Overview

We are a radio broadcasting company whose primary business is operating radio stations throughout the United States. We own and operate 43 radio stations in the following markets: Atlanta, GA, Augusta, GA, Boston, MA, Fayetteville, NC, Fort Myers-Naples, FL, Greenville-New Bern-Jacksonville, NC, Las Vegas, NV, Miami-Fort Lauderdale, FL, Philadelphia, PA, West Palm Beach-Boca Raton, FL, and Wilmington, DE. We also operate one radio station in the expanded AM band in Augusta, GA (see "Item 1 - Business - Federal Regulation of Radio Broadcasting"). In addition, we provide management services to one radio station in Las Vegas, NV. We refer to each group of radio stations in each radio market as a market cluster.

Recent Developments

On January 11, 2013, we acquired two FM translator licenses from Reach Communications, Inc. for $30,000. The translator licenses allow us to rebroadcast the programming of one of our radio stations in Fort Myers-Naples, FL on the FM band over an expanded area of coverage.

On December 12, 2012, our board of directors declared a special cash dividend of $0.085 per each share on our Class A and Class B common stock. The one-time special dividend of $1.9 million in the aggregate was paid on December 27, 2012 to stockholders of record on December 22, 2012. This was a one-time special dividend and we cannot guarantee any future dividends. The declaration and payment of any future dividends will be at the sole discretion of the board of directors.

On October 1, 2012, we acquired three FM translator licenses from Reach Communications, Inc. for $150,000. The translator licenses allow us to rebroadcast the programming of one of our radio stations in Fort Myers-Naples, FL on the FM band over an expanded area of coverage.

Financial Statement Presentation

The following discussion provides a brief description of certain key items that appear in our financial statements and general factors that impact these items.

Net Revenue. Our net revenue is primarily derived from the sale of advertising airtime to local and national advertisers. Net revenue is gross revenue less agency commissions, generally 15% of gross revenue. Local revenue generally consists of advertising airtime and digital sales to advertisers in a radio station's local market either directly to the advertiser or through the advertiser's agency. National revenue generally consists of advertising airtime sales to agencies purchasing advertising for multiple markets. National sales are generally facilitated by our national representation firm, which serves as our agent in these transactions.

Our net revenue is generally determined by the advertising rates that we are able to charge and the number of advertisements that we can broadcast without jeopardizing listener levels. Advertising rates are primarily based on the following factors:

• a radio station's audience share in the demographic groups targeted by advertisers as measured principally by the Arbitron Ratings Company;

• the number of radio stations, as well as other forms of media, in the market competing for the attention of the same demographic groups;

• the supply of, and demand for, radio advertising time; and

• the size of the market.

Our net revenue is affected by general economic conditions, competition and our ability to improve operations at our market clusters. Seasonal revenue fluctuations are also common in the radio broadcasting industry and are primarily due to variations in advertising expenditures by local and national advertisers. Our revenues are typically lowest in the first calendar quarter of the year.

We use barter sales agreements to reduce cash paid for operating costs and expenses by exchanging advertising airtime for goods or services; however, we endeavor to minimize barter revenue in order to maximize cash revenue from our available airtime.

We also continue to invest in digital support services to develop and promote our radio station websites. We derive revenue from our websites through the sale of advertiser promotions and advertising on our websites and the sale of advertising airtime during audio streaming of our radio stations over the internet.

Operating Expenses. Our operating expenses consist primarily of (1) programming, engineering, sales, advertising and promotion, and general and administrative expenses incurred at our radio stations, (2) general and administrative expenses, including compensation and other expenses, incurred at our corporate offices, and (3) depreciation and amortization. We strive to control our operating expenses by centralizing certain functions at our corporate offices and consolidating certain functions in each of our market clusters.

Critical Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect reported amounts and related disclosures. We consider an accounting estimate to be critical if:

• it requires assumptions to be made that were uncertain at the time the estimate was made; and

• changes in the estimate or different estimates that could have been selected could have a material impact on our results of operations or financial condition.

