<PAGE>


===============================================================================
                      UNITED STATES SECURITIES AND EXCHANGE
                                   COMMISSION
                             Washington, D.C. 20549
                             ----------------------
                                    FORM 10-K
(Mark One)
[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
      THE SECURITIES EXCHANGE ACT OF 1934
      For the fiscal year ended December 31, 2001
                                -----------------

                                       OR
[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934
      For the transition period from ___________ to ____________

                        Commission file number: 333-80523
                              SUSQUEHANNA MEDIA CO.
             (Exact name of registrant as specified in its charter)

                 DELAWARE                               23-2722964
     (State or other jurisdiction of       (I.R.S. Employer Identification No.)
     incorporation or organization)

    140 E. Market Street, York, PA                                     17401
    (Address of principal executive offices)                         (Zip Code)

             Registrant's telephone number, including area code: (717) 848-5500
             Securities Registered Pursuant To Section 12(b) of The Act: None
             Securities Registered Pursuant To Section 12(g) of The Act: None
                         -----------------------------

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for 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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K [X]

                         -----------------------------

     As of March 27, 2002, there were 1,100,000 shares of Common Stock
outstanding all of which was held by Susquehanna Pfaltzgraff Co., the Company's
parent.

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      NONE
===============================================================================

<PAGE>



                                      INDEX

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS..........................2
PART I........................................................................3
     Item 1.   Business.......................................................3
     Item 2.   Properties....................................................27
     Item 3.   Legal Proceedings.............................................27
     Item 4.   Submission of Matters to a Vote of Security Holders...........27
PART II......................................................................28
     Item 5.   Market for Registrant's Common Equity and Related Stockholder
               Matters.....................................................  28
     Item 6.   Selected Annual and Quarterly Financial Data..................29
     Item 7.   Management's Discussion and Analysis of Financial Condition
               and Results of Operations.................................... 32
     Item 7A.  Quantitative and Qualitative Disclosure About Market Risk.....40
     Item 8.   Financial Statements and Supplementary Data...................41
     Item 9.   Changes in and Disagreements With Accountants on Accounting
               and Financial Disclosure......................................62
PART III.....................................................................63
     Item 10.  Directors and Executive Officers of the Registrant............63
     Item 11.  Executive Compensation........................................64
     Item 12.  Security Ownership of Certain Beneficial Owners and
               Management....................................................65
     Item 13.  Certain Relationships and Related Transactions................67
PART  IV.....................................................................70
     Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form
               8-K...........................................................70

                                      1

<PAGE>



              CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     Some of the statements in this Form 10-K, as well as statements made by us
in filings with government regulatory bodies, including the Securities and
Exchange Commission, and in periodic press releases and other public comments
and communications, constitute "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. Certain, but not
necessarily all, of such forward-looking statements can be identified by the use
of forward-looking terminology, such as "believes," "expects," "may," "will,"
"should," "approximately," or "anticipates" or the negative thereof or other
variations thereof or comparable terminology, or by discussion of strategies,
each of which involves risks and uncertainties.

     All statements other than of historical facts included herein or therein,
including those regarding market trends, our financial position, business
strategy, projected plans and objectives of management for future operations,
are forward-looking statements. Such forward-looking statements involve known
and unknown risks, uncertainties and other factors that may cause our actual
results or performance to be materially different from any future results,
performance or achievements expressed or implied by the forward-looking
statements. Such factors include, but are not limited to:

          .   general economic and business conditions, both nationally and in
              our markets;

          .   terrorists' acts or adverse reactions to United States anti-
              terrorism activities;

          .   expectations and estimates concerning future financial
              performance;

          .   the possibly material impact and timing of compensation expenses
              related to changes in performance share values and the change in
              value of minority interests subject to required repurchase;

          .   acquisition opportunities and our ability to successfully
              integrate acquired businesses, properties or other assets and
              realize anticipated benefits of such acquisitions;

          .   financing plans and access to adequate capital on favorable
              terms;

          .   our ability to service our outstanding indebtedness and
              the impact such indebtedness may have on the way we operate our
              businesses;

          .   the impact of competition from other radio stations, media forms
              and communication service providers;

          .   the impact of existing and future regulations affecting our
              businesses, including radio licensing and ownership rules and
              cable television regulations;

          .   the possible non-renewal of cable franchises;

          .   increases in programming costs;

          .   the accuracy of anticipated trends in our businesses, including
              those discussed in "Management's Discussion and Analysis of
              Financial Condition and Results of Operations" herein;

          .   advances in technology and our ability to adapt to and capitalize
              on such advances;

          .   decreases in our customers' advertising and entertainment
              expenditures; and

          .   other factors over which we may have little or no control.

     All forward-looking statements attributable to us or to persons acting
on our behalf are expressly qualified in their entirety by this cautionary
statement. We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. In light of these risks and uncertainties, the
forward-looking events and circumstances discussed in this Form 10-K might not
transpire.

                                      2

<PAGE>

                                     PART I

ITEM 1.    BUSINESS

  OVERVIEW OF SUSQUEHANNA MEDIA

     Susquehanna Media was incorporated in 1993 as a cable and radio
broadcasting holding company subsidiary of Susquehanna Pfaltzgraff.
Susquehanna Pfaltzgraff was founded in 1941 by Louis J. Appell, Sr. to own and
operate WSBA-AM, our flagship radio station in York, Pennsylvania.  In 1954,
The Pfaltzgraff Co., a leading manufacturer of ceramic dinnerware, was merged
into Susquehanna Pfaltzgraff.  The Pfaltzgraff Co. had been owned by the family
of Mrs. Louis J. Appell, Sr.  We entered the cable television business in 1965
when we were awarded a franchise to operate in York, Pennsylvania.

     We are a diversified communications company with operations in radio
broadcasting and cable television. We are the second largest privately owned
radio broadcaster and the 11th largest radio broadcaster overall in the United
States based on 2000 revenues. As of December 31, 2001, we owned and operated
18 FM and 9 AM stations that serve four of the nation's ten largest radio
markets (San Francisco, Dallas, Houston and Atlanta), as well as four other
markets (Cincinnati, Indianapolis, Kansas City, and York, Pennsylvania). We
were also the 19th largest cable multiple system operator in the United States
based on subscribers with seven cable systems serving approximately 195,000
subscribers as of December 31, 2001.

     We also provide Internet access and enhanced services to residential
and business customers under the tradename "BlazeNet." Our services include (i)
Internet access via telephone dial-up service or cable modem, (ii) website
creation, hosting and maintenance, and (iii) local and wide area network
design, construction and operation. Custom designed web integrated solutions
and services for the media and entertainment, retail and associations and
not-for-profit markets are provided to commercial customers under the tradename
of "Susquehanna Technologies."

  RADIO BROADCASTING

     Our radio broadcasting business focuses on operating, acquiring and
developing radio stations in the 40 largest markets in the United States. We
have over 50 years of experience operating radio properties and currently own
stations serving the demographically attractive San Francisco, Dallas, Houston
and Atlanta markets, four of the top ten radio markets in the United States.
Our radio stations offer a broad range of programming formats, such as country,
top 40, adult contemporary, oldies, rock, and sports and talk radio, each
targeted to a specific demographic audience within a market. We believe that
our large market radio presence and variety of programming formats makes us
attractive to a diverse base of local and national advertisers and enables us
to capitalize on our ratings to generate higher market revenue share.

     Our business strategy for radio includes the following key elements
intended to establish leadership positions in the markets we serve and to
enhance our operating and financial performance:

          .   Focus on large markets. For the year ended December 31, 2001,
              we generated approximately 73% of our radio revenues from the
              ten largest markets in the United States and more than 96% from
              top 40 markets. We intend to continue focusing on large markets.

                                      3

<PAGE>

          .   Employ targeted programming and market research. We seek to
              maximize station operating performance through extensive market
              research, innovative programming, and distinctive marketing
              campaigns.

          .   Emphasize sales and marketing. We place great emphasis on
              being familiar with our listening audience and their lifestyle
              characteristics in order to match effectively our audience's
              demographics with the specific target audiences of our
              advertisers.

          .   Decentralize management. We decentralize much of our
              operations to regional and local levels. Each of our regional
              and local station groups is managed by a team of experienced
              broadcasters who understand the musical tastes, demographics and
              competitive opportunities of their particular market.

          .   Selectively pursue strategic acquisitions. In addition to
              seeking continued internal growth, we intend to pursue
              acquisition opportunities that would allow us to continue to
              compete more effectively for advertising revenues and to
              increase our growth rate of revenues and cash flow.

  THE RADIO BROADCASTING INDUSTRY

     The radio broadcasting industry is characterized by the following key
factors:

     Significant growth. The sale of advertising time to local and national
spot advertisers and to national network advertisers is the primary source of
revenues for radio stations. Local and national spot advertising is generally
used to target the market where a station is located or to cover regions larger
than the markets where a station is located. National network advertising is
included in national syndicated programming aired on radio stations. The growth
in total radio advertising revenue tends to be fairly stable, growing over the
last 25 years at an approximately 8.8% compound annual rate, compared to a
gross domestic product growth rate of approximately 7.1%.

     Broad market coverage. According to the Radio Advertising Bureau's
Radio Marketing Guide and Fact Book for Advertisers 2001-2002, each week radio
reaches approximately 96% of all Americans over 12 years of age. More than
one-half of all radio listening occurs outside the home, and three out of four
adults are reached by car radio each week. The average listener spends
approximately three hours and 2 minutes per day listening to radio. The highest
portion of radio listening occurs during the morning, particularly between the
time a listener wakes up and the time he reaches work. This "morning drive
time" period reaches more than 80% of people over 12 years of age, and as a
result, radio advertising sold during this period achieves premium advertising
rates.

     Low-cost advertising. The cost to reach a thousand listeners, or
impressions, is the benchmark for comparing different media with different
reach and frequency aspects. Radio is recognized by the advertising community
for its ability to generate a high frequency of commercial impressions cost
efficiently.  This is caused by its low cost per minute, or low cost per rating
point.  Stations are generally classified by their on-air format, such as
country, adult contemporary, oldies and news/talk. A station's format and style
of presentation enables it to efficiently target certain demographics. By
capturing a specific share of a market's radio listening audience, with
particular concentration in a targeted demographic, a station is able to market
its broadcasting time to enable advertisers to maximize their reach for each
dollar of advertising expenditures.

  RADIO PROPERTIES

                                      4

<PAGE>

          Our radio subsidiary, Susquehanna Radio Corp., operates radio
stations in San Francisco, Dallas, Houston and Atlanta, all of which are top
ten markets, as well as radio stations in Cincinnati, Indianapolis, Kansas
City, and York, Pennsylvania. The following table sets forth certain
information regarding our radio stations and their respective markets as of
December 31, 2001. The table excludes WABZ-FM in Albemarle, North Carolina and
KIKT-FM and KGVL-AM in Greenville, Texas, which are owned by us, but operated
by third parties under a time brokerage agreement. Market rank by revenue is
based upon market revenue size of the primary radio market served by the
station among all radio markets in the United States, as reported in Duncan's
2001 Radio Market Guide for the year 2000. Station rank and audience share are
based upon a station's share of its primary demographic target for the period
Monday through Sunday, 6 a.m. to 12 midnight by market, as reported by Arbitron
in Fall 2001. Combined market revenue share represents our share of the total
radio advertising revenue from the market, as reported in Duncan's 2001 Radio
Market Guide. Combined market revenue rank represents our rank in the market as
measured by the amount of its radio advertising revenue from the market, as
reported in Duncan's 2001 Radio Market Guide.

<TABLE>
<CAPTION>
                                                                                      Station
                                                                        Station       Audience
                        Market                                            Rank        Share In     Combined  Combined
                         Rank      Station                  Primary     In Primary     Primary      Market    Market
                          By      Programming    Year     Demographic   Demographic  Demographic   Revenue    Revenue
 Market And Stations    Revenue     Format     Acquired      Target       Target       Target       Share      Rank
 -------------------    -------     ------     --------      ------       ------       ------       -----      ----
<S>                         <C>  <C>           <C>          <C>             <C>        <C>          <C>          <C>
San Francisco, CA......     4                                                                       18.9%        3

  KFOG/KFFG-FM/(1)/....          Adult Album   1983/1995    A 25-44         1           4.2%
                                 Alternative
  KNBR-AM..............          Sports/Talk     1989       M 25-54         5           3.8%
  KSAN-FM..............          Classic Rock    1997       M 25-44         5           5.1%
  KTCT-AM..............          Sports/Talk     1997       M 25-54        19           1.3%

Dallas/Ft. Worth, TX...     5                                                                       13.1%        4

  KTCK/KTBK-AM/
    KTDK-FM/(1)/.......          Sports/Talk     1996       M 25-54         1           8.5%
  KPLX-FM..............          Country         1974       A 25-54         1           5.7%
  KLIF/KKLF-AM/(1)/              Talk          1980/1998    A 35-64        21           1.6%
  KKMR-FM (2)                    Adult Album   1996/1998    A 25-44        18           2.6%
                                 Alternative

Atlanta, GA............     6                                                                        6.4%        6

  WNNX-FM..............          Modern Rock     1974       M 18-34         1           8.5%
  WWWQ-FM/(3)/.........          Contemporary    1997       W 18-34         9             --
                                 Hit Radio

Houston, TX............     9                                                                        7.1%        6

  KRBE-FM..............          Contemporary    1986       W 18-34         3          10.1%
                                 Hit Radio
Cincinnati, OH.........     20                                                                      12.0%        3

  WRRM-FM..............          Adult           1972       W 25-54         1          11.5%
                                 Contemporary
  WMOJ-FM..............          Rhythmic        1997       W 35-64         4           9.4%
                                 Oldies

Indianapolis, IN.......     31                                                                      23.5%        3

  WFMS-FM..............          Country         1972       A 25-54         2          13.7%
  WGLD-FM..............          Oldies          1993       A 35-54         2           9.4%
  WGRL-FM/(4)/.........          Young           1997       A 25-54        18           1.3%

</TABLE>

                                       5

<PAGE>

<TABLE>
<CAPTION>
                                                                                      Station
                                                                        Station       Audience
                        Market                                            Rank        Share In     Combined  Combined
                         Rank      Station                  Primary     In Primary     Primary      Market    Market
                          By      Programming    Year     Demographic   Demographic  Demographic   Revenue    Revenue
 Market And Stations    Revenue     Format     Acquired      Target       Target       Target       Share      Rank
 -------------------    -------     ------     --------      ------       ------       ------       -----      ----
<S>                         <C>  <C>           <C>          <C>             <C>        <C>          <C>          <C>
                                 Country
Kansas City, KS........     29                                                                      16.0%        3

  KCMO-FM..............          Oldies          2000       A 35-54         1           6.4%
  KCFX-FM..............          Classic Rock    2000       A 25-54         2           6.0%
  KCMO-AM..............          Talk            2000       M 35-64         13          3.6%
  KFME-FM/(5)/.........          Hot Adult       2001       A 25-49         6           4.9%
                                 Contemporary
York, PA...............     99                                                                      39.1%        1

  WARM-FM..............          Adult           1962       W 25-54         1          12.5%
                                 Contemporary
  WSBA-AM..............          Talk            1942       A 35-64         5           3.1%
</TABLE>

----------------------

/(1)/  These stations are simulcast and have been combined for market rank and
       ratings.

/(2)/  KKMR-FM changed its format to classic rock on January 3, 2002. The
       station changed its call letters to KDBN-FM effective January 28, 2002.

/(3)/  In November 2000, the Federal Communication Commission (FCC) granted our
       petition to move WHMA-FM from Anniston, Alabama to College Park, Georgia.
       Station call letters were changed from WHMA-FM to WWWQ-FM when it debuted
       in the Atlanta market on January 22, 2001.

/(4)/  WGRL-FM changed its format from Young Country to Eighties' Hits on
       December 26, 2001. Audience ratings in the table are a result of the
       station's format prior to this change.

/(5)/  KFME-FM signed on June 18, 2001. Our Kansas City sales staff is selling
       the station's commercial airtime under a joint sales agreement with
       Jesscom, Inc., which is programming and operating the station.

   MARKET OVERVIEWS

     We own and operate radio stations in the following markets:

     San Francisco. We have operated in the San Francisco market since 1983, and
currently own three FM and two AM stations in the area. We own KNBR-AM, one of
the original 50,000 watt, clear channel AM licenses, which provides clear
reception throughout northern California and as far inland as eastern Nevada.
The station is currently programmed with a sports talk format and has the
broadcast rights to the San Francisco Giants and the Golden State Warriors.
Three of our stations, KNBR-AM, KFOG/KFFG-FM and KSAN-FM, are each ranked among
the top 5 stations in their respective target demographics.

     Dallas/Ft. Worth. We have been operating in the Dallas/Ft. Worth market
since 1974, and currently own four FM and five AM stations in the area. Three of
our stations, KTCK-AM, KTBK-AM, and KTDK-FM, which are programmed with a sports
talk format and are simulcast, are each ranked 1st in the market among males 25
to 54. KPLX, which is programmed with a "Texas" country format, is rated 1st in
the market among persons 12 and older. KIKT-FM and KGVL-AM in Greenville, Texas,
are owned by us, but operated by third parties under a time brokerage agreement.

                                       6

<PAGE>

     Houston. We entered the Houston market in 1986 when we acquired KRBE-FM,
which serves the Houston market with a Top 40 radio format. KRBE-FM has been a
dominant radio station in Houston since the 1970s and is ranked 3rd among women
18 to 34. This station attracts over 700,000 listeners each week.

     Atlanta. Atlanta represents one of the most desirable radio broadcast
markets in the country, with only 20 FM and 30 total radio stations serving the
market. We currently own two FM stations in the market. We entered the Atlanta
market in 1974 with the acquisition of WNNX-FM, which is programmed with modern
rock and ranked 1st among men 18 to 34. In November 2000, the FCC granted our
petition to move WHMA-FM, a sports-talk format station in Anniston, Alabama, to
the Atlanta market. Station call letters were changed to WWWQ-FM when it
debuted in the Atlanta market on January 22, 2001 with a Top 40 format.

     Cincinnati. We have operated in Cincinnati since 1972, and currently
own two FM stations in the market. WRRM-FM, which is programmed with adult
contemporary, is the sole adult contemporary station in the market and is ranked
1st among women 25 to 54. WMOJ-FM, which is programmed as a rhythmic oldies
station, is a strong contender, placing 4th among women 35 to 64.

     Indianapolis. We have operated in Indianapolis since 1972, and currently
own three FM stations in the market. WFMS-FM, which is programmed with
contemporary country, is the second ranked station among women 25 to 54 and has
ranked either 1st or 2nd in the market since 1992. Oldies WGLD, with its 50
kilowatt transmitting power, effectively targets adults 35-54, ranking 2nd in
the market. Since switching its format from Young Country to Eighties' Hits on
December 26, 2001, WGRL-FM has seen improvement in audience ratings and renewed
interest from the advertising community.

     Kansas City. In July 2000, we acquired three radio stations serving the
Kansas City market. Oldies KCMO-FM dominates the market as the number one radio
station in its target adult 35-54 demographic. KCFX-FM ranks 2nd among adults
25 to 54 and is the flagship station for the Kansas City Chiefs. KCMO-AM is one
of the oldest continuously operated radio stations in the United States, on the
air since 1936. In 2001, the Company agreed to sell KFME-FM's commercial
airtime under a joint sales agreement with Jesscom, Inc., which is programming
and operating the station. The Company holds a 40% interest in joint venture
with Jesscom, Inc. to operate KFME-FM.

     York. We have operated in York since 1942, and currently own two stations
in the market. WARM-FM, which is programmed with an adult contemporary format,
ranking 1st among women 25 to 54. WSBA-AM, which is programmed talk and news,
is the AM ratings leader in York.

   ADVERTISING

     Most of our radio revenues are generated from the sale of local, regional
and national advertising for broadcast on our radio stations. In 2001,
approximately 81% of our radio revenues were generated from the sale of local
and regional advertising, compared to 78% in 2000 and 71% in 1999. We generate
additional radio revenues by marketing our proprietary database of listeners,
selling print advertising and sponsoring local events. These important and
growing sources of revenue supplement our traditional advertising revenues
without increasing on-air commercial time.

     Each radio station's local sales staff solicits advertising either directly
from local advertisers or indirectly through advertising agencies. We employ
personnel in each of our markets to produce commercials for advertisers.
National advertising sales are made by a firm specializing in such sales in
exchange for a commission from us based on our gross revenue, net of agency
commission from the

                                       7

<PAGE>

advertising sold. Regional advertising sales, which we define as sales in
regions surrounding our markets to companies that advertise in our markets, are
generally made by our local sales staff.

     We estimate the optimum number of advertisements available for sale by a
station for a particular time period. The number of advertisements that can be
broadcast without jeopardizing listening levels (and resulting ratings) is
limited in part by the programming format of a particular station. We seek to
maximize revenue by managing on-air inventory of advertising time and adjusting
prices to local market conditions and to our ability, through our marketing
efforts, to provide advertisers with an effective means of reaching a targeted
demographic group. Each of our stations has a general target level of on-air
inventory that it makes available for advertising. This target level may vary at
different times of the day but tends to remain stable over time. Much of our
selling activity is based on demand for our on-air inventory, and in general, we
respond to this demand by varying prices rather than varying our target
inventory level for a particular station. As a result, most changes in revenue
are explained by demand-driven pricing changes rather than changes in available
inventory.

     We believe that radio is one of the most efficient and cost-effective means
for advertisers to reach specific demographic groups. Advertising rates charged
by radio stations are based primarily on:

              .   a station's share of audiences in the demographic groups
                  targeted by advertisers;

              .   the number of stations in the market competing for the same
                  demographic groups;

              .   the supply of and demand for radio advertising time; and

              .   certain qualitative factors.

     Rates are generally highest during morning and afternoon commuting hours. A
station's listenership is reflected in ratings surveys that estimate the number
of listeners tuned to the station and the time they spend listening. Each
station's ratings are used by its advertisers and advertising representatives in
connection with advertising sales and are used by us to chart audience growth,
set advertising rates and adjust programming. The radio broadcast industry's and
our principal rating agency is Arbitron, which publishes periodic ratings
surveys for significant domestic radio markets.

   COMPETITION

     The radio broadcasting industry is very competitive. The success of each of
our stations depends largely upon its audience ratings and its share of the
overall advertising revenues within its market. Our audience ratings and
advertising revenue are subject to change, and any adverse change in a
particular market affecting advertising expenditures or an adverse change in the
relative market positions of the stations located in a particular market could
have a material adverse effect on the revenues of our radio stations located in
that market. There can be no assurance that any one or all of our radio stations
will be able to maintain or increase current audience ratings or advertising
revenue market share.

