---




UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





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FORM 10-Q





(Mark One)


|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ---------------------------------------------------------------------------------------




For the quarterly period ended June 30, 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





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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)





(Not Applicable)


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





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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  ̈





As of August 13, 2002, there
were 1,100,000 total shares of common stock, $1.00 par value outstanding.





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SUSQUEHANNA MEDIA CO.





FORM 10-Q





TABLE OF CONTENTS





PART IFINANCIAL INFORMATION

2Item 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

9Item 3.

Quantitative and Qualitative Disclosures About Market Risk

14PART IIOTHER INFORMATION

15Item 6.

Exhibits and Reports on Form 8-K

15




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PART IFINANCIAL INFORMATION





Item 1.Financial Statements





SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES





CONDENSED CONSOLIDATED BALANCE SHEETS


(Dollars in thousands, except share data)





June 30, 2002


December 31, 2001(unaudited)ASSETSCurrent AssetsAccounts receivable, net

$
49,038


$
44,778Interest receivable from Parent


3,571



Deferred income taxes


2,553



2,252Other current assets


5,833



6,140Total Current Assets


60,995



53,170Property, Plant and Equipment, net


151,020



144,123Intangible Assets, net


327,859



316,160Note Receivable from Parent


118,232



118,232Investments and Other Assets


38,804



37,397$
696,910


$
669,082LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesCash overdrafts

$
2,533


$
2,687Accounts payable


9,709



8,386Current portion of long-term debt


17,030



8,780Accrued interest


3,288



5,291Accrued income taxes


6,307



3,155Deferred income


1,185



1,256Accrued salaries and benefits


5,480



5,020Accrued ESOP benefit costs


4,400



Accrued franchise and licensing fees


2,343



2,647Other accrued expenses


6,802



6,711Total Current Liabilities


59,077



43,933Long-term Debt


497,121



486,325Other Liabilities


14,620



10,994Deferred Income Taxes


48,341



45,108Minority Interests


71,147



67,229Stockholders EquityPreferred stockvoting, 7% cumulative with par value of $100, authorized 110,000 shares, 70,449.21 issued and
outstanding


7,050



7,050Common stockvoting, $1 par value, authorized 1,100,000 shares, 1,100,000 shares issued and
outstanding


1,100



1,100Retained earnings (Accumulated deficit)


(1,546
)


7,343Total Stockholders Equity


6,604



15,493$
696,910


$
669,082





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




2




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SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES





CONDENSED CONSOLIDATED INCOME STATEMENTS


(Dollars in thousands, except per share data)


(unaudited)





For the Three Months Ended June 30,


For the Six Months Ended June
30,2002


2001


2002


2001RevenuesRadio

$
57,124


$
53,418


$
97,862


$
93,198Cable


31,260



25,745



59,470



50,408Internet and Other


2,178



2,699



4,939



5,107Total revenues


90,562



81,862



162,271



148,713Operating ExpensesOperating and programming


34,147



32,118



62,988



60,402Selling


9,936



9,973



18,808



18,417General and administrative


20,601



18,461



35,450



32,973Depreciation and amortization


6,963



9,563



13,257



18,851Total operating expenses


71,647



70,115



130,503



130,643Operating Income


18,915



11,747



31,768



18,070Other Income (Expense)Interest expense


(7,609
)


(9,385
)


(14,860
)


(19,672
)Interest income from loan to Parent


1,785



1,668



3,551



3,215Replacement of cable distribution system






(760
)






(760
)Other


(149
)


(381
)


(446
)


(102
)Income Before Income Taxes


12,942



2,889



20,013



751Provision for Income Taxes


4,929



1,133



7,600



303Income Before Cumulative Effect of Change in Accounting Principle and Minority Interests


8,013



1,756



12,413



448Cumulative Effect of Change in Accounting Principle










(3,069
)


Income Before Minority Interests


8,013



1,756



9,344



448Minority Interests


(1,312
)


(283
)


(2,475
)


(644
)Net Income (Loss)


6,701



1,473



6,869



(196
)Preferred Dividends Declared


(124
)


(124
)


