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** **

 

** **

**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington,D.C.  20549**

 

**FORM 10-Q**

 

**(MarkOne)**

 

**x**                    **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934**

 

**For the quarterly period ended September 30, 2010**

 

**or**

 

**o****                       TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934**

 

**For the transition period from              to**

 

**Commission File Number:****001-14461**

 

**Entercom Communications Corp.**

(Exact name of registrant as specified in its charter)

 

| **Pennsylvania**                                               | ** ** | **23-1701044**                       |
|----------------------------------------------------------------|------------|--------------------------------------|
| (State or other jurisdiction of incorporation or organization) |       | (I.R.S. employer identification no.) |

 

**401 City Avenue, Suite 809**

**Bala Cynwyd, Pennsylvania 19004**

(Address of principal executive offices and zip code)

 

**(610) 660-5610**

(Registrant’s telephone number, including area code)

 

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

 

Indicate by check mark whether the registrant (1) has filed allreports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days. Yes x No o

 

Indicate by checkmark whether the registrant has submittedelectronically and posted on its corporate Web site, if any, every InteractiveData File required to be submitted and posted pursuant to Rule 405 of  Regulation S-T (section 232.405 of thischapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files.) Yes o No o

 

Indicate by check mark whether the registrant is a large acceleratedfiler, an accelerated filer, a non-accelerated filer, or a smaller reportingcompany.  See the definitions of “largeaccelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2of the Exchange Act.

 

| Large accelerated filer o |   | Accelerated filer o         |
|--------------------------------|--------|----------------------------------|
|                           |   |                             |
| Non-accelerated filer x   |   | Smaller reporting company o |

 

Indicate by check mark whether the registrant is a shell company (asdefined in Rule 12b-2 of the Exchange Act). Yes o No x

 

Indicate the number of shares outstanding of each of the issuer’sclasses of common stock, as of the latest practicable date.

 

Class A common stock, $0.01 par value — 29,653,973 SharesOutstanding as of October 31, 2010

(Class A Shares Outstanding include 1,384,096 unvested and vestedbut deferred restricted stock units)

Class B common stock, $0.01 par value — 7,457,532 SharesOutstanding as of October 31, 2010

 

 

 

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**ENTERCOMCOMMUNICATIONS CORP.**

 

**INDEX**

 
| **Part I   Financial Information** | ** **                                                                                  |
|--------------------------------------------------------|---------------------------------------------------------------------------------------------|
| ** **                                             | ** **                                                                                  |
| Item  1.                                               | Financial  Statements                                                                       | 1 |
| Item 2.                                                | Management’s  Discussion and Analysis of Financial Condition and Results of Operations | 27 |
| Item 3.                                                | Quantitative  and Qualitative Disclosures About Market Risk                                 | 41 |
| Item 4.                                                | Controls and  Procedures                                                                    | 42 |
| ** **                                             |                                                                                        |   |
| **Part II   Other Information**         |                                                                                        |
|                                                   |                                                                                        |   |
| Item 1.                                                | Legal Proceedings                                                                           | 43 |
| Item 1A.                                               | Risk Factors                                                                                | 43 |
| Item 2.                                                | Unregistered  Sales of Equity Securities and Use of Proceeds                                | 43 |
| Item 3.                                                | Defaults  Upon Senior Securities                                                            | 43 |
| Item  4.                                               | Reserved                                                                                    | 43 |
| Item 5.                                                | Other Information                                                                           | 43 |
| Item  6.                                               | Exhibits                                                                                    | 44 |
|                                                   |                                                                                        |   |
| **Signatures**                                         | 45                                                                                          |
|                                                   |                                                                                        |
| **Exhibit Index**                                 | 46                                                                                          |

 

**Private Securities Litigation Reform Act Safe HarborStatement**

 

Inaddition to historical information, this report contains statements by us withregard to our expectations as to financial results and other aspects of ourbusiness that involve risks and uncertainties and may constitute forward-looking statements within the meaning of Section 27A of the Securities Actof 1933 and Section 21E of the Securities Exchange Act of 1934.

 

Forward-lookingstatements are presented for illustrative purposes only and reflect our currentexpectations concerning future results and events.  All statements other than statements ofhistorical fact are “forward-looking statements” for purposes of federal andstate securities laws, including, without limitation, any projections ofearnings, revenues or other financial items; any statements of the plans,strategies and objectives of management for future operations; any statementsconcerning proposed new services or developments; any statements regarding futureeconomic conditions or performance; any statements of belief; and anystatements of assumptions underlying any of the foregoing.

 

Youcan identify forward-looking statements by our use of words such as “anticipates,”“believes,” “continues,” “expects,” “intends,” “likely,” “may,” “opportunity,” “plans,”“potential,” “project,” “will,” and similar expressions which identifyforward-looking statements, whether in the negative or the affirmative.  We cannot guarantee that we actually willachieve these plans, intentions or expectations.  These forward-looking statements are subjectto risks, uncertainties and other factors, some of which are beyond ourcontrol, which could cause actual results to differ materially from thoseforecasted or anticipated in such forward-looking statements.  You should not place undue reliance on theseforward-looking statements, which reflect our view only as of the date of thisreport.  We undertake no obligation toupdate these statements or publicly release the result of any revision(s) tothese statements to reflect events or circumstances after the date of thisreport or to reflect the occurrence of unanticipated events.

 

Keyrisks to our company are described in our Annual Report on Form 10-K filedwith the Securities and Exchange Commission on March 15, 2010 and as maybe supplemented by the risks described under Part II, Item 1A of ourquarterly reports on Form 10-Q and in our Current Reports on Form 8-K.

 

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** **

**PART I**

 

**FINANCIAL INFORMATION**

 

**ITEM 1.          Financial Statements**

** **

**ENTERCOM COMMUNICATIONS CORP.**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

**(amounts in thousands)**

**(unaudited)**

 
| ** **                                                          | ** ** | **SEPTEMBER 30,** | ** ** | **DECEMBER 31,** | ** ** |
|---------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                          | ** ** | **2010**               | ** ** | **2009**              | ** ** |
| **ASSETS:**                                                         | ** ** | ** **             | ** ** | ** **            | ** ** |
| Cash and cash equivalents                                           |       | $                      | 3,447      |                  | $          | 10,751 |   |
| Accounts receivable, net of allowance for doubtful  accounts        |       | 76,073                 |       | 68,319                |       |
| Prepaid expenses, deposits and other                                |       | 5,166                  |       | 4,701                 |       |
| Prepaid and refundable federal and state income  taxes              |       | 843                    |       | 7,628                 |       |
| Insurance claim receivable                                          |       | —                 |       | 16,500                |       |
| Total current assets                                                |       | 85,529                 |       | 107,899               |       |
| Investments                                                         |       | 391                    |       | 391                   |       |
| Net property and equipment                                          |       | 64,574                 |       | 71,740                |       |
| Radio broadcasting licenses                                         |       | 707,852                |       | 707,852               |       |
| Goodwill                                                            |       | 38,168                 |       | 38,168                |       |
| Deferred charges and other assets, net of  accumulated amortization |       | 10,353                 |       | 8,486                 |       |
|                                                                |       |                   |       |                  |       |
| **TOTAL ASSETS**                                                    |       | $                      | 906,867    |                  | $          | 934,536 |   |
| ** **                                                          | ** ** | ** **             | ** ** | ** **            | ** ** |
| **LIABILITIES:**                                                    | ** ** | ** **             | ** ** | ** **            | ** ** |
| Accounts payable                                                    |       | $                      | 1,802      |                  | $          | 477 |   |
| Accrued expenses                                                    |       | 13,516                 |       | 13,152                |       |
| Accrued compensation and other current liabilities                  |       | 16,654                 |       | 12,678                |       |
| Insurance claim payable                                             |       | —                 |       | 16,500                |       |
| Long-term debt, current portion                                     |       | 131,026                |       | 80,024                |       |
| Total current liabilities                                           |       | 162,998                |       | 122,831               |       |
| Long-term debt, net of current portion                              |       | 545,129                |       | 655,728               |       |
| Financing method lease obligations                                  |       | 12,610                 |       | 12,610                |       |
| Deferred tax liabilities                                            |       | 15,581                 |       | —                |       |
| Other long-term liabilities                                         |       | 21,390                 |       | 29,415                |       |
| Total long-term liabilities                                         |       | 594,710                |       | 697,753               |       |
| Total liabilities                                                   |       | 757,708                |       | 820,584               |       |
|                                                                |       |                   |       |                  |       |
| **CONTINGENCIES AND COMMITMENTS**                                   |       |                   |       |                  |       |
|                                                                |       |                   |       |                  |       |
| **SHAREHOLDERS’ EQUITY:**                                      |       |                   |       |                  |       |
| Preferred stock                                                     |       | —                 |       | —                |       |
| Class A, B and C common stock                                  |       | 371                    |       | 372                   |       |
| Additional paid-in capital                                          |       | 591,430                |       | 588,622               |       |
| Accumulated deficit                                                 |       | (432,369               | )          | (461,610              | )          |
| Accumulated other comprehensive loss                                |       | (10,273                | )          | (13,432               | )          |
| Total shareholders’ equity                                     |       | 149,159                |       | 113,952               |       |
|                                                                |       |                   |       |                  |       |
| **TOTAL LIABILITIES AND  SHAREHOLDERS’ EQUITY**                |       | $                      | 906,867    |                  | $          | 934,536 |   |

 

**See notes to condensedconsolidated financial statements.**

 

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**ENTERCOM COMMUNICATIONSCORP.**

**CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**

**(amounts in thousands, except share and per share data)**

**(unaudited)**

 
| ** **                                                                                                                   | ** ** | **NINE MONTHS ENDED** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                                                                                                   | ** ** | **SEPTEMBER 30,**          | ** ** |
|                                                                                                                         | ** ** | **2010**                        |       | **2009** |   |
| **NET REVENUES**                                                                                                             |       | $                               | 289,359    |   | $ | 276,436 |   |
|                                                                                                                         |       |                            |       |   |   |
| **OPERATING (INCOME) EXPENSE:**                                                                                              |       |                            |       |   |   |
| Station operating expenses, including non-cash  compensation expense of $965 in 2010 and $1,460 in 2009                      |       | 195,603                         |       | 192,006 |   |
| Depreciation and amortization expense                                                                                        |       | 9,736                           |       | 12,660 |   |
| Corporate general and administrative expenses,  including non-cash compensation expense of $3,349 in 2010 and $4,237 in 2009 |       | 16,292                          |       | 17,386 |   |
| Impairment loss                                                                                                              |       | —                          |       | 67,676 |   |
| Net time brokerage agreement income                                                                                          |       | —                          |       | (2 | ) |
| Net loss on sale or disposal of assets                                                                                       |       | 176                             |       | 149 |   |
| Total operating expense                                                                                                      |       | 221,807                         |       | 289,875 |   |
| **OPERATING INCOME (LOSS)**                                                                                                  |       | 67,552                          |       | (13,439 | ) |
|                                                                                                                         |       |                            |       |   |   |
| **OTHER (INCOME) EXPENSE:**                                                                                                  |       |                            |       |   |   |
| Interest expense, including amortization of  deferred financing expense of $2,930 in 2010 and $1,147 in 2009                 |       | 22,795                          |       | 23,828 |   |
| Interest and dividend income                                                                                                 |       | (15                             | )          | (35 | ) |
| Net (gain) loss on extinguishment of debt                                                                                    |       | 62                              |       | (19,260 | ) |
| Other income                                                                                                                 |       | (38                             | )          | (380 | ) |
| **TOTAL OTHER EXPENSE**                                                                                                      |       | 22,804                          |       | 4,153 |   |
|                                                                                                                         |       |                            |       |   |   |
| **INCOME (LOSS) BEFORE INCOME  TAXES**                                                                                       |       | 44,748                          |       | (17,592 | ) |
| **INCOME TAXES**                                                                                                             |       | 15,597                          |       | 710 |   |
| **NET INCOME (LOSS)**                                                                                                        |       | $                               | 29,151     |   | $ | (18,302 | ) |
|                                                                                                                         |       |                            |       |   |   |
| **NET INCOME (LOSS) PER SHARE -  BASIC**                                                                                     |       | $                               | 0.82       |   | $ | (0.52 | ) |
|                                                                                                                         |       |                            |       |   |   |
| **NET INCOME (LOSS) PER SHARE -  DILUTED**                                                                                   |       | $                               | 0.78       |   | $ | (0.52 | ) |
|                                                                                                                         |       |                            |       |   |   |
| **WEIGHTED AVERAGE SHARES:**                                                                                                 |       |                            |       |   |   |
| Basic                                                                                                                        |       | 35,699,525                      |       | 35,327,093 |   |
| Diluted                                                                                                                      |       | 37,591,370                      |       | 35,327,093 |   |

 

**See notes to condensed consolidated financial statements.**

 

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**ENTERCOM COMMUNICATIONS CORP.**

**CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**

**(amounts in thousands, except share and per share data)**

**(unaudited)**

** **
| ** **                                                                                                                 | ** ** | **THREE MONTHS ENDED** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                                                                 | ** ** | **SEPTEMBER 30,**           | ** ** |
| ** **                                                                                                                 | ** ** | **2010**                         | ** ** | **2009** | ** ** |
| **NET REVENUES**                                                                                                           |       | $                                | 102,737    |   | $ | 99,765 |   |
|                                                                                                                       |       |                             |       |   |   |
| **OPERATING (INCOME) EXPENSE:**                                                                                            |       |                             |       |   |   |
| Station operating expenses, including non-cash  compensation expense of $397 in 2010 and $698 in 2009                      |       | 67,726                           |       | 66,273 |   |
| Depreciation and amortization expense                                                                                      |       | 3,089                            |       | 4,120 |   |
| Corporate general and administrative expenses,  including non-cash compensation expense of $815 in 2010 and $1,300 in 2009 |       | 5,190                            |       | 5,802 |   |
| Net loss on sale or disposal of assets                                                                                     |       | 185                              |       | 149 |   |
| Total operating expense                                                                                                    |       | 76,190                           |       | 76,344 |   |
| **OPERATING INCOME**                                                                                                       |       | 26,547                           |       | 23,421 |   |
|                                                                                                                       |       |                             |       |   |   |
| **OTHER (INCOME) EXPENSE:**                                                                                                |       |                             |       |   |   |
| Interest expense, including amortization of  deferred financing expense of $1,440 in 2010 and $371 in 2009                 |       | 8,645                            |       | 7,856 |   |
| Interest and dividend income                                                                                               |       | (4                               | )          | (18 | ) |
| Net gain on extinguishment of debt                                                                                         |       | —                           |       | (3,132 | ) |
| Net (gain) loss on investments                                                                                             |       | —                           |       | — |   |
| Other income                                                                                                               |       | (16                              | )          | — |   |
| **TOTAL OTHER EXPENSE**                                                                                                    |       | 8,625                            |       | 4,706 |   |
|                                                                                                                       |       |                             |       |   |   |
| **INCOME BEFORE INCOME TAXES**                                                                                             |       | 17,922                           |       | 18,715 |   |
| **INCOME TAXES**                                                                                                           |       | 7,233                            |       | 440 |   |
| **NET INCOME**                                                                                                             |       | $                                | 10,689     |   | $ | 18,275 |   |
| ** **                                                                                                                 | ** ** | ** **                       | ** ** | ** ** | ** ** |
| **NET INCOME PER SHARE - BASIC**                                                                                           |       | $                                | 0.30       |   | $ | 0.52 |   |
|                                                                                                                       |       |                             |       |   |   |
| **NET INCOME PER SHARE - DILUTED**                                                                                         |       | $                                | 0.29       |   | $ | 0.50 |   |
|                                                                                                                       |       |                             |       |   |   |
| **WEIGHTED AVERAGE SHARES:**                                                                                               |       |                             |       |   |   |
| Basic                                                                                                                      |       | 35,722,801                       |       | 35,291,969 |   |
| Diluted                                                                                                                    |       | 37,309,956                       |       | 36,620,613 |   |

 

**See notes to condensed consolidated financial statements.**

 

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**ENTERCOM COMMUNICATIONS CORP.**

**CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)**

**(amounts in thousands)**

**(unaudited)**

** **
| ** **                                                                     | ** ** | **NINE MONTHS ENDED** | ** ** |
|--------------------------------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                                                     | ** ** | **SEPTEMBER 30,**          | ** ** |
| ** **                                                                     | ** ** | **2010**                        | ** ** | **2009** | ** ** |
|                                                                           |       |                            |       |   |   |
| **NET INCOME (LOSS)**                                                          |       | $                               | 29,151     |   | $ | (18,302 | ) |
|                                                                           |       |                            |       |   |   |
| **OTHER COMPREHENSIVE INCOME, NET  OF TAXES:**                                 |       |                            |       |   |   |
|                                                                           |       |                            |       |   |   |
| Net unrealized gain on derivatives, net of taxes of  $0 in 2010 and $0 in 2009 |       | 3,159                           |       | 16 |   |
|                                                                           |       |                            |       |   |   |
| **COMPREHENSIVE INCOME (LOSS)**                                                |       | $                               | 32,310     |   | $ | (18,286 | ) |

 

**See notes to condensed consolidated financial statements.**

 

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**ENTERCOM COMMUNICATIONS CORP.**

**CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME**

**(amounts in thousands)**

**(unaudited)**

 
| ** **                                                                                      | ** ** | **THREE MONTHS ENDED** | ** ** |
|-------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                                      | ** ** | **SEPTEMBER 30,**           | ** ** |
| ** **                                                                                      | ** ** | **2010**                         | ** ** | **2009** | ** ** |
| ** **                                                                                      | ** ** | ** **                       | ** ** | ** ** | ** ** |
| **NET INCOME**                                                                                  |       | $                                | 10,689     |   | $ | 18,275 |   |
|                                                                                            |       |                             |       |   |   |
| **OTHER COMPREHENSIVE INCOME  (LOSS), NET OF TAXES (BENEFIT):**                                 |       |                             |       |   |   |
|                                                                                            |       |                             |       |   |   |
| Net unrealized gain (loss) on derivatives, net of  taxes (benefit) of $0 in 2010 and $0 in 2009 |       | 1,424                            |       | (1,343 | ) |
|                                                                                            |       |                             |       |   |   |
| **COMPREHENSIVE INCOME**                                                                        |       | $                                | 12,113     |   | $ | 16,932 |   |

 

**See notes to condensed consolidated financial statements.**

 

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**ENTERCOM COMMUNICATIONS CORP.**

**CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY**

**NINE MONTHS ENDED SEPTEMBER 30, 2010 AND YEAR ENDED DECEMBER 31, 2009**

**(amounts in thousands, except share data)**

**(unaudited)**

 
| ** **                                                                            | ** ** | ** **            | ** ** | ** **       | ** ** | ** **  | ** ** | ** **   | ** ** | ** **        | ** ** | ** **   | ** ** | **Accumulated**        | ** ** | ** ** | ** ** |
|---------------------------------------------------------------------------------------|------------|-----------------------|------------|------------------|------------|-------------|------------|--------------|------------|-------------------|------------|--------------|------------|------------------------|------------|------------|------------|
| ** **                                                                            | ** ** | **Common Stock** | ** ** | **Additional**   | ** ** | ** **  | ** ** | **Other**    | ** ** | ** **        | ** ** |
| ** **                                                                            | ** ** | **Class A**      | ** ** | **Class B** | ** ** | **Paid-in** | ** ** | **Retained** | ** ** | **Comprehensive** | ** ** | ** **   | ** ** |
| ** **                                                                            | ** ** | **Shares**            | ** ** | **Amount**       | ** ** | **Shares**  | ** ** | **Amount**   | ** ** | **Capital**       | ** ** | **Earnings** | ** ** | **Income (Loss)** | ** ** | **Total**  | ** ** |
| Balance, December 31, 2008                                                       |       | 29,479,188            |       | $                | 295        |        | 7,607,532  |         | $          | 76                |       | $            | 582,325    |                   | $          | (467,177   | )          | $ | (15,262 | ) | $ | 100,257 |   |
| Net income                                                                            |       | —                |       | —           |       | —      |       | —       |       | —            |       | 5,398        |       | —                 |       | 5,398      |       |
| Conversion of Class B common stock to  Class A common stock                 |       | 150,000               |       | 1                |       | (150,000    | )          | (1           | )          | —            |       | —       |       | —                 |       | —     |       |
| Compensation expense related to granting of stock  options                            |       | —                |       | —           |       | —      |       | —       |       | 485               |       | —       |       | —                 |       | 485        |       |
| Compensation expense related to granting of  restricted stock units                   |       | 796,824               |       | 8                |       | —      |       | —       |       | 6,380             |       | —       |       | —                 |       | 6,388      |       |
| Issuance of common stock related to an incentive  plan                                |       | 74,369                |       | —           |       | —      |       | —       |       | 97                |       | —       |       | —                 |       | 97         |       |
| Common stock repurchase                                                               |       | (662,664              | )          | (7               | )          | —      |       | —       |       | (882              | )          | —       |       | —                 |       | (889       | )          |
| Purchase of vested employee restricted stock units                                    |       | (82,556               | )          | —           |       | —      |       | —       |       | (104              | )          | —       |       | —                 |       | (104       | )          |
| Net dividend equivalents on restricted stock units  (net of forfeitures and payments) |       | —                |       | —           |       | —      |       | —       |       | —            |       | 169          |       | —                 |       | 169        |       |
| Realization of tax benefit for dividend equivalent  payments                          |       | —                |       | —           |       | —      |       | —       |       | 321               |       | —       |       | —                 |       | 321        |       |
| Net unrealized gain on derivatives                                                    |       | —                |       | —           |       | —      |       | —       |       | —            |       | —       |       | 1,830                  |       | 1,830      |       |
| Balance, December 31, 2009                                                       |       | 29,755,161            |       | 297              |       | 7,457,532   |       | 75           |       | 588,622           |       | (461,610     | )          | (13,432                | )          | 113,952    |       |
| Net income                                                                            |       | —                |       | —           |       | —      |       | —       |       | —            |       | 29,151       |       | —                 |       | 29,151     |       |
| Compensation expense related to granting of stock  options                            |       | —                |       | —           |       | —      |       | —       |       | 431               |       | —       |       | —                 |       | 431        |       |
| Compensation expense related to granting of  restricted stock units                   |       | (4,278                | )          | —           |       | —      |       | —       |       | 3,883             |       | —       |       | —                 |       | 3,883      |       |
| Exercise of stock options                                                             |       | 86,725                |       | 1                |       | —      |       | —       |       | 114               |       | —       |       | —                 |       | 115        |       |
| Purchase of vested employee restricted stock units                                    |       | (181,086              | )          | (2               | )          | —      |       | —       |       | (1,620            | )          | —       |       | —                 |       | (1,622     | )          |
| Net dividend equivalents on restricted stock units  (net of forfeitures and payments) |       | —                |       | —           |       | —      |       | —       |       | —            |       | 90           |       | —                 |       | 90         |       |
| Net unrealized gain on derivatives                                                    |       | —                |       | —           |       | —      |       | —       |       | —            |       | —       |       | 3,159                  |       | 3,159      |       |
| Balance, September 30, 2010                                                      |       | 29,656,522            |       | $                | 296        |        | 7,457,532  |         | $          | 75                |       | $            | 591,430    |                   | $          | (432,369   | )          | $ | (10,273 | ) | $ | 149,159 |   |

 

**See notes to condensed consolidated financial statements.**

 

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**ENTERCOM COMMUNICATIONS CORP.**

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(amounts in thousands)**

**(unaudited)**

 
| ** **                                                                                | ** ** | **NINE MONTHS ENDED** | ** ** |
|-------------------------------------------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                                                                | ** ** | **SEPTEMBER 30,**          | ** ** |
| ** **                                                                                | ** ** | **2010**                        | ** ** | **2009** | ** ** |
| **OPERATING ACTIVITIES:**                                                                 |       |                            |       |   |   |
| Net income (loss)                                                                         |       | $                               | 29,151     |   | $ | (18,302 | ) |
|                                                                                      |       |                            |       |   |   |
| Adjustments to reconcile net income (loss) to net  cash provided by operating activities: |       |                            |       |   |   |
| Depreciation and amortization                                                             |       | 9,736                           |       | 12,660 |   |
| Amortization of deferred financing costs                                                  |       | 2,930                           |       | 1,147 |   |
| Deferred tax benefit and other                                                            |       | 15,581                          |       | 605 |   |
| Provision for bad debts                                                                   |       | 797                             |       | 2,035 |   |
| Net loss on sale or disposal of assets                                                    |       | 176                             |       | 149 |   |
| Non-cash stock-based compensation expense                                                 |       | 4,314                           |       | 5,697 |   |
| Deferred rent                                                                             |       | 5                               |       | 12 |   |
| Unearned revenue - long-term                                                              |       | —                          |       | (532 | ) |
| Net (gain) loss on extinguishment of debt                                                 |       | 62                              |       | (19,260 | ) |
| Deferred compensation                                                                     |       | 976                             |       | 1,506 |   |
| Impairment loss                                                                           |       | —                          |       | 67,676 |   |
| Other income                                                                              |       | (38                             | )          | (380 | ) |
|                                                                                      |       |                            |       |   |   |
| Changes in assets and liabilities:                                                        |       |                            |       |   |   |
| Accounts receivable                                                                       |       | (8,520                          | )          | (1,265 | ) |
| Prepaid expenses and deposits                                                             |       | 16,032                          |       | (16,741 | ) |
| Prepaid and refundable income taxes                                                       |       | 6,785                           |       | 115 |   |
| Accounts payable and accrued liabilities                                                  |       | (15,476                         | )          | 13,599 |   |
| Accrued interest expense                                                                  |       | (125                            | )          | (1,964 | ) |
| Accrued liabilities - long-term                                                           |       | (25                             | )          | (577 | ) |
| Prepaid expenses - long-term                                                              |       | (511                            | )          | (216 | ) |
| **Net cash provided by operating  activities**                                            |       | 61,850                          |       | 45,964 |   |
|                                                                                      |       |                            |       |   |   |
| **INVESTING ACTIVITIES:**                                                                 |       |                            |       |   |   |
| Additions to property and equipment                                                       |       | (1,935                          | )          | (1,714 | ) |
| Proceeds from sale of property, equipment,  intangibles and other assets                  |       | 114                             |       | 106 |   |
| Deferred charges and other assets                                                         |       | (240                            | )          | (83 | ) |
| Proceeds from investments                                                                 |       | 38                              |       | 15 |   |
| Proceeds from termination of radio station  contract                                      |       | —                          |       | 380 |   |
| **Net cash used in investing  activities**                                                |       | (2,023                          | )          | (1,296 | ) |
|                                                                                           |            |                                 |            |  |  |  |  |

 

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**ENTERCOM COMMUNICATIONS CORP.**

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

** (amounts in thousands)**

**(unaudited)**

 
| ** **                                                        | ** ** | **NINE MONTHS ENDED** | ** ** |
|-------------------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                                        | ** ** | **SEPTEMBER 30,**          | ** ** |
| ** **                                                        | ** ** | **2010**                        | ** ** | **2009** | ** ** |
| **FINANCING ACTIVITIES:**                                         |       | ** **                      |       |   |   |
| Deferred expenses related to bank facility  amendment             |       | (5,155                          | )          | — |   |
| Proceeds from issuance of long-term debt                          |       | 37,500                          |       | 37,000 |   |
| Proceeds from the financing method of lease  obligations          |       | —                          |       | 4,531 |   |
| Payments of long-term debt                                        |       | (90,518                         | )          | (29,017 | ) |
| Retirement of senior subordinated notes                           |       | (6,579                          | )          | (39,703 | ) |
| Purchase of the Company’s common stock                       |       | —                          |       | (889 | ) |
| Proceeds from issuance of employee stock plan                     |       | —                          |       | 82 |   |
| Proceeds from the exercise of stock options                       |       | 115                             |       | — |   |
| Purchase of vested restricted stock units                         |       | (1,622                          | )          | (96 | ) |
| Payment of dividend equivalents on vested  restricted stock units |       | (872                            | )          | (751 | ) |
| **Net cash used in financing  activities**                        |       | (67,131                         | )          | (28,843 | ) |
|                                                              |       |                            |       |   |   |
| **NET INCREASE (DECREASE) IN CASH  AND CASH EQUIVALENTS**         |       | (7,304                          | )          | 15,825 |   |
| **CASH AND CASH EQUIVALENTS,  BEGINNING OF YEAR**                 |       | 10,751                          |       | 4,284 |   |
| **CASH AND CASH EQUIVALENTS, END  OF PERIOD**                     |       | $                               | 3,447      |   | $ | 20,109 |   |
|                                                              |       |                            |       |   |   |
| **SUPPLEMENTAL DISCLOSURES OF  CASH FLOW INFORMATION:**           |       |                            |       |   |   |
| Cash paid during the period for:                                  |       |                            |       |   |   |
| Interest                                                          |       | $                               | 20,009     |   | $ | 24,664 |   |
| Income taxes                                                      |       | $                               | 83         |   | $ | 192 |   |

 

**SUPPLEMENTALDISCLOSURES ON NON-CASH INVESTING AND FINANCING ACTIVITIES:**

 

Duringthe nine months ended September 30, 2010, the Company issued 0.1 millionrestricted stock units (net of forfeitures) that will increase its paid-incapital by $0.2 million over the vesting period of the restricted stock units.For purposes of computing forfeitures noted above, 0.1 million market-basedrestricted stock units that were forfeited as the vesting conditions were notmet, were not included.

 

Duringthe nine months ended September 30, 2009, the Company issued 0.2 millionrestricted stock units, recorded modification expense of $1.4 million and hadforfeitures of $2.4 million that will decrease on an aggregate basis itspaid-in capital by $0.6 million over the vesting period of the restricted stockunits.

 

**See notes to condensed consolidated financial statements.**

 

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**ENTERCOM COMMUNICATIONS CORP.**

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009**

 

**1.             BASIS OFPRESENTATION**

 

Thecondensed consolidated interim unaudited financial statements included hereinhave been prepared by Entercom Communications Corp. and its subsidiaries(collectively, the “Company”) in accordance with: (i) generally acceptedaccounting principles (“U.S. GAAP”) for interim financial information; and (ii) theinstructions of the Securities and Exchange Commission (the “SEC”) for Form 10-Qand Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotesrequired by generally accepted accounting principles for annual financialstatements.  In the opinion ofmanagement, the financial statements reflect all adjustments considerednecessary for a fair statement of the results of operations and financialposition for the interim periods presented. All such adjustments are of a normal and recurring nature. The Company’sresults are subject to seasonal fluctuations and, therefore, the results shownon an interim basis are not necessarily indicative of results for a full year.

 

ThisForm 10-Q should be read in conjunction with the financial statements andrelated notes included in the Company’s audited financial statements as of andfor the year ended December 31, 2009 and filed with the SEC on March 15,2010, as part of the Company’s Annual Report on Form 10-K.  Certain information and footnote disclosuresnormally included in financial statements prepared in accordance with generallyaccepted accounting principles have been condensed or omitted pursuant to such rules andregulations.

 

***Recent Accounting Pronouncements***

 

InJune 2009, the accounting standards were amended for determining whetherto consolidate a variable interest entity. These amended standards eliminate amandatory quantitative approach for determining whether a variable interestprovides the entity with a controlling financial interest in a variableinterest entity in favor of a qualitatively focused analysis, and require anongoing reassessment of whether an entity is the primary beneficiary. Theseamended standards were effective January 1, 2010.  The adoption of the amended standards did nothave any effect on our results of operations, cash flows or financial position.

 

**2.             SHARE-BASEDCOMPENSATION**

 

***Restricted Stock Units (“RSUs”)***

 

Asummary of the Company’s outstanding RSUs as of September 30, 2010, andchanges in RSUs during the nine months ended September 30, 2010, is asfollows:

 
| ** **                                              | ** ** | ** **               | ** ** | ** **         | ** ** | ** **   | ** ** | **Weighted**      | ** ** | ** **                | ** ** |
|---------------------------------------------------------|------------|--------------------------|------------|--------------------|------------|--------------|------------|-------------------|------------|---------------------------|------------|
| ** **                                              | ** ** | ** **               | ** ** | ** **         | ** ** | ** **   | ** ** | **Average**       | ** ** | **Aggregate**             | ** ** |
| ** **                                              | ** ** | ** **               | ** ** | ** **         | ** ** | **Weighted** | ** ** | **Remaining**     | ** ** | **Intrinsic**             | ** ** |
| ** **                                              | ** ** | ** **               | ** ** | ** **         | ** ** | **Average**  | ** ** | **Contractual**   | ** ** | **Value As Of** | ** ** |
| ** **                                              | ** ** | ** **               | ** ** | **Number of** | ** ** | **Purchase** | ** ** | **Term**          | ** ** | **September 30,**    | ** ** |
| ** **                                              | ** ** | **Period Ended**    | ** ** | **RSUs**           | ** ** | **Price**    | ** ** | **In Years** | ** ** | **2010**                  | ** ** |
| ** **                                              | ** ** | ** **               | ** ** | ** **         | ** ** | ** **   | ** ** | ** **        | ** ** | ** **                | ** ** |
| RSUs outstanding as of:                                 |       | December 31,  2009  |       | 1,917,533          |       |         |       |              |       |                      |       |
| RSUs awarded                                            |       |                     |       | 73,586             |       |         |       |              |       |                      |       |
| RSUs released                                           |       |                     |       | (525,603           | )          |         |       |              |       |                      |       |
| RSUs forfeited                                          |       |                     |       | (78,239            | )          |         |       |              |       |                      |       |
| RSUs outstanding as of:                                 |       | September 30,  2010 |       | 1,387,277          |       | $            | —     |              | 1.2        |                      | $          | 10,903,997 |   |
|                                                    |       |                     |       |               |       |         |       |              |       |                      |       |
| RSUs vested and expected to vest                        |       |                     |       | 1,283,966          |       | $            | —     |              | 1.1        |                      | $          | 9,432,750 |   |
| RSUs exercisable (vested and deferred)                  |       |                     |       | 83,871             |       | $            | —     |              | —     |                      | $          | 659,226 |   |
| Weighted average remaining recognition period in  years |       |                     |       | 2.1                |       |         |       |              |       |                      |       |

 

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Asof September 30, 2010, there was $3.6 million of unamortized compensationexpense, net of estimated forfeitures, related to unvested RSUs, which isexpected to be recognized over a remaining weighted average recognition periodof 2.1 years.

 

**RSUs With Service And Market Conditions**

 

Duringthe nine months ended September 30, 2010, 50% of the Company’s outstanding0.1 million RSUs with service and market conditions vested while the other 50%were forfeited (as not all of the market conditions were satisfied).

 

Duringthe first quarter of 2009, the Company modified 0.2 million RSUs with serviceand market conditions by eliminating the market conditions.  Due to the modification, additional expenseof $0.2 million will be recognized over the new vesting period of two yearsfrom the modification date.

 

***Options***

 

Thefollowing table presents the option activity for the nine months ended September 30,2010:

 
| ** **                                              | ** ** | ** **               | ** ** | ** **         | ** ** | ** **   | ** ** | **Weighted**      | ** ** | **Aggregate**          | ** ** |
|---------------------------------------------------------|------------|--------------------------|------------|--------------------|------------|--------------|------------|-------------------|------------|------------------------|------------|
| ** **                                              | ** ** | ** **               | ** ** | ** **         | ** ** | ** **   | ** ** | **Average**       | ** ** | **Intrinsic**          | ** ** |
| ** **                                              | ** ** | ** **               | ** ** | ** **         | ** ** | **Weighted** | ** ** | **Remaining**     | ** ** | **Value**              | ** ** |
| ** **                                              | ** ** | ** **               | ** ** | ** **         | ** ** | **Average**  | ** ** | **Contractual**   | ** ** | **As of**         | ** ** |
| ** **                                              | ** ** | ** **               | ** ** | **Number Of** | ** ** | **Exercise** | ** ** | **Term**          | ** ** | **September 30,** | ** ** |
| ** **                                              | ** ** | **Period Ended**    | ** ** | **Options**        | ** ** | **Price**    | ** ** | **In Years** | ** ** | **2010**               | ** ** |
|                                                    |       |                     |       |               |       |         |       |              |       |                   |       |
| Options outstanding as of:                              |       | December 31,  2009  |       | 1,148,032          |       | $            | 3.13       |              |       |                   |       |   |
| Options granted                                         |       |                     |       | 2,500              |       | $            | 12.08      |              |       |                   |       |   |
| Options exercised                                       |       |                     |       | (86,725            | )          | $            | 1.34       |              |       |                   |       |   |
| Options forfeited                                       |       |                     |       | (41,280            | )          | $            | 1.72       |              |       |                   |       |   |
| Options expired                                         |       |                     |       | (11,127            | )          | $            | 30.08      |              |       |                   |       |   |
| Outstanding as of:                                      |       | September 30,  2010 |       | 1,011,400          |       | $            | 3.06       |              | 8.1        |                   | $          | 6,080,738 |   |
|                                                    |       |                     |       |               |       |         |       |              |       |                   |       |
| Options vested and expected to vest as of:              |       | September 30,  2010 |       | 938,258            |       | $            | 3.18       |              | 8.1        |                   | $          | 5,620,797 |   |
| Options vested and exercisable as of:                   |       | September 30,  2010 |       | 221,045            |       | $            | 8.06       |              | 7.3        |                   | $          | 1,118,633 |   |
| Weighted average remaining recognition period in  years |       |                     |       | 2.4                |       |         |       |              |       |                   |       |

 

Asof September 30, 2010, $0.7 million of unrecognized compensation costsrelated to unvested stock options, net of estimated forfeitures, is expected tobe recognized in future periods over a weighted average period of 2.4 years.

 

Thefair value of each option grant was estimated on the date of grant using thefollowing weighted average assumptions:

 
| ** **                     | ** ** | **Nine Months Ended** | ** ** |
|--------------------------------|------------|---------------------------------|------------|
| ** **                     | ** ** | **September 30,**          | ** ** |
| ** **                     | ** ** | **2010**                        | ** ** | **2009** | ** ** |
| Expected life (years)          |       | 6.3                             |       | 6.3 |   |
| Expected volatility factor (%) |       | 69.2%                           |       | 54.9% to 66.6% |   |
| Risk-free interest rate (%)    |       | 3.0%                            |       | 2.2% to 2.9% |   |
| Expected dividend yield (%)    |       | 0.0%                            |       | 0.0% |   |

 

The following table summarizes significantranges of outstanding and exercisable options as of September 30, 2010:

 

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| ** **               | ** ** | ** ** | ** ** | **Options Outstanding** | ** ** | **Options Exercisable** | ** ** |
|--------------------------|------------|------------|------------|------------------------------|------------|------------------------------|------------|
| ** **               | ** ** | ** ** | ** ** | ** **                   | ** ** | **Weighted**                 | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **               | ** ** | ** ** | ** ** | **Number Of**           | ** ** | **Average**                  | ** ** | ** ** | ** ** | **Number Of** | ** ** | ** ** | ** ** |
| ** **               | ** ** | ** ** | ** ** | **Options**                  | ** ** | **Remaining**                | ** ** | **Weighted** | ** ** | **Options** | ** ** | **Weighted** | ** ** |
| ** **               | ** ** | ** ** | ** ** | **Outstanding**              | ** ** | **Contractual**              | ** ** | **Average** | ** ** | **Exercisable** | ** ** | **Average** | ** ** |
| ** **               | ** ** | ** ** | ** ** | **September 30,**       | ** ** | **Term**                     | ** ** | **Exercise** | ** ** | **September 30,** | ** ** | **Exercise** | ** ** |
| **Exercise Prices** | ** ** | **2010**   | ** ** | **In Years**            | ** ** | **Price**                    | ** ** | **2010** | ** ** | **Price** | ** ** |
| $                        |  1.34 |       | $          | 1.34                         |       | 923,275                      |       | 8.3 |   | $ | 1.34 |   | 169,714 |   | $ | 1.34 |   |
| $                        |  2.02 |       | $          | 48.21                        |       | 88,125                       |       | 5.8 |   | $ | 21.13 |   | 51,331 |   | $ | 30.29 |   |
|                     |       |       |       | 1,011,400                    |       | 8.1                          |       | $ | 3.06 |   | 221,045 |   | $ | 8.06 |   |

 

***Recognized Non-Cash Compensation Expense***

 

Thefollowing table summarizes stock-based compensation expense related to awardsof RSUs, employee stock options and purchases under the employee stock purchaseplan for the nine and three months ended September 30, 2010 and 2009:

 
| ** **                                                        | ** ** | **Nine Months Ended** | ** ** | **Three Months Ended** | ** ** |
|-------------------------------------------------------------------|------------|---------------------------------|------------|----------------------------------|------------|
| ** **                                                        | ** ** | **September 30,**          | ** ** |
| ** **                                                        | ** ** | **2010**                        | ** ** | **2009**                         | ** ** | **2010** | ** ** | **2009** | ** ** |
| ** **                                                        | ** ** | **(amounts in thousands)**      | ** ** |
| Station operating expenses                                        |       | $                               | 965        |                             | $          | 1,460 |   | $ | 397 |   | $ | 698 |   |
| Corporate general and  administrative expenses                    |       | 3,349                           |       | 4,237                            |       | 815 |   | 1,300 |   |
| Stock-based compensation  expense included in operating expenses  |       | 4,314                           |       | 5,697                            |       | 1,212 |   | 1,998 |   |
| Income tax benefit (net of  a fully reserved valuation allowance) |       | —                          |       | —                           |       | — |   | — |   |
| Total                                                             |       | $                               | 4,314      |                             | $          | 5,697 |   | $ | 1,212 |   | $ | 1,998 |   |

 

***2009 Option Exchange Program***

 

InFebruary 2009, the Company’s Board of Directors approved an amendment tothe Entercom Equity Compensation Plan (the “Plan”) to permit a one-time OptionExchange Program (the “2009 OEP”), which amendment was approved at the May 2009shareholders’ meeting. On April 13, 2009, the Company commenced the 2009OEP, which was subject to shareholder approval, by making an offer to exchangeto the Company’s eligible employees and non-employee directors. The Companyoffered such persons the opportunity to make an election to exchange all oftheir outstanding stock options with exercise prices equal to or greater than$11.80 per share for a lesser number of RSUs. The exchange ratios were asfollows:

 
| **Option**                            | ** ** | **Exchange Ratio**          | ** ** |
|---------------------------------------|------------|----------------------------------|------------|
| **Strike Price**                 | ** ** | **(Options For RSUs)** | ** ** |
| At least $11.80, but less than $30.00 |       | 2.25  for 1                      |       |
| $30.00 or more                        |       | 4.5  for 1                       |       |

 

OnMay 15, 2009, following the May 14, 2009 expiration of the 2009 OEPexchange offer, the Company granted 0.7 million RSUs in exchange for 2.1million options. As a result of the 2009 OEP, the number of RSUs that can beissued under the Plan was effectively increased by 0.7 million as all RSUsgranted did not count against the restricted stock sublimit in the Plan.  In addition, the number of awards that can beissued under the Plan was effectively reduced by 2.1 million as all optionsthat were exchanged will not be available for re-grant under the Plan.

