**Table of Contents**

** **

 

** **

**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C.  20549**

 

**FORM 10-Q**

 

**(Mark One)**

 

| **x**                                                  | **QUARTERLY REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**  |
|--------------------------------------------------------|---------------------------------------------------------------------------------------------------------|
|                                                   |
| **For the quarterly period ended June 30,  2009** |
|                                                   |
| **or**                                                 |
|                                                   |
| **o**                                                  | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

 

**For thetransition 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, Pennsylvania 19004**

(Address of principal executive offices andzip code)

 

**(610) 660-5610**

(Registrant’s telephone number, includingarea code)

 

 

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

 

Indicate by check mark whether the registrant(1) has filed all reports required to be filed by Section 13 or 15(d) ofthe Securities 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 oNo o

 

Indicate by check mark whether the registrantis a large accelerated filer, an accelerated filer, a non-accelerated filer, ora smaller reporting company.  See thedefinitions of “large accelerated filer,” “accelerated filer” and “smallerreporting company” in Rule 12b-2 of the Exchange Act.

 

| Large accelerated filer o                     |   | Accelerated filer x         |
|-----------------------------------------------|--------|-----------------------------|
|                                          |   |                        |
| Non-accelerated filer o                       |   | Smaller reporting company o |
| (Do not check if a smaller reporting company) |   |                        |

 

Indicate by check mark whether the registrantis a shell company (as defined in Rule 12b-2 of the Exchange Act). 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 common stock, $.01 par value –29,624,523 Shares Outstanding as of July 29, 2009

(Class A Shares Outstanding include1,942,686 unvested and vested but deferred restricted stock units)

Class B common stock, $.01 par value –7,607,532 Shares Outstanding as of July 29, 2009

 

 

** **

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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 | 34 |
| Item 3.                                                       | Quantitative  and Qualitative Disclosures About Market Risk                                 | 45 |
| Item 4.                                                       | Controls and  Procedures                                                                    | 46 |
|                                                          |                                                                                        |   |
| **Part II     Other Information**         |                                                                                        |
|                                                          |                                                                                        |   |
| Item 1.                                                       | Legal Proceedings                                                                           | 46 |
| Item  1A.                                                     | Risk Factors                                                                                | 46 |
| Item 2.                                                       | Unregistered  Sales of Equity Securities and Use of Proceeds                                | 46 |
| Item 3.                                                       | Defaults Upon  Senior Securities                                                            | 47 |
| Item 4.                                                       | Submission of  Matters to a Vote of Security Holders                                        | 47 |
| Item 5.                                                       | Other Information                                                                           | 48 |
| Item  6.                                                      | Exhibits                                                                                    | 49 |
|                                                          |                                                                                        |   |
| **Signatures**                                                |                                                                                        | 50 |
|                                                          |                                                                                        |   |
| **Exhibit Index**                                        |                                                                                        | 51 |

 

**Private Securities Litigation Reform Act SafeHarbor Statement**

 

In addition to historical information, this report contains statementsby us with regard to our expectations as to financial results and other aspectsof our business that involve risks and uncertainties and may constituteforward- looking statements within the meaning of Section 27A of theSecurities Act of 1933 and Section 21E of the Securities Exchange Act of1934.

 

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

 

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

 

Key risks to our company are described in our Annual Report on Form 10-Kfiled with the Securities and Exchange Commission on February 26, 2009 andas may be supplemented by the risks described under Part II, Item 1A, ofour quarterly reports on Form 10-Q and in our Current Reports on Form 8-K.

 

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** **

**PART I**

 

**FINANCIAL INFORMATION**

 

**ITEM 1.     Financial Statements**

** **

**ENTERCOM COMMUNICATIONS CORP.**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

**(amounts in thousands)**

**(unaudited)**

 

**ASSETS**

 
| ** **                                                   | ** ** | **JUNE 30,** | ** ** | **DECEMBER 31,** | ** ** |
|--------------------------------------------------------------|------------|--------------|------------|------------------|------------|
| ** **                                                   | ** ** | **2009**     | ** ** | **2008**         | ** ** |
| **CURRENT ASSETS:**                                          |       |         |       |             |       |
| Cash and cash equivalents                                    |       | $            | 17,915     |             | $          | 4,284 |   |
| Accounts receivable, net of allowance for doubtful  accounts |       | 72,841       |       | 75,354           |       |
| Prepaid expenses and deposits                                |       | 5,189        |       | 4,801            |       |
| Prepaid and refundable income taxes                          |       | 533          |       | 628              |       |
| Short-term investment                                        |       | 23           |       | 23               |       |
| Total current assets                                         |       | 96,501       |       | 85,090           |       |
|                                                         |       |         |       |             |       |
| **INVESTMENTS**                                              |       | 1,370        |       | 1,376            |       |
|                                                         |       |         |       |             |       |
| **PROPERTY AND EQUIPMENT:**                                  |       |         |       |             |       |
| Land, land easements and land improvements                   |       | 16,498       |       | 16,486           |       |
| Buildings                                                    |       | 21,001       |       | 20,964           |       |
| Equipment                                                    |       | 123,376      |       | 122,986          |       |
| Furniture and fixtures                                       |       | 15,513       |       | 15,029           |       |
| Leasehold improvements                                       |       | 21,235       |       | 21,129           |       |
|                                                         |       | 197,623      |       | 196,594          |       |
| Accumulated depreciation                                     |       | (120,443     | )          | (113,036         | )          |
|                                                         |       | 77,180       |       | 83,558           |       |
| Capital improvements in progress                             |       | 1,150        |       | 1,306            |       |
| Net property and equipment                                   |       | 78,330       |       | 84,864           |       |
|                                                         |       |         |       |             |       |
| **RADIO BROADCASTING LICENSES**                              |       | 707,852      |       | 768,646          |       |
|                                                         |       |         |       |             |       |
| **GOODWILL**                                                 |       | 38,168       |       | 45,050           |       |
|                                                         |       |         |       |             |       |
| **DEFERRED CHARGES AND OTHER ASSETS - Net**                  |       | 9,978        |       | 11,708           |       |
|                                                         |       |         |       |             |       |
| **TOTAL**                                                    |       | $            | 932,199    |             | $          | 996,734 |   |

 

**See notes to condensed consolidated financialstatements.**

 

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**ENTERCOM COMMUNICATIONS CORP.**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

**(amounts in thousands)**

**(unaudited)**

** **

**LIABILITIES AND SHAREHOLDERS’ EQUITY**

** **
| ** **                                   | ** ** | **JUNE 30,** | ** ** | **DECEMBER 31,** | ** ** |
|----------------------------------------------|------------|--------------|------------|------------------|------------|
| ** **                                   | ** ** | **2009**     | ** ** | **2008**         | ** ** |
| **CURRENT LIABILITIES:**                     |       |         |       |             |       |
| Accounts payable                             |       | $            | 387        |             | $          | 352 |   |
| Accrued expenses                             |       | 15,503       |       | 15,231           |       |
| Accrued liabilities:                         |       |         |       |             |       |
| Salaries                                     |       | 7,302        |       | 7,484            |       |
| Interest                                     |       | 1,269        |       | 2,343            |       |
| Advertiser obligations and other commitments |       | 1,250        |       | 1,197            |       |
| Other                                        |       | 5,200        |       | 5,684            |       |
| Current portion of long-term debt            |       | 60,023       |       | 30,023           |       |
| Total current liabilities                    |       | 90,934       |       | 62,314           |       |
|                                         |       |         |       |             |       |
| **LONG-TERM LIABILITIES:**                   |       |         |       |             |       |
| Senior debt                                  |       | 701,162      |       | 720,174          |       |
| 7.625% senior subordinated notes             |       | 44,056       |       | 83,500           |       |
| Other long-term liabilities                  |       | 28,054       |       | 30,489           |       |
| Total long-term liabilities                  |       | 773,272      |       | 834,163          |       |
| Total liabilities                            |       | 864,206      |       | 896,477          |       |
|                                         |       |         |       |             |       |
| **CONTINGENCIES AND COMMITMENTS**            |       | —       |       | —           |       |
|                                         |       |         |       |             |       |
| **SHAREHOLDERS’ EQUITY:**               |       |         |       |             |       |
| Preferred stock                              |       | —       |       | —           |       |
| Class A, B and C common stock           |       | 371          |       | 371              |       |
| Additional paid-in capital                   |       | 585,126      |       | 582,325          |       |
| Accumulated deficit                          |       | (503,601     | )          | (467,177         | )          |
| Accumulated other comprehensive loss         |       | (13,903      | )          | (15,262          | )          |
| Total shareholders’ equity              |       | 67,993       |       | 100,257          |       |
|                                         |       |         |       |             |       |
| **TOTAL**                                    |       | $            | 932,199    |             | $          | 996,734 |   |

 

**See notesto condensed consolidated financial statements.**

 

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**ENTERCOM COMMUNICATIONS CORP.**

**CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**

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

**(unaudited)**

 
| ** **                                                                                                      | ** ** | **SIX MONTHS ENDED** | ** ** |
|-----------------------------------------------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                                                                      | ** ** | **JUNE 30,**         | ** ** |
| ** **                                                                                                      | ** ** | **2009**             | ** ** | **2008** | ** ** |
|                                                                                                            |       |                 |       |   |   |
| **NET REVENUES**                                                                                                |       | $                    | 176,671    |   | $ | 219,170 |   |
|                                                                                                            |       |                 |       |   |   |
| **OPERATING (INCOME) EXPENSE:**                                                                                 |       |                 |       |   |   |
| Station operating expenses, including non-cash  compensation expense of $762 in 2009 and $1,113 in 2008         |       | 125,733              |       | 138,615 |   |
| Depreciation and amortization expense                                                                           |       | 8,540                |       | 11,535 |   |
| Corporate general and administrative expenses,  including non-cash expense of $2,937 in 2009 and $4,605 in 2008 |       | 11,584               |       | 15,355 |   |
| Impairment loss                                                                                                 |       | 67,676               |       | 184,587 |   |
| Net time brokerage agreement income                                                                             |       | (2                   | )          | (143 | ) |
| Net gain on sale or disposal of assets                                                                          |       | —               |       | (9,999 | ) |
| Total operating expense                                                                                         |       | 213,531              |       | 339,950 |   |
| **OPERATING LOSS**                                                                                              |       | (36,860              | )          | (120,780 | ) |
|                                                                                                            |       |                 |       |   |   |
| **OTHER (INCOME) EXPENSE:**                                                                                     |       |                 |       |   |   |
| Interest expense, including amortization of deferred  financing expense of $776 in 2009 and $842 in 2008        |       | 15,972               |       | 24,410 |   |
| Interest and dividend income                                                                                    |       | (17                  | )          | (267 | ) |
| Net gain on extinguishment of debt                                                                              |       | (16,128              | )          | (2,384 | ) |
| Net gain on derivative instruments                                                                              |       | —               |       | (34 | ) |
| Loss on investments                                                                                             |       | —               |       | 211 |   |
| Other income                                                                                                    |       | (380                 | )          | (3,256 | ) |
| **TOTAL OTHER (INCOME) EXPENSE**                                                                                |       | (553                 | )          | 18,680 |   |
|                                                                                                            |       |                 |       |   |   |
| **LOSS FROM CONTINUING OPERATIONS**                                                                             |       |                 |       |   |   |
| **BEFORE INCOME TAXES (BENEFIT)**                                                                               |       | (36,307              | )          | (139,460 | ) |
|                                                                                                            |       |                 |       |   |   |
| **INCOME TAXES (BENEFIT)**                                                                                      |       | 270                  |       | (52,336 | ) |
| **LOSS FROM CONTINUING OPERATIONS**                                                                             |       | (36,577              | )          | (87,124 | ) |
| Loss from discontinued operations, net of income tax  benefit                                                   |       | —               |       | (3,977 | ) |
| **NET LOSS**                                                                                                    |       | $                    | (36,577    | ) | $ | (91,101 | ) |
|                                                                                                            |       |                 |       |   |   |
| **NET LOSS PER SHARE - BASIC AND DILUTED**                                                                      | ** ** | ** **           | ** ** | ** ** | ** ** |
| Loss from continuing operations                                                                                 |       | $                    | (1.03      | ) | $ | (2.34 | ) |
| Loss from discontinued operations, net of income tax  benefit                                                   |       | —               |       | (0.10 | ) |
| **NET LOSS PER SHARE - BASIC AND DILUTED**                                                                      |       | $                    | (1.03      | ) | $ | (2.44 | ) |
|                                                                                                            |       |                 |       |   |   |
| **DIVIDENDS DECLARED AND PAID PER COMMON SHARE**                                                                |       | $                    | —     |   | $ | 0.48 |   |
|                                                                                                            |       |                 |       |   |   |
| **WEIGHTED AVERAGE SHARES:**                                                                                    |       |                 |       |   |   |
| Basic and Diluted                                                                                               |       | 35,342,509           |       | 37,304,858 |   |

 

**See notes to condensed consolidated financialstatements.**

 

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**ENTERCOM COMMUNICATIONS CORP.**

**CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**

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

**(unaudited)**

 
| ** **                                                                                                      | ** ** | **THREE MONTHS ENDED** | ** ** |
|-----------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|
| ** **                                                                                                      | ** ** | **JUNE 30,**           | ** ** |
| ** **                                                                                                      | ** ** | **2009**               | ** ** | **2008** | ** ** |
|                                                                                                            |       |                   |       |   |   |
| **NET REVENUES**                                                                                                |       | $                      | 101,300    |   | $ | 123,780 |   |
|                                                                                                            |       |                   |       |   |   |
| **OPERATING (INCOME) EXPENSE:**                                                                                 |       |                   |       |   |   |
| Station operating expenses, including non-cash  compensation expense of $672 in 2009 and $730 in 2008           |       | 67,164                 |       | 74,525 |   |
| Depreciation and amortization expense                                                                           |       | 4,224                  |       | 5,533 |   |
| Corporate general and administrative expenses,  including non-cash expense of $1,235 in 2009 and $1,415 in 2008 |       | 5,897                  |       | 7,020 |   |
| Impairment loss                                                                                                 |       | 67,676                 |       | 184,587 |   |
| Net time brokerage agreement income                                                                             |       | —                 |       | (45 | ) |
| Net (gain) loss on sale or disposal of assets                                                                   |       | (7                     | )          | 22 |   |
| Total operating expense                                                                                         |       | 144,954                |       | 271,642 |   |
| **OPERATING LOSS**                                                                                              |       | (43,654                | )          | (147,862 | ) |
|                                                                                                            |       |                   |       |   |   |
| **OTHER (INCOME) EXPENSE:**                                                                                     |       |                   |       |   |   |
| Interest expense, including amortization of deferred  financing expense of $382 in 2009 and $414 in 2008        |       | 7,859                  |       | 10,846 |   |
| Interest and dividend income                                                                                    |       | (9                     | )          | (188 | ) |
| Net gain on extinguishment of debt                                                                              |       | (8,373                 | )          | (615 | ) |
| Loss on investments                                                                                             |       | —                 |       | 135 |   |
| Other income                                                                                                    |       | —                 |       | (3,256 | ) |
| **TOTAL OTHER (INCOME) EXPENSE**                                                                                |       | (523                   | )          | 6,922 |   |
|                                                                                                            |       |                   |       |   |   |
| **LOSS FROM CONTINUING OPERATIONS**                                                                             |       |                   |       |   |   |
| **BEFORE INCOME TAX BENEFIT**                                                                                   |       | (43,131                | )          | (154,784 | ) |
|                                                                                                            |       |                   |       |   |   |
| **INCOME TAX BENEFIT**                                                                                          |       | (1,218                 | )          | (58,491 | ) |
| **LOSS FROM CONTINUING OPERATIONS**                                                                             |       | (41,913                | )          | (96,293 | ) |
| Loss from discontinued operations, net of income tax  benefit                                                   |       | —                 |       | (33 | ) |
| **NET LOSS**                                                                                                    |       | $                      | (41,913    | ) | $ | (96,326 | ) |
| ** **                                                                                                      | ** ** | ** **             | ** ** | ** ** | ** ** |
| **NET LOSS PER SHARE - BASIC AND DILUTED**                                                                      |       |                   |       |   |   |
| Loss from continuing operations                                                                                 |       | $                      | (1.19      | ) | $ | (2.60 | ) |
| Loss from discontinued operations, net of income tax  benefit                                                   |       | —                 |       | — |   |
| **NET LOSS PER SHARE - BASIC AND DILUTED**                                                                      |       | $                      | (1.19      | ) | $ | (2.60 | ) |
|                                                                                                            |       |                   |       |   |   |
| **DIVIDENDS DECLARED AND PAID PER COMMON SHARE**                                                                |       | $                      | —     |   | $ | 0.10 |   |
|                                                                                                            |       |                   |       |   |   |
| **WEIGHTED AVERAGE SHARES:**                                                                                    |       |                   |       |   |   |
| Basic and Diluted                                                                                               |       | 35,289,531             |       | 36,965,906 |   |

 

**See notes to condensed consolidated financialstatements.**

 

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**ENTERCOM COMMUNICATIONS CORP.**

**CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVELOSS**

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

**(unaudited)**

 
| ** **                                                                     | ** ** | **SIX MONTHS ENDED** | ** ** |
|--------------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                                     | ** ** | **JUNE 30,**         | ** ** |
|                                                                           | ** ** | **2009**             |       | **2008** |   |
|                                                                           |       |                 |       |   |   |
| **NET LOSS**                                                                   |       | $                    | (36,577    | ) | $ | (91,101 | ) |
|                                                                           |       |                 |       |   |   |
| **OTHER COMPREHENSIVE INCOME, NET OF TAXES:**                                  |       |                 |       |   |   |
|                                                                           |       |                 |       |   |   |
| Unrealized gain on investments, net of taxes of $86  in 2008                   |       | —               |       | 132 |   |
|                                                                           |       |                 |       |   |   |
| Unrealized gain on derivatives, net of taxes of $0  in 2009 and $3,101 in 2008 |       | 1,359                |       | 4,790 |   |
|                                                                           |       |                 |       |   |   |
| **COMPREHENSIVE LOSS**                                                         |       | $                    | (35,218    | ) | $ | (86,179 | ) |

 

**See notes to condensed consolidated financialstatements.**

 

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**ENTERCOM COMMUNICATIONS CORP.**

**CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVELOSS**

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

**(unaudited)**

 
| ** **                                                                     | ** ** | **THREE MONTHS ENDED** | ** ** |
|--------------------------------------------------------------------------------|------------|------------------------|------------|
| ** **                                                                     | ** ** | **JUNE 30,**           | ** ** |
| ** **                                                                     | ** ** | **2009**               | ** ** | **2008** | ** ** |
|                                                                           |       |                   |       |   |   |
| **NET LOSS**                                                                   |       | $                      | (41,913    | ) | $ | (96,326 | ) |
|                                                                           |       |                   |       |   |   |
| **OTHER COMPREHENSIVE INCOME, NET OF TAXES:**                                  |       |                   |       |   |   |
|                                                                           |       |                   |       |   |   |
| Unrealized gain on investments, net of taxes of $70  in 2008                   |       | —                 |       | 108 |   |
|                                                                           |       |                   |       |   |   |
| Unrealized gain on derivatives, net of taxes of $0  in 2009 and $4,214 in 2008 |       | 2,344                  |       | 6,510 |   |
|                                                                           |       |                   |       |   |   |
| **COMPREHENSIVE LOSS**                                                         |       | $                      | (39,569    | ) | $ | (89,708 | ) |

 

**See notes to condensed consolidated financialstatements.**

 

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**CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’EQUITY**

**SIX MONTHS ENDED JUNE 30, 2009 AND YEAR ENDEDDECEMBER 31, 2008**

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

**(unaudited)**

 
| ** **                                                                        | ** ** | **Common Stock** | ** ** | **Additional**   | ** ** | ** **  | ** ** | **Other**    | ** ** | ** **        | ** ** |
|-----------------------------------------------------------------------------------|------------|------------------|------------|------------------|------------|-------------|------------|--------------|------------|-------------------|------------|
| ** **                                                                        | ** ** | **Class A** | ** ** | **Class B** | ** ** | **Paid-in** | ** ** | **Retained** | ** ** | **Comprehensive** | ** ** | ** ** | ** ** |
| ** **                                                                        | ** ** | **Shares**       | ** ** | **Amount**       | ** ** | **Shares**  | ** ** | **Amount**   | ** ** | **Capital**       | ** ** | **Earnings** | ** ** | **Income (Loss)** | ** ** | **Total** | ** ** |
|                                                                              |       |             |       |             |       |        |       |         |       |              |       |   |   |   |   |   |   |
| Balance, December 31, 2007                                                   |       | 31,132,700       |       | $                | 311        |        | 7,607,532  |         | $          | 76                |       | $ | 595,915 |   | $ | 64,597 |   | $ | (132 | ) | $ | 660,767 |   |
| Net loss                                                                          |       | —           |       | —           |       | —      |       | —       |       | —            |       | (516,651 | ) | — |   | (516,651 | ) |
| Compensation expense related to granting of stock  options                        |       | —           |       | —           |       | —      |       | —       |       | 425               |       | — |   | — |   | 425 |   |
| Compensation expense related to granting of  restricted stock units               |       | 478,075          |       | 5                |       | —      |       | —       |       | 8,236             |       | — |   | — |   | 8,241 |   |
| Issuance of common stock related to an incentive  plan                            |       | 72,092           |       | 1                |       | —      |       | —       |       | 328               |       | — |   | — |   | 329 |   |
| Common stock repurchase                                                           |       | (2,073,518       | )          | (21              | )          | —      |       | —       |       | (13,923           | )          | — |   | — |   | (13,944 | ) |
| Purchase of vested employee restricted stock units                                |       | (130,161         | )          | (1               | )          | —      |       | —       |       | (1,374            | )          | — |   | — |   | (1,375 | ) |
| Payments of dividends                                                             |       | —           |       | —           |       | —      |       | —       |       | (7,282            | )          | (14,301 | ) | — |   | (21,583 | ) |
| Dividend equivalents on restricted stock units (net  of forfeitures and payments) |       | —           |       | —           |       | —      |       | —       |       | —            |       | (822 | ) | — |   | (822 | ) |
| Net unrealized loss on derivatives                                                |       | —           |       | —           |       | —      |       | —       |       | —            |       | — |   | (15,262 | ) | (15,262 | ) |
| Net unrealized gain on investments                                                |       | —           |       | —           |       | —      |       | —       |       | —            |       | — |   | 132 |   | 132 |   |
| Balance, December 31, 2008                                                   |       | 29,479,188       |       | 295              |       | 7,607,532   |       | 76           |       | 582,325           |       | (467,177 | ) | (15,262 | ) | 100,257 |   |
| Net loss                                                                          |       | —           |       | —           |       | —      |       | —       |       | —            |       | (36,577 | ) | — |   | (36,577 | ) |
| Compensation expense related to granting of stock  options                        |       | —           |       | —           |       | —      |       | —       |       | 229               |       | — |   | — |   | 229 |   |
| Compensation expense related to granting of  restricted stock units               |       | 814,021          |       | 7                |       | —      |       | —       |       | 3,447             |       | — |   | — |   | 3,454 |   |
| Issuance of common stock related to an incentive  plan                            |       | 74,369           |       | —           |       | —      |       | —       |       | 97                |       | — |   | — |   | 97 |   |
| Common stock repurchase                                                           |       | (662,664         | )          | (7               | )          | —      |       | —       |       | (882              | )          | — |   | — |   | (889 | ) |
| Purchase of vested employee restricted stock units                                |       | (80,047          | )          | —           |       | —      |       | —       |       | (90               | )          | — |   | — |   | (90 | ) |
| Dividend equivalents on restricted stock units (net  of forfeitures and payments) |       | —           |       | —           |       | —      |       | —       |       | —            |       | 153 |   | — |   | 153 |   |
| Net unrealized gain on derivatives                                                |       | —           |       | —           |       | —      |       | —       |       | —            |       | — |   | 1,359 |   | 1,359 |   |
| Balance, June 30, 2009                                                       |       | 29,624,867       |       | $                | 295        |        | 7,607,532  |         | $          | 76                |       | $ | 585,126 |   | $ | (503,601 | ) | $ | (13,903 | ) | $ | 67,993 |   |

