**Table of Contents**

** **

 

** **

**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C.  20549**

 

**FORM 10-K**

 

**(Mark One)**

 
| **x**                                                 | ** ** | **ANNUAL  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934**     |
|-------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------|
|                                                  |       |                                                                                                     |
| **For the fiscal year ended December 31,  2009** |
|                                                  |       |                                                                                                     |
| **or**                                                |
|                                                  |       |                                                                                                     |
| **o**                                                 |       | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934** |

 

**For the transition period from           to          **

 

**Commission File Number:  001-14461**

 

****

 

**EntercomCommunications 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)

 

**SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OFTHE ACT:**

 

| **Title of  each class**                            | ** ** | **Name of  exchange on which registered** |
|-----------------------------------------------------|------------|-------------------------------------------|
| Class A Common Stock, par value $.01 per share |       | New York Stock Exchange                   |

 

**SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OFTHE ACT:**

NONE

 

Indicate by check mark if the registrant is a well-known seasonedissuer, as defined in Rule 405 of the Securities Act. **Yes****o  No ****x**

 

Indicate by check mark if the registrant is not required to filereports pursuant to Section 13 or Section 15(d) of the ExchangeAct.**Yes****o  No****x**

 

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

 

Indicate by check mark whetherthe registrant has submitted electronically and posted on its corporateWebsite, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T (Section 232.405 ofthis chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files). **Yes****o  No ****o**

 

Indicate by check mark ifdisclosure of delinquent filers pursuant to Item 405 of Regulation S-K is notcontained herein, and will not be contained, to the best of registrant’sknowledge, in definitive proxy or information statements incorporated byreference in Part III of this Form 10-K or any amendment to this Form 10-K.**x**

 

Indicate by check mark whether the registrant is a largeaccelerated filer, an accelerated filer, or a non-accelerated filer.

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

 

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

 

As of February 28, 2010, the aggregatemarket value of the Class A common stock held by non-affiliates of theregistrant was $36,873,196 based on the June 30, 2009 closing price of$1.53 on the New York Stock Exchange on such date.

 

Class A common stock, $0.01 par value29,675,448 Shares Outstanding as of February 28, 2010 (Class A SharesOutstanding includes 1,575,891 unvested and vested but deferred restrictedstock units).

 

Class B common stock, $0.01 par value7,457,532 Shares Outstanding as of February 28, 2010.

 

 

 

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**DOCUMENTS INCORPORATED BY REFERENCE**

 

Certain information in the registrant’s Definitive Proxy Statement forits 2010 Annual Meeting of Shareholders, pursuant to Regulation 14A, isincorporated by reference in Part III of this report, which will be filedwith the Securities and Exchange Commission no later than April 30, 2010.

 

TABLE OF CONTENTS

 
| ** **    | ** **                                                                                                         | **Page** |
|---------------|--------------------------------------------------------------------------------------------------------------------|----------|
|          |                                                                                                               |     |
| PART I   |                                                                                                               |     |
|          |                                                                                                               |     |
| Item 1.       | Business                                                                                                           | 1        |
| Item 1A.      | Risk Factors                                                                                                       | 7        |
| Item 1B.      | Unresolved Staff  Comments                                                                                         | 12       |
| Item 2.       | Properties                                                                                                         | 12       |
| Item 3.       | Legal Proceedings                                                                                                  | 13       |
| Item 4.       | [Reserved]                                                                                                         | 13       |
|          |                                                                                                               |     |
| PART II  |                                                                                                               |     |
|          |                                                                                                               |     |
| Item 5.       | Market for Registrant’s Common Equity,  Related Shareholder Matters and Issuer Purchases of Equity Securities | 13       |
| Item 6.       | Selected Financial  Data                                                                                           | 18       |
| Item 7.       | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                        | 21       |
| Item 7A.      | Quantitative  and Qualitative Disclosures about Market Risk                                                        | 43       |
| Item 8.       | Financial  Statements and Supplementary Data                                                                       | 44       |
| Item 9.       | Changes in and  Disagreements with Accountants on Accounting and Financial Disclosure                              | 44       |
| Item 9A.      | Controls and  Procedures                                                                                           | 44       |
| Item 9B.      | Other Information                                                                                                  | 46       |
|          |                                                                                                               |     |
| PART III |                                                                                                               |     |
|          |                                                                                                               |     |
| Item 10.      | Directors,  Executive Officers and Corporate Governance                                                            | 46       |
| Item 11.      | Executive  Compensation                                                                                            | 46       |
| Item 12.      | Security  Ownership of Certain Beneficial Owners and Management and Related Shareholder  Matters                   | 46       |
| Item 13.      | Certain  Relationships and Related Transactions and Director Independence                                          | 46       |
| Item 14.      | Principal  Accounting Fees and Services                                                                            | 46       |
|          |                                                                                                               |     |
| PART IV  |                                                                                                               |     |
|          |                                                                                                               |     |
| Item 15.      | Exhibits,  Financial Statement Schedules                                                                           | 47       |
|          |                                                                                                               |     |
| Signatures    |                                                                                                               | 117      |

 

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**CERTAIN DEFINITIONS**

 

Unless the context requires otherwise, all references in this report to“Entercom,” “we,” “us,” “our” and similar terms refer to EntercomCommunications Corp. and its consolidated subsidiaries, which would include anyvariable interest entities that are required to be consolidated under accountingguidance.

 

**NOTE REGARDING FORWARD-LOOKING STATEMENTS**

 

This report contains, in addition to historical information, 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, as amended.

 

Forward-looking statements, including certain pro forma information,are presented for illustrative purposes only and reflect our currentexpectations concerning future results and events.  All statements other than statements ofhistorical fact are “forward-looking statements” for purposes of federal andstate securities laws including, without limitation, any projections ofearnings, revenues or other financial items; any statements of the plans,strategies and objectives of management for future operations; any statementsconcerning proposed new services or developments; any statements 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.  These risks, uncertainties and factorsinclude, but are not limited to, the factors described in Part I, Item 1A,“Risk Factors.”

 

The pro forma information reflects adjustments and is presented forcomparative purposes only and does not purport to be indicative of what hasoccurred or indicative of future operating results or financial position.

 

You should not place undue reliance on these forward-lookingstatements, which reflect our view only as of the date of this report.  We undertake no obligation to update thesestatements or publicly release the result of any revision(s) to thesestatements to reflect events or circumstances after the date of this report orto reflect the occurrence of unanticipated events.

 

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**PART I**

 

**ITEM 1.****                ****BUSINESS**

 

We are one of the five largest radio broadcastingcompanies in the United States with a nationwide portfolio in excess of 100stations in 23 markets, including San Francisco, Boston, Seattle, Denver,Portland, Sacramento and Kansas City. We were organized in 1968 as aPennsylvania corporation.

 

**Our Strategy**

 

Our strategy focuses on providing compelling contentin the communities we serve to enable us to offer our advertisers an effectivemarketing platform to reach a large targeted local audience.  Theprincipal components of our strategy are to: (i) build strongly-brandedradio stations; (ii) develop market leading station clusters; (iii) focuson creating effective integrated marketing solutions for our customers thatincorporate our audio, digital and experiential assets; and (iv) recruit,develop, motivate and retain superior employees.

 

**Source Of Revenue**

 

The primary source of revenues for our radio stationsis the sale of advertising time to local, regional and national spotadvertisers and national network advertisers.  A station’s local salesstaff generates the majority of its local and regional advertising salesthrough direct solicitations of local advertising agencies and businesses. Weretain a national representation firm to sell national spot commercial airtimeon our stations to advertisers outside of our local markets. National spotradio advertising typically accounts for approximately 20% of a radio station’srevenues. A growing source of revenues is from station websites and streamingaudio which allow for enhanced audience interaction and participation as wellas integrated advertising.

 

We believe that radio is an efficient and effectivemeans of reaching specifically identified demographic groups.  Our stations are typically classified bytheir format, such as news, talk, classic rock, adult contemporary,alternative, country and jazz, among others. A station’s format enables it to target specific segments of listenerssharing certain demographics. Advertisers and stations use data published byaudience measuring services to estimate how many people within particulargeographical markets and demographics listen to specific stations. Ourgeographically and demographically diverse portfolio of radio stations allowsus to deliver targeted messages to specific audiences for advertisers on alocal, regional and national basis.

 

**Competition**

 

The radio broadcasting industry is highlycompetitive.  Our stations compete forlisteners and advertising revenue with other radio stations within theirrespective markets. In addition, our stations compete for audiences andadvertising revenues with other media such as: broadcast and cable television,newspapers and magazines, outdoor advertising, direct mail, yellow pages,Internet, satellite radio, wireless media alternatives, cellular phones andother forms of advertisement.

 

The following are some of thefactors that are important to a radio station’s competitive position: (i) audience ratings; (ii) programcontent; (iii) management talent and expertise; (iv) sales talent andexpertise; (v) audience characteristics; (vi) signal strength; and (vii) thenumber and characteristics of other radio stations and other advertising mediain the market area.  We work to improveour competitive position through promotional campaigns aimed at the demographicgroups targeted by our stations and sales efforts designed to attractadvertisers. Radio station operators are subject to the possibility of anotherstation changing programming formats to compete directly for listeners andadvertisers.

 

We believe owning multiple radio stations in a marketallows us to provide our listeners with a more diverse programming selectionand a more efficient means for our advertisers to reach those listeners. Byowning multiple stations in a market, we are also able to operate our stationswith more highly skilled local management teams and eliminate duplicativeoperating and overhead expenses.

 

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**OurRadio Stations**

 

We operate with anationwide portfolio of 23 markets, including San Francisco, Boston, Seattle,Denver, Portland, Sacramento, Kansas City, Indianapolis, Milwaukee, Austin,Norfolk, Buffalo, New Orleans, Memphis, Providence, Greensboro, Greenville/Spartanburg,Rochester, Madison, Wichita, Wilkes-Barre/Scranton, Springfield (MA) andGainesville/Ocala.

 

**Federal Regulation Of RadioBroadcasting**

 

***Overview***. The radio broadcasting industry is subject to extensive and changingregulation of, among other things, ownership limitations, program content,advertising content, technical operations and business and employmentpractices. The ownership, operation and sale of radio stations are subject tothe jurisdiction of the Federal Communications Commission (“FCC”) pursuant tothe Communications Act of 1934, as amended (the “Communications Act”). Amongother things, the FCC: (i) assigns frequency bands for broadcasting; (ii) determinesthe particular frequencies, locations, operating power, and other technical parametersof stations; (iii) issues, renews, revokes and modifies station licenses; (iv) determineswhether to approve changes in ownership or control of station licenses; (v) regulatesequipment used by radio stations; (vi) adopts and implements regulationsand policies which directly affect the ownership, operation and business andemployment practices of stations; and (vii) regulates certain aspects ofother electronic media which compete with the broadcast industry.

 

The following is a brief summary of certain provisionsof the Communications Act and of certain specific FCC regulations and policies.This summary is not a comprehensive listing of all of the regulations andpolicies affecting radio stations.  Forfurther information concerning the nature and extent of federal regulation ofradio stations, you should refer to the Communications Act, FCC rules andFCC public notices and rulings.

 

***FCC Licenses***. The operation of a radio broadcast station requires a license from theFCC.  Certain of our subsidiaries holdthe FCC licenses for our stations.  Thenumber of radio stations that can operate in a given area or market is limitedby the number of AM frequencies permitted to serve a given area and the numberof FM frequencies allotted by the FCC to communities in an area or market,based upon considerations of interference to and from other operating orauthorized stations. The FCC’s multiple ownership rules further limit thenumber of stations serving the same area that may be owned or controlled by asingle individual or entity.

 

There is no national limit on the number of radiostations that a single entity may own. Radio station ownership is regulated by rules applicableto the number of stations that may be owned in common in an individual localradio market.  The FCC ownership rules definea “local radio market” as comprising all radio stations, both commercial andnon-commercial, which are included within a designated Arbitron market or, forstations located outside of Arbitron markets, all stations which have certainoverlapping signal contours.  Digitalradio channels authorized for AM and FM stations do not count as separate “stations”for purposes of the ownership limitations. The radio ownership rules limitthe number of radio stations that can be owned by a single individual or entityin a local radio market as follows:

 

·                  in markets with 45 or more commercial andnon-commercial radio stations, ownership is limited to eight commercialstations, no more than five of which can be in the same service (that is, AM orFM);

 

·                  in markets with 30 to 44 commercial andnon-commercial radio stations, ownership is limited to seven commercialstations, no more than four of which can be in the same service;

 

·                  in markets with 15 to 29 commercial andnon-commercial radio stations, ownership is limited to six commercial stations,no more than four of which can be in the same service; and

 

·                  in markets with 14 or fewer commercial andnon-commercial radio stations, ownership is limited to the fewer of fivecommercial stations or not more than 50% of stations in the market, and no more thanthree of the stations can be in the same service.

 

Since the number of stations in a local market mayfluctuate from time to time, the number of stations that can be owned by a singleindividual or entity in a given market can vary over time.  Once the FCC approves the ownership of acluster of stations in a market, that owner may continue to hold those stationsunder the

 

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“grandfathering” policies, despite a decrease in thenumber of stations in the market.  Marketclusters, such as our stations in Greenville, Kansas City and Wilkes-Barre/Scranton,which had been licensed under the former ownership rules but may exceedthe ownership limits when applying the Arbitron-based market standard of thepresent rule, are considered to be “grandfathered.” If, at the time of aproposed future transaction, a cluster does not comply with the multipleownership limitations based upon the number of stations then present in themarket, the entire cluster cannot be transferred intact to a single partyunless the purchaser qualifies as an “eligible entity” under specified smallbusiness standards and meets certain control tests, or the purchaser promisesto file within 12 months following consummation an application to assign the “excess”stations in the market to an eligible entity or to an irrevocable divestituretrust for ultimate assignment of such stations to an eligible entity.

 

***Classifications***. AM stations are classified as Class A, B, C or D depending on thetype of channel and size and nature of the area they are designed to serve. Class Astations operate on an unlimited time basis and are designed to render primaryand secondary service over an extended area. Class B stations operate onan unlimited time basis and are designed to render service only over a primaryservice area. Class C stations operate on a local channel and are designedto render service only over a primary service area that may be reduced as aconsequence of interference. Class D stations operate either duringdaytime hours only, during limited times only or on an unlimited time basiswith low nighttime power.

 

The class of an FM station determines the minimum andmaximum facilities requirements. Some FM class designations depend upon thegeographic zone in which the transmitter site of the FM station is located. Ingeneral, commercial FM stations are classified in order of increasing maximumpower and antenna height, as follows: Class A, B1, C3, B, C2, C1, C0 andC.  Under certain circumstances, Class CFM stations that do not meet the minimum antenna height requirements aresubject to an involuntary downgrade to Class C0 to correspond to theexisting operating characteristics of the station.

 

***Multiple Ownership Rules***. The Communications Act imposes specific limits on the number ofcommercial radio stations an individual or entity can own in a singlemarket.  FCC rules and regulationsimplement these limitations.  On June 2,2003, the FCC adopted new ownership rules following a comprehensive reviewof its ownership regulations. The ownership rules adopted in 2003included: (i) new cross-media limits that in certain markets eliminatedthe newspaper-broadcast cross-ownership ban and altered the television-radiocross-ownership limitations; and (ii) regulations that revised the mannerin which the radio numeric ownership limitations were to be applied,substituting where available geographic markets as determined by Arbitron inplace of the former standard and, in areas outside of Arbitron markets, therelevant radio market for purposes of the rules remained determined byoverlap of specified signal contours. The former standard was based on certainoverlapping signal contours.

 

The 2003 ownership rules were appealed to theU.S. Court of Appeals for the Third Circuit, which imposed a stay of the rules withthe exception that the court allowed: (a) the use of Arbitron markets todefine local radio markets where available; (b) the inclusion ofnon-commercial radio stations in determining the number of stations in a radiomarket; (c) the attribution of joint sales agreements with in-marketstations; and (d) the limitations on the transfers of non-compliantownership clusters.  On December 18,2007, the FCC adopted an order that modified only the newspaper/broadcastcross-ownership rule to adopt a rebuttable presumption permitting thecross-ownership of one newspaper and one television or radio station in the top20 television markets under certain circumstances, and establishing a waiverprocedure applicable to such combinations in smaller markets.  The FCC declined to make changes to any otherbroadcast ownership rules, and retained the rules as then in effect.  This decision was also appealed to the ThirdCircuit Court of Appeals. The FCC has advised the Court that the December 2007decision may not represent the majority view of the current Commission, andasked the Court to defer further proceedings contemplated before the FCC. TheCourt has recently requested that the FCC show cause why the stay of thenewspaper/broadcast cross-ownership rule, as adopted in December 2007,should not be lifted and the appeals heard. At this time, the FCC’s decisionremains subject to both administrative and judicial appeals.

 

As presently applied, the FCC’s newspaper-broadcastcross-ownership rules impose limitations on the circumstances under whichthe same party may own a broadcast station and a daily newspaper in the samegeographic market, as described above. The FCC’s radio-television cross-ownership rules limit the numberof radio stations that a local owner of television stations may hold.  We own no television stations or dailynewspapers, but, to the extent these limitations continue to be enforced, thesecross-media rules may limit the prospective buyers in the market of anystations we may wish to sell.

 

***Ownership Attribution***. In the application of the ownershiplimitations, the FCC generally only considers “attributable” ownershipinterests.  Attributable interests generally include: (i) equity anddebt interests which when combined exceed 33% of a licensee’s or other media’stotal asset value, if the interest holder supplies 

 

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more than 15% of a station’s total weekly programmingor has an attributable interest in any same-market media (television, radio,cable or newspaper), with a higher threshold in the case of investments incertain “eligible entities” acquiring broadcast stations; (ii) a 5% orgreater direct or indirect voting stock interest, including certain interestsheld in trust, unless the holder is a qualified passive investor, in which casethe threshold is a 20% or greater voting stock interest; (iii) any equityinterest in a limited liability company or a partnership, including a limitedpartnership, unless properly “insulated” from management activities; and (iv) anyposition as an officer or director of a licensee or of its direct or indirectparent.

 

The FCC also considers the provision by the owner ofone radio station of more than 15% of hours of weekly programming or the saleof more than 15% of the weekly advertising of another radio station servingsubstantially the same area under agreements commonly referred to as timebrokerage or joint sales agreements, or otherwise, to represent an attributableinterest of the party providing the programming or selling the advertising eventhough the ownership of the station broadcasting the programming or theadvertising is distinct from that of the provider.  In instances, as in our case, where there isa “single majority voting shareholder,” voting stock interests held by otherowners in excess of the five percent standard described above are considered tobe non-attributable.  This exemptionremains in effect, but has been under review by the FCC for a number of years.

 

***Alien Ownership Rules.*** The Communications Act prohibits the issuanceto or holding of broadcast licenses by foreign governments or aliens, non-U.S.citizens, whether individuals or entities, including any interest in acorporation which holds a broadcast license if more than 20% of the capitalstock is owned or voted by aliens. In addition, the FCC may prohibit anycorporation from holding a broadcast license if the corporation is directly orindirectly controlled by any other corporation of which more than 25% of thecapital stock is owned of record or voted by aliens if the FCC finds that theprohibition is in the public interest. Our articles of incorporation prohibitthe ownership, voting and transfer of our capital stock in violation of the FCCrestrictions, and prohibit the issuance of capital stock or the voting rightssuch capital stock represents to or for the account of aliens or corporationsotherwise subject to control by aliens in excess of the FCC limits.

 

***License Renewal****. *Thelicenses issued by the FCC for radio stations are renewable authorizations thatare ordinarily granted for an eight year term, which is standardized for allstations in a particular state.  Astation may continue to operate beyond the expiration date of its license if atimely filed license renewal application is pending. During the periods when arenewal application is pending, informal objections to and petitions to denythe renewal application can be filed by interested parties, including membersof the public, on a variety of grounds. The FCC is required to renew abroadcast station license if the FCC finds that the station has served thepublic interest, convenience and necessity; there have been no seriousviolations by the licensee of the Communications Act or the FCC’s rules andregulations; and there have been no other violations by the licensee of theCommunications Act or the FCC’s rules and regulations that, takentogether, constitute a pattern of abuse. In a pending rule-making proceeding, the FCC has sought comments on theadoption of processing guidelines for renewal applications regarding a station’slocally-oriented programming performance. The effect of whether and to whatextent any such requirements are ultimately adopted and become effective cannotcurrently be determined.

 

If a challenge is filed against a renewal application,and, as a result of an evidentiary hearing, the FCC determines that thelicensee has failed to meet certain fundamental requirements and that nomitigating factors justify the imposition of a lesser sanction, the FCC maydeny a license renewal application. Historically, FCC licenses have generallybeen renewed.  A petition to deny therenewal applications of all of our Sacramento radio stations has been filed andis pending, and the renewal applications of certain other stations remainpending due to listener complaints. Subject to the resolution of open FCC inquiries, we have no reason tobelieve that our licenses will not continue to be renewed in the ordinary course,although there can be no assurance to that effect. The non-renewal of one ormore of our licenses could have a material adverse effect on our business.

 

***Transfer Or Assignment OfLicenses.***  The Communications Act prohibits theassignment of broadcast licenses or the transfer of control of a broadcastlicensee without the prior approval of the FCC. In determining whether to grantsuch approval, the FCC considers a number of factors pertaining to the existinglicensee and the proposed licensee, including:

 

·                  compliance with the various rules limitingcommon ownership of media properties in a given market;

 

·                  the “character” of the proposed licensee; and

 

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·                  compliance with the Communications Act’slimitations on alien ownership as well as compliance with other FCC regulationsand policies.

 

To obtain FCC consent for the assignment or transferof control of a broadcast license, appropriate applications must be filed withthe FCC. Interested parties may file objections or petitions to deny suchapplications. When evaluating an assignment or transfer application, the FCC isprohibited from considering whether the public interest might be served byassignment or transfer of the broadcast license to any party other than the onespecified in the application.  Noassignment or transfer application will be granted for any station by the FCCwhile a renewal application is pending for the station. Once an assignment ortransfer application is granted, interested parties have 30 days followingpublic notice of the grant to seek reconsideration of that grant.  The FCC usually has an additional ten dayswithin which to set aside the grant on its own motion.  The Communications Act permits certain courtappeals of a contested grant as well.

 

***Programming And Operation***. The Communications Act requires broadcasters to serve the “publicinterest.” A licensee is required to present programming that is responsive toissues in the station’s community of license and to maintain recordsdemonstrating this responsiveness. The FCC regulates, among other things,political advertising; sponsorship identification; the advertisement ofcontests and lotteries; the conduct of station-run contests; obscene, indecentand profane broadcasts; certain employment practices; and certain technicaloperation requirements, including limits on human exposure to radio-frequencyradiation.  The FCC considers complaintsfrom listeners concerning a station’s public service programming, employmentpractices, or other operational issues when processing a renewal applicationfiled by a station, but the FCC may consider complaints at any time and mayimpose fines or take other action for violations of the FCC’s rules separatefrom its action on a renewal application.

 

In recent years, the FCC has received an increasingnumber of complaints alleging that broadcast stations have carried indecentprogramming at times when children may be in the audience, in violation offederal criminal law and the FCC’s policies which prohibit programming that isdeemed to be indecent or profane under FCC decisions and is broadcast duringthe period between 6:00 am and 10:00 pm; the period between 10:00 pm through6:00 am is considered to be a “safe harbor” period and less stringent standardsapply to programming carried then. FCC regulations prohibit the broadcast ofobscene material at any time. The FCC has greatly intensified its enforcementactivities with respect to programming which it considers indecent or profane,including: (i) adopting rules to implement the statutory increase inthe maximum fine which may be assessed for the broadcast of indecent or profaneprogramming to $325,000 for a single violation, up to a maximum of $3,000,000for a continuing violation; (ii) imposing fines on a per utterance basisinstead of the imposition of a single fine for an entire program; and (iii) repeatedlywarning broadcasters that future “serious” violations may result in thecommencement of license revocation proceedings. There are a number of outstanding indecency proceedings in which we aredefending our stations’ conduct, and there may be other complaints of thisnature which have been submitted to the FCC of which we have not yet beennotified.

 

In April 2009, the U.S. Supreme Court reversed adecision of the U.S. Court of Appeals for the Second Circuit involving certainaspects of the FCC’s indecency rules, upholding the FCC’s policies under standardsof administrative law, but remanding the case to the Second Circuit for thedevelopment of a full record on the constitutional challenge to the rules. In acase involving a separate aspect of the FCC’s indecency rules, the U.S. Courtof Appeals for the Third Circuit reversed the FCC’s finding of indecency and,after the FCC sought review, the U.S. Supreme Court summarily remanded thatdecision without opinion to the Third Circuit for reconsideration in light ofthe reversal and remand of the Second Circuit case. Both cases were argued in2010.  For further discussion, pleaserefer to Part I, Item 3, “Legal Proceedings,” and to the risk factorsdescribed in Part I, Item 1A, “Risk Factors.”

 

The Communications Act and the FCC rules requirethat, when it is not evident from the content that any money, goods, servicesor other valuable consideration has been paid or promised to a station or anemployee for the broadcast of certain programming, appropriate sponsorshipidentification announcement(s) must be given.  Following inquiries initiated by the FCC intosponsorship identification practices at several media companies, including us,we and other media companies entered into consent decrees pursuant to which wehave adopted certain policies and procedures regarding our relationships withrecord labels and artists concerning the broadcast of music on our stations. Weadmitted no violations of any FCC rules in connection with theinvestigation, and the FCC found none. We have also entered into a consent judgment terminating a lawsuitbrought by the New York Attorney General in which we agreed to adopt a numberof business reforms and practices in the future and to make a payment to anon-profit organization to support music education and appreciation.  We admitted no liability in this action, andthe court found none.  The FCC has underconsideration rule-making proceedings concerning other sponsorship

 

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identification issues, such as product placement.  We cannot determine if any new regulationswill ultimately be adopted, and if adopted, what effect such regulations mayhave on our operations.

 

The FCC rules prohibit employment discriminationby broadcast stations on the basis of race, religion, color, national originand gender. These rules require broadcasters generally to: (i) refrainfrom discrimination in hiring and promotion; (ii) widely disseminateinformation about all full-time job openings to all segments of the communityto ensure that all qualified applicants have sufficient opportunity to applyfor the job; (iii) send job vacancy announcements to recruitmentorganizations and others in the community indicating an interest in all or somevacancies at the station; and (iv) implement a number of specificrecruitment outreach efforts, such as job fairs, internship programs, andinteraction with educational and community groups from among a menu ofapproaches itemized by the FCC.  Theapplicability of these policies to part-time employment opportunities is thesubject of a pending further rule-making proceeding.  In addition, the FCC bars discrimination withregard to race or gender in station transactions and has other rules designedto enhance the diversification of station ownership.

 

The FCC has rules which concern the manner inwhich on-air contests conducted by a station are announced and conducted,requiring in general that the material rules and terms of the contest bebroadcast periodically and that the contest be conducted substantially asannounced.  The FCC has a pendinginvestigation into a contest at one of our stations (see Item 3, “LegalProceedings,” for further discussion). We are cooperating in thisinvestigation. In addition, a civil lawsuit arising from this incident has beenresolved.

 

The FCC has adopted procedures that in general requirethe auction of broadcast spectrum in circumstances when two or more partieshave applications for new radio facilities or when applications propose majorchanges that are mutually exclusive. Such procedures may limit our efforts tobuild new stations, or to modify or expand the broadcast signals of ourexisting stations.

 

***EnforcementAuthority***.  The FCC has the power to impose penalties forviolations of its rules under the Communications Act, including theimposition of monetary fines, the issuance of short-term licenses, theimposition of a condition on the renewal of a license, the denial of authorityto acquire new stations, and the revocation of operating authority.  The maximum fine for a single violation ofthe FCC’s rules (other than indecency rules) is currently $37,500.  The maximum fine for a violation of the FCC’sindecency rules is $325,000 for each violation or each day of a continuingviolation, with a maximum fine of up to $3,000,000 for a continuing violation.

 

***Proposed And RecentChanges***.Congress, the FCC, and other federal agencies are considering or may in thefuture consider and adopt new laws, regulations and policies regarding a widevariety of matters that could: (1) affect, directly or indirectly, theoperation, ownership and profitability of our radio stations; (2) resultin the loss of audience share and advertising revenues for our radio stations;and (3) affect our ability to acquire additional radio stations or tofinance those acquisitions.  We cannotpredict what other matters may be proposed or considered by the FCC orCongress, and we are unable to determine what effect, if any, the adoption ofany such restrictions or limitations may have on our operations.

 

***Federal Antitrust Laws***. The federal agencies responsible for enforcing the federal antitrustlaws, the Federal Trade Commission and the Department of Justice, mayinvestigate certain acquisitions. For an acquisition meeting certain sizethresholds, the Hart-Scott-Rodino Antitrust Improvements Act of 1976 requiresthe parties to file Notification and Report Forms with the Federal TradeCommission and the Department of Justice and to observe specifiedwaiting-period requirements before consummating the acquisition.

 

**HD Radio**®

 

The Federal Communications Commission selected In-BandOn-ChannelTM (“IBOC”) as the exclusive technology for introduction ofterrestrial digital operations by AM and FM radio stations. The technology,developed by iBiquity Digital Corporation, is also known as “HD Radio®.”  We have aminority equity interest in iBiquity. We currently utilize HD Radio® digitaltechnology on most of our FM stations. We are also a founding member of the HD Digital Radio AllianceAssociation, which was formed to promote and develop HD Radio® and its digitalmulticast operations.  The advantages ofdigital audio broadcasting over traditional analog broadcasting technologyinclude improved sound quality, additional channels and the ability to offer agreater variety of auxiliary services. HD Radio® technology permits a station to transmit radioprogramming in both analog and digital formats.

 

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**Employees**

 

As of March 1, 2010, we had a staff ofapproximately 1,560 full-time employees and 750 part-time employees.  With respect to certain of our stations inour Kansas City and San Francisco markets, we are a party to collectivebargaining agreements with the American Federation of Television and RadioArtists.  Approximately 19 employees arerepresented by these collective bargaining agreements.  We believe that our relations with ouremployees are good.

 

**Corporate Governance**

 

*Code Of Business Conduct And Ethics.*  We have adopted a Code of Business Conductand Ethics that applies to each of our employees including our principalexecutive officers and senior members of our finance department. Our Code ofBusiness Conduct and Ethics can be found on the “Investors” tab / “Governance”sub-page of our website located at www.entercom.com.

 

*Board Committee Charters.* Each of our Audit Committee, Compensation Committee andNominating/Corporate Governance Committee has a committee charter as requiredby the rules of the New York Stock Exchange.  These committee charters can be found on the “Investors” tab / “Governance” sub-page ofour website located at www.entercom.com.

 

*Corporate Governance Guidelines.* New York Stock Exchange rules require our Board of Directors toestablish certain Corporate Governance Guidelines.  These guidelines can be found on the “Investors” tab / “Governance” sub-page ofour website located at www.entercom.com.

 

**Environmental Compliance**

 

As the owner, lessee or operator of various realproperties and facilities, we are subject to various federal, state and localenvironmental laws and regulations. Historically, compliance with these lawsand regulations has not had a material adverse effect on our business. Therecan be no assurance, however, that compliance with existing or newenvironmental laws and regulations will not require us to make significantexpenditures of funds.

 

**Seasonality**

 

Seasonal revenue fluctuations are common in the radiobroadcasting industry and are due primarily to fluctuations in advertisingexpenditures. Our revenues are typically lowest in the first calendar quarter.

 

**Internet Address And Internet Access To Periodic And CurrentReports**

 

You can find more information about us at our Internetwebsite located at www.entercom.com. Our Annual Report on Form 10-K, ourQuarterly Reports on Form 10-Q, our Current Reports on Form 8-K andany amendments to those reports are available free of charge through ourInternet website as soon as reasonably practicable after we electronically filesuch material with the Securities and Exchange Commission (the “SEC”).  We will also provide a copy of our annualreport on Form 10-K upon any written request.

 

**ITEM 1A.    RISK FACTORS**

 

Many statements contained in this report areforward-looking in nature (see Note Regarding Forward-Looking Statements at thebeginning of this Form 10-K). These statements are based on current plans,intentions or expectations, and actual results could differ materially as wecannot guarantee that we will achieve these plans, intentions orexpectations.  Among the factors thatcould cause actual results to differ are the following:

 

**The Global Economic Crisis Has Affected Our Business And WeCannot Predict Its Future Impact.**

 

Recent economic conditions had a negativeimpact on our results of operations during 2009 due to reduced demand in theadvertising sector. This negative trend appears to be reversing in the firstquarter of 2010, primarily due to the strengthening of advertiser demand. Asthe economy and the advertising environment rebound, we would expect to comparefavorably to prior periods. If economic conditions worsen, a number of negativeeffects on our business could result, including a decrease in our net revenuesand profitability and further impairment of our assets.

 

The capital and credit markets experienced unprecedented volatility anddisruption in 2008 and 2009. If the economic crisis were to relapse, there canbe no assurance that we will not experience an adverse effect on our ability toaccess capital, which may be material to our business, financial condition andresults of operations.  In addition,

 

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ourability to access the capital markets may be severely restricted at a time whenwe would like or need to do so, which could have an impact on our flexibilityto react to changing economic and business conditions.

 

**We Must Comply With The Covenants In OurSenior Secured Credit Facility, Which Restricts Our Operational Flexibility.**

 

Our senior secured credit facility (the “BankFacility”) as amended during March 2010 contains provisions that restrictand under certain circumstances limit our ability to borrow money, makeacquisitions, investments or restricted payments including dividends, therepurchase of stock, swap or sell assets, or merge or consolidate with anothercompany.  We have pledged substantiallyall of our assets, including the stock or equity interests of our subsidiariesto secure the debt under our Bank Facility.

 

Our Bank Facility requires us to maintaincompliance with specific financial covenants. Our ability to meet thesefinancial covenants can be affected by operating performance or other eventsbeyond our control, and we cannot be assured that we will meet these covenants.The recent economic crisis reduced demand for advertising in general, includingadvertising on our radio stations. Our ability to maintain compliance with ourcovenants will be highly dependent on our results of operations as the economyrecovers from the economic downturn. Specifically, our Bank Facility as amended,requires us to comply with certain financial covenants which are defined termswithin the agreement, including: (1) a maximum Consolidated Leverage Ratioof Consolidated Funded Indebtedness to Consolidated Operating Cash Flow thatcannot exceed seven times in 2010 and which decreases quarterly in incrementsin 2011 to a ratio of six times; and (2) a minimum ratio of ConsolidatedOperating Cash Flow to Consolidated Interest Charges of two times.

 

Failure to comply with our financialcovenants or other terms of our Bank Facility and the failure to negotiate andobtain any required relief from our lenders could result in the acceleration ofthe maturity of our outstanding bank debt and our lenders could proceed againstour assets, including the equity interests of our subsidiaries.  Under these circumstances, the accelerationof our debt could have a material adverse effect on our business.

 

**We Have Substantial Indebtedness Which CouldHave Important Consequences.**

 

Historically, we have carried significantamounts of debt. We have outstanding indebtedness to our bank and bond holdersof $737.2 million (including a $1.5 million letter of credit) as of December 31,2009 that could have an impact on us. For example, these obligations:

 

·                  increaseour vulnerability in an economic downturn, limit our ability to withstandcompetitive pressures and reduce our flexibility in responding to changingbusiness and economic conditions;

 

·                  impairour ability to obtain additional financing for working capital, capitalexpenditures, acquisitions and general corporate or other purposes;

 

·                  requireus to dedicate a substantial portion of our cash flow from operations to debtservice, thereby reducing the availability of cash flow for other purposes; and

 

·                  limitor prohibit our ability to pay dividends and make other distributions.

 

The undrawnamount of the Bank Facility’s revolving credit (“Revolver”) was $289.5 millionas of December 31, 2009.  The amountof the Revolver available to us is a function of covenant compliance at thetime of borrowing.  Based on ourfinancial covenant analysis as of December 31, 2009, we would be limitedto borrowings significantly less than the undrawn limit unless such borrowingswere used to repay indebtedness or for transactions that increase cash flow forpurposes of covenant calculation.

 

Under our BankFacility, as amended, we have restrictions that under certain circumstances,limit our ability to borrow money, make acquisitions, investments or restrictedpayments including dividends, the repurchase of stock, swap or the sale ofassets, or the merger or consolidation with another company. If ourConsolidated Leverage Ratio exceeds six times, then we have furtherrestrictions on the use of the Revolver, including but not limited to, theelimination of any funding for dividends and share repurchases. In addition tocash flow from operations, we plan to use the Revolver to fund the amortizationof the term loan (“Term Loan”), which was $370.0 million outstanding as of December 31,2009.

 

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Notwithstandingthe foregoing, we may from time-to-time seek to amend our existing Bank Facilityor obtain other funding or additional financing, which may result in higherinterest rates.  Amending our BankFacility or obtaining other funding or additional financing prior to theexpiration of the current agreement will be essential as the Revolver will bedue as a balloon payment upon the expiration of the Bank Facility on June 30,2012.  Failure to refinance upon maturitycould result in default and have a material adverse impact on our Company.

 

**We Face Many Unpredictable Business Risks,Both General And Specific To The Radio Broadcasting Industry, Which Could HaveA Material Adverse Effect On Our Future Operations.**

 

Our future operations are subject to manybusiness risks, including those risks that specifically influence the radiobroadcasting industry, which could have a material adverse effect on ourbusiness including:

 

·                  economicconditions, both generally and relative to the radio broadcasting industry;

 

·                  shiftsin population, demographics or audience tastes;

 

·                  thelevel of competition for advertising revenues with other radio stations andother advertising- supported media;

 

·                  technologicalchanges and innovations;

 

·                  newlaws and regulations;

 

·                  theimposition by law or regulation of new or increased fees on radio broadcastingand related activities; and

 

·                  changesin governmental regulations and policies, and actions of federal regulatorybodies, including the FCC, the Department of Justice and the Federal TradeCommission.

 

Given the inherent unpredictability of thesevariables, we cannot predict with any degree of certainty, what effect, if any,these variables will have on our future operations. Generally, advertisingtends to decline during economic recession or downturn, as evidenced by thenegative impact that the current economic downturn has had on radioadvertising.  Our advertising revenue islikely to be adversely affected by a recession or downturn in the United Stateseconomy, the economy of an individual geographic market in which we own oroperate radio stations, or other events or circumstances that adversely affectadvertising activity.

 

**Our Radio Stations May Be AdverselyAffected By Competition For Advertising Revenues.**

 

Our radio stations are in a highlycompetitive business. Our radio stations compete for audiences and advertisingrevenues within their respective markets directly with other radio stations, aswell as with other media, such as newspapers and magazines, Internet, broadcastand cable television, outdoor advertising and direct mail. Audience ratings andmarket shares are subject to change, and any change in a particular marketcould have a material adverse effect on the revenue of our stations located inthat market. While we already compete in some of our markets with otherstations with similar programming formats, if another existing or new radiostation in a market were to convert its programming format to a format similarto one of our stations or if an existing competitor were to strengthen itsoperations, our stations could suffer a reduction in ratings and/or advertisingrevenue and could incur increased promotional and other expenses. We cannot beassured that any of our stations will be able to maintain or increase theircurrent audience ratings and advertising revenues.

 

**We Must Respond To The Increased CompetitionFor Audio Distribution And The Rapid Changes In Technology, Services AndStandards That Characterize Our Industry In Order To Remain Competitive.**

 

The radio broadcasting industry is subject torapid technological change, evolving industry standards and the emergence ofnew media technologies and services. These technologies and services, some ofwhich are commercial free, include the following:

 

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·                  personaldigital audio devices (e.g., iPods®, mp3® players, audio via WiFi, mobilephones and WiMAX);

 

·                  Internetradio services such as Pandora;

 

·                  satellite-delivereddigital audio radio services;

 

·                  HDRadio®, whichprovides multi-channel, multi-format digital radio services in the samebandwidth currently occupied by traditional AM and FM radio services; and

 

·                  low-power FM radio, which couldresult in additional FM radio broadcast outlets.

 

We cannot predict the effect, if any, thatcompetition arising from new technologies or regulatory changes may have on theradio broadcasting industry or on our financial condition and results ofoperations.

 

**We Are Dependent On Federally Issued LicensesTo Operate Our Radio Stations And Are Subject To Extensive Federal Regulation.**

 

The radio broadcasting industry is subject toextensive regulation by the FCC under the Communications Act of 1934 (see, forexample, the discussion of FCC regulations contained in Part I, Item 1, “Business,”of this Form 10-K). We are required to obtain licenses from the FCC tooperate our radio stations. Licenses are normally granted for a term of eightyears and are renewable. Although the vast majority of FCC radio stationlicenses are routinely renewed, we cannot be assured that the FCC will approveour future renewal applications or that the renewals will not includeconditions or qualifications. A number of our applications to renew our stationlicenses have been objected to by third parties and remain pending before theFCC. The non-renewal, or renewal with substantial conditions or modifications,of one or more of our licenses could have a material adverse effect on us.

 

We must comply with extensive FCC regulationsand policies in the ownership and operation of our radio stations. FCCregulations limit the number of radio stations that a licensee can own in amarket, which could restrict our ability to consummate future transactions andin certain circumstances could require us to divest some radio stations. TheFCC’s rules governing our radio station operations impose costs on ouroperations, and changes in those rules could have an adverse effect on ourbusiness. The FCC also requires radio stations to comply with certain technicalrequirements to limit interference between two or more radio stations. If theFCC relaxes these technical requirements, it could impair the signalstransmitted by our radio stations and could have a material adverse effect onus. Moreover, these FCC regulations and others may change over time, and we cannotbe assured that changes would not have a material adverse effect on us. The FCChas a pending investigation into a contest at one of our stations where acontestant died after participating in the contest. We are currently thesubject of several other investigations by the FCC.

 

**The FCC Has Engaged In Vigorous EnforcementOf Its Indecency Rules Against The Broadcast Industry, Which Could Have AMaterial Adverse Effect On Our Business.**

 

FCC regulations prohibit the broadcast ofobscene material at any time and indecent or profane material between the hoursof 6:00 a.m. and 10:00 p.m. In the last several years, the FCC hasenhanced its enforcement efforts relating to the regulation of indecency andhas threatened on more than one occasion to initiate license revocationproceedings against a broadcast licensee who commits a “serious” indecencyviolation. Congress has dramatically increased the penalties for broadcastingobscene, indecent or profane programming, and these penalties may potentiallysubject broadcasters to license revocation, renewal or qualificationproceedings in the event that they broadcast such material. In addition, theFCC’s heightened focus on the indecency regulatory scheme, against thebroadcast industry generally, may encourage third parties to oppose our licenserenewal applications or applications for consent to acquire broadcast stations.Several of our stations are currently subject to indecency-related inquiriesand/or proposed fines at the FCC’s Enforcement Bureau as well as objections toour license renewals based on such inquiries and proposed fines, and we may inthe future become subject to additional inquiries or proceedings related to ourstations’ broadcast of obscene, indecent or profane material. To the extentthat these inquiries or other proceedings result in the imposition of fines, asettlement with the FCC, revocation of any of our station licenses or denialsof license renewal applications, our results of operation and business could bematerially adversely affected.

 

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**Because Of Our Holding Company Structure, WeDepend On Our Subsidiaries For Cash Flow, And Our Access To This Cash Flow IsRestricted.**

 

We operate as a holding company. All of ourradio stations are currently owned and operated by our subsidiaries. EntercomRadio, LLC (“Radio”), our 100% owned finance subsidiary, is the borrower underour Bank Facility and was the issuer of our Senior Subordinated Notes (“Notes”)(the Notes were redeemed at par on March 8,2010). All of our station-operating subsidiaries and FCC licensesubsidiaries are subsidiaries of Radio. Further, we guaranteed Radio’sobligations under the Bank Facility on a senior secured basis and under theNotes on an unsecured basis, junior to our Bank Facility. Radio’ssubsidiaries are all full and unconditional guarantors jointly and severallyunder the Bank Facility.

 

As a holding company, our only source of cashto pay our obligations, including corporate overhead and other accountspayable, are distributions from our subsidiaries. We currently expect that thenet earnings and cash flow of our subsidiaries will be retained and used bythem in their operations, including servicing their debt obligations. Even ifour subsidiaries elect to make distributions to us, we cannot be assured thatapplicable state law and contractual restrictions, including the dividendcovenants contained in our Bank Facility, would permit such dividends ordistributions.

 

**We Have Incurred Losses Over The Past SeveralYears And We May Incur Future Losses.**

 

We have reported net losses in our consolidated statement of operationsover the past several years, primarily as a result of recording non-cashwrite-downs of our broadcasting licenses and goodwill. In 2009, 2008 and 2007,we recorded impairments to our broadcasting licenses and goodwill of $67.7million, $835.7 million (excluding impairments recorded during the firstquarter of 2008 to assets held for sale) and $84.0 million, respectively. As ofDecember 31, 2009, our broadcasting licenses and goodwill comprise 79.8%of our total assets. If events occur or circumstances change that would reducethe fair value of the broadcasting licenses and goodwill below the amountreflected on the balance sheet, we may be required to recognize impairmentcharges, which may be material, in future periods.

 

**Our Common Stock May Cease To Be Listed On Its CurrentStock Exchange.**

 

Our common stock is currently listed on the New York Stock Exchange (“NYSE”)under the symbol “ETM”. In the future, we may not be able to meet thecontinued listing requirements of the NYSE, which require, among other things, (i) aminimum closing price of our common stock; (ii) a minimum marketcapitalization; and (iii) a minimum stockholders’ equity and marketcapitalization. If we are unableto satisfy the NYSE criteria for continued listing, our common stock would besubject to delisting, which could negatively impact us by, among other things,reducing the liquidity and market price of our common stock.  (See “Management’s Discussion and Analysis”for a discussion of the NYSE continued listing requirements.)

 

**Our Chairman Of The Board And Our PresidentAnd Chief Executive Officer Effectively Control Our Company And Own ASubstantial Equity Interest In Us. Their Interests May Conflict With YourInterest.**

 

As of February 28, 2010, Joseph M.Field, our Chairman of the Board, beneficially owned 2,651,170 shares of our Class Acommon stock and 6,408,282 shares of our Class B common stock,representing approximately 64.7% of the total voting power of all of ouroutstanding common stock.  As of February 28,2010, David J. Field, our President and Chief Executive Officer, one of ourdirectors and the son of Joseph M. Field, beneficially owned 2,549,747 sharesof our Class A common stock and 749,250 shares of our outstanding Class Bcommon stock, representing approximately 10.2% of the total voting power of allof our outstanding common stock. Collectively, Joseph M. Field and David J.Field and other members of the Field family beneficially own all of ouroutstanding Class B common stock. Other members of the Field family andTrusts for their benefit also own shares of Class A common stock.

 

Shares of Class B common stock aretransferable only to Joseph M. Field, David J. Field, certain of their familymembers or trusts for any of their benefit. Upon any other transfer, shares ofour Class B common stock automatically convert into shares of our Class Acommon stock on a one-for-one basis. Shares of our Class B common stockare entitled to ten votes only when Joseph M. Field or David J. Field votethem, subject to certain exceptions when they are restricted to one vote.Joseph M. Field generally is able to control the vote on all matters submittedto a vote of shareholders and, therefore, is able to direct our management andpolicies, except with respect to those matters when the shares of our Class Bcommon stock are only entitled to one vote and those matters

 

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requiring a class vote under the provisions of our articles ofincorporation, bylaws or applicable law, including, without limitation, theelection of the two Class A directors. Without the approval of Joseph M.Field, we will be unable to consummate transactions involving an actual orpotential change of control, including transactions in which investors mightotherwise receive a premium for their shares over then current market prices.

 

**Future Sales By Joseph M. Field CouldAdversely Affect The Price Of Our Class A Common Stock.**

 

The price for our Class A common stockcould fall substantially if Joseph M. Field sells in the public market ortransfers large amounts of shares, including any shares of our Class Bcommon stock (as described in the above paragraph) which are automaticallyconverted to Class A common stock when sold.  These sales, or the possibility of suchsales, could make it more difficult for us to raise capital by selling equityor equity-related securities in the future.

 

**The Difficulties Associated With Any AttemptTo Gain Control Of Our Company Could Adversely Affect The Price Of Our Class ACommon Stock.**

 

Joseph M. Field controls the decision as towhether a change in control will occur for our Company.  There are also provisions contained in ourarticles of incorporation, by-laws and Pennsylvania law that could make it moredifficult for a third party to acquire control of our Company. In addition, FCCapproval for transfers of control of FCC licenses and assignments of FCClicenses are required. These restrictions and limitations could adverselyaffect the trading price of our Class A common stock.

 

**We Depend On Selected Market Clusters OfRadio Stations.**

 

For the year ended December 31, 2009, wegenerated in excess of 50% of our net revenues in six of our 23 markets(Boston, San Francisco, Portland, Seattle, Denver and Kansas City).Accordingly, we may have greater exposure to adverse events or conditions thataffect the economy in any of these markets, which could have a material adverseeffect on our financial position and results of operations.

 

**Our Stock Price And Trading Volume Could BeVolatile.**

 

Our Class A common stock has beenpublicly traded since January 29, 1999. The market price of our Class Acommon stock and our trading volume has been subject to fluctuations since thedate of our initial public offering. The stock market has from time to timeexperienced price and volume fluctuations that have affected the market pricesof public equities. As a result, the market price of our Class A commonstock could experience volatility, regardless of our operating performance.

 

**The Loss Of Key Personnel Could Have AMaterial Adverse Effect On Our Business.**

 

Our business depends upon the continuedefforts, abilities and expertise of our executive officers and other keyexecutives. We believe that the loss of one or more of these individuals couldhave a material adverse effect on our business.

 

**ITEM 1B.****                    UNRESOLVEDSTAFF COMMENTS**

 

None.

