | 12,247 
|Investment in subsidiaries                                       |  |                          | 447,196 |                       |   |        |                     |  |   | (447,196 | ) |  |   |       
|                                                                 |  |                          |         |                       |   |         |                     |  |   |          |   |  |   |        
|Total assets                                                     |  | $                        | 524,305 |                       | $ | 461,460 |                     |  | $ | (442,388 | ) |  | $ | 543,377
|                                                                 |  |                          |         |                       |   |         |                     |  |   |          |   |  |   |        
|Liabilities and Stockholders Equity                             |  |                          |         |                       |   |         |                     |  |   |          |   |  |   |        
|Current liabilities:                                             |  |                          |         |                       |   |         |                     |  |   |          |   |  |   |        
|Accounts payable, accrued expenses and other current liabilities |  | $                        | 15,518  |                       | $ | 1,198   |                     |  | $ | 4,808    |   |  | $ | 21,524 
|                                                                 |  |                          |         |                       |   |         |                     |  |   |          |   |  |   |        
|Total current liabilities                                        |  |                          | 15,518  |                       |   | 1,198   |                     |  |   | 4,808    |   |  |   | 21,524 
|Long-term debt                                                   |  |                          | 199,634 |                       |   |        |                     |  |   |         |   |  |   | 199,634
|Other long-term liabilities                                      |  |                          | 15,098  |                       |   | 13,066  |                     |  |   |         |   |  |   | 28,164 
|                                                                 |  |                          |         |                       |   |         |                     |  |   |          |   |  |   |        
|Total liabilities                                                |  |                          | 230,250 |                       |   | 14,264  |                     |  |   | 4,808    |   |  |   | 249,322
|Stockholders equity                                             |  |                          | 294,055 |                       |   | 447,196 |                     |  |   | (447,196 | ) |  |   | 294,055
|                                                                 |  |                          |         |                       |   |         |                     |  |   |          |   |  |   |        
|Total liabilities and stockholders equity                       |  | $                        | 524,305 |                       | $ | 461,460 |                     |  | $ | (442,388 | ) |  | $ | 543,377
|                                                                 |  |                          |         |                       |   |         |                     |  |   |          |   |  |   |        



12



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NEXTMEDIA OPERATING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(Dollars in thousands)



NextMedia Operating, Inc.

Supplemental Combining Balance Sheet

March 31, 2004



|                                                                 |  |                          |         |                       |   |         |                     |  |   |          |   |  |   |        
|---------------------------------------------------------------- |  | ------------------------ | ------- | --------------------- | - | ------- | ------------------- |  | - | -------- | - |  | - | -------
|                                                                 |  | NextMedia Operating,Inc. |         | GuarantorSubsidiaries |   |         | Eliminating Entries |  |   | Total   
|Assets                                                           |  |                          |         |                       |   |         |                     |  |   |          |   |  |   |        
|Current assets:                                                  |  |                          |         |                       |   |         |                     |  |   |          |   |  |   |        
|Cash and cash equivalents                                        |  | $                        | 1,562   |                       | $ | (571    | )                   |  | $ |         |   |  | $ | 991    
|Accounts receivable, net                                         |  |                          | 9,610   |                       |   | 4,259   |                     |  |   |         |   |  |   | 13,869 
|Prepaid and other current assets                                 |  |                          | 762     |                       |   | 4,380   |                     |  |   |         |   |  |   | 5,142  
|                                                                 |  |                          |         |                       |   |         |                     |  |   |          |   |  |   |        
|Total current assets                                             |  |                          | 11,934  |                       |   | 8,068   |                     |  |   |         |   |  |   | 20,002 
|Property and equipment, net                                      |  |                          | 26,599  |                       |   | 49,919  |                     |  |   |         |   |  |   | 76,518 
|Intangibles, net                                                 |  |                          | 30,246  |                       |   | 422,042 |                     |  |   |         |   |  |   | 452,288
|Other                                                            |  |                          | 4,748   |                       |   | 710     |                     |  |   | 5,070    |   |  |   | 10,528 
|Investment in subsidiaries                                       |  |                          | 467,122 |                       |   |        |                     |  |   | (467,122 | ) |  |   |       
|                                                                 |  |                          |         |                       |   |         |                     |  |   |          |   |  |   |        
|Total assets                                                     |  | $                        | 540,649 |                       | $ | 480,739 |                     |  | $ | (462,052 | ) |  | $ | 559,336
|                                                                 |  |                          |         |                       |   |         |                     |  |   |          |   |  |   |        
|Liabilities and Stockholders Equity                             |  |                          |         |                       |   |         |                     |  |   |          |   |  |   |        
|Current liabilities:                                             |  |                          |         |                       |   |         |                     |  |   |          |   |  |   |        
|Accounts payable, accrued expenses and other current liabilities |  | $                        | 10,430  |                       | $ | (144    | )                   |  | $ | 5,070    |   |  | $ | 15,356 
|                                                                 |  |                          |         |                       |   |         |                     |  |   |          |   |  |   |        
|Total current liabilities                                        |  |                          | 10,430  |                       |   | (144    | )                   |  |   | 5,070    |   |  |   | 15,356 
|Long-term debt                                                   |  |                          | 220,713 |                       |   |        |                     |  |   |         |   |  |   | 220,713
|Other long-term liabilities                                      |  |                          | 14,405  |                       |   | 13,761  |                     |  |   |         |   |  |   | 28,166 
|                                                                 |  |                          |         |                       |   |         |                     |  |   |          |   |  |   |        
|Total liabilities                                                |  |                          | 245,548 |                       |   | 13,617  |                     |  |   | 5,070    |   |  |   | 264,235
|Stockholders equity                                             |  |                          | 295,101 |                       |   | 467,122 |                     |  |   | (467,122 | ) |  |   | 295,101
|                                                                 |  |                          |         |                       |   |         |                     |  |   |          |   |  |   |        
|Total liabilities and stockholders equity                       |  | $                        | 540,649 |                       | $ | 480,739 |                     |  | $ | (462,052 | ) |  | $ | 559,336
|                                                                 |  |                          |         |                       |   |         |                     |  |   |          |   |  |   |        