 

TheCompany applied modification accounting for the 2009 OEP and will recognizeshare-based compensation expense of $1.2 million on a straight-line basis overthe four-year vesting period of the RSUs. Under modification accounting, thefair value of the new shares immediately prior to the exchange was greater by$1.2 million than the fair value of the surrendered options. In addition, underthe bifurcated method, share-based compensation expense of $0.9 millionassociated with any unvested options exchanged and cancelled as of themodification date will be recognized over the remaining original option term,and the expense will only be reversed if the original service period is notmet.

 

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**3.             INTANGIBLE ASSETS AND GOODWILL**

 

***(A) Indefinite-Lived Intangibles***

 

Goodwilland certain intangible assets are not amortized.  The Company accounts for its acquiredbroadcasting licenses as indefinite-lived intangible assets and, similar togoodwill, these assets are reviewed at least annually for impairment. At thetime of each review, if the fair value is less than the recorded value ofgoodwill and certain intangibles (such as broadcasting licenses), then a chargeis recorded to the results of operations.

 

TheCompany may only write down the carrying value of its indefinite-livedintangibles. The Company is not permitted to increase the carrying value if thefair value of these assets subsequently increases.

 

**Broadcasting Licenses**

 

The Company performs its broadcasting licenseimpairment test by evaluating its broadcasting licenses for impairment at themarket level using the direct method. For purposes of testing impairment, indefinite-lived intangible assetsare combined into a single unit of accounting. Since the broadcasting licensesin each market are operated as a single asset, each market’s broadcastinglicenses are a single unit of accounting. The Company determines the fair valueof the broadcasting licenses in each of its markets by relying on a discountedcash flow approach (a 10-year income model) assuming a start-up scenario inwhich the only assets held by an investor are broadcasting licenses. The Company’sfair value analysis contains assumptions incorporating variables that are basedon past experiences and judgments about future performance using industrynormalized information for an average station within a certain market. Thesevariables include, but are not limited to: (1) the risk-adjusted discountrate used in the valuation of fair value; (2) market share and profitmargin of an average station within a market based upon market size and stationtype; (3) the forecast growth rate of each radio market, includingassumptions regarding each market’s population, household income, retail salesand other factors that would influence advertising expenditures; (4) estimatedcapital start-up costs and losses incurred during the early years; (5) thelikely media competition within the market area; (6) an effective tax rateassumption; and (7) future terminal values.

 

***Broadcasting License Impairment Testing During The Second Quarter Of2010***

 

TheCompany completed the impairment test for broadcasting licenses and determinedthat the fair value of the broadcasting licenses was more than the amountreflected in the balance sheet for each of the Company’s markets and,accordingly, no impairment was recorded.

 

The methodology used by the Company in determining itskey estimates and assumptions was applied consistently to each market. As aresult, the analysis for each market is the same. Of the seven variablesidentified above, the Company believes that the first three (in clauses (1) through(3) above) are the most important to the determination of fair value. Thefollowing table reflects the estimates and assumptions used in 2010 as comparedto the second quarter of 2009, the date of the most recent prior impairmenttest.  In general, when comparing thesecond quarter of 2010 to the second quarter of 2009: (1) the discountrate decreased primarily due to a decrease in the estimated required returns ondebt and equity of publicly tradedradio companies; (2) the market specific operating profit margin rangeremained relatively flat; and (3) the market long-term revenue growthrates were marginally higher as the outlook for the industry improved.

 
| ** **                                                          | ** ** | **Second**     | ** ** | **Second**     | ** ** |
|---------------------------------------------------------------------|------------|----------------|------------|----------------|------------|
| ** **                                                          | ** ** | **Quarter**    | ** ** | **Quarter**    | ** ** |
| ** **                                                          | ** ** | **2010**       | ** ** | **2009**       | ** ** |
| Discount rates                                                      |       | 10.0%          |       | 10.6%          |       |
| Operating profit margin ranges of the Company’s  markets       |       | 21.0% to 42.5% |       | 21.0% to 44.0% |       |
| Long-term revenue growth rate ranges of the  Company’s markets |       | 1.5% to 2.0%   |       | 1.0% to 2.5%   |       |

 

Thefollowing table presents the changes in the carrying value of the Company’sbroadcasting licenses for the nine months ended September 30, 2010 and2009:

 

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| ** **                       | ** ** | **Broadcasting Licenses**       | ** ** |
|----------------------------------|------------|--------------------------------------|------------|
| ** **                       | ** ** | **Carrying Amount**             | ** ** |
| ** **                       | ** ** | **2010**                             | ** ** | **2009** | ** ** |
| ** **                       | ** ** | **(amounts in thousands)** | ** ** |
| ** **                       | ** ** | ** **                           | ** ** | ** ** | ** ** |
| Balance as of beginning of year  |       | $                                    | 707,852    |   | $ | 768,646 |   |
| Impairment loss                  |       | —                               |       | (60,794 | ) |
| Balance as of September 30, |       | $                                    | 707,852    |   | $ | 707,852 |   |

 

Theamount of unamortized broadcasting licenses reflected in the balance sheet asof September 30, 2010 and December 31, 2009 was $707.9 million. Therewere no events or circumstances since the Company’s second quarter annual testthat required the Company to test the carrying value of its broadcastinglicenses.

 

***Broadcasting License Impairment Testing During The Second Quarter Of2009***

 

During the second quarter of 2009, the Companycompleted the impairment test for broadcasting licenses and determined that thefair value of its broadcasting licenses was less than the amount reflected inthe balance sheet for each of the Company’s markets, other than Seattle, andrecorded an impairment loss of $60.8 million. The prolonged economic downturnnegatively impacted the radio broadcasting industry as advertising revenuescontinued to decline and expectations for growth over the next year werereduced. The reduction in the projected growth levels for the industry was theprimary reason for further impairment to the Company’s broadcasting licenses inthe second quarter of 2009, which impairment was in addition to the impairmentrecorded in 2008. As revenues decline, profitability levels are also negativelyimpacted, as fixed costs represent a large component of a radio station’soperating expenses. As a result, the asset base is particularly sensitive tothe impact of continued declining revenues.

 

**Goodwill**

 

TheCompany performs its annual impairment test on its goodwill during the secondquarter of each year by comparing the fair value for each reporting unit withthe amount reflected on the balance sheet. The Company has determined that aradio market is a reporting unit and, in total, the Company assesses goodwillat 19 separate reporting units (three of the Company’s 22 reporting units haveno goodwill recorded as of September 30, 2010). If the fair value of anyreporting unit is less than the amount reflected in the balance sheet, anindication exists that the amount of goodwill attributed to a reporting unitmay be impaired, and the Company is required to perform a second step of theimpairment test. In the second step, the Company compares the amount reflectedin the balance sheet to the implied fair value of the reporting unit’sgoodwill, determined by allocating the reporting unit’s fair value to all ofits assets and liabilities in a manner similar to a purchase price allocation.

 

Todetermine the fair value, the Company uses an income and market approach foreach reporting unit. The market approach compares recent sales and offeringprices of similar properties. The income approach uses the subject property’sincome generated over a specified time and capitalized at an appropriate marketrate to arrive at an indication of the most probable selling price.

 

***Goodwill Impairment Test During Second Quarter Of 2010***

 

Instep one of the Company’s goodwill analysis, the Company considered the resultsof the market approach and the income approach in computing the fair value ofthe Company’s reporting units. In the market approach, the Company applied anestimated market multiple of between seven and a half times and eight times toeach reporting unit’s operating performance to calculate the fair value. Thismultiple was higher than the six times multiple applied to all markets in thesecond quarter of 2009.  Managementbelieves that these approaches are an appropriate measurement given the currentmarket valuations of broadcast radio stations together with the historicalmarket transactions, including those in recent months. Factors contributing tothe determination of the reporting unit’s operating performance were historicalperformance and management’s estimates of future performance.

 

Inthe income approach, the Company utilized the discounted cash flow method tocalculate the fair value of the reporting unit (the key estimates andassumptions are included in the table below). The results of step one indicatedthat it was not necessary to perform the second step analysis in any of themarkets tested, as the fair values for all of the Company’s markets were abovebook value. As a result of the step one test, no impairment loss was

 

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recordedduring the second quarter of 2010. The Company performed a reasonableness testby comparing the fair value results for goodwill by using the implied multiplebased on the Company’s cash flow performance and its current stock price, andthen comparing the results to prevailing radio broadcast transaction multiples.

 

Thefollowing table reflects certain key estimates and assumptions used in 2010 and in the second quarter of 2009, the date of the most recent prior impairment test. The rangesfor operating profit margin and revenue growth rates are for the Company’smarkets.  In general, when comparing thesecond quarter of 2010 to the second quarter of 2009: (1) the discountrate decreased primarily due to a decrease in the estimated required returns inthe debt and equity of publicly traded radio companies; (2) the marketspecific operating profit margin range narrowed; and (3) the marketlong-term revenue growth rate range narrowed.

 
| ** **                                                          | ** ** | **Second**     | ** ** | **Second**     | ** ** |
|---------------------------------------------------------------------|------------|----------------|------------|----------------|------------|
| ** **                                                          | ** ** | **Quarter**    | ** ** | **Quarter**    | ** ** |
| ** **                                                          | ** ** | **2010**       | ** ** | **2009**       | ** ** |
| Discount rates                                                      |       | 10.0%          |       | 10.6%          |       |
| Operating profit margin ranges of the Company’s  markets       |       | 26.0% to 39.0% |       | 21.0% to 41.0% |       |
| Long-term revenue growth rate ranges of the  Company’s markets |       | 1.5% to 2.0%   |       | 1.0% to 2.5%   |       |

 

Thefollowing table presents the change in the carrying value of the Company’sgoodwill for the nine months ended September 30, 2010 and 2009:

 
| ** **                                                           | ** ** | **Goodwill**                         | ** ** |
|----------------------------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                                           | ** ** | **Carrying Amount**             | ** ** |
| ** **                                                           | ** ** | **September 30,**               | ** ** |
| ** **                                                           | ** ** | **2010**                             | ** ** | **2009** | ** ** |
| ** **                                                           | ** ** | **(amounts in thousands)** | ** ** |
| Goodwill before cumulative loss on impairment as  of January 1, |       | $                                    | 163,783    |   | $ | 163,783 |   |
| Accumulated loss on impairment                                       |       | (125,615                             | )          | (118,733 | ) |
| Goodwill after cumulative loss on impairment                         |       | 38,168                               |       | 45,050 |   |
| Loss on impairment during the year                                   |       | —                               |       | (6,882 | ) |
| Ending balance as of September 30,                              |       | $                                    | 38,168     |   | $ | 38,168 |   |

 

Therewere no events or circumstances since the Company’s second quarter annual testthat required the Company to test the carrying value of its goodwill. If actualmarket conditions are less favorable than those projected by the industry orthe Company, or if events occur or circumstances change that would reduce thefair value of the Company’s goodwill below the amount reflected in the balancesheet, the Company may be required to recognize impairment charges, which couldbe material, in future periods.

 

***Goodwill Impairment Test During Second Quarter Of 2009***

 

Instep one of the Company’s goodwill analysis, the Company considered the resultsof the market approach and the income approach in computing the fair value ofthe Company’s reporting units. In the market approach, the Company applied anestimated market multiple of six times to each reporting unit’s operatingperformance to calculate the fair value. The Company applied the same marketmultiple consistently across all reporting units. In the income approach, theCompany utilized the discounted cash flow method to calculate the fairvalue of the reporting unit. The results of step one indicated that it wasnecessary to perform the second step analysis in seven of the 22 markets. Thefair values for two of the seven markets were marginally above book value.Management believes that these approaches are commonly used methodologies forvaluing broadcast radio stations and that a six times multiple was anappropriate measurement given the then recent fall in market valuations ofbroadcast radio stations together with a historically low level of market transactionsin recent months. The marginal stations were included in the Company’s step twoimpairment testing due to the subjective nature of the step one analysis(unobservable inputs) and the sensitivities inherent in these calculations.Factors contributing to the determination of the reporting unit’s operatingperformance were historical performance and management’s estimates of futureperformance.

 

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Underthe second step, the Company determined that the fair value of the Company’sgoodwill was less than the amount reflected in the balance sheet for the sevenmarkets tested, which were Austin, Greensboro, Greenville, Indianapolis,Kansas City, Memphis and Wichita, and recorded an impairment loss of $6.9million during the second quarter of 2009. Contributing factors to theimpairment were a decline in the advertising dollars in these markets and itseffect on the Company’s operations, coupled with changes in the anticipatedgrowth and profitability of these markets.

 

**4.             SENIOR DEBT**

 

***Bank Facility***

 

TheCompany has a credit agreement (“Bank Facility”) with a syndicate of lendersfor a $1,050 million senior secured credit facility that matures on June 30,2012. The Bank Facility was originally comprised of $650 million in revolvingcredit (the “Revolver”) and a $400 million term loan (“Term Loan”).

 

TheCompany is required to make payments on the Term Loan in quarterly amounts,which payments started at $15 million (September 30, 2009), are currentlyat $25 million and ultimately increase to $60 million. The Company plans tofund the amortization of the Term Loan with cash flow from operations and itsavailable Revolver capacity.

 

Asof September 30, 2010, the Company had outstanding under the BankFacility: (1) $676.0 million, including: (i) $365.0 million in drawnRevolver; and (ii) $311.0 million in Term Loan; and (2) a $0.7million letter of credit.  As of September 30,2010, the Company had $3.4 million in cash and cash equivalents.

 

On March 11, 2010, the Company amended its BankFacility (the “Amendment”). The Bank Facility requires the Company to complywith certain financial covenants such as a maximum Consolidated Leverage Ratioand a minimum Consolidated Interest Coverage Ratio (defined terms within theagreement). In connection with the Amendment, certain key terms, as definedwithin the Bank Facility, were revised as follows:

 

·                  The Consolidated Leverage Ratio cannotexceed seven times in 2010. Beginning in 2011, this covenant ratio decreasesquarterly in increments to a ratio of six times as of December 31, 2011.

·                  Depending on the Consolidated LeverageRatio (Consolidated Funded Indebtedness to Consolidated Operating Cash Flow),the Company may elect an interest rate equal to: (1) the Eurodollar Rateplus fees that can range from 0.5% to 2.5%; or (2) the Base Rate plus feesthat can range from 0.0% to 1.5%, where the Base Rate is the highest of:(a) the Federal Funds Rate plus 0.5%; (b) the Eurodollar Rate plus1.0%; or  (c) the Prime Rate.

·                  During periods when the ConsolidatedLeverage Ratio exceeds six times (defined in the Bank Facility as a “RestrictedPeriod”), the Company is: (a) restricted in its ability to take certainactions, including but not limited to, the payment of dividends and therepurchase of its stock; and (b) subject to additional limitations onacquisitions and investments.

 

As of September 30,2010, the Consolidated Leverage Ratio did not exceed six times.  As aresult, the Company will cease to be in a Restricted Period shortly after thefiling of this Quarterly Report.

 

Asof September 30, 2010, the undrawn amount of the Revolver was $284.3million. The amount of the Revolver available to the Company, however, is afunction of covenant compliance at the time of borrowing. Based on the Company’sfinancial covenant analysis as of September 30, 2010, the Company would belimited to borrowings significantly less than the undrawn limit unless suchborrowings were used to repay indebtedness or for transactions that increase cashflow for purposes of covenant calculation.

 

TheCompany’s ability to maintain compliance with its covenants is highly dependenton the Company’s results of operations. If the Company were to enter into an agreement with its lenders forcovenant compliance relief, such relief could result in higher interestexpense.

 

Managementbelieves that for the next 12 months, the Company can continue to maintain itscompliance with these covenants. Management also believes that cash on hand andcash from operating activities, together with available borrowings under theRevolver, will be sufficient to permit the Company to meet its liquidityrequirements for the next 12 months, including the Company’s scheduled debtrepayments.  The Company’s operating cashflow remains positive, and management believes that it is adequate to fund theCompany’s operating needs.  As a result,

 

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theCompany has not been required to rely upon, and the Company does not anticipatebeing required to rely upon, the Revolver to fund the Company’s operations.

 

Amendingthe Company’s Bank Facility or obtaining other funding or additional financingprior to the expiration of the current agreement will be essential since theRevolver balance outstanding will be due in full upon the expiration of theBank Facility on June 30, 2012.

 

TheBank Facility is secured by a pledge of 100% of the capital stock and otherequity interest in all of the Company’s wholly owned subsidiaries. In addition,the Bank Facility, as amended, is secured by a lien on all of the Company’sassets, other than real property.

 

TheAmendment in March 2010 was treated as a modification to a debtinstrument.  As a result, in the firstquarter of 2010, the Company recorded deferred financing costs of $5.2 millionrelated to the Amendment, which will be amortized over the remaining life ofthe Bank Facility on: (1) a straight-line basis for the Revolver; and (2) aneffective interest rate method for the Term. In addition, unamortized deferredfinancing costs of $3.1 million as of the Amendment date will continue to beamortized over the remaining life of the Bank Facility.

 

**5.             7.625%SENIOR SUBORDINATED NOTES**

 

Duringthe nine months ended September 30, 2010, the Company repurchased theremaining $6.6 million of its 7.625% Senior Subordinated Notes (“Notes”) due March 1,2014 at par and recorded in the statement of operations a loss on the extinguishmentof debt of $0.1 million due to the write-off of deferred financing costs.

 

Duringthe nine months ended September 30, 2009, the Company repurchased $59.6million of its Notes due March 1, 2014. For the nine and three monthsended September 30, 2009, the Company recorded in the statement ofoperations a gain on the extinguishment of debt of $19.3 million and $3.1million, respectively, net of the write-off of deferred financing costs of $0.7million and $0.2 million, respectively.

 

**6.             FINANCINGMETHOD LEASE OBLIGATIONS**

 

Duringthe fourth quarter of 2009, the Company completed the sale of certain towerfacilities for $12.6 million in cash.  Atthe same time, the Company entered into leases for space on the towers at mostof these sites for use by the Company’s radio stations. The Company classifiedthis transaction under the finance method as the agreement provides for anearn-out whereby the Company can receive additional cash consideration of up to$2.0 million after 42 months, depending on whether the buyer meets certainrevenue targets.

 

Theamount of depreciation and amortization expense attributable to assets heldunder the financing method was $0.2 million and less than $0.1 million for thenine months ended September 30, 2010 and 2009, respectively.

 

Forthe nine months ended September 30, 2010, the amount of interest expensefor the total cash consideration received of $12.6 million was $0.5million.  For the nine months ended September 30,2009, no interest expense associated with lease financing obligations wasrecognized as lease payments commenced in October 2009.

 

**7.             DERIVATIVESAND HEDGING ACTIVITIES**

 

TheCompany from time to time enters into derivative financial instruments,including interest rate exchange agreements (“Swaps”) and interest rate collaragreements (“Collars”), to manage its exposure to fluctuations in interestrates. Under a fixed rate Swap, the Company pays a fixed rate on a notionalamount to a bank, and the bank pays to the Company a variable rate on thenotional amount equal to the Company’s Eurodollar borrowing rate. A Collarestablishes two separate agreements: an upper limit or “Cap” and a lower limitor “Floor” for the Company’s Eurodollar borrowing rate.

