10-K 1 d25950_form10k.txt FORM 10K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED FEBRUARY 28, 2001 OR ___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ____________. Commission File Number: 333-44177 BRILL MEDIA COMPANY, LLC (Exact name of registrant as specified in its charter) Virginia 52-2071822 (State of Formation) (I.R.S. Employer Identification No.) (812) 423-6200 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12 (b) of the Act: None Securities registered pursuant to Section 12 (g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. _X_ YES ___ NO STATE THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF THE REGISTRANT None DOCUMENTS INCORPORATED BY REFERENCE None TABLE OF CONTENTS -------------------------------------------------------------------------------- Item Part No No Description Page No -------------------------------------------------------------------------------- I 1 Business 3 2 Properties 19 3 Legal Proceedings 20 4 Submission of Matters to a Vote of Security Holders 20 II 5 Market for Registrant's Common Equity and Related Stockholder Matters 20 6 Selected Consolidated Financial Data 20 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 22 7A Quantitative and Qualitative Disclosures About Market Risk 30 8 Financial Statements and Supplementary Data 32 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 52 III 10 Directors and Executive Officers of the Registrant 52 11 Executive Compensation 54 12 Security Ownership of Certain Beneficial Owners and Management 56 13 Certain Relationships and Related Transactions 56 IV 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K 58 -------------------------------------------------------------------------------- 2 PART I ITEM 1. BUSINESS General Brill Media Company, LLC, a Virginia limited liability company (BMC), collectively with its direct and indirect subsidiaries (Subsidiaries), is referred to herein as the "Company." The Company is a diversified media enterprise that acquires, develops, manages, and operates radio stations, newspapers and related businesses in middle markets. The Company presently owns, operates, or manages thirteen radio stations (Stations) serving four markets located in Pennsylvania, Kentucky/Indiana, Colorado, and Minnesota/Wisconsin. The Company's newspaper businesses (Newspapers) operate integrated newspaper publishing, printing and print advertising distribution operations, providing total-market print advertising coverage throughout a thirty-six county area in the central and northern portions of the lower peninsula of Michigan. These operations offer a three-edition daily newspaper, twenty-three weekly publications, two monthly real estate guides, two web offset printing operations for Newspapers' publications and outside customers, and three private distribution systems. The Company is wholly owned indirectly by Alan R. Brill (Mr. Brill), who founded the business and began its operations in 1981. The Company's overall operations, including its sales and marketing strategy, long-range planning, and management support services are managed by Brill Media Company, L.P. (BMCLP), a limited partnership indirectly owned by Mr. Brill. See "Item 13. Certain Relationships and Related Transactions" beginning on page 56. The Company generally considers radio "middle markets" to be markets ranked 80 to 200 by the Arbitron Company (Arbitron). The Company considers "middle markets" for purposes of its newspaper operations to be generally comparable to the smaller markets in such range. Recently Completed Transactions In October 1999, the Company submitted the winning bid of $1,561,000 in accordance with the FCC rules for auctioning broadcast spectrum for a new FM radio broadcast signal in Wellington, Colorado. The Company paid the FCC an initial deposit of $312,000 in October 1999 with the balance due after final FCC authorization. In April 2000, the Company received FCC authorization and licensing of the station was completed and the remaining amount of $1,249,000 was paid. The Company expects to begin broadcasting in fiscal 2002. In November 2000, certain wholly-owned subsidiaries of the Company paid $1,099 in cash to acquire 100% of the membership interests of TSB IV, LLC (T4L), a Virginia limited liability company, pursuant to an Agreement for Transfer of Membership Interest. Simultaneously, Mr. Brill made a capital contribution of $1,099 in cash to the 3 Company. Prior to the transaction, T4L had been a Managed Affiliate of the Company as described in Note 9 to the consolidated financial statements of the Company for the fiscal year ended February 28, 2001 and was indirectly owned by Mr. Brill. The consolidated financial statements give retroactive effect to the acquisition of T4L, which was accounted for similar to a pooling-of-interests due to the related party nature of the transaction. Accordingly, the net assets acquired from T4L were recorded at T4L's book value and the results of operations of the Company include the historical results of operations of T4L. T4L's assets, at book value, included current assets of $394,000, broadcasting equipment of $1,501,000 and intangibles of $5,770,000. T4L's liabilities totaled approximately $14 million at November 17, 2000 and included accounts payable, other accrued expenses, a promissory note payable of $12,906,000 to the Company, as well as other purchase money and capital lease obligations including a capitalized lease to a related party. In addition, for the years ended February 29, 2000 and February 28, 1999 revenues were $2,219,000 and $2,256,000 and net loss was $1,669,000 and $1,513,000, respectively. Radio Stations Overview Unless otherwise indicated herein, rank for the Company's markets has been obtained from Arbitron's RADIO MARKET REPORT issued during the spring of 2001 reporting on fall 2000 research. Station cluster revenue rankings of the Company's radio markets have been derived by comparing the Company's revenues in each market to the revenues for the Company's competitors (utilizing the estimated revenues for each competing radio station as provided by BIA Publications, Inc.). The terms local marketing agreement (LMA), time brokerage agreement (TBA) and joint sales agreement (JSA) are referred to in various places in this Report. An LMA or TBA refers to an agreement, although it may take various forms, under which one party agrees in consideration of a fee paid to provide, on a cooperative basis, the programming, sales, marketing and similar services for a separately owned radio station located in the same radio market and realize the financial benefit of such activities. A JSA refers to an agreement, similar to an LMA or TBA, under which a radio station agrees to provide the sales and marketing services for another station while the owner of such other radio station provides the programming for such other radio station. LMAs, TBAs and JSAs are more fully described in "Federal Regulation of Radio Broadcasting" beginning on page 11. 4 Set forth below is a list of the Stations, specifying their broadcasting frequency, Federal Communications Commission (FCC) class, format, control, market, Arbitron market rank and station cluster rank by revenues in the respective market coverage area.