FCC Broadcasting Licenses. As of December 31, 2012, FCC broadcasting licenses with an aggregate carrying amount of $183.3 million represented 70.7% of our total assets. We are required to test our licenses for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that our licenses might be impaired. We assess qualitative factors to determine whether it is more likely than not that our licenses are impaired. If we determine it is more likely than not that our licenses are impaired then we are required to perform the quantitative impairment test. The quantitative impairment test compares the fair value of our licenses with their carrying amounts. If the carrying amounts of the licenses exceed their fair value, an impairment loss is recognized in an amount equal to that excess. For the purpose of testing our licenses for impairment, we combine our licenses into reporting units based on our market clusters.

We assessed qualitative factors including cost factors, financial performance, industry and market conditions, and macroeconomic conditions during 2012 and determined that it was not more likely than not that the fair value of our licenses in Atlanta, GA, Augusta, GA, Boston, MA, Fayetteville, NC, Fort Myers-Naples, FL, Greenville-New Bern-Jacksonville, NC, Miami-Fort Lauderdale, FL, Philadelphia, PA, and West Palm Beach-Boca Raton, FL was less than their respective carrying amounts therefore we did not perform the quantitative impairment test for the licenses in these market clusters in 2012.

However, due to the amount by which fair value, as determined during the quantitative impairment test performed as of November 30, 2011, exceeded the respective carrying amounts in Las Vegas, NV and Wilmington, DE and the recognition of impairment losses in prior years, we elected to perform the quantitative impairment test for the licenses in these market clusters in 2012.

We estimated the fair value of our licenses in Las Vegas, NV and Wilmington, DE using an income approach. The income approach measures the expected economic benefits the licenses provide and discounts these future benefits using discounted cash flow analyses. The discounted cash flow analyses assume that each license is held by a hypothetical start-up radio station and the value yielded by the discounted cash flow analyses represents the portion of the radio station's value attributable solely to its license. The discounted cash flow model incorporates variables such as radio market revenues; the projected growth rate for radio market revenues; projected radio market revenue share; projected radio station operating income margins; and a discount rate appropriate for the radio broadcasting industry. The variables used in the analyses reflect historical radio station and market growth trends, as well as anticipated radio station performance, industry standards, and market conditions. The discounted cash flow projection period of ten years was determined to be an appropriate time horizon for the analyses. Stable market revenue share and operating margins are expected at the end of year three (maturity).

As of November 30, 2012, the key assumptions used in the discounted cash flow analyses are as follows:

               Revenue growth rates                    2.0% - 3.5%
               Market revenue shares at maturity      16.1% - 28.0%
               Operating income margins at maturity   36.0% - 38.0%
               Discount rate                              9.5%

If we had made different assumptions or used different estimates, the fair value of our licenses could have been materially different. If actual results are different from assumptions or estimates used in the discounted cash flow analyses, we may incur impairment losses in the future and they may be material.

Cash flows and operating income are dependent on advertising revenues. Advertising revenues are influenced by competition from other radio stations and media, demographic changes, and changes in government rules and regulations. In addition, advertising is generally considered a discretionary expense meaning advertising expenditures tend to decline disproportionately during economic downturns as compared to other types of business expenditures. If actual results are lower, we may incur impairment losses in the future and they may be material.

The carrying amount of FCC broadcasting licenses for Las Vegas, NV and Wilmington, DE and the percentage by which fair value exceeded the carrying amount is as follows:

                                            FCC
                                       broadcasting
                      Market cluster     licenses        Excess
                      Las Vegas, NV       33,814,730        18.7
                      Wilmington, DE      19,496,000         9.5

As a result of the quantitative impairment test performed for Las Vegas, NV and Wilmington, DE in the fourth quarter of 2012, we recorded no impairment losses related to our FCC broadcasting licenses for these reporting units. However there can be no assurance that impairments of our FCC broadcasting licenses will not occur in future periods.

Goodwill. As of December 31, 2012, goodwill with an aggregate carrying amount of $13.6 million represented 5.3% of our total assets. We are required to test our goodwill for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that our goodwill might be impaired. We assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If we determine it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then we are required to perform the first step of a two-step impairment test by calculating the fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit. If the carrying amount of a reporting unit exceeds its fair value, then we are required to perform the second step of the two-step goodwill impairment test to measure the amount of the impairment loss. For the purpose of testing our goodwill for impairment, we have identified our market clusters as our reporting units.