     Our stations compete directly for listeners and advertising revenues with
other radio stations within their respective markets. Radio stations compete for
listeners primarily on the basis of program content that appeals to a particular
demographic group. By building a strong listener base comprised of specific
demographic groups in each of its markets, we are able to attract advertisers
seeking to reach those listeners. Radio stations periodically change their
formats to compete directly with other stations for listeners and advertisers.
Another station's decision to convert to a format similar to that of one of our
radio stations in the same geographic area or launch an aggressive promotional
campaign may result in

                                       8

<PAGE>

lower ratings and advertising revenue, increased promotion and other expenses
and, accordingly, lower our broadcast cash flow.

     Factors that are material to a radio station's competitive position include
management experience, the station's local audience rank in its market,
transmitter power, assigned frequency, audience characteristics, local program
acceptance and the number and characteristics of other radio stations in the
market area. We attempt to improve our competitive position in each of our
markets by extensively researching our stations' programming, by implementing
advertising campaigns aimed at the demographic groups for which our stations
program and by managing our sales efforts to attract a larger share of
advertising dollars for each individual station. In selling advertising,
however, we compete with many organizations that have substantially greater
financial and other resources.

     Recent changes in the Communications Act and the FCC's rules and policies
permit increased ownership and operation of multiple local radio stations. As a
result, organizations are acquiring and operating larger blocks of radio
stations. We compete with these organizations, as well as other radio station
groups, to purchase additional stations. Some of these groups are owned or
operated by companies that have substantially greater financial and other
resources.

     Although the radio broadcasting industry is highly competitive, and
competition is enhanced to some extent by changes in existing radio station
formats and upgrades of power, certain regulatory limitations on market entry
continue to exist. The operation of a radio broadcast station requires a license
from the FCC, and the number of radio stations that an entity can operate in a
given market is limited by the availability of FM and AM radio frequencies
allotted or assigned by the FCC to communities in that market, as well as by the
FCC's multiple ownership rules regulating the number of stations that may be
owned and controlled by a single entity. See "Federal Regulation of Radio
Broadcasting."

     In addition to other radio stations, we compete for advertising revenues
with other media, including newspapers, broadcast television, cable television,
magazines, direct mail, coupons and outdoor advertising. The radio broadcasting
industry also competes with new media technologies, such as the delivery of
audio programming by cable television systems, over the Internet, and by
satellite digital audio radio services. Digital audio radio services may deliver
by satellite to nationwide and regional audiences, multi-channel, multi-format,
digital radio services with sound quality equivalent to compact discs. The
delivery of information through the presently unregulated Internet also could
create a new form of competition. Despite the introduction of new technologies
for the delivery of entertainment and information, including television
broadcasting, cable television, audio tapes and compact discs, the radio
broadcasting industry historically has grown. A growing population and greater
availability of radios, particularly car and portable radios, have contributed
to this growth. There can be no assurance, however, that the introduction of new
media technology will not have an adverse effect on the radio broadcasting
industry.

   CABLE TELEVISION

     We entered the cable television industry in 1965, when we were awarded the
franchise to operate in York, Pennsylvania. Our cable systems currently serve
approximately 195,000 subscribers as of December 31, 2001 through 11 signal
receiving and transmitting facilities (headends) in Pennsylvania, Mississippi,
Maine, Illinois and Indiana. We own, develop and operate geographically
clustered cable television systems in small and medium-sized communities. We
believe that these systems are less susceptible to competition and subscriber
turnover than urban cable television systems and result in more predictable
revenue and cash flow.

                                       9

<PAGE>

     Our business strategy for cable television includes the following key
elements intended to enhance our operating and financial performance:

              .   Build strategic clusters. To maximize operating
                  efficiencies, we have pursued the development and
                  acquisition of cable television systems in communities
                  that are within close proximity to our existing systems.

              .   Focus on customer satisfaction. To maximize customer
                  satisfaction, we strive to provide reliable, high-quality
                  service offerings, superior customer service and
                  attractive programming choices at reasonable rates.

              .   Continue upgrade of technical facilities. We seek to
                  provide reliable, high-quality cable television services
                  to our customers. To achieve this goal we are continually
                  expanding and upgrading our cable systems to increase
                  channel capacity, enhance signal quality, improve
                  technical reliability and reduce the number of headends in
                  existing systems.

              .   Develop new sources of revenues. The investment we have
                  made in our cable systems has enabled us to generate
                  additional revenue by providing expanded tiers of basic
                  programming, digital cable services, premium services, and
                  additional pay-per-view services. In addition, we are
                  expanding new services, such as Internet access, high-
                  speed data, video-on-demand and other interactive services.

     THE CABLE TELEVISION INDUSTRY

     A cable customer generally pays an initial installation charge and fixed
monthly fees for cable television services and for other services (such as the
rental of converters and remote control devices). Such monthly service fees
constitute the primary source of revenue for cable television operators. In
addition to these services, cable television operators generate revenue from
additional fees paid by customers for pay-per-view programming of movies and
special events and from the sale of available advertising spots on
advertiser-supported programming. Additionally, cable television operators
frequently offer their customers home shopping services, from which the systems
receive a share of revenue from sales of products in the systems' service areas.
Cable television operators are also generating increasing revenues from the sale
of enhanced data services. Cable television revenues tend to be stable, growing
over the last 15 years at a 10.8% compound annual rate, compared to a gross
domestic product growth rate of 6.1%. Cable television did not experience a
single down year in revenue during this period of time. Cable television systems
offer customers various levels (or "tiers") of cable television services
consisting of:

              .   a limited basic service, comprised of off-air broadcast
                  television signals, local origination programming produced
                  by the cable system and/or public access groups, and a
                  limited number of satellite services such as home shopping
                  channels and C-Span; and

              .   an expanded basic service, comprised of satellite
                  delivered, non-broadcast channels such as: Cable News
                  Network (CNN), Entertainment and Sports Programming
                  Network (ESPN) and Lifetime Network (LIFE).

     For an extra monthly charge, cable television systems also offer premium
television services. These services (such as Home Box Office, Cinemax and
Showtime) are satellite delivered channels offering feature films, live sporting
events, concerts and other special entertainment features presented without
commercial interruption.

                                       10

<PAGE>

     Digital cable, offers enhanced television viewing with interactive guides,
compact disc quality music channels, theater sound quality, and multiple
services of premium and pay-per-view channels. These additional product
offerings are made possible by use of bandwidth-saving digital compression.

     For an additional monthly charge, our basic subscribers can also get cable
modem Internet access, which offers broadband access to the Internet at speeds
exceeding standard dial-up access. Services offered include residential and
commercial Internet access, e-mail and commercial point-to-point circuits. Cable
modem revenues from Cable subscribers are included in the Cable segment.

     A cable television system receives television, radio and data signals that
are transmitted to the system's headend by means of off-air antennae, microwave
relay systems and satellite earth stations. These signals are then modulated,
amplified and distributed, primarily through coaxial cable, and in some
instances fiber optic cable, to customers who pay a fee for this service. Cable
television systems may also originate their own television programming and other
information services for distribution through the system. Cable television
systems generally are constructed and operated pursuant to non-exclusive
franchises or similar licenses granted by local governmental authorities for a
specified term of years, generally for extended periods of up to 15 years.

   CABLE PROPERTIES

     The following table sets forth certain information regarding our cable
systems as of December 31, 2001. Homes passed represents the maximum number of
homes that could become subscribers in the particular cable system. Basic
penetration represents basic subscribers as a percentage of homes passed.
Digital penetration represents digital terminals as a percentage of basic
subscribers. Premium penetration represents premium units as a percentage of
basic subscribers. Premium units represents the aggregate number of individual
premium services (e.g., HBO, Cinemax, Showtime) for which customers have
subscribed. Cable modem penetration represents cable modem subscribers as a
percentage of homes passed. Average monthly revenue per basic subscriber
(television and cable modem) represents revenues divided by 12 divided by the
weighted average number of subscribers for the year.

<TABLE>
<CAPTION>
                                                                                                              Average
                                                                                                              Monthly
                                                                                                 Cable        Revenue
                            Homes         Basic         Basic       Digital       Premium        Modem       Per Basic
   Cable System             Passed     Subscribers   Penetration  Penetration   Penetration   Penetration   Subscriber
   ------------             ------     -----------   -----------  -----------   -----------   -----------   ----------
<S>                         <C>           <C>            <C>           <C>          <C>            <C>        <C>
Pennsylvania
   York..............       120,451        90,746        75.3%         17.3%        40.0%          5.8%       $45.27
   Williamsport......        53,600        41,022        76.5          13.7         28.3           6.1         45.51
Mississippi
   Rankin............        37,434        23,150        61.8          22.8         48.1           NA          45.07
Maine
   Brunswick.........        29,902        20,466        68.4          12.8         27.3          17.2         50.07
Illinois/Indiana
   Midwest...........        27,524        19,506        70.9          14.7         35.9           0.6         40.24
                             ------        ------        ----          ----         ----           ---         -----

Totals                      268,911       194,890        72.5%         16.5%        36.8%          5.8%       $45.28
</TABLE>

   CABLE SYSTEMS

     The following table sets forth certain selected technical, operating and
financial data for each of our cable systems as of and for the year ended
December 31, 2001. Density represents homes passed divided by miles of plant.
Plant bandwidth represents percentage of plant mileage within a system served

                                       11

<PAGE>

by the indicated plant bandwidth. Increased bandwidth offers greater capacity
for signals and resultant additional revenues. Basic penetration represents
basic subscribers as a percentage of homes passed. Digital terminals represents
the number of active terminals for which customers have subscribed to digital
services. Digital penetration represents digital terminals as a percentage of
basic subscribers. Premium units represents the aggregate number of individual
premium services (e.g., HBO, Cinemax, Showtime) for which customers have
subscribed. Premium penetration represents premium units as a percentage of
basic subscribers. Cable modem penetration represents cable modem subscribers
as a percentage of homes passed. Average monthly revenue per basic subscriber
represents revenues divided by 12 divided by the weighted average number of
subscribers for the year.

<TABLE>
<CAPTION>

                                       YORK         WILLIAMSPORT    RANKIN     BRUNSWICK      MIDWEST       TOTAL
                                       ----         ------------    ------     ---------      -------       -----
<S>                                    <C>             <C>          <C>          <C>           <C>         <C>
TECHNICAL DATA:
Miles of Plant.....................      1,754            1,022          730          779           553        4,818
Density............................         69               52           51           42            50           56
Head-ends..........................          1                2            2            2             4           11
Planned 2002 Headend eliminations            0                1            0            1             0            2
Plant Bandwidth:
      330-450MHz...................       0.0%            15.0%        69.0%        16.0%         17.0%        18.0%
      550 MHz......................       0.0%             0.0%        25.0%        33.0%         83.0%        18.0%
      750 MHz......................     100.0%            85.0%         6.0%        51.0%          0.0%        64.0%
OPERATING DATA:
Homes passed.......................    120,451           53,600       37,434       29,902        27,524      268,911

Basic subscribers..................     90,746           41,022       23,150       20,466        19,506      194,890
Basic penetration..................      75.3%            76.5%        61.8%        68.4%         70.9%        72.5%
Digital terminals..................     15,688            5,609        5,285        2,625         2,868       32,075

Digital penetration................      17.3%            13.7%        22.8%        12.8%         14.7%        16.5%
Premium units......................     36,278           11,607       11,145        5,592         7,005       71,627
Premium penetration................      40.0%            28.3%        48.1%        27.3%         35.9%        36.8%
Cable modems.......................      6,966            3,271           NA        5,137           165       15,539
Cable modem penetration............       5.8%             6.1%           NA        17.2%          0.6%         5.8%
FINANCIAL DATA:
Revenue (in thousands).............   $ 49,397         $ 21,026     $ 12,509     $ 12,217      $  9,609    $ 104,758
Average monthly revenue per
   basic subscriber................   $  45.27         $  45.51     $  45.07     $  50.07      $  40.24    $   45.28
</TABLE>

     York. The York, Pennsylvania cable system is our largest, serving
subscribers in 51 municipalities and accounting for 47% of our total subscribers
and 47% of our 2001 Cable revenues. A hybrid fiber/coaxial rebuild of the York
system began in 1995 and is now completed. The entire cable plant now has a
capacity of 750 MHz. The York system is two-way capable, which allows cable
modem service and other interactive services. Cable modem service has been
provided to customers since 1997, with approximately 6% penetration to homes
passed as of December 31, 2001. During the year, York transitioned the cable
modem product from our BlazeNet ISP to @Home. When @Home declared bankruptcy and
discontinued their service to York, cable modem customers were transitioned to
an in-house Internet platform with backbone connectivity supplied by AT&T. (This
transition also similarly impacted our Williamsport cable system.) We believe
the transition slowed cable modem subscriber growth in December 2001, but not on
a long-term basis. Digital services were launched in October 1999, with
penetration exceeding 17% of basic customers as of December 31, 2001. The York
system was one of the first systems in the country to launch interactive
shopping and games on digital terminals.

     Williamsport. The Williamsport system accounts for 21% of our total
subscribers and 20% of our 2001 Cable revenues. During the third quarter we
acquired approximately 3,800 subscribers from River Valley Communications. The
subscribers are being managed by our Williamsport system and will be technically
merged to the existing system after a rebuild that is expected to be complete
during 2002.

                                       12

<PAGE>

With the exception of the River Valley acquisition, the system has been
completely rebuilt to 750 MHz and is two-way capable. Cable modem services are
presently offered to residential and commercial customers with penetration
exceeding 6% of homes passed as of December 31, 2001. Williamsport system cable
modem subscribers also experienced a transition from @Home to an in-house
Internet platform similar to York. Digital services were launched in June 2000
with penetration of nearly 14% of basic customers as of December 31, 2001.

     Rankin. The Rankin County, Mississippi cable system encompasses three small
towns, many upscale suburban developments and the southeastern shore of an
attractive reservoir recreation area just east of the state capital of Jackson.
The area continues to experience housing growth. Over the past five years, the
average annual compound internal growth rate of new subscribers to the Rankin
system has been 3.3%, and the system accounts for 12% of our total subscribers
and 12% of our 2001 Cable revenues. Approximately 31% of the Rankin system
currently has a bandwidth of 550 MHz or greater. The system launched digital
technology in February 2000, and digital penetration is approximately 23% of
basic customers as of December 31, 2001. Rankin does not offer cable modem
service.

     Brunswick. The Brunswick cable system serves the communities of Brunswick,
Freeport, Bath, Harpswell and Woolwich, Maine and accounts for 11% of our total
subscribers and 12% of our 2001 Cable revenues. Approximately 84% of the
Brunswick system has been rebuilt to a minimum of 550 MHz. The primary headend
in Brunswick serves approximately 98% of the subscribers. The remaining small
headend acquired in December 1998 will be eliminated over the next 12 months and
linked to the Brunswick headend. The Brunswick system is two-way capable. The
system has been providing cable modem service since 1996 to commercial customers
and since 1998 to residential customers. Cable modem penetration exceeds 15% of
homes passed as of December 31, 2001. Digital services were launched in August
2000, and achieved nearly 13% penetration to basic customers at December 31,
2001.

     Midwest. The Midwest cable group serves Shelbyville, Indiana and Olney and
DuQuoin, Illinois. Shelbyville offers attractive demographics and growth
opportunities as a result of its proximity to the growing Indianapolis market.
The Midwest group accounts for 9% of our total subscribers and approximately 9%
of our 2001 Cable revenues. The system currently has bandwidth ranging from 450
MHz to 550 MHz, with 83% at 550 MHz. Digital services were launched in 2000, in
both Indiana and Illinois with penetration of nearly 15% of basic customers as
of December 31, 2001. On January 15, 2002, we entered into an asset purchase
agreement with Fairbanks Communications, Inc. to acquire the cable system
serving Lawrenceburg, Indiana. The cable system serves approximately 11,000
basic subscribers on one headend. We expect a second quarter 2002 closing.

   PROGRAMMING

     We have various contracts to obtain basic, satellite and premium
programming for our cable systems from the National Cable Television
Cooperative, Comcast Corporation and in some cases directly from program
suppliers, including, in limited circumstances, some broadcast stations, with
compensation generally based on a fixed fee per customer or a percentage of the
gross receipts for the particular service. Some program suppliers provide volume
discount pricing structures and some offer marketing support.

     Programming costs are expected to increase in the ordinary course of our
business as a result of increases in the number of basic subscribers, increased
costs to purchase cable programming, expansion of the number of channels
provided to customers and contractual rate increases from programming suppliers.
In the event that we acquire Comcast's ownership interests in Susquehanna Cable,
our programming costs will increase faster than they would otherwise. See Part
III, Item 13 of this annual report for additional details regarding our
relationship with Comcast.

                                       13

<PAGE>

   MARKETING, CUSTOMER SERVICE AND COMMUNITY RELATIONS

     Our cable marketing strategy is designed to increase total revenues and
revenues per subscriber by:

              .    aggressively promoting and marketing our current services;

              .    expanding our product offerings; and

              .    providing superior customer service.

     We believe that this strategy will enable us to acquire new customers and
maintain a positive relationship with existing customers to retain their
business and sell them additional products. Implementation strategies include:

              .    targeted marketing campaigns using door-to-door sales, direct
                   mail and telemarketing;

              .    price promotions, such as installation specials, to attract
                   new subscribers and discounts for premium packages for
                   multi-pay customers;

              .    introduction of multiplexed premium channels to improve their
                   price/value perception; and

              .    advertisement and sponsorship of community-based events to
                   enhance our local presence.

     We believe that providing superior customer service is a key element of our
long-term success because the quality of customer service affects our ability to
retain customers. We believe that it also contributes to subscriber growth and
positions us to sell additional products and services. To enhance customer
service, we have initiated programs to improve the skills of our employees. In
2000, we introduced an initiative for customer service employees entitled Sales
Training for Excellence in Leadership, Learning and Retention (STELLAR, then
STELLAR+ in 2001), which includes extensive training, performance follow-up and
standardized customer service and sales skills for all customer service
representatives.

         Recognizing that positive franchise and public relations are crucial to
our overall success, we emphasize maintaining good working relationships with
municipal officials in our franchise areas and with the communities that we
serve. Our local management meets regularly with municipal officials to keep
them informed of both our activities and trends in the industry. As a result of
these working relationships, we receive valuable feedback on our standing with
the municipalities and the satisfaction of our customers. Local management is
also responsible for maintaining a high level of visibility for us, which is
accomplished through active involvement in various community and nonprofit
organizations.

     TECHNOLOGY

         As part of our commitment to customer service, we seek to provide
reliable, high-quality cable television service. As such, our primary objective
with respect to Susquehanna Cable's capital expenditures is to maintain, expand
and upgrade its cable plant to improve and expand its cable television services.
Through a capital investment program, we have expanded channel capacity,
enhancing signal quality, improving technical reliability and providing a
platform to deliver high-speed data services, including Internet access. We
believe that such technical improvements and upgrades create additional revenue
opportunities, enhance operating efficiencies, improve franchising relations and
increase

                                      14

<PAGE>

customer satisfaction. We expect capital spending in 2002 for rebuild
activities to total approximately $12.0 million, which we expect to be funded
by operations and existing credit facilities.

          The following table summarizes, as of December 31, 2001, our
existing bandwidth profile and our bandwidth profile upon completion of
work-in-progress projects (which are generally expected to be completed by the
end of 2002).

<TABLE>
<CAPTION>

                                     330 TO 450 MHz         550 MHz          750 to 860 MHz
                                    (Approximately 60  (Approximately 82   (Approximately 82
                                    Analog Channels)   Analog Channels)   Analog Channels)/(1)/
                                    ----------------   ----------------   --------------------
<S>                                        <C>                <C>                <C>
EXISTING BANDWIDTH PROFILE
Miles of plant                             875                886                 3039
% miles of plant                           18%                18%                  64%
BANDWIDTH PROFILE UPON
   COMPLETION OF WORK IN PROGRESS
Miles of plant                             497                981                3,322
% miles of plant                           10%                20%                  70%
</TABLE>

/(1)/  Plus 200 MHz of additional bandwidth for digital programming and
other enhanced services.

     Our use of fiber optic technology as an enhancement to coaxial is enabling
us to consolidate headends and reduce amplifier cascades, thereby improving
picture quality and system reliability and reducing headend and maintenance
expenditures. Fiber optic strands are capable of carrying hundreds of video,
data and voice channels over extended distances without the extensive signal
amplification typically required for coaxial cable. We anticipate that the
installation of fiber optic cable will allow us to consolidate from 11 headends
as of December 31, 2001 to 9 headends by the end of 2002. In our larger systems,
fiber optic technology is deployed in a "ring" design providing a redundant path
for video and data signals being delivered to large subscriber groups. This
approach provides an extra degree of reliability in the event that fiber optic
cable is damaged on the primary path.

     Digital compression is a technology that enables cable operators to
increase channel capacity of cable television systems by permitting a
significantly increased number of digitalized video signals to fit within a
cable television system's existing bandwidth. At December 31, 2001, digitally
compressed services were available to 99% of our customer base.

     The provision of high-speed cable modems to residential and business
customers has recently become a source of additional revenue to the cable
industry. Cable modem revenues represented approximately 5% of 2001 Cable
revenues. Cable modems provide Internet access at higher speeds and lower costs
than the technologies offered by other communication providers. For example, a
10 megabit-capable cable modem provides Internet access at download speeds
approximately 10 times faster than typical 56.0 kilobit dial-up telephone modem
connections. Cable modem service is available in York and Williamsport,
Pennsylvania and Brunswick, Maine and on a more limited basis in Shelbyville,
Indiana.

     In 2000 we signed a contract with @Home Solutions, a company formed to
provide smaller cable operators Internet connectivity and content services from
@Home. Our York and Williamsport, Pennsylvania cable systems relaunched cable
modem service using @Home Internet connectivity and content in the third quarter
2001. @Home declared bankruptcy in the fourth quarter 2001 and discontinued
service to our cable systems on December 5, 2001. We transitioned customers to
in-house Internet access facilities (utilizing Internet backbone circuits of
Blazenet on a temporary basis) with an approximate 12-hour service disruption.
We subsequently transitioned our Internet backbone circuits to AT&T. Other than
slowing our internal growth of cable modem customers, which we believe was

                                       15

<PAGE>

temporary, there was little impact to the customer base because of the
transition from @Home. We incurred approximately $400,000 of additional
capital expenditures to create our in-house Internet platform.

   DATA AND OTHER SERVICES

     For the years ended December 31, 2001 and 2000, our Data segment
accounted for approximately 3.4% and 2.1% of our total revenues.

     Susquehanna Data Services. Susquehanna Data Services, Inc., a subsidiary of
ours, was formed in 1996 to provide Internet and data networking services to
residential and business customers. Marketing its products and services under
the tradename "BlazeNet," Susquehanna Data Services offers Internet access over
both telephone and cable modems, website creation, hosting and maintenance,
local and wide area network design, construction and operation, and
telecommunications products from Susquehanna Adelphia Telecommunications and
other local telephone companies. As a website host, we provide a central
computer that is connected to the Internet 24 hours a day. We store all of our
customers' website files on our computer so that each website and all of its
content are available to users worldwide at all times. Our local and wide area
network services enable us to provide network services in both a limited area,
such as a building or campus, or a larger area extending beyond a single
building or campus. As of December 31, 2001, BlazeNet provided access service to
approximately 11,300 business and consumer accounts.

