10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

þ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2007

Or

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                      to                     

Commission file number: 1-1969

ARBITRON INC.

(Exact name of registrant as specified in its charter)

Delaware	52-0278528
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

142 West 57^th Street
New York, New York 10019
(Address of principal executive offices) (Zip Code)
(212) 887-1300
(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 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 þ      Accelerated Filer o      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

     The registrant had 29,931,126 shares of common stock, par value $0.50 per share, outstanding as of April 30, 2007.

ARBITRON INC.

INDEX

			Page No.
PART I – FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Consolidated Balance Sheets – March 31, 2007 and December 31, 2006	4
		Consolidated Statements of Income – Three Months Ended March 31, 2007 and 2006	5
		Consolidated Statements of Cash Flows – Three Months Ended March 31, 2007 and 2006	6
		Notes to Consolidated Financial Statements – March 31, 2007	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
	Item 4.	Controls and Procedures	26
PART II – OTHER INFORMATION
	Item 6.	Exhibits	27
	Signature		28

2

          Arbitron owns or has the rights to various trademarks, trade names or service marks used in its radio audience measurement business and subsidiaries, including the following: the Arbitron name and logo, Arbitrends^SM, RetailDirect^®, RADAR^®, Tapscan^®, Tapscan WorldWide^®, LocalMotion^®, Maximi$er^®, Maximi$er^® Plus, Arbitron PD Advantage^®, SmartPlus^®, Arbitron Portable People Meter^TM, Marketing Resources Plus^®, MRP^SM, PrintPlus^TM, MapMAKER Direct ^SM, Media Professional^®, Media Professional Plus^SM, Qualitap^SM, MediaM aster^SM, Prospector^SM, and Schedule-It^SM.

          The trademarks Windows^®, Media Rating Council^® and Homescan^® are the registered trademarks of others.

3

PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

ARBITRON INC.
Consolidated Balance Sheets
(In thousands, except par value data)

	March 31,			December 31,
	2007			2006
	(unaudited)			(audited)
Assets
Current assets
Cash and cash equivalents	$	29,343		$	33,640
Short-term investments		39,345			27,625
Trade accounts receivable, net of allowance for doubtful accounts of $1,490 at March 31, 2007 and $1,419 at December 31, 2006		31,501			33,296
Inventory		3,139			3,793
Prepaid expenses and other current assets		7,198			4,167
Deferred tax assets		2,900			3,024
Total current assets		113,426			105,545
Investment in affiliates		9,015			13,907
Property and equipment, net of accumulated depreciation of $29,292 at March 31, 2007 and $29,120 at December 31, 2006		38,752			41,470
Goodwill, net		40,558			40,558
Other intangibles, net		1,718			2,029
Noncurrent deferred tax assets		5,936			5,913
Other noncurrent assets		807			898
Total assets	$	210,212		$	210,320
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	8,747		$	9,972
Accrued expenses and other current liabilities		23,517			33,258
Deferred revenue		58,756			66,875
Total current liabilities		91,020			110,105
Noncurrent liabilities		11,334			10,959
Total liabilities		102,354			121,064
Stockholders’ equity
Preferred stock, $100.00 par value, 750 shares authorized, no shares issued		—			—
Common stock, $0.50 par value, authorized 500,000 shares, issued 32,338 shares at March 31, 2007 and December 31, 2006		16,169			16,169
Additional paid-in capital		59,606			53,598
Accumulated earnings (net distributions to Ceridian in excess of accumulated earnings) prior to spin-off		(239,042	)		(239,042	)
Retained earnings subsequent to spin-off		279,366			266,905
Common stock held in treasury, 2,412 shares at March 31, 2007 and 2,646 shares on December 31, 2006		(1,206	)		(1,323	)
Accumulated other comprehensive loss		(7,035	)		(7,051	)
Total stockholders’ equity		107,858			89,256
Total liabilities and stockholders’ equity	$	210,212		$	210,320

See accompanying notes to consolidated financial statements.

4

ARBITRON INC.
Consolidated Statements of Income
(In thousands, except per share data)
(unaudited)

	Three Months Ended
	March 31,
	2007			2006
Revenue	$	91,777		$	85,088
Costs and expenses
Cost of revenue		32,250			24,255
Selling, general and administrative		20,357			19,456
Research and development		10,737			9,981
Total costs and expenses		63,344			53,692
Operating income		28,433			31,396
Proportionate share of net loss of affiliates		(3,756	)		(2,375	)
Income before interest and income tax expense		24,677			29,021
Interest income		581			987
Interest expense		95			943
Income before income tax expense		25,163			29,065
Income tax expense		9,668			10,879
Net income	$	15,495		$	18,186
Net income per weighted-average common share
Basic	$	0.52		$	0.59
Diluted	$	0.52		$	0.58
Dividends declared per common share	$	0.10		$	0.10
Weighted-average common shares used in calculations
Basic		29,748			31,062
Potentially dilutive securities		234			179
Diluted		29,982			31,241

See notes to consolidated financial statements.

5

ARBITRON INC.
Consolidated Statements of Cash Flows
(In thousands)
(unaudited)

	Three Months Ended
	March 31,
	2007			2006
Cash flows from operating activities
Net income	$	15,495		$	18,186
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization of property and equipment		2,365			1,623
Amortization of intangible assets		311			465
Loss on asset disposals		84			45
Asset impairment charges		—			638
Deferred income taxes		98			279
Proportionate share of net loss of affiliates		3,755			2,375
Distributions from affiliate		3,350			3,051
Bad debt expense		222			135
Non-cash share-based compensation		1,300			1,420
Changes in operating assets and liabilities
Trade accounts receivable		1,424			2,379
Prepaid expenses and other assets		(2,653	)		(1,893	)
Inventory		654			(4,389	)
Accounts payable		(333	)		1,403
Accrued expense and other current liabilities		(9,180	)		(1,251	)
Deferred revenue		(7,191	)		(5,727	)
Other noncurrent liabilities		375			323
Net cash provided by operating activities		10,076			19,062
Cash flows from investing activities
Additions to property and equipment		(4,216	)		(4,091	)
Purchases of short-term investments		(93,195	)		(222,445	)
Proceeds from sales of short-term investments		81,475			216,585
Net cash used in investing activities		(15,936	)		(9,951	)
Cash flows from financing activities
Proceeds from stock option exercises and stock purchase plan		4,039			2,700
Stock repurchases		—			(4,904	)
Tax benefits realized from share-based awards		518			462
Dividends paid to stockholders		(3,008	)		(3,099	)
Net cash provided by (used in) financing activities		1,549			(4,841	)
Effect of exchange rate changes on cash and cash equivalents		14			34
Net (decrease) increase in cash and cash equivalents		(4,297	)		4,304
Cash and cash equivalents at beginning of year		33,640			40,848
Cash and cash equivalents at end of year	$	29,343		$	45,152

See accompanying notes to consolidated financial statements.

6

ARBITRON INC.
Notes to Consolidated Financial Statements
March 31, 2007
(unaudited)

1. Basis of Presentation and Consolidation

Presentation

          The accompanying unaudited consolidated financial statements of Arbitron Inc. (the “Company” or “Arbitron”) have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for fair presentation have been included and are of a normal recurring nature. Certain amounts in the financial statements for prior periods have been reclassified to conform to the current period’s presentation. The consolidated balance sheet as of December 31, 2006 was audited at that date, but all of the information and footnotes as of December 31, 2006 required by U.S. generally accepted accounting principles have not been included in this Form 10-Q. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006.

Consolidation

          The consolidated financial statements of Arbitron reflect the consolidated financial position, results of operations and cash flows of Arbitron Inc. and its subsidiaries: Arbitron Holdings Inc., Audience Research Bureau S.A. de C.V., Ceridian Infotech (India) Private Limited, CSW Research Limited, Euro Fieldwork Limited, and Arbitron International, LLC. All significant intercompany balances have been eliminated in consolidation.

2. New Accounting Pronouncements

          In July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation (“FIN”) 48, Accounting for Uncertainty in Income Taxes (“FIN 48”), an interpretation of FASB Statement No. 109, Accounting for Income Taxes. FIN 48 clarifies the accounting for uncertainty in income taxes by prescribing the recognition threshold a tax position is required to meet before being recognized in the financial statements. The Company adopted FIN 48, effective January 1, 2007. The impact of applying FIN 48 to the Company’s consolidated financial statements was immaterial. For further disclosure, see Note 12-Taxes.

          Effective December 31, 2006, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans (“SFAS No. 158”). Arbitron currently measures planned assets and benefit obligations as of September 30 each year. In accordance with the provisions of SFAS No. 158, the measurement date will be required to be as of the date of the Company’s fiscal year-end statement of financial position effective for fiscal years ending after December 15, 2008.

7

          In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”), which defines fair value, establishes guidelines for measuring fair value and expands disclosures regarding fair value measurements. SFAS No. 157 does not require any new fair value measurements but rather eliminates inconsistencies in guidance found in various prior accounting pronouncements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. The management of the Company is evaluating the impact of SFAS No. 157, but does not currently expect the adoption of SFAS No. 157, effective January 1, 2008, to have a material impact on the Company’s consolidated financial statements.

          In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS No. 159”), which permits companies to choose to measure many financial instruments and certain 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. The management of the Company is evaluating the potential impact of SFAS No. 159 on the consolidated financial statements.

3. Long-term Debt

          On October 18, 2006, the Company prepaid its outstanding senior-secured notes obligation using $50.0 million of its available cash and short-term investments. Under the original terms of the note agreement, the notes carried a fixed interest rate of 9.96% and a maturity date of January 31, 2008.

          On December 20, 2006, the Company entered into an agreement with a consortium of lenders to provide up to $150.0 million of financing to the Company through a five-year, unsecured revolving credit facility (the “2006 Credit Facility”). The agreement contains an expansion feature for the Company to increase the financing available under the 2006 Credit Facility up to $200.0 million. As of March 31, 2007, no borrowings had been made under the 2006 Credit Facility. As of March 31, 2007, and December 31, 2006, the Company was in compliance with the terms of its 2006 Credit Facility.

          Although the Company had no borrowings under the 2006 Credit Facility as of March 31, 2007, if a default occurs on future borrowings, either because Arbitron is unable to generate sufficient cash flow to service the debt or because Arbitron fails to comply with one or more of the restrictive covenants, the lenders could elect to declare all of the then outstanding borrowings, as well as accrued interest and fees, to be immediately due and payable. In addition, a default may result in the application of higher rates of interest on the amounts due.

