Overview

We are one of the largest radio broadcasting companies in the United States, based on revenues. We operate a nationwide portfolio in excess of 100 radio stations in 23 markets (based upon completion of pending acquisitions and dispositions), including San Francisco, Boston, Seattle, Denver, Sacramento, Portland, Indianapolis, Kansas City, Milwaukee, Austin, Norfolk, Buffalo, New Orleans, Memphis, Providence, Greensboro, Greenville/Spartanburg, Rochester, Madison, Wichita, Wilkes-Barre/Scranton, Springfield and Gainesville/Ocala.

A radio broadcasting company derives its revenues primarily from the sale of broadcasting time to local and national advertisers. The revenues are determined by the advertising rates charged and the number of advertisements broadcast. Advertising rates are primarily based on four factors:

† a station's audience share in the demographic groups targeted by advertisers as measured principally by periodic reports issued by The Arbitron Ratings Company;

† the number of radio stations in the market competing for the same demographic groups;

† the supply of, and demand for, radio advertising time, both nationally and in the regions in which the station operates; and

† the market's size based upon available radio advertising revenue.

In 2008, we generated 77% of our net revenues from local advertising, which is sold primarily by each individual local radio station's sales staff, and 20% from national advertising, which is sold by independent advertising sales representatives. Local and national revenues include advertising on our websites and the sale of advertising during audio streaming of our radio stations over the internet. We generated the balance of our 2008 revenues principally from network compensation, promotional activities and rental income from tower sites. Our most significant station operating expenses are employee compensation, and programming and promotional expenses.

Several factors may adversely affect a radio broadcasting company's performance in any given period. In the radio broadcasting industry, seasonal revenue fluctuations are common and are due primarily to variations 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 in listeners' tastes or changes in a competitor's format. This could have an immediate negative impact on a station's ratings and/or revenues, and there are no guarantees that the modification or change will be beneficial at some future time. Our management is continually focused on these opportunities as well as the risks and associated uncertainties. We strive to develop compelling content and strong brand images to maximize audience ratings that are crucial to our stations' financial success.

You should read the following discussion and analysis of our financial condition and results in conjunction with our consolidated financial statements and related notes included elsewhere in this report. The following results of operations include a discussion of the year ended December 31, 2008 as compared to the year ended December 31, 2007 and a discussion of the year ended December 31, 2007 as compared to the year ended December 31, 2006. Our results of operations for the relevant periods represent the operations of the radio stations: (1) owned and operated by us; or (2) operated by us pursuant to time brokerage agreements ("TBA"); and exclude those owned by us but operated by others pursuant to TBAs.

Under the heading "Same Station Considerations," we evaluate net revenues, station operating expenses and operating income by comparing the performance of stations owned or operated by us throughout a relevant year to the performance of those same stations in the prior year whether or not owned or operated by us. We use these comparisons to assess the effect of acquisitions and dispositions of stations on our operations throughout the periods measured.

Results Of Operations

Year ended December 31, 2008 compared to the year ended December 31, 2007

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

Acquisitions

† On March 14, 2008, we acquired through an exchange agreement three radio stations in San Francisco, California, from Bonneville International Corporation ("Bonneville"). We began operating these stations on February 26, 2007 under a TBA that in 2008 increased our net revenues, station operating expenses and depreciation and amortization expense.

† On December 10, 2007, we acquired WVEI-FM (formerly WBEC-FM), a station in Springfield, Massachusetts, for $5.8 million in cash. We began operating this station on February 10, 2006 under a TBA by simulcasting the format of WEEI-AM (a radio station owned and operated by us in the Boston, Massachusetts, market). The impact to 2008 was an increase in our depreciation and amortization expense and interest expense.

† On November 30, 2007, we acquired from CBS Radio Stations Inc. ("CBS") four radio stations in Austin, Texas, and three radio stations in Memphis, Tennessee, for $101.0 million in cash. We began operating these stations on November 1, 2006 under a TBA. The impact to 2008 was an increase in our depreciation and amortization expense and interest expense and a decrease in our TBA expense.

† On November 30, 2007, we acquired from CBS 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, Bonneville began operating the same three stations under a TBA with us. The impact to 2008 was a decrease in our net revenues, station operating expenses and TBA fees and an increase to our interest expense.