13



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NEXTMEDIA OPERATING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(Dollars in thousands)



NextMedia Operating, Inc.

Supplemental Combining Statement of Operations

For the Three Months Ended
March 31, 2003



|                                                                                         |  |                           |        |   |                       |   |                     |  |   |        |   |  |   |        |  
|---------------------------------------------------------------------------------------- |  | ------------------------- | ------ | - | --------------------- | - | ------------------- |  | - | ------ | - |  | - | ------ | -
|                                                                                         |  | NextMedia Operating, Inc. |        |   | GuarantorSubsidiaries |   | Eliminating Entries |  |   | Total  |  
|Net revenue                                                                              |  | $                         | 15,905 |   |                       | $ | 7,651               |  | $ |       |   |  | $ | 23,556 |  
|Market level expenses, exclusive of depreciation and amortization shown separately below |  |                           | 10,223 |   |                       |   | 5,113               |  |   |       |   |  |   | 15,336 |  
|Corporate expenses                                                                       |  |                           | 1,461  |   |                       |   | 477                 |  |   |       |   |  |   | 1,938  |  
|Depreciation and amortization                                                            |  |                           | 1,547  |   |                       |   | 802                 |  |   |       |   |  |   | 2,349  |  
|                                                                                         |  |                           |        |   |                       |   |                     |  |   |        |   |  |   |        |  
|Operating income (loss)                                                                  |  |                           | 2,674  |   |                       |   | 1,259               |  |   |       |   |  |   | 3,933  |  
|Interest expense, net                                                                    |  |                           | 5,726  |   |                       |   |                    |  |   |       |   |  |   | 5,726  |  
|Other (income) loss                                                                      |  |                           | 480    |   |                       |   | 8                   |  |   |       |   |  |   | 488    |  
|Equity in income of subsidiaries                                                         |  |                           | (1,251 | ) |                       |   |                    |  |   | 1,251  |   |  |   |       |  
|                                                                                         |  |                           |        |   |                       |   |                     |  |   |        |   |  |   |        |  
|Income (loss) before provision for income taxes                                          |  |                           | (2,281 | ) |                       |   | 1,251               |  |   | (1,251 | ) |  |   | (2,281 | )
|Provision for income taxes                                                               |  |                           | 2,880  |   |                       |   |                    |  |   |       |   |  |   | 2,880  |  
|Net income (loss) from continuing operations                                             |  |                           | (5,161 | ) |                       |   | 1,251               |  |   | (1,251 | ) |  |   | (5,161 | )
|Income from discontinued operations                                                      |  |                           | (1     | ) |                       |   |                    |  |   |       |   |  |   | (1     | )
|                                                                                         |  |                           |        |   |                       |   |                     |  |   |        |   |  |   |        |  
|Net income (loss)                                                                        |  | $                         | (5,160 | ) |                       | $ | 1,251               |  | $ | (1,251 | ) |  | $ | (5,160 | )
|                                                                                         |  |                           |        |   |                       |   |                     |  |   |        |   |  |   |        |  



14



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NEXTMEDIA OPERATING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(Dollars in thousands)



NextMedia Operating, Inc.

