---



SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



(Mark
One)

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



For the quarterly period ended June 30, 2003



OR



| ̈ |  | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ----------------------------------------------------------------------------------



For the transition period from
 to



Commission file number 000-28395



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INTEREP NATIONAL RADIO SALES, INC.

(Exact Name of Registrant as Specified in Its Charter)



|New York (State or Other Jurisdiction of Incorporation or Organization)      |  | 13-1865151 (I.R.S. Employer Identification No.)
|---------------------------------------------------------------------------- |  | -----------------------------------------------
|                                                                             | 
|100 Park Avenue, New York, New York (Address of Principal Executive Offices) |  | 10017 (Zip Code)                               



(212) 916-0700

(Registrants Telephone Number, Including Area Code)



---



Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x  No ̈



Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ̈No  x



The number of shares of the registrants Common Stock outstanding as of the close of business on August 5, 2003, was 5,937,199 shares of Class A Common Stock, and 4,310,960 shares of Class B Common Stock.





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PART I



FINANCIAL INFORMATION



|Item 1. |  | Financial Statements
|------- |  | --------------------



INTEREP NATIONAL RADIO SALES, INC.



CONSOLIDATED BALANCE SHEETS

(in
thousands, except share information)



|                                                                                                                                                                                                                                                 |  | June 30, 2003 |         |   | December 31, 2002 |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------- | ------- | - | ----------------- | -
|                                                                                                                                                                                                                                                 |  | (unaudited)   |         |   |                   |  
|ASSETS                                                                                                                                                                                                                                           |  |               |         |   |                   |  
|Current assets:                                                                                                                                                                                                                                  |  |               |         |   |                   |  
|Cash and cash equivalents                                                                                                                                                                                                                        |  | $             | 17,603  |   |                   | $
|Receivables, less allowance for doubtful accounts of $1,293 and $1,317, respectively                                                                                                                                                             |  |               | 23,123  |   |                   |  
|Representation contract buyouts receivable                                                                                                                                                                                                       |  |               | 494     |   |                   |  
|Current portion of deferred representation contract costs                                                                                                                                                                                        |  |               | 18,044  |   |                   |  
|Prepaid expenses and other current assets                                                                                                                                                                                                        |  |               | 1,391   |   |                   |  
|                                                                                                                                                                                                                                                 |  |               |         |   |                   |  
|Total current assets                                                                                                                                                                                                                             |  |               | 60,655  |   |                   |  
|                                                                                                                                                                                                                                                 |  |               |         |   |                   |  
|Fixed assets, net                                                                                                                                                                                                                                |  |               | 3,745   |   |                   |  
|Deferred representation contract costs                                                                                                                                                                                                           |  |               | 61,675  |   |                   |  
|Investments and other assets                                                                                                                                                                                                                     |  |               | 10,009  |   |                   |  
|                                                                                                                                                                                                                                                 |  |               |         |   |                   |  
|Total assets                                                                                                                                                                                                                                     |  | $             | 136,084 |   |                   | $
|                                                                                                                                                                                                                                                 |  |               |         |   |                   |  
|                                                                                                                                                                                                                                                 |  |              
|LIABILITIES AND SHAREHOLDERS DEFICIT                                                                                                                                                                                                            |  |               |         |   |                   |  
|                                                                                                                                                                                                                                                 |  |              
|Current liabilities:                                                                                                                                                                                                                             |  |               |         |   |                   |  
|Accounts payable and accrued expenses                                                                                                                                                                                                            |  | $             | 15,649  |   |                   | $
|Accrued interest                                                                                                                                                                                                                                 |  |               | 5,153   |   |                   |  
|Representation contract buyouts payable                                                                                                                                                                                                          |  |               | 8,221   |   |                   |  
|Accrued employee-related liabilities                                                                                                                                                                                                             |  |               | 2,242   |   |                   |  
|                                                                                                                                                                                                                                                 |  |               |         |   |                   |  
|Total current liabilities                                                                                                                                                                                                                        |  |               | 31,265  |   |                   |  
|                                                                                                                                                                                                                                                 |  |               |         |   |                   |  
|Long-term debt                                                                                                                                                                                                                                   |  |               | 108,529 |   |                   |  
|                                                                                                                                                                                                                                                 |  |               |         |   |                   |  
|Representation contract buyouts payable                                                                                                                                                                                                          |  |               | 7,601   |   |                   |  
|                                                                                                                                                                                                                                                 |  |               |         |   |                   |  
|Other noncurrent liabilities                                                                                                                                                                                                                     |  |               | 3,321   |   |                   |  
|                                                                                                                                                                                                                                                 |  |               |         |   |                   |  
|Shareholders deficit:                                                                                                                                                                                                                           |  |               |         |   |                   |  
|4% Series A cumulative convertible preferred stock, $0.01 par value400,000 shares authorized, 114,037 and 110,000 shares
issued and outstanding at June 30, 2003 and December 31, 2002, respectively (aggregate liquidation preference$11,404) |  |               | 1       |   |                   |  
|Class A common stock, $0.01 par value20,000,000 shares authorized, 5,922,206 and 5,644,699 shares issued and outstanding at
June 30, 2003 and December 31, 2002, respectively                                                                   |  |               | 59      |   |                   |  
|Class B common stock, $0.01 par value10,000,000 shares authorized, 4,325,953 and 4,603,460 shares issued and outstanding at
June 30, 2003 and December 31, 2002, respectively                                                                   |  |               | 43      |   |                   |  
|Additional paid-in-capital                                                                                                                                                                                                                       |  |               | 51,339  |   |                   |  
|Accumulated deficit                                                                                                                                                                                                                              |  |               | (66,074 | ) |                   |  
|                                                                                                                                                                                                                                                 |  |               |         |   |                   |  
|Total shareholders deficit                                                                                                                                                                                                                      |  |               | (14,632 | ) |                   |  
|                                                                                                                                                                                                                                                 |  |               |         |   |                   |  
|Total liabilities and shareholders deficit                                                                                                                                                                                                      |  | $             | 136,084 |   |                   | $
|                                                                                                                                                                                                                                                 |  |               |         |   |                   |  



The accompanying Notes
to Unaudited Interim Consolidated Financial Statements are an integral part of these balance sheets.



1



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INTEREP NATIONAL RADIO SALES, INC.



CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)



|                                                                    |  | For the Three Months Ended June 30, |        | For the Six MonthsEnded June 30, |     
|------------------------------------------------------------------- |  | ----------------------------------- | ------ | -------------------------------- | ----
|                                                                    |  | 2003                                |        |                                  | 2002
|Commission revenues                                                 |  | $                                   | 22,832 |                                  |     
|Contract termination revenue                                        |  |                                     | 570    |                                  |     
|                                                                    |  |                                     |        |                                  |     
|Total revenues                                                      |  |                                     | 23,402 |                                  |     
|                                                                    |  |                                     |        |                                  |     
|                                                                    |  |                                     |        |                                 
|Operating expenses:                                                 |  |                                     |        |                                  |     
|Selling expenses                                                    |  |                                     | 15,901 |                                  |     
|General and administrative expenses                                 |  |                                     | 3,391  |                                  |     
|Depreciation and amortization expense                               |  |                                     | 5,590  |                                  |     
|                                                                    |  |                                     |        |                                  |     
|Total operating expenses                                            |  |                                     | 24,882 |                                  |     
|                                                                    |  |                                     |        |                                  |     
|                                                                    |  |                                     |        |                                 
|Operating (loss) income                                             |  |                                     | (1,480 | )                                |     
|Interest expense, net                                               |  |                                     | 2,792  |                                  |     
|                                                                    |  |                                     |        |                                  |     
|                                                                    |  |                                     |        |                                 
|Income (loss) before provision (benefit) for income taxes           |  |                                     | (4,272 | )                                |     
|Provision (benefit) for income taxes                                |  |                                     | 131    |                                  |     
|                                                                    |  |                                     |        |                                  |     
|Net (loss) income                                                   |  |                                     | (4,403 | )                                |     
|Preferred stock dividend                                            |  |                                     | 130    |                                  |     
|                                                                    |  |                                     |        |                                  |     
|Net (loss) income applicable to common shareholders                 |  | $                                   | (4,533 | )                                |     
|                                                                    |  |                                     |        |                                  |     
|                                                                    |  |                                     |        |                                 
|Basic (loss) earnings per share applicable to common shareholders   |  | $                                   | (0.44  | )                                |     
|Diluted (loss) earnings per share applicable to common shareholders |  | $                                   | (0.44  | )                                |     





The accompanying Notes to Unaudited Interim Consolidated Financial Statements are an integral part of these

statements.



2



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INTEREP NATIONAL RADIO SALES, INC.



CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)



|                                                                                |  | For the Six MonthsEnded June 30, |        
|------------------------------------------------------------------------------- |  | -------------------------------- | -------
|                                                                                |  | 2003                             |        
|Cash flows from operating activities:                                           |  |                                  |        
|Net loss                                                                        |  | $                                | (13,240
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |                                  |        
|Depreciation and amortization                                                   |  |                                  | 11,178 
|Noncash compensation expense                                                    |  |                                  |       
|Noncash interest expense                                                        |  |                                  | 52     
|Changes in assets and liabilities:                                              |  |                                  |        
|Receivables                                                                     |  |                                  | 6,783  
|Representation contract buyouts receivable                                      |  |                                  | 185    
|Prepaid expenses and other current assets                                       |  |                                  | (462   
|Other noncurrent assets                                                         |  |                                  | (759   
|Accounts payable and accrued expenses                                           |  |                                  | 3,424  
|Accrued interest                                                                |  |                                  | 81     
|Accrued employee-related liabilities                                            |  |                                  | (406   
|Other noncurrent liabilities                                                    |  |                                  | 46     
|                                                                                |  |                                  |        
|Net cash provided by operating activities                                       |  |                                  | 6,882  
|                                                                                |  |                                  |        
|Cash flows from investing activities:                                           |  |                                  |        
|Additions to fixed assets                                                       |  |                                  | (546   
|                                                                                |  |                                  |        
|Net cash used in investing activities                                           |  |                                  | (546   
|                                                                                |  |                                  |        
|Cash flows from financing activities:                                           |  |                                  |        
|Station representation contract payments                                        |  |                                  | (6,847 
|Issuance of Class B common stock                                                |  |                                  |       
|Issuance of Series A convertible preferred stock, net of issuance costs         |  |                                  |       
|                                                                                |  |                                  |        
|Net cash used in financing activities                                           |  |                                  | (6,847 
|                                                                                |  |                                  |        
|Net (increase) decrease in cash and cash equivalents                            |  |                                  | (511   
|Cash and cash equivalents, beginning of period                                  |  |                                  | 18,114 
|                                                                                |  |                                  |        
|Cash and cash equivalents, end of period                                        |  | $                                | 17,603 
|                                                                                |  |                                  |        
|                                                                                |  |                                 
|Supplemental disclosures of cash flow information:                              |  |                                  |        
|Cash paid during the period for:                                                |  |                                  |        
|Interest                                                                        |  | $                                | 5,275  
|Income taxes                                                                    |  |                                  | 177    
|Non-cash investing and financing activities:                                    |  |                                  |        
|Station representation contracts acquired                                       |  | $                                | 3,008  
|Preferred stock dividend                                                        |  |                                  | 240    



The accompanying Notes
to Unaudited Interim Consolidated Financial Statements are an integral part of these statements.



3



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INTEREP NATIONAL RADIO SALES, INC.



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share information)



1.    Summary of Significant Accounting Policies



Principles of Consolidation



The consolidated financial statements include the accounts of Interep National Radio Sales, Inc. (Interep), together with its subsidiaries
(collectively, the Company), and have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted. All significant intercompany transactions and balances have been eliminated.



The consolidated financial statements as of June 30, 2003 are unaudited;
however, in the opinion of management, such statements include all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the results for the periods presented. The interim financial statements should be read in
conjunction with the audited financial statements and notes thereto included in the Companys Consolidated Financial Statements for the year ended December 31, 2002, which are available upon request of the Company. Due to the seasonal nature of
the Companys business, the results of operations for the interim periods are not necessarily indicative of the results that might be expected for future interim periods or for the full year ending December 31, 2003.



Comprehensive (Loss) Income



For the three and six months ended June 30, 2003 and 2002, the
Companys comprehensive (loss) income was equal to the respective net (loss) income for each of the periods presented.