(1) WIOV-FM serves both Lancaster and Reading. The Company also owns and operates WIOV-AM, an AM-C station in Reading. The station cluster revenue rank for WIOV-FM includes WIOV-AM. (2) The Company estimates that on a combined basis the Evansville / Owensboro / Henderson market would have an Arbitron rank of 129 based on separate rankings of 156 and 276 for Evansville and Owensboro, respectively. Station cluster revenue rank for the Evansville/Owensboro/Henderson market is provided on the FM station's primary Metro area and includes the associated AM. WBKR-FM's Metro area is that of Owensboro with WKDQ-FM and WSTO-FM covering Evansville. (3) WSTO-FM is managed by the Company and owned by an entity, which is indirectly owned by Mr. Brill, but is not a Subsidiary (Managed Affiliate). (4) The Company does not subscribe to the Arbitron service in this market. Both market rank and revenue share have been estimated by the Company, without the benefit of any independent investigation or confirmation of a paid service provider. 5 Radio Industry Overview Radio stations generate the majority of their revenue from the sale of advertising time to local and national spot advertisers and national network advertisers. Radio is considered an efficient means of reaching specifically identified demographic groups. Radio stations are typically classified by their on-air format, such as country, adult contemporary, oldies or news/talk. A radio station's format and style of presentation enable it to target certain demographic and geographic groups. By capturing a specific listening audience share of a market's radio audience, with particular concentration in a targeted demographic group, a radio station is able to market its broadcasting time to advertisers seeking to reach a specific audience. Advertisers and radio stations utilize data published by audience measuring services, such as Arbitron, to estimate how many people within particular geographic markets and demographic groups listen to specific radio stations. A radio station's local sales staff generates the majority of its local and regional advertising sales through direct solicitations of local advertising agencies and businesses. To generate national advertising sales, a radio station will engage a firm that specializes in soliciting radio advertising sales on a national level. National sales representatives obtain advertising principally from advertising agencies located outside the radio station's market and receive commissions based on the revenue from the advertising obtained. The Company believes that the radio business in middle markets differs significantly from that of the major markets. This distinction is characterized by the lesser number of radio stations in smaller markets, the lesser number of advertising alternatives, the greater relevance of any single business (or radio station) to the market's life, the greater proportion of advertising that is sold locally as opposed to national accounts and the much smaller proportion of advertising that is controlled by agencies. For these reasons, in middle markets a radio station has greater flexibility in competitive and sales strategy and has greater control, through its own direct marketing efforts, on its own success, as compared to major markets. With fewer competitors in a middle market, a radio station can pursue listeners on a broader basis and serve a broader spectrum of advertisers, be less subject to competitive changes of competitors and, most importantly, deal directly with customers and around agencies if necessary to demonstrate and convince advertisers of the effectiveness of advertising on the station. A radio station does not have to wait for programming to be successful to draw customers when it can deal with potential clients directly on the basis of its effectiveness. As a result of ownership deregulation (see "Federal Regulation of Radio Broadcasting", beginning on page 11), middle market owners also can achieve the mass and efficiencies of major market operations through multiple radio station ownership. Such deregulation has greatly increased opportunities for ownership of radio stations in middle markets and has greatly increased the liquidity of radio station trading in the marketplace and, therefore, the liquidity that the financing markets are willing to offer. 6 Newspapers Overview Set forth below is a list of the Newspapers' publications in the state of Michigan and their respective circulation. Newspaper Location Circulation ---------------------------------------------------------------------------- Morning Sun Mt. Pleasant 13,275 Isabella County Herald Mt. Pleasant 11,355 Mt. Pleasant Buyers Guide Mt. Pleasant 28,605 Clare County Buyers Guide Clare 12,670 Alma Reminder Alma 19,730 Cadillac Buyers Guide Cadillac 19,825 Carson City Reminder Carson City 10,870 Edmore Advertiser Edmore 14,635 Hemlock Shoppers Guide Hemlock 10,945 Gladwin Buyers Guide Gladwin 16,880 Midland Buyers Guide Midland 24,555 St. Johns Reminder St. Johns 17,770 The Northeastern Shopper (2 Editions) Tawas City 40,300 Northern Star (2 Editions) Gaylord 19,550 Alpena Star Alpena 20,650 Presque Isle Star Alpena 6,450 Petoskey Star Ad-Vertiser Petoskey 10,150 Charlevoix County Star Petoskey 10,150 Star Ad-Vertiser Kalkaska 14,700 Star Buyer's Guide (2 Editions) West Branch 16,200 Roscommon County Star Prudenville 13,400 Straits Area Star Cheboygan 15,150 Preview Community Weekly Traverse City 31,260 AdVisor Community Weekly Honor 8,650 Northern Michigan Real Estate Guide Mt. Pleasant 18,500 Central Real Estate Guide Mt. Pleasant 16,000 The Newspapers serve a thirty-six county area of small communities in the central and northern portions of the lower peninsula of Michigan, where there are few other newspapers, one local television station, and few radio stations. The Company has central offices and production facilities in Mt. Pleasant, Michigan and Gaylord, Michigan and leads the central and northern Michigan markets in media billings. The Company's three edition daily newspaper, the MORNING SUN, has paid daily circulation of 11,880 and paid Sunday circulation of 13,075 subscribers and is the only daily newspaper published in Gratiot, Isabella and Clare counties. The Company's twenty-six weeklies and two monthly real estate guides are delivered free to more than 400,000 households in the central and northern portions of the lower peninsula of Michigan. The Company's multiple products and private delivery systems permit advertisers to buy customized receivership and readership in the portion of the local 7 market(s) that best reaches their potential customers. The Company also publishes numerous niche publications such as vacation guides. The Newspapers have a widely diversified base of advertising and printing customers and during the year ended February 28, 2001, no one customer represented more than 2% of the Company's revenues. The Newspapers' market covers an area approximately 120 miles by 240 miles, containing a total population in excess of 900,000 people. The area's relatively low population density makes print the only medium to serve the market efficiently. The Newspapers' market coverage includes the Michigan counties of Alcona, Alpena, Antrim, Arenac, Benzie, Clare, Charlevoix, Cheboygan, Clinton, Crawford, Emmet, Gladwin, Grand Traverse, Gratiot, Ionia, Iosco, Isabella, Kalkaska, Leelanau, Mecosta, Midland, Missaukee, Montcalm, Montmorency, Oscoda, Ogemaw, Osceola, Otsego, Presque Isle, Roscommon, Wexford and parts of Bay, Lake, Saginaw, Shiawassee and Mackinac counties. DISTRIBUTION. In addition to delivering its publications, the Newspapers also deliver over 125 million advertising insert pieces per year to residents in the central and northern portions of the lower peninsula of Michigan. Customized delivery to a particular zone can be specifically created for an advertiser to reach as few as 150 households or more than 400,000 households on a given day at less than half the cost charged by the post office. Newspapers' distribution systems include approximately 685 independent contractors and enable an advertiser to buy any part of the Company's distribution area that best serves the advertiser's needs. Newspaper Industry Overview Newspaper publishing is one of the oldest and largest segments of the media industry. Newspapers are an important medium for local advertising. The newspaper industry in the United States is comprised of the following segments: national and major metropolitan dailies; small metropolitan suburban dailies; suburban and community non-dailies; and free circulation "total market coverage" publications and shoppers (Shoppers). In many communities, the local newspaper provides a combination of social and economic connections which make it attractive for readers and advertisers alike. The Company believes that small metropolitan and suburban dailies as well as suburban and community non-dailies and Shoppers are generally effective in addressing the needs of local readers and advertisers under widely varying economic conditions. The Company believes that because small metropolitan and suburban daily newspapers rely on a broad base of local retail and local classified advertising rather than more volatile national and major account advertising, their advertising revenues tend to be relatively stable. In addition, the Company believes such newspapers tend to publish information which is of particular interest to the local reader and which national and major metropolitan newspapers, television and radio generally do not report to the same extent. Most small metropolitan and suburban daily newspapers are the only daily local newspapers in the communities they serve. The Company believes that relatively few daily newspapers 8 have been established in recent years due to the high cost of starting a daily newspaper operation and building a franchise identity. Shoppers provide nearly 100% household penetration in their areas of distribution and generally derive revenues solely from advertising. These publications have limited or no news or editorial content. The Shoppers are delivered by carriers and are free to the consumer. The newspaper industry, as represented by larger markets at one end and smaller markets on the other, is composed of two distinct sub-industries. They differ particularly because of the influences of size, alternative claims on readers' attention, alternative advertising vehicles, alternative newspaper competitors, methods and costs of distribution, labor costs and flexibility, other cost structures, and significance of the product to its readers and customers. In all of these parameters the Company believes that in middle markets, these factors are more favorable to the financial results and stability of a newspaper business. These factors also create a more vital product for the readers in a middle market than newspapers may be in a major market, which typically has numerous and diverse information and entertainment sources. Acquisition Strategy The Company seeks to acquire under performing middle market media businesses whose acquisition costs are low relative to potential revenues and cashflow. The Company focuses on developing significant long-term franchises in middle markets. The Company then seeks to improve revenues and cashflow, using its particular promotional, marketing, sales, programming and editorial approaches. The Company targets businesses that it believes operate in underdeveloped market segments with a low level of competition and a strong economic base, as well as radio stations with competitive technical facilities and businesses that are located in areas deemed desirable for relocation in terms of personnel recruitment. The Company believes that its acquisition strategy, properly implemented, has a number of specific benefits, including (i) diversification of revenues and cashflow across a broader base of industries, properties and markets, (ii) geographic clustering which has allowed improved cashflow margins through the consolidation of facilities, centralized newsgathering, cross-selling of advertising and elimination of redundant expenses, (iii) improved access to consultants and other industry resources, (iv) greater appeal to qualified industry management talent and (v) efficiencies from economies of scale. If and when achieved, new acquisitions may adversely affect near-term operating results due to increased capital requirements, transitional management and operating adjustments, increased interest costs associated with acquisition debt, and other factors. Any future acquisitions may be highly-leveraged, and such acquisitions well may increase the Company's overall leveraged position. There can be no assurance that debt or equity financing for such acquisitions will be available on acceptable terms, or that the Company will be able to identify or consummate any new acquisitions. Any failure to 9 make necessary acquisitions, or the making of unsuccessful acquisitions, could have a material adverse effect on the future financial condition and operating results of the Company. Advertising Sales Virtually all of the Company's revenue is generated from local, regional and national advertising for its Stations and Newspapers. During the year ended February 28, 2001, approximately 97% of the Company's revenues were generated from the sale of local and regional advertising. Additional revenue is generated from the sale of national advertising, network compensation payments and other miscellaneous transactions. The major categories of the Company's advertisers include retailers, restaurants, fast food, automotive and grocery. Each local sales staff solicits advertising either directly from the local advertiser or indirectly through an advertising agency with emphasis placed on direct contact. In so doing, the Company seeks to address individual advertiser needs and more effectively design an advertising campaign to help the advertiser sell its product. The Company employs personnel in each of its markets to produce advertisements for the customers. National sales are obtained via outside firms specializing in advertising on a national level. The firms are paid a commission based on a percentage of gross revenue from national advertising. The Company's local sales staff predominantly generates local and regional sales. Competition GENERAL. Each of the Company's Stations and Newspapers competes in varying degrees with other newspapers, magazines, direct mail, free shoppers, outdoor advertising, other FM and AM radio stations, television and cable television stations, and other media present within their respective markets. Radio broadcasting and newspaper distribution also are exposed to competition from developing media technologies, such as the delivery of audio programming through cable television or telephone wires, the introduction of digital radio broadcasting, which may provide a medium for the delivery by satellite or terrestrial means of multiple audio programming formats to local and national audiences, the increasing development and use of direct mail advertising, the growth of wireless communications and fiber optic delivery systems, the development of televised shopping programs, the potential for televised "newspapers," and the increasing growth of the Internet. The Stations and Newspapers also may encounter competition from future, unforeseen developments in technology that subsequently may be commercialized, and at all times they will face potential, additional competition from new or expanding market entrants. The Company cannot predict what effect, if any, these or other new technologies or competitors may have on the Company. RADIO. The radio broadcasting industry is highly competitive. The success of each of the Company's Stations in its middle markets depends largely upon the effectiveness of its direct marketing and sales efforts and its share of the overall advertising revenue within its market supported by its audience ratings. The Company's 10 audience ratings and advertising revenues are subject to change, and any adverse change in a particular market affecting advertising expenditures or in the relative market positions of the radio stations located in that market could have a material adverse effect on the revenue of the Company's Stations located in that market. There can be no assurance that any one of the Company's Stations will be able to maintain or increase its current audience ratings or advertising revenue market share. Past changes in the FCC's policies and rules permit increased ownership and operation of multiple local radio stations. Management believes that radio stations that operate under common management or elect to take advantage of joint arrangements such as LMAs or JSAs may in certain circumstances have lower operating costs and may be able to offer advertisers more attractive rates and services. Although the Company currently operates multiple Stations in each of its markets and intends to pursue the creation of additional multiple radio station groups, the Company's competitors in certain markets include operators of multiple radio stations or operators who already have entered into LMAs or JSAs. The Company also competes with other radio station groups to purchase additional radio stations. Some of these groups are owned or operated by companies that have substantially greater financial and other resources than the Company. NEWSPAPERS. The Company's Newspapers compete primarily with other daily and weekly newspapers, shoppers, shared mail packages and other local advertising media. The Newspapers also compete in varying degrees for advertisers and readers with magazines, other radio stations, broadcast television, telephone book directories and other communications media that operate in their markets. The Company believes that its production systems and technologies, which enable it to publish separate editions in narrowly targeted zones, allow it to compete effectively in its markets. Federal Regulation of Radio Broadcasting GENERAL. The ownership, operation and sale of broadcast stations, including those licensed to the Company, are subject to the jurisdiction of the FCC, which acts under authority derived from the Communications Act of 1934, as amended (Communications Act). Among other things, the FCC assigns frequency bands for broadcasting; issues broadcast station licenses; determines whether to approve changes in ownership or control of broadcast station licenses; regulates certain equipment used by broadcast stations; adopts and implements regulations and policies that directly or indirectly affect the ownership, operation and employment practices of broadcast stations, and has the power to impose penalties for violations of its rules under the Communications Act. The following is a brief summary of certain provisions of the Communications Act and of specific FCC regulations and policies. Failure to observe these or other rules and policies can result in the imposition of various sanctions, including monetary forfeitures, the grant of "short" (less than the maximum) license renewal terms or, for particularly egregious violations, the denial of a license renewal application, the 11 revocation of a license or the denial of FCC consent to acquire additional broadcast properties or to sell presently-owned broadcast properties unconditionally. Reference should be made to the Communications Act, FCC rules and the public notices and rulings of the FCC for further information concerning the nature and extent of federal regulation of broadcast stations. LICENSE GRANT AND RENEWAL. Radio broadcast licenses are granted for maximum terms of eight years. Licenses may be renewed through an application to the FCC. The FCC may not consider competing applications for the frequency being used by the renewal applicant if the FCC finds that the broadcast station has served the public interest, convenience and necessity, that there have been no serious violations by the licensee or by parties with attributable interests in 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 or by parties with attributable interests in 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 renewals 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 the FCC 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 is restricted. No such petitions are currently pending against any of the Company's Stations. The FCC classifies each AM and FM station. An AM station operates on a clear channel, regional channel or local channel. A clear channel is one on which AM stations are assigned to serve wide areas. Clear channel AM stations are classified as either: Class A stations, which operate on an unlimited time basis and are designed to render primary and secondary service over an extended area; Class B stations, which operate on an unlimited time basis and are designed to render service only over a primary service area; and Class D stations, which operate either during daytime hours only, during limited times only or on an unlimited time basis with low nighttime power. A regional channel is one on which Class B and Class D AM stations may operate and serve primarily a principal center of population and the rural areas contiguous to it. A local channel is one on which AM stations operate on an unlimited time basis and serve primarily a community and the suburban and rural areas immediately contiguous thereto. Class C AM stations operate on a local channel and are designed to render service only over a primary service area that may be reduced as a consequence of interference. Its class determines the minimum and maximum facilities requirements for an FM station. FM class designations depend upon the geographic zone in which the transmitter of the FM station is located. In general, commercial FM stations are 12 classified as follows, in order of increasing power and antenna height: Class A, B1, B, C3, C2, C1, C0 and C. The parameters for each classification are as follows: Class Maximum Power Maximum Antenna Height (HAAT)* in Meters ---------- ------------------- ----------------------------------------------- A 6 kw 100 B1 25 kw 100 B 50 kw 150 C3 25 kw 100 C2 50 kw 150 C1 100 kw 299 C0 100 kw 450 C 100 kw 600 * Height Above Average Terrain The following table sets forth the market, call letters, FCC license classification, HAAT, power and frequency of each of the Stations owned, operated or managed by the Company, and the date on which each Station's FCC license expires.

