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The following is an excerpt from a 10-K SEC Filing, filed by STC BROADCASTING INC on 3/1/2001.
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STC BROADCASTING INC - 10-K - 20010301 - NOTES_TO_FINANCIAL_STATEMENT

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)

1. ORGANIZATION AND NATURE OF OPERATIONS:

The accompanying financial statements present the consolidated financial statements of STC Broadcasting, Inc. ("STC") and subsidiaries (the "Company"). STC was incorporated on November 1, 1996, in the state of Delaware, commenced operations on March 1, 1997, and is a wholly owned subsidiary of Sunrise Television Corp. ("Sunrise"). All of the voting common stock of Sunrise, one share, is owned by Smith Broadcasting Partners, L.P. ("SBP"). SBP is a limited partnership owned by the four senior managers of the Company and is controlled by Smith Broadcasting Group, Inc. ("SBG"). SBG is controlled by Robert N. Smith, the Chief Executive Officer and a Director of Sunrise and the Company. All of the non-voting common stock of Sunrise (891,499 shares) is owned by Sunrise Television Partners, L.P., of which the managing general partner is controlled by Thomas O. Hicks, an affiliate of Hicks Muse, Tate and Furst, Incorporated ("Hicks Muse"). The Company owns the following commercial television stations (the "Stations") at December 31, 2000:

STATION           ACQUISITION DATE     DESIGNATED MARKET AREA                 NETWORK AFFILIATION
-------           ----------------     ----------------------                 -------------------

WEYI              March 1, 1997        Flint-Saginaw-Bay City, Michigan               NBC
KRBC              April 1, 1998        Abilene-Sweetwater, Texas                      NBC
KACB              April 1, 1998        San Angelo, Texas                              NBC
WDTN              June 1, 1998         Dayton, Ohio                                   ABC
WNAC(2)           June 1, 1998         Providence, Rhode Island and
                                          New Bedford, Massachusetts                  FOX
KVLY              November 1, 1998     Fargo, North Dakota                            NBC
KFYR              November 1, 1998     Bismarck, North Dakota                         NBC
KUMV              November 1, 1998     Williston, North Dakota                        NBC
KMOT              November 1, 1998     Minot, North Dakota                            NBC
KQCD              November 1, 1998     Dickinson, North Dakota                        NBC
WUPW              February 1, 1999     Toledo, Ohio                                   FOX

Stations sold to Cox Broadcasting, Inc.: Effective January 5, 2001
------------------------------------------------------------------
WTOV(1)           March 1, 1997        Wheeling, West Virginia                        NBC
                                          and Steubenville, Ohio
WJAC(1)           October 1, 1997      Johnstown, Altoona, State                      NBC
                                          College, Pennsylvania


(1) See footnote 16 for information on the sale of these stations to Cox Broadcasting, Inc. ("Cox")

(2) See footnote 17 for information on the pending acquisition in the Providence market.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Basis of Presentation

The accompanying consolidated financial statements include the consolidated accounts of the Company. All material intercompany items and transactions have been eliminated.

F-7

STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less to be cash equivalents.

Concentration of Risk and Accounts Receivable

The Company serves the markets shown in Note 1 and accordingly, the revenue potential of the Company is dependent on the economy in these markets. The Company monitors the collectibility of its accounts receivable through continuing credit evaluations. Credit risk is limited due to the large number of customers comprising the Company's customer base and their dispersion across different geographic areas. Total provision for losses on doubtful accounts amounted to approximately $492, $403 and $351 for the three years ended December 31, 2000, respectively.

Program Rights

The Company has agreements with distributors for the rights to television programming over contract periods which generally run from one to four years. Each contract is recorded as an asset and liability when the license agreement is signed or committed to by the Company. Program rights and the corresponding obligation are classified as current or long-term based on the estimated usage and payment terms.

The capitalized cost of program rights for one-time only programs is amortized on a straight-line basis over the period of the program rights agreements. The capitalized cost of program rights for multiple showing syndicated program material is amortized on an accelerated basis over the period of the program rights agreements. Program rights are reflected in the consolidated balance sheets at the lower of unamortized cost or estimated net realizable value. Estimated net realizable values are based upon management's expectation of future advertising revenues, net of sales commissions, to be generated by the program material. Payments of program rights liabilities are typically paid on a scheduled basis and are not affected by adjustments for amortization or estimated net realizable value.

Barter Transactions

The Company purchases certain programming, which includes advertising time of the syndicator during the airing of the programs. The estimated fair value of advertising revenue received in program barter transactions is recognized as revenue and a corresponding program cost when the airtime is used by the advertiser. The Company broadcasts certain customers' advertising in exchange for equipment, merchandise, or services. The estimated fair value of the equipment, merchandise or services received is recorded as deferred trade costs, the corresponding obligation to broadcast advertising is recorded as deferred trade revenues, resulting in a net current asset or net current liability. The deferred trade costs are expensed or capitalized as they are used, consumed or received. Deferred trade revenues are recognized as the related advertising is aired.

The following table summarizes revenues realized from barter transactions:

                        Three Years Ended
                          December 31,
                  --------------------------
                   2000      1999      1998
                  ------    ------    ------

Program barter    $1,449    $1,835    $1,261
Other              1,128     1,078       738
                  ------    ------    ------
Total             $2,577    $2,913    $1,999
                  ======    ======    ======

F-8

STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Property and Equipment

Property and equipment of the Stations acquired were recorded at the estimate of fair value based upon independent appraisals, and property and equipment acquired subsequent thereto is recorded at cost. Property and equipment is depreciated using the straight-line method over the estimated useful lives of the assets, as follows:

Land improvements             15 years
Buildings and improvements    20-39 years
Broadcast equipment           5-15 years
Vehicles                      3 years
Furniture and computers       5 years

Expenditures for maintenance and repairs are charged to operations as incurred, whereas expenditures for renewals and betterments are capitalized.

The major classes of property and equipment are as follows:

                                                              December 31,
                                                        ----------------------
                                                          2000          1999
                                                        --------      --------

Land and improvements                                   $  3,320      $  3,313
Buildings and improvements                                13,099        12,746
Broadcast equipment                                       70,529        69,799
Vehicles                                                   2,525         2,155
Furniture and computers                                    5,733         5,487
                                                        --------      --------
                                                          95,206        93,500
Less: accumulated depreciation and amortization          (33,371)      (20,795)
                                                        --------      --------
Property and equipment, net                             $ 61,835      $ 72,705
                                                        ========      ========

Intangible Assets

Intangible assets consist principally of values assigned to the Federal Communications Commission (FCC) licenses and network affiliation agreements of the Stations. Intangible assets are being amortized on the straight-line basis over 15 years.

Intangible assets consist of the following:

                                                              December 31,
                                                        -----------------------
                                                           2000          1999
                                                        ---------     ---------

FCC licenses                                            $  94,182     $  94,182
Network affiliations                                      201,285       201,285
Other                                                       3,254         3,236
                                                        ---------     ---------
                                                          298,721       298,703
Less: Accumulated amortization                            (54,826)      (34,614)
                                                        ---------     ---------
Intangible assets, net                                  $ 243,895     $ 264,089
                                                        =========     =========

Other Assets

Other assets consist primarily of values assigned to deferred financing and acquisition costs and the non-current portion of program rights. Deferred financing costs are amortized over the applicable loan period (seven or ten years) on a straight-line basis, and deferred acquisition and organization costs are amortized over a five year period on a straight-line basis. At December 31, 2000, the Company has a $5,000 deposit with an escrow agent related to the purchase of WPRI (see footnote 17).

F-9

STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Other assets consist of the following:

                                                                 December 31,
                                                               2000       1999
                                                             -------    -------

Deferred financing and acquisition costs, net
   of accumulated amortization of $7,265, and $4,754,
   respectively                                              $ 7,582    $10,082
Program rights, net of current portion                         6,066     10,323
Other                                                          5,700        107
                                                             -------    -------
                                                             $19,348    $20,512
                                                             =======    =======

Revenue Recognition

The Company's primary source of revenue is the sale of television time to advertisers. Revenue is recorded when the advertisements are broadcast and is net of agency and national representative commissions.

