Table ofContents

 

 

 

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C.  20549**

 

**FORM 10-Q**

 

**(Mark One)**

 

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

 

**For the quarterly period endedJune 30, 2010**

 

**or**

 

**o****                  ****TRANSITION REPORT PURSUANT TO SECTION 13OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For the transition period from                    to                    **

 

**Commission File Number: 001-14461**

 

**Entercom Communications Corp.**

(Exact name of registrant as specified in itscharter)

 

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

 

**401 City Avenue, Suite 809**

**Bala Cynwyd, Pennsylvania19004**

(Address of principal executive offices and zipcode)

 

**(610) 660-5610**

(Registrant’s telephone number, including areacode)

 

 

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

 

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

 

Indicate by checkmark whether the registranthas submitted electronically and posted on its corporate Web site, if any,every Interactive Data File required to be submitted and posted pursuant to Rule 405of  Regulation S-T (section 232.405 ofthis chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files.) Yes  o No  o

 

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer,a non-accelerated filer, or a smaller reporting company.  See the definitions of “large acceleratedfiler,” “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 registrantis a shell company (as defined in Rule 12b-2 of the ExchangeAct).  Yes  o  No  x

 

Indicate the number of shares outstanding ofeach of the issuer’s classes of common stock, as of the latest practicabledate.

 

Class A commonstock, $0.01 par value — 29,652,356 Shares Outstanding as of July 23, 2010

(Class A SharesOutstanding include 1,389,329 unvested and vested but deferred restricted stockunits)

Class B commonstock, $0.01 par value — 7,457,532 Shares Outstanding as of July 23, 2010

 

 

 

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**ENTERCOM COMMUNICATIONS 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 ActSafe Harbor Statement**

 

In addition to historical information, this reportcontains statements by us with regard to our expectations as to financialresults and other aspects of our business that involve risks and uncertaintiesand may constitute forward- looking statements within the meaning of Section 27Aof the Securities Act of 1933 and Section 21E of the Securities ExchangeAct of 1934.

 

Forward-looking statements are presented forillustrative purposes only and reflect our current expectations concerningfuture results and events.  Allstatements other than statements of historical fact are “forward-lookingstatements” for purposes of federal and state securities laws, including,without limitation, any projections of earnings, revenues or other financialitems; any statements of the plans, strategies and objectives of management forfuture operations; any statements concerning proposed new services ordevelopments; any statements regarding future economic conditions orperformance; any statements of belief; and any statements of assumptionsunderlying any of the foregoing.

 

You can identify forward-looking statements by our useof words such as “anticipates,” “believes,” “continues,” “expects,” “intends,” “likely,”“may,” “opportunity,” “plans,” “potential,” “project,” “will,” and similarexpressions which identify forward-looking statements, whether in the negativeor the affirmative.  We cannot guaranteethat we actually will achieve 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.

 

Key risks to our company are described in our AnnualReport on Form 10-K filed with the Securities and Exchange Commission on March 15,2010 and as may be supplemented by the risks described under Part II, Item1A, of our quarterly reports on Form 10-Q and in our Current Reports on Form 8-K.

 

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**PART I**

 

**FINANCIALINFORMATION**

 

**ITEM 1.     FinancialStatements**

 

**ENTERCOM COMMUNICATIONS CORP.**

**CONDENSEDCONSOLIDATED BALANCE SHEETS**

**(amounts in thousands)**

**(unaudited)**

 
| ** **                                                          | ** ** | **JUNE 30,** | ** ** | **DECEMBER 31,** | ** ** |
|---------------------------------------------------------------------|------------|--------------|------------|------------------|------------|
| ** **                                                          | ** ** | **2010**     | ** ** | **2009**         | ** ** |
| **ASSETS:**                                                         | ** ** | ** **   | ** ** | ** **       | ** ** |
| Cash and cash equivalents                                           |       | $            | 4,371      |             | $          | 10,751 |   |
| Accounts receivable, net  of allowance for doubtful accounts        |       | 76,612       |       | 68,319           |       |
| Prepaid expenses and  deposits, other                               |       | 5,800        |       | 4,701            |       |
| Prepaid and refundable  federal and state income taxes              |       | 643          |       | 7,628            |       |
| Insurance claim receivable                                          |       | —       |       | 16,500           |       |
| Total current assets                                                |       | 87,426       |       | 107,899          |       |
| Investments                                                         |       | 391          |       | 391              |       |
| Net property and equipment                                          |       | 67,063       |       | 71,740           |       |
| Radio broadcasting  licenses                                        |       | 707,852      |       | 707,852          |       |
| Goodwill                                                            |       | 38,168       |       | 38,168           |       |
| Deferred charges and other  assets, net of accumulated amortization |       | 11,859       |       | 8,486            |       |
|                                                                |       |         |       |             |       |
| **TOTAL  ASSETS**                                                   |       | $            | 912,759    |             | $          | 934,536 |   |
| ** **                                                          | ** ** | ** **   | ** ** | ** **       | ** ** |
| **LIABILITIES:**                                                    | ** ** | ** **   | ** ** | ** **       | ** ** |
| Accounts payable                                                    |       | $            | 3,330      |             | $          | 477 |   |
| Accrued expenses                                                    |       | 12,198       |       | 13,152           |       |
| Accrued compensation and  other current liabilities                 |       | 15,374       |       | 12,678           |       |
| Insurance claim payable                                             |       | —       |       | 16,500           |       |
| Long-term debt, current  portion                                    |       | 96,025       |       | 80,024           |       |
| Total current liabilities                                           |       | 126,927      |       | 122,831          |       |
| Long-term debt, net of  current portion                             |       | 605,136      |       | 655,728          |       |
| Financing method lease  obligations                                 |       | 12,610       |       | 12,610           |       |
| Deferred tax liabilities                                            |       | 9,139        |       | —           |       |
| Other long-term  liabilities                                        |       | 23,116       |       | 29,415           |       |
| Total long-term  liabilities                                        |       | 650,001      |       | 697,753          |       |
| Total liabilities                                                   |       | 776,928      |       | 820,584          |       |
|                                                                |       |         |       |             |       |
| **CONTINGENCIES  AND COMMITMENTS**                                  |       |         |       |             |       |
|                                                                |       |         |       |             |       |
| **SHAREHOLDERS’  EQUITY:**                                     |       |         |       |             |       |
| Preferred stock                                                     |       | —       |       | —           |       |
| Class A, B and C  common stock                                 |       | 372          |       | 372              |       |
| Additional paid-in capital                                          |       | 590,216      |       | 588,622          |       |
| Accumulated deficit                                                 |       | (443,060     | )          | (461,610         | )          |
| Accumulated other  comprehensive loss                               |       | (11,697      | )          | (13,432          | )          |
| Total shareholders’ equity                                     |       | 135,831      |       | 113,952          |       |
|                                                                |       |         |       |             |       |
| **TOTAL  LIABILITIES AND SHAREHOLDERS’ EQUITY**                |       | $            | 912,759    |             | $          | 934,536 |   |

 

**See notes to condensedconsolidated financial statements.**

 

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**ENTERCOM COMMUNICATIONS CORP.**

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS**

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

**(unaudited)**

 
| ** **                                                                                                                  | ** ** | **SIX MONTHS ENDED** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                                                                                  | ** ** | **JUNE 30,**         | ** ** |
| ** **                                                                                                                  | ** ** | **2010**             | ** ** | **2009** | ** ** |
|                                                                                                                        |       |                 |       |   |   |
| **NET  REVENUES**                                                                                                           |       | $                    | 186,622    |   | $ | 176,671 |   |
|                                                                                                                        |       |                 |       |   |   |
| **OPERATING  (INCOME) EXPENSE:**                                                                                            |       |                 |       |   |   |
| Station operating  expenses, including non-cash compensationexpense of $568 in 2010 and $762 in 2009                        |       | 127,877              |       | 125,733 |   |
| Depreciation and  amortization expense                                                                                      |       | 6,647                |       | 8,540 |   |
| Corporate general and  administrative expenses, including non-cashcompensation expense of $2,534 in 2010 and $2,937 in 2009 |       | 11,102               |       | 11,584 |   |
| Impairment loss                                                                                                             |       | —               |       | 67,676 |   |
| Net time brokerage  agreement income                                                                                        |       | —               |       | (2 | ) |
| Net gain on sale or disposal  of assets                                                                                     |       | (9                   | )          | — |   |
| Total operating expense                                                                                                     |       | 145,617              |       | 213,531 |   |
| **OPERATING  INCOME (LOSS)**                                                                                                |       | 41,005               |       | (36,860 | ) |
|                                                                                                                        |       |                 |       |   |   |
| **OTHER  (INCOME) EXPENSE:**                                                                                                |       |                 |       |   |   |
| Interest expense,  including amortization of deferred financingexpense of $1,490 in 2010 and $776 in 2009                   |       | 14,150               |       | 15,972 |   |
| Interest and dividend  income                                                                                               |       | (11                  | )          | (17 | ) |
| Net (gain) loss on  extinguishment of debt                                                                                  |       | 62                   |       | (16,128 | ) |
| Other income                                                                                                                |       | (22                  | )          | (380 | ) |
| **TOTAL  OTHER (INCOME) EXPENSE**                                                                                           |       | 14,179               |       | (553 | ) |
|                                                                                                                        |       |                 |       |   |   |
| **INCOME  (LOSS) BEFORE INCOME TAXES**                                                                                      |       | 26,826               |       | (36,307 | ) |
| **INCOME  TAXES**                                                                                                           |       | 8,364                |       | 270 |   |
| **NET  INCOME (LOSS)**                                                                                                      |       | $                    | 18,462     |   | $ | (36,577 | ) |
|                                                                                                                        |       |                 |       |   |   |
| **NET  INCOME (LOSS) PER SHARE - BASIC**                                                                                    |       | $                    | 0.52       |   | $ | (1.03 | ) |
|                                                                                                                        |       |                 |       |   |   |
| **NET  INCOME (LOSS) PER SHARE - DILUTED**                                                                                  |       | $                    | 0.49       |   | $ | (1.03 | ) |
|                                                                                                                        |       |                 |       |   |   |
| **WEIGHTED  AVERAGE SHARES:**                                                                                               |       |                 |       |   |   |
| Basic                                                                                                                       |       | 35,686,383           |       | 35,342,509 |   |
| Diluted                                                                                                                     |       | 37,678,189           |       | 35,342,509 |   |

 

**See notes to condensedconsolidated financial statements.**

 

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**ENTERCOM COMMUNICATIONS CORP.**

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS**

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

**(unaudited)**

 
| ** **                                                                                                                | ** ** | **THREE MONTHS ENDED** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|
| ** **                                                                                                                | ** ** | **JUNE 30,**           | ** ** |
| ** **                                                                                                                | ** ** | **2010**               | ** ** | **2009** | ** ** |
|                                                                                                                      |       |                   |       |   |   |
| **NET  REVENUES**                                                                                                         |       | $                      | 105,788    |   | $ | 101,300 |   |
|                                                                                                                      |       |                   |       |   |   |
| **OPERATING  (INCOME) EXPENSE:**                                                                                          |       |                   |       |   |   |
| Station operating  expenses, including non-cash compensationexpense of $390 in 2010 and $672 in 2009                      |       | 68,489                 |       | 67,164 |   |
| Depreciation and  amortization expense                                                                                    |       | 3,266                  |       | 4,224 |   |
| Corporate general and  administrative expenses, including non-cashcompensation expense of $962 in 2010 and $1,235 in 2009 |       | 5,227                  |       | 5,897 |   |
| Impairment loss                                                                                                           |       | —                 |       | 67,676 |   |
| Net gain on sale or  disposal of assets                                                                                   |       | (38                    | )          | (7 | ) |
| Total operating expense                                                                                                   |       | 76,944                 |       | 144,954 |   |
| **OPERATING  INCOME (LOSS)**                                                                                              |       | 28,844                 |       | (43,654 | ) |
|                                                                                                                      |       |                   |       |   |   |
| **OTHER  (INCOME) EXPENSE:**                                                                                              |       |                   |       |   |   |
| Interest expense,  including amortization of deferred financingexpense of $941 in 2010 and $382 in 2009                   |       | 7,170                  |       | 7,859 |   |
| Interest and dividend  income                                                                                             |       | (4                     | )          | (9 | ) |
| Net gain on extinguishment  of debt                                                                                       |       | —                 |       | (8,373 | ) |
| **TOTAL  OTHER (INCOME) EXPENSE**                                                                                         |       | 7,166                  |       | (523 | ) |
|                                                                                                                      |       |                   |       |   |   |
| **INCOME  (LOSS) BEFORE INCOME TAXES (BENEFIT)**                                                                          |       | 21,678                 |       | (43,131 | ) |
| **INCOME  TAXES (BENEFIT)**                                                                                               |       | 7,416                  |       | (1,218 | ) |
| **NET  INCOME (LOSS)**                                                                                                    |       | $                      | 14,262     |   | $ | (41,913 | ) |
| ** **                                                                                                                | ** ** | ** **             | ** ** | ** ** | ** ** |
| **NET  INCOME (LOSS) PER SHARE - BASIC**                                                                                  |       | $                      | 0.40       |   | $ | (1.19 | ) |
|                                                                                                                      |       |                   |       |   |   |
| **NET  INCOME (LOSS) PER SHARE - DILUTED**                                                                                |       | $                      | 0.38       |   | $ | (1.19 | ) |
|                                                                                                                      |       |                   |       |   |   |
| **WEIGHTED  AVERAGE SHARES:**                                                                                             |       |                   |       |   |   |
| Basic                                                                                                                     |       | 35,714,159             |       | 35,289,531 |   |
| Diluted                                                                                                                   |       | 37,581,924             |       | 35,289,531 |   |

 

**See notes to condensedconsolidated financial statements.**

 

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**ENTERCOM COMMUNICATIONS CORP.**

**CONDENSEDCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)**

**(amounts in thousands)**

**(unaudited)**

 
| ** **                                                                     | ** ** | **SIX MONTHS ENDED** | ** ** |
|--------------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                                     | ** ** | **JUNE 30,**         | ** ** |
| ** **                                                                     | ** ** | **2010**             | ** ** | **2009** | ** ** |
|                                                                           |       |                 |       |   |   |
| **NET  INCOME (LOSS)**                                                         |       | $                    | 18,462     |   | $ | (36,577 | ) |
|                                                                           |       |                 |       |   |   |
| **OTHER  COMPREHENSIVE INCOME, NET OF TAXES:**                                 |       |                 |       |   |   |
|                                                                           |       |                 |       |   |   |
| Net unrealized gain on  derivatives, net of taxesof  $0 in 2010 and $0 in 2009 |       | 1,735                |       | 1,359 |   |
|                                                                           |       |                 |       |   |   |
| **COMPREHENSIVE  INCOME (LOSS)**                                               |       | $                    | 20,197     |   | $ | (35,218 | ) |

 

**See notes to condensedconsolidated financial statements.**

 

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**ENTERCOM COMMUNICATIONS CORP.**

**CONDENSED CONSOLIDATED STATEMENTOF COMPREHENSIVE INCOME (LOSS)**

**(amounts in thousands)**

**(unaudited)**

 
| ** **                                                                     | ** ** | **THREE MONTHS ENDED** | ** ** |
|--------------------------------------------------------------------------------|------------|------------------------|------------|
| ** **                                                                     | ** ** | **JUNE 30,**           | ** ** |
| ** **                                                                     | ** ** | **2010**               | ** ** | **2009** | ** ** |
|                                                                           |       |                   |       |   |   |
| **NET  INCOME (LOSS)**                                                         |       | $                      | 14,262     |   | $ | (41,913 | ) |
|                                                                           |       |                   |       |   |   |
| **OTHER  COMPREHENSIVE INCOME, NET OF TAXES:**                                 |       |                   |       |   |   |
|                                                                           |       |                   |       |   |   |
| Net unrealized gain on  derivatives, net of taxesof  $0 in 2010 and $0 in 2009 |       | 1,712                  |       | 2,344 |   |
|                                                                           |       |                   |       |   |   |
| **COMPREHENSIVE  INCOME (LOSS)**                                               |       | $                      | 15,974     |   | $ | (39,569 | ) |

 

**See notes to condensedconsolidated financial statements.**

 

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**ENTERCOM COMMUNICATIONS CORP.**