 

**See notes to condensed consolidated financialstatements.**

 

7

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Table ofContents

 

**ENTERCOM COMMUNICATIONS CORP.**

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

** (amounts inthousands)**

** (unaudited)**

 
| ** **                                                                                                                                               | ** ** | **SIX MONTHS ENDED** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                                                                                                               | ** ** | **JUNE 30,**         | ** ** |
| ** **                                                                                                                                               | ** ** | **2009**             | ** ** | **2008** | ** ** |
| **OPERATING ACTIVITIES:**                                                                                                                                |       |                 |       |   |   |
| Net loss                                                                                                                                                 |       | $                    | (36,577    | ) | $ | (91,101 | ) |
| Loss from discontinued operations before impairment  loss, net of tax benefit                                                                            |       | —               |       | 37 |   |
| Impairment loss from discontinued operations                                                                                                             |       | —               |       | 6,675 |   |
| Deferred tax benefit from discontinued operations                                                                                                        |       | —               |       | (2,735 | ) |
| Loss from continuing operations                                                                                                                          |       | (36,577              | )          | (87,124 | ) |
|                                                                                                                                                     |       |                 |       |   |   |
| Adjustments to reconcile loss from continuing  operations to net cash provided by continuing operating activities:                                       |       |                 |       |   |   |
| Depreciation and amortization                                                                                                                            |       | 8,540                |       | 11,535 |   |
| Amortization of deferred financing costs                                                                                                                 |       | 776                  |       | 842 |   |
| Deferred taxes                                                                                                                                           |       | 270                  |       | (52,336 | ) |
| Provision for bad debts                                                                                                                                  |       | 1,372                |       | 1,412 |   |
| Net gain on sale or disposal of assets                                                                                                                   |       | —               |       | (9,999 | ) |
| Non-cash stock-based compensation expense                                                                                                                |       | 3,699                |       | 5,718 |   |
| Net loss on investments                                                                                                                                  |       | —               |       | 211 |   |
| Net gain on derivatives                                                                                                                                  |       | —               |       | (34 | ) |
| Deferred rent                                                                                                                                            |       | 18                   |       | 145 |   |
| Unearned revenue - long-term                                                                                                                             |       | (421                 | )          | (20 | ) |
| Net gain on extinguishment of debt                                                                                                                       |       | (16,128              | )          | (2,384 | ) |
| Deferred compensation                                                                                                                                    |       | 744                  |       | 1,175 |   |
| Tax benefit for vesting of restricted stock unit  awards                                                                                                 |       | —               |       | (474 | ) |
| Impairment loss                                                                                                                                          |       | 67,676               |       | 184,587 |   |
| Other income                                                                                                                                             |       | (380                 | )          | (3,500 | ) |
| Changes in assets and liabilities (net of effects of  acquisitions and dispositions in all years and the effect of deconsolidation  activities in 2008): |       |                 |       |   |   |
| Accounts receivable                                                                                                                                      |       | 1,121                |       | (5,691 | ) |
| Prepaid expenses and deposits                                                                                                                            |       | (388                 | )          | (1,246 | ) |
| Prepaid and refundable income taxes                                                                                                                      |       | 95                   |       | 14,298 |   |
| Accounts payable and accrued liabilities                                                                                                                 |       | (513                 | )          | (1,732 | ) |
| Accrued interest expense                                                                                                                                 |       | (1,074               | )          | — |   |
| Accrued expenses - long-term                                                                                                                             |       | (577                 | )          | — |   |
| Prepaid expenses - long-term                                                                                                                             |       | (229                 | )          | 200 |   |
|                                                                                                                                                     |       |                 |       |   |   |
| **Net cash provided by continuing operating  activities**                                                                                                |       | 28,024               |       | 55,583 |   |
| Net cash used in discontinued operating activities                                                                                                       |       | —               |       | (37 | ) |
| **Net cash provided by operating activities**                                                                                                            |       | 28,024               |       | 55,546 |   |
|                                                                                                                                                          |            |                      |            |  |  |  |  |

 

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**ENTERCOM COMMUNICATIONS CORP.**

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

** (amounts inthousands)**

** (unaudited)**

 
| ** **                                                               | ** ** | **SIX MONTHS ENDED** | ** ** |
|--------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                               | ** ** | **JUNE 30,**         | ** ** |
| ** **                                                               | ** ** | **2009**             | ** ** | **2008** | ** ** |
| **INVESTING ACTIVITIES:**                                                |       |                 |       |   |   |
| Additions to property and equipment                                      |       | (1,240               | )          | (4,498 | ) |
| Proceeds from sale of property, equipment,  intangibles and other assets |       | 19                   |       | 21,006 |   |
| Purchases of radio station assets                                        |       | —               |       | (374 | ) |
| Deferred charges and other assets                                        |       | (43                  | )          | (848 | ) |
| Purchases of investments                                                 |       | —               |       | (6 | ) |
| Proceeds from investments                                                |       | 6                    |       | 193 |   |
| Proceeds from termination of radio station contract                      |       | 380                  |       | — |   |
| Proceeds from insurance recovery                                         |       | —               |       | 3,500 |   |
| Station acquisition deposits and costs                                   |       | —               |       | 4,141 |   |
| **Net cash provided by (used in) investing  activities**                 |       | (878                 | )          | 23,114 |   |
|                                                                     |       |                 |       |   |   |
| **FINANCING ACTIVITIES:**                                                |       |                 |       |   |   |
| Proceeds from issuance of long-term debt                                 |       | 25,000               |       | 56,000 |   |
| Payments of long-term debt                                               |       | (14,011              | )          | (68,511 | ) |
| Retirement of senior subordinated debt                                   |       | (22,860              | )          | (38,765 | ) |
| Purchase of the Company’s common stock                              |       | (889                 | )          | (13,260 | ) |
| Proceeds from issuance of employee stock plan                            |       | 82                   |       | 183 |   |
| Purchase of vested restricted stock units                                |       | (90                  | )          | (1,360 | ) |
| Payment of dividend equivalents on vested restricted  stock units        |       | (747                 | )          | (914 | ) |
| Payment of dividends                                                     |       | —               |       | (17,946 | ) |
| Tax benefit for vesting of restricted stock awards                       |       | —               |       | 474 |   |
| **Net cash used in investing activities**                                |       | (13,515              | )          | (84,099 | ) |
|                                                                     |       |                 |       |   |   |
| **NET INCREASE (DECREASE) IN CASH AND CASH  EQUIVALENTS**                |       | 13,631               |       | (5,439 | ) |
| **CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR**                         |       | 4,284                |       | 10,945 |   |
| **CASH AND CASH EQUIVALENTS, END OF PERIOD**                             |       | $                    | 17,915     |   | $ | 5,506 |   |
|                                                                     |       |                 |       |   |   |
| **SUPPLEMENTAL DISCLOSURES OF CASH FLOW  INFORMATION:**                  |       |                 |       |   |   |
| Cash paid during the period for:                                         |       |                 |       |   |   |
| Interest                                                                 |       | $                    | 16,307     |   | $ | 24,273 |   |
| Income taxes                                                             |       | $                    | 192        |   | $ | 22 |   |
| Dividends                                                                |       | $                    | —     |   | $ | 17,946 |   |

 

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

 

During the six months ended June 30, 2009, the Company issued 0.2million restricted stock units, recorded modification expense of $1.4 millionand had forfeitures of $2.1 million that will decrease on an aggregate basisits paid-in capital by $0.4 million over the vesting period of the restrictedstock units.

 

During the six months ended 2008, the Company issued 0.5 millionrestricted stock units (net of forfeitures) and will increase itspaid-in-capital by $6.0 million over the vesting period of the restricted stockunits.

 

On March 14, 2008, the Company completed an exchange of radiostation assets with Bonneville International Corporation and as a result theCompany: (1) received $220.0 million in assets, including cash of $1.0million; (2) provided assets with a basis of $210.0 million (includingtransaction costs); and (3) recorded a gain of $10.0 million.

 

**See notes to condensed consolidated financialstatements.**

 

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** **

**ENTERCOM COMMUNICATIONS CORP.**

**NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS**

**SIX MONTHS ENDED JUNE 30, 2009 AND 2008**

 

**1.****                                      BASISOF PRESENTATION**

 

The condensedconsolidated interim unaudited financial statements included herein have beenprepared by Entercom Communications Corp. and its subsidiaries (collectively,the “Company”) in accordance with: (i) generally accepted accountingprinciples for interim financial information; and (ii) the instructions ofthe Securities and Exchange Commission (the “SEC”) for Form 10-Q and Article 10of Regulation S-X.  Accordingly, they donot include all of the information and footnotes required by generally acceptedaccounting principles for annual financial statements.  In the opinion of management, the financialstatements reflect all adjustments considered necessary for a fair statement ofthe results of operations and financial position for the interim periodspresented.  All such adjustments are of anormal and recurring nature. The Company’s results are subject to seasonalfluctuations and, therefore, the results shown on an interim basis are notnecessarily indicative of results for a full year.

 

This Form 10-Qshould be read in conjunction with the financial statements and notes theretoincluded in the Company’s audited financial statements as of and for the yearended December 31, 2008 and filed with the SEC on February 26, 2009,as part of the Company’s Annual Report on Form 10-K.  Certain information and footnote disclosuresnormally included in financial statements prepared in accordance with generallyaccepted accounting principles have been condensed or omitted pursuant to such rules andregulations.

 

***Recent AccountingPronouncements***

 

**FAS No. 168**

 

In June 2008, the Financial Accounting Standards Board (“FASB”)approved the *“FASB Accounting Standards Codification”*as a single source of authoritative nongovernmental U.S. GAAP that was launchedJuly 1, 2009. The Codification does not change current U.S. GAAP, but isintended to simplify user access to all authoritative literature related to aparticular topic in one place. The Company’s adoption of Financial AccountingStandard (“FAS”) No. 168, which will be effective in the third quarter of2009, will not have an impact on the Company’s results of operations, cashflows or financial position.

 

**FAS No. 165**

 

In May 2009, the FASB issued FAS No. 165, *“Subsequent Events,”* which sets forth the period,circumstances and disclosure after the balance sheet date during whichmanagement shall evaluate events or transactions that may occur for potentialrecognition or disclosure in the financial statements. The Company’s adoptionof FAS No. 165, which was effective for the Company in the period ended June 30,2009, did not have an effect on the Company’s result of operations, cash flowsor financial position.

 

**FASNo. 142-3**

 

In April 2008, the FASBissued FAS No. 142-3, *“Determination of theUseful Life of Intangible Assets,”* which amends the factors thatshould be considered in developing the renewal or extension assumptions used todetermine the useful life of recognized intangible assets under FAS No. 142,*“Goodwill and Other Intangible Assets.”*  FAS No. 142-3, which requires expandeddisclosure regarding the determination of intangible asset useful lives, alsoimproves the consistency between the useful life of a recognized intangibleasset under FAS No. 142 and the period of expected cash flows used tomeasure the fair value of the asset under FAS No. 141R. FAS No. 142-3was effective for the Company on January 1, 2009. The impact to theCompany will be limited to the application of this standard to futureacquisitions.

 

**FASNo. 107-1**

 

In April 2009, the FASB issued FAS No. 107-1and APB 28-1, *“Interim Disclosures about Fair ValueFinancial Instruments,”* which requires disclosures about fair valueof financial instruments in interim reporting periods that were previously onlyrequired in annual financial statements. The Company’s adoption of FAS 107-1 and APB 28-1, which waseffective for the Company for the period ended June 30, 2009, did not havean effect on the Company’s result of operations, cash flows or financialposition.

 

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**FASNo. 161**

 

In March 2008, the FASB issued FAS No. 161,*“Disclosures about Derivative Instrumentsand Hedging Activities - an amendment of FASB Statement No. 133.”*FAS No. 161 changes the disclosure requirements for derivative instrumentsand hedging activities. Entities are required to provide enhanced disclosuresabout: (1) how and why an entity uses derivative instruments; (2) howderivative instruments and related hedged items are accounted for under SFAS No. 133and its related interpretations; and (3) how derivative instruments andrelated hedged items affect an entity’s financial position, financialperformance and cash flows. The Company has included the relevant disclosureseffective in its first quarter 2009 financial statements under Note 7,Derivatives And Hedging Activities.

 

**FAS No. 160**

 

In December 2007, the FASB issued FAS No. 160,*“Noncontrolling Interests in ConsolidatedFinancial Statements - an Amendment of ARB No. 51.”* FAS No. 160 changes the accounting andreporting for minority interests, which are recharacterized as noncontrollinginterests and classified as a component of equity.  FAS No. 160 was effective for theCompany as of January 1, 2009.  Theadoption of FAS No. 160 did not have an impact on the Company’s financialposition, results of operations or cash flows.

** **

**FAS No. 141R And FAS No. 141R-a**

 

In December 2007, the FASB issued FAS No. 141R,*“Business Combinations,”* thatwill significantly change how business combinations are accounted for throughthe use of fair values in financial reporting and will impact financialstatements both on the acquisition date and in subsequent periods.  In February 2009, the FASB issued FAS No. 141R-a,*“Accounting for Assets Acquired and LiabilitiesAssumed in a Business Combination That Arise from Contingencies,”*which allows an exception to the recognition and fair value measurementprinciples of FAS No. 141R.  Thisexception requires that acquired contingencies be recognized at fair value onthe acquisition date if fair value can be reasonably estimated during theallocation period.  FAS No. 141R waseffective for the Company as of January 1, 2009 for all businesscombinations that close on or after January 1, 2009.

 

**2.**                                      SHARE-BASEDCOMPENSATION

 

As of June 30, 2009, 0.9 million shares are available for futuregrant under the Entercom Equity Compensation Plan (the “Plan”).  On January 1 of each year, the number ofshares of Class A common stock authorized under the Plan is automaticallyincreased by 1.5 million, or a lesser number as may be determined by theCompany’s Board of Directors.  On January 1,2009, the shares available for grant were automatically increased by 1.5million shares.  The Company issues newshares of Class A common stock upon the exercise of stock options and thelater of vesting or issuance of restricted stock (or restricted stock units).

 

***RestrictedStock Units***

** **

**Restricted Stock Activity**

 

During the six months ended June 30, 2009, the Company issued 0.2million restricted stock units at a weighted average fair value of $1.76 pershare and will increase its additional paid-in capital by $0.3 million over thevesting period of the restricted stock units (excluding the fair value impactof: (i) $1.2 million for the 2009 Option Exchange Program as describedbelow; (ii) $0.2 million for modified restricted stock units with marketconditions; and (iii) forfeitures). In addition, as a result of a high number of forfeitures during the currentperiod, paid-in capital will be reduced by $2.1 million. During the six monthsended June 30, 2008, the Company issued 0.5 million restricted stock units(net of forfeitures) at a weighted average fair value of $11.70 and willincrease its additional paid-in capital by $6.0 million over the vesting periodof the restricted stock units. During the six months ended June 30, 2009and 2008, 0.3 million units and 0.4 million units, respectively, of restrictedstock were both vested and released.

 

As of June 30, 2009, there was $10.8 million of unamortizedcompensation expense, net of estimated forfeitures, related to unvestedrestricted stock units, which is expected to be amortized over a remainingweighted-average recognition period of 2.8 years.

 

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Asummary of the Company’s outstanding restricted stock units as of June 30,2009, and changes in restricted stock units during the six months ended June 30,2009, is as follows:

 
| ** **                                                | ** ** | ** **             | ** ** | ** **     | ** ** | ** **     | ** ** | **Weighted-**   | ** ** | **Aggregate**     | ** ** |
|-----------------------------------------------------------|------------|------------------------|------------|----------------|------------|----------------|------------|-----------------|------------|-------------------|------------|
| ** **                                                | ** ** | ** **             | ** ** | **Number of**  | ** ** | **Weighted-**  | ** ** | **Average**     | ** ** | **Intrinsic**     | ** ** |
| ** **                                                | ** ** | ** **             | ** ** | **Restricted** | ** ** | **Average**    | ** ** | **Remaining**   | ** ** | **Value As Of**   | ** ** |
| ** **                                                | ** ** | ** **             | ** ** | **Stock**      | ** ** | **Purchase**   | ** ** | **Contractual** | ** ** | **June 30,** | ** ** |
| ** **                                                | ** ** | **Period Ended**       | ** ** | **Units**      | ** ** | **Price**      | ** ** | **Term**        | ** ** | **2009**          | ** ** |
| ** **                                                | ** ** | ** **             | ** ** | ** **     | ** ** | ** **     | ** ** | ** **      | ** ** | ** **        | ** ** |
| Restricted stock units  outstanding as of:                |       | December 31, 2008 |       | 1,421,985      |       |           |       |            |       |              |       |
| Restricted stock units  awarded                           |       |                   |       | 176,596        |       |           |       |            |       |              |       |
| Restricted stock units  issued in exchange for options    |       |                   |       | 711,985        |       |           |       |            |       |              |       |
| Restricted stock units  released                          |       |                   |       | (293,138       | )          |           |       |            |       |              |       |
| Restricted stock units  forfeited                         |       |                   |       | (74,560        | )          |           |       |            |       |              |       |
| Restricted stock units  outstanding as of:                |       | June 30, 2009     |       | 1,942,868      |       | $              | —     |            | 1.8        |              | $          | 2,972,588 |   |
|                                                      |       |                   |       |           |       |           |       |            |       |              |       |
| Restricted stock units  vested and expected to vest       |       |                   |       | 1,778,603      |       | $              | —     |            | 1.8        |              | $          | 2,619,113 |   |
| Restricted stock units  exercisable (vested and deferred) |       |                   |       | 66,764         |       | $              | —     |            | —     |              | $          | 102,149 |   |
| Weighted average remaining  recognition period in years   |       |                   |       | 2.8            |       |  

  |       |            |       |              |       |

 

**Restricted Stock Units With Service AndMarket Conditions**

 

During the six months ended June 30,2009 and 2008, none of the Company’s 0.1 million and 0.3 million restrictedstock units with service and market conditions, respectively, vested.

 

During the first quarter of 2009, the Companymodified 0.2 million restricted stock units with service and market conditionsby eliminating the market conditions. Due to the modification, additional expense of $0.2 million will berecognized over the new vesting period of two years from the modification date.

 

***Options***

 

There were 1.1 million and 0.2 million options granted during the sixmonths ended June 30, 2009 and 2008, respectively. For such options, theCompany used the Black-Scholes option-pricing model and determined: (1) theterm by using the simplified plain-vanilla method as allowed under StaffAccounting Bulletin (“SAB”) No. 110; (2) a historical volatility overa period commensurate with the expected term, with the observation of thevolatility on a daily basis; (3) a risk-free interest rate that wasconsistent with the expected term of the stock options and based on the U.S.Treasury yield curve in effect at the time of the grant; and (4) an annualdividend yield based upon the Company’s most recent quarterly dividend percommon share, if any, at the time of the grant.

 

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

 
| ** **                      | ** ** | **Six Months Ended** | ** ** |
|---------------------------------|------------|----------------------|------------|
| ** **                      | ** ** | **June 30,**    | ** ** |
| ** **                      | ** ** | **2009**             | ** ** | **2008** | ** ** |
| Expected life (years)           |       | 6.3                  |       | 6.3 |   |
| Expected volatility factor  (%) |       | 54.9 to 61.4%        |       | 30.9% to 32.3% |   |
| Risk-free interest rate  (%)    |       | 2.2% to 2.4%         |       | 2.7% to 3.3% |   |
| Expected dividend yield  (%)    |       | 0.0%                 |       | 3.7% to 14.6% |   |

 

No options were exercised during the six months ended June 30,2009 and 2008.