Joint Operating Agreement

The Company has a Joint Marketing and Programming Agreement ("JMPA") with Clear Channel Communications (CCC) under which CCC programs certain airtime, including news programming for WNAC and manages the sale of commercial air time on WNAC and WPRI, the CBS station in Providence, for an initial period of ten years commencing July 1, 1996. The Company and CCC each receive 50% of the broadcast cash flow generated by the two stations subject to certain adjustments, as defined. This amount is recorded by the Company as income from joint operating agreement in the accompanying consolidated statements of operations. See note 17 for information on the Company's proposed acquisition of WPRI.

Income Taxes

Income taxes are provided using the liability method in accordance with Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes."

Long-Lived Assets

Long-lived assets and identifiable intangibles are reviewed periodically for impairment if events or changes in circumstances indicate that the carrying amount should be addressed. The Company has determined that there has been no impairment in the carrying value of long-lived assets of the Stations, as of December 31, 2000 and 1999.

Fair Value of Financial Instruments

The book value of all financial instruments, other than the Senior Subordinate Notes, approximates their fair value as of December 31, 2000 and 1999. The fair values of the Company's Senior Subordinate Notes are estimated based on quoted market prices and/or quoted market prices for similar issues or on the current rates offered to the Company for debt of the same remaining maturities.

The carrying amounts and fair value of the Senior Subordinate Notes at December 31, 2000 were as follows:

Carrying amount $100,000 Fair Value $ 93,000

F-10

STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (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 reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates.

Basic and Diluted Net Loss per Common Share

Net loss per common share is computed as net loss applicable to common stockholder divided by the weighted average number of shares of common stock outstanding.

Reclassifications

Certain reclassifications have been made to the 1999 and 1998 financial statements to conform to the current year's presentation.

Current Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued SFAS 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133). SFAS 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments imbedded in other contracts, (collectively referred to as derivatives) and for hedging activities. Specifically, SFAS 133 requires the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not designated as part of a hedging relationship must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, the effective portion of the hedge's change in fair value is either (1) offset against the change in fair value of the hedged asset, liability or firm commitment through income or (2) held in equity until the hedged item is recognized in income. The ineffective portion of a hedge's change in fair value is immediately recognized in income. The Company adopted SFAS 133, as amended, on January 1, 2001.

The adoption of SFAS 133 will result in a $240 benefit, net of tax, from a cumulative effect of a change in accounting principle in the Company's consolidated financial statements for the quarter ending March 31, 2001.

3. ACQUISITIONS AND DISPOSALS:

2000 Transactions

During 2000, the Company did not acquire or dispose of any material assets. See footnote 16 for information relating to the sale of WTOV and WJAC subsequent to year-end, and footnote 17 for information relating to the pending purchase of WPRI, the CBS affiliate in the Providence, Rhode Island, and New Bedford, Massachusetts, market.

1999 Transactions

On February 5, 1999, the Company acquired substantially all of the assets related to WUPW from Raycom Media, Inc. for approximately $74,487. WUPW, Channel 36, is the UHF FOX-affiliated television station serving the Toledo, Ohio market. The accompanying consolidated financial statements reflect the acquisition under the purchase method of accounting and include the results of operations from February 5, 1999. The acquired assets and assumed liabilities were recorded at fair value as of the date of acquisition. The approximate purchase price was allocated as follows:

F-11

STC BROADCASTING, INC. AND
SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Property and equipment           $  4,688
Intangibles                        70,119
Working Capital                      (320)
                                 --------
                                 $ 74,487
                                 ========

The acquisition was funded with $40,000 of borrowings and the sale of $35,000 Redeemable Preferred Stock Series B.

On March 3, 1999, the Company, STC License Company, a subsidiary of the Company, and Nexstar Broadcasting of Rochester, Inc. (Nexstar) entered into an asset purchase agreement to sell to Nexstar the television broadcast license and operating assets of WROC, Rochester, New York for approximately $46,000 subject to adjustment for certain customary proration amounts. On April 1, 1999, the Company completed the non-license sale of WROC assets to Nexstar for $43,000 and entered into a Time Brokerage Agreement with Nexstar under which Nexstar programmed most of the available time of WROC and retained the revenues from the sale of advertising time through the license closing on December 23, 1999. The Company recognized a gain of $4,500 from the sale.

1998 Transactions

On April 1, 1998, the Company acquired 100% of the outstanding stock of Abilene Radio and Television Company (ARTC) for approximately $8,172. ARTC owned and operated television stations KRBC and KACB, NBC affiliates for Abilene and San Angelo, Texas. The accompanying consolidated financial statements reflect the acquisition under the purchase method of accounting and include the results of operations from April 1, 1998. The acquired assets and assumed liabilities were recorded at fair value as of the date of acquisition. The approximate purchase price was allocated as follows:

Property and equipment           $ 5,503
Intangible assets                  6,570
Working capital                      303
Deferred taxes                    (4,204)
                                 -------
                                 $ 8,172
                                 =======

The acquisition was funded with $8,000 of borrowings and available cash on hand.

In a series of transactions, the Company acquired certain assets from Hearst-Argyle Stations, Inc., (Hearst) through transactions structured as an exchange of assets (the Hearst Transaction). On February 3, 1998, the Company agreed to acquire WPTZ, WNNE, and a local marketing agreement (LMA) for WFFF from Sinclair Broadcast Group, Inc. for $72,000, with the intention of using these assets in the Hearst Transaction. WPTZ and WNNE are the NBC affiliates and WFFF is the FOX affiliate serving the Burlington, Vermont and Plattsburgh, New York television market. On February 18, 1998, the Company agreed with Hearst to trade KSBW, the NBC affiliate in Salinas, California, WPTZ and WNNE for WDTN, the ABC affiliate in Dayton, Ohio, WNAC, the FOX affiliate in Providence, Rhode Island, WNAC's interest in a Joint Marketing Programming Agreement with WPRI, the CBS affiliate in Providence, Rhode Island, and approximately $22,000 in cash. On April 24, 1998, the Company completed a purchase of non-license assets (all operating assets other than FCC licenses and other minor equipment) of WPTZ, WNNE and WFFF for $70,000. WFFF was sold by the Company to a related party on April 24, 1998 (see Note 8). Under the purchase method of accounting, the accompanying financial statements reflect the results of operations of WPTZ and WNNE for the period April 24, 1998 to May 31, 1998. Funds to complete the acquisition of WPTZ, WNNE, and WFFF were provided by Hearst. The assets acquired were pledged to Hearst under the related loan agreement which was repaid on July 3, 1998, the date the transaction closed.

F-12

STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

On June 1, 1998, the Company contractually received the benefits of the operation of stations WDTN, and WNAC and WNAC's joint operating agreement with WPRI. The accompanying consolidated financial statements reflect the asset swap using the purchase method of accounting and include the results of operations from June 1, 1998. The Company recorded a book gain of approximately $17,457 on the asset swap.

The fair value of the WDTN and WNAC assets were allocated as follows:

Property and equipment           $  19,615
Intangible assets                   93,892
Working capital                      3,084
                                 ---------
                                 $ 116,591
                                 =========

The asset swap was funded by borrowings of $72,500, $10,400 of additional contributed capital from Sunrise and available cash.

On November 1, 1998, the Company acquired substantially all of the assets of KVLY, KFYR, KUMV, KMOT, and KQCD (the Meyer Stations) from Meyer Broadcasting for approximately $65,259. The accompanying consolidated financial statements reflect the acquisition under the purchase method of accounting and include results of operations from November 1, 1998. The acquired assets and assumed liabilities were recorded at fair value as of the date of acquisition. The purchase price was allocated as follows:

Property and equipment           $  32,615
Intangible assets                   33,568
Working capital                       (924)
                                 ---------
                                 $  65,259
                                 =========

The acquisition was funded by $43,500 of borrowings, $22,800 of additional contributed capital from Sunrise and available cash.