          Interest paid during each of the three month periods ended March 31, 2007, and 2006 was approximately $0.1 million and $1.2 million, respectively. Non-cash amortization of deferred financing costs classified as interest expense during the three month periods ended March 31, 2007 and 2006 was less than $0.1 million and $0.1 million, respectively.

8

4. Stockholders’ Equity

          Changes in stockholders’ equity for the three months ended March 31, 2007, were as follows (in thousands):

										Net Distributions
										to Ceridian			Retained						Total
								Additional		in Excess of			Earnings			Accumulated			Stock-
	Shares		Common		Treasury			Paid-In		Accumulated			Subsequent			Other Compre-			holders
	Outstanding		Stock		Stock			Capital		Earnings			to Spin-off			hensive Loss			Equity
Balance as of December 31, 2006		29,692	$	16,169	$	(1,323	)	$	53,598	$	(239,042	)	$	266,905		$	(7,051	)	$	89,256
Net income		—		—		—			—		—			15,495			—			15,495
Common stock issued		234		—		117			4,190		—			—			—			4,307
Stock repurchased		—		—		—			—		—			—			—			—
Excess tax benefit from stock option exercises		—		—		—			518		—			—			—			518
Non-cash compensation		—		—		—			1,300		—			—			—			1,300
Dividends declared		—		—		—			—		—			(3,034	)		—			(3,034	)
Other comprehensive income		—		—		—			—		—			—			16			16
Balance as of March 31, 2007		29,926	$	16,169	$	(1,206	)	$	59,606	$	(239,042	)	$	279,366		$	(7,035	)	$	107,858

     A quarterly cash dividend of $0.10 per common share was paid to stockholders on April 2, 2007.

5. Short-term Investments

          Short-term investments as of March 31, 2007, and December 31, 2006, consisted of $39.3 million and $27.6 million, respectively, in municipal and other government-issued variable-rate demand notes and auction-rate securities recorded by the Company at fair value. All of the Company’s short-term investment assets are classified as available-for-sale securities in accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities.

          For the three months ended March 31, 2007 and 2006, gross purchases of available-for-sale securities were $93.2 million and $222.4 million, respectively, and gross proceeds from sales of available-for-sale securities were $81.5 million and $216.6 million for the three months ended March 31, 2007 and 2006, respectively.

9

6. Inventories

          Inventories as of March 31, 2007, and December 31, 2006, consisted of $3.1 million and $3.8 million, respectively, of Portable People Meter^TM equipment held for resale to international licensees of the PPM^TM service. The inventory is accounted for on a first-in, first-out (FIFO) basis.

7. Net Income Per Weighted-Average Common Share

          The computations of basic and diluted net income per weighted-average common share for the three months ended March 31, 2007 and 2006 are based on Arbitron’s weighted-average shares of common stock and potentially dilutive securities outstanding.

          Potentially dilutive securities are calculated in accordance with the treasury stock method, which assumes that the proceeds from the exercise of all stock options are used to repurchase the Company’s common stock at the average market price for the period. As of March 31, 2007 and 2006, there were options to purchase 1,990,745 and 2,442,732 shares of the Company’s common stock outstanding, of which options to purchase 13,319 and 1,137,665 shares of the Company’s common stock, respectively, were excluded from the computation of diluted net income per weighted-average common share, either because the options’ exercise prices were greater than the average market price of the Company’s common shares or assumed repurchases from proceeds from the options’ exercise were potentially antidilutive. The Company elected to use the short-cut method of determining its initial hypothetical tax benefit windfall pool and, in accordance with provisions under SFAS No. 123R, Share Based Payments, (“SFAS No. 123R”) the assumed proceeds associated with the entire amount of tax benefits for share-based awards granted prior to SFAS No. 123R adoption were used in the diluted shares computation. For share-based awards granted subsequent to the January 1, 2006 SFAS No. 123R adoption date, the assumed proceeds for the related excess tax benefits were used in the diluted shares computation.

          On November 16, 2006, Arbitron announced that its Board of Directors authorized a program to repurchase up to $100.0 million of its outstanding common stock through either periodic open-market or private transactions at then-prevailing market prices over a period of two years through December 31, 2008. As of March 31, 2007, no shares were repurchased under this program.

8. Contingencies

          The Company is involved, from time to time, in litigation and proceedings arising in the ordinary course of business. Legal costs for services rendered in the course of these proceedings are charged to expense as they are incurred.

          During 2005, the Pennsylvania Department of Revenue concluded a sales tax audit of the Company and notified the Company of an assessment of $3.6 million, including outstanding sales tax and accumulated interest since 2001. Since 2005, the assessment has increased due to additional interest to $3.9 million as of March 31, 2007.

          Currently, the Company is in the appeals process with the Commonwealth of Pennsylvania, and continues to contest the assessment in its entirety. Consistent with the findings of a previous Pennsylvania sales tax audit of the Company, the Company contends that it continues to provide nontaxable services to its Pennsylvania customers and intends to vigorously defend this position during the appeals process. Although the Company anticipates a successful outcome, it cannot guarantee that a favorable resolution of this matter will occur. Given the nature of this uncertainty, no loss has been recognized as of March 31, 2007.

10

9. Comprehensive Income and Accumulated Other Comprehensive Loss

          The Company’s comprehensive income is comprised of net income, foreign currency translation adjustments, and defined benefit plan liabilities, net of tax (expense) benefits. The components of comprehensive income were as follows (in thousands):

	Three Months Ended
	March 31,
	2007		2006
Net income	$	15,495	$	18,186
Other comprehensive income:
Foreign currency translation adjustment, net of tax expense of $8 and $13 for 2007 and 2006, respectively		12		22
Defined benefit plan liabilities, net of tax benefit of $4 for 2007		4		—
Other comprehensive income		16		22
Comprehensive income	$	15,511	$	18,208

          The components of accumulated other comprehensive loss were as follows (in thousands):

	March 31,			December 31,
	2007			2006
Foreign currency translation adjustment	$	352		$	340
Defined benefit plan liabilities		(7,387	)		(7,391	)
Accumulated other comprehensive loss	$	(7,035	)	$	(7,051	)

10. Investment in Affiliates

          Investment in affiliates consists of the Company’s 49.5% interest in Scarborough, a syndicated, qualitative local market research partnership, and the Company’s 50.0% interest in Project Apollo LLC (the “LLC”), a national marketing panel service pilot. On February 1, 2007, the Company announced the formation of the jointly owned LLC. The LLC’s objective is to test a proposed service that would provide multimedia exposure data combined with sales data from a single source to produce a measure of advertising effectiveness.

11

11. Retirement Plans

          Certain of Arbitron’s United States employees participate in a defined-benefit pension plan that closed to new participants effective January 1, 1995. Arbitron subsidizes health care benefits for eligible retired employees who participate in the pension plan and were hired before January 1, 1992.

          In September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, (“SFAS No. 158”) which required the Company to recognize the underfunded status of its defined-benefit plans as a liability in the balance sheet as of December 31, 2006, and to recognize any changes in that funded status through comprehensive income. Arbitron currently measures plan assets and benefit obligations as of September 30 each year. Effective for fiscal years ending after December 15, 2008, the measurement date, in accordance with the provisions of SFAS No. 158, will be required to be as of the date of the Company’s fiscal year-end statement of financial position.

          The components of periodic benefit costs for the defined-benefit pension plan and postretirement plan were as follows (in thousands):

	Defined-Benefit						Postretirement				Supplemental
	Pension Plan						Plan				Retirement Plans
	Three Months						Three Months				Three Months
	Ended March 31,						Ended March 31,				Ended March 31,
	2007			2006			2007		2006		2007			2006
Service cost	$	217		$	241		$	9	$	9	$	33		$	36
Interest cost		445			413			21		16		53			41
Expected return on plan assets		(551	)		(494	)		—		—		—			—
Amortization of prior service cost		6			6			—		—		(6	)		(6	)
Amortization of net loss		165			180			12		5		48			34
Net periodic benefit cost	$	282		$	346		$	42	$	30	$	128		$	105

          Arbitron estimates that it will contribute $2.4 million in 2007 to these defined-benefit plans.

12. Taxes

          On January 1, 2007, Arbitron adopted the provisions of Financial Accounting Standards Board Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes. In applying FIN 48, the Company assessed all material positions taken on income tax returns for years through December 31, 2006, that are still subject to examination by relevant taxing authorities. As of the date of adoption, the Company’s unrecognized tax benefits totaled $0.7 million. If recognized, the $0.7 million would reduce the Company’s effective tax rate in future periods.

          The Company files numerous income tax returns, primarily in the United States, including federal, state, and local obligations, as well as certain foreign jurisdictions. Tax years ended December 31, 2003 through December 31, 2006 remain open for assessment by the Internal Revenue Service. Generally, the Company is not subject to state, local, or foreign examination for years prior to 2002. However, tax years 1989 through 2001 remain open for assessment for certain state taxing jurisdictions where net operating loss (“NOL”) carryforwards were utilized on the income tax returns since 2002.

          The Company accrues potential interest and penalties and recognizes income tax expense where, under relevant tax law, interest and penalties would be assessed if the uncertain tax position ultimately were not sustained.

12

          Management determined it is reasonably possible that certain unrecognized tax benefits as of the date of adoption will decrease during the subsequent 12 months due to the expiration of statute limitations and due to the settlement of certain state audit examinations. The estimated decrease in these unrecognized federal tax benefits and the estimated decrease in unrecognized tax benefits from various states were both immaterial.

13. Share-Based Compensation

          The following table sets forth information with regard to the income statement recognition of share-based compensation:

	For The Three		For The Three
	Months Ended		Months Ended
	March 31, 2007		March 31, 2006
Cost of revenue	$	134	$	131
Selling, general and administrative		1,089		1,191
Research and development		77		98
Share-based compensation	$	1,300	$	1,420

          There was no capitalized share-based compensation cost incurred during the three months ended March 31, 2007 and 2006.

          In some cases, the vesting of share-based awards is accelerated due to an employee’s retirement. Prior to the adoption of SFAS No. 123R, Share-Based Payments (“SFAS No. 123R”), the amount disclosed for the Company’s pro forma compensation expense did not include an acceleration of expense recognition for retirement eligible employees. For share-based arrangements granted subsequent to the adoption of SFAS No. 123R, the Company accelerates expense recognition if retirement eligibility affects the vesting of the award. If the accelerated pro forma expense recognition had occurred prior to January 1, 2006, the share-based compensation expense for the three months ended March 31, 2007 and 2006, would have been lower by $0.2 million and $0.4 million, respectively.