     Susquehanna Technologies. The web design company that we acquired in
October 2000 has been remarketed as Susquehanna Technologies. Susquehanna
Technologies' focus is on custom designed web integration solutions and services
to the media and entertainment, retail and associations and not-for-profit
industries. These three market verticals were selected for our focus because of
existing in-house expertise. We are positioning for the future with proven
success in web based procurement systems, website content management systems and
e-commerce applications as well as web site design. Because of the collapse of
the Internet sector in 2001 and customer uncertainty caused by the terror events
in September, sales for Susquehanna Technologies have been stagnant.

     Adelphia Partnership. In 1997, Susquehanna Media, through its wholly-owned
subsidiary Susquehanna Fiber Systems, Inc., entered into a 50/50 partnership
with Hyperion Telecommunications of Pennsylvania, Inc., now Adelphia Business
Solutions, Inc., a subsidiary of Adelphia Communications Corp., to enter the
competitive local exchange carrier business in the York, Pennsylvania market.
The partnership provides long distance access circuits to businesses bypassing
the local telephone company, point-to-point data circuits and switched business
access services. Susquehanna Cable has constructed and maintains a 242 mile
fiber optic SONET ring network that is leased to the partnership under a
long-term contract. As of December 31, 2001, the partnership provided service to
92 buildings in the York area and had over 8,300 access lines installed.

   FRANCHISES

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

               .    time limitations on commencement and completion of
                    construction;

                                       16

<PAGE>

               .    conditions of service, including mix of programming
                    required to meet the needs and interests of the community;

               .    the provision of free service to schools and certain other
                    public institutions;

               .    the maintenance of insurance and indemnity bonds; and

               .    the payment of fees to communities.

     Certain of these franchises may require the imposition of penalties if the
franchise agreements are violated. Certain provisions of these local franchises
are subject to limits imposed by federal law.

     As of December 31, 2001, we held a total of 136 franchises. Franchise
agreements with many of these franchises require the payment of fees to the
issuing authorities ranging from 1% to 5% of gross revenues (with the majority
in the 3% to 5% range) from the related cable system. The Cable Communications
Policy Act of 1984 (1984 Cable Act) prohibits franchising authorities from
imposing annual franchise fees in excess of 5% of gross annual revenues and
permits the cable television system operator to seek renegotiation and
modification of franchise requirements if warranted by changed circumstances
that render performance commercially impracticable.

     Our cable franchises expire at various times through 2016. The following
table sets forth certain information relating to our franchises:

<TABLE>
<CAPTION>

                                  Number of   Percentage of Total   Percentage of Total
Year of Franchise Expiration      Franchises       Franchises        Basic Subscribers
----------------------------     -----------       ----------        -----------------
<S>                                  <C>              <C>                   <C>
2002 - 2004....................       41               30%                   40%
2005 and after.................       95               70%                   60%
                                      --               ---                   ---

Total                                136              100%                  100%
                                     ===              ====                  ====
</TABLE>

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

   COMPETITION

     Cable television systems face competition from alternative methods of
distributing video programming and from other sources of news, information and
entertainment. These sources include direct broadcast satellite, off-air
television broadcast programming, newspapers, movie theaters, live sporting
events, interactive online computer services and home video products, including
DVDs and videotape cassette recorders. The extent to which a cable television
system is competitive depends, in

                                       17

<PAGE>

part, upon that system's ability to provide, at a reasonable price to
customers, a greater variety of programming and other communications services
than those available off-air or through alternative delivery sources and upon
superior technical performance and customer service.

     Competing Franchises. Cable television systems generally operate pursuant
to franchises granted on a non-exclusive basis. Franchising authorities may not
unreasonably deny requests for additional franchises and may operate cable
television systems themselves. Well-financed businesses from outside the cable
television industry (such as the public utilities that own the poles to which
cable is attached) or neighboring cable operators may become competitors for
franchises or providers of competing services. Within Susquehanna Cable Co.
systems there exists a small overbuild by a neighboring cable operator
consisting of approximately 3,000 homes passed (1% of total homes passed) which
started ten years ago by two cable operators no longer in the business.
Susquehanna acquired one of the operators in 1999. In the last three years the
boundaries of the overbuild area has not expanded. Additional cable television
systems may be constructed in the future in our other franchise areas.

     Digital Broadcast Satellites. The fastest growing method of satellite
distribution is by high-powered direct broadcast satellites utilizing video
compression technology, which provides more than 200 channels of programming
over a single high-powered digital broadcast satellite. Digital broadcast
satellite service can be received virtually anywhere in the United States
through small rooftop or side-mounted antennae/dishes and is not subject to
certain local restrictions on the location and use of digital broadcast
satellite and other satellite receiver dishes. Digital broadcast satellite
service is presently being heavily marketed on a nationwide basis by two service
providers. Digital broadcast satellite systems offer all of their programming
with digital quality, but may have higher up-front costs or require long-term
agreements and may lack local programming and service. Both digital broadcast
satellite providers offer some local signals in a limited number of large
markets. Digital broadcast satellite providers in the Indiana portion of our
Midwest market offer some local programming. During 2001, a proposed merger
between the two primary digital broadcast satellite providers was announced. At
this point in time the merger is in regulatory review and is being contested by
the National Association of Broadcasters. It is uncertain whether this potential
merger will result in additional competition in our markets or the impact such
potential competition may have on our cable operations.

     Satellite Master Antenna Television Systems. Cable television operators
also face competition from private satellite master antenna television systems
that serve condominiums, apartment and office complexes and private residential
developments. Like cable television systems, satellite master antenna television
systems offer both improved reception of local television stations and many of
the same satellite-delivered program services. Satellite master antenna
television operators often enter into exclusive agreements with building owners
or homeowners associations, although some states have enacted laws that
authorize franchised cable television operators access to such private
complexes. Packages of data and video services are also being offered to private
residential and commercial developments. As long as they do not use public
rights-of-way, satellite master antenna television systems can interconnect
non-commonly owned buildings without having to comply with many of the local,
state and federal regulations that are imposed on cable television systems. Our
ability to compete for customers in residential and commercial developments
served by satellite master antenna television operators is uncertain.

     Local Multipoint Distribution Service. Local multipoint distribution
service, a wireless service, can deliver over 100 channels of programming
directly to consumers' homes. A large amount of this spectrum was auctioned in
March 1998, and cable television operators and local telephone companies were
restricted in their participation in this auction. It is uncertain whether this
spectrum will be used to deliver multichannel video programming and other
services to subscribers and thereby compete with franchised cable television
systems.

                                       18

<PAGE>

     Multichannel Multipoint Distribution Systems. Multichannel multipoint
distribution systems use low power microwave frequencies to transmit video
programming over the air to customers. Wireless distribution services provide
many of the same programming services as cable television systems, and digital
compression technology is likely to increase significantly the channel capacity
of their systems. Multichannel multipoint distribution systems service requires
unobstructed "line of sight" transmission paths. In the majority of our
franchise service areas, prohibitive topography and "line of sight" access have
limited, and are likely to continue to limit, competition from multichannel
multipoint distribution systems. Moreover, in the majority of our franchise
areas, multichannel multipoint distribution systems operators face significant
barriers to growth because lower population densities make these areas less
attractive. We are not aware of any significant multichannel multipoint
distribution systems operation currently within our cable television franchise
service areas. Wireless One, owned by MCI/Worldcom has announced that they are
discontinuing their residential multichannel multipoint distribution system,
which were in direct competition with our Rankin County Mississippi cable
system. MCI has indicated that they intend to utilize the frequencies for
commercial data transport.

     Local Exchange Carriers. The Telecommunications Act of 1996 (1996 Telecom
Act) allows local exchange carriers and others to compete with cable television
systems and other video services in their telephone service territory, subject
to certain regulatory requirements. Local exchange carriers use a variety of
distribution methods, including both broadband wire facilities and wireless
transmission facilities within and outside of their telephone service areas.
Local exchange carriers and other telephone companies have an existing
relationship with the households in their service areas, have substantial
financial resources, and may have an existing infrastructure capable of
delivering cable television service. Unlike cable television systems, local
exchange carriers are not required, under certain circumstances, to obtain local
franchises to deliver video services and are not subject to certain obligations
imposed under such franchises. We believe that our rural markets are unlikely to
support competition in the provision of video and telecommunications broadband
services given the lower population densities and higher capital costs per
household of installing plant. However, Senate Bill 2646-Rural Broadband Access,
passed on February 13, 2002. The bill proposes to provide $100.0 million in
grants, loans and loan guarantees to eligible companies to construct or improve
broadband facilities in eligible rural communities. To be eligible communities
must not have more than 20,000 inhabitants and not be located in a designated
standard metropolitan statistical area. Senate Bill 2646 is currently being
considered in the House. It is uncertain whether this potential incentive will
prompt additional competition in our markets or the impact such potential
competition may have on our cable operations.

     Public Utilities. Registered utility holding companies and their
subsidiaries may provide telecommunications services (including cable
television). Electric utilities must establish separate subsidiaries known as
"exempt telecommunications companies" and must apply to the FCC for operating
authority. Due to their resources, electric utilities could be formidable
competitors to traditional cable television systems. Electric utilities also
have the potential to become significant competitors in the video marketplace,
as many of them already possess fiber optic transmission lines in certain areas
they serve.

     Other New Technologies. Other new technologies, including Internet-based
services, may compete with cable television systems. Incumbent television
broadcast licensees may obtain licenses for digital television, which can
deliver high definition television pictures, multiple digital-quality program
streams, as well as CD-quality audio programming and advanced digital services,
such as data transfer or subscription video. Television broadcast stations are
authorized to transmit textual and graphic information. Commercial and
noncommercial FM stations may use their sub-carrier frequencies to provide
non-broadcast services, including data transmissions. In addition, over-the-air
interactive video and data service permits two-way interaction with commercial
and educational programming, along with informational and data services. Local
exchange carriers and other common carriers provide facilities for

                                       19

<PAGE>

the transmission and distribution of video services, including interactive
computer-based services like the Internet, data and other non-video services.

     Advances in communications technology, as well as changes in the
marketplace and the regulatory and legislative environments, are constantly
occurring. We are not, therefore, able to predict the effect that current or
future developments might have on the cable industry or on our operations. See
"Cautionary Note Regarding Forward-Looking Statements."

  EMPLOYEES

     We have approximately 1,455 employees as of December 31, 2001. No employees
are covered by collective bargaining agreements, and we consider relations with
our employees to be good.

CABLE PERFORMANCE SHARE PLAN

     On July 1, 2000, the first of a three-step change in the valuation of
Susquehanna Cable's performance share plan occurred. Performance shares were
previously valued using a formula. On July 1, 2000, performance shares were
revalued based 2/3 on the former formula and 1/3 on fair value as determined by
an independent valuation of Susquehanna Pfaltzgraff Co. for ESOP purposes
performed as of December 31, 1999. On April 1, 2001, performance shares were
valued based 1/3 on the former formula and 2/3 on fair value as of December 31,
2000. On April 1, 2002, performance shares values will be wholly based on fair
value as of December 31, 2001. In the first step of the valuation change, the
Cable and Data segments recognized charges against operating income and Adjusted
EBITDA of $1.9 million and $1.1 million, respectively. (See definition of
Adjusted EBITDA with Selected Financial Data.) In the second step of the
valuation change, the Cable and Data segments recognized charges against
operating income and Adjusted EBITDA of $2.6 million and $1.6 million,
respectively. We expect that charges against operating income and Adjusted
EBITDA for the final step in the valuation change will be $2.5 million in the
Cable segment and $1.4 million in the Data segment in second quarter 2002.

RADIO EMPLOYEE STOCK PLAN

     On July 1, 2000, the Radio Employee Stock Plan's non-voting Class B common
stock, was revalued in a similar manner to the Cable performance share plan.
Radio Class B common stock, which was previously valued using a formula, will
also transition to fair value by April 1, 2002, like the Cable performance share
plan. While there was no expense recognized for the Radio plan's July 2000
change in valuation, minority interests increased approximately $19 million.
Radio minority interests increased an additional $22.3 million in April 2001 due
to the next step in the valuation change. We expect Radio minority interests to
increase an additional $16.8 million in April 2002 due to the final step to fair
value. Net income will not be affected by the 2002 change in minority interests.

FEDERAL REGULATION OF RADIO BROADCASTING

   INTRODUCTION

     The ownership, operation and sale of broadcast stations, including those
licensed to us, are subject to the jurisdiction of the FCC, which acts under
authority derived from the Communications Act of 1934 (the Communications Act).
The Communications Act was amended in 1996 by the 1996 Telecom Act to make
changes in several broadcast laws. Among other things, the FCC grants permits

                                      20

<PAGE>

and licenses to construct and operate radio stations; assigns frequency bands
for broadcasting; determines whether to approve changes in ownership or control
of station licenses; regulates equipment used by stations and the operating
power and other technical parameters of stations; adopts and implements
regulations and policies that directly or indirectly affect the ownership,
operation and employment practices of stations; regulates some forms of radio
broadcasting programming; and has the power to impose penalties for violations
of its rules under the Communications Act.

   LICENSE GRANT AND RENEWAL

     Radio broadcast licenses are granted and renewed for maximum terms of eight
years. Licenses must be renewed through an application to the FCC. The
Communications Act requires that the FCC grant the renewal of a station's
license if the FCC finds that, during the preceding term of the license, the
station has served the public interest, convenience and necessity, that there
have been no serious violations by the licensee of the Communications Act or the
rules and regulations of the FCC, and that there have been no other violations
by the licensee of the Communications Act or the rules and regulations of the
FCC that, when taken together, would constitute a pattern of abuse.

     Petitions to deny license renewal applications can be filed by interested
parties, including members of the public. Such petitions may raise various
issues before the FCC. The FCC is required to hold hearings on renewal
applications if it is unable to determine that renewal of a license would serve
the public interest, convenience and necessity, or if a petition to deny raises
a "substantial and material question of fact" as to whether the grant of the
renewal application would be prima facie inconsistent with the public interest,
convenience and necessity. Also, during certain periods when a renewal
application is pending, the transferability of the applicant's license may be
restricted. Historically, we have not experienced any material problems renewing
our licenses to operate our radio stations and are not currently aware of any
facts that would prevent the timely renewal of our licenses. There can be no
assurance, however, that our licenses will be renewed.

     The following table sets forth certain regulatory information regarding
each of the stations owned by us. "HAAT," which applies to FM stations only,
represents height above average terrain. Height above average terrain means the
actual height of the station's transmitting antenna above the ground level of
the surrounding terrain and is used to measure the coverage of an FM station.
The FCC class determines the maximum power and maximum height above average
terrain for the particular station. Height Above Average Terrain is not
applicable to AM stations.

<TABLE>
<CAPTION>
                                        Frequency
                          City of        (FM-MHZ)      FCC        HAAT       Power in        Expiration Date of
Market and Stations       License        (AM-KHZ)     Class     (Meters)   Kilowatts (Day)        License
-------------------       -------        --------     -----     --------   ---------------        -------
<S>                    <C>              <C>             <C>        <C>         <C>           <C>
San Francisco, CA
     KNBR-AM.........  San Francisco     680 KHz        A          --          50 KW         December 1, 2005
     KFOG-FM.........  San Francisco    104.5 MHz       B          459         7.1 KW        December 1, 2005
     KFFG-FM.........    Los Altos       97.7 MHz       A          137         3.3 KW        December 1, 2005
     KSAN-FM.........    San Mateo      107.7 MHz       B          354         8.9 KW        December 1, 2005
     KTCT-AM.........    San Mateo       1050 KHz       B          --          50 KW         December 1, 2005
Dallas/Ft. Worth, TX
     KLIF-AM.........      Dallas         570 KHz       B          --           5 KW          August 1, 2005
     KKLF-AM.........  Dennison/Sherman   950 KHz       B          --          .5 KW          August 1, 2005
     KTCK-AM.........      Dallas        1310 KHz       B          --           9 KW          August 1, 2005
     KPLX-FM.........    Ft. Worth       99.5 MHz       C          511         100 KW         August 1, 2005
     KKMR-FM/(1)/....   Haltom City      93.3 MHz      C2          120          50 KW         August 1, 2005
     KTDK-FM.........      Sanger       104.1 MHz      C3          150          11 KW         August 1, 2005
     KTBK-AM.........     Sherman        1700 KHz       B          --           10 KW         August 1, 2005
     KGVL-AM/(2)/....    Greenville      1400 KHz       C          --           1 KW          August 1, 2005
     KIKT-FM/(2)/....    Greenville      93.5 MHz       A          100          1.8 KW        August 1, 2005
Houston, TX
     KRBE-FM.........     Houston       104.1 MHz       C          585         100 KW         August 1, 2005
Atlanta, GA
     WNNX-FM.........     Atlanta        99.7 MHz       C          315         100 KW          April 1, 2004
     WWWQ-FM            College Park    100.5 MHz      C3          291          3 KW              Pending
Cincinnati, OH
     WRRM-FM.........    Cincinnati      98.5 MHz       B          246        17.5 KW         October 1, 2004
     WMOJ-FM.........    Fairfield       94.9 MHz       B          322        10.5 KW         October 1, 2004
</TABLE>

                                      21

<PAGE>

<TABLE>
<CAPTION>
                                        Frequency
                          City of        (FM-MHZ)      FCC        HAAT       Power in        Expiration Date of
Market and Stations       License        (AM-KHZ)     Class     (Meters)   Kilowatts (Day)        License
-------------------       -------        --------     -----     --------   ---------------        -------
<S>                    <C>              <C>             <C>        <C>         <C>           <C>
Indianapolis, IN
     WFMS-FM.........   Indianapolis     95.5 MHz       B          302          13 KW          August 1, 2004
     WGRL-FM.........   Noblesville      93.9 MHz       A          138         3.3 KW          August 1, 2004
     WGLD-FM.........   Indianapolis    104.5 MHz       B          150          50 KW          August 1, 2004
Kansas City, MO
     KCMO-FM.........    Kansas City     94.9 MHz       C          321         100 KW        February 1, 2005
     KCMO-AM.........    Kansas City     710 KHz        B          --           10 KW        February 1, 2005
     KCFX-FM.........  Harrisonville,MO 101.1 MHz      C1          303          97 KW        February 1, 2005
     KFME-FM.........   Garden City, MO 105.1 MHz      C1          299         100 KW             Pending
York/Lancaster, PA
     WSBA-AM.........       York         910 KHz        B          --            5 KW          August 1, 2006
     WARM-FM.........       York        103.3 MHz       B          398          6.4 KW         August 1, 2006
Albemarle, NC
     WABZ-FM/(2)/....    Albemarle      100.9 MHz       A          61            3 KW        December 1, 2003

--------------------
</TABLE>

/(1)/   KKMR-FM changed its call letters to KDBN-FM effective January 28, 2002.

/(2)/   Operated by a third party under a time brokerage agreement.

   REGULATORY APPROVALS

     Broadcast licenses may not be assigned nor may the control of broadcast
licenses be transferred without the prior approval of the FCC. In determining
whether to assign, transfer, grant or renew a broadcast license, the FCC
considers a number of factors pertaining to the proposed licensee, including
limits on common ownership of media properties, financial qualifications of the
proposed licensee, the "character" of the proposed licensee (including that no
party to the application (i.e. officer, director, or 10% or greater owner) is
subject to the denial of federal benefits that include FCC benefits pursuant to
Section 5301 of the Anti-Drug Abuse Act of 1988, 21 U.S.C. sec. 862),
limitations on alien ownership, and compliance with programming, public file and
anti-discrimination requirements.

     Assigning a license or transferring control requires the filing of an
application with the FCC. The FCC staff reviews the application and determines
whether to grant the application. This process generally takes about four
months. During the application process, interested parties and the public may
file petitions, during specific periods of time, to deny or raise objections to
the application. A full FCC review of staff action can be requested, and final
FCC approval or disapproval is subject to judicial review.

     Absent a timely request for reconsideration, administrative review or
judicial review, the FCC staff's grant of an application becomes final by
operation of law and generally is no longer subject to administrative or
judicial review.

     The pendency of a license renewal application may alter the aforementioned
timetables, because the FCC might not issue an unconditional assignment grant if
the station's license renewal is pending.

   OWNERSHIP MATTERS

     The 1996 Telecom Act and the FCC's broadcast multiple ownership rules do
not restrict the number of radio stations one person or entity may own
(including having an attributable interest in), operate or control on a national
level, but do impose restrictions on a local level.

These restrictions are:

                                      22

<PAGE>

          (i)   in a market with 45 or more commercial radio signals, an entity
     may own up to eight commercial radio stations, not more than five of which
     are in the same service (FM or AM);

          (ii)  in a market with between 30 and 44 (inclusive) commercial radio
     signals, an entity may own up to seven commercial radio stations, not more
     than four of which are in the same service;

          (iii) in a market with between 15 and 29 (inclusive) commercial radio
     signals, an entity may own up to six commercial radio stations, not more
     than four of which are in the same service; and

          (iv)  in a market with 14 or fewer commercial radio signals, an entity
     may own up to five commercial radio stations, not more than three of which
     are in the same service, except that an entity may not own more than 50% of
     the stations in such market.

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

   REGULATION OF CABLE TELEVISION

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

   FEDERAL LEGISLATION

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

   FEDERAL REGULATION

     The FCC is the principal federal regulatory agency with jurisdiction over
cable television. It has adopted regulations covering such areas as
cross-ownership between cable television systems and other communications
businesses, carriage of television broadcast programming, cable rates, consumer
protection and customer service, leased access, indecent programming, programmer
access to cable television systems, programming agreements, technical standards,
consumer electronics equipment compatibility, ownership of home wiring, program
exclusivity, equal employment opportunity, consumer education and lockbox
enforcement, origination cablecasting and sponsorship identification, political
programming and advertising, advertising during children's programming, signal
leakage and frequency

                                      23

<PAGE>

use, maintenance of various records, and antenna structure notification,
marking and lighting. The FCC has the authority to enforce these regulations
through the imposition of substantial fines, the issuance of cease and desist
orders and/or the imposition of other administrative sanctions, such as the
revocation of FCC licenses needed to operate certain transmission facilities
often used in connection with cable operations. A brief summary of certain of
these federal regulations as adopted to date follows.

   RATE REGULATION

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

     Existing regulations require cable television systems to permit customers
to purchase video programming on a per channel or a per program basis without
the necessity of subscribing to any tier of service, other than the basic
service tier, unless the cable television system is technically incapable of
doing so. Generally, this exemption from compliance with the statute for cable
television systems that do not have such technical capability is available until
a cable television system obtains the capability, but not later than December
2002.