Supplemental Combining Statement of Operations

For the Three Months Ended
March 31, 2004



|                                                                                         |  |                           |        |   |                       |   |        |                     |  |   |        |   |  |   |        |  
|---------------------------------------------------------------------------------------- |  | ------------------------- | ------ | - | --------------------- | - | ------ | ------------------- |  | - | ------ | - |  | - | ------ | -
|                                                                                         |  | NextMedia Operating, Inc. |        |   | GuarantorSubsidiaries |   |        | Eliminating Entries |  |   | Total  |  
|Net revenue                                                                              |  | $                         | 16,401 |   |                       | $ | 7,990  |                     |  | $ |       |   |  | $ | 24,391 |  
|Market level expenses, exclusive of depreciation and amortization shown separately below |  |                           | 10,826 |   |                       |   | 5,647  |                     |  |   |       |   |  |   | 16,473 |  
|Corporate expenses                                                                       |  |                           | 1,331  |   |                       |   | 598    |                     |  |   |       |   |  |   | 1,929  |  
|Depreciation and amortization                                                            |  |                           | 1,191  |   |                       |   | 2,196  |                     |  |   |       |   |  |   | 3,387  |  
|Local marketing agreement fees                                                           |  |                           | 30     |   |                       |   |       |                     |  |   |       |   |  |   | 30     |  
|                                                                                         |  |                           |        |   |                       |   |        |                     |  |   |        |   |  |   |        |  
|Operating income (loss)                                                                  |  |                           | 3,023  |   |                       |   | (451   | )                   |  |   |       |   |  |   | 2,572  |  
|Interest expense, net                                                                    |  |                           | 6,063  |   |                       |   |       |                     |  |   |       |   |  |   | 6,063  |  
|Other income                                                                             |  |                           | 197    |   |                       |   | (4,019 | )                   |  |   |       |   |  |   | (3,822 | )
|Equity in loss of subsidiaries                                                           |  |                           | (3,568 | ) |                       |   |       |                     |  |   | 3,568  |   |  |   |       |  
|                                                                                         |  |                           |        |   |                       |   |        |                     |  |   |        |   |  |   |        |  
|Income (loss) before provision for income taxes                                          |  |                           | 331    |   |                       |   | 3,568  |                     |  |   | (3,568 | ) |  |   | 331    |  
|(Benefit) provision for income taxes                                                     |  |                           | (695   | ) |                       |   |       |                     |  |   |       |   |  |   | (695   | )
|                                                                                         |  |                           |        |   |                       |   |        |                     |  |   |        |   |  |   |        |  
|Net income (loss)                                                                        |  | $                         | 1,026  |   |                       | $ | 3,568  |                     |  | $ | (3,568 | ) |  | $ | 1,026  |  
|                                                                                         |  |                           |        |   |                       |   |        |                     |  |   |        |   |  |   |        |  



15



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##### Table of Contents

NEXTMEDIA OPERATING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(Dollars in thousands)



NextMedia Operating, Inc.

Supplemental Combining Statement of Cash Flows

For the Three Months Ended
March 31, 2003



|                                                    |  |                           |         |   |                       |   |        |                     |  |       |   |  |   |         |  
|--------------------------------------------------- |  | ------------------------- | ------- | - | --------------------- | - | ------ | ------------------- |  | ----- | - |  | - | ------- | -
|                                                    |  | NextMedia Operating, Inc. |         |   | GuarantorSubsidiaries |   |        | Eliminating Entries |  | Total |  
|Net cash provided by (used in) operating activities |  | $                         | (7,624  | ) |                       | $ | 985    |                     |  | $     |  |  | $ | (6,639  | )
|                                                    |  |                           |         |   |                       |   |        |                     |  |       |   |  |   |         |  
|Cash Flows From Investing Activities                |  |                           |         |   |                       |   |        |                     |  |       |   |  |   |         |  
|Purchase of equipment                               |  |                           | (478    | ) |                       |   | (1,137 | )                   |  |       |  |  |   | (1,615  | )
|Payments for acquisitions, net of cash acquired     |  |                           | (66,456 | ) |                       |   |       |                     |  |       |  |  |   | (66,456 | )
|Proceeds from sale of broadcasting properties       |  |                           | 5,411   |   |                       |   |       |                     |  |       |  |  |   | 5,411   |  
|                                                    |  |                           |         |   |                       |   |        |                     |  |       |   |  |   |         |  
|Net cash used in investing activities               |  |                           | (61,523 | ) |                       |   | (1,137 | )                   |  |       |  |  |   | (62,660 | )
|                                                    |  |                           |         |   |                       |   |        |                     |  |       |   |  |   |         |  
|Cash Flows From Financing Activities                |  |                           |         |   |                       |   |        |                     |  |       |   |  |   |         |  
|Proceeds from revolving credit facilities           |  |                           | 34,000  |   |                       |   |       |                     |  |       |  |  |   | 34,000  |  
|Repayment of revolving credit facilities            |  |                           | (5,750  | ) |                       |   |       |                     |  |       |  |  |   | (5,750  | )
|Capital contributions from Parent                   |  |                           | 27,100  |   |                       |   |       |                     |  |       |  |  |   | 27,100  |  
|Payments of financing related costs                 |  |                           | (18     | ) |                       |   |       |                     |  |       |  |  |   | (18     | )
|Other                                               |  |                           | 158     |   |                       |   |       |                     |  |       |  |  |   | 158     |  
|                                                    |  |                           |         |   |                       |   |        |                     |  |       |   |  |   |         |  
|Net cash provided by financing activities           |  |                           | 55,490  |   |                       |   |       |                     |  |       |  |  |   | 55,490  |  
|                                                    |  |                           |         |   |                       |   |        |                     |  |       |   |  |   |         |  
|Net decrease in cash                                |  |                           | (13,658 | ) |                       |   | (152   | )                   |  |       |  |  |   | (13,809 | )
|Cash at beginning of period                         |  |                           | 14,952  |   |                       |   | (505   | )                   |  |       |  |  |   | 14,446  |  
|                                                    |  |                           |         |   |                       |   |        |                     |  |       |   |  |   |         |  
|Cash at end of period                               |  | $                         | 1,294   |   |                       | $ | (657   | )                   |  |       |  |  | $ | 637     |  
|                                                    |  |                           |         |   |                       |   |        |                     |  |       |   |  |   |         |  