 

The following table presents the optionactivity for the six months ended June 30, 2009:

 

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| ** **                                              | ** ** | ** **             | ** ** | ** **    | ** ** | ** **    | ** ** | **Weighted-**   | ** ** | **Intrinsic**     | ** ** |
|---------------------------------------------------------|------------|------------------------|------------|---------------|------------|---------------|------------|-----------------|------------|-------------------|------------|
| ** **                                              | ** ** | ** **             | ** ** | ** **    | ** ** | **Weighted-** | ** ** | **Average**     | ** ** | **Value**         | ** ** |
| ** **                                              | ** ** | ** **             | ** ** | ** **    | ** ** | **Average**   | ** ** | **Remaining**   | ** ** | **As of**         | ** ** |
| ** **                                              | ** ** | ** **             | ** ** | **Number of** | ** ** | **Exercise**  | ** ** | **Contractual** | ** ** | **June 30,** | ** ** |
| ** **                                              | ** ** | **Period Ended**       | ** ** | **Options**   | ** ** | **Price**     | ** ** | **Term**        | ** ** | **2009**          | ** ** |
|                                                    |       |                   |       |          |       |          |       |            |       |              |       |
| Options outstanding as of:                              |       | December 31, 2008 |       | 2,493,930     |       | $             | 28.33      |            |       |              |       |   |
| Options granted                                         |       |                   |       | 1,060,250     |       | $             | 1.34       |            |       |              |       |   |
| Options forfeited                                       |       |                   |       | (42,312       | )          | $             | 3.01       |            |       |              |       |   |
| Options exchanged for  restricted stock units           |       |                   |       | (2,084,518    | )          | $             | 29.02      |            |       |              |       |   |
| Options expired                                         |       |                   |       | (251,537      | )          | $             | 22.54      |            |       |              |       |   |
| Outstanding as of:                                      |       | June 30, 2009     |       | 1,175,813     |       | $             | 4.90       |            | 8.8        |              | $          | 194,133 |   |
|                                                    |       |                   |       |          |       |          |       |            |       |              |       |
| Options vested and expected  to vest as of:             |       | June 30, 2009     |       | 1,069,427     |       | $             | 5.24       |            | 8.7        |              | $          | 174,438 |   |
| Options vested and  exercisable as of:                  |       | June 30, 2009     |       | 120,355       |       | $             | 33.97      |            | 1.8        |              | $          | — |   |
| Weighted average remaining  recognition period in years |       |                   |       | 3.6           |       |          |       |            |       |              |       |

 

As of June 30, 2009, $1.3 million of accumulated unrecognizedcompensation costs related to unvested stock options, net of estimatedforfeitures, is expected to be recognized in future periods over a weightedaverage period of 3.6 years.

 

Thefollowing table summarizes significant ranges of outstanding and exercisableoptions as of June 30, 2009:

 
| ** **          | ** **  | **Options  Outstanding** | ** ** | **Options  Exercisable** | ** ** |
|---------------------|-------------|--------------------------|------------|--------------------------|------------|
| ** **          | ** **  | **Number  Of**           | ** ** | **Weighted**             | ** ** | ** ** | ** ** | **Number  Of** | ** ** | ** ** | ** ** |
| ** **          | ** **  | **Options**              | ** ** | **Average**              | ** ** | **Weighted** | ** ** | **Options** | ** ** | **Weighted** | ** ** |
| ** **          | ** **  | **Outstanding**          | ** ** | **Remaining**            | ** ** | **Average** | ** ** | **Exercisable** | ** ** | **Average** | ** ** |
| ** **          | ** **  | **June 30,**        | ** ** | **Contractual**          | ** ** | **Exercise** | ** ** | **June 30,** | ** ** | **Exercise** | ** ** |
| **Exercise Prices** | ** **  | **2009**                 | ** ** | **Life**                 | ** ** | **Price** | ** ** | **2009** | ** ** | **Price** | ** ** |
| $                   |  1.34  |                     | $          | 1.34                     |       | 1,021,750 |   | 9.6 |   | $ | 1.34 |   | — |   | $ | — |   |
| $                   |  2.02  |                     | $          | 12.31                    |       | 43,313 |   | 8.5 |   | $ | 9.85 |   | 9,605 |   | $ | 11.66 |   |
| $                   |  27.75 |                     | $          | 33.9                     |       | 29,500 |   | 0.7 |   | $ | 28.26 |   | 29,500 |   | $ | 28.26 |   |
| $                   |  35.05 |                     | $          | 35.05                    |       | 52,500 |   | 1.2 |   | $ | 35.05 |   | 52,500 |   | $ | 35.05 |   |
| $                   |  40.00 |                     | $          | 48.21                    |       | 28,750 |   | 2.1 |   | $ | 45.32 |   | 28,750 |   | $ | 45.32 |   |
|                |        |                     |       | 1,175,813                |       | 8.8 |   | $ | 4.90 |   | 120,355 |   | $ | 33.97 |   |

 

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

 

The following table summarizes stock-basedcompensation related to awards of restricted stock units, employee stockoptions and purchases under the employee stock purchase plan for the six andthree months ended June 30, 2009 and 2008:

 

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| ** **                                                                | ** ** | **Six Months Ended**       | ** ** | **Three Months Ended** | ** ** |
|---------------------------------------------------------------------------|------------|----------------------------|------------|------------------------|------------|
| ** **                                                                | ** ** | **June 30,**          | ** ** |
| ** **                                                                | ** ** | **2009**                   | ** ** | **2008**               | ** ** | **2009** | ** ** | **2008** | ** ** |
|                                                                      |       | **(amounts in thousands)** |       |
|                                                                      |       |                       |       |                   |       |   |   |   |   |
| Station operating expenses                                                |       | $                          | 762        |                   | $          | 1,113 |   | $ | 672 |   | $ | 730 |   |
| Corporate general and administrative expenses                             |       | 2,937                      |       | 4,605                  |       | 1,235 |   | 1,415 |   |
| Stock-based compensation expense included in  operating expenses          |       | 3,699                      |       | 5,718                  |       | 1,907 |   | 2,145 |   |
| Income tax benefit (net of a fully reserved  valuation allowance in 2009) |       | —                     |       | (1,965                 | )          | — |   | (725 | ) |
| Total                                                                     |       | $                          | 3,699      |                   | $          | 3,753 |   | $ | 1,907 |   | $ | 1,420 |   |

 

***2009 Option ExchangeProgram***

 

In February 2009, the Company’s Board of Directors approved anamendment to the Plan to permit a one-time Option Exchange Program (“2009 OEP”),which amendment was approved at the May 2009 shareholders’ meeting. On April 13,2009, the Company commenced the 2009 OEP (subject to shareholder approval) bymaking an offer to exchange to the Company’s eligible employees andnon-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 shares of the Company’s restricted stock units. The exchange ratios were asfollows:

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

 

On May 15, 2009, following the May 14, 2009 expiration of theCompany’s 2009 OEP, the Company 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 the Plan.  In addition, the number of awards that can beissued under the Plan was effectively reduced by 2.1 million as all optionsthat were exchanged will not be available for re-grant under the Plan.

 

The Company applied modification accounting for the 2009 OEP and willrecognize share-based compensation expense of $1.2 million on a straight-linebasis over the four-year vesting period of the restricted stock units. 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 modification date will be recognized over the remainingoriginal option term, and the expense will only be reversed if the originalservice period is not met.

 

***Tax Benefit, OrAdditional Paid-In-Capital Pool***

 

In connection with the vesting of restricted stock units issued underthe Company’s 2006 Option Exchange Program, the Company received tax deductionsin excess of previously recorded tax benefits. As a result, the Company recorded a windfall tax benefit of $0.5 millionfor the six months ended June 30, 2008, which was classified as afinancing cash inflow in the condensed consolidated statements of cash flows.

 

For the six months ended June 30,2008, the Company utilized its paid-in-capital pool of $1.7****million(including the $0.5 million as described above) that resulted from tax benefitsrecorded in this period and in prior periods.

 

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** **

**3.**                                      INTANGIBLE ASSETS AND GOODWILL

 

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

 

Under the provisions of SFAS No. 142, “*Goodwill and Other Intangible Assets,*” goodwill and certainintangible assets are not amortized.  TheCompany has concluded that our acquired broadcasting licenses are treated as anindefinite-lived intangible asset and similar to goodwill, these assets arereviewed at least annually for impairment. At the time of each review, if therecorded value of goodwill and certain intangibles (such as broadcastinglicenses) is more than their fair value, then a charge is made to the resultsof operations.

 

Under accounting guidance, the Company may only write down the carryingvalue of its indefinite-lived intangibles, but is not permitted to increase thecarrying value if the fair value of these assets subsequently increases.

 

***Change In AnnualTesting Period For Broadcasting Licenses***

 

In 2009, the Company changed the period when it performs its annualimpairment test for broadcasting licenses from the first quarter to the secondquarter of each year, in line with its annual impairment test forgoodwill.  The prior impairment test forbroadcasting licenses was performed during the fourth quarter of 2008.

 

**Broadcasting Licenses**

 

The Company performs its broadcasting license impairment test byevaluating its broadcasting licenses for impairment at the market level usingthe direct method. Emerging Issues Task Force (“EITF”) 02-07 states thatseparately recorded indefinite-lived intangible assets should be combined intoa single unit of accounting for purposes of testing impairment if they areoperated as a single asset.  The Companydetermines the fair value of the broadcasting licenses in each of its marketsby relying on a discounted cash flow approach (a 10-year income model) assuminga start-up scenario in which the only assets held by an investor arebroadcasting licenses. The Company’s fair value analysis contains assumptionsincorporating variables that are based on past experiences and judgments aboutfuture performance using industry normalized information for an average stationwithin a certain market. These variables include, but are not limited to: (1) theforecast growth rate of each radio market, including assumptions regarding eachmarket’s population, household income, retail sales and other factors thatwould influence advertising expenditures; (2) market share and profitmargin of an average station based upon market size and station type; (3) estimatedcapital start-up costs and losses incurred during the early years; (4) risk-adjusteddiscount rate; (5) the likely media competition within the market area; (6) aneffective tax rate assumption; and (7) future terminal values.

 

During the second quarter of 2009, the Company completed the impairmenttest for broadcasting licenses and determined that the fair value of thebroadcasting licenses was less than the amount reflected in the balance sheetfor each of the Company’s markets, other than Seattle, and recorded animpairment loss of $60.8 million. The prolonged economic downturn negativelyimpacted the radio broadcasting industry as advertising revenues continued todecline and expectations for growth over the next fiscal year were reduced. Theprojected growth levels for the industry and the Company are now less thanthose originally forecasted for 2009, which is the primary reason for furtherimpairment to broadcasting licenses in the current quarter.  As revenues decline, profitability levels arealso negatively 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.

 

The following table reflects certain key estimates and assumptionssince the most recent annual test in the fourth quarter of 2008.  The ranges for operating profit margin andmarket long-term revenue growth rates are for each of the Company’s markets. Ingeneral, when comparing between the fourth quarter of 2008 and the secondquarter of 2009: (1) the market specific operating profit margin rangedeclined; and (2) the market long-term revenue growth rates wereconsistent, however, current period revenues were less than previouslyprojected for 2009.

 

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| ** **                            | ** ** | **Fourth**     | ** ** | **Second**     | ** ** |
|---------------------------------------|------------|----------------|------------|----------------|------------|
| ** **                            | ** ** | **Quarter**    | ** ** | **Quarter**    | ** ** |
| ** **                            | ** ** | **2008**       | ** ** | **2009**       | ** ** |
| Discount rates                        |       | 10.6%          |       | 10.6%          |       |
| Operating profit margin ranges        |       | 21.0% to 46.7% |       | 21.0% to 44.0% |       |
| Market long-term revenue growth rates |       | 1.0% to 2.0%   |       | 1.0% to 2.5%   |       |

 

The following table presents, in thousands, the changes in broadcastinglicenses for the six months ended June 30, 2009 and 2008:

 
| ** **         | ** ** | ** **              | ** ** | **Carrying** | ** ** |
|--------------------|------------|-------------------------|------------|--------------|------------|
| ** **         | ** ** | ** **              | ** ** | **Amount**   | ** ** |
| Balance as of:     |       | December 31,  2008 |       | $            | 768,646    |   |
| Loss on impairment |       |                    |       | (60,794      | )          |
| Balance as of:     |       | June 30,  2009     |       | $            | 707,852    |   |
|               |       |                    |       |         |       |
| ** **         | ** ** | ** **              | ** ** | **Carrying** | ** ** |
| ** **         | ** ** | ** **              | ** ** | **Amount**   | ** ** |
| Balance as of:     |       | December 31,  2007 |       | $            | 1,316,983  |   |
| Acquisition        |       |                    |       | 210,358      |       |
| Loss on impairment |       |                    |       | (117,000     | )          |
| Balance as of:     |       | June 30,  2008     |       | $            | 1,410,341  |   |

 

The amount of unamortized broadcasting licenses reflected in thebalance sheet as of June 30, 2009 and December 31, 2008 was $707.9million and $768.6 million, respectively. If actual market conditions are lessfavorable than those projected by the industry or the Company, or if eventsoccur or circumstances change that would reduce the fair value of the Company’sbroadcasting licenses below the amount reflected in the balance sheet, theCompany may be required to recognize impairment charges, which may be material,in future periods.

 

In connection with the Company’s annual review of its goodwill duringthe second quarter of 2008, the Company determined that the fair value ofseveral of its markets’ broadcasting licenses was impaired under the secondstep of its goodwill analysis.  As aresult, for the six months ended June 30, 2008, the Company recorded animpairment loss in the Denver, Greenville, Indianapolis and Memphis markets onan aggregate basis of $117.0 million and reduced its carrying value ofbroadcasting licenses.  Contributingfactors to the impairment were a decline in the advertising dollars in thesemarkets and its effect on the Company’s operations, coupled with changes in theanticipated growth of these markets.

 

Please refer to Note 14, Discontinued Operations, for a discussion ofan impairment to broadcasting licenses in Rochester, New York, during the sixmonths ended June 30, 2008.

 

**Goodwill**

 

The Company performs its annual impairment test on its goodwill duringthe second quarter of each year by comparing the fair value for each reportingunit with the amount reflected on the balance sheet. The Company has determinedthat a radio market is a reporting unit and in total, the Company assessesgoodwill at 22 separate reporting units. If the fair value for any reportingunit is less than the amount reflected in the balance sheet, an indicationexists that the amount of goodwill attributed to a reporting unit may beimpaired, and the Company is required to perform a second step of theimpairment test. In the second step, the Company compares 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 in accordance with SFAS No. 141R, to the amountreflected in the balance sheet.

 

To determine the fair value, the Company uses an income and market approachfor each reporting unit. The market approach compares recent sales and offeringprices of similar properties. The income approach uses the

 

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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.

 

Instep one of the Company’s goodwill analysis, the Company considered the resultsof the market approach and the income approach in computing the fair value ofthe Company’s reporting units. In the market approach, the Company applied anestimated market multiple of 6.0x (consistent with the multiple used inthe fourth quarter of 2008) to each reporting unit’s operating performance tocalculate the fair value. The Company applied the same market multipleconsistently across all reporting units. In the income approach, the Companyutilized the discounted cash flow method to calculate the fair value ofthe reporting unit (the key estimates and assumptions are included in the tablebelow). The results of step one indicated that it was necessary to perform thesecond step analysis in seven of the 22 markets (each market is a reportingunit). The fair values for two of the seven markets were marginally above bookvalue. Management believes that these approaches are commonly usedmethodologies for valuing broadcast radio stations and that a 6.0x multiple isan appropriate measurement given the recent fall in market valuations ofbroadcast radio stations together with a historically low level of markettransactions in recent months. The marginal stations were included inthe Company’s step one impairment testing due to the subjective nature of thestep one analysis and the sensitivities inherent in these calculations. Factorscontributing to the determination of the reporting unit’s operating performancewere historical performance and/or management’s estimates of futureperformance.

 

Underthe second step, the Company determined that the fair value of the Company’sgoodwill was less than the amount reflected in the balance sheet for the sevenmarkets tested, which were Austin, Greensboro, Greenville, Indianapolis, KansasCity, Memphis and Wichita, and recorded an impairment loss of $6.9million during the second quarter of 2009. Contributing factors to the impairment were a decline in theadvertising dollars in these markets and its effect on the Company’soperations, coupled with changes in the anticipated growth and profitability ofthese markets.

 

The prolonged economic downturn negatively impacted the radiobroadcasting industry as advertising revenues continued to decline andexpectations for growth over the next year also declined. The projected revenuegrowth levels for the industry and the Company are now less than thoseoriginally forecasted for 2009, which caused further goodwill impairment in thecurrent quarter. As revenues decline, profitability levels are also negativelyimpacted as fixed costs represent a large component of a radio station’soperating expenses. As a result, the asset base is particularly sensitive tothe impact of declining revenues.

 

The following table reflects certain key estimates and assumptionssince the most recent annual test in the fourth quarter of 2008.  The ranges for operating profit margin andrevenue growth rates are for each of the Company’s markets.  In general, when comparing between the fourthquarter of 2008 and the second quarter of 2009: (1) the market specificoperating profit margin range declined; and (2) the market long-termrevenue growth rates were consistent, however, current period revenues wereless than previously projected for 2009.

 
| ** **                            | ** ** | **Fourth**     | ** ** | **Second**     | ** ** |
|---------------------------------------|------------|----------------|------------|----------------|------------|
| ** **                            | ** ** | **Quarter**    | ** ** | **Quarter**    | ** ** |
| ** **                            | ** ** | **2008**       | ** ** | **2009**       | ** ** |
| Discount rates                        |       | 10.6%          |       | 10.6%          |       |
| Operating profit margin ranges        |       | 21.0% to 44.0% |       | 21.0% to 41.0% |       |
| Market long-term revenue growth rates |       | 1.0% to 2.0%   |       | 1.0% to 2.5%   |       |

 

The following table presents, in thousands, the change in goodwill forthe six months June 30, 2009 and 2008:

 

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| ** **         | ** ** | ** **              | ** ** | **Carrying** | ** ** |
|--------------------|------------|-------------------------|------------|--------------|------------|
| ** **         | ** ** | ** **              | ** ** | **Amount**   | ** ** |
| Balance as of:     |       | December 31,  2008 |       | $            | 45,050     |   |
| Loss on impairment |       |                    |       | (6,882       | )          |
| Balance as of:     |       | June 30,  2009     |       | $            | 38,168     |   |
|               |       |                    |       |         |       |
|               |       |                    |       | **Carrying** |       |
|               |       |                    |       | **Amount**   |       |
| Balance as of:     |       | December 31,  2007 |       | $            | 115,614    |   |
| Acquisition        |       |                    |       | 2,807        |       |
| Loss on impairment |       |                    |       | (67,587      | )          |
| Balance as of:     |       | June 30,  2008     |       | $            | 50,834     |   |

 

During the second quarter of 2008, the Company recorded an impairmentloss of $67.6 million on an aggregate basis for the Denver and Indianapolismarkets. Contributing factors to the impairment were a decline in the availableadvertising dollars in these markets and its effect on the Company’soperations, coupled with changes in the anticipated growth of the broadcastingindustry and its impact on prices paid for radio stations.

 

Please refer to Note 14, Discontinued Operations, for a discussion ofan impairment to goodwill during the six months ended June 30, 2008related to the disposition of radio station assets in Rochester, New York.

 

The amount of goodwill reflected in the Company’s balance sheet as of June 30,2009 and December 31, 2008 was $38.2 million and $45.1 million,respectively.  If actual marketconditions are less favorable than those projected by the industry or theCompany, or if events occur or circumstances change that would reduce the fairvalue of the Company’s goodwill below the amount reflected in the balancesheet, the Company may be required to recognize impairment charges, which maybe material, in future periods.

 

***(B) Definite-LivedIntangibles***

 

The Company has definite-lived intangible assets that consist ofadvertiser lists and customer relationships, acquired advertising contracts andincome leases. These assets are amortized over the period for which the assetsare expected to contribute to the Company’s future cash flows and are reviewedfor impairment whenever events or changes in circumstances indicate that thecarrying amount of an asset may not be recoverable. The amount of theamortization expense for definite-lived intangible assets was $0.1 million and$2.8 million for the six months ended June 30, 2009 and 2008,respectively.  As of June 30, 2009,the Company reflected $0.9 million in unamortized definite-lived assets, whichis included in deferred charges and other assets on the balance sheet.

 

The following is an estimate of the amortization expense for definite-livedassets, in thousands, for each of the succeeding years ending December 31:

 

 
|        |                          |   |                | **Definite-** |   |
|-------------|-------------------------------|--------|---------------------|---------------|--------|
|        |                          |   |                | **Lived**     |   |
|        |                          |   |                | **Assets**    |   |
| Year ending | December 31,:            |   |                |          |   |   |
| 2009        | Excludes  year to date ended: |   | June 30,  2009 |          | $      | 72 |   |
| 2010        |                          |   |                | 124           |   |   |
| 2011        |                          |   |                | 84            |   |   |
| 2012        |                          |   |                | 81            |   |   |
| 2013        |                          |   |                | 53            |   |   |
| Thereafter  |                          |   |                | 445           |   |   |
| Total       |                          |   |                | $             | 859    |   |   |

 

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**4.****                                      ACQUISITIONS,DISPOSITIONS AND UNAUDITED PRO FORMA SUMMARY**

 

***Acquisitions AndDispositions For The Six Months Ended June 30, 2009***

 

There wereno acquisitions or dispositions during the six months ended June 30, 2009.

 

***Acquisitions AndDispositions For The Six Months Ended June 30, 2008***

 

**Exchange: Four Stations In Cincinnati, Ohio, And Three Stations In Seattle,Washington, In Exchange For Three Stations In San Francisco, California**

 

On March 14, 2008, the Company completed an exchange transactionto exchange four radio stations in Cincinnati, Ohio, and three radio stationsin Seattle, Washington, for three radio stations in San Francisco, California,and $1.0 million in cash.  The fair valueof the assets acquired in exchange for the assets disposed was accounted forunder FAS No. 141, which resulted in a fair value of $220.0 million.

 

On February 26, 2007, each party to the exchange transactioncommenced operations of the counter-party’s respective radio stations pursuantto a time brokerage agreement (“TBA”).

 

As a result of the exchange transaction, the Company recorded $2.8million of goodwill which is fully deductible for income tax purposes. Theexchange transaction provided the Company with entry into the San Franciscomarket, where management believes it can increase the market share of theacquired stations. Upon completion of the transactions described herein, theCompany: (1) owns and operates three stations in San Francisco; (2) continuesto own and operate four radio stations in the Seattle market; and (3) exitedthe Cincinnati market.  The Companyreported a gain on sale or disposal of assets of $10.0 million, which wasprimarily attributable to the disposition of the three radio stations in theSeattle market.