Stock Options

          Stock options awarded to employees under the 1999 and 2001 Stock Incentive Plans (each individual plan referred to herein as “SIP,” and collectively as the “SIPs”) generally vest annually over a three-year period, have five-year or 10-year terms and have an exercise price not less than the fair market value of the underlying stock at the date of grant. Stock options granted to directors under the 1999 SIP generally vest upon the date of grant, are generally exercisable in six months after the date of grant, have 10-year terms and have an exercise price not less than the fair market value of the underlying stock at the date of grant. Certain option and share awards provide for accelerated vesting if there is a change in control of the Company (as defined in the SIPs).

          The Company uses historical data to estimate option exercise and employee termination in order to determine the expected term of the option; identified groups of optionholders that have similar historical exercise behavior are considered separately for valuation purposes. The expected term of options granted represents the period of time that such options are expected to be outstanding. The expected term can vary for certain groups of optionholders exhibiting different behavior. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury strip bond yield curve in effect at the time of grant. Expected volatilities are based on the historical volatility of the Company’s common stock.

13

     The fair value of each option granted during the three months ended March 31, 2007, was estimated on the date of grant using a Black-Scholes option valuation model. Those assumptions along with other data regarding the Company’s stock options for the three months ended March 31, 2007, and 2006, are noted in the following table:

	For The Three	For The Three
	Months Ended	Months Ended
	March 31, 2007	March 31, 2006
Assumptions:
Expected volatility	26.40 - 26.52%	27.32%
Expected dividends	1.00%	1.00%
Expected term (in years)	5.75 - 6.25	6.00
Risk-free rate	4.56 - 4.67%	4.37 - 4.85%
Weighted-average volatility	26.51%	27.32%
Weighted-average term (in years)	5.77	6.00
Weighted-average risk-free rate	4.66%	4.37%
Weighted-average grant date fair value	$14.33	$12.36
Other data:
Options granted	7,319	140,591
Weighted average exercise price for options granted	$45.90	$38.86

          As of March 31, 2007, there was $3.0 million of total unrecognized compensation cost related to options granted under the SIPs. This aggregate unrecognized cost is expected to be recognized over a weighted-average period of 2.0 years. The weighted average exercise price and weighted average remaining contractual term for outstanding stock options as of March 31, 2007,was $36.98 and 6.2 years, respectively. The total intrinsic value of options exercised during the three months ended March 31, 2007, and 2006, was $1.5 million and $1.2 million, respectively.

Nonvested Share Awards

          The Company’s nonvested share awards generally vest over four or five years on either a monthly or annual basis. Compensation expense is recognized on a straight-line basis using the market price on the date of grant as the awards vest. For the three months ended March 31, 2007, and 2006, the number of nonvested share awards granted was 102,300 and 79,482 shares, respectively, and the weighted average grant date fair value was $46.12 and $38.88, respectively. The total fair value of share awards vested during the three months ended March 31, 2007, and 2006, was $0.5 million and less than $0.1 million, respectively. As of March 31, 2007, there was $7.2 million of total unrecognized compensation cost related to nonvested share awards granted under the SIPs. This aggregate unrecognized cost for nonvested share awards is expected to be recognized over a weighted-average period of 3.3 years.

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Deferred Stock Units

          Deferred stock units granted to employees vest annually over a three-year period and are convertible to shares of common stock, subsequent to their termination of employment. Deferred stock units granted to nonemployee directors vest immediately upon grant and are convertible to shares of common stock subsequent to their termination of service as a director. For the three months ended March 31, 2007, the number of deferred stock units granted to employee and nonemployee directors was 21,667 and 1,263 shares, respectively. The total fair value of deferred stock units that vested during the three months ended March 31, 2007, and 2006, was $0.1 million. As of March 31, 2007, the total unrecognized compensation cost related to deferred stock units granted under the SIPs was $1.6 million. The aggregate unrecognized costs as of March 31, 2007, is expected to be recognized over a weighted-average period of 1.7 years.

Employee Stock Purchase Plan

          The Company’s compensatory Employee Stock Purchase Plan (“ESPP”) provides for the issuance of up to 600,000 shares of newly issued or treasury common stock of Arbitron. The purchase price of the stock to ESPP participants is 85% of the lesser of the fair market value on either the first day or the last day of the applicable three-month offering period. The total amount of compensation expense recognized for ESPP share-based arrangements was $0.1 million for each of the three month periods ended March 31, 2007, and 2006. The number of ESPP shares issued during the three months ended March 31, 2007, and 2006, was 8,282 and 9,478 shares, respectively.

14. Concentration of Credit Risk

          Arbitron’s quantitative radio audience measurement service and related software sales, which are primarily provided to radio broadcasters, accounted for approximately 94% and 95% of the Company’s revenue for the three months ended March 31, 2007, and 2006, respectively. Arbitron had one customer that individually represented 19% of its revenue for the year ended December 31, 2006. Arbitron routinely assesses the financial strength of its customers and has experienced only nominal losses on its trade accounts receivable.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

          The following discussion should be read in conjunction with Arbitron’s consolidated financial statements and the notes thereto in this Form 10-Q.

Forward-Looking Statements

          This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The statements regarding Arbitron Inc. and its subsidiaries (“we,” “our,” “Arbitron” or the “Company”) in this document that are not historical in nature, particularly those that utilize terminology such as “may,” “will,” “should,” “likely,” “expects,” “anticipates,” “estimates,” “believes,” or “plans” or comparable terminology, are forward-looking statements based on current expectations about future events, which Arbitron has derived from information currently available to it. These forward-looking statements involve known and unknown risks and uncertainties that may cause our results to be materially different from results implied in such forward-looking statements. These risks and uncertainties include, in no particular order, whether we will be able to:

• renew contracts with large customers as they expire;

• successfully execute our business strategies, including implementing our Portable People Meter^TM service and entering into potential joint-venture or other third-party agreements;

• effectively manage the impact of any further consolidation in the radio and advertising agency industries;

• respond to rapidly changing technological needs of our customer base, including creating new proprietary software systems and new customer products and services that meet these needs in a timely manner;

• successfully manage the impact on our business of any economic downturn generally and in the advertising market in particular;

• successfully manage the impact on costs of data collection due to lower respondent cooperation in surveys, privacy concerns, consumer trends, technology changes and/or government regulations;

• successfully develop and implement technology solutions to measure multi-media and advertising in an increasingly competitive environment; and

• successfully obtain and/or maintain Media Rating Council accreditation for our audience measurement services.

          Additional important factors known to Arbitron that could cause actual results to differ materially from our forward-looking statements are identified and discussed from time to time in Arbitron’s filings with the Securities and Exchange Commission, including in particular the risk factors discussed under the caption “ITEM 1A. RISK FACTORS” in Arbitron’s Annual Report on Form 10-K for the year ended December 31, 2006.

          The forward-looking statements contained in this document speak only as of the date hereof, and Arbitron undertakes no obligation to correct or update any forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

          Arbitron is an international media and marketing information services firm primarily serving radio, cable television, advertising agencies, advertisers, out-of-home media, online media and, through its Scarborough Research joint venture with The Nielsen Company, broadcast television and print media.

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          Arbitron currently provides four main services:

• measuring radio audiences in local markets in the United States;

• measuring national radio audiences and the audience size and composition of network radio programs and commercials;

• providing application software used for accessing and analyzing media audience and marketing information data; and

• providing consumer, shopping and media usage information services to radio, cable television, advertising agencies, advertisers, retailers, out-of-home media, online industries and, through its Scarborough joint venture, broadcast television and print media.

Known Trends That Management Considers Material

          Significant Concentrations. Historically, the Company’s quantitative radio measurement services and related software have accounted for a substantial majority of its total revenues. Consolidation in the radio broadcasting industry has led to a concentration of ownership of radio stations and, consequently, Arbitron’s dependence on a limited number of key customers for such services and related software has increased. For the year ended December 31, 2006, Clear Channel Communications, Inc. (“Clear Channel”) and CBS Radio represented approximately 19 percent and nine percent, respectively, of Arbitron’s total revenue. The Company’s agreements with these customers are not exclusive and do not contain automatic renewal obligations. Arbitron currently has license agreements with Clear Channel to provide radio ratings and software services for Clear Channel’s radio stations and networks through Arbitron’s Fall 2008 survey. In May 2006, Arbitron announced that it had entered into a license agreement with CBS Radio to provide diary-based services and PPM radio ratings to all of its stations, as the new ratings technology is deployed, through Arbitron’s Winter 2014 survey. On February 9, 2007, The Media Audit/Ipsos announced that they will receive funding from a number of broadcasters, including Clear Channel, to test their competing electronic ratings system in the Houston market. In March 2007, Arbitron announced that Clear Channel had signed a multi-year agreement for the PPM radio ratings service in Philadelphia.

          Arbitron’s quantitative radio audience measurement business and related software sales accounted for approximately 94% of its revenue for the three months ended March 31, 2007. The Company expects that for the year ended December 31, 2007, Arbitron’s quantitative radio audience measurement business and related software sales will account for approximately 85% of its revenue, which is consistent with historic annual trends. Quarterly fluctuations in this percentage are reflective of the seasonal delivery schedule of the Company’s radio audience measurement business.

          Electronic Measurement Initiatives. Arbitron has begun execution of its plan to progressively roll out its PPM ratings service to the top 50 radio markets by 2010. Measurement by PPM technology began in pilot mode in Houston in June 2005. In January 2007 the Houston methodology was accredited by the MRC and is on track to replace the diary-based service in July of this year.

          In parallel a PPM panel was installed in Philadelphia beginning in August 2006. The Philadelphia radio measurement data have been audited by the MRC and, on the basis of the successful completion of this audit, the PPM service in Philadelphia has replaced the diary service effective April 27, 2007. The Philadelphia PPM data are not yet accredited — the process of obtaining accreditation continues. Commercialization of the remaining top 50 radio markets by 2010 is currently on schedule with Arbitron’s previously announced rollout plan.

          Arbitron also is actively exploring opportunities to leverage its PPM technologies for strategic applications in addition to its quantitative radio ratings services. In this regard, in February 2007, Arbitron formed Project Apollo LLC (“Project Apollo”), a jointly owned limited liability company with Nielsen Media Research, Inc. to explore the feasibility of the commercialization of a national marketing panel service.

          Currently, approximately 21,000 panelists have been installed worldwide for PPM-supported services, including the national marketing panel service and the PPM rating service.

