Edgar Filing: RADIO ONE INC

form10-qmarch312009.htm

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________

Form 10-Q

________________

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2009

Commission File No. 0-25969

________________

RADIO ONE, INC.

(Exact name of registrant as specified in its charter)

________________

Delaware	52-1166660
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

5900 Princess Garden Parkway,

7th Floor

Lanham, Maryland 20706

(Address of principal executive offices)

(301) 306-1111

Registrant’s telephone number, including area code

________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer þ Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at April 30, 2009
Class A Common Stock, $.001 Par Value	2,986,222
Class B Common Stock, $.001 Par Value	2,861,843
Class C Common Stock, $.001 Par Value	3,121,048
Class D Common Stock, $.001 Par Value	51,711,916

TABLE OF CONTENTS

		Page

PART I. FINANCIAL INFORMATION

Item 1.	Consolidated Statements of Operations for the Three Months Ended March 31, 2009 and 2008 (Unaudited)	4
	Consolidated Balance Sheets as of March 31, 2009 (Unaudited) and December 31, 2008	5
	Consolidated Statement of Changes in Equity for the Three Months Ended March 31, 2009 (Unaudited)	6
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2009 and 2008 (Unaudited)	7
	Notes to Consolidated Financial Statements (Unaudited)	8
	Consolidating Financial Statements	19
	Consolidating Statement of Operations for the Three Months Ended March 31, 2009 (Unaudited)	19
	Consolidating Statement of Operations for the Three Months Ended March 31, 2008 (Unaudited)	20
	Consolidating Balance Sheet as of March 31, 2009 (Unaudited)	21
	Consolidating Balance Sheet as of December 31, 2008	22
	Consolidating Statement of Cash Flows for the Three Months Ended March 31, 2009 (Unaudited)	23
	Consolidating Statement of Cash Flows for the Three Months Ended March 31, 2008 (Unaudited)	24
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3.	Defaults Upon Senior Securities	36
Item 4.	Submission of Matters to a Vote of Security Holders	36
Item 5.	Other Information	36
Item 6.	Exhibits	36
	SIGNATURES	37

CERTAIN DEFINITIONS

Unless otherwise noted, the terms “Radio One,” “the Company,” “we,” “our” and “us” refer to Radio One, Inc. and its subsidiaries.

Cautionary Note Regarding Forward-Looking Statements

This document contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements do not relay historical facts, but rather reflect our current expectations concerning future operations, results and events. All statements other than statements of historical fact are “forward-looking statements” including any projections of earnings, revenues or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. You can identify some of these forward-looking statements by our use of words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “likely,” “may,” “estimates” and similar expressions. You can also identify a forward-looking statement in that such statements discuss matters in a way that anticipates operations, results or events that have not already occurred but rather will or may occur in future periods. We cannot guarantee that we will achieve any forward-looking plans, intentions, results, operations or expectations. Because these statements apply to future events, they are subject to risks and uncertainties, some of which are beyond our control that could cause actual results to differ materially from those forecasted or anticipated in the forward-looking statements. These risks, uncertainties and factors include (in no particular order), but are not limited to:

•

the effects the current global financial and economic crisis, credit and equity market volatility and the deteriorating

U.S. economy may continue to have on our business and financial condition and the business and financial condition of our advertisers;

•

a continued worsening of the economy could negatively impact our ability to meet our cash needs and our ability to maintain compliance with our debt covenants;

•

fluctuations in the demand for advertising across our various media given the current economic environment;

•

risks associated with the implementation and execution of our business diversification strategy;

•

increased competition in our markets and in the radio broadcasting and media industries;

•

changes in media audience ratings and measurement methodologies;

•

regulation by the Federal Communications Commission relative to maintaining our broadcasting licenses, enacting media ownership rules and enforcing of indecency rules;

•

changes in our key personnel and on-air talent;

•

increases in the costs of our programming, including on-air talent and content acquisitions cost;

•

financial losses that may be sustained due to impairment charges against our broadcasting licenses, goodwill and other intangible assets, particularly in light of the current economic environment;

•

our incurrence of net losses over the past three fiscal years;

•

increased competition from new technologies;

•

the impact of our acquisitions, dispositions and similar transactions;

•

our high degree of leverage and potential inability to refinance our debt given current market conditions;

•

our current non-compliance with NASDAQ rules for continued listing of our Class A and Class D common stock; and

•

other factors mentioned in our filings with the Securities and Exchange Commission including the factors discussed in detail in Item 1A, “Risk Factors,” in our 2008 Annual Report on Form 10-K/A.

You should not place undue reliance on these forward-looking statements, which reflect our view as of the date of this report. We undertake no obligation to publicly update or revise any forward-looking statements because of new information, future events or otherwise.

RADIO ONE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended March 31,
	2009			2008
	(Unaudited)
				(As Adjusted-
				See Note 1)
	(In thousands, except share data)

NET REVENUE	$	60,671		$	72,498
OPERATING EXPENSES:
Programming and technical, including stock-based compensation of $31 and $33, respectively		20,617			19,065
Selling, general and administrative, including stock-based compensation of $95 and $172, respectively		23,669			24,649
Corporate selling, general and administrative, including stock-based compensation of $357 and $123, respectively		5,490			6,530
Depreciation and amortization		5,255			3,664
Impairment of long-lived assets		48,953			—
Total operating expenses		103,984			53,908
Operating (loss) income		(43,313	)		18,590
INTEREST INCOME		18			201
INTEREST EXPENSE		10,779			17,259
GAIN ON RETIREMENT OF DEBT		1,221			—
EQUITY IN INCOME (LOSS) OF AFFILIATED COMPANY		1,150			(2,829	)
OTHER INCOME (EXPENSE), net		50			(11	)
Loss before provision for income taxes, noncontrolling interest in income of subsidiaries and income (loss) from discontinued operations		(51,653	)		(1,308	)
PROVISION FOR INCOME TAXES		7,071			8,898
Net loss from continuing operations		(58,724	)		(10,206	)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, net of tax		158			(7,821	)
CONSOLIDATED NET LOSS		(58,566	)		(18,027	)
NONCONTROLLING INTEREST IN INCOME OF SUBSIDIARIES		871			823
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	(59,437	)	$	(18,850	)

BASIC AND DILUTED NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS
Continuing operations	$	(0.84	)	$	(0.11	)
Discontinued operations, net of tax		(0.00	)		(0.08	)
Net loss attributable to common stockholders	$	(0.84	)	$	(0.19	)

AMOUNTS ATTRIBUTABLE TO COMMON STOCKHOLDERS
Continuing operations	$	(59,595	)	$	(11,029	)
Discontinued operations, net of tax		158			(7,821	)
Net loss attributable to common stockholders	$	(59,437	)	$	(18,850	)

WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic		70,719,332			98,728,411
Diluted		70,719,332			98,728,411

The accompanying notes are an integral part of these consolidated financial statements.

RADIO ONE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	As of
	March 31, 2009			December 31, 2008
	(Unaudited)

	(In thousands, except share data)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	20,302		$	22,289
Trade accounts receivable, net of allowance for doubtful accounts of $2,429 and $3,789, respectively		40,572			49,937
Prepaid expenses and other current assets		4,432			5,560
Deferred tax assets		108			108
Current assets from discontinued operations		327			303
Total current assets		65,741			78,197
PROPERTY AND EQUIPMENT, net		46,116			48,602
GOODWILL		137,095			137,095
RADIO BROADCASTING LICENSES		714,724			763,657
OTHER INTANGIBLE ASSETS, net		41,507			44,217
INVESTMENT IN AFFILIATED COMPANY		49,420			47,852
OTHER ASSETS		4,961			5,797
NON-CURRENT ASSETS FROM DISCONTINUED OPERATIONS		—			60
Total assets	$	1,059,564		$	1,125,477

LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable	$	3,080		$	3,691
Accrued interest		4,241			10,082
Accrued compensation and related benefits		10,335			10,534
Income taxes payable		1,448			30
Other current liabilities		10,042			12,477
Current portion of long-term debt		26,518			43,807
Current liabilities from discontinued operations		177			582
Total current liabilities		55,841			81,203
LONG-TERM DEBT, net of current portion		650,680			631,555
OTHER LONG-TERM LIABILITIES		10,477			11,008
DEFERRED TAX LIABILITIES		91,962			86,236
Total liabilities		808,960			810,002

STOCKHOLDERS’ EQUITY:
Convertible preferred stock, $.001 par value, 1,000,000 shares authorized; no shares outstanding at March 31, 2009 and December 31, 2008		—			—
Common stock — Class A, $.001 par value, 30,000,000 shares authorized; 2,994,215 and 3,016,730 shares issued and outstanding as of March 31, 2009 and December 31, 2008, respectively		3			3
Common stock — Class B, $.001 par value, 150,000,000 shares authorized; 2,861,843 shares issued and outstanding as of March 31, 2009 and December 31, 2008, respectively		3			3
Common stock — Class C, $.001 par value, 150,000,000 shares authorized; 3,121,048 shares issued and outstanding as of March 31, 2009 and December 31, 2008, respectively		3			3
Common stock — Class D, $.001 par value, 150,000,000 shares authorized; 55,564,186 and 69,971,551 shares issued and outstanding as of March 31, 2009 and December 31, 2008, respectively		56			70
Accumulated other comprehensive loss		(2,926	)		(2,981	)
Additional paid-in capital		1,027,575			1,033,921
Accumulated deficit		(776,962	)		(717,525	)
Total stockholders’ equity		247,752			313,494
Noncontrolling interest		2,852			1,981
Total equity		250,604			315,475
Total liabilities and equity	$	1,059,564		$	1,125,477

The accompanying notes are an integral part of these consolidated financial statements.