16



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##### Table of Contents

NEXTMEDIA OPERATING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(Dollars in thousands)



NextMedia Operating, Inc.

Supplemental Combining Statement of Cash Flows

For the Three Months Ended
March 31, 2004



|                                                    |  |                           |         |   |                       |   |      |                    |  |       |   |  |   |         |  
|--------------------------------------------------- |  | ------------------------- | ------- | - | --------------------- | - | ---- | ------------------ |  | ----- | - |  | - | ------- | -
|                                                    |  | NextMedia Operating, Inc. |         |   | GuarantorSubsidiaries |   |      | EliminatingEntries |  | Total |  
|Net cash provided by (used in) operating activities |  | $                         | (4,055  | ) |                       | $ | 583  |                    |  | $     |  |  | $ | (3,472  | )
|                                                    |  |                           |         |   |                       |   |      |                    |  |       |   |  |   |         |  
|Cash Flows From Investing Activities                |  |                           |         |   |                       |   |      |                    |  |       |   |  |   |         |  
|Purchase of equipment                               |  |                           | (1,340  | ) |                       |   | (724 | )                  |  |       |  |  |   | (2,064  | )
|Payments for acquisitions, net of cash acquired     |  |                           | (16,526 | ) |                       |   |     |                    |  |       |  |  |   | (16,526 | )
|Proceeds from sale of assets                        |  |                           | 217     |   |                       |   |     |                    |  |       |  |  |   | 217     |  
|Proceeds from termination of interest rate swaps    |  |                           | 1,600   |   |                       |   |     |                    |  |       |  |  |   | 1,600   |  
|                                                    |  |                           |         |   |                       |   |      |                    |  |       |   |  |   |         |  
|                                                    |  |                           |         |  
|Net cash used in investing activities               |  |                           | (16,049 | ) |                       |   | (724 | )                  |  |       |  |  |   | (16,773 | )
|                                                    |  |                           |         |   |                       |   |      |                    |  |       |   |  |   |         |  
|Cash Flows From Financing Activities                |  |                           |         |   |                       |   |      |                    |  |       |   |  |   |         |  
|Proceeds from revolving credit facilities           |  |                           | 25,000  |   |                       |   |     |                    |  |       |  |  |   | 25,000  |  
|Repayment of revolving credit facilities            |  |                           | (4,000  | ) |                       |   |     |                    |  |       |  |  |   | (4,000  | )
|Payments of financing related costs                 |  |                           | (143    | ) |                       |   |     |                    |  |       |  |  |   | (143    | )
|Other                                               |  |                           | (328    | ) |                       |   |     |                    |  |       |  |  |   | (328    | )
|                                                    |  |                           |         |   |                       |   |      |                    |  |       |   |  |   |         |  
|Net cash provided by financing activities           |  |                           | 20,529  |   |                       |   |     |                    |  |       |  |  |   | 20,529  |  
|                                                    |  |                           |         |   |                       |   |      |                    |  |       |   |  |   |         |  
|Net decrease in cash                                |  |                           | 425     |   |                       |   | (141 | )                  |  |       |  |  |   | 284     |  
|Cash at beginning of period                         |  |                           | 1,137   |   |                       |   | (430 | )                  |  |       |  |  |   | 707     |  
|                                                    |  |                           |         |   |                       |   |      |                    |  |       |   |  |   |         |  
|Cash at end of period                               |  | $                         | 1,562   |   |                       | $ | (572 | )                  |  | $     |  |  | $ | 991     |  
|                                                    |  |                           |         |   |                       |   |      |                    |  |       |   |  |   |         |  



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##### Table of Contents

|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------



Overview



Our business consists of two out-of-home media divisions: radio broadcasting and outdoor advertising. Our radio broadcasting business consists of radio
stations for which we provide programming and sell on-air advertising time. Our outdoor advertising business includes traditional outdoor advertising displays, such as bulletins and posters, as well as alternative advertising displays that we
install in public locations, including restaurants, health clubs, retail stores and entertainment venues.