 

Duringthe nine months ended September 30, 2010 and 2009, the Company hadoutstanding the aggregate notional amounts of $475.0 million and $550.0million, respectively, of cash flow interest rate transactions that were hedgedagainst the Company’s variable rate senior debt.  In accordance with the terms of a Swap agreementdated January 28, 2008, the notional amount decreased from $225.0 millionto $150.0 million on January 28, 2010 thereby eliminating a notionalamount of $75.0 million with a fixed Eurodollar London interbank offered rate (“LIBOR”)of 3.03%.

 

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As of September 30,2010, the Company had the following derivatives outstanding:

 
| **Type**   | ** ** | ** **             | ** ** | ** **             | ** **            | ** ** | ** ** | **Fixed**    | ** ** | ** **              | ** **            |
|------------|------------|------------------------|------------|------------------------|-----------------------|------------|------------|--------------|------------|-------------------------|-----------------------|
| **Of**     | ** ** | **Notional**           | ** ** | **Effective**          | ** **            | ** ** | ** ** | **LIBOR**    | ** ** | **Expiration**          | ** **            |
| **Hedge**  | ** ** | **Amount**             | ** ** | **Date**               | ** **            | **Collar** | ** ** | **Rate**     | ** ** | **Date**                | ** **            |
| ** ** | ** ** | **(amounts**           | ** ** | ** **             | ** **            | ** ** | ** ** | ** **   | ** ** | ** **              | ** **            |
| ** ** | ** ** | **(in millions)** | ** ** | ** **             | ** **            | ** ** | ** ** | ** **   | ** ** | ** **              | ** **            |
|       |       |                   |       |                   |                  |       |       |         |       |                    |                  |
| Swap       |       | $                      | 150.0      |                   | January 28, 2008 |       | n/a        |         | 3.03%      |                    | January 28, 2011 |   |
| Collar     |       | 100.0                  |       | February 28, 2008 | [                     | Cap

Floor |       | 4.00%  2.14% | ]          | February 28, 2011  |                  |
| Swap       |       | 125.0                  |       | March 28, 2008    |                  | n/a        |       | 2.91%        |       | September 28, 2011 |                  |
| Swap       |       | 100.0                  |       | May 28, 2008      |                  | n/a        |       | 3.62%        |       | May 28, 2012       |                  |
| Total      |       | $                      | 475.0      |                   |                  |       |       |         |       |                    |                  |   |

 

The following is asummary of the fair value of the derivatives outstanding as of September 30,2010 and December 31, 2009:

 
| ** **                       |   | ** **                  |   | **Fair Value**                  |       |
|----------------------------------|--------|-----------------------------|--------|--------------------------------------|------------|
| ** **                       |   | ** **                  |   | **September 30,**               | ** ** | **December 31,** |   |
| ** **                       |   | **Balance Sheet**      |   | **2010**                             | ** ** | **2009** |   |
| ** **                       |   | **Location**                |   | **Asset (Liability)**           |       |
| ** **                       |   | ** **                  |   | **(amounts in thousands)** |       |
| **Designated Derivatives**       |   | ** **                  |   |                                 |       |   |   |
| Interest rate hedge transactions |   | Current Liabilities         |   | $                                    | (5,252     | ) | $ | — |   |
| Interest rate hedge transactions |   | Other Long-Term Liabilities |   | $                                    | (5,021     | ) | $ | (13,432 | ) |

 

TheCompany does not expect to reclassify to the statement of operations within thenext 12 months any portion of the amount outstanding as of September 30,2010.

 

The following is asummary (amounts in thousands) of the gains (losses) related to the Company’scash flow hedges for the nine and three months ended September 30, 2010and 2009:

 
| ** **                                                                        | ** ** | **Nine Months Ended** | ** ** | **Three Months Ended** | ** ** |
|-----------------------------------------------------------------------------------|------------|---------------------------------|------------|----------------------------------|------------|
| ** **                                                                        | ** ** | **September 30,**          | ** ** | **September 30,**           | ** ** |
| **Description**                                                                   | ** ** | **2010**                        | ** ** | **2009**                         | ** ** | **2010** | ** ** | **2009** | ** ** |
| ** **                                                                        | ** ** | ** **                      | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** |
| Type Of Derivative Designated As A Cash Flow Hedge                                |       | Interest  Rate                  |       | Interest  Rate                   |       | Interest  Rate |   | Interest  Rate |   |
| Amount of Gain (Loss) Recognized In Other Comprehensive Income  ("OCI") |       | $                               | 3,159      |                             | $          | 16 |   | $ | 1,424 |   | $ | (1,343 | ) |
| Location Of Gain (Loss) Reclassified From OCI To Statement Of  Operations         |       | Interest  Expense               |       | Interest  Expense                |       | Interest  Expense |   | Interest  Expense |   |
| Amount of Gain (Loss) Reclassified From OCI To Statement Of  Operations           |       | $                               | —     |                             | $          | — |   | $ | — |   | $ | — |   |
| Location Of Gain (Loss) In Statement Of Operations                                |       | Interest  Expense               |       | Interest  Expense                |       | Interest  Expense |   | Interest  Expense |   |
| Amount Of Gain (Loss) In Statement Of Operations Due To  Ineffectiveness          |       | $                               | —     |                             | $          | — |   | $ | — |   | $ | — |   |

 

The following tablepresents the accumulated derivative gains (losses) recorded in the statementsof other comprehensive income (loss) as of September 30, 2010 and December 31,2009:

 

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| ** **                              | ** ** | **September 30,**               | ** ** | **December 31,** | ** ** |
|-----------------------------------------|------------|--------------------------------------|------------|-----------------------|------------|
| ** **                              | ** ** | **2010**                             | ** ** | **2009**              | ** ** |
| ** **                              | ** ** | **Assets (Liabilities)**        | ** ** |
| ** **                              | ** ** | **(amounts in thousands)** | ** ** |
|                                    |       |                                 |       |                  |       |
| Accumulated  derivative unrealized loss |       | $                                    | (10,273    | )                     | $          | (13,432 | ) |
|                                         |            |                                      |            |                       |            |  |  |

 

**8.             CONTINGENCIES AND GUARANTORARRANGEMENTS**

 

***Contingencies***

 

TheCompany is subject to various outstanding claims which arise in the ordinarycourse of business and to other legal proceedings.  Management anticipates that any potentialliability of the Company which may arise out of, or with respect to, thesematters will not materially affect the Company’s financial position, results ofoperations or cash flows.

 

TheCompany uses a combination of insurance and self-insurance mechanisms toprovide for the potential liabilities for workers’ compensation, generalliability, property, directors’ and officers’ liability, vehicle liability andemployee health care benefits. Liabilities associated with the risks that areretained by the Company are estimated, in part, by considering claims experience,demographic factors, severity factors, outside expertise and other actuarialassumptions. Under one of these policies, the Company is required to maintain aletter of credit in the amount of $0.7 million.

 

InJanuary 2010, a plaintiff acknowledged full satisfaction by the Company’sinsurance carrier of a judgment against the Company. In connection with thesatisfaction of this claim, as of December 31, 2009, the Company recordedan insurance claim receivable from its insurance company of $16.5 million alongwith a claim payable to the plaintiff of $16.5 million.

 

TheCompany could face increased costs in the form of fines and a greater risk thatthe Company could lose any one or more of its broadcasting licenses if theFCC concludes that programming broadcast by a Company station was obscene,indecent or profane and such conduct warrants license revocation.  The FCC’sauthority to impose a fine for the broadcast of such material is $325,000for a single incident, with a maximum fine of up to $3.0 million for acontinuing violation. In the past, the FCC has issued Notices of ApparentLiability and a Forfeiture Order with respect to several of the Company’sstations proposing fines for certain programming which the FCC deemed to havebeen indecent. These cases are the subject of pending administrative appeals.The FCC has also investigated other complaints from the public that someof the Company’s stations broadcast indecent programming.  Theseinvestigations remain pending.  The FCC initiated an investigation intothe incident that was the subject of the lawsuit described above.

 

TheCompany has filed on a timely basis renewal applications for those radiostations with radio broadcasting licenses that are subject to renewal with theFCC. The Company’s costs to renew its licenses with the FCC are minimal and areexpensed as incurred rather than capitalized. Certain licenses were not renewed prior to the renewal date. The Companycontinues to operate these radio stations under their existing licenses untilthe licenses are renewed.  The FCC maydelay the renewal pending the resolution of open inquiries. The affectedstations are, however, authorized to continue operations until the FCC actsupon the renewal applications.

 

TheCompany’s agreements with Broadcast Music, Inc. (“BMI”) and AmericanSociety of Composers, Authors and Publishers (“ASCAP”) each expired as of December 31,2009. In January 2010, the Radio Music Licensing Committee, of which theCompany is a participant, filed motions in the New York courts against BMI andASCAP on behalf of the radio industry, seeking interim fees and a determinationof fair and reasonable industry-wide license fees. The courts recently approvedreduced interim fees for ASCAP and BMI. The final fees, as determined by thecourts, may be retroactive to the beginning of the period and may be differentfrom these interim fees.

 

***Guarantor Arrangements***

 

TheCompany enters into indemnification agreements in the ordinary course ofbusiness and other agreements which include indemnification provisions.  The Company believes that the estimated fairvalue of these

 

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agreementsis minimal and has not recorded liabilities for these agreements as of September 30,2010.

 

**9.             SHAREHOLDERS’ EQUITY**

 

***Dividend Equivalents***

 

TheCompany’s grants of RSUs include the right, upon vesting, to receive a cashpayment equal to the aggregate amount of dividends, if any, that the holderwould have received on the shares of common stock underlying their RSUs if suchRSUs had been vested during the period. For the nine months ended September 30,2010 and 2009, the Company paid $0.9 million and $0.8 million, respectively, tothe holders of RSUs that vested during these periods. The long-term dividendequivalent amount, accrued and unpaid on unvested RSUs, was $0.3 million and$0.8 million as of September 30, 2010 and December 31, 2009,respectively, and is included under other long-term liabilities in the balancesheet. The short-term dividend equivalent amount, accrued and unpaid onunvested RSUs, was $0.5 million and $1.0 million as of September 30, 2010and December 31, 2009, respectively, and is included under other currentliabilities in the balance sheet. The amount paid is considered a windfall taxbenefit that will be recorded to paid-in capital when realized.

 

***Deemed Purchases Of Vested RSUs***

 

Uponvesting, unless an employee elects to pay the tax withholding obligation incash, the Company withholds shares of stock in an amount sufficient to coverthe employee’s tax withholding obligations. As a result, during the nine months ended September 30, 2010 and2009, the Company was deemed to have repurchased 0.2 million and 0.1 millionshares of stock, respectively.

 

***Share Repurchase Programs***

 

TheCompany’s share repurchase program expired on June 30, 2009.

 

Duringthe nine months ended September 30, 2009, the Company repurchased 0.7million shares in the amount of $0.9 million at an average price of $1.34 pershare.

 

**10.          DEFERRED COMPENSATION PLANS**

 

TheCompany provides certain of its employees and the Board of Directors with anopportunity to defer a portion of their compensation on a tax-favored basis.The obligations by the Company to pay these benefits under these plansrepresent unsecured general obligations that rank equally with the Company’s otherunsecured indebtedness. Deferred compensation expense is allocated to corporategeneral and administrative expenses and station operating expenses.

 

Asof September 30, 2010 and December 31, 2009, $6.0 million and $5.2million, respectively, were deferred under these plans and were included inother long-term liabilities.  For thenine and three months ended September 30, 2010, the Company recorded anincrease in deferred compensation expense of $0.3 million and $0.6 million,respectively. For the nine and three months ended September 30, 2009, theCompany recorded an increase in deferred compensation expense of $0.8 millionand $0.6 million, respectively.

 

**11.          NET INCOME (LOSS) PER SHARE**

 

***Nine Months Ended September 30, 2010 and 2009***

 

Theeffect of stock options and RSUs in the calculation of net income (loss) pershare, using the treasury stock method, was: (1) dilutive for the nine andthree months ended September 30, 2010 and the three months ended September 30,2009; and (2) anti-dilutive for the nine months ended September 30,2009.

 

Thefollowing table sets forth the computations of basic and diluted net income(loss) per share for the nine months ended September 30, 2010 and 2009:

 

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| ** **                                  | ** ** | **Nine Months Ended**                                                                     | ** ** |
|---------------------------------------------|------------|-----------------------------------------------------------------------------------------------------|------------|
| ** **                                  | ** ** | **September 30, 2010**                                                                    | ** ** | **September 30, 2009** | ** ** |
| ** **                                  | ** ** | **(amounts in thousands, except share and per share data)** | ** ** |
| ** **                                  | ** ** | ** **                                                                                          | ** ** | ** ** | ** ** | **Net Income** | ** ** | ** ** | ** ** | ** ** | ** ** | **Net Loss** | ** ** |
| ** **                                  | ** ** | **Net Income**                                                                                      | ** ** | **Shares** | ** ** | **Per  Share** | ** ** | **Net Loss** | ** ** | **Shares** | ** ** | **Per  Share** | ** ** |
| Basic net income (loss) per common share:   |       |                                                                                                |       |   |   |   |   |   |   |   |   |   |   |
| Net income (loss)                           |       | $                                                                                                   | 29,151     |   | 35,699,525 |   | $ | 0.82 |   | $ | (18,302 | ) | 35,327,093 |   | $ | (0.52 | ) |
| Impact of equity awards                     |       |                                                                                                |       | 1,891,845 |   |   |   |   |   | — |   |   |   |
| Diluted net income (loss) per common share: |       |                                                                                                |       |   |   |   |   |   |   |   |   |   |   |
| Net income (loss)                           |       | $                                                                                                   | 29,151     |   | 37,591,370 |   | $ | 0.78 |   | $ | (18,302 | ) | 35,327,093 |   | $ | (0.52 | ) |

 

Incomputing the incremental shares under the treasury stock method for the ninemonths ended September 30, 2010, 0.1 million restricted stock units andoptions to purchase 0.1 million shares of common stock at a range of $9.84 to$48.21 were excluded from the computation as they were anti-dilutive.

 

Forthe nine months ended September 30, 2009, 0.7 million incremental shareswere not included in diluted net loss per share as the shares wereanti-dilutive when reporting a net loss.

 

Incomputing the incremental shares under the treasury stock method for the ninemonths ended September 30, 2009, 0.8 million restricted stock units(including less than 0.1 million restricted stock units with market and serviceconditions, as half of the restricted stock units with market conditions werenot satisfied as of September 30, 2009) and options to purchase 1.2million shares of common stock at a range of $2.20 to $48.21, were excludedfrom the computation as they were anti-dilutive.

 

***Three Months Ended September 30, 2010 and 2009***

 

Theeffect of stock options and RSUs in the calculation of net income per share,using the treasury stock method, was dilutive for the three months ended September 30,2010 and 2009.

 
| ** **                           | ** ** | **Three Months Ended**                                                                    | ** ** |
|--------------------------------------|------------|-----------------------------------------------------------------------------------------------------|------------|
| ** **                           | ** ** | **September 30, 2010**                                                                    | ** ** | **September 30, 2009** | ** ** |
| ** **                           | ** ** | **(amounts in thousands, except share and per share data)** | ** ** |
| ** **                           | ** ** | ** **                                                                                          | ** ** | ** ** | ** ** | **Net  Income** | ** ** | ** ** | ** ** | ** ** | ** ** | **Net  Income** | ** ** |
| ** **                           | ** ** | **Net Income**                                                                                      | ** ** | **Shares** | ** ** | **Per  Share** | ** ** | **Net  Income** | ** ** | **Shares** | ** ** | **Per  Share** | ** ** |
| Basic net income per common share:   |       |                                                                                                |       |   |   |   |   |   |   |   |   |   |   |
| Net income                           |       | $                                                                                                   | 10,689     |   | 35,722,801 |   | $ | 0.30 |   | $ | 18,275 |   | 35,291,969 |   | $ | 0.52 |   |
| Impact of equity awards              |       |                                                                                                |       | 1,587,155 |   |   |   |   |   | 1,328,644 |   |   |   |
| Diluted net income per common share: |       |                                                                                                |       |   |   |   |   |   |   |   |   |   |   |
| Net income                           |       | $                                                                                                   | 10,689     |   | 37,309,956 |   | $ | 0.29 |   | $ | 18,275 |   | 36,620,613 |   | $ | 0.50 |   |

 

Incomputing the incremental shares under the treasury stock method for the threemonths ended September 30, 2010, 0.3 million RSUs and options to purchase0.1 million shares of common stock at a range of $7.55 to $48.21, were excludedfrom the computation as they were anti-dilutive.

 

Incomputing the incremental shares under the treasury stock method for the threemonths ended September 30, 2009, 0.8 million restricted stock units(including less than 0.1 million restricted stock units with market and serviceconditions, as half of the restricted stock units with market and serviceconditions were not satisfied as of September 30, 2009) and options topurchase 1.2 million shares of common stock at a range of $2.20 to $48.21 wereexcluded from the computation as they were anti-dilutive.

 

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**12.          INCOME TAXES**

 

***Effective Tax Rate - Overview***

 

The Company’s income tax rates for the nine monthsand three months ended September 30, 2010 were based on the estimatedannual effective tax rate for 2010 (excluding the impact of a valuationallowance for deferred tax assets as described below), and include: (1) theeffect of permanent differences between income subject to income tax for bookand tax purposes; and (2) any discrete items of tax. The Company’s effective tax rate, which canfluctuate from quarter to quarter, can be higher than the federal statutoryrate of 35% primarily as a result of the provision for state taxes (net of afederal tax deduction).

 

TheCompany’s effective income tax rate may be impacted by: (1) changes in thelevel of income in any of the Company’s taxing jurisdictions; (2) changesin the statutes and rules applicable to taxable income in the jurisdictionsin which the Company operates; (3) changes in the expected outcome ofincome tax audits; (4) changes in the estimate of expenses that are notdeductible for tax purposes; (5) income taxes in certain states where thestates’ current taxable income is dependent on factors other than the Company’sconsolidated net income; and (6) the effect of recording changes in theCompany’s liabilities for uncertain tax positions.

 

An impairment loss will result in an income taxbenefit during the period incurred (before any adjustment for a deferred taxasset valuation allowance) as the amortization of broadcasting licenses andgoodwill is deductible for income tax purposes.

 

**Tax Rates For The Nine Months And Three Months Ended September 30,2010**

 

Theeffective income tax rates were 34.9% and 40.4% for the nine months and threemonths ended September 30, 2010, respectively. These effective income taxrates reflect: (1) an increase in net deferred tax liabilities associatedwith non-amortizable assets such as broadcasting licenses and goodwill; (2) changesin the deferred tax asset valuation allowance for the reasons as describedbelow under Valuation Allowance For Deferred Tax Assets; and (3) certaindiscrete items of tax.

 

**Tax Rates For The Nine Months And Three Months Ended September 30,2009**

 

Theeffective income tax rates were 4.0% and 2.4% for the nine months and threemonths ended September 30, 2009, respectively. The effective income taxrates for the nine and three months ended September 30, 2009 reflect anincrease and a decrease, respectively, in the deferred tax valuation allowancefor the reasons as described below under Valuation For Deferred Tax Assets(after consideration for any net deferred tax liabilities associated withnon-amortizable assets such as broadcasting licenses and goodwill).

 

***Deferred Tax Liabilities***

 

As of September 30, 2010, deferred tax liabilities were $15.6 million,primarily from net deferred tax liabilities associated with non-amortizableassets such as broadcasting licenses and goodwill.  As of December 31, 2009, thedeferred tax liabilities were fullyoffset by deferred tax assets. Theincome tax accounting process to determine the deferred tax liabilitiesinvolves estimating all temporary differences between the tax and financial reportingbases of the Company’s assets and liabilities, based on enacted tax laws andstatutory tax rates applicable to the period in which the differences areexpected to affect taxable income. The Company estimated the current exposureby assessing the temporary differences and computing the provision for incometaxes by applying the estimated effective tax rate to income.

 

***Valuation Allowance For Deferred Tax Assets***

 

TheCompany decreased its valuation allowance by $5.0 million to $45.9 million asof September 30, 2010 from $50.9 million as of December 31, 2009,primarily related to a decrease in its deferred tax assets associated withbroadcast licenses and goodwill as of September 30, 2010 as compared to December 31,2009. As a result of cumulative losses incurred by the Company since 2006, adeferred tax asset valuation allowance was established due to the uncertaintythat the deferred tax assets would be realized in future years (afterconsideration for any net deferred tax liabilities associated with non-amortizableassets such as broadcasting licenses and goodwill). The valuation allowance asof September 30, 2010 and December 31, 2009 includes $4.1 million and$5.3 million, respectively, for an income tax benefit recorded in othercomprehensive income (loss).