4. ACCRUED EXPENSES:

Accrued expenses consist of the following:

                                               December 31,
                                            2000        1999
                                           ------      ------

Interest                                   $3,313      $3,291
Compensation                                1,622       1,483
National representative fees                  108         120
Property taxes                                403         363
Professional fees                             252         221
Other                                         463         267
                                           ------      ------
Total                                      $6,161      $5,745
                                           ======      ======

5. OBLIGATIONS FOR PROGRAM RIGHTS:

The aggregate scheduled maturities of program rights obligations subsequent to December 31, 2000 are as follows:

F-13

STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

WJAC

                               Remaining     and
Year                            Stations     WTOV      Total
----                            -------    -------    -------

2001                            $ 4,004    $ 3,033    $ 7,037
2002                              3,187         --      3,187
2003                              1,393         --      1,393
2004                                940         --        940
2005                                546         --        546
Thereafter                          140         --        140
                                -------    -------    -------
                                 10,210      3,033     13,243
Less: Current portion             4,004      3,033      7,037
                                -------    -------    -------
Long-term portion of
program rights payable          $ 6,206    $     0    $ 6,206
                                =======    =======    =======

6. LONG-TERM DEBT:

Long-term debt consists of the following:

                                              December 31,
                                          --------------------
                                            2000        1999
                                          --------    --------
Senior Credit Agreement:
         Term Loan                        $ 93,500    $ 98,500
         Revolving Credit Facility           1,750       1,250
Senior Subordinate Notes                   100,000     100,000
                                          --------    --------

Total long-term debt                       195,250     199,750
Less: current portion                        8,000       5,000
                                          --------    --------
Long-term debt, net of current portion    $187,250    $194,750
                                          ========    ========

The following table shows scheduled payments on long-term debt:

                Prior to             After
 Year           Cox Sale            Cox Sale
 ----           --------            --------

2001            $  8,000            $     --
2002              12,500                  --
2003              17,500                 909
2004              20,000               7,636
2005              20,000               7,636
Thereafter       117,250             111,069
                --------            --------
                $195,250            $127,250
                ========            ========

The following table shows interest expense for the periods indicated:

                                              Years Ended
                                              December 31,
                                     -----------------------------
                                       2000       1999       1998
                                     -------    -------    -------

Senior Subordinate Notes             $11,000    $11,000    $11,000

Credit Agreement                       7,853      9,635      4,358

Hearst-Argyle loan ( Note 3)              --         --        943
                                     -------    -------    -------

Total                                $18,853    $20,635    $16,301
                                     =======    =======    =======

F-14

STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

In 1997, the Company completed a private placement of $100,000 principal amount of its 11% Senior Subordinated Notes ("Senior Subordinate Notes") due March 15, 2007, which subsequently were exchanged for registered Senior Subordinate Notes having substantially identical terms.

Interest on the Senior Subordinate Notes is payable semiannually on March 15 and September 15 of each year. The Senior Subordinate Notes will mature on March 15, 2007. Except as described below, the Company may not redeem the Senior Subordinate Notes prior to March 15, 2002. On and after such date, the Company may redeem the Senior Subordinate Notes, in whole or in part, together with accrued and unpaid interest, if any, to the redemption date. The Senior Subordinate Notes will not be subject to any sinking fund requirements. Upon a change of control, as defined, the Company will have the option, at any time on or prior to March 15, 2002, to redeem the Senior Subordinate Notes, in whole but not in part, at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest plus the applicable premium and if the Senior Subordinate Notes are not redeemed or if such change of control occurs after March 15, 2002, the Company will be required to offer to repurchase the Senior Subordinate Notes at a price equal to 101% of the principal amount thereof, together with accrued and unpaid interest, if any, to the repurchase date.

The Senior Subordinate Notes are unsecured and subordinated in right of payment to all existing and future senior indebtedness of the Company. The Senior Subordinate Notes rank pari passu with any future senior subordinated indebtedness of the Company and will rank senior to all other subordinated indebtedness of the Company. The indenture under which the Senior Subordinate Notes were issued permits the Company to incur additional indebtedness, including senior indebtedness subject to certain limitations.

On July 2, 1998, the Company entered into an Amended and Restated Credit Agreement (the Senior Credit Agreement) with various lenders which provides a $100,000 term loan facility and $65,000 revolving credit facility. The Company recorded a pretax extraordinary loss of $4,586 on the retirement of the previous credit agreement. The loss consisted of $2,422 of previously unamortized costs incurred on the Credit Agreement and $2,164 of financing fees paid to the lenders of the Senior Credit Agreement.

The Senior Credit Agreement bears interest at an annual rate, at the Company's option, equal to the applicable borrowing rate plus the applicable margin as defined in the Senior Credit Agreement (10.750% at December 31, 2000), or the Eurodollar Rate plus the applicable margin as defined in the Senior Credit Agreement (8.315% at December 31, 2000). Interest rates may be reduced in the event the Company meets certain financial tests relating to consolidated leverage.

The Senior Credit Agreement provides for first priority security interests in all of the tangible and intangible assets of the Company and its direct and indirect subsidiaries. In addition, the loans under the Senior Credit Agreement are guaranteed by Sunrise and the Company's current direct and indirect and any future subsidiaries. The Senior Credit Agreement contains certain financial and operating maintenance covenants including a maximum consolidation leverage ratio (currently 6.75:1), a minimum consolidated fixed charge coverage ratio (currently 1.05:1), and a consolidated interest coverage ratio (currently 1.5:1). The Company is limited in the amount of annual payments that may be made for capital expenditures and corporate expenses.

On September 11, 1998, the Company entered into a three year interest rate swap agreement to reduce the impact of changing interest rates on $70,000 of its variable rate borrowings under the Senior Credit Agreement. The base interest rate was fixed at 5.15% plus the applicable borrowing margin (currently 1.875%) for an overall borrowing rate of 7.025% at December 31, 2000. On December 30, 1999, the Company entered into a swap agreement that fixed the interest rate on $25,000 of its floating rate borrowings for 18 months at 5%, plus the applicable borrowing margin (currently 1.875%), an overall borrowing rate of 6.875% at December 31, 2000. The variable interest rates on these contracts are based

F-15

STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

upon the three-month London Inter Bank Offered Rate (LIBOR) and the measurement and settlement is performed quarterly. The quarterly settlements of this agreement will be recorded as an adjustment to interest expense and are not anticipated to have a material effect on the consolidated financial statements of the Company. The counter party to the rate swap agreements is one of the lenders under the Senior Credit Agreement.

On January 5, 2001, the Company closed the sale of WJAC and WTOV to Cox (see footnote 16) and used $68,000 of the proceeds to permanently reduce the term portion of the Senior Credit Agreement. Simultaneous with the sale to Cox, the Company cancelled its $70,000 and $25,000 swap agreement and entered into a new swap agreement that fixed the interest rate on $25,000 million of its remaining floating rate borrowings for 18 months at 4.56%, plus the applicable borrowing margin (currently 1.875%) for an overall borrowing rate of 6.435%.

The operating covenants of the Senior Credit Agreement and the Senior Subordinate Notes include limitations on the ability of the Company to: (i) incur additional indebtedness, other than certain permitted indebtedness; (ii) permit additional liens or encumbrances, other than certain permitted liens;
(iii) make any investments in other persons, other than certain permitted investments; (iv) become obligated with respect to contingent obligations, other than certain permitted contingent obligations; and (v) make restricted payments (including dividends on its common stock). The operating covenants also include restrictions on certain specified fundamental changes, such as mergers and asset sales, transactions with shareholders and affiliates and transactions outside the ordinary course of business as currently conducted, amendments or waivers of certain specified agreements and the issuance of guarantees or other credit enhancements. At December 31, 2000, the Company was in compliance with the financing and operating covenants of both the Senior Credit Agreement and the Senior Subordinate Notes.