**CONDENSED CONSOLIDATED STATEMENTSOF SHAREHOLDERS’ EQUITY**

**SIX MONTHS ENDED JUNE 30, 2010AND YEAR ENDED DECEMBER 31, 2009**

**(amounts in thousands, exceptshare 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 grantingof  stock options                            |       | —           |       | —           |       | —      |       | —       |       | 485               |       | —       |       | —            |       | 485        |       |
| Compensation expense  related to grantingof  restricted stock units                   |       | 796,824          |       | 8                |       | —      |       | —       |       | 6,380             |       | —       |       | —            |       | 6,388      |       |
| Issuance of common stock  relatedto 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 restrictedstock  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                                                                            |       | —           |       | —           |       | —      |       | —       |       | —            |       | 18,462       |       | —            |       | 18,462     |       |
| Compensation expense  related to grantingof  stock options                            |       | —           |       | —           |       | —      |       | —       |       | 255               |       | —       |       | —            |       | 255        |       |
| Compensation expense  related to grantingof  restricted stock units                   |       | (4,226           | )          | —           |       | —      |       | —       |       | 2,847             |       | —       |       | —            |       | 2,847      |       |
| Exercise of stock options                                                             |       | 81,975           |       | —           |       | —      |       | —       |       | 109               |       | —       |       | —            |       | 109        |       |
| Purchase of vested  employee restricted stock units                                   |       | (180,396         | )          | —           |       | —      |       | —       |       | (1,617            | )          | —       |       | —            |       | (1,617     | )          |
| Net dividend equivalents  on restrictedstock  units (net of forfeitures and payments) |       | —           |       | —           |       | —      |       | —       |       | —            |       | 88           |       | —            |       | 88         |       |
| Net unrealized gain on  derivatives                                                   |       | —           |       | —           |       | —      |       | —       |       | —            |       | —       |       | 1,735             |       | 1,735      |       |
| Balance, June 30,  2010                                                          |       | 29,652,514       |       | $                | 297        |        | 7,457,532  |         | $          | 75                |       | $            | 590,216    |              | $          | (443,060   | )          | $      | (11,697 | )      | $      | 135,831 |   |

 

**See notes to condensedconsolidated financial statements.**

 

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**ENTERCOM COMMUNICATIONS CORP.**

**CONDENSED CONSOLIDATED STATEMENTSOF CASH FLOWS**

**(amounts in thousands)**

**(unaudited)**

 
| ** **                                                                                | ** ** | **SIX MONTHS ENDED** | ** ** |
|-------------------------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                                                | ** ** | **JUNE 30,**         | ** ** |
| ** **                                                                                | ** ** | **2010**             | ** ** | **2009** | ** ** |
| **OPERATING  ACTIVITIES:**                                                                |       |                 |       |   |   |
| Net income (loss)                                                                         |       | $                    | 18,462     |   | $ | (36,577 | ) |
|                                                                                      |       |                 |       |   |   |
| Adjustments to reconcile  net income (loss) to net cash provided by operating activities: |       |                 |       |   |   |
| Depreciation and  amortization                                                            |       | 6,647                |       | 8,540 |   |
| Amortization of deferred  financing costs                                                 |       | 1,490                |       | 776 |   |
| Deferred tax benefit and  other                                                           |       | 9,139                |       | 270 |   |
| Provision for bad debts                                                                   |       | 742                  |       | 1,372 |   |
| Net gain on sale or  disposal of assets                                                   |       | (9                   | )          | — |   |
| Non-cash stock-based  compensation expense                                                |       | 3,102                |       | 3,699 |   |
| Deferred rent                                                                             |       | (5                   | )          | 18 |   |
| Unearned revenue - long-term                                                              |       | —               |       | (421 | ) |
| Net (gain) loss on  extinguishment of debt                                                |       | 62                   |       | (16,128 | ) |
| Deferred compensation                                                                     |       | 237                  |       | 744 |   |
| Impairment loss                                                                           |       | —               |       | 67,676 |   |
| Other income                                                                              |       | (22                  | )          | (380 | ) |
|                                                                                      |       |                 |       |   |   |
| Changes in assets and  liabilities:                                                       |       |                 |       |   |   |
| Accounts receivable                                                                       |       | (9,014               | )          | 1,121 |   |
| Prepaid expenses and  deposits                                                            |       | 15,398               |       | (388 | ) |
| Prepaid and refundable  income taxes                                                      |       | 6,985                |       | 95 |   |
| Accounts payable and  accrued liabilities                                                 |       | (14,516              | )          | (513 | ) |
| Accrued interest expense                                                                  |       | (185                 | )          | (1,074 | ) |
| Accrued liabilities -  long-term                                                          |       | (949                 | )          | (577 | ) |
| Prepaid expenses -  long-term                                                             |       | (431                 | )          | (229 | ) |
| **Net  cash provided by operating activities**                                            |       | 37,133               |       | 28,024 |   |
|                                                                                      |       |                 |       |   |   |
| **INVESTING  ACTIVITIES:**                                                                |       |                 |       |   |   |
| Additions to property and  equipment                                                      |       | (1,474               | )          | (1,240 | ) |
| Proceeds from sale of  property, equipment, intangibles and other assets                  |       | 108                  |       | 19 |   |
| Deferred charges and other  assets                                                        |       | (46                  | )          | (43 | ) |
| Proceeds from investments                                                                 |       | 22                   |       | 6 |   |
| Proceeds from termination  of radio station contract                                      |       | —               |       | 380 |   |
| **Net  cash used in investing activities**                                                |       | (1,390               | )          | (878 | ) |
|                                                                                           |            |                      |            |  |  |  |  |

 

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**ENTERCOM COMMUNICATIONS CORP.**

**CONDENSED CONSOLIDATED STATEMENTSOF CASH FLOWS**

**(amounts in thousands)**

**(unaudited)**

 
| ** **                                                        | ** ** | **SIX MONTHS ENDED** | ** ** |
|-------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                        | ** ** | **JUNE 30,**         | ** ** |
| ** **                                                        | ** ** | **2010**             | ** ** | **2009** | ** ** |
| **FINANCING  ACTIVITIES:**                                        |       |                 |       |   |   |
| Deferred expenses related  to bank facility                       |       | (5,155               | )          | — |   |
| Proceeds from issuance of  long-term debt                         |       | 37,500               |       | 25,000 |   |
| Payments of long-term debt                                        |       | (65,512              | )          | (14,011 | ) |
| Retirement of senior  subordinated notes                          |       | (6,579               | )          | (22,860 | ) |
| Purchase of the Company’s  common stock                      |       | —               |       | (889 | ) |
| Proceeds from issuance of  employee stock plan                    |       | —               |       | 82 |   |
| Proceeds from the exercise  of stock options                      |       | 109                  |       | — |   |
| Purchase of vested  restricted stock units                        |       | (1,617               | )          | (90 | ) |
| Payment of dividend  equivalents on vested restricted stock units |       | (869                 | )          | (747 | ) |
| **Net  cash used in financing activities**                        |       | (42,123              | )          | (13,515 | ) |
|                                                              |       |                 |       |   |   |
| **NET  INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS**         |       | (6,380               | )          | 13,631 |   |
| **CASH  AND CASH EQUIVALENTS, BEGINNING OF YEAR**                 |       | 10,751               |       | 4,284 |   |
| **CASH  AND CASH EQUIVALENTS, END OF PERIOD**                     |       | $                    | 4,371      |   | $ | 17,915 |   |
|                                                              |       |                 |       |   |   |
| **SUPPLEMENTAL  DISCLOSURES OF CASH FLOW INFORMATION:**           |       |                 |       |   |   |
| Cash paid during the  period for:                                 |       |                 |       |   |   |
| Interest                                                          |       | $                    | 12,883     |   | $ | 16,307 |   |
| Income taxes                                                      |       | $                    | 82         |   | $ | 192 |   |

 

**SUPPLEMENTAL DISCLOSURES ON NON-CASH INVESTING AND FINANCINGACTIVITIES:**

 

During the six months ended June 30, 2010, theCompany issued 0.1 million restricted stock units (net of forfeitures) thatwill increase its paid-in capital by $0.2 million over the vesting period ofthe restricted stock units. For purposes of computing forfeitures noted above,0.1 million market-based restricted stock units that did not vest as thevesting conditions were not met, were not included.

 

During the six months ended June 30, 2009, theCompany issued 0.2 million restricted stock units, recorded modificationexpense of $1.4 million and had forfeitures of $2.1 million that will decreaseon an aggregate basis its paid-in capital by $0.4 million over the vestingperiod of the restricted stock units.

 

**See notes to condensedconsolidated financial statements.**

 

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**ENTERCOM COMMUNICATIONS CORP.**

**NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS**

**SIX MONTHS ENDED JUNE 30, 2010AND 2009**

 

**1.****                                     ****BASIS OF PRESENTATION**

 

The condensed consolidated interim unaudited financialstatements included herein have been prepared by Entercom Communications Corp.and its subsidiaries (collectively, the “Company”) in accordance with: (i) generallyaccepted accounting principles (“U.S. GAAP”) for interim financial information;and (ii) the instructions of the Securities and Exchange Commission (the “SEC”)for Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of theinformation and footnotes required by generally accepted accounting principlesfor annual financial statements.  In theopinion of management, the financial statements reflect all adjustmentsconsidered necessary 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.

 

This Form 10-Q should be read in conjunction withthe financial statements and related notes included in the Company’s auditedfinancial statements as of and for the year ended December 31, 2009 andfiled with the SEC on March 15, 2010, as part of the Company’s AnnualReport on Form 10-K.  Certaininformation and footnote disclosures normally included in financial statementsprepared in accordance with generally accepted accounting principles have beencondensed or omitted pursuant to such rules and regulations.

 

***Recent AccountingPronouncements***

 

In June 2009, the accounting standards wereamended for determining whether to consolidate a variable interest entity.These amended standards eliminate a mandatory quantitative approach todetermine whether a variable interest provides the entity with a controllingfinancial interest in a variable interest entity in favor of a qualitativelyfocused analysis, and require an ongoing reassessment of whether an entity isthe primary beneficiary. These amended standards were effective January 1,2010.  The adoption of the amendedstandards did not have any effect on our results of operations, cash flows orfinancial position.

 

**2.****                                     ****SHARE-BASED COMPENSATION**

 

***Restricted Stock Units (“RSUs”)***

 

A summary of the Company’s outstanding RSUs as of June 30,2010, and changes in RSUs during the six months ended June 30, 2010, is asfollows:

 
| ** **                                            | ** ** | ** **             | ** ** | ** **    | ** ** | ** **   | ** ** | **Weighted**    | ** ** | ** **        | ** ** |
|-------------------------------------------------------|------------|------------------------|------------|---------------|------------|--------------|------------|-----------------|------------|-------------------|------------|
| ** **                                            | ** ** | ** **             | ** ** | ** **    | ** ** | ** **   | ** ** | **Average**     | ** ** | **Aggregate**     | ** ** |
| ** **                                            | ** ** | ** **             | ** ** | ** **    | ** ** | **Weighted** | ** ** | **Remaining**   | ** ** | **Intrinsic**     | ** ** |
| ** **                                            | ** ** | ** **             | ** ** | ** **    | ** ** | **Average**  | ** ** | **Contractual** | ** ** | **Value As Of**   | ** ** |
| ** **                                            | ** ** | ** **             | ** ** | **Number of** | ** ** | **Purchase** | ** ** | **Term**        | ** ** | **June 30,** | ** ** |
| ** **                                            | ** ** | **Period Ended**       | ** ** | **RSUs**      | ** ** | **Price**    | ** ** | **In Years**    | ** ** | **2010**          | ** ** |
|                                                  | ** ** | ** **             | ** ** | ** **    | ** ** | ** **   | ** ** | ** **      | ** ** | ** **        | ** ** |
| RSUs outstanding as of:                               |       | December 31, 2009 |       | 1,917,533     |       |         |       |            |       |              |       |
| RSUs awarded                                          |       |                   |       | 71,336        |       |         |       |            |       |              |       |
| RSUs released                                         |       |                   |       | (523,603      | )          |         |       |            |       |              |       |
| RSUs forfeited                                        |       |                   |       | (75,937       | )          |         |       |            |       |              |       |
| RSUs outstanding as of:                               |       | June 30, 2010     |       | 1,389,329     |       | $            | —     |            | 1.4        |              | $          | 12,253,882 |   |
|                                                  |       |                   |       |          |       |         |       |            |       |              |       |
| RSUs vested and expected  to vest                     |       |                   |       | 1,264,506     |       | $            | —     |            | 1.4        |              | $          | 10,413,204 |   |
| RSUs exercisable (vested  and deferred)               |       |                   |       | 83,871        |       | $            | —     |            |       |              | $          | 739,742 |   |
| Weighted average remainingrecognition period in years |       |                   |       | 2.3           |       |         |       |            |       |              |       |

 

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As of June 30, 2010, there was $4.6 million ofunamortized compensation expense, net of estimated forfeitures, related tounvested RSUs, which is expected to be recognized over a remaining weightedaverage recognition period of 2.3 years.

 

**RSUs With Service And MarketConditions**

 

During the six months ended June 30, 2010, 50% ofthe Company’s outstanding 0.1 million RSUs with service and market conditionsvested while the other 50% were forfeited (as not all of the market conditionswere satisfied).

 

During the first quarter of 2009, the Company modified0.2 million RSUs with service and market conditions by eliminating the marketconditions.  Due to the modification,additional expense of $0.2 million will be recognized over the new vestingperiod of two years from the modification date.

 

***Options***

 

The following table presents the option activity forthe six months ended June 30, 2010:

 
| ** **                                              | ** ** | ** **             | ** ** | ** **    | ** ** | ** **   | ** ** | **Weighted**    | ** ** | **Aggregate**     | ** ** |
|---------------------------------------------------------|------------|------------------------|------------|---------------|------------|--------------|------------|-----------------|------------|-------------------|------------|
| ** **                                              | ** ** | ** **             | ** ** | ** **    | ** ** | ** **   | ** ** | **Average**     | ** ** | **Intrinsic**     | ** ** |
| ** **                                              | ** ** | ** **             | ** ** | ** **    | ** ** | **Weighted** | ** ** | **Remaining**   | ** ** | **Value**         | ** ** |
| ** **                                              | ** ** | ** **             | ** ** | ** **    | ** ** | **Average**  | ** ** | **Contractual** | ** ** | **As of**         | ** ** |
| ** **                                              | ** ** | ** **             | ** ** | **Number of** | ** ** | **Exercise** | ** ** | **Term**        | ** ** | **June 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                                       |       |                   |       | (81,975       | )          | $            | 1.34       |            |       |              |       |   |
| Options forfeited                                       |       |                   |       | (30,030       | )          | $            | 1.83       |            |       |              |       |   |
| Options expired                                         |       |                   |       | (10,877       | )          | $            | 30.74      |            |       |              |       |   |
| Outstanding as of:                                      |       | June 30, 2010     |       | 1,027,650     |       | $            | 3.04       |            | 8.4        |              | $          | 7,109,082 |   |
|                                                    |       |                   |       |          |       |         |       |            |       |              |       |
| Options vested and  expected to vest as of:             |       | June 30, 2010     |       | 939,900       |       | $            | 3.17       |            | 8.4        |              | $          | 6,474,527 |   |
| Options vested and  exercisable as of:                  |       | June 30, 2010     |       | 221,670       |       | $            | 8.00       |            | 7.6        |              | $          | 1,299,211 |   |
| Weighted average remaining  recognitionperiod  in years |       |                   |       | 2.6           |       |         |       |            |       |              |       |

 

As of June 30, 2010, $0.8 million of unrecognizedcompensation costs related to unvested stock options, net of estimatedforfeitures, is expected to be recognized in future periods over a weightedaverage period of 2.6 years.

