General

We are a leading national radio broadcast company whose business is acquiring, developing and operating radio stations located throughout the United States. Cox Enterprises indirectly owns approximately 77% of our common stock and has approximately 97% of the voting power of Cox Radio.

The primary source of our revenues is the sale of local and national advertising for broadcast on our radio stations. For the year ended December 31, 2008, 71% and 20% of our net revenues were generated from local and national advertising, respectively. For the years ended December 31, 2007 and 2006, 70% of net revenues were generated from local advertising and 21% and 22%, respectively, of net revenues were generated from national advertising. In addition to the sale of advertising time for cash, our stations also exchange advertising time for goods, services or programming, which can be used by the stations in their business operations (barter transactions). The use of barter transactions is generally confined to promotional items or services for which we would otherwise have paid cash. Barter transactions for programming are used to supplement station program offerings. Advertising spots given up under these arrangements are based on contractual terms. In addition, it is our general policy not to pre-empt advertising spots paid for in cash with advertising spots paid for in trade. Our most significant station operating expenses are employees' salaries and benefits, commissions, programming expenses and advertising and promotional expenditures.

Our revenues vary throughout the year. As is typical in the radio broadcasting industry, our revenues and operating income are generally lowest in the first quarter. Our operating results in any period may be affected by the incurrence of advertising and promotional expenses that do not necessarily produce commensurate revenues until the impact of the advertising and promotion is realized in future periods.

Critical Accounting Estimates

Use of Estimates

Our accounting and reporting policies are in accordance with accounting principles generally accepted in the United States and conform to general practices within the radio broadcasting industry. An accounting estimate would be a critical accounting estimate for purposes of the disclosure in this report only if it meets two criteria. First, the accounting estimate requires management to make assumptions about matters that are highly uncertain at the time the accounting estimate is made. Second, it must be the case that different estimates that management reasonably could have used for the accounting estimate in the current period, or changes in the accounting estimate that are reasonably likely to occur from period-to-period, would have a material impact on the presentation of our financial condition, changes in financial condition or results of operations. The estimates and assumptions we use are based on historical experience and other factors, which management believes to be reasonable under the circumstances. We evaluate our estimates on an on-going basis, including those related to intangible assets, bad debts, contingencies and litigation, income taxes and fair value of financial instruments (as discussed in "Quantitative and Qualitative Disclosure About Market Risk" below). Actual results could differ significantly from these estimates and assumptions and could have a material impact on the carrying value of assets and liabilities at the balance sheet dates and results of operations for the reporting periods.

We believe the following are the critical accounting estimates that require the most significant judgments and assumptions and are particularly susceptible to a significant change in the preparation of the financial statements.

Impairment of Intangible Assets

Intangible assets consist primarily of FCC broadcast licenses, but also include goodwill and certain other intangible assets acquired in purchase business combinations. In accordance with Statement of Financial Accounting Standard (SFAS) No. 142, Goodwill and Other Intangible Assets, goodwill and FCC licenses are indefinite-lived intangible assets which are not amortized. Other intangible assets are amortized over the contractual or useful lives of the assets in a manner consistent with how the assets are expected to contribute to our cash flows.

COX RADIO / 2008 FORM 10-K

We evaluate FCC licenses and goodwill for impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired. FCC licenses are evaluated for impairment at the market level using the direct method. If the carrying amount of FCC licenses is greater than their estimated fair value in a given market, the carrying amount of FCC licenses in that market is reduced to its estimated fair value. Goodwill is evaluated in each of our reporting units (markets) using the residual method. If the carrying amount of goodwill in a reporting unit is greater than its implied fair value, determined from the estimated fair value of that reporting unit, the carrying amount of goodwill in that reporting unit is reduced to its estimated fair value.

In performing impairment tests, the estimated fair values of our FCC licenses and reporting units are determined using a discounted cash flow model with the assistance of an independent appraiser. This income approach consists of a quantitative model, which incorporates variables such as market advertising revenues, market revenue share projections and anticipated operating profit margins. The variables used in the analysis reflect historical station and advertising market trends, as well as anticipated future performance and market conditions, and vary based on the size and rank of the market, the ratings of our stations and other economic factors specific to the geographic area. Multiples of operating cash flow derived from market transactions are also considered in order to corroborate the estimated values derived from the discounted cash flow models.