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          Commercialization of the PPM radio ratings service and exploration of other strategic applications of the PPM technology, including the national marketing panel service, will require a substantial financial investment. Arbitron believes that during the PPM rollout period its costs and expenses will increase and substantial capital expenditures will be required. In addition, the management of Arbitron expects that, if the decision to commercialize the national market panel service is made, Arbitron’s expenses will increase as a result of continued deployment costs associated with the national marketing panel service and the strategic development of its electronic ratings business.

          Arbitron believes that, while commercialization of the PPM ratings service and other strategic applications of the PPM technology will have a near-term negative impact on its results of operations, which impact likely would be material, its operating margins can be restored through the completion of the PPM transition process in the top 50 radio markets, although there can be no assurance that this will be the case.

          Arbitron announced in April 2007, that broadcasters in Iceland have selected the PPM system, through a competitive request for proposals for electronic audience measurement, as the audience measurement currency system for both radio and television, making Iceland the first country to use the PPM system’s multimedia measurement capabilities. The six-year contract was awarded to the Reykjavik-based research and consulting firm Capacent, supported by TNS Norway.

Response Rates and Sample Proportionality

          Arbitron must achieve response rates sufficient to maintain confidence in its ratings, the support of the industry and accreditation by the MRC. Overall response rates have declined over the past several years, and it has become increasingly difficult and more costly for the Company to obtain consent from persons to participate in its surveys. Another measure often used by clients to assess quality in Arbitron’s surveys is proportionality, which refers to how well the distribution of the sample for any individual survey matches the distribution of the population in the market. In recent years, Arbitron’s ability to deliver survey samples of young adults that match the percentage of this demographic group in the total population has deteriorated, caused in part by the trend among some households to disconnect their landline phones, effectively removing these households from the Arbitron sample frame. As consumers adopt modes of telecommunication other than telephone landlines, such as mobile phones and cable or Internet calling, it is becoming increasingly difficult for Arbitron to reach and recruit participants. Recruiting mobile phone-only households will lead to increased costs. Arbitron has committed extensive efforts and resources to address the decline of response rates and to maintain sample proportionality, including a comprehensive set of initiatives to bolster response rates and improve sample proportionality among African-American, Hispanic, and young male respondents in Arbitron’s diary-based markets. These initiatives include providing for substantial increases in cash incentives and other survey treatments. The most significant response rate initiatives in 2007 include the completion of the rollout of the 2006 response rate and proportionality action plan and the opening of a third Arbitron owned and operated participant interviewing center during the first quarter of 2007. Arbitron’s experience is that the internal interviewing centers outperform the outsourced calling center vendors that they replace. Management believes that significant additional expenditures will be required in the future with respect to response rates and sample proportionality.

Mexico

          In February 2007, Arbitron announced that it would discontinue its service in Mexico after the delivery of the Fall 2006 survey in February 2007. Arbitron’s syndicated radio audience measurement service provided audience estimates covering a wide variety of demographics and dayparts for the three largest radio markets in Mexico: Mexico City, Guadalajara and Monterrey. This service also provided qualitative information concerning consumer and media usage in Mexico. The impact of discontinuing this service on the Company’s consolidated revenue and operating results will not be material.

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New Accounting Pronouncements

          In July 2006, the FASB issued FASB Interpretation (“FIN”) 48, Accounting for Uncertainty in Income Taxes (“FIN 48”), an interpretation of FASB Statement No. 109, Accounting for Income Taxes. FIN 48 clarifies the accounting for uncertainty in income taxes by prescribing the recognition threshold a tax position is required to meet before being recognized in the financial statements. The Company adopted FIN 48, effective January 1, 2007. The impact of applying FIN 48 to the Company’s consolidated financial statements was immaterial.

          Effective December 31, 2006, the Company adopted SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans (“SFAS No. 158”). Arbitron currently measures plan assets and benefit obligations as of September 30 each year. In accordance with the provisions of SFAS No. 158, the measurement date will be required to be as of the date of the Company’s fiscal year-end statement of financial position effective for fiscal years ending after December 15, 2008.

          In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”), which defines fair value, establishes guidelines for measuring fair value and expands disclosures regarding fair value measurements. SFAS No. 157 does not require any new fair value measurements but rather eliminates inconsistencies in guidance found in various prior accounting pronouncements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. The management of the Company is evaluating the impact of SFAS No. 157, but does not currently expect the adoption of SFAS No. 157, effective January 1, 2008, to have a material impact on the Company’s consolidated financial statements.

          In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS No. 159”), which permits companies to choose to measure many financial instruments and certain 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. The management of the Company is evaluating the potential impact of SFAS No. 159 on the consolidated financial statements.

Critical Accounting Policies and Estimates

          Critical accounting policies and estimates are those that are both important to the presentation of Arbitron’s financial position and results of operations, and require management’s most difficult, complex or subjective judgments.

          Arbitron capitalizes software development costs with respect to significant internal-use software initiatives or enhancements in accordance with Statement of Position 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. The costs are capitalized from the time that the preliminary project stage is completed and management considers it probable that the software will be used to perform the function intended, until the time the software is placed in service for its intended use. Once the software is placed in service, the capitalized costs are amortized over periods of three to five years. Management performs an assessment quarterly to determine if it is probable that all capitalized software will be used to perform its intended function. If an impairment exists, the software cost is written down to estimated fair value. As of March 31, 2007, and December 31, 2006, Arbitron’s capitalized software developed for internal use had carrying amounts of $19.7 million and $19.3 million, respectively, including $9.3 million and $9.0 million, respectively, of software related to the PPM system.

          Arbitron uses the asset and liability method of accounting for income taxes. Under this method, income tax expense is recognized for the amount of taxes payable or refundable for the current year and for deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity’s financial statements or tax returns. Management must make assumptions, judgments and estimates to determine the current provision for income taxes and also deferred tax assets and liabilities and any valuation allowance to be recorded against a deferred tax asset. Assumptions, judgments, and estimates relative to the current provision for income taxes take into account current tax laws, interpretations of current tax laws and possible outcomes of current and future audits conducted by domestic and foreign tax authorities.

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Changes in tax law or interpretation of tax laws and the resolution of current and future tax audits could significantly impact the amounts provided for income taxes in the consolidated financial statements. Assumptions, judgments and estimates relative to the value of a deferred tax asset take into account forecasts of the amount and nature of future taxable income. Actual operating results and the underlying amount and nature of income in future years could render current assumptions, judgments and estimates of recoverable net deferred taxes inaccurate. Any of the assumptions, judgments and estimates mentioned above could cause actual income tax obligations to differ from estimates, thus impacting Arbitron’s financial position and results of operations.

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Results of Operations

Comparison of the Three Months Ended March 31, 2007 to the Three Months Ended March 31, 2006

          The following table sets forth information with respect to the consolidated statements of income of Arbitron:

Consolidated Statements of Income
(Dollars in thousands, except per share amounts)
(unaudited)

	Three Months Ended						Increase						Percentage of
	March 31,						(Decrease)						Revenue
	2007			2006			Dollars			Percent			2007			2006
Revenue	$	91,777		$	85,088		$	6,689			7.9	%		100.0	%		100.0	%
Costs and expenses
Cost of revenue		32,250			24,255			7,995			33.0	%		35.1	%		28.5	%
Selling, general and administrative		20,357			19,456			901			4.6	%		22.2	%		22.9	%
Research and development		10,737			9,981			756			7.6	%		11.7	%		11.7	%
Total costs and expenses		63,344			53,692			9,652			18.0	%		69.0	%		63.1	%
Operating income		28,433			31,396			(2,963	)		(9.4	%)		31.0	%		36.9	%
Proportionate share of net loss of affiliates		(3,756	)		(2,375	)		(1,381	)		58.1	%		(4.1	%)		(2.8	%)
Income before interest and income tax expense		24,677			29,021			(4,344	)		(15.0	%)		26.9	%		34.1	%
Interest income		581			987			(406	)		(41.1	%)		0.6	%		1.2	%
Interest expense		95			943			(848	)		(89.9	%)		0.1	%		1.1	%
Income before income tax expense		25,163			29,065			(3,902	)		(13.4	%)		27.4	%		34.2	%
Income tax expense		9,668			10,879			(1,211	)		(11.1	%)		10.5	%		12.8	%
Net income	$	15,495		$	18,186		$	(2,691	)		(14.8	%)		16.9	%		21.4	%
Net income per weighted-average common share
Basic	$	0.52		$	0.59		$	(0.07	)		(11.9	%)
Diluted	$	0.52		$	0.58		$	(0.06	)		(10.3	%)
Cash dividends declared per common share	$	0.10		$	0.10		$	—
Other data:
EBIT (1)	$	24,677		$	29,021		$	(4,344	)		(15.0	%)
EBITDA (1)	$	27,353		$	31,109		$	(3,756	)		(12.1	%)
EBIT and EBITDA Reconciliation (1)
Net income	$	15,495		$	18,186		$	(2,691	)
Income tax expense		9,668			10,879			(1,211	)
Interest income		(581	)		(987	)		(406	)
Interest expense		95			943			(848	)
EBIT (1)		24,677			29,021			(4,344	)
Depreciation and amortization		2,676			2,088			588
EBITDA (1)	$	27,353		$	31,109		$	(3,756	)

(1) EBIT (earnings before interest and income taxes) and EBITDA (earnings before interest, income taxes, depreciation and amortization) are non-GAAP financial measures that the management of Arbitron believes are useful to investors in evaluating Arbitron’s results. For further discussion of these non-GAAP financial measures, see paragraph below entitled “EBIT and EBITDA” of this quarterly report.

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          Revenue. Revenue increased 7.9% to $91.8 million for the three months ended March 31, 2007, from $85.1 million for the same period in 2006, due primarily to $5.2 million of increases related to the ratings subscriber base, contract renewals, and price escalations in multiyear customer contracts for Arbitron’s quantitative data license revenue, a $0.7 million increase in PPM International revenues, and a $0.7 million increase associated with Continental Research.

          Cost of Revenue. Cost of revenue increased by 33.0% to $32.3 million for the three months ended March 31, 2007, from $24.3 million for the same period in 2006, and as a percentage of revenue to 35.1% in 2007 from 28.5% in 2006. The increase in cost of revenue was primarily attributable to an $8.1 million increase in Arbitron’s quantitative, qualitative and software application services, which was comprised substantially of a $1.6 million increase in PPM costs largely associated with the management and recruitment of the PPM panels for the Philadelphia and New York rollout markets, a $1.7 million increase in expenses associated with PPM rating costs that were classified as research and development in 2006 and as cost of revenue in 2007, a $1.9 million increase in diary data collection and processing costs, a $1.0 million increase associated with response rate initiatives, and a $0.8 million increase due to operating costs associated with the opening of a third participant interviewing center during the first quarter of 2007. Cost of revenue also increased by $1.0 million due to Continental Research costs increases. These increases in aggregate were partially offset by a $1.1 million decrease in Project Apollo costs, which, due to the formation of Project Apollo in February 2007, are now being expensed directly by the affiliate. Arbitron records its share of the net operating results of the affiliate through the proportionate share of net loss in affiliates line of the Company’s consolidated income statement. The management of Arbitron expects that Arbitron’s cost of revenue will continue to increase in the future as a result of its efforts to commercialize the PPM ratings service and support the rollout of this service over the next two to three years.