(247
)


(247
)Net Income (Loss) Available for Common Shares

$
6,577


$
1,349


$
6,622


$
(443
)Basic and Diluted Net Income (Loss) Per Common ShareIncome before cumulative effect of change in accounting principle

$
5.98


$
1.23


$
8.81


$
(0.40
)Cumulative effect of change in accounting principle










(2.79
)


$
5.98


$
1.23


$
6.02


$
(0.40
)





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




3




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SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES





CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


(Dollars in thousands)


(unaudited)





Six Months Ended June 30,2002


2001Cash Flows from Operating ActivitiesIncome before minority interests

$
9,344


$
448Adjustments to reconcile net income to net cash:Depreciation and amortization


13,257



18,851Deferred income taxes


4,942



134Cumulative effect of change in accounting principle


3,069



Equity in earnings of investees


81



(426
)Deferred financing amortization


664



643Investment write-down






500Loss on replacement of cable distribution system






760Derivative (gain) loss


(428
)


505Changes in assets and liabilities:Decrease (increase) in accounts receivable, net


(4,260
)


5,938Decrease (increase) in other current assets


288



(2,436
)Increase in interest receivable from parent


(3,552
)


(3,215
)Increase (decrease) in accounts payable


1,323



(2,586
)Decrease in accrued interest


(1,575
)


(415
)Increase (decrease) in accrued income taxes


3,072



(488
)Increase in accrued ESOP benefit costs


4,400



4,271Increase (decrease) in other accrued expenses


177



(3,656
)Increase in other liabilities


3,626



7,830Net cash provided by operating activities


34,428



26,658Cash Flows from Investing ActivitiesPurchase of property, plant and equipment, net


(10,193
)


(14,228
)Purchase of land and building from Parent






(2,250
)Acquisition


(26,659
)


(13,684
)Increase in investments, other assets and intangible assets


(2,096
)


(1,647
)Net cash used by investing activities


(38,948
)


(31,809
)Cash Flows from Financing ActivitiesIncrease in revolving credit facility


19,300



8,600Non-voting subsidiary common stock transactions


(14,129
)


(1,773
)Repayment of long-term debt


(250
)


Decrease in cash overdraft


(154
)


(598
)Payments of preferred dividends


(247
)


(247
)Net cash provided (used) by financing activities


(4,520
)


5,982Net Increase in Cash and Cash Equivalents






831Cash and Cash Equivalents, beginning






Cash and Cash Equivalents, ending

$



$
831





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




4




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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 generally accepted accounting principles 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 generally accepted accounting principles have been condensed or
omitted; however, Media believes that the disclosures are adequate to make the information presented not misleading. The consolidated financial statements included herein should be read in conjunction with the consolidated financial statements and
the notes thereto included in Medias December 31, 2001 Annual Report on Form 10-K 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.





Media believes that the accompanying condensed consolidated interim financial statements contain all material
adjustments (consisting only of normal recurring adjustments), necessary to present fairly its consolidated financial position as of June 30, 2002 and the results of its operations for the three and six months ended June 30, 2002 and 2001 and its
cash flows for the six months ended June 30, 2002 and 2001.





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





Interim results are not necessarily indicative of results for the full year or future periods.





2.    Recent Developments





Recent Accounting Pronouncements





Media adopted Statement of Financial Accounting Standard No. 142, Goodwill and Other Intangible
Assets (SFAS 142), on January 1, 2002. Under SFAS 142, goodwill and other intangible assets with indefinite lives are not amortized in the statement of income, but are evaluated annually for possible impairment. Accordingly, Media ceased
amortization of Federal Communications Commission licenses, cable franchise values and goodwill effective January 1, 2002. Adoption of SFAS 142 reduced amortization by approximately $6.8 million for the six months ended June 30, 2002.





SFAS No. 142 required 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) has 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 recognized for the amount by which the carrying value of goodwill exceeds its fair value.




