##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-Q (Mark One) þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2005 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 333-80523 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 East Market Street
York, Pennsylvania 17401
(717) 848-5500
(Address, including zip code and telephone
number, including area code, of
registrants principal executive
offices) (Former name, former address and former fiscal year,
if changed since last report)
(Not Applicable) 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 þ NO o Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12-b2 of
the Exchange Act). YES o NO þ As of May 13, 2005, there were 1,100,000 total shares of common stock, $1.00 par value outstanding,
all of which was owned by Susquehanna Pfaltzgraff Co., the Registrants parent.




---



##### 



SUSQUEHANNA MEDIA CO.
FORM 10-Q TABLE OF CONTENTS  PART I  FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    2Condensed Consolidated Balance Sheets
    
    
    2Condensed Consolidated Income Statements
    
    
    3Condensed Consolidated Statements of Cash Flows
    
    
    4Notes to Condensed Consolidated Financial Statements
    
    
    5Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    7Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    12Item 4. Disclosure Controls and Procedures
    
    
    12PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    13Item 6. Exhibits
    
    
    13Signature
    
    
    14




---



##### 



PART I  FINANCIAL INFORMATION 
 ITEM 1. FINANCIAL STATEMENTS SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES 
 CONDENSED CONSOLIDATED BALANCE SHEETS
  March 31, 2005
    
    
    December 31,(Unaudited)
    
    
    2004ASSETSCurrent AssetsAccounts receivable, less allowance for doubtful
accounts of $1,912 in 2005 and $1,822 in 2004
    
    $
    42,880
    
    
    $
    50,332Other current assets
    
    
    9,781
    
    
    
    7,278Total Current Assets
    
    
    52,661
    
    
    
    57,610Property, Plant and Equipment, at costLand
    
    
    6,285
    
    
    
    6,233Buildings and improvements
    
    
    26,736
    
    
    
    26,722Equipment
    
    
    339,311
    
    
    
    334,471Construction-in-progress
    
    
    17,291
    
    
    
    14,872389,623
    
    
    
    382,298Accumulated depreciation and amortization
    
    
    191,593
    
    
    
    182,549Property, Plant and Equipment, net
    
    
    198,030
    
    
    
    199,749Intangible Assets and Goodwill, net
    
    
    512,035
    
    
    
    514,299Investments and Other Assets
    
    
    20,022
    
    
    
    19,323$
    782,748
    
    
    $
    790,981LIABILITIES AND STOCKHOLDERS DEFICITCurrent LiabilitiesCash overdrafts
    
    $
    952
    
    
    $
    1,428Current portion of long-term debt
    
    
    3,510
    
    
    
    3,368Accounts payable
    
    
    11,482
    
    
    
    13,181Accrued employee-related costs
    
    
    15,463
    
    
    
    12,812Accrued income taxes
    
    
    7,912
    
    
    
    11,781Deferred income taxes
    
    
    4,969
    
    
    
    5,114Accrued interest
    
    
    9,800
    
    
    
    7,564Accrued franchise and licensing fees
    
    
    1,495
    
    
    
    2,864Deferred income
    
    
    2,902
    
    
    
    3,943Judgment payable
    
    
    10,105
    
    
    
    10,105Other current liabilities
    
    
    10,028
    
    
    
    8,206Total Current Liabilities
    
    
    78,618
    
    
    
    80,366Long-term Debt
    
    
    567,702
    
    
    
    573,864Other Liabilities
    
    
    13,796
    
    
    
    13,964Deferred Income Taxes
    
    
    76,067
    
    
    
    74,894Minority Interests
    
    
    64,250
    
    
    
    68,499Stockholders DeficitPreferred stock  Voting, 7% cumulative with
$100 par value, authorized 110,000 shares
    
    
    7,050
    
    
    
    7,050Common stock  Voting, $1 par value, 1,100,000
shares authorized
    
    
    1,100
    
    
    
    1,100Retained earnings
    
    
    80,701
    
    
    
    76,212Receivable from Parent
    
    
    (106,536
    )
    
    
    (104,968
    )Total Stockholders Deficit
    
    
    (17,685
    )
    
    
    (20,606
    )$
    782,748
    
    
    $
    790,981
 The accompanying notes are an integral part of these condensed consolidated financial statements. 2




---



##### 



`SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES 
 CONDENSED CONSOLIDATED INCOME STATEMENTS
 
 For the Three MonthsEnded March 31,2005
    
    
    2004RevenuesRadio
    
    $
    48,458
    
    
    $
    46,679Cable
    
    
    47,732
    
    
    