          Selling, General and Administrative. Selling, general and administrative expenses increased 4.6% to $20.4 million for the three months ended March 31, 2007, from $19.5 million for the same period in 2006, and decreased as a percentage of revenue to 22.2% in 2007 from 22.9% in 2006. The $0.9 million increase in selling, general and administrative expenses was due primarily to a $0.7 million increase in consulting fees and a $0.6 million increase in expenses associated with the update of our legacy customer reporting systems, partially offset by $0.6 million in internally developed software impairment charges expensed during 2006 related to Nielsen Media Research Inc.’s election not to join Arbitron in the commercial deployment of the PPM system.

          Research and Development. Research and development expenses increased 7.6% to $10.7 million during the three months ended March 31, 2007, from $10.0 million for the same period in 2006, and remained flat as a percentage of revenue at 11.7% in 2007 and 2006. Increased research and development expenses of $0.8 million resulted primarily from a $1.2 million increase in expenses associated with Arbitron’s continued development of the next generation of its client software, and a $1.8 million increase related to applications and infrastructure to support the PPM service, substantially offset by a $1.7 million decrease in expenses associated with PPM ratings costs that were classified as research and development in 2006 and as cost of revenue in 2007, and a $0.5 million decrease in expenses in support of the Company’s diary rating service.

          Operating Income. Operating income decreased 9.4% to $28.4 million for the three months ended March 31, 2007, from $31.4 million for the same period in 2006. Operating margin percentage decreased to 31.0% in 2007 from 36.9% in 2006. Operating margins for the three months ended March 31, 2007, were negatively impacted due to higher costs related to planned expenses required to build Arbitron’s PPM panels for the Philadelphia and New York markets and increased expenses incurred in support of the PPM ratings service.

          Proportionate Share of Net Loss of Affiliates. Proportionate share of net loss of affiliates (relating collectively to Arbitron’s Scarborough joint venture and jointly-owned Project Apollo) increased 58.1% to $3.8 million for the three months ended March 31, 2007, from $2.4 million for the same period in 2006. The formalization of Project Apollo occurred during February 2007. The purpose of Project Apollo is to complete the development and testing of the Project Apollo marketing research service and the expansion of the pilot panel to a full national service if the test results meet expectations and generate marketplace support. Arbitron’s $1.1 million share of the Project Apollo loss for the three months ended March 31, 2007, is the primary cause of the $1.4 million increase in first-quarter losses, as compared to the same period of 2006. Arbitron expects that its proportionate share of net income (loss) of affiliates will continue to be adversely impacted due to the costs incurred, during the testing of the national marketing research service. If the decision is made to commercialize the national marketing panel service, there will be significant costs incurred to increase the size of the panel to a commercial level. These cost increases will be incurred in advance of receiving expected revenue from the service.

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          Interest Income. Interest income decreased 41.1% to $0.6 million during the three months ended March 31, 2007, from $1.0 million for the same period in 2006 due to lower average cash and short-term investment balances, which were partially offset by higher interest rates.

          Interest Expense. Interest expense decreased 89.9% to $0.1 million for the three months ended March 31, 2007, from $0.9 million for the same period in 2006, due to Arbitron’s prepayment of its senior-secured notes obligation on October 18, 2006.

          Income Tax Expense. The effective tax rate was increased from 37.4% for the three months ended March 31, 2006, to 38.4% for the three months ended March 31, 2007, to reflect the increase in certain non-deductible expenses.

          Net Income. Net income decreased 14.8% to $15.5 million for the three months ended March 31, 2007, from $18.2 million for the same period in 2006, due primarily to planned expenses required to build Arbitron’s PPM panels for the Philadelphia and New York markets, and to support the strategic development of Arbitron’s PPM ratings business.

          EBIT and EBITDA. Arbitron has presented EBIT and EBITDA, both non-GAAP financial measures, as supplemental information that management of Arbitron believes is useful to investors in evaluating Arbitron’s results because they exclude certain items that are not directly related to Arbitron’s core operating performance. EBIT is calculated by deducting net interest income from net income and adding back income tax expense to net income. EBITDA is calculated by deducting net interest income from net income and adding back income tax expense, and depreciation and amortization to net income. EBIT and EBITDA should not be considered substitutes either for net income, as indicators of Arbitron’s operating performance, or for cash flow, as measures of Arbitron’s liquidity. In addition, because EBIT and EBITDA may not be calculated identically by all companies, the presentation here may not be comparable to other similarly titled measures of other companies. EBIT decreased 15.0% to $24.7 million and EBITDA decreased 12.1% to $27.4 million for the three months ended March 31, 2007, from $29.0 million and $31.1 million, respectively, in the same period in 2006.

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Liquidity and Capital Resources

          Working capital was $22.4 million and ($4.6) million as of March 31, 2007, and December 31, 2006, respectively. Excluding the deferred revenue liability, which does not require a significant additional cash outlay by Arbitron, working capital was $81.2 million and $62.3 million as of March 31, 2007, and December 31, 2006, respectively. Cash and cash equivalents were $29.3 million and $33.6 million as of March 31, 2007, and December 31, 2006, respectively. In addition, short-term investments were $39.3 million and $27.6 million as of March 31, 2007, and December 31, 2006, respectively. Management expects that Arbitron’s cash position, along with these readily convertible assets, as of March 31, 2007, and cash flow generated from operations and its available revolving credit facility will be sufficient to support Arbitron’s operations for the foreseeable future.

          Net cash provided by operating activities was $10.1 million and $19.1 million for the three months ended March 31, 2007, and 2006, respectively. The $9.0 million decrease in net cash provided by operating activities was mainly attributable to a $7.9 million decrease in the change in accrued expenses and other current liabilities, a $2.7 million decrease in net income resulting primarily from planned costs required to build Arbitron’s PPM panels for the commercialization rollout of the PPM service, a $1.7 million increase in cash outflows due to the timing of vendor payments and a $1.5 million decrease in the change in deferred revenue. These cash outflows were partially offset by a $5.0 million increase in cash inflow due to the prior year increase in purchases of PPM international inventory. The decrease in the change in accrued expenses and other current liabilities resulted primarily from the timing of $4.0 million in expenditures for accrued payroll and benefit costs for the three months ended March 31, 2007, as compared to the same period of 2006, $1.9 million in expenditures associated with the formation of the Project Apollo LLC in the first quarter of 2007, and $1.6 million in lower accrued taxes due to reduced earnings for the three months ended March 31, 2007, as compared to the same period of 2006.

          Net cash used by investing activities was $15.9 million and $10.0 million for the three months ended March 31, 2007, and 2006, respectively. The $6.0 million increase in cash used in investing activities was driven primarily by $5.9 million in increased net purchases of variable-rate demand notes issued by municipal government agencies and auction-rate securities for the three months ended March 31, 2007, as compared to the same period of 2006. The timing of stock repurchases for 2007, which did not begin until the second quarter of 2007, led to additional available cash, which was used for net short-term investment purchases for the three months ended March 31, 2007, in excess of net purchases for the same period of 2006.

          Net cash provided by financing activities was $1.5 million for the three months ended March 31, 2007, and net cash used in financing activities was $4.8 million for the three months ended March 31, 2006. The $6.4 million fluctuation in financing activities was primarily attributable to $4.9 million in prior year repurchases of Arbitron’s outstanding common stock during the three months ended March 31, 2006. As of March 31, 2007, no stock repurchases had been made for 2007 under the announced Board authorization to repurchase up to $100.0 million of its outstanding common stock through December 31, 2008. A $1.3 million increase in proceeds from stock option exercises was the result of higher average stock prices, as well as higher average exercise prices for the quarter ended March 31, 2007, as compared to the same period of 2006.

          On December 20, 2006, Arbitron entered into an agreement with a consortium of lenders to provide up to $150.0 million of financing to Arbitron through a five-year, unsecured revolving credit facility ( “2006 Credit Facility”). The agreement contains an expansion feature for Arbitron to increase the financing available under the 2006 Credit Facility up to $200.0 million. Interest on borrowings under the 2006 Credit Facility will be calculated based on a floating rate for a duration of up to six months as selected by Arbitron.

          Arbitron’s 2006 Credit Facility contains financial terms, covenants and operating restrictions that potentially restrict financial flexibility. Under the terms of the 2006 Credit Facility, Arbitron is required to maintain certain leverage and coverage ratios and meet other financial conditions. The agreement contains certain financial covenants and limits, among other things, Arbitron’s ability to sell assets, incur additional indebtedness, and grant or incur liens on its assets. Under the terms of the 2006 Credit Facility, all of Arbitron’s material domestic subsidiaries, if any, guarantee the commitment. Currently, Arbitron does not have any material domestic subsidiaries as defined under the terms of the 2006 Credit Facility. Although the management of Arbitron does not believe that the terms of its 2006 Credit Facility limit the operation of its business in any material respect, the terms of the 2006 Credit Facility may restrict or prohibit Arbitron’s ability to raise additional debt capital when needed or could prevent Arbitron from investing in other growth initiatives. Arbitron has been in compliance with the terms of the 2006 Credit Facility since its inception.

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          On November 16, 2006, Arbitron announced that its Board of Directors authorized a program to repurchase up to $100.0 million of its outstanding common stock through either periodic open-market or private transactions at then-prevailing market prices through December 31, 2008. As of April 30, 2007, the number of shares of Arbitron’s outstanding common stock repurchased under this program was 62,000 shares for $3.0 million.

          Commercialization of the PPM radio ratings service and exploration of other strategic applications of the PPM technology, including the national marketing panel service, will require a substantial financial investment. Arbitron believes that during the PPM rollout period its costs and expenses will increase and substantial capital expenditures will be required. In addition, the management of Arbitron expects that, if the decision is made to commercialize the national marketing panel service, Arbitron’s expenses will increase as a result of continued deployment costs associated with the strategic development of its electronic ratings business and the national marketing panel service being developed through Project Apollo, which was jointly formed between Arbitron and Nielsen Media Research Inc. in February 2007.