 

The fair value of each option grant was estimated onthe date of grant using the following weighted average assumptions:

 
| ** **                      | ** ** | **Six Months Ended** | ** ** |
|---------------------------------|------------|----------------------|------------|
| ** **                      | ** ** | **June 30,**    | ** ** |
| ** **                      | ** ** | **2010**             | ** ** | **2009** | ** ** |
| Expected life (years)           |       | 6.3                  |       | 6.3 |   |
| Expected volatility factor  (%) |       | 69.2%                |       | 54.9% to 61.4% |   |
| Risk-free interest rate  (%)    |       | 3.0%                 |       | 2.2% to 2.4% |   |
| Expected dividend yield  (%)    |       | 0.0%                 |       | 0.0% |   |

 

The following tablesummarizes significant ranges of outstanding and exercisable options as of June 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** | ** ** |
| ** **           | ** ** | ** ** | ** ** | **June 30,**        | ** ** | **Term**                 | ** ** | **Exercise** | ** ** | **June 30,** | ** ** | **Exercise** | ** ** |
| **Exercise  Prices** | ** ** | **2010**   | ** ** | **In  Years**            | ** ** | **Price**                | ** ** | **2010** | ** ** | **Price** | ** ** |
| $                    | 1.34       |       | $          | 1.34                     |       | 934,525                  |       | 8.6 |   | $ | 1.34 |   | 173,464 |   | $ | 1.34 |   |
| $                    | 1.57       |       | $          | 12.08                    |       | 60,375                   |       | 8.4 |   | $ | 8.37 |   | 15,456 |   | $ | 11.41 |   |
| $                    | 27.75      |       | $          | 47.77                    |       | 17,250                   |       | 2.3 |   | $ | 35.97 |   | 17,250 |   | $ | 35.97 |   |
| $                    | 47.82      |       | $          | 48.21                    |       | 15,500                   |       | 1.7 |   | $ | 48.00 |   | 15,500 |   | $ | 48.00 |   |
|                 |       |       |       | 1,027,650                |       | 8.4                      |       | $ | 3.04 |   | 221,670 |   | $ | 8.00 |   |

 

***Recognized Non-CashCompensation Expense***

 

The following table summarizes stock-basedcompensation expense related to awards of RSUs, employee stock options andpurchases under the employee stock purchase plan for the six months ended June 30,2010 and 2009:

 
|                                                              |   | **Six Months Ended**       | ** ** | **Three Months Ended** |       |
|-------------------------------------------------------------------|--------|----------------------------|------------|------------------------|------------|
|                                                              |   | **June 30,**          |       |
|                                                              |   | **2010**                   | ** ** | **2009**               | ** ** | **2010** | ** ** | **2009** |   |
|                                                              |   | **(amounts in thousands)** |       |
| Station operating expenses                                        |   | $                          | 568        |                   | $          | 762 |   | $ | 390 |   | $ | 672 |   |
| Corporate general and  administrative expenses                    |   | 2,534                      |       | 2,937                  |       | 962 |   | 1,235 |   |
| Stock-based compensation  expense included in operating expenses  |   | 3,102                      |       | 3,699                  |       | 1,352 |   | 1,907 |   |
| Income tax benefit (net of  a fully reserved valuation allowance) |   | —                     |       | —                 |       | — |   | — |   |
| Total                                                             |   | $                          | 3,102      |                   | $          | 3,699 |   | $ | 1,352 |   | $ | 1,907 |   |

 

***2009 OptionExchange Program***

 

In February 2009, the Company’s Board ofDirectors approved an amendment to the Entercom Equity Compensation Plan (the “Plan”)to permit a one-time 2009 Option Exchange Program (“2009 OEP”), which amendmentwas approved at the May 2009 shareholders’ meeting. On April 13,2009, the Company commenced the 2009 OEP, which was subject to shareholderapproval, by making an offer to exchange to the Company’s eligible employeesand non-employee directors. The Company offered such persons the opportunity tomake an election to exchange all of their outstanding stock options withexercise prices equal to or greater than $11.80 per share for a lesser numberof RSUs. The exchange ratios were 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              |

 

On May 15, 2009, following the May 14, 2009expiration of the Company’s 2009 OEP, the Company granted 0.7 million RSUs inexchange for 2.1 million options. As a result of the 2009 OEP, the number of RSUsthat can be issued under the Plan was effectively increased by 0.7 million asall RSUs granted did not count against the restricted stock sublimit in thePlan.  In addition, the number of awardsthat can be issued under the Plan was effectively reduced by 2.1 million as alloptions that were exchanged will not be available for re-grant under the Plan.

 

The Company applied modification accounting for the2009 OEP and will recognize share-based compensation expense of $1.2 million ona straight-line basis over the four-year vesting period of the RSUs. Undermodification accounting, the fair value of the new shares immediately prior tothe exchange was greater by $1.2 million than the fair value of the surrenderedoptions. In addition, under the bifurcated method, share-based compensationexpense of $0.9 million associated with any unvested options exchanged andcancelled as of the

 

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modification date will be recognized over theremaining original option term, and the expense will only be reversed if theoriginal service period is not met.

 

**3.****                                     ****INTANGIBLE ASSETS AND GOODWILL**

 

***(A) Indefinite-LivedIntangibles***

 

Goodwill and certain intangible assets are notamortized.  The Company accounts for itsacquired broadcasting licenses as indefinite-lived intangible assets and,similar to goodwill, these assets are reviewed at least annually forimpairment. At the time of each review, if the fair value is less than therecorded value of goodwill and certain intangibles (such as broadcastinglicenses), then a charge is recorded to the results of operations.

 

The Company may only write down the carrying value ofits indefinite-lived intangibles. The Company is not permitted to increase thecarrying value if the fair value of these assets subsequently increases.

 

**Broadcasting Licenses**

 

The Company performs itsbroadcasting license impairment test by evaluating its broadcasting licensesfor impairment at the market level using the direct method.  For purposes of testing impairment,indefinite-lived intangible assets are combined into a single unit ofaccounting. Since the broadcasting licenses in each market are operated as asingle asset, each market’s broadcasting licenses are a single unit ofaccounting. The Company determines the fair value of the broadcasting licensesin each of its markets by relying on a discounted cash flow approach (a 10-yearincome model) assuming a start-up scenario in which the only assets held by aninvestor are broadcasting licenses. The Company’s fair value analysis containsassumptions incorporating variables that are based on past experiences andjudgments about future performance using industry normalized information for anaverage station within a certain market. These variables include, but are notlimited to: (1) the risk-adjusted discount rate used in the valuation offair value; (2) market share and profit margin of an average stationwithin a market based upon market size and station type; (3) the forecastgrowth rate of each radio market, including assumptions regarding each market’spopulation, household income, retail sales and other factors that wouldinfluence advertising expenditures; (4) estimated capital start-up costsand losses incurred during the early years; (5) the likely mediacompetition within the market area; (6) an effective tax rate assumption;and (7) future terminal values.

 

***Broadcasting License ImpairmentTesting During The Second Quarter Of 2010***

 

The Company completed the impairment test forbroadcasting licenses and determined that the fair value of the broadcastinglicenses was more than the amount reflected in the balance sheet for each ofthe Company’s markets and accordingly, no impairment was recorded.

 

The methodology used by theCompany in determining its key estimates and assumptions was appliedconsistently to each market. As a result, the analysis for each market is thesame. Of the seven variables identified above, the Company believes that thefirst three (in clauses (1) through (3) above) are the most importantto the determination of fair value. The following table reflects theseestimates and assumptions used in 2010 as compared to the second quarter of2009, the date of the most recent prior impairment test.  In general, when comparing the second quarterof 2010 to the second quarter of 2009: (1) thediscount rate decreased primarily due to a decrease in the estimated requiredreturns on debt and equity of publicallytraded radio companies; (2) the market specific operating profit marginrange remained relatively flat; and (3) the market long-term revenuegrowth rates 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%   |       |

 

The following table presents the changes in thecarrying value of the Company’s broadcasting licenses for the six months ended June 30,2010 and 2009:

 

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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  June 30,     |       | $                          | 707,852    |   | $ | 707,852 |   |

 

The amount of unamortized broadcasting licensesreflected in the balance sheet as of June 30, 2010 and December 31,2009 was $707.9 million.

 

***Broadcasting License ImpairmentTesting During The Second Quarter Of 2009:***

 

During the second quarter of2009, the Company completed the impairment test for broadcasting licenses anddetermined that the fair value of its broadcasting licenses was less than theamount reflected in the balance sheet for each of the Company’s markets, otherthan Seattle, and recorded an impairment loss of $60.8 million. The prolongedeconomic downturn negatively impacted the radio broadcasting industry asadvertising revenues continued to decline and expectations for growth over thenext year were reduced. The reduction in the projected growth levels for theindustry was the primary reason for further impairment to the Company’sbroadcasting licenses in the second quarter, which was in addition to theimpairment recorded in 2008. As revenues decline, profitability levels are alsonegatively impacted as fixed costs represent a large component of a radiostation’s operating expenses. As a result, the asset base is particularlysensitive to the impact of continued declining revenues.

 

**Goodwill**

 

The Company performs its annual impairment test on itsgoodwill during the second quarter of each year by comparing the fair value foreach reporting unit with the amount reflected on the balance sheet. The Companyhas determined that a radio market is a reporting unit and, in total, theCompany assesses goodwill at 19 separate reporting units (three of the Company’s22 reporting units have no goodwill recorded as of June 30, 2010). If thefair value of any reporting unit is less than the amount reflected in thebalance sheet, an indication exists that the amount of goodwill attributed to areporting unit may be impaired, and the Company is required to perform a secondstep of the impairment test. In the second step, the Company compares theamount 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.

 

To determine the fair value, the Company uses anincome and market approach for each reporting unit. The market approachcompares recent sales and offering prices of similar properties. The incomeapproach uses the subject property’s income generated over a specified time andcapitalized at an appropriate market rate to arrive at an indication of themost probable selling price.

 

***Goodwill Impairment Test DuringSecond Quarter Of 2010***

 

In step one of the Company’s goodwill analysis, theCompany considered the results of the market approach and the income approachin computing the fair value of the Company’s reporting units. In the marketapproach, the Company applied an estimated market multiple of between seven anda half times and eight times to each reporting unit’s operating performance tocalculate the fair value. This multiple was higher than the six times multipleapplied to all markets in the second quarter of 2009.  Management believes that these approaches arean appropriate measurement given the current market valuations of broadcastradio stations together with the historical market transactions, includingthose in recent months. Factors contributing to the determination of thereporting unit’s operating performance were historical performance andmanagement’s estimates of future performance.

 

In the income approach, the Company utilized thediscounted cash flow method to calculate the fair value of the reportingunit (the key estimates and assumptions are included in the table below). Theresults of step one indicated that it was not necessary to perform the secondstep analysis in any of the markets tested as the fair values for all of theCompany’s markets were above book value. As a result of the step one test, noimpairment loss was

 

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recorded during the second quarter of 2010. TheCompany performed a reasonableness test by comparing the fair value results forgoodwill by using the implied multiple based on the Company’s cash flow performanceand its current stock price and comparing the results to prevailing radiobroadcast transaction multiples.

 

The following table reflects certain key estimates andassumptions used in 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 the Company’s markets. In general, when comparing the second quarter of 2010 to the secondquarter of 2009: (1) the discount rate decreased primarily due to adecrease in the estimated required returns in the debt and equity of publicallytraded radio companies; (2) the market specific operating profit marginrange narrowed; and (3) the market long-term revenue growth rate rangenarrowed.

 
| ** **                                                          | ** ** | **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%   |       |

 

The following table presents the change in thecarrying value of the Company’s goodwill for the six months ended June 30,2010 and 2009:

 
| ** **                                                           | ** ** | **Goodwill**               | ** ** |
|----------------------------------------------------------------------|------------|----------------------------|------------|
| ** **                                                           | ** ** | **Carrying Amount**        | ** ** |
| ** **                                                           | ** ** | **June 30,**          |
| ** **                                                           | ** ** | **2010**                   | ** ** | **2009** | ** ** |
| ** **                                                           | ** ** | **(amounts in thousands)** | ** ** |
| Goodwill before cumulative  loss on impairmentas  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  June 30,                                  |       | $                          | 38,168     |   | $ | 38,168 |   |

 

If actual market conditions are less favorable thanthose projected by the industry or the Company, or if events occur orcircumstances change that would reduce the fair value of the Company’s goodwillbelow the amount reflected in the balance sheet, the Company may be required torecognize impairment charges, which could be material, in future periods.

 

***Goodwill Impairment Test DuringSecond Quarter Of 2009***

 

In step one of the Company’s goodwill analysis, theCompany considered the results of the market approach and the income approachin computing the fair value of the Company’s reporting units. In the marketapproach, the Company applied an estimated market multiple of six times to eachreporting unit’s operating performance to calculate the fair value. The Companyapplied the same market multiple consistently across all reporting units. Inthe income approach, the Company utilized the discounted cash flow method tocalculate the fair value of the reporting unit. The results of step oneindicated that it was necessary to perform the second step analysis in seven ofthe 22 markets. The fair values for two of the seven markets were marginallyabove book value. Management believes that these approaches are commonly usedmethodologies for valuing broadcast radio stations and that a six timesmultiple was an appropriate measurement given the then recent fall in marketvaluations of broadcast radio stations together with a historically low levelof market transactions in recent months. The marginal stations were included inthe Company’s step two impairment testing due to the subjective nature of thestep one analysis (unobservable inputs) and the sensitivities inherent in thesecalculations. Factors contributing to the determination of the reporting unit’soperating performance were historical performance and management’s estimates offuture performance.

 

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Under the second step, theCompany determined that the fair value of the Company’s goodwill was lessthan the amount reflected in the balance sheet for the seven markets tested,which were Austin, Greensboro, Greenville, Indianapolis, Kansas City,Memphis and Wichita, and recorded an impairment loss of $6.9 million during thesecond quarter of 2009. Contributing factors to the impairment were a declinein the advertising dollars in these markets and its effect on the Company’soperations, coupled with changes in the anticipated growth and profitability ofthese markets.

 

**4.****                                     ****SENIOR DEBT**

 

***BankFacility***

 

The Company has a creditagreement (“Bank Facility”) with a syndicate of lenders for a $1,050 millionsenior secured credit facility that matures on June 30, 2012. The BankFacility was originally comprised of $650 million in revolving credit (the “Revolver”)and a $400 million term loan (“Term Loan”).

 

The Company is required tomake payments on the Term Loan in quarterly amounts starting at $15 million (September 30,2009) and ultimately increasing to $60 million. The Company plans to fund theamortization of the Term Loan with cash flow from operations and its availableRevolver capacity.

 

As of June 30, 2010,the Company had: (1) $701.0 million outstanding under the Bank Facility,including: (i) $336.0 million in Term Loan; and (ii) $365.0 millionin drawn Revolver; and (2) a $0.7 million letter of credit.  As of June 30, 2010, the Company had$4.4 million in cash and cash equivalents.

 

On March 11, 2010, the Companyamended its Bank Facility (the “Amendment”). The Bank Facility requires theCompany to comply with certain financial covenants such as a maximum ConsolidatedLeverage Ratio and a minimum Consolidated Interest Coverage Ratio (definedterms within the agreement). In connection with the Amendment, certain keyterms, as defined within 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) theFederal Funds Rate plus 0.5%; (b) the Eurodollar Rate plus 1.0%; or (c) thePrime 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, the repurchaseof its stock; and (b) subject to additional limitations on acquisitionsand investments.

 

As of June 30, 2010,the Consolidated Leverage Ratio exceeded six times.  As a result, theCompany is in a Restricted Period.

 

The Company’s ability tomaintain compliance with its covenants will be highly dependent on the Company’sresults of operations.  If the Companywere to enter into an agreement with its lenders for covenant compliancerelief, such relief could result in higher interest expense.

 

As of June 30, 2010,the undrawn amount of the Revolver was $284.3 million. The amount of theRevolver available to the Company, however, is a function of covenant complianceat the time of borrowing. Based on the Company’s financial covenant analysis asof June 30, 2010, the Company 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.

 

Management believes that forthe next 12 months the Company can continue to maintain its compliance withthese covenants. Management also believes that cash on hand and cash fromoperating activities, together with available borrowings under the Revolver,will be sufficient to permit the Company to meet its liquidity requirements forthe next 12 months, including the Company’s scheduled debt repayments.  The Company’s operating cash flow remainspositive and Management believes that it is adequate to fund the Company’soperating needs.  As a result,

 

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the Company has not been required to rely upon, andthe Company does not anticipate being required to rely upon, the Revolver tofund the Company’s operations.

 

Amending the Company’s BankFacility or obtaining other funding or additional financing prior to theexpiration 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.

 

The Bank Facility is securedby a pledge of 100% of the capital stock and other equity interest in all ofthe Company’s wholly owned subsidiaries. In addition, the Bank Facility asamended, is secured by a lien on all of the Company’s assets, other than realproperty.

 

The Amendment in March 2010was treated as a modification to a debt instrument.  As a result, in the first quarter of 2010,the Company recorded deferred financing costs of $5.2 million related to theAmendment, which will be amortized over the remaining life of the Bank Facilityon: (1) a straight-line basis for the Revolver; and (2) an effectiveinterest rate method for the Term. In addition, unamortized deferred financingcosts of $3.1 million as of the Amendment date will continue to be amortizedover the remaining life of the Bank Facility.

 

**5.****                                     ****7.625% SENIOR SUBORDINATED NOTES**

 

During the six months ended June 30,2010, the Company repurchased the remaining $6.6 million of its 7.625% SeniorSubordinated Notes (“Notes”) due March 1, 2014 at par and recorded in thestatement of operations a loss on the extinguishment of debt of $0.1 milliondue to the write-off of deferred financing costs.

 

During the six and threemonths ended June 30, 2009, the Company repurchased $39.4 million and$18.4 million of its Notes, respectively. For the six and three months ended June 30,2009, the Company recorded in the statement of operations a gain on theextinguishment of debt of $16.1 million and $8.4 million, respectively, net ofthe write-off of deferred financing costs of $0.5 million and $0.2 million,respectively.