5




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Media has identified its four reporting units as Radio, Cable, Internet, and
Other. Based on the results of this assessment, it was determined that only goodwill for Medias Internet reporting unit was impaired. Accordingly, the transitional assessment processs second step was only performed for the Internet
reporting unit. A $5.0 million non-cash charge was recognized to reduce the Internet reporting units goodwill to its fair value as of January 1, 2002. The $5.0 million transitional loss, net of a $1.9 million income tax benefit, has been
reported as the cumulative effect of a change in accounting principle.





Cable Performance Share Plan and Radio
Employee Stock Plan





On April 1, 2002, the final step of a three-step change in the valuation bases for
Cables performance share plan and Radios employee stock plan occurred. Operating income and Adjusted EBITDA for the three and six months ended June 30, 2002 included a $4.1 million charge for Cables performance share plan valuation
change. A similar $4.2 million charge was recognized in second quarter 2001. Radios employee stock plan had no effect on second quarter operating income or Adjusted EBITDA. However, the 2002 change in valuation basis for Radios employee
stock plan decreased stockholders equity by $16.8 million.





In May 2002, Radio repurchased approximately
$14.6 million of Class B nonvoting shares from retirees and current key employees. All repurchased shares were subsequently retired. Existing credit facilities were used to finance the transactions. The repurchases were accounted for as treasury
stock transactions.





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. Cable performance shares are
accounted for as stock appreciation rights. A $0.1 million compensation expense was recognized in the second quarter related to the sale of performance shares and issuance of options.





On June 18, 2002, certain key employees purchased a total of 1,190 newly-issued Susquehanna Radio Corp. Class B nonvoting common 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.





Interest Rate Swap





At June 30, 2002, Media was party to an interest rate swap agreement, which effectively changes $50.0 million of variable rate debt to
fixed rate debt. The effective interest rate on the $50.0 million was 6.5% at June 30, 2002. The interest rate swap was marked to market and recorded at its fair value as of June 30, 2002. Accordingly, interest expense was reduced $0.4 million for
the six months ended June 30, 2002 (all of which occurred in the three months ended March 31, 2002). Although Media has not elected hedge accounting for this swap contract, hedge accounting may be elected for future contracts.





Acquisitions and Investments





Media is a 50% partner in a York, Pennsylvania-based competitive local exchange carrier partnership with Adelphia Business Solutions, Inc. Adelphia has stated that its partner in this




6




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partnership is not included in its parents recent bankruptcy filings. The partnerships
operations are continuing. As of June 30, 2002, Medias investments and other assets included $4.5 million related to this partnership. For the three and six months ended June 30, 2002, the Internet and Other segments pretax income and
Adjusted EBITDA included $0.2 million income and $0.1 million loss related to this partnerships operations, respectively.





On April 1, 2002, Cable purchased certain assets of Fairbanks Communications, Inc. for $26.5 million cash. The assets comprise a single cable system serving approximately 11,300 customers in the Lawrenceburg, Indiana area. The
systems results have been included in the results of operations since acquisition. Existing credit facilities were utilized to finance the acquisition. Due to the immaterial effect on the consolidated statement of financial position and
statement of operations, no proforma disclosures have been included.





On June 25, 2002, Media agreed to purchase
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. The acquisition is subject to regulatory approval. Closing is
expected to occur in fourth quarter 2002. Media plans to use existing credit facilities to fund the acquisition.




7




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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 Internet and Other. These 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 and annual report, are applied consistently across all segments.





Segment information (in thousands of dollars) follows:





Radio

Cable


Internet and
Other


TotalFor the Three Months Ended June 30, 2002Operating income (loss)

$
16,570

$
4,275


$
(1,930
)

$
18,915Interest expense, net


1,522


2,851



3,236



7,609Depreciation and amortization


1,279


5,658



(25
)


6,963Income (loss) before income taxes


14,696


1,423



(3,177
)


12,942Provision (benefit) for income taxes


5,416


629



(1,116
)


4,929Identifiable assets


347,540


213,845



135,525



696,910Capital expenditures


604


6,448



93



7,145For the Three Months Ended June 30, 2001Operating income (loss)


11,702


1,490



(1,445
)


11,747Interest expense, net


2,463


3,009



3,913



9,385Depreciation and amortization


2,955


6,353



255



9,563Income (loss) before income taxes


9,229


(2,279
)