Radio Broadcasting Division



We derive our radio broadcast revenues primarily from the sale of advertising time to local and national advertisers. Our radio division operating expenses consist primarily of employee salaries and commissions, programming expenses,
advertising and promotional expenses, rental for studio premises, rental of transmission tower space and music license royalty fees. We seek to control these expenses by centralizing certain functions, such as finance, accounting, legal, human
resources and management information systems and the overall programming management function and by requiring adherence to strict cost controls at the station level.



Our radio advertising revenues generally reflect the advertising rates that our radio stations can charge and the number of
advertisements that we can broadcast without jeopardizing listener levels and resulting ratings. We typically base our advertising rates upon demand for a stations advertising inventory and its ability to attract audiences in targeted
demographic groups, as well as upon the number of stations competing in the market.



Most of our markets are mid-sized or suburban markets, which typically attract a larger percentage of advertising revenues from local, rather than national, advertising.



The radio broadcast industry typically experiences seasonal revenue
fluctuations due primarily to fluctuations in advertising expenditures by local and national advertisers, with revenues typically being the lowest in the first calendar quarter of each year. A radio stations operating results in any period
also may be affected by advertising and promotional expenditures that do not necessarily produce revenues in the period in which the expenditures are made.



Outdoor Advertising Division



We derive our outdoor advertising revenues primarily through contracts with local and national advertisers. Our outdoor division operating expenses
consist primarily of employee salaries and commissions, rental of sites for advertising displays, costs for installation of advertising frames, maintenance and shipping costs, printing of advertisements and production costs.



Our outdoor advertising revenues reflect advertising rates prevailing in the
relevant market, the location of our displays and our available inventory. We generally base our advertising rates on a particular displays exposure, or number of impressions delivered, relative to the demographics of the
particular market and its location within that market. Our outdoor advertising display contracts typically have terms ranging from one month to one year.



We estimate the number of impressions delivered by an outdoor display, for example, by estimating the number of individuals viewing the site during a
defined period. We apply a similar formula for determining advertising rates for our other display products. Because roadside bulletin displays are large and generate a higher number of impressions than other outdoor products, advertising rates for
bulletins are significantly higher than those for our other outdoor and alternative display products.



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##### Table of Contents

Factors Affecting Comparability



We commenced operations in late-1999 when our predecessor by merger completed its first acquisition. Our results of
operations from period to period are not comparable because of the impact of the various acquisitions and dispositions that we have completed, as well as our rapid build-up in personnel in connection with additional acquisitions. Moreover, our
expected growth through acquisitions is likely to continue to limit the comparability of our results of operations.



Results of Operations



The following table presents certain summary historical financial data in dollars and as a percentage of net revenues for the periods indicated on a
consolidated basis and for each of our out-of-home media divisions.