Assumptions about the economy, future cash flows, growth rates and discount rates used in developing discounted cash flow analyses are subjective. We consider the assumptions used in our fair value estimates to be reasonable. However, had we used different assumptions, our reported results may have varied, possibly materially.

In connection with preparing our financial statements for the period ended June 30, 2008, we concluded, based on deteriorating macro-economic factors, as well as declining radio industry revenues and a weakening in prevailing radio station transaction multiples, that interim impairment tests pursuant to SFAS No. 142 were appropriate. These interim tests incorporated decreases in projections for future market performance, as well as a decrease in estimated terminal value growth rates. Based on these tests, we recorded aggregate pre-tax impairment charges with respect to our FCC licenses in various markets of $131.9 million and aggregate pre-tax impairment charges with respect to our goodwill in various markets of $15.7 million.

In connection with our annual impairment tests as of December 31, 2008, we further revised our projections of future market operating performance, and took into consideration the continued decline in the general economy, the advertising industry and our market capitalization. The discount rate used also was increased to reflect changes in the overall credit environment. Based on these tests, we recorded aggregate pre-tax impairment charges with respect to our FCC licenses in various markets of $594.5 million and aggregate pre-tax impairment charges with respect to our goodwill in various markets of $7.1 million. See Note 7 to our Consolidated Financial Statements for further details regarding these impairment charges.

We utilize a discounted cash flow model as our principal valuation method, but also consider market transactions in evaluating the recoverability of goodwill and FCC licenses. As such, we have concluded that the recorded balances of these assets as of December 31, 2008 are recoverable through future cash flows. We will continue to monitor the need to test intangible assets for impairment as required by SFAS No. 142, including considering the uncertainty surrounding the current economic environment, changes in estimates of future cash flows, market transactions and volatility in the stock market, as well as in our own stock price in assessing goodwill and FCC licenses for recoverability.

Cox Radio evaluates amortizing intangible assets for recoverability when circumstances indicate an impairment may have occurred, using an undiscounted cash flow methodology. If the future undiscounted cash flows for the intangible asset are less than net book value, net book value is reduced to the estimated fair value.

Allowance for Doubtful Accounts

We evaluate the collectibility of our accounts and notes receivable based on a combination of factors. In circumstances where we are aware of a specific party's inability to meet its financial obligations, we record a specific reserve to reduce the amounts recorded to what we believe will be collected. For all other parties, the evaluation considers the balance of aged receivables, the nature and volume of the portfolio, specific problem accounts and notes receivable, and economic

conditions that may affect the debtor's ability to repay, and such other factors as, in our judgment, deserve recognition under existing economic conditions. Accounts and notes receivable are charged-off to the allowance when, in our opinion, such receivables are deemed to be uncollectible. Subsequent recoveries, if any, are credited to the allowance. In addition, we consider the customer's creditworthiness prior to revenue recognition.

Contingencies and Litigation

On an on-going basis, we evaluate our exposures related to contingencies and litigation and record a liability when available information indicates that a liability is probable and estimable. We also disclose significant matters that are reasonably possible to result in a loss or are probable but not estimable.

Income Tax Estimates

The provision for income taxes is based on current period income, changes in deferred income tax assets and liabilities, changes in our operations in various jurisdictions, income tax rates and tax positions taken on returns. We prepare and file tax returns based on our interpretation of tax laws and regulations and record estimates based on these judgments and interpretations. Significant judgment is required in assessing and estimating the application and interpretation of complex tax laws and regulations. In the normal course of business, our filed tax returns are subject to examination by taxing authorities. These examinations could result in challenges to tax positions that we have taken. These challenges could arise from a variety of tax issues such as the deductibility of certain expenses, the timing of the recognition of income and expense, allocations of income and expense between states, the tax basis of certain assets and the taxation of acquisitions and disposals. Ultimately, the results of these challenges could require us to pay additional taxes and could also require the payment of interest assessments.