(4,061
)


2,889Provision (benefit) for income taxes


3,454


(507
)


(1,814
)


1,133Identifiable assets


347,764


186,335



138,188



672,287Capital expenditures


3,610


5,945



(325
)


9,230For the Six Months Ended June 30, 2002Operating income (loss)


23,501


10,041



(1,774
)


31,768Interest expense, net


3,152


5,590



6,118



14,860Depreciation and amortization


2,596


10,610



51



13,257Income (loss) before income taxes


19,983


4,451



(4,421
)


20,013Provision (benefit) for income taxes


7,364


1,968



(1,732
)


7,600Identifiable assets


347,540


213,845



135,525



696,910Capital expenditures


942


8,861



390



10,193For the Six Months Ended June 30, 2001Operating income (loss)


16,653


4,136



(2,719
)


18,070Interest expense, net


5,238


6,506



7,928



19,672Depreciation and amortization


5,701


12,619



531



18,851Income (loss) before income taxes


11,387


(3,130
)


(7,506
)


751Provision (benefit) for income taxes


4,256


(728
)


(3,225
)


303Identifiable assets


347,764


186,335



138,188



672,287Capital expenditures


6,067


10,364



47



16,478




8




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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 Media 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, 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, Medias 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 the actual results or performance of
Media 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 Medias markets), interest rate movements, terrorist acts or adverse reactions to United States anti-terrorism activities, acquisition opportunities and Medias ability to successfully integrate acquired businesses, properties or other
assets and realize the anticipated benefits of such acquisitions, expectations and estimates concerning future financial performance, financing plans and access to capital on favorable terms, Medias ability to service its outstanding
indebtedness, the impact of competition, existing and future regulations affecting Medias business, nonrenewal of cable franchises, increases in programming costs, advances in technology and Medias ability to adapt to and capitalize on
such advances, decreases in Medias customers advertising and entertainment expenditures, changes in generally accepted accounting principles and standards, as well as related SEC rules and regulations, and other factors over which Media may
have little or no control.




9




---




Results of Operations





The following table summarizes Medias consolidated historical results of operations and consolidated historical results of operations as a percentage of total
revenues for the three months and six months ended June 30, 2002 and 2001.





Three months ended June 30,2002


2001RevenuesRadio

$
57.1

63.1
%

$
53.4


65.3
%Cable


31.2

34.5
%


25.7


31.4
%Internet and Other


2.2

2.4
%


2.7


3.3
%Total revenues


90.5

100.0
%


81.8


100.0
%Operating expensesOperating and programming


34.1

37.7
%


32.1


39.2
%Selling, general and administrative


30.5

33.7
%


28.3


34.7
%Depreciation and amortization


7.0

7.7
%


9.6


11.7
%Total operating expenses


71.6

79.1
%


70.0


85.6
%Operating income

$
18.9

20.9
%

$
11.8


14.4
%Net income

$
6.7

7.4
%

$
1.5


1.8
%Adjusted EBITDA

$
28.3

31.3
%

$
23.7


29.0
%Six Months ended June 30,2002


2001RevenuesRadio

$
97.9

60.3
%

$
93.2


62.7
%Cable


59.5

36.7
%


50.4


33.9
%Internet and Other


4.9

3.0
%


5.1


3.4
%Total revenues


162.3

100.0
%


148.7


100.0
%Operating expensesOperating and programming


63.0

38.8
%


60.4


40.6
%Selling, general and administrative


54.3

33.4
%


51.3


34.5
%Depreciation and amortization


13.3

8.2
%


18.9


12.7
%Total operating expenses


130.5

80.4
%


130.6


87.8
%Operating income

$
31.8

19.6
%

$
18.1


12.2
%Net income (loss)

$
6.9

4.3
%

$
(0.2
)

(0.1
)%Adjusted EBITDA

$
49.3

30.4
%

$
41.7


28.0
%




10




---




Three Months Ended June 30, 2002 Compared to the Three Months Ended June 30,
2001