|                                                                                         |  |                              |        |   |            |       |   |      |   |        |            |  |       |  
|---------------------------------------------------------------------------------------- |  | ---------------------------- | ------ | - | ---------- | ----- | - | ---- | - | ------ | ---------- |  | ----- | -
|                                                                                         |  | Three months ended March 31, |       
|                                                                                         |  | 2003                         |        |   | % of sales |       |   | 2004 |   |        | % of sales | 
|                                                                                         |  | (dollars in thousands)       |       
|Consolidated Operating Data:                                                             |  |                              |        |   |            |       |   |      |   |        |            |  |       |  
|Net revenue                                                                              |  | $                            | 23,556 |   |            | 100.0 | % |      | $ | 24,391 |            |  | 100.0 | %
|Market level expenses, exclusive of depreciation and amortization shown separately below |  |                              | 15,336 |   |            | 65.1  |   |      |   | 16,473 |            |  | 67.5  |  
|Corporate expenses                                                                       |  |                              | 1,938  |   |            | 8.2   |   |      |   | 1,929  |            |  | 7.9   |  
|Depreciation and amortization                                                            |  |                              | 2,349  |   |            | 10.0  |   |      |   | 3,387  |            |  | 13.9  |  
|Local marketing agreement fees                                                           |  |                              |       |   |            |      |   |      |   | 30     |            |  | 0.1   |  
|                                                                                         |  |                              |        |   |            |       |   |      |   |        |            |  |       |  
|Operating income                                                                         |  |                              | 3,933  |   |            | 16.7  |   |      |   | 2,572  |            |  | 10.5  |  
|Interest expense, net                                                                    |  |                              | 5,726  |   |            |       |   |      |   | 6,063  |            |  |       |  
|Other (income) expense, net                                                              |  |                              | 488    |   |            |       |   |      |   | (3,822 | )          |  |       |  
|Income tax (benefit) expense                                                             |  |                              | 2,880  |   |            |       |   |      |   | (695   | )          |  |       |  
|Income from discontinued operations                                                      |  |                              | (1     | ) |            |       |   |      |   |       |            |  |       |  
|                                                                                         |  |                              |        |   |            |       |   |      |   |        |            |  |       |  
|Net income (loss)                                                                        |  | $                            | (5,160 | ) |            |       |   |      | $ | 1,026  |            |  |       |  
|                                                                                         |  |                              |        |   |            |       |   |      |   |        |            |  |       |  
|Radio Broadcasting Operating Data:                                                       |  |                              |        |   |            |       |   |      |   |        |            |  |       |  
|Net revenue                                                                              |  | $                            | 15,905 |   |            | 100.0 | % |      | $ | 16,401 |            |  | 100.0 | %
|Market level expenses, exclusive of depreciation and amortization shown separately below |  |                              | 10,223 |   |            | 64.3  |   |      |   | 10,826 |            |  | 66.0  |  
|Depreciation and amortization                                                            |  |                              | 1,547  |   |            | 6.6   |   |      |   | 1,191  |            |  | 7.3   |  
|Local marketing agreement fees                                                           |  |                              |        |   |            |      |   |      |   | 30     |            |  | 0.2   |  
|                                                                                         |  |                              |        |   |            |       |   |      |   |        |            |  |       |  
|Segment operating income                                                                 |  | $                            | 4,135  |   |            | 26.0  |   |      | $ | 4,354  |            |  | 26.5  |  
|                                                                                         |  |                              |        |   |            |       |   |      |   |        |            |  |       |  
|Outdoor Advertising Operating Data:                                                      |  |                              |        |   |            |       |   |      |   |        |            |  |       |  
|Net revenue                                                                              |  | $                            | 7,651  |   |            | 100.0 | % |      | $ | 7,990  |            |  | 100.0 | %
|Market level expenses, exclusive of depreciation and amortization shown separately below |  |                              | 5,113  |   |            | 66.8  |   |      |   | 5,647  |            |  | 70.7  |  
|Depreciation and amortization                                                            |  |                              | 802    |   |            | 10.5  |   |      |   | 2,196  |            |  | 27.5  |  
|                                                                                         |  |                              |        |   |            |       |   |      |   |        |            |  |       |  
|Segment operating income                                                                 |  | $                            | 1,736  |   |            | 22.7  |   |      | $ | 147    |            |  | 1.8   |  
|                                                                                         |  |                              |        |   |            |       |   |      |   |        |            |  |       |  



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##### Table of Contents

Comparison of Three Months Ended March 31, 2004 to Three Months Ended March 31, 2003



Net Revenues. Consolidated net revenues increased $835,000 to $24.4
million in 2004 from $23.6 million in 2003. Radio net revenues increased $496,000 to $16.4 million in 2004 from $15.9 million in 2003. Outdoor advertising net revenues increased $339,000 to $8.0 million in 2004 from $7.7 million in 2003. Net
revenues increased $2.0 million due to acquisitions offset by a decrease of $1.3 million due to dispositions. The remaining $200,000 of the increase in net revenue was attributable to organic growth in the assets we owned and operated at March 31,
2004.



Market Level Expenses. Consolidated market level
expenses increased 1.2 million to $16.5 million in 2004 from $15.3 million in 2003. Radio market level expenses increased $603,000 to $10.8 million in 2004 from $10.2 million in 2003. Outdoor advertising market level expenses increased $535,000 to
$5.6 million in 2004 from $5.1 million in 2003. These increases were attributable primarily to our completion of acquisitions in 2003 and 2004. As a percentage of net revenues, consolidated market level expenses increased from 65.1% to 67.5% because
we incurred costs to position developmental properties for future growth.



Corporate Expenses. Corporate expenses were flat at $1.9 million in 2004 compared to 2003. As a percentage of net revenues, corporate expenses declined from 8.2% to 7.9% because we maintained corporate costs
despite growth through acquisitions and operations.