Cox Radio adopted the provisions of Financial Accounting Standards Board (FASB) Interpretation (FIN) 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109, Accounting for Income Taxes, on January 1, 2007. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest benefit that is greater than 50 percent likely of being realized upon settlement.

Results of Operations

This discussion should be read in conjunction with our accompanying audited consolidated financial statements and notes thereto. Results of operations represent the operations of the radio stations owned or operated by us, or for which we provide sales and marketing services, during the applicable periods.

Year Ended December 31, 2008 Compared with Year Ended December 31, 2007



(Amounts in thousands)    December 31, 2008     December 31, 2007    $ Change      % Change
Net revenues:
Local                    $           290,726   $           313,196   $ (22,470 )       (7.2 %)
National                              82,833                93,826     (10,993 )      (11.7 %)
Other                                 36,680                37,830      (1,150 )       (3.0 %)
Total net revenues       $           410,239   $           444,852   $ (34,613 )       (7.8 %)

Net revenues are gross revenues less agency commissions. Local revenues are comprised of advertising sales made within a station's local market or region either directly with the advertiser or through the advertiser's agency. National revenues represent sales made to advertisers or agencies who are purchasing advertising for multiple markets; these sales are typically facilitated by our national representation firm, which serves as our sales agent in these transactions. Other revenues are comprised of Internet revenues, syndicated radio program revenues, network revenues and revenues from community events and sponsorships.

COX RADIO / 2008 FORM 10-K

Net revenues for 2008 decreased $34.6 million, a 7.8% decrease compared to 2007. Due to the current economic downturn, many of our advertisers have reduced spending on advertising. Local revenues decreased 7.2%, national revenues decreased 11.7% and other revenues decreased 3.0%, each as compared to 2007, due to overall weakness in the economy and the advertising market. Our stations in Long Island, Birmingham and Tulsa delivered revenue growth during 2008. Those increases were more than offset by results of our stations in Atlanta, Orlando, Miami, Tampa, San Antonio, Southern Connecticut, Jacksonville and Richmond, where revenues were down for 2008.

(Amounts in thousands)          December 31, 2008         December 31, 2007         $ Change        % Change
Cost of services
(exclusive of
depreciation and
amortization shown
below)                         $            96,705       $            94,120       $    2,585            2.7 %

Cost of services is comprised of expenses incurred by our technical, news and programming departments. Cost of services increased $2.6 million, or 2.7% over 2007, due primarily to increased costs associated with programming talent, particularly in our Atlanta and Tampa markets.

(Amounts in thousands)         December 31, 2008         December 31, 2007        $ Change          % Change
Selling, general and
administrative expenses       $           164,266       $           176,364       $ (12,098 )           (6.9 %)

Selling, general and administrative expenses are comprised of expenses incurred by our sales, promotion and general and administrative departments. Selling, general and administrative expenses decreased $12.1 million, or 6.9% compared to 2007, due to decreased compensation expense associated with performance units awarded under our LTIP and a decline in sales commissions and bonuses. Compensation expense for these awards is recognized over a five-year period and is based on the amount that is ultimately expected to be paid upon vesting. During 2008, we revalued our outstanding performance unit awards to reflect amounts ultimately expected to be paid out upon vesting, which resulted in a reversal of previously-accrued compensation expense to reflect updated expectations.

(Amounts in thousands)          December 31, 2008         December 31, 2007        $ Change          % Change
Corporate general and
administrative expenses        $            17,344       $            20,287       $  (2,943 )          (14.5 %)
Depreciation and
amortization                                10,454                    11,169            (715 )           (6.4 %)
Impairment of intangible
assets                                     749,262                   117,134         632,128                *
Other operating
expenses, net                                  175                       191             (16 )           (8.4 %)

*Change was not statistically meaningful.

Corporate general and administrative expenses decreased 14.5%, or $2.9 million compared to 2007, also due to a reduction in compensation expense associated with performance units awarded to corporate employees under our LTIP.