 

The following is a summary of those radio stations that were includedin the exchange on March 14, 2008:

 
| **Markets**        | ** ** | **Radio Stations**                      | ** ** | **Transactions**  |
|--------------------|------------|-----------------------------------------|------------|-------------------|
| San  Francisco, CA |       | KDFC-FM;  KBWF-FM; and KOIT-FM          |       | Company  acquired |
| Seattle,  WA       |       | KBSG-FM;  KIRO-AM; and KTTH-AM          |       | Company  disposed |
| Cincinnati,  OH    |       | WKRQ-FM;  WSWD-FM; WUBE-FM; and WYGY-FM |       | Company  disposed |

 

For the three radio stations acquired in San Francisco, the aggregatepurchase price, including transaction costs of $0.4 million, was allocated asfollows:

 
| **Description**                             | ** ** | **Amount**         | ** ** | **Useful Lives** | ** ** |
|---------------------------------------------|------------|--------------------|------------|------------------|------------|
| ** **                                  | ** ** | **(in thousands)** | ** ** | ** **       | ** ** |
| ** **                                  | ** ** | ** **         | ** ** | ** **       | ** ** |
| Leasehold improvements                      |       | $                  | 1,919      |             | 7 years    |   |
| Furniture and equipment                     |       | 173                |       | 5 years          |       |
| Equipment                                   |       | 2,032              |       | 3 to 5 years     |       |
| Total tangible assets                       |       | 4,124              |       |             |       |
|                                        |       |               |       |             |       |
| Advertiser lists and customer relationships |       | 56                 |       | 3 years          |       |
| Acquired advertising contracts              |       | 2,039              |       | less than 1 year |       |
| Broadcasting licenses                       |       | 210,358            |       | non-amortizing   |       |
| Goodwill                                    |       | 2,807              |       | non-amortizing   |       |
| Total intangible assets                     |       | 215,260            |       |             |       |
|                                        |       |               |       |             |       |
| Total assets                                |       | 219,384            |       |             |       |
| Asset retirement liabilities                |       | (10                | )          | 7 years          |       |
| Net assets acquired                         |       | $                  | 219,374    |             |       |   |

 

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**Austin, Texas**

 

On January 15, 2008, the Company sold the radio station assets ofKLQB-FM, formerly KXBT-FM, in Austin, Texas, for $20.0 million in cash.  The buyer had operated this station under aTBA since February 26, 2007. The Company believes that the divestiture ofthis station will not alter the competitive position of the remaining threestations the Company currently operates in this market.  No gain or loss was reported on the sale.

 

As background on this disposition, on November 30, 2007, theCompany purchased from CBS Radio Stations Inc. the assets of four radiostations serving the Austin radio market.

 

***Unaudited Pro FormaSummary Of Financial Information***

 

The following pro forma information presents the consolidated resultsof operations as if any acquisitions which occurred had all occurred as of thebeginning of each period presented, after giving effect to certain adjustments,including depreciation and amortization of assets and interest expense on anydebt incurred to fund the acquisitions which would have been incurred had suchacquisitions occurred as of the beginning of the periods presented. Forpurposes of this presentation, the data does not reflect on a pro forma basisdispositions of radio stations (other than the disposition of: (1) a radiostation in Cincinnati as the Company has never operated this station; and (2) thedisposition of radio stations in Seattle and Cincinnati as this disposition wasin exchange for the assets as described under Note 4).  In addition, the tables reflect on a proforma basis as if the discontinued operations in Rochester were notdiscontinued. These unaudited pro forma results have been prepared forcomparative purposes only and do not purport to be indicative of what wouldhave occurred had the acquisitions been made as of that date or results whichmay occur in the future.

 
| ** **                                    | ** ** | **Six Months Ended**                              | ** ** | **Three Months Ended** | ** ** |
|-----------------------------------------------|------------|---------------------------------------------------|------------|------------------------|------------|
| ** **                                    | ** ** | **June 30,**                                 | ** ** |
| ** **                                    | ** ** | **2009**                                          | ** ** | **2008**               | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                                    | ** ** | **(amounts in thousands, except per share data)** | ** ** |
| ** **                                    | ** ** | **(unaudited)**                                   | ** ** |
| ** **                                    | ** ** | **Actual**                                        | ** ** | **Pro Forma**          | ** ** | **Actual** | ** ** | **Actual** | ** ** |
| ** **                                    | ** ** | ** **                                        | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net revenues                                  |       | $                                                 | 176,671    |                   | $          | 220,610 |   | $ | 101,300 |   | $ | 124,180 |   |
| Net loss                                      |       | $                                                 | (36,577    | )                      | $          | (101,251 | ) | $ | (41,913 | ) | $ | (96,326 | ) |
| Net loss per common share - basic and diluted |       | $                                                 | (1.03      | )                      | $          | (2.71 | ) | $ | (1.19 | ) | $ | (2.61 | ) |

 

**5.****                                      SENIORDEBT**

 

***Bank Facility***

 

In June 2007, the Company entered into a credit agreement (the “BankFacility”) with a syndicate of banks (currently 24 banks) for a $1,050 millionsenior secured credit facility that matures in June 2012. The BankFacility is comprised of $650 million in revolving credit (“Revolver”) and a$400 million term loan (“Term A”). The Company is required to make repaymentsof the Term A beginning September 2009 in quarterly amounts starting at$15 million and increasing to $60 million. The Bank Facility is secured by apledge of 100% of the capital stock and other equity interest in all of theCompany’s wholly owned subsidiaries. The Bank Facility requires the Company tocomply with certain financial covenants which are defined terms within theagreement, including: (1) Consolidated Funded Indebtedness not to exceed 6times Consolidated Operating Cash Flow; and (2) Consolidated OperatingCash Flow to be at a minimum of 2 times Consolidated Interest Charges.

 

As of June 30, 2009, the Company had: (1) $761.0 millionoutstanding under the Bank Facility, including: (i) $400.0 million in TermA; and (ii) 361.0 million in drawn Revolver; and (2) a $1.5 millionletter of credit.

 

The undrawn amount of the Revolver was $287.5 million as of June 30,2009. The amount of the Revolver available to the Company, however, is afunction of covenant compliance at the time of borrowing. Based on the Company’sfinancial covenant analysis as of June 30, 2009, and assuming any newlyborrowed funds were not used to repay indebtedness or in a manner which had a positiveeffect on Consolidated Operating Cash Flow, the Company could borrow $42.9million of the $287.5 million in available Revolver. The entire amount of theavailable Revolver could be borrowed by the Company to the extent such borrowedfunds are used to repay indebtedness. To this end, the Company plans to use itsavailable Revolver capacity and cash flow from operations to fund theamortization of the Term A.

 

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The Companybelieves it will be in compliance in 2009 with the financial covenants andother terms of the Company’s Bank Facility and Senior Subordinated Notes (the “Notes”).

 

The currenteconomic crisis has reduced demand for advertising in general, includingadvertising on the Company’s radio stations. If the Company’s revenues decline more than planned due to difficultmarket conditions, the Company’s ability to maintain compliance with thefinancial covenants in its credit facilities would become increasinglydifficult without additional remedial measures. Such remedial measures include,but are not limited to, management’s plans to further reduce operating costs,opportunistically repurchase debt at a discount and the sale of assets. If theCompany’s remedial measures were not successful in maintaining covenantcompliance, then the Company would negotiate with its lenders for relief, whichrelief could result in higher interest expense. Failure to comply with theCompany’s financial covenants or other terms of the Bank Facility or SeniorSubordinated Notes and failure to negotiate relief from its lenders couldresult in the acceleration of the maturity of all outstanding debt. Under thesecircumstances, the acceleration of the Company’s debt could have a materialadverse effect on the Company’s business.

 

**6.****                                      SENIORSUBORDINATED NOTES**

 

During the sixmonths ended June 30, 2009 and 2008, the Company repurchased $39.4 millionand $41.7 million, respectively, of its 7.625% Senior Subordinated Notes due March 1,2014. For the six and three months ended June 30, 2009, the Companyrecorded in the statement of operations a gain on the extinguishment of debt of$16.1 million and $8.4 million, respectively, net of the write-off of deferredfinancing costs of $0.5 million and $0.2 million, respectively.  During the six months and three months ended June 30,2008, the Company recorded in the statements of operations a gain on theextinguishment of debt of $2.4 million and $0.6 million, respectively, net ofthe write-off of deferred financing costs of $0.6 million and $0.2 million,respectively.  The Notes outstanding asof June 30, 2009 were $44.1 million.

 

**7.**                                      DERIVATIVESAND HEDGING ACTIVITIES

 

The Companyfrom time to time enters into derivative financial instruments, includinginterest rate exchange agreements (“Swaps”) and interest rate collar agreements(“Collars”), to manage its exposure to fluctuations in interest rates. Under afixed rate Swap, the Company pays a fixed rate on a notional amount to a bank,and the bank pays to the Company a variable rate on the notional amount equalto the Company’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, 2009 and 2008, the Companyhad outstanding the aggregate notional amount of $550.0 million of cash flowinterest rate transactions that were hedged against the Company’s variable ratesenior debt.  During the six months endedJune 30, 2008, a derivative rate hedging transaction with a notionalamount of $30.0 million and an initial term of 10 years expired.

 

As of June 30, 2009, the Company had the following derivativesoutstanding:

 

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| ** ** | ** ** | ** **        | ** ** | ** **    | ** **          | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **     | ** **         | **Effective** | ** **         | ** **        | ** ** |
|------------|------------|-------------------|------------|---------------|---------------------|------------|------------|------------|------------|------------|------------|------------|------------|----------------|--------------------|---------------|--------------------|-------------------|------------|
| ** ** | ** ** | ** **        | ** ** | ** **    | ** **          | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **     | ** **         | **Date That** | ** **         | **Notional**      | ** ** |
| **Type**   | ** ** | ** **        | ** ** | ** **    | ** **          | ** ** | ** ** | ** ** | ** ** | **Fixed**  | ** ** | ** ** | ** ** | ** **     | ** **         | **Notional**  | ** **         | **Amount**        | ** ** |
| **Of**     | ** ** | **Notional**      | ** ** | **Effective** | ** **          | ** ** | ** ** | ** ** | ** ** | **LIBOR**  | ** ** | ** ** | ** ** | **Expiration** | ** **         | **Amount**    | ** **         | **After**         | ** ** |
| **Hedge**  | ** ** | **Amount**        | ** ** | **Date**      | ** **          | ** ** | ** ** | **Collar** | ** ** | **Rate**   | ** ** | ** ** | ** ** | **Date**       | ** **         | **Decreases** | ** **         | **Decrease**      | ** ** |
| ** ** | ** ** | **(amounts**      | ** ** | ** **    | ** **          | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **     | ** **         | ** **    | ** **         | **(amounts**      | ** ** |
| ** ** | ** ** | **(in millions)** | ** ** | ** **    | ** **          | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **     | ** **         | ** **    | ** **         | **(in millions)** | ** ** |
|       |       | ** **        |       |          |                |       |       |       |       |       |       |       |       |           |               |          |               | ** **        |       |
| Swap       |       | $                 | 225.0      |          | Jan. 28, 2008  |       |       |       | n/a        |       | 3.03       | %          |       |           | Jan. 28, 2011 |          | Jan. 28, 2010 |              | $          | 150.0 |   |
|       |       |              |       |          |                |       |       |       |       |       |       |       |       |           |               |          |               |              |       |
| Collar     |       | $                 | 100.0      |          | Feb. 28, 2008  |       | [          |       | Cap  Floor |       | 4.00  2.14 | %  %       | ]          |           | Feb. 28, 2011 |          | n/a                |              | n/a        |   |
|       |       |              |       |          |                |       |       |       |       |       |       |       |       |           |               |          |               |              |       |
| Swap       |       | $                 | 125.0      |          | March 28, 2008 |       |       |       | n/a        |       | 2.91       | %          |       |           | Sept. 28, 2011     |          | n/a                |              | n/a        |   |
|       |       |              |       |          |                |       |       |       |       |       |       |       |       |           |               |          |               |              |       |
| Swap       |       | $                 | 100.0      |          | May 28, 2008   |       |       |       | n/a        |       | 3.62       | %          |       |           | May 28, 2012  |          | n/a                |              | n/a        |   |
|            |            |                   |            |               |                     |            |            |            |            |            |            |            |            |                |                    |               |                    |                   |            |  |  |

 

The following is a summary of the fair valueof the derivatives outstanding as of June 30, 2009 and December 31,2008:

 
| ** **                       | ** ** | ** **                   | ** ** | **Fair Value**             | ** ** |
|----------------------------------|------------|------------------------------|------------|----------------------------|------------|
| ** **                       | ** ** | ** **                   | ** ** | **June 30,**          | ** ** | **December 31,** | ** ** |
| ** **                       | ** ** | **Balance Sheet**            | ** ** | **2009**                   | ** ** | **2008** | ** ** |
| ** **                       | ** ** | **Location**                 | ** ** | **Asset (Liability)**      | ** ** |
| ** **                       | ** ** | ** **                   | ** ** | **(amounts in thousands)** | ** ** |
| **Designated Derivatives**       |       |                         |       |                       |       |   |   |
| Interest rate hedge transactions |       | Other  Long Term Liabilities |       | $                          | (13,903    | ) | $ | (15,262 | ) |
|                                  |            |                              |            |                            |            |  |  |  |  |

 

The Company does not expect to reclassify to the statement ofoperations within the next 12 months any portion of the amount outstanding asof June 30, 2009.

 

Thefollowing is a summary of the gains (losses) related to the Company’s cash flowhedges for the six months ended June 30, 2009 and 2008:

 

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| **Six  Months Ended June 30, 2009** | ** ** |
|------------------------------------------|------------|
| **Type Of**                              | ** ** | **Amount Of** | ** ** | **Location Of** | ** ** | **Amount Of** | ** ** | ** ** | ** ** | **Amount Of** | ** ** |
| **Derivative**                           | ** ** | **Gain (Loss)** | ** ** | **Gain (Loss)** | ** ** | **Gain (Loss)** | ** ** | **Location Of** | ** ** | **Gain (Loss)** | ** ** |
| **Designated**                           | ** ** | **Recognized In** | ** ** | **Reclassified** | ** ** | **Reclassified** | ** ** | **Gain (Loss)** | ** ** | **In Statement** | ** ** |
| **As A**                                 | ** ** | **Other** | ** ** | **From OCI To** | ** ** | **From OCI To** | ** ** | **In Statement** | ** ** | **Of Operations** | ** ** |
| **Cash Flow**                            | ** ** | **Comprehensive** | ** ** | **Statement Of** | ** ** | **Statement Of** | ** ** | **Of** | ** ** | **Due To** | ** ** |
| **Hedge**                                | ** ** | **Income (“OCI”)** | ** ** | **Operations** | ** ** | **Operations** | ** ** | **Operations** | ** ** | **Ineffectiveness** | ** ** |
| ** **                               | ** ** | **(amounts in** | ** ** | ** ** | ** ** | **(amounts in** | ** ** | ** ** | ** ** | **(amounts in** | ** ** |
| ** **                               | ** ** | **thousands)** | ** ** | ** ** | ** ** | **thousands)** | ** ** | ** ** | ** ** | **thousands)** | ** ** |
|                                     |       |   |   |   |   |   |   |   |   |   |   |
| Interest Rate                            |       | $ | 1,359 |   | Interest Expense |   | $ | — |   | Interest Expense |   | $ | — |   |
|                                          |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 
| **Six  Months Ended June 30, 2008** | ** ** |
|------------------------------------------|------------|
| **Type Of**                              | ** ** | **Amount Of** | ** ** | **Location Of** | ** ** | **Amount Of** | ** ** | ** ** | ** ** | **Amount Of** | ** ** |
| **Derivative**                           | ** ** | **Gain (Loss)** | ** ** | **Gain (Loss)** | ** ** | **Gain (Loss)** | ** ** | **Location Of** | ** ** | **Gain (Loss)** | ** ** |
| **Designated**                           | ** ** | **Recognized In** | ** ** | **Reclassified** | ** ** | **Reclassified** | ** ** | **Gain (Loss)** | ** ** | **In Statement** | ** ** |
| **As A**                                 | ** ** | **Other** | ** ** | **From OCI To** | ** ** | **From OCI To** | ** ** | **In Statement** | ** ** | **Of Operations** | ** ** |
| **Cash Flow**                            | ** ** | **Comprehensive** | ** ** | **Statement Of** | ** ** | **Statement Of** | ** ** | **Of** | ** ** | **Due To** | ** ** |
| **Hedge**                                | ** ** | **Income (“OCI”)** | ** ** | **Operations** | ** ** | **Operations** | ** ** | **Operations** | ** ** | **Ineffectiveness** | ** ** |
| ** **                               | ** ** | **(amounts in** | ** ** | ** ** | ** ** | **(amount in** | ** ** | ** ** | ** ** | **(amounts in** | ** ** |
| ** **                               | ** ** | **thousands)** | ** ** | ** ** | ** ** | **thousands)** | ** ** | ** ** | ** ** | **thousands)** | ** ** |
|                                     |       |   |   |   |   |   |   |   |   |   |   |
| Interest Rate                            |       | $ | 7,891 |   | Interest Expense |   | $ | — |   | Interest Expense |   | $ | 34 |   |
|                                          |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

The following is a summary of the gains(losses) related to the Company’s cash flow hedges for the three months ended June 30,2009 and 2008:

 
| **Three  Months Ended June 30, 2009** | ** ** |
|--------------------------------------------|------------|
| **Type Of**                                | ** ** | **Amount Of** | ** ** | **Location Of** | ** ** | **Amount Of** | ** ** | ** ** | ** ** | **Amount Of** | ** ** |
| **Derivative**                             | ** ** | **Gain (Loss)** | ** ** | **Gain (Loss)** | ** ** | **Gain (Loss)** | ** ** | **Location Of** | ** ** | **Gain (Loss)** | ** ** |
| **Designated**                             | ** ** | **Recognized In** | ** ** | **Reclassified** | ** ** | **Reclassified** | ** ** | **Gain (Loss)** | ** ** | **In Statement** | ** ** |
| **As A**                                   | ** ** | **Other** | ** ** | **From OCI To** | ** ** | **From OCI To** | ** ** | **In Statement** | ** ** | **Of Operations** | ** ** |
| **Cash Flow**                              | ** ** | **Comprehensive** | ** ** | **Statement Of** | ** ** | **Statement Of** | ** ** | **Of** | ** ** | **Due To** | ** ** |
| **Hedge**                                  | ** ** | **Income (“OCI”)** | ** ** | **Operations** | ** ** | **Operations** | ** ** | **Operations** | ** ** | **Ineffectiveness** | ** ** |
| ** **                                 | ** ** | **(amounts in** | ** ** | ** ** | ** ** | **(amounts in** | ** ** | ** ** | ** ** | **(amounts in** | ** ** |
| ** **                                 | ** ** | **thousands)** | ** ** | ** ** | ** ** | **thousands)** | ** ** | ** ** | ** ** | **thousands)** | ** ** |
|                                       |       |   |   |   |   |   |   |   |   |   |   |
| Interest Rate                              |       | $ | 2,344 |   | Interest  Expense |   | $ | — |   | Interest  Expense |   | $ | — |   |
|                                            |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 
| **Three  Months Ended June 30, 2008** | ** ** |
|--------------------------------------------|------------|
| **Type Of**                                | ** ** | **Amount Of** | ** ** | **Location Of** | ** ** | **Amount Of** | ** ** | ** ** | ** ** | **Amount Of** | ** ** |
| **Derivative**                             | ** ** | **Gain (Loss)** | ** ** | **Gain (Loss)** | ** ** | **Gain (Loss)** | ** ** | **Location Of** | ** ** | **Gain (Loss)** | ** ** |
| **Designated**                             | ** ** | **Recognized In** | ** ** | **Reclassified** | ** ** | **Reclassified** | ** ** | **Gain (Loss)** | ** ** | **In Statement** | ** ** |
| **As A**                                   | ** ** | **Other** | ** ** | **From OCI To** | ** ** | **From OCI To** | ** ** | **In Statement** | ** ** | **Of Operations** | ** ** |
| **Cash Flow**                              | ** ** | **Comprehensive** | ** ** | **Statement Of** | ** ** | **Statement Of** | ** ** | **Of** | ** ** | **Due To** | ** ** |
| **Hedge**                                  | ** ** | **Income (“OCI”)** | ** ** | **Operations** | ** ** | **Operations** | ** ** | **Operations** | ** ** | **Ineffectiveness** | ** ** |
| ** **                                 | ** ** | **(amounts in** | ** ** | ** ** | ** ** | **(amount in** | ** ** | ** ** | ** ** | **(amounts in** | ** ** |
| ** **                                 | ** ** | **thousands)** | ** ** | ** ** | ** ** | **thousands)** | ** ** | ** ** | ** ** | **thousands)** | ** ** |
|                                       |       |   |   |   |   |   |   |   |   |   |   |
| Interest Rate                              |       | $ | 10,724 |   | Interest  Expense |   | $ | — |   | Interest  Expense |   | $ | — |   |
|                                            |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

Thefollowing table presents the accumulated derivative gains (losses) recorded inthe statement of comprehensive income (loss) as of June 30, 2009 and December 31,2008:

 

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| ** **                              | ** ** | **June 30,**          | ** ** | **December 31,** | ** ** |
|-----------------------------------------|------------|----------------------------|------------|-----------------------|------------|
| ** **                              | ** ** | **2009**                   | ** ** | **2008**              | ** ** |
| ** **                              | ** ** | **Assets (Liabilities)**   | ** ** |
| ** **                              | ** ** | **(amounts in thousands)** | ** ** |
|                                    |       |                       |       |                  |       |
| Accumulated  derivative unrealized loss |       | $                          | (13,903    | )                     | $          | (15,262 | ) |
|                                         |            |                            |            |                       |            |  |  |

 

***Accounting For Derivative Instruments AndHedging Activities***

 

The Companyrecognizes at fair value all derivatives, whether designated in hedgingrelationships or not, in the balance sheet as either assets or liabilities. Theaccounting for changes in the fair value of a derivative, including certainderivative instruments embedded in other contracts, depends on the intended useof the derivative and the resulting designation. If the derivative isdesignated as a fair value hedge, the changes in the fair value of thederivative and the hedged item are recognized in the statement of operations.If the derivative is designated as a cash flow hedge, changes in the fair valueof the derivative are recorded in other comprehensive income and are recognizedin the statement of operations when the hedged item affects net income. If aderivative does not qualify as a hedge, it is marked to fair value through thestatement of operations.  Any feesassociated with these derivatives are amortized over their term.  Under these derivatives, the differentials tobe received or paid are recognized as an adjustment to interest expense overthe life of the contract. In the event the cash flow hedges are terminatedearly, any amount previously included in comprehensive income (loss) would bereclassified as interest expense to the statement of operations as theforecasted transaction settles.