RADIO ONE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2009 (UNAUDITED)

	Radio One Inc. Stockholders
	Convertible Preferred Stock		Common Stock Class A		Common Stock Class B		Common Stock Class C		Common Stock Class D			Comprehensive Loss			Accumulated Other Comprehensive Loss			Additional Paid-In Capital			Accumulated Deficit			Noncontrolling Interest		Total Equity
	(In thousands, except share data)
BALANCE, as of December 31, 2008	$	—	$	3	$	3	$	3	$	70					$	(2,981	)	$	1,033,921		$	(717,525	)	$	1,981	$	315,475
Comprehensive loss:
Consolidated net loss		—		—		—		—		—		$	(58,566	)		—			—			(59,437	)		871		(58,566	)
Change in unrealized income on derivative and hedging activities, net of taxes		—		—		—		—		—			55			55			—			—			—		55
Comprehensive loss												$	(58,511	)
Repurchase of 22,515 shares of Class A common stock and 14,407,165 shares of Class D common stock		—		—		—		—		(14	)					—			(6,829	)		—			—		(6,843	)
Vesting of non-employee restricted stock		—		—		—		—		—						—			157			—			—		157
Stock-based compensation expense		—		—		—		—		—						—			326			—			—		326
BALANCE, as of March 31, 2009	$	—	$	3	$	3	$	3	$	56					$	(2,926	)	$	1,027,575		$	(776,962	)	$	2,852	$	250,604

The accompanying notes are an integral part of these consolidated financial statements.

RADIO ONE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

	Three Months Ended March 31,
	2009			2008
	(Unaudited)
				(As Adjusted-
				See Note 1)
	(In thousands)
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
Net loss attributable to common stockholders	$	(59,437	)	$	(18,850	)
Noncontrolling interest in income of subsidiaries		871			823
Consolidated net loss		(58,566	)		(18,027	)
Adjustments to reconcile consolidated net loss to net cash from operating activities:
Depreciation and amortization		5,255			3,664
Amortization of debt financing costs		602			689
Deferred income taxes		5,726			8,997
Impairment of long-lived assets		48,953			—
Equity in (income) loss of affiliated company		(1,150	)		2,829
Stock-based and other compensation		483			368
Gain on retirement of debt		(1,221	)		—
Change in interest due on stock subscriptions receivable		—			(5	)
Amortization of contract inducement and termination fee		(474	)		(515	)
Effect of change in operating assets and liabilities, net of assets acquired:
Trade accounts receivable		9,365			3,403
Prepaid expenses and other assets		1,128			1,134
Other assets		837			(976	)
Accounts payable		(611	)		(1,628	)
Accrued interest		(5,841	)		(9,986	)
Accrued compensation and related benefits		(199	)		(1,233	)
Income taxes payable		1,418			716
Other liabilities		(2,966	)		(803	)
Net cash flows from operating activities of discontinued operations		247			5,767
Net cash flows from (used in) operating activities		2,986			(5,606	)
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchases of property and equipment		(1,148	)		(3,270	)
Equity investments		—			(997	)
Purchase of other intangible assets		(39	)		(221	)
Deposits for station equipment and purchases and other assets		—			(517	)
Net cash flows used in investing activities		(1,187	)		(5,005	)
CASH FLOWS USED IN FINANCING ACTIVITIES:
Repayment of other debt		(153	)		(490	)
Proceeds from credit facility		80,000			10,000
Repayment of credit facility		(75,570	)		(11,500	)
Repurchase of senior subordinated notes		(1,220	)		—
Repurchase of common stock		(6,843	)		—
Payment of dividend to noncontrolling interest shareholders		—			(3,916	)
Net cash flows used in financing activities		(3,786	)		(5,906	)
DECREASE IN CASH AND CASH EQUIVALENTS		(1,987	)		(16,517	)
CASH AND CASH EQUIVALENTS, beginning of period		22,289			24,247
CASH AND CASH EQUIVALENTS, end of period	$	20,302		$	7,730

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest	$	16,018		$	27,245
Income taxes	$	17		$	28

Supplemental Note: In July 2007, a seller financed loan of $2.6 million was incurred when the Company acquired the assets of WDBZ-AM, a radio station located in the Cincinnati metropolitan area. The balance as of March 31, 2009 and 2008 was $0 and $514,000, respectively.

The accompanying notes are an integral part of these consolidated financial statements.

RADIO ONE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

(a) Organization

Radio One, Inc. (a Delaware corporation referred to as “Radio One”) and its subsidiaries (collectively, the “Company”) is one of the nation’s largest radio broadcasting companies and the largest broadcasting company that primarily targets African-American and urban listeners. While our primary source of revenue is the sale of local and national advertising for broadcast on our radio stations, we have recently diversified our revenue streams and have made acquisitions and investments in other complementary media properties. In April 2008, we acquired Community Connect Inc. (“CCI”), an online social networking company that hosts the website BlackPlanet, the largest social networking site primarily targeted at African-Americans. This acquisition is consistent with our operating strategy of becoming a multi-media entertainment and information content provider to African-American consumers. Our other media acquisitions and investments include our approximate 36% ownership interest in TV One, LLC (“TV One”), an African-American targeted cable television network that we invested in with an affiliate of Comcast Corporation and other investors; our 51% ownership interest in Reach Media, Inc. (“Reach Media”), which operates the Tom Joyner Morning Show; and our acquisition of certain assets (“Giant Magazine”) of Giant Magazine, LLC, an urban-themed lifestyle and entertainment magazine. Through our national multi-media presence, we provide advertisers with a unique and powerful delivery mechanism to the African-American audience.

While diversifying our operations, since December 2006, we completed the sale of approximately $287.9 million of our non-core radio assets. While we maintained our core radio franchise, these dispositions have allowed the Company to more strategically allocate its resources consistent with its long-term multi-media operating strategy. We currently own 53 broadcast stations located in 16 urban markets in the United States.

As part of our consolidated financial statements, consistent with our financial reporting structure and how the Company currently manages its businesses, we have provided selected financial information on the Company’s two reportable segments: (i) Radio Broadcasting and (ii) Internet/Publishing. (See Note 10 – Segment Information.)

(b) Interim Financial Statements

The interim consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In management’s opinion, the interim financial data presented herein include all adjustments (which include only normal recurring adjustments) necessary for a fair presentation. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations.

Results for interim periods are not necessarily indicative of results to be expected for the full year. This Form 10-Q should be read in conjunction with the financial statements and notes thereto included in the Company’s 2008 Annual Report on Form 10-K/A.

Certain reclassifications associated with accounting for discontinued operations have been made to the accompanying prior period financial statements to conform to the current period presentation. Where applicable, these financial statements have been identified as “As Adjusted.” These reclassifications had no effect on previously reported net income or loss, or any other previously reported statements of operations, balance sheet or cash flow amounts. (See Note 3 — Discontinued Operations for further discussion.)

During the second quarter of 2008, Radio One was advised that prior period financial statements of TV One, an affiliate accounted for under the equity method, had been restated to correct certain errors that affected the reported amount of members’ equity and liabilities. These restatement adjustments had a corresponding effect on the Company’s share of the earnings of TV One reported in prior periods. Under the guidance of Staff Accounting Bulletin (“SAB”) No. 99, “Materiality” and SAB No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” the Company has determined the errors are immaterial to our consolidated financial statements for all prior periods. However, because the effects of correcting the cumulative prior period errors would have been material to our second quarter 2008 consolidated financial statements, we have adjusted certain previously reported amounts in the accompanying 2008 interim consolidated financial statements.