The Company holds a construction permit issued by the FCC to construct a new FM broadcast station on channel 232, licensed to Wellington, Colorado, which is part of the Fort Collins/Greeley/Loveland, Colorado radio market. The station will be a Class C3 facility and will operate on 94.3 mhz with a HAAT of 168 meters and a power of 8.7 kilowatts. This construction permit was issued on April 21, 2000 and will expire on April 21, 2003 unless the station is constructed and on the air prior to that date or the expiration of the permit has been extended pursuant to the FCC rules. OWNERSHIP MATTERS. The Communications Act prohibits the assignment of a broadcast license or the transfer of control of a broadcast licensee without the prior 13 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 licensee, including compliance with various rules limiting common ownership of media properties, the "character" of the licensee and those persons holding "attributable" interests therein, compliance with the Communications Act, including the limitation on alien ownership, as well as compliance with other FCC rules and policies. As part of the license renewal and transfer application process, notice of the filing of such application is made and third parties are provided with opportunities to file informal objections or formal petitions to deny the application. Interested parties also may seek review of the grant of an application by the full FCC and by federal courts. The Communications Act and FCC rules also generally restrict the common ownership, operation or control of radio broadcast stations serving the same local market, of a radio broadcast station and a television broadcast station serving the same local market, and of a radio broadcast station and a daily newspaper serving the same local market. Under these "cross-ownership" rules, absent waivers, the Company would not be permitted to acquire any television broadcast station (other than low power television) in a local market where it already owned any radio broadcast station, or acquire a daily newspaper and retain such common ownership through the next renewal cycle for the radio stations in the market where the daily newspaper is acquired. In response to changes in the Communications Act adopted in 1996, the FCC amended its multiple ownership rules to eliminate the national limits on ownership of AM and FM stations. The FCC's broadcast multiple ownership rules restrict the number of radio stations one person or entity may own, operate or control on a local level. These limits are: (i) in a market with 45 or more commercial radio stations, a person or entity may own, operate or control or have an attributable ownership interest in 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 stations, a person or entity may own, operate or control or have an attributable ownership interest in 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 stations, a person or entity may own, operate or control or have an attributable ownership interest in 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 stations, a person or entity may own, operate or control or have an attributable ownership interest in up to five commercial radio stations, not more than three of which are in the same 14 service, except that a person or entity may not own, operate or control more than 50% of the radio stations in such market. None of these multiple ownership rules requires any change in the Company's current ownership of radio stations. However, these rules will limit the number of additional stations which the Company may acquire or control in the future in its markets. The FCC generally applies its television/radio/newspaper cross-ownership rules and its broadcast multiple ownership rules by considering the "attributable," or cognizable interests held by a person or entity. A person or entity can have an attributable interest in a radio station, television station or daily newspaper by being an officer, director, partner, member or shareholder of a company that owns that station or newspaper or by holding more than one-third of the equity and debt of a broadcast licensee and either (i) providing a significant amount of programming to that broadcast licensee or (ii) owning another broadcast station in the same market. Whether that interest is cognizable under the FCC's ownership rules is determined by the FCC's attribution rules. If an interest is attributable, the FCC treats the person or entity that holds that interest as the "owner" of the radio station, television station or daily newspaper in question for purposes of applying the FCC's ownership rules. With respect to a corporation, officers and directors and persons or entities that directly or indirectly can vote 5% or more of the corporation's stock (20% or more of such stock in the case of insurance companies, investment companies, bank trust departments and certain other "passive investors" that hold such stock for investment purposes only) generally are attributed with ownership of whatever radio stations, television stations and daily newspapers the corporation owns. With respect to a partnership, the interest of a general partner is attributable, as is the interest of any limited partner who is "materially involved" in the media-related activities of the partnership. Debt instruments (except as noted above with respect to a one-third combination of debt plus equity), nonvoting stock, options and warrants for voting stock that have not yet been exercised, limited partnership interests where the limited partner is not "materially involved" in the media-related activities of the partnership, and minority (under 5%) voting stock, generally do not subject their holders to attribution. Limited liability companies ("LLC"), are treated the same as limited partnerships for purposes of the FCC attribution rules. Thus, if members were insulated from material involvement in the media-related activities of the LLC, their interests would not be attributable. Since under the doctrine of attributed ownership, all of the Company's Stations are deemed to be owned by Mr. Brill, the FCC multiple ownership rules could serve to limit to some extent the ability of the Company to acquire additional broadcast stations in some markets. The FCC issued a Notice of Proposed Rule Making in MM Docket No. 00-244 on December 13, 2000 to consider whether to amend the rules insofar as they determine the 15 size of a radio market and count the number of radio stations in a market in which one party has attributable interests. Any changes in the FCCs radio ownership rules that may be adopted in this proceeding could also limit to some extent the ability of the Company to acquire additional radio broadcast stations in some markets. PROGRAMMING AND OPERATION. The Communications Act requires broadcasters to serve the "public interest." Since 1981, the FCC gradually has relaxed or eliminated many of the more formalized procedures it developed to promote the broadcast of certain types of programming responsive to the needs of a broadcast station's community of license. However, licensees continue to be required to determine community problems, needs and interests, to broadcast programming that is responsive to such problems, needs and interests, and to maintain records demonstrating such responsiveness. Complaints from listeners concerning a broadcast station's programming will be considered by the FCC when it evaluates the licensee's renewal application, but such complaints also may be filed and considered at any time. Broadcast stations also must pay regulatory and application fees and follow various FCC rules that regulate, among other things, political advertising, the broadcast of obscene or indecent programming, sponsorship identification and technical operations (including limits on radio frequency radiation). The broadcast of contests and lotteries is regulated by FCC rules. In the past, the FCC has also required licensees to develop and implement programs designed to promote equal employment opportunities for women and minorities and submit reports to the FCC on these matters annually and in connection with a renewal application. Recent court decisions have held that the FCC's equal employment rules are unconstitutional, and the FCC has suspended those rules pending further review. Failure to observe these or other rules and policies can result in the imposition of various sanctions, including monetary forfeitures, the grant of "short" (less than the maximum) renewal terms or, for particularly egregious violations, the denial of a license renewal application or the revocation of a license. FCC rules regarding human exposures to levels of radio frequency radiation require applicants for new broadcast stations, renewals of broadcast licenses or modifications of existing licenses to inform the FCC at the time of filing such applications whether a new or existing broadcast facility would expose people to radio frequency radiation in excess of certain guidelines. More restrictive radiation limits became effective on October 15, 1997. To date, such regulations have not had a material effect on the Company's business and the Company anticipates that such regulations will not have a material effect on its business in the future. LOCAL MARKETING AGREEMENTS. Since the early 1990s, a number of radio stations, including certain of the Company's Stations, have entered into LMAs and TBAs. These agreements take various forms. Separately-owned and licensed radio stations may agree to function cooperatively in terms of programming, advertising sales 16 and other matters, subject to compliance with the antitrust laws and the FCC's rules and policies, including the requirement that the licensee of each radio station maintain independent control over the programming and other operations of its own radio station. The FCC has held that such agreements do not violate the Communications Act as long as the licensee of the radio station that is being substantially programmed by another entity maintains responsibility for, and control over, operations of its radio station and otherwise ensures compliance with applicable FCC rules and policies and that the entity providing the programming is in compliance with the FCC local ownership rules. A radio station that brokers substantial time on another radio station in its market or engages in an LMA with a radio station in the same market will be considered to have an attributable ownership interest in the brokered radio station for purposes of the FCC's ownership rules, discussed above. As a result, a radio station may not enter into an LMA that allows it to program more than 15% of the broadcast time, on a weekly basis, of another local radio station that it could not own under the FCC's local multiple ownership rules. FCC rules also prohibit a broadcast licensee from simulcasting more than 25% of its average weekly programming on another radio station in the same broadcast service (i.e., AM-AM or FM-FM) where the two radio stations serve substantially the same geographic area, whether the licensee owns the radio stations or owns one and programs the other through an LMA arrangement. Another example of a cooperative agreement between independently owned radio stations in the same market is a JSA, whereby one radio station sells advertising time both on itself and on a radio station under separate ownership. In the past, the FCC has determined that issues of joint advertising sales should be left to antitrust enforcement. JSAs are not deemed by the FCC to be attributable for the purpose of its multiple ownership rules. ANTITRUST CONSIDERATIONS. The Company is aware that the U.S. Federal Trade Commission (FTC) and the Antitrust Division of the U.S. Department of Justice (DOJ), which evaluate transactions to determine whether those transactions should be challenged under the federal antitrust laws, have been increasingly active recently in their review of radio station acquisitions, particularly where an operator proposes to acquire additional radio stations in its existing markets. For an acquisition meeting certain size thresholds, the Hart-Scott-Radio Act (HSR Act) and the rules promulgated there under require the parties to file Notification and Report Forms with the FTC and the DOJ and to observe specified waiting period requirements before consummating the acquisition. At any time before or after the consummation of a proposed acquisition, the FTC or the DOJ could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the acquisition or seeking divestiture of the business acquired or other assets of the acquiring company. Acquisitions that are not required to be reported under the HSR Act may be investigated by the FTC or the DOJ under the antitrust laws before or after consummation. In addition, private parties may under certain circumstances bring legal action to challenge an acquisition under the antitrust laws. 17 As part of its increased scrutiny of radio station acquisitions, the DOJ has stated publicly that it believes that LMAs, JSAs and other similar agreements customarily entered into in connection with radio station transfers prior to the expiration of the waiting period under the HSR Act could violate the HSR Act because they may constitute acquisitions or joint ventures subject to the filing and waiting period provisions of the HSR Act. If the Company should grow in size, whether through acquisitions or otherwise, it will become increasingly vulnerable to scrutiny under various antitrust and similar regulatory laws administered by various federal and state authorities, laws and regulations in which considerations of absolute or relative size or market share may be relevant if not controlling. Such laws and regulations are quite complex and subject to amendment and to frequent variations in interpretation or enforcement. As a result of such increased scrutiny, the Company could experience delays, increased costs, and compelled changes in connection with future transactions. If it were to be determined that one or more of the Company or its Subsidiaries had violated or were violating one or more of such laws or regulations, in addition to liability for resulting damages, any affected entity could face potential regulatory or court-ordered divestiture of one or more properties. Any such result could have a material adverse effect upon the Company. From time to time, the Congress and the FCC have considered, and in the future may consider and adopt, new or revised laws, regulations, and policies regarding a wide variety of matters that, directly or indirectly, could affect the operation, ownership, and profitability of the Stations, result in the loss of audience share and advertising revenues for the Stations, or affect the Company's ability to acquire additional radio stations or to finance such acquisitions. Such matters include: proposals to impose spectrum use or other fees on FCC licensees; the FCC's equal employment opportunity rules and matters relating to political broadcasting; technical and frequency allocation matters; proposals to restrict or prohibit the advertising of beer, wine, and other alcoholic beverages on radio; changes in the FCC's cross-interest, multiple ownership, and cross-ownership rules and policies; the creation of a new low power FM radio service that could result in additional radio station competition in the Company's markets; changes to broadcast technical requirements; proposals to allow telephone or cable television companies to deliver audio and video programming to the home through existing phone lines; and proposals to limit the tax deductibility of advertising expenses by advertisers. The Company cannot predict whether any proposed changes will be adopted or what other matters might be considered in the future, nor can it judge in advance what impact, if any, the implementation of any of these proposals or changes might have on the Company. The foregoing brief description does not purport to be comprehensive and reference should be made to the Communications Act, the Telecommunications Act of 1996, the FCC's rules, and the public notices and policies of the FCC for further 18 information concerning the nature and extent of federal regulation of radio broadcast stations. Employees At February 28, 2001, the Company employed approximately 500 persons full-time and 120 persons part-time. None of such employees is covered by collective bargaining agreements, and the Company considers its relations with its employees to be good. Approximately 685 independent contractors distribute the Newspapers' publications. The Company employs several on-air personalities with large loyal audiences in their respective markets. The loss of one of these personalities could result in a short-term loss of audience share, but the Company does not believe that any such loss would have a material adverse effect on the Company's financial condition or results of operations. Operating Segments Revenues and other information for the Company's radio and newspaper operating segments are provided in Note 10 of the consolidated financial statements included in this Report. ITEM 2. PROPERTIES The types of properties required to support the Stations include offices, studios, transmitter sites and antenna sites. A Station's studios are generally housed with its offices in business districts, while transmitter sites and antenna sites are generally located so as to provide maximum market coverage. The Company owns studio facilities in Ephrata, Pennsylvania; Owensboro, Kentucky; Windsor, Colorado; and transmitter and antenna sites in Reading, Pennsylvania; Owensboro, Kentucky; Henderson, Kentucky; and Superior, Wisconsin. The Company leases its remaining studio and office facilities, and leases certain transmitter and antenna sites. The Company does not anticipate any difficulties in renewing any facility leases or in leasing alternative or additional space, if required. The Company owns substantially all of its other station equipment, consisting principally of transmitting antennae, transmitters, studio equipment and general office equipment. The Newspapers' facilities for administration, printing and distribution are all leased, with the exception of its northern-most printing facility located in Gaylord, Michigan, which the Company owns. The Company does not anticipate any difficulties in renewing any facility leases or in leasing alternative or additional space, if required. The Company owns a late model Goss Community press line and other various modern editorial, classified, composing and camera equipment. 19 No one property is material to the Company's operations. The Company believes that its properties are generally in good condition and suitable for its operations; however, it continually looks for opportunities to upgrade its properties and intends to upgrade studios, office space, and transmission facilities in certain markets. ITEM 3. LEGAL PROCEEDINGS Currently and from time to time the Company is involved in litigation incidental to the conduct of its business, but it is not a party to any lawsuit or proceeding that, in the opinion of the Company, is likely to have a material adverse effect on the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The operating agreement of BMC provides that its manager shall manage its business, which presently is Brill Media Management, Inc. (Media). Media also is a Subsidiary of BMC. In lieu of an annual meeting, Messrs. Alan Brill, Robert M. Leich, Philip C. Fisher, Clifton E. Forrest and Charles W. Laughlin were appointed directors of Media by written consent as of February 10, 2001. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The common equity of BMC is comprised of membership interests (Membership Interests), all of which are indirectly owned by Mr. Brill. ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA The selected consolidated financial data presented below should be read in conjunction with the consolidated financial statements of Brill Media Company, LLC and notes thereto included elsewhere in this Report and "Management's Discussion and Analysis of Financial Condition and Results of Operations" beginning on page 22. The selected consolidated financial data (except for the other financial and operating 20 data) of Brill Media Company, LLC have been derived from the audited consolidated financial statements of Brill Media Company, LLC for the respective years.