Revenue Recognition



The Company is a national representation (rep) firm serving radio broadcast clients and certain internet service providers throughout the
United States. Commission revenues are derived from sales of advertising time for radio stations under representation contracts. Commissions and fees are recognized in the month the advertisement is broadcast. In connection with its unwired network
business, the Company collects fees for unwired network radio advertising and, after deducting its commissions, remits the fees to the respective radio stations. In instances when the Company is not legally obligated to pay a station or service
provider until the corresponding receivable is paid, fees payable to stations have been offset against the related receivable from advertising agencies in the accompanying consolidated balance sheets. The Company records all commission revenues on a
net basis. Commissions are recognized based on the standard broadcast calendar that ends on the last Sunday in each reporting period. The broadcast calendars for the three and six months ended June 30, 2003 and 2002 both had 13 and 26 weeks,
respectively.



Representation Contract Termination Revenue
and Contract Acquisition Costs



The Companys station
representation contracts usually renew automatically from year to year after their stated initial terms unless either party provides written notice of termination at least twelve months prior to the next automatic renewal date. In accordance with
industry practice, in lieu of termination, an arrangement is normally made for the purchase of such contracts by a successor representative firm. The purchase price paid by the successor representation firm is generally based upon the historic
commission income projected over the remaining contract period, plus two months. Income earned from the loss of station representation contracts (contract termination revenue) is recognized on the effective date of the buyout agreement.



4



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INTEREP NATIONAL RADIO SALES, INC.



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



Costs of obtaining station representation contracts are deferred and amortized over the life of the
new contract. Such amortization is included in the accompanying consolidated statements of operations as a component of depreciation and amortization expense. Amounts which are to be amortized during the next year are included as current assets in
the accompanying consolidated balance sheets.



Loss Per
Share



Basic earnings (loss) per share applicable to
common shareholders for each of the respective periods has been computed by dividing the net income (loss) by the weighted average number of common shares outstanding during the period, amounting to 10,248,159 and 9,390,497 for the three months
ended June 30, 2003 and 2002, respectively, and 10,248,159 and 9,307,935 for the six months ended June 30, 2003 and 2002, respectively. Diluted earnings per share applicable to common shareholders reflects the potential dilution that could occur if
the outstanding options to purchase common stock were exercised, utilizing the treasury stock method, and also assumes conversion of outstanding convertible preferred stock into shares of common stock at the stated rate of conversion (Note 3). For
the purposes of determining diluted earnings per share applicable to common shareholders for the three months ended June 30, 2002, 3,115,422 shares have been assumed to be converted. For the three months ended June 30, 2003, and for the six months
ended June 30, 2003 and 2002, the exercise of outstanding options would have an anti-dilutive effect and therefore have been excluded from the calculation.



Restructuring and Severance Charges



A strategic restructuring program was undertaken in 2001 in response to difficult economic conditions and to further ensure the Companys competitive
position. In 2001, the Company recognized restructuring charges of $3,471, which were primarily comprised of termination benefits. The restructuring program resulted in the termination of approximately 53 employees. At December 31, 2002, the
remaining accrual was approximately $742. During 2003, the Company offered an early retirement program, which was accepted by six people, including two executives, to reduce compensation costs on a going forward basis. This resulted in approximately
$1,500 of termination benefits to be paid over an extended period of time, approximately $1,425 of which was recorded during 2003 at net present value. In June 2002, Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 146, Accounting for Costs Associated with Exit or Disposal Activities.This statement requires the Company to record this new liability at fair value as of the time the liability was
incurred. During the six months ended June 30, 2003, the Company paid approximately $690 of termination benefits under both programs. As of June 30, 2003, the remaining accrual was $1,515, of which $955 is included in accrued employee related
liabilities and $560 is included in other noncurrent liabilities.



New Accounting Pronouncements



In January
2003, the FASB issued SFAS No. 148, Accounting for Stock-Based CompensationTransition and Disclosure. SFAS No. 148 amends FASB Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation to
provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No.148 amends the disclosure requirements of SFAS No. 123 to require prominent
disclosures in both annual and interim financial statements of the method of accounting for stock-based employee compensation and the effect of the method used on reported results. SFAS No. 148 is effective for fiscal years beginning after December
15, 2002 and was adopted by the Company for all periods presented herein.



The Company did not change to the fair value based method of accounting for stock-based employee compensation; therefore, adoption of SFAS No. 148 will only impact disclosures, not the financial results, of the
Company.



5



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INTEREP NATIONAL RADIO SALES, INC.



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments
and Hedging Activities. SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. SFAS No. 149 also amends SFAS No. 133 for decisions made (1) as part of the Derivatives Implementation Group process that effectively required amendments to SFAS No.133, (2) in
connection with other FASB projects dealing with financial instruments, and (3) in connection with implementation issues raised in relation to the application of the definition of a derivative. SFAS No. 149 is effective for contracts entered into or
modified after June 30, 2003, except as stated below, and for hedging relationships designated after June 30, 2003. In addition, except as stated below, all provisions of SFAS No. 149 will be applied prospectively. The provisions of SFAS No.149 that
relate to SFAS No.133 implementation issues that have been effective for fiscal quarters that began prior to June 15, 2003 should continue to be applied in accordance with their respective effective dates. In addition, certain provisions relating to
forward purchases or sales of when-issued securities or other securities that do not yet exist, should be applied to both existing contracts and new contracts entered into after June 30, 2003. The adoption of SFAS No. 149 will have no impact on the
Companys financial position and results of operations.



In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity. SFAS No. 150 establishes standards for how an issuer classifies and measures in its
statement of financial position certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances)
because that financial instrument embodies an obligation of the issuer. This Statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003. The Company is still considering the impact of SFAS No. 150 on the Companys financial position and results of operations.



Use of Estimates



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



Segment Reporting



The Company is managed as
one segment and all revenues are derived from representation operations and related activities.



Reclassification



Certain reclassifications have been made to prior period financial statements to conform to the current periods presentation.



2.    Stock-Based Employee Compensation



In prior years, the Company repriced options with an exercise price of $8.77
to an exercise price of $2.81, which represented the fair market value on the date of the repricing. In accordance with generally accepted accounting principles, the Company has adopted variable plan accounting for these options from the date of the
repricing and has recorded compensation expense of $391 for the three months ended June 30, 2002 and



6



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INTEREP NATIONAL RADIO SALES, INC.



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



compensation income of $529 for the six months ended June 30, 2002. No adjustment was required for the three and six months ended June 30, 2003.