    39,111Other
    
    
    1,117
    
    
    
    1,071Total revenues
    
    
    97,307
    
    
    
    86,861Operating ExpensesOperating and programming
    
    
    40,900
    
    
    
    34,588Selling
    
    
    10,500
    
    
    
    9,691General and administrative
    
    
    20,398
    
    
    
    19,678Depreciation and amortization
    
    
    11,519
    
    
    
    8,966Total operating expenses
    
    
    83,317
    
    
    
    72,923Operating Income
    
    
    13,990
    
    
    
    13,938Other Income (Expense)Interest expense
    
    
    (6,976
    )
    
    
    (8,843
    )Interest income on receivable from Parent
    
    
    1,568
    
    
    
    1,656Gain on sale of WABZ-FM
    
    
    300
    
    
    
    Other
    
    
    95
    
    
    
    63Income Before Income Taxes and Minority
Interests
    
    
    8,977
    
    
    
    6,814Provision for Income Taxes
    
    
    3,452
    
    
    
    2,573Income Before Minority Interests
    
    
    5,525
    
    
    
    4,241Minority Interests
    
    
    (913
    )
    
    
    (750
    )Net Income
    
    
    4,612
    
    
    
    3,491Preferred Dividends Declared
    
    
    (123
    )
    
    
    (123
    )Net Income Available for Common Shares
    
    $
    4,489
    
    
    $
    3,368
 The accompanying notes are an integral part of these condensed consolidated financial statements. 3




---



##### 



SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 For the Three MonthsEnded March 31,2005
    
    
    2004Cash Flows from Operating ActivitiesNet income
    
    $
    4,612
    
    
    $
    3,491Adjustments to reconcile net income to net cash provided
by operating activities:Depreciation and amortization
    
    
    11,519
    
    
    
    8,966Deferred income taxes
    
    
    1,028
    
    
    
    632Minority interests
    
    
    913
    
    
    
    750Gain on sale of WABZ-FM
    
    
    (300
    )
    
    
    Equity in losses (earnings) of investees
    
    
    (40
    )
    
    
    36Deferred financing amortization
    
    
    189
    
    
    
    755Changes in assets and liabilities:Decrease in accounts receivable, net
    
    
    7,452
    
    
    
    9,820Increase in other current assets
    
    
    (2,503
    )
    
    
    (2,983
    )Increase in interest receivable from Parent
    
    
    (1,568
    )
    
    
    (1,674
    )Decrease in accounts payable
    
    
    (1,699
    )
    
    
    (973
    )Increase in accrued interest
    
    
    2,236
    
    
    
    6,161Increase (decrease) in accrued income taxes
    
    
    (3,869
    )
    
    
    1,639Increase (decrease) in other accrued expenses
    
    
    2,063
    
    
    
    (220
    )Decrease in other liabilities
    
    
    (168
    )
    
    
    (203
    )Net cash provided by operating activities
    
    
    19,865
    
    
    
    26,197Cash Flows from Investing ActivitiesPurchase of property, plant and equipment, net
    
    
    (7,536
    )
    
    
    (5,345
    )Acquisitions
    
    
    
    
    
    
    (109,696
    )Additional proceeds from sale of WABZ-FM
    
    
    300
    
    
    
    Increase in investments, other assets and intangible assets
    
    
    (858
    )
    
    
    (267
    )Net cash used by investing activities
    
    
    (8,094
    )
    
    
    (115,308
    )Cash Flows from Financing ActivitiesIncrease (decrease) in revolving credit facility
    
    
    (6,500
    )
    
    
    12,800New term loan borrowings
    
    
    
    
    
    
    250,000Repayment of loans
    
    
    (1,455
    )
    
    
    (174,251
    )Increase (decrease) in cash overdrafts
    
    
    (476
    )
    
    
    179Payment of preferred dividends
    
    
    (123
    )
    
    
    (123
    )Non-voting subsidiary common stock transactions
    
    
    (3,217
    )
    
    
    (19
    )Net cash provided by (used by) financing activities
    
    
    (11,771
    )
    
    
    88,586Net Decrease in Cash and Cash Equivalents
    
    
    
    
    
    
    (525
    )Cash and Cash Equivalents, beginning
    
    
    
    
    
    
    525Cash and Cash Equivalents, ending
    
    $
    
    
    
    $
    
 The accompanying notes are an integral part of these condensed consolidated financial statements. 4




