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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




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FORM 10-K


(Mark One)

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

For the transition period from ___________ to ____________

Commission file number: 333-80523

SUSQUEHANNA MEDIA CO.

(Exact name of registrant as specified in its charter)


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

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



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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 or any amendment to
this Form 10-K [X]

Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
Yes [   ] No [X]

As of June 30, 2002, the aggregate market value of the voting and non-voting
common equity of the Registrant held by non-affiliates was $0.



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As of March 31, 2003, there were 1,100,000 shares of Common Stock
outstanding all of which was held by Susquehanna Pfaltzgraff Co., the
Registrants parent.

DOCUMENTS INCORPORATED BY REFERENCE

None



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TABLE OF CONTENTS



|                                                     |                                                                                               |  |  |  |  |  |  | 
|---------------------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
|RISK FACTORS                                        
|PART I                                              
|                                                     | Item 1. Business                                                                             
|                                                     | Item 2. Properties                                                                           
|                                                     | Item 3. Legal Proceedings                                                                    
|                                                     | Item 4. Submission of Matters to a Vote of Security Holders                                  
|PART II                                             
|                                                     | Item 5. Market for Registrants Common Equity and Related Stockholder Matters                
|                                                     | Item 6. Selected Annual and Quarterly Financial Data                                         
|                                                     | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                                     | Item 7A. Quantitative and Qualitative Disclosure About Market Risk.                          
|                                                     | Item 8. Consolidated Financial Statements and Supplementary Data                             
|                                                     | Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
|PART III                                            
|                                                     | Item 10. Directors and Executive Officers of the Registrant                                  
|                                                     | Item 11. Executive Compensation                                                              
|                                                     | Item 12. Security Ownership of Certain Beneficial Owners and Management                      
|                                                     | Item 13. Certain Relationships and Related Transactions                                      
|                                                     | Item 14. Controls and Procedures                                                             
|PART IV                                             
|                                                     | Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K                    
|EX-12 COMPUTATION OF RATIOS OF EARNINGS             
|SECTION 906 CERTIFICATION OF PRESIDENT & CEO        
|SECTION 906 CERTIFICATION OF CFO                    



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INDEX

|                                                     |                                                                                               |  |    |    | 
|---------------------------------------------------- | --------------------------------------------------------------------------------------------- |  | -- | -- | 
|CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS |                                                                                               |  | 1  |   
|RISK FACTORS                                         |                                                                                               |  | 2  |   
|PART I                                               |                                                                                               |  | 7  |   
|                                                     | Item 1. Business                                                                              |  |    | 7  | 
|                                                     | Item 2. Properties                                                                            |  |    | 31 | 
|                                                     | Item 3. Legal Proceedings                                                                     |  |    | 31 | 
|                                                     | Item 4. Submission of Matters to a Vote of Security Holders                                   |  |    | 31 | 
|PART II                                              |                                                                                               |  | 32 |   
|                                                     | Item 5. Market for Registrants Common Equity and Related Stockholder Matters                 |  |    | 32 | 
|                                                     | Item 6. Selected Annual and Quarterly Financial Data                                          |  |    | 32 | 
|                                                     | Item 7. Managements Discussion and Analysis of Financial Condition and
Results of Operations |  |    | 35 | 
|                                                     | Item 7A. Quantitative and Qualitative Disclosure About Market Risk                            |  |    | 45 | 
|                                                     | Item 8. Consolidated Financial Statements and Supplementary Data                              |  |    | 46 | 
|                                                     | Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure  |  |    | 73 | 
|PART III                                             |                                                                                               |  | 74 |   
|                                                     | Item 10. Directors and Executive Officers of the Registrant                                   |  |    | 74 | 
|                                                     | Item 11. Executive Compensation                                                               |  |    | 75 | 
|                                                     | Item 12. Security Ownership of Certain Beneficial Owners and Management                       |  |    | 75 | 
|                                                     | Item 13. Certain Relationships and Related Transactions                                       |  |    | 78 | 
|                                                     | Item 14. Controls and Procedures                                                              |  |    | 80 | 
|PART IV                                              |                                                                                               |  | 81 |   
|                                                     | Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K                     |  |    | 81 | 





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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements in this report, as well as statements made by us in
filings with government regulatory bodies, including the Securities and
Exchange Commission (SEC), 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;                                                                                                                
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | interest rate movements;                                                                                                                                                                     
| |  |  | 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;                                      
| |  |  | changes in generally accepted accounting
principles and standards, as well as SEC rules and
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. Any forward-looking statement speaks only as of the date it was
made, and, except for our ongoing obligations to disclose material information
as required by the federal securities laws, 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 report might not
transpire. You should also read carefully the factors described in the Risk
Factors section of this report.

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RISK FACTORS

Before you invest in our securities, you should be aware that there are
various risks involved in your investment. You should read and consider
carefully each of the following factors, as well as the other information
contained in this report before making a decision to invest in our securities.

RISKS RELATING TO US AND OUR BUSINESSES

Our significant debt service
obligations will limit our cash flow and affect how we operate our
company.

We have a significant level of debt and debt service obligations. As of
December 31, 2002, we had approximately $521.1 million of indebtedness. We
also had the ability to incur $50.2 million of additional debt under our senior
credit facility. If we add new debt to our current debt levels, the related
risks that we now face could intensify.

Our substantial indebtedness poses important consequences to you,
including the risks that:



| |  |  | we will use a substantial portion of our cash flow from
operations to pay principal and interest on our debt, thereby
reducing the funds available for working capital, capital
expenditures, acquisitions and other general corporate purposes;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | our indebtedness may limit our ability to obtain additional
financing on satisfactory terms;                                                                                                                                                    
|
| |  |  | insufficient cash flow from operations may force us to sell
assets, restructure or refinance our debt, or seek additional equity
capital, which we may be unable to do at all or on satisfactory
terms;                                         
|
| |  |  | our level of indebtedness may make us more vulnerable to
economic downturns and may limit our ability to withstand
competitive pressures;                                                                                                       
|
| |  |  | indebtedness under the senior credit facility bears interest
at variable rates which could create higher debt service
requirements if market interest rates increase; and                                                                       
|
| |  |  | our failure to comply with the financial and other covenants
applicable to our debt could result in an event of default, which,
if not cured or waived, could have a material adverse effect on us.                                             

These risks may directly impact our ability to service our debt obligations.

We depend upon our subsidiaries for the cash flow necessary to service our debt obligations.

Susquehanna Media is a holding company. We conduct our business through
our operating subsidiaries and do not have any operations of our own. As a
result, we are dependent upon the ability of our subsidiaries to provide us
with cash, in the form of dividends, inter-company credits, loans or otherwise,
to meet our debt service obligations. These subsidiaries are separate and
distinct legal entities and have no obligations to pay any amounts due on our
indebtedness or to make any funds available therefore. In addition, dividends,
loans or other distributions to us from our subsidiaries may be subject to
contractual or other restrictions, will depend upon the results of operations
of such subsidiaries and may be subject to other business considerations.

Not all of our subsidiaries are wholly-owned. To the extent that
subsidiaries of Susquehanna Media that are not wholly-owned declare dividends
or make other distributions to stockholders, these minority stockholders will
receive their shares of such payments, and such amounts will not be available
to service our indebtedness. The indenture governing our senior subordinated
notes does, however, limit the amount of dividends and other distributions that
may be paid to these minority stockholders.

Our indebtedness prohibits us from engaging in activities that may benefit us.

Our senior credit facility and the indenture governing our senior
subordinated notes each contain a number of significant covenants. These
covenants limit or restrict our ability to:



| |  |  | incur additional debt;
| | - |  | ----------------------

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| |  |  | pay dividends and make distributions;                    
| | - |  | ---------------------------------------------------------
|
| |  |  | repurchase securities;                                   
|
| |  |  | make certain investments;                                
|
| |  |  | incur liens;                                             
|
| |  |  | transfer or sell assets;                                 
|
| |  |  | enter into transactions with insiders or related parties;
|
| |  |  | issue or sell stock of subsidiaries; or                  
|
| |  |  | merge or consolidate.                                    

These limitations and restrictions may adversely affect our ability to
finance our future operations or capital needs or engage in other business
activities that may be in our best interests.

Our senior credit facility contains cross-default provisions that may enable
senior lenders to proceed against collateral in the event of a default on our
senior subordinated notes.

The events that qualify under the indenture governing our senior
subordinated notes as events of default, including a change of control, may
also be events of default under our senior credit facility or other
indebtedness. An event of default under the senior credit facility would
permit our lenders to accelerate our indebtedness. If we cannot repay such
borrowings when due, the lenders could proceed against the collateral securing
the debt.

If we do not successfully integrate future acquisitions, we may not successfully increase our cash flow.

As part of our business strategy, we intend to acquire suitable radio
stations and cable systems. In the event that we acquire additional radio
stations and cable systems, we may have difficulty integrating the operations,
systems and management of such businesses, and unforeseen integration
difficulties may require a disproportionate amount of managements attention
and our other resources. In addition, there can be no assurance that any
future acquisitions will be as successful as recent acquisitions, and future
acquisitions may not increase our cash flow or yield other anticipated
benefits.

Recent events that are beyond our control have increased the level of public
and regulatory scrutiny in general and in the capital markets and have resulted
in increased regulation and new accounting standards. The reaction to these
events may have negative impacts on our business, financial condition and
access to capital.

As a result of the bankruptcy filings by the Enron Corporation and
WorldCom, Inc., recently discovered accounting irregularities of public
companies, alleged insider trading violations and investigations by
governmental authorities of companies in different industries, businesses have
been under a generally increased amount of public and regulatory scrutiny.
Recently discovered accounting irregularities have caused regulators and
legislators to review current accounting practices, financial disclosures and
companies relationships with their independent auditors. The capital markets
and rating agencies also have increased their level of scrutiny. We believe
that we are complying with all applicable laws, and we have taken steps to
avoid these events, but it is difficult or impossible to predict or control
what effect these types of disruptions may have on our business, financial
condition or our access to the capital markets.

Additionally, it is unclear what laws or regulations may develop, and we
cannot predict the ultimate impact of any future changes in accounting
regulations or practices in general with respect to public companies or in our
operations specifically. Any such new accounting standards could impact the
way we are required to record revenues, assets and liabilities. These changes
in accounting standards could lead to negative impacts on reported earnings or
increases in liabilities that could, in turn, affect our reported results of
operations.

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RISKS RELATING TO THE RADIO BROADCASTING INDUSTRY

We are dependent upon advertising revenues to generate income and cash flow. A
concentration of stations in any particular market intensifies our exposure to
economic declines.

We derive substantially all of our broadcast revenues from the sale of
advertising on our radio stations. For the years ended December 31, 2002, 2001
and 2000, 93%, 92% and 92% of our radio revenues, respectively, were generated
from the sale of broadcast advertising. Because advertisers generally reduce
their spending during economic downturns, we could be adversely affected by a
future national recession. In addition, because a substantial portion of our
broadcast revenues are derived from local advertisers, our ability to generate
advertising revenues in specific markets could be adversely affected by local
or regional economic downturns.

A concentration of stations in any particular market intensifies our
exposure to economic declines. We are particularly dependent on advertising
revenue from the San Francisco and Dallas markets, which generated 36% and 21%,
respectively of our total radio revenue for the year ended December 31, 2001.
Advertising revenue from the San Francisco and Dallas markets, generated 27%
and 25%, respectively of our total radio revenue for the year ended December
31, 2002. In 2001, a dramatic decrease in advertising by Internet
businesses decreased our San Francisco
stations revenues. The decreased revenues resulted in lower operating income. During 2002, the San Francisco economy has
experienced a modest recovery, however its recovery has trailed other markets.

The ongoing impact of acts of war and terrorism, which have further depressed
economic activity in the United States and globally, may reduce our advertising
revenues and have other negative effects on our business.

The general slowdown in the Unites States economy, as well as the ongoing
impact of acts of war and terrorism against the United States, and the
countrys response thereto, could cause our advertising revenues to decline due
to advertising cancellations, delays or defaults in payment for advertising
time, and other factors. In addition, these ongoing events have further
depressed economic activity in the United States and globally, including the
markets in which we operate, and may have other negative effects on our
business, the nature and duration of which we cannot predict. If these acts of
war or terrorism or weak economic conditions continue or worsen, our financial
condition and results of operations may be materially and adversely affected.

Competition from other radio stations and media forms could reduce our
advertising revenues and cash flow.

The radio broadcasting industry is very competitive. The success of each
of our stations is dependent upon its audience ratings and share of the overall
advertising revenues within its market. Our stations compete for audiences and
advertising revenues directly with other radio stations, and some of the owners
of those competing stations have much greater financial resources than we do.
Our stations also compete with other media such as cable television,
newspapers, magazines, direct mail, compact discs, music videos, the Internet
and outdoor advertising. We cannot be sure that any of our stations can
maintain or increase its current audience ratings or market share. In
addition, other stations may change their format or programming to compete
directly with our stations for audience and advertisers or engage in aggressive
promotional campaigns. If this happens, the ratings and advertising revenues
of our stations could decrease, the promotion and other expenses of our
stations could increase, and our stations would have lower broadcast cash flow.

New media technologies are also being introduced to compete with the radio
broadcasting industry. Some of these new technologies are:



| |  |  | digital audio broadcasting and satellite digital audio radio
service, which provide for the delivery of multiple new, high
quality audio programming formats to local and national audiences;
and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | streaming audio delivered through the Internet.                                                                                                                                                  

We cannot predict at this time the effect, if any, that any of these new
technologies may have on the radio broadcasting industry in general or our
stations in particular.

Licensing and ownership rules may limit the growth of our radio broadcasting
operations.

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The radio broadcasting industry is subject to extensive regulation by the
Federal Communications Commission under the Communications Act of 1934. FCC
approval is required for the issuance, renewal or transfer of radio broadcast
station operating licenses. We cannot operate our radio stations without FCC
licenses. The failure to renew our licenses on their expiration dates or the
inclusion of conditions or qualifications in our licenses could have a negative
impact on our business. The Communications Act and FCC rules impose specific
limits on the number of stations an entity can own in a single market.
Ownership rules may affect our acquisition strategy because they may prevent us
from acquiring additional stations in a particular market. We may also be
prevented from engaging in a swap transaction if the swap would cause us to
violate these rules.

The FCC has indicated that it may examine and may impose limits upon the
advertising revenue share acquired by one entity in a single market. It is not
clear how the FCC will proceed in this area. In addition, the Department of
Justice, either directly through its administration of the Hart-Scott-Rodino
pre-merger notification requirements, or generally, has taken an active role in
reviewing acquisitions of stations in particular markets and, in some
instances, has conditioned its clearance on the parties agreement to limit
market share to a level approved by the Department.

Media Ownership Policy Reexamination

In 2001, the FCC began rulemaking proceedings on two of its broadcast
ownership rules  the Broadcast-Newspaper Cross-Ownership Rule and the Local
Radio Ownership Rule. In September of 2002, the FCC issued a Notice of
Proposed Rulemaking, or NPRM, in which it sought comment on its four other
broadcast ownership rules: the Television-Radio Cross-Ownership Rule; the Dual
Network Rule; the Local Television Ownership Rule; and the National Television
Ownership Rule. The September NPRM consolidated the three proceedings into a
single biennial review for all broadcast ownership rules; such biennial reviews
are required in accordance with the 1996 Telecom Act. Final comments
were due
to be filed no later than February 3, 2003, and a decision whether to retain
the existing rules or perhaps relax them may be forthcoming from the FCC as
early as the end of March 2003. Relaxation of the multiple ownership rules may
allow us, and competitors, to increase the number of stations we own in a
particular market, and may permit us, and competitors, to own other media in a
particular market. We cannot predict the impact of the results of the FCCs
rulemaking on our business.

RISKS RELATING TO THE CABLE TELEVISION INDUSTRY

Competition from other communication service providers could reduce our revenues and cash flow.

Cable television systems operate in a very competitive business
environment, and we may compete against competitors with fewer regulatory
burdens, greater financial and personnel resources, greater brand name
recognition and long-standing relationships with regulatory authorities.
Moreover, mergers, joint ventures and alliances among franchise, wireless or
private cable television operators, regional bell operating companies and
others may result in providers capable of offering cable television and other
telecommunications services in direct competition with us.

Our cable television systems face competition from:



| |  |  | alternative methods of receiving and distributing television signals, including:
| | - |  | --------------------------------------------------------------------------------



| | 1. |  | direct broadcast satellite, which is a satellite
service of one or more program channels that can be received
on a subscribers premises directly using an antenna;                              
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | multichannel multipoint distribution systems,
which use low power microwave frequencies with increased
channel capacity to transmit video programming over the air to
customers;                 
|
| | 3. |  | satellite master antenna television systems,
which use one central antenna to receive and deliver
programming to a concentrated group of viewers, such as in
apartments, hotels or hospitals; and
|
| | 4. |  | broadcast digital television, which can deliver
high definition television pictures, digital-quality programs
and CD-quality audio programming;                                                  



| |  |  | data transmission and Internet service providers;
| | - |  | -------------------------------------------------

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| |  |  | regional bell operating companies, other telephone companies,
public utility companies and other entities that are in the process
of entering the cable television business; and                             
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | other sources of news, information and entertainment such as
newspapers, movie theaters, live sporting events and home video
products, including videotape cassette recorders and digital video
disc players.

If our cable franchises are not renewed or if our franchises encounter
competition, we may experience a significant decline in our revenues and cash
flow.

Cable television companies operate under non-exclusive franchises granted
by local authorities, which are subject to renewal and renegotiation from time
to time. Our business is dependent upon the retention and renewal of our local
franchises. The non-renewal or termination of franchises relating to a
significant portion of our subscribers could have a material adverse effect on
our revenues and cash flow. A franchise is generally granted for a fixed term
ranging from 5 to 15 years, but in many cases the franchise may be terminated
if the franchisee fails to comply with the material provisions of the franchise
agreement. Franchises typically impose conditions relating to the use and
operation of the cable television system, including requirements relating to
the payment of fees, system bandwidth capacity, customer service requirements,
franchise renewal and termination. The Cable Communications Policy Act of 1984
provides for an orderly franchise renewal process in which franchise renewal
will not be unreasonably withheld. If renewal is denied and the franchising
authority acquires ownership of the system or effects a transfer of the system
to another person, the operator generally is entitled to the fair market
value, but with no value allocated to the franchise itself in a non-renewal
situation, for the system covered by such franchise. No assurances can be given
that we will be able to retain or renew our franchises or that the terms of any
such renewals will be on terms as favorable to us as our existing franchises.

Changes in cable television regulation could increase our costs and reduce our revenues.

Federal, state and local regulation can increase the costs of operating
our cable systems and limit the rates we can charge. The Cable Television
Consumer Protection and Competition Act of 1992, the Telecommunications Act of
1996 and the FCCs rules implementing these acts have increased the
administrative and operational expenses of cable television systems. The FCC
and local or state franchise authorities have also gained additional regulatory
oversight powers under these acts. The FCC is currently considering whether
franchise authorities should be allowed to collect a franchise fee on revenues
derived from cable modem service. The FCC and Congress continue to be
concerned that rates for programming services are rising at a rate exceeding
inflation. It is therefore possible that, notwithstanding the recent
elimination of cable programming service tiers rate regulation, Congress may
enact legislation in the future to reimpose additional rate controls on cable
systems.

Cable television systems generally operate pursuant to non-exclusive
franchises, permits or licenses granted by a municipality or other state or
local governmental entity. The terms and conditions of franchises vary
materially from jurisdiction to jurisdiction. A number of states subject cable
systems to the jurisdiction of centralized state governmental agencies. No
state in which we currently operate has enacted state level regulation. We
cannot predict whether any of the states in which we currently operate will
engage in such regulation in the future. If we become subject to this type of
regulation, the costs of operating our cable systems may increase and the rates
we can charge may be limited.

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

Our cable programming costs are increasing. Programming has been and is
expected to continue to be our largest single expense item and accounted for
approximately 33% and 29% of the our total operating costs for the years ended
December 31, 2002 and 2001, respectively. In recent years, the cable industry
has experienced a rapid escalation in the cost of programming, particularly
sports programming. Moreover, television stations have become increasingly
aggressive in demanding cash or other consideration in return for granting
retransmission consent for our ability to carry such stations. This escalation
may continue, and we may not be able to pass programming cost increases on to
our subscribers. In addition, as we add programming to our limited and
expanded basic tiers, we may face additional market constraints on our
ability to pass these costs on to our subscribers. Our financial condition,
results of operations and cash flows could be negatively affected by further increases in programming costs.

6



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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 Co.
(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 2001 revenues. As of December 31, 2002, we owned and operated
nineteen FM and eight 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 18th largest cable multiple system operator in the United
States based on subscribers with five cable systems serving approximately
206,500 subscribers as of December 31, 2002.

We also provide Internet access and enhanced services to residential and
business customers under the trade name 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 trade
name 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 60 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, 2002, we generated approximately 73% of our radio revenues
from the ten largest markets in the United States and more than
97% from top 40 markets. We intend to continue focusing on large
markets.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7



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##### Table of Contents





| |  |  | 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 8.6% compound annual rate, compared
to a gross domestic product growth rate of approximately 6.8%.

Broad market coverage. According to the Radio Advertising Bureaus Radio
Marketing Guide and Fact Book for Advertisers 2002-2003, 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 84% of adults are
reached by car radio each week. The average listener spends approximately
three hours 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 85% 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.

8



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Radio Properties

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, 2002. The table
excludes WABZ-FM in Albemarle, North Carolina, KIKT-FM and KGVL-AM in
Greenville, Texas, WAVG-AM in Jeffersonville, Indiana, KQKC-FM and WZZB-AM in
Seymour, Indiana, and KKLF-AM in Dallas/Ft. Worth, 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 2002 Radio Market Guide for the year 2001. 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 2002. Combined market revenue share represents
our share of the total radio advertising revenue from the market, as reported
in Duncans 2002 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 2002 Radio Market Guide.

|                     |  |         |    |             |  |                         |  |             |  |             |  |             |  |          |  |          |      |   |  |  |   | 
|-------------------- |  | ------- | -- | ----------- |  | ----------------------- |  | ----------- |  | ----------- |  | ----------- |  | -------- |  | -------- | ---- | - |  |  | - | 
|                     |  |         |    |             |  |                         |  |             |  |             |  |             |  | 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    
|                     |  |         |    |             |  |                         |  |             |  |             |  |             |  |          |  |         
|San Francisco, CA    |  |         | 4  |             |  |                         |  |             |  |             |  |             |  |          |  |          | 17.4 | % |  |  | 3 | 
|KFOG/KFFG-FM(1)      |  |         |    |             |  | Adult Album
Alternative |  | 1983/1995   |  | A 25-44     |  | 4           |  | 3.8%     |  |          |      |   |  |  |   | 
|KNBR-AM              |  |         |    |             |  | Sports/Talk             |  | 1989        |  | M 25-54     |  | 1           |  | 5.9%     |  |          |      |   |  |  |   | 
|KSAN-FM              |  |         |    |             |  | Classic Rock            |  | 1997        |  | M 25-44     |  | 2           |  | 4.2%     |  |          |      |   |  |  |   | 
|KTCT-AM              |  |         |    |             |  | Sports/Talk             |  | 1997        |  | M 25-54     |  | 16          |  | 2.0%     |  |          |      |   |  |  |   | 
|Dallas/Ft. Worth, TX |  |         | 5  |             |  |                         |  |             |  |             |  |             |  |          |  |          | 13.0 | % |  |  | 4 | 
|KTCK/KTBK-AM/        |  |         |    |             |  |                         |  |             |  |             |  |             |  |          |  |          |      |   |  |  |   | 
|KTDK-FM(1)           |  |         |    |             |  | Sports/Talk             |  | 1996        |  | M 25-54     |  | 1           |  | 7.9%     |  |          |      |   |  |  |   | 
|KPLX-FM              |  |         |    |             |  | Country                 |  | 1974        |  | A 25-54     |  | 1           |  | 6.5%     |  |          |      |   |  |  |   | 
|KLIF-AM              |  |         |    |             |  | Talk                    |  | 1980/1998   |  | A 35-64     |  | 18          |  | 1.6%     |  |          |      |   |  |  |   | 
|KDBN-FM(2)           |  |         |    |             |  | Classic Rock            |  | 1996/1998   |  | M 25-54     |  | 6           |  | 4.2%     |  |          |      |   |  |  |   | 
|Atlanta, GA          |  |         | 6  |             |  |                         |  |             |  |             |  |             |  |          |  |          | 7.0  | % |  |  | 6 | 
|WNNX-FM              |  |         |    |             |  | Modern Rock             |  | 1974        |  | M 18-34     |  | 5           |  | 5.7%     |  |          |      |   |  |  |   | 
|WWWQ-FM              |  |         |    |             |  | Contemporary
Hit Radio  |  | 1997        |  | W 18-34     |  | 4           |  | 6.3%     |  |          |      |   |  |  |   | 
|Houston, TX          |  |         | 8  |             |  |                         |  |             |  |             |  |             |  |          |  |          |      |   |  |  |   | 
|KRBE-FM              |  |         |    |             |  | Contemporary
Hit Radio  |  | 1986        |  | W 18-34     |  | 3           |  | 8.0%     |  |          | 6.7  | % |  |  | 6 | 
|Cincinnati, OH       |  |         | 21 |             |  |                         |  |             |  |             |  |             |  |          |  |          | 12.1 | % |  |  | 3 | 
|WRRM-FM              |  |         |    |             |  | Adult
Contemporary      |  | 1972        |  | W 25-54     |  | 1           |  | 11.7%    |  |          |      |   |  |  |   | 
|WMOJ-FM              |  |         |    |             |  | Rhythmic
Oldies         |  | 1997        |  | W 35-64     |  | 2           |  | 8.9%     |  |          |      |   |  |  |   | 
|WYGY-FM              |  |         |    |             |  | Country                 |  | 2002        |  | A 25-54     |  | 12          |  | 3.6%     |  |          |      |   |  |  |   | 

9



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|                    |  |         |     |             |  |                        |  |             |  |             |  |             |  |          |  |          |      |   |  |  |   | 
|------------------- |  | ------- | --- | ----------- |  | ---------------------- |  | ----------- |  | ----------- |  | ----------- |  | -------- |  | -------- | ---- | - |  |  | - | 
|                    |  |         |     |             |  |                        |  |             |  |             |  |             |  | 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    
|                    |  |         |     |             |  |                        |  |             |  |             |  |             |  |          |  |         
|Kansas City, KS     |  |         | 29  |             |  |                        |  |             |  |             |  |             |  |          |  |          | 15.2 | % |  |  | 3 | 
|KCMO-FM             |  |         |     |             |  | Oldies                 |  | 2000        |  | A 35-54     |  | 4           |  | 5.6%     |  |          |      |   |  |  |   | 
|KCFX-FM             |  |         |     |             |  | Classic Rock           |  | 2000        |  | A 25-54     |  | 3           |  | 6.0%     |  |          |      |   |  |  |   | 
|KCMO-AM             |  |         |     |             |  | Talk                   |  | 2000        |  | A 35-64     |  | 16          |  | 2.4%     |  |          |      |   |  |  |   | 
|KFME-FM(3)          |  |         |     |             |  | Hot Adult
Contemporary |  | 2001        |  | A 25-49     |  | 13          |  | 3.9%     |  |          |      |   |  |  |   | 
|Indianapolis, IN    |  |         | 31  |             |  |                        |  |             |  |             |  |             |  |          |  |          | 23.4 | % |  |  | 2 | 
|WFMS-FM             |  |         |     |             |  | Country                |  | 1972        |  | A 25-54     |  | 2           |  | 11.7%    |  |          |      |   |  |  |   | 
|WGLD-FM             |  |         |     |             |  | Oldies                 |  | 1993        |  | A 35-54     |  | 3           |  | 9.2%     |  |          |      |   |  |  |   | 
|WGRL-FM             |  |         |     |             |  | 80s Hits              |  | 1997        |  | A 25-54     |  | 13t         |  | 3.4%     |  |          |      |   |  |  |   | 
|York, PA            |  |         | 103 |             |  |                        |  |             |  |             |  |             |  |          |  |          | 36.2 | % |  |  | 1 | 
|WARM-FM             |  |         |     |             |  | Adult
Contemporary     |  | 1962        |  | W 25-54     |  | 1           |  | 12.5%    |  |          |      |   |  |  |   | 
|WSBA-AM             |  |         |     |             |  | Talk                   |  | 1942        |  | A 35-64     |  | 9           |  | 3.3%     |  |          |      |   |  |  |   | 



---

|(1) |  | These stations are simulcast and have been combined for market rank and
audience share.                                                                                                                                                                                                                                                
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | This station changed its format to classic rock on January 3, 2002. The
station changed its call letters from KKMR-FM to KDBN-FM effective
January 28, 2002.                                                                                                                                                                           
|   
|(3) |  | 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. The
station is licensed to 105.1 FM LLC, of which we own 40% and an option to
acquire the remaining interest in 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-FM, which is programmed with a Texas country format, is
rated 1st in the market among persons 25 to 54. On January 3,
2002, KDBN-FM changed its format to classic rock. KIKT-FM and KGVL-AM in
Greenville, Texas, and KKLF-AM in Dallas/Ft. Worth, Texas are owned by us, but operated by third parties under a time
brokerage agreement.