7. REDEEMABLE PREFERRED STOCK:

Series A

In March of 1997, the Company issued 300,000 shares of Redeemable Preferred Stock Series A with an aggregate liquidation preference of $30,000, or $100 per share, which is entitled to quarterly dividends that will accrue at a rate per annum of 14%. Prior to February 28, 2002, dividends may be paid in either additional whole shares of Redeemable Preferred Stock Series A or cash, at the Company's option, and only in cash following that date. The Senior Subordinate Notes and the Senior Credit Agreement prohibit the payment of cash dividends until May 31, 2002. At December 31, 2000, dividends have been accrued but are unpaid on the Redeemable Preferred Stock Series A.

The Redeemable Preferred Stock Series A is subject to mandatory redemption in whole on February 28, 2008, at a price equal to the then effective liquidation preference thereof, plus all accumulated and unpaid dividends to the date of redemption. Prior to February 28, 2008, the Company has various options on redemption of the Redeemable Preferred Stock Series A at various redemption prices exceeding the liquidation preference.

The Company may, at its option, subject to certain conditions, including its ability to incur additional indebtedness under the Senior Subordinate Notes and the Senior Credit Agreement, on any scheduled dividend payment date, exchange the Redeemable Preferred Stock Series A, in whole but not in part, for the Company's 14% subordinated exchange debentures due 2008 (the Exchange Debentures). Holders of the Redeemable Preferred Stock Series A will be entitled to receive $1.00 principal amount of Exchange Debentures for each $1.00 in liquidation preference of Redeemable Preferred Stock Series A.

Holders of the Redeemable Preferred Stock Series A have no voting rights, except as otherwise required by law; however, the holders of the Redeemable Preferred Stock Series A, voting together as

F-16

STC BROADCASTING,INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

a single class, shall have the right to elect the lesser of the two directors or 25% of the total number of directors constituting the Board of Directors of the Company upon the occurrence of certain events, including but not limited to, the failure by the Company on or after February 28, 2002, to pay cash dividends in full on the Redeemable Preferred Stock Series A for six or more quarterly dividend periods, the failure by the Company to discharge any mandatory redemption or repayment obligation with respect to the Redeemable Preferred Stock Series A, the breach or violation of one or more of the covenants contained in the Certificate of Designation, or the failure by the Company to repay at final stated maturity, or the acceleration of the final stated maturity of, certain indebtedness of the Company.

The Certificate of Designation for the Redeemable Preferred Stock Series A and the indenture for the Exchange Debentures contain covenants customary for securities comparable to the Redeemable Preferred Stock Series A and the Exchange Debentures, including covenants that restrict the ability of the Company and its subsidiaries to incur additional indebtedness, pay dividends and make certain other restricted payments, to merge or consolidate with any other person or to sell, assign, transfer, lease, convey, or otherwise dispose of all or substantially all of the assets of the Company. Such covenants are substantially identical to those covenants contained in the Senior Subordinate Notes.

Series B

On February 5, 1999, the Company entered into a $90,000 Redeemable Preferred Stock Series B bridge financing agreement (the Preferred Agreement) with three purchasers, two of which are participants in the Senior Credit Agreement, and sold $35,000 or 35,000 shares of Redeemable Preferred Stock Series B to fund the WUPW purchase, and $2,500 or 2,500 shares to fund an escrow account to pay dividends on the stock.

On August 5, 1999, the Company repaid all amounts outstanding under the Preferred Agreement by a borrowing of $21,000 under the Senior Credit Agreement, a $15,000 capital contribution from Sunrise, and $1,500 of available cash. The availability for selling additional preferred stock under the Preferred Agreement was cancelled.

On December 30, 1999, the Company sold to Sunrise 25,000 shares of Redeemable Preferred Stock Series B with an aggregate liquidation preference of $25,000. Each share is entitled to quarterly dividends that will accrue at 14% rate per annum. The Company's Senior Credit Agreement and Senior Subordinated Notes prohibit the payment of cash dividends until May 31, 2002. At December 31, 2000, dividends have been accrued but are unpaid on the Redeemable Preferred Stock Series B.

The Redeemable Preferred Stock Series B is subject to mandatory redemption in whole on February 28, 2008 at a price equal to the then effective liquidation preference per share plus an amount in cash equal to all accumulated and unpaid dividends per share. Prior to February 28, 2008, the Company can redeem the Redeemable Preferred Stock Series B at the then effective liquidation preference per share plus an amount in cash equal to all accumulated and unpaid dividend per share. In the event of a Change of Control (as defined in the Certificate of Designation for the Redeemable Preferred Stock Series B), the Company must offer to purchase all outstanding shares at the then effective liquidation preference per share plus an amount in cash equal to all accumulated and unpaid dividends per share.

With respect to dividends and distributions upon liquidation, winding-up and dissolution of the Company, the Redeemable Preferred Stock Series B ranks senior to all classes of common stock of the Company and the Redeemable Preferred Stock Series A of the Company.

Holders of the Redeemable Preferred Stock Series B have no voting rights, except as otherwise required by law or as expressly provided in the Certificate of Designation for the Redeemable Preferred Stock Series B; however, the holders of the Redeemable Preferred Stock Series B, voting together as a single class, shall have the right to elect the lesser of two directors or 25% of the total number of directors

F-17

STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

constituting the Board of Directors of the Company upon the occurrence of certain events, including but not limited to, the failure by the Company on or after February 28, 2002, to pay cash dividends in full on the Redeemable Preferred Stock Series B for six or more quarterly dividend periods or the failure by the Company to discharge any mandatory redemption or repayment obligation with respect to the Redeemable Preferred Stock Series B or the breach or violation of one or more of the covenants contained in the Certificate of Designation or the failure by the Company to repay at final stated maturity, or the acceleration of the final stated maturity of, certain indebtedness of the Company.

The Certificate of Designation for the Redeemable Preferred Stock Series B contains covenants customary for securities comparable to the Redeemable Preferred Stock Series B, including covenants that restrict the ability of the Company and its subsidiaries to incur additional indebtedness, pay dividends and make certain other restricted payments, to merge or consolidate with any other person or to sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the assets of the Company. Such covenants are substantially identical to those covenants contained in the Senior Subordinated Notes.

Redeemable Preferred Stock dividend and accretion consisted of the following:

                                   Years Ended
                                   December 31,
                          ---------------------------
                            2000      1999      1998
                          -------    ------    ------
Series A
     Accrued Dividends    $ 6,538    $5,696    $4,964
     Accretion                136       136       136
Series B
     Accrued Dividends      3,688        --        --
     Dividends Paid            --     1,191        --
     Accretion                 99       400        --
                          -------    ------    ------
                          $10,461    $7,423    $5,100
                          =======    ======    ======

8. TRANSACTIONS WITH AFFILIATES:

In March of 1997, Sunrise and the Company entered into a ten-year agreement (the Monitoring and Oversight Agreement) with an affiliate of Hicks Muse (Hicks Muse Partners) pursuant to which Sunrise and the Company have agreed to pay Hicks Muse Partners an annual fee payable quarterly for oversight and monitoring services to the Company. The annual fee is adjustable on January 1, of each calendar year to an amount equal to 0.2% of the budgeted consolidated annual net revenues of the Company and its subsidiaries for the then-current fiscal year plus reimbursement of certain expenses.

The Monitoring and Oversight Agreement makes available the resources of Hicks Muse Partners concerning a variety of financial and operational matters. The Company does not believe that the services that have been, and will continue to be, provided to the Company by Hicks Muse Partners could otherwise be obtained by the Company without the addition of personnel or the engagement of outside professional advisors. In the Company's opinion, the fees provided for under the Monitoring and Oversight Agreement reasonably reflect the benefits received, and to be received, by Sunrise and the Company. Total payments related to this agreement amounted to approximately $209, $233 and $201 for the three years ended December 31, 2000, respectively.