 

**6.****                                     ****FINANCING METHOD LEASE OBLIGATIONS**

 

During the fourth quarter of2009, the Company completed the sale of certain tower facilities for $12.6million in cash.  At the same time, theCompany entered into leases for space on the towers at most of these sites foruse by the Company’s radio stations. The Company classified this transactionunder the finance method as the agreement provides for an earn-out whereby theCompany can receive additional cash consideration of up to $2.0 million after42 months, depending on whether the buyer meets certain revenue targets.

 

The amount of depreciationand amortization expense attributable to assets held under the financing methodwas $0.1 million for the six months ended June 30, 2010 and the amount ofinterest expense for the cash consideration received of $12.6 million was $0.3million for the six months ended June 30, 2010.

 

**7.****                                     ****DERIVATIVES AND HEDGING ACTIVITIES**

 

The Company from time totime enters into derivative financial instruments, including interest rateexchange agreements (“Swaps”) and interest rate collar agreements (“Collars”),to manage its exposure to fluctuations in interest rates. Under a fixed rateSwap, the Company pays a fixed rate on a notional amount to a bank, and thebank pays to the Company a variable rate on the notional amount equal to theCompany’s Eurodollar borrowing rate. A Collar establishes two separateagreements: an upper limit or “Cap” and a lower limit or “Floor” for theCompany’s Eurodollar borrowing rate.

 

During the six months ended June 30,2010 and 2009, the Company had outstanding the aggregate notional amounts of$475.0 million and $550.0 million, respectively, of cash flow interest ratetransactions that were hedged against the Company’s variable rate seniordebt.  In accordance with the terms of aSwap agreement dated January 28, 2008, the notional amount decreased from$225.0 million to $150.0 million on January 28, 2010 thereby eliminating anotional amount of $75.0 million with a fixed Eurodollar London interbankoffered rate (“LIBOR”) of 3.03%.

 

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

 

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| **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        |       | 4.00       | %          |  ]    | February 28,  2011  |                   |
| Floor      | 2.14       | %                  |
| 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 a summary of the fair value of thederivatives outstanding as of June 30, 2010 and December 31, 2009:

 
| ** **                        | ** ** | ** **                   | ** ** | **Fair  Value**             | ** ** |
|-----------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| ** **                        | ** ** | ** **                   | ** ** | **June 30,**           | ** ** | **December 31,** | ** ** |
| ** **                        | ** ** | **Balance  Sheet**           | ** ** | **2010**                    | ** ** | **2009** | ** ** |
| ** **                        | ** ** | **Location**                 | ** ** | **Asset  (Liability)**      | ** ** |
| ** **                        | ** ** | ** **                   | ** ** | **(amounts  in thousands)** | ** ** |
| **Designated  Derivatives**       |       |                         |       |                        |       |   |   |
| Interest  rate hedge transactions |       | Current  Liabilities         |       | $                           | (3,279     | ) | $ | — |   |
| Interest  rate hedge transactions |       | Other  Long-Term Liabilities |       | $                           | (8,418     | ) | $ | (13,432 | ) |

 

The Company does not expectto reclassify to the statement of operations within the next 12 months any portionof the amount outstanding as of June 30, 2010.

 

The following is a summary (amounts in thousands)of the gains (losses) related to the Company’s cash flow hedges for the sixmonths and three months ended June 30, 2010 and 2009:

 
| ** **                                                                       | ** ** | **Six  Months Ended** | ** ** | **Three  Months Ended** | ** ** |
|----------------------------------------------------------------------------------|------------|-----------------------|------------|-------------------------|------------|
| ** **                                                                       | ** ** | **June 30,**     | ** ** | **June 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 OtherComprehensive Income (“OCI”) |       | $                     | 1,735      |                    | $          | 1,359 |   | $ | 1,712 |   | $ | 2,344 |   |
| Location  Of Gain (Loss) Reclassified From OCI ToStatement Of Operations         |       | Interest  Expense     |       | Interest  Expense       |       | Interest  Expense |   | Interest  Expense |   |
| Amount  of Gain (Loss) Reclassified From OCI ToStatement 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 OperationsDue To Ineffectiveness          |       | $                     | —     |                    | $          | — |   | $ | — |   | $ | — |   |

 

The following table presents the accumulatedderivative gains (losses) recorded in the statements of other comprehensiveincome (loss) as of June 30, 2010 and December 31, 2009:

 

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| ** **                              | ** ** | **June 30,**          | ** ** | **December 31,** | ** ** |
|-----------------------------------------|------------|----------------------------|------------|-----------------------|------------|
| ** **                              | ** ** | **2010**                   | ** ** | **2009**              | ** ** |
| ** **                              | ** ** | **Assets (Liabilities)**   | ** ** |
| ** **                              | ** ** | **(amounts in thousands)** |
|                                    |       |                       |       |                  |       |
| Accumulated derivative  unrealized loss |       | $                          | (11,697    | )                     | $          | (13,432 | ) |
|                                         |            |                            |            |                       |            |  |  |

 

**8.****                                     ****CONTINGENCIES AND GUARANTOR ARRANGEMENTS**

 

***Contingencies***

 

The Company is subject tovarious outstanding claims which arise in the ordinary course of business andto other legal proceedings.  In theopinion of management, any potential liability of the Company which may ariseout of, or with respect to, these matters will not materially affect theCompany’s financial position, results of operations or cash flows.

 

The Company uses acombination of insurance and self-insurance mechanisms to provide for thepotential liabilities for workers’ compensation, general liability, property,directors’ and officers’ liability, vehicle liability and employee health carebenefits. Liabilities associated with the risks that are retained by theCompany are estimated, in part, by considering claims experience, demographicfactors, severity factors, outside expertise and other actuarial assumptions.Under one of these policies, the Company is required to maintain a letter ofcredit in the amount of $0.7 million.

 

In January 2010, aplaintiff acknowledged full satisfaction by the Company’s insurance carrier ofa judgment against the Company. In connection with the satisfaction of thisclaim, as of December 31, 2009, the Company recorded an insurance claimreceivable from its insurance company of $16.5 million along with a claimpayable to the plaintiff of $16.5 million.

 

The Company could faceincreased costs in the form of fines and a greater risk that the Company couldlose any one or more of its broadcasting licenses if the FCC concludesthat programming broadcast by a Company station was obscene, indecent orprofane and such conduct warrants license revocation.  The FCC’s authorityto impose a fine for the broadcast of such material is $325,000 for asingle incident, with a maximum fine of up to $3.0 million for a continuingviolation. In the past, the FCC has issued Notices of Apparent Liability anda Forfeiture Order with respect to several of the Company’s stationsproposing fines for certain programming which the FCC deemed to have beenindecent. These cases are the subject of pending administrative appeals. TheFCC 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.

 

The Company has filed on atimely basis renewal applications for those radio stations with radiobroadcasting licenses that are subject to renewal with the FCC. The Company’scosts to renew its licenses with the FCC are minimal and are expensed asincurred rather than capitalized. Certain licenses were not renewed prior to the renewal date, which isnot unusual. The Company continues to operate these radio stations under theirexisting licenses until the licenses are renewed.  The FCC may delay the renewal pending theresolution of open inquiries. The affected stations are, however, authorized tocontinue operations until the FCC acts upon the renewal applications.

 

The Company’s agreementswith Broadcast Music, Inc. (“BMI”) and American Society of Composers,Authors and Publishers (“ASCAP”) each expired as of December 31, 2009. In January 2010,the Radio Music Licensing Committee, of which the Company is a participant,filed motions in the New York courts against BMI and ASCAP on behalf of theradio industry, seeking interim fees and a determination of fair and reasonableindustry-wide license fees. The courts recently approved reduced interim feesfor ASCAP and BMI. The final fees, as determined by the courts, may beretroactive to the beginning of the period and may be different from theseinterim fees.

 

***GuarantorArrangements***

 

The Company enters intoindemnification agreements in the ordinary course of business and other

 

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agreements which include indemnificationprovisions.  The Company believes theestimated fair value of these agreements is minimal and has not recordedliabilities for these agreements as of June 30, 2010.

 

**9.****                                     ****SHAREHOLDERS’ EQUITY**

 

***DividendEquivalents***

 

The Company’s grants of RSUsinclude the right, upon vesting, to receive a cash payment equal to the aggregateamount of dividends, if any, that a holder would have received on the shares ofcommon stock underlying their RSUs if such RSUs had been vested during theperiod. For the six months ended June 30, 2010 and 2009, the Company paid$0.9 million and $0.7 million, respectively, to the holders of RSUs that vestedduring these periods. The long-term dividend equivalent amount, accrued andunpaid on unvested RSUs, was $0.3 million and $0.8 million as of June 30,2010 and December 31, 2009, respectively, and is included under otherlong-term liabilities in the balance sheet. The short-term dividend equivalentamount, accrued and unpaid on unvested RSUs, was $0.5 million and $1.0 millionas of June 30, 2010 and December 31, 2009, respectively, and isincluded under other current liabilities in the balance sheet. The amount paidis considered a windfall tax benefit that will be recorded to paid-in capitalwhen realized.

 

***Purchases OfVested RSUs***

 

Upon vesting, unless anemployee elects to pay the tax withholding obligation in cash, the Companywithholds shares of stock in an amount sufficient to cover the employee’s taxwithholding obligations.  As a result,during the six months ended June 30, 2010 and 2009, the Company was deemedto have repurchased 0.2 million and 0.1 million shares of stock, respectively.

 

***ShareRepurchase Programs***

 

The Company’s sharerepurchase program expired on June 30, 2009.

 

During the six months ended June 30,2009, the Company repurchased 0.7 million shares in the amount of $0.9 millionat an average price of $1.34 per share.

 

**10.****                              ****DEFERRED COMPENSATION PLANS**

 

The Company provides certainof its employees and the Board of Directors with an opportunity to defer aportion of their compensation on a tax-favored basis. The obligations by theCompany to pay these benefits under these plans represent unsecured generalobligations that rank equally with the Company’s other unsecured indebtedness.Deferred compensation expense is allocated to corporate general andadministrative expenses and station operating expenses.

 

As of June 30, 2010 andDecember 31, 2009, $5.3 million and $5.2 million, respectively, weredeferred under these plans and were included in other long-termliabilities.  For the six months andthree months ended June 30, 2010, the Company recorded a decrease indeferred compensation expense of $0.5 million and $0.3 million, respectively.For the six months and three months ended June 30, 2009, the Companyrecorded an increase in deferred compensation expense of $0.3 million and $0.5million, respectively.

 

**11.****                              ****NET INCOME PER SHARE**

 

***Six Months Ended June 30,2010 and 2009***

 

The effect of stock optionsand RSUs in the calculation of net income per share, using the treasury stockmethod, was dilutive for the six months ended June 30, 2010 andanti-dilutive for the six months ended June 30, 2009.

 

The following table setsforth the computations of basic and diluted net income per share for the sixmonths ended June 30, 2010 and 2009:

 

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|                                         |       |                                                         |       |                    |       |            |       |          |       |       |       |           |       |   |   |   |   |
|----------------------------------------------|------------|--------------------------------------------------------------|------------|-------------------------|------------|-----------------|------------|---------------|------------|------------|------------|----------------|------------|--------|--------|--------|--------|
| ** **                                   | ** ** | **Six Months Ended**                                         | ** ** |
| ** **                                   | ** ** | **June 30, 2010**                                       | ** ** | **June 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)                           |       | $                                                            | 18,462     |                    | 35,686,383 |            | $          | 0.52          |       | $          | (36,577    | )              | 35,342,509 |   | $      | (1.03  | )      |
| Impact  of equity awards                     |       |                                                         |       | 1,991,806               |       |            |       |          |       | —     |       |           |       |
| Diluted  net income (loss) per common share: |       |                                                         |       |                    |       |            |       |          |       |       |       |           |       |
| Net  income (loss)                           |       | $                                                            | 18,462     |                    | 37,678,189 |            | $          | 0.49          |       | $          | (36,577    | )              | 35,342,509 |   | $      | (1.03  | )      |

 

In computing the incrementalshares under the treasury stock method for the six months ended June 30,2010, 0.1 million restricted stock units and options to purchase 0.1 millionshares of common stock at a range of $11.01 to $48.21 were excluded from thecomputation as they were anti-dilutive.

 

For the six months ended June 30,2009, 0.2 million incremental shares were not included in diluted net loss pershare as the shares were anti-dilutive when reporting a net loss.

 

In computing the incrementalshares under the treasury stock method for the six months ended June 30,2009, 1.0 million restricted stock units (including less than 0.1 millionrestricted stock units with market and service conditions, as half of the restrictedstock units with market conditions were not satisfied as of June 30, 2009)and options to purchase 1.8 million shares of common stock at a range of $1.48to $48.21, were excluded from the computation as they were anti-dilutive.

 

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

 

The effect of stock optionsand RSUs in the calculation of net income per share, using the treasury stockmethod, was dilutive for the three months ended June 30, 2010 andanti-dilutive for the three months ended June 30, 2009.

 
|                                         |       |                                                         |       |                    |       |            |       |          |       |       |       |           |       |   |   |   |   |
|----------------------------------------------|------------|--------------------------------------------------------------|------------|-------------------------|------------|-----------------|------------|---------------|------------|------------|------------|----------------|------------|--------|--------|--------|--------|
| ** **                                   | ** ** | **Three Months Ended**                                       | ** ** |
| ** **                                   | ** ** | **June 30, 2010**                                       | ** ** | **June 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)                           |       | $                                                            | 14,262     |                    | 35,714,159 |            | $          | 0.40          |       | $          | (41,913    | )              | 35,289,531 |   | $      | (1.19  | )      |
| Impact  of equity awards                     |       |                                                         |       | 1,867,765               |       |            |       |          |       | —     |       |           |       |
| Diluted  net income (loss) per common share: |       |                                                         |       |                    |       |            |       |          |       |       |       |           |       |
| Net  income (loss)                           |       | $                                                            | 14,262     |                    | 37,581,924 |            | $          | 0.38          |       | $          | (41,913    | )              | 35,289,531 |   | $      | (1.19  | )      |

 

In computing the incrementalshares under the treasury stock method for the three months ended June 30,2010, 0.1 million RSUs and options to purchase under 0.1 million shares ofcommon stock at a range of $12.50 to $48.21, were excluded from the computationas they were anti-dilutive.

 

For the three months ended June 30,2009, 0.4 million incremental shares were not included in diluted net loss pershare as the shares were anti-dilutive when reporting a net loss.

 

In computing the incrementalshares under the treasury stock method for the three months ended June 30,2009, 0.9 million restricted stock units (including less than 0.1 millionrestricted stock units with market and service conditions, as half of therestricted stock units with market and service conditions were not satisfied asof June 30,

 

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2009) and options to purchase 1.2 million shares ofcommon stock at a range of $1.75 to $48.21, were excluded from the computationas they were anti-dilutive.

 

**12.****                              ****INCOME TAXES**

 

***EffectiveTax Rate - Overview***

 

TheCompany’s income tax rates for the six months and three months ended June 30,2010 were based on the estimated annual effective taxrate for 2010 (excluding the impact of a valuation allowance for deferred taxassets as described below), and includes: (1) the effect of permanentdifferences between income subject to income tax for book and tax purposes; and(2) any discrete items of tax. TheCompany’s effective tax rate, which can fluctuate from quarter to quarter, canbe higher than the federal statutory rate of 35% primarily as a result of theprovision for state taxes (net of a federal tax deduction).

 

The Company’s effectiveincome tax rate may be impacted by: (1) changes in the level of income inany of the Company’s taxing jurisdictions; (2) changes in the statutes andrules applicable to taxable income in the jurisdictions in which theCompany operates; (3) changes in the expected outcome of income tax audits;(4) changes in the estimate of expenses that are not deductible for taxpurposes; (5) income taxes in certain states where the states’ currenttaxable income is dependent on factors other than the Company’s consolidatednet income; and (6) the effect of recording changes in the Company’sliabilities for uncertain tax positions.

 

Animpairment loss will result in an income tax benefit during the period incurred(before any adjustment for a deferred tax asset valuation allowance) as theamortization of broadcasting licenses and goodwill is deductible for income taxpurposes.

 

**Tax Rates For The Six MonthsAnd Three Months Ended June 30, 2010**

 

The effective income taxrates were 31.2% and 34.2% for the six months and three months ended June 30,2010, respectively. For the six months and three months ended June 30,2010, the effective income tax rates reflect: (1) an increase in netdeferred tax liabilities associated with non-amortizable assets such asbroadcasting licenses and goodwill; (2) an increase in the deferred taxasset valuation allowance for the reasons as described below under ValuationAllowance For Deferred Tax Assets; and (3) certain discrete items of tax.