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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 5th among men 18 to 34. In November 2000, the FCC
granted our petition to move WHMA-FM, a country 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.

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.

Cincinnati. We have operated in Cincinnati since 1972, and currently own
three 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, placing 2nd among women 35 to 64. WYGY-FM is a country
station, which we purchased in the fall of 2002.

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 3rd 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 is ranked 4th in its target adult 35-54
demographic. KCFX-FM ranks 3rd among adults 25 to 54 and is the flagship
station for the Kansas City Chiefs. KCMO-AM is one of the oldest continuously
operated talk 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., who 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 2002,
approximately 80% of our radio revenues were generated from the sale of local
and regional advertising, compared to 81% in 2001 and 78% in 2000. 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

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exchange for a commission from us based on our gross revenue, net of
agency commission from the 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

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radio stations in the same geographic area or launch an aggressive
promotional campaign may result in lower ratings and advertising revenue,
increased promotion and other expenses and, accordingly, lower our operating
income.

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, Internet 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, audiotapes 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 206,500 subscribers as of December 31, 2002
through five cable
systems with a total of ten 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.

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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 and are
evaluating video-on-demand, telephony, and other interactive
services.

The Cable Television Industry

Total customers of a cable system include customers who subscribe to
either the basic video service or Internet Access using a cable modem. 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 10.2% compound annual rate, compared to a gross domestic
product growth rate of 5.4%. 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

14



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##### Table of Contents



offering feature films, live sporting events, concerts and other special
entertainment features presented without commercial interruption.

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.

On an a la carte basis or for an additional monthly charge, our basic
subscribers can also get Internet access via a cable modem, 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, through coaxial cable and 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 20 years.

Cable Properties

The following table sets forth certain information regarding our cable
systems as of December 31, 2002. Homes passed represents the maximum number of
homes that could become subscribers in the particular cable system. Total
customers represents the total of video only and cable modem only customers.
Total customer penetration represents total customers as a percentage of homes
passed. 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.

|                 |              |        |         |           |       |             |          |             |             |             |             |             |         |             |         |             |       |            |           |      |   |  |      |      |   |  |      |      |       |  |         |      |   |       |         |       | 
|---------------- | ------------ | ------ | ------- | --------- | ----- | ----------- | -------- | ----------- | ----------- | ----------- | ----------- | ----------- | ------- | ----------- | ------- | ----------- | ----- | ---------- | --------- | ---- | - |  | ---- | ---- | - |  | ---- | ---- | ----- |  | ------- | ---- | - | ----- | ------- | ----- | 
|                 |              |        |         |           |       |             |          |             |             |             |             |             |         |             |         |             |       |            |           |      |   |  |      |      |   |  |      |      |       |  |         |      |   |       | Average
|                 |              |        |         |           |       |             |          |             |             |             |             |             |         |             |         |             |       |            |           |      |   |  |      |      |   |  |      |      |       |  |         |      |   |       | Monthly
|                 |              |        |         |           |       |             |          |             |             |             | Total       |             |         |             |         |             |       |            |           |      |   |  |      |      |   |  |      |      | Cable |  | Revenue
|                 |              |        | Homes   |           | Total |             | Customer |             | Basic Video |             | Basic Video |             | Digital |             | Premium |             | Modem |            | Per Basic
|Cable System     |              | Passed |         | Customers |       | Penetration |          | Subscribers |             | Penetration |             | Penetration |         | Penetration |         | Penetration |       | Subscriber
|                 |              |        |         |           |       |             |          |             |             |             |             |             |         |             |         |             |       |           
|Pennsylvania     |              |        |         |           |       |             |          |             |             |             |             |             |         |             |         |             |       |            |           |      |   |  |      |      |   |  |      |      |       |  |         |      |   |       |         |      
|                 | York         |        |         | 125,313   |       |             |          | 91,143      |             |             |             | 72.7        | %       |             |         | 91,102      |       |            |           | 72.7 | % |  |      | 25.0 | % |  |      | 36.7 | %     |  |         | 10.6 | % |       | $       | 51.94 | 
|                 | Williamsport |        |         | 53,904    |       |             |          | 41,025      |             |             |             | 76.1        | %       |             |         | 40,913      |       |            |           | 75.9 | % |  |      | 18.8 | % |  |      | 25.4 | %     |  |         | 9.9  | % |       | $       | 49.62 | 
|Mississippi      |              |        |         |           |       |             |          |             |             |             |             |             |         |             |         |             |       |            |           |      |   |  |      |      |   |  |      |      |       |  |         |      |   |       |         |      
|                 | Rankin       |        |         | 38,489    |       |             |          | 23,289      |             |             |             | 60.5        | %       |             |         | 23,289      |       |            |           | 60.5 | % |  |      | 34.0 | % |  |      | 46.3 | %     |  | NA      |      | $ | 49.58 |        
|Maine            |              |        |         |           |       |             |          |             |             |             |             |             |         |             |         |             |       |            |           |      |   |  |      |      |   |  |      |      |       |  |         |      |   |       |         |      
|                 | Brunswick    |        |         | 29,933    |       |             |          | 20,565      |             |             |             | 68.7        | %       |             |         | 20,308      |       |            |           | 67.8 | % |  |      | 20.2 | % |  |      | 26.8 | %     |  |         | 22.7 | % |       | $       | 55.87 | 
|Illinois/Indiana |              |        |         |           |       |             |          |             |             |             |             |             |         |             |         |             |       |            |           |      |   |  |      |      |   |  |      |      |       |  |         |      |   |       |         |      
|                 | Midwest      |        |         | 45,114    |       |             |          | 30,350      |             |             |             | 67.3        | %       |             |         | 30,314      |       |            |           | 67.2 | % |  |      | 15.3 | % |  |      | 30.6 | %     |  |         | 2.1  | % |       | $       | 42.79 | 
|                 |              |        |         |           |       |             |          |             |             |             |             |             |         |             |         |             |       |            |           |      |   |  |      |      |   |  |      |      |       |  |         |      |   |       |         |       | 
|Totals           |              |        | 292,753 |           |       |             | 206,372  |             |             |             | 70.5        | %           |         |             | 205,926 |             |       |            | 70.3      | %    |   |  | 22.9 | %    |   |  | 33.7 |      |       |  | 9.0     | %    |   | $     | 50.35   |      

15



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##### Table of Contents



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, 2002. Density represents homes passed divided by miles of plant.
Plant bandwidth represents percentage of plant mileage within a system served
by the indicated plant bandwidth. Increased bandwidth offers greater capacity
for signals and resultant additional revenues. Total customer penetration
represents total customers as a percentage of homes passed. Basic penetration
represents basic subscribers as a percentage of homes passed. A basic
subscriber is a household receiving at least our lowest level of video service.
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.

|                                             |            |   |         |       |              |   |        |       |           |    |         |      |       |   |        |      |     |   |        |      |        |   |         |      |  
|-------------------------------------------- | ---------- | - | ------- | ----- | ------------ | - | ------ | ----- | --------- | -- | ------- | ---- | ----- | - | ------ | ---- | --- | - | ------ | ---- | ------ | - | ------- | ---- | -
|                                             |            |   | YORK    |       | WILLIAMSPORT |   | RANKIN |       | BRUNSWICK |    | MIDWEST |      | TOTAL
|                                             |            |   |         |       |              |   |        |       |           |    |         |      |      
|TECHNICAL DATA:                              |            |   |         |       |              |   |        |       |           |    |         |      |       |   |        |      |     |   |        |      |        |   |         |     
|Miles of Plant                               |            |   | 1,802   |       |              |   | 1,024  |       |           |    | 768     |      |       |   | 790    |      |     |   | 940    |      |        |   | 5,324   |     
|Density                                      |            |   | 70      |       |              |   | 53     |       |           |    | 50      |      |       |   | 38     |      |     |   | 48     |      |        |   | 55      |     
|Head-ends                                    |            |   | 1       |       |              |   | 1      |       |           |    | 2       |      |       |   | 1      |      |     |   | 5      |      |        |   | 10      |     
|Plant Bandwidth:                             |            |   |         |       |              |   |        |       |           |    |         |      |       |   |        |      |     |   |        |      |        |   |         |     
|                                             | 330-450MHz |   |         | 0.0   | %            |   |        | 0.0   | %         |    |         | 65.0 | %     |   |        | 6.0  | %   |   |        | 26.0 | %      |   |         | 14.0 | %
|                                             | 550 MHz    |   |         | 0.0   | %            |   |        | 0.0   | %         |    |         | 24.0 | %     |   |        | 32.0 | %   |   |        | 49.0 | %      |   |         | 17.0 | %
|                                             | 750 MHz    |   |         | 100.0 | %            |   |        | 100.0 | %         |    |         | 11.0 | %     |   |        | 62.0 | %   |   |        | 25.0 | %      |   |         | 69.0 | %
|OPERATING DATA:                              |            |   |         |       |              |   |        |       |           |    |         |      |       |   |        |      |     |   |        |      |        |   |         |     
|Homes passed                                 |            |   | 125,313 |       |              |   | 53,904 |       |           |    | 38,489  |      |       |   | 29,933 |      |     |   | 45,114 |      |        |   | 292,753 |     
|Total customers                              |            |   | 91,143  |       |              |   | 41,025 |       |           |    | 23,289  |      |       |   | 20,565 |      |     |   | 30,350 |      |        |   | 206,372 |     
|Total customer penetration                   |            |   | 72.7    | %     |              |   | 76.1   | %     |           |    | 60.5    | %    |       |   | 68.7   | %    |     |   | 67.3   | %    |        |   | 70.5    | %   
|Basic Subscribers                            |            |   | 91,102  |       |              |   | 40,913 |       |           |    | 23,289  |      |       |   | 20,308 |      |     |   | 30,314 |      |        |   | 205,926 |     
|Basic penetration                            |            |   | 72.7    | %     |              |   | 75.9   | %     |           |    | 60.5    | %    |       |   | 67.8   | %    |     |   | 67.2   | %    |        |   | 70.3    | %   
|Digital terminals                            |            |   | 22,970  |       |              |   | 7,704  |       |           |    | 7,924   |      |       |   | 4,097  |      |     |   | 4,650  |      |        |   | 47,165  |     
|Digital penetration                          |            |   | 25.0    | %     |              |   | 18.8   | %     |           |    | 34.0    | %    |       |   | 20.2   | %    |     |   | 15.3   | %    |        |   | 22.9    | %   
|Premium units                                |            |   | 33,421  |       |              |   | 10,392 |       |           |    | 10,791  |      |       |   | 5,436  |      |     |   | 9,265  |      |        |   | 69,305  |     
|Premium penetration                          |            |   | 36.7    | %     |              |   | 25.4   | %     |           |    | 46.3    | %    |       |   | 26.8   | %    |     |   | 30.6   | %    |        |   | 33.7    | %   
|Cable modems                                 |            |   | 13,308  |       |              |   | 5,332  |       |           | NA |         |      | 6,781 |   |        |      | 945 |   |        |      | 26,366 |  
|Cable modem penetration                      |            |   | 10.6    | %     |              |   | 9.9    | %     |           | NA |         |      | 22.7  | % |        |      | 2.1 | % |        |      | 9.0    | %
|FINANCIAL DATA:                              |            |   |         |       |              |   |        |       |           |    |         |      |       |   |        |      |     |   |        |      |        |   |         |     
|Revenue (in thousands)                       |            | $ | 56,547  |       |              | $ | 24,326 |       |           | $  | 13,802  |      |       | $ | 13,775 |      |     | $ | 14,304 |      |        | $ | 122,754 |     
|Average monthly revenue per
basic subscriber |            | $ | 51.94   |       |              | $ | 49.62  |       |           | $  | 49.58   |      |       | $ | 55.87  |      |     | $ | 42.79  |      |        | $ | 50.35   |     

York. The York, Pennsylvania cable system is our largest, serving
subscribers in 51 municipalities and accounting for 44% of our total
subscribers and 46% of our 2002 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 11% penetration
to homes passed as of December 31, 2002. Digital services were

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launched in October 1999, with penetration exceeding 25% of basic
customers as of December 31, 2002. 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 20% of our total
subscribers and 20% of our 2002 Cable revenues. 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 of nearly 10%
of homes passed as of December 31, 2002. Digital services were launched in
June 2000 with penetration of nearly 19% of basic customers as of December 31,
2002.

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 2.8%, and the system accounts for 11% of our total
subscribers and 11% of our 2002 Cable revenues. Approximately 35% 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 34% of basic customers as of December 31, 2002. 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 10%
of our total subscribers and 11% of our 2002 Cable revenues. 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 is approximately 23% of homes passed as of December 31,
2002. Digital services were launched in August 2000, and exceed 20%
penetration to basic customers as of December 31, 2002.

Midwest.
The Midwest cable system serves Shelbyville and Lawrenceburg,
Indiana and Olney and DuQuoin, Illinois. The Lawrenceburg area was acquired
April 1, 2002 and added 11,300 basic video subscribers to the
Midwest system. The Midwest system accounts for 14% of our total subscribers and approximately
12% of our 2002 Cable revenues. The system currently has bandwidth ranging
from 450 MHz to 750 MHz, with 74% between 550 and 750 MHz. Rebuilds have been
completed in all areas except for a portion of the acquired Lawrenceburg,
Indiana system. Digital services were launched in 2000, with penetration of
nearly 15% of basic customers as of December 31, 2002.

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.

Marketing, Customer Service And Community Relations

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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 direct mail and
telemarketing;                                                                                        
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | price promotions, such as installation specials, to
attract new subscribers and a one month premium sampling program
for all new digital video customers;
|
| |  |  | 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 Plus 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, enhanced signal quality, improved technical reliability and
provided 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 customer satisfaction. We expect capital
spending in 2003 for rebuild activities to total approximately $11.1 million,
which we expect to be funded by operations and existing credit facilities.

18



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The following table summarizes, as of December 31, 2002, 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 2003).

|                                                      |  |                   |     |                   |  |                      |     |   |  |  |       |  
|----------------------------------------------------- |  | ----------------- | --- | ----------------- |  | -------------------- | --- | - |  |  | ----- | -
|                                                      |  | 330 TO 450 MHz    |     | 550 MHz           |  | 750 to 860 MHz      
|                                                      |  | (Approximately 60 |     | (Approximately 82 |  | (Approximately 82   
|                                                      |  | Analog Channels)  |     | Analog Channels)  |  | Analog Channels) (1)
|                                                      |  |                   |     |                   |  |                     
|EXISTING BANDWIDTH PROFILE                            |  |                   |     |                   |  |                      |     |   |  |  |       |  
|Miles of plant                                        |  |                   | 796 |                   |  |                      | 902 |   |  |  | 3,626 |  
|% miles of plant                                      |  |                   | 14  | %                 |  |                      | 17  | % |  |  | 69    | %
|BANDWIDTH PROFILE UPON
COMPLETION OF WORK IN PROGRESS |  |                   |     |                   |  |                      |     |   |  |  |       |  
|Miles of plant                                        |  |                   | 29  |                   |  |                      | 904 |   |  |  | 4,506 |  
|% miles of plant                                      |  |                   | 1   | %                 |  |                      | 17  | % |  |  | 82    | %



---

|(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. 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, 2002, digitally
compressed services were available to 99% of our customer base.

The provision of high-speed cable modems to residential and business
customers has become a significant source of additional revenue to the cable
industry. Cable modem revenues represented approximately 8% and 5% of 2002 and
2001 Cable revenues, respectively. 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 every system except our Rankin County facility.

Internet and Other Services

For the years ended December 31, 2002 and 2001, our Internet and Other
segment accounted for approximately 2.8% and 3.4% 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 trade name 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

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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, 2002, BlazeNet provided access service
to approximately 10,200 business and consumer accounts. Former BlazeNet
residential cable modem subscribers are now served by our York cable
operations.

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 government
sectors. Due to the collapse of the Internet sector in 2001, which has
continued through 2002, sales for Susquehanna Technologies have been stagnant.
A $5.0 million goodwill impairment loss related to this reporting unit was
recognized for the year ended December 31, 2002.

Adelphia Partnership. In 1997, Susquehanna Media, through its
wholly-owned subsidiary Susquehanna Fiber Systems, Inc., entered into a 50/50
partnership with Adelphia Business Solutions, Inc. 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s York cable operation 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, 2002, the
partnership provided service to 94 buildings in the York area and had over
9,400 access and long distance lines installed. During 2002, our partners
parent company declared bankruptcy under Chapter 11. The partnership is not
currently included in this bankruptcy proceeding.

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;                                              
| | - |  | --------------------------------------------------------------------------------------------------------------
|
| |  |  | 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, 2002, we held a total of 149 franchises. Many
franchise agreements 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

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modification of franchise requirements if warranted by changed
circumstances that render performance commercially impracticable.

Our cable franchises expire at various times through 2022. The following
table sets forth certain information relating to our franchises:

|                  |  |            |     |                     |  |                     |     |   |  |  |     |  
|----------------- |  | ---------- | --- | ------------------- |  | ------------------- | --- | - |  |  | --- | -
|Year of Franchise |  | Number of  |     | Percentage of Total |  | Percentage of Total
|Expiration        |  | Franchises |     | Franchises          |  | Basic Subscribers  
|                  |  |            |     |                     |  |                    
|2003              |  |            | 8   |                     |  |                     | 5   | % |  |  | 5   | %
|2004              |  |            | 8   |                     |  |                     | 5   | % |  |  | 15  | %
|2005              |  |            | 5   |                     |  |                     | 3   | % |  |  | 2   | %
|2006 and after    |  |            | 128 |                     |  |                     | 87  | % |  |  | 78  | %
|                  |  |            |     |                     |  |                     |     |   |  |  |     |  
|Total             |  |            | 149 |                     |  |                     | 100 | % |  |  | 100 | %
|                  |  |            |     |                     |  |                     |     |   |  |  |     |  

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, webcasts and home video products,
including DVDs and videotape cassette recorders. The extent to which a cable
television system is competitive depends, in part, upon that systems ability
to provide, at a reasonable price to customers, a greater variety of
programming and other communications services than those available off-air or
through alternative delivery sources and upon superior technical performance
and customer service.

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

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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 and one digital broadcast satellite provider is offering
local signals in the York market.

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.

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 was 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

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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, the Secretary of Agriculture announced the launch
of the Rural Utilities Services (RUS) Rural Broadband Access Loan and Loan
Guarantee Program. The program will allow RUS to make available $1.2 billion
in loans and loan guarantees during fiscal year 2003 to provide 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. It is uncertain whether this incentive program
will prompt additional competition in our markets, or what 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 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 1,567 employees as of December 31, 2002. No employees
are covered by collective bargaining agreements, and we consider relations with
our employees to be good.

Radio Employee Stock Plan

The Radio Employee Stock Plan (Plan), as established in 1987, offers
certain key employees a right to purchase non-voting Susquehanna Radio Corp.
shares at a formula value. For each share purchased, a participant receives a
vested option to purchase two additional shares at the same price for a ten
year and one month period from the date of grant.

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On April 10, 2000, the Susquehanna Pfaltzgraff Co. Board of Directors
changed the method of determining the Plans share value effective July 1,
2000. Over a period ending April 1, 2002, Plan share value transitioned from a
formula value to a value based upon Susquehanna Pfaltzgraff Co.s annual
independent ESOP valuation (Appraised Value). On July 1, 2000, share value
was based one-third on Appraised Value and two-thirds on formula value. As of
April 1, 2001, share value was based two-thirds on Appraised Value and
one-third on formula value. As of April 1, 2002 and thereafter, Plan share
value was based solely on Radios Appraised Value.

The July 1, 2000 change in the method for valuing shares was a plan
modification that subjected shares formerly accounted for under Accounting
Principles Board Opinion 25 Accounting for Stock Issued to Employees to
Statement of Financial Accounting Standard No. 123, Accounting for Stock-Based
Compensation. Accordingly, as of July 1, 2000, shares formerly accounted for
as minority interests were recast as a Radio Employee Share Plan liability.
Changes in share value formerly charged directly against retained earnings have
been reflected as noncash charges to operating income. Our consolidated
financial statements for 2001 and 2000 have been restated (See Notes 7 and 15
to the consolidated financial statements). Financial statements for interim
periods have also been restated. As of April 1, 2002, Plan share value became
based solely on Appraised Value and the Radio Employee Share Plan Liability was
recast as minority interests. Subsequent increases in Plan share value will be
accounted for as an increase in minority interests in the consolidated
statement of operations.

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. As of April 1, 2002, performance share value was wholly based on fair
value as of December 31, 2001.

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
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

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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.

|                     |  |                   |  |           |  |       |  |          |  |                 |  |                   
|-------------------- |  | ----------------- |  | --------- |  | ----- |  | -------- |  | --------------- |  | ------------------
|                     |  |                   |  | Frequency |  |       |  |          |  |                 |  |                   
|                     |  | City of           |  | (FM-MHZ)  |  | FCC   |  | HAAT     |  | Power in        |  | Expiration Date of
|Market and Stations  |  | License           |  | (AM-KHZ)  |  | Class |  | (Meters) |  | Kilowatts (Day) |  | License           
|                     |  |                   |  |           |  |       |  |          |  |                 |  |                   
|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(2)           |  | 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    
|KDBN-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  |  | C0    |  | 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   
|WYGY-FM              |  | Lebanon           |  | 96.5 MHz  |  | B     |  | 245      |  | 19.5 KW         |  | August 1, 2004    
|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    
|WAVG-AM              |  | Jeffersonville    |  | 1450 MHz  |  | C     |  |         |  | 1 KW            |  | August 1, 2004    
|WZZB-AM              |  | Seymour           |  | 1390 MHz  |  | D     |  |         |  | 1 KW            |  | August 1, 2004    
|WQKC-FM              |  | Seymour           |  | 93.7 MHz  |  | B     |  | 213      |  | 25 KW           |  | August 1, 2004    
|Kansas City, MO      |  |                   |  |           |  |       |  |          |  |                 |  |                   
|KCMO-FM              |  | Kansas City       |  | 94.9 MHz  |  | C0    |  | 341      |  | 100 KW          |  | February 1, 2005  
|KCMO-AM              |  | Kansas City       |  | 710 KHz   |  | B     |  |         |  | 10 KW           |  | February 1, 2005  
|KCFX-FM              |  | Harrisonville, MO |  | 101.1 MHz |  | C0    |  | 335      |  | 100 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  

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---

|(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:



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

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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, horizontal and vertical ownership, carriage of television broadcast
programming, cable rates, pole attachment rates, consumer protection and
customer service, leased access, indecent programming, programmer access to
cable television systems, availability of satellite-delivered programming
services to cable system competitors, technical standards, consumer electronics
equipment compatibility, ownership of home wiring, mandatory deletion of
certain imported broadcast programming, equal employment opportunity, consumer
education and lockbox enforcement, origination cablecasting and sponsorship
identification, political programming and advertising, advertising during
childrens programming, signal leakage and frequency use, maintenance of
various records, and antenna structure notification, marking and lighting. The
FCC has the authority to enforce these regulations through the imposition of
substantial fines, the issuance of cease and desist orders and/or the
imposition of other administrative sanctions, such as the revocation of FCC
licenses needed to operate certain transmission facilities often used in
connection with cable operations. A brief summary of certain of these federal
regulations as adopted to date follows.

Rate Regulation

Where a cable television system is not subject to effective competition,
the rates for the basic service tier (the lowest level of cable programming
service which must include local broadcast channels and public access channels)
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

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the channels carried on the basic service tier, and for programming
offered on a per-channel or per-program basis are not subject to governmental
regulations. If local franchising authorities choose to regulate basic service
rates, they may order reductions and, in certain circumstances, refunds of
existing monthly rates and charges for associated equipment. In carrying out
their rate regulatory authority, however, local officials are subject to
certain FCC standards such as the obligation to evaluate rates in accordance
with FCC approved benchmark formulas or cost-of-service showings. Future rates
of regulated cable systems may not exceed an inflation-indexed amount, plus
increases in certain costs beyond the cable operators control, such as taxes,
franchise fees and increased programming costs. Cost-based adjustments to
these capped rates also can be made in the event a cable television operator
adds or deletes channels. There is also a streamlined cost-of-service
methodology available to justify a rate increase for significant system
rebuilds or upgrades. We currently have four franchisee authorities that are
certified to regulate for basic services, installation and equipment rates, ,
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.

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, 2005. A cable television system is generally required to
devote up to one-third of its activated channel capacity for the carriage of
local commercial television stations whether pursuant to the mandatory carriage
requirements or retransmission consent requirements of the 1992 Cable Act.
Local non-commercial television stations are also given mandatory carriage
rights, subject to certain exceptions, on cable systems with the principal
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 market conditions, channel capacity and similar matters when such
arrangements are renegotiated, including demands by television stations for
increased compensation in return for retransmission consent.

The FCC has recently adopted interim regulations regarding carriage of
digital television signals offered by local television broadcasters. Under
these regulations, local television broadcast stations transmitting solely in a
digital format are entitled to request carriage in their choice of digital or
converted analog format. Stations transmitting in both digital and analog
formats, which is permitted during the current ongoing transition period, have
no carriage rights for the digital format during the transition unless and
until they return in their analog channel. The FCC continues to consider
proposals to require cable operators to carry multiple digital programming
streams offered by local television stations, both during and after the digital
transition period. 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.

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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 cable service revenues, excluding
revenues derived from services other than cable service. 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.

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

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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.

Horizontal and Vertical Ownership/Cross-Ownership

In March of 2001, the U.S. Court of Appeals for the District of Columbia
Circuit reversed and remanded the FCCs cable television horizontal and
vertical ownership limits for further consideration. The horizontal ownership
limit had barred a cable operator from having an attributable interest in more
than 30 percent of the nationwide multichannel video programming
subscribership. The vertical ownership limit had barred a cable operator from
carrying attributable programming on more than 40 percent of channels, up to 75
channels of capacity. In its March 2001 decision, the D.C. Circuit Court of
Appeals also reversed and remanded two provisions of the FCCs ownership
attribution rules (the elimination of the single majority shareholder exemption
and the prohibition on the sale of programming by an insulated limited
partner.) In September of 2001, the FCC issued a Further Notice of Proposed
Rulemaking seeking to develop a complete record that would help the FCC produce
and support changes to the affected cable ownership and attribution rules in
accordance with the March 2001 court decision. Final public comments were due
in February of 2002. The FCC has not yet released its decision, and thus, we
cannot predict the impact of the results of the FCCs pending cable ownership
and attribution rulemaking on our business. However, revised FCC rules could
affect the investment of Susquehanna Cable held by Comcast Corporation, as well
as our ability to enter into other strategic relationships with larger cable
companies in the future. If Comcast divests its ownership interest in
Susquehanna Cable, our programming costs are likely to increase faster than
they would otherwise.

In February 2003, the FCC repealed its cable/broadcast cross-ownership
restriction in response to a D.C. Circuit Court of Appeals decision that the
FCC had failed to demonstrate that the restriction continued to be necessary in
light of increased competition. Thus, the principal remaining cross-ownership
restriction that still applies to cable operators is the prohibition from
owning or operating a satellite master antenna system or multichannel
multipoint distribution system in any area where a cable operator provides
franchised cable service and is not subject to effective competition. However,
a cable operator may acquire and operate a satellite master antenna system in
its existing franchise service area if the programming and other services
provided to the satellite master antenna system subscribers are offered
according to the terms and conditions of the cable operators local franchise
agreement.

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

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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.