In March of 1997, Sunrise and the Company entered into a ten-year agreement (the Financial Advisory Agreement) pursuant to which Hicks Muse Partners received a financial advisory fee of 1.5% of the transaction value at the closing of the Jupiter/Smith acquisition as compensation for its services as financial advisor to the Company. Hicks Muse Partners is entitled to receive a fee equal

F-18

STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

to 1.5% of the "transaction value" for each "add-on transaction" in which the Company is involved. The term "transaction value" means the total value of the add-on transaction including, without limitation, the aggregate amount of the funds required to complete the add-on transaction (excluding any fees payable pursuant to the Financial Advisory Agreement), including the amount of any indebtedness, preferred stock or similar terms assumed (or remaining outstanding). The term "add-on transaction" means any future proposal for a tender offer, acquisition, sale, merger, exchange offer, recapitalization, restructuring or other similar transaction directly involving the Company or any of its subsidiaries, and any other person or entity. The Financial Advisory Agreement makes available the resources of Hicks Muse Partners concerning a variety of financial and operational matters. The Company does not believe that the services that have been, and will continue to be provided by Hicks Muse Partners could otherwise be obtained by the Company without the addition of personnel or the engagement of outside professional advisors. In the Company's opinion, the fees provided for under the Financial Advisory Agreement reasonably reflect the benefits received and to be received by the Company. Total fees paid under this agreement for the three years ended December 31, 2000, were $0, $1,764, and $2,723, respectively, and were capitalized as cost of acquisition or netted against preferred stock.

In March of 1997, affiliates of Hicks Muse purchased 250,000 shares of the Redeemable Preferred Stock Series A for a purchase price of approximately $24,100 (or 96.5% of the initial liquidation preference of such shares) and received in connection therewith warrants to purchase shares of common stock of Sunrise. The Hicks Muse affiliates, along with the other purchaser of the Redeemable Preferred Stock Series A and warrants, received certain registration rights with respect to the shares of common stock of Sunrise issuable upon exercise of the warrants . On August 30, 2000, in conjunction with Hicks Muse becoming non-attributable in Sunrise and the Company for FCC purposes (footnote 11), Hicks Muse sold its 250,000 shares to an unrelated party and any future warrants were cancelled.

The Company has elected to participate in a Hicks Muse affiliate insurance program which covers vehicles, buildings, equipment, libel and slander, liability and earthquake damage. The Company pays actual invoice costs and no employee of Hicks Muse is compensated for these services other than through the above Monitoring and Oversight Agreement. Management believes the amounts paid are representative of the services provided.

The Company has elected to participate in the Sunrise health, life, vision and dental program, long and short-term disability, travel accident and long-term care program. Management believes the amounts paid are representative of the services provided.

A defined contribution 401(k) savings plan is provided to employees of the Company by Sunrise. Employees of the Company who have been employed for six months and who have attained the age of 21 years are generally eligible to participate. Certain employees represented by one union have elected not to participate in the Plan and have established their own plan. Total contributions by the Company to the defined contribution 401(k) savings plan were approximately $428, $492 and $341 for the three years ended December 31, 2000, respectively.

The Company has contracts with national representation firms to sell advertising time. During 1998, entities controlled by Hicks Muse acquired certain of these firms. In 1999, the Company entered into extensions of certain of these contracts in the normal course of business on terms and conditions which the Company considered representative of current market conditions.

In April 1998, the Company sold to Robert N. Smith the assets and certain rights and obligations related to WFFF for $500. The purchase price was secured by a note and liens on all of the assets sold and on July 23, 1998, the Company received full payment on the note.

F-19

STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

9. PENSION PLAN:

In October 1997, the Company approved the termination of two WJAC non-contributory, defined benefit pension plans (the Plans) covering principally all full-time salaried and hourly employees and certain part-time employees of WJAC. Effective December 31, 1997, the Company froze pension benefits at the current level and suspended future benefit accruals. The Company terminated the Plans during 1998. Final distribution to current and former employees and expenses related to the termination were paid out of the Plans' assets in 1998.

10. INCOME TAXES:

Commencing August 30, 2000, STC Broadcasting, Inc. files a consolidated federal income tax return with all of its subsidiaries. Prior to August 30, 2000, all nonqualifying subsidiaries filed separate federal income tax returns. STC Broadcasting, Inc. and certain subsidiaries file separate state income tax returns. The (benefit) provision for income taxes consists of the following for the three years ended December 31, 2000:

                                                          Years Ended
                                                          December 31,
                                                -------------------------------
                                                  2000        1999        1998
                                                --------     -------     ------

Deferred (Benefit) Provision:
     Federal                                    $(11,543)    $(6,408)    $1,659
     State                                        (1,996)     (1,117)       164
                                                --------     -------     ------
         Total Income Tax (Benefit)
           Provision                            $(13,539)    $(7,525)    $1,823
                                                ========     =======     ======

Deferred taxes reflect the tax effect on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Components of the Company's net deferred tax liability as of December 31, 2000 and 1999 are as follows:

                                                      December 31,
                                                ---------------------
                                                  2000         1999
                                                --------     --------

Deferred Tax Assets:
     Net operating loss (NOL) carryforward      $ 22,770     $ 15,224
     Deferred debt costs                           1,131        1,332
     Allowance for doubtful accounts                 188          215
     Other                                           431          115
                                                --------     --------
                                                  24,520       16,886
                                                --------     --------
Deferred Tax Liabilities:
     Intangible assets                           (15,721)     (19,492)
     Deferred gain on asset exchange              (4,912)      (5,166)
     Property and equipment                       (8,308)      (7,699)
                                                --------     --------
                                                 (28,941)     (32,357)
                                                --------     --------
         Net deferred tax liability               (4,421)     (15,471)
         Less: valuation allowance                    --       (2,489)
                                                --------     --------
                                                $ (4,421)    $(17,960)
                                                ========     ========

The Company has federal and state NOL carryforwards which expire from 2003 through 2020. During the years ended December 31, 1999 and 1998, the Company created $1,509 and $588, respectively, of valuation allowance to reserve for deferred tax assets resulting from nonqualifying subsidiaries' NOLs for the tax reporting period. During 2000, the Company's former nonqualifying subsidiaries qualified to file a consolidated federal income tax return due to changes in the Company's ownership control. As a result, the Company reversed existing valuation allowance attributed to NOL related deferred tax assets.

F-20

STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

The reconciliation of the income tax (benefit) provision based on the federal statutory income tax rate (34 percent) to the Company's income tax (benefit) provision is as follows for the three years ended December 31, 2000:

                                                           Years Ended
                                                           December 31,
                                                -------------------------------
                                                  2000         1999        1998
                                                --------     -------     ------

Tax (benefit) provision at the statutory rate   $ (8,413)    $(7,958)    $  980
State income tax (benefit) provision,
      net of federal tax effect                   (2,656)     (1,131)       202
Valuation allowance                               (2,489)      1,509        588
Other                                                 19          55         53
                                                --------     -------     ------
                                                $(13,539)    $(7,525)    $1,823
                                                ========     =======     ======

11. COMMITMENTS AND CONTINGENCIES:

Legal Proceedings

Lawsuits and claims are filed against the Company from time to time in the ordinary course of business including suits based on defamation. Management believes that the outcome of any such pending matters will not materially affect the financial position, results of operations or cash flows of the Company.

Management Contracts

On March 1, 1997, the Company entered into five-year employment agreements with four members of senior management for minimum base compensation of $250 and an annual bonus based upon criteria established by the Board of Directors. On February 1, 2001, the contracts were amended to eliminate a fixed termination date. If the executive officer terminates his employment for good reason, as defined, or Sunrise or the Company terminate his employment for any reason other than for cause, as defined, then such executive officer shall be paid his salary and shall continue to be covered by certain employee benefit plans for 12 months, provided, however, that continued coverage under any employee benefit plan of Sunrise or the Company shall terminate upon such executive officer becoming eligible for comparable benefits pursuant to new employment. In the event of a change of control (as defined in the employment agreements), either Sunrise, the Company, or the executive officer may terminate the employment agreement concurrently with sale and receive the salary and benefits on the same terms described in the preceding sentence.