 

**ITEM2.****                 PROPERTIES**

 

The types of properties required to supporteach of our radio stations include offices, studios and transmitter/antennasites. We typically lease our studio and office space, although we do own someof our facilities. Most of our studio and office space leases contain leaseterms with expiration dates of five to 15 years. A station’s studios aregenerally housed with its offices in downtown or business districts. We ownmany of our AM main transmitter/antenna sites and several of our FM maintransmitter/antenna sites. For those sites that we lease, we have entered intoleases with lease terms that generally range from five to 30 years.  In addition, we also entered into atransaction that covers multiple tower sites that were treated as financemethod lease obligations (for further discussion, see Note 9, Finance MethodLease Obligations, in the accompanying notes to the financial statements).

 

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The transmitter/antenna site for each stationis generally located so as to provide maximum market coverage. In general, wedo not anticipate difficulties in renewing facility or transmitter/antenna siteleases or in leasing additional space or sites if required. We haveapproximately $11.8 million in aggregate annual minimum rental commitmentsunder real estate leases.  Many of theseleases contain clauses such as defined contractual increases or cost of livingadjustments.

 

Our principal executive offices are locatedat 401 City Avenue, Suite 809, Bala Cynwyd, Pennsylvania 19004, in 10,678 squarefeet of leased office space. The lease on these premises expires October 31,2011.

 

We own substantially all of our otherequipment, consisting principally of transmitting antennae, transmitters,studio equipment and general office equipment. The towers, antennae and othertransmission equipment used by our stations are generally in goodcondition.  We generally consider ourfacilities to be suitable and of adequate size for our current and intendedpurposes.

 
| **ITEM 3.** | **LEGAL PROCEEDINGS** |
|-------------|-----------------------|

 

We currently and from time to time areinvolved in litigation incidental to the conduct of our business. In theopinion of management, any potential liability of ours that may arise out of orwith respect to these matters will not materially adversely affect our financialposition, results of operations or cash flows.

 

During January 2007, a suit seekingvarious damages was filed against us relating to an on-air contest. The claims,which were settled on October 29, 2009, were fully covered by ourinsurance policies.  In connection with the settled claim, as of December 31,2009 we recorded an insurance claim receivable from our insurance company of$16.5 million along with a claim payable to the plaintiff of $16.5million.  In January 2010, theplaintiff acknowledged full satisfaction of the judgment by our insurancecarrier.

 

Our agreementswith Broadcast Music, Inc. (“BMI”) and American Society of Composers,Authors and Publishers (“ASCAP”) each expired as of December 31,2009.  In January 2010, The RadioMusic License Committee, of which we are a participant, filed motions in theNew York courts against ASCAP and BMI on behalf of the radio industry, seekinginterim fees and a determination of fair and reasonable industry-wide licensefees.

 

We could face increased costs in the form offines and a greater risk that we could lose any one or more of our broadcastinglicenses if the FCC concludes that programming broadcast by our stationswas obscene, indecent or profane and such conduct warrants licenserevocation. The FCC’s authority to impose a fine for the broadcast ofsuch material is $325,000 for a single incident, with a maximum fine of up to$3.0 million for a continuing violation. In the past, the FCC has issuedNotices of Apparent Liability and a Forfeiture Order with respect toseveral of our stations proposing fines for certain programming which the FCCdeemed to have been indecent. These cases are the subject of pendingadministrative appeals. The FCC has also investigated other complaints from thepublic that some of our stations broadcast indecentprogramming.  These investigations remain pending.  For a furtherdiscussion, please refer to the risk factors described in Part I, Item 1A*,* “Risk Factors.”

 
| **ITEM 4.** | **[RESERVED]** |
|-------------|----------------|

 

**PART II**

 
| **ITEM 5.** | **MARKET  FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER  PURCHASES OF EQUITY SECURITIES** |
|-------------|-------------------------------------------------------------------------------------------------------------------------|

 

**Market Information For Our Common Stock**

 

Our Class Acommon stock, $0.01 par value, is listed on the New York Stock Exchange underthe symbol “ETM.” The table below shows, for the quarters indicated, thereported high and low trading prices of our Class A common stock on TheNew York Stock Exchange.

 

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| ** **         | ** ** | **Price Range** | ** ** |
|--------------------|------------|-----------------|------------|
| ** **         | ** ** | **High**        | ** ** | **Low** | ** ** |
| Calendar Year 2009 |       |            |       |   |   |
| First Quarter      |       | $               | 1.67       |   | $ | 0.83 |   |
| Second Quarter     |       | $               | 3.14       |   | $ | 1.09 |   |
| Third Quarter      |       | $               | 5.58       |   | $ | 1.36 |   |
| Fourth Quarter     |       | $               | 9.85       |   | $ | 5.02 |   |
|               |       |            |       |   |   |
| Calendar Year 2008 |       |            |       |   |   |
| First Quarter      |       | $               | 13.75      |   | $ | 9.46 |   |
| Second Quarter     |       | $               | 11.50      |   | $ | 6.96 |   |
| Third Quarter      |       | $               | 8.10       |   | $ | 4.89 |   |
| Fourth Quarter     |       | $               | 5.42       |   | $ | 0.52 |   |

 

There is noestablished trading market for our Class B common stock, $0.01 par value.

 

**Holders**

 

As of March 1,2010, there were approximately 312 shareholders of record of our Class Acommon stock.  This number does notinclude the number of shareholders whose shares are held of record by a brokeror clearing agency but does include each such brokerage house or clearingagency as one record holder.  Based uponavailable information, we believe we have approximately 3,693 beneficial ownersof our Class A common stock.  Thereare four shareholders of record of our Class B common stock, $0.01 parvalue, and no shareholders of record of our Class C common stock, $0.01par value.

 

**Dividends**

 

Previously, we used a portion of our capitalresources to pay dividends on a quarterly basis effective with the firstquarter of 2006 and continuing through the third quarter of 2008.  OurBoard of Directors has not declared any dividends since that time. Any futuredividends will be at the discretion of the Board of Directors based upon therelevant factors at the time of such consideration.  For a description of the restrictions on ourability to declare and pay dividends pursuant to our Bank Facility, as amended,see Liquidity under Item 7, Management’s Discussion And Analysis Of FinancialCondition And Results Of Operation and Note 8 in the notes to the accompanyingfinancial statements.

 

**Share Repurchases**

 

Our mostrecent share repurchase program expired on June 30, 2009.

 

Prior to theexpiration of the repurchase authorization, in 2009 we repurchased 0.7 millionshares for an aggregate amount of $0.9 million at an average price of $1.34 pershare and during 2008, we repurchased 2.1 million shares for an aggregateamount of $13.9 million at an average price of $6.72 per share.

 

The following table provides information onour repurchases during the quarter ended December 31, 2009:

 

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| ** **                                          | ** ** | ** **    | ** ** | ** **   | ** ** | ** **          | ** ** | **(d)**             | ** ** |
|-----------------------------------------------------|------------|---------------|------------|--------------|------------|---------------------|------------|---------------------|------------|
| ** **                                          | ** ** | ** **    | ** ** | ** **   | ** ** | **(c)**             | ** ** | **Maximum**         | ** ** |
| ** **                                          | ** ** | ** **    | ** ** | ** **   | ** ** | **Total**           | ** ** | **Approximate**     | ** ** |
| ** **                                          | ** ** | ** **    | ** ** | ** **   | ** ** | **Number**          | ** ** | **Dollar**          | ** ** |
| ** **                                          | ** ** | ** **    | ** ** | ** **   | ** ** | **Of Shares**       | ** ** | **Value Of**        | ** ** |
| ** **                                          | ** ** | **(a)**       | ** ** | ** **   | ** ** | **Purchased**       | ** ** | **Shares That**     | ** ** |
| ** **                                          | ** ** | **Total**     | ** ** | **(b)**      | ** ** | **As Part Of** | ** ** | **May Yet Be** | ** ** |
| ** **                                          | ** ** | **Number**    | ** ** | **Average**  | ** ** | **Publicly**        | ** ** | **Purchased**       | ** ** |
| ** **                                          | ** ** | **Of**        | ** ** | **Price**    | ** ** | **Announced**       | ** ** | **Under The**       | ** ** |
| ** **                                          | ** ** | **Shares**    | ** ** | **Paid Per** | ** ** | **Plans Or**        | ** ** | **Plans Or**        | ** ** |
| **Period**                                          | ** ** | **Purchased** | ** ** | **Share**    | ** ** | **Programs**        | ** ** | **Programs**        | ** ** |
| October 1, 2009 -  October 31, 2009 (1)   |       | 659           |       | $            | 7.78       |                | 659        |                | $          | — |   |
| November 1, 2009 -  November 30, 2009 (1) |       | —        |       | $            | —     |                | —     |                | $          | — |   |
| December 1, 2009 -  December 31, 2009 (1) |       | 462           |       | $            | 6.62       |                | 462        |                | $          | — |   |
| Total                                               |       | 1,121         |       |         |       | 1,121               |       |                |       |

 

----

(1) In connection with employee tax obligations related to thevesting of restricted stock during the three months ended December 31,2009 and in accordance with elections by certain employees, we are deemed tohave purchased the shares withheld to satisfy employees’ tax obligations of 659shares at an average price of $7.78 per share in October 2009 and 462 sharesat an average price of $6.62 per share in December 2009.  These shares are included in the table above.

 

**Equity Compensation Plan Information**

 

The following table sets forth, as of December 31,2009, the number of securities outstanding under our equity compensation plans,the weighted average exercise price of such securities and the number ofsecurities available for grant under these plans:

 

**EquityCompensation Plan Information as of December 31, 2009**

 
| ** **                                              | ** ** | **(a)**          | ** ** | **(b)**         | ** ** | **(c)**                 | ** ** |
|---------------------------------------------------------|------------|------------------|------------|-----------------|------------|-------------------------|------------|
| ** **                                              | ** ** | **Number Of**    | ** ** | **Weighted**    | ** ** | **Number Of**           | ** ** |
| ** **                                              | ** ** | **Shares To Be** | ** ** | **Average**     | ** ** | **Securities**          | ** ** |
| ** **                                              | ** ** | **Issued Upon**  | ** ** | **Exercise**    | ** ** | **Remaining Available** | ** ** |
| ** **                                              | ** ** | **Exercise of**  | ** ** | **Price of**    | ** ** | **for Future Issuance** | ** ** |
| ** **                                              | ** ** | **Outstanding**  | ** ** | **Outstanding** | ** ** | **Under Equity**        | ** ** |
| ** **                                              | ** ** | **Options,**     | ** ** | **Options,**    | ** ** | **Compensation Plans**  | ** ** |
| ** **                                              | ** ** | **Warrants**     | ** ** | **Warrants**    | ** ** | **(Excluding**          | ** ** |
| **Plan Category**                                       | ** ** | **and  Rights**  | ** ** | **and Rights**  | ** ** | **Column (a))**         | ** ** |
| ** **                                              |       |             |       |                 |       |                    |       |
| Equity Compensation Plans Approved by Shareholders:     |       |             |       |            |       |                    |       |
| Entercom Equity Compensation Plan (1)                   |       | 1,103,032        |       | $               | 3.20       |                    | 969,627    |   |
| Employee Stock Purchase Plan (2)                        |       | —           |       | —          |       | —                  |       |
|                                                    |       |             |       |                 |       |                    |       |
| Equity Compensation Plans Not Approved by Shareholders: | ** ** | ** **       | ** ** | ** **      | ** ** | ** **              | ** ** |
| None                                                    |       | —           |       | —          |       | —                  |       |
|                                                    | ** ** |             |       |            |       |                    |       |
| Total                                                   |       | 1,103,032        | ** ** | ** **      |       | 969,627                 |       |
|                                                         |            |                  |            |                 |            |                         |            |  |

 

----

(1)   Underthe Entercom Equity Compensation Plan (the “Plan”), the Company is authorizedto issue up to 11.5 million shares of Class A common stock, which amountincluded an increase on January 1, 2009 of 1.5 million shares.  The shares authorized are increased by 1.5million shares on January 1 of each year, or a lesser number as may bedetermined by the Company’s Board of Directors. On January 1, 2010, theshares authorized under the Plan were automatically increased by 1.5 millionshares to 13.0 million shares. As of December 31, 2009, 1.0 million shareswere available for future grant.

 

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(2)          Our Employee StockPurchase Plan expired March 31, 2009.

 

For a description of our equity compensationplans, please refer to Note 15 in the accompanying notes to the consolidatedfinancial statements.

 

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**Performance Graph**

 

*The following Comparative Stock PerformanceGraph shall not be deemed incorporated by reference by any general statementincorporating by reference this Form 10-K into any filing under theSecurities Act of 1933, as amended, or the Securities Exchange Act of 1934, asamended, except to the extent that we specifically incorporate this informationby reference.  This Comparative StockPerformance Graph is being furnished with this Form 10-K and shall nototherwise be deemed filed under such acts.*

 

The following line graph compares thecumulative 5-year total return provided to shareholders on our Class Acommon stock relative to the cumulative total returns of: (i) the S &P 500 index; and (ii) a peer group index consisting of CitadelBroadcasting Corp., Cumulus Media Inc. and Emmis Communications Corp. Last year Cox Radio, Inc. was included in our peer group. In 2009,however, Cox Radio, Inc. ceased to be a public company. An investment of$100 (with reinvestment of all dividends) is assumed to have been made in our Class Acommon stock and in each of the indices on December 31, 2004 and itsrelative performance is tracked through December 31, 2009.

 

**Cumulative Five-Year Return Index Of A $100Investment**

 

 
| ** **                    | ** ** | **12/31/04** | ** ** | **12/31/05** | ** ** | **12/31/06** | ** ** | **12/31/07** | ** ** | **12/31/08** | ** ** | **12/31/09** | ** ** |
|-------------------------------|------------|--------------|------------|--------------|------------|--------------|------------|--------------|------------|--------------|------------|--------------|------------|
|                          |       |         |       |         |       |         |       |         |       |         |       |         |       |
| Entercom Communications Corp. |       | $            | 100.00     |         | $          | 82.67        |       | $            | 83.11      |         | $          | 43.31        |       | $ | 4.16 |   | $ | 23.90 |   |
| S&P 500                   |       | $            | 100.00     |         | $          | 104.91       |       | $            | 121.48     |         | $          | 128.16       |       | $ | 80.74 |   | $ | 102.11 |   |
| Peer Group                    |       | $            | 100.00     |         | $          | 88.70        |       | $            | 66.92      |         | $          | 28.11        |       | $ | 4.24 |   | $ | 3.63 |   |

 

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**ITEM 6.  SELECTED FINANCIAL DATA**

 

The selected financial data below as of andfor the years ended December 31, 2005 through 2009 were derived from ouraudited consolidated financial statements. The selected financial data for theyears ended December 31, 2009, 2008 and 2007 and balance sheets as of December 31,2009 and 2008 are qualified by reference to, and should be read in conjunctionwith, the corresponding audited consolidated financial statements, and thenotes thereto, and Management’s Discussion and Analysis of Financial Conditionand Results of Operations included elsewhere in this annual report. Theselected financial data for the years ended December 31, 2006 and 2005 andthe balance sheets as of December 31, 2007, 2006 and 2005 are derived fromfinancial statements not included herein. Our financial results are notcomparable from year to year due to our acquisitions and dispositions of radiostations. We acquired several radio stations in 2008, 2007 and 2005 (none in2009 and one in 2006).  Also, in years2009, 2008 and 2007, we incurred impairment losses of $67.7 million, $835.7million and $84.0 million, respectively, in connection with our review ofgoodwill and broadcasting licenses under accounting guidance (please refer toNote 3 in the accompanying notes to the financial statements for furtherdiscussion of the contributing factors to the impairment loss).

 

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**SELECTEDFINANCIAL DATA**

**(amountsin thousands, except per share data)**

 
| ** **                                                                  | ** ** | **Years Ended December 31,** | ** ** |
|-----------------------------------------------------------------------------|------------|-----------------------------------|------------|
| ** **                                                                  | ** ** | **2009**                          | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
| ** **                                                                  |       |                                   |       |   |   |   |   |   |   |   |   |
| **Operating Data:**                                                         | ** ** | ** **                        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net revenues                                                                |       | $                                 | 372,432    |   | $ | 438,822 |   | $ | 468,351 |   | $ | 439,629 |   | $ | 431,799 |   |
| Operating (income) expenses:                                                |       |                              |       |   |   |   |   |   |   |   |   |
| Station operating expenses, including non-cash compensation expense         |       | 254,042                           |       | 276,187 |   | 283,541 |   | 259,630 |   | 247,647 |   |
| Depreciation and amortization                                               |       | 16,600                            |       | 20,442 |   | 16,631 |   | 15,812 |   | 16,660 |   |
| Corporate G & A expenses, including non-cash compensation  expense |       | 22,875                            |       | 26,917 |   | 28,888 |   | 33,794 |   | 18,868 |   |
| Impairment loss                                                             |       | 67,676                            |       | 835,716 |   | 84,037 |   | — |   | — |   |
| Net time brokerage agreement fees (income)                                  |       | (2                                | )          | (233 | ) | 14,001 |   | 2,766 |   | (13 | ) |
| Net (gain) loss on sale of assets                                           |       | 420                               |       | (9,899 | ) | (647 | ) | 1,280 |   | (5,873 | ) |
| Expenses related to a natural disaster                                      |       | —                            |       | — |   | — |   | — |   | 1,697 |   |
| Total operating expenses                                                    |       | 361,611                           |       | 1,149,130 |   | 426,451 |   | 313,282 |   | 278,986 |   |
| Operating income (loss)                                                     |       | 10,821                            |       | (710,308 | ) | 41,900 |   | 126,347 |   | 152,813 |   |
| Other (income) expense:                                                     |       |                              |       |   |   |   |   |   |   |   |   |
| Interest expense, including amortization of deferred financing costs        |       | 31,229                            |       | 45,040 |   | 51,183 |   | 44,173 |   | 29,925 |   |
| Interest income and dividend income from investments                        |       | (58                               | )          | (323 | ) | (740 | ) | (823 | ) | (396 | ) |
| Other income                                                                |       | (380                              | )          | (3,339 | ) | (895 | ) | — |   | — |   |
| (Gain) loss on early extinguishment of debt                                 |       | (20,805                           | )          | (6,949 | ) | 458 |   | — |   | — |   |
| Net (gain) loss on investments                                              |       | 966                               |       | 469 |   | (245 | ) | — |   | (2,819 | ) |
| Net gain on derivative instruments                                          |       | —                            |       | (34 | ) | (162 | ) | (446 | ) | (1,327 | ) |
| Total other expense                                                         |       | 10,952                            |       | 34,864 |   | 49,599 |   | 42,904 |   | 25,383 |   |
| Income (loss) from continuing operations before income taxes  (benefit)     |       | (131                              | )          | (745,172 | ) | (7,699 | ) | 83,443 |   | 127,430 |   |
| Income taxes (benefit)                                                      |       | (5,529                            | )          | (232,600 | ) | 695 |   | 35,596 |   | 49,164 |   |
| Income (loss) from continuing operations                                    |       | 5,398                             |       | (512,572 | ) | (8,394 | ) | 47,847 |   | 78,266 |   |
| Income (loss) from discontinued operations, net of taxes (benefit)          |       | —                            |       | (4,079 | ) | 37 |   | 134 |   | 95 |   |
| Net income (loss)                                                           |       | $                                 | 5,398      |   | $ | (516,651 | ) | $ | (8,357 | ) | $ | 47,981 |   | $ | 78,361 |   |

 

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**SELECTEDFINANCIAL DATA**

**(amountsin thousands, except per share data)**

 
| ** **                                                                  | ** ** | **Years Ended December 31,** | ** ** |
|-----------------------------------------------------------------------------|------------|-----------------------------------|------------|
| ** **                                                                  | ** ** | **2009**                          | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
| **Operating Data (continued):**                                             |       |                              |       |   |   |   |   |   |   |   |   |
| Net Income (Loss) Per Common Share - Basic:                                 |       |                              |       |   |   |   |   |   |   |   |   |
| Income (loss) from continuing operations                                    |       | $                                 | 0.15       |   | $ | (13.94 | ) | $ | (0.22 | ) | $ | 1.20 |   | $ | 1.70 |   |
| Income (loss) from discontinued operations, net of taxes (benefit)          |       | —                            |       | (0.11 | ) | — |   | — |   | — |   |
| Net income (loss) per common share - basic                                  |       | $                                 | 0.15       |   | $ | (14.05 | ) | $ | (0.22 | ) | $ | 1.20 |   | $ | 1.70 |   |
|                                                                        |       |                              |       |   |   |   |   |   |   |   |   |
| Net Income (Loss) Per Common Share - Diluted:                               |       |                              |       |   |   |   |   |   |   |   |   |
| Income (loss) from continuing operations                                    |       | $                                 | 0.15       |   | $ | (13.94 | ) | $ | (0.22 | ) | $ | 1.19 |   | $ | 1.70 |   |
| Income (loss) from discontinued operations, net of taxes (benefit)          |       | —                            |       | (0.11 | ) | — |   | — |   | — |   |
| Net income (loss) per common share - diluted                                |       | $                                 | 0.15       |   | $ | (14.05 | ) | $ | (0.22 | ) | $ | 1.19 |   | $ | 1.70 |   |
|                                                                        |       |                              |       |   |   |   |   |   |   |   |   |
| Weighted average shares - basic                                             |       | 35,321                            |       | 36,782 |   | 38,230 |   | 39,973 |   | 46,045 |   |
| Weighted average shares - diluted                                           |       | 36,403                            |       | 36,782 |   | 38,230 |   | 40,205 |   | 46,221 |   |
|                                                                        |       |                              |       |   |   |   |   |   |   |   |   |
| **Cash Flows Data:**                                                        | ** ** | ** **                        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Cash flows related to:                                                      |       |                              |       |   |   |   |   |   |   |   |   |
| Operating activities                                                        |       | $                                 | 73,902     |   | $ | 130,617 |   | $ | 93,492 |   | $ | 101,583 |   | $ | 136,552 |   |
| Investing activities                                                        |       | (2,062                            | )          | 31,944 |   | (273,876 | ) | (45,146 | ) | (38,618 | ) |
| Financing activities                                                        |       | (65,373                           | )          | (169,222 | ) | 180,534 |   | (61,713 | ) | (93,709 | ) |
|                                                                        |       |                              |       |   |   |   |   |   |   |   |   |
| **Other Data:**                                                             | ** ** | ** **                        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Dividends declared and paid per Class A and Class B common  share |       | $                                 | —     |   | $ | 0.58 |   | $ | 1.52 |   | $ | 1.52 |   | $ | — |   |

 
| ** **                                                         | ** ** | **2009**   | ** ** | **2008**   | ** ** | **2007**   | ** ** | **2006**   | ** ** | **2005**   | ** ** |
|--------------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|
| **Balance Sheet Data:**                                            | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Cash and cash equivalents                                          |       | $          | 10,751     |       | $          | 4,284      |       | $          | 10,945     |       | $          | 10,795 |   | $ | 16,071 |   |
| Intangibles and other assets                                       |       | 754,806    |       | 825,404    |       | 1,452,598  |       | 1,524,018  |       | 1,491,812  |       |
| Investment in deconsolidated subsidiaries and assets held for sale |       | —     |       | —     |       | 250,936    |       | —     |       | —     |       |
| Total assets                                                       |       | 934,536    |       | 996,734    |       | 1,919,352  |       | 1,733,258  |       | 1,697,758  |       |
| Senior debt, including current portion                             |       | 729,173    |       | 750,197    |       | 823,718    |       | 526,239    |       | 427,259    |       |
| Senior subordinated notes and other                                |       | 19,189     |       | 83,500     |       | 150,000    |       | 150,000    |       | 150,000    |       |
| Deferred tax liabilities and other long-term liabilities           |       | 28,897     |       | 30,489     |       | 249,499    |       | 237,621    |       | 199,846    |       |
| Total shareholders’ equity                                    |       | 113,952    |       | 100,257    |       | 660,767    |       | 777,092    |       | 885,715    |       |
|                                                                    |            |            |            |            |            |            |            |            |            |            |            |  |  |  |  |  |

 

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**ITEM 7.              MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

**Overview**

 

We are one of the five largest radiobroadcasting companies in the United States, with a nationwide portfolio inexcess of 100 stations in 23 markets, including San Francisco, Boston, Seattle,Denver, Portland, Sacramento and Kansas City.

 

A radio broadcasting companyderives its revenues primarily from the sale of broadcasting time to local andnational advertisers. Net revenues are gross revenues less advertising agencycommissions. The revenues are determined by the advertising rates charged andthe number of advertisements broadcast. We maximize our revenues by managingthe inventory of advertising spots available for broadcast, which can varythroughout the day, but is consistent over time. Advertising rates areprimarily based on four factors:

 

·      a station’s audience share in the demographicgroups targeted by advertisers as measured principally by periodic reportsissued by The Arbitron Ratings Company;

 

·      the number of radio stations in the marketcompeting for the same demographic groups;

 

·      the supply of, and demand for, radio advertisingtime, both nationally and in the regions in which the station operates; and

 

·      the market’s size based upon available radioadvertising revenue.

 

In 2009, we generated 78% ofour net revenues from local advertising, which is sold primarily by eachindividual local radio station’s sales staff, and 20% from nationaladvertising, which is sold by an independent advertising sales representative.Local and national revenues include advertising on our stations, websites,the sale of advertising during audio streaming of our radio stations over theInternet, promotional activities and e-commerce. We generated thebalance of our 2009 revenues principally from network compensation and rentalincome from owned tower sites.

 

Our most significant stationoperating expenses are employee compensation, programming and promotionalexpenses. Other significant expenses that impact our profitability are interestand depreciation and amortization expense.

 

Our performance is based uponthe aggregate performance of our radio stations.  Thefollowing are some of the factors that impact a radio station’s performance atany given time: (i) audience ratings; (ii) program content; (iii) managementtalent and expertise; (iv) sales talent and expertise; (v) audiencecharacteristics; (vi) signal strength; and (vii) the number andcharacteristics of other radio stations and other advertising media in themarket area.

 

In the radio broadcastingindustry, seasonal revenue fluctuations are common and are due primarily tovariations in advertising expenditures by local and national advertisers.Typically, revenues are lowest in the first calendar quarter of the year.

 

As opportunities arise, we may,on a selective basis, change or modify a station’s format due to changes inlisteners’ tastes or changes in a competitor’s format. This could have animmediate negative impact on a station’s ratings and/or revenues, and there areno guarantees that the modification or change will be beneficial at some futuretime. Our management is continually focused on these opportunities as well asthe associated risks and uncertainties. We strive to develop compellingcontent and strong brand images to maximize audience ratings that are crucialto our stations’ financial success.

 

You should read the followingdiscussion and analysis of our financial condition and results in conjunctionwith our consolidated financial statements and related notes included elsewherein this report. The following results of operations include a discussion of theyear ended December 31, 2009 as compared to the year ended December 31,2008 and a discussion of the year ended December 31, 2008 as compared tothe year ended December 31, 2007. Our results of operations for the relevant periods represent theoperations of the radio stations: (1) owned and operated by us; or (2) operatedby us pursuant to time brokerage agreements (“TBA”); and exclude those owned byus but operated by others pursuant to TBAs.

 

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Under the heading “Same StationConsiderations,” we evaluate net revenues, station operating expenses andoperating income by comparing the performance of stations owned or operated byus throughout a relevant year to the performance of those same stations in theprior year whether or not owned or operated by us. In addition, another partycommenced operation of certain towersites as part of our plan to exit the operation of non-strategic tower sites, whichalso impacted same station considerations when comparing the years 2009 with2008. We use these comparisons to assess the effect of acquisitions anddispositions on our operations throughout the periods measured.

 

**ResultsOf Operations**

 

**Yearended December 31, 2009 compared to the year ended December 31, 2008**

 

The followingsignificant factors affected our results of operations for the year ended December 31,2009 as compared to the prior year:

 

**Acquisition**

** **

·      OnMarch 14, 2008, we acquired through an exchange agreement three radiostations in San Francisco, California, that in 2008 increased our depreciationand amortization expense as we acquired certain intangible assets with lives ofa short duration.

 

**Dispositions**

 

·      During 2009, another party commenced operation of certain tower sites aspart of our plan to exit the operation of non-strategic tower sites, whichdecreased net revenues (tower rental income) and station operating expenses forsame station considerations, but had marginal impact to our reported results ofoperations.

 

·      On July 14, 2008, we sold three of our eight Rochester, New York,radio stations for net cash proceeds of $12.2 million, which the buyer beganoperating on May 1, 2008 under a TBA with us. The results for thesestations were reflected in discontinued operations.

 

·      OnMarch 14, 2008, we sold, through an exchange agreement, three of our sevenSeattle, Washington, radio stations that in 2008 resulted in a $10.0 milliongain on sale of assets.

 

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

 

**Financing**

 

·      During the years ended December 31,2009 and 2008, we repurchased $76.9 million and $66.5 million, respectively, ofNotes and recognized a net gain on extinguishment of debt of $20.8 million and$6.9 million, respectively.

 

·      Ourinterest expense decreased due to: (i) a decrease in interest rates; (ii) adecrease in our outstanding debt; and (iii) the redemption of a portion ofour Notes that had a higher interest rate than the average rate under oursenior debt.

 

·      Duringthe fourth quarter of 2009, another party commenced operating certain of ourtower facilities and we received $12.6 million in cash that was reflected asfinance method lease obligations due to our ability to participate in futureprofits from these towers.

 

**Other**

 

·      Theincome tax benefit in 2009 was favorably impacted by the passage of federal taxlegislation during the fourth quarter of 2009 that allowed us to carryback our2008 net operating loss for five years rather than for two years. As a result,we reversed the federal portion of our valuation allowance for deferred taxassets associated with a net operating loss carry forward as we now expect torecover $7.0 million of previously paid taxes.

 

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·      Duringthe years ended 2009, 2008 and 2007, we recorded an impairment loss of $67.7million, $835.7 million and $84.0 million, respectively, in connection with ourreview of goodwill and broadcasting licenses. Please refer to Note 3 in theaccompanying notes to the financial statements for further discussion of thecontributing factors to the impairment loss.

 

·      In2008, our income tax benefit on loss from continuing operations was negativelyimpacted by an increase to our valuation allowance of $59.4 million to fullyreserve our net deferred tax assets. Our deferred tax assets were also fullyreserved in 2009. The increase in the valuation allowance was primarily due tothe cumulative losses incurred by us since 2006, which caused uncertainty as tothe realization of the deferred tax assets in future years.

 

·      During2008, we recovered $3.6 million from our insurance company for damagesresulting 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.

 

***Net Revenues***

 
|              |   | **Years Ended**            |   |
|-------------------|--------|----------------------------|--------|
|              |   | **December 31, 2009** |   | **December 31, 2008** |   |
|              |   | **(dollars in millions)**  |   |
| Net Revenues      |   | $                          | 372.4  |   | $ | 438.8 |   |
| Amount of Change  |   | $                          | (66.4  | ) |   |   |
| Percentage Change |   | (15.1                      | )%     |   |   |
|                   |        |                            |        |  |  |  |  |

 

The recent economic downturnreduced demand for advertising in general, including advertising on our radiostations during 2009.  Net revenues declined in most of the markets wherewe operate stations.  Those markets that were impacted the most by thedecline in radio station net revenue dollars were the Boston, Seattle,Sacramento, San Francisco and Portland markets.

 

Economic conditionssequentially improved throughout 2009 and, based upon early indications for2010, this negative trend appears to be reversing, primarily due to thestrengthening of advertiser demand.  As the economy and the advertisingenvironment rebound, we would expect to compare favorably to prior periods.

 

*Same Station Considerations*:

 

·              Net revenues (towerrental income) in 2009 would have been lower by $1.0 million if we had adjustednet revenues for the transfer of tower operations to a third party as of thebeginning of the period.

 

·              Net revenues (towerrental income) in 2008 would have been lower by $0.9 million if we had adjustednet revenues for the transfer of tower operations to a third party as of thebeginning of the period.

 

***Station Operating Expenses***

 
|                       |   | **Years Ended**            |   |
|----------------------------|--------|----------------------------|--------|
|                       |   | **December 31, 2009** |   | **December 31, 2008** |   |
|                       |   | **(dollars in millions)**  |   |
| Station Operating Expenses |   | $                          | 254.0  |   | $ | 276.2 |   |
| Amount of Change           |   | $                          | (22.2  | ) |   |   |
| Percentage Change          |   | (8.0                       | )%     |   |   |
|                            |        |                            |        |  |  |  |  |

 

The decrease in station operating expenses was primarily due to: (1) adecrease in net revenues as described under Net Revenues as certain variableexpenses decrease with a corresponding decrease in net revenues; and (2) 

 

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cost reduction initiatives that commenced during the fourth quarter of2008, including but not limited to reductions in workforce, the elimination ofthe 401(k) employer matching contribution and other cost reductionactions.

 

Management anticipates that station operating expenses will increase in2010 as net revenues increase and as most cost-cutting measures were fullyrealized in early 2009.

 

*Same Station Considerations*:

 

·              Station operatingexpenses in 2009 would have been lower by $0.2 million if we had adjustedstation operating expenses for the transfer of tower operations to a thirdparty as of the beginning of the period.

 

·              Station operatingexpenses in 2008 would have been lower by $0.2 million if we had adjustedstation operating expenses for the transfer of tower operations to a thirdparty as of the beginning of the period.

 

***Depreciation And Amortization Expense***

 
|                                   |   | **Years Ended**            |   |
|----------------------------------------|--------|----------------------------|--------|
|                                   |   | **December 31, 2009** |   | **December 31, 2008** |   |
|                                   |   | **(dollars in millions)**  |   |
| Depreciation And  Amortization Expense |   | $                          | 16.6   |   | $ | 20.4 |   |
| Amount of Change                       |   | $                          | (3.8   | ) |   |   |
| Percentage Change                      |   | (18.6                      | )%     |   |   |
|                                        |        |                            |        |  |  |  |  |

 

Depreciation and amortization expense decreased in 2009 as the expensein 2008 was higher due to acquisitions during the first quarter of 2008 andfourth quarter of 2007, which included certain amortizable assets with lives ofa short duration.

 

***Corporate General And Administrative Expenses***

 
|                                           |   | **Years Ended**            |   |
|------------------------------------------------|--------|----------------------------|--------|
|                                           |   | **December 31, 2009** |   | **December 31, 2008** |   |
|                                           |   | **(dollars in millions)**  |   |
| Corporate General And  Administrative Expenses |   | $                          | 22.9   |   | $ | 26.9 |   |
| Amount of Change                               |   | $                          | (4.0   | ) |   |   |
| Percentage Change                              |   | (14.9                      | )%     |   |   |
|                                                |        |                            |        |  |  |  |  |

 

Corporate general and administrative expenses decreased primarily dueto: (1) a decrease in non-cash compensation expense of $2.5 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 recur in 2009. The decrease in corporategeneral and administrative expense was offset by an increase in deferredcompensation expense of $1.6 million as our deferred compensation liabilitygenerally tracks movements in the stock market.

 

***Operating Income (Loss)***

 
|                    |   | **Years Ended**            |   |
|-------------------------|--------|----------------------------|--------|
|                    |   | **December 31, 2009** |   | **December 31, 2008** |   |
|                    |   | **(dollars in millions)**  |   |
| Operating Income (Loss) |   | $                          | 10.8   |   | $ | (710.3 | ) |
| Amount of Change        |   | $                          | 721.1  |   |   |   |
| Percentage Change       |   | 101.5                      | %      |   |   |
|                         |        |                            |        |  |  |  |  |

 

The increase in operating income was primarily due to a decrease inimpairment loss of $768.0 million in connection with our review of broadcastinglicenses and goodwill in 2009 as compared to 2008. The decrease was partiallyoffset by: (1) a decrease in net revenues for the reasons described aboveunder Net Revenues, net of a 

 

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decrease instation operating expenses for the reasons described under Station OperatingExpenses; and (2) a decrease in net gain on sale or disposal of assets of$10.0 million as a result of the sale in 2008 of three of our Seattle stations.

 

*Same Station Considerations*:

 

·              Operating income in2009 would have been lower by $0.8 million if we had adjusted operating incomefor the transfer of tower operations to a third party as of the beginning ofthe period.

 

·              Operating loss in2008 would have been higher by $0.7 million if we had adjusted operating lossfor the transfer of tower operations to a third party as of the beginning ofthe period.

 

***Interest Expense***

 
|              |   | **Years Ended**            |   |
|-------------------|--------|----------------------------|--------|
|              |   | **December 31, 2009** |   | **December 31, 2008** |   |
|              |   | **(dollars in millions)**  |   |
| Interest Expense  |   | $                          | 31.2   |   | $ | 45.0 |   |
| Amount of Change  |   | $                          | (13.8  | ) |   |   |
| Percentage Change |   | (30.6                      | )%     |   |   |
|                   |        |                            |        |  |  |  |  |

 

The decrease in interestexpense was primarily due to: (1) a decrease in interest rates onoutstanding debt in 2009 as compared to 2008; (2) a decline in outstandingdebt upon which interest is computed; and (3) the repurchase of our Notes,which have a higher interest rate than the interest rate on the borrowingsunder our Bank Facility used to repurchase our Notes.

 

We anticipate a reduction ininterest expense associated with an expected reduction in outstanding debt in2010 and a reduction in January 2010 of $75.0 million in notional value ofan existing 3.03% fixed interest rate swap agreement. This reduction could beoffset by the impact of an increase in interest rates and fees associated withthe Amendment to our Bank Facility in the first quarter of 2010.

 

***Loss From Continuing Operations Before Income TaxBenefit***

 
|                                                       |   | **Years Ended**            |   |
|------------------------------------------------------------|--------|----------------------------|--------|
|                                                       |   | **December 31, 2009** |   | **December 31, 2008** |   |
|                                                       |   | **(dollars in millions)**  |   |
| Loss From Continuing  Operations Before Income Tax Benefit |   | $                          | (0.1   | ) | $ | (745.2 | ) |
| Amount of Change                                           |   | $                          | 745.1  |   |   |   |
| Percentage Change                                          |   | 100.0                      | %      |   |   |
|                                                            |        |                            |        |  |  |  |  |

 

The net change was primarilyattributable to: (1) an increase in operating income for the reasons asdescribed above under Operating Income (Loss); (2) a $13.9 millionincrease in gain on the retirement of our Notes; and (3) a decrease in ourinterest expense of $13.8 million for the reasons described above underInterest Expense.

 

***Income Tax Benefit***

 
|               |   | **Years Ended**            |   |
|--------------------|--------|----------------------------|--------|
|               |   | **December 31, 2009** |   | **December 31, 2008** |   |
|               |   | **(dollars in millions)**  |   |
| Income Tax Benefit |   | $                          | (5.5   | ) | $ | (232.6 | ) |
| Amount of Change   |   | $                          | 227.1  |   |   |   |
| Percentage Change  |   | 97.6                       | %      |   |   |
|                    |        |                            |        |  |  |  |  |

 

The income tax benefit in 2009was favorably impacted by the passage of tax legislation during the fourthquarter of 2009 that allows us to carryback our 2008 net operating loss forfive years rather than for two years. As a 

 

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result, we reversed the federal portion ofour valuation allowance for deferred tax assets as we now expect to recover$7.0 million of previously paid taxes.

 

The income tax benefit in 2008primarily resulted from the elimination of deferred tax liabilities associatedwith intangible assets due to the recording of an impairment loss in 2008 of$835.7 million. The income tax benefit was offset by an increase to ourvaluation allowance to fully reserve our net deferred tax assets, as thecumulative losses incurred by us over the past several years caused uncertaintyabout our ability to realize our deferred tax assets.

 

The Company’s income tax rate for the year ended December 31, 2009was not numerically relevant. For the year ended December 31, 2008, ourincome tax rate was 31.2%. The tax rates for the years ended December 31,2009 and 2008 were impacted by a decrease to the valuation allowance of $6.7million and an increase to the valuation allowance of $59.4 million,respectively.

 

We estimate that our annual taxrate for 2010, which may fluctuate from quarter to quarter, will be in the low40% range (before any necessary adjustment to the valuation allowance). Weestimate that our rate in 2010 will be affected primarily by: (1) changesin the level of income in any of our taxing jurisdictions; (2) addingfacilities in states that on average have different income tax rates thanstates in which we currently operate and the resulting effect on previouslyreported temporary differences between the tax and financial reporting bases ofour assets and liabilities; (3) the effect of recording changes in ourliabilities for uncertain tax positions; (4) taxes in certain states thatare dependent on factors other than taxable income; and (5) thelimitations on the deduction of cash and certain non-cash compensation expensefor certain key employees.  Our annualeffective tax rate may also be materially impacted by: (i) regulatorychanges in certain states in which we operate; (ii) changes in theexpected outcome of tax audits; (iii) changes in the estimate of expensesthat are not deductible for tax purposes; and (iv) changes in the deferredtax valuation allowance.

 

Deferred tax liabilitiesprimarily relate to differences between book and tax bases of certain of ourindefinite-lived intangibles (broadcasting licenses and goodwill). Underaccounting guidance, we do not amortize our indefinite-lived intangibles forfinancial statement purposes, but instead test them annually for impairment.The amortization of our indefinite-lived assets for tax purposes but not forbook purposes creates deferred tax liabilities. A reversal of deferred tax liabilities may occur when indefinite-livedintangibles: (1) become impaired; or (2) are sold for cash, whichwould typically only occur in connection with the sale of the assets of astation or groups of stations or the entire company in a taxabletransaction.  Due to the amortization fortax purposes of our indefinite-lived intangible assets, we expect to generatedeferred tax liabilities in future periods (without consideration for anyimpairment loss in future periods).

 

***Income (Loss) From Continuing Operations***

 
|                                      |   | **Years Ended**            |   |
|-------------------------------------------|--------|----------------------------|--------|
|                                      |   | **December 31, 2009** |   | **December 31, 2008** |   |
|                                      |   | **(dollars in millions)**  |   |
| Income (Loss) From  Continuing Operations |   | $                          | 5.4    |   | $ | (512.6 | ) |
| Amount of Change                          |   | $                          | 518.0  |   |   |   |
| Percentage Change                         |   | 101.1                      | %      |   |   |
|                                           |        |                            |        |  |  |  |  |

 

The change isprimarily due to the reasons described above under Loss From ContinuingOperations Before Income Tax Benefit, net of income tax benefit.

 

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***Loss From Discontinued Operations, Net Of TaxBenefit***

 

 
|                                                   |   | **Years Ended**            |       |
|--------------------------------------------------------|--------|----------------------------|------------|
|                                                   |   | **December 31, 2009** | ** ** | **December 31, 2008** |   |
|                                                   |   | **(dollars in millions)**  |       |
| Loss From Discontinued Operations,  Net Of Tax Benefit |   | $                          | —     |   | $ | (4.1 | ) |
| Amount of Change                                       |   | $                          | 4.1        |   |   |   |
| Percentage Change                                      |   | 100.0                      | %          |   |   |
|                                                        |        |                            |            |  |  |  |  |

 

The net change was primarily due to anon-cash impairment loss of $6.7 million (before income tax benefit) in thefirst quarter of 2008 for the Rochester assets that were held for sale and thatwere subsequently disposed of during the third quarter of 2008.

 

***Net Income (Loss)***

 
| ** **        | ** ** | **Years Ended**            | ** ** |
|-------------------|------------|----------------------------|------------|
| ** **        | ** ** | **December 31, 2009** | ** ** | **December 31, 2008** | ** ** |
| ** **        | ** ** | **(dollars in millions)**  | ** ** |
| Net Income (Loss) |       | $                          | 5.4        |   | $ | (516.7 | ) |
| Amount of Change  |       | $                          | 522.1      |   |   |   |
| Percentage Change |       | 101.1                      | %          |   |   |
|                   |            |                            |            |  |  |  |  |

 

The net changewas primarily attributable to the reasons described above under Loss FromContinuing Operations Before Income Tax Benefit and under Income Tax Benefit.

 

**ResultsOf Operations**

 

**Yearended December 31, 2008 compared to the year ended December 31, 2007**

 

The followingsignificant factors affected our results of operations for the year ended December 31,2008 as compared to the prior year:

 

**Acquisitions**

** **

·                  OnMarch 14, 2008, we acquired through an exchange agreement three radiostations in San Francisco, California. We began operating these stations on February 26,2007 under a TBA that in 2008 increased our net revenues, station operatingexpenses and depreciation and amortization expense.

 

·                  OnDecember 10, 2007, we acquired WVEI-FM (formerly WBEC-FM), a station inSpringfield, Massachusetts, for $5.8 million in cash. We began operating thisstation on February 10, 2006 under a TBA by simulcasting the format ofWEEI-AM (a radio station owned and operated by us in the Boston, Massachusetts,market). The impact to 2008 was an increase in our depreciation andamortization expense and interest expense.

 

·                  OnNovember 30, 2007, we acquired four radio stations in Austin, Texas, andthree radio stations in Memphis, Tennessee, for $101.0 million in cash. Webegan operating these stations on November 1, 2006 under a TBA. The impactto 2008 was an increase in our depreciation and amortization expense andinterest expense and a decrease in our TBA expense.

 

·                  OnNovember 30, 2007, we acquired four radio stations in Cincinnati, Ohio,for $119.0 million in cash. From November 1, 2006 through February 25,2007, we operated three of these stations under a TBA. On February 26,2007, a buyer began operating the same three stations under a TBA with us. Theimpact to 2008 was a decrease in our net revenues, station operating expensesand TBA fees and an increase to our interest expense.

 

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·                  OnNovember 30, 2007, we acquired four stations in Rochester, New York, for$42.0 million in cash. Of the four stations acquired, two stations werereflected in continuing operations and two stations were reflected indiscontinued operations. For the two stations reflected in continuingoperations, the impact to 2008 was an increase to our net revenues, stationoperating expenses, depreciation and amortization expense and interest expense.

 

**Dispositions**

 

·                  On July 14, 2008, we sold three of oureight Rochester, New York, radio stations for net cash proceeds of $12.2million, which the buyer began operating on May 1, 2008 under a TBA withus. The results for these stations were reflected in discontinuedoperations.

 

·                  OnMarch 14, 2008, we sold, through an exchange agreement, three of our sevenSeattle, Washington, radio stations which a buyer began operating on February 26,2007 under a TBA with us.  The impact to2008, due to the cessation of operation by us of these stations on February 26,2007, was a decrease in our net revenues, station operating expenses anddepreciation and amortization expense.

 

·                  OnMarch 14, 2008, we sold, through an exchange agreement, four Cincinnati,Ohio, radio stations we acquired during the fourth quarter of 2007 under twoseparate transactions. Pursuant to two TBA agreements, we operated thesestations from November 1, 2006 through February 25, 2007.  On February 26, 2007, a buyer beganoperating these stations under a TBA with us. The impact to 2008, due to the cessation of operation by us of thesestations on February 26, 2007, was a decrease in our net revenues and stationoperating expenses.

 

·                  OnJanuary 15, 2008, we sold a station in Austin, Texas, for $20.0 million incash.  The buyer began operating thisstation under a TBA on February 26, 2007 (a station we began operating on November 1,2006 under a TBA agreement with another party). The impact to 2008, due to thecessation of operation of this station by us on February 26, 2007 and thesale on January 15, 2008, was a decrease in our net revenues, stationoperating expenses and interest expense.

 

**Financing**

 

·                  Our interestexpense decreased due to: (i) a decrease in interest rates; and (ii) theredemption of a portion of our Notes that had a higher interest rate than therate under our senior debt. This decrease was offset by: (1) increasedborrowings used to finance: (a) acquisitions during the fourth quarter of2007 in the amount of $268.3 million; (b) the payment of cash dividends toour shareholders of $21.6 million in 2008 and $58.0 million in 2007; and (c) stockrepurchases during 2008 of $13.9 million and during 2007 of $55.0 million; and (2) interestexpense of $0.9 million related to the resolution of certain litigation.

 

·                  During the yearended December 31, 2008, we repurchased $66.5 million of our Notes andrecognized a net gain on extinguishment of debt of $6.9 million.

 

·                  On June 18,2007, we entered into a new credit facility that resulted in the recognition ofa $0.5 million loss on the early extinguishment of debt related to thewrite-off of deferred financing costs during the second quarter of 2007.

 

**Other**

 

·                  Duringthe years ended 2008 and 2007, we recorded an impairment loss of $835.7 millionand $84.0 million, respectively, in connection with our review of goodwill andbroadcasting licenses. Please refer to Note 3 in the accompanying notes to thefinancial statements for further discussion of the contributing factors to theimpairment loss.

 

·                  In2008, our income tax benefit on loss from continuing operations was negativelyimpacted by an increase to our valuation allowance of $59.4 million to fullyreserve our net deferred tax assets. The increase was primarily due to thecumulative losses incurred by us since 2006, which caused uncertainty as to therealization of the deferred tax assets in future years.

 

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·                  During2008, we recovered $3.6 million from our insurance company for damagesresulting 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.

 

·                  Duringthe first quarter of 2007, we recorded a discrete income tax expense adjustmentof $2.9 million as we commenced operations in 2007 in states which on averagehave higher income tax rates than in states in which we had previouslyoperated.

 

***Net Revenues***

 
| ** **        | ** ** | **Years Ended**            | ** ** |
|-------------------|------------|----------------------------|------------|
| ** **        | ** ** | **December 31, 2008** | ** ** | **December 31, 2007** | ** ** |
| ** **        | ** ** | **(dollars in millions)**  | ** ** |
| Net Revenues      |       | $                          | 438.8      |   | $ | 468.4 |   |
| Amount of Change  |       | $                          | (29.6      | ) |   |   |
| Percentage Change |       | (6.3                       | )%         |   |   |
|                   |            |                            |            |  |  |  |  |

 

Our decrease in net revenueswas primarily due to: (1) weak demand for advertising in general thatcontributed to an overall decline in total market revenues in most of themarkets where we operate stations; and (2) the commencement of operationsby other parties under TBAs on: (a) February 26, 2007 for three ofour seven Seattle radio stations; (b) February 26, 2007 for fourradio stations in the Cincinnati market; and (c) February 26, 2007for one radio station in the Austin market. Our decrease in net revenues wasoffset by: (i) the acquisition on November 30, 2007 of four radiostations in the Rochester market of which two radio stations were reflected incontinuing operations; (ii) the commencement by us of operations under aTBA on February 26, 2007 of three radio stations in the San Franciscomarket; and (iii) increases in net revenues for our radio stations inmarkets such as Buffalo, Madison and Milwaukee.