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 six studio facilities for our radio operations. We own broadcast
towers for 14 of our radio stations and lease 15 other broadcast towers. We
own the real property under eight of our broadcast towers and lease the land
under our other 21 towers. We own two auxiliary towers and lease two others as
backup facilities for main broadcast towers. We own the real property under
one of our auxiliary towers and lease the land under our other three auxiliary
towers. Three other auxiliary towers are under construction and should be
completed in early 2003. The newly constructed auxiliary towers and the land
under them will be leased. We own eight, and lease two, headend facilities for
our cable television operations. In connection with our cable operations, we
own nine tower locations and lease three others. In addition, we own the real
estate for eight 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 2002.

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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.

Susquehanna Media Co. did not issue any equity securities during 2002 and
it does not have any equity compensation plans.




Item 6.Selected Annual and Quarterly Financial Data

The below selected
balance sheet
financial data as of December
31, 2002 and 2001 and income statement and cash flows financial data
for the years ended December 31, 2002, 2001, and 2000 were derived from our audited consolidated
financial statements. Our audited consolidated financial statements and
related notes as of December 31, 2002 and 2001 and for the years ended December 31, 2002, 2001 and 2000 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. Please see Note 15 to the consolidated financial
statements for information regarding restatements.

|                                             |                      |                    |         |                         |         |      |         |            |         |            |         |            |         |            |         |         |         |   |         |         |         | 
|-------------------------------------------- | -------------------- | ------------------ | ------- | ----------------------- | ------- | ---- | ------- | ---------- | ------- | ---------- | ------- | ---------- | ------- | ---------- | ------- | ------- | ------- | - | ------- | ------- | ------- | 
|                                             |                      |                    |         | Year Ended December 31,
|                                             |                      |                    |         |                        
|                                             |                      |                    |         | 2002                    |         | 2001 |         | 2000       |         | 1999       |         | 1998      
|                                             |                      |                    |         |                         |         |      |         |            |         |            |         |           
|                                             |                      |                    |         |                         |         |      |         | (Restated) |         | (Restated) |         | (Restated) |         | (Restated)
|                                             |                      |                    |         | Dollars in Thousands   
|INCOME STATEMENT DATA:                       |                      |                    |         |                         |         |      |         |            |         |            |         |            |         |            |         |         |         |   |         |        
|Revenues:                                    |                      |                    |         |                         |         |      |         |            |         |            |         |            |         |            |         |         |         |   |         |        
|                                             |                      | Radio              |         | $                       | 216,222 |      |         | $          | 198,039 |            |         | $          | 220,886 |            |         | $       | 185,193 |   |         | $       | 151,170 | 
|                                             |                      | Cable              |         |                         | 122,754 |      |         |            | 104,758 |            |         |            | 93,113  |            |         |         | 82,720  |   |         |         | 70,641  | 
|                                             |                      | Internet
and Other |         |                         | 9,670   |      |         |            | 10,632  |            |         |            | 6,590   |            |         |         | 3,353   |   |         |         | 1,616   | 
|                                             |                      |                    |         |                         |         |      |         |            |         |            |         |            |         |            |         |         |         |   |         |        
|Total revenues                               |                      |                    | 348,646 |                         |         |      | 313,429 |            |         |            | 320,589 |            |         |            | 271,266 |         |         |   | 223,427 |        
|Total operating expenses                     |                      |                    | 292,378 |                         |         |      | 291,274 |            |         |            | 263,373 |            |         |            | 209,884 |         |         |   | 172,376 |        
|                                             |                      |                    |         |                         |         |      |         |            |         |            |         |            |         |            |         |         |         |   |         |        
|Operating income                             |                      |                    | 56,268  |                         |         |      | 22,155  |            |         |            | 57,216  |            |         |            | 61,382  |         |         |   | 51,051  |        
|Interest expense, net                        |                      |                    | 29,200  |                         |         |      | 37,887  |            |         |            | 37,523  |            |         |            | 28,573  |         |         |   | 20,506  |        
|Interest income from loan to parent company  |                      |                    | 7,162   |                         |         |      | 6,895   |            |         |            | 6,696   |            |         |            | 4,476   |         |         |   |        |        
|Other income (loss)                          |                      |                    | (1,406  | )                       |         |      | (256    | )          |         |            | (1,474  | )          |         |            | 379     |         |         |   | 334     |        
|                                             |                      |                    |         |                         |         |      |         |            |         |            |         |            |         |            |         |         |         |   |         |        
|Income (loss) before income taxes            |                      |                    | 32,824  |                         |         |      | (9,093  | )          |         |            | 24,915  |            |         |            | 37,664  |         |         |   | 30,879  |        
|Provision for income taxes                   |                      |                    | 17,904  |                         |         |      | 6,416   |            |         |            | 16,762  |            |         |            | 15,114  |         |         |   | 13,801  |        
|                                             |                      |                    |         |                         |         |      |         |            |         |            |         |            |         |            |         |         |         |   |         |        
|Income (loss) before minority interests      |                      |                    | 14,920  |                         |         |      | (15,509 | )          |         |            | 8,153   |            |         |            | 22,550  |         |         |   | 17,078  |        
|Minority interests                           |                      |                    | (3,758  | )                       |         |      | (1,694  | )          |         |            | (3,839  | )          |         |            | (4,140  | )       |         |   | (4,304  | )      
|                                             |                      |                    |         |                         |         |      |         |            |         |            |         |            |         |            |         |         |         |   |         |        
|Net income (loss)                            |                      | $                  | 11,162  |                         |         | $    | (17,203 | )          |         | $          | 4,314   |            |         | $          | 18,410  |         |         | $ | 12,774  |        
|                                             |                      |                    |         |                         |         |      |         |            |         |            |         |            |         |            |         |         |         |   |         |        
|RESTATEMENT
ADJUSTMENTS TO OPERATING INCOME: |                      |                    |         |                         |         |      |         |            |         |            |         |            |         |            |         |         |         |   |         |        
|                                             | Radio
stock plan     |                    | $       |                        |         |      | (       | 22,305)    |         |            | (       | 19,748)    |         |            | $       |        |         |   | $       |        |        
|                                             | Cable
rebuilds       |                    |         |                        |         |      |         | (2,285)    |         |            |         | (2,891)    |         |            |         | (2,499) |         |   |         | (1,900) |        
|                                             | Launch
fees          |                    |         |                        |         |      |         | (1,739)    |         |            |         | (385)      |         |            |         | (985)   |         |   |         |        |        
|                                             | Others               |                    |         |                        |         |      |         | (455)      |         |            |         | (345)      |         |            |         |        |         |   |         |        |        
|                                             |                      |                    |         |                         |         |      |         |            |         |            |         |            |         |            |         |         |         |   |         |        
|                                             |                      |                    | $       |                        |         |      | $       | (26,784)   |         |            | $       | (23,369)   |         |            | $       | (3,484) |         |   | $       | (1,900) |        
|                                             |                      |                    |         |                         |         |      |         |            |         |            |         |            |         |            |         |         |         |   |         |        
|BALANCE SHEET DATA(at end of period):        |                      |                    |         |                         |         |      |         |            |         |            |         |            |         |            |         |         |         |   |         |        
|                                             | Total assets         |                    | $       | 746,527                 |         |      | $       | 665,725    |         |            | $       | 657,342    |         |            | $       | 523,242 |         |   | $       | 353,241 |        
|                                             | Total debt           |                    |         | 521,137                 |         |      |         | 495,106    |         |            |         | 500,600    |         |            |         | 405,621 |         |   |         | 272,776 |        
|                                             | Stockholders equity |                    |         | 24,059                  |         |      |         | 13,390     |         |            |         | 31,086     |         |            |         | 28,767  |         |   |         | 8,023   |        
|SUPPLEMENTARY FINANCIAL DATA:                |                      |                    |         |                         |         |      |         |            |         |            |         |            |         |            |         |         |         |   |         |        
|Cash flows related to:                       |                      |                    |         |                         |         |      |         |            |         |            |         |            |         |            |         |         |         |   |         |        
|                                             | Operating activities |                    | $       | 86,035                  |         |      | $       | 66,954     |         |            | $       | 67,105     |         |            | $       | 60,211  |         |   | $       | 36,843  |        

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|                                        |                      |   |        |         |   |   |        |         |   |   |        |          |   |   |        |          |   |   |        |         |   | 
|--------------------------------------- | -------------------- | - | ------ | ------- | - | - | ------ | ------- | - | - | ------ | -------- | - | - | ------ | -------- | - | - | ------ | ------- | - | 
|                                        | Investing activities |   |        | (95,387 | ) |   |        | (60,760 | ) |   |        | (163,478 | ) |   |        | (182,944 | ) |   |        | (38,842 | )
|                                        | Financing activities |   |        | 9,352   |   |   |        | (6,194  | ) |   |        | 95,734   |   |   |        | 121,430  |   |   |        | 3,941   |  
|Capital expenditures                    |                      | $ | 28,329 |         |   | $ | 31,739 |         |   | $ | 36,913 |          |   | $ | 33,066 |          |   | $ | 29,592 |        
|RATIO OF EARNINGS TO FIXED CHARGES (1): |                      |   | 2.0x   |         |   |   | x     |         |   |   | 1.6x   |          |   |   | 2.2x   |          |   |   | 2.3x   |        



---

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

Unaudited Quarterly Financial Information (in thousands, except per share data)

The
following unaudited quarterly financial information for 2002, 2001 and 2000
was derived from our unaudited financial statements and as originally filed
included, 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. The restated results include
adjustments as further described elsewhere in Note 15 to the
consolidated financial statements. These unaudited quarterly operating results are not necessarily
indicative of the results that may be achieved for a full fiscal year or for
future periods. Amounts shown in the tables below are in thousands except for
per share data.

|                                             |                               |         |            |         |                         |         |            |         |                         |         |            |          |                         |         |        |        |  |   |        |        |  |   |        |        |  |   |        |        |  |  |  |  | 
|-------------------------------------------- | ----------------------------- | ------- | ---------- | ------- | ----------------------- | ------- | ---------- | ------- | ----------------------- | ------- | ---------- | -------- | ----------------------- | ------- | ------ | ------ |  | - | ------ | ------ |  | - | ------ | ------ |  | - | ------ | ------ |  |  |  |  | 
|2002                                         |                               | 1st Qtr |            | 1st Qtr |                         | 2nd Qtr |            | 2nd Qtr |                         | 3rd Qtr |            | 3rd Qtr  |                         | 4th Qtr |        |       
|                                             |                               |         |            |         |                         |         |            |         |                         |         |            |          |                         |         |        |        |  |  
|                                             |                               |         | (Restated) |         | (As
originallyreported) |         | (Restated) |         | (As
originallyreported) |         | (Restated) |          | (As
originallyreported) |         |        |        |  |   |       
|Revenues                                     |                               |         |            |         |                         |         |            |         |                         |         |            |          |                         |         |        |        |  |   |        |        |  |   |        |        |  |   |        |        |  |  |  | 
|                                             | Radio                         |         | $          | 40,738  |                         |         | $          | 40,738  |                         |         | $          | 57,124   |                         |         | $      | 57,124 |  |   | $      | 59,529 |  |   | $      | 59,529 |  |   | $      | 58,831 |  |  |  |  | 
|                                             | Cable                         |         |            | 28,210  |                         |         |            | 28,210  |                         |         |            | 31,260   |                         |         |        | 31,260 |  |   |        | 31,320 |  |   |        | 31,320 |  |   |        | 31,964 |  |  |  |  | 
|                                             | Internet
and Other            |         |            | 2,761   |                         |         |            | 2,761   |                         |         |            | 2,178    |                         |         |        | 2,178  |  |   |        | 2,281  |  |   |        | 2,281  |  |   |        | 2,450  |  |  |  |  | 
|                                             |                               |         |            |         |                         |         |            |         |                         |         |            |          |                         |         |        |        |  |   |        |        |  |   |        |        |  |   |        |        |  |  |  | 
|Total Revenues                               |                               |         | 71,709     |         |                         |         | 71,709     |         |                         |         | 90,562     |          |                         |         | 90,562 |        |  |   | 93,130 |        |  |   | 93,130 |        |  |   | 93,245 |        |  |  |  | 
|                                             |                               |         |            |         |                         |         |            |         |                         |         |            |          |                         |         |        |        |  |   |        |        |  |   |        |        |  |   |        |        |  |  |  | 
|Operating Expenses                           |                               |         |            |         |                         |         |            |         |                         |         |            |          |                         |         |        |        |  |   |        |        |  |   |        |        |  |   |        |        |  |  |  | 
|                                             | Operating and
programming     |         |            | 28,841  |                         |         |            | 28,841  |                         |         |            | 34,147   |                         |         |        | 34,147 |  |   |        | 36,249 |  |   |        | 36,249 |  |   |        | 32,632 |  |  |  |  | 
|                                             | Selling                       |         |            | 8,872   |                         |         |            | 8,872   |                         |         |            | 9,936    |                         |         |        | 9,936  |  |   |        | 10,279 |  |   |        | 10,279 |  |   |        | 11,327 |  |  |  |  | 
|                                             | General and
administrative    |         |            | 14,849  |                         |         |            | 14,849  |                         |         |            | 20,601   |                         |         |        | 20,601 |  |   |        | 16,438 |  |   |        | 16,438 |  |   |        | 16,672 |  |  |  |  | 
|                                             | Radio Stock Plan Expense      |         |            |        |                         |         |            |        |                         |         |            | 17,065   |                         |         |        |       |  |   |        |       |  |   |        |       |  |   |        |       |  |  |  |  | 
|                                             | Depreciation and
amortization |         |            | 6,294   |                         |         |            | 6,294   |                         |         |            | 6,963    |                         |         |        | 6,963  |  |   |        | 7,907  |  |   |        | 7,656  |  |   |        | 8,306  |  |  |  |  | 
|                                             | Goodwill impairment loss      |         |            |        |                         |         |            |        |                         |         |            |         |                         |         |        |       |  |   |        |       |  |   |        |       |  |   |        | 5,000  |  |  |  |  | 
|                                             |                               |         |            |         |                         |         |            |         |                         |         |            |          |                         |         |        |        |  |   |        |        |  |   |        |        |  |   |        |        |  |  |  | 
|Total Operating Expenses                     |                               |         | 58,856     |         |                         |         | 58,856     |         |                         |         | 88,712     |          |                         |         | 71,647 |        |  |   | 70,873 |        |  |   | 70,622 |        |  |   | 73,937 |        |  |  |  | 
|                                             |                               |         |            |         |                         |         |            |         |                         |         |            |          |                         |         |        |        |  |   |        |        |  |   |        |        |  |   |        |        |  |  |  | 
|Operating Income (Loss)                      |                               |         | 12,853     |         |                         |         | 12,853     |         |                         |         | 1,850      |          |                         |         | 18,915 |        |  |   | 22,257 |        |  |   | 22,508 |        |  |   | 19,308 |        |  |  |  | 
|Interest Expense, net                        |                               |         | (7,251     | )       |                         |         | (7,251     | )       |                         |         | (7,609     | )        |                         |         | (7,609 | )      |  |   | (7,132 | )      |  |   | (7,132 | )      |  |   | (7,208 | )      |  |  |  | 
|Transitional
Impairment Loss                 |                               |         |           |         |                         |         | (5.0       | )       |                         |         |           |          |                         |         |       |        |  |   |       |        |  |   |       |        |  |   |       |        |  |  |  | 
|Net Income (Loss)                            |                               | $       | 3,644      |         |                         | $       | (1,763     | )       |                         | $       | (9,908     | )        |                         | $       | 6,701  |        |  | $ | 9,416  |        |  | $ | 8,456  |        |  | $ | 8,010  |        |  |  |  | 
|                                             |                               |         |            |         |                         |         |            |         |                         |         |            |          |                         |         |        |        |  |   |        |        |  |   |        |        |  |   |        |        |  |  |  | 
|Restatement
adjustments to operating income: |                               |         |            |         |                         |         |            |         |                         |         |            |          |                         |         |        |        |  |   |        |        |  |   |        |        |  |   |        |        |  |  |  | 
|                                             | Radio
Stock Plan              |         | $          |        |                         |         |            |         |                         |         | $          | (17,065) |                         |         |        |        |  |   | $      |       |  |   |        |        |  |   |        |        |  |  |  |  | 
|                                             | Cable
rebuilds                |         |            |        |                         |         |            |         |                         |         |            |         |                         |         |        |        |  |   |        | (251)  |  |   |        |        |  |   |        |        |  |  |  |  | 
|                                             |                               |         |            |         |                         |         |            |         |                         |         |            |          |                         |         |        |        |  |   |        |        |  |   |        |        |  |   |        |        |  |  |  | 
|                                             |                               |         |            |        |                         |         |            |         |                         |         | $          | (17,065) |                         |         |        |        |  |   | $      | (251)  |  |   |        |        |  |   |        |        |  |  |  |  | 
|                                             |                               |         |            |         |                         |         |            |         |                         |         |            |          |                         |         |        |        |  |   |        |        |  |   |        |        |  |   |        |        |  |  |  | 

33



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##### Table of Contents



|                                                       |                               |         |            |         |                          |         |            |         |                          |         |            |          |                          |         |            |         |                          |   |        |        |  |   |        |        |  |   |        |         |  |   |        |        | 
|------------------------------------------------------ | ----------------------------- | ------- | ---------- | ------- | ------------------------ | ------- | ---------- | ------- | ------------------------ | ------- | ---------- | -------- | ------------------------ | ------- | ---------- | ------- | ------------------------ | - | ------ | ------ |  | - | ------ | ------ |  | - | ------ | ------- |  | - | ------ | ------ | 
|2001                                                   |                               | 1st Qtr |            | 1st Qtr |                          | 2nd Qtr |            | 2nd Qtr |                          | 3rd Qtr |            | 3rd Qtr  |                          | 4th Qtr |            | 4th Qtr
|                                                       |                               |         |            |         |                          |         |            |         |                          |         |            |          |                          |         |            |        
|                                                       |                               |         | (Restated) |         | (As
originally
reported) |         | (Restated) |         | (As
originally
reported) |         | (Restated) |          | (As
originally
reported) |         | (Restated) |         | (As
originally
reported)
|                                                       |                               |         |            |         |                          |         |            |         |                          |         |            |          |                          |         |            |         |                         
|Revenues                                               |                               |         |            |         |                          |         |            |         |                          |         |            |          |                          |         |            |         |                          |   |        |        |  |   |        |        |  |   |        |         |  |   |        |       
|                                                       | Radio                         |         | $          | 39,780  |                          |         | $          | 39,780  |                          |         | $          | 53,418   |                          |         | $          | 53,418  |                          |   | $      | 54,773 |  |   | $      | 54,773 |  |   | $      | 50,068  |  |   | $      | 50,068 | 
|                                                       | Cable                         |         |            | 24,663  |                          |         |            | 24,663  |                          |         |            | 25,745   |                          |         |            | 25,745  |                          |   |        | 26,596 |  |   |        | 26,596 |  |   |        | 27,754  |  |   |        | 27,754 | 
|                                                       | Internet
and Other            |         |            | 2,408   |                          |         |            | 2,408   |                          |         |            | 2,699    |                          |         |            | 2,699   |                          |   |        | 2,844  |  |   |        | 2,844  |  |   |        | 2,681   |  |   |        | 2,681  | 
|                                                       |                               |         |            |         |                          |         |            |         |                          |         |            |          |                          |         |            |         |                          |   |        |        |  |   |        |        |  |   |        |         |  |   |        |       
|Total Revenues                                         |                               |         | 66,851     |         |                          |         | 66,851     |         |                          |         | 81,862     |          |                          |         | 81,862     |         |                          |   | 84,213 |        |  |   | 84,213 |        |  |   | 80,503 |         |  |   | 80,503 |       
|                                                       |                               |         |            |         |                          |         |            |         |                          |         |            |          |                          |         |            |         |                          |   |        |        |  |   |        |        |  |   |        |         |  |   |        |       
|Operating Expenses                                     |                               |         |            |         |                          |         |            |         |                          |         |            |          |                          |         |            |         |                          |   |        |        |  |   |        |        |  |   |        |         |  |   |        |       
|                                                       | Operating and
programming     |         |            | 28,129  |                          |         |            | 28,284  |                          |         |            | 31,961   |                          |         |            | 32,118  |                          |   |        | 33,035 |  |   |        | 33,193 |  |   |        | 29,543  |  |   |        | 29,741 | 
|                                                       | Selling                       |         |            | 8,444   |                          |         |            | 8,444   |                          |         |            | 11,129   |                          |         |            | 9,973   |                          |   |        | 10,128 |  |   |        | 9,672  |  |   |        | 9,433   |  |   |        | 8,638  | 
|                                                       | General and
administrative    |         |            | 14,590  |                          |         |            | 14,512  |                          |         |            | 18,539   |                          |         |            | 18,461  |                          |   |        | 15,473 |  |   |        | 15,395 |  |   |        | 16,726  |  |   |        | 16,647 | 
|                                                       | Radio Stock Plan Expense      |         |            |        |                          |         |            |        |                          |         |            | 22,305   |                          |         |            |        |                          |   |        |       |  |   |        |       |  |   |        |        |  |   |        |       | 
|                                                       | Depreciation and
amortization |         |            | 9,323   |                          |         |            | 9,288   |                          |         |            | 10,013   |                          |         |            | 9,563   |                          |   |        | 10,158 |  |   |        | 10,041 |  |   |        | 12,345  |  |   |        | 10,520 | 
|                                                       |                               |         |            |         |                          |         |            |         |                          |         |            |          |                          |         |            |         |                          |   |        |        |  |   |        |        |  |   |        |         |  |   |        |       
|Total Operating Expenses                               |                               |         | 60,486     |         |                          |         | 60,528     |         |                          |         | 93,947     |          |                          |         | 70,115     |         |                          |   | 68,794 |        |  |   | 68,301 |        |  |   | 68,047 |         |  |   | 65,546 |       
|                                                       |                               |         |            |         |                          |         |            |         |                          |         |            |          |                          |         |            |         |                          |   |        |        |  |   |        |        |  |   |        |         |  |   |        |       
|Operating Income (Loss)                                |                               |         | 6,365      |         |                          |         | 6,323      |         |                          |         | (12,085    | )        |                          |         | 11,747     |         |                          |   | 15,419 |        |  |   | 15,912 |        |  |   | 12,456 |         |  |   | 14,957 |       
|Interest Expense, net                                  |                               |         | (10,287    | )       |                          |         | (10,287    | )       |                          |         | (9,385     | )        |                          |         | (9,385     | )       |                          |   | (9,973 | )      |  |   | (9,973 | )      |  |   | (8,242 | )       |  |   | (8,242 | )     
|Net Income (Loss)                                      |                               | $       | (1,559     | )       |                          | $       | (1,669     | )       |                          | $       | (21,075    | )        |                          | $       | 1,473      |         |                          | $ | 2,873  |        |  | $ | 2,755  |        |  | $ | 2,558  |         |  | $ | 2,148  |       
|                                                       |                               |         |            |         |                          |         |            |         |                          |         |            |          |                          |         |            |         |                          |   |        |        |  |   |        |        |  |   |        |         |  |   |        |       
|Net income (loss) per
common share
(basic and diluted) |                               | $       | (1.53      | )       |                          | $       | (1.63      | )       |                          | $       | (19.27     | )        |                          | $       | 1.23       |         |                          | $ | 2.50   |        |  | $ | 2.39   |        |  | $ | 2.21   |         |  | $ | 1.84   |       
|                                                       |                               |         |            |         |                          |         |            |         |                          |         |            |          |                          |         |            |         |                          |   |        |        |  |   |        |        |  |   |        |         |  |   |        |       
|Restatement
adjustments to operating income:           |                               |         |            |         |                          |         |            |         |                          |         |            |          |                          |         |            |         |                          |   |        |        |  |   |        |        |  |   |        |         |  |   |        |       
|                                                       | Radio
Stock Plan              |         | $          |        |                          |         |            |         |                          |         | $          | (22,305) |                          |         |            |         |                          |   | $      |       |  |   |        |        |  |   | $      |        |  |   |        |        | 
|                                                       | Cable
rebuilds                |         |            |        |                          |         |            |         |                          |         |            | (415)    |                          |         |            |         |                          |   |        | (81)   |  |   |        |        |  |   |        | (1,789) |  |   |        |        | 
|                                                       | Launch
fees                   |         |            | 155     |                          |         |            |         |                          |         |            | (999)    |                          |         |            |         |                          |   |        | (298)  |  |   |        |        |  |   |        | (597)   |  |   |        |        | 
|                                                       | Others                        |         |            | (113)   |                          |         |            |         |                          |         |            | (113)    |                          |         |            |         |                          |   |        | (114)  |  |   |        |        |  |   |        | (115)   |  |   |        |        | 
|                                                       |                               |         |            |         |                          |         |            |         |                          |         |            |          |                          |         |            |         |                          |   |        |        |  |   |        |        |  |   |        |         |  |   |        |       
|                                                       |                               |         | $          | 42      |                          |         |            |         |                          |         | $          | (23,832) |                          |         |            |         |                          |   | $      | (493)  |  |   |        |        |  |   | $      | (2,501) |  |   |        |        | 
|                                                       |                               |         |            |         |                          |         |            |         |                          |         |            |          |                          |         |            |         |                          |   |        |        |  |   |        |        |  |   |        |         |  |   |        |        | 