Employees

As of December 31, 2000, the Company had approximately 456 full-time and 81 part-time employees. WEYI has a contract with United Auto Workers that expires on September 30, 2002 with respect to 39 employees. WDTN has a contract with the International Brotherhood of Electrical Workers ("IBEW") that expires July 1, 2003 with respect to 54 employees. KFYR has a contract with IBEW that expires on September 9, 2003 with respect to 9 employees. WTOV contracts with AFTRA and IBEW, and the WJAC contract with International Alliance of Theatrical Stage Employees were assumed by Cox on August 4, 2000, the date of LMA agreements with the Company. No significant labor problems have been experienced by the Stations. The Company considers its overall labor relations to be good. However, there can be no assurance that the Company's collective bargaining agreements will be renewed in the future or that the Company will not experience a prolonged labor dispute, which could have a material adverse effect on the Company's business, financial condition, or results of operations.

F-21

STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

FCC Ownership Matters

The FCC has amended its broadcast ownership rules (collectively, the FCC Ownership Rules). On August 5, 1999, the FCC adopted its initial orders substantially revising certain of the FCC Ownership Rules. These rule changes became effective on November 16, 1999. The FCC again modified the FCC Ownership Rules in a series of orders released January 19, 2001. In those actions, the FCC broadly affirmed its 1999 changes by rejecting most of the issues raised in the various petitions for reconsideration of the August 1999 orders, although it revised or clarified a number of specific elements of the FCC Ownership Rules. These most recent changes to the FCC Ownership Rules will not become effective until April 9, 2001. Parties also may seek further administrative or judicial review of the most recent changes in the FCC Ownership Rules, so these rules are subject to further changes. While the following discussion does not describe all of the FCC Ownership Rules or rule changes, it attempts to summarize those rules, as they stand now and as they will stand when the changes in the FCC's January 2001 orders become effective, that appear to be most relevant to the Company.

In August 1999, the FCC relaxed its "television duopoly" rule, which barred any entity from having an attributable interest in more than one television station with overlapping service areas. Under the current rules, one entity may have attributable interests in two television stations in the same Nielsen Designated Market Area (DMA) provided that: (1) one of the two stations is not among the top four in audience share and (2) at least eight independently owned and operated commercial and noncommercial television stations will remain in the DMA if the proposed transaction is consummated. After the January 2001 orders become effective, the FCC will count toward the eight independently owned station threshold only same DMA television stations that have overlapping service areas with at least one of the two stations to be commonly owned. The current rules also permit common ownership of television stations in the same DMA where one of the stations to be commonly owned has failed, is failing or is unbuilt or where extraordinary public interest factors are present. In order to transfer ownership in two commonly owned television stations in the same DMA, it will be necessary to demonstrate compliance with the FCC Ownership Rules at the time of the transfer. Lastly, the current rules authorize the common ownership of television stations with overlapping signal contours if the stations to be commonly owned are located in different DMAs.

Similarly, in August 1999, the FCC relaxed its cross ownership rule, which restricts the common ownership of television and radio stations in the same market. One entity now may own up to two television stations and six radio stations (or up to one television station and seven radio stations) in the same market provided that (1) 20 independent media voices (including certain newspapers and a single cable system) will remain in the relevant market following consummation of the proposed transaction, and (2) the proposed combination is consistent with the television duopoly and local radio ownership rules. If fewer than 20 but more than 9 independent voices will remain in a market following a proposed transaction, and the proposed combination is otherwise consistent with FCC rules, a single entity may have attributable interests in up to two television stations and four radio stations. In its January 2001 orders, the FCC further clarified that the various "independent voices" tests are applied on a market-by-market basis, with regard to both television designated market areas and radio markets. If these various "independent voices" tests are not met, a party generally may have an attributable interest in no more than one television station and one radio station in a market.

The FCC's August 1999 rule changes also redefined its rules that determine what constitutes "cognizable interest" in applying the FCC Ownership Rules (the Attribution Rules). Under the current Attribution Rules, a party will be deemed to have a cognizable interest in a television or radio station, cable system or daily newspaper that triggers the FCC's cross-ownership restrictions if (1) it is a non-passive investor and it owns 5% or more of the voting stock in the media outlet; (2) it is a passive investor (i.e., bank trust department, insurance company or mutual fund) and it owns 20% or more of the voting stock; or (3) its interests (which may be in the form of debt or equity (even if non-voting), or both) exceed 33% of

F-22

STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

the total asset value of the media outlet and it either (i) supplies at least 15% of a station's weekly broadcast hours or (ii) has an attributable interest, independent of this total asset rule, in another media outlet in the same market.

In its January 2001 orders, the FCC clarified that, for purposes of the Attribution Rules, the value of a media outlet's total assets may be based on either book value or justifiable fair market value, and any indirect interest. It announced that it would consider consideration already paid to a media outlet for a future interest (such as an upfront payment for warrants or an option) and financial deposits by a party made on behalf of a media outlet to secure a loan for the outlet (such as an escrow deposit) as part of the media outlet's total assets held by the party. It also confirmed that, if sudden, unexpected changes in a media outlet's total assets cause the outlet (or its attributable parties) to fall out of compliance with the FCC's rules, the outlet (or parties) would have a reasonable period of time (up to one year) in which to return to compliance. In addition, the FCC eliminated its single majority shareholder exception, which enabled a single shareholder that owned more than 50 percent of a media outlet's voting stock to be the only attributable shareholder in that outlet, even if other shareholders in that media outlet had interests (such as five percent of voting stock) that otherwise would have caused them to be attributable. Unlike the remainder of the order, however, this revision will not become effective until the Office of Management and Budget has completed an independent review of the burdens posed by this change. The FCC confirmed, however, that all investors who were nonattributable because of the presence of a single majority shareholder prior to December 14, 2000, would have this nonattributable status permanently grandfathered on a non-transferable basis.

Local marketing agreements (LMAs) also are treated as attributable interests for purposes of the FCC Ownership Rules. The FCC grandfathered television LMAs that were in effect prior to November 5, 1996, until it has completed the review of its attribution regulations in 2004. Parties may seek the permanent grandfathering of such an LMA, on a non-transferable basis, by demonstrating that the LMA is in the public interest and that it otherwise complies with FCC Rules.

Finally, the FCC has eliminated its "cross interest" policy, which had prohibited common ownership of a cognizable interest in one media outlet and a "meaningful" non-cognizable interest in another media outlet serving essentially the same market.

The recent changes to the FCC Ownership Rules did affect the Company's relationship with SAC. Prior to August 30, 2000, the Company owned a substantial non-voting equity stake in SAC, which, together with a wholly owned subsidiary, now owns WNAC-TV, Providence, Rhode Island. Under the new FCC Ownership Rules that were adopted in August 1999, the Company's formerly non-attributable interest in SAC was attributable. The Company concluded that a change was required to retain its interest in WNAC. See below actions taken by the Company and Hicks Muse.

With the changes in the FCC Ownership Rules, the Company no longer needs to maintain its waiver to own both KRBC-TV, Abilene, Texas, and KACB-TV, San Angelo, Texas, as the common ownership of these stations is now consistent with the Commission's Rules.

On October 2, 1999, AMFM Inc. ("AMFM") entered into an Agreement and Plan of Merger with Clear Channel Communications, Inc. ("Clear Channel") and CCU Merger Sub, Inc. (Merger Sub), pursuant to which AMFM would be merged with and into Merger Sub and become a wholly-owned subsidiary of Clear Channel (the "AMFM Merger"). The AMFM Merger was consummated on August 30, 2000. Thomas O. Hicks, who previously was the Company's ultimate controlling shareholder, had an attributable interest in AMFM and currently is the Vice-Chairman of Clear Channel. Because of the changes in FCC Ownership Rules and the AMFM Merger, the Company has taken certain actions to remain in compliance with the FCC Ownership Rules.

F-23

STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

On March 14, 2000, STC License Company filed an application with the FCC for consent to the transfer of control of Sunrise to SBP, which is controlled by Robert N. Smith. This application for transfer was approved on July 12, 2000, and was consummated on August 30, 2000. The transfer of control of Sunrise by Hicks Muse to SBP resulted in SBP holding all of the voting stock of Sunrise. On April 28, 2000, Hicks Muse entered into an agreement to sell to an unrelated party its interest in the Redeemable Preferred Stock Series A of the Company and Hicks Muse's interest in Senior Subordinate Notes of Sunrise. This transaction was consummated on August 30, 2000. Upon the transfer of control to SBP and the sale of these interests by Hicks Muse, Hicks Muse's interest in Sunrise and the Company became no longer attributable under the FCC Ownership Rules.