On March 19, 2003, the Company granted 40,000 options to an executive of
the Company at an exercise price of $1.73, which was the fair market value at the date of grant.



The Company has one stock-based compensation plan. The Company accounts for stock-based compensation utilizing the intrinsic value method in accordance
with the provisions of Accounting Principles Board Opinion No. 25 (APB 25), Accounting for Stock Issued to Employees and related Interpretations. Accordingly, no compensation cost has been recognized in the accompanying Consolidated
Statements of Operations for the six months ended June 30, 2003 and 2002 in respect of stock options granted during those periods. Had compensation cost for these options been determined consistent with SFAS No. 123 and SFAS No. 148, the
Companys net loss applicable to common shareholders, basic and diluted loss per share would have been as follows:



|                                                                                                                                            |  | For the six monthsended June 30, |        
|------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | -------
|                                                                                                                                            |  | 2003                             |        
|Net loss applicable to common shareholders, as reported                                                                                     |  | $                                | (13,480
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related
tax effects |  |                                  | (420   
|                                                                                                                                            |  |                                  |        
|Pro forma net loss                                                                                                                          |  | $                                | (13,900
|                                                                                                                                            |  |                                  |        
|Loss per share:                                                                                                                             |  |                                  |        
|Basic and dilutedas reported                                                                                                               |  | $                                | (1.32  
|                                                                                                                                            |  |                                  |        
|Basic and dilutedpro forma                                                                                                                 |  | $                                | (1.36  
|                                                                                                                                            |  |                                  |        



As required, the pro
forma disclosures above include options granted since January 1, 1995. Consequently, the effects of applying SFAS No. 123 for providing pro forma disclosures may not be representative of the effects on reported net income (loss) for future years
until all options outstanding are included in the pro forma disclosures. For purposes of pro forma disclosures, the estimated fair value of stock-based compensation plans and other options is amortized to expense primarily over the vesting period.



3.    Shareholders Deficit



In May 2002, the Company amended its certificate of incorporation for the
purpose of establishing a series of preferred stock referred to as the Series A Convertible Preferred Stock (the Series A Stock), with the authorization to issue up to 400,000 shares. The Series A Stock has a face value of $100 per share
and a liquidation preference in such amount in priority over the Companys Class A and Class B common stock. Each share of the Series A Stock may be converted at the option of the holder at any time into 25 shares of Class A common stock at an
initial conversion price of $4.00 per share (subject to anti-dilution adjustments). If the market price of the Companys Class A common stock is $8.00 or more for 30 consecutive trading days, the Series A Stock will automatically be converted
into shares of Class A common stock at the then applicable conversion price. The Series A Stock bears a 4% annual cumulative dividend that may be paid in cash or in kind (in additional shares of the Series A Stock) at the Companys discretion.
The Company expects to pay such dividends in kind for the foreseeable future. Holders of shares of the Series A Stock vote on an as converted basis, together with the holders of Class A and Class B common stock. During the second quarter
of 2002, the Company completed a series of private placements to issue 110,000 units for an aggregate purchase price of $11,000. Each unit consists of one share of Series A Stock and 6.25 warrants to acquire an equal number of



7



---

INTEREP NATIONAL RADIO SALES, INC.



NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



shares of Class A common stock. The warrants are exercisable at any time from the date of grant and expire five years from the date of grant. The Company
allocated the net proceeds of approximately $10,230 from the sale of Series A Stock between the convertible preferred stock and the warrants, both of which are classified in additional paid in capital. In accordance with Emerging Issue Task Force
Issue No. 00-27, Application of Issue No. 98-5 to Certain Convertible Instruments, the Company recorded approximately $2,100 of beneficial conversion in additional paid in capital. The Company incurred approximately $770 in legal and other costs
directly related to the private placements. A stock dividend for the Series A Stock in the amount of 4,037 shares was paid as of May 1, 2003.



During 2002, the Company issued 747,759 shares of Class B common stock to the Interep Stock Growth Plan (SGP) for net cash proceeds of $2,300.
The shares were issued at the current fair market value on the date of issuance. No Class B common stock was issued in the first six months of 2003 related to the SGP. The trustees of the SGP decided to purchase Class A common stock in the open
market for the SGP until such time that the price of the Class A common stock reaches $3.00 per share.



4.    Commitments and Contingencies



The Company may be involved in various legal actions from time to time arising in the normal course of business. In the opinion of management, there are
no matters outstanding that would have a material adverse effect on the consolidated financial position or results of operations of the Company.



Certain clients of the Company were served summons and complaints (on separate matters) for alleged breaches of various national sales representation
agreements. The Company had agreed to indemnify its clients from and against any loss, liability, cost or expense incurred in the actions. In the first quarter of 2002, the Company entered into a settlement agreement regarding these contract
acquisition claims. The settlement resulted in the offset of approximately $12,500 in representation contract buyout receivables and payables as well as additional contract termination revenue of $2,400. In addition, the settlement agreement
includes amended payment schedules for approximately $10,000 in contract representation payables previously recorded.



8



---

Item 2.Managements Discussion and Analysis of Financial Condition and Results
of Operations



The following discussion should
be read in conjunction with our Consolidated Financial Statements, including the notes thereto, included elsewhere in this Report.



Throughout this Quarterly Report, when we refer to Interep or the Company, we refer collectively to Interep National Radio Sales,
Inc. and all of our subsidiaries unless the context indicates otherwise or as otherwise noted.



Important Note Regarding Forward Looking Statements



Some of the statements made in this Quarterly Report are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not statements of
historical fact, but instead represent our belief about future events. In some cases, you can identify forward-looking statements by terminology such as may, will, should, expects, plans,
anticipates, believes, estimates, predicts, potential, continue, or the negative of these terms or other comparable terminology. These statements are based on many assumptions
and involve known and unknown risks and uncertainties that are inherently uncertain and beyond our control. These risks and uncertainties may cause our or our industrys actual results, levels of activity, performance or achievements to be
materially different than any expressed or implied by these forward-looking statements. Although we believe that the expectations in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. You should review the factors noted in Managements Discussion and Analysis of Financial Condition and Results of OperationCertain Factors That May Affect Our Results of Operations below for a discussion of some of
the things that could cause actual results to differ from those expressed in our forward-looking statements.