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|                                             |                               |         |            |         |                          |         |            |         |                          |         |            |         |                          |         |            |         |                          |   |         |          |  |   |         |        |  |   |         |         |  |   |         |        | 
|-------------------------------------------- | ----------------------------- | ------- | ---------- | ------- | ------------------------ | ------- | ---------- | ------- | ------------------------ | ------- | ---------- | ------- | ------------------------ | ------- | ---------- | ------- | ------------------------ | - | ------- | -------- |  | - | ------- | ------ |  | - | ------- | ------- |  | - | ------- | ------ | 
|2000                                         |                               | 1st Qtr |            | 1st Qtr |                          | 2nd Qtr |            | 2nd Qtr |                          | 3rd Qtr |            | 3rd Qtr |                          | 4th Qtr |            | 4th Qtr
|                                             |                               |         |            |         |                          |         |            |         |                          |         |            |         |                          |         |            |        
|                                             |                               |         | (Restated) |         | (As
originally
reported) |         | (Restated) |         | (As
originally
reported) |         | (Restated) |         | (As
originally
reported) |         | (Restated) |         | (As
originally
reported)
|                                             |                               |         |            |         |                          |         |            |         |                          |         |            |         |                          |         |            |         |                         
|Revenues                                     |                               |         |            |         |                          |         |            |         |                          |         |            |         |                          |         |            |         |                          |   |         |          |  |   |         |        |  |   |         |         |  |   |         |       
|                                             | Radio                         |         | $          | 41,682  |                          |         | $          | 41,682  |                          |         | $          | 60,732  |                          |         | $          | 60,732  |                          |   | $       | 57,364   |  |   | $       | 57,364 |  |   | $       | 61,108  |  |   | $       | 61,108 | 
|                                             | Cable                         |         |            | 22,145  |                          |         |            | 22,145  |                          |         |            | 23,107  |                          |         |            | 23,107  |                          |   |         | 23,544   |  |   |         | 23,544 |  |   |         | 24,317  |  |   |         | 24,317 | 
|                                             | Internet
and Other            |         |            | 1,270   |                          |         |            | 1,270   |                          |         |            | 1,457   |                          |         |            | 1,457   |                          |   |         | 1,592    |  |   |         | 1,592  |  |   |         | 2,271   |  |   |         | 2,271  | 
|                                             |                               |         |            |         |                          |         |            |         |                          |         |            |         |                          |         |            |         |                          |   |         |          |  |   |         |        |  |   |         |         |  |   |         |       
|Total Revenues                               |                               |         | 65,097     |         |                          |         | 65,097     |         |                          |         | 85,296     |         |                          |         | 85,296     |         |                          |   | 82,500  |          |  |   | 82,500  |        |  |   | 87,696  |         |  |   | 87,696  |       
|                                             |                               |         |            |         |                          |         |            |         |                          |         |            |         |                          |         |            |         |                          |   |         |          |  |   |         |        |  |   |         |         |  |   |         |       
|Operating Expenses                           |                               |         |            |         |                          |         |            |         |                          |         |            |         |                          |         |            |         |                          |   |         |          |  |   |         |        |  |   |         |         |  |   |         |       
|                                             | Operating and programming     |         |            | 23,616  |                          |         |            | 23,738  |                          |         |            | 29,168  |                          |         |            | 29,259  |                          |   |         | 28,722   |  |   |         | 29,934 |  |   |         | 30,115  |  |   |         | 30,702 | 
|                                             | Selling                       |         |            | 8,166   |                          |         |            | 8,044   |                          |         |            | 9,766   |                          |         |            | 9,624   |                          |   |         | 10,248   |  |   |         | 9,036  |  |   |         | 10,927  |  |   |         | 10,006 | 
|                                             | General and administrative    |         |            | 12,491  |                          |         |            | 12,459  |                          |         |            | 14,021  |                          |         |            | 13,989  |                          |   |         | 16,441   |  |   |         | 16,408 |  |   |         | 13,705  |  |   |         | 13,672 | 
|                                             | Radio Stock Plan Expense      |         |            |         |                          |         |            |        |                          |         |            |         |                          |         |            |        |                          |   |         | 19,748   |  |   |         |       |  |   |         |         |  |   |         |       | 
|                                             | Depreciation and amortization |         |            | 7,293   |                          |         |            | 7,239   |                          |         |            | 8,711   |                          |         |            | 7,720   |                          |   |         | 8,496    |  |   |         | 8,443  |  |   |         | 11,739  |  |   |         | 9,731  | 
|                                             | Goodwill impairment loss      |         |            |         |                          |         |            |        |                          |         |            |         |                          |         |            |        |                          |   |         |          |  |   |         |       |  |   |         |         |  |   |         |       | 
|                                             |                               |         |            |         |                          |         |            |         |                          |         |            |         |                          |         |            |         |                          |   |         |          |  |   |         |        |  |   |         |         |  |   |         |       
|Total Operating Expenses                     |                               |         | 51,566     |         |                          |         | 51,480     |         |                          |         | 61,666     |         |                          |         | 60,592     |         |                          |   | 83,655  |          |  |   | 63,821  |        |  |   | 66,486  |         |  |   | 64,111  |       
|                                             |                               |         |            |         |                          |         |            |         |                          |         |            |         |                          |         |            |         |                          |   |         |          |  |   |         |        |  |   |         |         |  |   |         |       
|Operating Income (Loss)                      |                               |         | 13,531     |         |                          |         | 13,617     |         |                          |         | 23,630     |         |                          |         | 24,704     |         |                          |   | (1,155  | )        |  |   | 18,679  |        |  |   | 21,210  |         |  |   | 23,585  |       
|Interest Expense, net                        |                               |         | (8,057     | )       |                          |         | (8,057     | )       |                          |         | (8,103     | )       |                          |         | (8,103     | )       |                          |   | (10,546 | )        |  |   | (10,546 | )      |  |   | (10,816 | )       |  |   | (10,816 | )     
|Net Income (Loss)                            |                               | $       | 3,382      |         |                          | $       | 3,437      |         |                          | $       | 9,264      |         |                          | $       | 8,336      |         |                          | $ | (14,621 | )        |  | $ | 5,182   |        |  | $ | 6,289   |         |  | $ | 5,593   |       
|                                             |                               |         |            |         |                          |         |            |         |                          |         |            |         |                          |         |            |         |                          |   |         |          |  |   |         |        |  |   |         |         |  |   |         |       
|Restatement
adjustments to
operating income: |                               |         |            |         |                          |         |            |         |                          |         |            |         |                          |         |            |         |                          |   |         |          |  |   |         |        |  |   |         |         |  |   |         |       
|                                             | Radio
Stock Plan              |         | $          |        |                          |         |            |         |                          |         | $          |        |                          |         |            |         |                          |   | $       | (19,748) |  |   |         |        |  |   | $       |        |  |   |         |        | 
|                                             | Cable
rebuilds                |         |            |        |                          |         |            |         |                          |         |            | (937)   |                          |         |            |         |                          |   |         |         |  |   |         |        |  |   |         | (1,954) |  |   |         |        | 
|                                             | Launch
fees                   |         |            |        |                          |         |            |         |                          |         |            | (51)    |                          |         |            |         |                          |   |         |         |  |   |         |        |  |   |         | (334)   |  |   |         |        | 
|                                             | Others                        |         |            | (86)    |                          |         |            |         |                          |         |            | (86)    |                          |         |            |         |                          |   |         | (86)     |  |   |         |        |  |   |         | (87)    |  |   |         |        | 
|                                             |                               |         |            |         |                          |         |            |         |                          |         |            |         |                          |         |            |         |                          |   |         |          |  |   |         |        |  |   |         |         |  |   |         |       
|                                             |                               |         | $          | (86)    |                          |         |            |         |                          |         | $          | (1,074) |                          |         |            |         |                          |   | $       | (19,834) |  |   |         |        |  |   | $       | (2,375) |  |   |         |        | 
|                                             |                               |         |            |         |                          |         |            |         |                          |         |            |         |                          |         |            |         |                          |   |         |          |  |   |         |        |  |   |         |         |  |   |         |       




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
which have been restated as described elsewhere in this annual report (See Note 15 to the consolidated financial statements for further information
regarding restatements). 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. Please review
Cautionary Note Regarding Forward-Looking Statements and Risk Factors for a
discussion of the factors that may impact our actual and future results.

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, 2002 we owned and operated 9 FM
and 8 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 18th largest cable multiple system operator in the United States
with five cable systems serving approximately 206,500 subscribers as of December 31, 2002.

For the year ended
December 31, 2002, we had revenues and operating income
of $348.6 million and $56.2 million, respectively, with approximately 76% of
operating income generated by our radio broadcast operations and 38% by our
cable television operations. Internet and Other incurred a $7.5 million
operating loss. For the year ended December 31, 2002, our net income was $11.1
million, our

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##### Table of Contents



cash flows from (used in) operating, investing and financing activities
were $86.0 million, $(95.4) million and $9.4 million, respectively, and our
ratio of earnings to fixed charges was 2.0x. Income for both 2002 and 2001 was
significantly reduced by the recognition of $17.1 million and
$22.3 million
charges, respectively for increases in value of the Radio Employee Stock Plan.
The charges are more fully described in Notes 7 and 15 to the accompanying
consolidated financial statements. These charges did not reduce operating cash
flows in either year.

We provide Internet access and enhanced services to residential and
business customers under the trade name BlazeNet. We also focus on custom
designed web integration solutions and services to the media and entertainment,
retail and associations and not-for-profit industries under the trade name
Susquehanna Technologies.

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, 2000 through 2002, cash advertising revenue
was 99% of radio 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.

Most of our cable revenues are derived from monthly subscriber fees for
cable television programming services, high-speed Internet access via cable
modems 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. Radio Employee Stock Plan charges recognize the increase in value of
the plan during the transition to fair value that ended April 1, 2002. The
charges are more fully described in Note 7 to the accompanying consolidated
financial statements.

Cable operating expenses include programming expenses, employee salaries
and benefits, electricity, Internet backbone circuits, depreciation,
amortization and selling, general and administrative expenses for accounting
and billing services, franchise fees, office administration expenses and
corporate charges. Replacement of distribution system recognizes the loss
incurred when functioning distribution system is replaced by new equipment with
greater capabilities.

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Depreciation and amortization expense relates to the depreciation of
tangible assets used in the business and the amortization of intangible assets
not affected by the adoption of Statement of Financial
Accounting Standard No. 142, Goodwill and Other Intangible
Assets (SFAS 142) which resulted in the cessation of amortization of FCC
licenses, cable franchise values and goodwill on January 1, 2002.

Critical Accounting Policies and Estimates

Our managements discussion and analysis of 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. Cable installation revenues are
recognized to the extent of direct selling costs. Cable franchise fees, which
may be up to 5% of subscriber revenues, must be collected and remitted to
franchising authorities. Franchise fees are passed through to subscribers as
permitted and are included in cable revenues. Internet 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.

Valuation of Long-Lived and Indefinite-Lived Intangible Assets.The
Company evaluates the recoverability of its long-lived assets including
property, plant and equipment and intangible assets subject to amortization
whenever events or changes in circumstances suggest the carrying values may not
be recoverable. Analyses based on undiscounted cash flows generated by the
related operations and appraisals, trends or other indicators of fair value are
used in these evaluations. If the assets carrying value exceeds the indicated
fair value, a loss is recognized for the difference between the fair value and
the assets carrying value.

The Company evaluates the recoverability of its indefinite-lived
intangible assets and goodwill annually or whenever events or changes in
circumstances suggest that the asset may be impaired. The Company performs its
annual impairment testing generally one level below its reporting segments.
Radio Federal Communications Commission broadcast licenses and goodwill are
evaluated at the radio market cluster level, cable franchise values and
goodwill are evaluated at the system level and Internet and Other goodwill is
evaluated at the segment level. Indefinite-lived intangible assets other than
goodwill are generally valued using discounted cash flow analyses, projections,
trends, appraisals and multiples evidenced in the reporting units businesses.
Comparable current market transactions, estimated future
operating results, appraisals, trends and other profitability information
may also be used in the

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evaluations. If the carrying value of an asset is
greater than its indicated fair value, an impairment charge would be recognized
for the difference in values.

Derivative Financial Instruments. Derivative financial instruments are
used solely to limit interest rate exposure on variable rate debt. No
derivative financial instruments are held for trading purposes. The Company is
not a party to any leveraged instruments. Interest swaps and collars may
either be treated as hedges or marked-to-market as elected on a
contract-by-contract basis. The Company has entered into interest rate swaps
to limit its exposure to interest rate changes on a portion of its variable
rate debt. Hedge accounting has not been elected. Variations in fair value
are marked-to-market on a current basis and are a component of interest expense
in the consolidated statements of operations.

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
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.

Results Of Operations

The following tables summarize our consolidated historical results of
operations and consolidated historical results of operations as a percentage of
revenues for the years ended December 31, 2002, 2001 and 2000 (in millions of
dollars):

|                           |                                     |   |       |      |       |  |                    |      |       |   |       |      |  |  |                              |      |   |   |      |     |  |  |       |      |   |   |       |       |   |  |       |      |   
|-------------------------- | ----------------------------------- | - | ----- | ---- | ----- |  | ------------------ | ---- | ----- | - | ----- | ---- |  |  | ---------------------------- | ---- | - | - | ---- | --- |  |  | ----- | ---- | - | - | ----- | ----- | - |  | ----- | ---- | --
|                           |                                     |   |       |      |       |  |                    |      |       |   |       |      |  |  | Year ended December 31, 2002 |      |   |   |      |     |  |  |      
|                           |                                     |   |       |      |       |  |                    |      |       |   |       |      |  |  |                              |      |   |   |      |     |  |  |      
|                           |                                     |   | Radio |      | Cable |  | Internet and Other |      | Total
|                           |                                     |   |       |      |       |  |                    |      |      
|Revenues                   |                                     | $ | 216.2 |      |       |  | 100.0              | %    |       | $ | 122.7 |      |  |  | 100.0                        | %    |   | $ | 9.7  |     |  |  | 100.0 | %    |   | $ | 348.6 |       |   |  | 100.0 | %   
|Operating Expenses:        |                                     |   |       |      |       |  |                    |      |       |   |       |      |  |  |                              |      |   |   |      |     |  |  |       |      |   |   |       |       |   |  |       |     
|                           | Operating and programming           |   |       | 69.6 |       |  |                    | 32.2 | %     |   |       | 56.0 |  |  |                              | 45.6 | % |   |      | 6.3 |  |  |       | 64.9 | % |   |       | 131.9 |   |  |       | 37.8 | % 
|                           | Selling                             |   |       | 34.9 |       |  |                    | 16.1 | %     |   |       | 3.7  |  |  |                              | 3.0  | % |   |      | 1.8 |  |  |       | 18.6 | % |   |       | 40.4  |   |  |       | 11.6 | % 
|                           | General and administrative          |   |       | 46.3 |       |  |                    | 21.4 | %     |   |       | 18.7 |  |  |                              | 15.3 | % |   |      | 3.5 |  |  |       | 36.0 | % |   |       | 68.5  |   |  |       | 19.7 | % 
|                           | Radio Employee Stock Plan           |   |       | 17.1 |       |  |                    | 7.9  | %     |   |       |     |  |  |                              |     |   |   |      |    |  |  |       |     |   |   |       | 17.1  |   |  |       | 4.9  | % 
|                           | Depreciation and amortization       |   |       | 5.7  |       |  |                    | 2.7  | %     |   |       | 23.2 |  |  |                              | 18.9 | % |   |      | 0.6 |  |  |       | 6.2  | % |   |       | 29.5  |   |  |       | 8.5  | % 
|                           | Goodwill impairment loss            |   |       |     |       |  |                    |     |       |   |       |     |  |  |                              |     |   |   |      | 5.0 |  |  |       | 51.6 | % |   |       | 5.0   |   |  |       | 1.4  | % 
|                           |                                     |   |       |      |       |  |                    |      |       |   |       |      |  |  |                              |      |   |   |      |     |  |  |       |      |   |   |       |       |   |  |       |     
|Total Operating Expenses   |                                     |   | 173.6 |      |       |  | 80.3               | %    |       |   | 101.6 |      |  |  | 82.8                         | %    |   |   | 17.2 |     |  |  | 177.3 | %    |   |   | 292.4 |       |   |  | 83.9  | %   
|                           |                                     |   |       |      |       |  |                    |      |       |   |       |      |  |  |                              |      |   |   |      |     |  |  |       |      |   |   |       |       |   |  |       |     
|Operating Income (Loss)    |                                     | $ | 42.6  |      |       |  | 19.7               | %    |       | $ | 21.1  |      |  |  | 17.2                         | %    |   | $ | (7.5 | )   |  |  | (77.3 | )%   |   | $ | 56.2  |       |   |  | 16.1  | %   
|                           |                                     |   |       |      |       |  |                    |      |       |   |       |      |  |  |                              |      |   |   |      |     |  |  |       |      |   |   |       |       |   |  |       |     
|Other Income (Expense)     |                                     |   |       |      |       |  |                    |      |       |   |       |      |  |  |                              |      |   |   |      |     |  |  |       |      |   |   |       |       |   |  |       |     
|                           | Interest expense                    |   |       |      |       |  |                    |      |       |   |       |      |  |  |                              |      |   |   |      |     |  |  |       |      |   |   |       | (29.2 | ) |  |       | (8.4 | )%
|                           | Interest income from loan to parent |   |       |      |       |  |                    |      |       |   |       |      |  |  |                              |      |   |   |      |     |  |  |       |      |   |   |       | 7.2   |   |  |       | 2.1  | % 
|                           | Other expense                       |   |       |      |       |  |                    |      |       |   |       |      |  |  |                              |      |   |   |      |     |  |  |       |      |   |   |       | (1.4  | ) |  |       | (0.4 | )%
|Provision for Income Taxes |                                     |   |       |      |       |  |                    |      |       |   |       |      |  |  |                              |      |   |   |      |     |  |  |       |      |   |   | (17.9 | )     |   |  | (5.1  | )%  
|Minority Interests         |                                     |   |       |      |       |  |                    |      |       |   |       |      |  |  |                              |      |   |   |      |     |  |  |       |      |   |   | (3.8  | )     |   |  | (1.1  | )%  
|                           |                                     |   |       |      |       |  |                    |      |       |   |       |      |  |  |                              |      |   |   |      |     |  |  |       |      |   |   |       |       |   |  |       |     
|Net Income                 |                                     |   |       |      |       |  |                    |      |       |   |       |      |  |  |                              |      |   |   |      |     |  |  |       |      |   | $ | 11.1  |       |   |  | 3.2   | %   
|                           |                                     |   |       |      |       |  |                    |      |       |   |       |      |  |  |                              |      |   |   |      |     |  |  |       |      |   |   |       |       |   |  |       |     

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|                                        |                                     |   |       |      |       |  |                    |      |       |   |       |      |  |  |                                         |      |   |   |      |     |  |  |       |      |   |   |       |       |   |  |       |      |   
|--------------------------------------- | ----------------------------------- | - | ----- | ---- | ----- |  | ------------------ | ---- | ----- | - | ----- | ---- |  |  | --------------------------------------- | ---- | - | - | ---- | --- |  |  | ----- | ---- | - | - | ----- | ----- | - |  | ----- | ---- | --
|                                        |                                     |   |       |      |       |  |                    |      |       |   |       |      |  |  | Year ended December 31, 2001 (Restated) |      |   |   |      |     |  |  |      
|                                        |                                     |   |       |      |       |  |                    |      |       |   |       |      |  |  |                                         |      |   |   |      |     |  |  |      
|                                        |                                     |   | Radio |      | Cable |  | Internet and Other |      | Total
|                                        |                                     |   |       |      |       |  |                    |      |      
|Revenues                                |                                     | $ | 198.0 |      |       |  | 100.0              | %    |       | $ | 104.8 |      |  |  | 100.0                                   | %    |   | $ | 10.6 |     |  |  | 100.0 | %    |   | $ | 313.4 |       |   |  | 100.0 | %   
|Operating Expenses:                     |                                     |   |       |      |       |  |                    |      |       |   |       |      |  |  |                                         |      |   |   |      |     |  |  |       |      |   |   |       |       |   |  |       |     
|                                        | Operating and programming           |   |       | 67.0 |       |  |                    | 33.8 | %     |   |       | 47.9 |  |  |                                         | 45.7 | % |   |      | 7.8 |  |  |       | 73.6 | % |   |       | 122.7 |   |  |       | 39.2 | % 
|                                        | Selling                             |   |       | 32.4 |       |  |                    | 16.4 | %     |   |       | 4.4  |  |  |                                         | 4.2  | % |   |      | 2.3 |  |  |       | 21.7 | % |   |       | 39.1  |   |  |       | 12.5 | % 
|                                        | General and administrative          |   |       | 44.7 |       |  |                    | 22.6 | %     |   |       | 15.9 |  |  |                                         | 15.2 | % |   |      | 4.7 |  |  |       | 44.3 | % |   |       | 65.3  |   |  |       | 20.9 | % 
|                                        | Radio Employee Stock Plan           |   |       | 22.3 |       |  |                    | 11.3 | %     |   |       |     |  |  |                                         |     |   |   |      |    |  |  |       |     |   |   |       | 22.3  |   |  |       | 7.1  | % 
|                                        | Depreciation and amortization       |   |       | 12.0 |       |  |                    | 6.0  | %     |   |       | 28.8 |  |  |                                         | 27.5 | % |   |      | 1.0 |  |  |       | 9.4  | % |   |       | 41.8  |   |  |       | 13.3 | % 
|                                        |                                     |   |       |      |       |  |                    |      |       |   |       |      |  |  |                                         |      |   |   |      |     |  |  |       |      |   |   |       |       |   |  |       |     
|Total Operating Expenses                |                                     |   | 178.4 |      |       |  | 90.1               | %    |       |   | 97.0  |      |  |  | 92.6                                    | %    |   |   | 15.8 |     |  |  | 149.0 | %    |   |   | 291.2 |       |   |  | 93.0  | %   
|                                        |                                     |   |       |      |       |  |                    |      |       |   |       |      |  |  |                                         |      |   |   |      |     |  |  |       |      |   |   |       |       |   |  |       |     
|Operating Income (Loss)                 |                                     | $ | 19.6  |      |       |  | 9.9                | %    |       | $ | 7.8   |      |  |  | 7.4                                     | %    |   | $ | (5.2 | )   |  |  | (49.0 | )%   |   |   | 22.2  |       |   |  | 7.0   | %   
|                                        |                                     |   |       |      |       |  |                    |      |       |   |       |      |  |  |                                         |      |   |   |      |     |  |  |       |      |   |   |       |       |   |  |       |     
|Other
Income (Expense)
Interest expense |                                     |   |       |      |       |  |                    |      |       |   |       |      |  |  |                                         |      |   |   |      |     |  |  |       |      |   |   | (37.9 | )     |   |  | (12.1 | )%  
|                                        | Interest income from loan to parent |   |       |      |       |  |                    |      |       |   |       |      |  |  |                                         |      |   |   |      |     |  |  |       |      |   |   |       | 6.9   |   |  |       | 2.2  | % 
|                                        | Other expense                       |   |       |      |       |  |                    |      |       |   |       |      |  |  |                                         |      |   |   |      |     |  |  |       |      |   |   |       | (0.3  | ) |  |       | (0.1 | )%
|Provision for income taxes              |                                     |   |       |      |       |  |                    |      |       |   |       |      |  |  |                                         |      |   |   |      |     |  |  |       |      |   |   | (6.4  | )     |   |  | (2.0  | )%  
|Minority interests                      |                                     |   |       |      |       |  |                    |      |       |   |       |      |  |  |                                         |      |   |   |      |     |  |  |       |      |   |   | (1.7  | )     |   |  | (0.5  | )%  
|                                        |                                     |   |       |      |       |  |                    |      |       |   |       |      |  |  |                                         |      |   |   |      |     |  |  |       |      |   |   |       |       |   |  |       |     
|Net (loss)                              |                                     |   |       |      |       |  |                    |      |       |   |       |      |  |  |                                         |      |   |   |      |     |  |  |       |      |   | $ | (17.2 | )     |   |  | (5.5  | )%  
|                                        |                                     |   |       |      |       |  |                    |      |       |   |       |      |  |  |                                         |      |   |   |      |     |  |  |       |      |   |   |       |       |   |  |       |     

|                                        |                                     |   |       |      |       |  |                    |      |       |   |      |      |  |  |                                         |      |   |   |     |      |   |  |       |      |    |   |       |       |   |  |       |      |   
|--------------------------------------- | ----------------------------------- | - | ----- | ---- | ----- |  | ------------------ | ---- | ----- | - | ---- | ---- |  |  | --------------------------------------- | ---- | - | - | --- | ---- | - |  | ----- | ---- | -- | - | ----- | ----- | - |  | ----- | ---- | --
|                                        |                                     |   |       |      |       |  |                    |      |       |   |      |      |  |  | Year ended December 31, 2000 (Restated) |      |   |   |     |      |   |  |       |     
|                                        |                                     |   |       |      |       |  |                    |      |       |   |      |      |  |  |                                         |      |   |   |     |      |   |  |      
|                                        |                                     |   | Radio |      | Cable |  | Internet and Other |      | Total
|                                        |                                     |   |       |      |       |  |                    |      |      
|Revenues                                |                                     | $ | 220.9 |      |       |  | 100.0              | %    |       | $ | 93.1 |      |  |  | 100.0                                   | %    |   | $ | 6.6 |      |   |  | 100.0 | %    |    | $ | 320.6 |       |   |  | 100.0 | %   
|Operating Expenses:                     |                                     |   |       |      |       |  |                    |      |       |   |      |      |  |  |                                         |      |   |   |     |      |   |  |       |      |    |   |       |       |   |  |       |     
|                                        | Operating and programming           |   |       | 66.4 |       |  |                    | 30.0 | %     |   |      | 40.5 |  |  |                                         | 43.5 | % |   |     | 4.7  |   |  |       | 71.2 | %  |   |       | 111.6 |   |  |       | 34.8 | % 
|                                        | Selling                             |   |       | 33.8 |       |  |                    | 15.3 | %     |   |      | 4.0  |  |  |                                         | 4.3  | % |   |     | 1.3  |   |  |       | 19.7 | %  |   |       | 39.1  |   |  |       | 12.2 | % 
|                                        | General and administrative          |   |       | 43.3 |       |  |                    | 19.6 | %     |   |      | 14.0 |  |  |                                         | 15.0 | % |   |     | (0.6 | ) |  |       | (9.1 | )% |   |       | 56.7  |   |  |       | 17.7 | % 
|                                        | Radio Employee Stock Plan           |   |       | 19.7 |       |  |                    | 9.0  | %     |   |      |     |  |  |                                         |     |   |   |     |     |   |  |       |     |    |   |       | 19.7  |   |  |       | 6.1  | % 
|                                        | Depreciation and amortization       |   |       | 10.1 |       |  |                    | 4.6  | %     |   |      | 25.4 |  |  |                                         | 27.2 | % |   |     | 0.7  |   |  |       | 10.6 | %  |   |       | 36.2  |   |  |       | 11.3 | % 
|                                        |                                     |   |       |      |       |  |                    |      |       |   |      |      |  |  |                                         |      |   |   |     |      |   |  |       |      |    |   |       |       |   |  |       |     
|Total Operating Expenses                |                                     |   | 173.4 |      |       |  | 78.5               | %    |       |   | 83.9 |      |  |  | 90.1                                    | %    |   |   | 6.1 |      |   |  | 92.4  | %    |    |   | 263.3 |       |   |  | 82.2  | %   
|                                        |                                     |   |       |      |       |  |                    |      |       |   |      |      |  |  |                                         |      |   |   |     |      |   |  |       |      |    |   |       |       |   |  |       |     
|Operating Income                        |                                     | $ | 47.5  |      |       |  | 21.5               | %    |       | $ | 9.2  |      |  |  | 9.9                                     | %    |   | $ | 0.5 |      |   |  | 7.6   | %    |    |   | 57.3  |       |   |  | 17.9  | %   
|                                        |                                     |   |       |      |       |  |                    |      |       |   |      |      |  |  |                                         |      |   |   |     |      |   |  |       |      |    |   |       |       |   |  |       |     
|Other
Income (Expense)
Interest expense |                                     |   |       |      |       |  |                    |      |       |   |      |      |  |  |                                         |      |   |   |     |      |   |  |       |      |    |   | (37.6 | )     |   |  | (11.7 | )%  
|                                        | Interest income from loan to parent |   |       |      |       |  |                    |      |       |   |      |      |  |  |                                         |      |   |   |     |      |   |  |       |      |    |   |       | 6.7   |   |  |       | 2.1  | % 
|                                        | Other expense                       |   |       |      |       |  |                    |      |       |   |      |      |  |  |                                         |      |   |   |     |      |   |  |       |      |    |   |       | (1.5  | ) |  |       | (0.5 | )%
|Provision for Income Taxes              |                                     |   |       |      |       |  |                    |      |       |   |      |      |  |  |                                         |      |   |   |     |      |   |  |       |      |    |   | (16.8 | )     |   |  | (5.2  | )%  
|Minority interests                      |                                     |   |       |      |       |  |                    |      |       |   |      |      |  |  |                                         |      |   |   |     |      |   |  |       |      |    |   | (3.8  | )     |   |  | (1.2  | )%  
|                                        |                                     |   |       |      |       |  |                    |      |       |   |      |      |  |  |                                         |      |   |   |     |      |   |  |       |      |    |   |       |       |   |  |       |     
|Net income                              |                                     |   |       |      |       |  |                    |      |       |   |      |      |  |  |                                         |      |   |   |     |      |   |  |       |      |    | $ | 4.3   |       |   |  | 1.3   | %   
|                                        |                                     |   |       |      |       |  |                    |      |       |   |      |      |  |  |                                         |      |   |   |     |      |   |  |       |      |    |   |       |       |   |  |       |     

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

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Revenues. Revenues increased $35.2 million, or 11%, from 2001 to 2002.
Radio revenues increased $18.2 million, or 9%, from 2001 to 2002. Every Radio
market increased revenues over 2001, led by Dallas, Atlanta and Kansas City.
The improved revenue performance is attributable to higher listener ratings and
improved general economic conditions compared to 2001. Cable revenues
increased $17.9 million, or 17%, from 2001 to 2002. 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. The acquisition of the Lawrenceburg, Indiana cable assets April 1,
2002, contributed 22% of the total increase in Cable revenues.

Operating and
programming expenses.Operating and programming expenses
increased $9.2 million or 8% from 2001 to 2002. Operating and programming
expenses did not increase at the same pace as the growth in revenues reflecting
cost containment initiatives in Radio implemented in 2001 and the growth of
digital and cable modem products in Cable. The majority of the increase in
operating and programming expenses is attributable to the acquisition of the
Lawrenceburg cable assets and to increases in the cost of acquired cable
programming. The Lawrenceburg cable assets increased operating and programming
expenses $2.1 million from 2001 to 2002. The cost of acquired programming,
excluding the Lawrenceburg assets, increased $3.7 million or 13% from 2001 to
2002, resulting from rate increases from program suppliers, launch of new cable
channels and changes in customer volume. Although significant in both years,
the Radio Employee Stock Plan charge decreased $5.2 million or 23% from 2001 to
2002. See Note 7 to the accompanying consolidated financial statements for
further information.