 

**Tax Rates For The Six MonthsAnd Three Months Ended June 30, 2009**

 

The effective income taxrates (benefits) were 0.7% and (2.8%) for the six months and three months endedJune 30, 2009, respectively. The effective income tax rates for the sixmonths and three months ended June 30, 2009 were positively impactedprimarily by a decrease in net deferred tax liabilities associated withnon-amortizable assets such as broadcasting licenses and goodwill.

 

***Deferred TaxLiabilities***

 

Asof June 30, 2010, deferred tax liabilities were $9.1 million, primarily from net deferredtax liabilities associated with non-amortizable assets such as broadcastinglicenses and goodwill.  As of December 31,2009, the deferred tax liabilities were fully offset by deferred tax assets. The income tax accounting process to determine the deferred taxliabilities involves estimating all temporary differences between the tax andfinancial reporting bases of the Company’s assets and liabilities, based onenacted tax laws and statutory tax rates applicable to the period in which thedifferences are expected to affect taxable income. The Company estimated thecurrent exposure by assessing the temporary differences and computing theprovision for income taxes by applying the estimated effective tax rate toincome.

 

***ValuationAllowance For Deferred Tax Assets***

 

The Company increased itsvaluation allowance by $2.8 million to $53.7 million as of June 30, 2010from $50.9 million as of December 31, 2009, primarily as a result of anincrease in its deferred tax assets as of June 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 withnon-amortizable assets such as broadcasting licenses and goodwill). Thevaluation allowance as of June 30, 2010 and December 31, 2009

 

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includes $4.6 million and $5.3 million, respectively,for an income tax benefit recorded in other comprehensive income (loss).

 

The Company has alsoconsidered future taxable income and ongoing prudent and feasible tax-planningstrategies in assessing the need for the valuation allowance.  On aquarterly basis, management assesses whether it remains more likely than notthat the deferred tax assets will not be realized.  In the event the Company determines ata future time that it could realize its deferred tax assets in excess of thenet amount recorded, the Company will reduce its deferred tax asset valuationallowance and decrease income tax expense in the period when the Company makessuch determination.

 

***Income TaxPayments And Refunds***

 

The Company made income taxpayments of $0.1 million and $0.2 million for the six months ended June 30,2010 and 2009, respectively.

 

The Company received stateincome tax refunds of less than $0.1 million for each of the six months ended June 30,2010 and 2009.

 

As a result of federal taxlegislation during the fourth quarter of 2009 that allowed the Company tocarryback its 2008 net operating loss for five years rather than for two years,the Company recorded $7.1 million under prepaid and refundable incometaxes.  On April 2, 2010, theCompany received $6.8 million in federal income tax refunds and expects toreceive the balance of $0.3 million during the second half of 2010.

 

***LiabilitiesFor Uncertain Tax Positions***

 

For the six months and threemonths ended June 30, 2010, the Company recorded decreases of $0.9 millionand $0.2 million, respectively, to income tax expense, which amounts consistedprimarily of the expiration of statutes of limitation for certain taxliabilities (including interest and principal), partially offset by income taxliabilities for the current year (including interest and principal).  For the six months and three months ended June 30,2009, the Company recorded income tax expense of $0.1 million for each period,which amounts consisted primarily of interest and penalties. The Company’sliabilities for uncertain tax positions as of June 30, 2010 and December 31,2009 were $4.4 million and $5.3 million, respectively, which were recorded inthe balance sheets as long-term tax liabilities. The Company reviews itsestimates on a quarterly basis, and any change in its liabilities for uncertaintax positions will result in an adjustment to its income tax expense in thestatement of operations in each period measured.

 

***Federal AndState Income Tax Audits***

 

The Company is subject tofederal and state income tax audits from time to time that could result inproposed assessments. The Company cannot predict with certainty how theseaudits will be resolved and whether the Company will be required to makeadditional tax payments, which may or may not include penalties and interest.The Company is currently under audit by the Internal Revenue Service for thetax years of 2004 through 2008. For most states where the Company conductsbusiness, the Company is subject to examination for the preceding three to sixyears. In certain states, the period could be longer.

 

**13.****                              ****ACCOUNTS RECEIVABLE AND RELATED ALLOWANCE FOR DOUBTFUL ACCOUNTS**

 

Accountsreceivable are primarily attributable to advertising that has aired on theCompany’s radio stations, but for which payment has not been collected, net ofagency commissions and an estimated allowance for doubtful accounts. Estimatesof the allowance for doubtful accounts are recorded based on management’sjudgment of the collectability of the accounts receivable based on historicalinformation, relative improvements or deteriorations in the age of the accountsreceivable and changes in current economic conditions.

 

Theaccounts receivable balances and reserve for doubtful accounts as of June 30,2010 and December 31, 2009 are presented in the following table:

 

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| ** **                                                   | ** ** | **June 30,**          | ** ** | **December 31,** | ** ** |
|--------------------------------------------------------------|------------|----------------------------|------------|-----------------------|------------|
| ** **                                                   | ** ** | **2010**                   | ** ** | **2009**              | ** ** |
| ** **                                                   | ** ** | **(amounts in thousands)** | ** ** |
|                                                         |       |                       |       |                  |       |
| Accounts  receivable                                         |       | $                          | 79,935     |                  | $          | 71,618 |   |
| Allowance  for doubtful accounts                             |       | (3,323                     | )          | (3,299                | )          |
| Accounts  receivable, net of allowance for doubtful accounts |       | $                          | 76,612     |                  | $          | 68,319 |   |

 

As of June 30, 2010 andDecember 31, 2009, the Company recorded accounts receivable credits in theamounts of $2.4 million and $1.8 million, respectively, which amounts areincluded in the balance sheets under other current liabilities.  Accounts receivable credits can result fromadvertiser prepayments or overpayments.

 

As of June 30, 2010 andDecember 31, 2009, the Company recorded current unearned revenues of $0.4 millionand $0.8 million, respectively, which amounts are included in the balancesheets under other current liabilities.

 

**14.****                              ****FAIRVALUE MEASUREMENTS**

 

The fair value is the price that would be received tosell an asset or paid to transfer a liability in an orderly transaction betweenmarket participants at the measurement date (exit price). The Company utilizesmarket data or assumptions that market participants would use in pricing theasset or liability, including assumptions about risk and the risks inherent inthe inputs to the valuation technique. These inputs can be readily observable,market corroborated, or generally unobservable. The Company utilizes valuationtechniques that maximize the use of observable inputs and minimize the use ofunobservable inputs. The fair value hierarchy prioritizes the inputs used tomeasure fair value. The hierarchy gives the highest priority to unadjustedquoted prices in active markets for identical assets or liabilities (level 1measurement) and the lowest priority to unobservable inputs (level 3measurement).

 

***Recurring Fair Value Measurements***

 

The following tables set forth, by level within thefair value hierarchy, the Company’s financial assets and liabilities that wereaccounted for at fair value on a recurring basis as of June 30, 2010 and December 31,2009. The financial assets and liabilities are classified in their entiretybased on the lowest level of input that is significant to the fair valuemeasurement. The Company’s assessment of the significance of a particular inputto the fair value measurement requires judgment and may affect the valuation offair value assets and liabilities and their placement within the fair valuehierarchy levels.

 
| ** **                      | ** ** | **As Of June 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)**                      | ** ** |
|                            | ** ** | ** **                                      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Assets**                      | ** ** | ** **                                      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Available For Sale  Securities  |       | $                                               | 391        |   | $ | — |   | $ | — |   | $ | 391 |   |
|                            |       |                                            |       |   |   |   |   |   |   |
| **Liabilities**                 |       |                                            |       |   |   |   |   |   |   |
| Interest Rate Cash Flow  Hedges |       | $                                               | (11,697    | ) | $ |   |   | $ | (11,697 | ) | $ | — |   |

 

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| ** **                      | ** ** | **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)**                      | ** ** |
|                            | ** ** | ** **                                      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Assets**                      | ** ** | ** **                                      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Available For Sale  Securities  |       | $                                               | 391        |   | $ | — |   | $ | — |   | $ | 391 |   |
|                            |       |                                            |       |   |   |   |   |   |   |
| **Liabilities**                 |       |                                            |       |   |   |   |   |   |   |
| Interest Rate Cash Flow  Hedges |       | $                                               | (13,432    | ) | $ |   |   | $ | (13,432 | ) | $ | — |   |

 

For the Company’sinterest rate hedges, the Company pays a fixed rate and receives a variableinterest rate that is observable based upon a forward interest rate curve andis therefore considered a level 2 item (based on the Eurodollar rate).

 

For the Company’sassets measured at fair value on a recurring basis using significantunobservable inputs (level 3), the following amounts in thousands are areconciliation of the activity during each of the quarters within the sixmonths ended June 30, 2010 and 2009:

 
| ** **                                                                        | ** ** | **Available**  | ** ** |
|-----------------------------------------------------------------------------------|------------|----------------|------------|
| ** **                                                                        | ** ** | **For Sale**   | ** ** |
| ** **                                                                        | ** ** | **Securities** | ** ** |
| **Assets**                                                                        | ** ** | ** **     | ** ** |
| Balance  as of December 31, 2009, March 31, 2010 and June 30, 2010 |       | $              | 391        |   |
| ** **                                                                        | ** ** | ** **     | ** ** |
| ** **                                                                        | ** ** | **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      |   |

 

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

 

The Company has certain assets that are measured atfair value on a non-recurring basis under the circumstances and eventsdescribed in Note 3, Intangible Assets And Goodwill, and are adjusted tofair value only when the carrying values are more than the fair values.  The categorization of the framework used toprice the assets is considered a level 3, due to the subjective nature of theunobservable inputs used to determine the fair value.

 

Included in the following table are the majorcategories of assets measured at fair value on a non-recurring basis as of June 30,2009, along with the impairment loss, if any, recognized on the fair valuemeasurement for the six months and three months ended June 30, 2009:

 

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**Non-Recurring Assets Subject ToFair Value Measurement**

 
| ** **                   | ** ** | **As Of June 30, 2009**      | ** ** | ** **        | ** ** | ** **      | ** ** |
|------------------------------|------------|-----------------------------------|------------|-------------------|------------|-----------------|------------|
| ** **                   | ** ** | **Fair Value Measurements Using** | ** ** | ** **        | ** ** | ** **      | ** ** |
| ** **                   | ** ** | ** **                        | ** ** | **Quoted Prices** | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                   | ** ** | ** **                        | ** ** | **In Active**     | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                   | ** ** | ** **                        | ** ** | **Markets For**   | ** ** | **Significant** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                   | ** ** | ** **                        | ** ** | **Identical**     | ** ** | **Other**       | ** ** | **Significant** | ** ** | **Impairment Loss** | ** ** |
| ** **                   | ** ** | ** **                        | ** ** | **Assets Or**     | ** ** | **Observable**  | ** ** | **Unobservable** | ** ** | **June 30, 2009** | ** ** |
| ** **                   | ** ** | ** **                        | ** ** | **Liabilities**   | ** ** | **Inputs**      | ** ** | **Inputs** | ** ** | **Six Months** | ** ** | **Three Months** | ** ** |
| **Description**              | ** ** | **Total**                         | ** ** | **(Level 1)**     | ** ** | **(Level 2)**   | ** ** | **(Level 3)** | ** ** | **Ended** | ** ** | **Ended** | ** ** |
| ** **                   | ** ** | **(amounts in thousands)**        | ** ** |
| ** **                   | ** ** | ** **                        | ** ** | ** **        | ** ** | ** **      | ** ** | ** ** |   |   |   |   |   |
| Net property and equipment   |       | $                                 | 76,921     |              | $          | —          |       | $ | — |   | $ | 76,921 |   | $ | — |   | $ | — |   |
| Other intangibles, net       |       | 1,831                             |       | —            |       | —          |       | 1,831 |   | — |   | — |   |
| Goodwill                     |       | 38,168                            |       | —            |       | —          |       | 38,168 |   | 6,882 |   | 6,882 |   |
| Radio broadcasting  licenses |       | 707,852                           |       | —            |       | —          |       | 707,852 |   | 60,794 |   | 60,794 |   |
|                         |       |                              |       |              |       |            |       |   |   |   |   |   |   |
| Total                        |       | $                                 | 824,772    |              | $          | —          |       | $ | — |   | $ | 824,772 |   | $ | 67,676 |   | $ | 67,676 |   |

 

***Fair Value Of FinancialInstruments Subject To Disclosure***

 

The estimated fair value of financial instruments isdetermined using the best available market information and appropriatevaluation methodologies.  Considerablejudgment is necessary, however, in interpreting market data to develop theestimates of fair value.  Accordingly,the estimates presented are not necessarily indicative of the amounts that theCompany could realize in a current market exchange, or the value thatultimately will be realized upon maturity or disposition.  The use of different market assumptions mayhave a material effect on the estimated fair value amounts.

 

The following methods and assumptions were used toestimate the fair value of financial instruments:

 

(1) Cash and cash equivalents, accountsreceivable and accounts payable, including accrued liabilities: The carryingamount of these assets and liabilities approximates fair value because of theshort maturity of these instruments.

 

(2) Senior debt (see Note 4, Senior Debt): As of June 30,2010 and December 31, 2009, the fair value of the Company’s senior debtunder the Company’s Bank Facility was $658.2 million and $675.8 million,respectively, while the carrying value was $701.0 million and $729.0 million,respectively. The Company’s determination of the fair value was based on a riskadjusted rate.

 

(3) 7.625% Senior Subordinated Notes (see Note5): As of December 31, 2009, the fair value of the Company’s Notes was$6.0 million, while the carrying value was $6.6 million. The fair value wasbased on available market prices.  On March 8,2010, the Company redeemed at par all of the remaining $6.6 million Notesoutstanding.

 

(4) Outstanding Letters of Credit: The Companyhad a letter of credit outstanding in the amount of $0.7 million as of June 30,2010 and $1.5 million as of December 31, 2009. The Company does notbelieve it is practicable to estimate the fair value of this financialinstrument and does not expect any material loss from the resolution sinceperformance is not likely to be required.

 

**15.****                              ****DEFERREDCHARGES AND OTHER ASSETS AND OTHER LONG-TERM LIABILITIES**

 

Deferred charges and otherassets, including definite-lived intangible assets, consist of the following:

 

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| ** **                                        | ** ** | **June 30,**          | ** ** | **December 31,** | ** ** |
|---------------------------------------------------|------------|----------------------------|------------|-----------------------|------------|
| ** **                                        | ** ** | **2010**                   | ** ** | **2009**              | ** ** |
| ** **                                        | ** ** | **(amounts in thousands)** | ** ** |
| ** **                                        | ** ** | ** **                 | ** ** | ** **            | ** ** |
| Debt issuance costs, net                          |       | $                          | 7,357      |                  | $          | 3,756 |   |
| Software costs, net                               |       | 749                        |       | 1,280                 |       |
| Prepaid assets - long term                        |       | 1,917                      |       | 1,421                 |       |
| Deferred contracts and  other agreements, net     |       | 699                        |       | 743                   |       |
| Leasehold premium, net                            |       | 661                        |       | 706                   |       |
| Deposits - long term                              |       | 328                        |       | 393                   |       |
| Advertiser lists and  customer relationships, net |       | 21                         |       | 41                    |       |
| Other                                             |       | 127                        |       | 146                   |       |
|                                              |       | $                          | 11,859     |                  | $          | 8,486 |   |

 

As of June 30, 2010 and December 31, 2009,the deferred rent liabilities were $3.4 million and are included in other underlong-term liabilities.

 

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**ITEM 2.****    ****Management’s Discussion And Analysis Of FinancialCondition And Results Of Operations**

 

In preparing the discussionand analysis contained in this Item 2, we presume that readers have read orhave access to the discussion and analysis contained in our Annual Report on Form 10-K filed with the Securities and ExchangeCommission (the “SEC”) on March 15, 2010. In addition, you should read thefollowing discussion and analysis of our financial condition and results ofoperations in conjunction with our consolidated financial statements andrelated notes included elsewhere in this report. The following results ofoperations include a discussion of the six months and three months ended June 30,2010 as compared to the six months and three months ended June 30,2009.  Our results of operations duringthe relevant periods represent the operations of the radio stations owned andoperated by us.

 

Under the heading “Same Station Considerations,” weevaluate net revenues, station operating expenses and operating income bycomparing the performance of stations owned or operated by us throughout arelevant period to the performance of those same stations in the prior periodwhether or not owned or operated by us. During the fourth quarter of 2009,another party commenced the operation of certain of our tower sites, whichimpacted same station considerations for the periods presented. The operationof these tower sites by another party is part of our plan to exit the operation of non-strategic towersites. We use these comparisons to assess the effect of acquisitions anddispositions on our operations throughout the periods measured.