On March 24, 2000, the Company filed an application with the FCC to convert its non-voting shares of SAC capital stock into voting shares of SAC capital stock. The application for transfer was approved on July 12, 2000, and was consummated on August 30, 2000. A principal effect of this transaction will allow SAC to file a consolidated tax return with Sunrise and the Company.

On November 29, 2000, the Company filed an application with the FCC to merge SALC into STC License Company and SAC into STC Broadcasting, Inc., with STC License and STC Broadcasting being the surviving companies. The FCC approved that application on December 13, 2000, but the transaction has not yet been consummated.

Lease Commitments

The Company leases land for three transmitter towers, two studio/office facilities, satellite sales and news offices and two corporate offices and minor equipment. Total rent expenses were approximately $640, $421 and $132 for the three years ended December 31, 2000, respectively.

At December 31, 2000, the total minimum annual rental commitments under non-cancelable leases for the three transmitter land sites, the two studio facilities and the two corporate offices are as follows:

Year                          Total
----                         ------

2001                         $  461
2002                            466
2003                            440
2004                            372
2005                            317
Thereafter                    1,675
                             ------
Total                        $3,731
                             ======

The lease on the WUPW transmitter site is a 99 year lease with an end date of December 2, 2089. The Company has an option to purchase the property on August 1, 2018 at fair market value. The above lease commitment disclosure includes the monthly payments, (presently $5 a month plus an annual 3% increase) through the option date.

13. TERMINATED SINCLAIR ACQUISITION

On March 16, 1999, the Company and Sinclair Communications, Inc. ("Sinclair") entered into a purchase agreement (the "Sinclair Agreement"). Pursuant to the Sinclair Agreement, the Company agreed to acquire from Sinclair: WICS, Channel 20, Springfield, Illinois; WICD, Channel 15, Champaign, Illinois; and KGAN, Channel 2, Cedar Rapids, Iowa (collectively, the "Sinclair Stations") for a total purchase price of $87,000 including working capital, fees, and expenses. In April 1999, and at various other times, the Antitrust Division of the United States Department of Justice ("DOJ") issued various requests for additional information under the Hart-Scott-Rodino Antitrust Improvements Act in connection with the acquisition.

F-24

STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

On March 14, 2000, the Company entered into a Termination Agreement with Sinclair thereby ending the Company's plan to acquire the Sinclair Stations. The approval by the Antitrust Division of the DOJ was not received on a timely basis. Attempts were made to comply with various information requests of the DOJ, numerous compromises were offered to the DOJ and offers the Company deemed reasonable were found unacceptable by the DOJ. The Company incurred a one time charge of $875 in the first quarter 2000 related to its efforts to purchase the Sinclair Stations, respond to the information requests of the DOJ, its extended negotiation with the DOJ and the Company's subsequent effort to remarket WICS and WICD in an attempt to reach a reasonable compromise with the DOJ.

14. CANCELLED PRIVATE PLACEMENT

During 1999, the Company and Sunrise had plans to sell debt securities of Sunrise or preferred stock of the Company in a private placement to complete the Sinclair Agreement (see Note 13) and repay the outstanding amounts under the Preferred Agreement. Sunrise and the Company subsequently determined that they would attempt to fund the Sinclair Agreement through an additional borrowing under the Senior Credit Agreement and by an additional capital contribution by Sunrise. The results of operations for the year ended December 31, 1999 include a charge of $825 for expenses incurred in the cancelled private placement.

15. SEGMENT INFORMATION

The Company has 10 reportable segments, two license corporations and a corporate office in accordance with SFAS 131, "Disclosures about Segments of an Enterprise and Related Information." These segments are television stations in designated market areas (DMA) as defined by A. C. Nielsen Company. The majority of each segments' revenues are broadcast related.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies. All segments have local distinct management separate from corporate management. The Company evaluates segment performance based on station operating income before depreciation, amortization, interest income, interest expense, income taxes, nonrecurring gains and losses, and extraordinary items.

The Company has no intersegment sales or transfers other than interest that is allocated to subsidiaries but not divisions.

The following tables set forth information by segments, aggregated with segments that have similar economic characteristics, and reconciles segment information to the consolidated financial statements amounts.

F-25

STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

                           Year       Net         Net          Total       Capital      Depreciation      New        Program
                                   Revenues      Income        Assets    Expenditures       and         Program    Amortization
                                                 (Loss)                                 Amortization    Rights
                           ----    --------     ---------     ---------  ------------   ------------    -------    ------------

Segment Groups

49 - 75 DMA                2000    $ 44,880     $  (7,836)    $  42,665    $ 3,185        $  6,055      $ 1,324      $ 3,530
                           1999      44,409        (8,312)       49,632      1,813           5,916        4,048        4,455
                           1998      35,963           597       159,801      1,655          10,081          492        3,973

76 DMA and above           2000      35,351       (12,258)       51,017      1,740           9,779          762        1,483
                           1999      36,748       (13,385)       64,867      3,551           9,428        2,064        1,723
                           1998      31,160         3,582       144,161      3,901          10,301          727        1,723

License Corporations       2000           0        11,879       241,243          0          19,995            0            0
                           1999           0        15,638       261,241          0          20,271            0            0
                           1998           0        10,417        71,657          0           3,725            0            0

Corporate                  2000           0        (2,990)       13,832         14             827            0            0
                           1999           0        (9,822)        8,433        417             774            0            0
                           1998           0       (16,396)        8,893         17             926            0            0
                           ----    --------     ---------     ---------    -------        --------      -------      -------

Company Totals             2000      80,231       (11,205)      348,757      4,939          36,656        2,086        5,013
                           1999      81,157       (15,881)      384,173      5,781          36,389        6,112        6,178
                           1998      67,123        (1,800)      384,512      5,573          25,033        1,219        5,696
                           ====    ========     =========     =========    =======        ========      =======      =======

                        Year     Program        Income tax        Gain        Gain        Cancelled      Interest       Cancelled
                                 Payments       Provision       on Asset     on Sale       Private       Expense(2)     Sinclair
                                              (Benefit)(1)        Swap       of WROC      Placement                       Deal
                        ----     --------     ------------      --------     -------      ---------      ----------     ---------

Segment Groups

49 - 75 DMA             2000     $ 3,879        $      0         $    0      $    0         $   0         $ 2,560        $   0
                        1999       4,543               0              0           0             0           2,560            0
                        1998       4,058               0              0           0             0           1,493            0

76 DMA and above        2000       1,453               0              0           0             0           4,384            0
                        1999       1,815               0              0         979             0           4,384            0
                        1998       1,621               0          9,457           0             0           4,208            0

License Corporations    2000           0               0              0           0             0               0            0
                        1999           0               0              0       3,521             0               0            0
                        1998           0               0          8,000           0             0               0            0

Corporate               2000           0         (13,539)             0           0             0          11,909          875
                        1999           0          (7,525)             0           0           825          13,691            0
                        1998           0              97              0           0             0          10,600            0
                        ----     -------        --------         ------      ------         -----         -------        -----

Company Totals:         2000       5,332         (13,539)             0           0             0          18,853          875
                        1999       6,358          (7,525)             0       4,500           825          20,635            0
                        1998       5,679              97         17,457           0             0          16,301            0
                        ====     =======        ========         ======      ======         =====         =======        =====


(1) The extraordinary loss of early retirement of debt and tax provision (benefit) were allocated entirely to the corporate office.

(2) Interest expense is allocated to various subsidiaries, which own WJAC, KRBC, KACB, WTOV and WNAC.