The impact on the financial statements is as follows (in thousands):

Selected Statement of Operations Data

	Three Months Ended March 31, 2008
	As Previously Reported			Adjustments			As Adjusted
	(In thousands, except share data)

Equity in Loss of Affiliated Company	$	(2,285	)	$	(544	)	$	(2,829	)
Loss before provision for income taxes, noncontrolling interest in income of subsidiaries and discontinued operations	$	(805	)	$	(503	)	$	(1,308	)
Net loss from continuing operations	$	(9,703	)	$	(503	)	$	(10,206	)
Net loss attributable to common stockholders	$	(18,307	)	$	(543	)	$	(18,850	)

Basic and Diluted Net Loss from Continuing Operations per Common Share	$	(0.11	)	$	(0.00	)	$	(0.11	)
Basic and Diluted Net Loss from Discontinued Operations per Common Share		(0.08	)		(0.00	)		(0.08	)
Basic and Diluted Net Loss Attributable to Common Stockholders	$	(0.19	)	$	(0.00	)	$	(0.19	)

Financial instruments as of March 31, 2009 and December 31, 2008 consisted of cash and cash equivalents, short-term investments, trade accounts receivable, accounts payable, accrued expenses, long-term debt and subscriptions receivable. The carrying amounts approximated fair value for each of these financial instruments as of March 31, 2009 and December 31, 2008, except for the Company’s outstanding senior subordinated notes. The 87/8% Senior Subordinated Notes due July 2011 had a fair value of approximately $30.5 million and $52.0 million as of March 31, 2009 and December 31, 2008, respectively. The 63/8% Senior Subordinated Notes due February 2013 had a fair value of approximately $44.0 million and $60.0 million as of March 31, 2009 and December 31, 2008, respectively. The fair value was determined based on the fair market value of similar instruments.

(d) Revenue Recognition

The Company recognizes revenue for broadcast advertising when a commercial is broadcast and is reported, net of agency and outside sales representative commissions, in accordance with SAB No. 104, Topic 13, “Revenue Recognition, Revised and Updated.” Agency and outside sales representative commissions are calculated based on a stated percentage applied to gross billing. Generally, clients remit the gross billing amount to the agency or outside sales representative, and the agency or outside sales representative remits the gross billing, less their commission, to the Company. Agency and outside sales representative commissions were approximately $5.5 million and $7.9 million during the three months ended March 31, 2009 and 2008, respectively.

CCI, which the Company acquired in April 2008, currently generates the majority of the Company’s internet revenue, and derives such revenue principally from advertising services, including advertising aimed at diversity recruiting. Advertising services include the sale of banner and sponsorship advertisements. Advertising revenue is recognized either as impressions (the number of times advertisements appear in viewed pages) are delivered, when “click through” purchases or leads are reported, or ratably over the contract period, where applicable. CCI has a diversity recruiting agreement with Monster, Inc. (“Monster”). Under the agreement, Monster posts job listings and advertising on CCI’s websites and CCI earns revenue for displaying the images on its websites. This agreement ends December 2009.

Publishing revenue generated by Giant Magazine, mainly advertising, subscription and newsstand sales, is recognized when the issue is available for sale.

(e) Barter Transactions

The Company provides broadcast advertising time in exchange for programming content and certain services. In accordance with guidance provided by the Emerging Issues Task Force (“EITF”) No. 99-17, “Accounting for Advertising Barter Transactions,” the terms of these exchanges generally permit the Company to preempt such broadcast time in favor of advertisers who purchase time in exchange for cash. The Company includes the value of such exchanges in both broadcasting net revenue and station operating expenses. The valuation of barter time is based upon the fair value of the network advertising time provided for the programming content and services received. For the three months ended March 31, 2009 and 2008, barter transaction revenues reflected in net revenue were $757,000 and $599,000, respectively. Additionally, barter transaction costs were reflected in programming and technical expenses and selling, general and administrative expenses of $716,000 and $558,000 and $41,000 for both the three month periods ended March 31, 2009 and 2008.

(f) Comprehensive Loss

The Company’s comprehensive loss consists of net loss attributable to common stockholders and other items recorded directly to the equity accounts. The objective is to report a measure of all changes in equity of an enterprise that result from transactions and other economic events during the period, other than transactions with owners. The Company’s other comprehensive income (loss) consists of losses on derivative instruments that qualify for cash flow hedge treatment. (See Note 6 - Derivative Instruments and Hedging Activities.)

The following table sets forth the components of comprehensive loss:

	Three Months Ended March 31,
	2009			2008
	(In thousands)

Consolidated net loss	$	(58,566	)	$	(18,027	)
Other comprehensive income (loss) (net of tax benefit of $0 and $0, respectively):
Derivative and hedging activities		55			(3,148	)
Comprehensive loss		(58,511	)		(21,355	)
Comprehensive loss attributable to the noncontrolling interest		—			—
Comprehensive loss attributable to common stockholders	$	(58,511	)	$	(21,355	)

(g) Goodwill and Radio Broadcasting Licenses

In connection with past acquisitions, a significant amount of the purchase price was allocated to radio broadcasting licenses, goodwill and other intangible assets. Goodwill consists of the excess of the purchase price over the fair value of tangible and identifiable intangible net assets acquired. In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” goodwill and radio broadcasting licenses are not amortized, but are tested annually for impairment at the reporting unit level and unit of accounting level, respectively. We test for impairment annually, on October 1st of each year, or more frequently when events or changes in circumstances or other conditions suggest impairment may have occurred. Impairment exists when the asset carrying values exceed their respective fair values, and the excess is then recorded to operations as an impairment charge. With the assistance of a third party valuation firm, we test for license impairment at the unit of accounting level using the income approach, which involves, but is not limited to judgmental assumptions about projected revenue growth, future operating margins discount rates and terminal values. In testing for goodwill impairment, we follow a two-step approach, also using the income approach that first estimates the fair value of the reporting unit, and then determines the implied goodwill after allocating the reporting unit’s fair value of assets and liabilities. Any excess of carrying value over its respective implied goodwill is written off in order to reduce the reporting unit’s carrying value to fair value. We then perform a reasonableness test by comparing the average implied multiple arrived at based on our cash flow projections and estimated fair values to multiples for actual recently completed sale transactions. During the first quarter of 2009, the prolonged economic downturn caused further deterioration to the 2009 outlook for the radio industry, and resulted in further significant revenue and profitability declines beyond levels assumed in our 2008 annual and year end impairment testing. As a result, we have made reductions to our internal projections. Given the adverse impact on terminal values, we deemed the worsening radio outlook and the lowering of our internal projections as impairment indicators that warranted interim testing, which we performed as of February 28, 2009. The outcome of our interim testing was to record impairment charges against radio broadcasting licenses in 11 of our 16 markets, for approximately $49.0 million, for the three months ended March 31, 2009. (See Note 4 — Goodwill, Radio Broadcasting Licenses and Other Intangible Assets.)

(h) Fair Value Measurements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements,” which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. The standard responds to investors’ requests for more information about: (1) the extent to which companies measure assets and liabilities at fair value; (2) the information to measure fair value; and (3) the effect that fair value measurements have on earnings. SFAS No. 157 is applied whenever another standard requires (or permits) assets or liabilities to be measured at fair value. The standard does not expand the use of fair value to any new circumstances. Effective January 1, 2008, we adopted SFAS No. 157 for all financial instruments and non-financial instruments accounted for at fair value on a recurring basis. Effective January 1, 2009, we adopted SFAS No. 157 for all non-financial instruments accounted for at fair value on a non-recurring basis. SFAS No. 157 establishes a new framework for measuring fair value and expands related disclosures.

The fair value framework requires the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment. The three levels are defined as follows:

Level 1: Inputs are unadjusted quoted prices in active markets for identical assets and liabilities that can be accessed at measurement date.

	Level 2: Observable inputs other than those included in Level 1. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical
	assets or liabilities in inactive markets.

	Level 3: Unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability.

As of March 31, 2009 and December 31, 2008, respectively, the fair values of our financial liabilities are categorized as follows:

	Total			Level 1			Level 2			Level 3
	(In thousands)
As of March 31, 2009
Liabilities subject to fair value measurement:
Interest rate swaps (a)		$	2,927		$	—		$	2,927		$	—
Employment agreement award (b)			4,204			—			—			4,204
Total		$	7,131		$	—		$	2,927		$	4,204

As of December 31, 2008
Liabilities subject to fair value measurement:
Interest rate swaps (a)		$	2,983		$	—		$	2,983		$	—
Employment agreement award (b)			4,326			—			—			4,326
Total		$	7,309		$	—		$	2,983		$	4,326

(a) Based on London Interbank Offered Rate (“LIBOR”).
(b) Pursuant to an employment agreement (the “Employment Agreement”) executed in April 2008, the Chief Executive Officer (“CEO”) will be eligible to receive an award amount equal to 8% of any proceeds from distributions or other liquidity events in excess of the return of the Company’s aggregate investment in TV One. The Company reviewed the factors underlying this award during the quarter ended March 31, 2009 and at December 31, 2008. The Company’s obligation to pay the award will be triggered only after the Company’s recovery of the aggregate amount of its capital contribution in TV One and only upon actual receipt of distributions of cash or marketable securities or proceeds from a liquidity event with respect to the Company’s membership interest in TV One. The CEO was fully vested in the award upon execution of the Employment Agreement, and the award lapses upon expiration of the Employment Agreement in April 2011, or earlier if the CEO voluntarily leaves the Company or is terminated for cause. The Company engaged a third party valuation firm to perform a fair valuation of the award. (See Note 6 – Derivative Instruments and Hedging Activities.)