Depreciation and Amortization. Consolidated depreciation and amortization increased $1.1 million to $3.4 million in 2004 from $2.3 million in 2003. Radio depreciation and amortization decreased $356,000 to $1.2 million in 2004 from
$1.5 million in 2003. Outdoor advertising depreciation and amortization increased $1.4 to $2.2 in 2004 from $800,000 in 2003. The increase in outdoor depreciation and amortization was attributable to acquisitions during 2003 and 2004 which resulted
in the addition of depreciable fixed assets and definite lived intangibles which are amortized over their useful lives.



Interest and Other Income (Expense) Net. Interest expense, net, increased to $6.1 million in 2004 from $5.7 million in 2003 due to indebtedness
incurred in connection with our acquisitions. Other income (expense), net increased to $3.8 million of income in 2004 primarily as a result of the $1.8 million gain recognized on the exchange of our outdoor advertising assets in Baltimore, Maryland
and New York, New York for assets in Myrtle Beach, South Carolina and a $3.0 million gain in connection with the settlement of our arbitration with PNE Media, LLC.



Income Tax. We do not expect that our deferred tax liabilities will reverse within our net operating loss
carry-forward period. Accordingly, we record additional deferred tax expense throughout the year to establish a valuation allowance against net operating loss carry-forwards generated by amortization of goodwill and indefinite lived intangibles that
is deductible for tax purposes, but is not amortized for book purposes. During the first quarter of 2004, the deferred tax expense was offset by a $3.8 million deferred tax benefit related to our Myrtle Beach asset exchange.



Net Loss. Consolidated net loss changed $6.2 million to $1.0 million
of net income in 2004 from a $5.2 million net loss in 2003 as a result of the factors described above.



Liquidity and Capital Resources



Our cash and cash equivalents balance at March 31, 2004 was approximately $991,000 compared to $707,000 at December 31, 2003.



Net cash used in operating activities was $3.5 million and $6.6 million for the three months ended March 31, 2004 and 2003, respectively. The decrease in
our net cash used in operating activities was due primarily to the additional operating income resulting from acquisitions completed during 2003 and 2004. First quarter cash from operations is generally a use due to the timing of our semi-annual
interest payments on our senior subordinated notes.



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##### Table of Contents

Net cash provided by financing activities was $20.5 million for the three months ended March 31, 2004
compared to cash provided by financing activities of $55.5 for the three months ended March 31, 2003. During the three months ended March 31, 2003, there were more acquisitions and a greater use of cash from operations; consequently, there was more
financing activity during that period. Net cash used in investing activities was $16.8 million and $62.7 million for the three months ended March 31, 2004 and 2003, respectively. These cash flows primarily reflect expenditures for acquisitions and
capital expenditures.



Sources and Uses of Funds



We use a significant portion of our capital resources to consummate
acquisitions. Through March 31, 2004, we funded our acquisitions from the following sources: equity capital contributions of approximately $354.0 million from our indirect parent, NextMedia Investors, funded by equity investments from several
private investment funds and our senior management, and aggregate borrowings, net of repayments, of approximately $220.7 million. We expect to obtain financing for future acquisitions through the incurrence of debt, additional equity contributions,
internally generated funds or a combination of the foregoing. There can be no assurance, however, that external financing will be available to us on terms we consider favorable or that cash flow from operations will be sufficient to fund our ongoing
liquidity requirements.



On April 9, 2004, the Company
terminated its existing senior credit facility and entered into a new $75.0 million senior credit facility maturing in five years. Our new senior credit facility contains customary restrictive covenants that, among other things, limit our ability to
incur additional indebtedness and liens in connection therewith, pay dividends and make capital expenditures above specified limits. Under the new senior credit facility, we must satisfy specified financial covenants, such as a maximum total
leverage ratio, a maximum senior leverage ratio and a minimum ratio of consolidated EBITDA to consolidated net cash interest expense. As of March 31, 2004, we were in compliance with all of these covenants. After taking into account these
restrictive covenants, as of March 31, 2004, we had approximately $52.0 million of borrowing capacity under our senior credit facility. As a result of the termination of our existing credit facility, we expect to record a charge in the second
quarter of 2004 to write off the associated deferred financing costs.



Capital expenditures in the three months ended March 31, 2004 increased slightly to $2.1 million from $1.6 million for the three months ended March 31, 2003. The following table sets forth our capital expenditures for the three months ended
March 31, 2004. Recurring capital expenditures are related to the maintenance of our existing broadcast facilities and outdoor structures. Non-recurring capital expenditures are related primarily to radio signal upgrades and facility consolidations.
Revenue producing capital expenditures are related to the construction of new outdoor structures which management believes will generate future revenue.



|                           |  |                                   |      
|-------------------------- |  | --------------------------------- | -----
|                           |  | Three Months Ended March 31, 2004
|                           |  | (in thousands)                   
|Recurring                  |  | $                                 | 733  
|Non-recurring              |  |                                   | 933  
|Revenue producing          |  |                                   | 398  
|                           |  |                                   |      
|Total capital expenditures |  | $                                 | 2,064
|                           |  |                                   |      



Our 10.75% senior
subordinated notes due 2011 require us to make semi-annual interest payments of approximately $10.8 million on January 1 and July 1 of each year. The indenture governing the notes contains certain restrictive covenants that, among other things,
limit our ability to incur additional indebtedness and pay dividends. As of March 31, 2004, we were in compliance with these covenants.