† On November 30, 2007, we acquired from CBS four stations in Rochester, New York, for $42.0 million in cash. Of the four stations acquired, two stations were reflected in continuing operations and two stations were reflected in discontinued operations. For the two stations reflected in continuing operations, the impact to 2008 was an increase to our net revenues, station operating expenses, depreciation and amortization expense and interest expense.

Dispositions

† 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 began operating on May 1, 2008 under a TBA with us. The results for these stations were reflected in discontinued operations.

† On March 14, 2008, we sold to Bonneville through an exchange agreement, three of our seven Seattle, Washington, radio stations which Bonneville began operating on February 26, 2007 under a TBA with us. The impact to 2008, due to the cessation of operation of these stations on February 26, 2007, was a decrease in our net revenues, station operating expenses and depreciation and amortization expense.

† On March 14, 2008, we sold to Bonneville, through an exchange agreement, four Cincinnati, Ohio, radio stations we acquired during the fourth quarter of 2007 under two separate transactions. Pursuant to two TBA agreements, we operated these stations from November 1, 2006 through February 25, 2007. On February 26, 2007, Bonneville began operating these stations under a TBA with us. The impact to 2008, due to the cessation of operation of these stations on February 26, 2007, was a decrease in our net revenues and station operating expenses.

† On January 15, 2008, we sold KLQB-FM (formerly KXBT-FM), Austin, Texas, to Univision Radio Broadcasting Texas, L.P. ("Univision") for $20.0 million in cash. Univision began operating KLQB-FM under a TBA on February 26, 2007 (a station we began operating on November 1, 2006 under a TBA agreement with CBS). The impact to 2008, due to the cessation of operation of this station on February 26, 2007 and the sale on January 15, 2008, was a decrease in our net revenues, station operating expenses and interest expense.

Financing

† Our interest expense decreased due to: (i) a decrease in interest rates; and (ii) the redemption of a portion of our Senior Subordinated Notes (the "Notes") that had a higher interest rate than the rate under our senior debt. This decrease was offset by: (1) increased borrowings used to finance:
(a) acquisitions during the fourth quarter of 2007 in the amount of $268.3 million; (b) the payment of cash dividends to our shareholders of $21.6 million in 2008 and $58.0 million in 2007; and (c) stock repurchases during 2008 of $13.9 million and during 2007 of $55.0 million; and (2) interest expense of $0.9 million related to the resolution of certain litigation.

† During the year ended December 31, 2008, we repurchased $66.5 million of Senior Subordinated Notes and recognized 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 of a $0.5 million loss on the early extinguishment of debt related to the write-off of deferred financing costs during the second quarter of 2007.

Other

† During the years ended 2008 and 2007, we recorded an impairment loss of $835.7 million and $84.0 million, respectively, in connection with our review of goodwill and broadcasting licenses under the provisions of SFAS No. 142. Please refer to Note 3 in the accompanying notes to the financial statements for further discussion of the contributing factors to the impairment loss.

† In 2008, our income tax benefit on loss from continuing operations was negatively impacted by an increase to our valuation allowance of $59.4 million to fully reserve our net deferred tax assets. The increase was primarily due to the cumulative losses incurred by us since 2006, which caused uncertainty as to the realization of the deferred tax assets in future years.

† During 2008, we recovered $3.6 million from our insurance company for damages resulting from Hurricane Katrina.

† During the first quarter of 2008, we reviewed our carrying amount for the Rochester assets then held for sale and determined that an impairment loss of $6.7 million was necessary as a result of the status of our then ongoing divestiture process.

† During the first quarter of 2007, we recorded a discrete income tax expense adjustment of $2.9 million as we commenced operations in 2007 in states which on average have higher income tax rates than in states in which we had previously operated.

Net Revenues:



                                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 revenues was primarily due to: (1) weak demand for advertising in general that contributed to an overall decline in total market revenues in most of the markets where we operate stations; and (2) the commencement of operations by other parties under TBAs on: (a) February 26, 2007 for three of our seven Seattle radio stations; (b) February 26, 2007 for four radio stations in the Cincinnati market; and (c) February 26, 2007 for one radio station in the Austin market. Our decrease in net revenues was offset by:
(i) the acquisition on November 30, 2007 of four radio stations in the Rochester market of which two radio stations were reflected in continuing operations;
(ii) the commencement by us of operations under a TBA on February 26, 2007 of three radio stations in the San Francisco market; and (iii) increases in net revenues for our radio stations in markets such as Buffalo, Madison and Milwaukee.