The following table presents the changes in Level 3 liabilities measured at fair value on a recurring basis for the three months ended March 31, 2009.

	Employment Agreement Award
	(In thousands)

Balance at December 31, 2008	$	4,326
Gains included in earnings (realized/unrealized)		(122	)
Changes in Accumulated other comprehensive loss		—
Purchases, issuances, and settlements		—
Balance at March 31, 2009	$	4,204

The amount of total gains for the period included in earnings attributable to the change in unrealized gains relating to assets and liabilities still held at the reporting date	$	(122	)

Gains included in earnings (realized/unrealized) were recorded in the consolidated statement of operations as corporate selling, general and administrative expenses for the three months ended March 31, 2009.

Certain assets and liabilities are measured at fair value on a non-recurring basis. These assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances. Included in this category are goodwill, radio broadcasting licenses and other intangible assets, net, that are written down to fair value when they are determined to be impaired.

As of March 31, 2009, each major category of assets and liabilities measured at fair value on a non-recurring basis during the period are categorized as follows:

	Total		Level 1		Level 2		Level 3		Total Gains (Losses)
	(In millions)
As of March 31, 2009
Non-recurring assets subject to fair value measurement:
Goodwill	$	137.1	$	—	$	—	$	137.1	$	—
Radio broadcasting licenses		714.7		—		—		714.7		(49.0	)
Other intangible assets, net		41.5		—		—		41.5		—
Total	$	893.3	$	—	$	—	$	893.3	$	(49.0	)

As of December 31, 2008, the total recorded carrying value of goodwill and radio broadcasting licenses was approximately $137.1 million and $763.7 million, respectively. Pursuant to SFAS No. 142, and in connection with its interim impairment testing performed for asset values as of February 28, 2009, carrying values for radio broadcasting licenses in 11 of the Company’s 16 markets were written down to fair values, resulting in a total license carrying value of approximately $714.7 million as of March 31, 2009. The license write-downs resulted in an impairment charge of approximately $49.0 million, which was recorded against earnings, for the quarter ended March 31, 2009. The interim testing resulted in no impairment to goodwill. A description of the Level 3 inputs and the information used to develop the inputs is discussed in Note 4 — Goodwill, Radio Broadcasting Licenses and Other Intangible Assets.

As of December 31, 2008, the total recorded carrying value of other intangible assets excluding goodwill and radio broadcasting licenses was approximately $44.2 million. Pursuant to SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” no impairment indicators existed during the three months ended March 31, 2009, thus no impairment assessment was warranted. Considering applicable amortization and interest expense of approximately $2.7 million for the first quarter, the carrying value of other intangible assets excluding goodwill and radio broadcasting licenses was approximately $41.5 million as of March 31, 2009.

(i) Impact of Recently Issued Accounting Pronouncements

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133.” SFAS No. 161 requires disclosure of the fair value of derivative instruments and their gains and losses in a tabular format. It also provides for more information about an entity’s liquidity by requiring disclosure of derivative features that are credit risk related. Finally, it requires cross referencing within footnotes to enable financial statement users to locate important information about derivative instruments. Effective January 1, 2009, the Company adopted SFAS No. 161. The Company’s adoption of SFAS No. 161 had no impact on its financial condition or results of operations. (See Note 6 – Derivative Instruments and Hedging Activities.)

In December 2007, the FASB issued SFAS No. 141R, “Business Combinations.” SFAS No. 141R replaces SFAS No. 141, and requires the acquirer of a business to recognize and measure the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at fair value. SFAS No. 141R also requires transaction costs related to the business combination to be expensed as incurred. SFAS No. 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Effective January 1, 2009, the Company adopted SFAS No. 141R. There was no new business combination activity for the three month period ended March 31, 2009; therefore, the adoption of SFAS No. 141R has not yet impacted our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 51.” This statement amends ARB No. 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. This statement is effective for fiscal years beginning after December 15, 2008. Effective January 1, 2009, the Company adopted SFAS No. 160. SFAS No. 160 changed the accounting and reporting for minority interests, which is now characterized as noncontrolling interests and classified as a component of equity. SFAS No. 160 required retroactive adoption of the presentation and disclosure requirements for existing minority interests, with all other requirements applied prospectively. Reflected in the December 31, 2008 Form 10-K/A, minority interests characterized as liabilities in the consolidated balance sheet was approximately $2.0 million. This amount has been recharacterized as noncontrolling interests and classified as a component of shareholders’ equity.

In December 2007, the SEC issued SAB No. 110 that modified SAB No. 107 regarding the use of a “simplified” method in developing an estimate of expected term of “plain vanilla” share options in accordance with SFAS No. 123R, “Share-Based Payment.” Under SAB No. 107, the use of the “simplified” method was not allowed beyond December 31, 2007. SAB No. 110 allows, however, the use of the “simplified” method beyond December 31, 2007 under certain circumstances. We currently use the “simplified” method under SAB No. 107, and we expect to continue to use the “simplified” method in future periods if the facts and circumstances permit.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” which permits companies to choose to measure certain financial instruments and other items at fair value that are not currently required to be measured at fair value. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. Effective January 1, 2008, the Company adopted SFAS No. 159, which provides entities the option to measure many financial instruments and certain other items at fair value. Entities that choose the fair value option will recognize unrealized gains and losses on items for which the fair value option was elected in earnings at each subsequent reporting date. The Company has currently chosen not to elect the fair value option for any items that are not already required to be measured at fair value in accordance with generally accepted accounting principles.

In September 2006, the FASB issued SFAS No. 157, which provides guidance for using fair value to measure assets and liabilities. The standard also responds to investors’ requests for more information about: (1) the extent to which companies measure assets and liabilities at fair value; (2) the information used to measure fair value; and (3) the effect that fair value measurements have on earnings. SFAS No. 157 will apply whenever another standard requires (or permits) assets or liabilities to be measured at fair value. The standard does not expand the use of fair value to any new circumstances. The Company adopted SFAS No. 157 effective January 1, 2008. In February 2008, the FASB issued FASB Staff Position on Statement 157, "Effective Date of FASB Statement No. 157," ("FSP No.157-2"). FSP No. 157-2 delayed the effective date of SFAS No. 157 for nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed on a recurring basis, to fiscal years beginning after November 15, 2008. Effective January 1, 2009, the Company adopted FSP No. 157-2. The adoption of FSP No. 157-2 did not have a material impact on the Company’s consolidated financial statements.

(j) Liquidity

The Company continually projects its anticipated cash needs, which include its operating needs, capital requirements, the TV One funding commitment and principal and interest payments on its indebtedness. Management’s most recent operating income and cash flow projections considered the current economic crisis, which has reduced advertising demand in general, as well as the limited credit environment. As of the filing of this Form 10-Q, management believes the Company can meet its liquidity needs through March 31, 2010 with cash and cash equivalents on hand, projected cash flows from operations and, to the extent necessary, through its additional borrowing available under the Credit Agreement, which was approximately $13.0 million at March 31, 2009. Based on these projections, management also believes the Company will be in compliance with its debt covenants through March 31, 2010. However, a continued worsening economy, or other unforeseen circumstances, may negatively impact the Company’s operations beyond those assumed in its projections. Management considered the risks that the current economic conditions may have on its liquidity projections, as well as the Company’s ability to meet its debt covenant requirements. If economic conditions deteriorate unexpectedly to an extent that we could not meet our liquidity needs or it appears that noncompliance with debt covenants is likely to result, the Company would implement several remedial measures, which could include further operating cost and capital expenditure reductions, and further de-leveraging actions, which may include repurchases of discounted senior subordinated notes and other debt repayments, subject to our available liquidity to make sure repurchases. If these measures are not successful in maintaining compliance with our debt covenants, the Company would attempt to negotiate for relief through an amendment with its lenders or waivers of covenant noncompliance, which could result in higher interest costs, additional fees and reduced borrowing limits. There is no assurance that the Company would be successful in obtaining relief from its debt covenant requirements in these circumstances. Failure to comply with its debt covenants and a corresponding failure to negotiate a favorable amendment or waivers with the Company’s lenders could result in the acceleration of the maturity of all the Company’s outstanding debt, which would have a material adverse effect on the Company’s business and financial position.