We believe that cash from operations, together with available borrowings under our senior credit facility will be sufficient to permit us to meet our
financial obligations and to fund our existing operations for at least the next twelve months.



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Recent Accounting Pronouncements



In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46 (FIN 46), Consolidation of
Variable Interest Entities. FIN 46 must be applied to interests in variable interest entities created before February 1, 2003 beginning in the first interim or annual period beginning after March 15, 2004. For variable interest entities
created after February 1, 2003, FIN 46 is effective for the first interim period after December 31, 2003. The adoption of FIN 46 has not had a material impact on our financial statements.



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK



From January 2002 through January 2004, we were party to various interest rate swap agreements with aggregate notional amounts ranging from $75.0 million to $100.0 million. Pursuant to these swaps, we paid a floating
rate of interest and received a fixed rate of interest on the notional amount. Pursuant to the swaps, we received net interest proceeds of $950,000 and $2.0 million in 2002 and 2003, respectively. We recognized quarterly income or expense to record
the swaps at fair value during the periods they were outstanding. In February 2004, we terminated the existing swaps, realized a $1.6 million gain, and received proceeds of $1.6 million. We are no longer party to any swaps.



Our remaining long-term debt has a fixed interest rate. Consequently, we do
not believe we are currently exposed to any material interest rate or market risk in connection with our remaining long-term debt.



ITEM 4. CONTROLS AND PROCEDURES



Based on their evaluation of our disclosure controls and procedures conducted as of the end of the period covered by this report on Form 10-Q, our principal executive officer and our principal financial officer have concluded that, as of
the date of their evaluation, our disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) promulgated under the Securities Exchange Act of 1934, as amended) are effective.



There have been no significant changes in our internal controls or in other
factors that could significantly affect the internal controls subsequent to the date of their evaluation in connection with the preparation of this quarterly report on Form 10-Q.



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PART II



ITEM 1. LEGAL PROCEEDINGS



In
March 2004, the arbitration panel on our previously disclosed dispute with PNE Media, LLC delivered an award that was favorable to us and, after certain set-offs, resulted in a net recovery of approximately $3.6 million. The arbitration award has
been fully implemented.



We currently are not a party to any
material lawsuit or proceeding.



ITEM 2. CHANGES IN SECURITIES



None.



ITEM 3. DEFAULTS UPON SENIOR SECURITIES



None.



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS



None.



ITEM 5. OTHER INFORMATION



None.



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.



(a) Exhibits



|            |   |  |                                                                                                                                                   
|----------- | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |   |  | Description                                                                                                                                       
|            |  
|31.1        | * |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                
|            |  
|31.2        | * |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                               
|            |  
|32.1        | * |  | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|            |  
|32.2        | * |  | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

---

|* | Filed herewith
|- | --------------



(b) Reports on Form 8-K



On March 11, 2004, we
filed a Current Report on Form 8-K announcing earnings results for the year ended December 31, 2003.



On May 11, 2004, we filed a Current Report on Form 8-K announcing earning results for the three months ended March 31, 2004.



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SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



|                   |  |     |  |                                                                                       
|------------------ |  | --- |  | --------------------------------------------------------------------------------------
|                   |  |     |  | NEXTMEDIA OPERATING, INC. (Registrant)                                                
|                   |  |    
|DATE: May 12, 2004 |  | By: |  | /s/ STEVEN DINETZ                                                                     
|                   |  |     |  | Steven Dinetz, Chief Executive Officer and President (Principal Executive Officer)    
|                   |  |    
|DATE: May 12, 2004 |  | By: |  | /s/ SEAN R. STOVER                                                                    
|                   |  |     |  | Sean R. Stover, Chief Financial Officer (Principal Financial Officer)                 
|                   |  |    
|DATE: May 12, 2004 |  | By: |  | /s/ SCHUYLER HANSEN                                                                   
|                   |  |     |  | Schuyler Hansen, Chief Accounting Officer and Treasurer (Principal Accounting Officer)



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Exhibits



|            |   |  |                                                                                                                                                   
|----------- | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |   |  | Description                                                                                                                                       
|            |  
|31.1        | * |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                
|            |  
|31.2        | * |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                               
|            |  
|32.1        | * |  | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|            |  
|32.2        | * |  | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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|* | Filed herewith
|- | --------------



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