Amounts for fiscal 2000, 1999, 1998 and 1997 were restated to reflect the inclusion of T4L. (a) The extraordinary item in fiscal 1998 reflects a $1.6 million write-off of previously deferred financing costs along with a prepayment penalty of $2.8 million related to the early extinguishment of senior debt. (b) The cumulative effect of change in accounting principle in fiscal 2000 resulted from the write-off of previously capitalized start-up costs. 21 (c) The term Media Cashflow represents EBITDA plus incentive plan expense, management fees, time brokerage fees paid, acquisition related consulting expense and interest income from loans made by the Company to Managed Affiliates. EBITDA represents operating income plus depreciation and amortization expense. As used above Media Cashflow and EBITDA include the results of unrestricted subsidiaries and therefore differ from the same terms as defined in the Indenture for the Company's Senior Notes (Indenture). Management fees payable to BMCLP are subordinated, to the extent provided in the Indenture, to the prior payment of the Senior Notes. Although Media Cashflow and EBITDA are not measures of performance calculated in accordance with GAAP, management believes that these measures are useful to an investor in evaluating the Company because these measures are widely used in the media industry to evaluate a media company's operating performance. However, Media Cashflow and EBITDA should not be considered in isolation or as substitutes for net income, cash flows from operating activities and other income or cash flow statements prepared in accordance with GAAP as measures of liquidity or profitability. In addition, Media Cashflow and EBITDA as determined by the Company may not be comparable to related or similar measures as reported by other companies and do not represent funds available for discretionary use. (d) Total debt includes the Senior Notes, the Senior Secured Facility (as defined below), secured obligations, mortgage obligations, obligations under capital leases, secured subordinated obligations, appreciation notes, unsecured obligations (including obligations due to affiliates) and performance incentive plan liabilities. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General The following discussion and analysis of the financial condition and results of operations of the Company should be read in conjunction with the consolidated financial statements of Brill Media Company, LLC and notes thereto included elsewhere in this Report. Brill Media Company, LLC was organized in 1997. The Subsidiaries, all of which are wholly-owned, include various radio, newspaper and related businesses. The Stations own and operate FM and AM radio stations in Pennsylvania, Colorado, Indiana/Kentucky, and Minnesota/Wisconsin. The Newspapers own and operate integrated newspaper publishing, printing and print advertising distribution operations, providing total-market print advertising coverage throughout a thirty-six county area in the central and northern portions of the lower peninsula of Michigan. The historical financial statements of Brill Media Company, LLC included elsewhere in this Report include the financial position and results of operations on a consolidated basis. 22 The Stations' revenues are derived primarily from advertising revenues. In general, each Station receives revenues for advertising sold for placement within the Station's programming. Advertising is sold in time increments and is priced primarily based on a Station's program's popularity within the demographic group an advertiser desires to reach, as well as quality of service provided to the customer, creativity in marketing the client's products and services, the personal relationship between the Station's account executive and the client, and the client's view of the popularity of the Station among its target customer base. In addition, advertising rates are affected by the number of advertisers competing for available time, the size and demographic make-up of the markets served by the Stations and the availability of alternative advertising media in the market area. Rates are highest during the most desirable listening hours, with corresponding reductions during other hours. During the year ended February 28, 2001, over 92% of the Stations' advertising revenues were generated from local and regional advertising, which is sold primarily by a Station's sales staff. The remainder of the advertising revenues represents national advertising and network compensation payments. In addition to any commissions paid to its sales staff, the Stations generally pay commissions to advertising agencies on local and regional advertising and to sales representation firms on national advertising. The advertising revenues of a Station generally are highest in the second and fourth calendar quarters of each year, due in part to increases in consumer advertising in the spring and retail advertising in the period leading up to and including the holiday season. During the year ended February 28, 2001, no single customer in any of the Stations' markets provided more than 2% of the Company's revenues. In the broadcasting industry, radio stations often utilize trade (or barter) agreements to exchange advertising time for goods or services (such as other media advertising, travel or lodging), in lieu of cash. In order to preserve most of its on-air inventory for cash advertising, the Company generally enters into trade agreements only if the goods or services bartered to the Company will be used in the Company's business. The Company has minimized its use of trade agreements and has sold over 90% of its radio advertising time for cash for the year ended February 28, 2001. In addition, it is the Company's general policy not to pre-empt radio advertising spots paid for in cash with radio advertising spots paid for in trade. Each Station's financial results depend on a number of factors, including the general strength of the local and national economies, population growth, the ability to provide popular programming, local market and regional competition, the relative efficiency of radio broadcasting compared to other advertising media, signal strength, development of competitive technologies and government regulation and policies. The Newspapers' revenues are derived primarily from advertising and subscription revenues and to a lesser extent, from printing and print distribution revenues. In general, newspaper publications receive revenue for advertising sold to reach readership within its geographical distribution area and its customers' marketing areas. The combined coverage and timing of the numerous weekly publications and the daily 23 publications provide the Newspapers with flexibility and efficiencies to create a competitive advantage in attracting advertisers. As an inducement to its customers, the Newspapers offer advertisers more efficient buys when they purchase ad placement in multiple publications. The Newspapers have a widely diversified customer base, and for the year ended February 28, 2001, no single customer of the Newspapers represented more than 2% of the Company's revenues. The Newspapers' financial results are dependent on a number of factors, particularly those that impact local retail sales, including the general strength of the local and national economies, population growth, local and regional market competition and the perceived relative efficiency of newspapers compared to other advertising media. The following table sets forth the percentage of revenues generated by the Company's Stations and Newspapers. Years Ended February 28 or 29 Revenues 2001 2000 1999 1998 1997 ------------------------------------------------------------------------------ Stations 39% 40% 40% 54% 51% Newspapers 61% 60% 60% 46% 49% ------------------------------------------------------------ 100% 100% 100% 100% 100% ============================================================ The primary operating expenses incurred in the ownership and operation of the Stations include employee salaries and commissions, programming, advertising and promotion expenses. For the Newspapers, the primary operating expenses are employee salaries and commissions, newsprint and delivery charges. Newsprint represents the Newspapers' single largest raw material expense, the cost of which is cyclical and may vary widely from period to period. The Company also incurs and will continue to incur significant depreciation and amortization expense as a result of completed and future acquisitions of radio stations and newspapers as well as interest expense due to existing borrowings and future borrowings. The consolidated financial statements of Brill Media Company, LLC tend not to be directly comparable from period to period due to the Company's acquisition and disposition activity. Results of Operations Year Ended February 28, 2001 Compared to Year Ended February 28, 2000 Revenues for the year ended February 28, 2001 were $45.8 million, a $.9 million or 2.0% increase from $44.9 million for the prior fiscal year. The Stations' revenues were $17.7 million, down 1.3% from $18.0 million for the prior fiscal year and Newspapers' revenues were $28.1 million, up 4.2% from $27.0 million for the prior fiscal year. Stations' revenues, excluding last year's TBA fees from the Missouri radio stations which have been sold, increased $.4 million or 2.4% from the prior fiscal year. 24 The Newspapers' revenues increased $1.1 million or 4.2% from the prior fiscal year. Operating expenses for the year ended February 28, 2001 were $41.4 million, an increase of $1.2 million or 3.0% from the prior fiscal year. The Stations' operating expenses increased $.3 million or 1.8% from the prior fiscal year. The Newspapers' operating expenses increased $.9 million over the prior fiscal year. Included in this net increase is an increase of $1.9 million in operating expenses, which were a direct result of the increase in compensation to attract and retain qualified employees in the tightening job market and also an increase in newsprint costs as compared to the prior fiscal year. This amount is offset by a decrease of $1.0 million attributable to the net decrease in non-cash provisions for amortization, depreciation and incentive plan. The change in the incentive plan from the prior year is primarily the result of decreased operating profits of certain newspaper properties. As a result of the above, operating income for the year ended February 28, 2001 was $4.4 million, a decrease of $.3 million or 6.3% from the prior fiscal year. Other income (expense) for the year ended February 28, 2001 was $15.8 million of net expense, an increase of $7.3 million or 85.1% over the prior comparative period. Of this $7.3 million increase, $6.0 million is from gain on sale of assets of the Missouri properties recognized in fiscal 2000, with the remainder attributable to increases in interest expense associated with the additional borrowing and financing activities of fiscal 1999 and 2000. Year Ended February 29, 2000 Compared to Year Ended February 28, 1999 Revenues for the year ended February 29, 2000 were $44.9 million, a $2.3 million or 5.5% increase from $42.6 million for the prior fiscal year. The Stations' revenues were $18.0 million, up 5.2% from $17.1 million for the prior fiscal year and Newspapers' revenues were $27.0 million, up 5.7% from $25.5 million for the prior fiscal year. Stations' revenues increased $.9 million or 5.2% from the prior fiscal year. The fiscal 2000 acquisition accounted for $.2 million of this increase with the remainder due to continuing same station growth within each market. The Newspapers' revenues increased $1.5 million or 5.7% from the prior fiscal year. Fiscal 2000 and 1999 acquisitions accounted for $1.4 million of the increase. 25 Operating expenses for the year ended February 29, 2000 were $40.3 million, an increase of $3.0 million or 8.0% from the prior fiscal year. The Stations' operating expenses increased $.6 million or 4.0% from the prior fiscal year. The fiscal 2000 acquisitions accounted for $.2 million of this increase. The Newspapers' operating expenses increased $2.4 million over the prior fiscal year. Of this increase, $1.9 million was attributable to the 2000 and 1999 acquisitions; $.9 million was attributable to increases in non-cash provisions for amortization, depreciation and incentive plan. The increase in the incentive plan was due to improved operating profits of certain newspaper properties. Excluding the acquisitions and the non-cash provisions, the Newspapers' operating costs decreased by $.4 million. As a result of the above, operating income for the year ended February 29, 2000 was $4.7 million, a decrease of $.6 million or 12% from the prior fiscal year. Other income (expense) for the year ended February 29, 2000 was $8.5 million of net expense, a decrease of $4.7 million or 35.4% over the prior comparative period. This is primarily due to the gain on sale of assets of $6.0 million offset by an increase in net interest expense associated with the additional borrowing and financing activities for the acquisitions referenced above. Liquidity and Capital Resources Generally, the Company's operating expenses are paid before its advertising revenues are collected. As a result, working capital requirements have increased as the Company has grown and will likely increase in the future. Net cash provided by (used in) operating activities was ($7.2) million, ($.2) million and $.7 million for the years ended February 28, 2001, February 29, 2000 and February 28, 1999, respectively. The increase of $6.9 million in cash used in operating activities in fiscal 2001 from fiscal 2000 is primarily attributable to increased net interest payments and by operating activities. The decrease of $.9 million in cash provided by operating activities in fiscal 2000 from fiscal 1999 is primarily attributable to increased net interest payments and by operating activities of the 1999 and 2000 acquisitions. Net cash provided by (used in) investing activities was ($3.0) million, $2.1 million and ($6.7) million for the years ended February 28, 2001, February 29, 2000 and February 28, 1999, respectively. 26 The cash used in investing activities for fiscal 2001 is primarily attributable to the purchase of property and equipment along with the payment of the final installment on the acquisition of a new broadcast frequency in Wellington, Colorado (see Note 3 to the Consolidated Financial Statements included in Item 8), offset by the net repayment of loans between related parties and the Managed Affiliate. The cash provided by investing activities for fiscal 2000 is primarily attributable to the proceeds from the sale of the Missouri Properties, offset by additional loans to the managed affiliate and related parties, newspaper and radio acquisitions and the purchase of property and equipment. The cash used in investing activities for fiscal 1999 is primarily attributable to the additional loans to Managed Affiliates and related parties, a newspaper and a radio acquisition and the purchase of property and equipment. Net cash provided by (used in) financing activities was ($.9) million, $12.4 million and ($2.2) million for the years ended February 28, 2001, February 29, 2000 and February 28, 1999, respectively. The cash used in financing activities for the current year is attributable primarily to principal payments on long-term obligations. The cash provided by financing activities for fiscal 2000 is attributable primarily to $15 million in proceeds from the Senior Secured Facility entered into during October 1999. The increase was offset by payment of costs associated with the credit facility and principal payments of long-term obligations. Included in the principal payments of long-term obligations was $3 million of Appreciation Notes that were redeemed by proceeds provided by a capital contribution made by Mr. Brill. The use of cash for financing activities for fiscal 1999 is attributable primarily to repayments of long-term debt, net of proceeds from borrowings. EBITDA was $7.9 million, $8.0 million and $8.4 million for the years ended February 28, 2001, February 29, 2000 and February 28, 1999, respectively. Media Cashflow was $11.0 million, $12.1 million and $11.7 million for the same three comparative periods. The term Media Cashflow represents EBITDA plus incentive plan expense, management fees, time brokerage fees paid, acquisition related consulting expense and interest income from loans made by the Company to Managed Affiliates. EBITDA represents operating income plus depreciation and amortization expense. As used above Media Cashflow and EBITDA include the results of unrestricted subsidiaries and therefore differ from the same terms as defined in the Indenture for the Company's Senior Notes. 27 Although Media Cashflow and EBITDA are not measures of performance calculated in accordance with GAAP, management believes that these measures are useful in evaluating the Company and are widely used in the media industry to evaluate a media company's performance. However, Media Cashflow and EBITDA should not be considered in isolation or as substitutes for net income, cash flows from operating activities and other income or cash flow statements prepared in accordance with GAAP as measures of liquidity or profitability. In addition, Media Cashflow and EBITDA as determined by the Company may not be comparable to related or similar measures as reported by other companies and do not represent funds available for discretionary use. The Company has loaned $8.3 million to a Managed Affiliate and received in return a Managed Affiliate Note, which is unsecured, matures on November 15, 2003 and bears interest at a rate of 12% per annum. The Indenture generally limits the Company to $20 million of outstanding loans to Managed Affiliates unless the Company meets certain conditions as described below in "Certain Relationship and Related Transactions". The proceeds of such loans have been used by Managed Affiliates to purchase property, equipment, and intangibles and provide working capital. It is anticipated that similar relationships may be initiated with other affiliates in the future. For the year ended February 28, 2001, the Managed Affiliate reported revenues of $2.5 million, a net loss of $1.0 million and Media Cashflow of $.6 million. Long-term obligations include the Company's 12% senior notes due 2007 (Senior Notes). The Senior Notes require semi-annual cash interest payments on each June 15 and December 15 of $6.3 million. In October 1999, as permitted under the Indenture, the Company borrowed $15 million under a secured credit facility with a senior lender (the Senior Secured Facility), which matures October 2004. The facility bears interest, payable monthly, at the prime rate plus 1% with a minimum interest rate of 8% per annum (effectively 9.5% at February 28, 2001). The facility restricts the Company from essentially the same defined limitations as contained in the Indenture and includes certain financial covenants with respect to earnings and asset coverage. The facility is secured by substantially all assets of the restricted subsidiaries as defined in the Indenture. The Company's ability to pay interest on the Senior Notes and the Senior Secured Facility when due, and to satisfy its other obligations depends upon its future operating performance, and will be affected by financial, business, market, technological, competitive and other conditions, developments, pressures, and factors, many of which are beyond the control of the Company. The Company is highly leveraged, and many of its competitors are believed to operate with much less leverage and to have significantly greater operating and financial flexibility and resources. Historically, the Company has achieved significant growth through acquisitions. In order for the Company to achieve needed future growth in revenues and earnings and to replace the revenues and earnings of properties that may be sold by one or more of the Subsidiaries from time to time, additional acquisitions may be necessary. Meeting this 28 need for acquisitions will depend upon several factors, including the continued availability of suitable financing. There can be no assurance that the Company can or will successfully acquire and integrate future operations. In connection with future acquisition opportunities, the Company, or one or more of its subsidiaries, may need to incur additional indebtedness or issue additional equity or debt instruments. There can be no assurance that debt or equity financing for such acquisitions will be available on acceptable terms, or that the Company will be able to identify or consummate any new acquisitions. The Indenture limits the Company's ability to incur additional indebtedness. Limitations in the Indenture on the Company's ability to incur additional indebtedness, together with the highly leveraged nature of the Company, could limit operating activities, including the Company's ability to respond to market conditions, to provide for unanticipated capital investments and to take advantage of business opportunities. The Company's primary liquidity needs are to fund capital expenditures, provide working capital, meet debt service requirements and make acquisitions. The Company's principal sources of liquidity are cashflow from operations, cash on hand, repayments on notes receivable, proceeds from sales of properties and indebtedness permitted under the Indenture. The Company believes that liquidity from such sources should be sufficient to permit the Company to meet its debt service obligations, capital expenditures and working capital needs for the next 12 months, although additional capital resources may be required in connection with the further implementation of the Company's acquisition strategy. In the past, depreciation, amortization, and interest charges have contributed significantly to net losses incurred by the Company, and it is expected that such net losses will continue in the future. On a combined basis, the Company and its predecessors reported a net loss in all five of the prior fiscal years. In the fiscal year ended February 28, 2001, the Company reported a net loss of $11.5 million. While the Company expects that the Subsidiaries' cashflow will improve, the Company nonetheless expects that the Subsidiaries will continue to incur substantial net losses. Capital expenditures in fiscal 2001 were $2.4 million of which $.6 million related to Station operations and $1.8 related to Newspaper operations. The Company anticipates that capital expenditures in fiscal 2002 will approximate $1.0 million for existing properties. Seasonality Seasonal revenue fluctuations are common in the newspaper and radio broadcasting industries, caused by localized fluctuations in advertising expenditures. Accordingly, the Stations' and Newspapers' quarterly operating results have fluctuated in the past and will fluctuate in the future as a result of various factors, including seasonal demands of retailers and the timing and size of advertising purchases. Generally, in each 29 calendar year the lowest level of advertising revenues occurs in the first quarter and the highest levels occur in the second and fourth quarters. Inflation The Company believes that inflation affects its business no more than it generally affects other similar businesses. Income Taxes The taxable income or loss of the Company's "S" corporation and limited liability company subsidiaries for federal income tax purposes is passed through to Mr. Brill. Accordingly, the financial statements include no provision for federal income taxes of the Company's "S" corporation or limited liability company subsidiaries. Certain of the Company's subsidiaries are "C" corporations. The "C" corporations are in loss carryforward positions at February 28, 2001 for income tax purposes. As a result of net operating loss carryforwards and temporary differences, the "C" corporations have net deferred tax assets at February 28 or 29, 2001 and 2000 of approximately $8.4 million and $7.6 million, respectively and have established equivalent valuation allowances. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's market risk sensitive instruments do not subject the Company to material risk exposures, except for such risks related to interest rate fluctuations. As of February 28, 2001, the Company has debt outstanding of approximately $136.3 million. Senior Notes with a carrying value of $103.4 million have an estimated fair value of approximately $56.7 million. The fair market value of the Company's remaining debt of $32.9 million approximates its carrying value. Fixed interest rate debt totals approximately $119.9 million as of February 28, 2001 and includes: the Senior Notes which bear cash interest, payable semiannually, at a rate of 12% until maturity on December 15, 2007; other debt with stated rates of 7% to 10%; and capital leases with effective rates of 12%. The remainder of the debt totaling $16.4 million, or 12% of the total, is variable rate debt. The majority of such debt is the Senior Secured Facility, which currently bears interest at 9.5% (all of which are described in the notes to the financial statements included in Item 8 below). At February 28, 2001 long-term debt matures as follows:

30 At February 29, 2000 long-term debt includes: Total ------------ Senior Notes, net of unamortized discount of $ 1,829,553 $ 103,170,447 Senior Secured Facility 15,000,000 Other 14,444,357 ------------ $132,614,804 ============ 31 ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Brill Media Company, LLC (A Limited Liability Company) Consolidated Financial Statements Years ended February 28 or 29, 2001, 2000 and 1999 Contents Report of Independent Auditors...............................................33 Consolidated Financial Statements Consolidated Statements of Financial Position................................34 Consolidated Statements of Operations and Members' Deficiency................35 Consolidated Statements of Cash Flows........................................36 Notes to Consolidated Financial Statements...................................38 32 Report of Independent Auditors The Members of Brill Media Company, LLC We have audited the accompanying consolidated statements of financial position of Brill Media Company, LLC as of February 28, 2001 and February 29, 2000, and the related consolidated statements of operations and members' deficiency and cash flows for each of the three years in the period ended February 28, 2001. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Brill Media Company, LLC at February 28, 2001 and February 29, 2000, and the consolidated results of its operations and its cash flows for each of the three years in the period ended February 28, 2001, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. Ernst & Young LLP Chicago, Illinois April 27, 2001 Brill Media Company, LLC (A Limited Liability Company) Consolidated Statements of Financial Position

See accompanying notes. 34 Brill Media Company, LLC (A Limited Liability Company) Consolidated Statements of Operations and Members' Deficiency

See accompanying notes. 35 Brill Media Company, LLC (A Limited Liability Company) Consolidated Statements of Cash Flows