---



##### 



SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1. Basis of Presentation Pursuant to the rules and regulations of the Securities and Exchange Commission, the condensed
consolidated interim financial statements included herein have been prepared, without audit, by
Susquehanna Media Co. (the Company or Media). The financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of America (GAAP)
for interim financial information and with the instructions to the Form 10-Q and Regulation S-X.
Accordingly, certain information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the United States have been
condensed or omitted; however, Media believes that the disclosures are adequate to make the
information presented not misleading. The condensed consolidated financial statements included
herein should be read in conjunction with the consolidated financial statements and the notes
thereto included in Medias Annual Report on Form 10-K for the year ended December 31, 2004 filed
with the Securities and Exchange Commission. The condensed consolidated financial statements (the financial statements) include the
accounts of Media and all its subsidiaries. All significant intercompany accounts and transactions
have been eliminated. In the opinion of management, the accompanying condensed consolidated interim financial
statements contain all material adjustments (consisting only of normal recurring adjustments)
necessary to present fairly Medias consolidated financial position as of March 31, 2005, its
results of operations for the three months ended March 31, 2005 and 2004, and its cash flows for
the three months ended March 31, 2005 and 2004. The preparation of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results may differ from those
estimates. Interim results are not necessarily indicative of results for the full year or future
periods. 2. Recent Developments Litigation On July 29, 2004, Bridge Capital Investors II (BCI) sued Media for $10.0 million alleging
breach of contract and unjust enrichment in connection with Medias acquisition of Radio Station
WHMA-FM. On January 26, 2005, the United States District Court for the Northern District of Georgia
granted summary judgment in favor of BCI against Media. The summary judgment granted BCI $10.0
million plus interest at 9% per annum from January 22, 2001 and recovery of attorneys costs. On
February 22, 2005, Media appealed the judgment. The statement of operations for the three months
ended March 31, 2005 includes $0.2 million interest related to this judgment. Indefinite-lived
intangible assets (FCC licenses) were increased by $10.0 million as of December 31, 2004. The
related $10.1 million liability has been included in current liabilities as of March 31, 2005. Potential Sale of Media Susquehanna Pfaltzgraff Co., Medias Parent, has decided to explore a potential sale of
Medias principal businesses. Susquehanna Pfaltzgraff has retained UBS Securities LLC to serve as
its exclusive financial advisor in connection with the potential sales of Medias businesses. Media
will continue to operate its Radio and Cable businesses in normal course until any potential sale
transaction is completed. Radio Employee Stock Plan and Cable Performance Share Plan Media redeemed approximately $5.2 million of Radio Employee Stock Plan (Plan) shares during
the first quarter of 2005. Approximately $1.9 million of shares were exchanged for a note payable
over two years. Existing credit facilities were utilized to fund the redemptions .
Changes in share value are recognized on April 1st of each year. Based on the
results of the December 31, 2004 valuation, no additional minority interests related to the Plan
will be recognized on April 1, 2005. Based on the Parents ESOP valuation performed as of December 31, 2004, a $1.1 million charge
will be recognized as of April 1, 2005 for the increase in value of Cable Performance shares. The
change in performance shares value will be recognized as general and administrative expenses. 5




---



##### 



Recent Accounting Pronouncements In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest
Entities, an Interpretation of ARB No. 51 (FIN 46). FIN 46 addresses the consolidation by
business enterprises of variable interest entities as defined in the Interpretation. FIN 46
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. In
December 2003, the FASB issued FIN 46R, a revision to FIN 46, that delayed implementation of FIN 46
for entities other than Special Purpose Entities. Media adopted FIN 46R effective January 1, 2005
without material impact. In May 2003, the FASB issued Statement of Financial Accounting Standard No. 150, Accounting
for Certain Financial Instruments with Characteristics of both Liabilities and Equity (SFAS
150). SFAS 150 requires certain financial instruments previously classified as equity to be
classified as liabilities, or possibly assets, if they have certain characteristics. SFAS 150 is
effective for financial instruments entered into or modified after May 31, 2003. A Media subsidiary
has non-controlling interests that are subject to mandatory repurchase. However, the FASB has
indefinitely deferred implementation of SFAS 150s provisions related to these non-controlling
interests. In December 2004, FASB issued SFAS No. 123R Share-Based Payment (SFAS 123R) replacing SFAS
No. 123, Accounting for Stock-Based Compensation (SFAS 123) and superseding APB Opinion No. 25,
Accounting for Stock Issued to Employees. Under SFAS 123R, Media is a non-public company. SFAS
123R requires Media to recognize the cost of employee service received in exchange for an award of
equity instruments, including stock options, based on the grant date fair value of those equity
instruments. Grant date fair value may not be measured using minimum value, but must include the
effect of expected volatility based on an appropriate historical industry sector index. SFAS 123R
is effective for Media as of January 1, 2006. Since Media previously adopted SFAS 123, and all
outstanding options are fully vested, no transition provisions apply unless those options are
modified, repurchased or cancelled after SFAS 123Rs effective date. Media has not yet determined
the effect of adopting SFAS 123R. 3. Segment Information The Companys 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 Other. The business segments are consistent with the Companys
management of these businesses and its financial reporting structure. Accounting policies, as
described in the Companys most recent audited financial statements, are applied consistently
across all segments. Segment information follows (in thousands): Radio
    