 

TheCompany has also considered future taxable income and ongoing prudent andfeasible tax-planning strategies in assessing the need for the valuationallowance.  On a quarterly basis, management assesses whether it 

 

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remains more likely than not that the deferred taxassets will not be realized.  In the eventthe Company determines at a future time that it could realize its deferred taxassets in excess of the net amount recorded, the Company will reduce itsdeferred tax asset valuation allowance and decrease income tax expense in theperiod when the Company makes such determination.

 

***Income Tax Payments And Refunds***

 

TheCompany made income tax payments of $0.1 million and $0.2 million for the ninemonths ended September 30, 2010 and 2009, respectively.

 

TheCompany received state income tax refunds of less than $0.1 million for each ofthe nine months ended September 30, 2010 and 2009.

 

Asa result of federal tax legislation during the fourth quarter of 2009 thatallowed the Company to carryback its 2008 net operating loss for five yearsrather than for two years, the Company recorded in excess of $7.0 million underprepaid and refundable income taxes as of December 31, 2009.  On April 2, 2010, the Company received$6.8 million in federal income tax refunds and expects to receive the balanceof $0.4 million during the fourth quarter of 2010.

 

***Liabilities For Uncertain Tax Positions***

 

Forthe nine and three months ended September 30, 2010, the Company recordedincreases of $0.1 million and $1.0 million, respectively, to income taxexpense, which amounts consisted primarily of income tax liabilities for prior years(including interest and principal), partially offset by the expiration ofstatutes of limitation for certain tax liabilities (including interest andprincipal).  For the nine and threemonths ended September 30, 2009, the Company recorded income tax expenseof $0.5 million and $0.4 million, respectively, which amounts consistedprimarily of tax liabilities for the 2009 year (including interest andprincipal), partially offset by the expiration of statutes of limitation forcertain tax liabilities (including interest and principal). The Company’sliabilities for uncertain tax positions as of September 30, 2010 and December 31,2009 were $5.3 million for each period, which were recorded in the balancesheets as long-term tax liabilities. The Company reviews its estimates on aquarterly basis, and any change in its liabilities for uncertain tax positionswill result in an adjustment to its income tax expense in the statement ofoperations in each period measured.

 

Itis reasonably possible that the Company’s gross unrecognized tax benefitsbalance (exclusive of interest and penalties) may change within the next twelvemonths by a range from $1.8 million to $2.5 million.  This change would be primarily due to thesettlement during October 2010 of an audit with the Internal RevenueService (“IRS”) for all open tax periods through and including 2008 and theexpiration of the statute of limitations for certain tax jurisdictions, offsetby additional accruals of tax for existing liabilities.

 

***Federal And State Income Tax Audits***

 

TheCompany is subject to federal and state income tax audits from time to timethat could result in proposed assessments. The Company cannot predict withcertainty how these audits will be resolved and whether the Company will berequired to make additional tax payments, which may or may not includepenalties and interest. As of September 30, 2010, the Company’s tax yearsof 2004 through 2008 were open for audit by the IRS. For most states where theCompany conducts business, the Company is subject to examination for thepreceding three to six years. In certain states, the period could be longer.

 

DuringOctober 2010, the Company received a notice from the IRS that theexamination covering the tax years of 2004 through 2008 was completed with noproposed adjustment.  Based upon theresults of the examination, the Company does not expect to record income taxliabilities beyond the liabilities already recorded in the balance sheet duringthe third quarter 2010.

 

**13.          ACCOUNTS RECEIVABLE AND RELATEDALLOWANCE FOR DOUBTFUL ACCOUNTS**

 

Accounts receivable are primarily attributable toadvertising that has aired on the Company’s radio stations, but for whichpayment has not been collected, net of agency commissions and an estimatedallowance for doubtful accounts. Estimates of the allowance for doubtfulaccounts are recorded based on management’s judgment of the 

 

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collectability of the accounts receivable based onhistorical information, relative improvements or deteriorations in the age ofthe accounts receivable and changes in current economic conditions.

 

The accounts receivable balances and reserve fordoubtful accounts as of September 30, 2010 and December 31, 2009 arepresented in the following table:

 
| ** **                                                   | ** ** | **September 30,**               | ** ** | **December 31,** | ** ** |
|--------------------------------------------------------------|------------|--------------------------------------|------------|-----------------------|------------|
| ** **                                                   | ** ** | **2010**                             | ** ** | **2009**              | ** ** |
| ** **                                                   | ** ** | **(amounts in thousands)** | ** ** |
|                                                         |       |                                 |       |                  |       |
| Accounts receivable                                          |       | $                                    | 79,131     |                  | $          | 71,618 |   |
| Allowance for doubtful  accounts                             |       | (3,058                               | )          | (3,299                | )          |
| Accounts receivable, net  of allowance for doubtful accounts |       | $                                    | 76,073     |                  | $          | 68,319 |   |

 

As of September 30, 2010 and December 31,2009, the Company recorded accounts receivable credits in the amounts of $2.6million and $1.8 million, respectively, which amounts are included in thebalance sheets under other current liabilities. Accounts receivable credits can result from advertiser prepayments oroverpayments.

 

As of September 30, 2010 and December 31,2009, the Company recorded current unearned revenues of $0.3 million and $0.8million, respectively, which amounts are included in the balance sheets underother current liabilities.

 

**14.          FAIR VALUE MEASUREMENTS**

 

Thefair value is the price that would be received to sell an asset or paid to transfera liability in an orderly transaction between market participants at themeasurement date (exit price). The Company utilizes market data or assumptionsthat market participants would use in pricing the asset or liability, includingassumptions about risk and the risks inherent in the inputs to the valuationtechnique. These inputs can be readily observable, market corroborated, orgenerally unobservable. The Company utilizes valuation techniques that maximizethe use of observable inputs and minimize the use of unobservable inputs. Thefair value hierarchy prioritizes the inputs used to measure fair value. Thehierarchy gives the highest priority to unadjusted quoted prices in activemarkets for identical assets or liabilities (level 1 measurement) and thelowest priority to unobservable inputs (level 3 measurement).

 

***Recurring Fair Value Measurements***

 

Thefollowing tables set forth, by level within the fair value hierarchy, theCompany’s financial assets and liabilities that were accounted for at fair valueon a recurring basis as of September 30, 2010 and December 31, 2009.The financial assets and liabilities are classified in their entirety based onthe lowest level of input that is significant to the fair value measurement.The Company’s assessment of the significance of a particular input to the fairvalue measurement requires judgment and may affect the valuation of fair valueassets and liabilities and their placement within the fair value hierarchylevels.

 

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| ** **                     | ** ** | **As Of September 30, 2010**                        | ** ** |
|--------------------------------|------------|-------------------------------------------------------------------------|------------|
| ** **                     | ** ** | **Value Measurements At Reporting Date Using** | ** ** |
| ** **                     | ** ** | ** **                                                              | ** ** | **Quoted Prices** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                     | ** ** | ** **                                                              | ** ** | **In Active** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                     | ** ** | ** **                                                              | ** ** | **Markets For** | ** ** | **Significant** | ** ** | ** ** | ** ** |
| ** **                     | ** ** | ** **                                                              | ** ** | **Identical** | ** ** | **Other** | ** ** | **Significant** | ** ** |
| ** **                     | ** ** | ** **                                                              | ** ** | **Assets Or** | ** ** | **Observable** | ** ** | **Unobservable** | ** ** |
| ** **                     | ** ** | ** **                                                              | ** ** | **Liabilities** | ** ** | **Inputs** | ** ** | **Inputs** | ** ** |
| ** **                     | ** ** | **Total**                                                               | ** ** | **(Level 1)** | ** ** | **(Level 2)** | ** ** | **(Level 3)** | ** ** |
| **Description**                | ** ** | **Assets (Liabilities)**                                           | ** ** |
| ** **                     | ** ** | **(amounts in thousands)**                                    | ** ** |
| ** **                     |       |                                                                    | ** ** | ** ** |   |   | ** ** | ** ** | ** ** |
| **Liabilities**                |       |                                                                    |       |   |   |   |   |   |   |
| Deferred compensation          |       | $                                                                       | (6,025     | ) | $ | (6,025 | ) | $ | — |   | $ | — |   |
| Interest Rate Cash Flow Hedges |       | $                                                                       | (10,273    | ) | $ |   |   | $ | (10,273 | ) | $ | — |   |

 
| ** **                     | ** ** | **As Of December 31, 2009**                         | ** ** |
|--------------------------------|------------|-------------------------------------------------------------------------|------------|
| ** **                     | ** ** | **Value Measurements At Reporting Date Using** | ** ** |
| ** **                     | ** ** | ** **                                                              | ** ** | **Quoted Prices** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                     | ** ** | ** **                                                              | ** ** | **In Active** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                     | ** ** | ** **                                                              | ** ** | **Markets For** | ** ** | **Significant** | ** ** | ** ** | ** ** |
| ** **                     | ** ** | ** **                                                              | ** ** | **Identical** | ** ** | **Other** | ** ** | **Significant** | ** ** |
| ** **                     | ** ** | ** **                                                              | ** ** | **Assets Or** | ** ** | **Observable** | ** ** | **Unobservable** | ** ** |
| ** **                     | ** ** | ** **                                                              | ** ** | **Liabilities** | ** ** | **Inputs** | ** ** | **Inputs** | ** ** |
| ** **                     | ** ** | **Total**                                                               | ** ** | **(Level 1)** | ** ** | **(Level 2)** | ** ** | **(Level 3)** | ** ** |
| **Description**                | ** ** | **Assets (Liabilities)**                                           | ** ** |
| ** **                     | ** ** | **(amounts in thousands)**                                    | ** ** |
|                           |       |                                                                    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Liabilities**                |       |                                                                    |       |   |   |   |   |   |   |
| Deferred compensation          |       | $                                                                       | (5,173     | ) | $ | (5,173 | ) | $ | — |   | $ | — |   |
| Interest Rate Cash Flow Hedges |       | $                                                                       | (13,432    | ) | $ |   |   | $ | (13,432 | ) | $ | — |   |

 

For the Company’sdeferred compensation liability, the Company records the amounts at fair valueon a recurring basis. The unfunded plan allows participants to hypotheticallyinvest in various specified investment options such as equity funds, stockfunds, capital appreciation funds, money market funds, bond funds, mid-capvalue funds and growth funds. The nonqualified deferred compensation planliability is valued based on quoted market prices of the underlyinginvestments. The Company classifies its nonqualified deferred compensation planliability as Level 1.

 

For the Company’s interest rate hedges, theCompany pays a fixed rate and receives a variable interest rate that isobservable based upon a forward interest rate curve and is therefore considereda level 2 item (based on the Eurodollar rate).

 

For the Company’s assets measured at fairvalue on a recurring basis using significant unobservable inputs (level 3), thefollowing amounts in thousands are a reconciliation of the activity during eachof the quarters within the nine months ended 2009:

 

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| ** **                                                | ** ** | **Available**     | ** ** |
|-----------------------------------------------------------|------------|-------------------|------------|
| ** **                                                | ** ** | **For Sale** | ** ** |
| ** **                                                | ** ** | **Securities**    | ** ** |
| **Assets**                                                | ** ** | ** **        | ** ** |
| Balance as of  December 31, 2008                     |       | $                 | 1,399      |   |
| Recovery of investment                                    |       | (6                | )          |
| Balance as of  March 31, 2009 and June 30, 2009 |       | $                 | 1,393      |   |
| Recovery of investment                                    |       | (9                | )          |
| Balance as of  September 30, 2009                    |       | $                 | 1,384      |   |

 

***Non-Recurring Fair Value Measurements***

 

TheCompany has certain assets that are measured at fair value on a non-recurringbasis under the circumstances and events described in Note 3, IntangibleAssets And Goodwill, and are adjusted to fair value only when the carryingvalues are more than the fair values. The categorization of the framework used to price the assets isconsidered a level 3, due to the subjective nature of the unobservable inputsused to determine the fair value.

 

Includedin the following table are the major categories of assets measured at fairvalue on a non-recurring basis as of September 30, 2009, along with theimpairment loss, if any, recognized on the fair value measurement for the nineand three months ended September 30, 2009:

 

**Non-Recurring Assets Subject To Fair Value Measurement**

 
| ** **                  | ** ** | **As Of September 30, 2009** | ** ** | ** **             | ** ** | ** **         | ** ** |
|-----------------------------|------------|--------------------------------------------------|------------|------------------------|------------|--------------------|------------|
| ** **                  | ** ** | **Fair Value Measurements Using** | ** ** | ** **             | ** ** | ** **         | ** ** |
| ** **                  | ** ** | ** **                                       | ** ** | **Quoted Prices** | ** ** | ** **         | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                  | ** ** | ** **                                       | ** ** | **In Active**     | ** ** | ** **         | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                  | ** ** | ** **                                       | ** ** | **Markets For**   | ** ** | **Significant**    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                  | ** ** | ** **                                       | ** ** | **Identical**          | ** ** | **Other**          | ** ** | **Significant** | ** ** | **Impairment Loss** | ** ** |
| ** **                  | ** ** | ** **                                       | ** ** | **Assets Or**     | ** ** | **Observable**     | ** ** | **Unobservable** | ** ** | **September 30, 2009** | ** ** |
| ** **                  | ** ** | ** **                                       | ** ** | **Liabilities**        | ** ** | **Inputs**         | ** ** | **Inputs** | ** ** | **Nine Months** | ** ** | **Three Months** | ** ** |
| **Description**             | ** ** | **Total**                                        | ** ** | **(Level 1)**     | ** ** | **(Level 2)** | ** ** | **(Level 3)** | ** ** | **Ended** | ** ** | **Ended** | ** ** |
| ** **                  | ** ** | **(amounts in thousands)**             | ** ** |
| ** **                  | ** ** | ** **                                       | ** ** | ** **             | ** ** | ** **         | ** ** | ** ** |   |   |   |   |   |
| Net property and equipment  |       | $                                                | 71,314     |                   | $          | —             |       | $ | — |   | $ | 71,314 |   | $ | — |   | $ | — |   |
| Other intangibles, net      |       | 720                                              |       | —                 |       | —             |       | 720 |   | — |   | — |   |
| Goodwill                    |       | 38,168                                           |       | —                 |       | —             |       | 38,168 |   | 6,882 |   | — |   |
| Radio broadcasting licenses |       | 707,852                                          |       | —                 |       | —             |       | 707,852 |   | 60,794 |   | — |   |
|                        |       |                                             |       |                   |       |               |       |   |   |   |   |   |   |
| Total                       |       | $                                                | 818,054    |                   | $          | —             |       | $ | — |   | $ | 818,054 |   | $ | 67,676 |   | $ | — |   |

 

***Fair Value Of Financial Instruments Subject To Disclosure***

 

Theestimated fair value of financial instruments is determined using the bestavailable market information and appropriate valuation methodologies.  Considerable judgment is necessary, however,in interpreting market data to develop the estimates of fair value.  Accordingly, the estimates presented are notnecessarily indicative of the amounts that the Company could realize in acurrent market exchange, or the value that ultimately will be realized uponmaturity or disposition.  The use ofdifferent market assumptions may have a material effect on the estimated fairvalue amounts.

 

Thefollowing methods and assumptions were used to estimate the fair value offinancial instruments:

 

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(1) Cashand cash equivalents, accounts receivable and accounts payable, includingaccrued liabilities: The carrying amount of these assets and liabilitiesapproximates fair value because of the short maturity of these instruments.

 

(2) Seniordebt (see Note 4, Senior Debt): As of September 30, 2010 and December 31,2009, the fair value of the Company’s senior debt under the Company’s BankFacility was $662.9 million and $675.8 million, respectively, while thecarrying value was $676.0 million and $729.0 million, respectively. The Company’sdetermination of the fair value was based on a risk adjusted rate.

 

(3) 7.625%Senior Subordinated Notes (see Note 5): As of December 31, 2009, the fairvalue of the Company’s Notes was $6.0 million, while the carrying value was$6.6 million. The fair value was based on available market prices.  On March 8, 2010, the Company redeemedat par all of the remaining $6.6 million Notes outstanding.

 

(4) OutstandingLetters of Credit: The Company had a letter of credit outstanding in the amountof $0.7 million as of September 30, 2010 and $1.5 million as of December 31,2009. The Company does not believe it is practicable to estimate the fair valueof this financial instrument and does not expect any material loss from theresolution since performance is not likely to be required.

 

**15.          DEFERRED CHARGES AND OTHER ASSETS ANDOTHER LONG-TERM LIABILITIES**

 

Deferred charges and other assets, includingdefinite-lived intangible assets, consist of the following:

 
| ** **                                       | ** ** | **September 30,**               | ** ** | **December 31,** | ** ** |
|--------------------------------------------------|------------|--------------------------------------|------------|-----------------------|------------|
| ** **                                       | ** ** | **2010**                             | ** ** | **2009**              | ** ** |
| ** **                                       | ** ** | **(amounts in thousands)** | ** ** |
| ** **                                       | ** ** | ** **                           | ** ** | ** **            | ** ** |
| Debt issuance costs, net                         |       | $                                    | 5,918      |                  | $          | 3,756 |   |
| Software costs, net                              |       | 660                                  |       | 1,280                 |       |
| Prepaid assets - long term                       |       | 1,996                                |       | 1,421                 |       |
| Deferred contracts and other agreements, net     |       | 679                                  |       | 743                   |       |
| Leasehold premium, net                           |       | 647                                  |       | 706                   |       |
| Deposits - long term                             |       | 328                                  |       | 393                   |       |
| Advertiser lists and customer relationships, net |       | 11                                   |       | 41                    |       |
| Other                                            |       | 114                                  |       | 146                   |       |
|                                             |       | $                                    | 10,353     |                  | $          | 8,486 |   |

 

Asof September 30, 2010 and December 31, 2009, the deferred rentliabilities were $3.4 million for each period, and are included in other underlong-term liabilities.

 

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**ITEM 2.  Management’sDiscussion And Analysis Of Financial Condition And Results Of Operations**

 

In preparing the discussion and analysis containedin this Item 2, we presume that readers have read or have access to thediscussion and analysis contained in our Annual Report on Form 10-Kfiled with the Securities and Exchange Commission (the “SEC”) on March 15,2010. In addition, you should read the following discussion and analysis of ourfinancial condition and results of operations in conjunction with ourconsolidated financial statements and related notes included elsewhere in thisreport. The following results of operations include a discussion of the nineand three months ended September 30, 2010 as compared to the nine andthree months ended September 30, 2009. Our results of operations during the relevant periods represent theoperations of the radio stations owned and operated by us.

 

Underthe heading “Same Station Considerations,” we evaluate net revenues, stationoperating expenses and operating income by comparing the performance ofstations owned or operated by us throughout a relevant period to theperformance of those same stations in the prior period whether or not owned oroperated by us. During the fourth quarter of 2009, another party commenced theoperation of certain of our tower sites, which impacted same stationconsiderations for the periods presented. The operation of these tower sites byanother party is part of our plan toexit the operation of non-strategic tower sites. We use thesecomparisons to assess the effect of acquisitions and dispositions on ouroperations throughout the periods measured.

 

**Results Of Operations For The Year-To-Date**

 

Thefollowing significant factors affected our results of operations for the ninemonths ended September 30, 2010 as compared to the nine months ended September 30,2009:

 

·                  During March 2010, we amended our senior credit agreement (the “Amendment”to our “Bank Facility”) that increased our interest expense due to: (i) anincrease in deferred financing expense of $5.2 million, which will be amortizedover the remaining term of the Bank Facility; and (ii) an increase in feesincurred under the Bank Facility, primarily on outstanding debt.

 

·                  During March 2010,we repurchased the remaining $6.6 million of our then outstanding 7.625% seniorsubordinated notes (the “Notes”) at par and recognized a net loss onextinguishment of debt of $0.1 million due to the write-off of deferredfinancing expenses.

 

·                  During the ninemonths ended September 30, 2009, we repurchased $59.6 million of our Notesand recognized a net gain on extinguishment of debt of $19.3 million.

 

·                  During thesecond quarter of 2009, we recorded an impairment loss of $67.7 million inconnection with our review of certain intangible assets.

 

**Nine Months Ended September 30,2010 As Compared To The Nine Months Ended September 30, 2009**

* *

*Same Station Considerations*:

 

Duringthe fourth quarter of 2009, another party commenced the operation of certain ofour tower sites, which impacted same station considerations for the periodspresented.  The reported results for thecurrent year 2010 were not affected by the operation of the towers by anotherparty as the other party commenced operation prior to the beginning of 2010.

 

Forthe nine months ended September 30, 2009:

 

·                  Net revenueswould have been lower by $0.8 million if we had adjusted net revenues for thetransfer of tower operations to a third party as of the beginning of theperiod.

 

·                  Stationoperating expenses would have been lower by $0.1 million if we had adjustedstation operating expenses for the transfer of tower operations to a thirdparty as of the beginning of the period.

 

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·                  Operatingincome would have been lower by $0.7 million if we had adjusted operatingincome for the transfer of tower operations to a third party as of thebeginning of the period.