          Arbitron believes that, while commercialization of the PPM ratings service and other strategic applications of the PPM technology, including the possible commercialization of the Project Apollo national marketing panel service, will have a near-term negative impact on its results of operations during the first three-to-four years of commercialization, which impact likely would be material, its operating margins can be restored through the completion of the PPM transition process in the top 50 radio markets, although there can be no assurance that this will be the case. If a decision is made to commercialize these services, substantial additional expenditures would be incurred during the next few years.

          Arbitron expects to fund the Project Apollo pilot program for the national marketing service, and the expected commercialization of the PPM radio ratings service with its existing cash position and short-term investments, future cash from operations or through the most advantageous source of capital at the time, which may include borrowings under its current credit facility, sales of common and preferred stock and/or joint-venture transactions. Arbitron believes that one or more of these sources of capital will be available to fund its PPM-related cash needs, but there can be no assurance that the external sources of capital will be available on favorable terms, if at all.

Seasonality

          Arbitron recognizes revenue for services over the terms of license agreements as services are delivered, and expenses are recognized as incurred. Arbitron gathers radio-listening data in 299 United States local markets. All markets are measured at least twice per year (April-May-June for the “Spring Survey” and October-November-December for the “Fall Survey”). In addition, all major markets are measured two additional times per year (January-February-March for the “Winter Survey” and July-August-September for the “Summer Survey”). Arbitron’s revenue is generally higher in the first and third quarters as a result of the delivery of the Fall Survey and Spring Survey, respectively, to all markets, compared to revenue in the second and fourth quarters, when delivery of the Winter Survey and Summer Survey, respectively, is only provided to major markets. Arbitron’s expenses are generally higher in the second and fourth quarters as the “Spring Survey” and “Fall Survey” are being conducted. The transition from the diary service to the PPM service in the top 50 markets will have an impact on the seasonality of revenue and costs and expenses. Although revenue in the top 50 markets is recognized ratably over the year in both the diary and PPM services, there will be fluctuations in the depth of the seasonality pattern during the periods of transition between the services in each market. The larger impact on the seasonality pattern is related to the costs and expenses to produce the services. PPM costs and expenses will accelerate six to nine months in advance of the commercialization of each market as the panel is built. These increased costs will be recognized as incurred rather than upon the delivery of a particular quarterly survey, and will vary from the cost pattern associated with the delivery of the diary service.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

          The Company holds its cash and cash equivalents in highly liquid securities. The Company also holds short-term investments, which consist of investment grade, highly liquid securities classified as available-for-sale. A hypothetical interest rate change of 1% would have an impact of approximately $0.2 million on interest income over a three-month period.

Foreign Currency Exchange Rate Risk

          Arbitron’s foreign operations are not significant at this time, and, therefore, Arbitron’s exposure to foreign currency risk is minimal.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

          The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s President and Chief Executive Officer and the Company’s Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the most recently completed fiscal quarter. Based upon that evaluation, the Company’s President and Chief Executive Officer and the Company’s Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control Over Financial Reporting

          There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarterly period ended March 31, 2007, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 6. EXHIBITS

Exhibit No.	Description
Exhibit 10.1	Description of Terms of Executive Bonus Plan (Filed on Arbitron’s Current Report on Form 8-K, dated January 24, 2007, and incorporated herein by reference)*
Exhibit 10.2	Form of Executive Restricted Stock Unit Grant Agreement*
Exhibit 10.3	Form of CEO Restricted Stock Unit Grant Agreement*
Exhibit 31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* Indicates management contract or compensatory plan, contract or arrangement.

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SIGNATURE

          Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ARBITRON INC.
By:	/s/ SEAN R. CREAMER
	Sean R. Creamer
	Executive Vice President of Finance and Planning and
	Chief Financial Officer (on behalf of the registrant and as the registrant’s principal financial and principal accounting officer)
Date: May 4, 2007

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EX-10.2

Exhibit 10.2

ARBITRON INC.

Form of Restricted Stock Unit Agreement
Granted Under the 1999 Stock Incentive Plan

     AGREEMENT made between Arbitron Inc., a Delaware corporation (the “Company”), and                     (the “Participant”).

     For valuable consideration, receipt of which is acknowledged, the parties hereto agree as follows:

     1. Grant of RSUs.

          On                     , 20      (the “Date of Grant”) and subject to the terms and conditions set forth in this Agreement and in the Arbitron Inc. 1999 Stock Incentive Plan (the “Plan”), the Company has granted to the Participant Restricted Stock Units (“RSUs”) providing the right to receive (     ) shares of common stock, $0.50 par value, of the Company (the “Shares”).

     2. Vesting and Forfeiture.

     (a) While the Participant remains employed, the RSUs shall vest in four (4) equal annual installments commencing on the first anniversary of the Date of Grant, with an additional one fourth vesting on each of the second, third, and fourth anniversaries of the Date of Grant, subject to earlier vesting under subsection (b). The date upon which each installment vests shall be considered a “Vesting Date” for the portion of the RSUs vesting on that date.

     (b) The Vesting Date for all unvested RSUs shall be accelerated, if applicable, to the earliest of:

     (i) The death of the Participant;

     (ii) The “Disability” of the Participant (within the meaning of Proposed Treasury Regulation Section 1.409A-3(g)(4) or any successor regulation); and

     (iii) A “Change in Control” consisting of a change in ownership or effective control of the Company (within the meaning of Proposed Treasury Regulation Section 1.409A-3(g)(5) or any successor regulation).

          (c) If the Participant ceases to be employed by the Company (and any applicable Subsidiaries) for any reason or no reason (except for death or Disability), the Participant shall immediately and automatically forfeit all rights to any of his or her RSUs that have Vesting Dates after the date employment ends except as an applicable employment agreement or executive retention agreement may provide to the contrary.

     3. Issuance of Shares.

          Subject to the terms and conditions of this Agreement (including any Withholding Tax obligations), as soon as practicable after a Vesting Date, the Company shall issue one or more certificates representing the newly vested Shares to the Participant or his or her estate, or, as directed by the Participant, a brokerage account. The Company must, in any event, issue the applicable Shares no later than the later of (i) December 31 of the calendar year in which the Vesting Date occurs and (ii) the fifteenth day of the third calendar month following the Vesting Date. Until the Vesting Date, the Participant shall have no rights to any Shares or any rights associated with such Shares, including without limitation dividend or voting rights.

     4. Acceleration/ Deferral.

     (a) Acceleration. In no event may the Company deliver the Shares to the Participant earlier than an applicable Vesting Date.

     (b) Deferral. In no event may the Company or the Participant defer the delivery of the Shares beyond the date specified in Section 3 of this Agreement, unless such deferral complies in all respects with Proposed Treasury Regulation Section 1.409A-2(b) related to subsequent changes in the time or form of payment of nonqualified deferred compensation arrangements, or any successor regulation.

     5. Dividend Equivalent Rights.

          The Participant shall receive Dividend Equivalent Rights on the Shares between the applicable Vesting Date and the date on which Shares are distributed. “Dividend Equivalent Rights” mean a credit to the account of the Participant, based on the number of vested RSUs then credited to the Participant under this Agreement, equivalent to the cash, stock or other property dividends on shares of Common Stock. Dividend Equivalent credits shall be deemed reinvested in additional RSUs (or fractions thereof) by dividing the dollar amount of the Dividend Equivalent credit by the Fair Market Value of a share of the Company’s common stock on the payment date of the dividend. The resulting number of Common Stock equivalents shall be added to the number of RSUs subject to this Agreement.

     6. Restrictions Regarding Employment.

     (a) The Participant agrees that he or she will not take any Adverse Actions (as defined below) against the Company or any Subsidiary from the Date of Grant through the first anniversary of the Participant’s termination of employment with the Company or any Subsidiary (the “Restricted Period”). The Participant acknowledges that damages that may arise from a breach of this Section 6 may be impossible to ascertain or prove with certainty. Notwithstanding anything in this Agreement or the Plan to the contrary, if the Company determines in its sole discretion that the Participant has taken Adverse Actions against the Company or any Subsidiary at any time during the Restricted Period, in addition to other legal remedies that may be available, (i) the Company will be entitled to an immediate injunction from a court of competent jurisdiction to end such Adverse Action, without further proof of damage, (ii) the Committee will have the authority in its sole discretion to terminate immediately all rights of the Participant under the Plan and

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this Agreement without notice of any kind, and (iii) the Committee will have the authority in its sole discretion to cause a forfeiture of any Shares acquired by the Participant upon the vesting of the RSUs to the extent that such vesting occurred within six months prior to the date the Participant first commences any such Adverse Actions and require the Participant to disgorge any profits (however defined by the Committee) realized by the Participant relating to such vested portion of the Shares. Such disgorged profits paid to the Company must be made in cash (including check, bank draft or money order) or, with the Committee’s consent, shares of Common Stock with a Fair Market Value on the date of payment equal to the amount of such payment. The Company will be entitled to withhold and deduct from future wages of the Participant (or from other amounts that may be due and owing to the Participant from the Company or a Subsidiary) or make other arrangements for the collection of all amounts necessary to satisfy such payment obligation.

     (b) For purposes of this Agreement, an “Adverse Action” will mean any of the following: (i) engaging in any commercial activity in competition with any part of the business of the Company or any Subsidiary as conducted during the Restricted Period for which the Participant has or had access to trade secrets and/or confidential information; (ii) diverting or attempting to divert from the Company or any Subsidiary any business of any kind, including, without limitation, interference with any business relationships with suppliers, customers, licensees, licensors, clients or contractors; (iii) participating in the ownership, operation or control of, being employed by, or connected in any manner with any person or entity that solicits, offers or provides any services or products similar to those that the Company or any Subsidiary offers to its customers or prospective customers, (iv) making, or causing or attempting to cause any other person or entity to make, any statement, either written or oral, or conveying any information about the Company or any Subsidiary that is disparaging or that in any way reflects negatively on the Company or any Subsidiary; or (v) engaging in any other activity that is hostile, contrary or harmful to the interests of the Company or any Subsidiary, including, without limitation, influencing or advising any person who is employed by or in the service of the Company or any Subsidiary to leave such employment or service with the Company or any Subsidiary or to enter into the employment or service of any actual or prospective competitor of the Company or any Subsidiary, influencing or advising any competitor of the Company or any Subsidiary to employ to otherwise engage the services of any person who is employed by or in the service of the Company or any Subsidiary, or improperly disclosing or otherwise misusing any trade secrets or confidential information regarding the Company or any Subsidiary.