 

The Companyformally documents all relationships between hedging instruments and hedgeditems, as well as its risk-management objective and strategy for undertakingvarious hedge transactions. This process includes ongoing effectivenessassessments by relating all derivatives that are designated as fair value orcash flow hedges to specific assets and liabilities on the balance sheet or tospecific firm commitments or forecasted transactions. The Company’s derivativeactivities, all of which are for purposes other than trading, are initiatedwithin the guidelines of corporate risk-management policies. The Companyreviews the correlation and effectiveness of its derivatives on a periodicbasis.

 

The fair valueof these derivatives is determined under the provisions of SFAS No. 157using observable market based inputs (a level two measurement) and the impactof credit risk on a derivative’s fair value (the creditworthiness of thetransaction’s counterparty for assets and the creditworthiness of the Companyfor liabilities).

 

**8.****                                      CONTINGENCIES,GUARANTOR ARRANGEMENTS AND COMMITMENTS**

 

***Contingencies***

 

The Company issubject to various outstanding claims which arise in the ordinary course ofbusiness and to other legal proceedings. In the opinion of management, any potential liability of the Companywhich may arise out of, or with respect to, these matters will not materiallyaffect the Company’s financial position, results of operations or cash flows.

 

The Companyuses a combination of insurance and self-insurance mechanisms to provide forthe potential liabilities for workers’ compensation, general liability,property, director and officers’ liability, vehicle liability and employeehealth care benefits. Liabilities associated with the risks that are retainedby the Company are estimated, in part, by considering claims experience,demographic factors, severity factors, outside expertise and other actuarialassumptions. Under one of these policies, the Company is required to maintain aletter of credit in the amount of $1.5 million.

 

On January 25,2007, a wrongful death suit was filed against the Company in the CaliforniaSuperior Court in Sacramento relating to an on-air contest. The lawsuit seeksvarious damages, which may not be fully covered by the Company’s insurancepolicy. The FCC has also initiated an investigation into this contest. At thistime, the Company cannot predict the outcome of these proceedings.

 

The Companycould face increased costs in the form of fines and a greater risk that theCompany could lose any one or more of its broadcasting licenses if the FCCconcludes that programming broadcast by a Company station 

 

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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 commenced several other investigations based on allegationsreceived from the public that some of the Company’s stationsbroadcast indecent programming.  The Company has cooperated in theseinvestigations, which remain pending.  The Company estimates that theimposition of the proposed fines would not materially impact the Company’sfinancial position, results of operations or cash flows.

 

The Companyhas filed on a timely basis renewal applications for those radio stations withradio broadcasting licenses that are subject to renewal with the FCC. TheCompany’s costs to renew its licenses with the FCC are minimal and are expensedas incurred 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 application.

 

***Guarantor Arrangements***

 

The Company enters into indemnification agreements in the ordinarycourse of business and other 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, 2009.

 

***Commitments***

 

**Termination Of Pending Disposition Of RadioStation In Portland, Oregon**

 

In January 2009,the Company received $0.4 million as liquidated damages from a buyer as aresult of the termination by the buyer of an asset purchase agreement and a TBAwith the Company. On January 31, 2007, the Company entered into anagreement to sell KTRO-AM (formerly KKSN-AM) in Portland, Oregon, for $4.2million in cash. Concurrently with entering into the agreement, the Companyalso entered into a TBA that was effective on February 1, 2007.  On October 28,2008, the Company received a notice from the buyer stating that it would notconsummate the purchase transaction.

 

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

 

***Dividend Equivalents***

 

The Company’sgrants of RSUs (restricted stock units) include the right, upon vesting, toreceive a cash payment equal to the aggregate amount of dividends, if any, thata holder would have received on the shares of common stock underlying theirRSUs if such RSUs had been vested during the period. For the six months ended June 30,2009 and 2008, the Company paid $0.7 million and $0.9 million, respectively, tothe holders of restricted stock units that vested during these periods. Thelong-term dividend equivalent amount, accrued and unpaid on unvested restrictedstock units, was $0.3 million and $1.1 million as of June 30, 2009 and December 31,2008, respectively, and is included under other long-term liabilities in thebalance sheet. The short-term dividend equivalent amount, accrued and unpaid onunvested restricted stock units, was $1.5 million and $1.6 million as of June 30,2009 and December 31, 2008, respectively, and is included under othercurrent liabilities in the balance sheet. The Company recognizes the taxbenefit for income tax purposes as a reduction to its income tax expense(before any adjustment for a valuation allowance) rather than as an increase toits paid-in capital as all dividend equivalent payments are made to the holdersof restricted stock upon the later of vesting of the units or termination ofthe deferral period for previously vested units.

 

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***Repurchases Of Vested Restricted Stock Units***

 

Upon vesting,unless an employee elects to pay the tax withholding obligation in cash, theCompany withholds shares of stock in an amount sufficient to cover the employee’stax withholding obligations.  As aresult, during the six months ended June 30, 2009 and 2008, the Companywas deemed to have repurchased 0.1 million shares of stock in each period.

 

***Share Repurchase Programs***

 

The Company’sshare repurchase program expired on June 30, 2009.

 

During the sixmonths ended June 30, 2009, the Company repurchased 0.7 million shares inthe amount of $0.9 million at an average price of $1.34 per share.  During the six months ended June 30,2008, the Company repurchased 1.3 million shares in the amount of $13.3 millionat an average price of $10.18 per share.

 

**10.****                               DEFERREDCOMPENSATION PLANS**

 

The Company provides certain of its employees and the Board ofDirectors with an opportunity to defer a portion of their compensation on atax-favored basis. The obligations by the Company to pay these benefits underthese plans represent unsecured general obligations that rank equally with theCompany’s other unsecured indebtedness. Deferred compensation expense isallocated to corporate general and administrative expenses and stationoperating expenses.

 

As of June 30, 2009 and December 31, 2008, $4.5 million and$3.7 million, respectively, were deferred under these plans and were includedin other long-term liabilities. For the six months and three months ended June 30,2009, the Company recorded an increase in deferred compensation expense of $0.3million and $0.5 million, respectively. For the six months and three monthsended June 30, 2008, the Company recorded a decrease in deferredcompensation expense of $0.3 million and $0.1 million, respectively.

 

**11.****                               NETINCOME (LOSS) PER SHARE**

 

***Six Months Ended June 30,2009 and 2008***

 

The effect ofstock options and restricted stock units in the calculation of net income(loss) per share, using the treasury stock method, was anti-dilutive for thesix months and three months ended June 30, 2009 and June 30, 2008.

 

The following table setsforth the computations of basic and diluted net loss per share for the sixmonths ended June 30, 2009 and 2008:

 
| ** **                         | ** ** | **Six Months Ended**                                        | ** ** |
|------------------------------------|------------|-------------------------------------------------------------|------------|
| ** **                         | ** ** | **June 30, 2009**                                      | ** ** | **June 30, 2008** | ** ** |
| ** **                         | ** ** | **(amounts in thousands, except share and per share data)** | ** ** |
| ** **                         | ** ** | **Net Loss**                                                | ** ** | **Shares** | ** ** | **EPS** | ** ** | **Net Loss** | ** ** | **Shares** | ** ** | **EPS** | ** ** |
| Basic net loss per common share:   |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |
| Loss from continuing operations    |       | $                                                           | (36,577    | ) | 35,342,509 |   | $ | (1.03 | ) | $ | (87,124 | ) | 37,304,858 |   | $ | (2.34 | ) |
| Loss from discontinued operations  |       | —                                                      |       | — |   | — |   | (3,977 | ) | — |   | (0.10 | ) |
| Net loss                           |       | $                                                           | (36,577    | ) | 35,342,509 |   | $ | (1.03 | ) | $ | (91,101 | ) | 37,304,858 |   | $ | (2.44 | ) |
| Impact of equity awards            |       |                                                        |       | — |   |   |   |   |   | — |   |   |   |
| Diluted net loss per common share: |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |
| Loss from continuing operations    |       | $                                                           | (36,577    | ) | 35,342,509 |   | $ | (1.03 | ) | $ | (87,124 | ) | 37,304,858 |   | $ | (2.34 | ) |
| Loss from discontinued operations  |       | —                                                      |       | — |   | — |   | (3,977 | ) | — |   | (0.10 | ) |
| Net loss                           |       | $                                                           | (36,577    | ) | 35,342,509 |   | $ | (1.03 | ) | $ | (91,101 | ) | 37,304,858 |   | $ | (2.44 | ) |

 

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For the sixmonths ended June 30, 2009 and 2008, 0.2 million and 0.1 millionincremental shares, respectively, were not included in diluted net loss pershare as the shares were anti-dilutive when reporting a net loss.

 

In computingthe incremental shares under the treasury stock method for the six months endedJune 30, 2009, 1.0 million restricted stock units (including less than 0.1million restricted stock units with market and service conditions, as half ofthe restricted stock 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$1.48 to $48.21, were excluded from the computation as they were anti-dilutive.

 

In computingthe incremental shares under the treasury stock method for the six months endedJune 30, 2008, 1.3 million restricted stock units (including 0.3 millionrestricted stock units with market and service conditions as the marketconditions were not satisfied as of June 30, 2008) and options to purchase2.5 million shares of common stock at a range of $10.42 to $52.05, wereexcluded from the computation as they were anti-dilutive.

 

***Three Months Ended June 30,2009 and 2008***

 

The following table setsforth the computations of basic and diluted net loss per share for the threemonths ended June 30, 2009 and 2008:

 
| ** **                         | ** ** | **Three Months Ended**                                      | ** ** |
|------------------------------------|------------|-------------------------------------------------------------|------------|
| ** **                         | ** ** | **June 30, 2009**                                      | ** ** | **June 30, 2008** | ** ** |
| ** **                         | ** ** | **(amounts in thousands, except share and per share data)** | ** ** |
| ** **                         | ** ** | **Net Loss**                                                | ** ** | **Shares** | ** ** | **EPS** | ** ** | **Net Loss** | ** ** | **Shares** | ** ** | **EPS** | ** ** |
| Basic net loss per common share:   |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |
| Loss from continuing operations    |       | $                                                           | (41,913    | ) | 35,289,531 |   | $ | (1.19 | ) | $ | (96,293 | ) | 36,965,906 |   | $ | (2.60 | ) |
| Loss from discontinued operations  |       | —                                                      |       | — |   | — |   | (33 | ) | — |   | — |   |
| Net loss                           |       | $                                                           | (41,913    | ) | 35,289,531 |   | $ | (1.19 | ) | $ | (96,326 | ) | 36,965,906 |   | $ | (2.60 | ) |
| Impact of equity awards            |       |                                                        |       | — |   |   |   |   |   | — |   |   |   |
| Diluted net loss per common share: |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |
| Loss from continuing operations    |       | $                                                           | (41,913    | ) | 35,289,531 |   | $ | (1.19 | ) | $ | (96,293 | ) | 36,965,906 |   | $ | (2.60 | ) |
| Loss from discontinued operations  |       | —                                                      |       | — |   | — |   | (33 | ) | — |   | — |   |
| Net loss                           |       | $                                                           | (41,913    | ) | 35,289,531 |   | $ | (1.19 | ) | $ | (96,326 | ) | 36,965,906 |   | $ | (2.60 | ) |

 

For the threemonths ended June 30, 2009 and 2008, 0.4 million and 0.1 millionincremental shares, respectively, were not included in diluted net loss pershare as the shares were anti-dilutive when reporting a net loss.

 

In computingthe incremental shares under the treasury stock method for the three monthsended June 30, 2009, 0.9 million restricted stock units (including lessthan 0.1 million restricted stock units with market and service conditions, ashalf of the restricted stock units with market and service conditions were notsatisfied as of June 30, 2009) and options to purchase 1.2 million sharesof common stock at a range of $1.75 to $48.21, were excluded from thecomputation as they were anti-dilutive.

 

In computingthe incremental shares under the treasury stock method for the three monthsended June 30, 2008, 1.4 million restricted stock units (including 0.3million restricted stock units with market and service conditions as the marketconditions were not satisfied as of June 30, 2008) and options to purchase2.5 million shares of common stock at a range of $9.48 to $52.05, were excludedfrom the computation as they were anti-dilutive.

 

**12.****                               INCOMETAXES**

 

***Effective Tax Rate -Overview***

 

The Company’s income tax rates for the six months and three monthsended June 30, 2009 were based on the estimated annualeffective tax rate for 2009, which 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).

 

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The Company’s effective income tax rate may be impacted by: (1) changesin the level of income in any of the Company’s taxing jurisdictions; (2) changesin the statutes and rules applicable to taxable income in thejurisdictions in which the Company operates; (3) changes in the expectedoutcome of income tax audits; (4) changes in the estimate of expenses thatare not deductible for tax purposes; (5) income taxes in certain stateswhere the states’ current taxable income is dependent on factors other than theCompany’s consolidated net income; and (6) the effect of recording changesin the Company’s liabilities for uncertain tax positions.

 

An impairment loss will result in an income tax benefit during theperiod incurred (before any adjustment for a deferred tax asset valuationallowance) as the amortization of broadcasting licenses and goodwill isdeductible for income tax purposes.

 

**Tax Rate For The SixMonths And Three Months Ended June 30, 2009**

 

The effective income tax rates (benefits) were 0.7% and (2.8%) for thesix months and three months ended June 30, 2009, respectively. Theeffective income tax rate reflects an increase in the deferred tax assetvaluation allowance (after consideration for any net deferred tax liabilitiesassociated with non-amortizable assets such as broadcasting licenses andgoodwill) for the reasons as described below under Valuation Allowance ForDeferred Tax Assets.

 

**Tax Rate For The SixMonths And Three Months Ended June 30, 2008**

 

The effective income tax rates (benefits) were (37.5%) and (37.8%) forthe six months and three months ended June 30, 2008, respectively.

 

***Deferred TaxLiabilities***

 

As of June 30, 2009 and asof December 31, 2008 there were nodeferred tax liabilities as deferred tax liabilities were fully offset bydeferred tax assets. The income tax accounting process to determine thedeferred tax liabilities involves estimating all temporary differences betweenthe tax and financial reporting bases of the Company’s assets and liabilities,based on enacted tax laws and statutory tax rates applicable to the period inwhich the differences are expected to affect taxable income. The Companyestimated the current exposure by assessing the temporary differences andcomputing the provision for income taxes by applying the estimated effectivetax rate to income.

 

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

 

The Companyincreased its valuation allowance by $11.6 million to $79.0 million as of June 30,2009 from $67.4 million as of December 31, 2008, primarily as a result ofan increase in its deferred tax assets as of June 30, 2009 as compared to December 31,2008. As a result of cumulative losses incurred by the Company since 2006, a deferredtax asset valuation allowance was established due to the uncertainty that thedeferred tax assets would be realized in future years (after consideration forany net deferred tax liabilities associated with non-amortizable assets such asbroadcasting licenses and goodwill). The valuation allowance as of June 30,2009 and December 31, 2008 includes $5.5 million and $6.0 million,respectively, for an income tax benefit recorded in other comprehensive income(loss).

 

The Companyhas also considered future taxable income and ongoing prudent and feasibletax-planning strategies 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 Tax Payments***

 

The Company madeincome tax payments of $0.2 million and less than $0.1 million for the sixmonths ended June 30, 2009 and 2008, respectively.  The Company received income tax refunds ofless than $0.1 million and $14.3 million for the six months ended June 30,2009 and 2008, respectively.

 

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***Liabilities For Uncertain Tax Positions***

 

For the sixmonths ended June 30, 2009 and 2008, the Company recorded changes to itsliabilities for uncertain tax positions to the statements of operations asincome tax expense of $0.1 million for each period, which amounts consistedprimarily of interest and penalties. For the three months ended June 30,2009 and 2008, the Company recorded changes to its liabilities for uncertaintax positions to the statements of operations as income tax expense of lessthan $0.1 million for each period, which amounts consisted primarily ofinterest and penalties. The Company’s liabilities for uncertain tax positionsas of June 30, 2009 and December 31, 2008 were $4.4 million and $4.3million, respectively, which were recorded in the balance sheets as long-termtax liabilities. The Company reviews its estimates on a quarterly basis, andany change in its liabilities for uncertain tax positions will result in anadjustment to its income tax expense in the statement of operations in each periodmeasured.

 

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

 

The Company issubject to federal and state income tax audits from time to time that couldresult in proposed assessments. The Company cannot predict with certainty howthese audits 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 2007. 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.****                               ACCOUNTSRECEIVABLE AND RELATED ALLOWANCE FOR DOUBTFUL ACCOUNTS**

 

Accounts receivable are comprised primarily of advertising that hasaired on the Company’s radio stations, but for which payment has not beencollected, net of agency commissions and an estimated allowance for doubtfulaccounts. Estimates of the allowance for doubtful accounts are recorded basedon management’s judgment of the collectability of the accounts receivable basedon historical information, relative improvements or deteriorations in the ageof the accounts receivable and changes in current economic conditions.

 

The accounts receivable balances and reserve for doubtful accounts as of June 30,2009 and December 31, 2008 are presented in the following table:

 
| ** **                                                   | ** ** | **June 30,**          | ** ** | **December 31,** | ** ** |
|--------------------------------------------------------------|------------|----------------------------|------------|-----------------------|------------|
| ** **                                                   | ** ** | **2009**                   | ** ** | **2008**              | ** ** |
| ** **                                                   | ** ** | **(amounts in thousands)** | ** ** |
|                                                         |       |                       |       |                  |       |
| Accounts receivable                                          |       | $                          | 75,989     |                  | $          | 79,830 |   |
| Allowance for doubtful accounts                              |       | (3,148                     | )          | (4,476                | )          |
| Accounts receivable, net of allowance for  doubtful accounts |       | $                          | 72,841     |                  | $          | 75,354 |   |

 

As of June 30, 2009 and December 31,2008, the Company recorded accounts receivable credits in the amounts of $2.2million and $1.9 million, respectively, which amounts are included in thebalance sheets under other current liabilities.

 

As of June 30, 2009 and December 31,2008, the Company recorded: (1) short-term unearned revenues of $1.0million and $1.4 million, respectively, which amounts are included in thebalance sheets under other current liabilities; and (2) long-term unearnedrevenues of $0.3 million and $0.7 million, respectively, which amounts areincluded in the balance sheets under other long-term liabilities.

 

**14.****                            DISCONTINUEDOPERATIONS**

 

The Companyapplied the provisions of SFAS No. 144 to: (1) the disposition on July 14,2008 of radio broadcasting assets in the Rochester, New York, market (forfurther discussion of this disposition, please refer to the Annual Report on Form 10-Kas filed with the Securities and Exchange Commission on February 26,2009); (2) the disposition on March 14, 2008 of radio broadcastingassets in the Cincinnati, Ohio, market and in the Seattle, Washington, market(see Note 4, Acquisitions, Dispositions And Unaudited Pro Forma Summary); and (3) thedisposition on January 15, 2008 of a radio station in Austin, Texas, (seeNote 4, Acquisitions, Dispositions And Unaudited Pro Forma Summary).  SFAS No. 144 requires that in a periodin which a component of an entity has

 

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been disposed of or isclassified as held for sale, the income statement of a business enterprise forcurrent and prior periods shall report the results of operations of thecomponent, including any gain or loss recognized, in discontinued operations.

 

The Companydid not report as discontinued operations the disposition of the radio stationsin Cincinnati, Ohio, as there was no activity in this market by the Companysince the Company’s acquisition of these stations during the fourth quarter of2007 (these stations were operated by a third party pursuant to a TBA for theperiod from February 26, 2007 through March 14, 2008).

 

The Companydid not report as discontinued operations the disposition of the radio stationin the Austin market or the disposition of the three radio stations in theSeattle market as these operations did not meet the criteria for thereclassification of operating results to discontinued operations due to theexpected migration of cash flows from the disposed stations to otherCompany-owned radio stations.  Therefore,the results remain classified in income from continuing operations.

 

The Companydid not allocate any interest expense for the periods presented, as no debt wasrequired to be repaid under the Company’s Bank Facility as a result of thedisposition of these radio station assets.

 

Selected financial information related to discontinued operations inthe Rochester market for the six months and three months ended June 30,2008 is as follows:

 
| ** **                                                     | ** ** | **Three Months  Ended June 30,  2008** | ** ** | **Six Months  Ended June 30,  2008** | ** ** |
|----------------------------------------------------------------|------------|---------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                     | ** ** | **(amounts in thousands)**                  | ** ** |
|                                                           |       |                                        |       |                                      |       |
| Net broadcast revenues                                         |       | $                                           | 401        |                                      | $          | 1,440 |   |
|                                                           |       |                                        |       |                                      |       |
| Station operating expenses                                     |       | 454                                         |       | 1,477                                     |       |
| Impairment loss                                                |       | —                                      |       | 6,675                                     |       |
| Total operating expense                                        |       | 454                                         |       | 8,152                                     |       |
| Loss before tax benefit                                        |       | (53                                         | )          | (6,712                                    | )          |
| Income tax benefit                                             |       | 20                                          |       | 2,735                                     |       |
| Loss from discontinued operations, net of income taxes benefit |       | $                                           | (33        | )                                         | $          | (3,977 | ) |

 

During the first quarter of 2008, the Company reviewed its carryingamount for the Rochester assets held for sale at that time and determined thatan aggregate impairment loss for broadcasting licenses and goodwill of $6.7million was necessary due to: (1) the continued decline in advertisingrevenues; (2) the filing of an application with the FCC to place thesestations into a disposition trust; and (3) the potential for a forced saleby the disposition trustee.