36 Brill Media Company, LLC (A Limited Liability Company) Consolidated Statements of Cash Flows (continued)

See accompanying notes. 37 Brill Media Company, LLC (A Limited Liability Company) Notes to Consolidated Financial Statements Years ended February 28 or 29 for 2001, 2000 and 1999 1. Basis of Presentation and Business Basis of Presentation The consolidated financial statements include the accounts of Brill Media Company, LLC and its subsidiaries, all of which are wholly owned (collectively the Company or BMC). BMC's members are directly owned by Alan R. Brill (Mr. Brill). All inter-company balances and transactions have been eliminated in consolidation. BMC was organized in 1997 as a limited liability company under the laws of the state of Virginia and has a term of 50 years. Business The Company is a diversified media enterprise that acquires, develops, manages, and operates radio stations, newspapers and related businesses in middle markets. The Company presently owns, operates or manages thirteen radio stations serving four markets located in Pennsylvania, Kentucky/Indiana, Colorado, and Minnesota/Wisconsin (collectively referred to herein as Radio), and additionally, manages a radio station located in the Kentucky/Indiana market that is owned by an affiliate of the Company - see Note 9. The Company operates integrated newspaper publishing, printing and print advertising distribution operations, providing total-market print advertising coverage throughout a thirty-six county area in the central and northern portions of the lower peninsula of Michigan (collectively referred to herein as News). These operations offer a three-edition daily newspaper, twenty-three weekly publications, two monthly real estate guides, two web offset printing operations for newspaper publications and outside customers, and three private distribution systems. 38 2. Significant Accounting Policies Cash Equivalents The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. Inventories Inventories, consisting primarily of newsprint, are stated at the lower of cost (first in, first out) or market. Property and Equipment Property and equipment are stated at cost. Depreciation is provided under the straight-line method over the estimated useful lives of the various assets as follows: Buildings and improvements 10 to 40 years Towers and antennae 13 to 20 years Machinery and equipment 5 to 25 years Broadcast equipment 3 to 10 years Furniture and fixtures 5 to 10 years Intangible Assets Goodwill and FCC licenses are being amortized as required by generally accepted accounting principles. Amortization is calculated on the straight-line basis over a period of 40 years. Covenants not to compete are being amortized on the straight-line basis over the agreements' terms of five to six years. Deferred financing costs and favorable leasehold rights are being amortized on the straight-line basis over the terms of the underlying debt (5-10 years) or leases (3-20 years). Long-Lived Assets The Company annually considers whether indicators of impairment of long-lived assets held for use (including intangibles) are present. If such indicators are present, the Company determines whether the sum of the estimated undiscounted future cash flows is less than their carrying amounts. The Company recognizes any impairment loss based on the excess of the carrying amount of the assets over their fair value. No impairment loss has been recognized during the three years ended February 28, 2001. 39 2. Significant Accounting Policies (continued) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Revenue Recognition The Company recognizes revenue when advertising is aired by Radio or a publication is distributed by News. Radio also receives fees under time brokerage agreements (TBA), which are recognized based on a stated amount per month. Advertising Advertising costs are expensed as incurred and totaled $1,233,000, $1,613,000 and $1,419,000 in fiscal 2001, 2000 and 1999 respectively. Comprehensive Income Net loss for each of the three years in the period ended February 28, 2001 is the same as comprehensive loss. Start-Up Costs The Company adopted AcSEC Statement of Position 98-5 "Reporting on the Costs of Start-Up Activities" in the first quarter of fiscal 2000 and wrote-off, as required, approximately $165,000 of previously capitalized start-up costs as a cumulative effect of change in accounting principle. All subsequent start-up or preopening costs are expensed as incurred. Reclassifications Certain amounts in the fiscal 2000 consolidated financial statements have been reclassified to conform to the fiscal 2001 presentation. 3. Acquisitions and Dispositions In November 1998, the Company acquired three weekly shopping guide publications and a print distribution operation reaching approximately 66,000 households in the northwestern portion of the lower peninsula of Michigan (the 1999 News acquisition). Total consideration was $1,409,000, which consisted of $558,000 in cash and a secured seller 40 3. Acquisitions and Dispositions (continued) note valued at $851,000. The Company also entered into a six-year covenant not to compete valued at $406,000. In February 1999, the Company purchased radio station KTRR-FM, located in Loveland, Colorado, which it had been operating pursuant to a TBA since August 5, 1996. The purchase price of $2,134,000 included $584,000 in cash, a note payable of $1,350,000 and a $200,000 nonrefundable payment made in fiscal 1997. The Company also entered into a five-year covenant not to compete valued at $180,000. In April 1999, the Company acquired a real estate magazine, which has monthly distribution of approximately 20,000 households in the northwestern portion of the lower peninsula of Michigan (the 2000 News acquisition). Total consideration was $217,000, which consisted of $55,000 cash and a secured seller note valued at $162,000. The Company also entered into a six-year covenant not to compete valued at $54,000. In October 1999, the Company submitted the winning bid of $1,561,000 in accordance with the FCC rules for auctioning broadcast spectrum for a new FM radio broadcast signal in Wellington, Colorado. The Company paid the FCC an initial deposit of $312,000 in October 1999 with the balance due after final FCC authorization. In April 2000, the Company received FCC authorization and licensing of the station was completed and the remaining amount of $1,249,000 was paid. The Company expects to begin broadcasting in fiscal 2002. In January 2000, the Company acquired radio station KUSZ-FM located in the Duluth, Minnesota market for $1,000,000 in cash and a five-year covenant not to compete valued at $156,000. The Company had been operating the radio station pursuant to a TBA since August 1999. In February 2000, the Company sold the operating assets of its Missouri radio stations (collectively, the Missouri Properties), which had been operated pursuant to TBAs by the prospective buyer since November 1997. The sales price was $7,419,000 and resulted in a pretax gain of $6,175,000, net of related expenses. In November 2000, certain wholly-owned subsidiaries of the Company paid $1,099 in cash to acquire 100% of the membership interests of TSB IV, LLC (T4L), a Virginia limited liability company, pursuant to an Agreement for Transfer of Membership Interest. Simultaneously, Mr. Brill made a capital contribution of $1,099 in cash to the Company. Prior to the transaction, T4L had been a "managed affiliate" of the Company as described in Note 9 and was indirectly owned by Mr. Brill. The consolidated financial statements give retroactive effect to the acquisition of T4L, which was accounted for similar to a pooling-of-interests due to the related party nature of the transaction. Accordingly, the net assets acquired from T4L were recorded at T4L's 41 3. Acquisitions and Dispositions (continued) book value and the results of operations of the Company include the historical results of operations of T4L. T4L assets, at book value, included current assets of $394,000, broadcasting equipment of $1,501,000 and intangibles of $5,770,000. T4L liabilities totaled approximately $14 million at November 17, 2000 and included accounts payable, other accrued expenses, a promissory note payable of $12,906,000 to the Company, as well as other purchase money and capital lease obligations including a capitalized lease to a related party. In addition, for the years ended February 29, 2000 and February 28, 1999 revenues were $2,219,000 and $2,256,000 and net loss was $1,669,000 and $1,513,000, respectively. Other than the acquisition of T4L, the above acquisitions have been accounted for as purchases, and except where stated otherwise the financial statements include the results of operations from the acquisition dates. 4. Property and Equipment Property and equipment consists of the following: February 28 or 29 2001 2000 ------------------------ Land $ 691,100 $ 771,100 Buildings and improvements 9,143,804 4,171,674 Towers and antennae 2,529,108 2,431,958 Machinery and equipment 9,465,008 9,012,591 Broadcast equipment 4,852,304 4,426,922 Furniture and fixtures 4,468,801 3,512,400 Construction in progress -- 500,000 ------------------------ $31,150,125 $24,826,645 ======================== Property and equipment includes the following assets under capital leases: February 28 or 29 2001 2000 ---------------------- Buildings and improvements $5,847,602 $1,964,665 Machinery and equipment 227,838 227,838 Broadcast equipment 665,332 538,614 Furniture and fixtures 592,211 371,434 ---------------------- $7,332,983 $3,102,551 ====================== Amortization of property and equipment under capital leases is included with depreciation expense in the statements of operations and members' deficiency. 42 5. Other Assets Other assets consist of the following: February 28 or 29 2001 2000 ---------------------- Deferred financing costs $7,461,161 $7,461,961 Favorable leasehold rights 215,584 212,384 Other 446,430 823,566 ---------------------- 8,123,175 8,497,911 Less: Accumulated amortization 3,258,584 2,362,567 ---------------------- $4,864,591 $6,135,344 ====================== 6. Income Taxes The taxable income or loss of the Company's "S" corporation or limited liability company subsidiaries for federal and state income tax purposes is ultimately passed through to Mr. Brill. Accordingly, the financial statements include no provision for federal income taxes of the Company's "S" corporation or limited liability company subsidiaries. Certain of the Company's subsidiaries are "C" corporations. The Company calculates its current and deferred income tax provisions for the "C" corporations using the liability method. Under the liability method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. At February 28, 2001, the "C" corporations had net operating loss carryforwards of approximately $19 million for federal income tax purposes which expire in fiscal 2002 through 2021. 43 6. Income Taxes (continued) As a result of net operating loss carryforwards and temporary differences, the "C" corporations have a net deferred tax asset and have established a valuation allowance as follows: February 28 or 29 2001 2000 ------------------------- Gross deferred tax assets: Incentive plan expense $ 649,600 $ 1,199,688 Net operating loss carryforwards 7,597,111 6,842,998 Other 177,921 418,898 ------------------------- 8,424,632 8,461,584 Gross deferred tax liabilities: Deferred gain on replacement assets -- (846,456) ------------------------- Net deferred tax asset 8,424,632 7,615,128 Valuation allowance (8,424,632) (7,615,128) ------------------------- Net deferred tax asset recognized in the balance sheet $ -- $ -- ========================= Effective January 1, 2001, a "C" corporation subsidiary elected "S" corporation status. Accordingly, the Company reversed all deferred taxes at December 31, 2000 except net operating loss carryforwards. The reversal had no impact on the provision due to an offsetting valuation allowance. The net operating loss carryforwards may be utilized in future years under certain circumstances in accordance with Internal Revenue Service regulations. In addition, in fiscal 2001, the Company wrote off a deferred tax asset of $3.2 million against the related valuation allowance for net operating loss carryforwards of the Missouri Properties as it was determined the Company would not be able to utilize these net operating losses in future years. The components of the provision for income taxes are as follows: Year ended February 28 or 29 2001 2000 1999 -------------------------------------- Current federal tax $ -- $ 92,301 $ -- Current state tax 133,592 240,242 229,390 -------------------------------------- $133,592 $332,543 $229,390 ====================================== 44 6. Income Taxes (continued) The provision or benefit for income taxes for the "C" corporations differs from the amount computed by applying the United States federal income tax rate to income or loss before income taxes, extraordinary item and the cumulative effect of change in accounting principle. A reconciliation of the differences is as follows:

7. Long-Term Notes and Other Obligations Long-term obligations consist of the following:

45 The Company has $105,000,000 of senior unsecured notes (the Senior Notes) due in 2007. The Senior Notes bear cash interest, payable semiannually, at a rate of 12%. The Senior Notes were issued at a discount of approximately $10,539,000, which is being amortized to yield an effective interest rate of 12.2%. The Senior Notes are only redeemable at the Company's option in the event of an initial public offering or beginning December 15, 2002, at the following redemption prices (expressed in percentages of principal amount), plus accrued and unpaid interest: Periods Beginning December 15, Redemption Price ------------------------------------------------------------ 2002 106% 2003 104% 2004 102% 2005 and thereafter 100% Following one or more public offerings of the Company's capital stock with aggregate proceeds of at least $25 million, the Company may redeem up to 25% of the aggregate principal amount of the Senior Notes at 112% of the principal amount, plus accrued and unpaid interest provided the principal amount outstanding after any such redemption is at least $79 million. Upon the occurrence of a change in control, as defined, each holder of the Senior Notes has the right to require the Company to purchase all or any part of such holder's notes, at 101% of the principal amount thereof, plus accrued and unpaid interest. The Senior Notes are senior unsecured obligations of the Company. The Senior Notes are unconditionally guaranteed, fully, jointly, and severally, by each of the direct and indirect subsidiaries of BMC (the Guarantors), all of which are wholly owned. BMC is a holding company and has no operations, assets, or cash flows separate from its investments in its subsidiaries. Accordingly, separate financial statements and other disclosures concerning the Guarantors have not been presented because management has determined that they would not be material to investors. Brill Media Management, Inc., a wholly-owned subsidiary of BMC and the co-issuer of the Senior Notes, has minimal assets and liabilities ($100 cash and $100 capital at February 28, 2001 and at February 29, 2000) and no income or expenses since its formation in October 1997. 46 7. Long-Term Notes and Other Obligations (continued) The Senior Notes restrict BMC and its restricted subsidiaries from the following in excess of defined limitations: incurring additional indebtedness; making restricted payments; creating or permitting any liens to exist; making distributions; selling assets and subsidiary stock; transactions with affiliates; completing sale/leaseback transactions; creating new subsidiaries or designating unrestricted subsidiaries; engaging in other than permitted business activities; and completing mergers and acquisitions. In October 1999, as permitted under the Indenture governing the Senior Notes (the Indenture), the Company borrowed $15 million under a secured credit facility with a senior lender (the Senior Secured Facility), which matures October 2004. The facility bears interest, payable monthly, at the prime rate plus 1% (effectively 9.5% at February 28, 2001) with a minimum interest rate of 8% per annum. The facility restricts the Company from essentially the same defined limitations as contained in the Indenture and includes certain financial covenants with respect to earnings and asset coverage. The facility is secured by substantially all assets of the restricted subsidiaries, as defined in the Senior Notes. The senior secured obligations include approximately $2.5 million of obligations payable in quarterly installments including interest at the stated rate of 7% with the final installments of approximately $1.9 million due February 2004 and a $1.35 million obligation payable monthly in interest only installments at prime plus 1% until December 2001, then in quarterly payments of principal and interest until February 2009. Subordinated secured obligations include approximately $1.2 million of obligations payable in monthly installments including interest, at varying interest rates until July 2006 and a $790,000 obligation payable monthly, with interest at the stated rate of 7%, through October 2008 with a final installment of $153,000 due November 2008. The senior secured obligations, mortgage obligations and subordinated secured obligations are secured by the respective property for which the loan was initiated, and are effectively senior in right of payment to the Senior Notes and the Senior Secured Facility. During fiscal 2001, 2000 and 1999, the Company entered into new capital leases totaling $5,614,000, $1,511,000, and $195,000 respectively. 47 7. Long-Term Notes and Other Obligations (continued) In addition to the obligations described above, the Company has approximately $1.2 million of unsecured obligations, which are stated net of imputed interest and are payable through 2009. The Company has performance incentive plans with certain executives, which are recorded as long-term obligations. Such plans accumulate value based on certain defined performance factors. The executives were fully vested at February 28, 2001. Payments under the terms of the plans would commence only upon the death, disability, retirement, or termination of employment of an executive, and can be made at the discretion of the Company in amounts and on terms no less favorable to the executive than quarterly payments of 2.5% of the vested amount. Aggregate maturities of long-term obligations during the next five years are as follows: Fiscal Year Amount ------------------------------------------------------------ 2002 $1,332,628 2003 1,403,043 2004 3,395,266 2005 16,402,591 2006 808,314 The estimated fair market value of the Senior Notes was approximately $56.7 million at February 28, 2001, based on the average trading price at that date. The fair market value of the Company's remaining long-term debt approximates its carrying value. 48 8. Commitments The Company leases certain land, buildings, and equipment. Rent expense for fiscal 2001, 2000 and 1999 was $500,000, $599,000, and $426,000, respectively. Future minimum lease payments under operating leases that have initial or remaining noncancelable terms in excess of one year as of February 28, 2001, are as follows: Fiscal Year Amount ---------------------------------------------------------- 2002 $314,940 2003 272,301 2004 162,650 2005 45,173 2006 22,209 Thereafter 239,426 Certain litigation and claims arising in the normal course of business are pending against the Company and its subsidiaries. While it is not possible to predict the results of these matters, the Company is of the opinion that the ultimate disposition of all such matters, after taking into account the liabilities accrued with respect thereto and possible recoveries under insurance liability policies, will not have a material adverse effect on its consolidated financial position. 9. Transactions With Related Parties Brill Media Company, LP (BMCLP), owned indirectly by Mr. Brill, is a group executive management operation, which provides supervisory activities and certain corporate-wide administrative services to the Company. BMCLP earns a fee, paid monthly as permitted, based on a percentage of revenue under standard contractual arrangements. The Company was charged management fees by BMCLP in fiscal 2001, 2000, and 1999 of $2,905,000, $2,885,000 and $2,784,000, respectively. The payment of management fees is subordinated to the payment of the Company's obligations under the Senior Notes. The Company has a management agreement and a loan with an affiliate, owned by Mr. Brill, which operates a radio station in the same market as the Company. In accordance with the management agreement, the managed affiliate pays a fixed management fee plus a variable fee based on performance, as defined. The Company earned a management fee from the managed affiliate of $120,000 in each of fiscal 2001, 2000 and 1999. At February 28, 2001 and February 29, 2000, the note receivable from the managed affiliate totaled $8,302,000 and $7,703,000 respectively. The note receivable bears interest at 12%, payable semi-annually. Principal and any outstanding accrued interest is due November 2003. The Senior Notes indenture generally limits the Company to $20 million of outstanding loans to managed affiliates. 49 9. Transactions With Related Parties (continued) Capital leases with related parties were $6,510,000 at February 28, 2001 and $1,331,000 at February 29, 2000. The interest expense on these leases was $600,000, $48,000 and $19,000 for fiscal 2001, 2000 and 1999, respectively, and is included in interest expense from long-term notes and other obligations in the accompanying statements of operations. At February 28, 2001, amounts due from related parties includes a $3,000,000 note receivable plus accrued interest of $34,000 from an affiliate which operates a radio station in one of the Company's markets. This note bears interest at the prime rate payable annually until maturity on December 31, 2003. Also included in amounts due from related parties are notes receivable from officers of $500,000 plus accrued interest of $19,000. The five year notes bear interest at 6%, payable annually, with principal due March 2003. In addition, the Company has notes receivable of $903,000 plus accrued interest of $10,000 from certain related parties, which owns a radio facility, leased by the Company. The note bears interest at the prime rate plus 1% payable annually on December 31 of each year until maturity on November 30, 2004. At February 28, 2001, amounts payable to related parties include accrued management fees of $2,630,000 and other operating payables of $742,000. At February 29, 2000, amounts payable to related parties include accrued management fees of $1,792,000 and other operating payables of $332,000. 50 10. Operating Segments The Company has two operating segments: operation of AM and FM radio stations and publication of daily and weekly newspapers and shoppers. Information for the years ended February 28 or 29, 2001, 2000 and 1999, regarding the Company's major operating segments is presented in the following table:

51 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE The Company has not made any changes in, nor has it had any disagreements with its accountants, on accounting and financial disclosure. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Directors of Media are elected annually by its sole shareholder, BMC. Executive officers of Media are elected by, and serve at the pleasure of, Media's board of directors. The following table sets forth certain information with regard to Media's principal executive officers and directors as of February 28, 2001. Name Age Position ------------------------------------------------------------------------------ Alan R. Brill 58 Director, President and CEO Robert M. Leich 58 Director Philip C. Fisher 62 Director Clifton E. Forrest 52 Director, Vice President (Newspapers) and Assistant Secretary Charles W. Laughlin 72 Director Alan L. Beck 49 Vice President (Radio) Donald C. TenBarge 43 Vice President, CFO, Secretary and Treasurer Information concerning the experience and affiliations of the directors and executive officers of Media is as set forth below. ALAN R. BRILL, DIRECTOR, PRESIDENT AND CHIEF EXECUTIVE OFFICER. Mr. Brill founded the Company's predecessor beginning in 1981 and has worked in the media industry for 28 years. Prior to starting the Company, after Peace Corps service in Ecuador, Mr. Brill joined Arthur Young & Co. in New York City where he practiced as a CPA with a diversified clientele. In 1972, he joined a new, publicly traded real estate investment trust in Atlanta as a senior financial and administrative executive. The trust was involved in short and long-term real estate loans, primarily to proprietary hospitals. In 1973, he was recruited by Worrell Newspapers, Inc., a large, privately-owned newspaper group headquartered in Charlottesville, Virginia, as its chief financial officer and named to the company's Board of Directors. As a senior executive in the company, Mr. Brill was involved in or responsible for all the company's numerous acquisitions and financings, had a role in most significant operating matters and built a small television group for the company. Soon after the founder transferred his ownership interest to his son and withdrew from the business, Mr. Brill left Worrell to form the Company's predecessor in 1981. Mr. Brill earned a B.A. in economics and mathematics from DePauw University and an M.B.A. from Harvard Business School. Mr. Brill is a Certified Public Accountant. 52 ROBERT M. LEICH, DIRECTOR. Mr. Leich is President of Diversified Healthcare, Inc., and successor to Charles Leich & Co., one of the country's largest independent drug distributors. He is a director of Old National Bank, Evansville, Indiana and of the National Wholesale Druggists Association. He has served on the board of numerous civic and business organizations. Mr. Leich graduated from Yale University and received his M.B.A. degree from Indiana University at Bloomington. PHILIP C. FISHER, DIRECTOR. Dr. Fisher is Dean of Business, University of Southern Indiana and has published extensively on the case study method for entrepreneurial businesses. He has held numerous civic and business posts, including the board of the Evansville Chamber of Commerce and the executive committee of the Indiana Council for Economic Education. He received his undergraduate degree from Wayne State College, an M.B.A. from the University of South Dakota, and a Ph.D. from the Graduate School of Business of Stanford University. CLIFTON E. FORREST, DIRECTOR AND VICE PRESIDENT (NEWSPAPERS). Mr. Forrest joined the Company's predecessors in 1981 as publisher of CMN. In 1987, he moved to Evansville to become a senior officer of BMCLP. His responsibilities consist of managing the publishing, printing and distribution areas and overseeing employee benefit plans, risk management programs, personnel issues, and certain other matters. Mr. Forrest has 35 years of industry experience including 10 years at Worrell Newspapers, Inc. where he served in various roles publishing daily and weekly newspapers in five different states. Mr. Forrest earned a B.A. degree with an emphasis in journalism, marketing, advertising and industrial sociology from Wichita State University. CHARLES W. LAUGHLIN, DIRECTOR. Mr. Laughlin is a lawyer and presently of counsel to Thompson & McMullan, P.C., a law firm in Richmond, Virginia. Mr. Laughlin received his undergraduate degree from the College of William & Mary and his J.D. from the University of Virginia. After completing a clerkship with the United States Court of Appeals for the Fourth Circuit, he has practiced law in Richmond, Virginia since 1956 and has served as counsel to the Company since its inception. ALAN L. BECK, VICE PRESIDENT (RADIO). Mr. Beck joined the Company's predecessor in 1985 as President/General Manager of the Pennsylvania Stations. After two years, he moved to the BMCLP where he became Vice President-Radio Group Operations. Currently, his major responsibilities include supervising the Stations and promotional companies through the general managers, and acting as a resource for other operations. Mr. Beck has 24 years of experience in all facets of the radio and television industries. Mr. Beck earned a B.A. degree in marketing from Southern Illinois University. DONALD C. TENBARGE, VICE PRESIDENT, CHIEF FINANCIAL OFFICER, SECRETARY AND TREASURER. Mr. TenBarge joined BMCLP in 1988. He is responsible for the financial management and reporting of all operations and companies. In addition to managing the information systems, Mr. TenBarge also 53 participates in financing activities and acquisitions. Prior to joining BMCLP, Mr. TenBarge was a manager in a regional CPA firm where he spent nine years engaged in many aspects of audit, tax, systems, and financial planning. Mr. TenBarge earned a B.S. in Accounting from the University of Evansville and is a Certified Public Accountant. The Company's businesses depend to a significant extent upon the efforts, abilities, and expertise of Messrs. Brill, TenBarge, Beck, and Forrest. The loss of any of these executives of BMCLP potentially would have an adverse effect on the Company. Neither BMCLP nor the Company has any long-term employment contract with Mr. Brill or any other executive officer. To the full extent permitted by applicable Virginia law, Media is obligated to indemnify its officers and directors for liabilities and expenses incurred by them because of their status as officers or directors of Media. ITEM 11. EXECUTIVE COMPENSATION The following table sets forth the compensation paid by the Company to Mr. Brill, as its President, Chief Executive Officer and Treasurer, in all capacities during the periods indicated. The Company did not pay any of its executive officers salary and bonus in excess of $100,000 in fiscal 2001. SUMMARY COMPENSATION TABLE

Mr. Brill and the other executive officers received no compensation from the Company. All such persons also serve as officers of, and receive compensation from, BMCLP. BMCLP provides management services to the Company and also to affiliated and unaffiliated entities other than the Company pursuant to administrative management agreements. During fiscal 2001, fiscal 2000 and fiscal 1999, BMCLP earned approximately $2.9 million, $2.9 million and $2.8 million, respectively, for such services to the Company. See "Certain Relationships and Related Transactions." 54 Options/SAR Grants in Fiscal 2001 The following table sets forth certain information with respect to option grants made to Mr. Brill for the fiscal year ended February 28, 2001.