 

***Net Revenues***

 
| ** **        | ** ** | **Nine Months Ended**     | ** ** |
|-------------------|------------|-------------------------------------|------------|
| ** **        | ** ** | **September 30, 2010**    | ** ** | **September 30, 2009** | ** ** |
| ** **        | ** ** | **(dollars in millions)** | ** ** |
| Net Revenues      |       | $                                   | 289.4      |   | $ | 276.4 |   |
| Amount of Change  |       | $                                   | 13.0       |   |   |   |
| Percentage Change |       | 4.7                                 | %          |   |   |
|                   |            |                                     |            |  |  |  |  |

 

Basedupon our improved results for the current period as well as other indicators,we expect revenues to continue to grow for the remainder of 2010.  Pooreconomic conditions in 2009 led to lower demand for radio advertising.  In 2010, our revenues were favorably impactedby the strengthening of the economy and improving business conditions for boththe industry and for us.

 

Netrevenues in the current period increased in many of our markets.  Our net revenues increased the most for thoseradio stations located in our Denver, New Orleans, Rochester and San Franciscomarkets.

 

***Station Operating Expenses***

 
| ** **                 | ** ** | **Nine Months Ended**     | ** ** |
|----------------------------|------------|-------------------------------------|------------|
| ** **                 | ** ** | **September 30, 2010**    | ** ** | **September 30, 2009** | ** ** |
| ** **                 | ** ** | **(dollars in millions)** | ** ** |
| Station Operating Expenses |       | $                                   | 195.6      |   | $ | 192.0 |   |
| Amount of Change           |       | $                                   | 3.6        |   |   |   |
| Percentage Change          |       | 1.9                                 | %          |   |   |
|                            |            |                                     |            |  |  |  |  |

 

Theincrease in station operating expenses was primarily due to an increase in netrevenues as described above as certain variable expenses increase with acorresponding increase in net revenues. Management expects that, due to ananticipated increase in net revenues in 2010 for the reasons as described aboveunder Net Revenues, the correlating trend of increased station operatingexpenses (primarily from increased variable expenses) will continue for thebalance of the year.

 

***Depreciation And Amortization Expense***

 
| ** **                            | ** ** | **Nine Months Ended**     | ** ** |
|---------------------------------------|------------|-------------------------------------|------------|
| ** **                            | ** ** | **September 30, 2010**    | ** ** | **September 30, 2009** | ** ** |
| ** **                            | ** ** | **(dollars in millions)** | ** ** |
| Depreciation And Amortization Expense |       | $                                   | 9.7        |   | $ | 12.7 |   |
| Amount of Change                      |       | $                                   | (3.0       | ) |   |   |
| Percentage Change                     |       | (23.6                               | )%         |   |   |
|                                       |            |                                     |            |  |  |  |  |

 

Depreciationand amortization expense decreased in 2010 primarily due to the decrease overthe past several years in: (i) capital expenditures; (ii) deferredcharges and other assets; and (iii) acquisitions.

 

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***Corporate General And Administrative Expenses***

 
| ** **                                    | ** ** | **Nine Months Ended**     | ** ** |
|-----------------------------------------------|------------|-------------------------------------|------------|
| ** **                                    | ** ** | **September 30, 2010**    | ** ** | **September 30, 2009** | ** ** |
| ** **                                    | ** ** | **(dollars in millions)** | ** ** |
| Corporate General And Administrative Expenses |       | $                                   | 16.3       |   | $ | 17.4 |   |
| Amount of Change                              |       | $                                   | (1.1       | ) |   |   |
| Percentage Change                             |       | (6.3                                | )%         |   |   |
|                                               |            |                                     |            |  |  |  |  |

 

Corporategeneral and administrative expenses decreased primarily due to the decrease innon-cash compensation expense of $0.9 million as no discretionary annual equitycompensation awards were granted in 2010 and certain previously granted awardsdid not impact 2010 as they were fully amortized in 2009.

 

***Operating Income (Loss)***

 
| ** **              | ** ** | **Nine Months Ended**     | ** ** |
|-------------------------|------------|-------------------------------------|------------|
| ** **              | ** ** | **September 30, 2010**    | ** ** | **September 30, 2009** | ** ** |
| ** **              | ** ** | **(dollars in millions)** | ** ** |
| Operating Income (Loss) |       | $                                   | 67.6       |   | $ | (13.4 | ) |
| Amount of Change        |       | $                                   | 81.0       |   |   |   |
| Percentage Change       |       | 604.5                               | %          |   |   |
|                         |            |                                     |            |  |  |  |  |

 

Theincrease in operating income was primarily due to: (1) the absence of animpairment loss in the current period as compared to an impairment loss of$67.7 million that was recorded in the second quarter of the prior year; (2) anincrease in net revenues for the reasons described above under Net Revenues,net of an increase in station operating expenses for the reasons describedunder Station Operating Expenses; and (3) a decrease in depreciation andamortization for the reasons described under Depreciation And AmortizationExpense.

 

***Interest Expense***

 
| ** **        | ** ** | **Nine Months Ended**     | ** ** |
|-------------------|------------|-------------------------------------|------------|
| ** **        | ** ** | **September 30, 2010**    | ** ** | **September 30, 2009** | ** ** |
| ** **        | ** ** | **(dollars in millions)** | ** ** |
| Interest Expense  |       | $                                   | 22.8       |   | $ | 23.8 |   |
| Amount of Change  |       | $                                   | (1.0       | ) |   |   |
| Percentage Change |       | (4.2                                | )%         |   |   |
|                   |            |                                     |            |  |  |  |  |

 

Thedecrease in interest expense was primarily due to: (1) a decline inoutstanding debt upon which interest is computed; (2) the repurchase ofour Notes, which had a higher interest rate than the funds borrowed torepurchase such Notes; and (3) a reduction in January 2010 of $75.0million in notional value of an existing 3.03% fixed interest rate swapagreement. Interest rates on outstanding debt remained relatively flat duringthe nine months ended September 30, 2010 as compared to the nine monthsended September 30, 2009.

 

Thedecrease in interest expense was offset by; (1) an increase in deferredfinancing expense of $1.8 million, primarily from the amortization of the bankfees associated with the Amendment; and (2) an increase in our BankFacility fees that correlate to an increase in our Leverage Ratio during mostof the third quarter of 2010.

 

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***Income (Loss) Before Income Taxes***

 
| ** **                        | ** ** | **Nine Months Ended**     | ** ** |
|-----------------------------------|------------|-------------------------------------|------------|
| ** **                        | ** ** | **September 30, 2010**    | ** ** | **September 30, 2009** | ** ** |
| ** **                        | ** ** | **(dollars in millions)** | ** ** |
| Income (Loss) Before Income Taxes |       | $                                   | 44.7       |   | $ | (17.6 | ) |
| Amount of Change                  |       | $                                   | 62.3       |   |   |   |
| Percentage Change                 |       | 354.0                               | %          |   |   |
|                                   |            |                                     |            |  |  |  |  |

 

Theincrease was primarily attributable to an increase in operating income for thereasons as described above under Operating Income (Loss), which was partiallyoffset by the absence this year of a $19.3 million gain on the retirement ofour Senior Subordinated Notes as we repurchased our Notes at a discount in2009.

 

***Income Taxes***

 
| ** **        | ** ** | **Nine Months Ended**     | ** ** |
|-------------------|------------|-------------------------------------|------------|
| ** **        | ** ** | **September 30, 2010**    | ** ** | **September 30, 2009** | ** ** |
| ** **        | ** ** | **(dollars in millions)** | ** ** |
| Income Taxes      |       | $                                   | 15.6       |   | $ | 0.7 |   |
| Amount of Change  |       | $                                   | 14.9       |   |   |   |
| Percentage Change |       | 2128.6                              | %          |   |   |
|                   |            |                                     |            |  |  |  |  |

 

Incometax expense for the current period was primarily due to the recording of netdeferred tax liabilities associated with non-amortizable assets such asbroadcasting licenses and goodwill. These deferred tax liabilities cannot beused to offset deferred tax assets.

 

Asa result of cumulative losses incurred by the Company since 2006, a deferredtax asset valuation allowance was established due to the uncertainty that thedeferred tax assets would be realized in future years (after excluding deferredtax liabilities associated with non-amortizable assets).

 

***Net Income (Loss)***

 
| ** **        | ** ** | **Nine Months Ended**     | ** ** |
|-------------------|------------|-------------------------------------|------------|
| ** **        | ** ** | **September 30, 2010**    | ** ** | **September 30, 2009** | ** ** |
| ** **        | ** ** | **(dollars in millions)** | ** ** |
| Net Income (Loss) |       | $                                   | 29.2       |   | $ | (18.3 | ) |
| Amount of Change  |       | $                                   | 47.5       |   |   |   |
| Percentage Change |       | 259.6                               | %          |   |   |
|                   |            |                                     |            |  |  |  |  |

 

Thenet change was primarily attributable to the reasons described above underIncome (Loss) Before Income Taxes and Income Taxes.

 

**Results Of Operations For The Quarter**

 

During March 2010, we amended our senior creditagreement resulting in an increase in fees that affected our results ofoperations for the three months ended September 30, 2010.

 

**Three Months Ended September 30, 2010 As Compared To The ThreeMonths Ended September 30, 2009**

 

*Same Station Considerations*:

 

Duringthe fourth quarter of 2009, another party commenced the operation of certain ofour tower sites, which impacted same station considerations for the periodspresented.  The reported results for thecurrent year 2010 were not affected by the operation of the towers by anotherparty as the other party commenced operation prior to the beginning of 2010.

 

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Forthe three months ended September 30, 2009:

 

·                  Net revenueswould have been lower by $0.3 million if we had adjusted net revenues for thetransfer of tower operations to a third party as of the beginning of theperiod.

 

·                  Stationoperating expenses would have been lower by less than $0.1 million if we hadadjusted station operating expenses for the transfer of tower operations to athird party as of the beginning of the period.

 

·                  Operatingincome would have been lower by $0.3 million if we had adjusted operatingincome for the transfer of tower operations to a third party as of thebeginning of the period.

 

***Net Revenues***

 
| ** **         | ** ** | **Three Months Ended**    | ** ** |
|--------------------|------------|-------------------------------------|------------|
| ** **         | ** ** | **September 30, 2010**    | ** ** | **September 30, 2009** | ** ** |
| ** **         | ** ** | **(dollars in millions)** | ** ** |
| Net Revenues       |       | $                                   | 102.7      |   | $ | 99.8 |   |
| Amount  of Change  |       | $                                   | 2.9        |   |   |   |
| Percentage  Change |       | 2.9                                 | %          |   |   |
|                    |            |                                     |            |  |  |  |  |

 

Basedupon our improved results for the current period as well as other indicators,we expect revenues to grow for the remainder of 2010.  Poor economicconditions in 2009 led to lower demand for radio advertising.  In 2010, our revenues were favorably impactedby the strengthening of the economy and improving business conditions for boththe industry and for us.

 

Netrevenues increased in more than half of our markets.  Our net revenues increased the most for thoseradio stations located in our Denver, Milwaukee, New Orleans and Rochestermarkets.

 

***Station Operating Expenses***

 
| ** **                 | ** ** | **Three Months Ended**    | ** ** |
|----------------------------|------------|-------------------------------------|------------|
| ** **                 | ** ** | **September 30, 2010**    | ** ** | **September 30, 2009** | ** ** |
| ** **                 | ** ** | **(dollars in millions)** | ** ** |
| Station Operating Expenses |       | $                                   | 67.7       |   | $ | 66.3 |   |
| Amount of Change           |       | $                                   | 1.4        |   |   |   |
| Percentage Change          |       | 2.1                                 | %          |   |   |
|                            |            |                                     |            |  |  |  |  |

 

Theincrease in station operating expenses was primarily due to an increase in NetRevenues as described above as certain variable expenses increase with acorresponding increase in net revenues. Management expects that, due to ananticipated increase in net revenues in 2010 for the reasons as described aboveunder Net Revenues, the correlating trend of increased station operatingexpenses (primarily from increased variable expenses) will continue for thebalance of the year.

 

***Depreciation And Amortization Expense***

 
| ** **                            | ** ** | **Three Months Ended**    | ** ** |
|---------------------------------------|------------|-------------------------------------|------------|
| ** **                            | ** ** | **September 30, 2010**    | ** ** | **September 30, 2009** | ** ** |
| ** **                            | ** ** | **(dollars in millions)** | ** ** |
| Depreciation And Amortization Expense |       | $                                   | 3.1        |   | $ | 4.1 |   |
| Amount of Change                      |       | $                                   | (1.0       | ) |   |   |
| Percentage Change                     |       | (24.4                               | )%         |   |   |
|                                       |            |                                     |            |  |  |  |  |

 

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Depreciationand amortization expense decreased in 2010 primarily due to the decrease overthe past several years in: (i) capital expenditures; (ii) deferredcharges and other assets; and (iii) acquisitions.

 

***Corporate General And Administrative Expenses***

 
| ** **                                    | ** ** | **Three Months Ended**    | ** ** |
|-----------------------------------------------|------------|-------------------------------------|------------|
| ** **                                    | ** ** | **September 30, 2010**    | ** ** | **September 30, 2009** | ** ** |
| ** **                                    | ** ** | **(dollars in millions)** | ** ** |
| Corporate General And Administrative Expenses |       | $                                   | 5.2        |   | $ | 5.8 |   |
| Amount of Change                              |       | $                                   | (0.6       | ) |   |   |
| Percentage Change                             |       | (10.3                               | )%         |   |   |
|                                               |            |                                     |            |  |  |  |  |

 

Corporategeneral and administrative expenses decreased primarily due to the decrease innon-cash compensation expense of $0.5 million, as no discretionary annualequity compensation awards were granted in 2010, and certain previously grantedawards did not impact 2010 as they were fully amortized in 2009.

 

***Operating Income***

 
| ** **        | ** ** | **Three Months Ended** | ** ** |
|-------------------|------------|----------------------------------|------------|
| ** **        | ** ** | **September 30, 2010** | ** ** | **September 30, 2009** | ** ** |
|              |       | **(dollars  in millions)**       |       |
| Operating Income  |       | $                                | 26.5       |   | $ | 23.4 |   |
| Amount of Change  |       | $                                | 3.1        |   |   |   |
| Percentage Change |       | 13.2                             | %          |   |   |
|                   |            |                                  |            |  |  |  |  |

 

Theincrease in operating income was primarily due to: (1) an increase in netrevenues for the reasons described above under Net Revenues, net of an increasein station operating expenses for the reasons described under Station OperatingExpenses; and (2) a decrease in depreciation and amortization for thereasons described under Depreciation And Amortization Expense.

 

***Interest Expense***

 
| ** **        | ** ** | **Three Months Ended**    | ** ** |
|-------------------|------------|-------------------------------------|------------|
| ** **        | ** ** | **September 30, 2010**    | ** ** | **September 30, 2009** | ** ** |
| ** **        | ** ** | **(dollars in millions)** | ** ** |
| Interest Expense  |       | $                                   | 8.6        |   | $ | 7.9 |   |
| Amount of Change  |       | $                                   | 0.7        |   |   |   |
| Percentage Change |       | 8.9                                 | %          |   |   |
|                   |            |                                     |            |  |  |  |  |

 

Theincrease in interest expense was primarily due to: (1) an increase in ourBank Facility fees that correlate to an increase in our Leverage Ratio duringmost of the third quarter of 2010; and (2) an increase of $1.1 million inthe amortization of the Bank Facility fees primarily associated with theAmendment.

 

Thisincrease was offset by: (1) a decline in outstanding debt upon whichinterest is computed; (2) the repurchase of our Notes, which had a higherinterest rate than the funds borrowed to replace such Notes; and (3) areduction in January 2010 of $75.0 million in notional value of anexisting 3.03% fixed interest rate swap agreement. Interest rates onoutstanding debt remained relatively flat during the three months ended September 30,2010 as compared to the three months ended September 30, 2009.

 

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***Income Before Income Taxes***

 
| ** **                 | ** ** | **Three Months Ended**    | ** ** |
|----------------------------|------------|-------------------------------------|------------|
| ** **                 | ** ** | **September 30, 2010**    | ** ** | **September 30, 2009** | ** ** |
| ** **                 | ** ** | **(dollars in millions)** | ** ** |
| Income Before Income Taxes |       | $                                   | 17.9       |   | $ | 18.7 |   |
| Amount of Change           |       | $                                   | (0.8       | ) |   |   |
| Percentage Change          |       | (4.3                                | )%         |   |   |
|                            |            |                                     |            |  |  |  |  |

 

Theincrease was primarily attributable to an increase in operating income for thereasons as described above under Operating Income.  This increase was offset by: (1) a $3.1million decrease in the gain on the retirement of our Senior Subordinated Notesas we repurchased our Notes at a discount in the prior year; and (2) anincrease in interest expense for the reasons described under Interest Expense.

 

***Income Taxes***

 
| ** **        | ** ** | **Three Months Ended**    | ** ** |
|-------------------|------------|-------------------------------------|------------|
| ** **        | ** ** | **September 30, 2010**    | ** ** | **September 30, 2009** | ** ** |
| ** **        | ** ** | **(dollars in millions)** | ** ** |
| Income Taxes      |       | $                                   | 7.2        |   | $ | 0.4 |   |
| Amount of Change  |       | $                                   | 6.8        |   |   |   |
| Percentage Change |       | 1700.0                              | %          |   |   |
|                   |            |                                     |            |  |  |  |  |

 

Theincrease in income tax expense was primarily due to the recording in thecurrent year of net deferred tax liabilities associated with non-amortizableassets such as broadcasting licenses and goodwill.  These deferred tax liabilities cannot be usedto offset deferred tax assets.

 

Asa result of cumulative losses incurred by the Company since 2006, a deferredtax asset valuation allowance was established due to the uncertainty that thedeferred tax assets would be realized in future years (after excluding deferredtax liabilities associated with non-amortizable assets).

 

***Net Income***

 
| ** **        | ** ** | **Three Months Ended**    | ** ** |
|-------------------|------------|-------------------------------------|------------|
| ** **        | ** ** | **September 30, 2010**    | ** ** | **September 30, 2009** | ** ** |
| ** **        | ** ** | **(dollars in millions)** | ** ** |
| Net Income        |       | $                                   | 10.7       |   | $ | 18.3 |   |
| Amount of Change  |       | $                                   | (7.6       | ) |   |   |
| Percentage Change |       | (41.5                               | )%         |   |   |
|                   |            |                                     |            |  |  |  |  |

 

Thenet change was primarily attributable to the reasons described above underIncome Before Income Taxes and Income Taxes.

 

**Future Impairments**

 

As part of our annual review during the second quarter of 2010, wetested our broadcasting licenses and goodwill for impairment. No impairment wasrecorded as the fair value was greater than the amount reflected on our balancesheet. Future tests could result in impairments based on economic conditions atthat time.

 

**Liquidity And Capital Resources**

 

***Liquidity***

 

Historically,we have carried significant amounts of debt. As of September 30, 2010, wehad $676.0 million outstanding under our Bank Facility, which is comprised of$311.0 million in a term loan (the “Term Loan”) and

 

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$365.0million in drawn revolving credit (the “Revolver”). In addition, we haveoutstanding finance method lease obligations of $12.6 million and a $0.7million in a letter of credit.

 

TheTerm Loan reduces in quarterly amounts, which payments started at $15 million,are currently at $25 million and ultimately increase to $60 million. We plan tofund the amortization of the Term Loan with cash flow from operations and ouravailable Revolver capacity.

 

Asof September 30, 2010, we had $3.4 million in cash and cash equivalents.During the nine months ended September 30, 2010, we decreased ouroutstanding debt by $60.4 million, which includes a $0.8 million reduction inan outstanding letter of credit.

 

***Our Credit Agreement, As Amended***

 

On March 11, 2010,we amended our Bank Facility (the “Amendment”). In connection with the Amendment,certain key terms, as defined within the Bank Facility, were revised asfollows:

 

·                  TheConsolidated Leverage Ratio cannot exceed seven times in 2010. Beginning in2011, this covenant ratio decreases quarterly to a ratio of six times as of December 31,2011.

·                  Depending onthe Consolidated Leverage Ratio (Consolidated Funded Indebtedness toConsolidated Operating Cash Flow), we may elect an interest rate equal to: (1) theEurodollar Rate plus fees that can range from 0.5% to 2.5%; or (2) theBase Rate plus fees that can range from 0.0% to 1.5%, where the Base Rate isthe highest of: (a) the Federal Funds Rate plus 0.5%; (b) theEurodollar Rate plus 1.0%; or (c) the Prime Rate;

·                  During periodswhen the Consolidated Leverage Ratio exceeds six times (defined in the BankFacility as a “Restricted Period”), we are: (a) restricted in our abilityto take certain actions, including but not limited to, the payment of dividendsand the repurchase of our stock; and (b) subject to additional limitationson acquisitions and investments.