 

*Same Station Considerations*:

 

·                                          Netrevenues in 2008 were not impacted by any acquisitions or dispositions of radiostations as of the beginning of the period.

 

·                                          Netrevenues in 2007 would have been higher by $3.3 million if we had adjusted netrevenues to give effect to acquisitions or dispositions of radio stations as ofthe beginning of the period.

 

***Station Operating Expenses***

 
| ** **                 | ** ** | **Years Ended**            | ** ** |
|----------------------------|------------|----------------------------|------------|
| ** **                 | ** ** | **December 31, 2008** | ** ** | **December 31, 2007** | ** ** |
| ** **                 | ** ** | **(dollars in millions)**  | ** ** |
| Station Operating Expenses |       | $                          | 276.2      |   | $ | 283.5 |   |
| Amount of Change           |       | $                          | (7.3       | ) |   |   |
| Percentage Change          |       | (2.6                       | )%         |   |   |
|                            |            |                            |            |  |  |  |  |

 

The decrease in stationoperating expenses was primarily due to the factors leading to the decrease innet revenues as described above as certain variable expenses decrease with acorresponding decrease in net revenues, offset by the effects of inflation.

 

In the fourth quarter of 2008,we initiated several cost reduction initiatives, including certain stationoperating expense and personnel reductions and the cessation of our Company’svoluntary employee benefits matching programs. While the impact of theseinitiatives was not material in this quarter, future periods will havebenefited from these actions and any other cost reduction actions.

 

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*Same Station Considerations*:

 

·                                          Stationoperating expenses in 2008 were not impacted by any acquisitions ordispositions of radio stations as of the beginning of the period.

 

·                                          Stationoperating expenses in 2007 would have been higher by $1.9 million if we hadadjusted station operating expenses to give effect to acquisitions ordispositions of radio stations as of the beginning of the period.

 

***Depreciation And Amortization Expense***

 
| ** **                             | ** ** | **Years Ended**            | ** ** |
|----------------------------------------|------------|----------------------------|------------|
| ** **                             | ** ** | **December 31, 2008** | ** ** | **December 31, 2007** | ** ** |
| ** **                             | ** ** | **(dollars in millions)**  | ** ** |
| Depreciation And  Amortization Expense |       | $                          | 20.4       |   | $ | 16.6 |   |
| Amount of Change                       |       | $                          | 3.8        |   |   |   |
| Percentage Change                      |       | 22.9                       | %          |   |   |
|                                        |            |                            |            |  |  |  |  |

 

Depreciation and amortizationexpense increased due to the acquisitions of radio station assets in the firstquarter of 2008 and in the fourth quarter of 2007 (other than those assets inRochester, New York, that were acquired and held for sale or those assets inCincinnati, Ohio, which were acquired and reflected as an investment indeconsolidated subsidiaries), which included certain amortizable assets withlives of a short duration.

 

***Corporate General And Administrative Expenses***

 
| ** **                                     | ** ** | **Years Ended**            | ** ** |
|------------------------------------------------|------------|----------------------------|------------|
| ** **                                     | ** ** | **December 31, 2008** | ** ** | **December 31, 2007** | ** ** |
| ** **                                     | ** ** | **(dollars in millions)**  | ** ** |
| Corporate General And  Administrative Expenses |       | $                          | 26.9       |   | $ | 28.9 |   |
| Amount of Change                               |       | $                          | (2.0       | ) |   |   |
| Percentage Change                              |       | (6.9                       | )%         |   |   |
|                                                |            |                            |            |  |  |  |  |

 

Corporate general andadministrative expenses decreased primarily due to: (1) a decrease inlegal expenses of $1.4 million primarily associated with certain legal proceedingsin the year ended December 31, 2007 which did not recur in 2008; and (2) adeferred compensation expense reduction of $1.0 million as a result of adecrease in the value of the unfunded obligation as the deferred compensationliability generally tracks the movements in the stock market.

 

The decrease in corporategeneral and administrative expense was offset by an increase in non-cashcompensation expense of $1.5 million due to: (a) the cumulative effect ofequity awards issued over multiple years, including 2008, with the awardsvesting over periods of up to four years; and (b) the acceleration ofvesting of equity awards for a key officer.

 

***Operating Income (Loss)***

 
| ** **              | ** ** | **Years Ended**            | ** ** |
|-------------------------|------------|----------------------------|------------|
| ** **              | ** ** | **December 31, 2008** | ** ** | **December 31, 2007** | ** ** |
| ** **              | ** ** | **(dollars in millions)**  | ** ** |
| Operating Income (Loss) |       | $                          | (710.3     | ) | $ | 41.9 |   |
| Amount of Change        |       | $                          | (752.2     | ) |   |   |
| Percentage Change       |       | NM                         |       |   |   |
|                         |            |                            |            |  |  |  |  |

 

The decrease in operatingincome to an operating loss was primarily due to an increase in an impairmentloss of $751.7 million in connection with our review of broadcasting licensesand goodwill during the fourth quarter of 2008 and our review of goodwillduring the second quarter of 2008 (see Note 3 in the accompanying notes to thefinancial statements), which loss was primarily due to: (1) an increase inthe discount rate used; (2) a decrease in

 

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station transaction multiples; and (3) adecrease in advertising revenue growth projections for the broadcastingindustry. This decrease in operating income was offset by: (i) a decreasein time brokerage agreement fees of $14.2 million, primarily due to thecessation of a TBA on November 30, 2007; and (ii) an increase in netgain on sale or disposal of assets of $9.3 million primarily related to oursale of three radio stations in Seattle, Washington, in connection with anexchange agreement that was completed during the first quarter of 2008.

 

*Same Station Considerations*:

 

·                                          Operatingloss in 2008 was not impacted by any acquisitions or dispositions of radiostations as of the beginning of the period.

 

·                                          Operatingincome in 2007 would have been higher by $1.4 million if we had adjustedoperating income to give effect to acquisitions or dispositions of radiostations as of the beginning of the period.

 

***Interest Expense***

 
| ** **        | ** ** | **Years Ended**            | ** ** |
|-------------------|------------|----------------------------|------------|
| ** **        | ** ** | **December 31, 2008** | ** ** | **December 31, 2007** | ** ** |
| ** **        | ** ** | **(dollars in millions)**  | ** ** |
| Interest Expense  |       | $                          | 45.0       |   | $ | 51.2 |   |
| Amount of Change  |       | $                          | (6.2       | ) |   |   |
| Percentage Change |       | (12.1                      | )%         |   |   |
|                   |            |                            |            |  |  |  |  |

 

The decrease in interestexpense was primarily due to: (i) a decline in interest rates during theyear ended December 31, 2008 as compared to the year ended December 31,2007; and (ii) the repurchase during 2008 of $66.5 million of our Noteswhich have a higher interest rate than the replacement debt. This decrease wasoffset by: (1) higher average outstanding debt under our senior creditagreement used to finance: (a) the acquisition of radio station assets inseveral markets in the amount of $268.3 million during the fourth quarter of2007; (b) dividend payments of $21.6 million in 2008 and $58.0 million in2007; and (c) the repurchase of our common stock in the amount of $13.9million during 2008; and (2) higher interest expense of $0.9 millionrelated to the resolution of certain litigation.

 

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

 
| ** **                                                     | ** ** | **Years Ended**            | ** ** |
|----------------------------------------------------------------|------------|----------------------------|------------|
| ** **                                                     | ** ** | **December 31, 2008** | ** ** | **December 31, 2007** | ** ** |
| ** **                                                     | ** ** | **(dollars in millions)**  | ** ** |
| Loss From Continuing  Operations Before Income Taxes (Benefit) |       | $                          | (745.2     | ) | $ | (7.7 | ) |
| Amount of Change                                               |       | $                          | (737.5     | ) |   |   |
| Percentage Change                                              |       | NM                         |       |   |   |
|                                                                |            |                            |            |  |  |  |  |

 

The net change was primarilyattributable to an increase in impairment loss of $751.7 million due to thereasons as described above under Operating Income (Loss). The increase in lossfrom continuing operations before income tax provision (benefit) was offset by:(1) a $6.9 million gain on the retirement of our Notes; (2) adecrease in our interest expense of $6.1 million for the reasons describedabove under Interest Expense; and (3) a $2.4 million increase in otherincome related to an insurance recovery.

 

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***Income Taxes (Benefit)***

 
| ** **             | ** ** | **Years Ended**            | ** ** |
|------------------------|------------|----------------------------|------------|
| ** **             | ** ** | **December 31, 2008** | ** ** | **December 31, 2007** | ** ** |
| ** **             | ** ** | **(dollars in millions)**  | ** ** |
| Income Taxes (Benefit) |       | $                          | (232.6     | ) | $ | 0.7 |   |
| Amount of Change       |       | $                          | (233.3     | ) |   |   |
| Percentage Change      |       | NM                         |       |   |   |
|                        |            |                            |            |  |  |  |  |

 

The net change in income taxprovision (benefit) was primarily the result of the net change as describedabove under Loss From Continuing Operations Before Income Tax Provision(Benefit).  In addition, we recordeddiscrete items of tax of: (1) $59.4 million for the year ended December 31,2008 primarily due to an increase to our valuation allowance to fully reserveour net deferred tax assets; and (2) $2.9 million for the year ended December 31,2007 resulting from the commencement of operations in 2007 in states which onaverage have higher income tax rates than in states in which we previouslyoperated and the resulting effect on previously reported temporary differencesbetween the tax and financial reporting bases of our assets and liabilities.

 

For the years ended December 31,2008 and 2007, our income tax rate was 31.2% and 9.0%, respectively. Includedin the tax rate for the years ended December 31, 2008 and 2007 werediscrete items of tax (as described above) in the amount of $59.4 million and$2.9 million, respectively.

 

For the year ended December 31,2008, the income tax benefit was $232.6 million, which resulted from areduction in deferred tax liabilities primarily due to the recording of animpairment loss of $835.7 million.  Forthe year ended December 31, 2007, the income tax expense of $0.7 millionwas comprised of a current tax credit of $8.9 million and a deferred taxexpense of $9.6 million.

 

Our net non-current deferredtax liabilities were eliminated as of December 31, 2008 primarily due tothe deferred tax benefit associated with the $835.7 million impairment loss toour indefinite-lived intangible assets. Our net non-current deferred taxliabilities as of December 31, 2007 were $235.6 million. The deferred taxliabilities primarily relate to differences between book and tax bases ofcertain of our indefinite-lived intangibles (broadcasting licenses andgoodwill). We do not amortize our indefinite-lived intangibles for financialstatement purposes, but instead test them annually for impairment. Theamortization of our indefinite-lived assets for tax purposes but not for bookpurposes creates deferred tax liabilities. A reversal of deferred tax liabilities may occur when: (1) indefinite-livedintangibles become impaired; or (2) indefinite-lived intangibles are soldfor cash, which would typically only occur in connection with the sale of theassets of a station or groups of stations or the entire company in a taxabletransaction.

 

***Loss From Continuing Operations***

 
| ** **                       | ** ** | **Years Ended**            | ** ** |
|----------------------------------|------------|----------------------------|------------|
| ** **                       | ** ** | **December 31, 2008** | ** ** | **December 31, 2007** | ** ** |
| ** **                       | ** ** | **(dollars in millions)**  | ** ** |
| Loss From Continuing  Operations |       | $                          | (512.6     | ) | $ | (8.4 | ) |
| Amount of Change                 |       | $                          | (504.2     | ) |   |   |
| Percentage Change                |       | NM                         |       |   |   |
|                                  |            |                            |            |  |  |  |  |

 

The increasein loss from continuing operations is primarily due to the reasons describedabove under Loss From Continuing Operations Before Income Tax Provision(Benefit), net of income taxes (benefit).

 

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***Income (Loss) From Discontinued Operations, Net Of Taxes (Benefit)***

 
| ** **                                                          | ** ** | **Years Ended**            | ** ** |
|---------------------------------------------------------------------|------------|----------------------------|------------|
| ** **                                                          | ** ** | **December 31, 2008** | ** ** | **December 31, 2007** | ** ** |
| ** **                                                          | ** ** | **(dollars in millions)**  | ** ** |
| Income (Loss) From  Discontinued Operations, Net Of Taxes (Benefit) |       | $                          | (4.1       | ) | $ | — |   |
| Amount of Change                                                    |       | $                          | (4.1       | ) |   |   |
| Percentage Change                                                   |       | NM                         |       |   |   |
|                                                                     |            |                            |            |  |  |  |  |

 

The net change was primarily due to anon-cash impairment loss of $4.6 million (net of an income tax benefit of $2.1million) in the first quarter of 2008 for the Rochester assets which were thenheld for sale and were subsequently disposed of during the third quarter of2008.

 

***Net Loss***

 
| ** **        | ** ** | **Years Ended**            | ** ** |
|-------------------|------------|----------------------------|------------|
| ** **        | ** ** | **December 31, 2008** | ** ** | **December 31, 2007** | ** ** |
| ** **        | ** ** | **(dollars in millions)**  | ** ** |
| Net Loss          |       | $                          | (516.7     | ) | $ | (8.4 | ) |
| Amount of Change  |       | $                          | (508.3     | ) |   |   |
| Percentage Change |       | NM                         |       |   |   |
|                   |            |                            |            |  |  |  |  |

 

The net changewas primarily attributable to the reasons described above under Loss FromContinuing Operations Before Income Tax Provision (Benefit) and under IncomeTax Provision (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.  Any such impairment could be material.  As of December 31, 2009, no interimimpairment test was required during 2009 for our broadcasting licenses andgoodwill.

 

**Liquidity And Capital Resources**

 

***Liquidity***

 

We have used a significant portion of our capital resources torepurchase most of our Notes, acquire radio station assets, repurchase sharesof our Class A common stock and pay dividends to our shareholders.Generally, our cash requirements are funded from one or a combination of thefollowing sources: (1) internally generated cash flow; (2) borrowingsunder our credit agreement; and (3) the sales of assets.

 

Historically, we have carried significant amounts of debt. As of December 31,2009, we had outstanding $749.8 million, including: (1) $729.2million under our Bank Facility; (2) $12.6 million in finance method leaseobligations; (3) $6.6 million in Notes; and (4) $1.5 million in aletter of credit. As of December 31, 2009, we had $10.8 million in cashand cash equivalents. During the year ended December 31, 2009, wedecreased our outstanding debt by $85.3 million (which included a discount of$21.6 million on the repurchase of our Notes). During the year ended December 31,2008, we decreased our outstanding debt by $140.0 million (which included a$7.9 million discount on the repurchase of our Notes) due in part to the cashavailable from the sale of a station in Austin, Texas, for $20.0 million, $12.2million net cash proceeds made available from the sale of three radio stationsin our Rochester, New York, market as well as the receipt of $14.6 million inincome tax refunds.

 

***Our CreditAgreement, As Amended***

 

During March 2010,we amended (the “Amendment”) our Bank Facility with certain keyterms, as defined within the Bank Facility, revised as follows:

 

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

·                  Duringperiods when the Consolidated Leverage Ratio exceeds six times, we arerestricted in our ability to take certain actions, including but not limitedto, the payment of dividends and the repurchase of our stock;

·                  Certainrestrictions and limitations on acquisitions and investments; and

·                  A maximumConsolidated Leverage Ratio that cannot exceed seven times in 2010 and whichratio decreases quarterly in 2011 to a ratio of six times.

 

As of December 31, 2009, we have $3.3 million of unamortizeddeferred financing expenses outstanding related to the Bank Facility and weexpect to incur estimated additional costs of approximately $5.2 million inconnection with the Amendment.

 

Our Bank Facility with a syndicate of 33 lenders as of December 31,2009, is comprised of: (i) a Revolver of $650 million, of which $359.0million is outstanding as of December 31, 2009; and (ii) a Term Loanof $400 million, of which $370.0 million is outstanding as of December 31,2009.  The Term Loan reduces (from andafter September 30, 2009) in quarterly amounts starting at $15 million andultimately increasing to $60 million. The Revolver provides us with funds forworking capital and general corporate purposes including capital expenditures,and, except as limited under the Amendment, any one or more of the following:repurchases of Class A common stock, investments, dividends andacquisitions. The Bank Facility is secured by a pledge of 100% of the capitalstock and other equity interest in all of our wholly owned subsidiaries. Inaddition, the Bank Facility, as amended, is secured by a lien on all of ourassets, other than our real property.

 

As of December 31, 2009, the undrawn amount of the Revolver was$289.5 million. The amount available under the Revolver is a function ofcovenant compliance at the time of borrowing. Based on our financial covenantanalysis as of December 31, 2009, we would be limited to borrowingssignificantly less than the undrawn limit unless such borrowings were used torepay indebtedness or for transactions that increase cash flow for purposes ofcovenant calculation. We plan to use the Revolver and cash flow from operationsto fund the amortization of the Term Loan.

 

The Bank Facility, as amended, requires us to comply with certainfinancial covenants which are defined terms within the agreement, including: (1) amaximum Consolidated Leverage Ratio that cannot exceed seven times in 2010 andwhich decreases quarterly in 2011 to a ratio that will not exceed six times(prior to the Amendment, the Consolidated Leverage Ratio could not exceed sixtimes); and (2) a minimum ratio of Consolidated Operating Cash Flow toConsolidated Interest Charges of two times. Management believes we are in compliance with all financial covenantsand leverage ratios and all other terms of the Bank Facility as of December 31,2009.

 

We believe that over the next 12 months we will continue to maintainour compliance with these covenants. We believe that cash on hand and cash fromoperating activities, together with available borrowings under the Revolverwill be sufficient to permit us to meet our liquidity requirements over thenext 12 months, including our debt repayments. While our operating cash flowhas been reduced from prior periods during the recent economic downturn, it hasremained positive and adequate to fund our operating needs. As a result, wehave not been required to rely upon, and we do not anticipate having to relyupon, our Revolver to fund our operations

 

Our ability to maintain compliance with our covenants will be highlydependent on our results of operations as the economy recovers from the recenteconomic downturn and, to the extent necessary, our ability to implementremedial measures such as further reductions in operating costs.  If wewere to enter into an agreement with our lenders for covenant compliance relief,such relief could result in higher interest expense.

 

Failure to comply with our financial covenants or other terms of ourBank Facility and the failure to negotiate and obtain any required relief fromour lenders could result in the acceleration of the maturity of all outstandingdebt.  Under these circumstances, theacceleration of our debt could have a material adverse effect on ourbusiness.  Notwithstanding the foregoing,we may from time-to-time seek to amend our existing Bank Facility or obtain otherfunding or additional financing, which may result in higher interestrates.  Amending our Bank Facility orobtaining other funding or additional financing prior to the expiration of thecurrent agreement will be essential as the Revolver will be due as a balloonpayment upon the expiration of the Bank Facility on June 30, 2012.

 

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The recent economic downturn reduced demand for advertising in general,including advertising on our radio stations during 2009.  Economicconditions sequentially improved throughout 2009 and, based upon earlyindications for 2010, this negative trend appears to be reversing, primarily dueto the strengthening of advertiser demand.  We anticipate that revenuetrends will be positive in 2010 as the economy and the advertising environmentrebound and we compare favorably to prior periods.

 

***Operating Activities***

 

Net cash flows provided by operatingactivities were $73.9 million and $130.6 million for the years ended December 31,2009 and 2008, respectively. The decrease was mainly attributable to: (1) adecrease in 2009 of $44.2 million in net revenues, net of station operatingexpenses; and (2) a decrease in 2009 of $21.4 million in prepaid andrefundable taxes as we received $14.6 million of state and federal tax refundsin 2008 and we expect to receive $7.0 million in federal tax refunds in 2010.

 

Net cash flows provided by operating activitieswere $130.6 million and $93.5 million for the years ended December 31,2008 and 2007, respectively. The increase in 2008 was mainly attributable to anet decrease in working capital requirements of $42.0 million, primarily dueto: (1) a $22.2 million reduction in prepaid and refundable income taxesas we received income tax refunds in 2008 of $14.6 million; (2) a $13.8million reduction in outstanding accounts receivable; and (3) an increasein accounts payable and accrued liabilities of $6.7 million primarily due to$8.3 million that was accrued as of December 31, 2006, paid in 2007, andthat related to a settlement with the New York Attorney General and aninvestigation by the FCC.

 

***Investing Activities***

 

For the year ended December 31, 2009,net cash flows used in investing activities of $2.1 million primarily reflectadditions to property and equipment of $2.5 million.

 

For the year ended December 31, 2008,net cash flows provided by investing activities of $31.9 million primarilyreflect $20.0 million in net cash proceeds from the sale of a station inAustin, Texas, and $12.2 million in net cash proceeds from the sale of threestations in Rochester, New York, offset by cash used in investing activitiesfor additions to property and equipment of $8.6 million.

 

For the year ended December 31, 2007,net cash flows used in investing activities of $273.9 million primarilyreflect: (1) the purchase of radio station assets of $268.3 million; and (2) additionsto property and equipment of $9.3 million, offset by: (i) $2.9 millionfrom the sale of investments; (ii) $1.8 million from insurance recoveryproceeds; and (iii) $1.4 million from the reduction of station acquisitiondeposits and costs.

 

***Financing Activities***

 

Net cash flows (used in) provided by financing activities were $(65.4)million, $(169.2) million and $180.5 million for the years ended December 31,2009, 2008 and 2007, respectively. For the year ended December 31, 2009,the cash flows used in financing activities primarily reflects the netrepurchase of our Notes (after a discount of $21.6 million).

 

For the year ended December 31, 2008, the cash flows used infinancing activities primarily reflect the net repayment of debt (including therepurchase of our Notes) of $132.2 million, the payment of dividends of $21.6million and the repurchase of our common stock of $13.9 million.

 

For the year ended December 31, 2007, net cash flows provided byfinancing activities primarily reflect a net increase in outstandingindebtedness of $297.5 million, offset by: (1) the payment of $58.0million in dividends; (2) the repurchase of $55.0 million of our Class Acommon stock; and (3) deferred financing expense of $4.7 million relatedto our new credit facility.

 

***Our Former CreditAgreement***

 

Our former credit agreement (“Former Facility”) consisted of afive-year $900 million (as amended) senior secured revolving credit agreementwith a syndicate of banks that was to mature on August 11, 2009.  The Former Facility was secured by a pledgeof 100% of the capital stock and other equity interest in all of our 100% owned

 

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subsidiariesand required us to comply with certain financial covenants and leverage ratios,which were defined terms within the agreement.

 

***Income Taxes***

 

During the years ended December 31, 2009, 2008 and 2007, we paid anominal amount in income taxes as we have benefited from the tax deductionsavailable on acquired assets, which are primarily intangible assets such asbroadcasting licenses and goodwill. We anticipate that it will not be necessaryto make any additional quarterly estimated federal, and most state, income taxpayments for 2010, based upon projected quarterly taxable income and ourability to utilize federal net operating loss carryforwards beginning with 2009and certain state net operating loss carryforwards beginning with 2006.

 

***Income Tax Refunds***

 

As a result of tax legislation during the fourth quarter of 2009 thatallowed us to carryback our 2008 net operating loss for five years rather thanfor two years, we recorded $7.0 million under prepaid and refundable incometaxes as we expect to recover this amount in the first quarter of 2010 for incometaxes we previously paid.

 

In 2008, we received $14.6 million in income tax refunds that wasprimarily comprised of: (1) $8.4 million in previously paid federal incometaxes as a result of a 2007 net operating loss carryback; and (2) $6.2million in refunds related to federal and state estimated tax prepayments.

 

***Dividends***

 

Previously, we have used a portion of our capital resources to paydividends on a quarterly basis effective beginning with the first quarter of2006 and ending with and including the third quarter of 2008. Our Board ofDirectors has not declared any dividends since that time.

 

Pursuant to our Bank Facility as amended during March 2010, duringperiods when our Consolidated Leverage Ratio exceeds six times, we will beprohibited from paying dividends.

 

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 remainingin authorization for repurchases, expired on June 30, 2009. Depending onmarket conditions and other factors, new share repurchase programs could becommenced or suspended at any time or from time to time without prior notice.

 

Over the past several years, our Board of Directors authorized severalprograms to repurchase our Class A common stock. Under these repurchaseprograms, we repurchased and immediately retired: (1) in 2009, 0.7 millionshares for an aggregate of $0.9 million at an average price of $1.34 per share;(2) in 2008, 2.1 million shares for an aggregate of $13.9 million at anaverage price of $6.72 per share; and (3) in 2007, 2.2 million shares foran aggregate of $55.0 million at an average price of $25.28 per share.

 

***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 exchange offer to our eligibleemployees and non-employee directors. We offered such persons the opportunityto make 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 restricted stock units. The exchange ratio under the 2009 OEP was asfollows:

 

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

 

On May 15, 2009, following the May 14, 2009 expiration of our2009 OEP, we granted 0.7 million restricted stock units in exchange for 2.1million options. As a result of the 2009 OEP, the number of restricted stockunits that can be issued under the Plan was effectively increased by 0.7million as all restricted stock units granted did not count against therestricted stock sublimit.  In addition,the number of awards that can be issued under the Plan was effectively reducedby 2.1 million as all options that were exchanged will not be available forre-grant under the Plan.

 

***Senior SubordinatedNote Repurchases***

 

On March 5,2002,****we issued $150.0 million of Notes due March 1,2014. As of December 31, 2009 and 2008, we had outstanding $6.6 millionand $83.5 million, respectively, as we repurchased and retired, during theyears 2009 and 2008, $76.9 million and $66.5 million of the Notes,respectively.

 

On March 8, 2010, we redeemed at par allof the remaining $6.6 million Notes outstanding.

 

Interest on the Notes, which were in denominations of $1,000 each,accrued at the rate of 7.625% per annum and were payable semi-annually inarrears on March 1 and September 1. Effective March 1, 2010, the Notes were callable at a redemptionprice of 100.0% of their principal amount plus accrued interest. The Notes wereunsecured and ranked junior to our senior indebtedness. Our Notes also requiredus to comply with certain covenants that limited, among other things, ourability to incur indebtedness and to make certain payments.

 

***Capital Expenditures***

 

Capital expenditures for the years ended December 31, 2009, 2008and 2007 were $2.5 million, $8.6 million and $9.3 million, respectively. Weanticipate that capital expenditures in 2010 will be between $4.0 million and$5.0 million.

 

***Credit RatingAgencies***

 

Effective for 2009, we elected to discontinue our subscription to suchratings services. On a continuing basis, credit rating agencies such as Moody’sInvestor Services and Standard and Poor’s may evaluate our debt in order toassign a credit rating. Any future significant downgrade in our credit ratingcould adversely impact our future liquidity by limiting or eliminating ourability to obtain debt financing.

 

**Contractual Obligations**

 

The following table reflects a summary of ourcontractual obligations as of December 31, 2009:

 
| ** **                            | ** ** | **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)       |       | $                          | 779,554    |   | $ | 103,085 |   | $ | 669,193 |   | $ | 7,233 |   | $ | 43 |   |
| Operating lease  obligations          |       | 67,274                     |       | 11,837 |   | 20,985 |   | 14,699 |   | 19,753 |   |
| Finance method lease obligations  (2) |       | 31,588                     |       | 706 |   | 1,477 |   | 14,177 |   | 15,228 |   |
| Purchase obligations (3)              |       | 235,133                    |       | 63,330 |   | 90,316 |   | 46,487 |   | 35,000 |   |
| Other long-term  liabilities (4)      |       | 29,415                     |       | 1,362 |   | 13,665 |   | 1,129 |   | 13,259 |   |
| Total                                 |       | $                          | 1,142,964  |   | $ | 180,320 |   | $ | 795,636 |   | $ | 83,725 |   | $ | 83,283 |   |

 

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(1)                      (a)          Our Bank Facility hadoutstanding debt in the amount of $729.0 million as of December 31, 2009.The maturity under our Bank Facility could be accelerated if we do not maintaincompliance with certain covenants.

 

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(b)         Under our Notes, thematurity could be accelerated if we do not maintain compliance with certaincovenants or could be repaid in cash by us at our option prior to the due dateof the Notes.  On March 8, 2009, weredeemed at par all of the remaining$6.6 million Notes outstanding.

 

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

 

(2)                            Finance lease obligationsoutstanding include principal and interest expense.  When our continuing involvement in thistransaction ceases over a remaining period of 42 months in the year 2013, weexpect we will discontinue finance accounting and instead treat our obligationsunder the accounting guidance for capital and operating leases.

 

Also, we will recognize additionalobligations included in the above table that cover lease payments for theperiod subsequent to the 42 month period of continuing involvement. The minimumterm for each of the leases is 20 years, which covers the period of continuinginvolvement and the period subsequent to continuing involvement. For furtherdiscussion, see Note 9, Financing Method Lease Obligations in the accompanyingnotes to the financial statements.

 

(3)                    (a) We have purchase obligations of $233.6million including contracts primarily for on-air personalities, sportsprogramming rights, ratings services, music licensing fees, equipmentmaintenance and certain other operating contracts.

 

(b)         In addition to the above, we have $1.5 million in liabilitiesprimarily related to our obligation to provide a letter of credit.

 

(4)                      Includedwithin total other long-term liabilities of $29.4 million are liabilities forunrecognized tax positions of $5.3 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.  Please see Note 7, 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**

 

We utilize letters of credit to back certain payment and performanceobligations. Letters of credit are subject to limits based on amountsoutstanding under our credit facility. We had an outstanding letter of creditof $1.5 million as of December 31, 2009.

 

We enter into interest rate contracts (collars and swaps) to hedge aportion of our variable rate debt. See Note 10 in the accompanying notes to theconsolidated financial statements for a detailed discussion of our derivativeinstruments.

 

We do not have any relationships with unconsolidated entities orfinancial partnerships, such as entities often referred to as structuredfinance or special purpose entities, which would have been established for thepurpose of facilitating off-balance sheet financial arrangements or othercontractually narrow or limited purposes at December 31, 2009.Accordingly, we are not materially exposed to any financing, liquidity, marketor credit risk that could arise if we had engaged in such relationships.

 

As of December 31, 2009, we had no other off-balance sheetarrangements.

 

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**MarketCapitalization**

 

As of December 31, 2009 and 2008, our total market capitalizationwas $263.1 million and $45.6 million, respectively, which was $149.1 millionmore and $54.6 million less, respectively, than our equity book value. As of December 31,2009 and 2008, our stock price was $7.07 per share and $1.23 per share,respectively. The difference in market capitalization versus equity book valuecan be attributed to: (i) a partial recovery in our stock price ascompared to recent historical averages; and (ii) a reduction in equitybook value due to impairments to broadcasting licenses and goodwill during thepast several years (please refer to Note 3, Intangible Assets And Goodwill inthe accompanying notes to the financial statements for a discussion ofimpairment losses in 2009, 2008 and 2007).

 

**Intangibles**

 

As of December 31, 2009, approximately79.8% of our total assets consisted of radio broadcast licenses and goodwill,the value of which depends significantly upon the operational results of ourbusiness. We could not operate our radio stations without the related FCClicense for each station.  FCC licensesare subject to renewal every eight years; consequently, we continually monitorthe activities of our stations to ensure they comply with all regulatoryrequirements. Subject to delays in processing by the FCC, historically, all ofour licenses have been renewed at the end of their respective eight-year periods,and we expect that all licenses will continue to be renewed in the future. (SeePart I, Item 1A, “Risk Factors,” for a discussion of the risks associatedwith the renewal of licenses.)

 

**Inflation**

 

In 2009, we were not significantly impacted by theeffects of inflation on our radio station operating expenses, including wagesand equipment, although the exact impact cannot be reasonably determined.

 

**Recent Accounting Pronouncements Not YetAdopted**

 

In June, 2009, the accounting standards were amended for determiningwhether to consolidate a variable interest entity. These amended standardseliminate a mandatory quantitative approach to determine whether a variableinterest provides the entity with a controlling financial interest in avariable interest entity in favor of a qualitatively focused analysis, andrequire an ongoing reassessment of whether an entity is the primarybeneficiary. These amended standards are effective January 1, 2010. We donot anticipate the adoption of these amendments to have any effect on ourresults of operations, cash flows or financial position.

 

For a discussion of recent accounting pronouncements which impacted2009, please see Note 2 in the accompanying consolidated financial statements.

 

**Critical Accounting Policies**

 

Our discussion and analysis of our financial condition and results ofoperations are based upon our consolidated financial statements, which havebeen prepared in accordance with accounting principles generally accepted inthe United States. The preparation of these financial statements requires us tomake estimates and assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities as of the dateof the financial statements and the amount of reported revenues and expensesduring the reporting period. We base our estimates on historical experience andvarious other assumptions that we believe to be reasonable under thecircumstances, the results of which form the basis for making judgments aboutthe carrying values of assets and liabilities that are not readily availablefrom other sources. Actual results may differ from these estimates underdifferent circumstances or by using different assumptions.

 

We consider the following policies to be important in understanding thejudgments involved in preparing our financial statements and the uncertaintiesthat could affect our financial position, results of operations or cash flows.

 

***Revenue Recognition***

 

We recognize revenue from the sale ofcommercial broadcast time to advertisers when the commercials are broadcast,subject to meeting certain conditions such as persuasive evidence that anarrangement exists, the price is fixed and determinable and collection isreasonably assured. These criteria are generally met at the time an

 

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advertisement is broadcast, and the revenueis recorded net of advertising agency commission. Based upon past experience,the use of these criteria has been a reliable method to recognize revenues.

 

***Allowance ForDoubtful Accounts***

 

We record an allowance for doubtful accounts for estimated lossesresulting from our customers’ failure to make payments to us. We specificallyreview historical write-off activity by market, large customer concentrations,customer creditworthiness, the economic conditions of the customer’sindustry, and changes in our customer payment practices when evaluatingthe adequacy of the allowance for doubtful accounts. Our historical estimateshave been a reliable method to estimate future allowances. Our historicalreserves have generally ranged between 3% and 5% of our outstandingreceivables. Due to the recent economic downturn and its effect on our businessand our customer base, our accounts receivable reserve has been in the higherrange with a reserve of 4.6% as of December 31, 2009 and higher than usualin the prior year with a reserve of 5.6% as of 2008.  If the financial condition of our customersor markets were to deteriorate, resulting in an impairment of their ability tomake payments, then additional allowances could be required. Our net incomewould be negatively impacted by $0.02 per share (basic and diluted), assuming a1% increase in our outstanding accounts receivable allowance of $0.7 million asof December 31, 2009 (assuming a full valuation allowance against any taxbenefit).

 

***Contingencies AndLitigation***

 

On an ongoing basis, we evaluate our exposurerelated to contingencies and litigation and record a liability when availableinformation indicates that a liability is probable and estimable. We alsodisclose significant matters that are reasonably possible to result in a lossor are probable but not estimable.

 

***Estimation Of OurTax Rates***

 

We must make certain estimates and judgments in determining income taxexpense for financial statement purposes. These estimates and judgments must beused in the calculation of certain tax assets and liabilities because ofdifferences in the timing of recognition of revenue and expense for tax andfinancial statement purposes.

 

We must assess the likelihood that we will be able to recover ourdeferred tax assets. In 2009 and 2008, we recorded full valuation allowancesfor our net deferred tax assets primarily due to our cumulative losses over thepast three years.  As changes occur inour assessments regarding our ability to recover our deferred tax assets, ourtax provision is decreased in any period in which we determine that therecovery is probable.

 

In addition, the calculation of our tax liabilities requires us toaccount for uncertainties in the application of complex tax regulations. Werecognize liabilities for uncertain tax positions based on the two-step processprescribed within the interpretation of accounting for uncertain tax positions.The first step is to evaluate the tax position for recognition by determiningif the weight of available evidence indicates that it is more likely than notthat the position will be sustained on audit based upon its technical merits,including resolution of related appeals or litigation processes, if any. Thesecond step requires us to estimate and measure the tax benefit as the largestamount that has greater than a 50% likelihood of being realized upon ultimatesettlement. It is inherently difficult and subjective to estimate such amounts,as this requires us to determine the probability of various possible outcomes.We reevaluate these uncertain tax positions, and review whether any newuncertain tax positions have arisen, on a quarterly basis. This evaluation isbased on factors including, but not limited to, changes in facts orcircumstances, changes in tax law, effectively settled issues under audit,historical experience with similar tax matters, guidance from our tax advisors,and new audit activity. A change in recognition or measurement would result inthe recognition of a tax benefit or an additional charge to the tax provisionin the period in which the change occurs.

 

We believe our estimates of the value of our tax contingencies andvaluation allowances are critical accounting estimates, as they containassumptions based on past experiences and judgments about potential actions bytaxing jurisdictions. It is reasonably likely that the ultimate resolution ofthese matters may be greater or less than the amount that we have currentlyaccrued.  Excluding discrete items oftax, changes in our valuation allowance and impairment losses, our tax rateover the past several years has varied between a range of high 30% to low 40%.The effect of a 1% increase in our estimated tax rate as of December 31,2009, would be minimal as the 1% tax would be applied to a marginal loss forthe year.

 

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***Valuation OfShare-Based Compensation***

 

We determine the fair value of our employee stock options at the dateof grant using a Black-Scholes option-pricing model. The Black-Scholesoption-pricing model was developed for use in estimating the value ofexchange-traded options that have no vesting restrictions and are fullytransferable. Our employee stock options have characteristics significantlydifferent from these traded options. In addition, option-pricing models requirethe input of highly subjective assumptions, including the expected stock pricevolatility and expected term of the options granted.

 

We determine the fair value of restricted stock units with service andmarket conditions using a Monte Carlo simulation model. The fair value is basedon the use of certain assumptions regarding a number of highly complex andsubjective variables.  If other reasonableassumptions were used, the results could differ.

 

***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 December 31, 2009, we have recorded approximately $746.0 million inradio broadcasting licenses and goodwill, which represents 79.8% of our totalassets at that date. We must conduct impairment testing at least annually, ormore frequently if events or changes in circumstances indicate that the assetmight be impaired, and charge to operations an impairment expense only in theperiods in which the recorded value of these assets is more than their fairvalue. After an impairment expense is recognized, the recorded value of theseassets will be reduced by the impairment recognized and this shall be theassets’ new accounting basis. In 2009 and 2008, we recorded impairment lossesof $67.7 million and $835.7 million, respectively, for radio broadcastinglicenses and goodwill.

 

We believe our estimate of the value of our radio broadcasting licensesand goodwill assets is a critical accounting estimate as the value issignificant in relation to our total assets, and our estimate of the value usesassumptions that incorporate variables based on past experiences and judgmentsabout future performance of our stations. These variables include but are notlimited to: (1) the risk-adjusted discount rate used in the valuation offair value; (2) market share and profit margin of an average stationwithin a market based upon market size and station type; (3) the forecastgrowth rate of each radio market, including assumptions regarding each market’spopulation, household income, retail sales and other factors that wouldinfluence advertising expenditures; (4) estimated capital start-up costsand losses incurred during the early years; (5) the likely mediacompetition within the market area; (6) an effective tax rate assumption;and (7) future terminal values. Changes in our estimates of the fair value of these assets could resultin material future period write-downs in the carrying value of our broadcastinglicenses and goodwill assets.

 

During thesecond quarter of 2009, we completed the impairment test for broadcastinglicenses and determined that the fair value of the broadcasting licenses wasless than the amount reflected in the balance sheet for each of our markets,other than Seattle, and recorded an impairment loss of $60.8 million. Theprolonged economic downturn negatively impacted the radio broadcasting industryas advertising revenues continued to decline and expectations for growth overthe next year were reduced. The projected growth levels for the industry andfor us were less than those originally forecasted for 2009, which was theprimary reason for further impairment to broadcasting licenses in the secondquarter.  As revenues decline,profitability levels are also negatively impacted as fixed costs represent alarge component of a radio station’s operating expenses. As a result, the assetbase is particularly sensitive to the impact of continued declining revenues.

 

The methodology we use in determining our keyestimates and assumptions for broadcasting licenses was applied consistently toeach market (each market’s broadcasting licenses are a single unit ofaccounting).  As a result, the analysisfor each market is the same. Of the seven variables identified above, webelieve that the first three (in clauses (1) through (3)) are the mostimportant to the determination of value. The following table reflects these keyestimates and assumptions since the most recent impairment test forbroadcasting licenses in the fourth quarter of 2008.  The table also depicts therange of operating profit margin and market long-term revenue growth rates usedfor determining the fair value of our broadcasting licenses.  In general, when comparing between the secondquarter of 2009 and the fourth quarter of 2008: (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.

 

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

 

We believe all of our markets’ broadcasting licenses,except for one, are at risk for future impairment. The methodology used indetermining our key estimates and assumptions was applied consistently to eachmarket. While we believe we have made reasonable estimates and assumptions tocalculate the fair value of our broadcasting licenses, these estimates andassumptions could be materially different. If actual results for the industryare not consistent with our estimates and assumptions, then we could incuradditional impairments.

 

Operating profit margins are defined as profit beforeinterest, depreciation and amortization, income tax and corporate allocationcharges.  Operating profits are thendivided by broadcast revenues, net of agency and national representativecommissions, to compute the operating profit margins.  Operating profit margins are projected basedupon industry operating profit norms, which reflect market size and stationtype.  This assumption is not specific tothe performance of our stations in a market, but is predicated on the expectationthat a new entrant into the market could reasonably be expected to perform at alevel similar to a typical competitor.  Ifthe outlook for the industry’s growth declines further, then operating profitmargins would be negatively impacted, which would further impair the value ofour broadcasting licenses.

 

The long-term market growth rates are estimated frominformation available from industry sources, using historical and expectedperformance, which could be different in each of our markets.  Each market’s revenues were determined basedupon this data and market revenues were forecast over a ten-year projectionperiod to reflect the expected long-term growth rates for the radio broadcastindustry and for each of our markets. If the estimates used for the industry’sgrowth are less than forecasted, then our broadcasting licenses could befurther impaired.

 

The discount rate to be used by a typical marketparticipant reflects the risk inherent in future cash flows for the broadcastindustry and the same discount rate was used for each of our markets. Thediscount rate is calculated by weighting the required returns oninterest-bearing debt and common equity capital in proportion to theirestimated percentages in an expected capital structure.  The capital structure was estimated basedupon data available for publicly traded companies in the broadcastindustry.  The discount rate could benegatively impacted by reductions in the industry’s forecasted growth ratesthat directly impact future cash flows.

 

If we were to assume a 100 basis point change in ourthree key assumptions (a reduction in the long-term revenue growth rate, areduction in the operating performance cash flow and an increase in theweighted average cost of capital) used to determine the fair value of ourbroadcasting licenses and goodwill during the second quarter of 2009, thefollowing would be the incremental impact:

 

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**Sensitivity Analysis Of 100 BasisPoint Change**

 
| ** **                                              | ** ** | **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 |   |

 

Please refer to Note 3, Intangible Assets And Goodwill, in theaccompanying notes to the financial statements for a discussion of several keyassumptions used in the fair value estimate of our broadcasting licenses andgoodwill during the second quarter of 2009 as compared to the fourth quarter2008 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 such as governing thetiming of revenue recognition, that are important to the preparation of ourconsolidated financial statements, but do not meet the SEC’s definition ofcritical accounting policies because they do not involve subjective or complexjudgments.  In addition, for furtherdiscussion of new accounting policies that were effective for us on January 1,2009, please refer to the new accounting standards under Note 2 to theaccompanying notes to the financial statements.

 

**ITEM7A.****                    QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

We are exposedto market risk from changes in interest rates on our variable rate BankFacility. From time to time, we may seek to limit our exposure to interest ratevolatility through the use of derivative rate hedging instruments. If theborrowing rates under our LIBOR loans were to increase 1% above the rates as ofDecember 31, 2009, our interest expense under our Bank Facility wouldincrease by approximately $2.5 million on an annual basis, including anyinterest benefit or interest expense associated with the use of outstandingderivative rate hedging instruments.

 

During the year ended December 31,2009, the following derivative rate hedging transactions to fix interest on ourvariable rate debt were outstanding in the aggregate notional amount of $550.0million. These rate hedging transactions are tied to the one-month LIBORinterest rate.

 

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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  |                   | January 28, 2008 |       | n/a        |       | 3.03       | %                       | January 28, 2011  |          | January 28, 2010 |              | $          | 150.0 |   |
| Collar     |       | 100.0        |        | February 28, 2008 | [                     | Cap        |       | 4.00       | %          | ]                       | February 28, 2011 |          | n/a                   |              | n/a        |   |
| Floor      | 2.14       | %                 |
| Swap       |       | 125.0        |        | March 28, 2008    |                  | n/a        |       | 2.91       | %          | September 28, 2011 |                   | n/a           |                  | n/a               |       |
| Swap       |       | 100.0        |        | May 28, 2008      |                  | n/a        |       | 3.62       | %          | May 28, 2012       |                   | n/a           |                  | n/a               |       |
| Total      |       | $                 | 550.0  |                   |                  |       |       |       |       |                    |                   |          |                  |              |       |   |
|            |            |                   |             |                        |                       |            |            |            |            |                         |                        |               |                       |                   |            |  |  |  |

 

The net fair value (based uponcurrent market rates) of the rate hedging transactions is included asderivative instruments in long-term liabilities, which is based upon thematurity dates.  Our rate hedging transactionsare tied to the one-month LIBOR interest rate, which may fluctuatesignificantly on a daily basis. The fair value of the hedging transaction isaffected by a combination of several factors, including the change in theone-month LIBOR rate and the forward interest rate to maturity. Any increase inthe one-month LIBOR rate and/or the forward interest rate to maturity resultsin a more favorable valuation, while any decrease in the one-month LIBOR rateand/or forward interest rate to maturity results in a less favorable valuation.The fair value of our derivative instruments outstanding as of December 31,2009 was a liability of $13.4 million, which was a $1.8 million decrease in theliability as compared to the balance as of December 31, 2008. This positivechange was primarily due to the effect of a decrease in the remaining period ofeach derivative instrument as the forward interest rate to maturity remainedrelatively flat.

 

Our credit exposure under ourhedging agreements, or similar agreements we may enter into in the future, isthe cost of replacing such agreements in the event of non-performance by ourcounter-party. To minimize this risk, we select high credit qualitycounter-parties.  We do not anticipatenonperformance by such counter-parties, and no material loss would be expectedin the event of the counter-parties’ nonperformance.

 

Our cash equivalents are moneymarket instruments consisting of short-term government securities andrepurchase agreements that are fully collateralized by governmentsecurities.  We do not believe that wehave any material credit exposure with respect to these assets.

 

Our credit exposure related toour accounts receivable does not represent a significant concentration ofcredit risk due to the quantity of advertisers, the minimal reliance on any oneadvertiser, the multiple markets in which we operate and the wide variety ofadvertising business sectors.

 

See also additional disclosuresregarding liquidity and capital resources made under Part II, Item 7above.

 

**ITEM 8.****                       FINANCIALSTATEMENTS AND SUPPLEMENTARY DATA**

 

Our consolidated financialstatements, together with related notes and the report ofPricewaterhouseCoopers LLP, our independent registered public accounting firm,are set forth on the pages indicated in Part IV, Item 15.

 

**ITEM 9.****        CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTSON ACCOUNTING AND FINANCIAL DISCLOSURE**

 

None.

 

**ITEM 9A.****                   ****CONTROLS AND PROCEDURES**

 

**EvaluationOf Controls And Procedures**

 

We maintain “disclosure controls andprocedures” (as defined in Rules 13a-15(e) and 15d-15(e) of theExchange Act) that are designed to ensure that: (1) information requiredto be disclosed in our Exchange Act reports 

 

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is recorded, processed, summarized and reported within the time periodsspecified in the Securities and Exchange Commission’s rules and forms; and(2) such information is accumulated and communicated to our management,including our Chief Executive Officer and Chief Financial Officer, asappropriate, to allow for timely decisions regarding required disclosure.  In designing and evaluating our disclosurecontrols and procedures, our management recognizes that any controls andprocedures, no matter how well designed and operated, can provide onlyreasonable assurance of achieving the desired control objectives, and ourmanagement is required to apply its judgment in evaluating the cost-benefitrelationship of possible controls and procedures.

 

We carried out an evaluation, under thesupervision of and with the participation of our management, including ourChief Executive Officer and Chief Financial Officer, of the effectiveness ofour disclosure controls and procedures as of December 31, 2009. Based on the foregoing, our President/Chief Executive Officer and ExecutiveVice President - Operations/Chief Financial Officer concluded that, as of December 31,2009, our disclosure controls and procedures were effective at the reasonableassurance level.

 

**Changes In Internal Controls**

 

There has been no change in the Company’sinternal controls over financial reporting during the Company’s most recentfiscal quarter that has materially affected, or is reasonably likely to materiallyaffect, the Company’s internal controls over financial reporting.

 

**Management’s Report On Internal Control Over FinancialReporting**

 

Internal control over financial reportingrefers to the process designed by, or under the supervision of, our ChiefExecutive Officer and Chief Financial Officer, and effected by our board ofdirectors, management and other personnel, to provide reasonable assuranceregarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with generallyaccepted accounting principles, and includes those policies and proceduresthat:

 

·                  pertainto the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the Company;

 

·                  providereasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally acceptedaccounting principles, and that receipts and expenditures of the Company arebeing made only in accordance with authorizations of management and directorsof the Company; and

 

·                  providereasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of the Company’s assets that could have amaterial effect on the financial statements.