Overview



We derive a
substantial majority of our revenues from commissions on sales by us of national spot radio advertising airtime for the radio stations we represent. Generally, advertising agencies or media buying services retained by advertisers purchase national
spot advertising time. We receive commissions from our client radio stations based on the national spot radio advertising billings of the station, net of standard advertising agency and media buying services commissions. We enter into written
representation contracts with our clients, which include negotiated commission rates. Because commissions are based on the prices paid to radio stations for spots, our revenue base is essentially adjusted for inflation.



Our operating results generally depend on:



| |  |  | changes in advertising expenditures;
| | - |  | ------------------------------------



| |  |  | increases and decreases in the size of the total national spot radio advertising market;
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | changes in our share of this market;
| | - |  | ------------------------------------



| |  |  | acquisitions and terminations of representation contracts; and
| | - |  | --------------------------------------------------------------



| |  |  | operating expense levels.
| | - |  | -------------------------



The effect of these factors on our financial condition and results of operations varies from period to period.



A number of factors influence the performance of the national spot radio
advertising market, including, but not limited to, general economic conditions, consumer attitudes and spending patterns, the amount spent on advertising generally, the share of total advertising spent on radio and the share of total radio
advertising represented by national spot radio. In this regard, we, like other media businesses, were adversely affected by a slowing economy generally, and the events of September 11, 2001, in particular, which we believe contributed to



9



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a decrease in the amount spent on advertising in 2002. The war in Iraq also contributed to a decline in advertising during March, April and May of
2003.



Our share of the national spot advertising market
changes as a result of increases and decreases in the amount of national spot advertising broadcast by our clients. Moreover, our market share increases as we acquire representation contracts with new client stations and decreases if current client
representation contracts are terminated. Thus, our ability to attract new clients and to retain existing clients affects our market share.



The value of representation contracts that have been acquired or terminated during the last few years has tended to increase due to a number of factors,
including the consolidation of ownership in the radio broadcast industry following the passage of the Telecommunications Act of 1996. Since that time, we increased our representation contract acquisition activity and devoted a significant amount of
our resources to these acquisitions. We base our decisions to acquire a representation contract on the market share opportunity presented and an analysis of the costs and net benefits to be derived. We continuously seek opportunities to acquire
additional representation contracts on attractive terms, while maintaining our current clients. Our ability to acquire and maintain representation contracts has had, and will continue to have, a significant impact on our revenues and cash flows.



We recognize revenues on a contract termination as of the
effective date of the termination. When a contract is terminated, we write off in full the unamortized portion, if any, of the cost we originally incurred on our acquisition of the contract. When we enter into a representation contract with a new
client, we amortize the contract acquisition cost in equal monthly installments over the life of the new contract. As a result, our operating income is affected, negatively or positively, by the acquisition or loss of client stations. We are unable
to forecast any trends in contract buyout activity, or in the amount of revenues or expenses that will likely be associated with buyouts during a particular period. Generally, the amount of revenue resulting from the buyout of a representation
contract depends on the length of the remaining term of the contract and the revenue generated under the contract during the 12-month trailing period preceding the date of termination. The amount recognized by us as contract termination
revenue in any period is not, however, indicative of contract termination revenue that may be realized in any future period. Historically, the level of buyout activity has varied from period to period. Additionally, the length of the remaining
terms, and the commission revenue generation, of the contracts which are terminated in any period vary to a considerable extent. Accordingly, while buyout activity and the size of buyout payments has generally increased since 1996, their impact on
our revenues and income is expected to be uncertain, due to the variables of contract length and commission generation.



Similar to radio representation, we place advertising with Internet companies. Revenues and expenses from this portion of our business are affected
generally by the level of advertising on the Internet, and the portion of that advertising that we can direct to our clients websites, the prices obtained for advertising on the Internet and our ability to obtain contracts from high-traffic
Internet websites and from Internet advertisers.



Our selling
and corporate expense levels are dependent on management decisions regarding operating and staffing levels and inflation. Selling expenses represent all costs associated with our marketing, sales and sales support functions. Corporate expenses
include items such as corporate management, corporate communications, financial services, advertising and promotion expenses and employee benefit plan contributions.



Our business generally follows the pattern of advertising expenditures. It is seasonal to the extent that radio advertising
spending increases during the fourth calendar quarter in connection with the Christmas season and tends to be weaker during the first calendar quarter. Radio advertising also generally increases during the second and third quarters due to
holiday-related advertising, school vacations and back-to-school sales. Additionally, radio tends to experience increases in the amount of advertising revenues as a result of special events such as political election campaigns. Furthermore, the
level of advertising revenues of radio stations, and therefore our level of revenues, is susceptible to prevailing general and local economic conditions and the corresponding



10



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increases or decreases in the budgets of advertisers, as well as market conditions and trends affecting advertising expenditures in specific industries.



Results of Operations



Three Months Ended June 30, 2003 Compared to Three Months Ended June 30,
2002



Commission
revenues.    Commission revenues for the second quarter of 2003 decreased to $22.8 million from $23.7 million for the second quarter of 2002, or approximately 3.7%. This $0.9 million decrease was the result of a slowdown in
advertising due to the war in Iraq.



Contract termination
revenue.    Contract termination revenue in the second quarter of 2003 decreased by $3.4 million, or 85.7%, to $0.6 million from $4.0 million in the second quarter of 2002. This decrease was attributable to the higher level
of contract termination revenue in the second quarter 2002 due to in large part to the settlement of certain litigations we had with Katz Media, Inc. and Entravision Communications Corporation.



Selling expenses.    Selling expenses for the
second quarter of 2003 increased to $15.9 million from $15.5 million in the second quarter of 2002. This increase of $0.4 million, or approximately 2.6%, was due in large part to $0.4 million of termination benefits recorded in the second
quarter of 2003 in connection with an early retirement program we initiated to reduce ongoing operating expenses.



General and administrative expenses.    General and administrative expenses of $3.4 million for the second quarter of 2003
increased $0.3 million, or 9.5%, from $3.1 million for the second quarter of 2002 primarily due to increases in legal fees and promotional events.