 

Asof September 30, 2010, our Consolidated Leverage Ratio did not exceed sixtimes.  As a result, we will cease to be in a Restricted Period shortlyafter the filing of this Quarterly Report.

 

Theundrawn amount of the Revolver was $284.3 million as of September 30,2010. The amount available under the Revolver is a function of covenantcompliance at the time of borrowing. Based on our financial covenant analysisas of September 30, 2010, we would be limited to borrowings significantlyless than the undrawn limit unless such borrowings were used to repayindebtedness or for transactions that increase cash flow for purposes ofcovenant calculation.

 

TheBank Facility requires us to comply with certain financial covenants which aredefined terms within the agreement, including: (1) a maximum ConsolidatedLeverage Ratio; and (2) a minimum ratio of Consolidated Operating CashFlow to Consolidated Interest Charges of two times.  Management believes we are in compliance withall financial covenants and all other terms of the Bank Facility as of September 30,2010.

 

Ourability to maintain compliance with our covenants is highly dependent on ourresults of operations.  If we were toenter into an agreement with our lenders for covenant compliance relief, suchrelief could result in higher interest expense.

 

Webelieve that over the next 12 months, we can continue to maintain ourcompliance with these covenants. We believe that cash on hand and cash fromoperating activities, together with available borrowings under the Revolver,will be sufficient to permit us to meet our liquidity requirements over thenext 12 months, including our debt repayments. Our operating cash flow remains positive and we believe that it isadequate to fund our operating needs.  Asa result, we have not been required to rely upon, and we do not anticipatebeing required to rely upon, the Revolver to fund our operations.

 

Amendingour Bank Facility or obtaining other funding or additional financing prior tothe expiration of the current agreement will be essential since the Revolverbalance outstanding will be due in full upon the expiration of the BankFacility on June 30, 2012.

 

TheRevolver provides us with funds for working capital and general corporatepurposes including capital expenditures, and, except as limited under theAmendment, any one or more of the following: repurchases of Class A 

 

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commonstock, investments, dividends and acquisitions. The Bank Facility is secured bya pledge of 100% of the capital stock and other equity interest in all of ourwholly owned subsidiaries. In addition, the Bank Facility, as amended, issecured by a lien on all of our assets, other than our real property.

 

Basedupon our improved results for the current period as well as other indicatorsevidencing that advertiser demand continues to accelerate, we expect revenuesto grow for the remainder of 2010.  Poor economic conditions in 2009 ledto lower demand for radio advertising. Our revenues were favorably impacted in 2010 by the strengthening of theeconomy and improving business conditions for both the industry and us.

 

TheAmendment in March 2010 was treated as a modification to a debtinstrument.  As a result, in the firstquarter of 2010, we recorded deferred financing costs of $5.2 million relatedto the Amendment, which will be amortized over the remaining life of the BankFacility on: (1) a straight-line basis for the Revolver; and (2) aneffective interest rate method for the Term Loan. In addition, unamortizeddeferred financing costs of $3.1 million as of the Amendment date will continueto be amortized over the remaining life of the Bank Facility.

 

***Operating Activities***

 

Netcash flows provided by operating activities were $61.9 million and $46.0million for the nine months ended September 30, 2010 and 2009, respectively.The increase in 2010 was mainly attributable to an increase in net revenues(net of station operating expenses) and a decrease in working capitalrequirements of $5.2 million. Working capital requirements decreased primarilydue to the receipt of an income tax refund, offset by an increase in accountsreceivable that was related to the increase in net revenues (net of stationoperating expenses).

 

***Investing Activities***

 

Netcash flows used in investing activities were $2.0 million and $1.3 million forthe nine months ended September 30, 2010 and 2009, respectively.

 

Forthe nine months ended September 30, 2010 and 2009, the cash used ininvesting activities primarily reflects $1.9 million and $1.7 million,respectively, for additions to property and equipment.

 

***Financing Activities***

 

Netcash flows used in financing activities were $67.1 million and $28.8 millionfor the nine months ended September 30, 2010 and 2009, respectively.

 

Forthe nine months ended September 30, 2010, the cash flows used in financingactivities primarily reflect the reduction to our net borrowings of $53.0million under our Revolver and Term Loan and the repurchase at par of our Notesat $6.6 million. For the nine months ended September 30, 2009, the cashflows used in financing activities primarily reflect the repurchase of ourNotes at $39.7 million (after a discount of $19.9 million).

 

***Dividends***

 

Previously,we have used a portion of our capital resources to pay dividends on a quarterlybasis effective beginning with the first quarter of 2006 and ending with andincluding the third quarter of 2008. Our Board of Directors has not declaredany dividends since that time.

 

Anyfuture dividends will be at the discretion of the Board of Directors based uponthe relevant factors at the time of such consideration, including, withoutlimitation, compliance with the restrictions set forth in our Credit Facility. Specifically, pursuant to our Credit Facility we are prohibited frompaying dividends if our Consolidated Leverage Ratio exceeds six times.

 

***2009 Option Exchange Program***

 

InFebruary 2009, our Board of Directors approved an amendment to theEntercom Equity Compensation Plan to permit a one-time Option Exchange Program(“2009 OEP”), which amendment was approved at the May 2009 shareholders’meeting. On April 13, 2009, we commenced the 2009 OEP (subject toshareholder approval) by making an offer to exchange to our eligible employeesand non-employee directors. We offered such persons the opportunity to make anelection to exchange all of their outstanding stock options with exerciseprices equal to or

 

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greaterthan $11.80 per share for a lesser number of restricted stock units. Theexchange ratio under the 2009 OEP was as follows:

 
| **Option**                             | ** ** | **Exchange Ratio**          | ** ** |
|----------------------------------------|------------|----------------------------------|------------|
| **Strike Price**                  | ** ** | **(Options For RSUs)** | ** ** |
| At  least $11.80, but less than $30.00 |       | 2.25  for 1                      |       |
| $30.00 or more                         |       | 4.5  for 1                       |       |

 

OnMay 15, 2009, following the May 14, 2009 expiration of our 2009 OEP,we granted 0.7 million restricted stock units in exchange for 2.1 millionoptions. As a result of the 2009 OEP, the number of restricted stock units thatcan be issued under the Plan was effectively increased by 0.7 million as allrestricted stock units granted did not count against the restricted stocksublimit.  In addition, the number ofawards that can be issued under the Plan was effectively reduced by 2.1 millionas all options that were exchanged will not be available for re-grant under thePlan.

 

***Income Taxes***

 

Duringthe nine months ended September 30, 2010, we paid $0.1 million in stateincome taxes. We anticipate that it will not be necessary to make any quarterlyestimated federal and state income tax payments for the remainder of 2010 basedupon existing prepayments and expected quarterly income subject to tax.

 

Asa result of federal tax legislation during the fourth quarter of 2009 thatallowed us to carryback our 2008 net operating loss for five years rather thanfor two years, we recorded in excess of $7.0 million under prepaid andrefundable income taxes as of December 31, 2009.  On April 2, 2010, we received $6.8million in federal income tax refunds and we expect to receive of $0.4 millionduring the fourth quarter of 2010.

 

***Capital Expenditures***

 

Capitalexpenditures for the nine months ended September 30, 2010 were $1.9million. We anticipate that capital expenditures in 2010 will be between $3.0million and $3.5 million.

 

**ContractualObligations**

 

Thefollowing table reflects a summary as of September 30, 2010 of ourcalendar contractual obligations for the remainder of the year 2010 andthereafter:

 
| ** **                           | ** ** | **Payments Due By Period** | ** ** |
|--------------------------------------|------------|-------------------------------------------|------------|
| ** **                           | ** ** | ** **                                | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **More Than** | ** ** |
| ** **                           | ** ** | ** **                                | ** ** | **Less Than** | ** ** | **1 To 3** | ** ** | **3 To 5** | ** ** | **5** | ** ** |
| **Contractual Obligations:**    | ** ** | **Total**                                 | ** ** | **1 Year** | ** ** | **Years** | ** ** | **Years** | ** ** | **Years** | ** ** |
| ** **                           | ** ** | **(amounts in thousands)**                | ** ** |
| Long-term debt obligations (1)       |       | $                                         | 704,312    |   | $ | 29,724 |   | $ | 674,477 |   | $ | 68 |   | $ | 43 |   |
| Operating lease obligations          |       | 69,443                                    |       | 3,085 |   | 23,287 |   | 18,018 |   | 25,053 |   |
| Finance method lease obligations (2) |       | 30,930                                    |       | 177 |   | 1,467 |   | 14,166 |   | 15,120 |   |
| Purchase obligations (3)             |       | 234,840                                   |       | 19,258 |   | 116,811 |   | 62,832 |   | 35,939 |   |
| Other long-term liabilities (4)      |       | 36,971                                    |       | 41 |   | 5,712 |   | 1,138 |   | 30,080 |   |
| Total                                |       | $                                         | 1,076,496  |   | $ | 52,285 |   | $ | 821,754 |   | $ | 96,222 |   | $ | 106,235 |   |

 

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(1)                                  (a)  Our Bank Facilityhad outstanding debt in the amount of $676.0 million as of September 30,2010. The maturity under our Bank Facility could be accelerated if we do notmaintain compliance with certain covenants.

 

(b) The above table includes projected interest expense under the remaining term ofour Bank Facility.

 

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(2)                                  Finance lease obligationsoutstanding include principal and interest expense. When our continuinginvolvement in this transaction ceases in the year 2013, we expect we willdiscontinue finance accounting and instead treat our obligations under theaccounting guidance for capital and operating leases.

 

Wewill also recognize additional obligations included in the above table thatcover lease payments for the period subsequent to the initial period of 42months of continuing involvement. The minimum term for each of the leases is 20years, which covers the period of continuing involvement and the periodsubsequent to continuing involvement. For further discussion, see Note 6,Financing Method Lease Obligations, in the accompanying notes to the financialstatements.

 

(3)                                  (a)  We have purchaseobligations of $234.1 million, including contracts primarily for on-airpersonalities, sports programming rights, ratings services, music licensingfees, equipment maintenance and certain other operating contracts.

(b) We have $0.7 million in liabilities related to our obligation to provide aletter of credit.

 

(4)                                  Included within total otherlong-term liabilities of $37.0 million are deferred income tax liabilities of$15.6 million that are recognized for all temporary differences between the taxand financial reporting bases of our assets and liabilities based on enactedtax laws and statutory tax rates applicable to the periods in which thedifferences are expected to affect taxable income. Deferred tax liabilities mayvary according to changes in tax laws, tax rates and our operating results. Itis impractical to determine whether there will be a cash impact to anindividual year. Therefore, deferred income tax liabilities, together withliabilities for uncertain tax positions, are reflected in the above table inthe column labeled as “More Than 5 Years.” See Note 12, Income Taxes, in the accompanying notes to theconsolidated financial statements for a discussion of deferred tax liabilities,including liabilities for uncertain tax positions.

 

**Off-Balance Sheet Arrangements**

 

Variableinterest entity accounting was not applicable as of September 30, 2010 aswe had no pending transactions to acquire or dispose of radio stationassets.  As of September 30, 2010,we had no other off-balance sheet arrangements.

 

**Recent Accounting Pronouncements**

 

SeeNote 1 to the accompanying financial statements, Basis Of Presentation - NewAccounting Pronouncements, for a discussion of the status and potential impactof new accounting pronouncements.

 

**Critical Accounting Policies**

 

TheSEC defines critical accounting policies as those that are most important tothe portrayal of a company’s financial condition and results and that requiremanagement’s most difficult, subjective or complex judgments, often as a resultof the need to make estimates about the effect of matters that are inherentlyuncertain.

 

Therehave been no material changes to our critical accounting policies from theinformation provided in Part II, Item 7, “Management’s Discussion andAnalysis of Financial Condition and Results of Operations,” under the heading “CriticalAccounting Policies” in our Annual Report on Form 10-K for the year ended December 31,2009.  We have, however, providedadditional disclosures to one of our critical accounting policies for impairmenttesting of radio broadcasting licenses and goodwill as we conducted our annualimpairment test of broadcasting licenses and goodwill during the second quarterof 2010.

 

***Radio Broadcasting Licenses And Goodwill***

 

Wehave made acquisitions in the past for which a significant amount of thepurchase price was allocated to broadcasting licenses and goodwill assets. Asof September 30, 2010, we have recorded approximately $746.0 million inradio broadcasting licenses and goodwill, which represents 82% of our totalassets at that date. We must conduct impairment testing at least annually, ormore frequently if events or changes in circumstances indicate that the assetmight be impaired, and charge to operations an impairment expense only in theperiods in which the

 

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recordedvalue of these assets is more than their fair value. After an impairmentexpense is recognized, the recorded value of these assets will be reduced bythe impairment recognized and will be the assets’ new accounting basis. In 2009and 2008, we recorded impairment losses of $67.7 million and $835.7 million,respectively, for radio broadcasting licenses and goodwill.

 

Webelieve our estimate of the value of our radio broadcasting licenses andgoodwill assets is a critical accounting estimate as the value is significantin relation to our total assets, and our estimate of the value uses assumptionsthat incorporate variables based on past experiences and judgments about futureperformance of our stations. These variables include but are not limited to: (1) therisk-adjusted discount rate used in the valuation of fair value; (2) marketshare and profit margin of an average station within a market based upon marketsize and station type; (3) the forecast growth rate of each radio market,including assumptions regarding each market’s population, household income,retail sales and other factors that would influence advertising expenditures; (4) estimatedcapital start-up costs and losses incurred during the early years; (5) thelikely media competition within the market area; (6) an effective tax rateassumption; and (7) future terminal values.  Changes in our estimates of the fair value ofthese assets could result in material future period write-downs in the carryingvalue of our broadcasting licenses and goodwill assets.

 

**BroadcastingLicenses**

 

We perform our broadcasting license impairment testby evaluating our broadcasting licenses for impairment at the market levelusing the direct method.  For purposes oftesting impairment, indefinite-lived intangible assets are combined into asingle unit of accounting. Since the broadcasting licenses in each market areoperated as a single asset, each market’s broadcasting licenses are a singleunit of accounting.

 

Wecompleted the impairment test for broadcasting licenses during the secondquarter of 2010 and determined that the fair value of the broadcasting licenseswas more than the amount reflected in the balance sheet for each of our marketsand, accordingly, no impairment was recorded.

 

The methodology used by us in determining our keyestimates and assumptions was applied consistently to each market. As a result,the analysis for each market is the same. Of the seven variables identifiedabove, we believe that the first three (in clauses (1) through (3) above)are the most important to the determination of fair value. The following tablereflects these estimates and assumptions used in 2010 as compared to the secondquarter of 2009, the date of the most recent prior impairment test.   Ingeneral, when comparing the second quarter of 2010 to the second quarter of2009: (1) the discount rate decreased primarily due to a decreasein the estimated required returns on debt and equity of publicly traded radio companies; (2) the market specificoperating profit margin range remained relatively flat; and (3) the marketlong-term revenue growth rates were marginally higher for many markets as theoutlook for the industry improved.

 
| ** **                                                          | ** ** | **Second**     | ** ** | **Second**     | ** ** |
|---------------------------------------------------------------------|------------|----------------|------------|----------------|------------|
| ** **                                                          | ** ** | **Quarter**    | ** ** | **Quarter**    | ** ** |
| ** **                                                          | ** ** | **2010**       | ** ** | **2009**       | ** ** |
| Discount rates                                                      |       | 10.0%          |       | 10.6%          |       |
| Operating profit margin ranges of the Company’s  markets       |       | 21.0% to 42.5% |       | 21.0% to 44.0% |       |
| Long-term revenue growth rate ranges of the  Company’s markets |       | 1.5% to 2.0%   |       | 1.0% to 2.5%   |       |

 

Webelieve we have made reasonable estimates and assumptions to calculate the fairvalue of our broadcasting licenses; however, these estimates and assumptionscould be materially different than actual results. If actual market conditionsare less favorable than those projected by the industry or by us, or if eventsoccur or circumstances change that would reduce the fair value of ourbroadcasting licenses below the amount reflected in the balance sheet, we maybe required to recognize impairment charges, which could be material, in futureperiods.

 

Thetable below presents the percentage within a range by which the fair valueexceeded the carrying value of our radio broadcasting licenses as of June 30,2010 for 19 units of accounting where the carrying value of the licenses areconsidered material to our financial statements (19 geographical markets).  Rather than presenting the percentageseparately for each unit of accounting, management’s opinion is that this tablein summary form is more meaningful to the reader in assessing therecoverability of the broadcasting licenses. In addition, the units ofaccounting are not disclosed with the specific market name as such disclosurecould be competitively harmful to us.

 

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| ** **                    | ** ** | **Broadcasting Licenses As Of June 30, 2010**                             | ** ** |
|-------------------------------|------------|---------------------------------------------------------------------------------------------------------|------------|
| ** **                    | ** ** | **Percentage Range By Which Fair Value Exceeds Carrying Value** | ** ** |
| ** **                    | ** ** | ** **                                                                                              | ** ** | **Greater** | ** ** | **Greater** | ** ** | **Greater** | ** ** |
| ** **                    | ** ** | **0% To**                                                                                          | ** ** | **Than 5%** | ** ** | **Than 10%** | ** ** | **Than** | ** ** |
| ** **                    | ** ** | **5%**                                                                                                  | ** ** | **To 10%** | ** ** | **To 15%** | ** ** | **15%** | ** ** |
|                          |       |                                                                                                    |       |   |   |   |   |   |   |
| Number of units of accounting |       | 4                                                                                                       |       | 5 |   | 3 |   | 7 |   |
|                          |       |                                                                                                    |       |   |   |   |   |   |   |
| Carrying value (in thousands) |       | $                                                                                                       | 210,440    |   | $ | 150,482 |   | $ | 123,177 |   | $ | 223,162 |   |
|                               |            |                                                                                                         |            |  |  |  |  |  |  |  |  |  |  |

 

**Goodwill**

 

Weperformed our annual impairment test on our goodwill during the second quarterof 2010 by comparing the fair value for each reporting unit with the amountreflected on the balance sheet. We determined that a radio market is areporting unit and, in total, we assessed goodwill at 19 separate reportingunits (three of our 22 reporting units have no goodwill recorded as of September 30,2010). If the fair value of any reporting unit is less than the amountreflected in the balance sheet, an indication exists that the amount ofgoodwill attributed to a reporting unit may be impaired, and we are required toperform a second step of the impairment test. In the second step, we comparethe amount reflected in the balance sheet to the implied fair value of thereporting unit’s goodwill, determined by allocating the reporting unit’s fairvalue to all of its assets and liabilities in a manner similar to a purchaseprice allocation.

 

Todetermine the fair value, we use an income and market approach for eachreporting unit. The market approach compares recent sales and offering pricesof similar properties. The income approach uses the subject property’s incomegenerated over a specified time and capitalized at an appropriate market rateto arrive at an indication of the most probable selling price.

 

Instep one of our goodwill analysis, we considered the results of the marketapproach and the income approach in computing the fair value of our reportingunits. In the market approach, we applied an estimated market multiple ofbetween seven and a half times and eight times to each reporting unit’soperating performance to calculate the fair value. This multiple was higherthan the six times multiple applied to all markets in the second quarter of2009.  Management believes that theseapproaches are an appropriate measurement given the current market valuationsof broadcast radio stations together with the historical market transactions,including those in recent months. Factors contributing to the determination ofthe reporting unit’s operating performance were historical performance andmanagement’s estimates of future performance.

 

Inthe income approach, we utilized the discounted cash flow method to calculatethe fair value of the reporting unit (the key estimates and assumptionsare included in the table below). The results of step one indicated that it wasnot necessary to perform the second step analysis in any of the markets tested.As a result of the step one test, no impairment loss was recorded during thesecond quarter of 2010. We performed a reasonableness test by comparing thefair value results for goodwill by using the implied multiple based on our cashflow performance and our current stock price and comparing the results toprevailing radio broadcast transaction multiples.

 

Thefollowing table reflects certain key estimates and assumptions used in the second quarter of 2010 and in the second quarter of 2009, the date of the most recent priorimpairment test. The ranges for operating profit margin and revenuegrowth rates are for our markets.  Ingeneral, when comparing the second quarter of 2010 to the second quarter of2009: (1) the discount rate decreased primarily due to a decrease in theestimated required returns in the debt and equity of publicly traded radiocompanies; (2) the market specific operating profit margin range narrowed;and (3) the market long-term revenue growth rate range narrowed.