 

Internal control over financial reportingcannot provide absolute assurance of achieving financial reporting objectivesbecause of its inherent limitations. Internal control over financial reportingis a process that involves human diligence and compliance and is subject tolapses in judgment and breakdowns resulting from human failures. Internalcontrol over financial reporting also can be circumvented by collusion orimproper management override. Because of such limitations, there is a risk thatmaterial misstatements may not be prevented or detected on a timely basis byinternal control over financial reporting. However, these inherent limitationsare known features of the financial reporting process. Therefore, it ispossible to design into the process safeguards to reduce, though not eliminate,this risk. Management is responsible for establishing and maintaining adequateinternal control over financial reporting for the Company.

 

Management has used the framework set forthin the report entitled “Internal Control - Integrated Framework” published bythe Committee of Sponsoring Organizations (“COSO”) of the Treadway Commissionto evaluate the effectiveness of the Company’s internal control over financialreporting.  Based on this evaluation,management has concluded that the Company’s internal control over financialreporting was effective as of December 31, 2009. The effectiveness of theCompany’s internal control over financial reporting as of December 31,2009 has been audited by PricewaterhouseCoopers LLP, an independent registeredpublic accounting firm, as stated in their report which appears herein.

 

David J. Field, President and Chief ExecutiveOfficer

Stephen F. Fisher, Executive Vice President -Operations and Chief Financial Officer

 

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**ITEM 9B.****                   ****OTHER INFORMATION**

 

In connection with theAmendment to our Bank Facility on March 11, 2010, we wrote off certainexpenses incurred as of December 31, 2009.  As a result, ourfinancial results for the quarter and year ended December 31, 2009, asreleased on February 23, 2010, have been adjusted to reflect an additionalexpense of $0.3 million relating to the Amendment.  Upon the filing ofthis Annual Report on From 10K, the Company is replacing the “SelectedFinancial Data — Non-GAAP Disclosures” and “Covenant Analysis” disclosures onits website, originally posted February 23, 2010 and March 11, 2020,respectively, with updated disclosures to reflect this subsequent event. See Item 8, “Financial Statements and Supplementary Data,” which includesupdated fourth quarter summarized financial data.

 

**PART III**

 

**ITEM 10.****                      DIRECTORS,EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE**

 

The information required bythis Item 10 is incorporated in this report by reference to the applicableinformation set forth in our proxy statement for the 2010 Annual Meeting ofShareholders, which we expect to file with the Securities Exchange Commissionprior to April 30, 2010.

 

**ITEM 11.****                      EXECUTIVECOMPENSATION**

 

The information required bythis Item 11 is incorporated in this report by reference to the applicableinformation set forth in our proxy statement for the 2010 Annual Meeting ofShareholders, which we expect to file with the Securities Exchange Commissionprior to April 30, 2010.

 

**ITEM12.****           SECURITY OWNERSHIP OF CERTAIN BENEFICIALOWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS**

 

The information required bythis Item 12 is incorporated in this report by reference to the applicableinformation set forth in our proxy statement for the 2010 Annual Meeting ofShareholders, which we expect to file with the Securities Exchange Commissionprior to April 30, 2010.

 

**ITEM 13.****                      CERTAINRELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE**

 

The information required bythis Item 13 is incorporated in this report by reference to the applicableinformation set forth in our proxy statement for the 2010 Annual Meeting ofShareholders, which we expect to file with the Securities Exchange Commissionprior to April 30, 2010.

 

**ITEM 14.****                      PRINCIPALACCOUNTING FEES AND SERVICES**

 

The information required bythis Item 14 is incorporated in this report by reference to the applicableinformation set forth in our proxy statement for the 2010 Annual Meeting ofShareholders, which we expect to file with the Securities Exchange Commissionprior to April 30, 2010.

 

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**PART IV**

 

**ITEM 15.****                      EXHIBITS,FINANCIAL STATEMENT SCHEDULES**

 

**(a)****           The following documents are filed as part of thisReport:**

 
| **Document**                      | ** **                                                                                           | **Page** |
|-----------------------------------|------------------------------------------------------------------------------------------------------|----------|
|                              |                                                                                                 |     |   |
| Consolidated Financial Statements |                                                                                                 |     |
|                              | Report of Independent  Registered Public Accounting Firm                                             |     | 50 |
|                              |                                                                                                 |     |   |
| Consolidated Financial Statements |                                                                                                 |     |
|                              | Balance Sheets as of  December 31, 2009 and December 31, 2008                              |     | 51 |
|                              | Statements of Operations for the Years Ended  December 31, 2009, 2008 and 2007                  |     | 52 |
|                              | Statements of Comprehensive Income (Loss) for the  Years Ended December 31, 2009, 2008 and 2007 |     | 53 |
|                              | Statements of Shareholders’ Equity for the Years Ended  December 31, 2009, 2008 and 2007   |     | 54 |
|                              | Statements of Cash Flows for the Years Ended December 31,  2009, 2008 and 2007                  |     | 56 |
|                              | Notes to Consolidated Financial Statements                                                           |     | 58 |
|                              |                                                                                                 |     |
| Index to  Exhibits                |                                                                                                 | 118      |

 

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**(b)****   Exhibits**

 
| **Exhibit  Number** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                        |
|---------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.01                |       | Amended  and Restated Articles of Incorporation of the Entercom Communications Corp,  as amended on December 19, 2007. (1)                                                                                                                                                                                                                                                                                        |
| 3.02                |       | Amended  and Restated Bylaws of the Entercom Communications Corp. (2)                                                                                                                                                                                                                                                                                                                                                  |
| 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. (3)  (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. (3)  (Originally filed as  Exhibit 4.03)                                                                                                                                                         |
| 10.01               |       | Employment  Agreement, dated July 1, 2007, between Entercom Communications Corp. and  David J. Field. (4)                                                                                                                                                                                                                                                                                                         |
| 10.02               |       | First  Amendment To Employment Agreement, dated December 15, 2008, between  Entercom Communications Corp. and David J. Field. (5) (Originally filed  as Exhibit 10.02)                                                                                                                                                                                                                                  |
| 10.03               |       | Employment  Agreement, dated July 1, 2007, between Entercom Communications Corp. and  Joseph M. Field. (6)                                                                                                                                                                                                                                                                                                        |
| 10.04               |       | First  Amendment To Employment Agreement, dated December 15, 2008, between  Entercom Communications Corp. and Joseph M. Field. (5) (Originally filed  as Exhibit 10.04)                                                                                                                                                                                                                                 |
| 10.05               |       | Employment  Agreement, dated December 19, 2007, between Entercom Communications  Corp. and Stephen F. Fisher. (7)                                                                                                                                                                                                                                                                                                 |
| 10.06               |       | First  Amendment To Employment Agreement, dated December 15, 2008, between  Entercom Communications Corp. and Stephen F. Fisher. (5) (Originally  filed as Exhibit 10.06)                                                                                                                                                                                                                               |
| 10.07               |       | Employment  Agreement, dated December 17, 1998, between Entercom Communications  Corp. and John C. Donlevie. (8)                                                                                                                                                                                                                                                                                                  |
| 10.08               |       | Entercom Non-employee Director Compensation Policy. (9)                                                                                                                                                                                                                                                                                                                                                                |
| 10.09               |       | Amended and Restated Entercom Equity Compensation Plan. (10)                                                                                                                                                                                                                                                                                                                                                           |
| 10.10               |       | Entercom Annual Incentive Plan. (11)                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.11               |       | Credit  Agreement dated as of June 18, 2007 among Entercom Radio, LLC, as the  Borrower, Entercom Communications Corp., as the Parent, Bank of America, N.A.  as Administrative Agent and L/C Issuer, JP Morgan Chase Bank, N.A. as  Syndication Agent, BMO Capital Markets, Corp., BNP Paribas, Mizuho Corporate  Bank, LTD., Suntrust Bank as Co-Documentation Agents and The Other Lenders  Party Hereto. (12) |
| 21.01               |       | Information  Regarding Subsidiaries of Entercom Communications Corp. (13)                                                                                                                                                                                                                                                                                                                                              |
| 23.01               |       | Consent  of PricewaterhouseCoopers LLP. (13)                                                                                                                                                                                                                                                                                                                                                                           |
| 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. (13)                                                                                                                                                                                                                          |
| 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. (13)                                                                                                                                                                                                           |
| 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. (14)                                                                                                                                                                                                                                                     |
| 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.  (14)                                                                                                                                                                                                                                     |

 

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|   | (1) | Incorporated by  reference to Exhibit 3.01 to our Amendment to Registration Statement on  Form S-1, as filed on January 27, 1999 (File No. 333-61381),  Exhibit 3.1 of our Current Report on Form 8-K as filed on  December 21, 2007 and Exhibit 3.02 to our Quarterly Report on  Form 10-Q for the quarter ended June 30, 2009, as filed on  August 5, 2009. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (2) | Incorporated by  reference to Exhibit 3.01 to our Current Report on Form 8K filed on  February 21, 2008.                                                                                                                                                                                                                                                                                              |
|   | (3) | Incorporated by  reference to an exhibit (as indicated above) to our Quarterly Report on  Form 10-Q for the quarter ended March 31, 2002, as filed on  May 13, 2002.                                                                                                                                                                                                                                  |

 

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|   | (4)  | Incorporated by  reference to as Exhibit 10.01 to our Quarterly Report on Form 10-Q  for the quarter ended September 30, 2007, as filed on November 9,  2007.                |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (5)  | Incorporated by  reference to an exhibit (as indicated above) to our Annual Report on  Form 10-Q for the year ended December 31, 2008, as filed on  February 26, 2009.            |
|   | (6)  | Incorporated by  reference to as Exhibit 10.02 to our Quarterly Report on  Form 10-Q/A for the quarter ended September 30, 2007, as filed on  November 21, 2007.             |
|   | (7)  | Incorporated by  reference to as Exhibit 10.03 to our Quarterly Report on Form 10-K  for the year ended December 31, 2007, as filed on February 22,  2008.                   |
|   | (8)  | Incorporated by  reference to Exhibit 10.03 to our Amendment to Registration Statement on  Form S-1, as filed on January 6, 1999. (File No. 333-61381).                      |
|   | (9)  | Incorporated by  reference to Item 1.01 to our Current Report on Form 8K filed on  February 19, 2008.                                                                                  |
|   | (10) | Incorporated by  reference to Appendix A to our Proxy Statement on Schedule 14A filed on  March 23, 2009.                                                                                   |
|   | (11) | Incorporated by  reference to Exhibit 10.02 to our Current Report on Form 8K filed  on May 19, 2008.                                                                              |
|   | (12) | Incorporated by  reference to Exhibit 10.01 to our Quarterly Report on Form 10-Q for  the quarter ended June 30, 2007, as filed on August 2, 2007.                           |
|   | (13) | Filed herewith.                                                                                                                                                                                  |
|   | (14) | These exhibits are  submitted as “accompanying” this Annual Report on Form 10-K and shall  not be deemed to be “filed” as part of such Annual Report on Form 10-K. |

 

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**REPORT OFINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

 

To the Board of Directors and Shareholders

of Entercom Communications Corp.:

 

In our opinion, theaccompanying consolidated balance sheets and the related consolidatedstatements of operations, comprehensive income (loss), shareholders’ equity andcash flows present fairly, in all material respects, the financial position ofEntercom Communications Corp. and its subsidiaries at December 31, 2009and 2008, and the results of their operations and their cash flows for each ofthe three years in the period ended December 31, 2009 in conformity withaccounting principles generally accepted in the United States of America.  Also in our opinion, the Company maintained,in all material respects, effective internal control over financial reportingas of December 31, 2009, based on criteria established in Internal Control- Integrated Framework issued by the Committee of Sponsoring Organizations ofthe Treadway Commission (COSO).  TheCompany’s management is responsible for these financial statements, formaintaining effective internal control over financial reporting and for itsassessment of the effectiveness of internal control over financial reporting,included in Management’s Report on Internal Control Over Financial Reportingappearing under Item 9A.  Ourresponsibility is to express opinions on these financial statements and on theCompany’s internal control over financial reporting based on our integrated audits.  We conducted our audits in accordance withthe standards of the Public Company Accounting Oversight Board (UnitedStates).  Those standards require that weplan and perform the audits to obtain reasonable assurance about whether thefinancial statements are free of material misstatement and whether effectiveinternal control over financial reporting was maintained in all materialrespects.  Our audits of the financialstatements included examining, on a test basis, evidence supporting the amountsand disclosures in the financial statements, assessing the accountingprinciples used and significant estimates made by management, and evaluatingthe overall financial statement presentation. Our audit of internal control over financial reporting included obtainingan understanding of internal control over financial reporting, assessing therisk that a material weakness exists, and testing and evaluating the design andoperating effectiveness of internal control based on the assessed risk.  Our audits also included performing suchother procedures as we considered necessary in the circumstances. We believethat our audits provide a reasonable basis for our opinions.

 

As discussed in Note 7 to theconsolidated financial statements, the Company changed the manner in which itaccounts for uncertain tax positions in 2007.

 

A company’s internal controlover financial reporting is a process designed to provide reasonable assuranceregarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with generallyaccepted accounting principles.  Acompany’s internal control over financial reporting includes those policies andprocedures that (i) pertain to the maintenance of records that, inreasonable detail, accurately and fairly reflect the transactions anddispositions of the assets of the company; (ii) provide reasonableassurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accountingprinciples, and that receipts and expenditures of the company are being madeonly in accordance with authorizations of management and directors of thecompany; and (iii) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of thecompany’s assets that could have a material effect on the financial statements.

 

Because of its inherentlimitations, internal control over financial reporting may not prevent ordetect misstatements.  Also, projectionsof any evaluation of effectiveness to future periods are subject to the riskthat controls may become inadequate because of changes in conditions, or thatthe degree of compliance with the policies or procedures may deteriorate.

 

PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

March 15, 2010

 

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**CONSOLIDATED FINANCIAL STATEMENTSOF ENTERCOM COMMUNICATIONS CORP.**

 

**ENTERCOM COMMUNICATIONS CORP.**

**CONSOLIDATED BALANCE SHEETS**

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

 
| ** **                                                                                                                                           | ** ** | **DECEMBER 31,** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------|------------|
| ** **                                                                                                                                           | ** ** | **2009**         | ** ** | **2008** | ** ** |
| **ASSETS:**                                                                                                                                          | ** ** | ** **       | ** ** | ** ** | ** ** |
| Cash and cash equivalents                                                                                                                            |       | $                | 10,751     |   | $ | 4,284 |   |
| Accounts receivable, net of allowance for doubtful accounts  of $3,299 in 2009 and $4,476 in 2008                                                    |       | 68,319           |       | 75,354 |   |
| Prepaid expenses and deposits, other                                                                                                                 |       | 4,701            |       | 4,824 |   |
| Prepaid and refundable federal and state income  taxes                                                                                               |       | 7,628            |       | 628 |   |
| Insurance claim receivable                                                                                                                           |       | 16,500           |       | — |   |
| Total current assets                                                                                                                                 |       | 107,899          |       | 85,090 |   |
| Investments                                                                                                                                          |       | 391              |       | 1,376 |   |
| Net property and equipment                                                                                                                           |       | 71,740           |       | 84,864 |   |
| Radio broadcasting licenses                                                                                                                          |       | 707,852          |       | 768,646 |   |
| Goodwill                                                                                                                                             |       | 38,168           |       | 45,050 |   |
| Deferred charges and other assets, net of  accumulated amortization of $23,354 in 2009 and $21,675 in 2008                                           |       | 8,486            |       | 11,708 |   |
| **TOTAL ASSETS**                                                                                                                                     |       | $                | 934,536    |   | $ | 996,734 |   |
| ** **                                                                                                                                           | ** ** | ** **       | ** ** | ** ** | ** ** |
| **LIABILITIES:**                                                                                                                                     | ** ** | ** **       | ** ** | ** ** | ** ** |
| Accounts payable                                                                                                                                     |       | $                | 477        |   | $ | 352 |   |
| Accrued expenses                                                                                                                                     |       | 13,152           |       | 15,231 |   |
| Accrued compensation and other current liabilities                                                                                                   |       | 12,678           |       | 16,708 |   |
| Insurance claim payable                                                                                                                              |       | 16,500           |       | — |   |
| Long-term debt, current portion                                                                                                                      |       | 80,024           |       | 30,023 |   |
| Total current liabilities                                                                                                                            |       | 122,831          |       | 62,314 |   |
| Long-term debt, net of current portion                                                                                                               |       | 655,728          |       | 803,674 |   |
| Financing method lease obligations                                                                                                                   |       | 12,610           |       | — |   |
| Other long-term liabilities                                                                                                                          |       | 29,415           |       | 30,489 |   |
| Total long-term liabilities                                                                                                                          |       | 697,753          |       | 834,163 |   |
| Total liabilities                                                                                                                                    |       | 820,584          |       | 896,477 |   |
|                                                                                                                                                 |       |             |       |   |   |
| **CONTINGENCIES AND COMMITMENTS**                                                                                                                    |       |             |       |   |   |
|                                                                                                                                                 |       |             |       |   |   |
| **SHAREHOLDERS’ EQUITY:**                                                                                                                       |       |             |       |   |   |
| Preferred stock $0.01 par value; authorized  25,000,000 shares; no shares issued and outstanding                                                     |       | —           |       | — |   |
| Class A common stock $0.01 par value; voting;  authorized 200,000,000 shares; issued and outstanding 29,755,161 in 2009 and  29,479,188 in 2008 |       | 297              |       | 295 |   |
| Class B common stock $0.01 par value; voting;  authorized 75,000,000 shares; issued and outstanding 7,457,532 in 2009 and  7,607,532 in 2008    |       | 75               |       | 76 |   |
| Class C common stock $0.01 par value;  nonvoting; authorized 50,000,000 shares; no shares issued and outstanding                                |       | —           |       | — |   |
| Additional paid-in capital                                                                                                                           |       | 588,622          |       | 582,325 |   |
| Accumulated deficit                                                                                                                                  |       | (461,610         | )          | (467,177 | ) |
| Accumulated other comprehensive loss                                                                                                                 |       | (13,432          | )          | (15,262 | ) |
| Total shareholders’ equity                                                                                                                      |       | 113,952          |       | 100,257 |   |
| **TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY**                                                                                                  |       | $                | 934,536    |   | $ | 996,734 |   |

 

**See notes to consolidated financial statements.**

 

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**ENTERCOM COMMUNICATIONS CORP.**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

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

 
| ** **                                                                                                                       | ** ** | **YEARS ENDED DECEMBER 31,** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|
| ** **                                                                                                                       | ** ** | **2009**                     | ** ** | **2008** | ** ** | **2007** | ** ** |
| **NET REVENUES**                                                                                                                 |       | $                            | 372,432    |   | $ | 438,822 |   | $ | 468,351 |   |
|                                                                                                                             |       |                         |       |   |   |   |   |
| **OPERATING (INCOME) EXPENSE:**                                                                                                  |       |                         |       |   |   |   |   |
| Station operating expenses, including non-cash  compensation expense of $1,976 in 2009, $2,552 in 2008 and $2,374 in 2007        |       | 254,042                      |       | 276,187 |   | 283,541 |   |
| Depreciation and amortization expense                                                                                            |       | 16,600                       |       | 20,442 |   | 16,631 |   |
| Corporate general and administrative expenses,  including non-cash expense of $4,912 in 2009, $7,304 in 2008 and $5,834 in  2007 |       | 22,875                       |       | 26,917 |   | 28,888 |   |
| Impairment loss                                                                                                                  |       | 67,676                       |       | 835,716 |   | 84,037 |   |
| Net time brokerage agreement (income) fees                                                                                       |       | (2                           | )          | (233 | ) | 14,001 |   |
| Net (gain) loss on sale or disposal of assets                                                                                    |       | 420                          |       | (9,899 | ) | (647 | ) |
| Total operating expense                                                                                                          |       | 361,611                      |       | 1,149,130 |   | 426,451 |   |
| **OPERATING INCOME (LOSS)**                                                                                                      |       | 10,821                       |       | (710,308 | ) | 41,900 |   |
|                                                                                                                             |       |                         |       |   |   |   |   |
| **OTHER (INCOME) EXPENSE:**                                                                                                      |       |                         |       |   |   |   |   |
| Interest expense, including amortization of deferred  financing expense of $1,518 in 2009, $1,647 in 2008 and $1,681 in 2007     |       | 31,229                       |       | 45,040 |   | 51,183 |   |
| Interest and dividend income                                                                                                     |       | (58                          | )          | (323 | ) | (740 | ) |
| Net (gain) loss on extinguishment of debt                                                                                        |       | (20,805                      | )          | (6,949 | ) | 458 |   |
| Net gain on derivative instruments                                                                                               |       | —                       |       | (34 | ) | (162 | ) |
| Net (gain) loss on investments                                                                                                   |       | 966                          |       | 469 |   | (245 | ) |
| Other income                                                                                                                     |       | (380                         | )          | (3,339 | ) | (895 | ) |
| **TOTAL OTHER EXPENSE**                                                                                                          |       | 10,952                       |       | 34,864 |   | 49,599 |   |
|                                                                                                                             |       |                         |       |   |   |   |   |
| **LOSS FROM CONTINUING OPERATIONS**                                                                                              |       |                         |       |   |   |   |   |
| **BEFORE INCOME TAXES (BENEFIT)**                                                                                                |       | (131                         | )          | (745,172 | ) | (7,699 | ) |
|                                                                                                                             |       |                         |       |   |   |   |   |
| **INCOME TAXES (BENEFIT)**                                                                                                       |       | (5,529                       | )          | (232,600 | ) | 695 |   |
| **INCOME (LOSS) FROM CONTINUING OPERATIONS**                                                                                     |       | 5,398                        |       | (512,572 | ) | (8,394 | ) |
| Income (loss) from discontinued operations, net of  taxes (benefit)                                                              |       | —                       |       | (4,079 | ) | 37 |   |
| **NET INCOME (LOSS)**                                                                                                            |       | $                            | 5,398      |   | $ | (516,651 | ) | $ | (8,357 | ) |
|                                                                                                                             |       |                         |       |   |   |   |   |
| **NET INCOME (LOSS) PER SHARE - BASIC AND DILUTED**                                                                              | ** ** | ** **                   | ** ** | ** ** | ** ** | ** ** | ** ** |
| Income (loss) from continuing operations                                                                                         |       | $                            | 0.15       |   | $ | (13.94 | ) | $ | (0.22 | ) |
| Income (loss) from discontinued operations, net of  taxes (benefit)                                                              |       | —                       |       | (0.11 | ) | — |   |
| **NET INCOME (LOSS) PER SHARE - BASIC AND DILUTED**                                                                              |       | $                            | 0.15       |   | $ | (14.05 | ) | $ | (0.22 | ) |
|                                                                                                                             |       |                         |       |   |   |   |   |
| **DIVIDENDS DECLARED AND PAID PER COMMON SHARE**                                                                                 |       | $                            | —     |   | $ | 0.58 |   | $ | 1.52 |   |
|                                                                                                                             |       |                         |       |   |   |   |   |
| **WEIGHTED AVERAGE SHARES:**                                                                                                     |       |                         |       |   |   |   |   |
| Basic                                                                                                                            |       | 35,321,431                   |       | 36,782,166 |   | 38,229,695 |   |
| Diluted                                                                                                                          |       | 36,402,800                   |       | 36,782,166 |   | 38,229,695 |   |

 

**See notes to consolidated financial statements.**

 

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**ENTERCOM COMMUNICATIONS CORP.**

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

**(amounts in thousands)**

 
| ** **                                                                                                | ** ** | **YEARS ENDED DECEMBER 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|
| ** **                                                                                                | ** ** | **2009**                     | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                                                                                                | ** ** | ** **                   | ** ** | ** ** |   |   |   |
| **NET INCOME (LOSS)**                                                                                     |       | $                            | 5,398      |   | $ | (516,651 | ) | $ | (8,357 | ) |
|                                                                                                      |       |                         |       |   |   |   |   |
| **OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES  (BENEFIT):**                                           |       |                         |       |   |   |   |   |
|                                                                                                      |       |                         |       |   |   |   |   |
| Net unrealized gain (loss) on investments, net of  taxes of $86 in 2008 and a tax benefit of $145 in 2007 |       | —                       |       | 132 |   | (276 | ) |
|                                                                                                      |       |                         |       |   |   |   |   |
| Net unrealized gain (loss) on derivatives, net of  taxes (benefit) of $0 in 2009 and $0 in 2008           |       | 1,830                        |       | (15,262 | ) | — |   |
| ** **                                                                                                |       |                         |       |   |   |   |   |
| **COMPREHENSIVE INCOME (LOSS)**                                                                           |       | $                            | 7,228      |   | $ | (531,781 | ) | $ | (8,633 | ) |

 

**See notes to consolidated financial statements.**

 

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**ENTERCOM COMMUNICATIONS CORP.**

**CONSOLIDATED STATEMENTS OFSHAREHOLDERS’ EQUITY**

**YEARS ENDED DECEMBER 31, 2009, 2008 AND  2007**

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

 
| ** **                                                                            | ** ** | ** **       | ** ** | ** **       | ** ** | ** **   | ** ** | ** **       | ** ** | ** **        | ** ** | **Retained** | ** ** | ** **        | ** ** | ** ** | ** ** |
|---------------------------------------------------------------------------------------|------------|------------------|------------|------------------|------------|--------------|------------|------------------|------------|-------------------|------------|--------------|------------|-------------------|------------|------------|------------|
| ** **                                                                            | ** ** | **Common Stock** | ** ** | **Additional**   | ** ** | **Earnings** | ** ** | **Other**        | ** ** | ** **        | ** ** |
| ** **                                                                            | ** ** | **Class A** | ** ** | **Class B** | ** ** | **Paid-in**  | ** ** | **(Accumulated** | ** ** | **Comprehensive** | ** ** | ** **   | ** ** |
| ** **                                                                            | ** ** | **Shares**       | ** ** | **Amount**       | ** ** | **Shares**   | ** ** | **Amount**       | ** ** | **Capital**       | ** ** | **Deficit)** | ** ** | **Income (Loss)** | ** ** | **Total**  | ** ** |
| ** **                                                                            |       |                  |       |             |       |         |       |             |       |              |       |         |       |              |       |       |       |
| Balance, December 31, 2006                                                       |       | 32,379,345       |       | $                | 324        |         | 8,046,805  |             | $          | 80                |       | $            | 641,889    |              | $          | 134,655    |       | $ | 144 |   | $ | 777,092 |   |
| Net loss                                                                              |       | —           |       | —           |       | —       |       | —           |       | —            |       | (8,357       | )          | —            |       | (8,357     | )          |
| Conversion of Class B common stock to  Class A common stock                 |       | 439,273          |       | 4                |       | (439,273     | )          | (4               | )          | —            |       | —       |       | —            |       | —     |       |
| Accounting change, net of taxes                                                       |       | —           |       | —           |       | —       |       | —           |       | —            |       | (1,850       | )          | —            |       | (1,850     | )          |
| Compensation expense related to granting of stock  options                            |       | —           |       | —           |       | —       |       | —           |       | 212               |       | —       |       | —            |       | 212        |       |
| Compensation expense related to granting of  restricted stock units                   |       | 488,677          |       | 5                |       | —       |       | —           |       | 9,059             |       | —       |       | —            |       | 9,064      |       |
| Issuance of common stock related to an incentive  plan                                |       | 22,525           |       | —           |       | —       |       | —           |       | 465               |       | —       |       | —            |       | 465        |       |
| Exercise of stock options (including tax benefits)                                    |       | 21,585           |       | —           |       | —       |       | —           |       | 559               |       | —       |       | —            |       | 559        |       |
| Common stock repurchase                                                               |       | (2,176,039       | )          | (22              | )          | —       |       | —           |       | (54,979           | )          | —       |       | —            |       | (55,001    | )          |
| Purchase of vested employee restricted stock units                                    |       | (42,666          | )          | —           |       | —       |       | —           |       | (1,290            | )          | —       |       | —            |       | (1,290     | )          |
| Payments of dividends of $1.52 per share                                              |       | —           |       | —           |       | —       |       | —           |       | —            |       | (57,992      | )          | —            |       | (57,992    | )          |
| Net dividend equivalents on restricted stock units  (net of forfeitures and payments) |       | —           |       | —           |       | —       |       | —           |       | —            |       | (1,859       | )          | —            |       | (1,859     | )          |
| Net unrealized loss on investments                                                    |       | —           |       | —           |       | —       |       | —           |       | —            |       | —       |       | (276              | )          | (276       | )          |
| 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     | )          |
|                                                                                       |            |                  |            |                  |            |              |            |                  |            |                   |            |              |            |                   |            |            |            |  |  |  |  |  |  |

 

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**ENTERCOM COMMUNICATIONS CORP.**

**CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY**

**YEARS ENDED DECEMBER 31, 2009, 2008 AND  2007**

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

 

 
| ** **                                                                            | ** ** | ** **       | ** ** | ** **       | ** ** | ** **   | ** ** | ** **       | ** ** | ** **        | ** ** | **Retained** | ** ** | ** **        | ** ** | ** ** | ** ** |
|---------------------------------------------------------------------------------------|------------|------------------|------------|------------------|------------|--------------|------------|------------------|------------|-------------------|------------|--------------|------------|-------------------|------------|------------|------------|
| ** **                                                                            | ** ** | **Common Stock** | ** ** | **Additional**   | ** ** | **Earnings** | ** ** | **Other**        | ** ** | ** **        | ** ** |
| ** **                                                                            | ** ** | **Class A** | ** ** | **Class B** | ** ** | **Paid-in**  | ** ** | **(Accumulated** | ** ** | **Comprehensive** | ** ** | ** **   | ** ** |
| ** **                                                                            | ** ** | **Shares**       | ** ** | **Amount**       | ** ** | **Shares**   | ** ** | **Amount**       | ** ** | **Capital**       | ** ** | **Deficit)** | ** ** | **Income (Loss)** | ** ** | **Total**  | ** ** |
| ** **                                                                            |       |             |       |             |       |         |       |             |       |              |       |         |       |              |       |       |       |   |   |
| Payments of dividends of $0.58 per share                                              |       | —           |       | —           | —     |         | —     |             | —     | —            |       | —       | (7,282     | )                 | —     | (14,301    | )          | — | — |   | — | (21,583) |   |
| Net 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 income                                                                            |       | —           |       |             | —     |         | —     |             |       | —            |       |         | —     |              |       | 5,398      |       |   | — |   |   | 5,398 |   |
| Conversion of Class B common stock to  Class A common stock                 |       | 150,000          |       | —           | 1          |         | (150,000   | )                | —     | (1                | )          | —       | —     |              | —     | —     |       | — | — |   | — | — |   |
| Compensation expense related to granting of stock  options                            |       | —           |       | —           | —     |         | —     |             | —     | —            |       | —       | 485        |              | —     | —     |       | — | — |   | — | 485 |   |
| Compensation expense related to granting of  restricted stock units                   |       | 796,824          |       | —           | 8          |         | —     |             | —     | —            |       | —       | 6,380      |              | —     | —     |       | — | — |   | — | 6,388 |   |
| Issuance of common stock related to an incentive  plan                                |       | 74,369           |       | —           | —     |         | —     |             | —     | —            |       | —       | 97         |              | —     | —     |       | — | — |   | — | 97 |   |
| Common stock repurchase                                                               |       | (662,664         | )          | —           | (7         | )            | —     |             | —     | —            |       | —       | (882       | )                 | —     | —     |       | — | — |   | — | (889) |   |
| Purchase of vested employee restricted stock units                                    |       | (82,556          | )          | —           | —     |         | —     |             | —     | —            |       | —       | (104       | )                 | —     | —     |       | — | — |   | — | (104) |   |
| Net dividend equivalents on restricted stock units  (net of forfeitures and payments) |       | —           |       | —           | —     |         | —     |             | —     | —            |       | —       | —     |              | —     | 169        |       | — | — |   | — | 169 |   |
| Realization of tax benefit for dividend equivalent  payments                          |       | —           |       | —           | —     |         | —     |             | —     | —            |       | —       | 321        |              | —     | —     |       | — | — |   | — | 321 |   |
| Net unrealized gain on derivatives                                                    |       | —           |       | —           | —     |         | —     |             | —     | —            |       | —       | —     |              | —     | —     |       | — | 1,830 |   | — | 1,830 |   |
| Balance, December 31, 2009                                                       |       | 29,755,161       |       | $                | 297        |         | 7,457,532  |             | $          | 75                |       | $            | 588,622    |              | $          | (461,610   | )          | $ | (13,432 | ) | $ | 113,952 |   |

 

**See notes to consolidated financial statements.**

 

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**ENTERCOM COMMUNICATIONS CORP.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(amounts in thousands)**

 
| ** **                                                                                                                                               | ** ** | **YEARS ENDED DECEMBER 31,** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|
| ** **                                                                                                                                               | ** ** | **2009**                     | ** ** | **2008** | ** ** | **2007** | ** ** |
| **OPERATING ACTIVITIES:**                                                                                                                                |       |                         |       |   |   |   |   |
| Net income (loss)                                                                                                                                        |       | $                            | 5,398      |   | $ | (516,651 | ) | $ | (8,357 | ) |
| Income from discontinued operations before  impairment loss, net of taxes                                                                                |       | —                       |       | (520 | ) | (37 | ) |
| Impairment loss from discontinued operations                                                                                                             |       | —                       |       | 6,675 |   | — |   |
| Deferred tax benefit from discontinued operations                                                                                                        |       | —                       |       | (2,076 | ) | — |   |
| Income (loss) from continuing operations                                                                                                                 |       | 5,398                        |       | (512,572 | ) | (8,394 | ) |
|                                                                                                                                                     |       |                         |       |   |   |   |   |
| Adjustments to reconcile income (loss) from  continuing operations to net cash provided by continuing operating  activities:                             |       |                         |       |   |   |   |   |
| Depreciation and amortization                                                                                                                            |       | 16,600                       |       | 20,442 |   | 16,634 |   |
| Amortization of deferred financing costs                                                                                                                 |       | 1,518                        |       | 1,647 |   | 1,681 |   |
| Deferred taxes (benefit) and other                                                                                                                       |       | 999                          |       | (232,600 | ) | 9,628 |   |
| Tax benefit on exercise of options                                                                                                                       |       | —                       |       | — |   | 29 |   |
| Provision for bad debts                                                                                                                                  |       | 2,708                        |       | 4,594 |   | 3,322 |   |
| Net (gain) loss on sale or disposal of assets                                                                                                            |       | 420                          |       | (9,899 | ) | (647 | ) |
| Non-cash stock-based compensation expense                                                                                                                |       | 6,888                        |       | 9,856 |   | 8,208 |   |
| Net (gain) loss on investments                                                                                                                           |       | 966                          |       | 469 |   | (245 | ) |
| Net gain on derivatives                                                                                                                                  |       | —                       |       | (34 | ) | (162 | ) |
| Deferred rent                                                                                                                                            |       | (9                           | )          | 694 |   | 178 |   |
| Unearned revenue - long-term                                                                                                                             |       | (739                         | )          | 460 |   | (38 | ) |
| Net (gain) loss on extinguishment of debt                                                                                                                |       | (20,805                      | )          | (6,949 | ) | 458 |   |
| Deferred compensation                                                                                                                                    |       | 1,596                        |       | 903 |   | 952 |   |
| Tax benefit for vesting of restricted stock unit  awards                                                                                                 |       | —                       |       | (474 | ) | (1,199 | ) |
| Impairment loss                                                                                                                                          |       | 67,676                       |       | 835,716 |   | 84,037 |   |
| Other income                                                                                                                                             |       | (380                         | )          | (3,590 | ) | (895 | ) |
| 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                                                                                                                                      |       | 4,324                        |       | 10,365 |   | (3,442 | ) |
| Prepaid expenses and deposits                                                                                                                            |       | (16,397                      | )          | 777 |   | (988 | ) |
| Prepaid and refundable income taxes                                                                                                                      |       | (7,000                       | )          | 14,431 |   | (7,734 | ) |
| Accounts payable and accrued liabilities                                                                                                                 |       | 12,874                       |       | (1,775 | ) | (8,465 | ) |
| Accrued interest expense                                                                                                                                 |       | (1,944                       | )          | (2,073 | ) | (258 | ) |
| Accrued expenses - long-term                                                                                                                             |       | (577                         | )          | — |   | 577 |   |
| Prepaid expenses - long-term                                                                                                                             |       | (214                         | )          | 200 |   | 200 |   |
|                                                                                                                                                     |       |                         |       |   |   |   |   |
| **Net cash provided by continuing operating  activities**                                                                                                |       | 73,902                       |       | 130,588 |   | 93,437 |   |
| Net cash provided by discontinued operating  activities                                                                                                  |       | —                       |       | 29 |   | 55 |   |
| **Net cash provided by operating activities**                                                                                                            |       | 73,902                       |       | 130,617 |   | 93,492 |   |
|                                                                                                                                                     |       |                         |       |   |   |   |   |
| **INVESTING ACTIVITIES:**                                                                                                                                |       |                         |       |   |   |   |   |
| Additions to property and equipment                                                                                                                      |       | (2,467                       | )          | (8,553 | ) | (9,281 | ) |
| Proceeds from sale of property, equipment,  intangibles and other assets                                                                                 |       | 106                          |       | 33,991 |   | 97 |   |
| Purchases of radio station assets                                                                                                                        |       | —                       |       | (374 | ) | (268,308 | ) |
| Deferred charges and other assets                                                                                                                        |       | (120                         | )          | (1,110 | ) | (2,436 | ) |
| Purchases of investments                                                                                                                                 |       | —                       |       | — |   | (68 | ) |
| Proceeds from investments                                                                                                                                |       | 39                           |       | 251 |   | 2,857 |   |
|                                                                                                                                                          |            |                              |            |  |  |  |  |  |  |  |

 

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**ENTERCOM COMMUNICATIONS CORP.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(amounts in thousands)**

 
| ** **                                                                       | ** ** | **YEARS ENDED DECEMBER 31,** | ** ** |
|----------------------------------------------------------------------------------|------------|------------------------------|------------|
| ** **                                                                       | ** ** | **2009**                     | ** ** | **2008** | ** ** | **2007** | ** ** |
| **INVESTING ACTIVITIES (CONTINUED):**                                            |       |                         |       |   |   |   |   |
| Proceeds from termination of radio station contract                              |       | 380                          |       | — |   | — |   |
| Proceeds from insurance recovery                                                 |       | —                       |       | 3,590 |   | 1,844 |   |
| Station acquisition deposits and costs                                           |       | —                       |       | 4,149 |   | 1,419 |   |
| **Net cash provided by (used in) investing  activities**                         |       | (2,062                       | )          | 31,944 |   | (273,876 | ) |
|                                                                             |       |                              |       |   |   |   |   |
| **FINANCING ACTIVITIES:**                                                        |       |                         |       |   |   |   |   |
| Deferred expenses related to bank facility and  finance method lease obligations |       | (342                         | )          | — |   | (4,691 | ) |
| Proceeds from issuance of long-term debt                                         |       | 39,000                       |       | 56,000 |   | 933,500 |   |
| Proceeds from the financing method of lease  obligations                         |       | 12,610                       |       | — |   | — |   |
| Payments of long-term debt                                                       |       | (60,023                      | )          | (129,522 | ) | (636,021 | ) |
| Retirement of senior subordinated notes                                          |       | (55,272                      | )          | (58,633 | ) | — |   |
| Purchase of the Company’s common stock                                      |       | (889                         | )          | (13,944 | ) | (55,001 | ) |
| Proceeds from issuance of employee stock plan                                    |       | 82                           |       | 278 |   | 396 |   |
| Proceeds from the exercise of stock options                                      |       | —                       |       | — |   | 530 |   |
| Purchase of vested restricted stock units                                        |       | (104                         | )          | (1,375 | ) | (1,290 | ) |
| Payment of dividend equivalents on vested restricted  stock units                |       | (756                         | )          | (917 | ) | (96 | ) |
| Realization of tax benefit for dividend equivalents  payments                    |       | 321                          |       | — |   | — |   |
| Payment of dividends                                                             |       | —                       |       | (21,583 | ) | (57,992 | ) |
| Tax benefit for vesting of restricted stock unit  awards                         |       | —                       |       | 474 |   | 1,199 |   |
| **Net cash provided by (used in) financing  activities**                         |       | (65,373                      | )          | (169,222 | ) | 180,534 |   |
|                                                                             |       |                              |       |   |   |   |   |
| **NET INCREASE (DECREASE) IN CASH AND CASH  EQUIVALENTS**                        |       | 6,467                        |       | (6,661 | ) | 150 |   |
| **CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR**                                 |       | 4,284                        |       | 10,945 |   | 10,795 |   |
| **CASH AND CASH EQUIVALENTS, END OF YEAR**                                       |       | $                            | 10,751     |   | $ | 4,284 |   | $ | 10,945 |   |
|                                                                             |       |                              |       |   |   |   |   |
| **SUPPLEMENTAL DISCLOSURES OF CASH FLOW  INFORMATION:**                          |       |                         |       |   |   |   |   |
| Cash paid during the period for:                                                 |       |                         |       |   |   |   |   |
| Interest                                                                         |       | $                            | 31,643     |   | $ | 44,612 |   | $ | 49,752 |   |
| Income taxes                                                                     |       | $                            | 192        |   | $ | 22 |   | $ | 497 |   |
| Dividends                                                                        |       | $                            | —     |   | $ | 21,583 |   | $ | 57,992 |   |

 

**SUPPLEMENTAL DISCLOSURES ON NON-CASHINVESTING AND FINANCING ACTIVITIES:**

 

During the year ended December 31, 2009,the Company issued 1.1 million restricted stock units (including 0.7 millionrestricted stock units under a 2009 Option Exchange Program and 0.2 million formodified market conditioned restricted stock units) and will increase itsadditional paid-in capital by $1.7 million, before forfeitures, over thevesting period of the restricted stock units. Due to an unusually high numberof forfeitures in 2009, additional paid-in-capital will be reduced by $2.6million over the vesting period of the restricted stock units.

 

During the years ended December 31, 2008and 2007, the Company issued 0.5 million and $0.5 million restricted stockunits (net of forfeitures), respectively, and will increase its paid-in capitalby $6.0 million and $12.3 million, respectively, over the vesting period of therestricted stock units.

 

On March 14, 2008, the Company completedan exchange of radio station assets with another party 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 notesto condensed consolidated financial statements.**

 

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**ENTERCOMCOMMUNICATIONS CORP.**

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS**

**YEARSENDED DECEMBER 31, 2009, 2008 AND 2007**

 

**1.****             BASIS OF PRESENTATIONAND ORGANIZATION**

 

***Nature Of Business* —** EntercomCommunications Corp. (the “Company”) is oneof the five largest radio broadcasting companies in the United States with anationwide portfolio in excess of 100 stations in 23 markets, including SanFrancisco, Boston, Seattle, Denver, Portland, Sacramento and Kansas City.

 

**2.****             SIGNIFICANTACCOUNTING POLICIES**

 

***Principles Of Consolidation*** — Theaccompanying consolidated financial statements include the accounts of theCompany and its subsidiaries, all of which are 100% owned. All inter-companytransactions and balances have been eliminated in consolidation.  The Company also considers the applicabilityof any variable interest entities (“VIE”) that are required to be consolidatedby the primary beneficiary.  From time totime, the Company enters into time brokerage agreements (“TBA”) in connectionwith pending acquisitions or dispositions of radio stations and therequirements to consolidate a VIE may apply, depending on the facts andcircumstances related to each transaction. As of December 31, 2009, there are no pending acquisitions ordispositions.

 

***Reportable Segment -***TheCompany operates under one reportable business segment, radio broadcasting, forwhich segment disclosure is consistent with the management decision-makingprocess that determines the allocation of resources and the measuring ofperformance.

 

***Management’s Use Of Estimates***— The preparation ofconsolidated financial statements, in accordance with generally acceptedaccounting principles, requires the Company to make estimates and assumptionsthat affect the reported amounts of assets and liabilities, and the disclosureof contingent assets and liabilities, as of the date of the consolidatedfinancial statements, and the reported amounts of revenues and expenses duringthe reporting period.  Significantestimates and assumptions are used for, but not limited to: (1) assetimpairments, including broadcasting licenses and goodwill; (2) income taxvaluation allowances; (3) uncertain tax positions; (4) allowance fordoubtful accounts; (5) self-insurance reserves; (6) fair value ofequity awards; (7) estimated lives for tangible and intangible assets; (8) fairvalue measurements for financial instruments such as interest rate hedgingtransactions; and (9) contingency and litigation reserves. The Company’saccounting estimates require the use of judgment as future events and theeffect of these events cannot be predicted with certainty. The accountingestimates will change as new events occur, as more experience is acquired andas more information is obtained.  TheCompany will evaluate and update assumptions and estimates on an ongoing basisand may use outside experts to assist in the Company’s evaluation, asconsidered necessary. Actual results could differ from those estimates.

 

***Income Taxes*** — The Company applies theliability method of accounting for deferred income taxes. Deferred income taxesare recognized for all temporary differences between the tax and financialreporting bases of the Company’s assets and liabilities based on enacted taxlaws and statutory tax rates applicable to the periods in which the differencesare expected to affect taxable income. A valuation allowance is recorded for anet deferred tax asset balance when it is more likely than not that the benefitsof the tax asset will not be realized. The Company continues to assess the need for its deferred tax assetvaluation allowance in the jurisdictions in which it operates. Any adjustmentto the deferred tax asset valuation allowance would be recorded in the incomestatement of the period that the adjustment is determined to be required. TheCompany also accounts for uncertain tax positions that a company has taken orexpects to take on a tax return. Please see Note 7, Income Taxes, for a further discussion.

 

***Property And Equipment*** — Property andequipment are carried at cost. Major additions or improvements are capitalized,while repairs and maintenance are charged to expense when incurred. Upon saleor retirement, the related cost and accumulated depreciation are removed fromthe accounts, and any gain or loss is recognized in the statement ofoperations. The Company reviews on acontinuing basis the carrying value of property and equipment. If events orchanges in circumstances were to indicate that an asset’s carrying value is notrecoverable, a write-down of the asset would be recorded through a charge tooperations.

 

Depreciationexpense on property and equipment is determined on a straight-line basis. Theestimated useful lives for depreciation are as follows:

 

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| **Property Type**      | ** ** | **Period Of Depreciation**             |
|------------------------|------------|----------------------------------------|
| Land Improvements      |       | 10-15 years                            |
| Building               |       | 20 years                               |
| Equipment              |       | 3-20 years                             |
| Furniture and fixtures |       | 5-10 years                             |
| Leasehold improvements |       | shorter of economic life or lease term |

 

For the years ended December 31,2009, 2008 and 2007, the depreciation expense for property and equipment was$15.1 million, $16.3 million and $15.3 million, respectively.

 

As of December 31,2009, the Company had no construction commitments outstanding.

 

As of December 31,2009 and 2008, the following is a summary of the categories of property andequipment:

 
| ** **                                 | ** ** | **December 31,**      | ** ** |
|--------------------------------------------|------------|----------------------------|------------|
| ** **                                 | ** ** | **2009**                   | ** ** | **2008** | ** ** |
| ** **                                 | ** ** | **(amounts in thousands)** | ** ** |
| ** **                                 |       |                            | ** ** | ** ** | ** ** |
| **Property And Equipment:**                |       |                       |       |   |   |
| Land, land easements and land improvements |       | $                          | 16,500     |   | $ | 16,486 |   |
| Buildings                                  |       | 20,935                     |       | 20,964 |   |
| Equipment                                  |       | 123,362                    |       | 122,986 |   |
| Furniture and fixtures                     |       | 15,504                     |       | 15,029 |   |
| Leasehold improvements                     |       | 21,091                     |       | 21,129 |   |
|                                       |       | 197,392                    |       | 196,594 |   |
| Accumulated depreciation                   |       | (126,399                   | )          | (113,036 | ) |
|                                       |       | 70,993                     |       | 83,558 |   |
| Capital improvements in progress           |       | 747                        |       | 1,306 |   |
| Net property and equipment                 |       | $                          | 71,740     |   | $ | 84,864 |   |

 

***Revenue Recognition*** — Revenue from thesale of commercial broadcast time to advertisers is recognized when thecommercials are broadcast. Revenues presented in the financial statements arereflected on a net basis, after the deduction of advertising agency fees by theadvertising agencies, usually at a rate of 15% of gross revenues. Promotionalfees are recognized as services are rendered.  Advertiser payments received inadvance of when the commercials are broadcast are recorded as unearned revenue.

 

As of December 31,2009 and 2008, the Company recorded current unearned revenues in the amounts of$0.8 million and $1.4 million, respectively, which amounts are included in thebalance sheets under accrued compensation and other current liabilities. As of December 31,2008, the Company recorded long-term unearned revenues in the amount of $0.7million, which amount is included in the balance sheet under other long-termliabilities.

 

***Comprehensive Income (Loss) —*** The Company’scomprehensive income (loss) consists of net income (loss) and other itemsrecorded directly to the equity accounts. The Company recorded to thestatements of comprehensive income (loss): (1) for the year ended December 31,2009, an unrealized gain on derivatives of $1.8 million (a valuation allowancewas reduced by $1.2 million against the income taxes on the gain); (2) forthe year ended December 31, 2008, (a) an unrealized loss onderivatives of $15.3 million (a valuation allowance of $6.0 million was fullyreserved against the income tax benefit); and (b) an unrealized gain oninvestments of $0.2 million; and (3) for the year ended December 31,2007, an unrealized loss on investments of $0.4 million.  As of December 31, 2009, the Company’sother comprehensive loss of $13.4 million consisted of a net unrealized lossfrom interest rate derivative transactions.

 

***Concentration Of Risk*** — For the year endedDecember 31, 2009, six of the Company’s 23 market clusters (Boston,Denver, Kansas City, Portland, San Francisco and Seattle) generated in excessof 50% of the Company’s net revenues. For the year ended December 31,2008, six of the Company’s 23 market clusters (Boston, Kansas City, 

 

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Portland, Sacramento, SanFrancisco and Seattle) generated in excess of 50% of the Company’s netrevenues.  For the year ended December 31,2007, six of the Company’s 23 market clusters (Boston, Kansas City, Portland,Sacramento, San Francisco and Seattle) generated in excess of 50% of theCompany’s net revenues.