   CARRIAGE OF BROADCAST TELEVISION SIGNALS

     The 1992 Cable Act contains signal carriage requirements which allow
commercial television broadcast stations that are "local" to a cable television
system (i.e., the system is located in the station's designated market area) to
elect every three years whether to require the cable television system to carry
the station, subject to certain exceptions, or whether the cable television
system will have to negotiate for "retransmission consent" to carry the station.
The next election between must-carry and retransmission consent must occur by
October 1, 2002. A cable television system is generally required to devote up to
one-third of its activated channel capacity for the carriage of local commercial
television stations whether pursuant to the mandatory carriage requirements or
retransmission consent requirements of the 1992 Cable Act. Local non-commercial
television stations are also given mandatory carriage rights, subject to certain
exceptions, on cable systems with the principal headend located within the
larger of: (i) a 50-mile radius from the station's city of license; or (ii) the
station's Grade B contour (a measure of signal strength). Unlike commercial
stations, noncommercial stations are not given the option to negotiate
retransmission consent for the carriage of their signal. In addition, cable
television systems have to obtain retransmission consent for the carriage of all
"distant" commercial broadcast stations, except for certain "superstations"
(i.e., commercial satellite-delivered independent stations such as WGN). To
date, compliance with the "retransmission consent" and "must carry" provisions
of the 1992 Cable Act has not had a material effect on us, although this result
may change in the future depending on such factors as

                                      24

<PAGE>

market conditions, channel capacity and similar matters when such arrangements
are renegotiated. The FCC has initiated a rulemaking proceeding on the carriage
of television signals in high definition and digital formats. The final outcome
of this proceeding could have a material effect on the number of services that
a cable operator will be required to carry.

   RENEWAL OF FRANCHISES AND FRANCHISE FEES

     The 1984 Cable Act established renewal procedures and criteria designed to
protect incumbent franchisees against arbitrary denials of renewal. While these
formal procedures are not mandatory unless timely invoked by either the cable
television operator or the franchising authority, they can provide substantial
protection to incumbent franchisees. Even after the formal renewal procedures
are invoked, franchising authorities and cable television operators remain free
to negotiate a renewal outside the formal process. Nevertheless, renewal is by
no means assured, as the franchisee must meet certain statutory standards. Even
if a franchise is renewed, a franchising authority may impose new and more
onerous requirements such as upgrading cable-related facilities and equipment
and complying with voluntary commitments, although the municipality must take
into account the cost of meeting such requirements. The 1984 Cable Act, under
certain limited circumstances, permits a cable operator to obtain modifications
of franchise obligations. Franchises have generally been renewed for cable
television operators that have provided satisfactory services and have complied
with the terms of their franchises. Historically, we have not experienced any
material problems renewing our franchises for our cable television systems. We
are not aware of any current or past material failure on our part to comply with
our franchise agreements. We believe that we have generally complied with the
terms of our franchises and have provided quality levels of service.

     The 1992 Cable Act makes several changes to the process under which a cable
television operator seeks to enforce his renewal rights which could make it
easier in some cases for a franchising authority to deny renewal. Franchising
authorities may consider the "level" of programming service provided by a cable
television operator in deciding whether to renew. For alleged franchise
violations occurring after December 29, 1984, franchising authorities have the
right to deny renewal because of an operator's failure to substantially comply
with the material terms of the franchise even if the franchising authority has
"effectively acquiesced" to such past violations. The franchising authority is,
however, precluded from denying renewal if, after giving the cable television
operator notice and opportunity to cure, it fails to respond to a written notice
from the cable television operator of its failure or inability to cure. Courts
may not reverse a denial of renewal based on procedural violations found to be
"harmless error."

     Franchising authorities may generally impose franchise fees of up to 5% of
a cable television system's annual gross revenues, excluding revenues derived
from telecommunications services. However, they may be able to exact some
compensation for cable systems' use of public rights-of-way to provide
telecommunications service. In the past several years, substantial public
controversy has arisen with regard to the ability of local franchise authorities
to regulate high speed Internet access provided by cable television systems.
Among the key issues in dispute are the franchise authority's ability to require
cable operators to offer multiple unaffiliated Internet service providers access
to their systems ("open access"), to impose franchise fees on revenues that
cable systems earn from providing cable modem service or to impose service or
other requirements on a cable system's Internet offerings. These issues
currently are pending in several court proceedings and before the FCC. While the
FCC tentatively has concluded that local franchise authorities lack authority to
impose such requirements on cable operators, further agency proceedings are
underway that could alter the initial conclusion.

                                      25

<PAGE>

   CHANNEL SET-ASIDES

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

   COPYRIGHT MATTERS

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

   STATE AND LOCAL REGULATION

     Cable television systems generally are operated pursuant to nonexclusive
franchises, permits or licenses granted by a municipality or other state or
local government entity. The terms and conditions of franchises vary materially
from jurisdiction to jurisdiction. Franchises generally contain provisions
governing fees to be paid to the franchising authority, length of the franchise
term, renewal, sale or transfer of the franchise, territory of the franchise,
design and technical performance of the system, use and occupancy of public
streets and number and types of cable television services provided. The 1992
Cable Act prohibits exclusive franchises and allows franchising authorities to
regulate customer service and rates. Franchising authorities may operate their
own multichannel video distribution system without a franchise. States and local
franchising authorities may adopt certain restrictions on cable television
systems ownership.

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

                                      26

<PAGE>

ITEM 2.   PROPERTIES

     The headquarters of our cable television operations are located in York,
Pennsylvania in office space leased from our parent. We do not have a separate
headquarters for our radio broadcast operations.

     We lease nine studio facilities for our radio operations. We own broadcast
towers for 12 of our radio stations and lease 14 other broadcast towers. We own
the real property under seven of our broadcast towers and lease the land under
our other 19 towers. We own nine, and lease two, headend facilities for our
cable television operations. In connection with our cable operations, we own
eight tower locations and lease nine others. In addition, we own the real estate
for five and lease the real estate for two fiber optic hub sites. See also
"Business--Radio Properties" in Item 1 of this annual report.

     Our principal physical assets with respect to our cable operations consist
of cable television operating plant and equipment, including signal receiving,
encoding and decoding devices, headends and distribution systems and customer
house drop equipment for each of our cable television systems. The signal
receiving apparatus typically includes a tower, antenna, ancillary electronic
equipment and earth stations for reception of satellite signals. Headends,
consisting of associated electronic equipment necessary for the reception,
amplification and modulation of signals, are located near the receiving devices.
Our distribution system consists primarily of coaxial and fiber optic cables and
related electronic equipment. See also "Business--Cable Properties" and "--Cable
Systems" in Item 1 of this annual report.

     We believe that our properties are in good condition and suitable for our
operations.

ITEM 3.   LEGAL PROCEEDINGS

     We currently and from time to time are involved in litigation incidental to
the conduct of our business, but we are not currently a party to any lawsuit or
proceeding which, in our opinion, is likely to have a material adverse effect on
us.

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

     No matters were submitted to security holders for a vote during the fourth
quarter of 2001.

                                      27

<PAGE>

                                    PART II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     There is no market for our common stock. All of our outstanding common
stock is owned by our parent, Susquehanna Pfaltzgraff Co.

                                      28

<PAGE>

ITEM 6.   SELECTED ANNUAL AND QUARTERLY FINANCIAL DATA

     The below selected financial data as of and for the years ended December
31, 2001, 2000, 1999, 1998 and 1997 is derived from our audited consolidated
financial statements. Our audited consolidated financial statements and related
notes for the years ended December 31, 2001, 2000 and 1999 are included
elsewhere in this annual report. You should read this information and the
accompanying notes in conjunction with the consolidated financial statements and
related notes and the other financial information included elsewhere in this
annual report.

<TABLE>
<CAPTION>
                                                               Year Ended December 31,
                                                              -----------------------
                                               2001         2000        1999        1998       1997
                                               ----         ----        ----        ----       ----
                                                               (dollars in thousands)
<S>                                          <C>         <C>         <C>         <C>         <C>
INCOME STATEMENT DATA:
Revenues:
   Radio                                     $198,039    $220,886    $185,193    $151,170    $131,438
   Cable                                      104,758      93,113      82,720      70,641      65,122
   Data and other                              10,632       6,590       3,353       1,616         539
                                              -------     -------     -------     -------     -------
Total revenues                                313,429     320,589     271,266     223,427     197,099
Total operating expenses                      264,490     240,004     203,218     172,224     154,389
                                              -------     -------     -------     -------     -------
Operating income                               48,939      80,585      68,048      51,203      42,710
Interest expense, net                          37,887      37,523      28,573      20,506      18,890
Gain (loss) on sale of assets                  (4,185)     (3,891)     (1,499)      1,748       9,451
Interest income from loan to parent company     6,895       6,696       4,476          --          --
Pension curtailment gain                           --          --       2,299          --          --
Other income (loss)                             (256)      (1,474)        379         334         426
                                              -------     -------     -------     -------     -------

Income before income taxes                     13,506      44,393      45,130      32,779      33,697
Provision for income taxes                      6,538      16,661      18,044      14,523      14,033
                                              -------     -------      ------      ------     -------

Income before extraordinary loss                6,968      27,732      27,086      18,256      19,664
Loss related to early retirement of debt           --          --      (3,316)         --          --
                                              -------     -------     -------     -------     -------

Income before minority interests                6,968      27,732      23,770      18,256      19,664
Minority interests                             (2,261)     (5,185)     (4,140)     (4,304)     (3,070)
                                              -------     -------     -------     -------     -------

Net income                                   $  4,707    $ 22,547    $ 19,630    $ 13,952    $ 16,594
                                              =======    ========    ========    ========    ========

BALANCE SHEET DATA (at end of period):
Total assets                                 $669,082    $659,457    $526,142    $355,141    $333,476
Total debt                                    495,105     500,600     405,621     272,776     265,500
Stockholders' equity (deficit)                 15,493      33,230      31,281       9,201      (2,295)

RATIO OF EARNINGS TO FIXED                       1.3x        2.1x        2.4x        2.3x        2.7x
CHARGES/(1)/:

SUPPLEMENTARY FINANCIAL DATA:
Adjusted EBITDA:/(2)/
   Radio                                     $ 61,324    $ 83,332    $ 64,744    $ 42,553    $ 34,062
   Cable                                       40,082      36,664      35,458      31,699      29,511
   Data and Other                              (2,728)      1,663       2,167        (386)       (692)
                                             --------    --------    --------     -------     -------
Total Adjusted EBITDA                        $ 98,678    $121,659    $102,369     $73,866     $62,881
                                             ========    ========    ========     =======     =======

Cash flows related to:
   Operating activities                      $ 66,954    $ 67,105    $ 60,211    $ 36,843    $ 36,347
   Investing activities                       (60,760)   (163,478)   (182,944)    (38,842)    (70,399)
   Financing activities                        (6,194)     95,734     121,430       3,941      33,334

Capital expenditures                         $ 31,739    $ 36,913    $ 33,066    $ 29,592    $ 22,610
</TABLE>
--------------------

/(1)/   The ratio of earnings to fixed charges is expressed as the ratio of
        income before income taxes and extraordinary items plus fixed charges
        (excluding capitalized interest) to fixed charges. Fixed charges
        consist of interest expense, capitalized interest and one-third of
        rental expense (the portion deemed representative of the interest
        factor).

                                      29

<PAGE>

/(2)/   We define Adjusted EBITDA as net income before income taxes,
        extraordinary items, interest expense, interest income, depreciation and
        amortization, employee stock ownership plan expense, pension curtailment
        gain, minority interest, and any gain or loss on the disposition of
        assets. Employee stock ownership plan expense recognized for the years
        ended December 31, 2001, 2000 and 1999 was $9.1 million, $8.3 million,
        and $6.4 million, respectively.

     Although Adjusted EBITDA is not a measure of performance calculated in
     accordance with generally accepted accounting principles (GAAP), we
     believe that Adjusted EBITDA is a meaningful measure of performance
     because it is commonly used in the radio and cable television industries
     to analyze and compare radio and cable television companies on the basis
     of operating performance, leverage and liquidity. In addition, our new
     senior credit facility and the indenture that governs our 8.5% senior
     subordinated notes contain certain covenants in which compliance is
     measured by computations substantially similar to those used in
     determining Adjusted EBITDA. There are no legal restrictions on the use of
     Adjusted EBITDA, other than those contained in our new senior credit
     facility and indenture. Management expects that Adjusted EBITDA will be
     used to satisfy working capital, debt service and capital expenditure
     requirements and other commitments and contingencies. Adjusted EBITDA
     should not be considered in isolation or as a substitute for or an
     alternative to net income, cash flow from operating activities or other
     income or cash flow data prepared in accordance with GAAP. Adjusted EBITDA
     should not be considered as a measure of a company's operating performance
     or liquidity. Adjusted EBITDA as presented may not be comparable to other
     similarly titled measures used by other companies.

                                       30

<PAGE>

UNAUDITED QUARTERLY FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE DATA)

     The following unaudited quarterly financial information for 2001 and 2000
was derived from our unaudited financial statements and includes, in the opinion
of our management, only those normal and recurring adjustments that our
management considers necessary for a fair presentation of the results of
operations for these periods. These unadited quarterly operating results are not
necessarily indicative of the results that may be achieved for a full fiscal
year or for future periods.

<TABLE>
<CAPTION>
               2001                      1st Qtr           2nd Qtr           3rd Qtr          4th Qtr
               ----                      -------           -------           -------          -------
<S>                                          <C>               <C>              <C>               <C>
Revenues
  Radio                                      39,780            53,418           54,773            50,068
  Cable                                      24,663            25,745           26,595            27,754
  Data and other                              2,408             2,699            2,844             2,681
                                            -------           -------           ------           -------
  Total Revenues                             66,851            81,862           84,213            80,503

Operating Expenses                           60,528            70,115           68,301            65,546
                                            -------           -------           ------           -------

Operating Income                              6,323            11,747           15,912            14,957

Interest Expense, net                        10,287             9,385            9,974             8,241

Depreciation and amortization                 9,288             9,563           10,041            10,520

Net income                                   (1,669)            1,473            2,755             2,149

Net income per common share
  (basic and diluted)                         (1.63)             1.23             2.39              1.84

Adjusted EBITDA                              17,954            23,765           28,807            28,152
</TABLE>

<TABLE>
<CAPTION>
               2000                       1st Qtr           2nd Qtr           3rd Qtr          4th Qtr
               ----                       -------           -------           -------          -------
<S>                                          <C>               <C>              <C>               <C>
Revenues
  Radio                                      41,682            60,732           57,364            61,108
  Cable                                      22,145            23,107           23,544            24,317
  Data and other                              1,270             1,457            1,592             2,271
                                            -------           -------           -------          -------
  Total Revenues                             65,097            85,296           82,500            87,696

Operating expenses                           51,480            60,592           63,821            64,111
                                            -------           -------           -------          -------

Operating Income                             13,617            24,704           18,679            23,585

Interest Expense, net                         8,059             8,102           10,546            10,816

Depreciation and amortization                 7,239             7,720            8,443             9,731

Net income                                    3,437             8,336            5,182             5,592

Net income per common share
  (basic and diluted)                          3.01              7.47             4.60              4.97

Adjusted EBITDA                              22,634            34,482           29,305            35,238
</TABLE>

                                       31

<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

     The following discussion and analysis should be read in conjunction with
"Selected Financial Data" and our financial statements and the notes thereto
included elsewhere in this annual report. Much of the discussion in this section
involves forward-looking statements. Our actual results may differ significantly
from the results suggested by these forward-looking statements.

   CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     Our management's discussion and analysis of its financial condition and
results of operations are based upon our consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States, as described in Note 1 to the consolidated
financial statements. In order to prepare these financial statements, we must
make certain estimates and judgments that may affect the reported value of
assets, liabilities, revenues and expenses as well as reported contingencies.
These estimates and judgments are evaluated on an ongoing basis and change based
upon business conditions and circumstances. Critical estimates involve the value
of intangible assets (primarily FCC Broadcast licenses and cable franchise
values), income taxes, fair value of financial instruments, allowances for
doubtful accounts, contingencies and the impact of any litigation. These
estimates are based on the known facts, our measured judgments of probable
outcomes and values, historical experience and other factors that we believe are
applicable and reasonable given the circumstances.

     We believe the following accounting policies are critical to preparation of
our financial statements since they affect the more significant estimates
reflected in the financial statements and related disclosures.

     Revenue Recognition. Revenues are recognized when related services are
provided. Radio revenues are reported when advertising is aired and when events
are held, net of agency commissions. Cable revenues are recognized when services
are provided to our subscribers. Data and Other revenues are recognized when
services are provided or performed. Revenues are recorded based on a reasonable
expectation of collection. Estimates of uncollectible accounts are made and
revised regularly based on customer history, economic conditions and other
credit information judged relevant given the circumstances.

     Impairment of Long-Lived Assets. Approximately 84% of assets employed in
our operations are comprised of intangible assets and property, plant and
equipment. The fair value of intangible assets is based on their market values
and the performance of the related businesses. Business performance, changes in
technologies, condition and location of assets affect the fair values of
long-lived tangible assets. In assessing the recoverability of long-lived
assets' costs, we make assumptions and estimates regarding the future cash flows
from operations to determine whether recoverability is probable. If these
assumptions or related estimates change in the future, we may be required to
recognize impairment charges for affected assets. Effective January 1, 2002,
Media adopted Statement of Financial Accounting Standard No. 142, "Goodwill and
Other Intangible Assets" which requires an initial assessment of FCC licenses,
cable franchise values and goodwill within the first six months of 2002, and on
at least an annual basis in subsequent years.

     Income Taxes. Our deferred income taxes reflect the probable future tax
consequences of temporary differences between the tax bases of assets and
liabilities and their financial reporting balances at each reported year-end.
Changes in enacted tax rates are reflected as they occur. We routinely evaluate
our effective income tax rates and adjust those rates based upon estimates and
available information pertinent to the statutory rates, apportionment and other
factors considered appropriate in the circumstances.

     Contingencies. We are involved in litigation and administrative proceedings
primarily arising in the normal course of our business. Based on the outcome of
these actions, we may be required to make payments or recognize a loss. On a
regular basis, we evaluate circumstances related to these actions, which may
include consultation with outside counsel. If a liability is probable and
reasonably estimable, a liability is recognized. Where a significant liability
is probable but not estimable, appropriate financial

                                       32

<PAGE>

statement disclosures are made. If circumstances surrounding a significant
matter change in the future, our consolidated results of operations and
financial position could be adversely affected.

   OVERVIEW

     We are a diversified communications company with operations in radio
broadcasting and cable television. We are the second largest privately owned
radio broadcaster and the 11th largest radio broadcaster overall in the United
States based on revenues. As of December 21, 2001 we owned and operated 18 FM
and 9 AM stations that serve four of the nation's ten largest radio markets (San
Francisco, Dallas, Houston and Atlanta), as well as four other markets
(Cincinnati, Indianapolis, Kansas City and York, Pennsylvania). We were also the
19th largest cable multiple system operator in the United States with seven
cable systems serving approximately 195,000 subscribers as of December 31, 2001.

     For the year ended December 31, 2001, we had revenues and Adjusted EBITDA
of $313.4 million and $98.7 million, respectively, with approximately 62% of
Adjusted EBITDA generated by our radio broadcast operations and 41% by our cable
television operations. For the year ended December 31, 2001, our net income was
$4.7 million, our cash flows from (used in) operating, investing and financing
activities were $66.9 million, $(60.8) million and $(6.1) million, respectively,
and our ratio of earnings to fixed charges was 1.3x.

     We also provide Internet access and enhanced services to residential and
business customers under the tradename "BlazeNet." The services include:

               .  Internet access via telephone dial-up service or cable modem;

               .  website creation, hosting and maintenance; and

               .  local and wide area network design, construction and
                  operation.

     The web design company that we acquired in October 2000 has been remarketed
as Susquehanna Technologies. Susquehanna Technologies' focus is on custom
designed web integration solutions and services to the media and entertainment,
retail and associations and not-for-profit industries.

     Revenues. Our principal source of radio broadcasting revenue is the sale of
broadcasting time on our stations for advertising. Radio revenue is reported net
of agency commissions. Sales of advertising are affected by changes in demand
for advertising time by national and local advertisers and by advertising rates
charged by the stations. Radio station advertising rates are based on a
station's ability to attract audiences that match the demographic groups that
advertisers want to reach, the number of stations competing in a marketplace,
and economic conditions. Radio stations attempt to maximize revenue by adjusting
advertising rates based upon local market conditions, by controlling inventory,
by creating demand, and by increasing audience ratings. Radio stations sometimes
use barter or trade agreements to exchange merchandise or services for
advertising time with advertisers, in lieu of cash. It is our policy not to
pre-empt advertising paid in cash with advertising paid in trade. For the years
ended December 31, 1999 through 2001, cash advertising revenue was 99% of
broadcasting revenue. Seasonal revenue fluctuations are common in the radio
broadcasting industry, due primarily to fluctuations in expenditure levels by
local and national advertisers. Our radio revenues are lowest in the first
quarter and are relatively level in the other quarters.

                                       33

<PAGE>

     Most of our cable revenues are derived from monthly subscriber fees for
cable television programming services, cable modem service and from fees
incident to the provision of such services, such as installation fees and fees
for converter rentals and rentals of remote control devices. Some revenues are
derived from advertising. Since cable is subject to regulation at the federal,
state and local levels, increases in rates charged for regulated services may be
governed by the 1992 Cable Act and the 1996 Telecom Act. Cable revenues are
affected by the timing of subscriber rate increases.

     Operating expenses. Radio operating expenses are comprised of employee
salaries and commissions, depreciation and amortization, programming expenses,
advertising expenses, promotion expenses and selling, general and administrative
expenses. General and administrative expenses include office administration and
other support functions that are handled on a centralized basis.

     Cable operating expenses include programming expenses, employee salaries
and benefits, electricity, depreciation, amortization and selling, general and
administrative expenses for accounting and billing services, franchise fees,
office administration expenses and corporate charges.

     Depreciation and amortization expense relates to the depreciation of
tangible assets used in the business and the amortization of franchise costs.

     Adjusted EBITDA. Adjusted EBITDA is net income before income taxes,
extraordinary items, interest expense, interest income, depreciation and
amortization, employee stock ownership plan expense, pension curtailment gain,
minority interest and any gain or loss on the disposition of assets.