 

**15.****                               FAIRVALUE MEASUREMENTS**

 

Effective January 1, 2008, the Companyadopted FAS No. 157, which requires enhanced disclosures about assets andliabilities carried at fair value under FAS No. 157.

 

As defined inFAS No. 157, fair value is the price that would be received to sell anasset or paid to transfer a liability in an orderly transaction between marketparticipants at the measurement date (exit price). The Company utilizes marketdata or assumptions that market participants would use in pricing the asset or liability,including assumptions about risk and the risks inherent in the inputs to thevaluation technique. These inputs can be readily observable, marketcorroborated, or generally unobservable. The Company utilizes valuationtechniques that maximize the use of observable inputs and minimize the use ofunobservable inputs. FAS No. 157 establishes a fair value hierarchy thatprioritizes the inputs used to measure fair value. The hierarchy gives thehighest priority to unadjusted quoted prices in active markets for identicalassets or liabilities (level 1 measurement) and the lowest priority tounobservable inputs (level 3 measurement).

 

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***Recurring Fair ValueMeasurements***

 

The followingtables set forth, by level within the fair value hierarchy, the Company’sfinancial assets and liabilities that were accounted for at fair value on arecurring basis as of June 30, 2009 and December 31, 2008. Thefinancial assets and liabilities are classified in their entirety based on thelowest level of input that is significant to the fair value measurement. TheCompany’s assessment of the significance of a particular input to the fairvalue measurement requires judgment and may affect the valuation of fair valueassets and liabilities and their placement within the fair value hierarchylevels.

 
| ** **                     | ** ** | **As Of June 30, 2009**                   | ** ** |
|--------------------------------|------------|------------------------------------------------|------------|
| ** **                     | ** ** | **Value Measurements At Reporting Date Using** | ** ** |
| ** **                     | ** ** | ** **                                     | ** ** | **Quoted Prices** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                     | ** ** | ** **                                     | ** ** | **In Active** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                     | ** ** | ** **                                     | ** ** | **Markets For** | ** ** | **Significant** | ** ** | ** ** | ** ** |
| ** **                     | ** ** | ** **                                     | ** ** | **Identical** | ** ** | **Other** | ** ** | **Significant** | ** ** |
| ** **                     | ** ** | ** **                                     | ** ** | **Assets Or** | ** ** | **Observable** | ** ** | **Unobservable** | ** ** |
| ** **                     | ** ** | ** **                                     | ** ** | **Liabilities** | ** ** | **Inputs** | ** ** | **Inputs** | ** ** |
| **Description**                | ** ** | **Total**                                      | ** ** | **(Level 1)** | ** ** | **(Level 2)** | ** ** | **(Level 3)** | ** ** |
| ** **                     | ** ** | **Assets (Liabilities)**                       | ** ** |
| ** **                     | ** ** | **(amounts in thousands)**                     | ** ** |
| ** **                     | ** ** | ** **                                     | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Assets**                     | ** ** | ** **                                     | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Available For Sale Securities  |       | $                                              | 1,370      |   | $ | — |   | $ | — |   | $ | 1,370 |   |
|                           |       |                                           |       |   |   |   |   |   |   |
| **Liabilities**                |       |                                           |       |   |   |   |   |   |   |
| Interest Rate Cash Flow Hedges |       | $                                              | (13,903    | ) | $ |   | $ | (13,903 | ) | $ | — |   |
|                                |            |                                                |            |  |  |  |  |  |  |  |  |  |  |

 
| ** **                     | ** ** | **As Of December 31, 2008**               | ** ** |
|--------------------------------|------------|------------------------------------------------|------------|
| ** **                     | ** ** | **Value Measurements At Reporting Date Using** | ** ** |
| ** **                     | ** ** | ** **                                     | ** ** | **Quoted Prices** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                     | ** ** | ** **                                     | ** ** | **In Active** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                     | ** ** | ** **                                     | ** ** | **Markets For** | ** ** | **Significant** | ** ** | ** ** | ** ** |
| ** **                     | ** ** | ** **                                     | ** ** | **Identical** | ** ** | **Other** | ** ** | **Significant** | ** ** |
| ** **                     | ** ** | ** **                                     | ** ** | **Assets Or** | ** ** | **Observable** | ** ** | **Unobservable** | ** ** |
| ** **                     | ** ** | ** **                                     | ** ** | **Liabilities** | ** ** | **Inputs** | ** ** | **Inputs** | ** ** |
| **Description**                | ** ** | **Total**                                      | ** ** | **(Level 1)** | ** ** | **(Level 2)** | ** ** | **(Level 3)** | ** ** |
| ** **                     | ** ** | **Assets (Liabilities)**                       | ** ** |
| ** **                     | ** ** | **(amounts in thousands)**                     | ** ** |
| ** **                     | ** ** | ** **                                     | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Assets**                     | ** ** | ** **                                     | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Available For Sale Securities  |       | $                                              | 1,399      |   | $ | — |   | $ | — |   | $ | 1,399 |   |
|                           |       |                                           |       |   |   |   |   |   |   |
| **Liabilities**                |       |                                           |       |   |   |   |   |   |   |
| Interest Rate Cash Flow Hedges |       | $                                              | (15,262    | ) | $ |   | $ | (15,262 | ) | $ | — |   |
|                                |            |                                                |            |  |  |  |  |  |  |  |  |  |  |

 

Foravailable-for-sale securities, the Company uses quoted equity prices foridentical assets and liabilities that are available in active markets (level1).  For the Company’s interest ratehedges, the Company pays a fixed rate and receives a variable interest ratethat is observable based upon a forward interest rate curve and is thereforeconsidered a level 2 item (based on London Interbank Offered Rate, or “LIBOR”).

 

Forthe Company’s assets measured at fair value on a recurring basis usingsignificant unobservable inputs (level 3), the following amounts in thousandsare a reconciliation of the activity during each of the quarters within the sixmonths ended June 30, 2009 and 2008:

 

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| ** **                                                | ** ** | **Available**  | ** ** |
|-----------------------------------------------------------|------------|----------------|------------|
| ** **                                                | ** ** | **For Sale**   | ** ** |
| ** **                                                | ** ** | **Securities** | ** ** |
| **Assets**                                                | ** ** | ** **     | ** ** |
| Balance as of December 31, 2008                      |       | 1,376          |       |
| Recovery of investment                                    |       | (6             | )          |
| Balance as of March 31, 2009 and  June 30, 2009 |       | $              | 1,370      |   |
|                                                           |            |                |            |  |

 
| ** **                                                | ** ** | **Available**  | ** ** |
|-----------------------------------------------------------|------------|----------------|------------|
| ** **                                                | ** ** | **For Sale**   | ** ** |
| ** **                                                | ** ** | **Securities** | ** ** |
| **Assets**                                                | ** ** | ** **     | ** ** |
| Balance as of December 31, 2007                      |       | $              | 1,557      |   |
| Purchases                                                 |       | 6              |       |
| Balance as of March 31, 2008 and  June 30, 2008 |       | $              | 1,563      |   |

 

***Non-Recurring Fair ValueMeasurements***

 

The Companyhas certain assets that are measured at fair value on a non-recurring basisunder the circumstances and events described in Note 3, Intangible Assets AndGoodwill, and are adjusted to fair value only when the carrying values are morethan the fair values.  The categorizationof the framework used to price the assets is considered a level 3, due to thesubjective nature of the unobservable inputs used to determine the fair value(see Note 3, Intangible Assets And Goodwill, for the disclosure of certain keyassumptions used to develop the unobservable inputs).

 

Included inthe following table are the major categories of assets measured at fair valueon a non-recurring basis as of June 30, 2009, along with the impairmentloss recognized on the fair value measurement for the six and three months endedJune 30, 2009:

 

**Non-RecurringAssets Subject To Fair Value Measurement**

 
| ** **                  | ** ** | **As Of June 30, 2009**      | ** ** | ** **        | ** ** | ** **      | ** ** |
|-----------------------------|------------|-----------------------------------|------------|-------------------|------------|-----------------|------------|
| ** **                  | ** ** | **Fair Value Measurements Using** | ** ** | ** **        | ** ** | ** **      | ** ** |
| ** **                  | ** ** | ** **                        | ** ** | **Quoted Prices** | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                  | ** ** | ** **                        | ** ** | **In Active**     | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                  | ** ** | ** **                        | ** ** | **Markets For**   | ** ** | **Significant** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                  | ** ** | ** **                        | ** ** | **Identical**     | ** ** | **Other**       | ** ** | **Significant** | ** ** | **Six Months** | ** ** | **Three Months** | ** ** |
| ** **                  | ** ** | ** **                        | ** ** | **Assets Or**     | ** ** | **Observable**  | ** ** | **Unobservable** | ** ** | **Ended** | ** ** | **Ended** | ** ** |
| ** **                  | ** ** | ** **                        | ** ** | **Liabilities**   | ** ** | **Inputs**      | ** ** | **Inputs** | ** ** | **June 30, 2009** | ** ** |
| **Description**             | ** ** | **Total**                         | ** ** | **(Level 1)**     | ** ** | **(Level 2)**   | ** ** | **(Level 3)** | ** ** | **Impairment Loss** | ** ** |
| ** **                  | ** ** | **(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 FAS No. 157 Disclosures***

 

The estimatedfair value of financial instruments is determined using the best availablemarket information and appropriate valuation methodologies.  Considerable judgment is necessary, however,in interpreting market data to develop the estimates of fair value.  Accordingly, the estimates presented are notnecessarily indicative of the amounts that the Company could realize in a currentmarket exchange, or the value that ultimately will be realized

 

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upon maturity ordisposition.  The use of different marketassumptions may have a material effect on the estimated fair value amounts.

 

The followingmethods and assumptions were used to estimate the fair value of financialinstruments:

 

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

 

(2) Seniordebt (see Note 5): As of June 30, 2009 and December 31, 2008, thefair value of the Company’s senior debt was $693.8 million and $700.3 million,respectively, while the carrying value was $761.0 million and $750.0 million,respectively. The Company’s determination of the fair value was based on a riskadjusted rate.

 

(3) 7.625%Senior Subordinated Notes (see Note 6): As of June 30, 2009 and December 31 ̧2008, the fair value of the Company’s 7.625% Senior Subordinated Notes was$25.3 million and $45.8 million, respectively, while the carrying value was$44.1 million and $83.5 million, respectively. The fair values were based onavailable market prices.

 

(4) OutstandingLetters of Credit: The Company had a letter of credit outstanding in the amountof $1.5 million as of June 30, 2009 and 2008. The Company does not believeit is practicable to estimate the fair value of this financial instrument anddoes not expect any material loss from the resolution since performance is notlikely to be required.

 

**16.**                               DEFERRED CHARGES AND OTHER ASSETS AND OTHERLONG-TERM LIABILITIES

** **

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

** **
| ** **                                       | ** ** | **June 30,**          | ** ** | **December 31,** | ** ** |
|--------------------------------------------------|------------|----------------------------|------------|-----------------------|------------|
| ** **                                       | ** ** | **2009**                   | ** ** | **2008**              | ** ** |
| ** **                                       | ** ** | **(amounts in thousands)** | ** ** |
| ** **                                       | ** ** | ** **                 | ** ** | ** **            | ** ** |
| Debt issuance costs, net                         |       | $                          | 4,543      |                  | $          | 5,775 |   |
| Software costs, net                              |       | 1,838                      |       | 2,454                 |       |
| Prepaid assets - long term                       |       | 1,477                      |       | 1,600                 |       |
| Deferred contracts and other agreements, net     |       | 793                        |       | 857                   |       |
| Leasehold premium, net                           |       | 750                        |       | 795                   |       |
| Deposits - long term                             |       | 353                        |       | —                |       |
| Advertiser lists and customer relationships, net |       | 61                         |       | 80                    |       |
| Other                                            |       | 163                        |       | 147                   |       |
|                                             |       | $                          | 9,978      |                  | $          | 11,708 |   |

 

As of June 30,2009 and December 31, 2008, the deferred rent liabilities were $3.5million and $3.4 million, respectively, and are included in other underlong-term liabilities.

 

**17.**                               SUBSEQUENT EVENTS

** **

**The Company has performed an evaluation of subsequentevents through August 5, 2009, which is the date the financial statementswere issued.**

 

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**ITEM 2.****     Management’s Discussion AndAnalysis Of Financial Condition And Results Of Operations**

 

In preparing the discussion and analysiscontained in this Item 2, we presume that readers have read or have access tothe discussion and analysis contained in our Annual Report on Form 10-Kfiled with the Securities and Exchange Commission (the “SEC”) on February 26,2009. In addition, you should read the following discussion and analysis of ourfinancial condition and results of operations in conjunction with ourconsolidated financial statements and related notes included elsewhere in thisreport. The following results of operations include a discussion of the six andthree months ended June 30, 2009 as compared to the six and three monthsended June 30, 2008.  Our results ofoperations during the relevant periods: (i) represent the operations ofthe radio stations: (1) owned and operated by us; (2) operated by uspursuant to time brokerage agreements (“TBAs”); and (ii) exclude thoseradio stations owned by us but operated by others pursuant to TBAs.

 

We discuss net revenues, station operating expenses and operatingincome by comparing the performance of stations owned or operated by usthroughout a relevant period to the performance of those same stations in theprior period whether or not owned or operated by us. We use these comparisonsto assess the performance of our operations by analyzing the effect ofacquisitions and dispositions of stations on net revenues and station operatingexpenses throughout the periods measured.

 

**Results of Operations**

 

The following significant factors affected our results of operationsfor the six months ended June 30, 2009 as compared to the six months endedJune 30, 2008:

 

**Acquisitions**

 

·                  On March 14,2008, we acquired three radio stations in San Francisco, California, that in2009 increased our depreciation and amortization expense.

 

**Dispositions**

 

·                  On July 14, 2008, we sold three of our eight Rochester, New York,radio stations, which the buyer began operating on May 1, 2008 under a TBAwith us, for net cash proceeds of $12.2 million. The results for these stationswere recognized as discontinued operations.

 

·                  On March 14, 2008, we sold three of our seven Seattle, Washington,radio stations and recognized a gain of $10.0 million on the disposition ofthese assets.

 

·                  On January 15, 2008, we sold an Austin, Texas, radio station for$20.0 million in cash.

 

**Financing**

 

·                  Our interest expense decreased dueto: (1) a decrease in interest rates; (2) a decrease in ouroutstanding debt; and (3) the redemption of a portion of our SeniorSubordinated Notes that had a higher interest rate than the rate under oursenior debt.

 

·                  During the six months ended June 30,2009, we repurchased $39.4 million of Senior Subordinated Notes and recognizeda net gain on extinguishment of debt of $16.1 million (net of deferredfinancing expenses). During the six months ended June 30, 2008, werepurchased $41.7 million of Senior Subordinated Notes and recognized a gain onextinguishment of debt of $2.4 million.

 

**Other**

 

·                  Duringthe second quarters of 2009 and 2008, we recorded an impairment loss of $67.7and $184.6 million, respectively, in connection with our review of certainintangible assets under the provisions of Statement of Financial AccountingStandard (“SFAS”) No. 142.

 

·                  Sincethe third quarter of 2008, we have increased the valuation allowance for ournet deferred tax assets (after consideration for any net deferred taxliabilities associated with non-amortizable assets such as 

 

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broadcasting licenses and goodwill) due to thecumulative losses incurred by us since 2006, which caused uncertainty as to therealization of the deferred tax assets in future years.

 

·                  Duringthe second quarter of 2008, we recovered $3.5 million from our insurancecompany for damages resulting from Hurricane Katrina.

 

·                  Duringthe first quarter of 2008, we reviewed our carrying amount for the Rochesterassets then held for sale and determined that an impairment loss of $6.7million was necessary as a result of the status of our then ongoing divestitureprocess.

 

**SixMonths Ended June 30, 2009 As Compared To The Six Months Ended June 30,2008**

 

***Net Revenues***

 

| ** **         | ** ** | **Six Months Ended**      | ** ** |
|--------------------|------------|---------------------------|------------|
| ** **         | ** ** | **June 30, 2009**    | ** ** | **June 30, 2008** | ** ** |
| ** **         | ** ** | **(dollars in millions)** | ** ** |
| Net  Revenues      |       | $                         | 176.7      |   | $ | 219.2 |   |
| Amount  of Change  |       | $                         | (42.5      | ) |   |   |
| Percentage  Change |       | (19.4                     | )%         |   |   |
|                    |            |                           |            |  |  |  |  |

 

Our decrease in net revenues was impacted by the current economicdownturn that caused declines in advertising and radio revenues. Net revenuesdeclined in most of the markets where we operate stations.  Those stations that were impacted the most bythe decline in net revenues were radio stations located in the Boston, San Francisco,Seattle and Sacramento markets. Management anticipates that the negative trend in radio industryrevenues will continue for the next several quarters, but we expect to seelower levels of decline in the second half of 2009.

 

***Station Operating Expenses***

 

| ** **                 | ** ** | **Six Months Ended**      | ** ** |
|----------------------------|------------|---------------------------|------------|
| ** **                 | ** ** | **June 30, 2009**    | ** ** | **June 30, 2008** | ** ** |
| ** **                 | ** ** | **(dollars in millions)** | ** ** |
| Station Operating Expenses |       | $                         | 125.7      |   | $ | 138.6 |   |
| Amount of Change           |       | $                         | (12.9      | ) |   |   |
| Percentage Change          |       | (9.3                      | )%         |   |   |
|                            |            |                           |            |  |  |  |  |

 

The decrease in station operating expenses was primarily due to: (1) adecrease in net revenues as described above as certain variable expensesdecrease with a corresponding decrease in net revenues; and (2) certaincost reduction initiatives that commenced during the fourth quarter of 2008,including but not limited to reductions in workforce and the elimination of the401(k) employer matching contribution. Management anticipates that the trend of declining station operatingexpenses will continue for the next several quarters as we realize the effectsof previously implemented cost-cutting measures together with the decline invariable station operating expense.

 

***Depreciation and Amortization Expense***

 

| ** **                            | ** ** | **Six Months Ended**      | ** ** |
|---------------------------------------|------------|---------------------------|------------|
| ** **                            | ** ** | **June 30, 2009**    | ** ** | **June 30, 2008** | ** ** |
| ** **                            | ** ** | **(dollars in millions)** | ** ** |
| Depreciation and Amortization Expense |       | $                         | 8.5        |   | $ | 11.5 |   |
| Amount of Change                      |       | $                         | (3.0       | ) |   |   |
| Percentage Change                     |       | (26.0                     | )%         |   |   |
|                                       |            |                           |            |  |  |  |  |

 

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Depreciation and amortization expense decreased in 2009 as the expensein 2008 was higher due to acquisitions during the fourth quarter of 2007, whichincluded certain amortizable assets with lives of a short duration.

 

***Corporate General and Administrative Expenses***

 

| ** **                                    | ** ** | **Six Months Ended**      | ** ** |
|-----------------------------------------------|------------|---------------------------|------------|
| ** **                                    | ** ** | **June 30, 2009**    | ** ** | **June 30, 2008** | ** ** |
| ** **                                    | ** ** | **(dollars in millions)** | ** ** |
| Corporate General and Administrative Expenses |       | $                         | 11.6       |   | $ | 15.4 |   |
| Amount of Change                              |       | $                         | (3.8       | ) |   |   |
| Percentage Change                             |       | (24.7                     | )%         |   |   |
|                                               |            |                           |            |  |  |  |  |

 

Corporate general and administrative expenses decreased primarily dueto: (1) a decrease in non-cash compensation expense of $1.7 million as aresult of a decrease in the fair value of equity awards issued; and (2) adecrease in legal expense of $1.3 million associated with certain legalproceedings during 2008 which did not reoccur in 2009.

 

***Operating Loss***

 

| ** **        | ** ** | **Six Months Ended**      | ** ** |
|-------------------|------------|---------------------------|------------|
| ** **        | ** ** | **June 30, 2009**    | ** ** | **June 30, 2008** | ** ** |
| ** **        | ** ** | **(dollars in millions)** | ** ** |
| Operating Loss    |       | $                         | (36.9      | ) | $ | (120.8 | ) |
| Amount of Change  |       | $                         | 83.9       |   |   |   |
| Percentage Change |       | (69.5                     | )%         |   |   |
|                   |            |                           |            |  |  |  |  |

 

The decrease in operating loss was primarily due to a reduction inimpairment loss of $116.9 million in connection with our review of broadcastinglicenses and goodwill in the second quarter of 2009 as compared to our reviewof goodwill during the second quarter of 2008. The decrease in operating losswas offset by: (1) a decrease in net revenues for the reasons describedabove under Net Revenues, net of a decrease in station operating expenses forthe reasons described under Station Operating Expenses; and (2) a decreasein net gain on sale or disposal of assets of $10.0 million as a result of thesale in 2008 of our Seattle stations.

 

***Interest Expense***

 

| ** **        | ** ** | **Six Months Ended**      | ** ** |
|-------------------|------------|---------------------------|------------|
| ** **        | ** ** | **June 30, 2009**    | ** ** | **June 30, 2008** | ** ** |
| ** **        | ** ** | **(dollars in millions)** | ** ** |
| Interest Expense  |       | $                         | 16.0       |   | $ | 24.4 |   |
| Amount of Change  |       | $                         | (8.4       | ) |   |   |
| Percentage Change |       | (34.4                     | )%         |   |   |
|                   |            |                           |            |  |  |  |  |

 

The decrease in interest expense was primarily due to: (1) adecrease in interest rates on outstanding debt during the six months ended June 30,2009 as compared to the six months ended June 30, 2008; (2) a declinein outstanding debt upon which interest is computed; and (3) therepurchase of our Senior Subordinated Notes, which have a higher interest ratethan the replacement debt.