2. ACQUISITIONS:

In June 2008, the Company purchased the assets of WPRS-FM, a radio station located in the Washington, DC metropolitan area for $38.0 million in cash. Since April 2007 and until closing, the station had been operated under a local marketing agreement (“LMA”), and the results of its operations had been included in the Company’s consolidated financial statements since the inception of the LMA. The station was consolidated with the Company’s existing Washington, DC operations in April 2007. The Company’s final purchase price allocation consisted of approximately $33.9 million to radio broadcasting license, approximately $1.3 million to definitive-lived intangibles (acquired favorable income leases), $965,000 to goodwill and approximately $1.8 million to fixed assets and is reflected on the Company’s consolidated balance sheet as of March 31, 2009.

In April 2008, the Company acquired CCI for $38.0 million in cash. CCI is an online social networking company operating branded websites including BlackPlanet, MiGente, and AsianAvenue. The Company’s purchase price allocation consists of approximately $10.2 million to current assets, $4.6 million to fixed assets, $20.4 million to goodwill, $9.9 million to definitive-lived intangibles (brand names, advertiser relationships and lists, favorable subleases, trademarks, trade names, etc.), and $5.0 million to current liabilities on the Company’s consolidated balance sheet as of March 31, 2009.

In July 2007, the Company purchased the assets of WDBZ-AM, a radio station located in the Cincinnati metropolitan area for approximately $2.6 million. The sales price was financed by a loan from the seller, which was paid in full in July 2008. Since August 2001 and up until closing, the station had been operated under a LMA, and the results of its operations had been included in the Company’s consolidated financial statements since the LMA. The station was consolidated with the Company’s existing Cincinnati operations in 2001. In accordance with SFAS No. 142, for the three months ended March 31, 2009, we impaired radio broadcasting licenses in the Cincinnati market (which consists of a total of three stations) by approximately $3.3 million. (See Note 4 — Goodwill, Radio Broadcasting Licenses and Other Intangible Assets.)

3. DISCONTINUED OPERATIONS:

Between December 2006 and May 2008, the Company sold the assets of 20 radio stations in seven markets for approximately $287.9 million in cash. The remaining assets and liabilities of these stations have been classified as discontinued operations as of March 31, 2009 and December 31, 2008, and the stations’ results of operations for the three month periods ended March 31, 2009 and 2008 have been classified as discontinued operations in the accompanying consolidated financial statements. For the period beginning December 1, 2006 and ending December 31, 2008, the Company used approximately $262.0 million of the proceeds from these asset sales to pay down debt.

Los Angeles Station: In May 2008, the Company sold the assets of its radio station KRBV-FM, located in the Los Angeles metropolitan area, to Bonneville International Corporation (“Bonneville”) for approximately $137.5 million in cash. Bonneville began operating the station under an LMA on April 8, 2008.

Miami Station: In April 2008, the Company sold the assets of its radio station WMCU-AM, located in the Miami metropolitan area, to Salem Communications Holding Corporation (“Salem”) for approximately $12.3 million in cash. Salem began operating the station under an LMA effective October 18, 2007.

Augusta Stations: In December 2007, the Company sold the assets of its five radio stations in the Augusta metropolitan area to Perry Broadcasting Company for approximately $3.1 million in cash.

Louisville Station: In November 2007, the Company sold the assets of its radio station WLRX-FM in the Louisville metropolitan area to WAY FM Media Group, Inc. for approximately $1.0 million in cash.

Dayton and Louisville Stations: In September 2007, the Company sold the assets of its five radio stations in the Dayton metropolitan area and five of its six radio stations in the Louisville metropolitan area to Main Line Broadcasting, LLC for approximately $76.0 million in cash.

Minneapolis Station: In August 2007, the Company sold the assets of its radio station KTTB-FM in the Minneapolis metropolitan area to Northern Lights Broadcasting, LLC for approximately $28.0 million in cash.

Boston Station: In December 2006, the Company sold the assets of its radio station WILD-FM in the Boston metropolitan area to Entercom Boston, LLC (“Entercom”) for approximately $30.0 million in cash. Entercom began operating the station under an LMA effective August 18, 2006.

The following table summarizes the operating results for these stations for the three month periods ended March 31, 2009 and 2008:

	Three Months Ended March 31,
	2009			2008
	(In thousands)

Net revenue	$	—		$	2,337
Station operating expenses		(247	)		4,046
Depreciation and amortization		—			79
Impairment of long-lived assets		—			5,076
Other income		—			98
Loss on sale of assets		—			225
Income (loss) before income taxes		247			(6,991	)
Provision for income taxes		89			830
Income (loss) from discontinued operations, net of tax	$	158		$	(7,821	)

The assets and liabilities of these stations classified as discontinued operations in the accompanying consolidated balance sheets consisted of the following:

	As of
	March 31, 2009		December 31, 2008
	(In thousands)
Currents assets:
Accounts receivable, net of allowance for doubtful accounts	$	327	$	303
Total current assets		327		303
Property and equipment, net		—		60
Total assets	$	327	$	363
Current liabilities:
Other current liabilities	$	177	$	582
Total current liabilities		177		582
Total liabilities	$	177	$	582

4. GOODWILL, RADIO BROADCASTING LICENSES AND OTHER INTANGIBLE ASSETS:

In the past, we have made acquisitions whereby a significant amount of the purchase price was allocated to radio broadcasting licenses, goodwill and other intangible assets. Effective January 1, 2002, in accordance with SFAS No. 142, we do not amortize our radio broadcasting licenses and goodwill. Instead, we perform a test for impairment annually, or when events or changes in circumstances or other conditions suggest an impairment may have occurred. Other intangible assets continue to be amortized on a straight-line basis over their useful lives. We perform our annual impairment test as of October 1st of each year. During the first quarter of 2009, the prolonged economic downturn caused further deterioration to the 2009 outlook for the radio industry, and resulted in further significant revenue and profitability declines beyond levels assumed in our 2008 annual and year end impairment testing. As a result, we have made reductions to our internal projections. Given the adverse impact on terminal values, we deemed the worsening radio outlook and the lowering of our internal projections as impairment indicators that warranted interim impairment testing, which we performed as of February 28, 2009. The outcome of our interim testing was to record impairment charges against radio broadcasting licenses in 11 of our 16 markets, for approximately $49.0 million, for the three months ended March 31, 2009. There was no impairment charge recorded for the same period in 2008.

We utilize the services of a third party valuation firm when evaluating our radio broadcasting licenses for impairment, and the testing is done at the unit of accounting level as determined by EITF 02-7, “Unit of Accounting for Testing Impairment of Indefinite-Lived Intangible Assets,” using the income approach method. The income approach method involves a 10-year model that incorporates several variables, including, but not limited to, discounted cash flows of a typical market participant, market revenue and long-term growth projections, estimated market share for the typical participant and estimated profit margins based on market size and station type. The model also assumes outlays for capital expenditures, future terminal values, an effective tax rate assumption and a discount rate based on the weighted-average cost of capital of the radio broadcast industry.

The impairment testing of goodwill is performed at the reporting unit level, and is also done with the assistance of a third party valuation firm. We had 21 reporting units as of our interim and annual goodwill impairment assessment dates. In testing for the impairment of goodwill, we also use the income approach method. The approach involves a 10-year model with similar variables as described above, except that the discounted cash flows are generally based on the Company’s actual and projected market share and performance for its markets. We follow a two-step process to evaluate if a potential impairment exists for goodwill. The first step of the process involves estimating the fair value of each reporting unit. If the reporting unit’s fair value is less than its carrying value, a second step is performed to allocate the fair value of the reporting unit to the individual assets and liabilities of the reporting unit in order to determine the implied fair value of the reporting unit’s goodwill as of the impairment assessment date. Any excess of the carrying value of the goodwill over the implied fair value of the goodwill is written off to reduce the reporting unit’s carrying value to its estimated fair value.

Below are key assumptions used in the income approach model for estimating asset fair values for the impairment testing performed October 1, 2008 and February 28, 2009.