Operating income before depreciation and amortization.    Operating income before depreciation and amortization decreased by
$5.0 million for the second quarter of 2003 to $4.1 million, from $9.1 million for the second quarter of 2002, for the reasons discussed above. Included in Operating income before depreciation and amortization for the second quarter of 2002 was $3.6
million of non-recurring contract termination revenue and non-cash option repricing as compared to $0.6 million for the second quarter of 2003. Operating income before depreciation and amortization is not a measure of performance calculated in
accordance with GAAP and should not be considered in isolation from or as a substitute for operating income (loss), net income (loss), cash flow or other GAAP measurements. We believe it is useful in evaluating the performance of Interep, in
addition to the GAAP data presented, as it is commonly used by lenders and the investment community to evaluate the performance of companies in our business.



Reconciliation of Operating income before depreciation and amortization to GAAP Loss Data



|                                                      |  | June 30, 2003          |        |   | June 30, 2002
|----------------------------------------------------- |  | ---------------------- | ------ | - | -------------
|                                                      |  | (dollars in thousands)
|Net (loss) income applicable to common shareholders   |  | $                      | (4,533 | ) |              
|Add back:                                             |  |                        |        |   |              
|Depreciation and amortization                         |  |                        | 5,590  |   |              
|Preferred stock dividend                              |  |                        | 130    |   |              
|Tax provision                                         |  |                        | 131    |   |              
|Interest expense, net                                 |  |                        | 2,792  |   |              
|                                                      |  |                        |        |   |              
|Operating income before depreciation and amortization |  | $                      | 4,110  |   |              
|                                                      |  |                        |        |   |              



11



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Depreciation and amortization expense.    Depreciation and amortization
expense decreased $0.4 million, or 6.5%, during the second quarter of 2003, to $5.6 million from $6.0 million in the second quarter of 2002. This decrease was primarily the result of lower contract acquisition cost amortization.



Operating (loss) income.    Operating loss was
$1.5 million for the second quarter of 2003 as compared to operating income of $3.1 million for the second quarter of 2002, for the reasons discussed above.



Interest expense, net.    Interest expense, net, increased $0.3 million, or 11.4%, to $2.8 million for the second quarter of
2003, from $2.5 million for the second quarter of 2002. This increase primarily resulted from a decrease in interest income received on cash balances as well as interest expense on the $10 million term loan facility we obtained in November 2002.



Provision (benefit) for income
taxes.    Our current and deferred income taxes, and associated valuation allowances, are impacted by events and transactions arising in the normal course of business as well as in connection with special and non-recurring
items. Assessment of the appropriate amount and classification of income taxes is dependent on several factors, including estimates of the timing and realization of deferred income tax assets and the timing of income tax payments. Actual collections
and payments may differ from these estimates as a result of changes in tax laws as well as unanticipated future transactions impacting related income tax balances. The provision for income taxes for the second quarter of 2003 decreased $0.2 million,
or 53.9%, to $0.1 million from $0.3 million for the comparable 2002 period.



Net (loss) income applicable to common shareholders.    Our net loss applicable to common shareholders was $4.5 million for the second quarter of 2003 compared to net income applicable to
common shareholders of $0.3 million for the second quarter of 2002, for the reasons discussed above.



Six Months Ended June 30, 2003 Compared to Six Months Ended June 30, 2002



Commission revenues.    Commission revenues for the first six months of both 2003 and 2002 were
$41.2 million The partial recovery in radio advertising generally from the levels in 2001 and early 2002 that were depressed by, among other factors, the events of September 11, 2001, was in the first six months partially offset by a slowdown
in advertising due to the war in Iraq.



Contract termination
revenue.    Contract termination revenue in the first six months of 2003 decreased by $5.8 million, or 91.0%, to $0.6 million from $6.4 million in the first six months of 2002. This decrease was attributable to the higher
level of contract termination revenue in the first six months 2002 due to in large part to the settlement of certain litigations we had with Katz Media, Inc. and Entravision Communications Corporation.



Selling expenses.    Selling expenses for the
first six months of 2003 increased to $31.3 million from $28.4 million in the first six months of 2002. This increase of $2.9 million, or approximately 10.2%, was due in large part to $1.5 million of termination benefits recorded in the first six
months of 2003 in connection with an early retirement program we initiated to reduce ongoing operating expenses. In addition, we recorded non-cash compensation credits on stock option incentives of $0.5 million in the first six months 2002 as a
result of the stock option repricing, but made no such adjustment in the first six months of 2003.



General and administrative expenses.    General and administrative expenses of $6.8 million for the first six months of 2003
increased $0.5 million, or 8.4%, from $6.3 million for the first six months of 2002 primarily due to increases in legal fees and promotional events.



Operating income before depreciation and amortization.    Operating income before depreciation and amortization decreased by
$9.2 million for the first six months of 2003 to $3.7 million, from $12.9 million for the first six months of 2002, for the reasons discussed above. Included in Operating income before depreciation and



12



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amortization for the six months ended June 30, 2002 was $6.9 million of non-recurring contract termination revenue and non-cash option repricing as compared
to $0.6 million for the six months ended June 30, 2003.



Reconciliation of Operating income before depreciation and amortization to GAAP Loss Data



|                                                      |  | June 30,2003           |         |   | June 30,2002 |  
|----------------------------------------------------- |  | ---------------------- | ------- | - | ------------ | -
|                                                      |  | (dollars in thousands) |        
|Net loss applicable to common shareholders            |  | $                      | (13,480 | ) |              | $
|Deduct:                                               |  |                        |         |   |              |  
|Tax benefit                                           |  |                        |        |   |              |  
|Add back:                                             |  |                        |         |   |              |  
|Depreciation and amortization                         |  |                        | 11,178  |   |              |  
|Preferred stock dividend                              |  |                        | 240     |   |              |  
|Tax provision                                         |  |                        | 177     |   |              |  
|Interest expense, net                                 |  |                        | 5,548   |   |              |  
|                                                      |  |                        |         |   |              |  
|Operating income before depreciation and amortization |  | $                      | 3,663   |   |              | $
|                                                      |  |                        |         |   |              |  



Depreciation and
amortization expense.    Depreciation and amortization expense decreased $0.7 million, or 6.1%, during the first six months of 2003, to $11.2 million from $11.9 million in the first six months of 2002. This decrease was
primarily the result of lower contract acquisition cost amortization.



Operating (loss) income.    Operating loss was $7.5 million for the first six months of 2003 as compared to operating income of $1.0 million for the first six months of 2002, for the reasons discussed above.