     (c) Should any provision of this Section 6 of the Agreement be held invalid or illegal, such illegality shall not invalidate the whole of this Section 6 of the Agreement, but, rather, the Agreement shall be construed as if it did not contain the illegal part or narrowed to permit its enforcement, and the rights and obligations of the parties shall be construed and enforced accordingly. In furtherance of and not in limitation of the foregoing, the Participant expressly agrees that should the duration of or business activities covered by, any provision of this Agreement be in excess of that which is valid or enforceable under applicable law, then such provision shall be construed to cover only that duration, extent or activities that may validly or enforceably be covered. The Participant acknowledges the uncertainty of the law in this respect and expressly stipulates that this Agreement shall be construed in a manner that renders its provisions valid and enforceable to the maximum extent (not exceeding its express terms) possible under applicable law. This Section 6 of the Agreement does not replace and is in addition to any other agreements the Participant may have with the Company or any of its Subsidiaries on the matters addressed herein.

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     7. Transferability.

          This Agreement may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of (whether by operation of law or otherwise) (collectively, a “transfer”), except that this Agreement may be transferred by the laws of descent and distribution or as otherwise permitted under the Plan. The Participant may only transfer the Shares that may be issued pursuant to this Agreement following a Vesting Date that covers them.

     8. Withholding Taxes.

     (a) The Participant has reviewed with the Participant’s own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. The Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents.

     (b) The Company’s obligation to deliver Shares to the Participant upon the vesting of the RSUs shall be subject to the satisfaction of all income tax (including federal, state and local taxes), social insurance, payroll tax, payment on account or other tax related withholding requirements (“Withholding Taxes”).

     (c) The Participant acknowledges and agrees that the Company has the right to deduct from payments of any kind otherwise due to the Participant any Withholding Taxes to be withheld with respect to the transactions contemplated by this Agreement, including the vesting of the Shares.

     9. Securities Laws.

          Notwithstanding any other provision of the Plan or this Agreement, the Company will not be required to issue, and the Executive may not sell, assign, transfer or otherwise dispose of, any shares of Common Stock received as payment of the RSUs, unless (a) there is in effect with respect to the shares of Common Stock received as payment of the RSUs a registration statement under the Securities Act of 1933, as amended, and any applicable state or foreign securities laws or an exemption from such registration, and (b) there has been obtained any other consent, approval or permit from any other regulatory body that the Committee, in its sole discretion, deems necessary or advisable. The Company may condition such issuance, sale or transfer upon the receipt of any representations or agreements from the parties involved, and the placement of any legends on certificates representing Common Stock received as payment of the RSUs, as may be deemed necessary or advisable by the Company to comply with such securities law or other restrictions.

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     10. Adjustments.

          In the event of any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of shares, rights offering, divestiture or extraordinary dividend (including a spin-off), or any other change in the corporate structure or shares of the Company, the Committee (or, if the Company is not the surviving corporation in any such transaction, the board of directors of the surviving corporation), in order to prevent dilution or enlargement of the rights of the Grantee, shall make equitable adjustments (which adjustments will be conclusive) as to the number and kind of securities or other property (including cash) covered by this grant of RSUs.

     11. Provisions of the Plan.

This Agreement is subject to the provisions of the Plan, a copy of which is furnished to the Participant with this Agreement. Any undefined terms are defined in the Plan.

     12. Miscellaneous.

     (a) Section 409A. This Agreement is intended to comply with the requirements of Section 409A of the Internal Revenue Code and shall be construed consistently therewith.

     (b) Unsecured Creditor. This Agreement shall create a contractual obligation on the part of Company to make payment of the RSUs credited to the account of the Participant at the time provided for in this Agreement. Neither the Participant nor any other party claiming an interest in deferred compensation hereunder shall have any interest whatsoever in any specific assets of the Company. The Executive’s right to receive payments hereunder shall be that of an unsecured general creditor of Company.

     (c) Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, and each other provision of this Agreement shall be severable and enforceable to the extent permitted by law.

     (d) Waiver. Any provision for the benefit of the Company contained in this Agreement may be waived, either generally or in any particular instance, by the Board of Directors of the Company or the Committee.

     (e) Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Company and the Participant and their respective heirs, executors, administrators, legal representatives, successors and assigns, subject to the restrictions on transfer set forth in Section 7 of this Agreement.

     (f) Notice. All notices required or permitted hereunder shall be in writing and deemed effectively given upon personal delivery or five calendar days after deposit in the United States Post Office, by registered or certified mail, postage prepaid, addressed to the other party hereto at the address shown beneath his, her, or its respective signature to this Agreement, or at such other address or addresses as either party shall designate to the other in accordance with this Section 12(f).

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     (g) Entire Agreement. This Agreement and the Plan constitute the entire agreement between the parties, and supersedes all prior agreements and understandings, relating to the subject matter of this Agreement.

     (h) Amendment. This Agreement may be amended or modified only by a written instrument executed by both the Company and the Participant.

     (i) Governing Law. This Agreement shall be construed, interpreted and enforced in accordance with the internal laws of the State of Delaware without regard to any applicable conflicts of laws.

     (j) Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to participation in the Plan, RSUs granted under the Plan or future RSUs that may be granted under the Plan by electronic means or to request the Participant’s consent to participate in the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and, if requested, to agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.

     (k) Participant’s Acknowledgments. The Participant acknowledges that he or she: (i) has read this Agreement; (ii) has been represented in the preparation, negotiation and execution of this Agreement by legal counsel of the Participant’s own choice or has voluntarily declined to seek such counsel; (iii) understands the terms and consequences of this Agreement; (iv) is fully aware of the legal and binding effect of this Agreement; and (v) understands that the law firm of Wilmer Cutler Pickering Hale and Dorr LLP is acting as counsel to the Company in connection with the transactions contemplated by the Agreement, and is not acting as counsel for the Participant.

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date last indicated below.

	ARBITRON INC.
Date:	By:
		Name:
		Title:
Date:	By:
	[Name of Participant]

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EX-10.3

Exhibit 10.3

ARBITRON INC.

Form of CEO Restricted Stock Unit Agreement
Granted Under the 1999 Stock Incentive Plan

     AGREEMENT made between Arbitron Inc., a Delaware corporation (the “Company”), and Stephen B. Morris (the “Participant”).

     For valuable consideration, receipt of which is acknowledged, the parties hereto agree as follows:

     1. Grant of RSUs.

           On                   20,            (the “Date of Grant”) and subject to the terms and conditions set forth in this Agreement and in the Arbitron Inc. 1999 Stock Incentive Plan (the “Plan”), the Company granted to the Participant Restricted Stock Units (“RSUs”) providing the right to receive (          ) shares of common stock, $0.50 par value, of the Company (the “Shares”).

     2. Vesting and Forfeiture.

     (a) While the Participant remains employed, the RSUs shall vest in three (3) equal annual installments commencing on December 31, 2007, with an additional one third vesting on each of December 31, 2008 and December 31, 2009, subject to earlier vesting under subsection (b). The date upon which each installment vests shall be considered a “Vesting Date” for the portion of the RSUs vesting on that date.

     (b) The Vesting Date for all unvested RSUs shall be accelerated, if applicable, to the earliest of:

     (i) The death of the Participant;

     (ii) The “Disability” of the Participant (within the meaning of Proposed Treasury Regulation Section 1.409A-3(g)(4) or any successor regulation); and

     (iii) A “Change in Control” consisting of a change in ownership or effective control of the Company (within the meaning of Treasury Regulation Section 1.409A-3(g)(5) or any successor regulation).

     (c) If the Participant ceases to be employed by the Company (and any applicable Subsidiaries) for any reason or no reason (except for death or Disability), the Participant shall immediately and automatically forfeit all rights to any of his RSUs that have Vesting Dates after the date employment ends except as an applicable employment agreement or executive retention agreement may provide to the contrary.

     3. Issuance of Shares.

          Subject to the terms and conditions of this Agreement (including any Withholding Tax obligations), as soon as practicable after a Vesting Date, the Company shall issue one or more certificates representing Fifty Percent (50%), rounded down to the next whole Share, of the newly vested Shares (the “Initial Tranches”) to the Participant or his estate, or, as directed by the Participant, a brokerage account, with the remaining Shares credited to the Participant’s account as an equivalent number of “Deferred Stock Units.” The Company must, in any event, issue the applicable Shares in respect of the Initial Tranches no later than the later of (i) December 31 of the calendar year in which the applicable Vesting Date occurs and (ii) the fifteenth day of the third calendar month following the Vesting Date. Until the Vesting Date, the Participant shall have no rights to any Shares or any rights associated with such Shares, including without limitation dividend or voting rights, and the Participant shall have no voting rights with respect to Deferred Stock Units.

     4. Acceleration/ Deferral.

     (a) Acceleration. In no event may the Company deliver the Shares to the Participant earlier than an applicable Vesting Date.

     (b) Deferral. The Company shall issue Shares in payment of the Deferred Stock Units as of or as soon as practicable after the first day of the seventh (7th) month (the “Deferred Payment Date”) following the Participant’s separation from service, as a lump sum in common stock of the Company (with any fractional share paid in cash). If the Participant separates from service with the Company and all Subsidiaries on account of death or if the Participant dies prior to payment under the preceding sentence, the Company shall make payment as soon as reasonably practicable following the Participant’s death, in accordance with the beneficiary designation form filed for this benefit (or, if none, according to the beneficiary designation form filed by the Participant with respect to his 2006 award of restricted stock) as the form may be updated from time to time (provided that a designation specific to the Deferred Stock Units hereunder shall take precedence over a form filed for the 2006 award). If there is a Change in Control, then upon consummation of the Change in Control, but in no event more than 15 days following the Change in Control, the Company shall provide the Participant a cash payment equal to the value per share of the consideration received in the Change in Control multiplied by the number of Deferred Stock Units then credited to the Participant under this Agreement. In no event may the Company or the Participant defer the delivery of the Shares beyond the date specified in this Section 4(b), unless such deferral complies in all respects with Treasury Regulation Section 1.409A-2(b) related to subsequent changes in the time or form of payment of nonqualified deferred compensation arrangements, or any successor regulation.

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     5. Dividend Equivalent Rights.

          The Participant shall receive Dividend Equivalent Rights on the Shares between the applicable Vesting Date and the date on which Shares are distributed. “Dividend Equivalent Rights” mean a credit to the account of the Participant, based on the number of vested RSUs or Deferred Stock Units then credited to the Participant under this Agreement, equivalent to the cash, stock or other property dividends on shares of Common Stock. Dividend Equivalent credits shall be deemed reinvested in additional RSUs or Deferred Stock Units, as applicable, (or fractions thereof) by dividing the dollar amount of the Dividend Equivalent credit by the Fair Market Value of a share of the Company’s common stock on the payment date of the dividend. The resulting number of Common Stock equivalents shall be added to the number of RSUs or Deferred Stock Units (as applicable) subject to this Agreement.