Depreciation
and amortization. Depreciation and amortization decreased
$12.3 million, or 29%, from 2001 to 2002. The effect of the adoption of SFAS
142 reduced depreciation and amortization $14.1 million from 2001 to 2002.
Cable depreciation and amortization expenses, excluding the effect of SFAS 142,
comprised $1.2 million of the increase, and resulted from the continuation of
our cable television system rebuilds, depreciation on the tangible assets of
the Lawrenceburg cable system and the continued rollout of digital cable and
cable modem services.

Goodwill
impairment loss.The annual assessment of goodwill as required
by SFAS 142 was performed as of December 31, 2002. It was determined that
goodwill associated with the Internet reporting unit was impaired as its
carrying value exceeded the fair value implicit in the independent appraisal
performed for the parents annual ESOP valuation. Based on a comparison of the
goodwills fair value as of December 31, 2002 and its carrying value, a $5.0
million goodwill impairment loss was recognized.

Operating
income.Operating income increased $34.0 million or 153%
from 2001 to 2002. Excluding decreased amortization from the adoption of SFAS 142, 2002 operating
income increased $19.9 million or 90% over 2001. Radio operating income
increased $23.0 million or 117% from 2001 to 2002. Excluding
decreased amortization from the adoption of SFAS 142, Radio operating income increased
$16.4 million or 84% from
2001 to 2002. The improvement in Radio operating income is the result of
higher revenues and a reduction in the recognized compensation expense
associated with the change in the valuation basis of the Radio Employee Stock
Plan. Cable operating income increased $13.3 million or 171% from 2001 to
2002. Excluding decreased amortization from the adoption of SFAS 142, Cable operating income
increased $6.5 million or 83% from 2001 to 2002. The improvement in Cable
operating income is the result of higher revenues.

Interest expense. Interest expense decreased $8.7 million or 23% from
2001 and 2002. Interest expense from increased borrowings was offset by
reductions in interest rates. Interest income of $7.2 million was recognized
in 2002 from loans to our parent.

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Net income.Net
income increased $28.3 million or 165% from 2001 to 2002.
The increase in net income can be attributed to the increase in Radio and
Cable operating income and a decrease in interest expense.

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

Revenues. 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 dot-com
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. Internet and Other revenues grew $4.0 million from 2000 to
2001, due primarily to the acquisition of the web design company in October
2000.

Operating and programming expenses.Operating and programming expenses
increased $11.1 million or 10% from 2000 to 2001. Approximately
73% of the
increase occurred in Cable and is related to the growth in revenues and an
increase in the cost to acquire programming.

General and administrative expenses.General and administrative expenses
increased $8.6 million or 15% from 2000 to 2001. The acquisition of the web
development company in October 2000 caused 18% of the increase in general and
administrative expenses in 2001. The remaining increase occurred in Cable
resulting from the increase in revenues.

The
Radio Employee Stock Plan charge increased $2.6 million or 13% from
2000 to 2001. See Notes 7 and 15 to the consolidated financial
statements for further information.

Depreciation
and amortization. Depreciation and amortization increased
$5.6 million, or 15%, from 2000 to 2001. Cable depreciation and amortization
expenses comprised $3.4 million of the increase, and resulted from the
continuation of our cable television system rebuilds and the continued rollout
of digital cable and cable modem services. Radio depreciation and amortization
increased $1.9 million, or 19%, 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 $35.1 million or 61% from
2000 to 2001. Depreciation and amortization increased while revenues
decreased, due to cable plant rebuilds and the Kansas City radio stations
acquisition. Radio operating income decreased $27.9 million or 59% from 2000
to 2001, primarily the result of the decrease in revenues and the
increased Radio Employee Stock Plan charge. 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.

Interest expense. Interest expense
increased $0.3 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.

Net
income.Net income decreased $21.5 million or 500% from 2000 to 2001
resulting in a net loss of $17.2 million. The decrease in net income can be
attributed to the decline in Radio operating income from 2000 to 2001.

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Liquidity and Capital Resources

Historically, our primary sources of liquidity have been cash flow from
operations and borrowings under our senior credit facilities. 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. We may also access capital markets from time to time, as
market conditions permit, with debtor equity financings.

Net cash provided by operating activities was $86.0 million and $66.9
million for the years ended December 31, 2002 and 2001, respectively. Our net
cash provided by operating activities was generated primarily by normal
operations.

Net cash used by investing activities was $95.4 million for the year ended
December 31, 2002. Acquisitions were $71.5 million for 2002. Capital
expenditures, excluding acquisitions, were $28.3 million for the year ended
December 31, 2002. Capital expenditures over this period were used primarily
to upgrade and maintain our cable systems. The parent repaid $4.2 million on
its outstanding loans in 2002.

Net cash provided by financing activities was primarily from a $26.1
million increase of our revolving credit commitment. Net cash provided by
financing activities was $9.4 million for the year ended December 31, 2002.
The primary use of cash from financing activities was for the repurchase of
Radio employee stock, totaling $14.4 million.

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 $28.3 million, $31.7 million and $36.9 million for the years
ended December 31, 2002, 2001 and 2000, respectively. Capital expenditures
over this period were used primarily to upgrade and maintain our cable systems.
We expect to make capital expenditures of approximately $33.6 million in 2003
to continue upgrading our current cable systems, for radio related maintenance
and equipment and for information technology projects. Management believes we
will be required to pay $10.0 million to the former owners of WHMA-FM in 2003
under the terms of the purchase agreement. See Note 5 to the Consolidated
Financial Statements.

We may
be required to repurchase Radio Employee Stock Plan Shares from
retirees and other participants in the future. Amounts that may be
repurchased are limited by the Plan and by debt covenants. We expect
to repurchase shares utilizing funds from existing credit facilities.

On February 11, 2003, we entered into an asset purchase agreement with
Lancaster-York Broadcasting, LLC to acquire WSOX-FM, a radio station licensed
to Red Lion, Pennsylvania for $23.0 million cash. Closing is anticipated by
third quarter 2003, utilizing our existing credit facilities.

In
February 2002, we
purchased approximately 34,000 square feet of office space in a
building constructed by a related company for $5.0 million. Existing
credit facilities were utilized for the purchase.

As of December 31, 2002, the fair value of the 8.5% Senior Subordinated
Notes due 2009 was $156.0 million. Any change in interest rates will affect
the market value of these notes, however cash outflows for semi-annual interest
payments are fixed. Under the indenture governing these notes, we may
issue an additional $100.0 million notes with substantially similar terms.

On May 12, 1999, we entered into a senior credit facility. The senior
credit facility consists of a $230 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 senior credit facility requires us to maintain certain financial
leverage and interest coverage ratios, which we are in compliance with as of
the date of this annual report. As of December 31, 2002, we had $50.2 million
of borrowing availability under our senior credit facility.

As of December 31, 2002, the average interest rate on all outstanding
borrowings was approximately 5.1%.

Our
senior credit facility includes a provision under which our lenders
could refuse to advance funds in the event of a material adverse
change in our financial condition.

The company was in compliance with its loan covenants at
December 31, 2002. A summary of the most restrictive
covenants, along with the corresponding value for these covenants
follows:

|  |  |                                                                    |  |          |      |              |  |  |      | 
|- |  | ------------------------------------------------------------------ |  | -------- | ---- | ------------ |  |  | ---- | 
|  |  | Covenant Test                                                      |  | Covenant |      | Actual Value
|  |  |                                                                    |  |          |      |             
|l |  | Fixed charge coverage ratio must be at least 1.05                  |  |          | 1.05 |              |  |  | 1.46 | 
|l |  | Maximum consolidated senior leverage ratio may
    not exceed 4.00 |  |          | 4.00 |              |  |  | 3.19 | 
|l |  | Debt service coverage ratio must be at least 1.20                  |  |          | 1.20 |              |  |  | 2.77 | 

A default in the senior credit facilitys covenants could
create a default in the senior subordinated notes.

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Future Commitments

The
following tables reflect our contractual cash obligations as of
December 31, 2002 in the
respective periods in which they are due (in thousands).

|                 |  |               |         |      |  |      |        |      |  |      |        |      |  |            |        |  |  |   |        |  |  |   |        |  |  |   |         | 
|---------------- |  | ------------- | ------- | ---- |  | ---- | ------ | ---- |  | ---- | ------ | ---- |  | ---------- | ------ |  |  | - | ------ |  |  | - | ------ |  |  | - | ------- | 
|Contractual Cash |  | Total Amounts |         |      |  |      |        |      |  |      |        |      |  |            |        |  |  |   |        |  |  |   |        |  |  |  
|Obligations      |  | Committed     |         | 2003 |  | 2004 |        | 2005 |  | 2006 |        | 2007 |  | Thereafter
|                 |  |               |         |      |  |      |        |      |  |      |        |      |  |           
|Long-term debt   |  | $             | 521,137 |      |  | $    | 17,032 |      |  | $    | 60,734 |      |  | $          | 71,037 |  |  | $ | 85,040 |  |  | $ | 89,919 |  |  | $ | 197,375 | 
|Broadcast rights |  |               | 23,600  |      |  |      | 8,450  |      |  |      | 8,900  |      |  |            | 3,050  |  |  |   | 3,200  |  |  |   |       |  |  |   |        | 
|Operating leases |  |               | 34,772  |      |  |      | 4,539  |      |  |      | 4,633  |      |  |            | 4,569  |  |  |   | 4,255  |  |  |   | 3,701  |  |  |   | 13,075  | 
|                 |  |               |         |      |  |      |        |      |  |      |        |      |  |            |        |  |  |   |        |  |  |   |        |  |  |   |         | 
|Total            |  | $             | 579,509 |      |  | $    | 30,021 |      |  | $    | 74,267 |      |  | $          | 78,656 |  |  | $ | 92,495 |  |  | $ | 93,620 |  |  | $ | 210,450 | 
|                 |  |               |         |      |  |      |        |      |  |      |        |      |  |            |        |  |  |   |        |  |  |   |        |  |  |   |         | 

Information regarding our contractual obligations at December 31, 2002, 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 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

Statement of Financial Accounting Standards No. 143 Accounting for Asset
Retirement Obligations (SFAS 143) specifies financial and reporting
obligations pertaining to the retirement of tangible long-lived assets and
associated retirement costs. SFAS 143 is effective for fiscal years beginning
after June 15, 2002. The Company does not expect SFAS 143 to have a material
effect on its financial position or results of operations.

Statement of Financial Accounting Standards No. 148 Accounting for
Stock-Based Compensation  Transition and Disclosure (SFAS 148) amends SFAS
123 to provide for alternative methods of transitioning to the fair value method
of valuing stock-based compensation. The Company is using the fair value
method. As of December 31, 2002, the number and value of stock options granted
and outstanding was immaterial.

Financial Accounting Standards Board Interpretation No. 45, Guarantors
Accounting and Requirements for Guarantees, Including Guarantees of
Indebtedness of Others (FIN 45), requires a guarantor to disclose its
obligations under certain guarantees that it has issued in interim and annual
financial statements for guarantees issued or modified after December 31, 2002.
For certain guarantees, a guarantor may be required to recognize a liability
for the fair value of the obligation at its inception. FIN 45 does not specify
an approach for subsequently measuring and recording the change in fair value
of the obligation. The interpretations disclosure provisions applied to
interim or annual financial statements for periods ending after December 15,
2002. The impact of adopting FIN 45 will be based on the nature and terms of
guarantees that the Company enters into or modifies in the future.

In January 2003, the FASB issued Interpretation No. 46,
Consolidation of Variable Interest Entities, an interpretation of
ARB No. 51. This Interpretation addresses the consolidation by
business enterprises of variable interest entities as defined in the
Interpretation. The Interpretation applies immediately to variable
interests in variable interest entities created after January 31,
2003, and to variable interests in variable interest entities
obtained after January 31, 2003. For enterprises, such as the
Company, with a variable interest in a variable interest entity
created before February 1, 2003, the Interpretation is applied to the
enterprise no later than the end of the first interim or annual
reporting period beginning after June 15, 2003. The application of
this Interpretation is not expected to have a material effect on the
Companys financial statements. The Interpretation requires
certain disclosures in financial statements issued after January 31,
2003 if it is reasonably possible that the Company will consolidate
or disclose information about variable interest entities when the
Interpretation becomes effective.

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Item 7A. Quantitative and Qualitative Disclosure About Market Risk.

As of December 31, 2002, we had $371.0 million in variable rate debt. The
fair value of this debt approximates its carrying value. Variable rate debt
matures as follows (in thousands):

|     |  |   |        |  |  |  |      |  |  |   |        | 
|---- |  | - | ------ |  |  |  | ---- |  |  | - | ------ | 
|2003 |  | $ | 17,000 |  |  |  | 2006 |  |  | $ | 85,000 | 
|2004 |  |   | 60,700 |  |  |  | 2007 |  |  |   | 89,875 | 
|2005 |  |   | 71,000 |  |  |  | 2008 |  |  |   | 47,375 | 

Our interest rate exposure is primarily impacted by changes in LIBOR
rates. At December 31, 2002, the weighted average interest rate for the
variable rate debt was 3.1%. 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, 2002 would increase by $3.7 million.

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Item 8. Consolidated Financial Statements and Supplementary Data

The
consolidated financial statements and Independent Auditors
Report and Report of Independent Accountants of
Susquehanna Media Co. and Subsidiaries are set forth on the pages listed below:

| |  |                                                                    |  |      |       | 
| |  | ------------------------------------------------------------------ |  | ---- | ----- | 
| |  |                                                                    |  | Page
| |  |                                                                    |  |     
| |  | Independent Auditors Report and Report of Independent Accountants |  |      | 46-47 | 
| |  |                                                                    |  |      |       | 
| |  | Financial Statements                                               |  |      |       | 
| |  |                                                                    |  |      |       | 
| |  | Consolidated Balance Sheets                                        |  |      | 48    | 
| |  |                                                                    |  |      |       | 
| |  | Consolidated Statements of Operations                              |  |      | 49    | 
| |  |                                                                    |  |      |       | 
| |  | Consolidated Statements of Cash Flows                              |  |      | 50    | 
| |  |                                                                    |  |      |       | 
| |  | Consolidated Statements of Stockholders Equity                    |  |      | 51    | 
| |  |                                                                    |  |      |       | 
| |  | Notes to Consolidated Financial Statements                         |  |      | 52-73 | 

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Independent Auditors Report

The Board of Directors and Stockholders of 
Susquehanna Media Co.:

We have audited the accompanying consolidated balance sheet of
Susquehanna Media Co. and subsidiaries (the Company) as of December
31, 2002, and the related consolidated statements of
operations, stockholders equity, and cash flows for the year
then ended. These consolidated
financial statements are the responsibility of the Companys
management. Our responsibility is
to express an opinion on these consolidated financial statements
based on our audit.

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

In our opinion, the consolidated financial statements referred to
above present fairly, in all
material respects, the financial position of Susquehanna Media Co.
and subsidiaries as of
December 31, 2002 and the results of their operations and their cash
flows for the year then ended in conformity with accounting
principles generally accepted in the United States of America.

As discussed in Note 1 to the consolidated financial statements, the
Company changed its method of accounting for goodwill and other
intangible assets in 2002.

/s/ KPMG LLP
Lancaster, PA
March 31, 2003

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Report of Independent Accountants

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

In our opinion, the accompanying consolidated balance sheet and related consolidated
statements of operations, 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 the results of their operations and their
cash flows for years ended December 31, 2001 and 2000, 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.

As discussed in Note 15 to the consolidated financial statements, the Company restated its
consolidated financial statements, as of December 31, 2001 and for the years ended
December 31, 2001 and 2000, to properly reflect the accounting for launch fees, changes
in share values of shares issued under the Susquehanna Radio Corp. Employee Stock Plan,
and certain other matters.

/s/ PricewaterhouseCoopers LLP
Philadelphia, PA

March 18, 2002, except for Note 15,
   for which the date is March 31, 2003

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

|                                                                                                                                      |                                                                                                |                                    |         |              |         |           |         |         |         | 
|------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------- | ---------------------------------- | ------- | ------------ | ------- | --------- | ------- | ------- | ------- | 
|                                                                                                                                      |                                                                                                |                                    |         | December 31,
|                                                                                                                                      |                                                                                                |                                    |         |             
|                                                                                                                                      |                                                                                                |                                    |         | 2002         |         | 2001     
|                                                                                                                                      |                                                                                                |                                    |         |              |         |          
|ASSETS                                                                                                                                |                                                                                                |                                    |         |              |         | (Restated
|                                                                                                                                      |                                                                                                |                                    |         |              |         | Note 15) 
|                                                                                                                                      |                                                                                                |                                    |         |              |         |           |         |        
|Current Assets                                                                                                                        |                                                                                                |                                    |         |              |         |           |         |        
|                                                                                                                                      | Accounts receivable, less allowance for doubtful
accounts of $1,970 in 2002 and $1,990 in 2001 |                                    | $       | 49,678       |         |           | $       | 44,778  |        
|                                                                                                                                      | Deferred income taxes (Note 4)                                                                 |                                    |         | 6,889        |         |           |         | 2,252   |        
|                                                                                                                                      | Current
portion of note receivable from Parent (Note 9)                                        |                                    |         | 4,422        |         |           |         | 4,169   |        
|                                                                                                                                      | Other current assets                                                                           |                                    |         | 5,212        |         |           |         | 6,140   |        
|                                                                                                                                      |                                                                                                |                                    |         |              |         |           |         |        
|                                                                                                                                      |                                                                                                | Total Current Assets               |         |              | 66,201  |           |         |         | 57,339  | 
|                                                                                                                                      |                                                                                                |                                    |         |              |         |           |         |        
|Property, Plant and Equipment, at cost                                                                                                |                                                                                                |                                    |         |              |         |           |         |        
|                                                                                                                                      | Land                                                                                           |                                    |         | 5,772        |         |           |         | 5,625   |        
|                                                                                                                                      | Buildings and improvements                                                                     |                                    |         | 17,205       |         |           |         | 15,713  |        
|                                                                                                                                      | Equipment                                                                                      |                                    |         | 258,034      |         |           |         | 228,419 |        
|                                                                                                                                      | Construction-in-progress                                                                       |                                    |         | 11,308       |         |           |         | 9,674   |        
|                                                                                                                                      |                                                                                                |                                    |         |              |         |           |         |        
|                                                                                                                                      |                                                                                                |                                    | 292,319 |              |         |           | 259,431 |        
|                                                                                                                                      | Accumulated depreciation and amortization                                                      |                                    |         | 138,675      |         |           |         | 118,308 |        
|                                                                                                                                      |                                                                                                |                                    |         |              |         |           |         |        
|                                                                                                                                      |                                                                                                | Property, Plant and Equipment, net |         |              | 153,644 |           |         |         | 141,123 | 
|                                                                                                                                      |                                                                                                |                                    |         |              |         |           |         |        
|Intangible Assets, net (Notes 2, 3 and 5)                                                                                             |                                                                                                |                                    | 387,883 |              |         |           | 322,006 |        
|                                                                                                                                      |                                                                                                |                                    |         |              |         |           |         |        
|Note Receivable from Parent (Note 9)                                                                                                  |                                                                                                |                                    | 109,641 |              |         |           | 114,063 |        
|                                                                                                                                      |                                                                                                |                                    |         |              |         |           |         |        
|Investments and Other Assets (Notes 2, 3, 6 and 9)                                                                                    |                                                                                                |                                    | 29,158  |              |         |           | 31,194  |        
|                                                                                                                                      |                                                                                                |                                    |         |              |         |           |         |        
|                                                                                                                                      |                                                                                                | $                                  | 746,527 |              |         | $         | 665,725 |        
|                                                                                                                                      |                                                                                                |                                    |         |              |         |           |         |        
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                  |                                                                                                |                                    |         |              |         |           |         |        
|Current Liabilities                                                                                                                   |                                                                                                |                                    |         |              |         |           |         |        
|                                                                                                                                      | Cash overdrafts                                                                                |                                    | $       | 849          |         |           | $       | 2,687   |        
|                                                                                                                                      | Current portion of long-term debt (Note 3)                                                     |                                    |         | 17,032       |         |           |         | 8,780   |        
|                                                                                                                                      | Accounts payable                                                                               |                                    |         | 13,035       |         |           |         | 8,386   |        
|                                                                                                                                      | Accrued interest                                                                               |                                    |         | 2,484        |         |           |         | 5,291   |        
|                                                                                                                                      | Accrued income taxes                                                                           |                                    |         | 9,761        |         |           |         | 3,155   |        
|                                                                                                                                      | Accrued employee-related costs                                                                 |                                    |         | 12,757       |         |           |         | 11,020  |        
|                                                                                                                                      | Accrued franchise and licensing fees                                                           |                                    |         | 3,676        |         |           |         | 2,647   |        
|                                                                                                                                      | Deferred income                                                                                |                                    |         | 1,022        |         |           |         | 1,256   |        
|                                                                                                                                      | Contract fee payable (Note 5)                                                                  |                                    |         | 10,000       |         |           |         |        |        
|                                                                                                                                      | Other accrued expenses                                                                         |                                    |         | 6,536        |         |           |         | 6,711   |        
|                                                                                                                                      |                                                                                                |                                    |         |              |         |           |         |        
|                                                                                                                                      |                                                                                                | Total Current Liabilities          |         |              | 77,152  |           |         |         | 49,933  | 
|                                                                                                                                      |                                                                                                |                                    |         |              |         |           |         |        
|Long-term Debt (Note 3)                                                                                                               |                                                                                                |                                    | 504,105 |              |         |           | 486,325 |        
|                                                                                                                                      |                                                                                                |                                    |         |              |         |           |         |        
|Radio Employee Stock Plan Liability (Notes 7 and 15)                                                                                  |                                                                                                |                                    |        |              |         |           | 43,321  |        
|                                                                                                                                      |                                                                                                |                                    |         |              |         |           |         |        
|Other Liabilities (Note 7)                                                                                                            |                                                                                                |                                    | 17,172  |              |         |           | 11,544  |        
|                                                                                                                                      |                                                                                                |                                    |         |              |         |           |         |        
|Deferred Income Taxes (Note 4)                                                                                                        |                                                                                                |                                    | 57,152  |              |         |           | 43,600  |        
|                                                                                                                                      |                                                                                                |                                    |         |              |         |           |         |        
|Minority Interests (Notes 7 and 15)                                                                                                   |                                                                                                |                                    | 66,887  |              |         |           | 17,612  |        
|                                                                                                                                      |                                                                                                |                                    |         |              |         |           |         |        
|Stockholders
Equity (Notes 3, 7 and 15)
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,
issued and outstanding       |                                    |         | 1,100        |         |           |         | 1,100   |        
|                                                                                                                                      | Retained earnings                                                                              |                                    |         | 15,909       |         |           |         | 5,240   |        
|                                                                                                                                      |                                                                                                |                                    |         |              |         |           |         |        
|                                                                                                                                      |                                                                                                | Total Stockholders Equity         |         |              | 24,059  |           |         |         | 13,390  | 
|                                                                                                                                      |                                                                                                |                                    |         |              |         |           |         |        
|                                                                                                                                      |                                                                                                | $                                  | 746,527 |              |         | $         | 665,725 |        
|                                                                                                                                      |                                                                                                |                                    |         |              |         |           |         |        

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SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except share data)

|                                                         |                                              |   |                                  |         |      |           |         |           |   |   |         |         |  
|-------------------------------------------------------- | -------------------------------------------- | - | -------------------------------- | ------- | ---- | --------- | ------- | --------- | - | - | ------- | ------- | -
|                                                         |                                              |   | For the Years Ended December 31,
|                                                         |                                              |   |                                 
|                                                         |                                              |   | 2002                             |         | 2001 |           | 2000   
|                                                         |                                              |   |                                  |         |      |           |        
|                                                         |                                              |   |                                  |         |      | (Restated |         | (Restated
|                                                         |                                              |   |                                  |         |      | Note 15)  |         | Note 15) 
|Revenues                                                 |                                              |   |                                  |         |      |           |         |          
|                                                         | Radio                                        |   | $                                | 216,222 |      |           | $       | 198,039   |   |   | $       | 220,886 |  
|                                                         | Cable                                        |   |                                  | 122,754 |      |           |         | 104,758   |   |   |         | 93,113  |  
|                                                         | Internet and other                           |   |                                  | 9,670   |      |           |         | 10,632    |   |   |         | 6,590   |  
|                                                         |                                              |   |                                  |         |      |           |         |           |   |   |         |        
|                                                         | Total revenues                               |   |                                  | 348,646 |      |           |         | 313,429   |   |   |         | 320,589 |  
|                                                         |                                              |   |                                  |         |      |           |         |           |   |   |         |        
|Operating Expenses                                       |                                              |   |                                  |         |      |           |         |           |   |   |         |        
|                                                         | Operating and programming                    |   |                                  | 131,869 |      |           |         | 122,668   |   |   |         | 111,621 |  
|                                                         | Selling                                      |   |                                  | 40,414  |      |           |         | 39,134    |   |   |         | 39,107  |  
|                                                         | General and administrative                   |   |                                  | 68,560  |      |           |         | 65,328    |   |   |         | 56,658  |  
|                                                         | Radio
Employee Stock Plan (Notes 7 and 15)   |   |                                  | 17,065  |      |           |         | 22,305    |   |   |         | 19,748  |  
|                                                         | Depreciation and amortization                |   |                                  | 29,470  |      |           |         | 41,839    |   |   |         | 36,239  |  
|                                                         | Goodwill
impairment loss (Note 5)            |   |                                  | 5,000   |      |           |         |          |   |   |         |        |  
|                                                         |                                              |   |                                  |         |      |           |         |           |   |   |         |        
|                                                         | Total operating expenses                     |   |                                  | 292,378 |      |           |         | 291,274   |   |   |         | 263,373 |  
|                                                         |                                              |   |                                  |         |      |           |         |           |   |   |         |        
|Operating Income                                         |                                              |   | 56,268                           |         |      |           | 22,155  |           |   |   | 57,216  |        
|Other Income (Expense)                                   |                                              |   |                                  |         |      |           |         |           |   |   |         |        
|                                                         | Interest expense                             |   |                                  | (29,200 | )    |           |         | (37,887   | ) |   |         | (37,523 | )
|                                                         | Interest income from loan to Parent (Note 9) |   |                                  | 7,162   |      |           |         | 6,895     |   |   |         | 6,696   |  
|                                                         | Other                                        |   |                                  | (1,406  | )    |           |         | (256      | ) |   |         | (1,474  | )
|                                                         |                                              |   |                                  |         |      |           |         |           |   |   |         |        
|Income (Loss) Before Income
Taxes and Minority Interests |                                              |   | 32,824                           |         |      |           | (9,093  | )         |   |   | 24,915  |        
|Provision for Income Taxes(Note 4)                       |                                              |   | (17,904                          | )       |      |           | (6,416  | )         |   |   | (16,762 | )      
|                                                         |                                              |   |                                  |         |      |           |         |           |   |   |         |        
|Income (Loss) Before Minority Interests                  |                                              |   | 14,920                           |         |      |           | (15,509 | )         |   |   | 8,153   |        
|Minority Interests(Note 15)                              |                                              |   | (3,758                           | )       |      |           | (1,694  | )         |   |   | (3,839  | )      
|                                                         |                                              |   |                                  |         |      |           |         |           |   |   |         |        
|Net Income (Loss) and Comprehensive
Income (Loss)        |                                              |   | 11,162                           |         |      |           | (17,203 | )         |   |   | 4,314   |        
|Preferred Dividends Declared                             |                                              |   | (493                             | )       |      |           | (493    | )         |   |   | (493    | )      
|                                                         |                                              |   |                                  |         |      |           |         |           |   |   |         |        
|Net Income (Loss) Available for
Common Shares            |                                              | $ | 10,669                           |         |      | $         | (17,696 | )         |   | $ | 3,821   |        
|                                                         |                                              |   |                                  |         |      |           |         |           |   |   |         |        