    
    Cable
    
    
    Other
    
    
    TotalFor the Three Months Ended March 31, 2005Operating income (loss)
    
    $
    9,382
    
    
    $
    5,813
    
    
    $
    (1,205
    )
    
    $
    13,990Interest expense, net
    
    
    1,013
    
    
    
    3,585
    
    
    
    2,378
    
    
    
    6,976Depreciation and amortization
    
    
    1,605
    
    
    
    9,750
    
    
    
    164
    
    
    
    11,519Income (loss) before income taxes
    
    
    8,725
    
    
    
    2,228
    
    
    
    (1,976
    )
    
    
    8,977Identifiable assets
    
    
    436,458
    
    
    
    339,156
    
    
    
    7,134
    
    
    
    782,748Capital expenditures
    
    
    492
    
    
    
    7,013
    
    
    
    31
    
    
    
    7,536For the Three Months Ended March 31, 2004Operating income (loss)
    
    $
    8,503
    
    
    $
    6,344
    
    
    $
    (909
    )
    
    $
    13,938Interest expense, net
    
    
    1,719
    
    
    
    3,612
    
    
    
    3,512
    
    
    
    8,843Depreciation and amortization
    
    
    1,665
    
    
    
    7,212
    
    
    
    89
    
    
    
    8,966Income (loss) before income taxes
    
    
    6,883
    
    
    
    2,732
    
    
    
    (2,801
    )
    
    
    6,814Identifiable assets (1)
    
    
    407,846
    
    
    
    342,052
    
    
    
    126,981
    
    
    
    876,879Capital expenditures
    
    
    661
    
    
    
    4,545
    
    
    
    139
    
    
    
    5,345
   (1)
    
    Receivable from Parent of $111.3 million was classified as an asset as of March 31, 2004. 6




---



##### 



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cautionary Note Regarding Forward-Looking Statements Some of the statements in this Form 10-Q, as well as statements made by us in filings with
government regulatory bodies, including the Securities and Exchange Commission, and in periodic
press releases and other public comments and communications, constitute forward looking
statements within the meaning of the Private Securities Litigation Reform Act of 1995. Certain,
but not necessarily all, of such forward-looking statements can be identified by the use of
forward-looking terminology, such as believes, expects, may, will, should, estimates,
intends, plans, 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. We have based these forward-looking statements on our current expectations and
projections about future events and trends affecting the financial condition of our business that
may prove to be incorrect. These forward-looking statements relate to future events, our future
financial performance, and involve known and unknown risks, uncertainties and other factors which
may cause our actual results, performance, achievements or industry results to be materially
different from any future results, performance or achievements expressed or implied by such
forward-looking statements. You should specifically consider the various factors identified in this
report and in any other documents filed by us with the SEC that could cause actual results to
differ materially from our forward-looking statements. 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 amount and timing of payments required under the Radio Employee Stock Plan and the Cable Performance Share Plan;
    acquisition opportunities and our ability to successfully integrate acquired businesses, properties or other assets and
realize anticipated benefits of such acquisitions;
    our ability to successfully enter new lines of business, from time to time, such as telephony;
    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, communication service providers and telephony service
providers;
    changes in accounting principles generally accepted in the United States and SEC rules and regulations;
    the impact of existing and future regulations affecting our businesses, including radio licensing and ownership rules and
cable television regulations;
    the possible non-renewal of cable franchises;
    increases in programming costs;
    the accuracy of anticipated trends in our businesses, including those discussed in Managements Discussion and Analysis of
Financial Condition and Results of Operations herein;
    advances in technology and our ability to adapt to and capitalize on such advances;
    decreases in our customers advertising and entertainment expenditures;
    the impact of the sale of one or more of our principal businesses by our Parent; 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 Form 10-Q might not transpire. You should also read carefully the
factors described in the Risk Factors section of our annual report on Form 10-K for the year
ended December 31, 2004. 7