Interest expense, net.    Interest
expense, net, increased $0.5 million, or 10.5%, to $5.5 million for the first six months of 2003, from $5.0 million for the first six months of 2002. This increase primarily resulted from a decrease in interest income received on cash balances as
well as interest expense on the $10 million term loan facility we obtained in November 2002.



Provision (benefit) for income taxes.    Our current and deferred income taxes, and associated valuation allowances, are impacted by events and transactions arising in the normal course of
business as well as in connection with special and non-recurring items. Assessment of the appropriate amount and classification of income taxes is dependent on several factors, including estimates of the timing and realization of deferred income tax
assets and the timing of income tax payments. Actual collections and payments may differ from these estimates as a result of changes in tax laws as well as unanticipated future transactions impacting related income tax balances. The provision for
income taxes for the first six months of 2003 was $0.2 million, compared to a benefit of $0.5 million for the comparable 2002 period.



Net loss applicable to common shareholders.    Our net loss applicable to common shareholders increased $10.0 million, or
287.4%, to $13.5 million for the first six months of 2003, from $3.5 million for the first six months of 2002 for the reasons discussed above.



Liquidity and Capital Resources



Our cash requirements have been primarily funded by cash provided from operations and financing transactions. At June 30, 2003, we had cash and cash
equivalents of $17.6 million and working capital of $29.4 million.



Cash provided by operating activities during the first six months of 2003 was $6.9 million, as compared to $5.8 million during the first six months of 2002. This fluctuation was primarily attributable to working capital components.



13



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Net cash used in investing activities is attributable to capital expenditures. Net cash used in investing
activities during the first six months of 2003 and 2002 were $0.5 million and $0.3 million, respectively.



Cash used for financing activities of $6.8 million during the first six months of 2003 was used for representation contract acquisition payments. Cash
used for financing activities of $5.0 million for the comparable period of 2002 consisted of $16.4 million of representation contract acquisition payments offset by the sale of additional stock to our Stock Growth Plan of $1.1 million and $10.3
million for the issuance of the Series A convertible preferred stock, net of issuance costs.



In general, as we acquire new representation contracts, we use more cash and, as our contracts are terminated, we receive additional cash. For the reasons noted above in Overview, we are not able to
predict the amount of cash we will require for contract acquisitions, or the cash we will receive on contract terminations, from period to period.



We do not have any written options on financial assets, nor do we have any special purpose entities. We have not guaranteed any obligations of our
unconsolidated investments.



The Senior Subordinated Notes were
issued under an indenture that limits our ability to engage in various activities. Among other things, we are generally not able to pay any dividends to our shareholders, other than dividends payable in shares of common stock; we can only incur
additional indebtedness under limited circumstances, and certain types of mergers, asset sales and changes of control either are not permitted or permit the note holders to demand immediate redemption of their Senior Subordinated Notes.



Our Senior Subordinated Notes are redeemable by us. If certain events
occurred which would be deemed to involve a change of control under the indenture, we would be required to offer to repurchase all of the Senior Subordinated Notes at a price equal to 101% of their aggregate principal, plus unpaid interest.



On November 7, 2002, we entered into an agreement with an
institutional lender to provide us with a $10 million term loan facility. The loan has a five-year term, maturing in November 2007, is secured by an interest in substantially all of our assets and requires that interest at a rate of 8.125% be paid
quarterly. In connection with the loan, we issued a warrant to an affiliate of the lender to purchase 225,000 shares of our Class A common stock for nominal consideration. These warrants were valued at $0.5 million using a Black-Scholes model and
have been recorded as a discount to the term loan facility, which is being amortized as interest expense based on an effective interest rate method over the life of the loan. In addition, 50,000 shares of our Class A common stock were issued to an
advisor in connection with the term loan. These shares were recorded at fair value at the time of issuance, which was $0.1 million, and have been recorded as deferred loan cost, which is being amortized on a straight line basis over the term of the
loan. In addition to covenants similar to those in the indenture governing our Senior Subordinated Notes, the agreement requires, among other things, that we maintain certain 12-month trailing EBITDA levels, we have certain minimum accounts
receivable as of the end of each quarter, and we have not less than $200 million of representation contract backlog as of the end of each quarter. Certain of the Companys subsidiaries are guarantors of the term loan and all guarantor
subsidiaries are wholly owned by the Company. The guarantees are full, unconditional and joint and several among the guarantor subsidiaries. We incurred approximately $1.2 million in legal and other costs directly related to the private placements.



During 2002, we completed a series of private placements to
issue 110,000 units for an aggregate purchase price of $11 million, less related costs. Each unit consists of one share of Series A Convertible Preferred Stock (Series A Preferred Stock) and 6.25 warrants to acquire the same number of
shares of our Class A common stock. The warrants are exercisable at any time from the date of grant and expire at various times in 2007. We also issued warrants to acquire 5,000 shares of our Class A common stock to a placement agent in connection
with the sale of 10,000 units. We incurred approximately $0.8 million in legal and other costs directly related to the private placements.



14



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We believe that the liquidity resulting from the transactions described above, together with anticipated
cash from continuing operations, should be sufficient to fund our operations and anticipated needs for required representation contract acquisition payments, and to make the required 10% annual interest payments on the Senior Subordinated Notes, as
well as the 8.125% annual interest payments under our term loan facility, for at least the next 12 months. We may not, however, generate sufficient cash flow for these purposes or to repay the notes at maturity. In this regard, we believe that the
cost-saving restructuring we implemented in 2001 contributed to an improvement in cash flow. Moreover, the improvement in radio advertising pacings experienced in the first six months of 2003, with the exception of the effects of the war in Iraq,
may be indicative of an improving revenue trend that should also have a positive effect on liquidity and cash flow. At the same time, we are currently seeking additional financing to enhance our working capital position.



Our ability to fund our operations and required contract acquisition payments
and to make scheduled principal and interest payments will depend on our future performance, which, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.
We may also need to refinance all or a portion of the notes on or prior to maturity. There can be no assurance that we will be able to effect any such refinancing on commercially reasonable terms, if at all.