Revenues.    Consolidated revenues of $90.5 million represented an $8.7
million or 11% increase over the second quarter of 2001. Radio revenue increased $3.7 million or 7% from 2001 to 2002. Results on a same stations basis exclude KFME-FM (Kansas City) and WHMA-AM (Anniston, Alabama) and Paragon Research. Second
quarter same stations revenue was $56.4 million, an increase of $3.7 million or 7% over 2001. Radio revenue growth was driven by higher advertising rates. Cable revenues increased $5.5 million or 21% from 2001 to 2002. Cables revenue growth
was primarily due to basic service rate increases and from increased penetration of digital cable and cable modem services and the April 1, 2002 Lawrenceburg sysem acquisition. On a same cable systems basis, revenues increased $4.3 million or 17%
higher than second quarter 2001. Revenue from Internet access and web design activities, decreased $0.5 million or 19% from 2001 to 2002. However, cable modem customers transferred from the Internet and Other segment to the Cable segment were
responsible for $0.4 million of Cables second quarter revenue growth and Internet and Others revenue decrease.





Operating income.    Second quarter consolidated operating income was $18.9 million, a $7.1 million or 60% increase over 2001. Approximately $3.4 million of increased consolidated operating income was due
to the January 1, 2002 cessation of amortization for FCC licenses, cable franchise values and goodwill as required by Statement of Financial Accounting Standard No. 142, Goodwill and Other Intangible Assets (SFAS 142). Radios
operating income for the second quarter was $16.5 million, a $4.7 million or 40% increase from second quarter 2001. Radio operating income increased $1.7 million due to the adoption of SFAS 142. Excluding the effect of SFAS 142, Radios
operating income for the second quarter increased $3.2 million or 24% compared to 2001. On a same stations basis, Radio operating income increased to $16.5 million for the quarter, a $4.7 million or 40% increase over 2001. Cable operating income for
the second quarter was $4.3 million, a $2.8 million or 187% increase from second quarter 2001. The impact of the Lawrenceburg acquisition reduced operating income by approximately $0.3 million for the quarter. Cables operating income for both
the three months ended June 30, 2002 and 2001 was reduced by a $2.6 million charge related to the valuation change for the Cable Performance Share Plan. Approximately $1.7 million of Cables second quarter improvement was attributable to the
impact of SFAS 142. Higher Radio and Cable revenues were primarily responsible for $3.8 million of the increase in consolidated operating income. Internets $0.6 million operating loss represented a $0.3 million improvement over second quarter
2001. The Internet and Other segment recognized a $1.5 million charge for the second quarter related to the valuation change for the Cable Performance Share Plan, compared to a $1.6 similar charge in 2001.





Depreciation and amortization.    Depreciation and amortization decreased $2.6 million or 27% from second
quarter 2001 primarily due to the effect of SFAS 142.





Interest expense.    Interest
expense decreased $1.8 million or 19% from second quarter 2001 to 2002. Interest expense for the quarter included no gain or loss related to an interest swap compared to a $0.2 million loss in the same period last year. Decreased interest rates were
responsible for the rest of the change since total long-term debt was relatively unchanged at June 30, 2002 and 2001.





Net income.    Consolidated second quarter net income of $6.7 million represented a $5.2 million increase over 2001. Improved operating income and a $1.8 million decrease in interest expense were the most
significant factors responsible for 2002s better results.





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




11




---




quarter consolidated Adjusted EBITDA of $28.3 million represented an increase of $4.6 million or 19%
from 2001. Radios Adjusted EBITDA was $19.5 million, a $3.1 million or 19% improvement from second quarter 2001. Same stations Adjusted EBITDA was $19.5 million, a $2.9 million or 18% increase from second quarter 2001. Cables Adjusted
EBITDA was $10.3 million, an increase of $2.0 million or 24% over 2001. Cables three month Adjusted EBITDA included $0.4 million related to the Lawrenceburg acquisition. Basic rate increases, and increased revenues from the deployment of
digital cable and cable modem services helped improve Cables Adjusted EBITDA. Internets Adjusted EBITDA decreased $0.6 million from second quarter 2001 to $(1.6) million in 2002.