Radio Broadcasting Licenses	October 1, 2008	February 28, 2009
Discount Rate	10.5%	10.5%
2009 Market Growth Rate Range	(8.0)%	(13.1)% - (17.7)%
Out-year Market Growth Rate Range	1.5% - 2.5%	1.5% - 2.5%
Market Share Range	1.2% - 27.0%	0.9% - 27.0%
Operating Profit Margin Range	20.0% - 50.7%	14.9% - 50.7%

Goodwill	October 1, 2008	February 28, 2009
Discount Rate	10.5%	10.5%
2009 Market Growth Rate Range	(8.0)%	(13.1)% - (17.7)%
Out-year Market Growth Rate Range	1.5% - 2.5%	1.5% - 2.5%
Market Share Range	1.1% - 23.0%	2.8% - 22.0%
Operating Profit Margin Range	18.0% - 60.0%	15.0% - 61.5%

In arriving at the estimated fair values for radio broadcasting licenses and goodwill, we also performed a reasonableness test on the fair value results by calculating our implied multiple based on our cash flow projections and our estimated fair values, and by reviewing our estimated fair values in comparison to the market capitalization of the Company.

Other intangible assets, excluding goodwill and radio broadcasting licenses, are being amortized on a straight-line basis over various periods. Other intangible assets consist of the following:

	As of
	March 31, 2009			December 31, 2008			Period of Amortization
	(In thousands)

Trade names	$	17,124		$	17,109		2-5 Years
Talent agreement		19,549			19,549		10 Years
Debt financing costs		15,590			15,586		Term of debt
Intellectual property		13,011			13,011		4-10 Years
Affiliate agreements		7,769			7,769		1-10 Years
Acquired income leases		1,282			1,282		3-9 Years
Non-compete agreements		1,260			1,260		1-3 Years
Advertiser agreements		6,613			6,613		2-7 Years
Favorable office and transmitter leases		3,655			3,655		2-60 Years
Brand names		2,539			2,539		2.5 Years
Other intangibles		1,241			1,241		1-5 Years
		89,633			89,614
Less: Accumulated amortization		(48,126	)		(45,397	)
Other intangible assets, net	$	41,507		$	44,217

Amortization expense of intangible assets for the three months ended March 31, 2009 and 2008 was approximately $2.1 million and $1.1 million, respectively. The amortization of deferred financing costs was charged to interest expense for all periods presented. The amount of deferred financing costs included in interest expense for the three months ended March 31, 2009 and 2008 was $602,000 and $674,000, respectively.

The following table presents the Company’s estimate of amortization expense for the remainder of years 2009 and 2010 through 2013 for intangible assets, excluding deferred financing costs.

	(In thousands)

2009	$	6,813
2010	$	7,243
2011	$	6,203
2012	$	5,920
2013	$	4,843

Actual amortization expense may vary as a result of future acquisitions and dispositions.

5. INVESTMENT IN AFFILIATED COMPANY:

In January 2004, the Company, together with an affiliate of Comcast Corporation and other investors, launched TV One, an entity formed to operate a cable television network featuring lifestyle, entertainment and news-related programming targeted primarily towards African-American viewers. At that time, we committed to make a cumulative cash investment of $74.0 million in TV One, of which $60.3 million had been funded as of March 31, 2009. The initial four year commitment period for funding the capital was extended to July 1, 2009, due in part to TV One’s lower than anticipated capital needs during the initial commitment period. In December 2004, TV One entered into a distribution agreement with DIRECTV and certain affiliates of DIRECTV became investors in TV One. As of March 31, 2009, the Company owned approximately 36% of TV One on a fully-converted basis.

The Company has recorded its investment at cost and has adjusted the carrying amount of the investment to recognize the change in the Company’s claim on the net assets of TV One resulting from operating income or losses of TV One as well as other capital transactions of TV One using a hypothetical liquidation at book value approach. For the three month period ended March 31, 2009, the Company’s allocable share of TV One’s operating income was approximately $1.2 million, compared to a $2.8 million loss for the three month period ended March 31, 2008.

During the second quarter of 2008, Radio One was advised that prior period financial statements of TV One, an affiliate accounted for under the equity method, had been restated to correct certain errors that affected the reported amount of members’ equity and liabilities. These restatement adjustments had a corresponding effect on the Company’s share of the losses of TV One reported in prior periods. Under the guidance of SAB No. 99 and SAB No. 108, the Company has determined the errors are immaterial to our consolidated financial statements for all prior periods. However, because the effects of correcting the cumulative prior period errors would have been material to our second quarter 2008 consolidated financial statements, we have adjusted certain previously reported amounts in the accompanying 2008 fiscal year consolidated financial statements for a $544,000 increase in the equity in loss of affiliated company.

We entered into separate network services and advertising services agreements with TV One in 2003. Under the network services agreement, we are providing TV One with administrative and operational support services and access to Radio One personalities. This agreement was originally scheduled to expire in January 2009, and has now been extended to January 2010. Under the advertising services agreement, we are providing a specified amount of advertising to TV One. This agreement was also originally scheduled to expire in January 2009 and has now been extended to January 2011. In consideration for providing these services, we have received equity in TV One, and receive an annual cash fee of $500,000 for providing services under the network services agreement.

The Company is accounting for the services provided to TV One under the advertising and network services agreements in accordance with EITF Issue No. 00-8, “Accounting by a Grantee for an Equity Instrument to Be Received in Conjunction with Providing Goods or Services.” As services are provided to TV One, the Company is recording revenue based on the fair value of the most reliable unit of measurement in these transactions. For the advertising services agreement, the most reliable unit of measurement has been determined to be the value of underlying advertising time that is being provided to TV One. For the network services agreement, the most reliable unit of measurement has been determined to be the value of the equity received in TV One. As a result, the Company is re-measuring the fair value of the equity received in consideration of its obligations under the network services agreement in each subsequent reporting period as the services are provided. The Company recognized $619,000 and approximately $1.1 million in revenue relating to these two agreements for the three month periods ended March 31, 2009 and 2008, respectively.

6.	DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES:

SFAS No. 161 amends and expands the disclosure requirements of FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities” (“SFAS No. 133”), with the intent to provide users of financial statements with an enhanced understanding of: (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS No. 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about the fair value of gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative instruments.

The fair values and the presentation of the Company’s derivative instruments in the consolidated balance sheet are as follows:

	Liability Derivatives
	As of March 31, 2009			As of December 31, 2008
	(In thousands)
	Balance Sheet Location		Fair Value	Balance Sheet Location		Fair Value
Derivatives designated as hedging instruments under SFAS No. 133:
Interest rate swaps	Other Long-Term Liabilities	$	2,927	Other Long-Term Liabilities	$	2,983

Derivatives not designated as hedging instruments under SFAS No.133:
Employment agreement award	Other Long-Term Liabilities	$	4,204	Other Long-Term Liabilities	$	4,326
Total derivatives		$	7,131		$	7,309

The effect and the presentation of the Company’s derivative instruments on the consolidated statement of operations are as follows:

Derivatives in SFAS No. 133 Cash Flow Hedging Relationships	Amount of Gain (Loss) in Other Comprehensive Income on Derivative (Effective Portion)					Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income (Effective Portion)					Gain (Loss) in Income (Ineffective Portion and Amount Excluded from Effectiveness Testing)
	Amount					Location		Amount			Location		Amount
Three Months Ended March 31,
(In thousands)
	2009			2008				2009		2008			2009		2008
Interest rate swaps	$	55	$	(3,148	)	Interest expense	$	-	$	-	Interest expense	$	-	$	-

Derivatives Not Designated as Hedging Instruments Under SFAS No. 133	Location of Gain (Loss) in Income on Derivative	Amount of Gain (Loss) in Income on Derivative
		Three Months Ended March 31,
		2009			2008
		(In thousands)

Employment agreement award	Corporate selling, general and administrative expense	$	(122	)	$	-

Hedging Activities

In June 2005, pursuant to the Credit Agreement (as defined in Note 7 - Long-Term Debt), the Company entered into four fixed rate swap agreements to reduce interest rate fluctuations on certain floating rate debt commitments. Two of the four $25.0 million swap agreements expired in June 2007 and 2008, respectively. The Company accounts for the remaining swap agreements using the mark-to-market method of accounting.

The remaining swap agreements have the following terms:

Agreement	Notional Amount	Expiration	Fixed Rate
No. 1	$25.0 million	June 16, 2010		4.27	%
No. 2	$25.0 million	June 16, 2012		4.47	%

Each swap agreement has been accounted for as a qualifying cash flow hedge of the Company’s senior bank term debt, in accordance with SFAS No. 133, whereby changes in the fair market value are reflected as adjustments to the fair value of the derivative instruments as reflected on the accompanying consolidated financial statements.

The Company’s objectives in using interest rate swaps are to manage interest rate risk associated with the Company’s floating rate debt commitments and to add stability to future cash flows. To accomplish this objective, the Company uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

The effective portion of changes in the fair value of derivatives designated and qualifying as cash flow hedges is recorded in Accumulated Other Comprehensive Loss and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During 2009, such derivatives were used to hedge the variable cash flows associated with existing floating rate debt commitments. The ineffective portion of the change in fair value of the derivatives, if any, is recognized directly in earnings. There was no hedging ineffectiveness during the three months ended March 31, 2009 and 2008.