We assessed qualitative factors including macroeconomic conditions, industry and market conditions, cost factors, and overall financial performance in 2012 and determined that it was not more likely than not that the fair value of any of our reporting units was less than their respective carrying amounts therefore we did not perform the two-step impairment test for any of our reporting units in 2012. No impairment losses related to our goodwill were recorded in 2012 however there can be no assurance that impairments of our goodwill will not occur in future periods.

Property and Equipment. We are required to assess the recoverability of our property and equipment whenever an event has occurred that may result in an impairment loss. If such an event occurs, we will compare estimates of related future undiscounted cash flows to the carrying amount of the asset. If the future undiscounted cash flow estimates are less than the carrying amount of the asset, we will reduce the carrying amount to the estimated fair value. The determination of when an event has occurred and estimates of

future cash flows and fair value all require management judgment. The use of different assumptions or estimates may result in alternative assessments that could be materially different. We did not identify any events that may have resulted in an impairment loss on our property and equipment in 2012. There can be no assurance that impairment of our property and equipment will not occur in future periods.

Accounts Receivable. We continually evaluate our ability to collect our accounts receivable. Our ongoing evaluation includes review of specific accounts at our radio stations, the current financial condition of our customers and our historical write-off experience. This ongoing evaluation requires management judgment and if we had made different assumptions about these factors, the allowance for doubtful accounts could have been materially different.

Recent Accounting Pronouncements

Recent accounting pronouncements are described in Note 2 to the accompanying financial statements.

Results of Operations

Year Ended December 31, 2012 Compared to the Year Ended December 31, 2011

The following summary table presents a comparison of our results of operations for the years ended December 31, 2011 and 2012 with respect to certain of our key financial measures. These changes illustrated in the table are discussed in greater detail below. This section should be read in conjunction with the financial statements and notes to financial statements included in Item 8 of this report.

                                              Year ended December 31,                   Change
                                              2011              2012                $               %
Net revenue                               $ 97,698,634      $ 100,240,597      $ 2,541,963           2.6 %
Station operating expenses                  63,320,617         62,528,795         (791,822 )        (1.3 )
Corporate general and administrative
expenses                                     8,046,126          8,105,250           59,124           0.7
Interest expense                             7,357,943          6,488,521         (869,422 )       (11.8 )
Loss on extinguishment of long-term
debt                                                -           2,563,979        2,563,979            -
Income tax expense                           6,725,731          7,246,887          521,156           7.7
Net income                                  10,100,325         11,031,270          930,945           9.2

Net Revenue. Net revenue increased $2.5 million during the year ended December 31, 2012. Significant factors affecting net revenue included a $1.9 million increase in political advertising as a result of the 2012 elections and $1.3 million of additional net revenue from KOAS-FM in Las Vegas, NV which was acquired in the third quarter of 2012. Net revenue was comparable to the same period in 2011 at our remaining market clusters.

Station Operating Expenses. Station operating expenses decreased $0.8 million during the year ended December 31, 2012. Significant factors affecting station operating expenses included a $0.8 million decrease as a result of the BMI fee settlement in the second quarter of 2012, a $0.9 million decrease at our Miami-Fort Lauderdale, FL market cluster primarily due to continuing cost containment measures, and $0.6 million of additional station operating expenses from KOAS-FM in Las Vegas, NV. Station operating expenses were comparable to the same period in 2011 at our remaining market clusters.

Corporate General and Administrative Expenses. Corporate general and administrative expenses during the year ended December 31, 2012 were comparable to the same period in 2011.

Interest Expense. Interest expense decreased $0.9 million during the year ended December 31, 2012. Significant factors affecting interest expense included a decrease in long-term debt outstanding, the expiration of interest rate swap agreements in the first and third quarters of 2011, and an increase in borrowing costs under our new credit agreements.

Loss on Extinguishment of Long-Term Debt. We recorded a $2.6 million loss on extinguishment of long-term debt related to our new credit agreements in the third quarter of 2012.