 

***Concentration Of Credit Risk*****— The Company’s revenues and accounts receivable relateprimarily to the sale of advertising within its radio stations’ broadcastareas. Credit is extended based on an evaluation of the customers’ financialcondition and, generally, collateral is not required. Credit losses areprovided for in the financial statements and consistently have been withinmanagement’s expectations. The Company also maintains deposit accounts withfinancial institutions. At times, such deposits may exceed FDIC insurancelimits.

 

***Long-Lived Assets*** — The Company evaluatesthe recoverability of its long-lived assets, which include property andequipment, broadcasting licenses (subject to an eight-year renewal cycle, whichrenewal information for each of the Company’s radio stations is available atthe website of the Federal Communications Commission, www.FCC.gov), goodwill,deferred charges, and other assets (see Note 3). The determination and measurement of an impairment loss require the useof significant judgments and estimates. Future events may impact thesejudgments and estimates.

 

***Debt Issuance Costs*** — The costs related tothe issuance of debt are capitalized and accounted for as interest expense overthe lives of the related debt. For the years ended December 31, 2009, 2008and 2007, the Company recognized interest expense related to amortization ofdebt issuance costs, excluding the expense for the early extinguishment of debt,of $1.5 million, $1.6 million and $1.7 million, respectively, which amountswere included in interest expense in the accompanying consolidated statementsof operations.

 

***Extinguishment Of Debt***— For the years ended December 31, 2009 and 2008, the Company recorded again of $20.8 million (net of a $0.8 million write-off of deferred financingcosts) and $6.9 million (net of a $0.9 million write-off of deferred financingcosts), respectively, to the statement of operations on the partialextinguishment of the Company’s 7.625% Senior Subordinated Notes (the “Notes”).For the year ended December 31, 2007, the Company recorded a loss onextinguishment of debt of $0.5 million to the statement of operations as theCompany entered into a new senior credit facility that replaced the Company’sexisting credit facility (see Note 8). At such time as the Company amends,appends or replaces, in part or in full, its credit agreement, the Companyreviews its unamortized financing costs, to determine the amount subject to extinguishmentunder the accounting provisions for changes in line-of-credit or revolving-debtarrangements.

 

***Corporate General And Administrative Expense***— Corporate general and administrative expense consists of corporate overheadcosts and non-cash compensation expense. Included in corporate general andadministrative expenses are those costs not specifically allocable to any ofthe Company’s individual business properties.

 

***Time Brokerage Agreement (“TBA”) (Income) Fees***— TBA (income) fees consist of fees paid or received under agreements whichpermit an acquirer to program and market stations prior to acquisition. TheCompany sometimes enters into such agreements prior to the consummation ofstation acquisitions and dispositions. For those radio stations operated by theCompany prior to acquisition, for the years ended December 31, 2008 and2007, the Company recorded: (1) TBA fees of under $0.1 million and $15.3million, respectively; (2) net revenues of $6.1 million and $53.4 million,respectively; and (3) station operating expenses of $3.6 million and $32.7million, respectively. For those radio stations operated by a buyer prior todisposition by the Company, for the years ended December 31, 2008 and2007, the Company recorded TBA income of $0.2 million and $1.3 million,respectively.

 

***Barter Transactions*** — The Company providesadvertising broadcast time in exchange for certain products, supplies andservices. The terms of the exchanges generally permit the Company to preemptsuch broadcast time in favor of advertisers who purchase time on regular terms.The Company includes the value of such exchanges in both broadcasting netrevenues and station operating expenses. Barter valuation is based uponmanagement’s estimate of the fair value of the products, supplies and servicesreceived. For the years ended December 31, 2009, 2008 and 2007, amountsreflected under barter transactions were: (1) barter revenues of $4.3million, $4.1 million and $4.3 million, respectively; and (2) barterexpenses of $4.2 million, $4.2 million and $4.2 million, respectively.

 

***Business Combinations —*** Accountingguidance for business combinations provides the criteria to recognizeintangible assets apart from goodwill. Other than goodwill, the Company uses a direct value method to determinethe fair value of all intangible assets required to be recognized for businesscombinations.  See Note 2, RecentAccounting Standards, for a discussion of a change to the accounting guidancefor business combinations that was effective for the Company as of January 1,2009.  For a discussion of impairmenttesting of those assets acquired in a business combination, including goodwill,see Note 3.

 

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***Leases —***The Company recognizes: (1) escalatedrents, including any rent holidays, on a straight-line basis over the term ofthe lease for those lease agreements where the Company receives the right tocontrol the use of the entire leased property at the beginning of the leaseterm; (2) amortization expense over the shorter of the economic lives ofthe leasehold assets or the lease term, excluding any lease renewals unless thelease renewals are reasonably assured; (3) landlord incentive payments tothe Company as deferred rent that is amortized as reductions to lease rentexpense over the lease term; and (4) rental costs associated with groundor building operating leases, that are incurred during a construction period,as rental expense.  As of December 31,2009 and 2008, the deferred rent liabilities were $3.4 million for each yearand are included in other under long-term liabilities. Please refer to Note 9,Finance Method Lease Obligations, for a discussion of certain leases that couldbe capitalized at a future time.

 

For thoseleasehold improvements acquired in a business combination or acquiredsubsequent to lease inception, the amortization period is based on the lesserof the useful life of the leasehold improvements or the period of the leaseincluding all renewal periods that are reasonably assured of exercise at thetime of the acquisition.

 

***Asset Retirement Obligations —*** The Companyreasonably estimates the fair value ofan asset retirement obligation.  For anasset retirement obligation that is conditional (uncertainty about the timingand/or method of settlement), the Company factors into its fair valuemeasurement a probability factor as the obligation is conditional on a  future event that may or may not be withinthe control of the Company.

 

***Accrued Compensation —*** Certain types ofemployee compensation are paid in subsequent periods. As of December 31,2009 and 2008, the Company recorded accrued compensation in the amounts of $6.8million and $7.5 million, respectively, which amounts are included in thebalance sheets under accrued compensation and other current liabilities.

 

***Cash And Cash Equivalents*** — Cash and cashequivalents consist primarily of amounts held on deposit with financialinstitutions, including investments held in financial institutions inimmediately available money market accounts and all highly liquid debtinstruments with initial maturities of three months or less.

 

***Accounts Receivable And Related Allowance ForDoubtful Accounts*** — Accounts receivable areprimarily attributable to advertising that has aired on the Company’s radiostations but for which payment has not been collected, net of agencycommissions, and an estimated allowance for doubtful accounts. Advertisers aregenerally invoiced for the advertising after the advertisements are aired. Anallowance for doubtful accounts is recorded using several factors includingmanagement’s judgment of the collectability of the accounts receivable,historical information, relative improvements or deteriorations in the age ofthe accounts receivable and changes in current economic conditions.

 

The accountsreceivable balance and reserve for doubtful accounts, as of December 31,2009 and 2008, are presented in the following table:

 
| ** **                                                   | ** ** | **December 31,**      | ** ** |
|--------------------------------------------------------------|------------|----------------------------|------------|
| ** **                                                   | ** ** | **2009**                   | ** ** | **2008** | ** ** |
| ** **                                                   | ** ** | **(amounts in thousands)** | ** ** |
| ** **                                                   |       |                       |       |   |   |
| Accounts receivable                                          |       | $                          | 71,618     |   | $ | 79,830 |   |
| Allowance for doubtful  accounts                             |       | (3,299                     | )          | (4,476 | ) |
| Accounts receivable, net  of allowance for doubtful accounts |       | $                          | 68,319     |   | $ | 75,354 |   |

 

As of December 31,2009 and 2008, the Company has recorded accounts receivable credits in theamounts of $1.8 million and $1.9 million, respectively, which amounts as of December 31,2009 and 2008 are included in the balance sheets under accrued compensation andother current liabilities.

 

The followingtable presents the changes in the allowance for doubtful accounts for the yearsended December 31, 2009, 2008 and 2007:

 

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| ** **              | ** ** | ** **                 | ** ** | **Additions**  | ** ** | ** **     | ** ** | ** **     | ** ** |
|-------------------------|------------|----------------------------|------------|----------------|------------|----------------|------------|----------------|------------|
| ** **              | ** ** | **Balance At**             | ** ** | **Charged To** | ** ** | **Deductions** | ** ** | **Balance At** | ** ** |
| ** **              | ** ** | **Beginning**              | ** ** | **Costs And**  | ** ** | **From**       | ** ** | **End Of**     | ** ** |
| **Year Ended**          | ** ** | **Of Year**                | ** ** | **Expenses**   | ** ** | **Reserves**   | ** ** | **Year**       | ** ** |
|                    |       | **(amounts in thousands)** |       |
| December 31,  2009 |       | $                          | 4,476      |           | $          | 2,708          |       | $              | (3,885     | ) | $ | 3,299 |   |
| December 31,  2008 |       | 2,746                      |       | 4,594          |       | (2,864         | )          | 4,476          |       |
| December 31,  2007 |       | 3,009                      |       | 3,322          |       | (3,585         | )          | 2,746          |       |
|                         |            |                            |            |                |            |                |            |                |            |  |  |  |  |

 

***Derivative Financial Instruments*****— The Company follows accounting guidance for itsderivative financial instruments, including certain derivative instrumentsembedded in other contracts, and hedging activities (for further discussion,see Note 10).

 

***Share-Based Compensation —***The Company records compensation expense for all share-based paymentawards made to employees and directors, including employee stock options andemployee stock purchase plan purchases at estimated fair values.  The Company also uses the simplified methodin developing an estimate of the expected term of certain stock options. Forfurther discussion of share-based compensation, please see Note 15).

 

***Investments*** — For those investments inwhich the Company has the ability to exercise significant influence over theoperating and financial policies of the investee, the investment is accountedfor under the equity method. For those investments in which the Company doesnot have a significant influence, the Company applies the accounting guidancefor certain investments in debt and equity securities. An investment isclassified into one of three categories: held-to-maturity, available-for-sale,or trading securities,**and,depending upon the classification, is carried at fair value based upon quotedmarket prices or historical cost when quoted market prices are unavailable.

 

The Companyalso provides certain quantitative and qualitative disclosures for thoseinvestments that are impaired (other than temporary) at the balance date andfor which an impairment has not been recognized.  Please see Note 5, Investments, for furtherdiscussion.

 

***Advertising And Promotion Costs —*** Costs of media advertising and associatedproduction costs are expensed when incurred.

 

***Insurance And Self-Insurance Liabilities —*** The Company uses a combination of insuranceand self-insurance mechanisms to provide for the potential liabilities forworkers’ compensation, general liability, property, director and officers’liability, vehicle liability and employee health care benefits. Liabilitiesassociated with the risks that are retained by the Company are estimated, inpart, by considering claims experience, demographic factors, severity factors,outside expertise and other actuarial assumptions. For any legal costs expectedto be incurred in connection with a loss contingency, the Company recognizesthe expense as incurred.

 

***Recognition Of Insurance Recoveries —*** TheCompany recognizes insurance recoveries when all of the contingencies relatedto the insurance claims have been satisfied.

 

***Sports Programming Costs —***Programming costs which are for a specifiednumber of events are amortized on an event-by-event basis, and programmingcosts which are for a specified season are amortized over the season on astraight-line basis.  The Companyallocates that portion of sports programming costs that are related tosponsorship and marketing activities to sales and marketing expenses on astraight-line basis over the term of the agreement.

 

***Reclassifications*****—******Certain reclassifications have been made to the prioryears’ financial statements to conform to the presentation in the current year.

 

***Recent Accounting Standards***—

 

**VariableInterest Entities**

 

In June, 2009,the accounting standards were amended for determining whether to consolidate avariable interest entity. These amended standards eliminate a mandatoryquantitative approach to determine whether a variable interest provides theentity with a controlling financial interest in a variable interest entity infavor of a 

 

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qualitatively focused analysis,and require an ongoing reassessment of whether an entity is the primarybeneficiary. These amended standards are effective January 1, 2010. TheCompany does not anticipate that the adoption of these standards will have anyeffect on the Company’s results of operations, cash flows or financialposition.

 

**Subsequent Events**

 

In May 2009, an accounting standard on subsequentevents was approved, which sets forth the period, circumstances and disclosureafter the balance sheet date during which management shall evaluate events ortransactions that may occur for potential recognition or disclosure in thefinancial statements. This standard, which was effective for the Company forthe period ended June 30, 2009, did not have an effect on the Company’sresult of operations, cash flows or financial position.

 

**Accounting Standards Codification**

 

In June 2008, an accounting standardscodification was approved as a single source of authoritative nongovernmentalU.S. generally accepted accounting principles (“GAAP”) that was effective forthe Company in the third quarter of 2009. The codification does not changecurrent U.S. GAAP, but is intended to simplify user access to all authoritativeliterature related to a particular topic in one place. The Company’s adoptionof this codification did not have an impact on the Company’s results ofoperations, cash flows or financial position.

 

**Determination Of The Useful Life OfIntangible Assets**

 

In April 2008,an accounting standard was issued regarding the determination of the usefullife of intangible assets.  This standardamends the factors that should be considered in developing the renewal orextension assumptions used to determine the useful life of recognizedintangible assets. This standard requires expanded disclosure regarding thedetermination of intangible asset useful lives and also improves theconsistency between the useful life of a recognized intangible asset and theperiod of expected cash flows used to measure the fair value of the asset. Thisstandard was effective for the Company on January 1, 2009. The impact tothe Company will be limited to the application of this standard to futureacquisitions.

 

**Disclosures About DerivativeInstruments And Hedging Activities**

 

In March 2008, disclosure requirementsfor derivative instruments and hedging activities were changed. Entities arerequired to provide enhanced disclosures about: (1) how and why an entityuses derivative instruments; (2) how derivative instruments and relatedhedged items are accounted for under U.S. GAAP and its related interpretations;and (3) how derivative instruments and related hedged items affect anentity’s financial position, financial performance and cash flows. The Companyhas included the relevant disclosures herein under Note 10, Derivatives AndHedging Activities.

 

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**3.****             INTANGIBLE ASSETS ANDGOODWILL**

 

**(A) Indefinite-LivedIntangibles**

 

The Company does not amortize its goodwill and certain intangibleassets.  The Company has concluded thatits acquired broadcasting licenses are treated as an indefinite-livedintangible asset and, similar to goodwill, these assets are reviewed at leastannually for impairment. At the time of each review, if the recorded value ofgoodwill and certain intangibles (such as broadcasting licenses) is more thantheir fair value, then a charge is recorded to the results of operations.

 

The Company may only write down the carrying value of itsindefinite-lived intangibles, but is not permitted to increase the carryingvalue if the fair value of these assets subsequently increases.

 

***Change In Annual Testing 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.  An interim impairment test forbroadcasting licenses was performed during the fourth quarter of 2008.

 

***(1)******           BroadcastingLicenses***

 

The Company performs its broadcasting license impairment test byevaluating its broadcasting licenses for impairment at the market level usingthe direct method.  Indefinite-livedintangible assets are combined into a single unit of accounting for purposes oftesting impairment. Since the broadcasting licenses in each of the markets areoperated as a single asset, each market’s broadcasting licenses are a singleunit of accounting. The Company determines the fair value of the broadcastinglicenses in each of its markets by relying on a discounted cash flow approach(a 10-year income model) assuming a start-up scenario in which the only assetsheld by an investor are broadcasting licenses. The Company’s fair valueanalysis contains assumptions incorporating variables that are based on pastexperiences and judgments about future performance using industry normalizedinformation for an average station within a certain market. These variablesinclude, but are not limited to: (1) the risk-adjusted discount rate usedin the valuation of fair value; (2) market share and profit margin of anaverage station within a market based upon market size and station type; (3) theforecast growth rate of each radio market, including assumptions regarding eachmarket’s population, household income, retail sales and other factors thatwould influence advertising expenditures; (4) estimated capital start-upcosts and losses incurred during the early years; (5) the likely mediacompetition within the market area; (6) an effective tax rate assumption;and (7) future terminal values.

 

***Broadcasting License Impairment For The Year Ended December 31,2009***

 

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 year were reduced. Theprojected growth levels for the industry and the Company were less than thoseoriginally forecasted for 2009, which was the primary reason for furtherimpairment to broadcasting licenses in the second 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 methodology used by the Company in determining its key estimatesand assumptions was applied consistently to each market. As a result, theanalysis for each market is the same. Of the seven variables identified above,the Company believes that the first three (in clauses (1) through (3)) arethe most important to the determination of fair value. The following tablereflects these estimates and assumptions since the most recent impairment testof broadcasting licenses in the fourth quarter of 2008.  The table also depicts therange of operating profit margin and market long-term revenue growth rates usedfor determining the fair value of the Company’s broadcasting licenses.  In general, when comparing between the secondquarter of 2009 and the fourth quarter of 2008: (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.

 

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

 

The following table presents, in thousands, the changes in broadcastinglicenses for each of the years ended December 31, 2009, 2008 and 2007:

 
| ** **                         | ** ** | **Carrying**    | ** ** |
|------------------------------------|------------|-----------------|------------|
| ** **                         | ** ** | **Amount**      | ** ** |
| ** **                         | ** ** | **(amounts in** | ** ** |
| ** **                         | ** ** | **thousands)**  | ** ** |
| ** **                         |       |            |       |
| Balance at  December 31, 2006 |       | $               | 1,351,389  |   |
| Acquisitions                       |       | 240,384         |       |
| Deconsolidated entities            |       | (109,419        | )          |
| Assets held for sale               |       | (126,685        | )          |
| Loss on impairment                 |       | (38,686         | )          |
| Balance at  December 31, 2007 |       | 1,316,983       |       |
| Acquisitions                       |       | 210,358         |       |
| Reversal of assets held  for sale  |       | 3,650           |       |
| Loss on impairment                 |       | (762,345        | )          |
| Balance at  December 31, 2008 |       | 768,646         |       |
| Loss on impairment                 |       | (60,794         | )          |
| Balance at  December 31, 2009 |       | $               | 707,852    |   |

 

If actual market conditions are less favorable than those projected bythe industry or the Company, or if events occur or circumstances change thatwould reduce the fair value of the Company’s broadcasting licenses below theamount reflected in the balance sheet, the Company may be required to recognizeimpairment charges, which may be material, in future periods.

 

***BroadcastingLicenses Impairment For The Year Ended December 31, 2008***

 

During the fourth quarter of2008, the Company determined that the fair value of the broadcasting licenseswas less than the amount reflected in the balance sheet for each of itsmarkets, other than Seattle, and recorded an impairment loss of $645.3 million.The impairment loss was indicative of a trend in the broadcast industry and wasnot unique to the Company. Factors that contributed to the impairment loss werechanges in estimates and assumptions since the most recent annual test in thefirst quarter of 2008, including but not limited to: (1) a decrease of upto 50% in advertising revenue growth projections to the low single digits forthe broadcasting industry; (2) a decrease in operating profit margins ofup to 4 percentage points; and (3) an increase in the cost of capital by25% to the low double digits from the high single digits.

 

During the second quarter of2008, the Company determined that the fair value of several of its markets’broadcasting licenses was impaired under the second step of its annual goodwillanalysis. As a result, the Company recorded an impairment loss in the Denver,Greenville, Indianapolis and Memphis markets on an aggregate basis of $117.0million and reduced its carrying value of broadcasting licenses. Contributingfactors to the impairment were a decline in the available advertising dollarsin these markets and its effect on the Company’s operations, coupled withchanges in the anticipated growth of these markets.

 

Except asotherwise described herein, during the first quarter of 2008, the Companycompleted the non-amortizing intangible asset impairment test for broadcastinglicenses and determined that the fair value of the broadcasting licenses wasequal to or greater than the amount reflected in the balance sheet for each ofthe Company’s markets.  Based upon theseresults, no impairment charges were recorded.

 

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During thefirst quarter of 2008, the Company reviewed its carrying amount for theRochester assets held for sale at that time and determined that an aggregateimpairment loss for broadcasting licenses of $6.4 million was necessary due to:(1) the continued decline in advertising revenues; (2) the filing ofan application with the FCC to place these stations into a disposition trust;and (3) the potential for a forced sale by the disposition trustee (forfurther discussion, see Note 17, Discontinued Operations).  The impairment loss was reflected in thestatement of operations as discontinued operations.

 

***BroadcastingLicenses Impairment For The Year Ended December 31, 2007***

 

The Company completed thenon-amortizing intangible asset impairment test for broadcasting licenses anddetermined that the fair value of the broadcasting licenses was less than theamount reflected in the balance sheet for several of the markets tested,including New Orleans, Greensboro and Norfolk. As a result, the Companyrecorded an impairment loss of $38.7 million. Contributing factors to theimpairment loss were a decline in the available advertising dollars in thesemarkets and its effect on the Company’s operations, coupled with changes in theanticipated growth of these markets. In addition, the broadcasting licenses inNew Orleans were impacted by the longer-than-expected economic recovery of theregion after Hurricane Katrina.

 

***(2) Goodwill***

 

The Company performs its annual impairmenttest on its goodwill during the second quarter of each year by comparing thefair value for each reporting unit with the amount reflected on the balancesheet. The Company has determined that a radio market is a reporting unit and,in total for 2009, the Company assessed goodwill at 22 separate reportingunits. If the fair value for any reporting unit is less than the amountreflected in the balance sheet, an indication exists that the amount ofgoodwill attributed to a reporting unit may be impaired, and the Company isrequired to perform a second step of the impairment test. In the second step,the Company compares, to the amount reflected in the balance sheet, the impliedfair value of the reporting unit’s goodwill, determined by allocating thereporting unit’s fair value to all of its assets and liabilities in a mannersimilar to a purchase price allocation.

 

To determine the fair value, the Company uses an income and marketapproach for each reporting unit. The market approach compares recent sales andoffering prices of similar properties. The income approach uses the subjectproperty’s income generated over a specified time and capitalized at anappropriate market rate to arrive at an indication of the most probable sellingprice.

 

***Goodwill Impairment For The Year Ended December 31,2009***

 

Instep one of the Company’s goodwill analysis during the second quarter, theCompany considered the results of the market approach and the income approachin computing the fair value of the Company’s reporting units. In the marketapproach, the Company applied an estimated market multiple of six times(consistent with the multiple used in the fourth quarter of 2008) to eachreporting unit’s operating performance to calculate the fair value. The Companyapplied the same market multiple consistently across all reporting units. Inthe income approach, the Company utilized the discounted cash flow method tocalculate the fair value of the reporting unit (key estimates and assumptionsare included in the table below). The results of step one indicated that it wasnecessary to perform the second step analysis in seven of the 22 markets (eachmarket is a reporting unit). The fair values for two of the seven markets weremarginally above book value. Management believes that these approaches arecommonly used methodologies for valuing broadcast radio stations and that a sixtimes multiple is an appropriate measurement given the recent fall in marketvaluations of broadcast radio stations together with a historically low levelof market transactions in recent months. The marginal stations wereincluded in the Company’s step two impairment testing due to the subjectivenature of the step one analysis (unobservable inputs) and the sensitivities inherentin these calculations. Factors contributing to the determination of thereporting unit’s operating performance were historical performance and/ormanagement’s estimates of future performance.

 

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 $6.9 millionduring the second quarter of 2009.Contributing factors to the impairment were a decline in the advertisingdollars in these markets and its effect on the Company’s operations, coupledwith changes in the anticipated growth and profitability of these markets.

 

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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 were less than those originallyforecasted for 2009, which caused further goodwill impairment in the secondquarter of 2009. 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.

 

Goodwill reflected in thebalance sheet as of December 31, 2009 was $38.2 million.  If actual market conditions are lessfavorable than those projected by the industry or the Company, or if an eventoccurs or circumstances change that would reduce the fair value of the Company’sgoodwill below the amount reflected in the balance sheet, the Company may berequired to recognize impairment charges in future periods.

 

The following table reflects the Company’sthree key estimates and assumptions since the most recent impairment test inthe fourth quarter of 2008.  The tablealso depicts the range of operating profit margin and market long-term revenuegrowth rates for the Company’s markets.  In general, when comparingbetween the second quarter of 2009 and the fourth quarter of 2008: (1) themarket specific operating profit margin range declined; and (2) the marketlong-term revenue growth rates were consistent; however, current periodrevenues were less than previously projected for 2009.

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

 

The following table presents the changes in goodwill for each of theyears ended December 31, 2009, 2008 and 2007:

 
| ** **                                                                     | ** ** | **Goodwill Carrying Amount** | ** ** |
|--------------------------------------------------------------------------------|------------|------------------------------|------------|
| ** **                                                                     | ** ** | **2009**                     | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                                                                     | ** ** | **(amounts in thousands)**   | ** ** |
| Goodwill balance before  cumulative loss on impairment as of January 1,   |       | $                            | 163,783    |   | $ | 160,976 |   | $ | 157,242 |   |
| Accumulated loss on  impairment as of January 1,                          |       | (118,733                     | )          | (45,362 | ) | — |   |
| Goodwill balance after  cumulative loss on impairment as of January 1,    |       | 45,050                       |       | 115,614 |   | 157,242 |   |
| Loss on impairment during  year                                                |       | (6,882                       | )          | (73,371 | ) | (45,353 | ) |
| Assets held for sale                                                           |       | —                       |       | — |   | (237 | ) |
| Deconsolidated entities                                                        |       | —                       |       | — |   | (3,771 | ) |
| Acquisitions                                                                   |       | —                       |       | 2,807 |   | 7,733 |   |
| Goodwill balance as of  December 31,                                      |       | $                            | 38,168     |   | $ | 45,050 |   | $ | 115,614 |   |
|                                                                           |       |                         |       |   |   |   |   |
| Goodwill balance before  cumulative loss on impairment as of December 31, |       | $                            | 163,783    |   | $ | 163,783 |   | $ | 160,967 |   |
| Accumulated loss on  impairment as of December 31,                        |       | (125,615                     | )          | (118,733 | ) | (45,353 | ) |
| Goodwill balance as of  December 31,                                      |       | $                            | 38,168     |   | $ | 45,050 |   | $ | 115,614 |   |

 

***Goodwill Impairment Loss For The Year Ended December 31,2008***

 

During the fourth quarter of2008, the Company performed an interim impairment test of its goodwill anddetermined under the second step that the fair value of the Company’s goodwillwas less than the amount reflected in the balance sheet for three of themarkets tested, including Greenville, Indianapolis and Memphis, and recorded animpairment loss of $5.8 million. Factors that contributed to the impairmentloss were changes in estimates and assumptions since the most recent annualtest in the second quarter of 2008, including but not limited to: (1) a

 

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decrease of up to 50% in advertising revenuegrowth projections to the low single digits for the broadcasting industry; (2) adecrease in operating profit margins of up to seven percentage points; and (3) anincrease in the cost of capital by 25% to the low double digits from the highsingle digits.

 

In determining which markets totest prior to the second step as described above, the Company computed theenterprise value by applying an estimated market multiple of mid to highersingle digits (which was a decrease from the market multiple of low doubledigits that was used in the test during the second quarter of 2008) to theoperating performance of each reporting unit. The Company applied the same market multiple consistently across allreporting units and determined that 15 of 23 markets tested may beimpaired.  Factors contributing to thedetermination of the reporting unit’s operating performance were historicalperformance and/or management’s estimates of future performance.

 

During the second quarter of2008, the Company performed its annual impairment test and, as a result, theCompany recorded an impairment loss of $67.6 million on an aggregate basis forthe Denver and Indianapolis markets. 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 their impact on prices paid for radio stations.

 

During thefirst quarter of 2008, the Company reviewed its carrying amount for theRochester assets held for sale at that time and determined that an impairmentloss for goodwill of $0.3 million was necessary due to: (1) the continueddecline in advertising revenues; (2) the filing of an application with theFCC to place these stations into a disposition trust; and (3) thepotential for a forced sale by the disposition trustee (for further discussion,see Note 17, Discontinued Operations). The impairment loss was reflected in thestatement of operations as discontinued operations.

 

***Goodwill Impairment For The Year Ended December 31,2007***

 

The Company performed itsannual impairment test during the second quarter of 2007 and determined that itwas necessary to record an impairment loss of $45.3 million for the Denvermarket. A contributing factor to the impairment was a decline in theadvertising dollars in the Denver market and its effect on the Company’soperations.

 

**(B) Definite-Lived Intangibles**

 

The Company has definite-livedintangible assets that consist of advertiser lists and customer relationships,and acquired advertising contracts. These assets are amortized over the periodfor which the assets are expected to contribute to the Company’s future cashflows and are reviewed for impairment whenever events or changes incircumstances indicate that the carrying amount of an asset may not berecoverable. For the years ended December 31, 2009, 2008 and 2007, theCompany reviewed the carrying value and the useful lives of these assets anddetermined they were appropriate. The amount of the amortization expense fordefinite-lived intangible assets was $0.2 million, $2.9 million and $0.8million for the years ended December 31, 2009, 2008 and 2007,respectively.

 

As of December 31, 2009,2008, the Company reflected $0.8 million and $0.9 million, respectively, inunamortized definite-lived assets, which amounts are as follows and areincluded in deferred charges and other assets on the balance sheet.  For a listing of the assets comprisingdeferred charges and other assets, refer to Note 6, Deferred Charges And OtherAssets.

 

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| ** **                                   | ** ** | **December 31, 2009** | ** ** |
|----------------------------------------------|------------|----------------------------|------------|
| ** **                                   | ** ** | **Gross  Carrying**        | ** ** | **Accumulated** | ** ** | ** ** | ** ** |
| ** **                                   | ** ** | **Amount**                 | ** ** | **Amortization** | ** ** | **Net Amount** | ** ** |
| ** **                                   | ** ** | **(amounts in thousands)** | ** ** |
| ** **                                   |       |                       |       |   |   |   |   |
| Advertiser lists and  customer relationships |       | $                          | 656        |   | $ | 615 |   | $ | 41 |   |
| Acquired advertising  contracts              |       | 6,352                      |       | 6,352 |   | — |   |
| Permits, patents and  trademarks             |       | 13                         |       | 11 |   | 2 |   |
| Deferred contracts and  other agreements     |       | 1,618                      |       | 875 |   | 743 |   |
| Total                                        |       | $                          | 8,639      |   | $ | 7,853 |   | $ | 786 |   |

 
| ** **                                   | ** ** | **December 31, 2008** | ** ** |
|----------------------------------------------|------------|----------------------------|------------|
| ** **                                   | ** ** | **Gross  Carrying**        | ** ** | **Accumulated** | ** ** | ** ** | ** ** |
| ** **                                   | ** ** | **Amount**                 | ** ** | **Amortization** | ** ** | **Net Amount** | ** ** |
| ** **                                   | ** ** | **(amounts in thousands)** | ** ** |
| ** **                                   |       |                       |       |   |   |   |   |
| Advertiser lists and  customer relationships |       | $                          | 656        |   | $ | 575 |   | $ | 81 |   |
| Acquired advertising  contracts              |       | 6,352                      |       | 6,352 |   | — |   |
| Permits, patents and  trademarks             |       | 13                         |       | 9 |   | 4 |   |
| Deferred contracts and  other agreements     |       | 1,618                      |       | 761 |   | 857 |   |
| Total                                        |       | $                          | 8,639      |   | $ | 7,697 |   | $ | 942 |   |

 

The following table presentsthe Company’s estimate of amortization expense for definite-lived assets foreach of the five succeeding years ended December 31:

 
| ** **                      | ** ** | **Definite-**     | ** ** |
|---------------------------------|------------|-------------------|------------|
| ** **                      | ** ** | **Lived**         | ** ** |
| ** **                      | ** ** | **Assets**        | ** ** |
| ** **                      | ** ** | **(amounts**      | ** ** |
| ** **                      | ** ** | **in thousands)** | ** ** |
| Years ending  December 31, |       |              |       |
| 2010                            |       | $                 | 124        |   |
| 2011                            |       | 84                |       |
| 2012                            |       | 81                |       |
| 2013                            |       | 53                |       |
| 2014                            |       | 49                |       |
| Thereafter                      |       | 395               |       |
| Total                           |       | $                 | 786        |   |

 

**4.             ACQUISITIONS, DIVESTITURES, OTHEREVENTS AND PRO FORMA SUMMARY**

 

The Company consummatedacquisitions of radio stations under the purchase method of accounting, and thepurchase price, including transaction costs for acquisitions prior to 2009, wasallocated to the assets based upon their respective fair values as determinedas of the purchase date.

 

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***Acquisitions AndDispositions For The Year Ended December 31, 2009***

 

Therewere no acquisitions during the above period (other than as disclosed underNote 9, Financing Method Lease Obligations and Note 12, Contingencies,Commitments and Guarantor Arrangements), during the year ended December 31,2009.

 

***Acquisition For TheYear Ended December 31, 2008***

 

**Acquisition Of Three Stations In SanFrancisco, California, In Exchange For Four Stations In Cincinnati, Ohio, AndThree Stations In Seattle, Washington**

 

On March 14, 2008, the Company completed an exchange transactionto acquire three radio stations in San Francisco, California, and $1.0 millionin cash for four radio stations in Cincinnati, Ohio, and three radio stationsin Seattle, Washington.  The fair valueof the assets acquired in exchange for the assets disposed was accounted forunder purchase price accounting, which resulted in a fair value of $220.0million.

 

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 Company reported a gain on sale or disposal ofassets of $10.0 million, which was primarily attributable to the disposition ofthe three radio stations in the Seattle 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 |

 

On February 26, 2007, each party to the exchange transactioncommenced operations of the counter-party’s respective radio stations pursuantto a TBA.  During the period of the TBA,the Company: (1) included net revenues and station operating expensesassociated with operating the San Francisco stations in the Company’s financialstatements; and (2) excluded net revenues and station operating expensesassociated with operating the Cincinnati stations and three of the Seattlestations in the Company’s consolidated financial statements. TBA income and TBAfees were equal in amount under the TBA agreements (other than the first threemonths when TBA income exceeded TBA expense by $0.3 million).

 

During the period subsequent tothe acquisition of the Cincinnati stations by the Company and prior to thedisposition of the Cincinnati stations by the Company (November 30, 2007through March 14, 2008), there were no revenues or station operatingexpenses reported by the Company, as the counter-party to the exchangeagreement operated these stations pursuant to a TBA.

 

For the three radio stationsacquired in San Francisco, the aggregate purchase price, including transactioncosts of $0.4 million, was allocated as follows:

 

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| **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    |             |       |   |

 

These assets were reviewed for impairment asdescribed in Note 3, Intangible Assets And Goodwill.

 

***Dispositions For TheYear Ended December 31, 2008***

 

**Rochester, New York**

 

On July 14, 2008, theCompany completed the sale of three radio stations, WRMM-FM, WZNE-FM andWFKL-FM, for $12.2 million in net cash proceeds.  Pursuant to a TBA and an agreement of saledated April 28, 2008, the buyer commenced operation of these stations on May 1,2008. During the third quarter of 2008, the Company recorded a $0.7 million gainon the disposition, which amount was recorded as discontinued operations. Uponcompletion of this transaction, the Company continues to own and operate fiveradio stations in the Rochester market.

 

As background on thisdisposition, on November 30, 2007, the Company purchased the assets offour radio stations serving the Rochester radio market.  In connection with certain regulatoryrequirements, the Company agreed to divest three radio stations, two of whichwere radio stations that were acquired on November 30, 2007.

 

**Austin, Texas**

 

On January 15, 2008, theCompany sold the radio station assets of KLQB-FM, formerly KXBT-FM, in Austin,Texas, for $20.0 million in cash.  Thebuyer had operated this station under a TBA since February 26, 2007. TheCompany believes that the divestiture of this station will not alter thecompetitive position of the remaining three stations the Company currentlyoperates in this market.  No gain or losswas reported on the sale.

 

As background on thisdisposition, on November 30, 2007, the Company purchased the assets offour radio stations serving the Austin radio market.

 

***Acquisitions For TheYear Ended December 31, 2007***

 

**Springfield,Massachusetts, Acquisition**

 

On December 10,2007, the Company acquired the radio station assets of WVEI-FM (formerlyWBEC-FM), serving the Springfield, Massachusetts, radio market, for $5.8million in cash, of which $2.3 million was paid as a deposit and $3.5 millionwas paid from funds borrowed under the Company’s senior credit facility. TheCompany commenced operations under a TBA on October 26, 2006 and includedthe net revenues, station operating expenses and TBA fees associated withoperating this station in the Company’s consolidated financial statements forthe years ended December 31, 2007 and 2006. The Company recorded less than$0.1 million of goodwill, which amount is fully deductible for income taxpurposes. Under the asset purchase agreement and the TBA, the Company did notassume any advertising contracts nor hire any employees. The proximity of thismarket to the stations that the

 

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Company currently operates inthe Boston radio market has allowed for certain synergies in programming, salesand administration.  The Company does notcurrently own or operate any other radio stations in this market.

 

For thisacquisition, the aggregate purchase price, including transaction costs of lessthan $0.1 million, was allocated as follows:

 
| **Description**         | ** ** | **Amount**         | ** ** | **Useful Lives** | ** ** |
|-------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **              | ** ** | **(in thousands)** | ** ** | ** **            | ** ** |
| ** **              | ** ** | ** **         | ** ** |                       | ** ** |
| Equipment               |       | $                  | 50         |                  | 5 years    |   |
| Total tangible assets   |       | 50                 |       |                  |       |
|                    |       |               |       |                       |       |
| Broadcasting licenses   |       | 5,700              |       | non-amortizing        |       |
| Goodwill                |       | 17                 |       | non-amortizing        |       |
| Total intangible assets |       | 5,717              |       |                  |       |
|                    |       |               |       |                       |       |
| Total purchase price    |       | $                  | 5,767      |                  |       |   |

 

**Cincinnati, Ohio, Exchange**

 

On December 5, 2007, theCompany completed a transaction to exchange WGRR-FM, a radio station includedin the acquisition described below, for WSWD-FM and certain other intellectualproperty.  WSWD-FM, with a frequency of94.9 on the FM band, had several call letter changes (in most recent order,formerly WYGY-FM and WPRV-FM). Each of the stations included in the exchange,WGRR-FM and WSWD-FM, serves the Cincinnati, Ohio, radio market. Concurrentlywith entering into the asset exchange agreement, the Company also entered intoreciprocal TBAs. Pursuant to these TBAs, on November 1, 2006, each partyto the transaction commenced operations of their respective radio station. TheCompany included the net revenues and station operating expenses associatedwith operating WSWD-FM in the Company’s consolidated financial statements forthe years ended December 31, 2007 and 2006. Under the asset purchaseagreement and the TBA, there were very few employees hired and a minimal numberof contracts assumed.

 

The fair value of the assetsacquired in exchange for the assets disposed, resulted in a fair value of $31.0million.  WSWD-FM, together with theother acquired Cincinnati radio station assets as described below, was disposedof on March 14, 2008, in connection with the exchange transactiondescribed above. The WSWD-FM assets acquired were not amortized during theyears ended December 31, 2008 and 2007 as these assets were part of adisposal group.

 

Forthis acquisition and disposition, the aggregate purchase price was allocated asfollows:

 
| ** **                      | ** ** | **Assets**                 | ** ** | **Assets**   | ** ** |
|---------------------------------|------------|----------------------------|------------|--------------|------------|
| ** **                      | ** ** | **Acquired**               | ** ** | **Disposed** | ** ** |
| ** **                      | ** ** | **(amounts in thousands)** | ** ** |
| ** **                      | ** ** | ** **                 | ** ** | ** **   | ** ** |
| Equipment                       |       | $                          | 208        |         | $          | 206 |   |
| Total tangible assets           |       | 208                        |       | 206          |       |
|                            |       |                       |       |         |       |
| Acquired advertising  contracts |       | —                     |       | 5            |       |
| Broadcasting licenses           |       | 30,787                     |       | 30,787       |       |
| Goodwill                        |       | 5                          |       | 2            |       |
| Total intangible assets         |       | 30,792                     |       | 30,794       |       |
|                            |       |                       |       |         |       |
| Total purchase price            |       | $                          | 31,000     |         | $          | 31,000 |   |

 

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**Austin, Texas; Cincinnati, Ohio; And Memphis,Tennessee, Acquisition**

 

On November 30, 2007, theCompany acquired the assets of 11 radio stations serving the Memphis, Austinand Cincinnati radio markets for a purchase price of $220.0 million in cash.The funds used to complete this transaction were borrowed under the Company’ssenior credit facility. The Company recorded $2.8 million of goodwill, whichamount is fully deductible for income tax purposes. On November 1, 2006,the Company commenced operations of these radio stations (other than WGRR-FM asdescribed in the exchange transaction above) under a TBA. The net revenues,station operating expenses and TBA fees associated with operating thesestations were included in the consolidated financial statements for the yearsended December 31, 2007 and 2006. With this acquisition, the Company entered into two new radio markets:Austin and Cincinnati (the Company exited the Cincinnati market in February 2007).In Memphis, the acquisition of three radio stations added to the three radiostations that the Company currently owns and operates in this market.  The Company believes that this acquisitionprovided: (1) an opportunity to increase the market share of the Memphisradio stations; (2) an improvement in the Company’s geographicaldiversity; and (3) an improvement in the Company’s ability to compete moreeffectively on a national basis.

 

For thisacquisition, the aggregate purchase price, including transaction costs of $0.4million, was allocated as follows:

 
| **Description**                                    | ** ** | **Amount**         | ** ** | **Useful Lives**             | ** **       |
|----------------------------------------------------|------------|--------------------|------------|------------------------------|------------------|
| ** **                                         | ** ** | **(in thousands)** | ** ** | ** **                   | ** **       |
| ** **                                         | ** ** | ** **         | ** ** |                              | ** **       |
| Land                                               |       | $                  | 1,374      |                         | non-depreciating |   |
| Building                                           |       | 191                |       | 2 to 20 years                |             |
| Leasehold improvements                             |       | 837                |       | 2 to 4 years                 |             |
| Equipment                                          |       | 5,416              |       | 5 to 15 years                |             |
| Furniture and fixtures                             |       | 236                |       | 5 years                      |             |
| Total tangible assets                              |       | 8,054              |       |                         |             |
|                                               |       |               |       |                              |             |
| Acquired income leases                             |       | 855                |       | over the life of each  lease |             |
| Favorable leases                                   |       | 424                |       | over the life of each  lease |             |
| Advertiser lists and  customer relationships       |       | 36                 |       | 3 years                      |             |
| Acquired advertising  contracts                    |       | 966                |       | less than one year           |             |
| Broadcasting licenses                              |       | 69,203             |       | non-amortizing               |             |
| Goodwill                                           |       | 2,849              |       | non-amortizing               |             |
| Total intangible assets                            |       | 74,333             |       |                         |             |
|                                               |       |               |       |                              |             |
| Assets contained in the  deconsolidated subsidiary |       | 119,250            |       | non amortizing               |             |
| Assets acquired and held  for sale                 |       | 20,065             |       | non amortizing               |             |
|                                               |       |               |       |                              |             |
| Total assets                                       |       | 221,702            |       |                         |             |
| Asset retirement liability                         |       | 51                 |       | less than one year           |             |
| Unfavorable lease  liabilities                     |       | 1,283              |       | 10 to 23 years               |             |
| Total purchase price                               |       | $                  | 220,368    |                         |             |   |

 

Included in the aboveacquisition were: (1) assets of $119.3 million contained in adeconsolidated subsidiary that comprised four radio stations in Cincinnati; and(2) assets of $20.1 million acquired and held for sale for one station inAustin, KLQB-FM (formerly KXBT-FM). These assets were not amortized during theyears ended December 31, 2008 and 2007 as these assets were part of adisposal group in accordance with accounting guidelines.

 

**Rochester,New York, Acquisition**

 

On November 30, 2007, theCompany acquired the assets of four radio stations serving the Rochester radiomarket for a purchase price of $42.0 million in cash. The funds used tocomplete this transaction were borrowed under the Company’s senior creditfacility. The Company recorded $0.7 million of goodwill, which amount is fully

 

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deductible for income tax purposes. Theacquisition of these four radio stations added to the four radio stations thatthe Company currently owns and operates in this market.

 

The FCC imposes specific limitson the number of commercial radio stations an entity can own in a singlemarket. Due to these restrictions, the Company cannot own or operate more thanfive FM radio stations in this market. In addition, the Company is required tomeet certain requirements under the Hart-Scott-Rodino Antitrust ImprovementsAct of 1976, as amended.  In connectiontherewith, the Company agreed with the U.S. Department of Justice to divestthree FM radio stations in this market. See Note 4 for a discussion of the disposition in Rochester, New York,on July 14, 2008. Upon the divestiture of three radio stations, theCompany owns and operates five radio stations in the Rochester, New York,market.  The Company believes that thisacquisition, net of the disposition, provides enhanced revenue opportunitiesand operating efficiencies for the Rochester radio station cluster.

 

For thisacquisition, the aggregate purchase price, including transaction costs of $0.1million, was allocated as follows:

 
| **Description**                              | ** ** | **Amount**         | ** ** | **Useful Lives** | ** **    |
|----------------------------------------------|------------|--------------------|------------|------------------|---------------|
| ** **                                   | ** ** | **(in thousands)** | ** ** | ** **       | ** **    |
|                                         |       |               |       |                  |          |
| Equipment                                    |       | $                  | 1,557      |             | 3 to 15 years |   |
| Furniture and equipment                      |       | 122                |       | 5 years          |          |
| Total tangible assets                        |       | 1,679              |       |             |          |
|                                         |       |               |       |                  |          |
| Advertiser lists and  customer relationships |       | 27                 |       | 3 years          |          |
| Acquired advertising  contracts              |       | 209                |       | less than 1 year |          |
| Broadcasting licenses                        |       | 21,387             |       | non-amortizing   |          |
| Goodwill                                     |       | 704                |       | non-amortizing   |          |
| Total intangible assets                      |       | 22,327             |       |             |          |
|                                         |       |               |       |                  |          |
| Assets acquired and held  for sale           |       | 18,116             |       | non amortizing   |          |
|                                         |       |               |       |                  |          |
| Total assets                                 |       | 42,122             |       |             |          |
| Asset retirement liability                   |       | 25                 |       | less than 1 year |          |
| Total purchase price                         |       | $                  | 42,097     |             |          |   |

 

The following is a summary ofthe transactions that affected the Rochester market:

 
| **Radio Stations**                    | ** ** | **Transaction**                            |
|---------------------------------------|------------|--------------------------------------------|
| WCMF-FM; WPXY-FM; WRMM-FM and WZNE-FM |       | Company acquired on November 30, 2007 |
| WFKL-FM; WRMM-FM and WZNE-FM          |       | Company disposed on July 14, 2008     |

 

***Supplemental Pro FormaInformation***

 

The following unauditedsupplemental pro forma information presents the consolidated results ofoperations as if any acquisitions, which occurred during the period as of January 1,2009 and as of January 1, 2008, had all occurred as of the beginning ofeach period presented, after giving effect to certain adjustments, includingdepreciation and amortization of assets and interest expense on any debtincurred to fund the acquisitions which would have been incurred had suchacquisitions occurred as of January 1, 2008. For purposes of thispresentation, the data does not reflect on a pro forma basis dispositions ofradio stations (other than the disposition of: (1) a radio station inCincinnati (WGRR-FM) as the Company never operated this station; and (2) thedisposition of radio stations in Seattle and Cincinnati as this disposition wasin exchange for the assets in San Francisco as described in Note 4).  In addition, the tables reflect, on a proforma basis, information as if the discontinued operations in Rochester werenot discontinued. 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.

 

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| ** **                                              | ** ** | **Years Ended  December 31,**                   | ** ** |
|---------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                              | ** ** | **2009**                                             | ** ** | **2008** | ** ** |
| ** **                                              | ** ** | **(amounts in thousands,  except   per share data)** | ** ** |
| ** **                                              | ** ** | ** **                                           | ** ** | **(unaudited)** | ** ** |
| ** **                                              | ** ** | **Actual**                                           | ** ** | **Proforma** | ** ** |
| ** **                                              |       |                                                 | ** ** | ** ** | ** ** |
| Net revenues                                            |       | $                                                    | 372,432    |   | $ | 440,262 |   |
| Net income (loss)                                       |       | $                                                    | 5,398      |   | $ | (526,801 | ) |
| Net income (loss) per  common share - basic and diluted |       | $                                                    | 0.15       |   | $ | (14.32 | ) |

 

**5.****             INVESTMENTS**

 

The Company’s investmentstrategy is to seek long-term strategic investments to enhance its corebusiness. The investments, noted in the table below, are comprised primarily ofequity securities for which the Company does not have the ability to exercisesignificant influence over the operating and financial policies of theinvestee. These investments are classified as available-for-sale and arecarried at fair value based upon quoted market prices or historical cost whenquoted market prices are unavailable. The net unrealized gain or loss, net oftaxes (benefit), on these investments is reported in the statements ofcomprehensive income (loss) and as a separate component of shareholders’equity. Any net realized gains or losses are reported in the statements ofoperations.