Certain Factors That May Affect Our Results of Operations



The following factors are some, but not all, of the variables that may
have an impact on our results of operations:



| |  |  | Changes in the ownership of our radio station clients, in the demand for radio advertising, in our expenses, in the types of services offered by our competitors, and in general
economic factors may adversely affect our ability to generate the same levels of revenue and operating results.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Advertising tends to be seasonal in nature as advertisers typically spend less on radio advertising during the first calendar quarter.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The terrorist attacks that occurred on September 11, 2001, and the subsequent military actions taken by the United States and its allies in response, have caused uncertainty. The
events leading up to the military action against Iraq, the commencement of hostilities and other geopolitical situations also contributed to this uncertainty. While the full consequences of these events remain unclear, we believe that they have
likely had a material adverse effect on general economic conditions, consumer confidence, advertising and the media industry and may continue to do so in the future.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The termination of a representation contract will increase our results of operations for the fiscal quarter in which the termination occurs due to the termination payments that are
usually required to be paid, but will negatively affect our results in later quarters due to the loss of commission revenues. Hence, our results of operations on a quarterly basis are not predictable and are subject to significant fluctuations.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We depend heavily on our key personnel, including our Chief Executive Officer Ralph C. Guild, our President and Chief Operating Officer George E. Pine and the President of our
Marketing Division Marc Guild, and our inability to retain them could adversely affect our business.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We rely on a limited number of clients for a significant portion of our revenues.
| | - |  | ---------------------------------------------------------------------------------



| |  |  | Our significant indebtedness may burden our operations, which could make us more vulnerable to general adverse economic and industry conditions, make it more difficult to obtain
additional financing when needed, reduce our cash flow from operations to make payments of principal and interest and make it more difficult to react to changes in our business and industry.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We may need additional financing for our future capital needs, which may not be available on favorable terms, if at all.
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | Competition could harm our business. Our only significant competitor is Katz Media Group, Inc., which is a subsidiary of a major radio station group that has
significantly greater financial and other resources
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



15



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| | than do we. In addition, radio must compete for a share of advertisers total advertising budgets with other advertising media such as television,
cable, print, outdoor advertising and the Internet.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Acquisitions and strategic investments could adversely affect our business.
| | - |  | ---------------------------------------------------------------------------



| |  |  | Our Internet business may suffer if the market for Internet advertising fails to develop or continues to weaken.
| | - |  | ----------------------------------------------------------------------------------------------------------------



Critical Accounting Policies



Financial Reporting Release No. 60 requires all companies to include a
discussion of critical accounting policies or methods used in the preparation of financial statements. Note 1 of the Notes to the Unaudited Interim Consolidated Financial Statements includes a summary of the significant accounting policies and
methods used in the preparation of our Consolidated Financial Statements.



Contractual Obligations and Other Commercial Commitments



|                                |  |                       |       | Payments Due by Period |   |          
|------------------------------- |  | --------------------- | ----- | ---------------------- | - | ---------
|                                |  | Total                 |       | Remainder 2003         |   | 2004-2005
|                                |  | (Dollars in Millions)
|Long term debt                  |  | $                     | 109.0 |                        | $ |         
|Operating leases                |  |                       | 17.0  |                        |   | 2.5      
|Representation contract buyouts |  |                       | 15.8  |                        |   | 4.3      
|                                |  |                       |       |                        |   |          
|Total                           |  | $                     | 141.8 |                        | $ | 6.8      
|                                |  |                       |       |                        |   |          



Item
3.Quantitative and Qualitative Disclosures About Market Risk



We are exposed to market risk from changes in interest rates that may adversely affect our results of operations and financial condition. We seek to
minimize the risks from these interest rate fluctuations through our regular operating and financing activities. Our policy is not to use financial instruments for trading or other speculative purposes. We are not currently a party to any such
financial instruments.



Item 4.Controls
and Procedures



(a) Evaluation of Disclosure
Controls and Procedures



Within the 90 days prior to the date
of this Report, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures under the supervision and with the participation of our management, including our Chairman of the Board and Chief
Executive Officer and our Senior Vice President and Chief Financial Officer. Based on that evaluation, our Chairman of the Board and Chief Executive Officer and our Senior Vice President and Chief Financial Officer concluded that our disclosure
controls and procedures are effective.



Disclosure controls and
procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commissions rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our
reports filed under that Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.



(b) Changes in Internal Controls



There have been no significant changes in our internal controls or in other
factors that could significantly affect internal controls subsequent to the date we carried out this evaluation.



16



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PART II



OTHER INFORMATION



|Item 1. |  | Legal Proceedings
|------- |  | -----------------



None.



|Item 2. |  | Changes In Securities And Use Of Proceeds
|------- |  | -----------------------------------------



None.



|Item 3. |  | Defaults Upon Senior Securities
|------- |  | -------------------------------



None.



|Item 4. |  | Submission Of Matters To A Vote Of Security Holders
|------- |  | ---------------------------------------------------



None.



|Item 5. |  | Other Information
|------- |  | -----------------



None.



|Item 6. |  | Exhibits And Reports On Form 8-K.
|------- |  | ---------------------------------



(A)Documents Filed as Part of this Report



|Exhibit No. |  | Description                                                                                                                                
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------
|31.1        |  | Certification of Chief Executive Officer pursuant to Rule 15d-14(a) (filed herewith)                                                       
|            | 
|31.2        |  | Certification of Chief Financial Officer pursuant to Rule 15d-14(a) (filed herewith)                                                       
|            | 
|32.1        |  | Certification pursuant to Rule 15d-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350(a), (b)) (furnished herewith)*



|* |  | The information furnished in Exhibit 32.1 shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange
Act), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language
in such filing.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



(B)Reports on Form 8-K



We have filed the following current reports on Form 8-K during our second fiscal quarter:



|Date of Report |  | Items Reported |  | Financial Statements Filed
|-------------- |  | -------------- |  | --------------------------
|May 1, 2003    |  | Item 12        |  | No                        
|June 2, 2003   |  | Item 5         |  | No                        



17



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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 in the City of New York, State of New York.



INTEREP NATIONAL RADIO SALES, INC.By:

/s/    WILLIAM J. MCENTEE, JR.William J. McEntee, Jr. Senior Vice President and Chief Financial Officer




August 8, 2003



18



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EXHIBIT INDEX



|Exhibit Number |  | Exhibit Description                                                                                                  
|-------------- |  | ---------------------------------------------------------------------------------------------------------------------
|31.1           |  | Certification of Chief Executive Officer pursuant to Rule 15d-14(a)                                                  
|               | 
|31.2           |  | Certification of Chief Financial Officer pursuant to Rule 15d-14(a)                                                  
|               | 
|32.1           |  | Certification pursuant to Rule 15d-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350(a),
(b))