During 2008, we recorded an aggregate of $749.3 million in non-cash impairment charges for the write-down of intangible assets in accordance with SFAS No. 142, as discussed further above. These non-cash impairment charges reduced the carrying value of goodwill and FCC licenses in our Atlanta, Athens, Birmingham, Greenville, Honolulu, Houston, Jacksonville, Louisville, Miami, Richmond, San Antonio, Southern Connecticut, Tampa and Tulsa markets to their estimated fair market values.

During the fourth quarter of 2007, we recorded a $117.1 million non-cash impairment charge for the write-down of intangible assets in accordance with SFAS No. 142. This non-cash impairment charge reduced the carrying value of goodwill and FCC licenses in our Birmingham, Greenville, Honolulu, Houston, Jacksonville, Louisville, Richmond, Southern Connecticut and Tulsa markets to their estimated fair market values.

The changes in depreciation and amortization or other operating expenses, net were not material to our overall operating results or financial condition.

(Amounts in thousands) December 31, 2008 December 31, 2007 $ Change % Change Operating (loss) income $ (627,967 ) $ 25,587 $ (653,554 ) *

*Change was not statistically meaningful.

Our operating loss for 2008 was $628.0 million, compared to operating income of $25.6 million for 2007, due to the non-cash impairment charges discussed above. We recorded non-cash impairment charges of $749.3 million and $117.1 million in 2008 and 2007, respectively, in order to reduce the carrying value of intangible assets in certain markets to their estimated fair values.

(Amounts in thousands) December 31, 2008 December 31, 2007 $ Change % Change Interest expense $ 13,696 $ 21,091 $ (7,395 ) (35.1 %)

Interest expense during 2008 totaled $13.7 million, as compared to $21.1 million for 2007. This decrease was primarily attributable to a lower borrowing rate under our credit facility. The average rate on our credit facility was 3.6% during 2008 and 6.0% during 2007.

(Amounts in thousands)    December 31, 2008       December 31, 2007       $ Change      % Change
Income taxes:
Current                  $            15,369     $            28,390     $  (13,021 )      (45.9 %)
Deferred                            (252,997 )               (24,470 )     (228,527 )          *
Total income taxes       $          (237,628 )   $             3,920     $ (241,548 )          *

*Change was not statistically meaningful.

Income tax expense decreased to a net income tax benefit of $237.6 million during 2008, as compared to 2007, due primarily to the aggregate non-cash impairment charges recorded in 2008 discussed above. Our effective tax rates for 2008 and 2007 were 37.0% and 67.7%, respectively. The change in income tax expense was due to a combination of factors including the change in pre-tax income, differences in book and tax treatment associated with the 2007 and 2008 non-cash impairment charges and adjustments for the actual or expected resolution of income tax audits.

(Amounts in thousands) December 31, 2008 December 31, 2007 $ Change % Change Net (loss) income $ (404,002 ) $ 1,867 $ (405,869 ) *

*Change was not statistically meaningful.

Our net loss for 2008 was $404.0 million, compared to net income of $1.9 million for 2007, due to the increased non-cash impairment charges discussed above and lower revenues.

COX RADIO / 2008 FORM 10-K

Year Ended December 31, 2007 Compared with Year Ended December 31, 2006



(Amounts in thousands)    December 31, 2007     December 31, 2006    $ Change      % Change
Net revenues:
Local                    $           313,196   $           308,279   $   4,917          1.6 %
National                              93,826                98,030      (4,204 )       (4.3 %)
Other                                 37,830                34,159       3,671         10.7 %
Total net revenues       $           444,852   $           440,468   $   4,384          1.0 %

Local revenues for 2007 increased 1.6% as compared to 2006 due to strength in our Atlanta, Birmingham and Greenville markets. Local revenues in Atlanta, our largest market, were up 11.2% in 2007 as compared to 2006. Growth in these markets was partially offset by year-over-year revenue declines in our Orlando, Tampa, San Antonio, Jacksonville and Dayton markets. National revenues decreased 4.3% from the prior year due to continued overall weakness in national advertising. However, national revenues in our Orlando and Birmingham markets were up over the prior year. Other revenues increased 10.7% compared to 2006, primarily due to a 20.4% increase in Internet revenues during that same period. Increased Internet revenues are a result of our continued focus on growing this revenue stream.