---



##### 



Overview Media is a diversified communications company with operations in radio broadcasting and
cable television. We are the largest privately-owned radio broadcaster and the 12th largest radio
broadcaster overall in the United States of America based on 2003 revenues. We are also the 17th
largest cable television multiple system operator in the United States of America based on
subscribers as of December 31, 2004. For the three months ended March 31, 2005, 50% of Medias revenues were from Radio and 49%
were from Cable. Medias outstanding common stock is owned by its corporate parent, Susquehanna Pfaltzgraff Co.
In April 2005, Susquehanna Pfaltzgraff Co. announced that it was exploring a potential sale of
Medias Radio and Cable businesses. The Radio business focuses on acquiring, operating and developing radio stations in the United
States 40 largest markets. Our Radio stations offer programming over a broad range of formats.
Revenues are generated by broadcasting local advertising, national advertising and client events on
our stations. The Cable business provides a broad range of cable television, high-speed Internet access (and
telephony services in New York) to geographically clustered subscribers in small to medium-sized
communities. Our Cable operations focus on providing subscribers with high-quality service
offerings, superior customer service and attractive programming choices at reasonable rates.
Cables revenues are generated by providing basic and expanded basic cable television service,
digital cable services, premium services, pay-per-view services, high-speed Internet access and in
certain areas, telephony services. Medias operations for the three months ended March 31, 2005 included the following notable
items:  
    Revenues increased $10.4 million or 12% from first quarter 2004 largely due to
Cables 2004 Carmel acquisition.
    Cables Carmel operation ceased using all RCN transition services including
telephone-based customer service, network monitoring, billing (voice, video and data),
telephony switching and Internet backbone.
    The Rankin County cable plant rebuild progressed during the quarter. The
rebuild is scheduled to be completed by July 2005.
    On January 26, 2005, the United States District Court for the Northern District
of Georgia granted a summary judgment against Media. The summary judgment granted BCI
the sum of $10.0 million with interest at the rate of 9% per annum from January 22,
2001 and also allowed BCIs recovery of attorneys fees and costs. On February 22,
2005, Media appealed the summary judgment. 8




---



##### 



Results of Operations The following table summarizes Medias consolidated historical results of operations
and consolidated historical results of operations as a percentage of revenues for the three
months ended March 31, 2005 and 2004 (in millions): Three months ended March 31, 2005Radio
    
    
    Cable
    
    
    Other
    
    
    TotalRevenues
    
    $
    48.5
    
    
    
    100.0
    %
    
    $
    47.7
    
    
    
    100.0
    %
    
    $
    1.1
    
    
    
    100.0
    %
    
    $
    97.3
    
    
    
    100.0
    %Operating expenses:Operating and programming
    
    
    16.3
    
    
    
    33.6
    %
    
    
    23.6
    
    
    
    49.5
    %
    
    
    1.0
    
    
    
    90.9
    %
    
    
    40.9
    
    
    
    42.0
    %Selling
    
    
    8.6
    
    
    
    17.7
    %
    
    
    1.7
    
    
    
    3.5
    %
    
    
    0.2
    
    
    
    18.2
    %
    
    
    10.5
    
    
    
    10.8
    %General and administrative
    
    
    12.6
    
    
    
    26.0
    %
    
    
    6.9
    
    
    
    14.5
    %
    
    
    0.9
    
    
    
    81.8
    %
    
    
    20.4
    
    
    
    21.0
    %Depreciation and amortization
    
    
    1.6
    
    
    
    3.3
    %
    
    
    9.7
    
    
    
    20.3
    %
    
    
    0.2
    
    
    
    18.2
    %
    
    
    11.5
    
    
    
    11.8
    %Total operating expenses
    
    
    39.1
    
    
    
    80.6
    %
    
    
    41.9
    
    
    
    87.8
    %
    
    
    2.3
    
    
    
    209.1
    %
    
    
    83.3
    
    
    
    85.6
    %Operating income (loss)
    
    $
    9.4
    
    
    
    19.4
    %
    
    $
    5.8
    
    
    
    12.2
    %
    
    $
    (1.2
    )
    
    
    (109.1
    )%
    
    
    14.0
    
    
    
    14.4
    %Other income (expense)Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7.0
    )
    