Same Station Considerations:

† Net revenues in 2008 were not impacted by any acquisitions or dispositions of radio stations as of the beginning of the period.

† Net revenues in 2007 would have been higher by $3.3 million if we had adjusted net revenues to give effect to acquisitions or dispositions of radio stations as of the beginning of the period.

Station Operating Expenses:



                                     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 station operating expenses was primarily due to the factors leading to the decrease in net revenues as described above as certain variable expenses decrease with a corresponding decrease in net revenues, offset by the effects of inflation.

In the fourth quarter of 2008, we initiated several cost reduction initiatives, including certain station operating expense and personnel reductions and the cessation of our Company's voluntary employee benefits matching programs. While the impact of these initiatives were not material in this quarter, future periods will benefit from these actions and any further cost reduction actions.

Same Station Considerations:

† Station operating expenses in 2008 were not impacted by any acquisitions or dispositions of radio stations as of the beginning of the period.

† Station operating expenses in 2007 would have been higher by $1.9 million if we had adjusted station operating expenses to give effect to acquisitions or dispositions of radio stations as of the beginning of the period.

Depreciation And Amortization Expenses:



                                           December 31, 2008     December 31, 2007
                                                    (dollars in millions)
 Depreciation and Amortization Expenses   $              20.4   $              16.6
 Amount of Change                         $               3.8
 Percentage Change                                       22.9 %

Depreciation and amortization expense increased due to the acquisitions of radio station assets in the first quarter of 2008 and in the fourth quarter of 2007 (other than those assets in Rochester, New York, that were acquired and held for sale or those assets in Cincinnati, Ohio, which were acquired and reflected as an investment in deconsolidated subsidiaries), which included certain amortizable assets with lives of a short duration.

Corporate General And Administrative Expenses:



                                      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 and administrative expenses decreased primarily due to: (1) a decrease in legal expenses of $1.4 million primarily associated with certain legal proceedings in the year ended December 31, 2007 which did not reoccur in 2008; and (2) a deferred compensation expense reduction of $1.0 million as a result of a decrease in the value of the unfunded obligation. The decrease in corporate general and administrative expense was offset by an increase in non-cash compensation expense of $1.5 million due to: (a) the cumulative effect of equity awards issued over multiple years, including 2008, with the awards vesting over periods of up to four years; and (b) the acceleration of vesting of equity awards for a key officer.

Operating Income (Loss):



                                    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 operating income to an operating loss was primarily due to an increase in an impairment loss of $751.7 million in connection with our review of broadcasting licenses and goodwill during the fourth quarter of 2008 and our review of goodwill during the second quarter of 2008 (see Note 3 in the accompanying notes to the financial statements), which loss was primarily due to: (1) an increase in the discount rate used; (2) a decrease in station transaction multiples; and (3) a decrease in advertising revenue growth projections for the broadcasting industry. This decrease in operating income was offset by: (i) a decrease in time brokerage agreement fees of $14.2 million, primarily due to the cessation of a TBA with CBS on November 30, 2007; and
(ii) an increase in net gain on sale or disposal of assets of $9.3 million primarily related to our sale of three radio stations in Seattle, Washington, in connection with our Bonneville exchange agreement that was completed during the first quarter of 2008.

† Operating loss in 2008 was not impacted by any acquisitions or dispositions of radio stations as of the beginning of the period.

† Operating income in 2007 would have been higher by $1.4 million if we had adjusted operating income to give effect to acquisitions or dispositions of radio stations as of the beginning of the period.

Interest Expense:



                                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 interest expense was primarily due to: (i) a decline in interest rates during the year 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 Senior Subordinated Notes which have a higher interest rate than the replacement debt. This decrease was offset by: (1) higher average outstanding debt under our senior credit agreement used to finance: (a) the acquisition of radio station assets in several markets in the amount of $268.3 million during the fourth quarter of 2007; (b) dividend payments of $21.6 million in 2008 and

$58.0 million in 2007; and (c) the repurchase of our common stock in the amount of $13.9 million during 2008; and (2) higher interest expense of $0.9 million related to the resolution of certain litigation.