(Amounts in thousands)          December 31, 2007         December 31, 2006         $ Change        % Change
Cost of services
(exclusive of
depreciation and
amortization shown
below)                         $            94,120       $            86,440       $    7,680            8.9 %

The increase in cost of services over 2006 was the result of a $2.1 million increase in pension expense related to expanded employee participation in Cox Enterprises' defined benefit pension plan, as well as additional costs associated with programming talent and programming rights.

(Amounts in thousands)         December 31, 2007         December 31, 2006         $ Change        % Change
Selling, general and
administrative expenses       $           176,364       $           171,366       $    4,998            2.9 %

The 2.9% increase in selling, general and administrative expenses over the prior year was partially attributable to expenses related to additional performance units and stock-based compensation awarded in the first quarter of 2007. Compensation expense for these awards is recognized as they vest. Additionally, there was a $3.2 million increase in pension expense related to expanded employee participation in Cox Enterprises' defined benefit pension plan.

(Amounts in thousands)           December 31, 2007         December 31, 2006        $ Change          % Change
Corporate general and
administrative expenses         $            20,287       $            19,869       $     418              2.1 %
Depreciation and                             11,169                    11,195             (26 )           (0.2 %)
amortization
Impairment of intangible                    117,134                   176,333         (59,199 )          (33.6 %)
assets
Other operating expenses,                       191                       794            (603 )          (75.9 %)
net

Corporate general and administrative expenses increased $0.4 million as compared to 2006 due to additional compensation expense related to performance units and stock-based compensation awarded to corporate personnel under the LTIP in the first quarter of 2007.

During the fourth quarter of 2007, we recorded a $117.1 million non-cash impairment charge for the write-down of intangible assets in accordance with SFAS No. 142. This non-cash impairment charge reduced the carrying value of intangible assets in our Birmingham, Greenville, Honolulu, Houston, Jacksonville, Louisville, Richmond, Southern Connecticut and Tulsa markets to their estimated fair market values.

During the fourth quarter of 2006, we recorded a $176.3 million non-cash impairment charge for the write-down of intangible assets in accordance with SFAS No. 142. This non-cash write-down reflected charges to reduce the carrying value of intangible assets in our Birmingham, Greenville, Houston, Louisville and Richmond markets to their estimated fair market values.

The changes in depreciation and amortization or other operating expenses, net were not material to our overall operating results or financial condition.

(Amounts in thousands) December 31, 2007 December 31, 2006 $ Change % Change Operating income (loss) $ 25,587 $ (25,529 ) $ 51,116 *

*Change was not statistically meaningful.

Operating income for 2007 was $25.6 million, as compared to a $25.5 million operating loss for 2006. The increase over the prior year was due to the $117.1 million impairment charge in 2007, as compared to a similar charge of $176.3 million in 2006, each as discussed above.

(Amounts in thousands) December 31, 2007 December 31, 2006 $ Change % Change Interest expense $ 21,091 $ 25,345 $ (4,254 ) (16.8 %)

The 16.8% decrease in interest expense over 2006 was the result of lower overall outstanding debt. The average rate on our credit facility was 6.0% during 2007 and 5.9% during 2006.

(Amounts in thousands)    December 31, 2007       December 31, 2006      $ Change    % Change
Income taxes:
Current                  $            28,390     $            25,535     $   2,855       11.2 %
Deferred                             (24,470 )               (51,960 )      27,490       52.9 %
Total income taxes       $             3,920     $           (26,425 )   $  30,345          *

*Change was not statistically meaningful.

Income tax expense increased $30.3 million to $3.9 million in 2007. The change in income tax expense was primarily attributable to the increase in income in 2007, changes in certain effective tax rates and adjustments for the actual or expected resolution of certain income tax audits. Our effective tax rates for 2007 and 2006 were 67.7% and 51.9%, respectively.

. . .