Amounts reported in Accumulated Other Comprehensive Loss related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s floating rate debt. During the next 12 months, the Company estimates that an additional amount of approximately $1.3 million will be reclassified as an increase to interest expense.

Under the swap agreements, the Company pays the fixed rate listed in the table above. The counterparties to the agreements pay the Company a floating interest rate based on the three month LIBOR, for which measurement and settlement is performed quarterly. The counterparties to these agreements are international financial institutions. The Company estimates the net fair value of these instruments as of March 31, 2009 to be a liability of approximately $2.9 million. The fair value of the interest rate swap agreements is estimated by obtaining quotations from the financial institutions, which are parties to the Company’s swap agreements. The fair value is an estimate of the net amount that the Company would pay on March 31, 2009, if the agreements were transferred to other parties or cancelled by the Company.

Costs incurred to execute the swap agreements are deferred and amortized over the term of the swap agreements. The amounts incurred by the Company, representing the effective difference between the fixed rate under the swap agreements and the variable rate on the underlying term of the debt, are included in interest expense in the accompanying consolidated statements of operations. In the event of early termination of these swap agreements, any gains or losses would be amortized over the respective lives of the underlying debt or recognized currently if the debt is terminated earlier than initially anticipated.

Other Derivative Instruments

The Company recognizes all derivatives at fair value, whether designated in hedging relationships or not, in the balance sheet as either an asset or liability. The accounting for changes in the fair value of a derivative, including certain derivative instruments embedded in other contracts, depends on the intended use of the derivative and the resulting designation. If the derivative is designated as a fair value hedge, the changes in the fair value of the derivative and the hedged item are recognized in the statement of operations. If the derivative is designated as a cash flow hedge, changes in the fair value of the derivative are recorded in other comprehensive income and are recognized in the statement of operations when the hedged item affects net income. If a derivative does not qualify as a hedge, it is marked to fair value through the statement of operations. Any fees associated with these derivatives are amortized over their term.

As of March 31, 2009, the Company was party to an Employment Agreement executed in April 2008 with the CEO which calls for an award that has been accounted for as a derivative instrument without a hedging relationship in accordance with the guidance provided in SFAS No. 133. Pursuant to the Employment Agreement, the CEO is eligible to receive an award amount equal to 8% of any proceeds from distributions or other liquidity events in excess of the return of the Company’s aggregate investment in TV One. With the assistance of a third party valuation firm, the Company reassessed the estimated fair value of the award at March 31, 2009 to be approximately $4.2 million, and accordingly, recorded non-cash compensation expense and a liability for this amount. The Company’s obligation to pay the award will be triggered only after the Company’s recovery of the aggregate amount of its capital contribution in TV One and only upon actual receipt of distributions of cash or marketable securities or proceeds from a liquidity event with respect to the Company’s membership interest in TV One. The CEO was fully vested in the award upon execution of the Employment Agreement, and the award lapses upon expiration of the Employment Agreement in April 2011, or earlier if the CEO voluntarily leaves the Company, or is terminated for cause.

7. LONG-TERM DEBT:

Long-term debt consists of the following:

	As of
	March 31, 2009		December 31, 2008
	(In thousands)
Credit Facilities:
87/8/% Senior Subordinated Notes due July 2011	$	101,510	$	103,951
63/8% Senior Subordinated Notes due February 2013		200,000		200,000
Senior bank term debt		89,131		164,701
Senior bank revolving debt		286,500		206,500
Capital lease		57		210
Total long-term debt		677,198		675,362
Less: current portion		26,518		43,807
Long-term debt, net of current portion	$	650,680	$	631,555

Credit Facilities

In June 2005, the Company entered into a credit agreement with a syndicate of banks (the “Credit Agreement”). Simultaneous with entering into the Credit Agreement, the Company borrowed $437.5 million to retire all outstanding obligations under its previous credit agreement. The Credit Agreement was amended in April 2006 and September 2007 to modify certain financial covenants and other provisions. The Credit Agreement expires the earlier of (a) six months prior to the scheduled maturity date of the 87/8% Senior Subordinated Notes due July 1, 2011 (unless the 87/8% Senior Subordinated Notes have been repurchased or refinanced prior to such date) or (b) June 30, 2012. The total amount available under the Credit Agreement is $800.0 million, consisting of a $500.0 million revolving facility and a $300.0 million term loan facility. Borrowings under the credit facilities are subject to compliance with certain provisions including but not limited to financial covenants. The Company may use proceeds from the credit facilities for working capital, capital expenditures made in the ordinary course of business, its common stock repurchase program, permitted direct and indirect investments and other lawful corporate purposes. The Credit Agreement contains affirmative and negative covenants that the Company must comply with, including (a) maintaining an interest coverage ratio of no less than 1.90 to 1.00 from January 1, 2006 to September 13, 2007, and no less than 1.60 to 1.00 from September 14, 2007 to June 30, 2008, and no less than 1.75 to 1.00 from July 1, 2008 to December 31, 2009, and no less than 2.00 to 1.00 from January 1, 2010 to December 31, 2010, and no less than 2.25 to 1.00 from January 1, 2011 and thereafter, (b) maintaining a total leverage ratio of no greater than 7.00 to 1.00 beginning April 1, 2006 to September 13, 2007, and no greater than 7.75 to 1.00 beginning September 14, 2007 to March 31, 2008, and no greater than 7.50 to 1.00 beginning April 1, 2008 to September 30, 2008, and no greater than 7.25 to 1.00 beginning October 1, 2008 to June 30, 2010, and no greater than 6.50 to 1.00 beginning July 1, 2010 to September 30, 2011, and no greater than 6.00 to 1.00 beginning October 1, 2011 and thereafter, (c) maintaining a senior leverage ratio of no greater than 5.00 to 1.00 beginning June 13, 2005 to September 30, 2006, and no greater than 4.50 to 1.00 beginning October 1, 2006 to September 30, 2007, and no greater than 4.00 to 1.00 beginning October 1, 2007 and thereafter, (d) limitations on liens, (e) limitations on the sale of assets, (f) limitations on the payment of dividends, and (g) limitations on mergers, as well as other customary covenants. The Company was in compliance with all debt covenants as of March 31, 2009. At the date of the filing of this Form 10-Q and based on its most recent projections, the Company's management believes it will be in compliance with all debt covenants through March 31, 2010. Based on its fiscal year end 2007 excess cash flow calculation, the Company made a debt principal prepayment of approximately $6.0 million in May 2008. For the year ended December 31, 2008 no excess cash calculation was required and therefore, no payment was required. In March 2009 the Company made a prepayment of $70.0 million on the term loan facility with $70.0 million in loan proceeds from the revolving facility.

As of March 31, 2009, we had approximately $213.5 million of borrowing capacity. Taking into consideration the financial covenants under the Credit Agreement, approximately $13.0 million of that amount is available for borrowing.

Under the terms of the Credit Agreement, upon any breach or default under either the 87/8% Senior Subordinated Notes or the 63/8% Senior Subordinated Notes, the lenders could among other actions immediately terminate the Credit Agreement and declare the loans then outstanding under the Credit Agreement to be due and payable in whole immediately. Similarly, under the 87/8% Senior Subordinated Notes and the 63/8% Senior Subordinated Notes, a default under the terms of the Credit Agreement would constitute an event of default, and the trustees or the holders of at least 25% in principal amount of the then outstanding notes (under either class) may declare the principal of such class of note and interest to be due and payable immediately.

Interest payments under the terms of the Credit Agreement are due based on the type of loan selected. Interest on alternate base rate loans as defined under the terms of the Credit Agreement is payable on the last day of each March, June, September and December. Interest due on the LIBOR loans is payable on the last day of the interest period applicable for borrowings up to three months in duration, and on the last day of each March, June, September and December for borrowings greater than three months in duration. In addition, quarterly installments of principal on the term loan facility are payable on the last day of each March, June, September and December commencing on September 30, 2007 in a percentage amount of the principal balance of the term loan facility outstanding on September 30, 2007, net of loan repayments, of 1.25% between September 30, 2007 and June 30, 2008, 5.0% between September 30, 2008 and June 30, 2009, and 6.25% between September 30, 2009 and June 30, 2012. Based on the $194.0 million net principal balance of the term loan facility outstanding on September 30, 2007 and a $70.0 million prepayment in March 2009, quarterly payments of $5.6 million are payable between March 31, 2009 and June 30, 2009, and $7.0 million between September 30, 2009 and June 30, 2012.