    
    (7.2
    )%Interest income on loan to Parent
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.6
    
    
    
    1.6
    %Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.4
    
    
    
    0.4
    %Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3.5
    )
    
    
    (3.6
    )%Minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.9
    )
    
    
    (0.9
    )%Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    4.6
    
    
    
    4.7
    %
 Three months ended March 31, 2004Radio
    
    
    Cable
    
    
    Other
    
    
    TotalRevenues
    
    $
    46.7
    
    
    
    100.0
    %
    
    $
    39.1
    
    
    
    100.0
    %
    
    $
    1.1
    
    
    
    100.0
    %
    
    $
    86.9
    
    
    
    100.0
    %Operating expenses:Operating and programming
    
    
    15.6
    
    
    
    33.4
    %
    
    
    18.3
    
    
    
    46.8
    %
    
    
    0.7
    
    
    
    63.6
    %
    
    
    34.6
    
    
    
    39.8
    %Selling
    
    
    8.2
    
    
    
    17.6
    %
    
    
    1.4
    
    
    
    3.6
    %
    
    
    0.2
    
    
    
    18.2
    %
    
    
    9.8
    
    
    
    11.3
    %General and administrative
    
    
    12.8
    
    
    
    27.4
    %
    
    
    5.9
    
    
    
    15.1
    %
    
    
    0.9
    
    
    
    81.8
    %
    
    
    19.6
    
    
    
    22.6
    %Depreciation and amortization
    
    
    1.6
    
    
    
    3.4
    %
    
    
    7.2
    
    
    
    18.4
    %
    
    
    0.1
    
    
    
    9.1
    %
    
    
    8.9
    
    
    
    10.2
    %Total operating expenses
    
    
    38.2
    
    
    
    81.8
    %
    
    
    32.8
    
    
    
    83.9
    %
    
    
    1.9
    
    
    
    172.7
    %
    
    
    72.9
    
    
    
    83.9
    %Operating income (loss)
    
    $
    8.5
    
    
    
    18.2
    %
    
    $
    6.3
    
    
    
    16.1
    %
    
    $
    (0.8
    )
    
    
    (72.7
    )%
    
    
    14.0
    
    
    
    16.1
    %Other income (expense)Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8.8
    )
    
    
    (10.1
    )%Interest income on loan to Parent
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.6
    
    
    
    1.8
    %Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2.6
    )
    
    
    (3.0
    )%Minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.7
    )
    
    
    (0.8
    )%Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    3.5
    
    
    
    4.0
    %
 9




---



##### 



Three Months Ended March 31, 2005 Compared to the Three Months Ended March 31, 2004 Consolidated Revenues. Consolidated revenues increased $10.4 million or 12% from 2004 to 2005. Radio
and Cable revenues were 50% and 49% of consolidated revenues, respectively. Revenue growth
was due primarily to Cables 2004 Carmel acquisition. Operating and programming expenses.Operating and programming expenses increased $6.3
million or 18% from 2004 to 2005. Approximately 84% of the consolidated increase in operating
and programming expense was attributable to the Cable segment which acquired Carmel in 2004. General and administrative expenses.General and administrative expenses increased $0.8
million or 4% from 2004 to 2005. Radio and Cable general and administrative expenses were 62%
and 34% of consolidated general and administrative expenses, respectively. Operating income.Operating income was unchanged from 2004 to 2005. The increase in
revenue was offset by increases in Cables operating and programming expenses and in
depreciation and amortization related to the Carmel acquisition. Net income.Net income increased $1.1 million or 31% from 2004 to 2005. The increase in net
income was attributable to lowered interest expense. The effective rate for income taxes did not
change significantly between 2005 and 2004. Depreciation and amortization.Depreciation and amortization increased $2.6 million or 29%
from 2004 to 2005. Cables Carmel acquisition and completed cable plant rebuilds were responsible
for the increase. Interest expense. Interest expense decreased $1.8 million or 20% from 2004 to 2005. Calling
the 8.5% Senior Subordinated Notes (Notes) in May 2004 reduced Medias effective average interest
rate. The call increased borrowings under Medias credit facility and replaced fixed rate debt
with cheaper variable rate debt. Medias total debt as of March 31, 2005 was $33.0 million less
than as of March 31, 2004. Radio Revenues. Radio revenues increased $1.8 million or 4% from 2004 to 2005 primarily from
growth in the San Francisco and Atlanta markets. Operating and programming expenses.Operating and programming expenses increased ratably
with revenues. General and administrative expenses.Radio general and administrative expenses declined
slightly resulting in a decrease in the percentage of general and administrative expense to
sales. Operating income.Operating income increased $0.9 million or 11% from 2004 to 2005 due
to higher revenues. Cable Revenues. Cable revenues increased $8.6 million or 22% from 2004 to 2005. On a same
systems basis (without Carmel, New York revenues), revenues increased $1.8 million or 5% from
2004 to 2005. The growth of high-speed Internet access subscribers and basic/expanded basic
service rate increases were responsible for the improvement in revenues. Operating and programming expenses.Cables operating and programming expenses increased
$5.3 million or 29% from 2004 to 2005. On a same system basis, operating and programming
expense increased $1.0 million or 6%. Approximately 47% of the increase in operating and
programming costs relates to increased costs for programming. Rate increases imposed by
program owners and the launch of new services both contributed to higher costs. Direct costs
associated with delivery of high-speed Internet access decreased slightly on a same systems
basis. Efficiencies were gained from merging the BlazeNet ISP business unit into the Cable
operation. The remaining operating expenses moved ratably with revenues. Selling expenses.Cable selling expenses increased $0.3 million or 21% from 2004 to
2005. On a same systems basis selling expenses increased $0.1 million or 11%. The increase
in selling expenses reflects additional marketing spending in response to competitive
pressures. 10