   RESULTS OF OPERATIONS

     The following table summarizes our consolidated historical results of
operations and consolidated historical results of operations as a percentage of
revenues for the years ended December 31, 2001, 2000 and 1999 (in millions of
dollars):

<TABLE>
<CAPTION>
                                       2001                     2000                     1999
                                       ----                     ----                     ----
<S>                               <C>          <C>         <C>           <C>         <C>          <C>
Revenues
  Radio                           $198.0        63.2%      $ 220.9        68.8%      $ 185.2       68.3%
  Cable                            104.8        33.4%         93.1        29.0%         82.7       30.5%
  Data and Other                    10.6         3.4%          6.6         2.2%          3.4        1.2%
                                 -------     --------      --------      ------      -------      ------
    Total revenues                 313.4       100.0%        320.6       100.0%        271.3      100.0%
                                 -------     --------      --------      ------      -------      ------

Operating expenses:
  Operating, programming,
    selling, general and
    Administrative                 225.1        71.8%        206.9        64.6%        175.7       64.7%
  Depreciation and amortization     39.4        12.6%         33.1        10.3%         27.6       10.2%
                                 -------     --------      --------      ------      -------      ------

Total operating expenses           264.5        84.4%        240.0        74.9%        203.3       74.9%
                                 -------     --------      --------      ------      -------      ------

Operating income                  $ 48.9        15.6%      $  80.6        25.1%      $  68.0       25.1%
                                 =======     ========      ========      ======      =======      ======

Net income                          $4.7        1.5 %      $  22.5         7.0%      $  19.6        7.2%
                                 =======     ========      ========      ======      =======      ======

Adjusted EBITDA                    $98.7        31.5%      $ 121.7        38.0%      $ 102.4       37.7%
                                 =======     ========      ========      ======      =======      ======
</TABLE>

                                       34

<PAGE>

   YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000

     Revenues. Our revenues decreased $7.2 million, or 2%, from 2000 to 2001.
Radio revenues decreased $22.9 million, or 10%, from 2000 to 2001. This
reduction was related to the loss of advertising revenues from Internet
businesses primarily in our San Francisco market, as well as the decline in the
general U.S. economy and resultant weakening of the U.S. advertising market.
Cable revenues increased $11.7 million, or 13%, from 2000 to 2001. Rate
increases on basic and expanded basic services and to a lesser extent increased
penetration of digital and cable modem services were responsible for the growth
in cable revenues. Data and Other revenues grew $4.0 million from 2000 to 2001,
due primarily to the acquisition of the web design company in October 2000.

     Depreciation and amortization. Depreciation and amortization increased $6.3
million, or 19%, from 2000 to 2001. Cable depreciation and amortization expenses
comprised $4.0 million of the increase, and resulted from the continuation of
our cable television system rebuilds and the continued roll-out of digital cable
and cable modem services. Radio depreciation and amortization increased $2.0
million, or 20%, from 2000 to 2001. The July 2000 acquisition of three Kansas
City radio stations was responsible for the increased radio depreciation and
amortization.

          Operating income. Operating income decreased $31.7 million or 39%
     from 2000 to 2001. Depreciation and amortization increased while revenues
decreased, due to cable plant rebuilds and the Kansas City radio stations
acquisition.  Other operating expenses increased approximately 10% from 2000 to
2001, also while revenues declined. Radio operating income decreased $25.2
million or 37% from 2000 to 2001. Same stations operating income, decreased
$17.4 million or 25% from 2000 to 2001 primarily the result of the decrease in
sales. The remaining decrease in Radio operating income is due to a full year
of operation in 2001 of the Kansas City stations and the January 2001 launch of
WWWQ in Atlanta. The Kansas City stations and WWWQ in Atlanta each generated
operating losses during 2001.

     Cable programming costs increased a full percentage point of revenues from
2000 to 2001. Programming increases were the result of both program license fee
increases and the launch of additional program channels. The second step of the
valuation basis change to the Cable performance share plan increased other
operating expenses $1.2 million from 2000 to 2001. Of the total charge for the
performance share revaluation, $2.6 million was recognized in the Cable segment
and $1.6 million in the Data segment.

     The web design company acquired in October 2000, generated $3.4 million
more operating losses during 2001 compared to 2000. The operating losses were
the result of the collapse of the Internet sector.

     Net income. Net income decreased $17.8 million or 79% from 2000 to 2001.
The decrease in net income can be attributed to the decline in Radio sales which
resulted in Radio net income declining $15.6 million or 47% from 2000 to 2001.

     Adjusted EBITDA. Adjusted EBITDA decreased $23.0 million, or 19%, from 2000
to 2001. Radio Adjusted EBITDA decreased $22.0 million or 26% from 2000 to 2001.
Same stations Adjusted EBITDA decreased $17.5 million caused by the decrease in
Radio sales from 2000 to 2001. The Cable Adjusted EBITDA increase of $3.4
million was offset by the decrease in operating income from the web design
company acquired in 2000. Cable Adjusted EBITDA increased less than the growth
in Cable revenues due to the increase in programming costs and the change in
valuation basis of the Cable performance share plan.

                                      35

<PAGE>

     Interest expense. Interest expense increased $0.4 million or 1% from 2000
and 2001. Interest expense from increased borrowings were offset by reductions
in interest rates. Interest income of $6.9 million was recognized in 2001 from
loans to our parent.

   YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999

     Revenues. Revenues increased $49.3 million, or 18%, from 1999 to 2000.
Radio revenues increased $35.7 million, or 19%, from 1999 to 2000. Radio's
revenue grew primarily from higher advertising rates. On July 20, 2000, three
radio stations were acquired in Kansas City, Missouri. The Kansas City radio
stations contributed $7.7 million to revenues, or 22% of the increased radio
revenues. Cable revenues increased $10.4 million, or 13%, from 1999 to 2000.
Rate increases on basic and expanded basic services were responsible for the
remaining growth in cable revenues. Data and Other revenues grew $3.2 million
from 1999 to 2000, due primarily to Blazenet sales growth.

     Depreciation and amortization. Depreciation and amortization increased $5.5
million, or 20%, from 1999 to 2000. Cable depreciation and amortization expenses
comprised $3.4 million of the increase, and resulted from the continuation of
our cable television system rebuilds and launches of digitally compressed
services. Radio depreciation and amortization increased $2.0 million, or 25%,
from 1999 to 2000. The acquisition of the three Kansas City radio stations was
responsible for $1.7 million or 85% of increased radio depreciation and
amortization.

     Operating income. Operating income increased $12.6 million or 18% from 1999
to 2000. While depreciation and amortization increased faster than revenues due
to cable plant rebuilds and the Kansas City radio stations acquisition, other
operating expenses increased approximately 18%, or 5% faster than the increase
in revenues. The two largest increases to the operating expenses were cable
program costs caused by the loss of previous group discounts totaling $1.9
million and charges totaling $3.0 million related to the revaluation of the
cable performance share plan. Of the total charge for the performance share
revaluation, $1.9 million was recognized in the Cable segment and $1.1 million
in the Data segment. There was no significant impact to operating income from
the acquired Kansas City radio stations. Radio promotion and advertising costs
and sales commissions grew commensurately with revenues.

     Net income. Net income increased $2.9 million or 15% from 1999 to 2000,
largely due to increased operating income. Loss on the replacement of cable
distribution plant was $2.4 million higher than in 1999. Interest expense, net
of interest income, increased $6.7 million from 1999 to 2000. A $1.0 million
loss was recognized due to the decline in value of certain investments. In 1999,
net income included a pension curtailment gain of $2.3 million and a $3.3
million extraordinary loss related to the early retirement of debt.

     Adjusted EBITDA. Adjusted EBITDA increased $19.3 million, or 19%, from 1999
to 2000. Adjusted EBITDA as a percentage of revenues remained equal to 1999 at
38%. Higher operating income with increased depreciation and amortization caused
Adjusted Radio EBITDA to increase $18.6 million, or 29%, from 1999 to 2000.
Adjusted Cable EBITDA increased $1.2 million, or 3%, between 1999 and 2000. The
significant cost increases experienced in 2000 were increased cable programming
costs due to the loss of discounts totaling $1.9 million and a $3.0 million
charge for the valuation change of Cable's performance share plan ($1.9 million
was recognized in Cable and $1.1 million in the Data segment).

     Interest expense. Interest expense increased $9.0 million, or 31%, between
1999 and 2000. The increase was due to $95.0 million of additional debt incurred
during 2000. Borrowings were used to acquire the assets of the three Kansas City
radio stations and to finance a portion of our cable rebuild

                                      36

<PAGE>

     projects. Interest income of $6.7 million was recognized in 2000 from the
loan to our parent. The increase in interest expense, net of interest income,
was $6.7 million, or 28% from 1999 to 2000.

   LIQUIDITY AND CAPITAL RESOURCES

     Historically, our primary sources of liquidity have been cash flow from
operations and borrowings under our senior credit facilities. Our future needs
for liquidity arise primarily from capital expenditures, potential acquisitions
of radio stations and cable systems, potential repurchases of our common stock,
and interest payable on our senior subordinated notes and our senior credit
facility.

     Net cash provided by operating activities was $66.9 million and $67.1
million for the years ended December 31, 2001 and 2000, respectively. Our net
cash provided by operating activities was generated primarily by normal
operations.

     Net cash used by investing activities was $60.8 million for the year ended
December 31, 2001. Acquisitions were $21.3 million for 2001. Capital
expenditures, excluding acquisitions, were $31.7 million for the year ended
December 31, 2001. Capital expenditures over this period were used primarily to
upgrade and maintain our cable systems. In addition to a loan we made to our
parent in 1999, we made a $14.6 million loan to our parent was made in 2001. The
parent repaid $4.4 million on its outstanding loans in 2001.

     Net cash used by financing activities was primarily for a $5.7 million
reduction of our revolving credit commitment. Net cash used by financing
activities was $6.1 million for the year ended December 31, 2001.

     Our acquisitions of radio stations and cable systems and our capital
expenditures have historically been financed with cash flow from operations and
borrowings under our senior credit facility. Capital expenditures, excluding
acquisitions, were $31.7 million, $36.9 million and $33.1 million for the years
ended December 31, 2001, 2000 and 1999, respectively. Capital expenditures over
this period were used primarily to upgrade and maintain our cable systems. We
expect to make capital expenditures of approximately $33.0 million in 2002 to
continue upgrading our current cable systems, for radio related maintenance and
equipment and for information technology projects. We may be required to pay
$10.0 million to the former owners of WHMA-FM in 2002 under the terms of the
purchase agreement. See Note 12 to the Consolidated Financial Statements.

     On January 15, 2002, we entered into an asset purchase agreement with
Fairbanks Communications, Inc. to acquire the cable system serving Lawrenceburg,
Indiana for $26.5 million cash. The cable system serves approximately 11,000
basic subscribers on one headend. We expect a second quarter 2002 closing
utilizing our existing credit facilities.

     On May 12, 1999, we sold $150 million of 8.5% Senior Subordinated Notes due
2009 for 99.75% of their face value. Proceeds to us were $145.5 million. As of
December 31, 2001, the fair value of these notes was $153.8 million. Any change
in interest rates will affect the market value of these notes, however cash
outflows for semi-annual interest payments are fixed.

     On May 12, 1999, we also entered into a senior credit facility. The senior
credit facility consists of a $250 million revolver, a $100 million term loan A,
and a $100 million term loan B (which mature in 2007 and 2008, respectively),
all collateralized by a pledge of all of our material assets (excluding real
property) and voting common stock. The credit agreement governing the new senior
credit facility requires us to maintain certain financial leverage and interest
coverage ratios, which we are in compliance

                                      37

<PAGE>

with as of the date of this annual report. As of December 31, 2001, we had
$105.0 million of borrowing availability under our senior credit facility.

     As of December 31, 2001, the average interest rate on all outstanding
borrowings was approximately 5.7%.

   FUTURE COMMITMENTS

     The following tables reflect our contractual cash obligations in the
respective periods in which they are due (in thousands).

<TABLE>
<CAPTION>
Contractual Cash        Total Amounts
  Obligations             Committed          2002         2003         2004         2005        2006         Thereafter
  -----------             ---------          ----         ----         ----         ----        ----         ----------
<S>                        <C>               <C>          <C>          <C>          <C>         <C>            <C>
Long-term debt             $495,105           $8,780      $17,033      $25,935      $71,038     $85,041        $287,278
Broadcast rights             31,800            8,200        8,450        8,900        3,050       3,200              --
Operating leases             31,484            4,214        3,981        4,008        4,056       3,985          11,240
                          ---------         --------     --------     --------      -------    --------       ---------
Total                      $558,389          $21,194      $29,464      $38,843      $78,144     $92,226        $298,518
                           ========          =======      =======      =======      =======     =======        ========
</TABLE>

     Information regarding our contractual obligations at December 31, 2001, is
included in the notes to the consolidated financial statements. Future debt
maturities, lease obligations and broadcast rights are included in Note 3, Note
10 and Note 12, respectively.

     We believe that funds generated from operations and the borrowing
availability under our new senior credit facility will be sufficient to finance
our current operations, our debt service obligations, including our obligations
under the notes, cash obligations in connection with potential repurchases of
our common stock and planned capital expenditures for the foreseeable future.
From time to time, we evaluate potential acquisitions of radio stations, cable
television systems, and Internet-related businesses. In connection with future
acquisition opportunities, we may incur additional debt or issue additional
equity or debt securities depending on market conditions and other factors. We
have no current commitments or agreements with respect to any material
acquisitions.

   RECENT ACCOUNTING PRONOUNCEMENTS

     In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141, Business Combinations (SFAS 141), and
Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets (SFAS 142). SFAS 141 requires all business combinations
initiated after June 30, 2001 to be accounted for using the purchase method.
SFAS 141 superseded APB Opinion No. 16, Business Combinations, and Statement of
Financial Accounting Standards No. 38, Accounting for preacquisition
Contingencies of Purchased Enterprises. SFAS 142 changes the financial
accounting and reporting requirements for acquired goodwill and other intangible
assets. Under SFAS 142, the Company is no longer required to amortize goodwill
and other intangible assets with indefinite lives. However, goodwill and
intangible assets with indefinite lives will be subject to at least annual
testing for impairment. SFAS 142 supersedes APB Opinion No. 17, Intangible
Assets. The Company will adopt SFAS 142 on January 1, 2002 and is in the process
of evaluating the effect that adoption may have on its consolidated results of
operations and financial position. The Company expects that its Federal
Communications Commission licenses, Cable franchise values and goodwill
intangible assets will cease being amortized in 2002. Amortization on these
assets approximated $14.1 million and $12.2 million for the years ended December
31, 2001 and 2000, respectively. Accordingly, adoption of SFAS 142 will have a
material effect on the Company's future results of operations. As part of the
SFAS

                                      38

<PAGE>

142 adoption process, the Company is in the process of identifying its
reporting units and evaluating the statement's effects on its results of
operations and financial position.

                                      39

<PAGE>

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

     As of December 31, 2001, we had $344.9 million in variable rate debt. The
fair value of this debt approximates its carrying value. Variable rate debt
matures as follows (in thousands):

2002            $ 8,750                  2006          $85,000
2003             17,000                  2007           89,875
2004             25,900                  2008           47,375
2005             71,000

     Our interest rate exposure is primarily impacted by changes in LIBOR rates.
At December 31, 2001, the weighted average interest rate for the variable rate
debt was 4.7%. If LIBOR rates increased 1%, and sustained that increased rate
for an entire year, annual interest expense on variable rate debt as of December
31, 2001 would increase by $3.4 million.

                                      40

<PAGE>

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The consolidated financial statements and report of independent accountants
of Susquehanna Media Co. and Subsidiaries are set forth on the pages listed
below:

<TABLE>
<CAPTION>
                                                                                                       Page
                                                                                                       ----
<S>                                                                                                   <C>
Report of Independent Accountants                                                                      42

Financial Statements

     Consolidated Balance Sheets                                                                       43

     Consolidated Statements of Operations                                                             44

     Consolidated Statements of Cash Flows                                                             45

     Consolidated Statements of Stockholders' Equity                                                   46

     Notes to Consolidated Financial Statements                                                       47-61
</TABLE>

                                      41

<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
Susquehanna Media Co.:

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income and comprehensive income, statement of
stockholders' equity, and cash flows present fairly, in all material respects,
the financial position of Susquehanna Media Co. and Subsidiaries (Company) at
December 31, 2001 and 2000, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2001 in
conformity with accounting principles generally accepted in the United States of
America. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.


/s/ PricewaterhouseCoopers LLP
Philadelphia, PA

March 18, 2002

                                       42

<PAGE>

                     SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                    (dollars in thousands, except share data)

<TABLE>
<CAPTION>
                                                                            December 31,
                                                                         2001        2000
                                                                         ----        ----
                                               ASSETS
<S>                                                                 <C>         <C>
Current Assets
  Accounts receivable, less allowance for doubtful
    Accounts of $1,970 in 2001 and $1,990 in 2000                   $   44,778  $  51,189
  Deferred income taxes (Note 4)                                         2,252          -
  Prepaid income taxes                                                     -        1,028
  Other current assets                                                   6,140      4,683
                                                                     ---------   ---------
    Total Current Assets                                                53,170     56,900
                                                                     ---------   ---------
Property, Plant and Equipment, at cost
  Land                                                                   5,625      4,480
  Buildings and improvements                                            15,713     11,695
  Equipment                                                            231,419    206,856
  Construction-in-progress                                               9,674     20,022
                                                                     ---------   ---------
                                                                       262,431    243,053
  Accumulated depreciation and amortization                            118,308    102,429
                                                                     ---------   ---------
    Property, Plant and Equipment, net                                 144,123    140,624
                                                                     ---------   ---------
Intangible Assets, net (Notes 2, 3 and 5)                              316,160    323,578
                                                                     ---------   ---------
Note Receivable from Parent (Note 9)                                   118,232    108,050
                                                                     ---------   ---------
Investments and Other Assets (Notes 2, 3, 6 and 9)                      37,397     30,305
                                                                     ---------   ---------
                                                                    $  669,082  $ 659,457
                                                                     =========   =========

                               LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
  Cash overdrafts                                                   $    2,687  $     598
  Current portion of long-term debt (Note 3)                             8,780         62
  Accounts payable                                                       8,386     12,859
  Accrued interest                                                       5,291      3,573
  Accrued income taxes                                                   3,155          -
  Deferred income taxes (Note 4)                                            -         494
  Accrued salaries and benefits                                          5,020      4,940
  Accrued franchise and licensing fees                                   2,647      2,897
  Deferred income                                                        1,256      3,044
  Other accrued expenses                                                 6,711      7,462
                                                                     ---------   ---------
    Total Current Liabilities                                           43,933     35,929
                                                                     ---------   ---------
Long-term Debt (Note 3)                                                486,325    500,600
                                                                     ---------   ---------
Other Liabilities (Note 7)                                              10,994      5,605
                                                                     ---------   ---------
Deferred Income Taxes (Note 4)                                          45,108     38,988
                                                                     ---------   ---------
Minority Interests (Note 7)                                             67,229     45,105
                                                                     ---------   ---------
Stockholders' Equity (Notes 3 and 7)
  Preferred stock - Voting, 7% cumulative with par value of $100,
    110,000 shares authorized                                            7,050      7,050
  Common stock - Voting, $1 par value, 1,100,000 shares authorized       1,100      1,100
  Retained earnings                                                      7,343     25,080
                                                                     ---------   ---------
    Total Stockholders' Equity                                          15,493     33,230
                                                                     ---------   ---------
                                                                    $  669,082  $ 659,457
                                                                     =========   =========
</TABLE>

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

                                      43

<PAGE>

                     SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                                     For the Years Ended December 31,
                                                   2001          2000          1999
                                                   ----          ----          ----
<S>                                            <C>             <C>           <C>
Revenues
  Radio                                          $  198,039    $  220,886    $  185,193
  Cable                                             104,758        93,113        82,720
  Data and other                                     10,632         6,590         3,353
                                                  ---------     ---------     ---------
    Total revenues                                  313,429       320,589       271,266
                                                  ---------     ---------     ---------
Operating Expenses
  Operating and programming                         123,336       113,633        95,145
  Selling                                            36,727        36,710        32,286
  General and administrative                         65,015        56,528        48,215
  Depreciation and amortization                      39,412        33,133        27,572
                                                  ---------     ---------     ---------
    Total operating expenses                        264,490       240,004       203,218
                                                  ---------     ---------     ---------
Operating Income                                     48,939        80,585        68,048
Other Income (Expense)
  Interest expense                                  (37,887)      (37,523)      (28,573)
  Interest income from loan to parent (Note 9)        6,895         6,696         4,476
  Gain (loss) on sale of assets (Note 2)             (4,185)       (3,891)       (1,499)
  Pension curtailment gain                                -             -         2,299
  Other                                                (256)       (1,474)          379
                                                  ---------     ---------     ---------
Income Before Income Taxes,
  Extraordinary Loss and
  Minority Interests                                 13,506        44,393        45,130
Provision for Income Taxes (Note 4)                  (6,538)      (16,661)      (18,044)
                                                  ---------     ---------     ----------
Income Before Extraordinary Loss and Minority
  Interests                                           6,968        27,732        27,086
Extraordinary Loss Related to Early
  Retirement of Debt, net of $2,165 tax benefit
  (Note 3)                                                -             -        (3,316)
                                                  ---------     ---------     ----------
Income Before Minority Interests                      6,968        27,732        23,770
  Minority Interests                                 (2,261)       (5,185)       (4,140)
                                                  ---------     ---------     ----------
Net Income and Comprehensive Income                   4,707        22,547        19,630
Preferred Dividends Declared                           (493)         (493)         (493)
                                                  ---------     ---------     ----------
Net Income Available for Common Shares           $    4,214    $   22,054    $   19,137
                                                  =========     =========     ==========

Basic Net Income Per Common Share (Note 8)
  Income before extraordinary loss               $     3.83    $    20.05    $    20.41
  Extraordinary loss                                      -             -         (3.01)
                                                  ---------     ---------     ----------
                                                 $     3.83    $    20.05    $    17.40
                                                  =========     =========     ==========
Diluted Net Income Per Common Share (Note 8)
  Income before extraordinary loss               $     3.83    $    20.05    $    20.13
  Extraordinary loss                                      -             -         (2.96)
                                                  ---------     ---------     ----------
                                                 $     3.83    $    20.05    $    17.17
                                                  =========     =========     ==========
</TABLE>

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

                                      44

<PAGE>

                     SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                                                   2001         2000          1999
                                                                   ----         ----          ----
<S>                                                              <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net Income                                                     $   4,707    $  22,547    $   19,630
  Adjustments to reconcile net income to net cash:
    Depreciation and amortization                                   39,412       33,133        27,572
    Minority interests                                               2,261        5,185         4,140
    Loss on sale of assets                                           4,185        3,891         1,499
    Deferred income taxes                                            3,374        1,502         4,124
    Deferred financing amortization                                  1,317        1,183           885
    Investment write-downs                                           1,500        1,100             -
    Equity in (income) losses of investees                           1,135         (342)         (652)
    Extraordinary loss                                                   -            -         3,316
    Pension curtailment gain                                             -            -        (2,299)
    Imputed deferred compensation                                        -            -            80