Interest payments under the terms of the 63/8% and the 87/8% Senior Subordinated Notes are due in February and August, and January and July of each year, respectively. Based on the $200.0 million principal balance of the 63/8% Senior Subordinated Notes outstanding on March 31, 2009, interest payments of $6.4 million are payable each February and August through February 2013. The Company made this $6.4 million payment in February 2009. Based on the $101.5 million principal balance of the 87/8% Senior Subordinated Notes outstanding on March 31, 2009, interest payments of $4.5 million are payable each January and July through July 2011. The Company made a $4.6 million payment in January 2009.

As of March 31, 2009, the Company had outstanding approximately $375.6 million on its credit facility. During the quarter ended March 31, 2009, we borrowed $80.0 million from our credit facility to fund the repurchase of bonds and general corporate purposes, and repaid approximately $75.6 million.

Senior Subordinated Notes

As of March 31, 2009, the Company had outstanding $200.0 million of its 63/8% Senior Subordinated Notes due February 2013 and $101.5 million of its 87/8% Senior Subordinated Notes due July 2011. During the quarter ended March 31, 2009, the Company repurchased $2.4 million of the 87/8% Senior Subordinated Notes at an average discount of 50.0%, and recorded a gain on the retirement of debt, net of the write-off of deferred financing costs, of approximately $1.2 million.

The indentures governing the Company’s senior subordinated notes also contain covenants that restrict, among other things, the ability of the Company to incur additional debt, purchase capital stock, make capital expenditures, make investments or other restricted payments, swap or sell assets, engage in transactions with related parties, secure non-senior debt with assets, or merge, consolidate or sell all or substantially all of its assets. The Company was in compliance with all covenants as of March 31, 2009. At the date of the filing of this Form 10-Q and based on its most recent projections, the Company's management believes it will be in compliance with all covenants through March 31, 2010.

The Company conducts a portion of its business through its subsidiaries. Certain of the Company’s subsidiaries have fully and unconditionally guaranteed the Company’s 87/8% Senior Subordinated Notes, the 63/8% Senior Subordinated Notes and the Company’s obligations under the Credit Agreement.

Future minimum principal payments of long-term debt as of March 31, 2009 are as follows:

	Senior Subordinated Notes		Credit Facilities and Other
	(In thousands)

April — December 2009	$	—	$	19,554
2010		—		27,854
2011		101,510		328,280
2012		—		—
2013		200,000		—
2014 and thereafter		—		—
Total long-term debt	$	301,510	$	375,688

The Credit Agreement expires the earlier of (i) six months prior to the scheduled maturity of the 87/8% Senior Subordinated Notes due July 1, 2011, unless the 87/8% Senior Subordinated Notes have been refinanced or repurchased prior to such date, or (ii) June 30, 2012. In prior reporting, management had assumed that the Company would refinance the 87/8% Senior Subordinated Notes prior to January 1, 2011 and, therefore, the maturity date for the loans governed by Credit Agreement would be June 30, 2012. However, while management continues to believe it is probable that the Company will refinance the 87/8% Senior Subordinated Notes prior to January 1, 2011, given the deterioration in the U.S. economy and the volatility and tightening of the credit markets, management believes it is appropriate to reflect that the loans governed by the Credit Agreement will mature on January 1, 2011, six months prior to the scheduled maturity of the 87/8% Senior Subordinated Notes.

8. INCOME TAXES:

The estimated annual effective tax rate from continuing operations for the three month period ended March 31, 2009 was (21.9%), which includes an immaterial effect for discrete items. This blended rate results from combining an estimated annual effective tax rate of (11.8%) for Radio One, Inc., which has a full valuation allowance for most of its deferred tax assets (“DTAs”), separate and apart from an estimated annual effective rate of 35.2% for Reach Media, which does not have a valuation allowance.

In 2007, the Company concluded it was more likely than not that the benefit from certain of its DTAs would not be realized. The Company considered its historically profitable jurisdictions, its sources of future taxable income and tax planning strategies in determining the amount of valuation allowance recorded. As part of that assessment, the Company also determined that it was not appropriate under generally accepted accounting principles to benefit its DTAs based on deferred tax liabilities (“DTLs”) related to indefinite-lived intangibles that cannot be scheduled to reverse in the same period. Because the DTL in this case would not reverse until some future indefinite period when the intangibles are either sold or impaired, any resulting temporary differences cannot be considered a source of future taxable income to support realization of the DTAs. As a result of this assessment, and given the then three year cumulative loss position, the uncertainty of future taxable income and the feasibility of tax planning strategies, the Company recorded a valuation allowance for certain of its DTAs in 2007. For the three month period ended March 31, 2009, an additional valuation allowance for the current year anticipated increase to DTA’s from the amortization of indefinite-lived intangibles was included in the annual effective tax rate calculation.

On January 1, 2007, the Company adopted the provisions of FIN No. 48,“Accounting for Uncertainty in Income Taxes - Interpretation of SFAS No. 109,” which recognizes the impact of a tax position in the financial statements if it is more likely than not that the position would be sustained on audit based on the technical merits of the position. The nature of the uncertainties pertaining to our income tax position is primarily due to various state tax positions. As of March 31, 2009, we had approximately $5.0 million in unrecognized tax benefits. Accrued interest and penalties related to unrecognized tax benefits is recognized as a component of tax expense. During the three months ended March 31, 2009, the Company recorded a benefit for interest and penalties of $2,000, due to a $6,000 release of interest from an expiring statute. As of March 31, 2009, the Company had a liability of $115,000 for unrecognized tax benefits for interest and penalties. The Company estimates the possible change in unrecognized tax benefits prior to March 31, 2010 would be anywhere from $0 to a reduction of $220,000, due to expiring statutes.

9. STOCKHOLDERS’ EQUITY:

Common Stock

Shareholders of Class A Common Stock are entitled to one vote per share. Shareholders of Class B Common Stock are entitled to ten votes per share. Shareholders of Class C and Class D Common Stock are not entitled to vote.

Stock Repurchase Program

In March 2008, the Company’s board of directors authorized a repurchase of shares of the Company’s Class A and Class D common stock through December 31, 2009, in an amount of up to $150.0 million, the maximum amount allowable under the Credit Agreement. The amount and timing of such repurchases will be based on pricing, general economic and market conditions, and the restrictions contained in the agreements governing the Company’s credit facilities and subordinated debt and certain other factors. While $150.0 million is the maximum amount allowable under the Credit Agreement, in 2005, under a prior board authorization, the Company utilized approximately $78.0 million to repurchase common stock leaving capacity of $72.0 million under the Credit Agreement. During the period ended March 31, 2009, the Company repurchased 22,515 shares of Class A common stock at an average price of $0.57 and 14.4 million shares of Class D common stock at an average price of $0.47. There were no shares repurchased during the period ended March 31, 2008; however, for the year ended December 31, 2008 the Company repurchased 421,661 shares of Class A common stock at an average price of $1.32 and 20.0 million shares of Class D common stock at an average price of $0.58. As of March 31, 2009, the Company had approximately $53.1 million in capacity available under the 2008 stock repurchase program.

The Company continues to have an open stock repurchase authorization with respect to its Class A and D stock and continued to make purchases subsequent to March 31, 2009. (See Note 14 – Subsequent Events.)

Stock Option and Restricted Stock Grant Plan

On January 1, 2006, the Company adopted SFAS No. 123(R), “Share — Based Payment,” using the modified prospective method, which requires measurement of compensation cost for all stock-based awards at fair value on date of grant and recognition of compensation over the service period for awards expected to vest. The fair value of stock options is determined using the Black- Scholes (“BSM”) valuation model, which is consistent with our valuation methodologies previously used for options in footnote disclosures required under SFAS No. 123, “Accounting for Stock-based Compensation,” as amended by SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure.” Such fair value is recognized as an expense over the service period, net of estimated forfeitures, using the straight-line method under SFAS No. 123(R). Estimating the number of stock awards that will ultimately vest requires judgment, and to the extent actual forfeitures differ substantially from our current estimates, amounts will be recorded as a cumulative adjustment in the period the estimated number of stock awards are revised. We consider many factors when estimating expected forfeitures, including the types of awards, employee classification and historical experience. Actual forfeitures may differ substantially from our current estimate.

The Company also uses the BSM valuation model to calculate the fair value of stock-based awards. The BSM incorporates various assumptions including volatility, expected life, and interest rates. For options granted the Company uses the BSM option-pricing model and determines: (1) the term by using the simplified “plain-vanilla” method as allowed under SAB No. 110; (2) a historical volatility over a period commensurate with the expected term, with the observation of the volatility on a daily basis; and (3) a risk-free interest rate that was consistent with the expected term of the stock options and based on the U.S. Treasury yield curve in effect at the time of the grant.

The Company did not grant st