---



##### 



General and administrative expenses.Cable general and administrative expenses
increased $1.0 million or 17% from 2004 to 2005. On a same systems basis, general and
administrative expenses decreased $0.1 million or 2% from 2004. Integration of our York,
Pennsylvania system into the centralized call center resulted in decreased costs. Remaining
systems are scheduled to be served by the centralized call center by October 2005. The Carmel
operation ceased using all RCN transition services as of March 31, 2005. Total RCN transition
services expense was $0.7 million for the three months ended March 31, 2005 compared to $0.4
million incurred in the period from March 9, 2004 through March 31, 2004. Depreciation and amortization.Depreciation and amortization increased $2.5 million from 2004
to 2005 due to the Carmel acquisition. On a same systems basis, depreciation and amortization
increased $0.5 million or 8%, due to the Rankin County, Mississippi cable plant rebuild. Operating income.Cable operating income decreased $0.5 million or 8% from 2004 to 2005. On
a same systems basis, Cable operating income increased $0.3 million or 4% from 2004 to 2005. The
decrease in operating income was attributable to the Carmel system (operating loss of $2.1 million
in first quarter 2005 compared to an operating loss of $1.3 million for the period from March 9
through March 31, 2004). Liquidity and Capital Resources The Companys primary sources of liquidity are cash flow from operations, borrowings
under its senior credit facilities and other borrowings. The Companys future needs for
liquidity arise primarily from capital expenditures, potential acquisitions of radio stations
and cable systems, potential repurchases of common stock, and interest payable on outstanding
indebtedness. From time to time, as market conditions permit, Media may also access the
capital markets with debt or equity financing. Net cash provided by operating activities was $19.9 million for the three months ended
March 31, 2005. The Companys net cash provided by operating activities was generated by
normal operations. Net cash used by investing activities was $8.1 million for the three months ended March
31, 2005. Capital expenditures, excluding acquisitions, were $7.5 million and $5.3 million
for the three months ended March 31, 2005 and 2004, respectively. Capital expenditures were
primarily used to upgrade and maintain our cable systems. The Company expects to make capital
expenditures of $30.5 million during the remainder of 2005, primarily for cable systems
upgrades. Media expects to utilize its senior credit facilities and operating cash flow to
fund these cable systems upgrades. Net cash used by financing activities was $11.8 million for the three months ended March 31,
2005. The revolving credit loan had $182.3 million available as of March 31, 2005. Term A and
Term B Loans were fully utilized as of March 31, 2005. Media repaid $6.5 million of revolving
credit borrowings during the three months ended March 31, 2005. The following tables reflect our contractual cash obligations as of March 31, 2005 in the
respective periods in which they are due (in thousands). TotalContractual Cash
    
    AmountsObligations
    
    Committed
    
    2005
    
    2006
    
    2007
    
    2008
    
    2009
    
    ThereafterLong-term debt
    
    $
    571,212
    
    
    $
    1,903
    
    
    $
    16,218
    
    
    $
    24,141
    
    
    $
    30,625
    
    
    $
    38,125
    
    
    $
    460,200Broadcast rights
    
    
    44,217
    
    
    