Media believes that although Adjusted EBITDA is not a disclosure required by generally accepted accounting principles, it provides a meaningful comparison of operating
performance because it is commonly used in the radio and cable television industries to analyze and compare radio and cable television companies on the basis of operating performance, leverage and liquidity. Although the Company believes this metric
is helpful in understanding its performance, Adjusted EBITDA should not be considered a substitute for net income or cash flow as indicators of the Companys financial performance or its ability to generate liquidity. Adjusted EBITDA as
presented may not be comparable to other similarly titled measures used by other companies.





Six Months Ended
June 30, 2002 Compared to the Six Months Ended June 30, 2001





Revenues.    Consolidated revenue for the six months were $162.3 million, a $13.6 million or 9% increase from 2001 to 2002. Radio revenues increased $4.7 million or 5% from 2001 to 2002, due to improving
economic conditions in most markets. Due to a change from a standard broadcast month calendar to a traditional calendar, Radios six month 2002 revenues include one more week than 2001. Results on a same stations basis exclude KFME-FM (Kansas
City) and WHMA-AM (Anniston, Alabama) and Paragon Research. Same stations revenue was $96.7 million, an increase of $5.1 million or 6% over the same period last year. Cable revenues of $59.5 million represented a $9.1 million or 18% improvement from
six month 2001 to 2002. Cables revenue growth came from the Lawrenceburg acquisition, basic service rate increases and from increased penetration of digital cable and cable modem service. On a same systems basis, Cable revenues increased $7.8
million or 15% over 2001. Revenue from Internet access and web design activities, decreased $0.2 million or 4% from 2001 to 2002. However, the transfer of cable modem subscribers from the Internet and Other segment to the Cable segment reduced six
month 2002 Internet and Other revenue by $0.8 million.





Operating
income.    Consolidated operating income for the six months ended June 30, 2002 was $31.8 million, a $13.7 million or 76% increase from 2001 to 2002. Implementation of SFAS 142 increased six month operating income by
approximately $6.8 million compared to 2001. Radio operating income for the six months was $23.5 million, a $6.8 million or 41% increase from 2001. However, implementation of SFAS 142 increased six month Radio operating income by $3.5 million. Same
stations operating income was $23.7 million, a $7.0 million or 42% increase from 2001. Excluding the effect of SFAS 142, same stations operating income for the six months increased $3.7 million or 19% from 2001. Cable operating income for the six
months was $10.0 million, a $5.9 million or 144% increase from six months 2001. The impact of the Lawrenceburg acquisition reduced operating income by approximately $0.3 million for the six months ended June 30, 2002. Approximately $3.3 million of
increased operating income was attributable to the impact of SFAS 142. Cables operating income for both the six months ended June 30, 2002 and 2001 was reduced by a $2.6 million charge related to the valuation change for the Cable Performance
Share Plan. Increased Cable revenue also drove the increase in operating income. Internets operating loss of $0.7 million for six months represented a $1.6 million improvement over the first six months of 2001, due largely to expense reduction
efforts.




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Depreciation and amortization.    Depreciation and
amortization decreased $5.6 million or 30% from 2001 to 2002 due primarily to the adoption of SFAS 142.





Interest expense.    Interest expense for the six months ended June 30, decreased $4.8 million or 24% from 2001 to 2002. Interest expense for six months included a $0.4 million gain related to an interest
swap compared to a $0.5 million loss in the same period last year. Decreased interest rates were primarily responsible for the decrease since debt levels were comparable at June 30, 2002 and 2001.





Net income.    Net income for the six months was $6.9 million, compared to a $0.2 net loss for 2001. Higher
Radio and Cable sales, the impact of implementing SFAS 142 and decreased interest expense were primarily responsible for the improvement. Charges related to the change in valuation of Cable performance shares were comparable for the six months ended
June 30, 2002 and 2001.