The Company made no grants to Mr. Brill of options or stock appreciation rights, and Mr. Brill did not exercise any stock or appreciation rights, in the fiscal year ended February 28, 2001. Mr. Brill held no options or SARs of the Company as of February 28, 2001. Incentive Plan Agreements and Compensation of Directors The Company has entered into performance incentive plan agreements (Plans) with Clifton E. Forrest with respect to the Newspapers' business and Alan L. Beck with respect to the Stations' business (the Executives) in their capacities as executives of the Company. The Plans are valued annually based on certain defined performance criteria. As of February 28, 2001, vested interests of the Executives in the Plans totaled approximately $.2 million for Mr. Forrest and $1.6 million for Mr. Beck. Payments under the Plans will commence only upon fulfillment of certain contingencies, including the Executive's death, disability, retirement, or employment termination and can be paid, at the Company's option, in amounts not to exceed quarterly payments of 2.5% of the Executive's vested amount. The Company also participates in a defined contribution profit sharing plan to which all Company employees may make voluntary contributions. In the year ended February 28, 2001, Thompson & McMullan, P.C. (to which Mr. Laughlin is of counsel) received approximately $275,000 in fees from the Company. Additionally, Messrs. Leich, Fischer and Laughlin received compensation as Directors for Media in fiscal 2001 in the combined amount of $45,000. 55 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Mr. Brill is the ultimate owner of all of the equity of the Company. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Since their organization or acquisition, each Subsidiary or affiliate owner of a Newspaper or Station has paid management fees to Brill Media Company, L.P. (BMCLP) pursuant to management agreements (Administrative Management Agreements). BMCLP is a limited partnership whose limited partner is Northwest Radio, Inc., an affiliate owned indirectly by Mr. Brill, and whose general partner is Brill Media Company, Inc., also an affiliate of the Company also owned by Mr. Brill. Acting pursuant to such Administrative Management Agreements, BMCLP is responsible for and provides to the Stations and Newspapers long-range strategic planning, management support and oversight, establishment of primary policies and procedures, resource allocation, accounting and auditing, regulatory and legal compliance and support, license renewals and the evaluation of potential acquisitions. In addition, executives of BMCLP visit the Company's Stations and Newspapers on a frequent basis to review performance, to assist local management with programming, production, sales, and recruiting efforts, to develop, implement, and verify overall Station and Newspaper operating and marketing strategies, and, most importantly, to remain aware of developments in each market. The executives of BMCLP are the same persons that are executives of BMC (see "Directors and Executive Officers of the Registrant"), for which they presently receive no compensation from the Company. Pursuant to such Administrative Management Agreements, BMCLP earns an annual fee, paid monthly as permitted, equal to ten percent of each Station's net cash revenues and five percent of each of the Newspapers' net cash revenues. Non-operating Subsidiaries and affiliates pay a nominal flat fee for any such service received. For fiscal 2001, 2000 and 1999 the aggregate amount of such Administrative Management Agreement fees charged to Subsidiaries was approximately $2.9 million, $2.9 million, $2.8 million, respectively. Pursuant to reimbursement agreements, from time to time third-party services or products (such as insurance coverage) may be provided to one or more of the Company, its Subsidiaries, or their affiliates, in which case such costs are reimbursed on a ratable basis to the provider, which may be BMCLP, the Company, or another Subsidiary or affiliate. From time to time one or more of the Subsidiaries may provide management services to a Managed Affiliate on an agreed fee basis for services rendered. Such fees generally consist of a nominal fixed fee plus a variable additional fee based upon the Managed Affiliate's performance. One of the Company's Subsidiaries, Tri-State Broadcasting, Inc. (Tri-State) has entered into such an agreement (Tri-State Agreement) with a Managed Affiliate, TSB III, LLC, the owner of Stations WSTO-FM and WVJS- 56 AM licensed to Owensboro, Kentucky. The entity is wholly owned indirectly by Mr. Brill. Pursuant to the Tri-State Agreement, Tri-State will receive from the Managed Affiliate a monthly fee of $10,000 and an additional annual fee based upon such Managed Affiliate's financial performance. The Company charged the Managed Affiliate $120,000 for the year ended February 28, 2001, for such services. During fiscal 2001, the Company entered into $1.7 million in capital leases on market rental terms with a related affiliate, owned indirectly by Mr. Brill, for use of operating facilities and equipment for Stations in the companies Indiana/Kentucky market. Also in fiscal 2001, the Company entered into a $3.6 million capital lease on market rental terms with a related affiliate, owned indirectly by Mr. Brill, for use of operating facilities for the Newspapers in Mt. Pleasant, Michigan. The Company entered into $1.2 million in capital leases on market rental terms with an affiliate, owned indirectly by Mr. Brill, for use of a studio facility and equipment in it's Minnesota market during fiscal 2000. Also during fiscal 2000, the Company advanced the affiliate $903,000 towards the renovation of the facility. The note bears interest at the prime rate plus 1% payable annually on December 31 of each year until maturity on November 30, 2004. From time to time various Company Subsidiaries and affiliates have entered into loan transactions between themselves, which transactions are duly recorded in the appropriate Company books and records and the annual effects of which are fully reflected in the Company's financial statements. During fiscal 1999, the Company advanced $3.0 million to an affiliate, which operates a radio station in one of the Company's markets. The note bears interest at the prime rate, payable annually until maturity on December 31, 2003. Also during this period, the Company advanced $500,000 to officers. The notes bear interest at 6%, payable annually, with principal due March 2003. The Company has loaned $8.3 million to the Managed Affiliate and received in return therefore a Managed Affiliate Note, which is unsecured, matures on November 15, 2003 and bears interest at a rate of 12% per annum. The proceeds of such loans have been used by the Managed Affiliate to purchase property, equipment, and intangibles and to provide working capital. Total interest income earned by the Company on this loan totaled $.9 million for the year ended February 28, 2001. It is anticipated that similar relationships may be initiated with other affiliates in the future. No transaction may cause the aggregate principal amount of Managed Affiliate Notes then outstanding to exceed $20.0 million unless: (i) the Board of Directors, including a majority of the disinterested members of the Board, determines that the terms of the transaction are no less favorable than those that could be obtained at the time of such transaction in arms-length dealings with a person who is not an "Affiliate"; (ii) the Company obtains a written opinion of an independent investment bank of nationally recognized standing that the transaction is fair to the Company from a financial point of view; and (iii) the 57 Company at the time of the transaction is able to make a "Restricted Payment" (as such terms are defined in the Indenture) in an amount equal to such excess amount. BMCLP will provide management services to certain of the Subsidiaries and may provide such services to other affiliates. Mr. Brill owns and controls, directly or indirectly, all of such entities, which also may enter into other contractual relationships from time to time. Such relationships may present a conflict between Mr. Brill's interests, as the ultimate owner of all parties to such relationships, and the interest of the holders of the Securities. The Company is subject to provisions of Virginia law that restrict transactions between the Company and its directors and officers, but the Company does not additionally have a conflicts policy. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a)(1) FINANCIAL STATEMENTS The following consolidated financial statements of the Company are attached hereto (located under Item 8 Financial Statements and Supplementary Data): Report of Independent Auditors Consolidated Statements of Financial Position at February 28, 2001 and February 29, 2000 Consolidated Statements of Operations and Members' Deficiency for the Years Ended February 28 or 29, 2001, 2000 and 1999 Consolidated Statements of Cash Flows for the Years Ended February 28 or 29, 2001, 2000 and 1999 Notes to Consolidated Financial Statements 58 (a)(2) FINANCIAL STATEMENT SCHEDULES The following financial statement schedule is set forth herein: Schedule II - Valuation and Qualifying Accounts and Reserves. Brill Media Company, LLC Schedule II - Valuation and Qualifying Accounts and Reserves

All other statements and schedules have been omitted because they are not required under related instructions, are inapplicable or are immaterial, or the information is shown in the consolidated financial statements of the Company or the notes thereto. (a)(3) EXHIBITS The following exhibits are furnished with this report: Exhibit Number Description of Exhibits -------------- ----------------------- 99 Press Release (a)(4) REPORTS ON FORM 8-K The Company during the fiscal fourth quarter filed, and amended, a Report on Form 8-K dated November 17, 2000 to report the acquisition of an affiliate TSB IV, LLC. The report included the following financial statements as exhibits thereto: (a) Financial Statements of Business Acquired - TSB IV, LLC (1) Report of Independent Auditor's (2) Statements of Financial Position as of February 28 or 29, 2000, 1999, 1998 (3) Statements of Operations and Members' Deficiency for the years ended February 28 or 29, 2000, 1999, 1998 (4) Statements of Cash Flows for the years ended February 28 or 29, 2000, 1999, 1998 (5) Notes to Financial Statements (a)1 Financial Statements of Business Acquired - TSB IV, LLC (1) Statements of Financial Position as of August 31, 2000 and 1999 59 (2) Statements of Operations and Members' Deficiency for the six months ended August 31, 2000 and 1999 (3) Statements of Cash Flows for the six months ended August 31, 2000 and 1999 (4) Notes to Financial Statements (b) Pro Forma Financial Information of Brill Media Company, LLC (1) Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended February 29, 2000 (2) Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended February 29, 2000 (3) Unaudited Pro Forma Condensed Consolidated Statement of Financial Position as of August 31, 2000 (4) Notes to Unaudited Pro Forma Condensed Consolidated Statement of Financial Position as of August 31, 2000 (5) Unaudited Pro Forma Condensed Consolidated Statement of Operations for the six months ended August 31, 2000 (6) Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations for the six months ended August 31, 2000 60 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BRILL MEDIA COMPANY, LLC By: BRILL MEDIA MANAGEMENT, INC., Manager May 24, 2001 By /s/ Alan R. Brill ---------------------------------- Alan R. Brill DIRECTOR, PRESIDENT AND CHIEF EXECUTIVE OFFICER May 24, 2001 By /s/ Donald C. TenBarge ---------------------------------- Donald C. TenBarge VICE PRESIDENT, CHIEF FINANCIAL OFFICER, SECRETARY AND TREASURER (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER) May 24, 2001 By /s/ Robert M. Leich ---------------------------- Robert M. Leich DIRECTOR May 24, 2001 By /s/ Philip C. Fisher ------------------------------- Philip C. Fisher DIRECTOR May 24, 2001 By /s/ Clifton E. Forrest ----------------------------- Clifton E. Forrest DIRECTOR AND VICE PRESIDENT May 24, 2001 By /s/ Charles W. Laughlin ------------------------------ Charles W. Laughlin DIRECTOR 61 EXHIBIT INDEX Exhibit Number Description of Exhibits -------------- ----------------------- 99 Press Release 62

BRILL MEDIA CO LLC 10-K