 

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| ** **                                                          | ** ** | **Second**     | ** ** | **Second**     | ** ** |
|---------------------------------------------------------------------|------------|----------------|------------|----------------|------------|
| ** **                                                          | ** ** | **Quarter**    | ** ** | **Quarter**    | ** ** |
| ** **                                                          | ** ** | **2010**       | ** ** | **2009**       | ** ** |
| Discount rates                                                      |       | 10.0%          |       | 10.6%          |       |
| Operating profit margin ranges of the Company’s  markets       |       | 26.0% to 39.0% |       | 21.0% to 41.0% |       |
| Long-term revenue growth rate ranges of the  Company’s markets |       | 1.5% to 2.0%   |       | 1.0% to 2.5%   |       |

 

Thetable below presents the percentage within a range by which the fair valueexceeded the carrying value of the reporting unit as of June 30, 2010 for19 reporting units under step one of the goodwill impairment test during thesecond quarter of 2010.  Rather thanpresenting the percentage separately for each reporting unit, management’sopinion is that this table in summary form is more meaningful to the reader inassessing the recoverability of the reporting unit, including goodwill. In addition,the reporting units are not disclosed with the specific market name as suchdisclosure could be competitively harmful to us.

 
| ** **                    | ** ** | **Reporting Units As Of June 30, 2010**                                   | ** ** |
|-------------------------------|------------|---------------------------------------------------------------------------------------------------------|------------|
| ** **                    | ** ** | **Percentage Range By Which Fair Value Exceeds Carrying Value** | ** ** |
| ** **                    | ** ** | ** **                                                                                              | ** ** | **Greater** | ** ** | **Greater** | ** ** | **Greater** | ** ** |
| ** **                    | ** ** | **0% To**                                                                                          | ** ** | **Than 5%** | ** ** | **Than 10%** | ** ** | **Than** | ** ** |
| ** **                    | ** ** | **5%**                                                                                                  | ** ** | **To 10%** | ** ** | **To 15%** | ** ** | **15%** | ** ** |
|                          |       |                                                                                                    |       |   |   |   |   |   |   |
| Number of reporting units     |       | 3                                                                                                       |       | — |   | 2 |   | 14 |   |
|                          |       |                                                                                                    |       |   |   |   |   |   |   |
| Carrying value (in thousands) |       | $                                                                                                       | 177,879    |   | $ | — |   | $ | 124,679 |   | $ | 454,939 |   |
|                               |            |                                                                                                         |            |  |  |  |  |  |  |  |  |  |  |

 

**SensitivityOf Key Broadcasting Licenses And Goodwill Assumptions**

 

Ifwe were to assume a 100 basis point change in certain of our key assumptions (areduction in the long-term revenue growth rate, a reduction in the operatingperformance cash flow and an increase in the weighted average cost of capital)used to determine the fair value of our broadcasting licenses and goodwillduring the second quarter of 2010, the following would be the incrementalimpact:

 

**Sensitivity Analysis**

 
| ** **                                              | ** ** | **Results Of**                  | ** ** | ** **          | ** ** | **Results Of** | ** ** |
|---------------------------------------------------------|------------|--------------------------------------|------------|---------------------|------------|---------------------|------------|
| ** **                                              | ** ** | **Long-Term**                        | ** ** | **Results Of** | ** ** | **Weighted**        | ** ** |
| ** **                                              | ** ** | **Revenue**                          | ** ** | **Operating**       | ** ** | **Average**         | ** ** |
| ** **                                              | ** ** | **Growth**                           | ** ** | **Performance**     | ** ** | **Cost Of**    | ** ** |
| ** **                                              | ** ** | **Rate**                             | ** ** | **Cash Flow**  | ** ** | **Capital**         | ** ** |
| ** **                                              | ** ** | **Decrease**                         | ** ** | **Decrease**        | ** ** | **Increase**        | ** ** |
| ** **                                              | ** ** | **(amounts in thousands)** | ** ** |
| Broadcasting Licenses                                   |       |                                 |       |                |       |                |       |
| Impairment assumption sensitivity result                |       | $                                    | 19,671     |                | $          | 11,557              |       | $ | 46,477 |   |
| Incremental broadcasting licenses impairment            |       | 19,671                               |       | 11,557              |       | 46,477              |       |
|                                                    |       |                                 |       |                |       |                |       |
| Goodwill                                                |       |                                 |       |                |       |                |       |
| Impairment assumption sensitivity result                |       | 1,050                                |       | 1,176               |       | 912                 |       |
| Incremental goodwill impairment                         |       | 1,050                                |       | 1,176               |       | 912                 |       |
|                                                    |       |                                 |       |                |       |                |       |
| Total incremental impairment from sensitivity  analysis |       | $                                    | 20,721     |                | $          | 12,733              |       | $ | 47,389 |   |

 

Thediscount rate to be used by a typical market participant reflects the riskinherent in future cash flows for the broadcast industry. The same discountrate was used for each of our markets. The discount rate is calculated byweighting the required returns on interest-bearing debt and common equitycapital in proportion to their estimated

 

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percentagesin an expected capital structure.  Thecapital structure was estimated based upon data available for publicly tradedcompanies in the broadcast industry.

 

Operatingprofit margins are defined as profit before interest, depreciation andamortization, income tax and corporate allocation charges.  Operating profits are then divided bybroadcast revenues, net of agency and national representative commissions, tocompute the operating profit margins. Operating profit margins are projected based upon industry operatingprofit norms, which reflect market size and station type.  This assumption is not specific to theperformance of our radio stations in a market, but is predicated on theexpectation that a new entrant into the market could reasonably be expected toperform at a level similar to a typical competitor. If the outlook for theindustry’s growth declines, then operating profit margins would be negativelyimpacted, which would negatively impact the value of our broadcasting licenses.

 

Todetermine the radio broadcasting industry’s future revenue growth rate,management uses publicly available information on industry expectations ratherthan management’s own estimates, which could be different. In addition, theselong-term market growth rate estimates could vary in each of our markets. Usingthe publicly available information on industry expectations, each market’srevenues were forecasted over a ten-year projection period to reflect theexpected long-term growth rate for the radio broadcast industry, which wasfurther adjusted for each of our markets. If the industry’s growth is less than forecasted, then the fair value ofour broadcasting licenses could be negatively impacted.

 

Pleaserefer to Note 3, in the accompanying notes to the financial statements for adiscussion of intangible assets and goodwill.

 

Fora more comprehensive list of our accounting policies, please see Note 2,Significant Accounting Policies, accompanying the consolidated financialstatements included in our latest annual report on Form 10-K for the yearended December 31, 2009.  Note 2 tothe consolidated financial statements included with Form 10-K containsseveral other policies, including policies governing the timing of revenuerecognition, that are important to the preparation of our consolidatedfinancial statements, but do not meet the SEC’s definition of criticalaccounting policies because they do not involve subjective or complexjudgments.  In addition, for furtherdiscussion of new accounting policies that were effective for us on January 1,2010, please refer to the new accounting pronouncements under Note 1 to theaccompanying notes to the financial statements.

 

**ITEM 3.                Quantitative And Qualitative Disclosures About MarketRisk**

 

Weare exposed to market risk from changes in interest rates on our variable ratesenior debt.  From time to time, we mayseek to limit our exposure to interest rate volatility through the use ofderivative rate hedging instruments.  Ifthe borrowing rates under LIBOR were to increase 1% above the current rates asof September 30, 2010, our interest expense on our senior debt wouldincrease by approximately $3.5 million on an annual basis, including anyinterest benefit or interest expense associated with the use of derivative ratehedging instruments as described below.

 

Thefollowing derivative rate hedging transactions, which fix interest on ourvariable rate debt, are outstanding as of September 30, 2010 in theaggregate notional amount of $475.0 million. These rate hedging transactionsare tied to the one-month LIBOR interest rate.

 
| **Type**   | ** ** | ** **             | ** ** | ** **             | ** **            | ** ** | ** ** | **Fixed**    | ** ** | ** **              | ** **            |
|------------|------------|------------------------|------------|------------------------|-----------------------|------------|------------|--------------|------------|-------------------------|-----------------------|
| **Of**     | ** ** | **Notional**           | ** ** | **Effective**          | ** **            | ** ** | ** ** | **LIBOR**    | ** ** | **Expiration**          | ** **            |
| **Hedge**  | ** ** | **Amount**             | ** ** | **Date**               | ** **            | **Collar** | ** ** | **Rate**     | ** ** | **Date**                | ** **            |
| ** ** | ** ** | **(amounts**           | ** ** | ** **             | ** **            | ** ** | ** ** | ** **   | ** ** | ** **              | ** **            |
| ** ** | ** ** | **(in millions)** | ** ** | ** **             | ** **            | ** ** | ** ** | ** **   | ** ** | ** **              | ** **            |
|       | ** ** | ** **             |       |                   |                  |       |       |         |       |                    |                  |
| Swap       |       | $                      | 150.0      |                   | January 28, 2008 |       | n/a        |         | 3.03%      |                    | January 28, 2011 |   |
| Collar     |       | 100.0                  |       | February 28, 2008 | [                     | Cap  Floor |       | 4.00%  2.14% | ]          | February 28, 2011  |                  |
| Swap       |       | 125.0                  |       | March 28, 2008    |                  | n/a        |       | 2.91%        |       | September 28, 2011 |                  |
| Swap       |       | 100.0                  |       | May 28, 2008      |                  | n/a        |       | 3.62%        |       | May 28, 2012       |                  |
| Total      |       | $                      | 475.0      |                   |                  |       |       |         |       |                    |                  |   |

 

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Thefair value (based upon current market rates) of the rate hedging transactionsis included as derivative instruments in long-term assets and/or liabilitiesfor those instruments with maturity dates greater than one year and short-termassets and/or liabilities for those instruments with maturity dates less thanone year. The fair value of the hedging transactions is affected by acombination of several factors, including the change in the one-month LIBORrate and the forward interest rate to maturity. Any increase in the one-monthLIBOR rate and/or the forward interest rate to maturity results in a morefavorable valuation, while any decrease in the one-month LIBOR rate and/orforward interest rate to maturity results in a less favorable valuation. Ourcredit exposure under these hedging agreements, or similar agreements we mayenter into in the future, is the cost of replacing an agreement in the event ofnon-performance by our counter-party.

 

Asof September 30, 2010, the fair value of our derivative instruments was aliability of $10.3 million, which represented a decrease in liability from thebalance as of December 31, 2009. The positive change was primarily due to the effect of a decrease in theremaining period of each derivative instrument, offset by a decrease in theforward interest rate curve to maturity for those derivatives with longerremaining lives. The liability as of September 30, 2010 included areduction in value for non-performance in accordance with the accountingprovisions for fair value measurement.

 

Ourcash equivalents are money market instruments consisting of short-termgovernment securities and repurchase agreements that are fully collateralizedby government securities.  We do notbelieve that we have any material credit exposure with respect to these assets.

 

Ourcredit exposure related to our accounts receivable does not represent asignificant concentration of credit risk due to the quantity of advertisers,the minimal reliance on any one advertiser, the multiple markets in which weoperate and the wide variety of advertising business sectors.

 

Seealso additional disclosures regarding liquidity and capital resources madeunder Liquidity and Capital Resources in Part 1, Item 2, above.

 

**ITEM 4.                Controls And Procedures**

 

**Evaluation Of Controls And Procedures**

 

Wemaintain “disclosure controls and procedures” (as defined in Rules 13a-15(e) and15d-15(e) of the Exchange Act) that are designed to ensure that: (i) informationrequired to be disclosed in our Exchange Act reports is recorded, processed,summarized and reported within the time periods specified in the Securities andExchange Commission’s rules and forms; and (ii) such information isaccumulated and communicated to our management, including our Chief ExecutiveOfficer and Chief Financial Officer, as appropriate, to allow for timelydecisions regarding required disclosure. In designing and evaluating ourdisclosure controls and procedures, our management recognizes that any controlsand procedures, no matter how well designed and operated, can provide onlyreasonable assurance of achieving the desired control objectives, and ourmanagement is required to apply its judgment in evaluating the cost-benefitrelationship of possible controls and procedures.

 

Wecarried out an evaluation, under the supervision and with the participation ofour management, including our Chief Executive Officer and Chief FinancialOfficer, of the effectiveness of our disclosure controls and procedures as ofthe end of the period covered by this report.  Based on the foregoing, ourPresident/Chief Executive Officer and Executive Vice President -Operations/Chief Financial Officer concluded that our disclosure controls andprocedures were effective at the reasonable assurance level.

 

**Changes In Internal Control Over Financial Reporting**

 

Therehas been no change in our internal control over financial reporting during ourmost recent fiscal quarter that has materially affected, or is reasonablylikely to materially affect, our internal control over financial reporting.

 

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**PART II**

**OTHER INFORMATION**

 

**ITEM 1.****                 ****LegalProceedings**

 

Therewere no material developments relating to the legal proceedings described inour Annual Report on Form 10-K for the year ended December 31, 2009,filed with the Securities and Exchange Commission on March 15, 2010.

 

**ITEM 1A.****              ****RiskFactors**

 

Therehave been no material changes from the Risk Factors described in our Form 10-K,filed with the SEC on March 15, 2010.

 

**ITEM 2.****                 ****UnregisteredSales Of Equity Securities And Use Of Proceeds**

 

Duringthe three-month period ending September 30, 2010, we withheld shares ofstock upon the vesting of restricted stock units to cover withholding taxobligations, unless an employee elected to pay such tax in cash.  Thefollowing table provides information on shares withheld (which are consideredrepurchased) during the three-month period ended September 30, 2010:

 
| ** **                                        | ** ** | ** **         | ** ** | ** **         | ** ** | **(c)**            | ** ** | **(d)**                  | ** ** |
|---------------------------------------------------|------------|--------------------|------------|--------------------|------------|--------------------|------------|--------------------------|------------|
| ** **                                        | ** ** | ** **         | ** ** | ** **         | ** ** | **Total**          | ** ** | **Maximum**              | ** ** |
| ** **                                        | ** ** | ** **         | ** ** | ** **         | ** ** | **Number Of** | ** ** | **Approximate**          | ** ** |
| ** **                                        | ** ** | ** **         | ** ** | ** **         | ** ** | **Shares**         | ** ** | **Dollar Value**    | ** ** |
| ** **                                        | ** ** | ** **         | ** ** | ** **         | ** ** | **Purchased**      | ** ** | **Of**                   | ** ** |
| ** **                                        | ** ** | ** **         | ** ** | ** **         | ** ** | **As**             | ** ** | **Shares That**     | ** ** |
| ** **                                        | ** ** | **(a)**            | ** ** | **(b)**            | ** ** | **Part Of**   | ** ** | **May Yet Be** | ** ** |
| ** **                                        | ** ** | **Total**          | ** ** | **Average**        | ** ** | **Publicly**       | ** ** | **Purchased**            | ** ** |
| ** **                                        | ** ** | **Number**         | ** ** | **Price**          | ** ** | **Announced**      | ** ** | **Under**                | ** ** |
| ** **                                        | ** ** | **Of Shares** | ** ** | **Paid**           | ** ** | **Plans Or**  | ** ** | **The Plans**       | ** ** |
| **Period**                                        | ** ** | **Purchased**      | ** ** | **Per Share** | ** ** | **Programs**       | ** ** | **Or Programs**     | ** ** |
| July 1, 2010 -  July 31, 2010           |       | 158                |       | $                  | 8.18       |               | —     |                     | $          | — |   |
| August 1, 2010 -  August 31, 2010       |       | 79                 |       | $                  | 5.29       |               | —     |                     | $          | — |   |
| September 1, 2010 -  September 30, 2010 |       | 453                |       | $                  | 7.39       |               | —     |                     | $          | — |   |
| Total                                             |       | 690                |       |               |       | —             |       |                     |       |

 

Inconnection with employee tax obligations related to the vesting of restrictedstock units during the three months ended September 30, 2010 and inaccordance with elections by certain employees, we are deemed to haverepurchased the following shares withheld to satisfy employees’ tax obligations:(i) 158 shares at an average price of $8.18 per share in July 2010; (ii) 79shares at an average price of $5.29 per share in August 2010, and (iii) 453shares at an average price of $7.39 per share in September 2010. Theseshares are included in the above table.

 

**ITEM 3.****                 ****DefaultsUpon Senior Securities**

 

None.

 

**ITEM 4.****                 ****[Reserved]**

 

N/A

 

**ITEM 5.****                 ****Other Information**

 

None.

 

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**ITEM 6.**** ****Exhibits**

 
| **Exhibit  Number** | ** ** | **Description**                                                                                                                                                                                             |
|---------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.01                |       | Amended  and Restated Articles of Incorporation of the Entercom Communications Corp.  as further amended on December 19, 2007 and May 15, 2009. (1)                                               |
| 3.02                |       | Amended  and Restated Bylaws of the Entercom Communications Corp. (2)                                                                                                                                       |
| 31.01               |       | Certification  of President and Chief Executive Officer required by  Rule 13a-14(a) or Rule 15d-14(a), as created by  Section 302 of the Sarbanes-Oxley Act of 2002. (3)                |
| 31.02               |       | Certification  of Executive Vice President and Chief Financial Officer required by  Rule 13a-14(a) or Rule 15d-14(a), as created by  Section 302 of the Sarbanes-Oxley Act of 2002. (3) |
| 32.01               |       | Certification  of President and Chief Executive Officer pursuant to 18 U.S.C. § 1350, as  created by Section 906 of the Sarbanes-Oxley Act of 2002. (4)                                           |
| 32.02               |       | Certification  of Executive Vice President and Chief Financial Officer pursuant to 18 U.S.C.  § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002. (4)                            |

 

----

| (1) |   | Incorporated  by reference to Exhibit 3.01 of our Amendment to Registration Statement  on Form S-1, as filed on January 27, 1999 (File  No. 333-61381), Exhibit 3.1 of our Current Report on Form 8-K  as filed on December 21, 2007 and Exhibit 3.02 of our Quarterly  Report on Form 10-Q for the quarter ended June 30, 2009, as filed  on August 5, 2009. |
|-----|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) |   | Incorporated  by reference to Exhibit 3.1 of our Current Report on Form 8-K as  filed on February 21, 2008.                                                                                                                                                                                                                                                                                           |
| (3) |   | Filed  herewith.                                                                                                                                                                                                                                                                                                                                                                                                     |
| (4) |   | These  exhibits are submitted herewith as “accompanying” this Quarterly Report on  Form 10-Q and shall not be deemed to be “filed” as part of such  Quarterly Report on Form 10-Q.                                                                                                                                                                                                     |

 

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**SIGNATURES**

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 

 
| ** **                   | **ENTERCOM COMMUNICATIONS CORP.**

(Registrant)         |
|------------------------------|---------------------------------------------------------|
| ** **                   | ** **                                              |
| ** **                   | ** **                                              |
| Date:  November 5, 2010 | /s/  David J. Field                                     |
| ** **                   | Name:  David J. Field                                   |
| ** **                   | Title:  President and Chief Executive Officer           |
| ** **                   | (principal  executive officer)                          |
| ** **                   |                                                    |
| ** **                   |                                                    |
| Date:  November 5, 2010 | /s/  Stephen F. Fisher                                  |
|                         | Name:  Stephen F. Fisher                                |
|                         | Title:  Executive Vice President - Operations and Chief |
|                         | Financial  Officer (principal financial officer)        |

 

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**EXHIBIT INDEX**

 
| **Exhibit  Number** | ** ** | **Description**                                                                                                                                                                                             |
|---------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.01                |       | Amended  and Restated Articles of Incorporation of the Entercom Communications Corp.  as further amended on December 19, 2007 and May 15, 2009. (1)                                               |
| 3.02                |       | Amended  and Restated Bylaws of the Entercom Communications Corp. (2)                                                                                                                                       |
| 31.01               |       | Certification  of President and Chief Executive Officer required by  Rule 13a-14(a) or Rule 15d-14(a), as created by  Section 302 of the Sarbanes-Oxley Act of 2002. (3)                |
| 31.02               |       | Certification  of Executive Vice President and Chief Financial Officer required by  Rule 13a-14(a) or Rule 15d-14(a), as created by  Section 302 of the Sarbanes-Oxley Act of 2002. (3) |
| 32.01               |       | Certification  of President and Chief Executive Officer pursuant to 18 U.S.C. § 1350, as  created by Section 906 of the Sarbanes-Oxley Act of 2002. (4)                                           |
| 32.02               |       | Certification  of Executive Vice President and Chief Financial Officer pursuant to 18 U.S.C.  § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002. (4)                            |

 

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| (1)    |   | Incorporated  by reference to Exhibit 3.01 of our Amendment to Registration Statement  on Form S-1, as filed on January 27, 1999 (File  No. 333-61381), Exhibit 3.1 of our Current Report on Form 8-K  as filed on December 21, 2007 and Exhibit 3.02 of our Quarterly  Report on Form 10-Q for the quarter ended June 30, 2009, as filed  on August 5, 2009. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (2)    |   | Incorporated  by reference to Exhibit 3.1 of our Current Report on Form 8-K as  filed on February 21, 2008.                                                                                                                                                                                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (3)    |   | Filed  herewith.                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (4)    |   | These  exhibits are submitted herewith as “accompanying” this Quarterly Report on  Form 10-Q and shall not be deemed to be “filed” as part of such  Quarterly Report on Form 10-Q.                                                                                                                                                                                                     |

 

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