Income Tax Expense. Our effective tax rate was approximately 40% for the years ended December 31, 2011 and 2012 which differs from the federal statutory rate of 34% due to the effect of state income taxes and certain expenses that are not deductible for tax purposes.

Net Income. Net income increased $0.9 million during the year ended December 31, 2012 as a result of the factors described above.

Liquidity and Capital Resources

Overview. Our primary sources of liquidity are internally generated cash flow and our revolving credit loan. Our primary liquidity needs have been, and for the next twelve months and thereafter are expected to continue to be, for working capital, debt service, and other general corporate purposes, including capital expenditures and radio station acquisitions. Historically, our capital expenditures have not been significant. In addition to property and equipment associated with radio station acquisitions, our capital expenditures have generally been, and are expected to continue to be, related to the maintenance of our studio and office space and the technological improvement, including upgrades necessary to broadcast HD Radio, and maintenance of our broadcasting towers and equipment. We have also purchased or constructed office and studio space in some of our markets to facilitate the consolidation of our operations.

Our credit agreements permit us to pay cash dividends and to repurchase additional shares of our common stock, subject to compliance with financial covenants, up to an aggregate amount of $2.0 million for the period from August 9, 2012 to December 31, 2012, $4.0 million for 2013, $5.0 million for each of 2014 and 2015, and $6.0 million for each year thereafter. On December 12, 2012, our board of directors declared a special cash dividend of $0.085 per each share on our Class A and Class B common stock. The one-time special dividend of $1.9 million in the aggregate was paid on December 27, 2012 to stockholders of record on December 22, 2012. We paid $0.1 million to repurchase 32,587 shares of our Class A common stock in 2012.

We expect to provide for future liquidity needs through one or a combination of the following sources of liquidity:

• internally generated cash flow;

• our credit facility;

• additional borrowings, other than under our existing credit facility, to the extent permitted thereunder; and

• additional equity offerings.

We believe that we will have sufficient liquidity and capital resources to permit us to provide for our liquidity requirements and meet our financial obligations for the next twelve months. However, poor financial results, unanticipated acquisition opportunities or unanticipated expenses could give rise to defaults under our credit facilities, additional debt servicing requirements or other additional financing or liquidity requirements sooner than we expect and we may not secure financing when needed or on acceptable terms.

Our ability to reduce our consolidated total debt ratio, as defined by our credit agreements, by increasing operating cash flow and/or decreasing long-term debt will determine how much, if any, of the remaining commitments under our revolving credit facility will be available to us in the future. Poor financial results or unanticipated expenses could result in our failure to maintain or lower our consolidated total debt ratio and we may not be permitted to make any additional borrowings under our revolving credit facility.

The following summary table presents a comparison of our capital resources for the years ended December 31, 2011 and 2012 with respect to certain of our key measures affecting our liquidity. The changes set forth in the table are discussed in greater detail below. This section should be read in conjunction with the financial statements and notes to financial statements included in Item 8 of this report.

                                                              Year ended December 31,
                                                             2011                 2012
Net cash provided by operating activities                $  20,668,341        $  20,404,535
Net cash used in investing activities                       (2,327,766 )         (3,787,370 )
Net cash used in financing activities                      (15,390,169 )        (18,566,586 )

Net increase (decrease) in cash and cash equivalents     $   2,950,406        $  (1,949,421 )

Net Cash Provided By Operating Activities. Net cash provided by operating activities decreased $0.3 million during the year ended December 31, 2012. Significant factors affecting net cash provided by operating activities included a $2.2 million increase in income tax payments, a $2.0 million increase in cash receipts from the sale of advertising airtime, and a $0.8 million decrease in interest payments.

Net Cash Used In Investing Activities. Net cash used in investing activities during the year ended December 31, 2012 included a $2.0 million payment for the acquisition of KOAS-FM in Las Vegas and payments of $1.7 million for capital expenditures. Net cash used in investing activities for the same period in 2011 included payments of $1.4 million for capital expenditures and $1.2 million for investments.

Net Cash Used In Financing Activities. Net cash used in financing activities during the year ended December 31, 2012 included repayments of $10.0 million under our credit facilities, payments of $4.0 million for loan fees related to the new credit facilities, repayment of a $2.5 million note payable to a related party for the acquisition of KOAS-FM in Las Vegas, and a $1.9 million special cash dividend. Net cash used in financing activities for the same period in 2011 included repayments of $15.3 million under our credit facility.