 

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***Loss From Continuing Operations Before Income Taxes (Benefit)***

 

| ** **                                                    | ** ** | **Six Months Ended**      | ** ** |
|---------------------------------------------------------------|------------|---------------------------|------------|
| ** **                                                    | ** ** | **June 30, 2009**    | ** ** | **June 30, 2008** | ** ** |
| ** **                                                    | ** ** | **(dollars in millions)** | ** ** |
| Loss From Continuing Operations Before Income Taxes (Benefit) |       | $                         | (36.3      | ) | $ | (139.5 | ) |
| Amount of Change                                              |       | $                         | 103.2      |   |   |   |
| Percentage Change                                             |       | (74.0                     | )%         |   |   |
|                                                               |            |                           |            |  |  |  |  |

 

The decrease was primarily attributable to: (1) a decrease inoperating loss for the reasons as described above under Operating Loss; (2) a$13.7 million increase on gain on the retirement of our Senior SubordinatedNotes as we repurchased debt at a higher discount; and (3) a decrease inour interest expense of $8.4 million for the reasons described above underInterest Expense.

 

***Income Taxes (Benefit)***

 

| ** **             | ** ** | **Six Months Ended**      | ** ** |
|------------------------|------------|---------------------------|------------|
| ** **             | ** ** | **June 30, 2009**    | ** ** | **June 30, 2008** | ** ** |
| ** **             | ** ** | **(dollars in millions)** | ** ** |
| Income Taxes (Benefit) |       | $                         | 0.3        |   | $ | (52.3 | ) |
| Amount of Change       |       | $                         | 52.6       |   |   |   |
| Percentage Change      |       | (100.5                    | )%         |   |   |
|                        |            |                           |            |  |  |  |  |

 

Our income tax expense was higher in 2009 as a result of recording afull valuation allowance for the full amount of our net deferred tax assets asa result of the cumulative losses incurred by us over the past three years (therecording of a full valuation allowance commenced during the third quarter of2008).

 

***Loss From Discontinued Operations, Net Of Tax Benefit***

 

| ** **                                            | ** ** | **Six Months Ended**      | ** ** |
|-------------------------------------------------------|------------|---------------------------|------------|
| ** **                                            | ** ** | **June 30, 2009**    | ** ** | **June 30, 2008** | ** ** |
| ** **                                            | ** ** | **(dollars in millions)** | ** ** |
| Loss From Discontinued Operations, Net Of Tax Benefit |       | $                         | —     |   | $ | (4.0 | ) |
| Amount of Change                                      |       | $                         | 4.0        |   |   |   |
| Percentage Change                                     |       | (100.5                    | )%         |   |   |
|                                                       |            |                           |            |  |  |  |  |

 

The netchange was primarily due to a non-cash impairment loss of $6.7 million (beforeincome tax benefit) in the first quarter of 2008 for the Rochester assets thatwere held for sale and that were subsequently disposed of during the thirdquarter of 2008.

 

***Net Loss***

 

| ** **        | ** ** | **Six Months Ended**      | ** ** |
|-------------------|------------|---------------------------|------------|
| ** **        | ** ** | **June 30, 2009**    | ** ** | **June 30, 2008** | ** ** |
| ** **        | ** ** | **(dollars in millions)** | ** ** |
| Net Loss          |       | $                         | (36.6      | ) | $ | (91.1 | ) |
| Amount of Change  |       | $                         | 54.5       |   |   |   |
| Percentage Change |       | (59.8                     | )%         |   |   |
|                   |            |                           |            |  |  |  |  |

 

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

 

**ThreeMonths Ended June 30, 2009 As Compared To The Three Months Ended June 30,2008**

 

***Net Revenues***

 

| ** **        | ** ** | **Three Months Ended**    | ** ** |
|-------------------|------------|---------------------------|------------|
| ** **        | ** ** | **June 30, 2009**    | ** ** | **June 30, 2008** | ** ** |
| ** **        | ** ** | **(dollars in millions)** | ** ** |
| Net Revenues      |       | $                         | 101.3      |   | $ | 123.8 |   |
| Amount of Change  |       | $                         | (22.5      | ) |   |   |
| Percentage Change |       | (18.2                     | )%         |   |   |
|                   |            |                           |            |  |  |  |  |

 

 

The decrease in net revenues was impacted by the current economicdownturn that contributed to weak demand for advertising in general, includingadvertising on our radio stations. Those stations that were impacted the mostby the decline in net revenues were radio stations located in the Boston, SanFrancisco, Seattle and Sacramento markets.

 

***Station Operating Expenses***

 

| ** **                 | ** ** | **Three Months Ended**    | ** ** |
|----------------------------|------------|---------------------------|------------|
| ** **                 | ** ** | **June 30, 2009**    | ** ** | **June 30, 2008** | ** ** |
| ** **                 | ** ** | **(dollars in millions)** | ** ** |
| Station Operating Expenses |       | $                         | 67.2       |   | $ | 74.5 |   |
| Amount of Change           |       | $                         | (7.3       | ) |   |   |
| Percentage Change          |       | (9.8                      | )%         |   |   |
|                            |            |                           |            |  |  |  |  |

 

The decrease in station operating expenses was primarily due to: (1) thefactors leading to the decrease in Net Revenues as described above as certainvariable expenses decrease with a corresponding decrease in net revenues; and (2) certaincost reduction initiatives that commenced during the fourth quarter of 2008,such as reductions in workforce and the elimination of the 401(k) employermatching contribution.

 

***Depreciation and Amortization Expense***

 

| ** **                            | ** ** | **Three Months Ended**    | ** ** |
|---------------------------------------|------------|---------------------------|------------|
| ** **                            | ** ** | **June 30, 2009**    | ** ** | **June 30, 2008** | ** ** |
| ** **                            | ** ** | **(dollars in millions)** | ** ** |
| Depreciation and Amortization Expense |       | $                         | 4.2        |   | $ | 5.5 |   |
| Amount of Change                      |       | $                         | (1.3       | ) |   |   |
| Percentage Change                     |       | (23.5                     | )%         |   |   |
|                                       |            |                           |            |  |  |  |  |

 

Depreciation and amortization expense decreased as 2008 was impacted byacquisitions during the fourth quarter of 2007, which included certainamortizable assets with lives of a short duration.

 

***Corporate General and Administrative Expenses***

 

| ** **                                    | ** ** | **Three Months Ended**    | ** ** |
|-----------------------------------------------|------------|---------------------------|------------|
| ** **                                    | ** ** | **June 30, 2009**    | ** ** | **June 30, 2008** | ** ** |
| ** **                                    | ** ** | **(dollars in millions)** | ** ** |
| Corporate General and Administrative Expenses |       | $                         | 5.9        |   | $ | 7.0 |   |
| Amount of Change                              |       | $                         | (1.1       | ) |   |   |
| Percentage Change                             |       | (15.7                     | )%         |   |   |
|                                               |            |                           |            |  |  |  |  |

 

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Corporate general and administrative expenses decreased primarily dueto a decrease in legal expense of $0.8 million associated with certain legalproceedings during 2008 which did not reoccur in 2009.

 

***Operating Loss***

 

| ** **        | ** ** | **Three Months Ended**    | ** ** |
|-------------------|------------|---------------------------|------------|
| ** **        | ** ** | **June 30, 2009**    | ** ** | **June 30, 2008** | ** ** |
| ** **        | ** ** | **(dollars in millions)** | ** ** |
| Operating Loss    |       | $                         | (43.7      | ) | $ | (147.9 | ) |
| Amount of Change  |       | $                         | 104.2      |   |   |   |
| Percentage Change |       | (70.5                     | )%         |   |   |
|                   |            |                           |            |  |  |  |  |

 

The decrease in operating loss was primarily due to a reduction inimpairment loss of $116.9 million in connection with our review of broadcastinglicenses and goodwill in the second quarter of 2009 as compared to our reviewof goodwill during the second quarter of 2008. The decrease in operating losswas offset by a decrease in net revenues for the reasons described above underNet Revenues, net of a decrease in station operating expenses for the reasonsdescribed under Station Operating Expenses.

 

***Interest Expense***

 

| ** **        | ** ** | **Three Months Ended**    | ** ** |
|-------------------|------------|---------------------------|------------|
| ** **        | ** ** | **June 30, 2009**    | ** ** | **June 30, 2008** | ** ** |
| ** **        | ** ** | **(dollars in millions)** | ** ** |
| Interest Expense  |       | $                         | 7.9        |   | $ | 10.9 |   |
| Amount of Change  |       | $                         | (3.0       | ) |   |   |
| Percentage Change |       | (27.6                     | )%         |   |   |
|                   |            |                           |            |  |  |  |  |

 

The decrease in interest expense was primarily due to: (1) adecrease in interest rates on outstanding debt during the three months ended June 30,2009 as compared to the three months ended June 30, 2008; (2) a declinein outstanding debt upon which interest is computed; and (3) therepurchase of our Senior Subordinated Notes, which have a higher interest ratethan the replacement debt.

 

***Loss From Continuing Operations Before Income Tax Benefit***

 

| ** **                                                | ** ** | **Three Months Ended**    | ** ** |
|-----------------------------------------------------------|------------|---------------------------|------------|
| ** **                                                | ** ** | **June 30, 2009**    | ** ** | **June 30, 2008** | ** ** |
| ** **                                                | ** ** | **(dollars in millions)** | ** ** |
| Loss From Continuing Operations Before Income Tax Benefit |       | $                         | (43.1      | ) | $ | (154.8 | ) |
| Amount of Change                                          |       | $                         | 111.7      |   |   |   |
| Percentage Change                                         |       | (72.2                     | )%         |   |   |
|                                                           |            |                           |            |  |  |  |  |

 

The decrease was primarily attributable to a decrease in operating lossfor the reasons as described above under Operating Loss and an increase ingains on the retirement of our Senior Subordinated Notes as we repurchased debtat a higher discount.

 

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***Income Tax Benefit***

 

| ** **         | ** ** | **Three Months Ended**    | ** ** |
|--------------------|------------|---------------------------|------------|
| ** **         | ** ** | **June 30, 2009**    | ** ** | **June 30, 2008** | ** ** |
| ** **         | ** ** | **(dollars in millions)** | ** ** |
| Income Tax Benefit |       | $                         | (1.2       | ) | $ | (58.5 | ) |
| Amount of Change   |       | $                         | 57.3       |   |   |   |
| Percentage Change  |       | (98.0                     | )%         |   |   |
|                    |            |                           |            |  |  |  |  |

 

Our income tax expense was higher in 2009 as a result of recording afull valuation allowance for the full amount of our net deferred tax assets asa result of the cumulative losses incurred by us over the past three years (therecording of a full valuation allowance commenced during the third quarter of2008).

 

***Net Loss***

 

| ** **        | ** ** | **Three Months Ended**    | ** ** |
|-------------------|------------|---------------------------|------------|
| ** **        | ** ** | **June 30, 2009**    | ** ** | **June 30, 2008** | ** ** |
| ** **        | ** ** | **(dollars in millions)** | ** ** |
| Net Loss          |       | $                         | (41.9      | ) | $ | (96.3 | ) |
| Amount of Change  |       | $                         | 54.4       |   |   |   |
| Percentage Change |       | (56.5                     | )%         |   |   |
|                   |            |                           |            |  |  |  |  |

 

The net change was primarily attributable to thereasons described above under Loss From Continuing Operations Before Income TaxBenefit and Income Tax Benefit.

 

**Future Impairments**

 

We may determine that it will be necessary totake impairment charges in future periods for various reasons, including if theeconomic downturn worsens and/or continues for an extended period of time.  Although the annual impairment test of ourbroadcasting licenses and goodwill was performed in the second quarter of 2009,we may be required to retest prior to our next annual evaluation.

 

**Liquidity And Capital Resources**

 

***Our Credit Agreement***

 

Our credit agreement (the “Bank Facility”), currently with a syndicateof 24 banks, provides for $1,050 million in senior secured credit that matureson June 30, 2012, which is comprised of $650 million in revolving credit (“Revolver”)and $400 million in a term loan (“Term A”). The Term A reduces beginning September 30,2009 in quarterly amounts starting at $15 million and increasing to $60million. The Revolver provides us with working capital and capital for generalcorporate purposes, including capital expenditures and any or all of thefollowing: Term A principal payments, repurchases of our Senior Subordinated Notes,repurchases of Class A common stock, dividends and acquisitions. The BankFacility is secured by a pledge of 100% of the capital stock and other equityinterest in all of our wholly owned subsidiaries. The Bank Facility requires usto comply with certain financial covenants which are defined terms within theagreement, including: (1) Consolidated Funded Indebtedness not to exceed 6times Consolidated Operating Cash Flow; and (2) Consolidated OperatingCash Flow to be at a minimum of 2 times Consolidated Interest Charges.Management believes we are in compliance with the financial covenants and allother terms of the Bank Facility.

 

***Liquidity***

 

As of June 30, 2009, we had outstanding $806.7 million in seniordebt, including: (1) $761.0 million under our Bank Facility, which iscomprised of $400.0 million in Term A and $361.0 million in drawn Revolver; (2) $44.1million in Senior Subordinated Notes; and (3) $1.5 million in a letter ofcredit. 

 

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The undrawn amount of the Revolver was $287.5 million as of June 30,2009. The amount of the Revolver available to us, however, is a function ofcovenant compliance at the time of borrowing. Based on our financial covenant analysis as of June 30, 2009, andassuming any newly borrowed funds were not used to repay indebtedness or in amanner which had a positive effect on Consolidated Operating Cash Flow, wecould borrow $42.9 million of the $287.5 million in available Revolver. Theentire amount of the available Revolver could be borrowed by us to the extentsuch borrowed funds are used to repay indebtedness. To this end, we plan to useour available Revolver capacity and cash flow from operations to fund theamortization of the Term A.

 

As of June 30, 2009, we had $17.9 million in cash and cashequivalents. During the six months ended June 30, 2009, we decreased ournet outstanding debt by $28.5 million (which included a discount of $16.6million on the retirement of our senior subordinated debt).

 

We may seek to obtain other funding or additional financing from timeto time. We believe that cash on hand and cash from operating activities,together with available borrowings under the Bank Facility, will be sufficientto permit us to meet our liquidity requirements. Our lenders require that weremain in compliance with certain covenants in our credit agreements. Webelieve that in 2009 we will maintain our compliance with these covenants.

 

The current economic downturn has reduced demand for advertising ingeneral, including advertising on our radio stations.  Management anticipates that the negativetrends in radio industry revenues will continue for the next several quarters,but we expect to see lower levels of decline in the second half of 2009. If ourrevenues decline more than planned due to difficult market conditions, ourability to maintain compliance with the financial covenants in our creditagreements would become increasingly difficult without remedial measures.  Such remedial measures would includemanagement’s plans to further reduce operating costs, opportunisticallyrepurchase debt at a discount and the sale of assets. If our remedial measureswere not successful in maintaining covenant compliance, then we would negotiatewith our lenders for relief, which relief could result in higher interestexpense.  Failure to comply with ourfinancial covenants or other terms of our credit agreements and failure to negotiaterelief from our lenders could result in the acceleration of the maturity of alloutstanding debt. Under these circumstances, the acceleration of our debt couldhave a material adverse effect on our business.

 

***NYSE — Continued Listing***

 

Our common stock is currently listed on the New York Stock Exchange (“NYSE”). The continued listing requirements of the NYSE include, among other things: (i) aminimum share closing price of $1.00 over a 30 consecutive day trading period; (ii) aminimum market capitalization of $15 million over a 30 consecutive day tradingperiod; and (iii) a minimum of either $50 million in market capitalizationor $50 million of shareholders’ equity (these two thresholds are reduced from$75 million on a “pilot program” basis through October 31, 2009).  While we are presently in compliance with theNYSE continued listing requirements, it is possible our common stock may in thefuture be subject to suspension and delisting procedures.

 

***Operating Activities***

 

Net cash flows provided by operatingactivities were $28.0 million and $55.5 million for the six months ended June 30,2009 and 2008, respectively. The decrease in 2009 was mainly attributable to: (1) adecrease in net revenues, net of station operating expenses, of $29.6 million;and (2) a decrease in prepaid and refundable taxes of $14.2 million as wereceived most of our state and federal tax refunds during the prior year.

 

***Investing Activities***

 

Net cash flows used in investing activitieswere $0.9 million for the six months ended June 30, 2009 and net cashflows provided by investing activities were $23.1 million for the six monthsended June 30, 2008.

 

For the six months ended June 30, 2009,the cash used in investing activities primarily reflects $1.2 million foradditions to property and equipment.  Forthe six months ended June 30, 2008, the cash provided by investingactivities primarily reflects $20.0 million in proceeds from the sale of astation in Austin, offset by cash used in investing activities for theadditions to property and equipment of $4.5 million.

 

***Financing Activities***

 

Net cash flows used in financing activitieswere $13.5 million and $84.1 million for the six months ended June 30,2009 and 2008, respectively.

 

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For the six months ended June 30, 2009,the cash flows used in financing activities primarily reflect the repurchase ofour Senior Subordinated Notes at $22.8 million (after a discount of $16.6million).  For the six months ended June 30,2008, the cash flows used in financing activities primarily reflect the netrepayment of debt (including the repurchase of our Senior Subordinated Notes)of $51.3 million, the repurchase of our common stock of $13.3 million; and thepayment of dividends of $17.9 million.

 

***Dividends***

 

Our Board of Directors approved dividends on a quarterly basiseffective with the first quarter of 2006 through the third quarter of2008.  Any future dividends will be at the discretion of the Board ofDirectors based upon the relevant factors at the time of such consideration.

 

***Share RepurchasePrograms***

 

Our most recent share repurchase program, which had $25.4 million inremaining authorization for repurchases, expired on June 30, 2009.

 

***Debt Repurchases***

 

We may from time to time seek to repurchase and retire our outstandingdebt through cash purchases, open market purchases, privately negotiatedtransactions or otherwise. Such repurchases or exchanges, if any, will dependon prevailing market conditions, our liquidity requirements, contractualrestrictions and other factors.  Theamounts involved may be material. During the six months ended June 30,2009, we repurchased and retired $39.4 million of our Senior SubordinatedNotes.

 

***2009 Option ExchangeProgram***

 

In February 2009, our Board of Directors approved an amendment tothe Entercom Equity Compensation Plan to permit a one-time Option ExchangeProgram (“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 shares of our restricted stock units. The exchange ratio underthe 2009 OEP was as follows:

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

 

On May 15, 2009, following the May 14, 2009 expiration of our2009 OEP, we granted 0.7 million restricted stock units in exchange for 2.1 millionoptions. As a result of the 2009 OEP, the number of restricted stock units thatcan be issued under the Plan was effectively increased by 0.7 million as allrestricted stock units granted did not count against the restricted stocksublimit.  In addition, the number ofawards that can be issued under the Plan was effectively reduced by 2.1 millionas all options that were exchanged will not be available for re-grant under thePlan.

 

***Income Taxes***

 

During the six months ended June 30, 2009, we paid $0.2 million instate income taxes. We anticipate that it will not be necessary to make anyquarterly estimated federal and state income tax payments for the remainder of2009 based upon existing prepayments and expected quarterly income subject totax.

 

***Capital Expenditures***

 

Capital expenditures for the six months ended June 30, 2009 were$1.2 million. We anticipate that capital expenditures in 2009 will be between$2.5 million and $3.5 million.

 

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**Contractual Obligations**

 

The followingtable reflects a summary as of June 30, 2009 of our calendar contractualobligations for the remainder of the year 2009 and thereafter:

 
| ** **                       | ** ** | **Payments Due By Period** | ** ** |
|----------------------------------|------------|----------------------------|------------|
| ** **                       | ** ** | ** **                 | ** ** | **Less than** | ** ** | **1 to 3** | ** ** | **3 to 5** | ** ** | **More Than 5** | ** ** |
| **Contractual Obligations:**     | ** ** | **Total**                  | ** ** | **1 year** | ** ** | **years** | ** ** | **years** | ** ** | **years** | ** ** |
| ** **                       | ** ** | **(amounts in thousands)** | ** ** |
| ** **                       | ** ** | ** **                 | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Long-term debt obligations  (1)  |       | $                          | 873,615    |   | $ | 43,889 |   | $ | 292,927 |   | $ | 492,109 |   | $ | 44,690 |   |
| Operating lease  obligations     |       | 69,456                     |       | 5,972 |   | 22,230 |   | 17,323 |   | 23,931 |   |
| Purchase obligations (2)         |       | 262,841                    |       | 43,358 |   | 102,127 |   | 62,700 |   | 54,656 |   |
| Other long-term  liabilities (3) |       | 28,054                     |       | 217 |   | 11,061 |   | 5,125 |   | 11,651 |   |
| **Total**                        |       | $                          | 1,233,966  |   | $ | 93,436 |   | $ | 428,345 |   | $ | 577,257 |   | $ | 134,928 |   |

 

----

(1)                     (a)          Our Bank Facility hadoutstanding debt in the amount of $761.0 million as of June 30, 2009. Thematurity under our Bank Facility could be accelerated if we do not maintaincompliance with certain covenants.

(b)        Under our 7.625% SeniorSubordinated Notes, the maturity could be accelerated if we do not maintaincompliance with certain covenants or could be repaid in cash by us at ouroption prior to the due date of the notes.

(c)         The above table includesprojected interest expense under the remaining term of our Bank Facility andour 7.625% Senior Subordinated Notes.

 

(2)                     (a)  Wehave $1.5 million in liabilities primarily related to our obligation to providea letter of credit.

(b)  Inaddition to the above, purchase obligations of $261.3 million include contractsprimarily for on-air personalities, sports programming rights, ratingsservices, music licensing fees, equipment maintenance and certain otheroperating contracts.

 

(3)                     Includedwithin total other long-term liabilities of $28.1 million are liabilities forunrecognized tax positions of $4.4 million, which have been reflected in theabove table in the column labeled as “More Than 5 Years” as it is impracticalto determine whether there will be a cash impact to an individual year.  See Note 12, Income Taxes, in theaccompanying notes to the consolidated financial statements for a discussion ofdeferred tax liabilities, including liabilities for unrecognized tax positions.

 

**Off-Balance Sheet Arrangements**

 

FIN 46R was not applicable as of June 30, 2009 as we had nopending transactions to acquire or dispose of radio station assets.  As of June 30, 2009, we had no otheroff-balance sheet arrangements.

 

**Recent Accounting Pronouncements**

 

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

 

**Critical Accounting Policies**

 

The SEC defines critical accounting policies as those that are mostimportant to the portrayal of a company’s financial condition and results andthat require management’s most difficult, subjective or complex judgments,often as a result of the need to make estimates about the effect of mattersthat are inherently uncertain.