Loss From Continuing Operations Before Income Tax Provision (Benefit):



                                            December 31, 2008     December 31, 2007
                                                     (dollars in millions)
Loss From Continuing Operations Before
Income Tax Provision (Benefit)             $            (745.2 ) $              (7.7 )
Amount of Change                           $            (737.5 )
Percentage Change                                           NM

The net change was primarily attributable to an increase in impairment loss of $751.7 million due to the reasons as described above under Operating Income (Loss). The increase in loss from continuing operations before income tax provision (benefit) was offset by: (1) a $6.9 million gain on the retirement of our senior subordinated debt; (2) a decrease in our interest expense of $6.1 million for the reasons described above under Interest Expense; and (3) a $2.4 million increase in other income related to an insurance recovery.

Income Tax Provision (Benefit):



                                       December 31, 2008     December 31, 2007
                                                (dollars in millions)
     Income Tax Provision (Benefit)   $            (232.6 ) $               0.7
     Amount of Change                 $            (233.3 )
     Percentage Change                                 NM

The net change in income tax provision (benefit) was primarily the result of the net change as described above under Loss From Continuing Operations Before Income Tax Provision (Benefit). In addition, we recorded discrete 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 reserve our 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 on average have higher income tax rates than in states in which we previously operated and the resulting effect on previously reported temporary differences between 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. Included in the tax rate for the years ended December 31, 2008 and 2007 were discrete 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 a reduction in deferred tax liabilities primarily due to the recording of an impairment loss of $835.7 million. For the year ended December 31, 2007, the income tax expense of $0.7 million was comprised of a current tax credit of $8.9 million and a deferred tax expense of $9.6 million.

We estimate that our annual tax rate for 2009, which may fluctuate from quarter to quarter, will be in the low 40% range (before any necessary adjustment to the valuation allowance). We estimate that our rate in 2009 will be affected primarily by: (1) changes in the level of income in any of our taxing jurisdictions; (2) adding facilities in states that on average have different income tax rates than states in which we currently operate and the resulting effect on previously reported temporary differences between the tax and financial reporting bases of our assets and liabilities; (3) the effect of recording changes in our Financial Interpretation No. ("FIN") 48 liabilities; and (4) the limitations on the deduction of cash and certain non-cash compensation expense for certain key employees. Our effective tax rate may also be materially impacted by: (i) regulatory changes in certain states in which we operate; (ii) changes in the expected outcome of tax audits; (iii) changes in the estimate of expenses that are not deductible for tax purposes; and
(iv) changes in the deferred tax valuation allowance.

Our net non-current deferred tax liabilities were eliminated as of December 31, 2008 primarily due to the deferred tax benefit associated with the $835.7 million impairment loss to our indefinite-lived intangible assets. Our net non-current deferred tax liabilities as of December 31, 2007 were $235.6 million. The deferred tax liabilities primarily relate to differences between book and tax bases of certain of our indefinite-lived intangibles (broadcasting licenses and goodwill). Under the

provisions of SFAS No. 142, we do not amortize our indefinite-lived intangibles for financial statement purposes, but instead test them annually for impairment. The amortization of our indefinite-lived assets for tax purposes but not for book creates deferred tax liabilities. A reversal of deferred tax liabilities may occur when: (1) indefinite-lived intangibles become impaired; or
(2) indefinite-lived intangibles are sold for cash, which would typically only occur in connection with the sale of the assets of a station or groups of stations or the entire company in a taxable transaction.

Loss From Continuing Operations:



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

Income (Loss) From Discontinued Operations, Net Of Income Tax Provision (Benefit):

                                    December 31, 2008          December 31, 2007
                                                (dollars in millions)
 Income (Loss) from
 Discontinued Operations, Net
 Of Income Tax Provision
 (Benefit)                        $                 (4.1 )  $                   -0-
 Amount of Change                 $                 (4.1 )
 Percentage Change                                    NM

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

Net Loss:



                                 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 change was primarily attributable to the reasons described above under Loss From Continuing Operations Before Income Tax Provision (Benefit) and the income benefit as described above under Income Tax Provision (Benefit).

Year ended December 31, 2007 compared to the year ended December 31, 2006

The following significant factors affected our results of operations for the year ended December 31, 2007 as compared to the prior year:

Acquisitions

† On December 10, 2007 we acquired WVEI-FM (formerly WBEC-FM), a station in Springfield, Massachusetts, for $5.8 million in cash. We began operating this station on February 10, 2006 under a TBA, by simulcasting the format of WEEI-AM (a radio station owned and operated by us in the Boston, Massachusetts, market). The impact to 2007 was an increase in our net revenues, . . .