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

|                                          |                                                                                          |                                                  |   |         |         |           |   |           |         |   |      |          |          |  
|----------------------------------------- | ---------------------------------------------------------------------------------------- | ------------------------------------------------ | - | ------- | ------- | --------- | - | --------- | ------- | - | ---- | -------- | -------- | -
|                                          |                                                                                          |                                                  |   | 2002    |         | 2001      |   | 2000     
|                                          |                                                                                          |                                                  |   |         |         |           |   |          
|                                          |                                                                                          |                                                  |   |         |         | (Restated |   | (Restated
|                                          |                                                                                          |                                                  |   |         |         | Note 15)  |   | Note 15) 
|                                          |                                                                                          |                                                  |   |         |         |           |   |           |         |  
|CASH FLOWS FROM OPERATING ACTIVITIES      |                                                                                          |                                                  |   |         |         |           |   |          
|                                          | Net income (loss)                                                                        |                                                  | $ | 11,162  |         |           | $ | (17,203   | )       |   | $    | 4,314    |         
|                                          | Adjustments to reconcile net income (loss) to net cash
provided by operating activities: |                                                  |   |         |         |           |   |           |         |   |      |          |         
|                                          |                                                                                          | Depreciation and amortization                    |   |         | 29,470  |           |   |           | 41,839  |   |      |          | 36,239   |  
|                                          |                                                                                          | Radio Employee Stock Plan                        |   |         | 17,065  |           |   |           | 22,305  |   |      |          | 19,748   |  
|                                          |                                                                                          | Cable performance share plan                     |   |         | 3,500   |           |   |           | 6,465   |   |      |          | 4,912    |  
|                                          |                                                                                          | Goodwill impairment loss                         |   |         | 5,000   |           |   |           |        |   |      |          |         |  
|                                          |                                                                                          | Minority interests                               |   |         | 3,758   |           |   |           | 1,694   |   |      |          | 3,839    |  
|                                          |                                                                                          | Deferred income taxes                            |   |         | 8,915   |           |   |           | 3,252   |   |      |          | 1,602    |  
|                                          |                                                                                          | Deferred financing amortization                  |   |         | 1,074   |           |   |           | 1,317   |   |      |          | 1,183    |  
|                                          |                                                                                          | Investment write-downs                           |   |         |        |           |   |           | 1,500   |   |      |          | 1,100    |  
|                                          |                                                                                          | Equity in (income) losses of investees           |   |         | 630     |           |   |           | 1,135   |   |      |          | (342     | )
|                                          | Changes in assets and liabilities:                                                       |                                                  |   |         |         |           |   |           |         |   |      |          |         
|                                          |                                                                                          | Decrease (increase) in accounts receivable, net  |   |         | (4,900  | )         |   |           | 6,411   |   |      |          | (8,171   | )
|                                          |                                                                                          | Increase in other current assets                 |   |         | 928     |           |   |           | (3,456  | ) |      |          | (302     | )
|                                          |                                                                                          | Increase (decrease) in accounts payable          |   |         | 4,649   |           |   |           | (4,472  | ) |      |          | (2,491   | )
|                                          |                                                                                          | Increase (decrease) in accrued interest          |   |         | (2,807  | )         |   |           | 1,718   |   |      |          | 465      |  
|                                          |                                                                                          | Change in prepaid/accrued income taxes           |   |         | 6,606   |           |   |           | 4,183   |   |      |          | (1,254   | )
|                                          |                                                                                          | Increase
(decrease) in other current liabilities |   |         | 1,859   |           |   |           | (710    | ) |      |          | 5,054    |  
|                                          |                                                                                          | Increase (decrease) in other liabilities         |   |         | (874    | )         |   |           | 976     |   |      |          | 1,209    |  
|                                          |                                                                                          |                                                  |   |         |         |           |   |           |         |   |      |         
|                                          |                                                                                          | Net cash provided by operating activities        |   |         | 86,035  |           |   |           | 66,954  |   |      |          | 67,105   |  
|                                          |                                                                                          |                                                  |   |         |         |           |   |           |         |   |      |         
|CASH FLOWS FROM INVESTING ACTIVITIES      |                                                                                          |                                                  |   |         |         |           |   |           |         |   |      |         
|                                          | Parents repayment of note                                                               |                                                  |   | 4,169   |         |           |   | 4,439     |         |   |      | 3,297    |         
|                                          | Purchase of property, plant and equipment, net                                           |                                                  |   | (28,329 | )       |           |   | (31,739   | )       |   |      | (36,913  | )       
|                                          | Acquisitions                                                                             |                                                  |   | (71,539 | )       |           |   | (21,300   | )       |   |      | (125,160 | )       
|                                          | Decrease (increase) in investments, other assets and
intangible assets                   |                                                  |   | 312     |         |           |   | 2,462     |         |   |      | (4,702   | )       
|                                          | Loan to Parent                                                                           |                                                  |   |        |         |           |   | (14,622   | )       |   |      |         |         
|                                          |                                                                                          |                                                  |   |         |         |           |   |           |         |   |      |         
|                                          |                                                                                          | Net cash used by investing activities            |   |         | (95,387 | )         |   |           | (60,760 | ) |      |          | (163,478 | )
|                                          |                                                                                          |                                                  |   |         |         |           |   |           |         |   |      |         
|CASH FLOWS FROM FINANCING ACTIVITIES      |                                                                                          |                                                  |   |         |         |           |   |           |         |   |      |         
|                                          | Increase (decrease) in revolving credit borrowings                                       |                                                  |   | 34,800  |         |           |   | (5,700    | )       |   |      | 95,100   |         
|                                          | Repayment of term loans                                                                  |                                                  |   | (8,750  | )       |           |   |          |         |   |      |         |         
|                                          | Increase (decrease) in cash overdrafts                                                   |                                                  |   | (1,838  | )       |           |   | 2,089     |         |   |      | 598      |         
|                                          | Radio Employee Stock Plan transactions                                                   |                                                  |   | (14,367 | )       |           |   | (2,090    | )       |   |      | 529      |         
|                                          | Payments of preferred dividends                                                          |                                                  |   | (493    | )       |           |   | (493      | )       |   |      | (493     | )       
|                                          |                                                                                          |                                                  |   |         |         |           |   |           |         |   |      |         
|                                          |                                                                                          | Net cash provided (used) by financing activities |   |         | 9,352   |           |   |           | (6,194  | ) |      |          | 95,734   |  
|                                          |                                                                                          |                                                  |   |         |         |           |   |           |         |   |      |         
|NET DECREASE IN CASH AND CASH EQUIVALENTS |                                                                                          |                                                  |  |         |         |           |  |           |         |   | (639 | )       
|CASH AND CASH EQUIVALENTS,January 1,      |                                                                                          |                                                  |  |         |         |           |  |           |         |   | 639  |         
|                                          |                                                                                          |                                                  |   |         |         |           |   |           |         |   |      |         
|CASH AND CASH EQUIVALENTS,December 31,    |                                                                                          | $                                                |  |         |         | $         |  |           |         | $ |     |         
|                                          |                                                                                          |                                                  |   |         |         |           |   |           |         |   |      |         

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SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
(in thousands)

|                                           |  |                                        |    |                 |         |              |         |          |   |               |       |  |   |   |       |  |   |   |        |           |         |           |        |  |         |  
|------------------------------------------ |  | -------------------------------------- | -- | --------------- | ------- | ------------ | ------- | -------- | - | ------------- | ----- |  | - | - | ----- |  | - | - | ------ | --------- | ------- | --------- | ------ |  | ------- | -
|                                           |  |                                        |    | Preferred Stock |         | Common Stock |         | Retained |   | Stockholders
|                                           |  |                                        |    | Shares          | Amounts | Shares       | Amounts | Earnings |   | Equity       
|                                           |  |                                        |    |                 |         |              |         |          |   |              
|                                           |  |                                        |    |                 |         |              |         |          |   |               |       |  |   |   |       |  |   |   |        | (Restated |         | (Restated
|                                           |  |                                        |    |                 |         |              |         |          |   |               |       |  |   |   |       |  |   |   |        | Note 15)  |         | Note 15) 
|                                           |  |                                        |    |                 |         |              |         |          |   |               |       |  |   |   |       |  |   |   |        |           |         |          
|Balance
as of January 1, 2000,
as restated |  |                                        | 70 |                 |         |              | 7,050   |          |   |               | 1,100 |  |   |   | 1,100 |  |   | $ | 20,617 |           |         | $         | 28,767 | 
|                                           |  | Net
income, as restated                |    |                 |         |              |         |          |   |               |       |  |   |   |       |  |   |   |        |           | 4,314   |           |        |  | 4,314   |  
|                                           |  | Preferred dividends
declared           |    |                 |         |              |         |          |   |               |       |  |   |   |       |  |   |   |        |           | (493    | )         |        |  | (493    | )
|                                           |  | Radio Employee Stock
Plan, as restated |    |                 |        |              |         |          |  |               |       |  |  |   |       |  |  |   |        |           | (1,502  | )         |        |  | (1,502  | )
|                                           |  |                                        |    |                 |         |              |         |          |   |               |       |  |   |   |       |  |   |   |        |           |         |           |        | 
|Balance as of
December 31, 2000            |  |                                        | 70 |                 |         |              | 7,050   |          |   |               | 1,100 |  |   |   | 1,100 |  |   |   | 22,936 |           |         |           | 31,086 | 
|                                           |  | Net
loss, as restated                  |    |                 |         |              |         |          |   |               |       |  |   |   |       |  |   |   |        |           | (17,203 | )         |        |  | (17,203 | )
|                                           |  | Preferred dividends
declared           |    |                 |        |              |         |          |  |               |       |  |  |   |       |  |  |   |        |           | (493    | )         |        |  | (493    | )
|                                           |  |                                        |    |                 |         |              |         |          |   |               |       |  |   |   |       |  |   |   |        |           |         |           |        | 
|Balance as of
December 31, 2001            |  |                                        | 70 |                 |         |              | 7,050   |          |   |               | 1,100 |  |   |   | 1,100 |  |   |   | 5,240  |           |         |           | 13,390 | 
|                                           |  | Net income                             |    |                 |         |              |         |          |   |               |       |  |   |   |       |  |   |   |        |           | 11,162  |           |        |  | 11,162  |  
|                                           |  | Preferred dividends
declared           |    |                 |        |              |         |          |  |               |       |  |  |   |       |  |  |   |        |           | (493    | )         |        |  | (493    | )
|                                           |  |                                        |    |                 |         |              |         |          |   |               |       |  |   |   |       |  |   |   |        |           |         |           |        | 
|Balance as of
December 31, 2002            |  |                                        | 70 |                 |         | $            | 7,050   |          |   |               | 1,100 |  |   | $ | 1,100 |  |   | $ | 15,909 |           |         | $         | 24,059 | 
|                                           |  |                                        |    |                 |         |              |         |          |   |               |       |  |   |   |       |  |   |   |        |           |         |           |        | 

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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. (Internet), 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, Illinois and Indiana. Radio advertising, cable television
subscriptions, and Internet services account for approximately 62%, 35%, and
3% of 2002 consolidated revenues, respectively. Radio, cable and Internet
services revenues were 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.
|  
|   |  | 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 accounting principles
generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of 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. Credit risk is managed through credit and
collection controls in the radio and Internet segments and by disconnecting
the cable segments delinquent subscribers. The allowance for bad debts is
determined by using historical experience, payment trends and credit
information in the context of existing 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 $27.7 million, $27.0 million, and
$23.1 million for the years ended December 31, 2002, 2001, and 2000,
respectively.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------

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SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



| |  | Asset additions and major renovations are capitalized and depreciated over
their estimated useful lives. Periodically, asset lives are reviewed and
adjusted based on facts and circumstances. Costs for constructing or
rebuilding cable transmission and distribution facilities and costs of new
cable service installations are capitalized. Costs of maintenance, repairs
and minor renovations are charged against income. Gains or losses on
dispositions are recognized in the consolidated statement of operations and
the related costs and accumulated depreciation are removed from the
consolidated balance sheet.                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Valuation of Long-Lived and Indefinite-Lived Intangible Assets- The
Company evaluates the recoverability of its long-lived assets including
property, plant and equipment and intangible assets subject to amortization
whenever events or changes in circumstances suggest the carrying values may
not be recoverable. Analyses based on undiscounted cash flows generated by
the related operations and appraisals, trends or other indicators of fair
value are used in these evaluations. If the assets carrying value exceeds
the indicated fair value, a loss is recognized for the difference between
the fair value and the assets carrying value.                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | The Company evaluates the recoverability of its indefinite-lived intangible
assets and goodwill annually or whenever events or changes in circumstances
suggest that the asset may be impaired. The Company performs its annual
impairment testing generally one level below its reporting segments. Radio
Federal Communications Commission broadcast licenses and goodwill are
evaluated at the radio market cluster level, cable franchise values and
goodwill are evaluated at the system level and Internet and Other goodwill
is evaluated at the segment level. Indefinite-lived intangible assets other
than goodwill are generally valued using discounted cash flow analyses,
projections, trends, appraisals and multiples evidenced in the reporting
units businesses. Comparable current market transactions, estimated future
operating results, appraisals, trends and other profitability information
may also be used in the evaluations. If the carrying value of an asset is
greater than its indicated fair value, an impairment charge would be
recognized for the difference in values.
|
| |  | Derivative Financial Instruments- Derivative financial instruments are used
solely to limit interest rate exposure on variable rate debt. No derivative
financial instruments are held for trading purposes. The Company is not a
party to any leveraged instruments. Interest swaps and collars may either
be treated as hedges or marked-to-market as elected on a
contract-by-contract basis. The Company has entered into interest rate
swaps to limit its exposure to interest rate changes on a portion of its
variable rate debt. Hedge accounting has not been elected. Variations in
fair value are marked-to-market on a current basis and are a component of
interest expense in the consolidated statements of operations.                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | 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 unless the
Company has the ability to exercise significant influence over the financial
and operating policies of the entity. Where such influence exists, the
investee is accounted for using the equity method. Investments in other
entities, which are at least 20% and not more than 50% owned, are reported
using the equity method.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

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SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



| |  | Revenues- Radio, cable and Internet revenues are recognized in the period
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, 2002, 2001, and 2000 were $31.2
million, $27.7 million, and $30.8 million, respectively. Cable subscriber
revenues are recognized when services are provided. Cable installation
revenues are recognized to the extent of direct selling costs incurred.
Cable franchise fees, which may be up to 5% of subscriber revenues, must be
collected and remitted to franchising authorities. Franchise fees are
passed through to subscribers as permitted and are included in cable
revenues. Internet and other revenues are recognized when services are
provided or performed. Medias revenues were concentrated in the following
media markets:
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                    |  |      |    |      |  |      |    |   |  |  |    |  
|------------------- |  | ---- | -- | ---- |  | ---- | -- | - |  |  | -- | -
|                    |  | 2002 |    | 2001 |  | 2000
|San Francisco       |  |      | 17 | %    |  |      | 18 | % |  |  | 25 | %
|York, PA            |  |      | 21 | %    |  |      | 21 | % |  |  | 18 | %
|Dallas  Fort Worth |  |      | 15 | %    |  |      | 15 | % |  |  | 14 | %



| |  | Interest- Interest paid was $31.7 million, $33.9 million, and $36.8 million
for the years ended December 31, 2002, 2001, and 2000, respectively.
Interest relating to construction of buildings and equipment is capitalized
as part of the related assets cost. Approximately $0.0 million, $0.5
million, and $0.9 million of interest was capitalized during the years ended
December 31, 2002, 2001 and 2000, 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. The method used does not differ materially from the effective
interest method.                                                                                                                                                                                                                                     
|
| |  | Income Taxes-
Income taxes are based on the asset and liability method. 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.                                                                                                                                 
|
| |  | Stock-Based Compensation- Compensation expense is recognized in accordance
with Statement of Financial Accounting Standard No. 123, 
Stock-Based Compensation (SFAS 123). After April 1, 2002, compensation expense on options is
recognized using minimum value. See Note 7 for accounting treatment prior
to April 1, 2002.                                                                                                                                                  
|
| |  | Recent Accounting Pronouncements- Statement of Financial Accounting
Standards No. 143 Accounting for Asset Retirement Obligations (SFAS
143) specifies financial and reporting obligations pertaining to the
retirement of tangible long-lived assets and associated retirement costs.
SFAS 143 is effective for fiscal years beginning after June 15, 2002. The
Company does not expect SFAS 143 to have a material effect on its financial
position or results of operations.
|
| |  | Statement of Financial Accounting Standards No. 148 Accounting for
Stock-Based Compensation  Transition and Disclosure (SFAS 148)
amends SFAS 123 to provide for alternative methods of transitioning
to the fair value method of valuing stock-based compensation. The
Company is using the fair value method. As of December 31, 2002,
the number and value of stock options granted and outstanding was
immaterial.                                                        

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SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|   |  | Financial Accounting Standards Board Interpretation No. 45,
Guarantors Accounting and Requirements for Guarantees, Including
Guarantees of Indebtedness of Others (FIN 45), requires a guarantor to disclose its obligations under certain guarantees that
it has issued in interim and annual financial statements for
guarantees issued or modified after December 31, 2002. For certain
guarantees, a guarantor may be required to recognize a liability for
the fair value of the obligation at its inception. FIN 45 does not
specify an approach for subsequently measuring and recording the
change in fair value of the obligation. The interpretations
disclosure provisions applied to interim or annual financial
statements for periods ending after December 15, 2002. The impact
of adopting FIN 45 will be based on the nature and terms of
guarantees that the Company enters into or modifies in the future.                                                                                                                                                                                                                                                    
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | In January 2003, the FASB issued Interpretation No. 46,
Consolidation of Variable Interest Entities, an interpretation of
ARB No. 51. This Interpretation addresses the consolidation by
business enterprises of variable interest entities as defined in the
Interpretation. The Interpretation applies immediately to variable
interests in variable interest entities created after January 31,
2003, and to variable interests in variable interest entities
obtained after January 31, 2003. For enterprises, such as the
Company, with a variable interest in a variable interest entity
created before February 1, 2003, the Interpretation is applied to the
enterprise no later than the end of the first interim or annual
reporting period beginning after June 15, 2003. The application of
this Interpretation is not expected to have a material effect on the
Companys financial statements. The Interpretation requires
certain disclosures in financial statements issued after January 31,
2003 if it is reasonably possible that the Company will consolidate
or disclose information about variable interest entities when the
Interpretation becomes effective.
|  
|2. |  | Acquisitions and Dispositions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|  
|   |  | All acquisitions have been accounted for as purchases. The results of
acquired operations were included in the Consolidated Statements of
Operations since their acquisition dates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|   |  | On September 30, 2002, Media purchased the assets of Radio Station WYGY-FM
from Caron Broadcasting, Inc. for $45.0 million cash. Radio Station WYGY-FM
is licensed to Lebanon, Ohio and serves the Cincinnati, Ohio marketplace.
Existing credit facilities were utilized for the acquisition. WYGY-FMs
revenues included in the consolidated statement of operations were
approximately $1.3 million. WYGY-FMs operations added approximately
$23,000 to consolidated income before income taxes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  
|   |  | On April 1, 2002, Cable purchased certain assets of Fairbanks
Communications, Inc. for $26.7 million cash. The assets served
11,300 subscribers
in the Lawrenceburg, Indiana area when acquired. The purchased assets are being
integrated into the Midwest system. Existing credit facilities were
utilized to finance the acquisition. Cable revenues in the consolidated
statement of operations included $3.9 million related to Lawrenceburg.
Consolidated income before income taxes includes a $2.4 million loss related
to Lawrenceburg. Depreciation for Lawrenceburg was $1.6 million due to
significant rebuild activities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  
|   |  | 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 served 3,800 customers when
purchased and is contiguous to the Williamsport, PA cable system. The
Company has eliminated the headend and upgraded the cable plant which has
been fully integrated into its Williamsport system.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|   |  | On May 25, 2001, Radio purchased all of 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. An unrelated party is
operating these stations under a local marketing agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

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SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



| |  | On February 15, 2001, Radio purchased a forty-percent interest in 1051FM,
LLC from Jesscom, Inc. (Jesscom) 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 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 has an option to purchase Jesscoms interest in 1051FM, LLC at
fair market value as determined by an independent appraiser (for not less
than $15 million and not more than $27 million) during a one year period
commencing February 14, 2004. Jesscom began broadcasting operations on June
18, 2001.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | 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 the Company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 pro forma disclosures
are included.                                                                                                                                                                                                                                                                                                
|
| |  | On October 19, 2000, the Companys Internet and Other segment 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 has integrated its existing web
development operations into Judds and is 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, the Companys Internet and Other segment purchased the
assets of Krone Group Inc., a full service marketing communications firm
located in Harrisburg, Pennsylvania, for $1.3 million cash.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

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SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | For acquisitions occurring after June 30, 2001, Statement of Financial
Accounting Standards No. 141, Business Combinations (SFAS 141) requires
an acquisitions total purchase price to be allocated to the fair value of
the assets acquired and the liabilities assumed as of the acquisition date.
Independent appraisals were generally utilized to determine and allocate fair values.
The Company has allocated the costs of purchased assets, at their fair
values as follows (in thousands):

|         |                               |       |   |        |        |      |   |        |        |  |   |         |         | 
|-------- | ----------------------------- | ----- | - | ------ | ------ | ---- | - | ------ | ------ |  | - | ------- | ------- | 
|         |                               |       |   | 2002   |        | 2001 |   | 2000  
|         |                               |       |   |        |        |      |   |       
|Radio    |                               |       |   |        |        |      |   |        |        |  |   |        
|         | Property, plant and equipment |       | $ | 1,091  |        |      | $ |       |        |  | $ | 3,581   |        
|         | Investments and other assets  |       |   |       |        |      |   | 10,000 |        |  |   |        |        
|         | Intangible assets             |       |   | 43,862 |        |      |   | 3,300  |        |  |   | 109,597 |        
|         |                               |       |   |        |        |      |   |        |        |  |   |        
|         |                               | Total |   | $      | 44,953 |      |   | $      | 13,300 |  |   | $       | 113,178 | 
|         |                               |       |   |        |        |      |   |        |        |  |   |        
|Cable    |                               |       |   |        |        |      |   |        |        |  |   |        
|         | Property, plant and equipment |       | $ | 9,365  |        |      | $ | 696    |        |  | $ | 819     |        
|         | Intangible assets             |       |   | 17,221 |        |      |   | 7,304  |        |  |   | 2,964   |        
|         |                               |       |   |        |        |      |   |        |        |  |   |        
|         |                               | Total |   | $      | 26,586 |      |   | $      | 8,000  |  |   | $       | 3,783   | 
|         |                               |       |   |        |        |      |   |        |        |  |   |        
|Internet |                               |       |   |        |        |      |   |        |        |  |   |        
|         | Property, plant and equipment |       | $ |       |        |      | $ |       |        |  | $ | 566     |        
|         | Intangible assets             |       |   |       |        |      |   |       |        |  |   | 7,633   |        
|         |                               |       |   |        |        |      |   |        |        |  |   |        
|         |                               | Total |   | $      |       |      |   | $      |       |  |   | $       | 8,199   | 
|         |                               |       |   |        |        |      |   |        |        |  |   |        



|   |  | Intangible assets related to these acquisitions are expected to be
deductible for tax purposes.
|-- |  | -----------------------------------------------------------------------------------------------
|  
|  
|3. |  | Long-Term Debt                                                                                 

|                                        |                                      |   |         |         |      |   |         |         | 
|--------------------------------------- | ------------------------------------ | - | ------- | ------- | ---- | - | ------- | ------- | 
|                                        |                                      |   | 2002    |         | 2001
|                                        |                                      |   |         |         |     
|Long-term debt includes (in thousands): |                                      |   |         |         |      |   |         |        
|                                        | 8.5% Senior Subordinated Notes       |   | $       | 150,000 |      |   | $       | 150,000 | 
|                                        | Term Loan A                        |   |         | 92,000  |      |   |         | 100,000 | 
|                                        | Term Loan B                        |   |         | 99,250  |      |   |         | 100,000 | 
|                                        | Revolving Credit Commitment          |   |         | 179,700 |      |   |         | 144,900 | 
|                                        | Other                                |   |         | 187     |      |   |         | 205     | 
|                                        |                                      |   |         |         |      |   |         |        
|                                        |                                      |   | 521,137 |         |      |   | 495,105 |        
|                                        | Less amounts payable within one year |   |         | 17,032  |      |   |         | 8,780   | 
|                                        |                                      |   |         |         |      |   |         |        
|                                        |                                      | $ | 504,105 |         |      | $ | 486,325 |        
|                                        |                                      |   |         |         |      |   |         |        

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SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



| |  | The $150.0 million 8.5% Senior Subordinated Notes are due in November 2009.
Interest is payable semi-annually. The Notes fair value as of December 31,
2002 is $156.0 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The Company maintains a Senior Secured Credit Facility (Facility) with a
group of banks. The revolving credit commitment
began reducing in 2002 and matures in 2007. The Facilitys term loans began
amortizing in 2002 and mature in 2007 and 2008. As of December 31, 2002, the revolving credit
commitments maximum borrowing was $230 million. The revolving credit
commitment and term loans bear interest at the LIBOR rate plus an applicable
margin based on certain ratios. The interest rate on the revolving credit
commitment was 2.83% and 3.37% at December 31, 2002 and 2001, respectively.
The interest rate on Term Loan A was 2.79 % and 6.31% and the interest
rate on Term Loan B was 3.9 % and 5.13% at December 31, 2002 and 2001,
respectively. Interest is payable quarterly or on maturity of a LIBOR-based
tranche. At December 31, 2002, approximately $50.2 million was available
for borrowing under the revolving credit commitment. The Facilitys
carrying balances are considered to be their fair value.
|
| |  | The banks hold collateralized interests in certain FCC licenses and stock
pledges from shareholders of the Company. The banks are further
collateralized by a first lien on all assets (tangible and intangible) of
the Company excluding realty and vehicles. The Company
must maintain debt coverage and financial ratios at prescribed levels. The
Company has further consented to restrict common stock dividends, investment
transactions with affiliates, repurchase of subsidiary non-voting stock,
ownership changes, sale of assets and incurrence of additional debt.                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | Derivative financial instruments are used solely to limit interest rate
exposure related to the revolving credit commitment and are not used for
trading purposes. The Company has entered into two interest rate swaps
totaling $70.0 million notional value, of which $50 million notional value
expires in 2003 and $20 million notional value expires in 2005. The effect
of these agreements convert the interest rate on $70.0 million of variable
rate debt to 5.85% fixed rate debt as of December 31, 2002. The Company has
not elected hedge accounting for these contracts. The interest rate swaps
were recognized at their $0.7 million and $1.5 million fair value
liabilities as a component of accrued interest as of December 31, 2002 and
2001, respectively. Interest swaps increased (decreased) interest expense
for the years ended December 31, 2002 and 2001 by ($0.8) million and $1.5
million, respectively.                                                                                                           
|
| |  | The non-current portion of long-term debt matures in the following years (in
thousands):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

|     |  |   |        |  |  |  |      |  |  |   |         | 
|---- |  | - | ------ |  |  |  | ---- |  |  | - | ------- | 
|2004 |  | $ | 60,734 |  |  |  | 2007 |  |  | $ | 89,919  | 
|2005 |  |   | 71,037 |  |  |  | 2008 |  |  |   | 47,375  | 
|2006 |  |   | 85,040 |  |  |  | 2009 |  |  |   | 150,000 | 