 

The followingtable summarizes the activities of the Company’s investments for the yearsended December 31, 2009, 2008 and 2007:

 
| ** **                         | ** ** | **Investments** | ** ** |
|------------------------------------|------------|-----------------|------------|
| ** **                         | ** ** | **(amounts in** | ** ** |
| ** **                         | ** ** | **thousands)**  | ** ** |
| ** **                         | ** ** | ** **      | ** ** |
| Balance at  December 31, 2006 |       | $               | 4,867      |   |
| Additional investment              |       | 68              |       |
| Recovery of investment             |       | (8              | )          |
| Divestiture of investment          |       | (2,605          | )          |
| Fair value or cost  adjustments    |       | (421            | )          |
| Balance at  December 31, 2007 |       | 1,901           |       |
| Additional investment              |       | 6               |       |
| Recovery of investment             |       | (9              | )          |
| Divestiture of investment          |       | (345            | )          |
| Fair value or cost  adjustments    |       | (154            | )          |
| Balance at  December 31, 2008 |       | 1,399           |       |
| Recovery of investment             |       | (19             | )          |
| Divestiture of investment          |       | (20             | )          |
| Fair value or cost  adjustments    |       | (966            | )          |
| Balance at  December 31, 2009 |       | $               | 394        |   |

 

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For those investments carriedat cost, the Company does not estimate fair value unless events orcircumstances arise that indicate a change in the fair value of theinvestment.  At December 31, 2009,in conjunction with the preparation of its financial statements, the Companyconcluded it had an event that required an assessment of its investment carriedat cost. As a result of this assessment, the Company recorded an impairment of$1.0 million to its consolidated statement of operations for the year ended December 31,2009. In the statements of comprehensive income (loss), for the year ended December 31,2008, the Company recorded an unrealized gain of $0.1 million (net of an incometax benefit of $0.1 million) and for the year ended December 31, 2007, theCompany recorded an unrealized loss of $0.3 million (net of an income taxbenefit of $0.1 million).

 

***Unrealized Gains And Losses As Of December 31, 2009, 2008 and 2007***

 

The followingchart reflects the aggregate related fair value of investments, with unrealizedgains and or losses that were segregated by the time period over which theinvestments were in an unrealized gains and/or losses position, including thosecost method investments not evaluated for impairment:

 
| ** **                                              | ** ** | **December 31, 2009** | ** ** |
|---------------------------------------------------------|------------|----------------------------|------------|
| ** **                                              | ** ** | **(amounts in thousands)** | ** ** |
| ** **                                              | ** ** | ** **                 | ** ** | **Aggregate Fair Value Of  Investments** | ** ** |
| ** **                                              | ** ** | **Total**                  | ** ** | **With Unrealized Gains  And/Or (Losses)** | ** ** |
| ** **                                              | ** ** | **Aggregate**              | ** ** | **Unrealized Gains** | ** ** | **Unrealized (Losses)** | ** ** |
| ** **                                              | ** ** | **Fair Value Of**          | ** ** | **Less Than** | ** ** | **1 year** | ** ** | **Less Than** | ** ** | **1 year** | ** ** |
| ** **                                              | ** ** | **Investments**            | ** ** | **1 Year** | ** ** | **Or Greater** | ** ** | **1 Year** | ** ** | **Or Greater** | ** ** |
| Investments carried at  fair value                      |       | $                          | —     |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| Investments at cost where  fair value was not estimated |       | 394                        |       | — |   | — |   | (966 | ) |   |   |
| Investments reflected  under the equity method          |       | —                     |       | — |   | — |   | — |   | — |   |
|                                                    |       | $                          | 394        |   | $ | — |   | $ | — |   | $ | (966 | ) | $ | — |   |

 
| ** **                                              | ** ** | **December 31, 2008** | ** ** |
|---------------------------------------------------------|------------|----------------------------|------------|
| ** **                                              | ** ** | **(amounts in thousands)** | ** ** |
| ** **                                              | ** ** | ** **                 | ** ** | **Aggregate Fair Value Of  Investments** | ** ** |
| ** **                                              | ** ** | **Total**                  | ** ** | **With Unrealized Gains  And/Or (Losses)** | ** ** |
| ** **                                              | ** ** | **Aggregate**              | ** ** | **Unrealized Gains** | ** ** | **Unrealized (Losses)** | ** ** |
| ** **                                              | ** ** | **Fair Value Of**          | ** ** | **Less Than** | ** ** | **1 year** | ** ** | **Less Than** | ** ** | **1 year** | ** ** |
| ** **                                              | ** ** | **Investments**            | ** ** | **1 Year** | ** ** | **Or Greater** | ** ** | **1 Year** | ** ** | **Or Greater** | ** ** |
| Investments carried at  fair value                      |       | $                          | —     |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| Investments at cost where  fair value was not estimated |       | 1,399                      |       | — |   | — |   | (154 | ) | — |   |
| Investments reflected  under the equity method          |       | —                     |       | — |   | — |   | — |   | — |   |
|                                                    |       | $                          | 1,399      |   | $ | — |   | $ | — |   | $ | (154 | ) | $ | — |   |

 
| ** **                                              | ** ** | **December 31, 2007** | ** ** |
|---------------------------------------------------------|------------|----------------------------|------------|
| ** **                                              | ** ** | **(amounts in thousands)** | ** ** |
| ** **                                              | ** ** | ** **                 | ** ** | **Aggregate Fair Value Of  Investments** | ** ** |
| ** **                                              | ** ** | **Total**                  | ** ** | **With Unrealized Gains  And/Or (Losses)** | ** ** |
| ** **                                              | ** ** | **Aggregate**              | ** ** | **Unrealized Gains** | ** ** | **Unrealized (Losses)** | ** ** |
| ** **                                              | ** ** | **Fair Value Of**          | ** ** | **Less Than** | ** ** | **1 year** | ** ** | **Less Than** | ** ** | **1 year** | ** ** |
| ** **                                              | ** ** | **Investments**            | ** ** | **1 Year** | ** ** | **Or Greater** | ** ** | **1 Year** | ** ** | **Or Greater** | ** ** |
| Investments carried at  fair value                      |       | $                          | 345        |   | $ | — |   | $ | 203 |   | $ | (421 | ) | $ | — |   |
| Investments at cost where  fair value was not estimated |       | 1,556                      |       | — |   | — |   | — |   | — |   |
| Investments reflected  under the equity method          |       | —                     |       | — |   | — |   | — |   | — |   |
|                                                    |       | $                          | 1,901      |   | $ | — |   | $ | 203 |   | $ | (421 | ) | $ | — |   |

 

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**6.****             DEFERRED CHARGES AND OTHER ASSETS**

 

Deferredcharges and other assets, including definite-lived intangible assets, consistof the following as of December 31, 2009 and 2008:

 
| ** **                                                                                                   | ** ** | **December 31,**      | ** ** | ** ** | ** ** |
|--------------------------------------------------------------------------------------------------------------|------------|----------------------------|------------|------------|------------|
| ** **                                                                                                   | ** ** | **2009**                   | ** ** | **2008**   | ** ** | **Period Of Amortization** | ** ** |
| ** **                                                                                                   | ** ** | **(amounts in thousands)** | ** ** | ** ** | ** ** |
| ** **                                                                                                   | ** ** | ** **                 | ** ** | ** ** | ** ** | ** ** | ** ** |
| Debt issuance costs less  accumulated amortization of****$6,762 in  2009 and $6,623 in 2008                  | ** ** | $                          | 3,756      | ** ** | $          | 5,775 | ** ** | Term of Debt | ** ** |
| Software costs less  accumulated amortization of $7,712 in 2009 and $6,418 in 2008                           |       | 1,280                      |       | 2,454      |       | 3 years |   |
| Deferred contracts and  other agreements less accumulated amortization of $876 in 2009 and $761 in  2008     |       | 743                        |       | 857        |       | Term of contracts |   |
| Leasehold premium less  accumulated amortization of $1,026 in 2009 and $937 in 2008                          |       | 706                        |       | 795        |       | Term of Lease |   |
| Advertiser lists and  customer relationships less accumulated amortization of $615 in 2009 and $575  in 2008 |       | 41                         |       | 81         |       | 3 Years |   |
| Permits, patents and  trademarks less accumulated amortization of $11 in 2009 and $9 in 2008                 |       | 2                          |       | 4          |       | 5 years |   |
| Prepaid assets - long-term                                                                                   |       | 1,421                      |       | 1,600      |       | Not applicable |   |
| Deposits - long-term                                                                                         |       | 393                        |       | —     |       | Not applicable |   |
| Note receivable -  long-term                                                                                 |       | 144                        |       | 142        |       | Not applicable |   |
| Total                                                                                                        |       | $                          | 8,486      |       | $          | 11,708 |   |   |   |

 

The amounts of the amortizationexpense for deferred charges and other assets, including amortization expenseof definite-lived intangible assets as discussed in Note 3 and deferredfinancing expense, were $3.1 million, $5.8 million and $3.1 million for theyears ended December 31, 2009, 2008 and 2007, respectively. Amortizationexpense includes the amortization of computer software costs with anamortization period of three years. The amortization of software costswas $1.3 million, $1.2 million and $0.5 million for the years ended December 31,2009, 2008 and 2007,respectively. The amortization of deferred financing costs was charged tointerest expense for all periods presented.

 

The followingtable presents the Company’s estimate of amortization expense, for each of thefive succeeding years ended December 31, for deferred charges and otherassets:

 
| ** **                         | ** ** | **(amounts in** | ** ** |
|------------------------------------|------------|-----------------|------------|
| **Years ending December 31,** | ** ** | **thousands)**  | ** ** |
| 2010                               |       | $               | 2,743      |   |
| 2011                               |       | 1,833           |       |
| 2012                               |       | 881             |       |
| 2013                               |       | 162             |       |
| 2014                               |       | 109             |       |
| Thereafter                         |       | 800             |       |
| Total                              |       | $               | 6,528      |   |

 

**7.             INCOMETAXES (BENEFIT)**

 

***Expected And Reported Income Taxes (Benefit)***

 

Income taxexpense (benefit) computed using the United States federal statutory rates isreconciled to the reported income tax expense (benefit) as follows:

 

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| ** **                                                                                                 | ** ** | **Years Ended  December 31,** | ** ** |
|------------------------------------------------------------------------------------------------------------|------------|------------------------------------|------------|
| ** **                                                                                                 | ** ** | **2009**                           | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                                                                                                 | ** ** | **(amounts in thousands)**         | ** ** |
|                                                                                                       |       |                               |       |   |   |   |   |
| Federal statutory income  tax rate                                                                         |       | 35                                 | %          | 35 | % | 35 | % |
|                                                                                                       |       |                               |       |   |   |   |   |
| Computed tax expense  (benefit) at federal statutory rates on income (loss) before income taxes  (benefit) |       | $                                  | 59         |   | $ | (260,810 | ) | $ | (2,695 | ) |
| State income tax expense  (benefit), net of federal benefit                                                |       | 176                                |       | (32,042 | ) | 435 |   |
| Increase (decrease) in  valuation allowance (federal and state)                                            |       | —                             |       | 59,366 |   | — |   |
| Change in state income tax  rates                                                                          |       | —                             |       | — |   | 2,910 |   |
| Decrease in valuation  allowance for change in federal net operating loss carryback rules                  |       | (6,696                             | )          |   |   |   |   |
| Nondeductible expenses and  other                                                                          |       | 932                                |       | 886 |   | 539 |   |
| State income tax credit  associated with the relocation of studio facilities                               |       | —                             |       | — |   | (494 | ) |
| Income taxes (benefit)  from continuing operations                                                         |       | $                                  | (5,529     | ) | $ | (232,600 | ) | $ | 695 |   |

 

***Effective Tax Rate (Benefit)***

 

The Company’s tax benefit forthe year ended December 31, 2009 as a percentage of pre-tax income was notnumerically relevant. The Company’s tax rate (benefit) for the years ended December 31,2008 and 2007, was (31.2)% and 9.0%, respectively. The differences between the federal statutorytax rate of 35% and the effective tax rates are primarily due to: (1) valuationallowances; (2) state tax provisions; and (3) permanent differencesthat are not fully deductible for tax purposes such as meals and entertainment.

 

For the year ended December 31,2009, the effective income tax benefit of $5.5 million primarily resulted froma change in tax legislation during the fourth quarter of 2009 that allowed netoperating losses to be carried back for up to five years rather than two years.As a result, the Company applied for a $7.0 million tax refund using its 2008net operating loss. Included in the $7.0 million tax refund was the realizationof $0.3 million in dividend equivalent payments, which were recorded as anincrease to paid-in-capital. Due to the expected refund from the Internal RevenueService, the Company’s full valuation allowance against this deferred tax assetwas removed.  The Company also recordedthe expected refund from the Internal Revenue Service as prepaid and refundableincome taxes.

 

For the year ended December 31,2008, the effective income tax benefit was negatively impacted by an increaseof $59.4 million in the valuation allowance. The effective income tax rate in2007 was negatively impacted by a discrete item of tax of $2.9 million due to the commencement of operationsin 2007 in states which on average have higher income tax rates than in statesin which the Company previously operated and the resulting effect on previouslyreported temporary differences between the tax and financial reporting bases ofthe Company’s assets and liabilities.

 

For all years, the effectiveincome tax rate (benefit) was impacted by: (1) the effect of permanentdifferences between income subject to income tax for book and tax purposes; (2) limitson the deduction of certain compensation expense; (3) income taxes incertain states where the states’ current taxable income is dependent on factorsother than the Company’s consolidated net income; and (4) the effect ofrecording changes in the Company’s liabilities for uncertain tax position. Theeffective tax rate in 2007 was favorably impacted by a deferred tax asset of$0.5 million (net of a valuation allowance of $0.7 million) from a state incometax credit that resulted from the relocation of certain studio facilities inthat state.

 

The fluctuations in theeffective annual rate for these years was also due to: (1) changes in thelevel of income or loss 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 tax audits; (4) changes in the estimate of expenses that arenot deductible for tax purposes; and (5) additional states in which theCompany conducts business.

 

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An impairmentloss will result in an income tax benefit (before any valuation allowance)during the period incurred as the amortization of broadcasting licenses andgoodwill is deductible for income tax purposes. For the years ended December 31, 2009, 2008 and 2007, the Companyrecorded an income tax benefit of $26.7 million, $328.4 million and $33.0million, respectively. The Company recorded a full valuation allowance againstthe income tax benefit in 2009 and 2008.

 

***Income Tax Expense***

 

Income tax expense (benefit) from continuing operations for the yearsended December 31, 2009, 2008 and 2007 is summarized as follows:

 
| ** **                                               | ** ** | **Years Ended  December 31,** | ** ** |
|----------------------------------------------------------|------------|------------------------------------|------------|
| ** **                                               | ** ** | **2009**                           | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                                               | ** ** | **(amounts in thousands)**         | ** ** |
| ** **                                               | ** ** | ** **                         | ** ** | ** ** | ** ** | ** ** | ** ** |
| From continuing  operations:                             |       |                               |       |   |   |   |   |
| Current:                                                 |       |                               |       |   |   |   |   |
| Federal                                                  |       | $                                  | (5,800     | ) | $ | — |   | $ | (8,549 | ) |
| State                                                    |       | 271                                |       | — |   | (384 | ) |
| Total current                                            |       | (5,529                             | )          | — |   | (8,933 | ) |
|                                                     |       |                               |       |   |   |   |   |
| Deferred:                                                |       |                               |       |   |   |   |   |
| Federal                                                  |       | —                             |       | (183,304 | ) | 8,575 |   |
| State                                                    |       | —                             |       | (49,296 | ) | 1,053 |   |
| Total deferred                                           |       | —                             |       | (232,600 | ) | 9,628 |   |
|                                                     |       |                               |       |   |   |   |   |
| Total income taxes  (benefit) from continuing operations |       | $                                  | (5,529     | ) | $ | (232,600 | ) | $ | 695 |   |

 

Income taxexpense (benefit) from discontinued operations for the years ended December 31,2009, 2008 and 2007 is summarized as follows:

 
| ** **                                                 | ** ** | **Years Ended  December 31,** | ** ** |
|------------------------------------------------------------|------------|------------------------------------|------------|
| ** **                                                 | ** ** | **2009**                           | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                                                 | ** ** | **(amounts in thousands)**         | ** ** |
| From discontinued  operations:                             |       |                               |       |   |   |   |   |
| Current:                                                   |       |                               |       |   |   |   |   |
| Federal                                                    |       | $                                  | —     |   | $ | — |   | $ | 8 |   |
| State                                                      |       | —                             |       | — |   | 1 |   |
| Total current                                              |       | —                             |       | — |   | 9 |   |
|                                                       |       |                               |       |   |   |   |   |
| Deferred:                                                  |       |                               |       |   |   |   |   |
| Federal                                                    |       | —                             |       | (1,450 | ) | — |   |
| State                                                      |       | —                             |       | (392 | ) | — |   |
| Total deferred                                             |       | —                             |       | (1,842 | ) | — |   |
|                                                       |       |                               |       |   |   |   |   |   |   |   |
| Total income taxes  (benefit) from discontinued operations |       | $                                  | —     |   | $ | (1,842 | ) | $ | 9 |   |

 

***Income Tax Payments, Refunds***

 

The Company made income tax payments of $0.2million, less than $0.1 million and $0.5 million, respectively, for the yearsended December 31, 2009, 2008 and 2007.

 

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***Income Tax Refunds***

 

As a result of tax legislationduring the fourth quarter of 2009 that allows the Company to carryback its 2008net operating loss for five years rather than for two years, the Companyrecorded $7.0 million under prepaid and refundable income taxes as the Companyexpects to recover this amount in the first half of 2010 for income taxespreviously paid.

 

In 2008, the Company received$14.6 million in income tax refunds that was primarily comprised of: (1) $8.4million in previously paid taxes as a result of a 2007 federal net operatingloss carryback; and (2) $6.2 million in refunds related to federal andstate estimated tax prepayments.

 

***Net Operating Loss Carryforwards***

 

As of December 31, 2009, the Companyhas: (1) federal net operating loss carryforwards of $48.0 million, whichexpires in 2029; and (2) state net operating loss carryforwards of $51.1million, which expire between 2016 and 2029. In addition the Company has: (1) federal and state capital losscarryforwards of $5.2 million, which expire between 2010 and 2013; and (2) astate tax income tax credit of $1.2 million that expires in 2017. The tax losscarryforwards presented above exclude $0.8 million of windfall tax benefitsthat will be recorded to paid-in-capital when realized. Utilization in future years of the netoperating loss carryforwards may be subject to limitations due to the changesin ownership provisions under Section 382 of the Internal Revenue Code andsimilar state provisions.

 

***Deferred Tax Assets AndDeferred Tax Liabilities***

 

Theincome tax accounting process, to determine the deferred tax assets anddeferred tax liabilities, involves estimating all temporary differences betweenthe tax and financial reporting bases of the Company’s assets and liabilitiesbased on tax laws and statutory tax rates applicable to the period in which thedifferences are expected to affect taxable income.

 

The taxeffects of significant temporary differences that comprise the net deferred taxassets and liabilities are as follows:

 

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| ** **                                                                                   | ** ** | **December 31,**      | ** ** |
|----------------------------------------------------------------------------------------------|------------|----------------------------|------------|
| ** **                                                                                   | ** ** | **2009**                   | ** ** | **2008** | ** ** |
| ** **                                                                                   | ** ** | **(amounts in thousands)** | ** ** |
| Deferred tax assets:                                                                         |       |                       |       |   |   |
| Employee benefits                                                                            |       | $                          | 1,380      |   | $ | 1,518 |   |
| Deferred compensation                                                                        |       | 494                        |       | 550 |   |
| Provision for doubtful  accounts                                                             |       | 1,300                      |       | 1,759 |   |
| Deferred income                                                                              |       | 310                        |       | 534 |   |
| Other                                                                                        |       | 84                         |       | — |   |
| Total current deferred tax  assets before valuation allowance                                |       | 3,568                      |       | 4,361 |   |
| Valuation allowance                                                                          |       | (3,568                     | )          | (4,201 | ) |
| Total current deferred tax  assets - net                                                     |       | —                     |       | 160 |   |
| Broadcasting licenses and  goodwill                                                          |       | 23,489                     |       | 43,371 |   |
| Share-based compensation                                                                     |       | 4,536                      |       | 5,099 |   |
| Investments - impairments                                                                    |       | 2,040                      |       | 2,038 |   |
| Lease rental obligations                                                                     |       | 1,353                      |       | 1,353 |   |
| Deferred compensation                                                                        |       | 2,092                      |       | 1,460 |   |
| State income tax credits                                                                     |       | 1,248                      |       | 1,248 |   |
| Federal and state income  tax loss carryforwards                                             |       | 20,131                     |       | 8,830 |   |
| Deferred income                                                                              |       | —                     |       | 291 |   |
| Derivative financial  instruments                                                            |       | 5,292                      |       | 5,998 |   |
| Other                                                                                        |       | 591                        |       | 435 |   |
| Total non-current deferred  tax assets before valuation allowance                            |       | 60,772                     |       | 70,123 |   |
| Valuation allowance                                                                          |       | (47,347                    | )          | (63,248 | ) |
| Total non-current deferred  tax assets - net                                                 |       | 13,425                     |       | 6,875 |   |
| Total deferred tax assets                                                                    |       | $                          | 13,425     |   | $ | 7,035 |   |
|                                                                                         |       |                       |       |   |   |
| Deferred tax liabilities:                                                                    |       |                       |       |   |   |
| Other                                                                                        |       | $                          | —     |   | $ | (160 | ) |
| Total current deferred tax  liabilities                                                      |       | —                     |       | (160 | ) |
| Deferral of gain  recognition on the extinguishment of debt                                  |       | (8,197                     | )          | — |   |
| Property, equipment and  certain intangibles (other than broadcasting licenses and goodwill) |       | (5,228                     | )          | (6,875 | ) |
| Total non-current deferred  tax liabilities                                                  |       | (13,425                    | )          | (6,875 | ) |
| Total deferred tax  liabilities                                                              |       | $                          | (13,425    | ) | $ | (7,035 | ) |
|                                                                                         |       |                       |       |   |   |
| Total net deferred tax  assets (liabilities)                                                 |       | $                          | —     |   | $ | — |   |

 

***Valuation Allowance ForDeferred Tax Assets***

 

As a result of incurringcumulative losses by the Company over the past several years, the Companyestablished a full valuation allowance (effective since the third quarter of2008) against total net deferred tax assets. As of December 31, 2009, thevaluation allowance of $50.9 million includes $5.3 million for income taxbenefits recorded in other comprehensive income (loss).

 

The Company increased itsvaluation allowance by $65.8 million to $67.4 million as of December 31,2008 from $1.6 million as of December 31, 2007, to reflect a valuationallowance for the full amount of the total net deferred tax assets. Thevaluation allowance as of December 31, 2008 includes $6.0 million for anincome tax benefit recorded in other comprehensive income (loss) and $0.5million for an income tax benefit recorded from an additional paid-in capitalpool.

 

As of December 31, 2007,the Company had a valuation allowance of $1.6 million primarily due to: (1) aten-year limitation for tax purposes on the ability of the Company to realizean income tax credit in a certain state;

 

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and (2) a five-year limitation for taxpurposes of utilizing a loss on investments for federal and state income taxpurposes, as only investment gains can be used to offset these losses.

 

The Company has certainnon-current deferred tax assets, subject to a valuation allowance, that arerelated to the issuance of awards under the Entercom Equity Compensation Plan(the “Plan”) as described under Note 15, Share-Based Compensation.  The Company adjusts the deferred tax assetswhen the share-based award expires.  TheCompany may not fully realize the deferred tax assets upon the expiration of awardsas the price of the Company’s Class A common stock may be less at the timethe award vests or is exercised, as compared to the price of the award at thetime the award was granted.

 

The Company has also consideredfuture taxable income and ongoing prudent and feasible tax-planning strategiesin 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.

 

The followingtable presents the changes in the deferred tax asset valuation allowance forthe years ended December 31, 2009, 2008 and 2007:

 
| ** **             | ** ** | ** **                 | ** ** | **Additions**   | ** ** | ** **      | ** ** | ** **     | ** ** | ** **     | ** ** |
|------------------------|------------|----------------------------|------------|-----------------|------------|-----------------|------------|----------------|------------|----------------|------------|
| ** **             | ** ** | ** **                 | ** ** | **(Deletions)** | ** ** | **Additions**   | ** ** | ** **     | ** ** | ** **     | ** ** |
| ** **             | ** ** | ** **                 | ** ** | **Charged/**    | ** ** | **(Deletions)** | ** ** | ** **     | ** ** | ** **     | ** ** |
| ** **             | ** ** | ** **                 | ** ** | **(Credited)**  | ** ** | **Charged/**    | ** ** | ** **     | ** ** | ** **     | ** ** |
| ** **             | ** ** | **Balance At**             | ** ** | **To Costs**    | ** ** | **(Credited)**  | ** ** | **Deductions** | ** ** | **Balance At** | ** ** |
| ** **             | ** ** | **Beginning**              | ** ** | **And**         | ** ** | **To**          | ** ** | **From**       | ** ** | **End Of**     | ** ** |
| **Year Ended**         | ** ** | **Year**                   | ** ** | **Expenses**    | ** ** | **Other**       | ** ** | **Reserves**   | ** ** | **Year**       | ** ** |
| ** **             | ** ** | **(amounts in thousands)** | ** ** |
| December 31, 2009 | ** ** | **$**                      | 67,449     | ** **      | **$**      | (6,696          | )          | **$**          | (1,181     | )              | **$**      | (8,657 | ) | **$** | 50,915 | ** ** |
| December 31, 2008 |       | 1,610                      |       | 59,366          |       | 6,473           |       | —         |       | 67,449         |       |
| December 31, 2007 |       | 845                        |       | 765             |       | —          |       | —         |       | 1,610          |       |
|                        |            |                            |            |                 |            |                 |            |                |            |                |            |  |  |  |  |  |

 

***Liabilities ForUncertain Tax Positions***

 

The Company provides for thefinancial statement recognition, measurement, presentation and disclosure ofuncertain tax positions that the Company has taken or expects to take on taxreturns.  Financial statements shouldreflect expected future tax consequences of such positions presuming the taxingauthorities have full knowledge of the position and all relevant facts.

 

The Company reevaluates these uncertain taxpositions on a quarterly basis or when new information becomes available tomanagement. These reevaluations are based on factors including, but not limitedto, changes in facts or circumstances, changes in tax law, successfully settledissues under audit, expirations due to statutes, and new audit activity. Such achange in recognition or measurement could result in the recognition of a taxbenefit or an increase to the tax accrual.

 

The Company classifies interest related toincome tax liabilities as income tax expense, and penalties are recognized as acomponent of income tax expense. The income tax liabilities and accruedinterest and penalties are presented as noncurrent liabilities as payments arenot anticipated within one year of the balance sheet date. These noncurrent incometax liabilities are recorded in other long-term liabilities in the consolidatedbalance sheets.

 

As of December 31, 2009and 2008, the Company’s liabilities for uncertain tax positions were $5.3million (includes interest and penalties of $1.8 million) and $4.3 million(includes interest and penalties of $1.5 million), respectively, which amountswere recorded as long-term liabilities in the balance sheets.  For the years ended December 31, 2009,2008 and 2007, the expense for uncertain tax positions (including interest andpenalty expense) was $1.0 million, $0.1 million and $0.2 million, respectively,which amounts were reflected in the consolidated statements of operations as anincrease to income tax expense. The interest and penalties included in the aboveexpense for uncertain tax positions for the years ended December 31, 2009,2008 and 2007 was $0.3 million, $0.1

 

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million and $0.2 million, respectively. TheCompany reviews its estimates on a quarterly basis and any change in itsliabilities for uncertain tax positions will result in an adjustment to itsincome tax expense in the statement of operations in each period measured.

 

On January 1, 2007, uponadoption of accounting guidance for uncertain tax positions, the Companyrecorded $1.8 million in expense that was charged to retained earnings (net oftaxes) as a cumulative effect of an accounting change to the Company’s retainedearnings. Of this amount, $1.1 million (net of taxes) represented interest andpenalties. Together with the previously recorded tax contingencies of $2.2million as of December 31, 2006, the Company’s liabilities upon adoptionwere $4.0 million as of January 1, 2007.

 

The followingtable presents the gross amount of changes in unrecognized tax benefits for theyears ended December 31, 2009, 2008 and 2007:

 
| ** **                        | ** ** | **Years Ended  December 31,** | ** ** |
|-----------------------------------|------------|------------------------------------|------------|
| ** **                        | ** ** | **2009**                           | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                        | ** ** | **(amounts in thousands)**         | ** ** |
|                              |       |                               |       |   |   |   |   |
| Beginning of year balance         |       | $                                  | (3,406     | ) | $ | (3,360 | ) | $ | (3,516 | ) |
| Prior year positions              |       |                               |       |   |   |   |   |
| Gross Increases                   |       | (1,185                             | )          | (79 | ) | — |   |
| Gross Decreases                   |       | —                             |       | 33 |   | 63 |   |
| Current year positions            |       |                               |       |   |   |   |   |
| Gross Increases                   |       | (308                               | )          | — |   | (95 | ) |
| Gross Decreases                   |       | —                             |       | — |   | 188 |   |
| Settlements with tax  authorities |       | —                             |       | — |   |   |   |
| Reductions due to statue  lapse   |       | 398                                |       | — |   |   |   |
| End of year balance               |       | $                                  | (4,501     | ) | $ | (3,406 | ) | $ | (3,360 | ) |

 

The grossamount of the Company’s unrecognized tax benefits as of December 31, 2009,2008 and 2007 was $4.5 million, $3.4 million and $3.4 million, respectively,which, if recognized, would impact the Company’s effective income tax rate inthe period of recognition. The above table includes a liability of $0.3 millionas of December 31, 2009 that was reflected as an offset to a deferred taxasset. The total amount of unrecognized tax benefits could increase or decreasewithin the next twelve months for a number of reasons including the expirationof statutes of limitations, audit settlements, tax examination activities. Asof December 31, 2009, there are certain unrecognized tax benefits of $1.2million that over the next twelve months are subject to the expiration ofvarious statutes of limitation.  TheCompany believes that the total amount of unrecognized tax benefits willsignificantly decrease over the next twelve months.

 

***Federal And StateIncome Tax Audits***

 

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

 

Management believes that theCompany has provided sufficient tax provisions for tax periods that are withinthe statutory period of limitations not previously audited and that arepotentially open for examination by the taxing authorities. Potentialliabilities associated with these years will be resolved when an event occursto warrant closure, primarily through the completion of audits by the taxingjurisdictions. To the extent audits or other events result in a materialadjustment to the accrued estimates, the effect would be recognized during theperiod of the event. There can be no assurance, however, that the ultimateoutcome of audits will not have a material adverse impact on the Company’sfinancial position, results of operations or cash flows.

 

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**8.****             LONG-TERM DEBT**

 

Long-term debt, including finance method lease obligations, wascomprised of the following at December 31, 2009 and 2008:

 
| ** **                                                                      | ** ** | **December 31,**      | ** ** |
|---------------------------------------------------------------------------------|------------|----------------------------|------------|
| ** **                                                                      | ** ** | **2009**                   | ** ** | **2008** | ** ** |
| ** **                                                                      | ** ** | **(amounts in thousands)** | ** ** |
|                                                                            | ** ** | ** **                 | ** ** | ** ** | ** ** |
| Revolver, due  June 30, 2012 (A)                                           |       | $                          | 359,000    |   | $ | 350,000 |   |
| Term Loan, with quarterly  principal payments beginning September 2009 (A) |       | 370,000                    |       | 400,000 |   |
| Senior Subordinated Notes,  due March 1, 2014 (B)                          |       | 6,579                      |       | 83,500 |   |
| Finance Method Lease  Obligations (C)                                           |       | 12,610                     |       | — |   |
| Other                                                                           |       | 173                        |       | 197 |   |
| Total                                                                           |       | 748,362                    |       | 833,697 |   |
| Current amount of  long-term debt                                               |       | (80,024                    | )          | (30,023 | ) |
| Total long-term debt                                                            |       | $                          | 668,338    |   | $ | 803,674 |   |

 

----

**(A) Senior Debt**

 

***Credit Agreement(the “Bank Facility”)***

 

In June 2007, the Companyentered into a credit agreement with a syndicate of lenders (currently 33different lenders as of December 31, 2009) for a $1,050 million seniorsecured credit facility that matures on June 30, 2012.  The Bank Facility is comprised of $650million in revolving credit (the “Revolver”) and a $400 million term loan (“TermLoan”). The Company is required to make payments of the Term Loan (from andafter September 30, 2009) in quarterly amounts starting at $15 million andultimately increasing to $60 million.

 

During March 2010, the Companyamended (the “Amendment”) its Bank Facility with certain key terms, as definedwithin the Bank Facility, revised as follows:

 

·      Depending on the Consolidated Leverage Ratio(Consolidated Funded Indebtedness to Consolidated Operating Cash Flow), theCompany may elect a rate equal to a choice of: (1) the Eurodollar Rateplus fees that can range from 0.5% to 2.5%; or (2) the Base Rate plus feesthat can range from 0.0% to 1.5%, where the Base Rate is the highest of: (a) theFederal Funds Rate plus 0.5%; (b) the Eurodollar Rate plus 1.0%; and (c) thePrime Rate;

·      During periods when theConsolidated Leverage Ratio exceeds six times, the Company is restricted in itsability to take certain actions, including but not limited to, the payment ofdividends and the repurchase of its stock;

·      Certain restrictions and limitations onacquisitions and investments; and

·      A maximum Consolidated Leverage Ratio that cannotexceed seven times in 2010 and which ratio decreases quarterly in increments in2011 to a ratio of six times.

 

As of December 31, 2009, the undrawn amount of the Revolver was$289.5 million. The amount of the Revolver available to the Company is afunction of covenant compliance at the time of borrowing.  Based on the Company’s financial covenantanalysis as of December 31, 2009 when the Consolidated Leverage Ratio ascalculated under the Amendment was 5.9x, the Company would be limited toborrowings significantly less than the undrawn limit unless such borrowingswere used to repay indebtedness or for transactions that increase cash flow forpurposes of covenant calculation. The Company plans to use the Revolver andcash flow from operations to fund the amortization of the Term Loan.

 

Management believes that over the next 12 months theCompany will continue to maintain its compliance with these covenants.Management also believes that cash on hand and cash from operating activities,together with available borrowings under the Revolver, will be sufficient to permitthe Company to meet its liquidity requirements over the next 12 months,including the Company’s scheduled debt repayments. While the Company’soperating cash flow has been reduced from prior periods during the recenteconomic downturn, it has remained positive and adequate to fund the Company’soperating needs. As a result, the Company has not been required to rely upon,and the Company does not anticipate having to rely upon, it’s Revolver to fundthe Company’s operations.

 

The Bank Facility is secured by a pledge of100% of the capital stock and other equity interest in all of the Company’swholly owned subsidiaries. In addition, the Bank Facility as amended is securedby a lien on all of the 

 

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Company’s assets, other than real property.The Bank Facility requires the Company to comply with certain financialcovenants and leverage ratios (defined terms within the agreement), which areas follows:

 

·      a maximum Consolidated Leverage Ratio that wasrevised under the Amendment and is described above (prior to the Amendment, theConsolidated Leverage Ratio consisted of Consolidated Funded Indebtedness tonot exceed six times Consolidated Operating Cash Flow); and

·      a minimum Consolidated Interest Coverage Ratio ofConsolidated Operating Cash Flow to Consolidated Interest Charges of two times.

 

The Company’s ability tomaintain compliance with its covenants will be highly dependent on the Company’sresults of operations as the economy recovers from the recent economic downturnand, to the extent necessary, the Company’s ability to implement remedialmeasures such as further reductions in operating costs.  If the Companywere to enter into an agreement with its lenders for covenant compliancerelief, or obtain other funding or additional financing, such relief oradditional financing could result in higher interest expense. Amending theCompany’s Bank Facility or obtaining other funding or additional financingprior to the expiration of the current agreement will be essential as theRevolver will be due as a balloon payment upon the expiration of the BankFacility on June 30, 2012.

 

In addition, based on theCompany’s Consolidated Leverage Ratio, the interest rate under the BankFacility was revised under the Amendment as described above.  Prior to the Amendment the interest rate was:(i) the Eurodollar rate plus a rate that ranges from 0.50% to 1.13%; or (ii) thegreater of prime rate plus a rate that ranges from 0.0% to 0.13% or the federalfunds rate plus a rate that ranges from 0.50% to 0.63%. The Company also pays acommitment fee that varies, depending on the Company’s Consolidated LeverageRatio and the amount of the unused commitment, to a maximum of 0.50% per year(prior to the Amendment, it was a maximum of 0.35% per year) on the averageunused balance of the Revolver.

 

The weighted average interestrate under the senior debt as of December 31, 2009 and 2008, before takinginto account the subsequent year’s impact of the Company’s outstandingderivative interest rate instruments, was 1.4% and 1.5%, respectively.

 

As of December 31, 2009, the Company had$3.3 million of unamortized deferred financing expenses outstanding related tothe Bank Facility and the Company expects to incur estimated additional costsof approximately $5.2 million in connection with the Amendment.

 

***Former CreditAgreement (the “Former Facility”)***

 

The Former Facility (asamended) provided for a $900 million Revolver that was secured by a pledge of100% of the capital stock and other equity interest in all of the Company’s100% owned subsidiaries. The Former Facility required the Company to complywith certain financial covenants and leverage ratios which were defined termswithin the agreement, including: (1) Consolidated Total Debt toConsolidated Operating Cash Flow; (2) Consolidated Operating Cash Flow toConsolidated Interest Expense; and (3) Consolidated Operating Cash Flow toConsolidated Fixed Charges. Upon the occurrence of certain events, the Company’sborrowing costs could increase to a maximum of: (i) the Eurodollar rateplus 1.50%; or (ii) the greater of the prime rate plus 0.5% or the federalfunds rate plus 1.0%. The interest payable on the Eurodollar rate was payableat the end of the selected duration. The Company also paid a commitment feethat varied, depending on certain financial covenants and the amount of theunused commitment, to a maximum of 0.375% per annum on the average unusedbalance of the Former Facility.

 

**Deferred Financing ExpensesFor The Year Ended December 31, 2007**

** **

In connection with thereplacement of the Former Facility with the Bank Facility, the Company: (1) recorded$0.5 million of the Former Facility’s unamortized deferred financing costs as aloss on early extinguishment of debt in other expense to the statement ofoperations for the year ended December 31, 2007; (2) deferred $2.2million of the Former Facility’s unamortized deferred financing expenses thatwill be amortized under the effective interest rate method over the life of theBank Facility; and (3) recorded $4.6 million of deferred financingexpenses related to the Bank Facility that will be amortized under theeffective interest rate method over the life of the Bank Facility.

 

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**(B) 7.625% Senior Subordinated Notes**

 

Duringthe years ended December 31, 2009 and 2008, the Company repurchased $76.9million and $66.5 million, respectively, of its $150.0 million Notes due March 1,2014. For the years ended December 31, 2009 and 2008, the Company recordedin the statements of operations a gain on the extinguishment of debt of $20.8million and $6.9 million, respectively, net of write-offs of deferred financingcosts of $0.8 million and $0.9 million, respectively. The Notes outstanding asof December 31, 2009 were $6.6 million.

 

On March 8,2010, the Company redeemed at par all of the remaining $6.6 million Notesoutstanding.

 

In March 2002,****the Companyissued $150.0 million of these Notes and received net proceeds of $145.7million. There was approximately $4.3 million in deferred offering costsrecorded in connection with the sale, which is amortized to interest expenseover the life of the Notes using the effective interest rate method. Intereston the Notes accrues at the rate of 7.625% per annum and is payablesemi-annually in arrears on March 1 and September 1. Effective March 1,2010, the Notes may be redeemed at a redemption price of 100.0% of theirprincipal amount plus accrued interest. The Notes are unsecured and rank juniorto the Company’s senior indebtedness. In addition to the parent, EntercomCommunications Corp., all of the Company’s other subsidiaries have fully andunconditionally guaranteed jointly and severally these Notes (the “SubsidiaryGuarantors”) (see Note 8 (G) Guarantor Financial Information). Undercertain covenants, the Subsidiary Guarantors are restricted from payingdividends or distributions in excess of amounts defined under the Notes, andthe Subsidiary Guarantors cannot incur additional indebtedness under certainrestrictive covenants.

 

**(C) FinanceMethod Lease Obligations**

 

In September 2009, the****Companyentered into an agreement to sell certain tower facilities and lease back mostof these tower sites for use by the Company’s radio stations.  This transaction is accounted for under thefinance method as described more fully under Note 9, Financing Method LeaseObligations.

 

**(D) InterestRate Transactions**

 

The Company enters intointerest rate transactions with different lenders to diversify its riskassociated with interest rate fluctuations against the variable rate debt underthe Bank Facility. See Note 10 for the accounting for these transactions. Underthese transactions, the Company agrees with other parties (participatingmembers of the Company’s Bank Facility) to exchange, at specified intervals,the difference between fixed rate and floating rate interest amounts calculatedby reference to an agreed notional principal amount against the variable debt.

 

The Company’s credit exposureunder these hedging agreements, or similar agreements the Company may enterinto in the future, is the cost of replacing such agreements in the event ofnon-performance by the Company’s counter-party. To minimize this risk, theCompany selects high credit quality counter-parties.  For those interest rate transactions with thesame counterparty, a master netting agreement exists which, under certaincircumstances, allows the Company and the counterparty to settle financialassets and liabilities on a net basis.

 

**(E) AggregatePrincipal Maturities**

 

Aggregateprincipal maturities on the Company’s outstanding debt are as follows:

 

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| ** **                          | ** ** | ** **                 | ** ** | ** **       | ** ** | **Finance**     | ** ** | ** ** | ** ** |
|-------------------------------------|------------|----------------------------|------------|------------------|------------|-----------------|------------|------------|------------|
| ** **                          | ** ** | ** **                 | ** ** | **Senior**       | ** ** | **Method**      | ** ** | ** ** | ** ** |
| ** **                          | ** ** | **Senior**                 | ** ** | **Subordinated** | ** ** | **Lease**       | ** ** | ** ** | ** ** |
| ** **                          | ** ** | **Debt**                   | ** ** | **Debt**         | ** ** | **Obligations** | ** ** | **Total**  | ** ** |
| ** **                          | ** ** | **(amounts in thousands)** | ** ** |
| **Years ending  December 31:** |       |                       |       |             |       |            |       |       |       |
| 2010                                |       | $                          | 80,024     |             | $          | —          |       | —     |       | $ | 80,024 |   |
| 2011                                |       | 170,027                    |       | —           |       | —          |       | 170,027    |       |
| 2012                                |       | 479,029                    |       | —           |       | —          |       | 479,029    |       |
| 2013                                |       | 30                         |       | —           |       | 12,610          |       | 12,640     |       |
| 2014                                |       | 28                         |       | 6,579            |       | —          |       | 6,607      |       |
| Thereafter                          |       | 35                         |       | —           |       | —          |       | 35         |       |
| Total                               |       | $                          | 729,173    |             | $          | 6,579           |       | $          | 12,610     |   | $ | 748,362 |   |
|                                     |            |                            |            |                  |            |                 |            |            |            |  |  |  |  |

 

**(F) OutstandingLetters Of Credit**

 

The Company isrequired to maintain a letter of credit, primarily in connection with insurancecoverage as described in Note 12.  As of December 31,2009, the amount of the outstanding letter of credit was $1.5 million.

 

**(G) Guarantorand Non-Guarantor Financial Information**

 

Entercom Radio, LLC(“Radio”), which is a wholly-owned subsidiary of Entercom Communications Corp.,holds the ownership interest in various subsidiary companies that own theoperating assets, including broadcasting licenses, permits, authorizations andcash royalties.  Radio (1) is theborrower of the Company’s senior debt under the Bank Facility, described inNote 8(A); and (2) was the borrower of the Company’s Notes, described inNote 8(B).  Entercom Communications Corp.and each of its direct and indirect subsidiaries (other than Radio) is aguarantor under its Bank Facility and Entercom Communications Corp. and each ofits direct and indirect subsidiaries (other than Radio) was a guarantor underits Notes.

 

Separate condensedconsolidating financial information is not included as Entercom CommunicationsCorp. does not have independent assets or operations, Radio is a 100% ownedfinance subsidiary of Entercom Communications Corp., and all guarantees byEntercom Communications Corp. and its subsidiaries are full, unconditional,joint and several under its Bank Facility and were full, unconditional, jointand several under its Notes.

 

Under the BankFacility, Radio is permitted to: (i) make distributions to Entercom CommunicationsCorp. in amounts as defined, which are required to pay Entercom CommunicationsCorp.’s reasonable overhead costs, including income taxes and other costsassociated with conducting the operations of Radio and its subsidiaries; and (ii) makecertain investments in unrestricted subsidiaries.  Under the Company’s Notes, Radio is permittedto make distributions to Entercom Communications Corp. in amounts, as defined,that are required to pay Entercom Communications Corp’s overhead costs andother costs associated with conducting the operations of Radio and itssubsidiaries.

 

**9.****            ****FINANCING METHOD LEASE OBLIGATIONS**

 

In September 2009, the Company entered into anagreement to sell certain tower facilities for up to $12.6 million in cash andlease back most of these tower sites for use by the Company’s radio stations.In addition, the agreement provides for an earn-out whereby the Company canreceive additional cash consideration for up to $2.0 million after 42 months,depending if the buyer meets certain revenue targets.  This transaction did not qualify as a salefor accounting purposes as the Company’s ability to share in future earn-outsis considered continuing involvement under accounting guidance. As a result,the Company classified this transaction as financing. Under the financingmethod: (1) the assets and accumulated depreciation remain on theconsolidated balance sheet and continue to be depreciated; (2) no gain isrecognized; (3) proceeds of $12.6 million received by the Company as of December 31,2009 from these transactions are recorded as financing method leaseobligations; and (4) transaction costs of $0.3 million as of December 31,2009 are recorded as deferred financing expense, which will be amortized over42 months. Payments under these leases over the partial lease term of 42 monthsare applied as payments of imputed interest at an approximate interest rate of5.5%.  Once the Company has no continuinginvolvement, the Company

 

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expects to apply the accounting provisions for saleand leaseback accounting.  The earn-outcomponent of this transaction will enable the Company to participate in the upsidepotential of these sites as the new owner (whose primary business is managingtower sites) is better suited to maximize the value of these sties through newthird party tenants.

 

Asof December 31, 2009, the Company received $12.6 million in cash thatcovered all of the tower facilities. For the year ended December 31, 2009,the Company recognized $0.1 million as interest expense associated withfinancing method lease obligations as lease payments commenced in October 2009.

 

The following table presents future minimum paymentsdue under financing method leases as of December 31, 2009:

 
| ** **                                        | ** ** | **December 31, 2009** | ** ** |
|---------------------------------------------------|------------|----------------------------|------------|
| ** **                                        | ** ** | **Principal**              | ** ** | **Interest** | ** ** | **Total** | ** ** |
| ** **                                        | ** ** | **(amounts in thousands)** | ** ** |
| Years ending December 31,                    |       |                       |       |   | ** ** | ** ** | ** ** |
| 2010                                              |       | $                          | —     |   | $ | 706 |   | $ | 706 |   |
| 2011                                              |       | —                     |       | 727 |   | 727 |   |
| 2012                                              |       | —                     |       | 749 |   | 749 |   |
| 2013                                              |       | 12,610                     |       | 386 |   | 12,996 |   |
| Total financing method lease obligations          |       | 12,610                     |       | 2,568 |   | 15,178 |   |
| Less current portion                              |       | —                     |       | 706 |   | 706 |   |
| Long term financing method lease obligations, net |       | $                          | 12,610     |   | $ | 1,862 |   | $ | 14,472 |   |

 

The following table presents property and equipmentheld under financing method leases, by major category, which representcomponents of property and equipment included in the balance sheet underproperty and equipment, as of December 31, 2009:

 
| ** **                                                      | ** ** | **December 31,** | ** ** |
|-----------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                      | ** ** | **2009**              | ** ** |
| ** **                                                      | ** ** | **(amounts**          | ** ** |
| ** **                                                      | ** ** | **in thousands)**     | ** ** |
| Land and land improvements                                      |       | $                     | 843        |   |
| Building                                                        |       | 358                   |       |
| Leasehold improvements                                          |       | 32                    |       |
| Equipment                                                       |       | 3,863                 |       |
| Leasehold premium                                               |       | 885                   |       |
| Total                                                           |       | 5,981                 |       |
| Less accumulated depreciation                                   |       | (4,180                | )          |
| Property and equipment held under financing method  leases, net |       | $                     | 1,801      |   |

 

The portion of depreciation expense attributable toassets held under financing method leases was less than $0.1 million for theyear ended December 31, 2009.

 

**10.****          DERIVATIVE AND HEDGINGACTIVITIES**

 

The Companyfrom time to time enters into derivative financial instruments, includinginterest rate hedging transactions, to manage its exposure to fluctuations ininterest rates under the Company’s variable rate credit facility.

 

***Accounting ForDerivative Instruments And Hedging Activities***

 

The Company recognizes at fairvalue all derivatives, whether designated in hedging relationships or not, inthe balance sheet as either assets or liabilities. The accounting for changesin the fair value of a derivative, including certain derivative instrumentsembedded in other contracts, depends on the intended use of the derivative andthe resulting designation. If the derivative is designated as a fair valuehedge, the changes in the fair value of the derivative and the hedged item arerecognized in the statement of operations. If the derivative is designated as acash

 

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flow hedge, changes in the fair value of thederivative are recorded in other comprehensive income (loss) and are recognizedin the statement of operations when the hedged item affects net income (loss).If a derivative does not qualify as a hedge, it is marked to fair value throughthe statement of operations.  Any feesassociated with these derivatives are amortized over their terms. Under thesederivatives, the differentials to be received or paid are recognized as anadjustment to interest expense over the life of the contract.

 

The Company formally documentsall relationships between hedging instruments and hedged items, as well as itsrisk-management objective and strategy for undertaking various hedgetransactions.  This process includesrelating all derivatives that are designated as fair value or cash flow hedgesto specific assets and liabilities on the balance sheet or to specific firmcommitments or forecasted transactions. The Company’s derivative activities,all of which are for purposes other than trading, are initiated within theguidelines of corporate risk-management policies. The Company reviews thecorrelation and effectiveness of its derivatives on a periodic basis.