    8,117
    
    
    
    11,200
    
    
    
    8,000
    
    
    
    8,250
    
    
    
    8,650
    
    
    Operating leases
    
    
    42,622
    
    
    
    5,309
    
    
    
    5,117
    
    
    
    4,953
    
    
    
    4,726
    
    
    
    4,333
    
    
    
    18,184Total
    
    $
    658,051
    
    
    $
    15,329
    
    
    $
    32,535
    
    
    $
    37,094
    
    
    $
    43,601
    
    
    $
    51,108
    
    
    $
    478,384
 Media was in compliance with its loan covenants, as each is defined under the credit
facilities, as of March 31, 2005. A summary of the most restrictive covenants follows: Covenant Test
    
    Actual ValueFixed charge coverage ratio must be at least 1.10
    
    
    1.51Maximum consolidated leverage ratio may not exceed 6.50
    
    
    4.04Interest coverage ratio must be at least 2.00
    
    
    4.84
 11




---



##### 



Media believes funds generated from operations and funds available from our existing credit
facilities will be sufficient to finance its current operations, its debt service obligations, and
its planned capital expenditures. From time to time, Media evaluates potential acquisitions of
radio stations and cable television systems. In connection with future acquisition opportunities,
Media may incur additional debt or issue additional equity or debt securities depending on market
conditions and other factors. Unless otherwise disclosed in this Form 10-Q, Media has no current
commitments or agreements with respect to any material acquisitions. 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We monitor and evaluate changes in market conditions on a regular basis. Based upon the most
recent review, management has determined that through March 31, 2005, there have been no material
developments affecting market risk since the filing of Medias December 31, 2004 Annual Report on
Form 10-K filed with the SEC. Medias average effective interest rate on variable rate debt was
approximately 4.8% as of March 31, 2005. 
 ITEM 4. DISCLOSURE CONTROLS AND PROCEDURES On
March 30, 2005, Media filed Amendment No. 1 to Form 10-Q
for the quarter ended September 30, 2004 that restated certain
costs for cable programming acquired through another cable operator.
A review of all cable programming contracts and arrangements was
performed. On a prospective basis, significant changes in cable
programming arrangements will be reviewed with the Disclosure
Committee as an additional quarterly disclosure control procedure. Pursuant to the Securities Exchange Act of 1934, we carried out an evaluation, with the
participation of our management, including our principal executive officer and principal financial
officer, of the effectiveness of our disclosure controls and procedures (as defined under the
Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon
that evaluation, our principal executive officer and principal financial officer, concluded that
our disclosure controls and procedures are effective in timely alerting them to material
information relating to us required to be included in our periodic SEC filings. There has been no
change in our internal control over financial reporting during the
quarter ended March 31, 2005, except as noted above, that has materially affected,
or is reasonably likely to materially affect, our internal control
over financial reporting. Management acknowledges that any system of internal control over
financial reporting, however well constructed and monitored, can only provide a reasonable
assurance that the objectives of that control system are met and that the maintenance and
monitoring of such control system is an ongoing process. Accordingly, the Companys internal
control over financial reporting may change in the future. 12




---



##### 



PART II  OTHER INFORMATION 
 ITEM 1. LEGAL PROCEEDINGS On July 29, 2004, Bridge Capital Investors II (BCI) sued Susquehanna Radio Corp., a Media
subsidiary, for $10.0 million alleging breach of contract and unjust enrichment in connection with
Medias acquisition of Radio Station WHMA-FM. The suit was filed in Federal District Court for the
Northern District of Georgia. The station was originally licensed to Anniston, Alabama then
subsequently moved to serve the Atlanta, Georgia metropolitan area. On January 26, 2005, the
United States District Court for the Northern District of Georgia granted summary judgment in favor
of BCI against Media. The summary judgment grants BCI the sum of $10.0 million with interest at
the rate of 9% per annum from January 22, 2001 and also allows BCIs recovery of attorneys fees
and costs. On February 22, 2005, Media appealed the judgment. 
 ITEM 6. EXHIBITS (a) Exhibits Filed Herewith:31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by David E. Kennedy.31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by John L. Finlayson.32.1
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by David E. Kennedy.32.2
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by John L. Finlayson.
 13




---



##### 



SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this
report to be signed on its behalf by the undersigned thereunto duly authorized. May 13, 2005
    
    SUSQUEHANNA MEDIA CO.By:
    
    /s/ John L. FinlaysonJohn L. FinlaysonVice President and ChiefFinancial Officer