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SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|4. |  | Income Taxes                                                                                            
|-- |  | --------------------------------------------------------------------------------------------------------
|  
|   |  | The provision for income taxes is summarized as follows for the years ended
December 31, (in thousands):

|                           |         |                |         |        |        |      |        |           |        |           |         |         |         |  
|-------------------------- | ------- | -------------- | ------- | ------ | ------ | ---- | ------ | --------- | ------ | --------- | ------- | ------- | ------- | -
|                           |         |                |         | 2002   |        | 2001 |        | 2000     
|                           |         |                |         |        |        |      |        |          
|                           |         |                |         |        |        |      |        | (Restated |        | (Restated
|                           |         |                |         |        |        |      |        | Note 15)  |        | Note 15) 
|Current                    |         |                |         |        |        |      |        |           |        |           |         |        
|                           | Federal |                | $       | (7,857 | )      |      | $      | (2,212    | )      |           | $       | (14,337 | )      
|                           | State   |                |         | (1,132 | )      |      |        | (952      | )      |           |         | (822    | )      
|                           |         |                |         |        |        |      |        |           |        |           |         |        
|                           |         | Total current  |         |        | (8,989 | )    |        |           | (3,164 | )         |         |         | (15,159 | )
|                           |         |                |         |        |        |      |        |           |        |           |         |        
|Deferred                   |         |                |         |        |        |      |        |           |        |           |         |        
|                           | Federal |                |         | (7,173 | )      |      |        | (2,588    | )      |           |         | (1,604  | )      
|                           | State   |                |         | (1,742 | )      |      |        | (664      | )      |           |         | 1       |        
|                           |         |                |         |        |        |      |        |           |        |           |         |        
|                           |         | Total deferred |         |        | (8,915 | )    |        |           | (3,252 | )         |         |         | (1,603  | )
|                           |         |                |         |        |        |      |        |           |        |           |         |        
|Provision for Income Taxes |         | $              | (17,904 | )      |        | $    | (6,416 | )         |        | $         | (16,762 | )      
|                           |         |                |         |        |        |      |        |           |        |           |         |        



| |  | Income tax payments for the years ended December 31, 2002, 2001, and 2000
were approximately $4.2 million, $1.2 million, and $18.4 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 of other companies in the consolidated federal return may reduce the
Companys tax payments. As of December 31, 2002 and 2001, the
Companys tax sharing account had a liability balance of
approximately $5.6 million and 4.4 million, respectively. The tax sharing account is included
in accrued income taxes. The tax
sharing account must be paid if a loss member leaves the consolidated tax
return group.
|
| |  | Reconciliations of the difference between the U.S. statutory income tax rate
and the Companys effective book income tax rate follow:                                                                                                                                                                                                                                                                                                                                                                                                                                             

|                                                      |  |      |      |      |  |           |       |           |  |  |      |  
|----------------------------------------------------- |  | ---- | ---- | ---- |  | --------- | ----- | --------- |  |  | ---- | -
|                                                      |  | 2002 |      | 2001 |  | 2000     
|                                                      |  |      |      |      |  |          
|                                                      |  |      |      |      |  | (Restated |       | (Restated
|                                                      |  |      |      |      |  | Note 15)  |       | Note 15) 
|U.S. statutory rate                                   |  |      | 35.0 | %    |  |           | 35.0  | %         |  |  | 35.0 | %
|State income taxes, net of
Federal income tax benefit |  |      | 5.7  |      |  |           | (11.9 | )         |  |  | 2.2  |  
|Non-deductible charge for
Radio Employee Stock Plan   |  |      | 18.2 |      |  |           | (84.8 | )         |  |  | 27.7 |  
|Non-deductible amortization and
expenses              |  |      | 0.9  |      |  |           | (6.9  | )         |  |  | 2.2  |  
|Other                                                 |  |      | (5.3 | )    |  |           | (2.0  | )         |  |  | 0.2  |  
|                                                      |  |      |      |      |  |           |       |           |  |  |      |  
|Effective book income tax rate                        |  |      | 54.5 | %    |  |           | (70.6 | )%        |  |  | 67.3 | %
|                                                      |  |      |      |      |  |           |       |           |  |  |      |  

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SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At December 31, 2002 and 2001, deferred tax assets and liabilities resulted
from the following temporary differences (in thousands):

|                               |                                             |   |        |        |      |   |           |        | 
|------------------------------ | ------------------------------------------- | - | ------ | ------ | ---- | - | --------- | ------ | 
|                               |                                             |   | 2002   |        | 2001
|                               |                                             |   |        |        |     
|                               |                                             |   |        |        |      |   | (Restated
|                               |                                             |   |        |        |      |   | Note 15) 
|Deferred tax assets:           |                                             |   |        |        |      |   |           |       
|                               | Allowance for doubtful accounts             |   | $      | 601    |      |   | $         | 649    | 
|                               | Investments                                 |   |        | 433    |      |   |           | 179    | 
|                               | Self-insured risks                          |   |        | 133    |      |   |           | 177    | 
|                               | Intangible assets                           |   |        | 2,605  |      |   |           |       | 
|                               | Pension benefits                            |   |        | 120    |      |   |           |       | 
|                               | Deferred income                             |   |        | 2,359  |      |   |           | 1,216  | 
|                               | Liabilities not recognized for tax purposes |   |        | 383    |      |   |           | 293    | 
|                               | Tangible assets                             |   |        | 827    |      |   |           |       | 
|                               | Stock option benefits/deferred compensation |   |        | 4,207  |      |   |           | 2,911  | 
|                               |                                             |   |        |        |      |   |           |       
|Total deferred tax assets      |                                             |   | 11,668 |        |      |   | 5,425     |       
|                               |                                             |   |        |        |      |   |           |       
|Deferred tax liabilities:      |                                             |   |        |        |      |   |           |       
|                               | Pension benefits                            |   |        | 2,036  |      |   |           | 1,847  | 
|                               | Tangible assets                             |   |        | 22,709 |      |   |           | 20,991 | 
|                               | Intangible assets                           |   |        | 35,034 |      |   |           | 21,837 | 
|                               | Investments in partnerships                 |   |        | 2,032  |      |   |           | 1,844  | 
|                               | Other liabilities                           |   |        | 120    |      |   |           | 254    | 
|                               |                                             |   |        |        |      |   |           |       
|Total deferred tax liabilities |                                             |   | 61,931 |        |      |   | 46,773    |       
|                               |                                             |   |        |        |      |   |           |       
|Net deferred tax liabilities   |                                             | $ | 50,263 |        |      | $ | 41,348    |       
|                               |                                             |   |        |        |      |   |           |       



|5. |  | Intangible Assets                                               
|-- |  | ----------------------------------------------------------------
|  
|   |  | Intangible assets are comprised of the following (in thousands):

|                                     |                                            |          |         |         |         |      |         |           |         | 
|------------------------------------ | ------------------------------------------ | -------- | ------- | ------- | ------- | ---- | ------- | --------- | ------- | 
|                                     |                                            |          |         | 2002    |         | 2001
|                                     |                                            |          |         |         |         |     
|                                     |                                            |          |         |         |         |      |         | (Restated
|                                     |                                            |          |         |         |         |      |         | Note 15) 
|Indefinite-lived, at carrying value: |                                            |          |         |         |         |      |         |          
|                                     | Federal Communications Commission licenses |          | $       | 295,379 |         |      |         | 245,960   |        
|                                     | Cable franchise values                     |          |         | 72,017  |         |      |         | 59,488    |        
|                                     | Goodwill                                   |          |         | 13,971  |         |      |         | 14,089    |        
|                                     |                                            |          |         |         |         |      |         |          
|                                     |                                            | Subtotal |         |         | 381,367 |      |         |           | 319,537 | 
|                                     |                                            |          |         |         |         |      |         |          
|Definite-lived, at cost:             |                                            |          |         |         |         |      |         |          
|                                     | Cable subscriber lists                     |          |         | 10,630  |         |      |         | 5,365     |        
|                                     | Favorable leases                           |          |         | 3,348   |         |      |         | 3,348     |        
|                                     | Other                                      |          |         | 865     |         |      |         | 396       |        
|                                     |                                            |          |         |         |         |      |         |          
|                                     |                                            |          | 14,843  |         |         |      | 9,109   |          
|                                     | Less accumulated amortization              |          |         | 8,327   |         |      |         | 6,640     |        
|                                     |                                            |          |         |         |         |      |         |          
|                                     |                                            | Subtotal |         |         | 6,516   |      |         |           | 2,469   | 
|                                     |                                            |          |         |         |         |      |         |          
|                                     |                                            | $        | 387,883 |         |         | $    | 322,006 |          
|                                     |                                            |          |         |         |         |      |         |          

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SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



| |  | Definite-lived intangible assets amortize in the following years (in
thousands):
| |  | --------------------------------------------------------------------------------

|     |  |   |       |  |  |            |      |  |       |   |     | 
|---- |  | - | ----- |  |  | ---------- | ---- |  | ----- | - | --- | 
|2003 |  | $ | 1,890 |  |  |            | 2006 |  |       | $ | 615 | 
|2004 |  |   | 1,165 |  |  |            | 2007 |  |       |   | 482 | 
|2005 |  |   | 810   |  |  | Thereafter |      |  | 1,554 |  



| |  | Cable subscriber lists are being amortized based on factors supplied by an
independent appraiser through 2013. Favorable leases are amortized using
the straight-line method over their respective terms. Amortization for the
years ended December 31, 2002, 2001, and 2000 was approximately $1.8
million, $14.9 million (restated), and $13.1 million (restated), respectively.                                                                                                                                                                             
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Prior to adoption of SFAS 142, goodwill and Federal Communications
Commission (FCC) licenses were amortized over 40 year periods using the
straight-line method. Cable franchise values were amortized over 15 years
using the straight-line method. Upon adoption of SFAS 142 on January 1,
2002, amortization of FCC licenses, cable franchise values and goodwill
ceased. The following pro forma financial information for 2001 and
2000 is presented as if SFAS No. 142 was adopted as of January 1, 2000
(amounts in thousands, except per share data):

|                                      |                     |  |      |        |      |  |                    |         |                    |  |   |        | 
|------------------------------------- | ------------------- |  | ---- | ------ | ---- |  | ------------------ | ------- | ------------------ |  | - | ------ | 
|                                      |                     |  | 2002 |        | 2001 |  | 2000              
|                                      |                     |  |      |        |      |  |                   
|                                      |                     |  |      |        |      |  | (Restated Note 15) |         | (Restated Note 15)
|Net income (loss):                    |                     |  |      |        |      |  |                    |         |                    |  |   |       
|                                      | As reported         |  | $    | 11,162 |      |  | $                  | (17,203 | )                  |  | $ | 4,314  | 
|                                      | SFAS No. 142 impact |  |      |       |      |  |                    | 9,165   |                    |  |   | 7,930  | 
|                                      |                     |  |      |        |      |  |                    |         |                    |  |   |       
|                                      | As adjusted         |  | $    | 11,162 |      |  | $                  | (8,038  | )                  |  | $ | 12,244 | 
|                                      |                     |  |      |        |      |  |                    |         |                    |  |   |       
|Basic and Diluted
Earnings per share: |                     |  |      |        |      |  |                    |         |                    |  |   |       
|                                      | As reported         |  | $    | 9.70   |      |  | $                  | (16.09  | )                  |  | $ | 3.47   | 
|                                      | SFAS No. 142 impact |  |      |       |      |  |                    | 8.33    |                    |  |   | 7.21   | 
|                                      |                     |  |      |        |      |  |                    |         |                    |  |   |       
|                                      | As adjusted         |  | $    | 9.70   |      |  | $                  | (7.76   | )                  |  | $ | 10.68  | 
|                                      |                     |  |      |        |      |  |                    |         |                    |  |   |       



| |  | Changes in the carrying value of goodwill and indefinite-lived intangible
assets follow:
| |  | ----------------------------------------------------------------------------------------

|                                                  |                           |                           |        |         |        |  
|------------------------------------------------- | ------------------------- | ------------------------- | ------ | ------- | ------ | -
|Radio Federal Communications Commission Licenses:
|                                                  | Balance January, 1 2001   |                           | $      | 252,633 |       
|                                                  |                           | Amortization              |        |         | (6,673 | )
|                                                  |                           |                           |        |        
|                                                  | Balance December 31, 2001 |                           |        | 245,960 |       
|                                                  |                           | Acquisitions              |        |         | 39,419 |  
|                                                  |                           | Contract
fee payable      |        |         | 10,000 |  
|                                                  |                           |                           |        |        
|                                                  | Balance December 31, 2002 |                           | $      | 295,379 |       
|                                                  |                           |                           |        |        
|Franchise Values:                                 |                           |                           |        |        
|                                                  | Balance January 1, 2001   |                           | $      | 58,297  |       
|                                                  |                           | Acquisitions              |        |         | 7,304  |  
|                                                  |                           | Other                     |        |         | 117    |  
|                                                  |                           | Purchase price allocation |        |         | (17    | )
|                                                  |                           | Amortization              |        |         | (6,213 | )
|                                                  |                           |                           |        |        
|Balance December 31, 2001                         |                           |                           | 59,488 |        
|                                                  | Acquisitions              |                           |        | 12,342  |       
|                                                  | Purchase price allocation |                           |        | 187     |       
|                                                  |                           |                           |        |        
|Balance December 31, 2002                         |                           | $                         | 72,017 |        
|                                                  |                           |                           |        |        

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SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|          |                           |                           |   |       |       |       |   |                  |      |       |   |       |        |   |   |        |        |  
|--------- | ------------------------- | ------------------------- | - | ----- | ----- | ----- | - | ---------------- | ---- | ----- | - | ----- | ------ | - | - | ------ | ------ | -
|          |                           |                           |   | Radio |       | Cable |   | Internet & Other |      | Total
|          |                           |                           |   |       |       |       |   |                  |      |      
|Goodwill: |                           |                           |   |       |       |       |   |                  |      |       |   |       |        |   |   |       
|          | Balance January, 1 2001   |                           | $ | 2,045 |       |       | $ | 5,945            |      |       | $ | 7,485 |        |   | $ | 15,475 |       
|          |                           | Purchase price allocation |   |       |      |       |   |                  |     |       |   |       | (80    | ) |   |        | (80    | )
|          |                           | Amortization              |   |       | (81   | )     |   |                  | (718 | )     |   |       | (507   | ) |   |        | (1,306 | )
|          |                           |                           |   |       |       |       |   |                  |      |       |   |       |        |   |   |       
|          | Balance December 31, 2001 |                           |   | 1,964 |       |       |   | 5,227            |      |       |   | 6,898 |        |   |   | 14,089 |       
|          |                           | Acquisitions              |   |       | 4,443 |       |   |                  | 207  |       |   |       |       |   |   |        | 4,650  |  
|          |                           | Purchase price allocation |   |       | 232   |       |   |                  |     |       |   |       |       |   |   |        | 232    |  
|          |                           | Impairment loss           |   |       |      |       |   |                  |     |       |   |       | (5,000 | ) |   |        | (5,000 | )
|          |                           |                           |   |       |       |       |   |                  |      |       |   |       |        |   |   |       
|          | Balance December 31, 2002 |                           | $ | 6,639 |       |       | $ | 5,434            |      |       | $ | 1,898 |        |   | $ | 13,971 |       
|          |                           |                           |   |       |       |       |   |                  |      |       |   |       |        |   |   |       



|   |  | Adoption of SFAS 142 reduced amortization by approximately $14.1 million for
the year ended December 31, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | SFAS 142 required the Company to perform a transitional assessment of
goodwill and intangible assets with indefinite lives as of January 1, 2002.
In order to perform this transitional assessment, Media (1) identified its
reporting units, (2) determined the carrying value of each reporting unit,
and (3) determined the fair value of each reporting unit using discounted
cash flows and other indicators of value. An impairment loss is indicated
if an intangible assets carrying value exceeds its fair value. After a
further review of the $5.0 million goodwill transitional impairment loss
previously recognized, the loss was more appropriately reflected as
occurring in 2002.                                                                                                                                                                                  
|  
|   |  | As required by SFAS 142, the Company evaluated the recoverability of its
goodwill and indefinite-lived intangible assets as of December 31, 2002.
Based on an impairment assessment of these assets, a $5.0 million Internet
goodwill impairment loss was recognized. The Parents independent appraisal
for ESOP valuation purposes as of December 31, 2002 was utilized in
determining the impairment loss. For disclosures related to the
consolidated statements of cash flows, the Internet goodwill impairment loss
is a non-cash item.                                                                                                                                                                                                                                                                                                                                        
|  
|   |  | WHMA-FM was moved from Anniston, Alabama to serve the Atlanta, Georgia
metropolitan area based upon a Federal Communications Commission (FCC)
Report and Order. The station commenced operations in College Park, Georgia
as WWWQ-FM in January 2001. Subsequently, a mutually exclusive applicant
filed a Petition for Reconsideration with the FCC that was denied. If a
final Report and Order is received on or before May 2003, Media must pay
$10.0 million to the former owners in accordance with the original purchase
agreement. Management believes that payment is probable and accordingly,
$10.0 million has been recognized as additional FCC license cost and as a
contract fee payable. Existing credit facilities are likely to be utilized
to pay this liability. For purposes of the consolidated statements of cash
flows, this transaction was a non-cash item.
|  
|6. |  | Investments and Other Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  
|   |  | A subsidiary is a 50% general partner in Susquehanna Adelphia Business
Solutions, a competitive access provider. Adelphias partner in this
partnership has indicated that it is not included in recent bankruptcy filings. As of December 31, 2002, Medias investments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

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SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|   |  | and other
assets included $3.9 million related to this partnership. For the years
ended December 31, 2002, 2001 and 2000, $0.6 million loss, $1.4 million
income, and $1.3 million income were included in the statement
of operations, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Unamortized deferred financing expenses were $4.8 million at December 31,
2002 and $5.5 million at December 31, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  
|   |  | 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. |  | Radio Employee Stock Plan and Cable Performance Share Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|   |  | Radio maintains an Employee Stock Plan (Plan) for certain key employees
who may purchase Susquehanna Radio Corp. Class B non-voting common stock
at a formula value set by the Plan. For each share purchased, participants
receive an immediately vested option to purchase two additional shares at
the same price. Total shares and options offered may not exceed 400,000
shares. Options expire ten years and one month after the grant date.
Options awarded may be subject to settlement in cash. Shares are subject to
repurchase by Radio, generally at values determined annually by the Plan
agreement. Radio has a right of first refusal to purchase outstanding
shares and may require a terminated employee to resell outstanding shares at
the current formula value. An employee who dies or becomes disabled, who
retires on or after the age of 60 or who terminates employment at or after
age 60 may require Radio to repurchase outstanding shares. 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.
|  
|   |  | Prior to 1996, shares issued and options granted were accounted for using
the intrinsic value method prescribed in Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees (APB 25) and Emerging
Issues Task Force 87-23. Accordingly, shares issued prior to 1996 were
treated as equity instruments and reflected as minority interest on the
balance sheet. Options were afforded variable accounting, until the point
of exercise.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  
|   |  | In 1996 the Company adopted the measurement and attribution provisions of
SFAS No. 123, which requires all shares and options issued after 1995 to be
measured based upon the change in formula value each year, with a
corresponding charge to operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|   |  | Option activity in the Radio Employee Stock Plan was as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

|                                      |           |  |                     |         |              |   |               |               | 
|------------------------------------- | --------- |  | ------------------- | ------- | ------------ | - | ------------- | ------------- | 
|                                      |           |  | Options Outstanding |         | Option Price
|                                      |           |  |                     |         |             
|Balance at January 1, 2000            |           |  | 70,032              |         |              | $ | 1.26 - $18.82 |              
|                                      | Exercised |  |                     | (70,032 | )            |   | $             | 1.26 - $18.82 | 
|                                      |           |  |                     |         |              |   |               |              
|Balance at December 31, 2000
and 2001 |           |  |                    |         |              |   |              |              
|                                      | Granted   |  |                     | 2,780   |              |   | $             | 170.64        | 
|                                      |           |  |                     |         |              |   |               |              
|Balance at December 31, 2002          |           |  | 2,780               |         |              | $ | 170.64        |              
|                                      |           |  |                     |         |              |   |               |              



| |  | On April 10, 2000, Susquehanna Pfaltzgraff Co.s Board of Directors
changed the method of determining the Plans share value effective July 1,
2000. Over a period that ended April 1, 2002, Plan share value transitioned
from a formula value to a value based upon Susquehanna Pfaltzgraff Co.s annual independent ESOP valuation (Appraised Value). On July 1,
2000, share value was based one-third on Appraised Value and two-thirds on
formula value. As of April 1, 2001, share value was based two-thirds on
Appraised Value and one-third on formula value. As of April 1, 2002 and
thereafter, Plan share value was based on Radios Appraised Value.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The July 1, 2000 change in the method for valuing shares was reconsidered to
be a plan modification that subjected shares formerly accounted for
under APB 25 to Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation (SFAS 123). This plan
modification required recognition of a $1.5 million charge to retained
earnings on July 1, 2000. As of July 1, 2000, shares formerly accounted for
as minority interests were reclassified to a Radio Employee Share Plan
Liability. Increases in share value were previously charged
directly against retained earnings. The plan modification required
increases in Plan share value to be expensed in the statement of operations
until share value equaled fair value. The $19.7 million increase in value
of Plan shares as of July 1, 2000, the $22.3 million increase in value of
Plan shares as of April 1, 2001 and the $17.1 million increase in value of
Plan shares as of April 1, 2002 were recognized as noncash compensation
charges in the statement of operations at those dates. These charges were
considered to be general and administrative expenses. For purposes of
disclosures related to the consolidated statements of cash flows, these
transactions were treated as noncash items.
|  
|   |  | As of April 1, 2002, Plan shares were reclassified from Radio Share Plan
Liability to minority interests. Future increases in Plan share value will
be recognized as minority interests in the consolidated statement of
operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  
|   |  | On June 18, 2002, certain key employees purchased a total of 1,390
newly-issued Plan shares at
$170.64 per share. For each share purchased, a fully-vested option was
granted to purchase two additional shares at $170.64 per share during a
period ending ten years and one month from the purchase date. A $0.3
million compensation expense was recognized in the second quarter related to
the sale of stock and grant of options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|   |  | In May 2002, Radio repurchased and retired approximately $14.6 million of
Plan shares from retirees and current key employees. Existing
credit facilities were used to finance the repurchases. The repurchases
were accounted for as acquisition of minority interests. As of December 31, 2002,
the total value of these outstanding shares was approximately $51.7 million,
which was included in accrued employee-related costs ($6.5 million) and
minority interests ($45.2 million).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  
|8. |  | Cable Performance Share Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|   |  | The Susquehanna Cable Co. Performance Share Plan is a non-qualified deferred
compensation plan for certain key employees. Participants are granted
performance share rights that may be purchased by deferring compensation.
Cable performance shares are accounted for as stock appreciation rights. On
April 10, 2000, the Susquehanna Pfaltzgraff Co. Board of Directors also
changed the method of determining performance share value. Performance
shares were formerly valued using a formula based on stockholders equity
and prior earnings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|  
|   |  | Over a period that ended April 1, 2002, performance share value transitioned
to a value based upon Susquehanna Pfaltzgraff Co.s annual independent ESOP
valuation (Appraised Value). On July 1, 2000, performance share value was
based one-third on Appraised Value and two-thirds on the previous formula
value. On April 1, 2001, performance share value were based two-thirds on
Appraised Value and one-third on the previous formula value. On April 1,
2002 and thereafter, performance share value was based on Cables Appraised
Value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

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SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



| |  | The July 1, 2000 revaluation of Cables performance shares resulted in
recognition of a $3.0 million compensation expense. On April 1, 2001, the
revaluation of performance shares resulted in the recognition of a $4.2
million compensation expense. Based on the ESOP valuation performed as of
December 31, 2001, $4.1 million compensation expense was recognized in 2002.
The increases in performance shares value were included in general and
administrative expenses.                                                                                                                                                                                                                                                                    
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | On June 18, 2002, certain key employees purchased a total of 250 Cable
performance shares at $267.91 per share. For each share purchased, a
fully-vested option was granted to purchase two additional performance
shares at $267.91 per share during a period ending ten years and one month
from the purchase date. A $0.1 million compensation expense was recognized
related to the sale of performance shares and issuance of performance share
options. As of December 31, 2002, 500 unexercised performance share options
at $267.91 per performance share were outstanding. The approximately $10.7
million and $7.2 million value of performance shares as of December 31, 2002
and 2001, respectively were included in other liabilities.



|9. |  | Employee Benefits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Most full-time employees participate in an Employee Stock Ownership Plan
(ESOP) of the Companys Parent. ESOP expense of approximately $9.1
million, $9.1 million and $8.3 million, was recognized for the years ended
December 31, 2002, 2001 and 2000, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|   |  | Coincident with the ESOPs 1999 creation, 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,
coincident with a second ESOP transaction, 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 that commenced in December 2001. On December
30, 2002, 2001 and 2000, the Parent made principal payments of $4.2 million,
$4.4 million and $3.3 million, respectively. Due to the Parent-subsidiary
relationship, it is impracticable to determine the fair value of these
notes.

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SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



| |  | Many full-time Company employees are covered by the Parents Susquehanna
Pfaltzgraff Co. Pension Plan, a noncontributory qualified defined benefit
pension plan. Benefits under the Pension Plan are based on employees years
of service and earnings over part or all of their careers through April
1999, when benefit accruals ceased.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The funded status of the Parents pension plan at December 31, was as
follows (in thousands):                                                                                                                                                                                                                                             

|                                                                           |  |      |        |      |  |   |        |  
|-------------------------------------------------------------------------- |  | ---- | ------ | ---- |  | - | ------ | -
|                                                                           |  | 2002 |        | 2001
|                                                                           |  |      |        |     
|Benefit obligation, beginning of year                                      |  | $    | 26,779 |      |  | $ | 25,480 |  
|Interest cost                                                              |  |      | 1,887  |      |  |   | 1,787  |  
|Actuarial losses                                                           |  |      | 1,888  |      |  |   | 726    |  
|Benefits paid                                                              |  |      | (1,236 | )    |  |   | (1,214 | )
|                                                                           |  |      |        |      |  |   |        |  
|Benefit obligation, end of year                                            |  |      | 29,318 |      |  |   | 26,779 |  
|                                                                           |  |      |        |      |  |   |        |  
|Fair value of plan assets, beginning of year                               |  |      | 35,437 |      |  |   | 38,054 |  
|Actual return on plan assets                                               |  |      | (4,103 | )    |  |   | (1,403 | )
|Benefits paid                                                              |  |      | (1,236 | )    |  |   | (1,214 | )
|                                                                           |  |      |        |      |  |   |        |  
|Fair value of plan assets, end of year                                     |  |      | 30,098 |      |  |   | 35,437 |  
|                                                                           |  |      |        |      |  |   |        |  
|Excess of fair value of plan assets over
benefit obligation at end of year |  |      | 780    |      |  |   | 8,658  |  
|Unrecognized
net actuarial loss                                            |  |      | 9,298  |      |  |   | 73     |  
|Unrecognized prior service costs                                           |  |      | 621    |      |  |   | 665    |  
|                                                                           |  |      |        |      |  |   |        |  
|Prepaid pension cost at December 31,                                       |  | $    | 10,699 |      |  | $ | 9,396  |  
|                                                                           |  |      |        |      |  |   |        |  



| |  | The Parents pension plans net pension costs for the years ended December 31, included the following components (in thousands):
| |  | --------------------------------------------------------------------------------------------------------------------------------

|                                   |  |      |        |      |  |      |        |   |  |   |        |  
|---------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                   |  | 2002 |        | 2001 |  | 2000
|                                   |  |      |        |      |  |     
|Service cost                       |  | $    | 210    |      |  | $    | 210    |   |  | $ | 230    |  
|Interest cost                      |  |      | 1,887  |      |  |      | 1,787  |   |  |   | 1,770  |  
|Expected return on plan assets     |  |      | (3,444 | )    |  |      | (3,297 | ) |  |   | (3,074 | )
|Amortization of net asset          |  |      |       |      |  |      | (53    | ) |  |   |       |  
|Amortization of prior service cost |  |      | 44     |      |  |      | 44     |   |  |   | 44     |  
|                                   |  |      |        |      |  |      |        |   |  |   |        |  
|Net periodic pension cost (income) |  | $    | (1,303 | )    |  | $    | (1,309 | ) |  | $ | (1,030 | )
|                                   |  |      |        |      |  |      |        |   |  |   |        |  



| |  | Negative pension cost recognized for the years ended December 31, 2002, 2001
and 2000 was $0.5 million, $0.5 million and $0.4 million, respectively.
Included in the Companys investments and other assets are prepaid pension
costs of $5.3 million and $4.4 million at December 31, 2002 and 2001.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The Parent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 2002, 2001 or                                                                                                        