 

***Hedge Accounting Treatment***

 

During the year ended December 31,2008, the Company entered into interest rate derivative transactions in theaggregate notional amount of $550.0 million, which were designated as a hedgeagainst the Company’s variable rate senior debt. During the period of thehedging relationship, the Company’s variable rate debt is expected to begreater than the notional amount of the derivative rate hedging transactions.These transactions are tied to the one-month LIBOR interest rate. Under a fixedrate swap, the Company pays a fixed rate on a notional amount to the lender,and the lender pays to the Company a variable rate on the notional amount equalto the Company’s Eurodollar borrowing rate. A collar establishes two separate agreements: an upper limit, or Cap,and a lower limit, or Floor, for the Company’s Eurodollar borrowing rate.

 

As of December 31, 2009, the Company hadthe following derivatives outstanding:

 
| ** ** | ** ** | ** **        | ** ** | ** **             | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** | ** **              | ** **            | **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      |                   | January 28, 2008 |       | n/a        |       | 3.03       | %          |                    | January 28, 2011 |          | January 28, 2010 |              | $          | 150.0 |   |
| Collar     |       | 100.0             |       | February 28, 2008 | [                     | Cap        |       | 4.00       | %          | ]          | February 28, 2011  |                  | n/a           |                  | n/a               |       |
| Floor      |       | 2.14              | %          |
| Swap       |       | 125.0             |       | March 28, 2008    |                  | n/a        |       | 2.91       | %          |       | September 28, 2011 |                  | n/a           |                  | n/a               |       |
| Swap       |       | 100.0             |       | May 28, 2008      |                  | n/a        |       | 3.62       | %          |       | May 28, 2012       |                  | n/a           |                  | n/a               |       |
| Total      |       | $                 | 550.0      |                   |                  |       |       |       |       |       |                    |                  |          |                  |              |       |   |
|            |            |                   |            |                        |                       |            |            |            |            |            |                         |                       |               |                       |                   |            |  |  |

 

For the years ended December 31, 2009and 2008, the Company recorded the net change in the fair value of thesederivatives as a gain of $1.8 million (net of a taxes of $1.2 million that wasfully offset by a reduction in the valuation allowance as of December 31, 2009)and a loss of $15.3 million (net of a tax benefit of $6.0 million that wasfully reserved as of December 31, 2008), respectively, to the statement ofcomprehensive income (loss) as these derivatives qualified for hedgedaccounting treatment. The fair value of these derivatives wasdetermined using observable market-based inputs (a level two measurement) andthe impact of the credit risk on a derivative’s fair value (thecreditworthiness of the transaction’s counterparty for assets and thecreditworthiness of the Company for liabilities).  The Company does not expect to reclassify anyportion of this amount to the statement of operations over the next twelvemonths.

 

During theyear ended December 31, 2007, the Company had no derivatives thatqualified for hedge accounting treatment.

 

The followingtable presents the fair value of the derivatives outstanding as of December 31,2009 and 2008:

 

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| ** **                       | ** ** | ** **                   | ** ** | **Fair Value**             | ** ** |
|----------------------------------|------------|------------------------------|------------|----------------------------|------------|
| ** **                       | ** ** | ** **                   | ** ** | **December 31,**      | ** ** | **December 31,** | ** ** |
| ** **                       | ** ** | **Balance Sheet**            | ** ** | **2009**                   | ** ** | **2008** | ** ** |
| ** **                       | ** ** | **Location**                 | ** ** | **Asset (Liability)**      | ** ** |
| ** **                       | ** ** | ** **                   | ** ** | **(amounts in thousands)** | ** ** |
| **Designated Derivatives**       |       |                         |       |                       |       |   |   |
| Interest rate hedge transactions |       | Other Long Term  Liabilities |       | $                          | (13,432    | ) | $ | (15,262 | ) |
|                                  |            |                              |            |                            |            |  |  |  |  |

 

The following is a summary of the gains (losses) related to the Company’scash flow hedges for the years ended December 31, 2009, 2008 and 2007:

 

The followingtable presents the accumulated derivative gain (loss) recorded in thestatements of other comprehensive income (loss) for the years ended December 31,2009, 2008 and 2007:

 

**Year Ended December 31, 2009**

 
| ** **     | ** ** | **Amount Of**         | ** ** | ** **       | ** **       | ** **       | ** ** | ** **       | ** ** | ** **          | ** ** |
|----------------|------------|-----------------------|------------|------------------|------------------|------------------|------------|------------------|------------|---------------------|------------|
| **Type Of**    | ** ** | **Gain (Loss)**       | ** ** | **Location Of**  | ** **       | **Amount Of**    | ** ** | ** **       | ** ** | **Amount Of**       | ** ** |
| **Derivative** | ** ** | **Recognized In**     | ** ** | **Gain (Loss)**  | ** **       | **Gain (Loss)**  | ** ** | **Location Of**  | ** ** | **Gain (Loss)**     | ** ** |
| **Designated** | ** ** | **Other**             | ** ** | **Reclassified** | ** **       | **Reclassified** | ** ** | **Gain (Loss)**  | ** ** | **In Statement**    | ** ** |
| **As A**       | ** ** | **Comprehensive**     | ** ** | **From OCI To**  | ** **       | **From OCI To**  | ** ** | **In Statement** | ** ** | **Of Operations**   | ** ** |
| **Cash Flow**  | ** ** | **Income (Loss)**     | ** ** | **Statement Of** | ** **       | **Statement Of** | ** ** | **Of**           | ** ** | **Due To**          | ** ** |
| **Hedge**      | ** ** | **(“OCI”)** | ** ** | **Operations**   | ** **       | **Operations**   | ** ** | **Operations**   | ** ** | **Ineffectiveness** | ** ** |
| ** **     | ** ** | **(amounts in**       | ** ** | ** **       | ** **       | **(amounts in**  | ** ** | ** **       | ** ** | **(amounts in**     | ** ** |
| ** **     | ** ** | **thousands)**        | ** ** | ** **       | ** **       | **thousands)**   | ** ** | ** **       | ** ** | **thousands)**      | ** ** |
| ** **     |       |                  |       |             |             |             |       |             |       |                |       |
| Interest  Rate |       | $                     | 1,830      |             | Interest Expense |             | $          | —           |       | Interest Expense    |       | $ | — |   |
|                |            |                       |            |                  |                  |                  |            |                  |            |                     |            |  |  |  |

 

**Year Ended December 31, 2008**

 
| **Type Of**    | ** ** | ** **        | ** ** | **Location Of**  | ** **       | **Amount Of**    | ** ** | ** **       | ** ** | **Amount Of**       | ** ** |
|----------------|------------|-------------------|------------|------------------|------------------|------------------|------------|------------------|------------|---------------------|------------|
| **Derivative** | ** ** | ** **        | ** ** | **Gain (Loss)**  | ** **       | **Gain (Loss)**  | ** ** | **Location Of**  | ** ** | **Gain (Loss)**     | ** ** |
| **Designated** | ** ** | **Amount Of**     | ** ** | **Reclassified** | ** **       | **Reclassified** | ** ** | **Gain (Loss)**  | ** ** | **In Statement**    | ** ** |
| **As A**       | ** ** | **Gain (Loss)**   | ** ** | **From OCI To**  | ** **       | **From OCI To**  | ** ** | **In Statement** | ** ** | **Of Operations**   | ** ** |
| **Cash Flow**  | ** ** | **Recognized In** | ** ** | **Statement Of** | ** **       | **Statement Of** | ** ** | **Of**           | ** ** | **Due To**          | ** ** |
| **Hedge**      | ** ** | **OCI**           | ** ** | **Operations**   | ** **       | **Operations**   | ** ** | **Operations**   | ** ** | **Ineffectiveness** | ** ** |
| ** **     | ** ** | **(amounts in**   | ** ** | ** **       | ** **       | **(amounts in**  | ** ** | ** **       | ** ** | **(amount in**      | ** ** |
| ** **     | ** ** | **thousands)**    | ** ** | ** **       | ** **       | **thousands)**   | ** ** | ** **       | ** ** | **thousands)**      | ** ** |
|           |       |              |       |             |             |             |       |             |       |                |       |
| Interest  Rate |       | $                 | (15,262    | )                | Interest Expense |             | $          | —           |       | Interest Expense    |       | $ | 34 |   |
|                |            |                   |            |                  |                  |                  |            |                  |            |                     |            |  |  |  |

 

**Year Ended December 31, 2007**

 
| **Type Of**    | ** ** | ** **        | ** ** | **Location Of**  | ** **       | **Amount Of**    | ** ** | ** **       | ** ** | **Amount Of**       | ** ** |
|----------------|------------|-------------------|------------|------------------|------------------|------------------|------------|------------------|------------|---------------------|------------|
| **Derivative** | ** ** | ** **        | ** ** | **Gain (Loss)**  | ** **       | **Gain (Loss)**  | ** ** | **Location Of**  | ** ** | **Gain (Loss)**     | ** ** |
| **Designated** | ** ** | **Amount Of**     | ** ** | **Reclassified** | ** **       | **Reclassified** | ** ** | **Gain (Loss)**  | ** ** | **In Statement**    | ** ** |
| **As A**       | ** ** | **Gain (Loss)**   | ** ** | **From OCI To**  | ** **       | **From OCI To**  | ** ** | **In Statement** | ** ** | **Of Operations**   | ** ** |
| **Cash Flow**  | ** ** | **Recognized In** | ** ** | **Statement Of** | ** **       | **Statement Of** | ** ** | **Of**           | ** ** | **Due To**          | ** ** |
| **Hedge**      | ** ** | **OCI**           | ** ** | **Operations**   | ** **       | **Operations**   | ** ** | **Operations**   | ** ** | **Ineffectiveness** | ** ** |
| ** **     | ** ** | **(amounts in**   | ** ** | ** **       | ** **       | **(amounts in**  | ** ** | ** **       | ** ** | **(amount in**      | ** ** |
| ** **     | ** ** | **thousands)**    | ** ** | ** **       | ** **       | **thousands)**   | ** ** | ** **       | ** ** | **thousands)**      | ** ** |
|           |       |              |       |             |             |             |       |             |       |                |       |
| Interest  Rate |       | $                 | —     |             | Interest Expense |             | $          | —           |       | Interest Expense    |       | $ | 162 |   |
|                |            |                   |            |                  |                  |                  |            |                  |            |                     |            |  |  |  |

 

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| ** **                              | ** ** | **December 31,**      | ** ** |
|-----------------------------------------|------------|----------------------------|------------|
| ** **                              | ** ** | **2009**                   | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                              | ** ** | **Assets (Liabilities)**   | ** ** |
| ** **                              | ** ** | **(amounts in thousands)** | ** ** |
| ** **                              |       |                            |       |   |   |   |   |
| Accumulated derivative  unrealized loss |       | $                          | (13,432    | ) | $ | (15,262 | ) | $ | — |   |
|                                         |            |                            |            |  |  |  |  |  |  |  |

 

***Non-Hedge Accounting Treatment***

 

The Companyhad a derivative rate transaction with a notional amount of $30.0 million andan initial term of ten years that expired in February 2008.  This interest rate transaction effectivelyfixed the interest at a rate of 5.8% on borrowing equal to the total notionalamount. For the years ended December 31, 2008 and 2007, the Companyrecorded to the consolidated statement of operations, gains of less than $0.1million and $0.2 million, respectively, under net gain on derivativeinstruments. In addition, the Company has reflected these amounts in theconsolidated statement of cash flows under net cash provided by operatingactivities.

 

**11.****          FAIR VALUE OF FINANCIALINSTRUMENTS**

 

***Fair Value Of Financial Instruments SubjectTo Fair Value Measurements***

 

The Company has determined thefinancial assets and liabilities subject to fair value measurement are: (1) availablefor sale securities as described under Note 5, Investments; (2) interestrate derivative transactions as described under Note 10, Derivative And HedgingActivities; (3) certain tangible and intangible assets subject toimpairment testing as described in Note 3, Intangible Assets And Goodwill; and (4) financialinstruments as described in Note 8, Long-Term Debt.

 

The fairvalue is the price that would be received to sell an asset or be paid totransfer a liability in an orderly transaction between market participants atthe measurement date (exit price). The Company utilizes market data orassumptions that market participants would use in pricing the asset orliability, including assumptions about risk and the risks inherent in theinputs to the valuation technique. These inputs can be readily observable,market corroborated, or generally unobservable. The Company utilizes valuationtechniques that maximize the use of observable inputs and minimize the use ofunobservable inputs. The fair value hierarchy prioritizes the inputs used tomeasure fair value. The hierarchy assigns the highest priority to unadjustedquoted prices in active markets for identical assets or liabilities (level 1measurement) and the lowest priority to unobservable inputs (level 3measurement). The three levels of the fair value hierarchy are as follows:

 

Level 1 — Quoted prices areavailable in active markets for identical assets or liabilities as of thereporting date.

 

Level 2 — Pricing inputs areother than quoted prices in active markets included in level 1, which areeither directly or indirectly observable as of the reported date.

 

Level 3 — Pricing inputsinclude significant inputs that are generally less observable from objectivesources. These inputs may be used with internally developed methodologies thatresult in management’s best estimate of fair value. At each balance sheet date,the Company performs an analysis of all instruments and includes in level 3 allof those whose fair value is based on significant unobservable inputs.

 

***Recurring Fair Value Measurements***

 

The following table sets forth,by level within the fair value hierarchy, the Company’s financial assets andliabilities that were accounted for at fair value on a recurring basis as of December 31,2009 and 2008. The financial assets and liabilities are classified in theirentirety based on the lowest level of input that is significant to the fairvalue measurement. The Company’s assessment of the significance of a particularinput to the fair value measurement requires judgment and may affect thevaluation of fair value assets and liabilities and their placement within thefair value hierarchy levels.

 

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| ** **                      | ** ** | **As Of December 31,  2009**               | ** ** |
|---------------------------------|------------|-------------------------------------------------|------------|
| ** **                      | ** ** | **Value Measurements At  Reporting Date Using** | ** ** |
| ** **                      | ** ** | ** **                                      | ** ** | **Quoted Prices** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                      | ** ** | ** **                                      | ** ** | **In Active** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                      | ** ** | ** **                                      | ** ** | **Markets For** | ** ** | **Significant** | ** ** | ** ** | ** ** |
| ** **                      | ** ** | ** **                                      | ** ** | **Identical** | ** ** | **Other** | ** ** | **Significant** | ** ** |
| ** **                      | ** ** | ** **                                      | ** ** | **Assets Or** | ** ** | **Observable** | ** ** | **Unobservable** | ** ** |
| ** **                      | ** ** | ** **                                      | ** ** | **Liabilities** | ** ** | **Inputs** | ** ** | **Inputs** | ** ** |
| ** **                      | ** ** | **Total**                                       | ** ** | **(Level 1)** | ** ** | **(Level 2)** | ** ** | **(Level 3)** | ** ** |
| **Description**                 | ** ** | **Assets (Liabilities)**                        | ** ** |
| ** **                      | ** ** | **(amounts in thousands)**                      | ** ** |
| ** **                      | ** ** | ** **                                      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Assets**                      | ** ** | ** **                                      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Available For Sale  Securities  |       | $                                               | 391        |   | $ | — |   | $ | — |   | $ | 391 |   |
|                            |       |                                            |       |   |   |   |   |   |   |
| **Liabilities**                 |       |                                            |       |   |   |   |   |   |   |
| Interest Rate Cash Flow  Hedges |       | $                                               | (13,432    | ) | $ | — |   | $ | (13,432 | ) | $ | — |   |

 
| ** **                      | ** ** | **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** | ** ** |
| ** **                      | ** ** | **Total**                                       | ** ** | **(Level 1)** | ** ** | **(Level 2)** | ** ** | **(Level 3)** | ** ** |
| **Description**                 | ** ** | **Assets (Liabilities)**                        | ** ** |
| ** **                      | ** ** | **(amounts in thousands)**                      | ** ** |
| ** **                      | ** ** | ** **                                      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Assets**                      | ** ** | ** **                                      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Available For Sale  Securities  |       | $                                               | 1,399      |   | $ | — |   | $ | — |   | $ | 1,399 |   |
|                            |       |                                            |       |   |   |   |   |   |   |
| **Liabilities**                 |       |                                            |       |   |   |   |   |   |   |
| Interest Rate Cash Flow  Hedges |       | $                                               | (15,262    | ) | $ | — |   | $ | (15,262 | ) | $ | — |   |

 

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”).The Company factors into the fair value of its interest rate hedges anadjustment for a non-performance risk by either the Company and/or by theCompany’s counterparty.

 

For the Company’s assets measuredat fair value on a recurring basis using significant, unobservable inputs(level 3), the following is a reconciliation of the activity during the yearsended December 31, 2009 and 2008:

 

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| ** **                            | ** ** | **Total**                   | ** ** | ** **                  | ** ** | ** **      | ** ** |
|---------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|-----------------|------------|
| ** **                            | ** ** | **Available**               | ** ** | **Balance  Sheet Location** | ** ** |
| ** **                            | ** ** | **For Sale**                | ** ** | **Current**                 | ** ** | ** **      | ** ** |
| ** **                            | ** ** | **Securities**              | ** ** | **Assets**                  | ** ** | **Investments** | ** ** |
| ** **                            | ** ** | **(amounts  in thousands)** | ** ** |
| **Assets**                            |       |                        |       |                        |       |            |       |
| Balance  as of December 31, 2007 |       | $                           | 1,556      |                        | $          | —          |       | $ | 1,556 |   |
| Purchases                             |       | 6                           |       | —                      |       | 6               |       |
| Impairment  of investment value       |       | (154                        | )          | —                      |       | (154            | )          |
| Recovery  of investment value         |       | (9                          | )          | —                      |       | (9              | )          |
| Reclassification  to current assets   |       | —                      |       | 23                          |       | (23             | )          |
| Balance  as of December 31, 2008 |       | 1,399                       |       | 23                          |       | 1,376           |       |
| Divestiture  of investment            |       | (20                         | )          | (20                         | )          | —          |       |
| Recovery  of investment               |       | (19                         | )          | —                      |       | (19             | )          |
| Impairment  of investment value       |       | (966                        | )          | —                      |       | (966            | )          |
| Balance  as of December 31, 2009 |       | $                           | 394        |                        | $          | 3               |       | $ | 391 |   |

 

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

 

The Company has certain assets that are measured at fair value on anon-recurring basis under the circumstances and events described in Note 3,Intangible Assets And Goodwill, and are adjusted to fair value only when thecarrying values are more than the fair values. As part of our step two goodwill impairment analysis, the Companyreviewed the fair value of net property and equipment and other intangibles,net, and concluded that these assets were not impaired as the fair value ofthese assets equaled or exceeded their carrying values. The categorization ofthe 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, for the disclosure of certain key assumptions used to develop theunobservable inputs).

 

Included in the following table are the major categories of assetsmeasured at fair value on a non-recurring basis for the year ended December 31,2009 along with the fair value measurement of the impairment loss recognizedfor the year ended December 31, 2009:

 

**Non-Recurring Assets Subject To Fair ValueMeasurement**

 
| ** **                   | ** ** | **For The Year Ended  December 31, 2009** | ** ** | ** **        | ** ** |
|------------------------------|------------|------------------------------------------------|------------|-------------------|------------|
| ** **                   | ** ** | **Fair Value Measurements  Using**             | ** ** | ** **        | ** ** |
| ** **                   | ** ** | ** **                                     | ** ** | **Quoted Prices** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                   | ** ** | ** **                                     | ** ** | **In Active**     | ** ** | ** ** | ** ** | ** ** | ** ** | **For The Year** | ** ** |
| ** **                   | ** ** | ** **                                     | ** ** | **Markets For**   | ** ** | **Significant** | ** ** | ** ** | ** ** | **Ended** | ** ** |
| ** **                   | ** ** | ** **                                     | ** ** | **Identical**     | ** ** | **Other** | ** ** | **Significant** | ** ** | **December 31,** | ** ** |
| ** **                   | ** ** | ** **                                     | ** ** | **Assets Or**     | ** ** | **Observable** | ** ** | **Unobservable** | ** ** | **2009** | ** ** |
| ** **                   | ** ** | ** **                                     | ** ** | **Liabilities**   | ** ** | **Inputs** | ** ** | **Inputs** | ** ** | **Impairment** | ** ** |
| **Description**              | ** ** | **Total**                                      | ** ** | **(Level 1)**     | ** ** | **(Level 2)** | ** ** | **(Level 3)** | ** ** | **Loss** | ** ** |
| ** **                   | ** ** | **(amounts in thousands)**                     | ** ** |
| ** **                   |       |                                           |       |              |       |   |   |   |   |   |   |
| Net property and equipment   |       | $                                              | 70,527     |              | $          | — |   | $ | — |   | $ | 70,527 |   | $ | — |   |
| Other intangibles, net       |       | 722                                            |       | —            |       | — |   | 722 |   | — |   |
| Goodwill                     |       | 38,168                                         |       | —            |       | — |   | 38,168 |   | 6,882 |   |
| Radio broadcasting  licenses |       | 707,852                                        |       | —            |       | — |   | 707,852 |   | 60,794 |   |
| Total                        |       | $                                              | 817,269    |              | $          | — |   | $ | — |   | $ | 817,269 |   | $ | 67,676 |   |

 

***Fair Value Of Financial Instruments SubjectTo Disclosures***

 

The estimated fair value offinancial instruments is determined using the best available market informationand appropriate valuation methodologies. Considerable judgment is necessary, however, in interpreting market data

 

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to develop the estimates of fair value.  Accordingly, the estimates presented are notnecessarily indicative of the amounts that the Company could realize in acurrent market exchange, or the value that ultimately will be realized uponmaturity or disposition.  The use ofdifferent market assumptions may have a material effect on the estimated fairvalue amounts.

 

The following methods andassumptions were used to estimate the fair value of financial instruments:

 

(1) Cash and cashequivalents, accounts receivable and accounts payable, including accruedliabilities: The carrying amount of these assets and liabilities approximatesfair value because of the short maturity of these instruments.

 

(2) Senior debt under theBank Facility: As of December 31, 2009 and 2008, the fair value of theCompany’s senior debt was $675.8 million and $700.3 million, respectively, andthe carrying value was $729.0 million and $750.0 million, respectively. TheCompany’s determination of the fair value was based on a risk adjusted rate.

 

(3) 7.625% SeniorSubordinated Notes: The fair value of the Company’s Notes as of December 31,2009 and 2008, was $6.0 million and $45.8 million, respectively, which wasbased on available market prices. As of December 31, 2009 and 2008, thecarrying value of the Notes was $6.6 million and $83.5 million, respectively.

 

(4) Outstanding Letters ofCredit: The Company had a letter of credit outstanding in the amount of $1.5million as of December 31, 2009 and 2008. The Company does not believe itis practicable to estimate the fair value of this financial instrument and doesnot expect any material loss from the resolution since performance is notlikely to be required.   During February 2010,the letter of credit was reduced to $0.7 million.

 

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

 

***Contingencies***

 

The Company is subject tovarious outstanding claims that arose in the ordinary course of business and toother legal proceedings as described below. In the opinion of management, anypotential liability of the Company that may arise out of or with respect tothese matters will not materially adversely affect the financial position,results of operations or cash flows of the Company.

 

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 (as referred to in Note 8,Long-Term Debt).

 

During January 2007, asuit seeking various damages was filed against the Company relating to anon-air contest. The claims, which were fully settled on October 29, 2009,were fully covered by the Company’s insurance policies. In connection with thesettled claim, as of December 31, 2009, the Company recorded an insuranceclaim receivable from its insurance company of $16.5 million, along with aclaim payable to the plaintiff of $16.5 million.  In January 2010, the plaintiffacknowledged full satisfaction of the judgment by the Company’s insurancecarrier.

 

The Company could face increased costs in the form of fines and agreater risk that the Company could lose any one or more of itsbroadcasting licenses if the FCC concludes that programming broadcast by aCompany station was obscene, indecent or profane and such conduct warrantslicense revocation.  The FCC’s authority to impose a fine for thebroadcast of such material is $325,000 for a single incident, with a maximumfine of up to $3.0 million for a continuing violation. In the past, the FCC hasissued Notices of Apparent Liability and a Forfeiture Order with respectto several of the Company’s stations proposing fines for certain programmingwhich the FCC deemed to have been indecent. These cases are the subject ofpending administrative appeals. The FCC has also investigated other complaints fromthe public that some of the Company’s stations broadcast indecentprogramming.  These investigations remain pending.  The FCC has alsoinitiated an investigation into the suit related to the on-air contest as notedabove.

 

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The Company has filed on a timely basis renewal applications for thoseradio stations with radio broadcasting licenses that are subject to renewalwith the FCC. The Company’s costs to renew its licenses with the FCC areminimal and are expensed as incurred rather than capitalized.  Certain licenses were not renewed prior tothe renewal date, which is not unusual. The Company continues to operate theseradio stations under their existing licenses until the licenses arerenewed.  The FCC may delay the renewalpending the resolution of open inquiries. The affected stations are, however,authorized to continue operations until the FCC acts upon the renewalapplication.

 

The Company’s agreements withBroadcast Music, Inc. (“BMI”) and American Society of Composers, Authorsand Publishers (“ASCAP”) each expired as of December 31, 2009. In January 2010,the Radio Music Licensing Committee, of which the Company is a participant, hasfiled motions in the New York courts against BMI and ASCAP on behalf of theradio industry, seeking interim fees and a determination of fair and reasonableindustry-wide license fees.

 

***Commitments***

 

**DispositionOf Multiple Tower Sites**

 

In September 2009,the Company entered into an agreement to sell multiple tower sites for up to$12.6 million in cash at closing and a contingent earn-out for up to $2.0million in cash after 42 months. Concurrently with entering into thisagreement, the Company agreed to lease space at many of these tower sites forcertain of the Company’s broadcasting operations.

 

The Company completedclosing in 2009 on all of the tower sites (for further discussion, see Note 9,Financing Method Lease Obligations).

 

**TerminationOf Pending Disposition Of Radio Station In Portland, Oregon**

 

In January 2009, the Company received$0.4 million as liquidated damages from a buyer as a result of the terminationby the buyer of an asset purchase agreement and related TBA with the Companyfor the sale of KTRO-AM (formerly KKSN-AM).

 

**Other**

 

Rental expense is incurredprincipally for office and broadcasting facilities. Rental expense during theyears ended December 31, 2009, 2008 and 2007 was approximately $12.4million, $12.4 million and $12.0 million, respectively.  Certain of the leases contain clauses thatprovide for contingent rental expense based upon defined events such as cost ofliving adjustments and/or maintenance costs in excess of pre-definedamounts.  Rental expense does not includeany payments made in connection with finance method lease obligations asdescribed under Note 9.

 

The Company also has variouscommitments under the following types of contracts: (1) operating leases; (2) sportsprogramming; (3) on-air talent; (4) music royalty fees; and (5) othercontracts with aggregate minimum annual commitments as of December 31,2009 as follows:

 

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| ** **                          | ** ** | **Operating**              | ** ** | **Sports**      | ** ** | **On-Air** | ** ** | **Other**     | ** ** | ** ** | ** ** |
|-------------------------------------|------------|----------------------------|------------|-----------------|------------|------------|------------|---------------|------------|------------|------------|
| ** **                          | ** ** | **Leases**                 | ** ** | **Programming** | ** ** | **Talent** | ** ** | **Contracts** | ** ** | **Total**  | ** ** |
| ** **                          | ** ** | **(amounts in thousands)** | ** ** |
| **Years  ending December 31:** | ** ** | ** **                 | ** ** | ** **      | ** ** | ** ** | ** ** | ** **    | ** ** | ** ** | ** ** |
| 2010                                |       | $                          | 11,837     |            | $          | 17,612     |       | $             | 30,097     |       | $          | 14,151 |   | $ | 73,697 |   |
| 2011                                |       | 11,091                     |       | 16,266          |       | 19,879     |       | 14,775        |       | 62,011     |       |
| 2012                                |       | 9,894                      |       | 15,084          |       | 12,950     |       | 11,362        |       | 49,290     |       |
| 2013                                |       | 8,341                      |       | 16,000          |       | 6,875      |       | 3,624         |       | 34,840     |       |
| 2014                                |       | 6,358                      |       | 17,000          |       | 2,767      |       | 221           |       | 26,346     |       |
| Thereafter                          |       | 19,753                     |       | 35,000          |       | —     |       | —        |       | 54,753     |       |
|                                |       | $                          | 67,274     |            | $          | 116,962    |       | $             | 72,568     |       | $          | 44,133 |   | $ | 300,937 |   |

 

***GuarantorArrangements***

 

The Company recognizes, at the inception of aguarantee, a liability for the fair value of the obligation undertaken byissuing the guarantee. The following is a summary of agreements that theCompany has determined is within the scope of guarantor arrangements:

 

·                  The Company enters into indemnification agreements in the ordinarycourse of business. Under these agreements, the Company typically indemnifies,holds harmless, and agrees to reimburse the indemnified party for lossessuffered or incurred by the indemnified party. The maximum potential amount offuture payments the Company could be required to make under theseindemnification agreements is unlimited. The Company believes the estimatedfair value of these agreements is minimal. Accordingly, the Company has notrecorded liabilities for these agreements as of December 31, 2009.

 

·                  Under the Company’s Bank Facility, the Company is required to reimburselenders for any increased costs that they may incur in an event of a change inlaw, rule or regulation resulting in their reduced returns from any changein capital requirements. The Company cannot estimate the potential amount ofany future payment under this provision, nor can the Company predict if such anevent will ever occur.

 

·                  In connection with many of the Company’s acquisitions,the Company enters into time brokerage agreements, or local marketingagreements for specified periods of time, usually six months or less, wherebythe Company typically indemnifies the owner and operator of the radio station,their employees, agents and contractors from liability, claims and damagesarising from the activities of operating the radio station under suchagreements. The maximum potential amount of any future payments the Companycould be required to make for any such previous indemnification obligations isindeterminable at this time. The Company has not, however, previously incurredany significant costs to defend lawsuits or settle claims relating to any suchindemnification obligation.

 

***FinancialStatements Of Parent As Guarantor***

 

The condensed parent company’sfinancial data has been prepared in accordance with Rule 12-04 ofRegulation S-X.  The parent company’sfinancial data includes the financial data of Entercom Communications Corp.,excluding all subsidiaries (the “Parent Company”).

 

The Parent Company’scondensed financial data (other than the statements of shareholders’ equity asthese statements are not condensed) has been prepared using the same accountingprinciples and policies described in the notes to the financial statements,with the only exception that Parent Company accounts for its investment in itssubsidiaries using the equity method.

 

Entercom Radio, LLC (“Radio”),which is a wholly-owned subsidiary of Parent Company, holds the ownershipinterest in various subsidiary companies that own the operating assets, includingbroadcasting licenses, permits, authorizations and cash royalties.  Radio (1) is the borrower of the Company’ssenior credit agreement (“Bank Facility”) as described in Note 8(A); and wasthe borrower of the Company’s Senior Subordinated 7.625%

 

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Notes (“Notes”), describedin Note 8(B).  The Parent Company andeach of its direct and indirect subsidiaries (other than Radio) is a guarantorof such debt.

 

Under the Bank Facility andNotes, Radio is permitted to make distributions to Parent Company in amounts,as defined, which are required to pay Parent Company’s reasonable overheadcosts, including income taxes and other costs associated with conducting theoperations of Radio and its subsidiaries.

 

The following tables setforth the condensed financial data (other than the statements of shareholders’equity as these statements are not condensed) of Parent Company:

 

·                  the balance sheets as of December 31,2009 and 2008;

·                  the statements of operations for the yearsended December 31, 2009, 2008 and 2007;

·                  the statements of comprehensive income (loss)for the years ended December 31, 2009, 2008 and 2007;

·                  the statements of shareholders’ equity forthe years ended December 31, 2009, 2008 and 2007; and

·                  the statements of cash flows for the yearsended December 31, 2009, 2008 and 2007.

 

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**ENTERCOM COMMUNICATIONS CORP.**

**CONDENSED PARENT COMPANY BALANCE SHEETS**

**(amounts in thousands)**

 
| ** **                                          | ** ** | **2009**   | ** ** | **2008** | ** ** |
|-----------------------------------------------------|------------|------------|------------|----------|------------|
| **ASSETS**                                          | ** ** | ** ** |       |     |       |
| ** **                                          |       |       |       |     |       |
| Current Assets                                      |       | $          | 17,713     |     | $          | 1,607 |   |
| Property And Equipment - Net                        |       | 739        |       | 890      |       |
| Deferred Charges And Other Assets - Net             |       | 2,545      |       | 3,696    |       |
| Investment In Subsidiaries                          |       | 131,309    |       | 111,050  |       |
| **TOTAL ASSETS**                                    |       | $          | 152,306    |     | $          | 117,243 |   |
|                                                |       |       |       |     |       |
| **LIABILITIES  AND****SHAREHOLDERS’ EQUITY:**  |       |       |       |     |       |
| Current Liabilities                                 |       | $          | 27,649     |     | $          | 6,277 |   |
| Long Term Liabilities                               |       | 10,705     |       | 10,709   |       |
| Total Liabilities                                   |       | 38,354     |       | 16,986   |       |
| **Shareholders’ Equity:**                      |       |       |       |     |       |
| Class A, B and C Common Stock                  |       | 372        |       | 371      |       |
| Additional Paid-In Capital                          |       | 588,622    |       | 582,325  |       |
| Accumulated Deficit                                 |       | (461,610   | )          | (467,177 | )          |
| Accumulated Other Comprehensive Loss                |       | (13,432    | )          | (15,262  | )          |
| Total shareholders’ equity                     |       | 113,952    |       | 100,257  |       |
| **TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY** |       | $          | 152,306    |     | $          | 117,243 |   |

 

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**ENTERCOM COMMUNICATIONS CORP.**

**CONDENSED PARENT COMPANY INCOME STATEMENTS**

**(amounts in thousands)**

 
| ** **                                         | ** ** | **YEARS ENDED DECEMBER 31,** | ** ** |
|----------------------------------------------------|------------|------------------------------|------------|
| ** **                                         | ** ** | **2009**                     | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                                         | ** ** | ** **                   | ** ** | ** ** | ** ** | ** ** | ** ** |
| NET REVENUES                                       |       | $                            | 632        |   | $ | 626 |   | $ | 560 |   |
|                                               | ** ** | ** **                   | ** ** | ** ** | ** ** | ** ** | ** ** |
| OPERATING (INCOME) EXPENSE:                        |       |                         |       |   |   |   |   |
| Depreciation and amortization expense              |       | 1,389                        |       | 1,255 |   | 641 |   |
| Corporate general and administrative expenses      |       | 22,733                       |       | 26,763 |   | 28,782 |   |
| Net (gain) loss on sale or disposal of assets      |       | (5                           | )          | — |   | 19 |   |
| Total operating expense                            |       | 24,117                       |       | 28,018 |   | 29,442 |   |
| OPERATING LOSS                                     |       | (23,485                      | )          | (27,392 | ) | (28,882 | ) |
|                                               |       |                         |       |   |   |   |   |
| OTHER (INCOME) EXPENSE:                            |       |                         |       |   |   |   |   |
| Interest expense                                   |       | 16                           |       | — |   | 1 |   |
| Interest and dividend income                       |       | (1                           | )          | (1 | ) | (5 | ) |
| Other income                                       |       | (380                         | )          | (3,339 | ) | (895 | ) |
| (Gain) loss from equity investment in subsidiaries |       | (22,989                      | )          | 725,199 |   | (20,321 | ) |
| TOTAL OTHER (INCOME) EXPENSE                       |       | (23,354                      | )          | 721,859 |   | (21,220 | ) |
|                                               |       |                         |       |   |   |   |   |
| LOSS BEFORE INCOME TAXES (BENEFIT)                 |       | (131                         | )          | (749,251 | ) | (7,662 | ) |
|                                               |       |                         |       |   |   |   |   |
| INCOME TAXES (BENEFIT)                             |       | (5,529                       | )          | (232,600 | ) | 695 |   |
| NET INCOME (LOSS)                                  |       | $                            | 5,398      |   | $ | (516,651 | ) | $ | (8,357 | ) |

 

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**ENTERCOM COMMUNICATIONS CORP.**

**PARENT COMPANY STATEMENTS OF COMPREHENSIVE INCOME(LOSS)**

**(amounts in thousands)**

** **
| ** **                                                                                                | ** ** | **YEARS ENDED DECEMBER 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|
| ** **                                                                                                | ** ** | **2009**                     | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                                                                                                |       |                         |       |   |   |   |   |
| **NET INCOME (LOSS)**                                                                                     |       | $                            | 5,398      |   | $ | (516,651 | ) | $ | (8,357 | ) |
|                                                                                                      |       |                         |       |   |   |   |   |
| **OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES  (BENEFIT):**                                           |       |                         |       |   |   |   |   |
|                                                                                                      |       |                         |       |   |   |   |   |
| Net unrealized gain (loss) on investments, net of  taxes of $86 in 2008 and a tax benefit of $145 in 2007 |       | —                       |       | 132 |   | (276 | ) |
|                                                                                                      |       |                         |       |   |   |   |   |
| Net unrealized gain (loss) on derivatives, net of  taxes (benefit) of $0 in 2009 and $0 in 2008           |       | 1,830                        |       | (15,262 | ) | — |   |
|                                                                                                      |       |                         |       |   |   |   |   |
| **COMPREHENSIVE INCOME (LOSS)**                                                                           |       | $                            | 7,228      |   | $ | (531,781 | ) | $ | (8,633 | ) |

 

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**ENTERCOM COMMUNICATIONS CORP.**

**PARENT COMPANY STATEMENTS OFSHAREHOLDERS’ EQUITY**

**YEARS ENDED DECEMBER 31, 2009,2008 AND  2007**

**(amounts in thousands, exceptshare data)**

 
| ** **                                                                            | ** ** | ** **       | ** ** | ** **       | ** ** | ** **   | ** ** | ** **       | ** ** | ** **        | ** ** | **Retained** | ** ** | **Accumulated**   | ** ** | ** ** | ** ** |
|---------------------------------------------------------------------------------------|------------|------------------|------------|------------------|------------|--------------|------------|------------------|------------|-------------------|------------|--------------|------------|-------------------|------------|------------|------------|
| ** **                                                                            | ** ** | **Common Stock** | ** ** | **Additional**   | ** ** | **Earnings** | ** ** | **Other**        | ** ** | ** **        | ** ** |
| ** **                                                                            | ** ** | **Class A** | ** ** | **Class B** | ** ** | **Paid-in**  | ** ** | **(Accumulated** | ** ** | **Comprehensive** | ** ** | ** **   | ** ** |
| ** **                                                                            | ** ** | **Shares**       | ** ** | **Amount**       | ** ** | **Shares**   | ** ** | **Amount**       | ** ** | **Capital**       | ** ** | **Deficit)** | ** ** | **Income (Loss)** | ** ** | **Total**  | ** ** |
|                                                                                  |       |             |       |             |       |         |       |             |       |              |       |         |       |              |       |       |       |
| Balance,  December 31, 2006                                                      |       | 32,379,345       |       | $                | 324        |         | 8,046,805  |             | $          | 80                |       | $            | 641,889    |              | $          | 134,655    |       | $ | 144 |   | $ | 777,092 |   |
| Net loss                                                                              |       | —           |       | —           |       | —       |       | —           |       | —            |       | (8,357       | )          | —            |       | (8,357     | )          |
| Conversion of  Class B common stock to Class A common stock                 |       | 439,273          |       | 4                |       | (439,273     | )          | (4               | )          | —            |       | —       |       | —            |       | —     |       |
| Accounting  change, net of taxes                                                      |       | —           |       | —           |       | —       |       | —           |       | —            |       | (1,850       | )          | —            |       | (1,850     | )          |
| Compensation  expense related to granting of stock options                            |       | —           |       | —           |       | —       |       | —           |       | 212               |       | —       |       | —            |       | 212        |       |
| Compensation  expense related to granting of restricted stock units                   |       | 488,677          |       | 5                |       | —       |       | —           |       | 9,059             |       | —       |       | —            |       | 9,064      |       |
| Issuance of  common stock related to an incentive plan                                |       | 22,525           |       | —           |       | —       |       | —           |       | 465               |       | —       |       | —            |       | 465        |       |
| Exercise of  stock options (including tax benefits)                                   |       | 21,585           |       | —           |       | —       |       | —           |       | 559               |       | —       |       | —            |       | 559        |       |
| Common stock  repurchase                                                              |       | (2,176,039       | )          | (22              | )          | —       |       | —           |       | (54,979           | )          | —       |       | —            |       | (55,001    | )          |
| Purchase of  vested employee restricted stock units                                   |       | (42,666          | )          | —           |       | —       |       | —           |       | (1,290            | )          | —       |       | —            |       | (1,290     | )          |
| Payments of  dividends of $1.52 per share                                             |       | —           |       | —           |       | —       |       | —           |       | —            |       | (57,992      | )          | —            |       | (57,992    | )          |
| Net dividend  equivalents on restricted stock units (net of forfeitures and payments) |       | —           |       | —           |       | —       |       | —           |       | —            |       | (1,859       | )          | —            |       | (1,859     | )          |
| Net unrealized  loss on investments                                                   |       | —           |       | —           |       | —       |       | —           |       | —            |       | —       |       | (276              | )          | (276       | )          |
| 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     | )          |
|                                                                                       |            |                  |            |                  |            |              |            |                  |            |                   |            |              |            |                   |            |            |            |  |  |  |  |  |  |

 

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**ENTERCOM COMMUNICATIONS CORP.**

**PARENT COMPANY STATEMENTS OF SHAREHOLDERS’ EQUITY**

**YEARS ENDED DECEMBER 31, 2009, 2008 AND  2007**

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

** **

 
| ** **                                                                            | ** ** | ** **       | ** ** | ** **       | ** ** | ** **   | ** ** | ** **       | ** ** | ** **        | ** ** | **Retained** | ** ** | ** **        | ** ** | ** ** | ** ** |
|---------------------------------------------------------------------------------------|------------|------------------|------------|------------------|------------|--------------|------------|------------------|------------|-------------------|------------|--------------|------------|-------------------|------------|------------|------------|
| ** **                                                                            | ** ** | **Common Stock** | ** ** | **Additional**   | ** ** | **Earnings** | ** ** | **Other**        | ** ** | ** **        | ** ** |
| ** **                                                                            | ** ** | **Class A** | ** ** | **Class B** | ** ** | **Paid-in**  | ** ** | **(Accumulated** | ** ** | **Comprehensive** | ** ** | ** **   | ** ** |
| ** **                                                                            | ** ** | **Shares**       | ** ** | **Amount**       | ** ** | **Shares**   | ** ** | **Amount**       | ** ** | **Capital**       | ** ** | **Deficit)** | ** ** | **Income (Loss)** | ** ** | **Total**  | ** ** |
| ** **                                                                            |       |                  |       |             |       |         |       |             |       |              |       |         |       |              |       |       |       |
| Payments of dividends of $0.58 per share                                              |       | —           |       | —           |       | —       |       | —           |       | (7,282            | )          | (14,301      | )          | —            |       | (21,583    | )          |
| Net 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 income                                                                            |       | —           |       | —           |       | —       |       | —           |       | —            |       | 5,398        |       | —            |       | 5,398      |       |
| Conversion of Class B common stock to  Class A common stock                 |       | 150,000          |       | 1                |       | (150,000     | )          | (1               | )          | —            |       | —       |       | —            |       | —     |       |
| Compensation expense related to granting of stock  options                            |       | —           |       | —           |       | —       |       | —           |       | 485               |       | —       |       | —            |       | 485        |       |
| Compensation expense related to granting of  restricted stock units                   |       | 796,824          |       | 8                |       | —       |       | —           |       | 6,380             |       | —       |       | —            |       | 6,388      |       |
| Issuance of common stock related to an incentive  plan                                |       | 74,369           |       | —           |       | —       |       | —           |       | 97                |       | —       |       | —            |       | 97         |       |
| Common stock repurchase                                                               |       | (662,664         | )          | (7               | )          | —       |       | —           |       | (882              | )          | —       |       | —            |       | (889       | )          |
| Purchase of vested employee restricted stock units                                    |       | (82,556          | )          | —           |       | —       |       | —           |       | (104              | )          | —       |       | —            |       | (104       | )          |
| Net dividend equivalents on restricted stock units  (net of forfeitures and payments) |       | —           |       | —           |       | —       |       | —           |       | —            |       | 169          |       | —            |       | 169        |       |
| Realization of tax benefit for dividend equivalent  payments                          |       | —           |       | —           |       | —       |       | —           |       | 321               |       | —       |       | —            |       | 321        |       |
| Net unrealized gain on derivatives                                                    |       | —           |       | —           |       | —       |       | —           |       | —            |       | —       |       | 1,830             |       | 1,830      |       |
| Balance, December 31, 2009                                                       |       | 29,755,161       |       | $                | 297        |         | 7,457,532  |             | $          | 75                |       | $            | 588,622    |              | $          | (461,610   | )          | $ | (13,432 | ) | $ | 113,952 |   |
|                                                                                       |            |                  |            |                  |            |              |            |                  |            |                   |            |              |            |                   |            |            |            |  |  |  |  |  |  |

 

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**ENTERCOM COMMUNICATIONS CORP.**

**CONDENSED PARENT COMPANY STATEMENTS OF CASH FLOWS**

**(amounts in thousands)**

 
| ** **                                                        | ** ** | **YEARS ENDED DECEMBER 31,** | ** ** |
|-------------------------------------------------------------------|------------|------------------------------|------------|
| ** **                                                        | ** ** | **2009**                     | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                                                        | ** ** | ** **                   | ** ** | ** ** | ** ** | ** ** | ** ** |
| OPERATING ACTIVITIES:                                             |       |                         |       |   |   |   |   |
| **Net cash used in operating activities**                         |       | $                            | (26,769    | ) | $ | (16,073 | ) | $ | (17,901 | ) |
|                                                              |       |                         |       |   |   |   |   |
| INVESTING ACTIVITIES:                                             |       |                         |       |   |   |   |   |
| Additions to property and equipment                               |       | (209                         | )          | (449 | ) | 278 |   |
| Deferred charges and other assets                                 |       | (106                         | )          | (1,072 | ) | (1,935 | ) |
| Proceeds from investments in subsidiaries                         |       | 83,563                       |       | 92,046 |   | 74,751 |   |
| **Net cash provided by investing activities**                     |       | 83,248                       |       | 90,525 |   | 73,094 |   |
|                                                              |       |                         |       |   |   |   |   |
| FINANCING ACTIVITIES:                                             |       |                         |       |   |   |   |   |
| Retirement of senior subordinated notes                           |       | (55,272                      | )          | (58,633 | ) | — |   |
| Purchase of the Company’s common stock                       |       | (889                         | )          | (13,944 | ) | (55,001 | ) |
| Proceeds from issuance of employee stock plan                     |       | 82                           |       | 278 |   | 396 |   |
| Proceeds from the exercise of stock options                       |       | —                       |       | — |   | 530 |   |
| Purchase of vested restricted stock units                         |       | (104                         | )          | (1,375 | ) | (1,290 | ) |
| Payment of dividend equivalents on vested restricted  stock units |       | (756                         | )          | (917 | ) | (96 | ) |
| Realization of tax benefit for dividend equivalents  payments     |       | 321                          |       | — |   | — |   |
| **Net cash used in financing activities**                         |       | (56,618                      | )          | (74,591 | ) | (55,461 | ) |
|                                                              |       |                         |       |   |   |   |   |
| **NET DECREASE IN CASH AND CASH EQUIVALENTS**                     |       | (139                         | )          | (139 | ) | (268 | ) |
| **CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR**                  |       | 505                          |       | 644 |   | 912 |   |
| **CASH AND CASH EQUIVALENTS, END OF YEAR**                        |       | $                            | 366        |   | $ | 505 |   | $ | 644 |   |

 

**Accounting Policies**

 

The Parent Companyfollows the accounting policies as described in Note 2 to the ConsolidatedFinancial Statements of Entercom Communications Corp.

 

***Debt*******— For a discussion of debt obligations of the Company,refer to Note 8 in the audited consolidated statements included elsewhereherein.

 

***Commitmentsand Contingencies*** — For a discussion of the commitments and contingencies of theCompany, refer to this note.

 

For further information,references should be made to the notes to the consolidated financial statementsof the Company.

 

**13.****          SHAREHOLDERS’ EQUITY**

 

***Company Share Repurchase Programs***

 

The Company’sBoard of Directors has authorized in the past, and may authorize in the future,share repurchase programs for the purchase of Class A common stock over adefined period of time. Such authorizations may be limited by an Amendment tothe Company’s Bank Facility that was entered into during March 2010(please refer to Note 8 for further discussion).

 

Anyrepurchases under these programs may be made in the open market, through blocktrades or otherwise. Depending on market conditions and other factors, theserepurchases may be commenced or suspended at any time

 

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or from time to time withoutprior notice.  All shares repurchased areimmediately restored to authorized but unissued status and any excess of costover par value is charged entirely to paid-in capital.

 

***Expired Share Repurchase Program***

 

The Company’s$100.0 million share repurchase program, which was extended several times andhad $25.4 million remaining as authorized for repurchase, expired on June 30,2009.

 

For the yearended December 31, 2009, the Company repurchased 0.7 million shares in theamount of $0.9 million at an average price of $1.34 per share and for the yearended December 31, 2008, the Company repurchased 2.1 million shares in theamount of $13.9 million at an average price of $6.72 share.

 

***Conversion Of Class B Common Stock***

 

Shares of Class Bcommon stock are transferable only to Joseph M. Field, David J. Field, certainof their family members or trusts for any of their benefit. Upon any othertransfer, shares of Class B common stock automatically convert into sharesof Class A common stock on a one-for-one basis.

 

During theyear ended December 31, 2009, Joseph M. Field contributed to charitableentities 150,000 shares. Upon the transfer of the stock, the shares wereautomatically converted to shares of Class A common stock.