Adjusted EBITDA.    Adjusted EBITDA is defined as net income
before income taxes, extraordinary items, interest expense, interest income, depreciation and amortization, employee stock ownership plan expense, minority interest and any gain or loss on the disposition of assets. Consolidated Adjusted EBITDA for
the six months of $49.3 million represented a $7.6 million or 18% increase from 2001 to 2002. Radios six month Adjusted EBITDA was $29.5 million, a $3.8 million or 15% increase from 2001. Same stations Adjusted EBITDA was $29.6 million, a $4.0
million or 16% increase from the first six months of 2001. Cables Adjusted EBITDA was $21.5 million, an increase of $3.8 million or 21% over 2001. Cables increased Adjusted EBITDA was driven primarily by basic rate increases and the
continued deployment of digital cable and cable modem services. Cables six month Adjusted EBITDA included approximately $0.4 million related to the Lawrenceburg acquisition. Internet and Others Adjusted EBITDA was $(1.6) million, a $0.1
million improvement from 2001.





Media believes that although Adjusted EBITDA is not a required disclosure of
generally accepted accounting principles, it provides a meaningful comparison of operating performance because it is commonly used in the radio and cable television industries to analyze and compare radio and cable television companies on the basis
of operating performance, leverage and liquidity. Although the Company believes the metric is helpful in understanding its performance, Adjusted EBITDA should not be considered a substitute for net income or cash flow as indicators of the
Companys financial performance or its ability to generate liquidity. Adjusted EBITDA as presented may not be comparable to other similarly titled measures used by other companies.





Liquidity and Capital Resources





The
Companys primary sources of liquidity are cash flow from operations and borrowings under its senior credit facilities. The Companys future needs for liquidity arise primarily from capital expenditures, potential acquisitions of radio
stations, cable systems, or related properties, potential repurchases of its common stock, and interest payable on outstanding indebtedness and its senior credit facilities.





Net cash provided by operating activities was $34.4 million and $26.7 million for the six months ended June 30, 2002 and 2001, respectively. Medias net cash provided
by operating activities was generated by normal operations.





Net cash used by investing activities was $38.9
million for the six months ended June 30, 2002, which included $26.5 million for the Lawrenceburg cable acquisition. Capital expenditures, excluding acquisitions, were $10.3 million and $16.5 million for the six months ended June 30, 2002 and 2001,
respectively. Capital expenditures were used largely to upgrade and maintain cable




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systems. Media expects to make capital expenditures of $19.7 million in the remainder of 2002, primarily for cable systems upgrades. We have
agreed to purchase approximately 34,000 square feet of office space at a total cost of $5.0 million during fourth quarter 2002. The offices are being constructed by a subsidiary of its Parent, Susquehanna Pfaltzgraff. We expect to use existing
credit facilities and operating cash flow to fund the cable systems upgrades and other capital expenditures.





Net
cash used by financing activities was $4.5 million for the six months ended June 30, 2002. The revolving credit facility, which had $85.7 million available for borrowing at June 30, 2002, was increased by $19.3 million during the first six months of
2002. At June 30, 2002, approximately $85.7 million was available for borrowing under Medias senior credit facilities. In the second quarter, Media repurchased and retired approximately $14.6 million of Radio Class B shares from retirees and
current key employees. Existing credit facilities were used to purchase the shares.





Media believes that funds
generated from operations and the borrowing availability under its senior credit facility 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. Except as noted 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 our recent review, management has determined that there have been no material developments affecting market risk since the filing of
Medias December 31, 2001 Annual Report on Form 10-K filed with the Securities and Exchange Commission.




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PART IIOTHER INFORMATION





Item 6.Exhibits and Reports on Form 8-K





(a)  Exhibits





(b)  Reports on Form 8-K during the quarter ended
June 30, 2002





The Company filed a Form 8-K on May 6, 2002 under Item 5, Other Events
indicating its earnings for the quarter ended March 31, 2002. Selected financial information was included therein.





The Company filed a Form 8-K on August 2, 2002 under Item 5, Other Events indicating its earnings for the quarter ended June 30, 2002. Selected financial information was included therein.




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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.





SUSQUEHANNA MEDIA CO.By:

/s/    JOHN L. FINLAYSONJohn L. Finlayson Vice
President and Principal Financial and Accounting Officer





August 13, 2002




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