  Changes in assets and liabilities:
    Decrease (increase) in accounts receivable, net                  6,411       (8,171)      (10,694)
    Increase in other current assets                                (3,456)        (302)         (484)
    Increase (decrease) in accounts payable                         (4,472)      (2,491)        5,236
    Increase in accrued interest                                     1,718          465         1,417
    Change in prepaid/accrued income taxes                           4,183       (1,254)        1,501
    Increase (decrease) in accrued ESOP benefit cost                  (130)      (1,240)        1,370
    Increase (decrease) in other accrued expenses                     (580)       6,294         3,570
    Increase in other liabilities                                    5,389        5,605             -
                                                                  ---------    ---------    ---------
      Net cash provided by operating activities                     66,954       67,105        60,211
                                                                  ---------    ---------    ---------
CASH FLOWS FROM INVESTING ACTIVITIES
  Parent's repayment of note                                         4,439        3,297         5,521
  Purchase of property, plant and equipment, net                   (31,739)     (36,913)      (33,066)
  Acquisitions, net                                                (21,300)    (125,160)      (33,571)
  Decrease (increase) in investments, other assets and intangible
  assets                                                             2,462       (4,702)       (4,978)
  Loan to parent                                                   (14,622)           -      (116,850)
                                                                  ---------    ---------    ---------
    Net cash used by investing activities                          (60,760)    (163,478)     (182,944)
                                                                  ---------    ---------    ---------
CASH FLOWS FROM FINANCING ACTIVITIES
  Increase (decrease) in revolving credit borrowings                (5,700)      95,100        55,500
  Increase in cash overdrafts                                        2,089          598             -
  Non-voting subsidiary common stock transactions                   (2,090)         529             9
  Payments of preferred dividends                                     (493)        (493)         (493)
  Proceeds from long-term debt                                           -            -       350,000
  Repayment of prior debt                                                -            -      (272,600)
  Payment of deferred financing costs                                    -            -        (8,061)
  Debt prepayment penalties                                              -            -        (2,925)
                                                                  ---------    ---------    ---------
    Net cash provided (used) by financing activities                (6,194)      95,734       121,430
                                                                  ---------    ---------    ---------
NET DECREASE IN CASH                                                     -         (639)       (1,303)
CASH AND CASH EQUIVALENTS, January 1,                                    -          639         1,942
                                                                  ---------    ---------    ---------
CASH AND CASH EQUIVALENTS, December 31,                          $       -    $       -    $      639
                                                                  =========    =========    =========
</TABLE>

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

                                      45

<PAGE>

                     SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                 (in thousands)

<TABLE>

                                     Preferred Stock            Common Stock                                     Stockholders'
                                   Shares      Amounts      Shares       Amounts     Retained Earnings              Equity
                                   ------      -------      ------       -------    ---------------------       ----------------
<S>                                  <C>        <C>          <C>        <C>            <C>                       <C>
Balance, January 1, 1999             70         $7,050       1,100      $1,100         $   1,051                 $   9,201

   Net income                                                                             19,630                    19,630
   Preferred dividends declared                                                             (493)                     (493)
   Merger of cable subsidiaries                                                            2,195                     2,195
   Adjustment of minority
     interest value                                                                          748                       748
                                 ---------    --------     --------    ---------       ---------                 ---------
Balance, January 1, 2000             70          7,050       1,100       1,100            23,131                    31,281

   Net income                                                                             22,547                    22,547
   Preferred dividends declared                                                             (493)                     (493)
   Minority interest                                                                     (18,904)                  (18,904)
      revaluation (Note 7)
   Adjustment of minority
      interest value                                                                      (1,201)                   (1,201)
                                 ---------    --------     --------    ---------       ---------                  --------

Balance, January 1, 2001             70          7,050       1,100       1,100            25,080                    33,230

   Net income                                                                              4,707                     4,707
   Preferred dividends declared                                                             (493)                     (493)
   Minority interest
      revaluation (Note 7)                                                               (22,286)                  (22,286)
   Adjustment of minority
      interest value                                                                         335                       335
                                 ---------    --------     --------    ---------       ---------                 ---------

Balance, December 31, 2001           70         $7,050       1,100      $1,100         $   7,343                 $  15,493
                                     ==         ======       =====      ======         =========                 =========

</TABLE>

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

                                      46

<PAGE>

                     SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   SIGNIFICANT ACCOUNTING POLICIES

          Nature of Operations - Susquehanna Media Co. (Media) and its
     subsidiaries, Susquehanna Radio Corp. (Radio), Susquehanna Cable Co.
     (Cable), Susquehanna Data Services, Inc. (Data), Susquehanna Fiber
     Systems, Inc., Susquehanna ET Investment Inc., and Media PCS Ventures,
     Inc. (collectively, the Company), are primarily in the businesses of radio
     broadcasting, cable television services, Internet services and other
     communications-related services.  Susquehanna Fiber Systems, Inc. is a 50%
     general partner in Susquehanna Adelphia Business Solutions, a competitive
     access provider.

     Through its subsidiaries, the Company operates radio stations in major
     U.S. markets and cable television systems in Pennsylvania, Maine,
     Mississippi, Illinois, and Indiana. Internet services are provided in
     Pennsylvania, Maine and Mississippi. Radio advertising, cable television
     subscriptions, and Internet services account for approximately 63%, 33%,
     and 4% of 2001 consolidated revenues, respectively. Radio, cable and
     Internet services revenues were 69%, 29%, and 2% of 2000 consolidated
     revenues, respectively. Radio, cable and Internet services revenues were
     68%, 31%, and 1% of 1999 consolidated revenues, respectively.

          Principles of Consolidation - The consolidated financial statements
     include the accounts of Media and its subsidiaries. All significant
     intercompany accounts and transactions are eliminated. All Media common
     stock is owned by Susquehanna Pfaltzgraff Co. (the Parent).

          Use of Estimates in the Preparation of Financial Statements - The
     preparation of financial statements in conformity with generally accepted
     accounting principles requires management to make estimates and
     assumptions that affect the reported amounts of assets and liabilities and
     disclosure of contingent assets and liabilities at the date of the
     financial statements and the reported amounts of revenue and expenses
     during the reporting period. Actual results could differ from those
     estimates.

          Cash and Cash Equivalents - The Company considers all highly liquid
     debt instruments purchased with a maturity of three months or less to be
     cash equivalents.

          Credit Risk - The Company's accounts receivable are largely from
     consumers and consumer businesses whose ability to pay is subject to
     changes in general economic conditions.

          Property, Plant and Equipment - These assets are stated at cost.
     Depreciation and amortization are computed on the straight-line method for
     financial statement purposes based on the following estimated useful
     lives:

          Buildings and improvements          -       10 to 40 years
          Equipment                           -       3 to 20 years

          Depreciation expense was approximately $24.7 million, $20.2 million,
     and $16.5 million for the years ended December 31, 2001, 2000, and 1999,
     respectively.

          Asset additions and major renovations are capitalized and depreciated
     over their estimated useful lives. Costs of maintenance, repairs and minor
     renovations are charged against income. Gains or losses on dispositions
     are credited to or charged against income, and the related costs and
     accumulated depreciation are removed from the balance sheet.

                                      47

<PAGE>

                     SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

          Impairment of Long-Lived Assets - When events or changes in
     circumstances indicate that the carrying value of an asset or group of
     assets may be impaired, the estimated future undiscounted pretax cash
     flows from the affected asset(s) are compared with carrying value to
     determine if an impairment loss must be recognized. No impairment losses
     were recognized in 2001, 2000 or 1999.

          Derivative Financial Instruments - Derivative financial instruments
     are used solely to limit interest rate exposure on variable rate debt.
     Contracts may either be treated as hedges or marked to market as elected
     on a contract-by-contract basis.

          Disclosures about Fair Value of Financial Instruments - Financial
     instruments include cash and cash equivalents, investments and long-term
     debt. The fair value of investments and cash and cash equivalents
     approximate their carrying values. Floating rate debt is considered fair
     value. The Senior Subordinated Notes' fair value is based on market
     quotations.

          Investments and Other Assets - The Company's investments of less than
     20% in other entities are reported using the cost method of accounting.
     Investments in other entities, which are at least 20% and not more than
     50% owned, are reported using the equity method.

          Net Income Per Share - Basic net income per share excludes dilution
     and is computed by dividing consolidated net income available for common
     shareholders by the weighted-average number of common shares outstanding
     for the period (1.1 million shares for the years ended December 31, 2001,
     2000, and 1999). Diluted net income per share in 1999 reflects the
     potential dilution that could occur if SRC common stock options were
     exercised; resulting in the issuance of additional common stock that would
     then share in SRC's earnings.

          Revenues - Revenues are recognized in the periods that services are
     provided. Radio revenues are reported when advertising is aired and when
     events are held, net of agency commissions. Agency commissions for the
     years ended December 31, 2001, 2000, and 1999 were $27.7 million, $30.8
     million, and $25.3 million, respectively. Cable subscriber revenues are
     recognized when services are provided. Data and other revenues are
     recognized when services are provided or performed. Media's revenues were
     concentrated in the following media markets:

                                   2001              2000             1999
                                   ----              ----             ----
San Francisco                       18%               25%              25%
York, PA                            21%               18%              19%
Dallas - Fort Worth                 15%               14%              13%

          Interest - Interest paid was $33.9 million, $36.8 million, and $27.3
     million for the years ended December 31, 2001, 2000, and 1999,
     respectively. Interest relating to construction of buildings and equipment
     is capitalized as part of the related asset's cost. Approximately $0.5
     million, $0.9 million, and $1.0 million of interest were capitalized
     during the years ended December 31, 2001, 2000 and 1999, respectively.

          Deferred financing costs are included in Investments and Other Assets
     and are amortized on a straight-line basis over the repayment period of
     the related debt.

          Income Taxes - Income taxes are based on the liability method of
     accounting. Deferred income taxes reflect the future tax consequences of
     temporary differences between the tax bases of assets and liabilities and
     their financial reporting balances at each year-end. Changes in enacted
     tax rates are reflected in the tax provision as they occur.

                                      48

<PAGE>

                     SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

          New Accounting Pronouncement - In July 2001, the Financial Accounting
     Standards Board issued Statement of Financial Accounting Standards No.
     141, Business Combinations (SFAS 141), and Statement of Financial
     Accounting Standards No. 142, Goodwill and Other Intangible Assets (SFAS
     142). SFAS 141 requires all business combinations initiated after June 30,
     2001 to be accounted for using the purchase method. SFAS 141 superseded
     APB Opinion No. 16, Business Combinations, and Statement of Financial
     Accounting Standards No. 38, Accounting for Preacquisition Contingencies
     of Purchased Enterprises. SFAS 142 changes the financial accounting and
     reporting requirements for acquired goodwill and other intangible assets.
     Under SFAS 142, the Company is no longer required to amortize goodwill and
     other intangible assets with indefinite lives. However, goodwill and
     intangible assets with indefinite lives will be subject to at least annual
     testing for impairment. SFAS 142 supersedes APB Opinion No. 17, Intangible
     Assets. The Company will adopt SFAS 142 on January 1, 2002 and is in the
     process of evaluating the effect that adoption may have on its
     consolidated results of operations and financial position. The Company
     expects that its Federal Communications Commission licenses, Cable
     franchise values and goodwill intangible assets will cease being amortized
     in 2002. Amortization on these assets approximated $14.1 million and $12.2
     million for the years ended December 31, 2001 and 2000, respectively.
     Accordingly, adoption of SFAS 142 will have a material effect on the
     Company's future results of operations. As part of the SFAS 142 adoption
     process, the Company is in the process of identifying its reporting units
     and evaluating the statement's effects on its results of operations and
     financial position.

     2.   ACQUISITIONS AND DISPOSITIONS

          All acquisitions during the years ended December 31, 2001, 2000 and
     1999 have been accounted for as purchases. The results of acquired
     operations were included in the Consolidated Statements of Income since
     acquisition.

          On August 31, 2001, Cable acquired the assets of River Valley Cable
     for $8.0 million cash. Existing credit facilities were used to finance the
     acquisition. The River Valley cable system serves 3,800 customers and is
     contiguous to the Williamsport, PA cable system. The Company plans to
     eliminate the headend and upgrade the cable plant in 2002.

          On May 25, 2001, Radio purchased the stock of Sunnyside
     Communications, Inc. for $3.3 million. Sunnyside Communications, Inc. owns
     and operates WQKC-FM and WZZB-AM serving Seymour, Indiana and WAVG-AM
     serving Jeffersonville, Indiana and Louisville, Kentucky. Existing credit
     facilities were used to finance the acquisition. The purchase price has
     been included in Investments and Other Assets. These stations are being
     operated by an unrelated party under a local marketing agreement.

          On February 15, 2001, Radio purchased a forty-percent interest in
     1051FM, LLC from Jesscom, Inc. for $10 million cash. Existing credit
     facilities were used to finance the acquisition. The purchase cost was
     included in Investments and Other Assets. 1051FM, LLC owned a construction
     permit to build a Class C-1 radio station with the call letters KFME-FM
     licensed to Garden City, Missouri, which serves the Kansas City market.
     Under the terms of a joint sales agreement, Radio sells commercial airtime
     on the station and Jesscom programs and operates the station. Radio is
     required to pay 1051FM, LLC's monthly operating expenses and additional
     fees. Radio may purchase the remaining sixty-percent interest in 1051FM,
     LLC during a one-year period beginning February 14, 2004, at a fair market
     value determined by an independent appraiser (for not less than $15
     million and not more than $27 million). Operations commenced June 18,
     2001.

                                      49

<PAGE>

                     SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

          On July 20, 2000, Radio purchased the assets of Kansas City, Missouri
     radio stations KCMO-AM, KCMO-FM and KCFX-FM for $113.2 million. Radio
     broadcast rights for the Kansas City Chiefs NFL franchise through the 2002
     football season were included in the purchase. The Company's existing
     credit facilities were used to finance the acquisition. In Media's
     opinion, it was impracticable to obtain full financial statements for the
     stations acquired because they were not separate business units, certain
     expenses were not historically allocated and separate balance sheets were
     not prepared for the acquired stations. Accordingly, no proforma
     disclosures are included.

          On October 19, 2000, Data purchased the assets of Judd's Online,
     Inc., a web development company based in Winchester, Virginia for $8.5
     million cash, including approximately $1.6 million in working capital. The
     Company is integrating its existing web development operations into Judd's
     and marketing the services through an existing subsidiary.

          On September 1, 2000, a Cable subsidiary purchased the assets serving
     approximately 2,200 cable subscribers in the Montgomery/Collomsville,
     Pennsylvania area for $3.8 million cash.

          On May 22, 2000, Data purchased the assets of Krone Group Inc., a
     full service marketing communications firm located in Harrisburg,
     Pennsylvania, for $1.3 million cash.

          On October 22, 1999, Radio purchased the assets of KIKT-FM and
     KGVL-AM in Greenville, Texas for $1.2 million. The Company simultaneously
     entered into a time brokerage agreement with a third party permitting them
     to operate the stations while FCC approval is pending on facility
     adjustments that will enhance signal coverage of another company-owned
     station, KKMR-FM, Dallas/Fort Worth, Texas. The purchase price has been
     included in Investments and Other Assets, since the station may be
     ultimately sold or swapped to facilitate a separate strategic acquisition.

          On January 29,1999, a Cable subsidiary purchased assets serving
     approximately 17,000 cable subscribers in the Hanover, Pennsylvania area
     for $33.4 million cash.

          The Company has allocated the costs of purchased assets, at their
     fair market values, excluding working capital, as follows (in thousands):

<TABLE>
<CAPTION>

                                                                   2001               2000               1999
                                                                   ----               ----               ----
<S>                                                              <C>                <C>                 <C>
Radio
   Property, plant and equipment                                 $        -         $    3,581          $        -
   Investments and other assets                                      13,300                  -               1,171
   Intangible assets                                                      -            109,597                   -
                                                                 ----------         ----------          ----------
      Total                                                      $   13,300         $  113,178          $    1,171
                                                                 ===========        ===========         ==========

Cable
   Property, plant and equipment                                 $      696         $      819          $    9,566
   Intangible assets                                                  7,304              2,964              23,834
                                                                 ----------         ----------          ----------
     Total                                                       $    8,000         $    3,783          $   33,400
                                                                 ==========         ==========          ==========

Data
   Property, plant and equipment                                 $        -         $      566          $        -
   Intangible assets                                                      -              7,633                   -
                                                                 ----------         ----------          ----------
     Total                                                       $        -         $    8,199          $        -
                                                                 ==========         ==========          ==========
</TABLE>

                                      50

<PAGE>

                 SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

          Cable is involved in an extensive, phased rebuilding of its
     distribution systems. Assets replaced in the rebuilt phases were retired
     and related losses of $4.2 million in 2001, $3.9 million in 2000, and $1.5
     million in 1999 were recognized.

3.   LONG-TERM DEBT

<TABLE>
<CAPTION>
                                                                     2001                       2000
                                                                     ----                       ----

<S>                                                      <C>                        <C>
Long-term debt includes (in thousands):
         8.5% Senior Subordinated Notes                  $        150,000           $        150,000
         Term Loan "A"                                            100,000                    100,000
         Term Loan "B"                                            100,000                    100,000
         Revolving Credit Commitment                              144,900                    150,600
         Other                                                        205                         62
                                                              -----------                -----------
                                                                  495,105                    500,662

         Less amounts payable within one year                       8,780                         62
                                                              -----------                -----------

                                                            $     486,325              $     500,600
                                                              ===========                ===========
</TABLE>

          At December 31, 2001, approximately $105.0 million was available for
     borrowing under the revolving credit commitment.

          On May 12, 1999, the Company sold $150.0 million of 8.5% Senior
     Subordinated Notes due in 2009. Proceeds to the Company totaled $145.5
     million. Interest is payable semi-annually. The fair value of the Notes at
     December 31, 2001 was $153.8 million.

          On May 12, 1999, the prior Term Loan and Reducing Revolver Commitment
     were replaced by a new $450.0 million Senior Secured Credit Facility with
     a group of banks. The new facility's Revolving Credit Commitment allows
     the Company to borrow up to $250.0 million. The revolving loans begin
     reducing in 2002 and mature in 2007. The Company's two $100.0 million Term
     Loan commitments begin amortizing in 2002 and mature in 2007 and 2008.
     Both the Revolving Credit Commitment and Term Loans bear interest priced
     at the LIBOR rate plus an applicable margin based on certain ratios. The
     interest rate on the Revolving Credit Commitment was 3.37% and 7.86% at
     December 31, 2001 and 2000, respectively. The interest rate on Term Loan
     "A" was 6.31% and 7.97% and the interest rate on Term Loan "B" was 5.13 %
     and 9.19% at December 31, 2001 and 2000, respectively. Interest is payable
     quarterly or on maturity of a LIBOR-based tranche.

          The 8.61% Series A, 8.41% Series B and 11.15% Series C Senior Notes
     with insurance companies were repaid on April 16, 1999 along with a
     prepayment premium of $2.9 million. Coincident with the repayment of prior
     long-term debt, the Company incurred a $3.3 million extraordinary loss
     (net of related tax benefits) for payment of prepayment premiums and the
     write-off of unamortized deferred financing costs.

     Derivative financial instruments are used solely to limit interest rate
     exposure on its Revolving Credit Commitment and are not used for trading
     purposes. The Company has entered into a $50.0 million notional value
     interest rate swap, which expires in 2003. The effect of this agreement
     converts the interest rate on $50.0 million of variable rate debt to an
     effective interest rate of 6.5% as of December 31, 2001. The Company has
     not elected hedge accounting for this contract. The interest rate swap was
     recognized at its fair value at December 31, 2001. Approximately $1.5
     million additional interest

                                      51

<PAGE>

                 SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     expense related to the swap was recognized for the year ended December
     31, 2001. Hedge accounting may be elected for future contracts.

          The banks have collateralized interests in certain FCC licenses and
     stock pledges from shareholders of the Company and its subsidiaries. The
     banks are further collateralized by a first lien on all assets (tangible
     and intangible) of the Company and its subsidiaries excluding realty and
     vehicles. The Company has agreed to maintain debt coverage and financial
     ratios at prescribed levels. The Company has further consented to restrict
     payment of common stock dividends, investment transactions with
     affiliates, ownership changes, sale of assets and issuance of additional
     debt.

     The non-current portion of long-term debt matures in the following years
     (in thousands):

2003                $17,033                 2007              $89,903
2004                 25,935                 2008               47,375
2005                 71,038                 2009              150,000
2006                 85,041

4.   INCOME TAXES

               The provision for income taxes is summarized as follows for the
     years ended December 31, (in thousands):

<TABLE>
<CAPTION>
                                            2001              2000              1999
                                            ----              ----              ----
<S>                                    <C>                 <C>               <C>
Current
     Federal                           $      (2,212)      $    (14,337)    $     (11,195)
     State                                      (952)              (822)           (2,726)
                                       -------------       ------------     -------------
        Total current                         (3,164)           (15,159)          (13,921)
                                       -------------       ------------     -------------
Deferred
     Federal                                  (2,710)            (1,503)           (4,393)
     State                                      (664)                 1               270
                                       -------------       ------------     -------------
        Total deferred                        (3,374)            (1,502)           (4,123)
                                       -------------       ------------     -------------

Provision for Income Taxes             $      (6,538)      $    (16,661)    $     (18,044)
                                       =============       ============     =============
</TABLE>

          Income tax payments for the years ended December 31, 2001, 2000, and
     1999 were approximately $1.2 million, $18.4 million, and $14.1 million,
     respectively.

          The Company is included in the consolidated federal income tax return
     of its Parent. The Company's tax provision is computed on a separate
     return basis. Losses utilized, from other companies, in the consolidated
     return may reduce the Company's tax payments.