 

**Results of Operations**

 

The following significant factors affected our resultsof operations for the six months ended June 30, 2010 as compared to thesix months ended June 30, 2009:

 

·                  During March 2010, we amended our seniorcredit agreement (the “Amendment” to our “Bank Facility”) that increased ourinterest expense due to an increase in deferred financing expense of $5.2million, which will be amortized over the remaining term of the Bank Facility.

 

·                  During March 2010, we repurchased the remaining $6.6 million of ourthen outstanding 7.625% senior subordinated notes (the “Notes”) at par andrecognized a net loss on extinguishment of debt of $0.1 million due to thewrite-off of deferred financing expenses.

 

·                  During the six months ended June 30, 2009, we repurchased $39.4million of our Notes and recognized a net gain on extinguishment of debt of$16.1 million.

 

·                  During the second quarter of 2009, we recorded an impairment loss of $67.7million in connection with our review of certain intangible assets.

 

**Six Months Ended June 30,2010 As Compared To The Six Months Ended June 30, 2009**

 

*Same Station Considerations*:

 

During the fourth quarter of 2009, another partycommenced the operation of certain of our tower sites, which impacted samestation considerations for the periods presented.  The as reported results for the current year2010 were not affected by the operation of the towers by another party as theother party commenced operation prior to the beginning of 2010.

 

For the six months ended June 30, 2009:

 

·                  Netrevenues would have been lower by $0.6 million if we had adjusted net revenuesfor the transfer of tower operations to a third party as of the beginning ofthe period.

 

·                  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.

 

·                  Operatingincome would have been lower by $0.5 million if we had adjusted operatingincome for the transfer of tower operations to a third party as of thebeginning of the period.

 

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***Net Revenues***

 
| ** **        | ** ** | **Six Months Ended**      | ** ** |
|-------------------|------------|---------------------------|------------|
| ** **        | ** ** | **June 30, 2010**    | ** ** | **June 30, 2009** | ** ** |
| ** **        | ** ** | **(dollars in millions)** | ** ** |
| Net Revenues      |       | $                         | 186.6      |   | $ | 176.7 |   |
| Amount of Change  |       | $                         | 9.9        |   |   |   |
| Percentage Change |       | 5.6                       | %          |   |   |
|                   |            |                           |            |  |  |  |  |

 

Based upon our improved results for the current periodas well as other indicators, we expect revenues to grow for the remainder of2010.  The poor economic conditions in 2009 led to lower demand for radioadvertising.  In the first quarter of2010 and continuing through the second quarter of 2010, the economy strengthenedand business conditions improved for both the industry and for us.

 

Net revenues in the current period increased in mostof our markets.  Our net revenuesincreased the most for those radio stations located in our Boston, Denver,Rochester and San Francisco markets.

 

***Station Operating Expenses***

 
| ** **                 | ** ** | **Six Months Ended**      | ** ** |
|----------------------------|------------|---------------------------|------------|
| ** **                 | ** ** | **June 30, 2010**    | ** ** | **June 30, 2009** | ** ** |
| ** **                 | ** ** | **(dollars in millions)** | ** ** |
| Station Operating Expenses |       | $                         | 127.9      |   | $ | 125.7 |   |
| Amount of Change           |       | $                         | 2.2        |   |   |   |
| Percentage Change          |       | 1.8                       | %          |   |   |
|                            |            |                           |            |  |  |  |  |

 

The increase in station operating expenses wasprimarily due to an increase in net revenues as described above as certainvariable expenses increase with a corresponding increase in net revenues.Management expects that, due to an anticipated increase in net revenues in 2010for the reasons as described above under Net Revenues, the correlating trend ofincreased station operating expenses (primarily from increased variableexpenses) will continue for the balance of the year.

 

***Depreciation And Amortization Expense***

 
| ** **                             | ** ** | **Six Months Ended**      | ** ** |
|----------------------------------------|------------|---------------------------|------------|
| ** **                             | ** ** | **June 30, 2010**    | ** ** | **June 30, 2009** | ** ** |
| ** **                             | ** ** | **(dollars in millions)** | ** ** |
| Depreciation And  Amortization Expense |       | $                         | 6.6        |   | $ | 8.5 |   |
| Amount of Change                       |       | $                         | (1.9       | ) |   |   |
| Percentage Change                      |       | (22.4                     | )%         |   |   |
|                                        |            |                           |            |  |  |  |  |

 

Depreciation and amortization expense decreased in 2010primarily due to the decrease over the past several years in: (i) capitalexpenditures; (ii) deferred charges and other assets; and (iii) acquisitions.

 

***Corporate General AndAdministrative Expenses***

 
| ** **                                     | ** ** | **Six Months Ended**      | ** ** |
|------------------------------------------------|------------|---------------------------|------------|
| ** **                                     | ** ** | **June 30, 2010**    | ** ** | **June 30, 2009** | ** ** |
| ** **                                     | ** ** | **(dollars in millions)** | ** ** |
| Corporate General And  Administrative Expenses |       | $                         | 11.1       |   | $ | 11.6 |   |
| Amount of Change                               |       | $                         | (0.5       | ) |   |   |
| Percentage Change                              |       | (4.3                      | )%         |   |   |
|                                                |            |                           |            |  |  |  |  |

 

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Corporate general and administrative expensesdecreased primarily due to the decrease in non-cash compensation expense as nodiscretionary annual equity compensation awards were granted in 2010 andcertain awards did not impact 2010 as they were fully amortized in 2009.

 

***Operating Income (Loss)***

 
| ** **              | ** ** | **Six Months Ended**      | ** ** |
|-------------------------|------------|---------------------------|------------|
| ** **              | ** ** | **June 30, 2010**    | ** ** | **June 30, 2009** | ** ** |
| ** **              | ** ** | **(dollars in millions)** | ** ** |
| Operating Income (Loss) |       | $                         | 41.0       |   | $ | (36.9 | ) |
| Amount of Change        |       | $                         | 77.9       |   |   |   |
| Percentage Change       |       | 211.1                     | %          |   |   |
|                         |            |                           |            |  |  |  |  |

 

The increase in operating income was primarily due to:(1) the absence of an impairment loss in the current period as compared toan impairment loss of $67.7 million that was recorded in the second quarter ofthe prior year; and (2) an increase in net revenues for the reasonsdescribed above under Net Revenues, net of an increase in station operatingexpenses for the reasons described under Station Operating Expenses.

 

***Interest Expense***

 
| ** **        | ** ** | **Six Months Ended**      | ** ** |
|-------------------|------------|---------------------------|------------|
| ** **        | ** ** | **June 30, 2010**    | ** ** | **June 30, 2009** | ** ** |
| ** **        | ** ** | **(dollars in millions)** | ** ** |
| Interest Expense  |       | $                         | 14.2       |   | $ | 16.0 |   |
| Amount of Change  |       | $                         | (1.8       | ) |   |   |
| Percentage Change |       | (11.3                     | )%         |   |   |
|                   |            |                           |            |  |  |  |  |

 

The decrease in interest expense was primarily due to:(1) a decline in outstanding debt upon which interest is computed; (2) therepurchase of our Notes, which have a higher interest rate than the replacementdebt; and (3) a reduction in January 2010 of $75.0 million innotional value of an existing 3.03% fixed interest rate swap agreement.Interest rates on outstanding debt remained relatively flat during the sixmonths ended June 30, 2010 as compared to the six months ended June 30,2009.

 

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

 
| ** **                         | ** ** | **Six Months Ended**      | ** ** |
|------------------------------------|------------|---------------------------|------------|
| ** **                         | ** ** | **June 30, 2010**    | ** ** | **June 30, 2009** | ** ** |
| ** **                         | ** ** | **(dollars in millions)** | ** ** |
| Income (Loss) Before  Income Taxes |       | $                         | 26.8       |   | $ | (36.3 | ) |
| Amount of Change                   |       | $                         | 63.1       |   |   |   |
| Percentage Change                  |       | 173.8                     | %          |   |   |
|                                    |            |                           |            |  |  |  |  |

 

The increase was primarily attributable to an increasein operating income for the reasons as described above under Operating Income(Loss), which was partially offset by a $16.2 million decrease in the gain onthe retirement of our Senior Subordinated Notes as we repurchased our Notes ata discount in the prior year.

 

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***Income Taxes***

 
| ** **        | ** ** | **Six Months Ended**      | ** ** |
|-------------------|------------|---------------------------|------------|
| ** **        | ** ** | **June 30, 2010**    | ** ** | **June 30, 2009** | ** ** |
| ** **        | ** ** | **(dollars in millions)** | ** ** |
| Income Taxes      |       | $                         | 8.4        |   | $ | 0.3 |   |
| Amount of Change  |       | $                         | 8.1        |   |   |   |
| Percentage Change |       | 2700.0                    | %          |   |   |
|                   |            |                           |            |  |  |  |  |

 

Income tax expense for the current period wasprimarily due to the recording of net deferred tax liabilities associated withnon-amortizable assets such as broadcasting licenses and goodwill. Thesedeferred tax liabilities cannot be used to offset deferred tax assets.  Our income tax expense for the current periodwas offset by the reduction in liabilities from uncertain tax positionsassociated with the expiration of the statute of limitations for certain taxjurisdictions.

 

As a result of cumulative losses incurred by theCompany since 2006, a deferred tax asset valuation allowance was establisheddue to the uncertainty that the deferred tax assets would be realized in futureyears (after excluding deferred tax liabilities associated with non-amortizableassets).

 

***Net Income (Loss)***

 
| ** **        | ** ** | **Six Months Ended**      | ** ** |
|-------------------|------------|---------------------------|------------|
| ** **        | ** ** | **June 30, 2010**    | ** ** | **June 30, 2009** | ** ** |
| ** **        | ** ** | **(dollars in millions)** | ** ** |
| Net Income (Loss) |       | $                         | 18.5       |   | $ | (36.6 | ) |
| Amount of Change  |       | $                         | 55.1       |   |   |   |
| Percentage Change |       | 150.5                     | %          |   |   |
|                   |            |                           |            |  |  |  |  |

 

The net change was primarily attributable to thereasons described above under Income (Loss) Before Income Taxes and IncomeTaxes.

 

During the second quarter of 2009, we recorded animpairment loss of $67.7 million in connection with our review of certainintangible assets, which was a significant factor that affected our results ofoperations for the three months ended June 30, 2009.

 

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

 

*Same Station Considerations*:

 

During the fourth quarter of 2009, another partycommenced the operation of certain of our tower sites, which impacted samestation considerations for the periods presented.  The as reported results for the current year2010 were not affected by the operation of the towers by another party as theother party commenced operation prior to the beginning of 2010.

 

For the three months ended June 30, 2009:

 

·                  Netrevenues would have been lower by $0.3 million if we had adjusted net revenuesfor the transfer of tower operations to a third party as of the beginning ofthe period.

 

·                  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.

 

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***Net Revenues***

 
| ** **        | ** ** | **Three Months Ended**    | ** ** |
|-------------------|------------|---------------------------|------------|
| ** **        | ** ** | **June 30, 2010**    | ** ** | **June 30, 2009** | ** ** |
| ** **        | ** ** | **(dollars in millions)** | ** ** |
| Net Revenues      |       | $                         | 105.8      |   | $ | 101.3 |   |
| Amount of Change  |       | $                         | 4.5        |   |   |   |
| Percentage Change |       | 4.4                       | %          |   |   |
|                   |            |                           |            |  |  |  |  |

 

Based upon our improved results for the current periodas well as other indicators, we expect revenues to grow for the remainder of2010.  The poor economic conditions in 2009 led to lower demand for radioadvertising.  In the first quarter of2010 and continuing through the second quarter of 2010, the economystrengthened and business conditions improved for both the industry and for us.

 

Net revenues increased in most of our markets.  Our net revenues increased the most for thoseradio stations located in our Boston, Buffalo, Denver, Rochester and SanFrancisco markets.

 

***Station Operating Expenses***

 
| ** **                 | ** ** | **Three Months Ended**    | ** ** |
|----------------------------|------------|---------------------------|------------|
| ** **                 | ** ** | **June 30, 2010**    | ** ** | **June 30, 2009** | ** ** |
| ** **                 | ** ** | **(dollars in millions)** | ** ** |
| Station Operating Expenses |       | $                         | 68.5       |   | $ | 67.2 |   |
| Amount of Change           |       | $                         | 1.3        |   |   |   |
| Percentage Change          |       | 1.9                       | %          |   |   |
|                            |            |                           |            |  |  |  |  |

 

The increase in station operating expenses wasprimarily due to an increase in Net Revenues as described above as certainvariable expenses increase with a corresponding increase in net revenues.Management expects that, due to an anticipated increase in net revenues in 2010for the reasons as described above under Net Revenues, the correlating trend ofincreased station operating expenses (primarily from increased variableexpenses) will continue for the balance of the year.

 

***Depreciation And AmortizationExpense***

 
| ** **                             | ** ** | **Three Months Ended**    | ** ** |
|----------------------------------------|------------|---------------------------|------------|
| ** **                             | ** ** | **June 30, 2010**    | ** ** | **June 30, 2009** | ** ** |
| ** **                             | ** ** | **(dollars in millions)** | ** ** |
| Depreciation And  Amortization Expense |       | $                         | 3.3        |   | $ | 4.2 |   |
| Amount of Change                       |       | $                         | (0.9       | ) |   |   |
| Percentage Change                      |       | (21.4                     | )%         |   |   |
|                                        |            |                           |            |  |  |  |  |

 

Depreciation and amortization expense decreased in2010 primarily due to the decrease over the past several years in: (i) capitalexpenditures; (ii) deferred charges and other assets; and (iii) acquisitions.

 

***Corporate General AndAdministrative Expenses***

 
| ** **                                     | ** ** | **Three Months Ended**    | ** ** |
|------------------------------------------------|------------|---------------------------|------------|
| ** **                                     | ** ** | **June 30, 2010**    | ** ** | **June 30, 2009** | ** ** |
| ** **                                     | ** ** | **(dollars in millions)** | ** ** |
| Corporate General And  Administrative Expenses |       | $                         | 5.2        |   | $ | 5.9 |   |
| Amount of Change                               |       | $                         | (0.7       | ) |   |   |
| Percentage Change                              |       | (11.9                     | )%         |   |   |
|                                                |            |                           |            |  |  |  |  |

 

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Corporate general and administrative expenses decreasedprimarily due to the decrease in deferred compensation expense as a result of adecrease in the value of an unfunded deferred compensation liability as thisliability generally tracks the movements in the stock market.

 

***Operating Income (Loss)***

 
| ** **              | ** ** | **Three Months Ended**    | ** ** |
|-------------------------|------------|---------------------------|------------|
| ** **              | ** ** | **June 30, 2010**    | ** ** | **June 30, 2009** | ** ** |
| ** **              | ** ** | **(dollars in millions)** | ** ** |
| Operating Income (Loss) |       | $                         | 28.8       |   | $ | (43.7 | ) |
| Amount of Change        |       | $                         | 72.5       |   |   |   |
| Percentage Change       |       | 165.9                     | %          |   |   |
|                         |            |                           |            |  |  |  |  |

 

The increase in operating income was primarily due to:(1) the absence of an impairment loss in the current period as compared toan impairment loss of $67.7 million that was recorded in the second quarter ofthe prior year; and (2) an increase in net revenues for the reasonsdescribed above under Net Revenues, net of an increase in station operatingexpenses for the reasons described under Station Operating Expenses.

 

***Interest Expense***

 
| ** **        | ** ** | **Three Months Ended**    | ** ** |
|-------------------|------------|---------------------------|------------|
| ** **        | ** ** | **June 30, 2010**    | ** ** | **June 30, 2009** | ** ** |
| ** **        | ** ** | **(dollars in millions)** | ** ** |
| Interest Expense  |       | $                         | 7.2        |   | $ | 7.9 |   |
| Amount of Change  |       | $                         | (0.7       | ) |   |   |
| Percentage Change |       | (8.9                      | )%         |   |   |
|                   |            |                           |            |  |  |  |  |

 

The decrease in interest expense was primarily due to:(1) a decline in outstanding debt upon which interest is computed; (2) therepurchase of our Notes, which have a higher interest rate than the replacementdebt; and (3) a reduction in January 2010 of $75.0 million innotional value of an existing 3.03% fixed interest rate swap agreement.Interest rates on outstanding debt remained relatively flat during the sixmonths ended June 30, 2010 as compared to the six months ended June 30,2009.