16. SALE OF WJAC AND WTOV

On July 6, 2000, the Company entered into an agreement with Cox Broadcasting, Inc. ("Cox") to sell Cox all of the capital stock of WJAC, Incorporated for $70,000. WJAC, Incorporated owns WJAC,

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STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

the NBC affiliate in Johnstown, Pennsylvania. In a related transaction, SAC and Smith Acquisition License Company, subsidiaries of the Company, entered into an agreement with Cox to sell the assets of WTOV, the NBC affiliate in Steubenville, Ohio, to Cox for $58,000. On August 4, 2000, the Company entered into Time Brokerage Agreements ("TBAs") with Cox under which Cox programs most of the available time on WJAC and WTOV and retains the revenues from such sales of advertising time. Cox pays the Company a $750 monthly fee under the two TBAs plus reimburses the Company for out of pocket costs. Beginning August 4, 2000, and as a result of the TBAs, the Company only records nonreimbursable expenses of WJAC and WTOV in the accompanying financial statements for 2000. On December 22, 2000, the Company and Cox amended their agreement for the sale of WJAC to provide for the sale of the FCC licenses for WJAC directly from STC License Company, the subsidiary of the Company which holds such licenses, to Cox. Prior to the closing of the sale of WJAC and WTOV, the Company incurred direct, incremental costs associated with the despositions of these stations. As of December 31, 2000, the Company had incurred $823 of these costs and have included them as other expense on the accompanying consolidated statement of operations.

The sale of WJAC, Incorporated and WTOV closed on January 5, 2001. Preliminary net proceeds from the transactions are approximately $126,000. $68,000 was used to permanently retire a portion of the Company's senior term loan agreement, $55,000 was transferred to a collateral account with the Company's senior lender pending the purchase of WPRI, and $3,000 was transferred to an indemnity escrow account.

The following is an unaudited proforma condensed balance sheet reflecting the sale of WJAC and WTOV as if the transactions had been completed on December 31, 2000:

                                 Unaudited Proforma Condensed Balance Sheet at December 31, 2000
                                 ---------------------------------------------------------------


                                                              Carrying Value
                                            Consolidated    of Net Assets Sold    Adjustments        Proforma
                                            ------------    ------------------    -----------        --------
Assets
Current assets
     Cash                                     $  5,026          $     (2)        $  58,000(1)        $ 63,024
     Accounts receivable                        11,422               (56)               --             11,366
     Current portion of program rights           6,873            (2,900)               --              3,973
     Other current assets                          358               (45)               --                313
                                              --------          --------         ---------           --------
         Total current assets                   23,679            (3,003)           58,000             78,676
Property and equipment                          61,835            (9,552)               --             52,283
Intangible assets                              243,895           (53,484)               --            190,411
Other assets                                    19,348              (723)               --             18,625
                                              --------          --------         ---------           --------
         Total assets                         $348,757          $(66,762)        $  58,000           $339,995
                                              ========          ========         =========           ========
Liabilities and Equity
Current liabilities
    Current portion of program rights         $  7,037          $ (3,033)        $      --           $  4,004
    All other current liabilities               17,122               (13)           (4,810)(1)(2)      12,299
                                              --------          --------         ---------           --------
         Total current liabilities              24,159            (3,046)           (4,810)            16,303
Long term debt                                 187,250                --           (60,000)(1)        127,250
Deferred taxes                                   4,421           (17,078)           21,000 (2)          8,343
Program rights                                   6,206                --                --              6,206
Redeemable preferred stock                      77,962                --                --             77,962
Stockholder's equity                            48,759           (46,638)          101,810            103,931
                                              --------          --------         ---------           --------
Total liabilities and equity                  $348,757          $(66,762)        $  58,000           $339,995
                                              ========          ========         =========           ========

Notes to proforma unaudited balance sheet:

1. Reflects the allocation of proceeds received on the sale of WJAC and WTOV.

2. Reflects the balance sheet income tax effects of the gain on the sale of WJAC and WTOV. Effects include the utilization of net operating loss carryforwards and a proforma current income tax payable of $3,190. Since the transaction actually closed in 2001, the Company anticipates actual taxes due on the gain will be approximately $1,000.

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STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

The following is an unaudited proforma condensed Statement of Operations reflecting the sale of WJAC and WTOV as if the transaction was effective on January 1, 2000.

           Unaudited Proforma Condensed Statement of Operations for Year Ended December 31, 2000
           -------------------------------------------------------------------------------------

                                                                Activities of
                                                Consolidated     Sold Assets     Adjustments(1)    Proforma
                                                ------------    -------------    --------------    --------

Net revenues                                      $ 80,231        $(14,236)        $     --        $ 65,995
Operating expenses
     Station operating                              21,331          (3,301)              --          18,030
     Selling, general & administrative              18,610          (2,640)              --          15,970
     Expenses realized from
         barter transactions                         2,415            (502)              --           1,913
     Depreciation                                   13,933          (2,492)              --          11,441
     Amortization                                   22,723          (5,415)              --          17,308
     Corporate expenses                              3,927              --               --           3,927
                                                  --------        --------         --------        --------
         Total operating expenses                   82,939         (14,350)              --          68,589
                                                  --------        --------         --------        --------
Operating loss                                      (2,708)            114               --          (2,594)
Interest expense                                   (18,853)             --            4,842 (1)     (14,011)
Other expense, net                                  (3,183)             97           71,882 (2)      68,796
                                                  --------        --------         --------        --------
(Loss) income  before income tax benefit           (24,744)            211           76,724          52,191
Income tax benefit (provision)                      13,539              --          (29,155)        (15,616)
                                                  --------        --------         --------        --------
Net (loss) income                                  (11,205)            211           47,569          36,575
Redeemable preferred stock
     dividends and accretion                       (10,461)             --               --         (10,461)
                                                  --------        --------         --------        --------
Net (loss) income applicable to common stock      $(21,666)       $    211         $ 47,569        $ 26,114
                                                  ========        ========         ========        ========

(1) The reduction in interest expense is the result of a reduction in pro forma long term debt using the assumed proceeds from the sale of WJAC and WTOV.

(2) Reflects the gain on the sale of WJAC and WTOV as if the sale occurred on January 1, 2000.

17. PURCHASE OF WPRI / SALE OF WNAC

On November 3, 2000, the Company entered into an Asset Purchase Agreement with Clear Channel to acquire the assets of WPRI, the CBS affiliate in the Providence, Rhode Island, and New Bedford, Massachusetts, market for a purchase price of $50,000. Closing of this transaction is subject to review and approval by the FCC and the transfer of the WNAC FCC license to an unrelated party. On January 31, 2001, the Company and certain subsidiaries entered into an Asset Purchase Agreement with Lin Television Corporation ("Lin") to sell Lin certain assets of WNAC, including the FCC License and an interest in the revised JMPA for $2,500. On February 1, 2001, the Company filed an application with the FCC to sell WNAC to Lin. Approval and consummation of that sale is a necessary precondition of the Company being able to acquire WPRI. This application is still pending.

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STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

18. UNAUDITED QUARTERLY DATA

                                                Operating           Net Loss
Year Ended                     Net               (Loss)           Applicable to
December 31,                 Revenues            Income           Common Stock
------------                 --------            -------          -------------

2000
  1st quarter                $18,567             $(3,222)           $ (8,516)
  2nd quarter                 21,756                  77              (6,545)
  3rd quarter                 18,815              (1,230)                417
  4th quarter                 21,093               1,667              (7,022)
                             -------             -------            --------
    Total                    $80,231             $(2,708)           $(21,666)
                             =======             =======            ========

1999
  1st quarter                $20,414             $(2,610)           $ (7,000)
  2nd quarter                 21,207                (243)             (5,067)
  3rd quarter                 18,223              (2,675)             (7,557)
  4th quarter                 21,313                (616)             (3,680)
                             -------             -------            --------
    Total                    $81,157             $(6,144)           $(23,304)
                             =======             =======            ========


1998
  1st quarter                $11,335             $(1,344)           $ (5,306)
  2nd quarter                 16,992               1,055              12,480
  3rd quarter                 15,726                (764)             (9,655)
  4th quarter                 23,070               2,738              (4,419)
                             -------             -------            --------
    Total                    $67,123             $ 1,685            $ (6,900)
                             =======             =======            ========

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BROKERAGE PARTNERS