          Reconciliations of the difference between the U.S. statutory income
     tax rate and the Company's effective book income tax rate follow:

                                      52

<PAGE>

                 SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                         2001                2000                1999
                                                         ----                ----                ----

<S>                                                     <C>                 <C>                   <C>
U.S. statutory rate                                     35.0%                35.0%                35.0%
State income taxes, net of
         Federal income tax benefit                      7.8                 1.2                   3.5
Non-deductible amortization and expenses                 4.5                 1.2                   1.2
Other                                                    1.1                 0.1                   0.3
                                                        ----                ----                  ----
Effective book income tax rate                          48.4%               37.5 %                40.0%
                                                        ====                ====                  ====
</TABLE>

          At December 31, 2001 and 2000, deferred tax assets and liabilities
resulted from the following temporary differences (in thousands):

<TABLE>
<CAPTION>
                                                                      2001                    2000
                                                                      ----                    ----
<S>                                                             <C>                      <C>
Deferred tax assets:
     Allowance for doubtful accounts                            $       649              $      494
     Investments                                                        179                     685
     Self insured risks                                                 177                     119
     Liabilities not recognized for tax purposes                        293                     163
     Stock option benefits/deferred compensation                      2,911                   1,229
                                                                -----------              ----------

Total deferred tax assets                                             4,209                   2,690
                                                                -----------              ----------

Deferred tax liabilities:
     Pension benefits                                                 1,847                   1,608
     Book/Tax basis differences -tangible assets                     21,283                  20,277
     Book/Tax basis differences -intangible assets                   21,837                  18,467
     Investments in partnerships                                      1,844                   1,516
     Other liabilities                                                  254                     304
                                                                -----------              ----------

Total deferred tax liabilities                                       47,065                  42,172
                                                                -----------              ----------

Net deferred tax liabilities                                    $    42,856              $   39,482
                                                                ===========              ==========
</TABLE>

5.   INTANGIBLE ASSETS

     Intangible assets, at cost, are comprised of the following (in thousands):

<TABLE>
<CAPTION>
                                                                   2001                    2000
                                                                   ----                    ----
<S>                                                           <C>                    <C>
Federal Communications Commission license                     $   266,775            $   266,775
Cable franchise values                                            103,730                 96,326
Goodwill                                                           18,928                 19,011
Cable subscriber lists                                              5,154                  5,154
Favorable leases                                                    3,348                  3,629
Going concern and other values                                     12,048                 11,673
                                                                 --------               --------
                                                                  409,983                402,568
Accumulated Amortization                                           93,823                 78,990
                                                                 --------               --------
</TABLE>

                                      53

<PAGE>

                     SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S>                                                            <C>                    <C>
                                                               $  316,160             $  323,578
                                                               ==========             ==========
</TABLE>

          Cable franchise values and cable subscriber lists are being amortized
     through 2014 and 2003, respectively. Favorable leases and covenants
     not-to-compete are amortized according to the life of the agreements.
     Federal Communications Commission (FCC) licenses, going concern values and
     goodwill are amortized over periods of up to 40 years for 2001, 2000 and
     1999. Most intangible assets are being amortized using the straight-line
     method. Amortization for the years ended December 31, 2001, 2000, and 1999
     was approximately $14.7 million, $13.0 million and $11.0 million,
     respectively.

6.   INVESTMENTS AND OTHER ASSETS

          A subsidiary of the Company is a 50% general partner in Susquehanna
     Adelphia Business Solutions, a competitive access provider. A capital
     contribution of $1.3 million was made during the year ended December 31,
     1999. For the years ended December 31, 2001, 2000, and 1999, $1.4 million,
     $1.3 million and $651 thousand of income was recognized from this
     investment, respectively.

          Unamortized deferred financing costs were $5.5 million at December
     31, 2001 and $6.5 million at December 31, 2000.

          Investment losses totaling $1.5 million were recognized during the
     Year ended December 31, 2001 due to management's judgment that Media's
     investments in Radiowave and Etour were not realizable. Investment losses
     of $1.1 million were recognized during the year ended December 31, 2000.
     The losses were included in Other Expense.

7.   STOCKHOLDERS' EQUITY

          Radio maintains an Employee Stock Plan to compensate certain key
     employees who may purchase Susquehanna Radio Corp. Class "B" non-voting
     common stock at the then current value. With each share purchased,
     participants receive options to purchase two additional shares at the same
     value. Options expire ten years and one month after the grant date. Total
     shares and options offered may not exceed 400,000 shares. Options awarded
     are subject to settlement in cash. Shares are subject to repurchase by
     Radio, generally at values determined annually in accordance with the Plan
     Agreement. The Plan's transaction year is April 1 through March 31.
     Although Radio may modify, suspend, or terminate the Plan at any time,
     previously offered purchase rights or options are not subject to change.

          Option activity in the Radio Employee Stock Plan was as follows:

                                                    Shares      Option Price
                                                    ------      ------------
Balance as January 1, 1999                          72,360     $ 1.26 - $ 18.82
   Exercised                                        (2,328)    $ 1.26 - $ 18.82
                                                     -----
Balance at December 31, 1999                        70,032     $ 1.26 - $ 18.82
                                                    ======

                                      54

<PAGE>

                     SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Balance  as January 1, 2000                         70,032     $ 1.26 - $ 18.82
   Exercised                                       (70,032)    $ 1.26 - $ 18.82
                                                    ------
Balance at December 31, 2000                             -
                                                    ======

                                                   2001       2000        1999
                                                   ----       ----        ----
Total compensation
expense (in thousands)                             $ -        $ -         $ 80
Risk free rate                                     N/A        N/A          N/A

     No options were granted in the years ended December 31, 2001 or 2000.

          The Susquehanna Cable Co. Performance Share Plan is a non-qualified
     deferred compensation plan designed to compensate certain key employees.
     Participants are granted performance share rights, which may be purchased
     by deferring compensation. Performance shares are valued using a formula
     based on stockholders' equity, earnings and Cable's appraised value as
     determined by Susquehanna Pfaltzgraff Co.'s annual independent ESOP
     valuation. There were no performance share rights granted in 2000 or 2001.

          On April 10, 2000, the Susquehanna Pfaltzgraff Co. Board of Directors
     changed the method of determining the repurchase value for Susquehanna
     Radio Corp.'s Employee Stock Plan and Susquehanna Cable Co.'s Performance
     Share Plan.

          Over a period ending April 1, 2002, repurchase values for both plans
     will transition to values based upon Susquehanna Pfaltzgraff Co.'s annual
     independent ESOP valuation. On July 1, 2000, repurchase values were based
     one-third on appraised value and two-thirds on the previous formula value.
     The revaluation of Radio's non-voting common shares increased minority
     interests by $18.9 million on July 1, 2000. The revaluation of Cable's
     performance shares resulted in recognition of a $3.0 million compensation
     expense on July 1, 2000.

          On April 1, 2001, repurchase values became based two-thirds on
     appraised value and one-third on the previous formula value. Radio
     minority interest values increased $22.3 million and Cable performance
     shares increased in value by $4.2 million on April 1, 2001. Other
     Liabilities include $7.2 million and $5.0 million related to Cable's
     performance shares at December 31, 2001 and 2000, respectively. On April
     1, 2002 and thereafter, repurchase values will be based on appraised
     values for Radio and Cable as determined by Susquehanna Pfaltzgraff Co.'s
     annual independent ESOP valuation. Based on the ESOP valuation performed
     as of December 31, 2001, Radio minority interests is expected to increase
     $16.8 million as of April 1, 2002. A $3.9 million compensation charge
     against operating income is expected to be recognized as of April 1, 2002
     for the final step in the revaluation of Cable performance shares.

          The increase in minority interests due to revaluation of Radio's
     non-voting common shares is a non-cash item for purposes of the Statements
     of Cash Flows.

          On April 25, 2001, Radio repurchased and retired 18,884 shares of SRC
     non-voting common stock from a former radio station manager for $1.8
     million. The transaction was accounted for using the treasury stock
     method. As of December 31, 2001, former employees held 68,540 shares of
     Radio non-voting common stock with an approximate value of $11.7 million.
     The stock is subject to required repurchase by the Company.

         Certain minority interests are valued using a contractual formula,
     which differs from a pro rata valuation. Accordingly, the contractual value
     is used to determine the liability. Any adjustment to the pro rata amount
     is charged or credited to stockholders' equity. Other minority interest
     expense recognized in the income statement is adjusted for subsidiaries
     with a stockholders' deficit.

                                      55

<PAGE>

                     SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

          On August 1, 1999, two Cable subsidiaries merged with two other
     Cable subsidiaries. These mergers had no impact on the Company's results
     of operations. The mergers of a subsidiary with stockholders' deficit into
     a subsidiary with stockholders' equity resulted in a $2.2 million decrease
     in minority interests and a corresponding increase in consolidated
     stockholders' equity.

8.   BASIC AND DILUTED NET INCOME PER COMMON SHARE

          The following table provides a reconciliation of the computation
     from basic to diluted net income per share (in thousands, except for per
     share data):

                                             2001         2000           1999
                                             ----         ----           ----
Net income before extraordinary loss      $  4,707     $  22,547     $  22,946
Extraordinary loss                               -             -        (3,316)
                                          --------     ---------     ---------
Net income                                   4,707        22,547        19,630
Preferred dividends declared                  (493)         (493)         (493)
                                          --------     ---------     ---------

Basic net income available for
  common shares                              4,214        22,054        19,137
Dilutive effect of potential
  issuance of SRC common stock                   -             -          (248)
                                          --------     ---------     ---------
Dilutive net income available for
  common shares                           $  4,214     $  22,054     $  18,889
                                          ========     =========     =========

Basic and diluted weighted-average
  shares                                     1,100         1,100         1,100
                                          ========     =========     =========

Basic net income per common share
  Income before extraordinary loss        $   3.83     $   20.05     $   20.41
  Extraordinary loss                             -             -         (3.01)
                                          --------     ---------     ---------
                                          $   3.83     $   20.05     $   17.40
                                          ========     =========     =========

Diluted net income per common share
  Income before extraordinary loss        $   3.83     $   20.05     $   20.13
  Extraordinary loss                             -             -         (2.96)
                                          --------     ---------     ---------
                                          $   3.83     $   20.05     $   17.17
                                          ========     =========     =========

9.   EMPLOYEE BENEFITS

          On March 19, 1999, the Parent's Board of Directors approved creation
     of an Employee Stock Ownership Plan (ESOP) for Susquehanna Pfaltzgraff Co.
     Full-time employees participate in the ESOP. ESOP expense of $9.1 million,
     $8.3 million and $6.4 million was recorded for the years ended December
     31, 2001, 2000 and 1999, respectively.

          On May 12, 1999, the Company made a $116.9 million twenty-year loan
     to its Parent at a 6% interest rate. Loan proceeds were used to fund the
     Parent's ESOP. Principal and interest payments totaling $10.0 million are
     receivable annually in December. On July 18, 2001, the Company loaned its
     Parent an additional $14.6 million at a 6.5% interest rate, repayable in
     18 annual installments of $1.4 million commencing December 30, 2001. The
     loan proceeds were ultimately used for the Susquehanna Pfaltzgraff Co.
     ESOP Trust's purchase of additional shares from Susquehanna Pfaltzgraff
     Co. shareholders. On December 30, 2001, 2000 and 1999, the Parent made
     principal payments of $4.4 million, $3.3 million and $5.5 million,
     respectively. Due to the Parent subsidiary relationship, it is
     impracticable to determine the note's fair values.

                                      56

<PAGE>

                     SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

          Certain full-time employees of the Company and its subsidiaries are
     covered by the Susquehanna Pfaltzgraff Co. Pension Plan (the Plan), a
     noncontributory qualified defined benefit pension plan. Benefits under the
     Plan are based on employees' years of service and earnings over part or
     all of their careers through April 1999, when benefit accruals ceased. On
     March 19, 1999, the Parent's Board of Directors approved a cessation of
     benefit accruals under the Plan effective April 30, 1999. Based on an
     independent actuary's calculations, the Company was allocated a $2.3
     million curtailment gain related to the Plan.

                                      57

<PAGE>

                     SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     The funded status of the Plan at December 31, was as follows (in
thousands):

                                                          2001          2000
                                                          ----          ----

Benefit obligation, beginning of year                  $  25,480     $  24,352
   Interest cost                                           1,787         1,770
   Actuarial losses                                          726           559
   Benefits paid                                          (1,214)       (1,201)
                                                       ----------    ----------

Benefit obligation, end of year                           26,779        25,480
                                                       ---------     ---------

Fair value of plan assets, beginning of year              38,054        40,033
   Actual return on plan assets                           (1,403)         (778)
   Benefits paid                                          (1,214)       (1,201)
                                                       ----------    ----------

Fair value of plan assets, end of year                    35,437        38,054
                                                       ---------     ---------

Excess of fair value of plan assets over
   benefit obligation at end of year                       8,658        12,574
   Unrecognized net actuarial gain                            73        (5,195)
   Unrecognized prior service costs                          665           709
                                                       ---------     ---------

Prepaid pension cost at December 31,                   $   9,396     $   8,088
                                                       =========     =========

      The Plan's net pension costs for the years ended December 31, included the
following components (in thousands):

                                             2001          2000           1999
                                             ----          ----           ----

Service cost                               $    210     $    230      $    230
Interest cost                                 1,787        1,770         1,744
Expected return on plan assets               (3,297)      (3,074)       (2,719)
Amortization of net asset                       (53)           -             4
Amortization of prior service cost               44           44           (41)
                                           --------     ---------     ---------

Net periodic pension cost                  $ (1,309)    $ (1,030)     $   (782)
                                           =========    ==========    =========

          Negative pension cost recognized for the years ended December 31,
     2001, 2000 and 1999 was $530 thousand, $376 thousand and $219 thousand,
     respectively. Included in the Company's other assets are prepaid pension
     costs of $4.4 million and $3.9 million at December 31, 2001 and 2000.

          The Plan's funding policy is to make contributions, as required by
     various regulations, not to exceed the maximum amounts deductible for
     federal income tax purposes (none in 2001, 2000 or 1999). Plan assets,
     primarily listed bonds and stocks, are held by independent trustees. The
     weighted average discount rate used in determining the actuarial present
     value of projected benefit obligations was 7.0% and 7.25%, respectively,
     for 2001 and 2000. The expected long-term rate of return on Plan assets was
     9% for both 2001 and 2000.

          The Parent also sponsors a defined contribution (401k) plan, which
     covers all full-time employees. Effective September 7, 2001, the match
     was suspended as a cost-savings measure. The plan formerly matched 75% of
     the first 2% of salary contributed by a participant. The Company
     contributed

                                      58

<PAGE>

                     SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     approximately $584 thousand, $714 thousand, and $590 thousand to the plan
     for the years ended December 31, 2001, 2000 and 1999, respectively.

10.   LEASE COMMITMENTS

          Rental expense for operating leases was $6.1 million, $5.2
     million, and $4.6 million for the years ended December 31, 2001, 2000, and
     1999, respectively.

          Annual aggregate minimum rental commitments under non-cancelable
     operating leases are as follows (in thousands of dollars):

2002            $4,214   2005              $4,056
2003             3,981   2006               3,985
2004             4,008   2007 and beyond   11,240

11.   RELATED PARTIES

          The Company purchases management services, office space and
     administrative services from related parties, primarily its Parent.
     Included in general and administrative expenses for the years ended
     December 31, are charges for (in thousands):

<TABLE>
<CAPTION>

                                                             2001          2000          1999
                                                             ----          ----          ----
<S>                                                      <C>           <C>           <C>
Management fees                                          $     5,743   $     4,103   $     2,846
Accounting, internal audit and tax services                      855           732           630
Human resources                                                  957           988         1,119
Treasury                                                         317           314           354
Occupancy, vehicle rentals and administrative services           870           897           857
                                                         -----------   -----------   -----------
                                                         $     8,742   $     7,034   $     5,806
                                                         ===========   ===========   ===========
</TABLE>

          Expenses are allocated based on the Parent's best estimates of
     proportional or incremental costs, whichever is more representative of
     costs on a stand-alone basis. In management's opinion, expenses shown in
     the financial statements approximate expenses on a stand-alone basis.

          Media's preferred stock is owned by related parties.

12.   CONTINGENCIES AND COMMITMENTS

          A Federal Communications Commission (FCC) Report and Order
     approved the move of Radio Station WHMA-FM to serve the Atlanta, Georgia
     Metro area. A mutually exclusive applicant filed a Petition for
     Reconsideration that was subsequently denied. Unless a further appeal is
     made, the FCC's Report and Order will become final. Once the Order becomes
     final, the Company must pay WHMA-FM's former owners $10.0 million in
     accordance with the original purchase agreement. The $10.0 million payment
     will be recognized as additional FCC License cost. The Company commenced
     operations in College Park, Georgia as WWWQ-FM in January 2001.

          KNBR, Inc., a subsidiary of the Company, is a limited partner in
     San Francisco Baseball

                                      59

<PAGE>

                     SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     Associates L.P. KNBR, Inc. has entered into a rights agreement that allows
     radio station KNBR-AM to broadcast Giants' baseball games through the 2004
     baseball season. The agreement requires annual rights payments ranging to
     $6 million in 2004. KNBR, Inc. expensed rights payment of $5.4 million,
     $5.3 million, and $4.8 million during the 2001, 2000, and 1999 baseball
     seasons, respectively.

          On October 26, 2001, the National Football League (NFL) approved
     a contract extending KCFX-FM's broadcast rights for the Kansas City Chiefs
     NFL franchise through the 2006 football season. The contract, which was
     effective as of August 1, 2001, requires rights payments ranging from $2.0
     million for the 2001 football season to $2.4 million for the 2006 football
     season. Rights payments totaling $2.2 million were paid and charged
     against income during the fourth quarter of 2000.

          An unrelated cable television Multiple System Operator (MSO)
     owns a 14.9% interest in Susquehanna Cable Co. and a 17.75% interest in
     each of Cable's operating subsidiaries. If the MSO offers to purchase the
     Company's interest in its cable television operations, the Company must
     either accept or reject the offer within sixty days. If the Company
     rejects the offer, the MSO may require the Company to repurchase the MSO's
     holdings at the offer price plus a fee equal to 3% of the MSO's $25.0
     million investment, compounded annually from 1993.

          Through November 12, 2003, the MSO may require the Company to
     repurchase its ownership interest at a price to be determined by
     independent appraisers. The "Put Right" may not be exercised if exercise
     would create default under certain debt agreements. If the "Put Right" is
     exercised, the Company may, at its sole discretion and in lieu of
     acquiring the MSO's ownership interests, sell Cable and pay the MSO its
     pro rata share of net proceeds. In any event, the MSO must be offered a
     first right to purchase Cable.

          The Company is involved in litigation and administrative
     proceedings primarily arising in the normal course of its business. In the
     opinion of management, the Company's recovery, if any, or the Company's
     liability, if any, under any pending litigation or administrative
     proceeding would not materially affect its financial condition or
     operations.

13.  SEGMENTS

          The Company's four business units have separate management teams
     and infrastructures that offer different products and services. The
     business units have been aggregated into three reportable segments: Radio,
     Cable, and Data and Other. Data and Other includes Internet access,
     hosting, and web creation revenues.

          The accounting policies of the segments are the same as those
     described in the summary of significant accounting policies. The Company
     evaluates performance based on operating income of the respective business
     units.

          Segment information for the years ended December 31, 2001, 2000,
     and 1999 was as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                 Data
                                                                                 ----
                                                        Radio        Cable      and Other    Consolidated
                                                        -----        -----      ---------    ------------
<S>                                                 <C>          <C>          <C>              <C>
For the Year Ended December 31, 2001
Operating income                                    $  42,359    $  11,788    $    (5,208)     $  48,939
Interest expense, net                                   9,099       11,861         16,927         37,887
</TABLE>

                                      60

<PAGE>

                     SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S>                                                 <C>          <C>          <C>              <C>
Depreciation and amortization                          11,870       26,504          1,038         39,412
Income (loss) before income taxes
   and minority interests                              32,199       (4,257)       (14,435)        13,507
Provision (benefit) for income taxes                   12,573         (832)        (5,203)         6,538
Identifiable assets                                   342,356      191,412        135,314        669,082
Capital expenditures                                    8,539       22,772            428         31,739

For the Year Ended December 31, 2000
Operating income                                    $  67,579    $  12,481    $       525      $  80,585
Interest expense, net                                   8,220       14,462         14,841         37,523
Depreciation and amortization                           9,899       22,494            740         33,133
Income (loss) before income taxes,
   and minority interests                              58,144       (5,872)        (7,879)        44,393
Provision (benefit) for income taxes                   21,092       (1,717)        (2,714)        16,661
Identifiable assets                                   339,618      187,822        132,017        659,457
Capital expenditures                                    5,574       30,359            980         36,913

For the Year Ended December 31, 1999
Operating income (loss)                             $  51,866    $  15,225    $       957      $  68,048
Interest expense, net                                   6,310       11,802         10,461         28,573
Depreciation and amortization                           7,965       19,048            559         27,572
Income (loss) before income taxes, and minority
   interests                                           47,212        2,290         (4,372)        45,130
Provision (benefit) for income taxes                   18,531        1,024         (1,511)        18,044
Identifiable assets                                   222,462      177,797        125,883        526,142
Capital expenditures                                    3,400       28,375          1,291         33,066
</TABLE>

14.   SUBSEQUENT EVENT

          On January 15, 2002, Cable entered into an agreement to purchase
     certain assets of Fairbanks Communications, Inc. for $26.5 million cash.
     The assets comprise a single cable system that serves 11,000 customers in
     the Lawrenceburg, Indiana area. Existing credit facilities will be
     utilized to finance the acquisition. The closing is expected during the
     second quarter 2002.

                                      61

<PAGE>

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

     None.

                                      62

<PAGE>

                                    PART III

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

          Our by-laws provide that the number of directors shall not be
less than three nor more than seven and may be fixed from time to time by
resolution of our board of directors. Our board is currently comprised of six
directors. All members of our board of directors are elected annually by our
parent, Susquehanna Pfaltzgraff.

          The following table sets forth certain information with respect
to our directors and executive officers and other key employees:

           Name       Age                      Position(s)
           ----       ---                      -----------
Louis J. Appell, Jr.  77   Chairman of the Board of Directors
Peter P. Brubaker     55   Director, Chief Executive Officer and President
Craig W. Bremer       53   Director, Secretary and General Counsel
John L. Finlayson     60   Director and Vice President
David E. Kennedy      49   Director and Vice President
William H. Simpson    60   Director
Alan L. Brayman       50   Treasurer
James D. Munchel      47   President and Chief Operating Officer of Susquehanna
                           Cable

          Louis J. Appell, Jr. is the Chairman of the Board of Directors of
Susquehanna Media, a position he has held since 1993.  He is also Chairman of
the Board of Susquehanna Pfaltzgraff.  He has over fifty years of experience in
the communications industry.  Mr. Appell holds a BA degree from Harvard College.

          Peter P. Brubaker is a Director, the Chief Executive Officer and
President of Susquehanna Media.  He has been a director and officer of
Susquehanna Media since 1993.  Prior to 1995, Mr. Brubaker was Vice
President/Finance of Susquehanna Pfaltzgraff.  He joined Susquehanna
Pfaltzgraff in 1977 and assumed responsibility for the cable operations in
1979.  He holds a BA degree from Wesleyan University and an MBA degree from the
Harvard Business School.  Mr. Brubaker serves as a director of the National
Cable Television Association.

          Craig W. Bremer is a Director and the Secretary and General Counsel
of Susquehanna Media, positions he has held since 1993. He is also the
Secretary of Susquehanna Pfaltzgraff. Mr. Bremer has been employed by
Susquehanna Pfaltzgraff since 1978. Prior to joining Susquehanna Pfaltzgraff,
Mr. Bremer was an associate with the law firm of Beckley & Madden, Harrisburg,
Pennsylvania. He holds a JD degree from Dickinson School of Law and is a member
of the Pennsylvania Bar. He earned a BS degree in History from Washington & Lee
University.