 

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

 
| ** **                                   | ** ** | **Three Months Ended**    | ** ** |
|----------------------------------------------|------------|---------------------------|------------|
| ** **                                   | ** ** | **June 30, 2010**    | ** ** | **June 30, 2009** | ** ** |
| ** **                                   | ** ** | **(dollars in millions)** | ** ** |
| Income (Loss) Before  Income Taxes (Benefit) |       | $                         | 21.7       |   | $ | (43.1 | ) |
| Amount of Change                             |       | $                         | 64.8       |   |   |   |
| Percentage Change                            |       | 150.3                     | %          |   |   |
|                                              |            |                           |            |  |  |  |  |

 

The increase was primarily attributable to an increasein operating income for the reasons as described above under Operating Income(Loss), offset by a $8.4 million decrease in the gain on the retirement of ourSenior Subordinated Notes as we repurchased our Notes at a discount in theprior year.

 

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***Income Taxes (Benefit)***

 
| ** **             | ** ** | **Three Months Ended**    | ** ** |
|------------------------|------------|---------------------------|------------|
| ** **             | ** ** | **June 30, 2010**    | ** ** | **June 30, 2009** | ** ** |
| ** **             | ** ** | **(dollars in millions)** | ** ** |
| Income Taxes (Benefit) |       | $                         | 7.4        |   | $ | (1.2 | ) |
| Amount of Change       |       | $                         | 8.6        |   |   |   |
| Percentage Change      |       | 716.7                     | %          |   |   |
|                        |            |                           |            |  |  |  |  |

 

Income tax expense for the current period wasprimarily due to the recording of net deferred tax liabilities associated withnon-amortizable assets such as broadcasting licenses and goodwill.  These deferred tax liabilities cannot be usedto offset deferred tax assets. Our income tax expense for the current periodwas offset by the reduction in liabilities from uncertain tax positionsassociated with the expiration of the statute of limitations for certain taxjurisdictions.

 

The income tax benefit for the prior year was theresult of reducing deferred tax liabilities associated with non-amortizableassets.

 

As a result of cumulative losses incurred by theCompany since 2006, a deferred tax asset valuation allowance was establisheddue to the uncertainty that the deferred tax assets would be realized in futureyears (after excluding deferred tax liabilities associated with non-amortizableassets).

 

***Net Income (Loss)***

 
| ** **        | ** ** | **Three Months Ended**    | ** ** |
|-------------------|------------|---------------------------|------------|
| ** **        | ** ** | **June 30, 2010**    | ** ** | **June 30, 2009** | ** ** |
| ** **        | ** ** | **(dollars in millions)** | ** ** |
| Net Income (Loss) |       | $                         | 14.3       |   | $ | (41.9 | ) |
| Amount of Change  |       | $                         | 56.2       |   |   |   |
| Percentage Change |       | 134.1                     | %          |   |   |
|                   |            |                           |            |  |  |  |  |

 

The net change was primarily attributable to thereasons described above under Income (Loss) Before Income Taxes (Benefit) andIncome Taxes (Benefit).

 

**Future Impairments**

 

As part of our annual review during the secondquarter of 2010, we tested our broadcasting licenses and goodwill forimpairment. No impairment was recorded as the fair value was greater than theamount reflected on our balance sheet. Future tests could result in impairmentsbased on economic conditions at that time.

 

**Liquidity And CapitalResources**

 

***Liquidity***

 

Historically, we have carried significant amounts ofdebt. As of June 30, 2010, we had outstanding under our Bank Facility,$701.0 million, which is comprised of $336.0 million in a term loan (the “TermLoan”) and $365.0 million in drawn revolving credit facility (the “Revolver”).In addition, we have outstanding finance method lease obligations of $12.6million and a $0.7 million in a letter of credit.

 

The Term Loan reduces in quarterly amounts starting at$15 million and ultimately increasing to $60 million. We plan to fund theamortization of the Term Loan with cash flow from operations and our availableRevolver capacity.

 

As of June 30, 2010, we had $4.4 million in cashand cash equivalents. During the six months ended June 30, 2010, wedecreased our outstanding debt by $35.4 million, which includes a $0.8 millionreduction in an outstanding letter of credit.

 

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***Our CreditAgreement, As Amended***

 

OnMarch 11, 2010, we amended ourBank Facility. In connection with the Amendment, certain key terms, as definedwithin the Bank Facility, were revised as follows:

 

·                  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 on theConsolidated Leverage Ratio (Consolidated Funded Indebtedness to ConsolidatedOperating 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.

 

As of June 30, 2010, our Consolidated LeverageRatio exceeded six times.  As a result, we are in a Restricted Period.

 

Our ability to maintain compliance with our covenantswill be highly dependent on our results of operations.  If we were to enter into an agreement withour lenders for covenant compliance relief, such relief could result in higherinterest expense.

 

The undrawn amount of the Revolver was $284.3 millionas of June 30, 2010. The amount available under the Revolver is a functionof covenant compliance at the time of borrowing. Based on our financialcovenant analysis as of June 30, 2010, we would be limited to borrowingssignificantly less than the undrawn limit unless such borrowings were used torepay indebtedness or for transactions that increase cash flow for purposes ofcovenant calculation.

 

The Bank Facility requires us to comply with certainfinancial covenants which are defined terms within the agreement, including:(1) a maximum Consolidated Leverage Ratio; and (2) a minimum ratio ofConsolidated Operating Cash Flow to Consolidated Interest Charges of two times.  Management believes we are in compliance withall financial covenants and leverage ratios and all other terms of the BankFacility as of June 30, 2010.

 

We believe that over the next 12 months we cancontinue to maintain our compliance with these covenants. We believe that cashon hand and cash from operating activities, together with available borrowingsunder the Revolver, will be sufficient to permit us to meet our liquidityrequirements over the next 12 months, including our debt repayments.  Our operating cash flow remains positive andwe believe that it is adequate to fund our operating needs.  As a result, we have not been required torely upon, and we do not anticipate being required to rely upon, the Revolverto fund our operations.

 

Amending our Bank Facility or obtaining other fundingor additional financing prior to the expiration of the current agreement willbe essential since the Revolver balance outstanding will be due in full uponthe expiration of the Bank Facility on June 30, 2012.

 

The Revolver provides us with funds for workingcapital and general corporate purposes including capital expenditures, and,except as limited under the Amendment, any one or more of the following:repurchases of Class A common stock, investments, dividends andacquisitions. The Bank Facility is secured by a pledge of 100% of the capitalstock and other equity interest in all of our wholly owned subsidiaries. Inaddition, the Bank Facility, as amended, is secured by a lien on all of ourassets, other than our real property.

 

Based upon our improved results for the current periodas well as other indicators evidencing that advertiser demand continues toaccelerate, we expect revenues to grow for the remainder of 2010.  Thepoor economic conditions in 2009 led to lower demand for radioadvertising.  In the first quarter of2010 and continuing through the second quarter of 2010, the economystrengthened and business conditions improved for both the industry and for us.

 

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The Amendment in March 2010 was treated as amodification to a debt instrument.  As aresult, in the first quarter of 2010, we recorded deferred financing costs of$5.2 million related to the Amendment, which will be amortized over theremaining life of the Bank Facility on: (1) a straight-line basis for theRevolver; and (2) an effective interest rate method for the Term Loan. Inaddition, unamortized deferred financing costs of $3.1 million as of theAmendment date will continue to be amortized over the remaining life of theBank Facility.

 

***Operating Activities***

 

Net cash flows provided by operating activities were$37.1 million and $28.0 million for the six months ended June 30, 2010 and2009, respectively. The increase in 2010 was mainly attributable to an increasein net revenues, net of station operating expenses, offset by an increase inworking capital requirements of $1.1 million. Working capital requirementsincreased primarily due to an increase in accounts receivable due to theincrease in net revenues, offset by the receipt of an income tax refund.

 

***Investing Activities***

 

Net cash flows used in investing activities were $1.4million and $0.9 million for the six months ended June 30, 2010 and 2009,respectively.

 

For the six months ended June 30, 2010 and 2009,the cash used in investing activities primarily reflects $1.5 million and $1.2million, respectively, for additions to property and equipment.

 

***Financing Activities***

 

Net cash flows used in financing activities were $42.1million and $13.5 million for the six months ended June 30, 2010 and 2009,respectively.

 

For the six months ended June 30, 2010, the cashflows used in financing activities primarily reflect the reduction to our netborrowings of $28.0 million under our Revolver and Term Loan and the repurchaseat par of our Notes at $6.6 million. For the six months ended June 30,2009, the cash flows used in financing activities primarily reflect the repurchaseof our Notes at $22.9 million (after a discount of $16.6 million).

 

***Dividends***

 

Any future dividends will be at the discretion of theBoard of Directors based upon the relevant factors at the time of suchconsideration, including, without limitation, compliance with the restrictionsset forth in our Credit Facility.

 

Previously, we have used a portion of our capitalresources to pay dividends on a quarterly basis effective beginning with thefirst quarter of 2006 and ending with and including the third quarter of 2008.Our Board of Directors has not declared any dividends since that time.

 

Pursuant to our Bank Facility, as amended in March 2010,during periods when our Consolidated Leverage Ratio exceeds six times, we areprohibited from paying dividends.

 

***2009 OptionExchange Program***

 

In February 2009, our Board of Directors approvedan amendment to the Entercom Equity Compensation Plan to permit a one-timeOption Exchange Program (“2009 OEP”), which amendment was approved at the May 2009shareholders’ meeting. On April 13, 2009, we commenced the 2009 OEP(subject to shareholder approval) by making an offer to exchange to oureligible employees and non-employee directors. We offered such persons theopportunity to make an election to exchange all of their outstanding stockoptions with exercise prices equal to or greater than $11.80 per share for alesser number of restricted stock units. The exchange ratio under the 2009 OEPwas as follows:

 

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| **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              |

 

On May 15, 2009, following the May 14, 2009expiration of our 2009 OEP, we granted 0.7 million restricted stock units inexchange for 2.1 million options. As a result of the 2009 OEP, the number ofrestricted stock units that can be issued under the Plan was effectivelyincreased by 0.7 million as all restricted stock units granted did not countagainst the restricted stock sublimit. In addition, the number of awards that can be issued under the Plan waseffectively reduced by 2.1 million as all options that were exchanged will notbe available for re-grant under the Plan.

 

***Income Taxes***

 

During the six months ended June 30, 2010, wepaid $0.1 million in state income taxes. We anticipate that it will not benecessary to make any quarterly estimated federal and state income tax paymentsfor the remainder of 2010 based upon existing prepayments and expectedquarterly income subject to tax.

 

As a result of federal tax legislation during thefourth quarter of 2009 that allowed us to carryback our 2008 net operating lossfor five years rather than for two years, we recorded $7.1 million underprepaid and refundable income taxes.  On April 2,2010, we received $6.8 million in federal income tax refunds and we expect toreceive the balance of $0.3 million during the second half of 2010.

 

***CapitalExpenditures***

 

Capital expenditures for the six months ended June 30,2010 were $1.5 million. We anticipate that capital expenditures in 2010 will bebetween $3.5 million and $4.0 million.

 

**Contractual Obligations**

 

The following table reflects a summary as of June 30,2010 of our calendar contractual obligations for the remainder of the year 2010and thereafter:

 
| ** **                          | ** ** | **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)     |       | $                          | 732,832    |   | $ | 57,483 |   | $ | 675,238 |   | $ | 68 |   | $ | 43 |   |
| Operating lease  obligations        |       | 63,943                     |       | 6,029 |   | 21,739 |   | 15,501 |   | 20,674 |   |
| Finance method leaseobligations (2) |       | 31,108                     |       | 351 |   | 1,467 |   | 14,166 |   | 15,124 |   |
| Purchase obligations (3)            |       | 216,215                    |       | 33,293 |   | 99,927 |   | 47,764 |   | 35,231 |   |
| Other long-term  liabilities (4)    |       | 32,255                     |       | 95 |   | 9,263 |   | 1,091 |   | 21,806 |   |
| Total                               |       | $                          | 1,076,353  |   | $ | 97,251 |   | $ | 807,634 |   | $ | 78,590 |   | $ | 92,878 |   |

 

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(1)                                 (a)  Our Bank Facility had outstanding debt in the amount of $701.0million as of June 30, 2010. The maturity under our Bank Facility could beaccelerated if we do not maintain compliance with certain covenants.

 

(b)  The above table includes projected interestexpense under the remaining term of our Bank Facility.

 

(2)                                 Finance lease obligations outstanding include principal and interestexpense.  When our continuing involvementin this transaction ceases after an initial period of 42 months that ends inthe year

 

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2013, we expect we will discontinue finance accountingand instead treat our obligations under the accounting guidance for capital andoperating leases.

 

We will also recognize additional obligations includedin the above table that cover lease payments for the period subsequent to theinitial period of 42 months of continuing involvement. The minimum term foreach of the leases is 20 years, which covers the period of continuinginvolvement and the period subsequent to continuing involvement. For furtherdiscussion, see Note 6, Financing Method Lease Obligations, in the accompanyingnotes to the financial statements.

 

(3)                                 (a)  We have purchase obligations of $215.5 million, includingcontracts primarily for on-air personalities, sports programming rights,ratings services, music licensing fees, equipment maintenance and certain otheroperating contracts.

(b)  We have $0.7 million in liabilitiesprimarily related to our obligation to provide a letter of credit.

 

(4)                                 Included within total other long-term liabilities of $32.3 million aredeferred income tax liabilities of $9.1 million that are recognized for alltemporary differences between the tax and financial reporting bases of ourassets and liabilities based on enacted tax laws and statutory tax ratesapplicable to the periods in which the differences are expected to affecttaxable income. Deferred tax liabilities may vary according to changes in taxlaws, tax rates and our operating results. It is impractical to determinewhether there will be a cash impact to an individual year. Therefore, deferredincome tax liabilities, together with liabilities for uncertain tax positions,are reflected in the above table in the column labeled as “More Than 5 Years”as it is impractical to determine whether there will be a cash impact to anindividual year.  See Note 12, IncomeTaxes, in the accompanying notes to the consolidated financial statements for adiscussion of deferred tax liabilities, including liabilities for uncertain taxpositions.

 

**Off-Balance Sheet Arrangements**

 

Variable interest entity accounting was not applicableas of June 30, 2010 as we had no pending transactions to acquire or disposeof radio station assets.  As of June 30,2010, we had no other off-balance sheet arrangements.

 

**Recent Accounting Pronouncements**

 

See Note 1 to the accompanying financial statements,Basis Of Presentation - New Accounting Pronouncements, for a discussion of thestatus and potential impact of new accounting pronouncements.

 

**Critical Accounting Policies**

 

The SEC defines critical accounting policies as thosethat are most important to the portrayal of a company’s financial condition andresults and that require management’s most difficult, subjective or complexjudgments, often as a result of the need to make estimates about the effect ofmatters that are inherently uncertain.

 

There have been no material changes to our criticalaccounting policies from the information provided in Part II, Item 7,“Management’s Discussion and Analysis of Financial Condition and Results ofOperations,” under the heading “Critical Accounting Policies” in our AnnualReport on Form 10-K for the year ended December 31, 2009.  We have, however, provided additionaldisclosures to one of our critical accounting policies for impairment testingof radio broadcasting licenses and goodwill as we conducted our annualimpairment test of broadcasting licenses and goodwill during the second quarterof 2010.

 

***Radio BroadcastingLicenses And Goodwill***

 

We have made acquisitions in the past for which asignificant amount of the purchase price was allocated to broadcasting licensesand goodwill assets. As of June 30, 2010, we have recorded approximately$746.0 million in radio broadcasting licenses and goodwill, which represents81.7% of our total assets at that date. We must conduct impairment testing atleast annually, or more frequently if events or changes in circumstancesindicate that the asset might be impaired, and charge to operations animpairment expense only in the periods in which the recorded value of theseassets is more than their fair value. After an impairment expense isrecognized, the recorded value of these assets will be reduced by theimpairment recognized and this shall be the assets’ new accounting basis. In2009 and

 

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2008, we recorded impairment losses of $67.7 millionand $835.7 million, respectively, for radio broadcasting licenses and goodwill.

 

We believe our estimate of the value of our radiobroadcasting licenses and goodwill assets is a critical accounting estimate asthe value is significant in relation to our total assets, and our estimate ofthe value uses assumptions that incorporate variables based on past experiencesand judgments about future performance of our stations. These variables includebut are not limited to: (1) the risk-adjusted discount rate used in thevaluation of fair value; (2) market share and profit margin of an averagestation within a market based upon market size and station type; (3) theforecast growth rate of each radio market, including assumptions regarding eachmarket’s population, household income, retail sales and other factors thatwould influence advertising expenditures; (4) estimated capital start-upcosts and losses incurred during the early years; (5) the likely mediacompetition within the market area; (6) an effective tax rate assumption;and (7) future terminal values. Changes in our estimates of the fair value of these assets could resultin material future period write-downs in the carrying value of our broadcastinglicenses and goodwill assets.