Credit Facilities. As of February 5, 2013, the aggregate outstanding balance of our credit facilities was $115.7 million.

As of December 31, 2012, the first lien facility consists of a term loan with a remaining balance of $86.7 million and a revolving credit facility with a maximum commitment of $20.0 million. As of December 31, 2012, we had $15.0 million in remaining commitments under our revolving credit facility. The revolving credit facility includes a $5.0 million sub-limit for letters of credit. At our election, the first lien facility may bear interest at either
(i) the adjusted LIBOR rate, as defined in the first lien credit agreement, plus a margin of 5.0% on the term loan and the adjusted LIBOR rate plus a margin ranging from 3.5% to 5.0% on the revolving credit facility that is determined by our consolidated total debt ratio, as defined in the first lien credit agreement or (ii) the base rate, as defined in the first lien credit agreement, plus a margin of 4.0% on the term loan and the base rate plus a margin ranging from 2.5% to 4.0% on the revolving credit facility that is determined by our consolidated total debt ratio. Interest on adjusted LIBOR rate loans is payable at the end of each applicable interest period and, for those interest periods with a duration in excess of three months, the three month anniversary of the beginning of such interest period. Interest on base rate loans is payable quarterly in arrears. The first lien facility carried interest, based on the adjusted LIBOR rate, at 5.18% as of December 31, 2012 and matures on August 9, 2017.

The first lien credit agreement requires mandatory prepayments equal to 50% of excess cash flow, as defined in the first lien credit agreement, when our consolidated total debt is equal to or greater than three times our consolidated operating cash flow, as defined in the first lien credit agreement. The mandatory prepayments decrease to 25% of excess cash flow when our consolidated total debt is less than three times our consolidated operating cash flow. The credit agreement also requires mandatory prepayments for defined amounts from net proceeds of asset sales, net insurance proceeds, and net proceeds of debt issuances.

The first lien facility requires us to comply with certain financial covenants which are defined in the first lien credit agreement. These financial covenants include:

• Consolidated Total Debt Ratio. Our consolidated total debt on the last day of each fiscal quarter through March 31, 2013 must not exceed 5.25 times our consolidated operating cash flow for the four quarters then ended. For the period from April 1, 2013 through December 31, 2013, the maximum ratio is 5.0 times. For the period from January 1, 2014 through December 31, 2014, the maximum ratio is 4.5 times. For the period from January 1, 2015 through December 31, 2015, the maximum ratio is 4.0 times. For the period from January 1, 2016 through December 31, 2016, the maximum ratio is 3.5 times. For the period from January 1, 2017 through maturity, the maximum ratio is 3.0 times.

• Interest Coverage Ratio. Our consolidated operating cash flow for the four quarters ending on the last day of each fiscal quarter through maturity must not be less than 2.0 times our consolidated cash interest expense for the four quarters then ended.

The first lien facility is secured by a first-priority lien on substantially all of the Company's assets and the assets of substantially all of its subsidiaries and is guaranteed jointly and severally by the Company and substantially all of its subsidiaries. The guarantees were issued to our lenders for repayment of the outstanding balance of the first lien facility. If we default under the terms of the first lien credit agreement, the Company and its applicable subsidiaries may be required to perform under their guarantees. As of December 31, 2012, the maximum amount of undiscounted payments the Company and its applicable subsidiaries would have had to make in the event of default was $91.7 million. The guarantees for the first lien facility expire on August 9, 2017.

The second lien facility consists of a term loan of $25.0 million. At our election, the second lien facility may bear interest at either the adjusted LIBOR rate or base rate, each as defined in the second lien credit agreement, plus a margin of 10.0% on an adjusted LIBOR rate loan and a margin of 9.0% on a base rate loan. The adjusted LIBOR rate for the second lien facility may not be less than 1.25%. Interest on adjusted LIBOR rate loans is payable at the end of each applicable interest period and, for those interest periods with a duration in excess of three months, the three month anniversary of the beginning of such . . .