          John L. Finlayson is a Director and Vice President of Susquehanna
Media and the Chief Financial Officer of Susquehanna Pfaltzgraff, where he has
been employed since 1978. He has been a Vice President of Susquehanna Media
since 1993. Prior to 1978, Mr. Finlayson was an audit manager with Arthur
Andersen & Co. He is a CPA and a graduate of Franklin and Marshall College.

                                      63

<PAGE>

          David E. Kennedy is a Director and a Vice President of Susquehanna
Media.  He has also been President of Susquehanna Radio since 1993.  Mr.
Kennedy joined the radio group in 1973 as an on-air personality of its former
Toledo, Ohio station.  He has held positions in programming, planning and
research during his career.  Mr. Kennedy is a graduate of the University of
Toledo and holds masters and doctoral degrees from Bowling Green State
University.  He serves as a director of the Radio Advertising Bureau and as a
director of the National Association of Broadcasters.

          William H. Simpson is a Director of Susquehanna Media and has served
as such since 1993.  He has been employed by Susquehanna Pfaltzgraff or an
affiliated corporation since 1971 and was promoted to his current position as
President and Chief Executive Office on January 1, 2002.  He was formerly
President of The Pfaltzgraff Co. from 1981 to 2001 and Vice President and
General Counsel of Susquehanna Pfaltzgraff from 1971 to 1981.  Mr. Simpson is a
graduate of the United States Air Force Academy and Harvard Law School.

          Alan L. Brayman is the Treasurer of Susquehanna Media.  He is also
Vice President, Treasury Operations, of Susquehanna Pfaltzgraff.  Mr. Brayman
joined Susquehanna Media in February 1998.  Prior to that, he was a principal
of Global Treasury Solutions from 1996 through January 1998.  Mr. Brayman was
also Assistant Treasurer and an officer of VF Corporation, an apparel
manufacturer, from January 1993 to December 1995.  Prior to that, Mr. Brayman
was employed by Armstrong World Industries Inc., a diversified manufacturer,
from 1973 to 1992, where he was Assistant Treasurer.  Mr. Brayman is a graduate
of the University of Delaware and has an MBA from Shippensburg University.

          James D. Munchel is the President and Chief Operating Officer of
Susquehanna Cable.  Mr. Munchel oversees the operations of all Susquehanna
Cable systems.  He joined a predecessor of Susquehanna Media in 1981 and was
promoted to General Manager of the York cable system in 1986.  Mr. Munchel was
promoted to his current position in 1999.  He is a graduate of Shippensburg
University.

ITEM 11.   EXECUTIVE COMPENSATION

          We do not compensate directors for services provided in that
capacity.

          We have no executive employees.  All of our executive officers are
also executive officers of Susquehanna Pfaltzgraff, (our parent company).
Susquehanna Pfaltzgraff paid all compensation of our executive officers under a
management agreement between Susquehanna Pfaltzgraff and us.  Under that
agreement, we pay a fee to Susquehanna Pfaltzgraff for executive office space,
services of the legal department and management services, including
compensation for the services rendered to us by the executive officers of
Susquehanna Pfaltzgraff.  Under the agreement, we paid a management fee in the
amount of $5.7 million in 2001.  As executive officers of Susquehanna
Pfaltzgraff, our executive officers will continue to render services to
Susquehanna Pfaltzgraff and its other subsidiaries in addition to us.

                                       64

<PAGE>

ITEM 12   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     SUSQUEHANNA MEDIA CO.

          We have the authority under our charter to issue 1,100,000 shares of
common stock, par value $1.00 per share, and 110,000 shares of 7% cumulative
preferred voting stock, par value $100.00 per share.  As of December 31, 2001,
we had outstanding 1,100,000 shares of common stock and 70,499.22 shares of
preferred stock.  The holders of our preferred stock are entitled to an annual
cumulative preferential dividend of $7.00 per share.  After payment of the
preferred stock dividend, holders of our preferred stock do not participate in
dividends on our common stock.  In the event of a liquidation of our company,
our preferred stockholders are entitled to a $100.00 liquidation preference and
any accrued and unpaid preferred stock dividends.  Thereafter, only common
stockholders are entitled to distributions.  Our preferred stock is not
convertible into our common stock.  The holders of our preferred stock and
common stock vote together as one class on all matters voted upon by our
stockholders.  Both classes receive one vote per share.

          All of the outstanding common stock of Susquehanna Media is owned by
our parent, Susquehanna Pfaltzgraff.  All of our preferred stock is owned by
related parties.  The following table sets forth certain information regarding
the beneficial ownership of our preferred stock as of December 31, 2001 by:

               .   each of our directors and executive officers;

               .   all of our directors and executive officers as a group; and

               .   each person (or group of affiliated persons) known by us to
                   beneficially own more than 5% of our outstanding preferred
                   stock.

          Unless otherwise indicated, each person has sole voting and
investment power with respect to the preferred shares shown as beneficially
owned by such person.

<TABLE>
<CAPTION>
                                                     Shares Beneficially Owned
                                                     -------------------------
           Name Of Beneficial Owner               Number                    Percent
           ------------------------               ------                    -------
<S>                                              <C>                        <C>
Directors and Executive Officers
Louis J. Appell, Jr./(1)/                        5,095.98                    7.2%
Peter P. Brubaker                                  793.77                    1.1%
Craig W. Bremer                                        --                     --
William H. Simpson                                     --                     --
John L. Finlayson                                      --                     --
Alan L. Brayman                                        --                     --
David E. Kennedy                                       --                     --
All directors and executive officers as a
  group (7 persons)                              5,889.75                    8.3%
Other 5% Holders
Louis J. Appell, III/(2)/                        7,513.71                   10.7%
Helen F. Appell, II/(3)/                         7,513.71                   10.7%
Barbara F. Appell/(4)/                           7,513.71                   10.7%
Walter M. Norton/(5)/                           32,085.41                   45.5%

</TABLE>

____________________
/(1)/     Shares held by Louis J. Appell, Jr. and Josephine S. Appell, as
          trustees of the Louis J. Appell, Jr. revocable trust.  Address is 140
          East Market Street, York, PA 17401.

                                       65

<PAGE>

/(2)/     Address is 1331 Via Colonna Terrace, Davis, CA 95616.

/(3)/     Address is 1700 Powder Mill Road, York, PA 17403.

/(4)/     Address is 306 West Princess Street, York, PA 17404.

/(5)/     Of these shares, (a) 8,324.26 are held jointly with Helen A. Norton;
          (b) 5,109.81 are held individually; (c) 277.48 are held by Helen A.
          and Walter M. Norton as trustees of the Helen A. Norton revocable
          trust; and (d) 18,373.86 are held in trust by Walter M. Norton.
          Address is 126 Skassen Lane, Harpswell, ME 04079.

     SUSQUEHANNA PFALTZGRAFF

          Susquehanna Pfaltzgraff Co. (Susquehanna Pfaltzgraff) has the
authority under its charter to issue 40,000,000 shares of common stock, par
value $.01 per share, 50,000,000 shares of ESOP common stock, par value $.01
per share, and 10,000,000 shares of Class A nonvoting common stock, par value
$.01 per share.  At December 31, 2001, we had outstanding 18,241,800 shares of
common stock, 7,023,727 shares of ESOP common stock and 2,301,555 shares of
Class A nonvoting common stock.  The holders of the ESOP common stock are
entitled to an annual cumulative preferential dividend of approximately $1.05
per share.  After payment of the ESOP common stock dividend, the ESOP common
stock, the common stock and the Class A nonvoting common stock share equally
and ratably on a share for share basis in dividends.  In the event of a
liquidation of Susquehanna Pfaltzgraff, the holders of ESOP common stock are
entitled to the payment of all accrued and unpaid dividends before any
distributions to holders of common stock or Class A common stock.  Thereafter,
all three classes of stock share in distributions on a pro rata basis.  Except
as required by law, the holders of Class A nonvoting common stock have no
voting rights.  Each share of common stock and ESOP common stock is entitled to
one vote on all matters submitted to a vote of stockholders.

          The following table sets forth certain information regarding the
beneficial ownership of Susquehanna Pfaltzgraff's common stock, ESOP common
stock and Class A nonvoting common stock as of December 31, 2001 by:

               .   each of our directors and executive officers;

               .   all of our directors and executive officers as a group; and

               .   each person (or group of affiliated persons) known by us to
                   beneficially own more than 5% of our outstanding common
                   stock.

          Unless otherwise indicated, each person has sole voting and
investment power with respect to the shares shown as beneficially owned by such
person.

                                       66

<PAGE>

<TABLE>
<CAPTION>
                                                Percentage    Number of    Percentage      Number of
                                  Number of        of           ESOP        of ESOP        Class A
                                   Common        Common        Common        Common        Common        Percentage
                                   Shares        Shares        Shares        Shares        Shares     of Class A Common      Total
                                Beneficially  Beneficially  Beneficially  Beneficially  Beneficially  Shares Beneficially   Voting
  Name of Beneficial Owner        Ownend         Owned         Owned         Owned         Owned           Owned          Power/(5)/
  ------------------------         -----         -----         -----         -----         -----           -----          ----------
<S>                              <C>            <C>        <C>                <C>       <C>                <C>              <C>
Directors and Executive
  Officers
Louis J. Appell, Jr./(1)//(2)/       64,204       0.3%            30           --       1,252,900          54.4%             0.3%
William H. Simpson/(1)/               --          --           1,537           --         426,085          18.5%              --
Peter B. Brubaker/(1)/                --          --           1,906           --         311,085          13.5%              --
John L. Finlayson/(1)/                --          --           1,751           --         311,485          13.5%              --
Craig W. Bremer/(1)/                  --          --           1,751           --              --            --               --
Alan L. Brayman/(1)/                  --          --           1,750           --              --            --               --
David E. Kennedy/(1)/                 --          --           1,906           --              --            --               --
Officers and directors
  as a group (7 persons)              --          --             --            --       2,301,555          100%               --
Other 5% Holders
Louis J. Appell Trusts/(3)/      16,824,300     90.4%            --            --            --              --             66.4%
Susquehanna Pfaltzgraff
  ESOP/(4)/                           --          --       6,088,336          85.5%          --              --             27.8%

</TABLE>

____________________
/(1)/     All addresses are 140 East Market Street, York, PA 17401.

/(2)/     Includes common shares held by Nathan Appell Trust for the benefit of
          Louis J. Appell, Jr.

/(3)/     Includes shares held as follows: (a) Louis J. Appell residuary trust
          for the benefit of Louis J. Appell, Jr. (5,861,800 shares); (b) Louis
          J. Appell residuary trust for the benefit of Helen A. Norton
          (5,968,900 shares); and (c) Louis J. Appell residuary trust for the
          benefit of George N. Appell and his descendants (4,993,600 shares).
          Addresses for each trust are 140 East Market Street, York, PA 17401.

/(4)/     Held of record by State Street Bank and Trust Co., as trustee of the
          Susquehanna Pfaltzgraff Co. Employee Stock Ownership Plan.  Address
          is P.O. Box 1521, Boston, MA 02104-9818.

/(5)/     Except in limited circumstances, the ESOP trustee votes all allocated
          ESOP shares held in trust.  Therefore, voting power reflects the
          voting of all allocated trust shares.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     RELATED PARTY TRANSACTIONS

          Susquehanna Pfaltzgraff, our parent company, provides us with
management services, executive office space and services of the legal
department.  Under an agreement between Susquehanna Pfaltzgraff and us, we paid
a management fee for such services in 2001 and 2000 in the amount of $5.7
million and $4.1 million, respectively.  Susquehanna Pfaltzgraff also provides
us, at cost, accounting and tax services, human resources services, treasury
services and administrative services.  For such services in 2001 and 2000, we
paid Susquehanna Pfaltzgraff an aggregate of $2.7 million and $2.6 million,
respectively.  Expenses are allocated based on the parent's best estimates of
proportional or incremental cost, whichever is deemed more representative of
cost on a stand-alone basis.

                                       67

<PAGE>

          An indirect subsidiary of ours leases vehicles and equipment from
Queen Street Leasing.  Radio leases a studio property from G-III Partners.  We
paid Queen Street Leasing and G-III Partners approximately $95,000 and
$178,000, respectively, in 2001 under such leases.  Queen Street Leasing and
G-III Partners are limited partnerships owned directly and indirectly by
Susquehanna Pfaltzgraff Co. and certain members of the Appell families.

          We and certain of our subsidiaries have entered into a Tax Sharing
Agreement with Susquehanna Pfaltzgraff, The Pfaltzgraff Co. and certain
subsidiaries of The Pfaltzgraff Co. for the payment of federal income taxes on
a consolidated basis.  The Tax Sharing Agreement establishes a method for the
computation, collection and payment of taxes by Susquehanna Pfaltzgraff and the
contribution to such payment by us and The Pfaltzgraff Co.

          Upon completion of the 1999 offering of senior subordinated notes, we
loaned $116.9 million to Susquehanna Pfaltzgraff, which it then loaned to its
newly formed employee stock ownership plan.  The employee stock ownership plan
used the proceeds of the loan to purchase approximately $116.9 million of
Susquehanna Pfaltzgraff Co.'s common stock from trusts for the benefit of Mr.
Appell, his siblings and certain members of their families.  On July 18, 2001,
we loaned $14.6 million to Susquehanna Pfaltzgraff, which it then loaned to its
employee stock ownership plan.  The employee stock ownership plan used the
proceeds of the loan to purchase a similar amount of Susquehanna Pfalzgraff
stock from members of the Appell families.  Our employees participate in the
employee stock ownership plan.  The loans to Susquehanna Pfaltzgraff Co.
matures on December 30, 2018 and bears interest at a per annum rate of 6.0% on
the original loan and 6.5% on the 2001 loan.  We expect the loan to be repaid
in annual installments of principal and interest.  Related interest income was
$6.9 million and $6.7 million in 2001 and 2000, respectively.

          We have 70,499.22 shares of voting preferred stock, $100 par value
per share outstanding.  The holders of the preferred stock are entitled to a
cumulative annual dividend of 7.0%.  The total amount of dividends paid on the
preferred stock in 2001 was $0.5 million.  The preferred stock is held by
certain members of Mr. Appell's family, trusts of which such persons are
trustees or beneficiaries and Peter P. Brubaker.  The holders of the preferred
stock have no right to require us to redeem their preferred stock.

          Each of these transactions was on terms and conditions no less
favorable to us than we would be able to obtain from unaffiliated third parties.

     THE LENFEST AGREEMENT

          Pursuant to an agreement among Lenfest Communications, Inc.
(Lenfest), Susquehanna Cable and certain of its subsidiaries (as amended, the
"Agreement"), Lenfest held minority ownership interests equal to 14.9% of
Susquehanna Cable and 17.75% of each of its principal operating subsidiaries.
Lenfest's ownership interests were acquired in exchange for capital
contributions of $11.0 million in cash in May 1993 and cable television systems
in December 1993 valued at $14.0 million.  The cable systems are located in Red
Lion and Mount Wolf, Pennsylvania and are now part of the York system.  In
January 2000, Comcast Corporation acquired Lenfest Communications, Inc. and
consequently, Lenfest's interest in Susquehanna Cable and certain of its
subsidiaries.  Comcast has succeeded to the Agreement's rights and obligations.
Programming costs for 2001 and 2000 were approximately $2.1 million and $1.9
million, respectively, higher than expected due to the loss of programming
discounts due to the change in ownership.  We anticipate that the cost of cable

                                       68

<PAGE>

programming will increase in the future as cable programming rates increase and
additional sources of cable programming become available.

          The Agreement provides for a right of first refusal whereby neither
Comcast nor Susquehanna Cable may sell its ownership interests without offering
them first to the other party. In addition, Susquehanna Cable may not sell any
cable television systems without offering them first to Comcast. If Susquehanna
Cable decides to sell the assets of a cable system and Comcast does not
exercise its right of first refusal, Susquehanna Cable must offer to repurchase
Comcast's shares in the subsidiary that is selling assets.

          The Agreement contains a buy-sell provision granting Susquehanna
Media, Susquehanna Cable or Comcast the right to make an offer to purchase the
other party's ownership interests in Susquehanna Cable and its subsidiaries. If
such an offer is made and rejected, the party to whom the offer was made is
then obligated to purchase the offering party's ownership interests in
Susquehanna Cable and its subsidiaries on the same terms and conditions. If we
purchase Comcast's interests pursuant to the buy-sell agreement, Comcast is
entitled to receive a fee equal to 3.0% of the original $25.0 million
investment compounded annually. This fee is not payable if Comcast buys
Susquehanna Cable's interests.

          The Agreement grants Comcast the right to resell to us (the "Put
Right") all of its ownership interests in Susquehanna Cable and its
subsidiaries for a three-year period beginning 18 months after the closing on
the new senior credit facility. Accordingly, the Put Right will expire on
November 12, 2003. The Put Right may not be exercised during any period when a
default exists under our new senior credit facility or if consummation of the
Put Right would create a default under our new senior credit facility or under
the senior subordinated notes. The value of Comcast's ownership interests in
Susquehanna Cable and its subsidiaries upon exercise of the Put Right would be
the average of the values determined by two independent appraisers with
expertise in the cable industry. In exchange for its ownership interests upon
exercise of the Put Right, Comcast would receive cash up to the amount of
borrowing availability under our new senior credit facility and would receive a
note for the balance, so long as the issuance of such note would comply with
the terms of the new senior credit facility and the covenant described above.
Upon Comcast's exercise of the Put Right, we would have the right, in our sole
discretion and in lieu of acquiring Comcast's ownership interests, to sell
Susquehanna Cable and its subsidiaries to a third party and Comcast would
receive a pro rata share of the proceeds of such sale.

                                       69

<PAGE>

                                     PART IV

ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
a)        THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT:

          1.        Consolidated Financial Statements Filed:
                    Please refer to Item 6 - Selected Annual and Quarterly
                    Financial Data and Item 8 - Consolidated Financial
                    Statement and Supplementary Data.

          2.        Consolidated Financial Statement Scheduled Filed:
                    Please refer to Item 6 - Selected Annual and Quarterly
                    Financial Data and Item 8 - Consolidated Financial
                    Statement and Supplementary Data.

          3.        Exhibits Filed:

Exhibit Number                                       Description
--------------                                       -----------
2                   Asset Purchase Agreement, dated May 11, 2000, among
                    Susquehanna Radio Corp. and Entercom Communications
                    Corp., Entercom Kansas City, LLC and Entercom Kansas
                    City License, LLC (incorporated herein by reference from
                    Exhibit 2 to the Company's Current Report on Form 8-K
                    filed August 2, 2000, file no. 333-80523)

3.1                 Certificate of Incorporation of Susquehanna Media Co., as
                    amended (incorporated herein by reference from Exhibit
                    3.1 to the Company's Registration Statement on Form S-4,
                    file No. 333-80523)

3.2                 By-laws of Susquehanna Media Co. (incorporated herein by
                    reference from Exhibit 3.2 to the Company's Registration
                    Statement on Form S-4, file No. 333-80523)

4.1                 Indenture for the 8 1/2% Senior Subordinated Notes due
                    2009, dated as of May 12, 1999, between Susquehanna
                    Media Co. and Chase Manhattan Trust Company, National
                    Association, as Trustee (incorporated herein by
                    reference from Exhibit 4.1 to the Company's Registration
                    Statement on Form S-4, file No. 333-80523)

4.2                 Form of Exchange Global Note for 8 1/2% Senior Subordinated
                    Note due 2009 (incorporated herein by reference from
                    Exhibit 4.2 to the Company's Registration Statement on
                    Form S-4, file No. 333-80523)

4.3                 Form of Exchange Certificated note for 8 1/2% Senior
                    Subordinated Note due 2009 (incorporated herein by
                    reference from Exhibit 4.3 to the Company's Registration
                    Statement on Form S-4, file No. 333-80523)

10.1                $450 million syndicated credit facility arranged by First
                    Union Capital Markets Corp. (incorporated herein by
                    reference from Exhibit 10.1 to the Company's
                    Registration Statement on Form S-4, file No. 333-80523)

10.2                Agreement dated November 6, 1992, by and among Lenfest
                    Communications, Inc., Susquehanna Cable Co. and certain
                    subsidiaries of Susquehanna Cable Co., as amended
                    (incorporated herein by reference from Exhibit 10.2 to
                    the Company's Registration Statement on Form S-4, file
                    No. 333-80523)

10.3                Management Agreement dated May 24, 1993 by and between
                    Susquehanna Pfaltzgraff Co. and Susquehanna Media Co.
                    (incorporated herein by reference from Exhibit 10.3 to
                    the Company's Registration Statement on Form S-4, file
                    No. 333-80523)

                                       70

<PAGE>

12                  Computation of ratios of earnings to fixed charges

21                  Subsidiaries of Susquehanna Media Co. (incorporated herein
                    by reference from Exhibit 21 to the Company's
                    Registration Statement on Form S-4, file No. 333-80523)

b)        FOURTH QUARTER 2001 REPORTS ON FORM 8-K.

          We filed a Current Report on Form 8-K (Item 5) on November 2, 2001
with respect to our earnings press release for the three and nine months ended
September 30, 2001.

                                       71

<PAGE>

    SUPPLEMENTARY INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
        SECTION 15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED
                  SECURITIES PURSUANT TO SECTION 12 OF THE ACT.

          No annual report or proxy materials have been sent to security
holders during the fiscal year ended December 31, 2001. No annual report or
proxy materials will be sent to security holders subsequent to the filing of
this annual report on Form 10-K.

                                       72

<PAGE>

                                   SIGNATURES

          Pursuant to the requirements of Section 13 or 15(d) 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.

                                                     SUSQUEHANNA MEDIA CO.

                                              /s/      Peter P. Brubaker
                                              ---------------------------------
                                              By:      Peter P. Brubaker,
                                                       Chief Executive Officer
                                                       and President
Date: March 27, 2002

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

<TABLE>
<CAPTION>
                     Signature                                     Title                              Date
                     ---------                                     -----                              ----
<S>                                                   <C>                                         <C>
/s/             Louis J. Appell, Jr.                     Chairman of the Board of                 March 27, 2002
---------------------------------------------------              Directors
                Louis J. Appell, Jr.

/s/             Peter P. Brubaker                        Director, Chief Executive                March 27, 2002
---------------------------------------------------        Officer and President
                Peter P. Brubaker

/s/             David E. Kennedy                         Director, Vice President                 March 27, 2002
---------------------------------------------------
                David E. Kennedy

/s/             Craig W. Bremer                       Director, Secretary and General             March 27, 2002
---------------------------------------------------                Counsel
                Craig W. Bremer

/s/            William H. Simpson                                  Director                       March 27, 2002
---------------------------------------------------
               William H. Simpson

/s/             John L. Finlayson                     Director, Vice President (and               March 27, 2002
---------------------------------------------------   principal accounting officer)
                John L. Finlayson

</TABLE>