 

***Dividends***

 

The Company’sBoard of Directors has not declared a dividend since the third quarter of2008.  Pursuant to the Company’s Bank Facility as amended during March 2010,during periods when the Company’s Consolidated Leverage Ratio exceeds sixtimes, the Company will be prohibited from paying dividends.

 

Any futuredividends will be at the discretion of the Board of Directors based upon therelevant factors at the time of such consideration.

 

The followingtable presents a summary of the Company’s dividend activity for the period fromJanuary 1, 2007 through December 31, 2009:

 
| ** **              | ** ** | ** **              | ** ** | **Amount** | ** ** |
|-------------------------|------------|-------------------------|------------|------------|------------|
| ** **              | ** ** | ** **              | ** ** | **Per**    | ** ** |
| **Record**              | ** ** | **Payment**             | ** ** | **Common** | ** ** |
| **Date**                | ** ** | **Date**                | ** ** | **Share**  | ** ** |
| ** **              |       |                         |       |       |       |
| September 12, 2008 |       | September 26, 2008 |       | $          | 0.10       |   |
| June 13, 2008      |       | June 27, 2008      |       | $          | 0.10       |   |
| March 14, 2008     |       | March 28, 2008     |       | $          | 0.38       |   |
| December 3, 2007   |       | December 17, 2007  |       | $          | 0.38       |   |
| September 14, 2007 |       | September 28, 2007 |       | $          | 0.38       |   |
| June 15, 2007      |       | June 28, 2007      |       | $          | 0.38       |   |
| March 14, 2007     |       | March 28, 2007     |       | $          | 0.38       |   |

 

***Dividend Equivalents***

 

The Company’sgrants of restricted stock units (“RSUs”) 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. The long-term dividendequivalent amount, accrued and unpaid on unvested RSUs, was $0.8 million and$1.1 million as of December 31, 2009 and 2008, respectively, and isincluded under other long-term liabilities in the balance sheet. The short-termdividend equivalent amount, accrued and unpaid on unvested RSUs, was $1.0million and $1.6 million as of December 31, 2009 and 2008, respectively,and is included under other current liabilities in the balance sheet.

 

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The amountspaid to the holders of RSUs that vested during the years ended December 31,2009 and 2008 were $0.8 million and $0.9 million, respectively. The amount paidis considered a windfall tax benefit that will be recorded to paid-in-capitalwhen realized. Due to the expected realization of the federal net operatingloss carryback for 2008 (please refer to Note 7, Income Taxes (Benefit) forfurther discussion), the Company recorded to paid-in-capital a $0.3 million taxbenefit for the $0.9 million paid to the holders of RSUs that vested during theyear ended December 31, 2008.

 

***Repurchases Of Vested RSUs***

 

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 years ended December 31, 2009 and 2008, the Company wasdeemed to have repurchased 0.1 million and 0.1 million shares of stock,respectively.   In connection with suchrepurchases, the Company recorded $0.1 million and $1.4 million as a financingactivity in the consolidated statements of cash flows for the years ended December 31,2009 and 2008, respectively.

 

**14.****          EMPLOYEE SAVINGS ANDBENEFIT PLANS**

 

***Employee Stock Purchase Plan***

 

The Company’sEmployee Stock Purchase Plan (the “Purchase Plan”) expired on March 31,2009 and was not renewed.  The PurchasePlan allowed for the participants to purchase shares of the Company’s Class Acommon stock at 85% of the market value of such shares on the purchasedate.  Under the Purchase Plan, thepurchase of stock was limited to the lesser of an amount not to exceed tenpercent of an employee’s annual gross earnings or an annual maximum limitationof $25,000 per employee.  Pursuant tothis Purchase Plan, the Company did not record compensation expense on thedifference between the market value and the purchase price, as this PurchasePlan was designed to meet the requirements of Section 423(b) of theInternal Revenue Code. During the years ended December 31, 2009, 2008 and2007, employees purchased 81 thousand shares, 71 thousand shares and 23thousand shares of Class A common stock, respectively.

 

***401(k) Savings Plan***

 

The Company has a retirementplan which is intended to be qualified under Section 401(k) of theInternal Revenue Code. The retirement plan is a defined contribution plan,available to all eligible employees, and allows participants to contribute upto the legal maximum of their eligible compensation, not to exceed the maximumtax-deferred amount allowed by the Internal Revenue Service. The retirementplan also allows the Company to make discretionary matching contributions,which may be reduced, suspended or reinstated at any given time. During the fourth quarter of 2008, theCompany suspended its discretionary matching contributions. The Companycontributed $1.8 million and $2.0 million under the 401(k) plan for theyears ended December 31, 2008 and 2007, respectively.

 

***Deferred Compensation 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 underthe deferred compensation plans represent unsecured general obligations thatrank equally with the Company’s other unsecured indebtedness. As of December 31,2009 and 2008, $5.3 million and $3.7 million, respectively, were deferred underthese deferred compensation plans and were included in other long-termliabilities in the consolidated balance sheets. For the years ended December 31,2009, 2008 and 2007, the Company recorded to deferred compensation expense anincrease of $1.1 million; a decrease of $1.4 million and an increase of $0.2million, respectively.  Any change in thedeferred compensation liability is recorded to general and administrativeexpense and to station operating expenses in the statements of operations.

 

**15.****          SHARE-BASED COMPENSATION**

 

***Equity Compensation Plan***

 

Under theEntercom Equity Compensation Plan (the “Plan”), the Company is authorized toissue share-based compensation awards to key employees, directors and consultants.  The RSUs and options that have been

 

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issued generally vest overperiods of up to four years. The options expire ten years from the date ofgrant. The Company issues new shares of Class A common stock upon theexercise of stock options and the later of vesting or issuance of restrictedstock (or RSUs).

 

On January 1of each year, the number of shares of Class A common stock authorizedunder the Plan is automatically increased by 1.5 million, or a lesser number asmay be determined by the Company’s Board of Directors. On January 1, 2010,the shares available for grant automatically increased by 1.5 million to 2.5million shares.

 

At theshareholders’ meeting on May 13, 2008, the Company’s shareholders approvedcertain amendments to the Plan including: (1) an increase in the sub-limitfor RSUs from 2.0 million to 3.0 million shares; and (2) the addition ofcertain performance criteria for purposes of satisfying expense deductionrequirements for income tax purposes.

 

***Accounting For Share-Based Compensation***

 

Themeasurement and recognition of compensation expense, for all share-basedpayment awards made to employees and directors, is based on estimated fairvalues.  The Company estimates the fairvalue of share-based payment awards on the date of grant using anoption-pricing model. The value of the portion of the award that is ultimatelyexpected to vest is recognized as expense over the requisite service periods inthe Company’s consolidated statements of operations.

 

The Companyused the straight-line single option method for recognizing compensationexpense, which was reduced for estimated forfeitures based on awards ultimatelyexpected to vest.  Estimated forfeituresare revised, if necessary, in subsequent periods if actual forfeitures differfrom those estimates.

 

***RSU Activity***

 

During theyear ended December 31, 2009, the Company issued 0.2 million RSUs at aweighted average fair value of $1.76 per share and will increase its additionalpaid-in capital by $0.3 million over the vesting period of the RSUs. These RSUsexclude the impact of: (1) an unusually high number of forfeitures duringthe year which will reduce paid-in capital by $2.6 million; (2) the 2009Option Exchange Program of $1.2 million as described below; and (3) modifiedRSUs with market conditions of $0.2 million.

 

During theyears ended December 31, 2008 and 2007, the Company issued in each year0.5 million RSUs (net of forfeitures) at a weighted average fair value of$10.72 and $25.17, respectively, and will increase its additional paid-incapital by $5.1 million and $12.3 million, respectively, over the vestingperiod of the RSUs. These amounts include a fair value adjustment for RSUs withservice and market-based conditions that were issued in 2008 and in 2007.

 

As of December 31,2009, there was $6.6 million of unamortized compensation expense, net ofestimated forfeitures, related to unvested RSUs, which is expected to berecognized over a remaining weighted average recognition period of 2.3 years.During the years ended December 31, 2009, 2008 and 2007, 0.3 millionunits, 0.5 million units and 0.2 million units, respectively, of restricted stockwere both vested and released.

 

A summary ofthe changes in RSUs under the Company’s Plan during the years ended December 31,2009 and 2008 is as follows:

 

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| ** **                                              | ** ** | ** **             | ** ** | **Number**     | ** ** | ** **   | ** ** | **Weighted**    | ** ** | **Aggregate**         | ** ** |
|---------------------------------------------------------|------------|------------------------|------------|----------------|------------|--------------|------------|-----------------|------------|-----------------------|------------|
| ** **                                              | ** ** | ** **             | ** ** | **Of**         | ** ** | **Weighted** | ** ** | **Average**     | ** ** | **Intrinsic**         | ** ** |
| ** **                                              | ** ** | ** **             | ** ** | **Restricted** | ** ** | **Average**  | ** ** | **Remaining**   | ** ** | **Value As Of**       | ** ** |
| ** **                                              | ** ** | ** **             | ** ** | **Stock**      | ** ** | **Purchase** | ** ** | **Contractual** | ** ** | **December 31,** | ** ** |
| ** **                                              | ** ** | **Period Ended**       | ** ** | **Units**      | ** ** | **Price**    | ** ** | **Term**        | ** ** | **2009**              | ** ** |
| ** **                                              |       |                        | ** ** | ** **     | ** ** | ** **   | ** ** | ** **      | ** ** | ** **            | ** ** |
| RSUs outstanding as of:                                 |       | December 31, 2008 |       | 1,421,985      |       |         |       |            |       |                  |       |
| RSUs awarded                                            |       |                   |       | 176,596        |       |         |       |            |       |                  |       |
| RSUs issued in exchange  for options                    |       |                   |       | 711,985        |       |         |       |            |       |                  |       |
| RSUs released                                           |       |                   |       | (301,276       | )          |         |       |            |       |                  |       |
| RSUs forfeited                                          |       |                   |       | (91,757        | )          |         |       |            |       |                  |       |
| RSUs outstanding as of:                                 |       | December 31, 2009 |       | 1,917,533      |       | $            | —     |            | 1.3        |                  | $          | 13,556,958 |   |
|                                                    |       |                   |       |           |       |         |       |            |       |                  |       |
| RSUs vested and expected  to vest                       |       |                   |       | 1,753,230      |       | $            | —     |            | 1.2        |                  | $          | 11,929,629 |   |
| RSUs exercisable (vested  and deferred)                 |       |                   |       | 65,871         |       | $            | —     |            | —     |                  | $          | 465,708 |   |
| Weighted average remaining  recognition period in years |       |                   |       | 2.3            |       |         |       |            |       |                  |       |

 

**RSUsWith Service And Market Conditions**

 

As of December 31,2009, none of the Company’s 0.1 million RSUs with service and market conditionsvested, as the applicable milestones had not been reached. The compensationexpense is recognized even if the market conditions are not satisfied and areonly reversed in the event the service period is not fulfilled.

 

During thefirst quarter of 2009 and the fourth quarter of 2007, market conditions wereremoved for 0.2 million and less than 0.1 million RSUs, respectively, whichresulted in additional non-cash compensation expense of $0.2 million and $0.5million, respectively. These RSUs, which were originally issued during the yearended December 31, 2006, will be expensed over the remaining serviceperiod or a new service period.

 

During theyear ended December 31, 2007, the Company issued 0.1 million RSUs withservice and market conditions.  Thevesting of these shares is based upon the performance of the Company’s stock ascompared to certain other companies over a three-year measurement period.  The market conditions allow for vesting ofportions of the award if certain shareholder performance targets are met.

 

**ValuationOf RSUs**

 

The fair valueof RSUs with service conditions is estimated based on the market value stockprice on the date of the grant, and the fair value of RSUs with service andmarket conditions is estimated using a lattice model as described below.

 

To determinethe fair value of RSUs with service and market conditions, the Company used theMonte Carlo simulation lattice model. The Company’s determination of the fairvalue was based on the number of shares granted, the Company’s stock price onthe date of grant and certain assumptions regarding a number of highly complexand subjective variables. If other reasonable assumptions were used, theresults could differ. The Company made assumptions with respect to thefollowing when applying the Monte Carlo simulation model:

 

Expected VolatilityTerm Structure - The Company estimated the volatility term structure using: (1) thehistorical volatility of its stock; and (2) the implied volatilityprovided by its traded options from a trailing month’s average of the closingbid-ask price quotes.

 

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Risk-FreeInterest Rate - The Company estimated the risk-free interest rate based uponthe implied yield available on U.S. Treasury issues using a constant maturityTreasury bond rate as of the date of grant.

 

ExpectedDividend Yield - The Company calculated the expected dividend yield at the timeof grant based upon the Company’s most recent quarterly dividend, if any, andthe Company’s stock price on the date of grant.

 

The weightedaverage fair value of granted RSUs with service and market conditions was $8.70per share for the year ended December 31, 2007 and is amortized over aperiod of three years.  The specificassumptions used for this valuation are as follows:

 
| ** **                    | ** ** | **Year**              |
|-------------------------------|------------|-----------------------|
| ** **                    | ** ** | **Ended**             |
| ** **                    | ** ** | **December 31,** |
| ** **                    | ** ** | **2007**              |
|                          |       |                  |
| Expected Volatility Structure |       | 23% to 27%            |
| Risk Free Interest Rate       |       | 4.6% to 5.1%          |
| Expected Dividend Yield       |       | 7.2%                  |

 

***Options***

 

**OptionActivity**

 

For the yearsended December 31, 2009, 2008 and 2007, the Company issued non-qualifiedoptions to purchase 1.1 million, 0.2 million and 0.6 million shares,respectively, of its Class A common stock at prices per share ranging from$1.34 to $6.62, $2.76 to $12.31 and $14.83 to $23.87, respectively, of whichall options were issued at market value on the date of grant. These optionsgenerally vest over a four-year period and expire ten years from the date ofgrant.

 

For the yearended December 31, 2007, the total intrinsic value of options exercisedwas $0.1 million (no options were exercised for the years ended December 31,2009 and 2008). For the year ended December 31, 2007, cash received fromstock option exercises was $0.5 million and the income tax benefit from stockoption exercises was less than $0.1 million.

 

As of December 31, 2009, $1.0 million ofaccumulated unrecognized compensation costs related to unvested stock options,net of forfeitures, are expected to be amortized in future periods over a weightedaverage period of 3.1 years.

 

The following table presentsthe option activity during the years ended December 31, 2009 and 2008under the Company’s stock option plan:

 

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| ** **                                               | ** ** | ** **             | ** ** | ** **    | ** ** | ** **   | ** ** | **Weighted**    | ** ** | **Intrinsic**         | ** ** |
|----------------------------------------------------------|------------|------------------------|------------|---------------|------------|--------------|------------|-----------------|------------|-----------------------|------------|
| ** **                                               | ** ** | ** **             | ** ** | ** **    | ** ** | **Weighted** | ** ** | **Average**     | ** ** | **Value**             | ** ** |
| ** **                                               | ** ** | ** **             | ** ** | ** **    | ** ** | **Average**  | ** ** | **Remaining**   | ** ** | **As of**             | ** ** |
| ** **                                               | ** ** | ** **             | ** ** | **Number of** | ** ** | **Exercise** | ** ** | **Contractual** | ** ** | **December 31,** | ** ** |
| ** **                                               | ** ** | **Period Ended**       | ** ** | **Options**   | ** ** | **Price**    | ** ** | **Term**        | ** ** | **2009**              | ** ** |
| ** **                                               |       |                   |       |          |       |         |       |            |       |                  |       |
| Options outstanding as of:                               |       | December 31, 2008 |       | 2,493,930     |       | $            | 28.33      |            |       |                  |       |   |
| Options granted                                          |       |                   |       | 1,086,750     |       | $            | 1.42       |            |       |                  |       |   |
| Options forfeited                                        |       |                   |       | (70,155       | )          | $            | 2.62       |            |       |                  |       |   |
| Options exchanged for RSUs                               |       |                   |       | (2,084,518    | )          | $            | 29.02      |            |       |                  |       |   |
| Options expired                                          |       |                   |       | (322,975      | )          | $            | 24.70      |            |       |                  |       |   |
| Outstanding as of:                                       |       | December 31, 2009 |       | 1,103,032     |       | $            | 3.20       |            | 8.8        |                  | $          | 5,808,683 |   |
|                                                     |       |                   |       |               |       |         |       |            |       |                  |       |
| Options vested and  expected to vest as of:              |       | December 31, 2009 |       | 989,693       |       | $            | 3.38       |            | 8.8        |                  | $          | 5,183,473 |   |
| Options vested and  exercisable as of:                   |       | December 31, 2009 |       | 50,542        |       | $            | 35.29      |            | 3.3        |                  | $          | 8,081 |   |
| Weighted average remaining  recognition period in years: |       |                   |       | 3.1           |       |         |       |            |       |                  |       |

 

The following table summarizes significant ranges of outstanding andexercisable options as of December 31, 2009:

 
| ** **          | ** ** | **Options Outstanding** | ** ** | **Options Exercisable** | ** ** |
|---------------------|------------|-------------------------|------------|-------------------------|------------|
| ** **          | ** ** | **Number Of**           | ** ** | **Weighted**            | ** ** | ** ** | ** ** | **Number Of** | ** ** | ** ** | ** ** |
| ** **          | ** ** | **Options**             | ** ** | **Average**             | ** ** | **Weighted** | ** ** | **Options** | ** ** | **Weighted** | ** ** |
| ** **          | ** ** | **Outstanding**         | ** ** | **Remaining**           | ** ** | **Average** | ** ** | **Exercisable** | ** ** | **Average** | ** ** |
| ** **          | ** ** | **December 31,**   | ** ** | **Contractual**         | ** ** | **Exercise** | ** ** | **December 31,** | ** ** | **Exercise** | ** ** |
| **Exercise Prices** | ** ** | **2009**                | ** ** | **Life**                | ** ** | **Price** | ** ** | **2009** | ** ** | **Price** | ** ** |
| $                   | 1.34       |                    | $          | 1.34                    |       | 995,750 |   | 9.1 |   | $ | 1.34 |   | — |   | $ | — |   |
| $                   | 1.57       |                    | $          | 11.69                   |       | 58,782 |   | 8.9 |   | $ | 7.11 |   | 8,042 |   | $ | 9.46 |   |
| $                   | 11.78      |                    | $          | 11.78                   |       | 8,000 |   | 8.1 |   | $ | 11.78 |   | 2,000 |   | $ | 11.78 |   |
| $                   | 27.75      |                    | $          | 42.88                   |       | 23,500 |   | 2.0 |   | $ | 37.02 |   | 23,500 |   | $ | 37.02 |   |
| $                   | 45.03      |                    | $          | 48.21                   |       | 17,000 |   | 2.3 |   | $ | 47.90 |   | 17,000 |   | $ | 47.90 |   |
|                |       |                    |       | 1,103,032               |       | 8.8 |   | $ | 3.20 |   | 50,542 |   | $ | 35.29 |   |

 

**ValuationOf Options**

 

The Company’s determination ofthe fair value of share-based payment awards on the date of grant using anoption-pricing model is affected by the Company’s stock price, as well asassumptions regarding a number of highly complex and subjective variables.These variables include, but are not limited to, the Company’s expected stockprice volatility over the term of the awards, and actual and projected employeestock option exercise behaviors. Option-pricing models were developed for use in estimating the value oftraded options that have no vesting or hedging restrictions and are fully transferable.The Company’s stock options have certain characteristics that are differentfrom traded options, and changes in the subjective assumptions could affect theestimated value.

 

The weighted average fair valueof each option granted for the years ended December 31, 2009, 2008 and2007 was $0.78, $0.77 and $2.41, respectively.

 

For options granted during theyears ended December 31, 2009, 2008 and 2007, the Company used theBlack-Scholes option-pricing model and determined: (1) the term by usingthe simplified plain-vanilla method as the Company’s employee exercise historymay not be indicative for estimating future exercises ; (2) a historicalvolatility over a period commensurate with the expected term, with theobservation of the volatility on a daily basis; (3) a risk-free interestrate that was consistent with the expected term of the stock options and basedon the U.S. Treasury yield

 

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curve in effect at the time of the grant; and(4) an annual dividend yield based upon the Company’s most recentquarterly dividend at the time of grant.

 

The fair value of each optiongrant was estimated on the date of grant using the following weighted averageassumptions:

 
| ** **                     | ** ** | **Years Ended  December 31,** |
|--------------------------------|------------|------------------------------------|
| ** **                     | ** ** | **2009**                           | ** ** | **2008** | ** ** | **2007** |
| Expected life (years)          |       | 6.3                                |   | 6.3 |   | 6.3 |
| Expected volatility factor (%) |       | 54.9% to 68.0%                     |   | 30.9% to 39.3% |   | 31.0% |
| Risk-free interest rate (%)    |       | 2.2% to 3.3%                       |   | 2.7% to 3.3% |   | 3.8% to 4.8% |
| Expected dividend yield (%)    |       | 0.0%                               |   | 0.0% to 14.6% |   | 6.4% to 10.2% |

 

**Recognized Non-Cash Compensation Expense**

 

The following table summarizesrecognized stock-based compensation expense related to awards of RSUs, employeestock options and purchases under the employee stock purchase plan for theyears ended December 31, 2009, 2008 and 2007:

 
| ** **                                                        | ** ** | **Years Ended  December 31,** | ** ** |
|-------------------------------------------------------------------|------------|------------------------------------|------------|
| ** **                                                        | ** ** | **2009**                           | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                                                        | ** ** | **(amounts in thousands)**         | ** ** |
|                                                              |       |                               |       |   |   |   |   |
| Station operating expenses                                        |       | $                                  | 1,976      |   | $ | 2,552 |   | $ | 2,374 |   |
| Corporate general and  administrative expenses                    |       | 4,912                              |       | 7,304 |   | 5,834 |   |
| Stock-based compensation  expense included in operating expenses  |       | 6,888                              |       | 9,856 |   | 8,208 |   |
| Income tax benefit (net of  a fully reserved valuation allowance) |       | —                             |       | (3,075 | ) | (2,791 | ) |
| Total stock-based  compensation expense                           |       | $                                  | 6,888      |   | $ | 6,781 |   | $ | 5,417 |   |

 

For the yearsended December 31, 2009, 2008 and 2007, stock-based compensation expenseconsisted primarily of awards for RSUs.

 

***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 RSUs. The exchange ratios were as follows:

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

 

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

 

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 RSUs. Under modificationaccounting, the fair value of the new shares immediately prior to the exchangewas greater by $1.2

 

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million than the fair value of the surrendered options. In addition,under the bifurcated method, share-based compensation expense of $0.9 millionassociated with any unvested options exchanged and cancelled as of themodification date will be recognized over the remaining original option term,and the expense will only be reversed if the original service period is notmet.

 

***Tax Benefit, Or Additional Paid-In CapitalPool***

 

For the year ended December 31, 2008, the Company utilized itspaid-in-capital pool of $1.7****million(including the $0.5 million as described below) that resulted from tax benefitsrecorded in this period and in prior periods.

 

In connection with the vesting of RSUs issued under the Company’s 2006Option Exchange Program, the Company received tax deductions in excess ofpreviously recorded tax benefits.  As aresult, the Company recorded a windfall tax benefit of $0.5 million for theyear ended December 31, 2008, which was classified as a financing cashinflow in the condensed consolidated statements of cash flows.

 

**16.****                               NETINCOME (LOSS) PER COMMON SHARE**

 

Net income(loss) per common share is calculated as basic net income (loss) per share anddiluted net income (loss) per share. Basic net income (loss) per share excludesdilution and is computed by dividing net income (loss) available to commonshareholders by the weighted average number of common shares outstanding forthe period. Diluted net income (loss) per share is computed in the same manneras basic net income (loss) after assuming issuance of common stock for allpotentially dilutive equivalent shares, which includes the potential dilutionthat could occur: (1) if all the Company’s outstanding stock options thatare in-the-money were exercised (using the treasury stock method); (2) ifthe RSUs with service conditions were fully vested (using the treasury stockmethod); (3) if the RSUs with service and market conditions wereconsidered contingently issuable; and (4) if the participation byemployees in the Employee Stock Purchase Plan, which expired on March 31,2009, is considered as an option (using the treasury stock method).Anti-dilutive instruments are not considered in this calculation.

 

The Companyconsidered the allocation of undistributed net income for multiple classes ofcommon stock and determined that it was appropriate to allocate undistributednet income between the Company’s Class A and Class B common stock onan equal basis.  For purposes of makingthis determination, the Company’s charter provides that the holders of Class Aand Class B common stock have equal rights and privileges except withrespect to voting on most matters voted by Joseph Field or David Field.

 

***Computation OfDiluted Net Income (Loss) Per Share***

 

The effect of stock options andRSUs in the calculation of net income (loss) per share, using the treasurystock method, was dilutive for the year ended December 31, 2009 andanti-dilutive for the years ended December 31, 2008 and 2007. Thecomputations are reflected as follows:

 

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***Computations For The Year Ended December 31,2009***

*** ***
| ** **                                                          | ** ** | **Year Ended December 31, 2009**                       | ** ** |
|---------------------------------------------------------------------|------------|-------------------------------------------------------------|------------|
| ** **                                                          | ** ** | **(amounts in thousands, except share and per share data)** | ** ** |
| ** **                                                          | ** ** |                                                             | ** ** | ** ** | ** ** | **Net Income** | ** ** |
| ** **                                                          | ** ** | **Net Income**                                              | ** ** | **Shares** | ** ** | **Per Share** | ** ** |
| Basic net income per common share:                                  |       |                                                        |       |   |   |   |   |
| Income from continuing operations                                   |       | $                                                           | 5,398      |   | 35,321,431 |   | $ | 0.15 |   |
| Income (loss) from discontinued operations, net  of taxes (benefit) |       | —                                                      |       | — |   | — |   |
| Net income                                                          |       | $                                                           | 5,398      |   | 35,321,431 |   | $ | 0.15 |   |
| Impact of equity awards                                             |       |                                                        |       | 1,081,369 |   |   |   |
| Diluted net income per common share:                                |       |                                                        |       |   |   |   |   |
| Income from continuing operations                                   |       | $                                                           | 5,398      |   | 36,402,800 |   | $ | 0.15 |   |
| Income (loss) from discontinued operations, net  of taxes (benefit) |       | —                                                      |       | — |   | — |   |
| Net income                                                          |       | $                                                           | 5,398      |   | 36,402,800 |   | $ | 0.15 |   |

 

In computing the incrementalshares under the treasury stock method, 0.8 million RSUs (including 0.1 millionRSUs with market and service conditions as half of the RSUs with marketconditions were not satisfied as of December 31, 2009) and options topurchase 0.9 million shares of common stock at a range of $3.46 to $48.21, wereexcluded from the computation as they were anti-dilutive.

 

***Computations For TheYear Ended December 31, 2008***

*** ***
| ** **                                             | ** ** | **Year Ended December 31, 2008**                       | ** ** |
|--------------------------------------------------------|------------|-------------------------------------------------------------|------------|
| ** **                                             | ** ** | **(amounts in thousands, except share and per share data)** | ** ** |
| ** **                                             | ** ** |                                                             | ** ** | ** ** | ** ** | **Net Loss** | ** ** |
| ** **                                             | ** ** | **Net Loss**                                                | ** ** | **Shares** | ** ** | **Per Share** | ** ** |
| Basic net loss per common share:                       |       |                                                        |       |   |   |   |   |
| Loss from continuing operations                        |       | $                                                           | (512,572   | ) | 36,782,166 |   | $ | (13.94 | ) |
| Loss from discontinued operations, net of tax  benefit |       | (4,079                                                      | )          | — |   | (0.11 | ) |
| Net loss                                               |       | $                                                           | (516,651   | ) | 36,782,166 |   | $ | (14.05 | ) |
| Impact of equity awards                                |       |                                                        |       | — |   |   |   |
| Diluted net loss per common share:                     |       |                                                        |       |   |   |   |   |
| Loss from continuing operations                        |       | $                                                           | (512,572   | ) | 36,782,166 |   | $ | (13.94 | ) |
| Loss from discontinued operations, net of tax  benefit |       | (4,079                                                      | )          | — |   | (0.11 | ) |
| Net loss                                               |       | $                                                           | (516,651   | ) | 36,782,166 |   | $ | (14.05 | ) |

 

The Company did not includeless than 0.1 million incremental shares in the diluted net loss per commonshare computation as the shares were anti-dilutive when reporting a net lossper share.

 

In computing the incrementalshares under the treasury stock method, 1.4 million RSUs (including 0.3 millionRSUs with market and service conditions as the market conditions were notsatisfied as of December 31, 2008) and options to purchase 2.5 millionshares of common stock at a range of $6.98 to $52.05, were excluded from thecomputation as they were anti-dilutive.

 

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***Computations For The Year Ended December 31,2007***

 
| ** **                                         | ** ** | **Year Ended  December 31, 2007**                       | ** ** |
|----------------------------------------------------|------------|--------------------------------------------------------------|------------|
| ** **                                         | ** ** | **(amounts in thousands,  except share and per share data)** | ** ** |
| ** **                                         | ** ** |                                                              | ** ** | ** ** | ** ** | **Net Loss** | ** ** |
| ** **                                         | ** ** | **Net  Loss**                                                | ** ** | **Shares** | ** ** | **Per Share** | ** ** |
| Basic net loss per common  share:                  |       |                                                         |       |   |   |   |   |
| Loss from continuing  operations                   |       | $                                                            | (8,394     | ) | 38,229,695 |   | $ | (0.22 | ) |
| Income from discontinued  operations, net of taxes |       | 37                                                           |       | — |   | — |   |
| Net loss                                           |       | $                                                            | (8,357     | ) | 38,229,695 |   | $ | (0.22 | ) |
| Impact of equity awards                            |       |                                                         |       | — |   |   |   |
| Diluted net loss per  common share:                |       |                                                         |       |   |   |   |   |
| Loss from continuing  operations                   |       | $                                                            | (8,394     | ) | 38,229,695 |   | $ | (0.22 | ) |
| Income from discontinued  operations, net of taxes |       | 37                                                           |       | — |   | — |   |
| Net loss                                           |       | $                                                            | (8,357     | ) | 38,229,695 |   | $ | (0.22 | ) |

 

The Company did not include 0.3million incremental shares in the diluted net loss per common share as theshares were anti-dilutive when reporting a net loss per share.

 

In computing the incrementalshares under the treasury stock method, 0.6 million RSUs (including 0.3 millionRSUs with market and service conditions as the market conditions were notsatisfied as of December 31, 2007) and options to purchase 1.8 millionshares of common stock at a range of $13.70 to $52.05, were excluded from thecomputation as they were anti-dilutive.

 

**17.****                               DISCONTINUEDOPERATIONS**

 

The Company applied theaccounting guidance for the disposition of long-lived assets to: (1) thedisposition of a building on November 24, 2008; (2) the dispositionof radio broadcasting assets in the Rochester, New York, market on July 14,2008; (3) the disposition of radio broadcasting assets in the Cincinnati,Ohio market on March 14, 2008; (4) the disposition of radiobroadcasting assets in the Seattle market on March 14, 2008; and (5) thedisposition of radio broadcasting assets in the Austin market on January 15,2008.  Accounting guidance requires thatin a period in which a component of an entity has 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 Company reported the disposition of radio broadcasting assets inthe Rochester, New York, market as discontinued operations, but did not report,however, the discontinued operations for the following dispositions whichremain classified in income (loss) from continuing operations:

 

·                  The radiostations in Cincinnati, Ohio, as there was no activity in this market by theCompany since the Company’s acquisition of these stations during the fourthquarter of 2007 (the stations were operated by a third party pursuant to a TBAfor the period from February 26, 2007 through March 14, 2008); and

·                  The radio station in the Austin market, thethree radio stations in the Seattle market and a building, as these operationsdid not meet the criteria for the reclassification of operating results todiscontinued operations due to the expected migration of cash flows from thedisposed stations and property to other Company-owned radio stations.

 

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Selected financial information related to discontinued operations inthe Rochester market for the years ended December 31, 2008 and 2007 is asfollows:

 
| ** **                                                                 | ** ** | **Years Ended  December 31,** | ** ** |
|----------------------------------------------------------------------------|------------|------------------------------------|------------|
| ** **                                                                 | ** ** | **2008**                           | ** ** | **2007** | ** ** |
|                                                                       |       |                               |       |   |   |
| Net broadcast revenues                                                     |       | $                                  | 1,440      |   | $ | 929 |   |
|                                                                       |       |                               |       |   |   |
| Station operating expenses                                                 |       | 1,456                              |       | 865 |   |
| Depreciation and  amortization                                             |       | —                             |       | 18 |   |
| Time brokerage agreement  income                                           |       | (45                                | )          | — |   |
| Gain on disposition of  assets                                             |       | (725                               | )          | — |   |
| Impairment loss                                                            |       | 6,675                              |       | — |   |
| Total operating expense                                                    |       | 7,361                              |       | 883 |   |
| Income (loss) before  income taxes (benefit)                               |       | (5,921                             | )          | 46 |   |
| Income taxes (benefit)                                                     |       | 1,842                              |       | (9 | ) |
| Income (loss) from  discontinued operations, net of income taxes (benefit) |       | $                                  | (4,079     | ) | $ | 37 |   |

 

During thefirst quarter of 2008, the Company reviewed its carrying amount for theRochester assets held for sale at that time and determined that an aggregateimpairment loss for broadcasting licenses and goodwill of $6.7 million wasnecessary due to: (1) the continued decline in advertising revenues; (2) thefiling of an application with the FCC to place these stations into adisposition trust; and (3) the potential for a forced sale by thedisposition trustee.

 

In accordance with theaccounting guidance for the allocation of interest expense to a discontinuedoperation, the Company did not allocate any interest expense for the periodspresented, as no debt was required to be repaid under the Company’s BankFacility as a result of the disposition of these radio station assets.

 

**18.****                               SUMMARIZEDQUARTERLY FINANCIAL DATA (Unaudited)**

 

The following table presentsunaudited operating results for each quarter within the two most recent years.The Company believes that all necessary adjustments, consisting only of normalrecurring adjustments, have been included in the amounts stated below topresent fairly the following quarterly results when read in conjunction withthe financial statements included elsewhere in this report. Results ofoperations for any particular quarter are not necessarily indicative of resultsof operations for a full year. The Company’s financial results are also notcomparable from quarter to quarter due to the Company’s acquisitions anddispositions of radio stations as described in Note 4 and due to theseasonality of revenues, with revenues usually the lowest in the first quarterof each year.

 

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| ** **                                                                | ** ** | **Quarters Ended**                                 | ** ** |
|---------------------------------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                                                | ** ** | **December 31**                               | ** ** | **September 30** | ** ** | **June 30 (2)** | ** ** | **March 31** | ** ** |
| ** **                                                                | ** ** | **(amounts in thousands,  except per share data)** | ** ** |
| **2009**                                                                  | ** ** | ** **                                         | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net revenues                                                              |       | $                                                  | 95,996     |   | $ | 99,765 |   | $ | 101,300 |   | $ | 75,371 |   |
| Operating income (loss)                                                   |       | $                                                  | 24,260     |   | $ | 23,421 |   | $ | (43,654 | ) | $ | 6,794 |   |
| Income (loss) from  continuing operations                                 |       | $                                                  | 23,700     |   | $ | 18,275 |   | $ | (41,913 | ) | $ | 5,336 |   |
| Net income (loss)                                                         |       | $                                                  | 23,700     |   | $ | 18,275 |   | $ | (41,913 | ) | $ | 5,336 |   |
|                                                                      |       |                                               |       |   |   |   |   |   |   |
| Basic income (loss) from  continuing operations per common share (1)      |       | $                                                  | 0.67       |   | $ | 0.52 |   | $ | (1.19 | ) | $ | 0.15 |   |
| Basic net income (loss)  per common share (1)                             |       | $                                                  | 0.67       |   | $ | 0.52 |   | $ | (1.19 | ) | $ | 0.15 |   |
| Weighted average basic  common shares outstanding                         |       | 35,295                                             |       | 35,292 |   | 35,290 |   | 35,394 |   |
|                                                                      |       |                                               |       |   |   |   |   |   |   |
| Diluted income (loss) from  continuing operations per common share (1)    |       | $                                                  | 0.64       |   | $ | 0.50 |   | $ | (1.19 | ) | $ | 0.15 |   |
| Diluted net income (loss)  per common share (1)                           |       | $                                                  | 0.64       |   | $ | 0.50 |   | $ | (1.19 | ) | $ | 0.15 |   |
| Weighted average diluted  common and common equivalent shares outstanding |       | 37,040                                             |       | 36,621 |   | 35,290 |   | 35,482 |   |

 
| ** **                                                                | ** ** | **Quarters Ended**                                 | ** ** |
|---------------------------------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                                                | ** ** | **December 31 (3)**                           | ** ** | **September 30** | ** ** | **June 30 (3)** | ** ** | **March 31 (3)** | ** ** |
| ** **                                                                | ** ** | **(amounts in thousands,  except per share data)** | ** ** |
| **2008**                                                                  | ** ** | ** **                                         | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net revenues                                                              |       | $                                                  | 104,097    |   | $ | 115,555 |   | $ | 123,780 |   | $ | 95,390 |   |
| Operating income (loss)                                                   |       | $                                                  | (622,337   | ) | $ | 32,809 |   | $ | (147,862 | ) | $ | 27,082 |   |
| Income (loss) from  continuing operations                                 |       | $                                                  | (429,222   | ) | $ | 3,774 |   | $ | (96,293 | ) | $ | 9,169 |   |
| Income (loss) from  discontinued operations                               |       | $                                                  | (582       | ) | $ | 480 |   | $ | (33 | ) | $ | (3,944 | ) |
| Net income (loss)                                                         |       | $                                                  | (429,804   | ) | $ | 4,254 |   | $ | (96,326 | ) | $ | 5,225 |   |
|                                                                      |       |                                               |       |   |   |   |   |   |   |
| Basic income (loss) from  continuing operations per common share (1)      |       | $                                                  | (11.89     | ) | $ | 0.11 |   | $ | (2.60 | ) | $ | 0.24 |   |
| Basic income (loss) from  discontinued operations per common share (1)    |       | $                                                  | (0.02      | ) | $ | 0.01 |   | $ | — |   | $ | (0.10 | ) |
| Basic net income (loss)  per common share (1)                             |       | $                                                  | (11.91     | ) | $ | 0.12 |   | $ | (2.60 | ) | $ | 0.14 |   |
| Weighted average basic  common shares outstanding                         |       | 36,095                                             |       | 36,367 |   | 36,966 |   | 37,636 |   |
|                                                                      |       |                                               |       |   |   |   |   |   |   |
| Diluted income (loss) from  continuing operations per common share (1)    |       | $                                                  | (11.89     | ) | $ | 0.11 |   | $ | (2.60 | ) | $ | 0.24 |   |
| Diluted income (loss) from  discontinued operations per common share (1)  |       | $                                                  | (0.02      | ) | $ | 0.01 |   | $ | — |   | $ | (0.10 | ) |
| Diluted net income (loss)  per common share (1)                           |       | $                                                  | (11.91     | ) | $ | 0.12 |   | $ | (2.60 | ) | $ | 0.14 |   |
| Weighted average diluted  common and common equivalent shares outstanding |       | 36,095                                             |       | 36,375 |   | 36,966 |   | 37,736 |   |
|                                                                      |       |                                               |       |   |   |   |   |   |   |
| Dividends declared and  paid per common share                             |       | $                                                  | —     |   | $ | 0.10 |   | $ | 0.10 |   | $ | 0.38 |   |

 

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(1)                                  Income(loss) from continuing operations per share, income (loss) from discontinuedoperations per share and net income (loss) per share is computed independentlyfor each quarter and the full year based upon respective average sharesoutstanding. Therefore, the sum of the quarterly per share amounts may notequal the annual per share amounts reported.

 

(2)                                  Duringthe second quarter of 2009, the Company recognized an impairment loss of $67.7million that was comprised of: (1) a broadcasting license impairment lossof $60.8 million that affected each of the Company’s radio markets, other thanSeattle; and (2) a goodwill impairment loss of $6.9 million for seven ofits 22 markets.

 

(3)                                  Duringthe fourth quarter of 2008, the Company recognized an impairment loss of $651.1million that was comprised of: (1) a broadcasting license impairment lossof $645.3 million that affected each of the Company’s radio markets, other thanSeattle; and (2) a goodwill impairment loss of $5.8 million for three ofits markets. During the second quarter of 2008, the Company recognized agoodwill and broadcasting license impairment loss of $184.6 million thataffected the Company’s Denver, Greenville, Indianapolis and Memphis radiomarkets. During the first quarter of 2008, the Company reduced its assets heldfor sale in the Rochester market and recorded an impairment loss of $6.7million to income (loss) from discontinued operations.

 

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**SIGNATURES**

 

Pursuant to the requirements ofSection 13 or 15(d) of the Securities and Exchange Act of 1934, theregistrant has duly caused this report to be signed on its behalf by theundersigned, thereunto duly authorized, in Bala Cynwyd, Pennsylvania, on March 15,2010.

 
|   | **ENTERCOM COMMUNICATIONS CORP.** |
|--------|-----------------------------------|
|   | ** **                        |
|   |                              |   |
|   | By:                               | /s/  DAVID J. FIELD |
|   |                              | David  J. Field, President, Chief Executive Officer |
|   |                              | (principal executive officer) |

 

Pursuant to the requirements ofthe Securities and Exchange Act of 1934, this report has been signed by thefollowing persons in the capacities and on the dates indicated.

 
| **SIGNATURE**                     | ** ** | **CAPACITY**                                       | ** ** | **DATE**             |
|-----------------------------------|------------|----------------------------------------------------|------------|----------------------|
| ** **                        | ** ** | ** **                                         | ** ** | ** **           |
| **Principal Executive Officer:**  |       |                                               |       |                 |
| ** **                        |       |                                               |       |                 |
| /s/  DAVID J. FIELD               |       | President,  Chief Executive Officer and a Director |       | March 15,  2010 |
| David  J. Field                   |       |                                               |       |                 |
|                              |       |                                               |       |                 |
| **Principal Financial Officer:**  |       |                                               |       |                 |
| ** **                        |       |                                               |       |                 |
| /s/  STEPHEN F. FISHER            |       | Executive  Vice President — Operations and    |       | March 15,  2010 |
| Stephen  F. Fisher                |       | Chief  Financial Officer                           |       |                 |
|                              |       |                                               |       |                 |
| **Principal Accounting Officer:** |       |                                               |       |                 |
| ** **                        |       |                                               |       |                 |
| /s/  EUGENE D. LEVIN              |       | Vice  President, Treasurer and Controller          |       | March 15,  2010 |
| Eugene  D. Levin                  |       |                                               |       |                 |
|                              |       |                                               |       |                 |
| **Directors:**                    |       |                                               |       |                 |
| ** **                        |       |                                               |       |                 |
| /s/  JOSEPH M. FIELD              |       | Chairman  of the Board                             |       | March 15,  2010 |
| Joseph  M. Field                  |       |                                               |       |                 |
|                              |       |                                               |       |                 |
| /s/  DAVID J. BERKMAN             |       | Director                                           |       | March 15,  2010 |
| David  J. Berkman                 |       |                                               |       |                 |
|                              |       |                                               |       |                 |
| /s/  JOHN C. DONLEVIE             |       | Executive  Vice President, Secretary,              |       | March 15,  2010 |
| John  C. Donlevie                 |       | General  Counsel and a Director                    |       |                 |
|                              |       |                                               |       |                 |
| /s/  DANIEL E. GOLD               |       | Director                                           |       | March 15,  2010 |
| Daniel  E. Gold                   |       |                                               |       |                 |
|                              |       |                                               |       |                 |
| /s/  ROBERT S. WIESENTHAL         |       | Director                                           |       | March 15,  2010 |
| Robert  S. Wiesenthal             |       |                                               |       |                 |
|                              |       |                                               |       |                 |
| /s/  MICHAEL J WOLF               |       | Director                                           |       | March 15,  2010 |
| Michael J. Wolf                   |       |                                               |       |                 |

 

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I**NDEX TO EXHIBITS**

 
| **Exhibit   Number** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                        |
|---------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.01                      |       | Amended  and Restated Articles of Incorporation of the Entercom Communications Corp,  as amended on December 19, 2007. (1)                                                                                                                                                                                                                                                                                        |
| 3.02                      |       | Amended  and Restated Bylaws of the Entercom Communications Corp. (2)                                                                                                                                                                                                                                                                                                                                                  |
| 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. (3)  (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. (3)  (Originally filed as  Exhibit 4.03)                                                                                                                                                         |
| 10.01                     |       | Employment  Agreement, dated July 1, 2007, between Entercom Communications Corp. and  David J. Field. (4)                                                                                                                                                                                                                                                                                                         |
| 10.02                     |       | First  Amendment To Employment Agreement, dated December 15, 2008, between  Entercom Communications Corp. and David J. Field. (5) (Originally filed  as Exhibit 10.02)                                                                                                                                                                                                                                  |
| 10.03                     |       | Employment  Agreement, dated July 1, 2007, between Entercom Communications Corp. and  Joseph M. Field. (6)                                                                                                                                                                                                                                                                                                        |
| 10.04                     |       | First  Amendment To Employment Agreement, dated December 15, 2008, between  Entercom Communications Corp. and Joseph M. Field. (5) (Originally filed  as Exhibit 10.04)                                                                                                                                                                                                                                 |
| 10.05                     |       | Employment  Agreement, dated December 19, 2007, between Entercom Communications  Corp. and Stephen F. Fisher. (7)                                                                                                                                                                                                                                                                                                 |
| 10.06                     |       | First  Amendment To Employment Agreement, dated December 15, 2008, between  Entercom Communications Corp. and Stephen F. Fisher. (5) (Originally  filed as Exhibit 10.06)                                                                                                                                                                                                                               |
| 10.07                     |       | Employment  Agreement, dated December 17, 1998, between Entercom Communications  Corp. and John C. Donlevie. (8)                                                                                                                                                                                                                                                                                                  |
| 10.08                     |       | Entercom Non-employee Director Compensation Policy. (9)                                                                                                                                                                                                                                                                                                                                                                |
| 10.09                     |       | Amended and Restated Entercom Equity Compensation Plan. (10)                                                                                                                                                                                                                                                                                                                                                           |
| 10.10                     |       | Entercom Annual Incentive Plan. (11)                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.11                     |       | Credit  Agreement dated as of June 18, 2007 among Entercom Radio, LLC, as the  Borrower, Entercom Communications Corp., as the Parent, Bank of America, N.A.  as Administrative Agent and L/C Issuer, JP Morgan Chase Bank, N.A. as  Syndication Agent, BMO Capital Markets, Corp., BNP Paribas, Mizuho Corporate  Bank, LTD., Suntrust Bank as Co-Documentation Agents and The Other Lenders  Party Hereto. (12) |
| 21.01                     |       | Information  Regarding Subsidiaries of Entercom Communications Corp. (13)                                                                                                                                                                                                                                                                                                                                              |
| 23.01                     |       | Consent  of PricewaterhouseCoopers LLP. (13)                                                                                                                                                                                                                                                                                                                                                                           |
| 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. (13)                                                                                                                                                                                                                          |
| 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. (13)                                                                                                                                                                                                           |
| 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. (14)                                                                                                                                                                                                                                                     |
| 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.  (14)                                                                                                                                                                                                                                     |

 

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|   |   | (1) | Incorporated by  reference to Exhibit 3.01 to our Amendment to Registration Statement on  Form S-1, as filed on January 27, 1999 (File No. 333-61381),  Exhibit 3.1 of our Current Report on Form 8-K as filed on  December 21, 2007 and Exhibit 3.02 to our Quarterly Report on  Form 10-Q for the quarter ended June 30, 2009, as filed on August 5,  2009. |
|--------|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | (2) | Incorporated  by reference to Exhibit 3.01 to our Current Report on Form 8K filed  on February 21, 2008.                                                                                                                                                                                                                                                                                              |
|   |   | (3) | Incorporated by reference to an exhibit (as  indicated above) to our Quarterly Report on Form 10-Q for the quarter  ended March 31, 2002, as filed on May 13, 2002.                                                                                                                                                                                                                                   |

 

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|   |   | (4)  | Incorporated  by reference to as Exhibit 10.01 to our Quarterly Report on  Form 10-Q for the quarter ended September 30, 2007, as filed on  November 9, 2007.                |
|--------|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | (5)  | Incorporated  by reference to an exhibit (as indicated above) to our Annual Report on  Form 10-Q for the year ended December 31, 2008, as filed on  February 26, 2009.            |
|   |   | (6)  | Incorporated  by reference to as Exhibit 10.02 to our Quarterly Report on  Form 10-Q/A for the quarter ended September 30, 2007, as filed on  November 21, 2007.             |
|   |   | (7)  | Incorporated  by reference to as Exhibit 10.03 to our Quarterly Report on  Form 10-K for the year ended December 31, 2007, as filed on  February 22, 2008.                   |
|   |   | (8)  | Incorporated  by reference to Exhibit 10.03 to our Amendment to Registration Statement  on Form S-1, as filed on January 6, 1999. (File  No. 333-61381).                     |
|   |   | (9)  | Incorporated by reference  to Item 1.01 to our Current Report on Form 8K filed on February 19,  2008.                                                                                  |
|   |   | (10) | Incorporated  by reference to Appendix A to our Proxy Statement on Schedule 14A filed on  March 23, 2009.                                                                                   |
|   |   | (11) | Incorporated  by reference to Exhibit 10.02 to our Current Report on Form 8K  filed on May 19, 2008.                                                                              |
|   |   | (12) | Incorporated  by reference to Exhibit 10.01 to our Quarterly Report on Form 10-Q  for the quarter ended June 30, 2007, as filed on August 2, 2007.                           |
|   |   | (13) | Filed  herewith.                                                                                                                                                                                 |
|   |   | (14) | These exhibits are submitted as  “accompanying” this Annual Report on Form 10-K and shall not be deemed  to be “filed” as part of such Annual Report on Form 10-K. |

 

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