 

There have been no material changes to our critical accounting policiesfrom the information provided in Part II, Item 7, “Management’s Discussionand Analysis of Financial Condition and Results of Operations,” under theheading “Critical Accounting Policies” in our Annual Report on Form 10-Kfor the year ended December 31, 

 

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2008.  We have, however, provided additionaldisclosures to one of our critical accounting policies for impairment testingof radio broadcasting licenses and goodwill.

 

***Radio BroadcastingLicenses And Goodwill***

 

We have made acquisitions in the past for which a significant amount ofthe purchase price was allocated to broadcasting licenses and goodwill assets.As of June 30, 2009, we have recorded approximately $746.0 million inradio broadcasting licenses and goodwill, which represents 80.0% of our totalassets at that date. We must conduct impairment testing at least annually, ormore frequently if events or changes in circumstances indicate that the assetmight be impaired as required by SFAS No. 142 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 2008, we recorded an impairment loss of $67.7 million and $835.7million, respectively, for radio broadcasting licenses and goodwill.

 

We believe our estimate of the value of our radio broadcasting licensesand goodwill assets is a critical accounting estimate as the value is significantin relation to our total assets, and our estimate of the value uses assumptionsthat incorporate variables based on past experiences and judgments about futureperformance of our stations. These variables include but are not limited to: (1) theforecast growth rate of each radio market, including assumptions regarding eachmarket’s population, household income, retail sales and other expenditures thatwould influence advertising expenditures; (2) market share and profitmargin of an average station within a market; (3) estimated capitalstart-up costs and losses incurred during the early years; (4) risk-adjusteddiscount rate; (5) the likely media competition within the market area;and (6) terminal values. Changes in our estimates of the fair value ofthese assets could result in material future period write-downs in the carryingvalue of our broadcasting licenses and goodwill assets.

 

If we were to assume a 100 basis point change in certain of our keyassumptions (a reduction in the long-term revenue growth rate, a reduction inthe operating performance cash flow and an increase in the weighted averagecost of capital) used to determine the fair value of our broadcasting licensesand goodwill during the second quarter of 2009, the following would be theincremental 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 millions)** | ** ** |
| Broadcasting Licenses                                   |       |                      |       |            |       |           |       |
| Impairment assumption  sensitivity result               |       | $                         | 127.6      |            | $          | 84.0           |       | $ | 159.7 |   |
| Impairment recorded during  the second quarter of 2009  |       | 60.8                      |       | 60.8            |       | 60.8           |       |
| Incremental broadcasting  licenses impairment           |       | 66.8                      |       | 23.2            |       | 98.9           |       |
|                                                    |       |                      |       |            |       |           |       |
| Goodwill                                                |       |                      |       |            |       |           |       |
| Impairment assumption  sensitivity result               |       | 2.6                       |       | 6.6             |       | 5.0            |       |
| Impairment recorded during  the second quarter of 2009  |       | 6.9                       |       | 6.9             |       | 6.9            |       |
| Incremental goodwill  impairment (decrease)             |       | (4.3                      | )          | (0.3            | )          | (1.9           | )          |
|                                                    |       |                      |       |            |       |           |       |
| Total incremental  impairment from sensitivity analysis |       | $                         | 62.5       |            | $          | 22.9           |       | $ | 97.0 |   |

 

The prolonged economic downturn negatively impacted the radiobroadcasting industry as advertising revenues continued to decline andexpectations for growth over the next year also declined. The projected revenuegrowth levels for the industry are now less than those originally forecastedfor 2009, which caused further impairment to broadcasting licenses and goodwillin the current quarter. As revenues decline, profitability levels are alsonegatively impacted as fixed costs represent a high component of a radiostation’s operating expenses. As a 

 

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result, theasset base is particularly sensitive to the impact of declining revenues.  Please refer to Note 3, Intangible Assets AndGoodwill, in the accompanying notes to the financial statements for adiscussion of several key assumptions used in the fair value estimate of ourbroadcasting licenses and goodwill during the second quarter of 2009 ascompared to the fourth quarter 2008 interim impairment test.

 

 

For a more comprehensive list of our accounting policies, please seeNote 2, Significant Accounting Policies, accompanying the consolidatedfinancial statements included in our latest annual report on Form 10-K forthe year ended December 31, 2008. 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 complex judgments.  In addition, for further discussion of newaccounting policies that were effective for us on January 1, 2009, pleaserefer to the new accounting pronouncements under Note 1 to the accompanyingnotes to the financial statements.

 

**ITEM3.****                                                     QuantitativeAnd Qualitative Disclosures About Market Risk**

 

We are exposed to market risk from changes in interest rates on ourvariable rate senior debt.  From time totime, we may seek to limit our exposure to interest rate volatility through theuse of derivative rate hedging instruments. If the borrowing rates under LIBOR were to increase 1% above the currentrates as of June 30, 2009, our interest expense on our senior debt wouldincrease by approximately $2.1 million on an annual basis, including anyinterest benefit or interest expense associated with the use of derivative ratehedging instruments as described below. We do not have interest rate riskrelated to our Senior Subordinated Notes, which have a fixed interest rate of7.625%.

 

The following derivative rate hedging transactions, which fix intereston our variable rate debt, are outstanding as of June 30, 2009 in theaggregate notional amount of $550.0 million. These rate hedging transactionsare tied to the one-month LIBOR interest rate.

 
| ** ** | ** ** | ** **                  | ** ** | ** **    | ** **          | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **     | ** **         | **Effective** | ** **         | ** **                  | ** ** |
|------------|------------|-----------------------------|------------|---------------|---------------------|------------|------------|------------|------------|------------|------------|------------|------------|----------------|--------------------|---------------|--------------------|-----------------------------|------------|
| ** ** | ** ** | ** **                  | ** ** | ** **    | ** **          | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **     | ** **         | **Date That** | ** **         | **Notional**                | ** ** |
| **Type**   | ** ** | ** **                  | ** ** | ** **    | ** **          | ** ** | ** ** | ** ** | ** ** | **Fixed**  | ** ** | ** ** | ** ** | ** **     | ** **         | **Notional**  | ** **         | **Amount**                  | ** ** |
| **Of**     | ** ** | **Notional**                | ** ** | **Effective** | ** **          | ** ** | ** ** | ** ** | ** ** | **LIBOR**  | ** ** | ** ** | ** ** | **Expiration** | ** **         | **Amount**    | ** **         | **After**                   | ** ** |
| **Hedge**  | ** ** | **Amount**                  | ** ** | **Date**      | ** **          | ** ** | ** ** | **Collar** | ** ** | **Rate**   | ** ** | ** ** | ** ** | **Date**       | ** **         | **Decreases** | ** **         | **Decrease**                | ** ** |
| ** ** | ** ** | **(amounts  (in millions)** | ** ** | ** **    | ** **          | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **     | ** **         | ** **    | ** **         | **(amounts  (in millions)** | ** ** |
|       |       |                        |       |          |                |       |       |       |       |       |       |       |       |           |               |          |               |                        |       |
| Swap       |       | $                           | 225.0      |          | Jan. 28, 2008  |       |       |       | n/a        |       | 3.03       | %          |       |           | Jan. 28, 2011 |          | Jan. 28, 2010 |                        | $          | 150.0 |   |
|       |       |                        |       |          |                |       |       |       |       |       |       |       |       |           |               |          |               |                        |       |
| Collar     |       | $                           | 100.0      |          | Feb. 28, 2008  |       | [          |       | Cap  Floor |       | 4.00  2.14 | %  %       | ]          |           | Feb. 28, 2011 |          | n/a                |                        | n/a        |   |
|       |       |                        |       |          |                |       |       |       |       |       |       |       |       |           |               |          |               |                        |       |
| Swap       |       | $                           | 125.0      |          | March 28, 2008 |       |       |       | n/a        |       | 2.91       | %          |       |           | Sept. 28, 2011     |          | n/a                |                        | n/a        |   |
|       |       |                        |       |          |                |       |       |       |       |       |       |       |       |           |               |          |               |                        |       |
| Swap       |       | $                           | 100.0      |          | May 28, 2008   |       |       |       | n/a        |       | 3.62       | %          |       |           | May 28, 2012  |          | n/a                |                        | n/a        |   |
|            |            |                             |            |               |                     |            |            |            |            |            |            |            |            |                |                    |               |                    |                             |            |  |  |

 

The fair value (based upon current market rates) of the rate hedgingtransactions is included as derivative instruments in long-term assets and/orliabilities as the maturity dates on these instruments are greater than oneyear. The fair value of the hedging transaction is affected by a combination ofseveral factors, including the change in the one-month LIBOR rate and theforward interest rate to maturity. Any increase in the one-month LIBOR rateand/or the forward interest rate to maturity results in a more favorablevaluation, while any decrease in the one-month LIBOR rate and/or forwardinterest rate to maturity results in a less favorable valuation. Our creditexposure under these hedging agreements, or similar agreements we may enterinto in the future, is the cost of replacing an agreement in the event ofnon-performance by our counter-party. As of June 30, 2009, our derivativeinstrument was a liability of $13.9 million, which represented a decrease of$1.4 million from the balance as of December 31, 2008. The decrease inliability was primarily due to a reduction in the remaining term for each ofthe hedging transactions. 

 

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The liabilityas of June 30, 2009 included a reduction in value for non-performance inaccordance with the fair value provisions of SFAS No. 157, *“Fair Value Measurement,”* that waseffective for us as of January 1, 2008.

 

Our cash equivalents are money market instruments consisting ofshort-term government securities and repurchase agreements that are fullycollateralized 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 receivable does notrepresent a significant concentration of credit risk due to the quantity ofadvertisers, the minimal reliance on any one advertiser, the multiple marketsin which we operate and the wide variety of advertising business sectors.

 

See also additional disclosures regarding liquidity and capitalresources made under Liquidity and Capital Resources in Part 1, Item 2above.

 

**ITEM 4.****                                                     ControlsAnd Procedures**

 

**Evaluation Of Controls And Procedures**

 

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

 

We carried out an evaluation, under the supervision and with theparticipation of our management, including our Chief Executive Officer andChief Financial Officer, of the effectiveness of our disclosure controls andprocedures as of the end of the period covered by this report.  Based onthe foregoing, our President/Chief Executive Officer and Executive VicePresident - Operations/Chief Financial Officer concluded that our disclosurecontrols and procedures were effective at the reasonable assurance level.

 

**Changes In Internal Control Over FinancialReporting**

 

There has been no change in our internalcontrol over financial reporting during our most recent fiscal quarter that hasmaterially affected, or is reasonably likely to materially affect, our internalcontrol over financial reporting.

 

**PART II**

**OTHERINFORMATION**

 

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

 

There have been no material developments relating to the legalproceedings described in our Annual Report on Form 10-K for the year endedDecember 31, 2008, filed with the Securities and Exchange Commission on February 26,2009.

 

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

 

There have been no material changes from the Risk Factors described inour Form 10-K, filed with the SEC on February 26, 2009.

 

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

 

A $100 millionshare repurchase program adopted by our Board of Directors on May 8, 2006and extended on May 3, 2007 and on April 23, 2008, expired on June 30,2009.

 

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During thethree-month period ending June 30, 2009, we withheld shares of stock uponthe vesting of restricted stock units to cover withholding tax obligations,unless an employee elected to pay such tax in cash.  The following tableprovides information on shares withheld (which are considered repurchased)during the three-month period ended June 30, 2009:

 
| **Period**                                             | ** ** | **(a)  Total  Number Of  Shares  Purchased** | ** ** | **(b)  Average Price  Paid Per  Share** | ** ** | **(c)  Total  Number Of  Shares  Purchased  As Part Of  Publicly  Announced  Plans Or  Programs** | ** ** | **(d)  Maximum  Approximate  Dollar Value Of  Shares That  May Yet Be  Purchased  Under The  Plans Or  Programs** | ** ** |
|--------------------------------------------------------|------------|----------------------------------------------|------------|-----------------------------------------|------------|--------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------|------------|
| April 1,  2009 - April 30, 2009 (1) (2) |       | 86                                           |       | $                                       | 1.48       |                                                                                                   | —     |                                                                                                                   | $          | 25,381,272 |   |
| May 1,  2009 - May 31, 2009 (1) (2)     |       | 142                                          |       | $                                       | 1.78       |                                                                                                   | —     |                                                                                                                   | $          | 25,381,272 |   |
| June 1,  2009 - June 30, 2009 (1) (2)   |       | 972                                          |       | $                                       | 1.99       |                                                                                                   | —     |                                                                                                                   | $          | — |   |
| Total                                                  |       | 1,200                                        |       |                                    |       | —                                                                                                 |       |                                                                                                                   |       |

 

----

(1) On April 23, 2008, our Board ofDirectors extended to June 30, 2009 a plan to repurchase up to $100million of our common stock that was due to expire on May 5, 2008.  On June 30, 2009, the plan to repurchaseexpired.

 

(2) In connection with employee taxobligations related to the vesting of restricted stock units during the sixmonths ended June 30, 2009 and in accordance with elections by certainemployees, we are deemed to have purchased the shares withheld to satisfyemployees’ tax obligations of 86 shares at an average price of $1.48 per sharein April 2009, 142 shares at an average price of $1.78 per share in May 2009and 972 shares at an average price of $1.99 per share in June 2009. Theseshares are included in the above table.

 

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

 

None.

 

**ITEM 4.****                                                     SubmissionOf Matters To A Vote Of Security Holders**

 

 

(a)          On May 12, 2009, weheld our annual meeting of shareholders.

 

(b)         At our annual meeting ofshareholders: (i) David J. Berkman and Daniel E. Gold were elected as Class Adirectors for one-year terms expiring at the 2010 annual meeting ofshareholders; and (ii) Joseph M. Field, David J. Field, John C. Donlevie,Robert S. Wiesenthal and Michael J. Wolf were elected as directors for one-yearterms expiring at the 2010 annual meeting of shareholders.

 

(c)          The following matterswere voted on and approved at our annual meeting of shareholders: (i) theelection of Class A directors; (ii) the election of directors otherthan Class A directors; (iii) the approval of an amendment to theEntercom Equity Compensation Plan to permit a one-time option exchange program;(iv) the approval of an amendment to the Articles of Incorporation toopt-out of the Control Transaction provisions of the Pennsylvania BusinessCorporation Law; (v) the approval of an amendment to the Articles ofIncorporation to opt-out of the Business Combination provisions of thePennsylvania Business Corporation Law; and (vi) the ratification of theselection of PricewaterhouseCoopers LLP as our independent registered publicaccounting firm for the year ended December 31, 2009.

 

The results of voting at the annual meeting of shareholders were asfollows:

 

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(i) Election of Class ADirectors

 
| **Nominee**      | ** ** | **For**    | ** ** | **Withheld** |
|------------------|------------|------------|------------|--------------|
| David J. Berkman |       | 21,075,760 |       | 3,605,382    |
| Daniel E. Gold   |       | 21,350,241 |       | 3,330,901    |

 

(ii) Election of OtherThan Class A Directors

 
| **Nominee**          | ** ** | **For**    | ** ** | **Withheld** |
|----------------------|------------|------------|------------|--------------|
| Joseph M. Field      |       | 91,997,388 |       | 2,789,074    |
| David J. Field       |       | 93,969,410 |       | 817,052      |
| John C. Donlevie     |       | 91,695,693 |       | 3,090,769    |
| Robert S. Wiesenthal |       | 91,264,302 |       | 3,522,160    |
| Michael J. Wolf      |       | 91,801,822 |       | 2,984,640    |

 

(iii) Approval of an amendment to the Entercom Equity CompensationPlan to permit a one-time option exchange program.

 
| **For**    | ** ** | **Against** | ** ** | **Abstain** |
|------------|------------|-------------|------------|-------------|
| 77,427,511 |       | 10,507,593  |       | 1,365,049   |

 

(iv) Approval of an amendment to the Company’s Articles ofIncorporation to opt-out of the Control Transaction provisions of the PABusiness Corporation Law.

 
| **For**    | ** ** | **Against** | ** ** | **Abstain** |
|------------|------------|-------------|------------|-------------|
| 83,196,703 |       | 10,593,067  |       | 996,684     |

 

(v) Approval of an amendment to the Company’s Articles ofIncorporation to opt-out of the Business Combination provisions of the PABusiness Corporation Law.

 
| **For**    | ** ** | **Against** | ** ** | **Abstain** |
|------------|------------|-------------|------------|-------------|
| 84,459,353 |       | 9,307,069   |       | 1,020,032   |

 

(vi) Ratification of The Selection of PricewaterhouseCoopers LLPas our Independent Registered Public Accounting Firm for the Year Ending December 31,2009.

 
| **For**    | ** ** | **Against** | ** ** | **Abstain** |
|------------|------------|-------------|------------|-------------|
| 94,365,543 |       | 49,618      |       | 371,299     |

 

**ITEM 5.****                                                     OtherInformation**

 

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. (1)                                                                                                                        |
| 3.02                |       | Entercom Communications Corp. Amendment to Articles of Incorporation  dated May 15, 2009. (2)                                                                                                                                                            |
| 3.03                |       | Amended and Restated Bylaws of the Entercom Communications Corp. (3)                                                                                                                                                                                          |
| 4.01                |       | Indenture dated as of March 5, 2002 by and among Entercom Radio,  LLC and Entercom Capital, Inc., as co-issuers, the Guarantors named  therein and HSBC Bank USA, as trustee. (4)  (Originally filed as  Exhibit 4.02)                    |
| 4.02                |       | First Supplemental Indenture dated as of March 5, 2002 by and  among Entercom Radio, LLC and Entercom Capital, Inc., as co-issuers, the  Guarantors named therein and HSBC Bank USA, as trustee. (4)  (Originally  filed as Exhibit 4.03) |
| 10.01               |       | Entercom Equity Compensation Plan, as amended May 15, 2009. (5)                                                                                                                                                                                          |
| 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. (2)                                                                   |
| 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. (2)                                                    |
| 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. (6)                                                                                             |
| 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. (6)                                                                              |

 

----

(1)                                 Incorporatedby reference to Exhibit 3.01 of our Amendment to Registration Statement onForm S-1, as filed on January 27, 1999 (File No. 333-61381) and Exhibit 3.1of our Current Report on Form 8-K as filed on December 21, 2007.

(2)                                 Filedherewith.

(3)                                 Incorporatedby reference to Exhibit 3.1 of our Current Report on Form 8-K asfiled on February 21, 2008.

(4)                                 Incorporatedby reference to an exhibit of our Quarterly Report on Form 10-Q for thequarter ended March 31, 2002, as filed on May 13, 2002.

(5)                                 Incorporatedby reference to Appendix A of the Company’s 2009 Proxy Statement on Schedule14A filed March 23, 2009.

(6)                                 Theseexhibits are submitted herewith as “accompanying” this Quarterly Report on Form 10-Qand shall not be deemed to be “filed” as part of such Quarterly Report on Form 10-Q.

 

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**SIGNATURES**

 

Pursuant to the requirements of theSecurities Exchange Act of 1934, the registrant has duly caused this report tobe signed on its behalf by the undersigned thereunto duly authorized.

 

 
| ** **                | **ENTERCOM COMMUNICATIONS CORP.**                                                                                        |
|---------------------------|--------------------------------------------------------------------------------------------------------------------------|
| ** **                | (Registrant)                                                                                                             |
| ** **                | ** **                                                                                                               |
| ** **                | ** **                                                                                                               |
| Date: August 5, 2009 | /S/ David J. Field                                                                                                       |
|                      | Name:                                                                                                                    | David J. Field |
|                      | Title:                                                                                                                   | President and Chief Executive Officer |
|                      | (principal executive officer)                                                                                            |
|                      |                                                                                                                     |
|                      |                                                                                                                     |
| Date: August 5, 2009 | /S/ Stephen F. Fisher                                                                                                    |
|                      | Name:                                                                                                                    | Stephen F. Fisher |
|                      | Title:   Executive Vice President - Operations and  Chief Financial Officer (principal financial officer) |

 

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**EXHIBITINDEX**

 
| **Exhibit  Number** | ** ** | **Description**                                                                                                                                                                                                                                               |
|---------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.01                |       | Amended and Restated Articles of Incorporation of the Entercom  Communications Corp. as further amended on December 19, 2007. (1)                                                                                                                        |
| 3.02                |       | Entercom Communications Corp. Amendment to Articles of Incorporation  dated May 15, 2009. (2)                                                                                                                                                            |
| 3.03                |       | Amended and Restated Bylaws of the Entercom Communications Corp. (3)                                                                                                                                                                                          |
| 4.01                |       | Indenture dated as of March 5, 2002 by and among Entercom Radio,  LLC and Entercom Capital, Inc., as co-issuers, the Guarantors named  therein and HSBC Bank USA, as trustee. (4)  (Originally filed as  Exhibit 4.02)                    |
| 4.02                |       | First Supplemental Indenture dated as of March 5, 2002 by and  among Entercom Radio, LLC and Entercom Capital, Inc., as co-issuers, the  Guarantors named therein and HSBC Bank USA, as trustee. (4)  (Originally  filed as Exhibit 4.03) |
| 10.01               |       | Entercom Equity Compensation Plan, as amended May 15, 2009. (5)                                                                                                                                                                                          |
| 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. (2)                                                                   |
| 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. (2)                                                    |
| 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. (6)                                                                                             |
| 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. (6)                                                                              |

 

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(1)                                 Incorporatedby reference to Exhibit 3.01 of our Amendment to Registration Statement onForm S-1, as filed on January 27, 1999 (File No. 333-61381) and Exhibit 3.1of our Current Report on Form 8-K as filed on December 21, 2007.

(2)                                 Filedherewith.

(3)                                 Incorporatedby reference to Exhibit 3.1 of our Current Report on Form 8-K asfiled on February 21, 2008.

(4)                                 Incorporatedby reference to an exhibit of our Quarterly Report on Form 10-Q for thequarter ended March 31, 2002, as filed on May 13, 2002.

(5)                                 Incorporatedby reference to Appendix A of the Company’s 2009 Proxy Statement on Schedule14A filed March 23, 2009.

(6)                                 Theseexhibits are submitted herewith as “accompanying” this Quarterly Report on Form 10-Qand shall not be deemed to be “filed” as part of such Quarterly Report on Form 10-Q.

 

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