 

**Broadcasting Licenses**

 

We perform our broadcastinglicense impairment test by evaluating our broadcasting licenses for impairmentat the market 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.

 

We completed the impairment test for broadcastinglicenses during the second quarter of 2010 and determined that the fair valueof the broadcasting licenses was more than the amount reflected in the balancesheet for each of our markets and accordingly, no impairment was recorded.

 

The methodology used by usin determining our key estimates and assumptions was applied consistently toeach market. As a result, the analysis for each market is the same. Of theseven variables identified above, we believe that the first three (in clauses (1) through(3) above) are the most important to the determination of fair value. Thefollowing table reflects these estimates and assumptions used in 2010 ascompared to the second quarter of 2009, the date of the most recent priorimpairment test.   In general, when comparing the second quarter of 2010 to the secondquarter of 2009: (1) the discount rate decreased primarily due to adecrease in the estimated required returns on debt and equity of publically traded radio companies; (2) themarket specific operating profit margin range remained relatively flat; and (3) themarket long-term revenue growth rates were marginally higher for many marketsas 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%   |       |

 

We believe we have made reasonable estimates andassumptions to calculate the fair value of our broadcasting licenses, however,these estimates and assumptions could be materially different than actualresults. If actual market conditions are less favorable than those projected bythe industry or by us, or if events occur or circumstances change that wouldreduce the fair value of our broadcasting licenses below the amount reflectedin the balance sheet, we may be required to recognize impairment charges, whichcould be material, in future periods.

 

The table below presents the percentage within a rangeby which the fair value exceeded the carrying value of our radio broadcastinglicenses as of June 30, 2010 for 19 units of accounting where the carryingvalue of the licenses are considered material to our financial statements (19geographical markets).  Rather thanpresenting the percentage separately for each unit of accounting, management’sopinion is that this table in summary form is more meaningful to the reader inassessing the recoverability of the broadcasting licenses. In addition, theunits of accounting are not disclosed with the specific market name as suchdisclosure could 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**

 

We performed our annual impairment test on ourgoodwill during the second quarter of 2010 by comparing the fair value for eachreporting unit with the amount reflected on the balance sheet. We determinedthat a radio market is a reporting unit and, in total, we assessed goodwill at19 separate reporting units (three of our 22 reporting units have no goodwillrecorded as of June 30, 2010). If the fair value of any reporting unit isless than the amount reflected in the balance sheet, an indication exists thatthe amount of goodwill attributed to a reporting unit may be impaired, and weare required to perform a second step of the impairment test. In the secondstep, we compare the amount reflected in the balance sheet to the implied fairvalue of the reporting unit’s goodwill, determined by allocating the reportingunit’s fair value to all of its assets and liabilities in a manner similar to apurchase price allocation.

 

To determine the fair value, we use an income andmarket approach for each reporting unit. The market approach compares recentsales and offering prices of similar properties. The income approach uses thesubject property’s income generated over a specified time and capitalized at anappropriate market rate to arrive at an indication of the most probable sellingprice.

 

In step one of our goodwill analysis, we consideredthe results of the market approach and the income approach in computing thefair value of our reporting units. In the market approach, we 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.

 

In the income approach, we utilized the discountedcash flow method to calculate the fair value of the reporting unit (thekey estimates and assumptions are included in the table below). The results ofstep one indicated that it was not necessary to perform the second stepanalysis in any of the markets tested. As a result of the step one test, noimpairment loss was recorded during the second quarter of 2010. We performed areasonableness test by comparing the fair value results for goodwill by usingthe implied multiple based on our cash flow performance and our current stockprice and comparing the results to prevailing radio broadcast transactionmultiples.

 

The following table reflects certain key estimates andassumptions used in 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 publically 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%   |       |

 

The table below presents the percentage within a rangeby which the fair value exceeded the carrying value of the reporting unit as ofJune 30, 2010 for 19 reporting units under step one of the goodwillimpairment test during the second quarter of 2010.  Rather than presenting the percentageseparately for each reporting unit, management’s opinion is that this table insummary form is more meaningful to the reader in assessing the recoverabilityof the reporting unit, including goodwill. In addition, the reporting units arenot disclosed with the specific market name as such disclosure could be competitivelyharmful 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 |   |
|                                |            |                                                                  |            |  |  |  |  |  |  |  |  |  |  |

 

**Sensitivity Of Key Broadcasting Licenses And Goodwill Assumptions**

 

If we were to assume a 100 basis point change incertain of our key assumptions (a reduction in the long-term revenue growthrate, a reduction in the operating performance cash flow and an increase in theweighted average cost of capital) used to determine the fair value of ourbroadcasting licenses and goodwill during the second quarter of 2010, thefollowing would be the incremental impact:

 

**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               |       | $                          | 19,670.9   |            | $          | 11,557.0       |       | $ | 46,477.2 |   |
| Incremental broadcasting  licenses impairment           |       | 19,670.9                   |       | 11,557.0        |       | 46,477.2       |       |
|                                                    |       |                       |       |            |       |           |       |
| Goodwill                                                |       |                       |       |            |       |           |       |
| Impairment assumption  sensitivity result               |       | 1,050.1                    |       | 1,176.4         |       | 912.1          |       |
| Incremental goodwill  impairment                        |       | 1,050.1                    |       | 1,176.4         |       | 912.1          |       |
|                                                    |       |                       |       |            |       |           |       |
| Total incremental  impairment from sensitivity analysis |       | $                          | 20,721.0   |            | $          | 12,733.4       |       | $ | 47,389.3 |   |

 

The discount rate to be used by a typical marketparticipant reflects the risk inherent in future cash flows for the broadcastindustry. The same discount rate was used for each of our markets. The discountrate is calculated by weighting the required returns on interest-bearing debt andcommon equity capital in proportion to their estimated

 

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percentages in an expected capital structure.  The capital structure was estimated basedupon data available for publicly traded companies in the broadcast industry.

 

Operating profit margins are defined as profit beforeinterest, depreciation and amortization, income tax and corporate allocationcharges.  Operating profits are thendivided by broadcast revenues, net of agency and national representativecommissions, to compute the operating profit margins.  Operating profit margins are projected basedupon industry operating profit norms, which reflect market size and stationtype.  This assumption is not specific tothe performance 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.

 

To determine the radio broadcasting industry’s futurerevenue growth rate, management uses publicly available information on industryexpectations rather than management’s own estimates, which could be different.In addition, these long-term market growth rate estimates could vary in each ofour markets. Using the publicly available information on industry expectations,each market’s revenues were forecasted over a ten-year projection period toreflect the expected long-term growth rate for the radio broadcast industry,which was further adjusted for each of our markets.  If the industry’s growth is less thanforecasted, then the fair value of our broadcasting licenses could benegatively impacted.

 

Please refer to Note 3, in the accompanying notes tothe financial statements for a discussion of intangible assets and goodwill.

 

For a more comprehensive list of our accountingpolicies, please see Note 2, Significant Accounting Policies, accompanying theconsolidated financial statements included in our latest annual report on Form 10-Kfor the year ended December 31, 2009. Note 2 to the consolidated financial statements included with Form 10-Kcontains several other policies, including policies governing the timing ofrevenue recognition, 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**

 

We are exposed to market risk from changes in interestrates on our variable rate senior debt. From time to time, we may seek to limit our exposure to interest ratevolatility through the use of derivative rate hedging instruments.  If the borrowing rates under LIBOR were toincrease 1% above the current rates as of June 30, 2010, our interestexpense on our senior debt would increase by approximately $3.1 million on anannual basis, including any interest benefit or interest expense associatedwith the use of derivative rate hedging instruments as described below.

 

The following derivative rate hedging transactions,which fix interest on our variable rate debt, are outstanding as of June 30,2010 in the aggregate notional amount of $475.0 million. These rate hedgingtransactions are 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        |       | 4.00       | %          |  ]    | February 28, 2011  |                  |
| Floor      | 2.14       | %                 |
| 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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The fair value (based upon current market rates) ofthe rate hedging transactions is included as derivative instruments inlong-term assets and/or liabilities for those instruments with maturity datesgreater than one year and short-term assets and or liabilities for thoseinstruments with maturity dates less than one year. The fair value of thehedging transactions is affected by a combination of several factors, includingthe change in the one-month LIBOR rate and the forward interest rate tomaturity. Any increase in the one-month LIBOR rate and/or the forward interestrate to maturity results in a more favorable valuation, while any decrease in theone-month LIBOR rate and/or forward interest rate to maturity results in a lessfavorable valuation. Our credit exposure under these hedging agreements, orsimilar agreements we may enter into in the future, is the cost of replacing anagreement in the event of non-performance by our counter-party.

 

As of June 30, 2010, the fair value of ourderivative instruments was a liability of $11.7 million, which represented amarginal decrease in liability from the balance as of December 31,2009.  The positive change was primarilydue to the effect of a decrease in the remaining period of each derivativeinstrument, offset by a decrease in the forward interest rate curve to maturityfor those derivatives with longer remaining lives. The liability as of June 30,2010 included a reduction in value for non-performance in accordance with theaccounting provisions for fair value measurement.

 

Our cash equivalents are money market instrumentsconsisting of short-term government securities and repurchase agreements that arefully collateralized by government securities. We do not believe that we have any material credit exposure with respectto these assets.

 

Our credit exposure related to our accounts receivabledoes not represent a significant concentration of credit risk due to thequantity of advertisers, the minimal reliance on any one advertiser, themultiple markets in which we operate and the wide variety of advertisingbusiness sectors.

 

See also additional disclosures regarding liquidityand capital resources made under Liquidity and Capital Resources in Part 1, Item2, above.

 

**ITEM 4.****                                               ****Controls And Procedures**

 

**Evaluation Of Controls And Procedures**

 

We maintain “disclosure controls and procedures” (asdefined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) thatare designed to ensure that: (i) information required to be disclosed inour Exchange Act reports is recorded, processed, summarized and reported withinthe time periods specified in the Securities and Exchange Commission’s rules andforms; and (ii) such information is accumulated and communicated to ourmanagement, including our Chief Executive Officer and Chief Financial Officer,as appropriate, to allow for timely decisions regarding required disclosure. Indesigning and evaluating our disclosure controls and procedures, our managementrecognizes that any controls and procedures, no matter how well designed andoperated, can provide only reasonable assurance of achieving the desiredcontrol objectives, and our management is required to apply its judgment inevaluating the cost-benefit relationship of possible controls and procedures.

 

We carried out an evaluation, under the supervisionand with the participation of our management, including our Chief ExecutiveOfficer and Chief Financial Officer, of the effectiveness of our disclosurecontrols and procedures as of the end of the period covered by thisreport.  Based on the foregoing, our President/Chief Executive Officer andExecutive Vice President - Operations/Chief Financial Officer concluded that ourdisclosure controls and procedures were effective at the reasonable assurancelevel.

 

**Changes In Internal Control OverFinancial Reporting**

 

There has been no change in our internal control overfinancial reporting during our most recent fiscal quarter that has materiallyaffected, or is reasonably likely to materially affect, our internal controlover financial reporting.

 

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**PART II**

**OTHERINFORMATION**

 

**ITEM 1.****                                               ****Legal Proceedings**

 

There were no material developments relating to thelegal proceedings described in our Annual Report on Form 10-K for the yearended December 31, 2009, filed with the Securities and Exchange Commissionon March 15, 2010.

 

**ITEM 1A.****                                      ****Risk Factors**

 

There have been no material changes from the RiskFactors described in our Form 10-K, filed with the SEC on March 15,2010.

 

**ITEM 2.****                                               ****Unregistered Sales Of Equity Securities And Use Of Proceeds**

 

During the three-month period ending June 30,2010, we withheld shares of stock upon the vesting of restricted stock units tocover withholding tax obligations, unless an employee elected to pay such taxin cash.  The following table provides information on shares withheld(which are considered repurchased) during the three-month period ended June 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**     | ** ** |
| April 1,  2010 - April 30, 2010 |       | —        |       | $             | —     |             | —     |                | $          | — |   |
| May 1,  2010 - May 31, 2010     |       | 287           |       | $             | 13.36      |             | —     |                | $          | — |   |
| June 1,  2010 - June 30, 2010   |       | 22,928        |       | $             | 9.43       |             | —     |                | $          | — |   |
|                                      |       |          |       |          |       |             |       |                |       |
| Total                                     |       | 23,215        |       |          |       | —           |       |                |       |

 

In connection with employee tax obligations related tothe vesting of restricted stock units during the three months ended June 30,2010 and in accordance with elections by certain employees, we are deemed tohave repurchased the shares withheld to satisfy employees’ tax obligations of: (i) 287shares at an average price of $13.36 per share in May 2010; and (ii) 22,928shares at an average price of $9.43 per share in June 2010. These sharesare included in the above table.

 

**ITEM 3.****                                               ****Defaults Upon Senior Securities**

 

None.

 

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

 

None.

 

**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)                                                                                                                  |
|               |       |                                                                                                                                                                                         |
| 10.01              |       | Consent to Receive Annual Bonus in the Form of  Equity, made by David J. Field for the benefit of Entercom Communications  Corp. dated May 4, 2010.  (3)                           |
|               |       |                                                                                                                                                                                         |
| 10.02              |       | Consent to Receive Annual Bonus in the Form of  Equity, made by Stephen F. Fisher for the benefit of Entercom Communications  Corp. dated May 4, 2010.  (3)                        |
|               |       |                                                                                                                                                                                         |
| 10.03              |       | Consent to Receive Annual Bonus in the Form of  Equity, made by John C. Donlevie for the benefit of Entercom Communications  Corp. dated May 4, 2010.  (3)                         |
|               |       |                                                                                                                                                                                         |
| 10.04              |       | Entercom Non-employee  Director Compensation Policy, adopted May 18, 2010.  (3)                                                                                                         |
|               |       |                                                                                                                                                                                         |
| 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 toRegistration 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 December21, 2007 and Exhibit 3.02 of our Quarterly Report on Form 10-Q for the quarterended June 30, 2009, as filed on August 5, 2009.

(2)                                 Incorporated by reference to Exhibit 3.1 of our Current Report on Form8-K as filed on February 21, 2008.

(3)                                 Filed herewith.

(4)                                 These exhibits are submitted herewith as “accompanying” this QuarterlyReport on Form 10-Q and shall not be deemed to be “filed” as part of such QuarterlyReport on Form 10-Q.

 

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**SIGNATURES**

 

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized.

 

 
| ** **           | **ENTERCOM COMMUNICATIONS CORP.**                                                                       |
|----------------------|---------------------------------------------------------------------------------------------------------|
|                 | (Registrant)                                                                                            |
|                 |                                                                                                    |
|                 |                                                                                                    |
| Date: August 2, 2010 | /S/ David J. Field                                                                                      |
|                 | Name: David J. Field                                                                                    |
|                 | Title: President and Chief Executive Officer                                                            |
|                 | (principal executive officer)                                                                           |
|                 |                                                                                                    |
|                 |                                                                                                    |
| Date: August 2, 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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Table ofContents

 

**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)                                                                                                                  |
|               |       |                                                                                                                                                                                         |
| 10.01              |       | Consent to Receive Annual Bonus in the Form of  Equity, made by David J. Field for the benefit of Entercom Communications  Corp. dated May 4, 2010.  (3)                           |
|               |       |                                                                                                                                                                                         |
| 10.02              |       | Consent to Receive Annual Bonus in the Form of  Equity, made by Stephen F. Fisher for the benefit of Entercom Communications  Corp. dated May 4, 2010.  (3)                        |
|               |       |                                                                                                                                                                                         |
| 10.03              |       | Consent to Receive Annual Bonus in the Form of  Equity, made by John C. Donlevie for the benefit of Entercom Communications  Corp. dated May 4, 2010.  (3)                         |
|               |       |                                                                                                                                                                                         |
| 10.04              |       | Entercom Non-employee  Director Compensation Policy, adopted May 18, 2010.  (3)                                                                                                         |
|               |       |                                                                                                                                                                                         |
| 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 toRegistration 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 December21, 2007 and Exhibit 3.02 of our Quarterly Report on Form 10-Q for the quarterended June 30, 2009, as filed on August 5, 2009.

(2)                                 Incorporated by reference to Exhibit 3.1 of our Current Report on Form8-K as filed on February 21, 2008.

(3)                                 Filed herewith.

(4)                                 These exhibits are submitted herewith as “accompanying” this QuarterlyReport on Form 10-Q and shall not be deemed to be “filed” as part of suchQuarterly Report on Form 10-Q.

 

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