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|    |  | 2000). 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
6.75% and 7.00% for 2002 and 2001, respectively. The expected long-term
rate of return on Plan assets was 8.75% and 9% for 2002 and 2001,
respectively.                                                                          
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The Parent also sponsors a defined contribution (401k) plan, which covers
all full-time employees. The plan matches 75% of the first 2% of salary
contributed by a participant. From September 7, 2001 through May 1, 2002,
the match was suspended as a cost-savings measure. The Company contributed
approximately $0.5 million, $0.6 million, and $0.7 million to this plan for
the years ended December 31, 2002, 2001 and 2000, respectively.
|   
|10. |  | Lease Commitments                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|    |  | Rental expense for operating leases was $6.0 million, $6.1 million, and $5.2
million for the years ended December 31, 2002, 2001, and 2000, respectively.                                                                                                                                                                                                                                                                                         
|   
|    |  | Annual aggregate minimum rental commitments under non-cancelable operating
leases are as follows (in thousands of dollars):                                                                                                                                                                                                                                                                                                                       

|     |  |   |       |  |  |                 |      |  |        |   |       | 
|---- |  | - | ----- |  |  | --------------- | ---- |  | ------ | - | ----- | 
|2003 |  | $ | 4,539 |  |  |                 | 2006 |  |        | $ | 4,255 | 
|2004 |  |   | 4,633 |  |  |                 | 2007 |  |        |   | 3,701 | 
|2005 |  |   | 4,569 |  |  | 2008 and beyond |      |  | 13,075 |  



|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):

|                                                       |  |      |       |      |  |      |       |  |  |   |       | 
|------------------------------------------------------ |  | ---- | ----- | ---- |  | ---- | ----- |  |  | - | ----- | 
|                                                       |  | 2002 |       | 2001 |  | 2000
|                                                       |  |      |       |      |  |     
|Management fees                                        |  | $    | 6,326 |      |  | $    | 5,743 |  |  | $ | 4,103 | 
|Accounting, internal audit and tax services            |  |      | 955   |      |  |      | 855   |  |  |   | 732   | 
|Human resources                                        |  |      | 1,049 |      |  |      | 957   |  |  |   | 988   | 
|Treasury                                               |  |      | 366   |      |  |      | 317   |  |  |   | 314   | 
|Occupancy, vehicle rentals and
administrative services |  |      | 519   |      |  |      | 870   |  |  |   | 897   | 
|                                                       |  |      |       |      |  |      |       |  |  |   |       | 
|                                                       |  | $    | 9,215 |      |  | $    | 8,742 |  |  | $ | 7,034 | 



| |  | 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 owed $0.9 million and $0.8 million to its Parent primarily for
uncleared payroll disbursements and invoiced administration expenses as of
December 31, 2002 and 2001, respectively. These amounts are paid in the
normal course of business.                                  
|
| |  | Medias preferred stock is owned by related parties.                                                                                                                                                                                                                                
|
| |  | Media purchased the principal offices of its York, Pennsylvania radio
stations formerly leased from a related limited partnership for $1.4 million
on December 24, 2002. The purchase price was based                                                                               

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|    |  | on an independent appraisal. These facilities were formerly leased at an
annual cost of $178,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | On June 27, 2001, the Company purchased land and a building located in
Indianapolis, Indiana from its Parent for $2,250,000 cash. The purchase
price was based on an independent appraisal. These facilities were formerly
leased from the Parent at an annual cost of $185,000.                                                                                                                                                                                                                                                                              
|   
|12. |  | Contingencies and Commitments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|    |  | KNBR, Inc., a subsidiary of the Company, is a limited partner in San
Francisco Baseball 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 $5.6 million, $5.4 million, and $5.3 million during the 2002,
2001, and 2000 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 $2.6 million, $2.0 and $2.2 million were
paid and charged against income during 2002, 2001, and 2000, respectively.                                
|   
|    |  | 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 managements
opinion, 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 main 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
Internet and Other. Internet and Other includes Internet access, hosting,
and web creation revenues. Operating income from intersegment revenues are
not significant.                                                                                                                                                         
|   
|    |  | The segments accounting policies 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.                                                                                                                                                                                                                                                                                                                                            

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



| |  | Segment information for the years ended December 31, 2002, 2001 and 2000 was
as follows (in thousands):
| |  | -------------------------------------------------------------------------------------------------------

|                                                          |  |       |         |       |  |           |         |              |  |          |         |   |  |   |         |  
|--------------------------------------------------------- |  | ----- | ------- | ----- |  | --------- | ------- | ------------ |  | -------- | ------- | - |  | - | ------- | -
|                                                          |  |       |         |       |  |           |         |              |  | Internet |         |   |  |  
|                                                          |  | Radio |         | Cable |  | and Other |         | Consolidated
|                                                          |  |       |         |       |  |           |         |             
|For the Year Ended December 31, 2002                      |  |       |         |       |  |           |         |              |  |          |         |   |  |   |         |  
|Operating income                                          |  | $     | 42,617  |       |  | $         | 21,082  |              |  | $        | (7,431  | ) |  | $ | 56,268  |  
|Interest expense, net                                     |  |       | 6,272   |       |  |           | 10,773  |              |  |          | 12,155  |   |  |   | 29,200  |  
|Radio Employee Stock Plan                                 |  |       | 17,065  |       |  |           |        |              |  |          |        |   |  |   | 17,065  |  
|Depreciation and amortization                             |  |       | 5,745   |       |  |           | 23,125  |              |  |          | 600     |   |  |   | 29,470  |  
|Income (loss) before income taxes
and minority interests  |  |       | 35,592  |       |  |           | 10,309  |              |  |          | (13,077 | ) |  |   | 32,824  |  
|Provision for income taxes                                |  |       | (18,477 | )     |  |           | (4,210  | )            |  |          | 4,783   |   |  |   | (17,904 | )
|Identifiable assets                                       |  |       | 400,912 |       |  |           | 216,996 |              |  |          | 128,619 |   |  |   | 746,527 |  
|Capital expenditures                                      |  |       | 5,710   |       |  |           | 20,902  |              |  |          | 1,717   |   |  |   | 28,329  |  
|For the Year Ended December 31, 2001(Restated)            |  |       |         |       |  |           |         |              |  |          |         |   |  |   |         |  
|Operating income                                          |  | $     | 19,599  |       |  | $         | 7,764   |              |  | $        | (5,208  | ) |  | $ | 22,155  |  
|Interest expense, net                                     |  |       | 9,099   |       |  |           | 11,861  |              |  |          | 16,927  |   |  |   | 37,887  |  
|Radio Employee Stock Plan                                 |  |       | 22,305  |       |  |           |        |              |  |          |        |   |  |   | 22,305  |  
|Depreciation and amortization                             |  |       | 12,012  |       |  |           | 28,789  |              |  |          | 1,038   |   |  |   | 41,839  |  
|Income (loss) before income taxes
and minority interests  |  |       | 9,438   |       |  |           | (4,096  | )            |  |          | (14,435 | ) |  |   | (9,093  | )
|Provision for income taxes                                |  |       | (12,409 | )     |  |           | 790     |              |  |          | 5,203   |   |  |   | (6,416  | )
|Identifiable assets                                       |  |       | 341,999 |       |  |           | 188,412 |              |  |          | 135,314 |   |  |   | 665,725 |  
|Capital expenditures                                      |  |       | 8,539   |       |  |           | 22,772  |              |  |          | 428     |   |  |   | 31,739  |  
|For the Year Ended December 31, 2000(Restated)            |  |       |         |       |  |           |         |              |  |          |         |   |  |   |         |  
|Operating income                                          |  | $     | 47,486  |       |  | $         | 9,205   |              |  | $        | 525     |   |  | $ | 57,216  |  
|Interest expense, net                                     |  |       | 8,220   |       |  |           | 14,462  |              |  |          | 14,841  |   |  |   | 37,523  |  
|Radio Employee Stock Plan                                 |  |       | 19,748  |       |  |           |        |              |  |          |        |   |  |   | 19,748  |  
|Depreciation and amortization                             |  |       | 10,114  |       |  |           | 25,385  |              |  |          | 740     |   |  |   | 36,239  |  
|Income (loss) before income taxes,
and minority interests |  |       | 38,051  |       |  |           | (5,257  | )            |  |          | (7,879  | ) |  |   | 24,915  |  
|Provision for income taxes                                |  |       | (20,964 | )     |  |           | 1,488   |              |  |          | 2,714   |   |  |   | (16,762 | )
|Identifiable assets                                       |  |       | 339,618 |       |  |           | 185,707 |              |  |          | 132,017 |   |  |   | 657,342 |  
|Capital expenditures                                      |  |       | 5,574   |       |  |           | 30,359  |              |  |          | 980     |   |  |   | 36,913  |  

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SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|14. |  | Subsequent Events                                                                                                                                                                                                                                                                                                                                                      
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | On February 11, 2003, the Company agreed to purchase the assets of WSOX-FM
for approximately $23 million. WSOX-FM is an Oldies station licensed to
Red Lion, Pennsylvania serving the central Pennsylvania area. A closing is
expected by third quarter 2003. This acquisition is expected to be funded
by cash flows from operations and existing credit facilities.
|   
|    |  | Media purchased approximately 34,000 square feet of office space in a
building constructed by a related company, at a total cost of approximately
$5.0 million in February 2003. Terms of the purchase were no less favorable
than terms for unrelated purchasers of office space in the project.
Existing credit facilities were utilized to fund the purchase.       

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|15. |  | Restatements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The consolidated financial
statements as of December 31 2001 and 2000, and for the years
then ended have been restated to: (1) properly reflect the
accounting for the changes in share values related to the
July 1, 2000 plan modification affecting shares issued under the
Radio Employees Stock Plan (Plan) (Note 7);
(2) properly account for payments received from Cable
programming suppliers for channel launch support and promotion
(Launch Fees); (3) depreciate cable distribution
system to be rebuilt ratably over the rebuild period as opposed to
the prior practice of recognizing a loss at the end of a rebuild
project; and (4) recognize additional amortization expense and lease
charges. Other reclassifications have been
made for presentation purposes.
|   
|    |  | The Plan-related restatements are
primarily limited to reporting the changes in Plan share values as
non-cash expenses, rather than as the direct charges to retained
earnings as previously reported. The Plan-related restatements had no
effect on cash, assets or cash flows. The Plan-related
restatement reduced retained earnings as of January 1, 2000
by $0.2 million and as of July 1, 2000 by
$1.5 million, and reduced operating income by $22.3 million
and $19.7 million in 2001 and 2000, respectively. Adjustments to minority interests pertain primarily to the
Plan-related restatements                                                                                                                                                                             
|   
|    |  | The Launch Fees-related
restatement reduced 2001 and 2000 operating income by approximately
$1.7 million and $0.4 million, respectively. Restated Launch
Fees also reduced retained earnings as of January 1, 2000 by
approximately $0.5 million. For presentation purposes, related
selling expense offsets were reclassified as operating and
programming expense
offsets. Launch Fees were formerly recognized as
reductions to marketing expenses based on advertising and marketing
efforts for the periods advertising campaigns were run. Launch fees
as restated are amortized on a straight-line basis over the related
Cable programming contracts remaining life and recognized as
reductions to operating and programming expenses.                                        
|   
|    |  | Restatements for depreciation and
losses for replacement of cable distribution system decreased
operating income by $2.3 million for 2001 and by
$2.9 million for 2000. Net income was increased by
approximately $1.2 million for 2001 and $0.6 million for
2001. Retained earnings as of January 1, 2000 was reduced by
approximately $1.8 million for the effects on prior periods.                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|    |  | Restatements for amortization and
lease costs reduced operating income by approximately
$0.5 million for 2001 and $0.3 million for 2000
respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|    |  | The effects of the restatements
are summarized below (in thousands):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

|                                    |  |               |         |                          |  |   |         | 
|----------------------------------- |  | ------------- | ------- | ------------------------ |  | - | ------- | 
|                                    |  | 2001          |         | 2001                    
|                                    |  |               |         |                         
|                                    |  | (As restated) |         | (As previously reported)
|                                   
|                                   
|                                   
|                                   
|Consolidated Balance Sheet          |  |               |         |                          |  |   |         | 
|                                   
|                                   
|                                   
|                                   
|Property, plant and equipment, net  |  | $             | 141,123 |                          |  | $ | 144,123 | 
|                                   
|                                   
|                                   
|                                   
|Intangible assets, net              |  |               | 322,006 |                          |  |   | 316,160 | 
|                                   
|                                   
|                                   
|                                   
|Investments and other assets        |  |               | 31,194  |                          |  |   | 37,397  | 
|                                   
|                                   
|                                   
|                                   
|Radio employee stock plan liability |  |               | 49,321  |                          |  |   |        | 
|                                   
|                                   
|                                   
|                                   
|Other liabilities                   |  |               | 11,544  |                          |  |   | 10,994  | 
|                                   
|                                   
|                                   
|                                   
|Deferred income taxes               |  |               | 43,600  |                          |  |   | 45,108  | 
|                                   
|                                   
|                                   
|                                   
|Minority interests                  |  |               | 17,612  |                          |  |   | 67,229  | 
|                                   
|                                   
|                                   
|                                   
|Retained earnings                   |  |               | 5,240   |                          |  |   | 7,343   | 
|                                   
|                                   
|                                   
|                                   
|Total stockholders equity          |  |               | 13,390  |                          |  |   | 15,493  | 

|                                          |                                                          |                               |                          |                          |         |               |  |                          |         |         |  |         |         |         |  |         |         |         | 
|----------------------------------------- | -------------------------------------------------------- | ----------------------------- | ------------------------ | ------------------------ | ------- | ------------- |  | ------------------------ | ------- | ------- |  | ------- | ------- | ------- |  | ------- | ------- | ------- | 
|                                          |                                                          | 2001                          |                          | 2001                     |         | 2000          |  | 2000                    
|                                          |                                                          |                               |                          |                          |         |               |  |                         
|                                          |                                                          | (As restated)                 |                          | (As previously reported) |         | (As restated) |  | (As previously reported)
|Consolidated Statements of
    Operations |                                                          |                               |                          |                          |         |               |  |                          |         |         |  |         |         |         |  |        
|                                          | Operating Expenses                                       |                               |                          |                          |         |               |  |                          |         |         |  |         |         |         |  |         |        
|                                          |                                                          | Operating and programming     |                          | $                        | 122,668 |               |  | $                        | 123,336 |         |  | $       | 111,621 |         |  | $       | 113,633 |        
|                                          |                                                          | Selling                       |                          |                          | 39,134  |               |  |                          | 36,727  |         |  |         | 39,107  |         |  |         | 36,710  |        
|                                          |                                                          | General and administrative    |                          |                          | 65,328  |               |  |                          | 65,015  |         |  |         | 56,658  |         |  |         | 56,528  |        
|                                          |                                                          | Radio Employee Stock Plan     |                          |                          | 22,305  |               |  |                          |        |         |  |         | 19,748  |         |  |         |        |        
|
|                                          |                                                          | Depreciation and amortization |                          |                          | 41,839  |               |  |                          | 39,412  |         |  |         | 36,239  |         |  |         | 33,133  |        
|                                          |                                                          |                               | Total Operating Expenses |                          |         | 291,274       |  |                          |         | 268,675 |  |         |         | 263,373 |  |         |         | 243,895 | 
|
|                                          | Operating Income                                         |                               |                          | 22,155                   |         |               |  | 48,939                   |         |         |  | 57,216  |         |         |  | 80,585  |        
|                                          | Loss on Sale of Assets (cable rebuilds)                  |                               |                          |                         |         |               |  | (4,185                   | )       |         |  |        |         |         |  | (3,891  | )      
|                                          | Income (Loss) Before Income Taxes and Minority Interests |                               |                          | (9,093                   | )       |               |  | 13,506                   |         |         |  | 24,915  |         |         |  | 44,393  |        
|                                          | Provision
for Income Taxes                               |                               |                          | (6,416                   | )       |               |  | (6,538                   | )       |         |  | (16,762 | )       |         |  | (16,661 | )      
|                                          | Income (Loss) Before Minority Interests                  |                               |                          | (15,509                  | )       |               |  | 6,968                    |         |         |  | 8,153   |         |         |  | 27,732  |        
|                                          | Minority Interests                                       |                               |                          | (1,694                   | )       |               |  | (2,261                   | )       |         |  | (3,839  | )       |         |  | (5,185  | )      
|                                          | Net Income (Loss)
and Comprehensive Income (Loss)        |                               |                          | (17,203                  | )       |               |  | 4,707                    |         |         |  | 4,314   |         |         |  | 22,547  |        

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restatements affected net income as follows (in thousands of dollars):

|                             |  |      |         |      |  |   |         |  
|---------------------------- |  | ---- | ------- | ---- |  | - | ------- | -
|                             |  | 2001 |         | 2000
|                             |  |      |         |     
|Radio Employee Stock Plan    |  | $    | (22,305 | )    |  | $ | (19,748 | )
|Cable launch fees            |  |      | (1,043  | )    |  |   | (245    | )
|Cable rebuilds               |  |      | 1,159   |      |  |   | 620     |  
|Impact
on minority interests |  |      | 567     |      |  |   | 1,346   |  
|Other                        |  |      | (288    | )    |  |   | (206    | )
|                             |  |      |         |      |  |   |         |  
|                             |  | $    | (21,910 | )    |  | $ | (18,233 | )
|                             |  |      |         |      |  |   |         |  

Restatements affected operating income as follows (in thousands of dollars):

|                 |  |      |         |      |  |   |         |  
|---------------- |  | ---- | ------- | ---- |  | - | ------- | -
|                 |  | 2001 |         | 2000
|                 |  |      |         |     
|Radio stock plan |  | $    | (23,305 | )    |  | $ | (19,748 | )
|Cable
rebuilds   |  |      | (2,285  | )    |  |   | (2,891  | )
|Launch
fees      |  |      | 1,739   |      |  |   | 385     |  
|
|Others           |  |      | (455    | )    |  |   | (345    | )
|                 |  |      |         |      |  |   |         |  
|                 |  | $    | (26,784 | )    |  | $ | (23,369 | )
|                 |  |      |         |      |  |   |         |  

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




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

As
previously reported, effective December 19, 2002, our board of
directors engaged KPMG LLP as our independent accountants to replace
PricewaterhouseCoopers LLP, who was dismissed as our independent
accountants on November 15, 2002. For additional detail regarding our
change in independent accountants, please refer to our Current
Reports on Form 8-K filed November 18 and December 26, 2002.

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##### Table of Contents






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. |  |     | 78 |             |  | Chairman of the Board of Directors             
|Peter P. Brubaker    |  |     | 56 |             |  | Director, Chief Executive Officer and President
|Craig W. Bremer      |  |     | 54 |             |  | Director, Secretary and General Counsel        
|John L. Finlayson    |  |     | 61 |             |  | Director and Vice President                    
|David E. Kennedy     |  |     | 50 |             |  | Director and Vice President                    
|William H. Simpson   |  |     | 61 |             |  | Director                                       
|Alan L. Brayman      |  |     | 51 |             |  | Treasurer                                      
|James D. Munchel     |  |     | 48 |             |  | Director and Vice
President                    

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.

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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 Officer 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 a Director and Vice President  of Susquehanna Media and
is also 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 $6.3 million in 2002. 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.




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

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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 Co. (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, 2002 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.

|                                                            |  |                           |           |         |  |  |      |  
|----------------------------------------------------------- |  | ------------------------- | --------- | ------- |  |  | ---- | -
|                                                            |  | Shares Beneficially Owned
|                                                            |  |                          
|Name Of Beneficial Owner                                    |  | Number                    |           | Percent
|                                                            |  |                           |           |        
|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                                            |  |                           |          |         |  |  |     |  
|James
D. Munchel                                            |  |                           |          |         |  |  |     |  
|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 | %



---

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

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| |  | 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, 2002, Susquehanna Pfaltzgraff 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,
2002 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.

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|                                         |  |                     |            |                     |  |                     |      |                     |  |                     |           |                     |  |            |      |   |  |  |           |  |  |  |      |   |  |  |      |  
|---------------------------------------- |  | ------------------- | ---------- | ------------------- |  | ------------------- | ---- | ------------------- |  | ------------------- | --------- | ------------------- |  | ---------- | ---- | - |  |  | --------- |  |  |  | ---- | - |  |  | ---- | -
|                                         |  |                     |            |                     |  | Percentage          |      | Number of           |  | Percentage          |           | Number of           |  |            |      |   |  |  |           | 
|                                         |  |                     |            |                     |  | of                  |      | ESOP                |  | of ESOP             |           | Class A             |  | Percentage |      |   |  | 
|                                         |  | Number of Common    |            | Common              |  | Common              |      | Common              |  | Common              |           | of Class A Common   |  | Total     
|                                         |  | Shares Beneficially |            | Shares Beneficially |  | Shares Beneficially |      | Shares Beneficially |  | Shares Beneficially |           | Shares Beneficially |  | Voting    
|Name of Beneficial Owner                 |  | Owned               |            | Owned               |  | Owned               |      | Owned               |  | Owned               |           | Owned               |  | Power(5)  
|                                         |  |                     |            |                     |  |                     |      |                     |  |                     |           |                     |  |           
|Directors and Executive
Officers         |  |                     |            |                     |  |                     |      |                     |  |                     |           |                     |  |            |      |   |  |  |           |  |  |  |      |   |  |  |      |  
|Louis J. Appell, Jr. (1) (2)             |  |                     |           |                     |  |                     |     |                     |  |                     | 57        |                     |  |            |     |   |  |  | 1,252,900 |  |  |  | 54.5 | % |  |  |     |  
|William H. Simpson (1)                   |  |                     |           |                     |  |                     |     |                     |  |                     | 2,196     |                     |  |            |     |   |  |  | 422,165   |  |  |  | 18.4 | % |  |  |     |  
|Peter B. Brubaker (1)                    |  |                     |           |                     |  |                     |     |                     |  |                     | 2,616     |                     |  |            |     |   |  |  | 310,450   |  |  |  | 13.5 | % |  |  |     |  
|John L. Finlayson (1)                    |  |                     |           |                     |  |                     |     |                     |  |                     | 2,416     |                     |  |            |     |   |  |  | 311,485   |  |  |  | 13.5 | % |  |  |     |  
|Craig W. Bremer (1)                      |  |                     |           |                     |  |                     |     |                     |  |                     | 2,374     |                     |  |            |     |   |  |  |          |  |  |  |     |   |  |  |     |  
|Alan L. Brayman (1)                      |  |                     |           |                     |  |                     |     |                     |  |                     | 2,296     |                     |  |            |     |   |  |  |          |  |  |  |     |   |  |  |     |  
|David E. Kennedy (1)                     |  |                     |           |                     |  |                     |     |                     |  |                     | 2,616     |                     |  |            |     |   |  |  |          |  |  |  |     |   |  |  |     |  
|James
D. Munchel (1)                     |  |                     |           |                     |  |                     |     |                     |  |                     | 2,616     |                     |  |            |     |   |  |  |          |  |  |  |     |   |  |  |     |  
|Officers and directors
group (7 persons) |  |                     |           |                     |  |                     |     |                     |  |                     |          |                     |  |            |     |   |  |  | 2,297,000 |  |  |  | 99.9 | % |  |  |     |  
|Other 5% Holders                         |  |                     |            |                     |  |                     |      |                     |  |                     |           |                     |  |            |      |   |  |  |           |  |  |  |      |   |  |  |      |  
|Louis J. Appell Trusts (3)               |  |                     | 16,824,300 |                     |  |                     | 92.2 | %                   |  |                     |          |                     |  |            |     |   |  |  |          |  |  |  |     |   |  |  | 66.8 | %
|Susquehanna Pfaltzgraff
ESOP (4)         |  |                     |           |                     |  |                     |     |                     |  |                     | 5,654,904 |                     |  |            | 81.3 | % |  |  |          |  |  |  |     |   |  |  | 22.4 | %



---

|(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 (5,922,793
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 2002 and 2001 in the amount of $6.3 million and $5.7
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 2002 and

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2001, we paid Susquehanna Pfaltzgraff
an aggregate of $2.9 million and $3.0
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.

An indirect subsidiary of ours leases vehicles and equipment from Queen
Street Leasing until December 2002 when it purchased the vehicles and equipment
for $0.4 million. Radio leased a studio property from G-III Partners until
December 2002, when Radio purchased the building for $1.4 million based on an
independent appraisal. We paid Queen Street Leasing and G-III Partners
approximately $133,000 and $178,000, respectively, in 2002 under such leases.
Queen Street Leasing and G-III Partners were limited partnerships owned
directly and indirectly by Susquehanna Pfaltzgraff Co. and certain members of
the Appell families. In December 2002, both limited partnerships ceased
operations and were subsequently dissolved.

We
purchased approximately 34,000 square feet of office space in a
building constructed by a related company, at a total cost of
approximately $5.0 million in February 2003. Existing credit
facilities were used to fund the purchase.

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 Pfaltzgraff
stock from members of the Appell families. Our employees participate in the
employee stock ownership plan. The loans to Susquehanna Pfaltzgraff Co.
mature on December 30, 2018 and bear 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
$7.2 million and $6.9 million in 2002 and 2001, 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 2002 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

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in Susquehanna Cable and certain of its subsidiaries. Comcast has succeeded to
the Agreements rights and obligations.

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.




Item 14.Controls and Procedures

Within the 90 days prior to the date of this report, under the supervision
and with the participation of management, including our Chief Executive Officer
and our Chief Financial and Accounting Officer, we have evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation,
our Chief Executive Officer and our Chief Financial and Accounting Officer have
concluded that our disclosure controls and procedures are effective in timely
alerting them to material information relating to us (including our
consolidated subsidiaries) required to be included in our periodic SEC filings.
There have been no significant changes in our internal controls or in other
factors that could significantly affect internal controls subsequent to the
date of their evaluation.

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PART IV




Item 15.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 Statements and
Supplementary Data.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------

2.     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 81/2% 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 81/2% 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 81/2% 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                                                                   

81



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|               |  |                                                                                                                                                                                                                                          
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                                                                                                              
|               |  |                                                                                                                                                                                                                                          
|               |  | 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)
|               |  |                                                                                                                                                                                                                                          
|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)                                                                         
|               |  |                                                                                                                                                                                                                                          
|99.1           |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by
Peter P. Brubaker                                                                                              
|               |  |                                                                                                                                                                                                                                          
|99.2           |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by
John L. Finlayson                                                                                              

b) Fourth Quarter 2002 Reports on Form 8-K.

We filed
a Current Report on Form 8-K (Item 5) on November 4,
2002 with
respect to our earnings press release for the three and nine months ended
September 30, 2002.

We filed
a Current Report on Form 8-K (Item 4) on November 18,
2002 with respect to the dismissal of PricewaterhouseCoopers LLP as
our independent accountants.

We filed
a Current Report on Form 8-K (Item 4) on December 26,
2002 with respect to the appointment of KPMG LLP as our independent
accountants.

82



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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, 2002. No annual report or proxy
materials will be sent to security holders subsequent to the filing of this
annual report on Form 10-K.

83



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##### Table of Contents



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 31, 2003

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.

|                                              |  |                                                                           |  |               
|--------------------------------------------- |  | ------------------------------------------------------------------------- |  | --------------
|Signature                                     |  | Title                                                                     |  | Date          
|                                              |  |                                                                           |  |               
|/s/ Louis J. Appell, Jr.
Louis J. Appell, Jr. |  | Chairman of the Board
of Directors                                        |  | March 31, 2003
|                                              |  |                                                                           |  |               
|/s/ Peter P. Brubaker
Peter P. Brubaker       |  | Director, Chief Executive
Officer and President                           |  | March 31, 2003
|                                              |  |                                                                           |  |               
|/s/ David E. Kennedy
David E. Kennedy         |  | Director, Vice President                                                  |  | March 31, 2003
|                                              |  |                                                                           |  |               
|/s/ Craig W. Bremer
Craig W. Bremer           |  | Director, Secretary and General
Counsel                                   |  | March 31, 2003
|                                              |  |                                                                           |  |               
|/s/ William H. Simpson
William H. Simpson     |  | Director                                                                  |  | March 31, 2003
|                                              |  |                                                                           |  |               
|/s/ John L. Finlayson
John L. Finlayson       |  | Director, Vice President (and
principal financial and
accounting officer) |  | March 31, 2003





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##### Table of Contents



Certification

I, Peter P. Brubaker, certify that:

1.     I have reviewed this annual report on Form 10-K of Susquehanna
Media Co., the Registrant;

2.     Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this annual report;

3.     Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Registrant as of, and for, the periods presented in this
annual report;

4.     The Registrants other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we
have:



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

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



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

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

|      |  |                |  |     |  |                                              
|----- |  | -------------- |  | --- |  | ---------------------------------------------
|Date: |  | March 31, 2003 |  | /s/ |  | Peter P. Brubaker                            
|      |  |                |  |     |  |                                              
|      |  |                |  |     |  | Peter P. Brubaker
Principal Executive Officer





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##### Table of Contents



Certification

I, John L. Finlayson, certify that:

1.     I have reviewed this annual report on Form 10-K of Susquehanna
Media Co., the Registrant;

2.     Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this annual report;

3.     Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Registrant as of, and for, the periods presented in this
annual report;

4.     The Registrants other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we
have:



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

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



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

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

|      |  |                |  |  |  |                                                             
|----- |  | -------------- |  |  |  | ------------------------------------------------------------
|Date: |  | March 31, 2003 |  |  |  | /s/ John L. Finlayson                                       
|      |  |                |  |  |  |                                                             
|      |  |                |  |  |  | John L. Finlayson
Principal Financial and Accounting
Officer