     6. Restrictions Regarding Employment.

     (a) The Participant agrees that he will not take any Adverse Actions (as defined below) against the Company or any Subsidiary from the Date of Grant through the first anniversary of the Participant’s termination of employment with the Company or any Subsidiary (the “Restricted Period”). The Participant acknowledges that damages that may arise from a breach of this Section 6 may be impossible to ascertain or prove with certainty. Notwithstanding anything in this Agreement or the Plan to the contrary, if the Company determines in its sole discretion that the Participant has taken Adverse Actions against the Company or any Subsidiary at any time during the Restricted Period, in addition to other legal remedies that may be available, (i) the Company will be entitled to an immediate injunction from a court of competent jurisdiction to end such Adverse Action, without further proof of damage, (ii) the Committee will have the authority in its sole discretion to terminate immediately all rights of the Participant under the Plan and this Agreement without notice of any kind, and (iii) the Committee will have the authority in its sole discretion to cause a forfeiture of any Shares acquired by the Participant upon the vesting of the RSUs to the extent that such vesting occurred within six months prior to the date the Participant first commences any such Adverse Actions and require the Participant to disgorge any profits (however defined by the Committee) realized by the Participant relating to such vested portion of the Shares. Such disgorged profits paid to the Company must be made in cash (including check, bank draft or money order) or, with the Committee’s consent, shares of Common Stock with a Fair Market Value on the date of payment equal to the amount of such payment. The Company will be entitled to withhold and deduct from future wages of the Participant (or from other amounts that may be due and owing to the Participant from the Company or a Subsidiary) or make other arrangements for the collection of all amounts necessary to satisfy such payment obligation.

     (b) For purposes of this Agreement, an “Adverse Action” will mean any of the following: (i) engaging in any commercial activity in competition with any part of the business of the Company or any Subsidiary as conducted during the Restricted Period for which the Participant has or had access to trade secrets and/or confidential information; (ii) diverting or attempting to divert from the Company or any Subsidiary any business of any kind, including, without limitation, interference with any business relationships with suppliers, customers, licensees, licensors, clients or contractors; (iii) participating in the ownership, operation or control of, being employed by, or connected in any manner with any person or entity that solicits, offers or provides any services or products similar to those that the Company or any Subsidiary offers to its customers or prospective customers, (iv) making, or causing or attempting to cause any other person or entity to

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make, any statement, either written or oral, or conveying any information about the Company or any Subsidiary that is disparaging or that in any way reflects negatively on the Company or any Subsidiary; or (v) engaging in any other activity that is hostile, contrary or harmful to the interests of the Company or any Subsidiary, including, without limitation, influencing or advising any person who is employed by or in the service of the Company or any Subsidiary to leave such employment or service with the Company or any Subsidiary or to enter into the employment or service of any actual or prospective competitor of the Company or any Subsidiary, influencing or advising any competitor of the Company or any Subsidiary to employ to otherwise engage the services of any person who is employed by or in the service of the Company or any Subsidiary, or improperly disclosing or otherwise misusing any trade secrets or confidential information regarding the Company or any Subsidiary.

     (c) Should any provision of this Section 6 of the Agreement be held invalid or illegal, such illegality shall not invalidate the whole of this Section 6 of the Agreement, but, rather, the Agreement shall be construed as if it did not contain the illegal part or narrowed to permit its enforcement, and the rights and obligations of the parties shall be construed and enforced accordingly. In furtherance of and not in limitation of the foregoing, the Participant expressly agrees that should the duration of or business activities covered by, any provision of this Agreement be in excess of that which is valid or enforceable under applicable law, then such provision shall be construed to cover only that duration, extent or activities that may validly or enforceably be covered. The Participant acknowledges the uncertainty of the law in this respect and expressly stipulates that this Agreement shall be construed in a manner that renders its provisions valid and enforceable to the maximum extent (not exceeding its express terms) possible under applicable law. This Section 6 of the Agreement does not replace and is in addition to any other agreements the Participant may have with the Company or any of its Subsidiaries on the matters addressed herein.

     7. Transferability.

          This Agreement may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of (whether by operation of law or otherwise) (collectively, a “transfer”), except that this Agreement may be transferred by the laws of descent and distribution or as otherwise permitted under the Plan. The Participant may only transfer the Shares that may be issued pursuant to this Agreement following a Vesting Date (or, for Deferred Stock Units, the Deferred Payment Date) that covers them.

     8. Withholding Taxes.

     (a) The Participant has reviewed with the Participant’s own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. The Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents.

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     (b) The Company’s obligation to deliver Shares to the Participant upon the vesting of the RSUs shall be subject to the satisfaction of all income tax (including federal, state and local taxes), social insurance, payroll tax, payment on account or other tax related withholding requirements (“Withholding Taxes”). FICA taxes will be withheld from other compensation due to the Participant with respect to RSUs that become credited as Deferred Stock Units.

     (c) The Participant acknowledges and agrees that the Company has the right to deduct from payments of any kind otherwise due to the Participant any Withholding Taxes to be withheld with respect to the transactions contemplated by this Agreement, including the vesting of the Shares.

     9. Securities Laws.

          Notwithstanding any other provision of the Plan or this Agreement, the Company will not be required to issue, and the Executive may not sell, assign, transfer or otherwise dispose of, any shares of Common Stock received as payment of the RSUs, unless (a) there is in effect with respect to the shares of Common Stock received as payment of the RSUs a registration statement under the Securities Act of 1933, as amended, and any applicable state or foreign securities laws or an exemption from such registration, and (b) there has been obtained any other consent, approval or permit from any other regulatory body that the Committee, in its sole discretion, deems necessary or advisable. The Company may condition such issuance, sale or transfer upon the receipt of any representations or agreements from the parties involved, and the placement of any legends on certificates representing Common Stock received as payment of the RSUs, as may be deemed necessary or advisable by the Company to comply with such securities law or other restrictions.

     10. Adjustments.

          In the event of any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of shares, rights offering, divestiture or extraordinary dividend (including a spin-off), or any other change in the corporate structure or shares of the Company, the Committee (or, if the Company is not the surviving corporation in any such transaction, the board of directors of the surviving corporation), in order to prevent dilution or enlargement of the rights of the Grantee, shall make equitable adjustments (which adjustments will be conclusive) as to the number and kind of securities or other property (including cash) covered by this grant of RSUs and any related Deferred Stock Units.

     11. Provisions of the Plan.

This Agreement is subject to the provisions of the Plan, a copy of which is furnished to the Participant with this Agreement. Any undefined terms are defined in the Plan.

     12. Miscellaneous.

     (a) Section 409A. This Agreement is intended to comply with the requirements of Section 409A of the Internal Revenue Code and shall be construed consistently therewith.

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     (b) Unsecured Creditor. This Agreement shall create a contractual obligation on the part of Company to make payment of the RSUs and Deferred Stock Units credited to the account of the Participant at the time provided for in this Agreement. Neither the Participant nor any other party claiming an interest in deferred compensation hereunder shall have any interest whatsoever in any specific assets of the Company. The Executive’s right to receive payments hereunder shall be that of an unsecured general creditor of Company.

     (c) Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, and each other provision of this Agreement shall be severable and enforceable to the extent permitted by law.

     (d) Waiver. Any provision for the benefit of the Company contained in this Agreement may be waived, either generally or in any particular instance, by the Board of Directors of the Company or the Committee.

     (e) Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Company and the Participant and their respective heirs, executors, administrators, legal representatives, successors and assigns, subject to the restrictions on transfer set forth in Section 7 of this Agreement.

     (f) Notice. All notices required or permitted hereunder shall be in writing and deemed effectively given upon personal delivery or five calendar days after deposit in the United States Post Office, by registered or certified mail, postage prepaid, addressed to the other party hereto at the address shown beneath his, her, or its respective signature to this Agreement, or at such other address or addresses as either party shall designate to the other in accordance with this Section 12(f).

     (g) Entire Agreement. This Agreement and the Plan constitute the entire agreement between the parties, and supersedes all prior agreements and understandings, relating to the subject matter of this Agreement.

     (h) Amendment. This Agreement may be amended or modified only by a written instrument executed by both the Company and the Participant.

     (i) Governing Law. This Agreement shall be construed, interpreted and enforced in accordance with the internal laws of the State of Delaware without regard to any applicable conflicts of laws.

     (j) Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to participation in the Plan, RSUs granted under the Plan or future RSUs that may be granted under the Plan by electronic means or to request the Participant’s consent to participate in the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and, if requested, to agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.

     (k) Participant’s Acknowledgments. The Participant acknowledges that he: (i) has read this Agreement; (ii) has been represented in the preparation, negotiation and execution of this Agreement by legal counsel of the Participant’s own choice or has voluntarily declined to seek such counsel; (iii) understands the terms and consequences of this Agreement; (iv) is fully aware of the legal and binding effect of this Agreement; and (v) understands that the law firm of Wilmer Cutler Pickering Hale and Dorr LLP is acting as counsel to the Company in connection with the transactions contemplated by the Agreement, and is not acting as counsel for the Participant.

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date last indicated below.

	ARBITRON INC.
Date:	By:
		Name:
		Title:
Date:	By:
		Stephen B. Morris

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EX-31.1

Exhibit 31.1

302(a) CERTIFICATION

I, Stephen B. Morris, President and Chief Executive Officer of Arbitron Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Arbitron Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

     a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 4, 2007	/s/ Stephen B. Morris
	Stephen B. Morris
	President and Chief Executive Officer

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EX-31.2

Exhibit 31.2

302(a) CERTIFICATION

I, Sean R. Creamer, Executive Vice President of Finance and Planning and Chief Financial Officer of Arbitron Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Arbitron Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

     a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 4, 2007	/s/ Sean R. Creamer
	Sean R. Creamer
	Executive Vice President of Finance and Planning and Chief Financial Officer

30

EX-32.1

Exhibit 32.1

WRITTEN STATEMENT OF CHIEF EXECUTIVE OFFICER
AND CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
(18 U.S.C. Section 1350)

The undersigned, the Chief Executive Officer and the Chief Financial Officer of Arbitron Inc. (the “Company”), each hereby certifies that, to his knowledge, on the date hereof:

(a) the Form 10-Q of the Company for the quarter ended March 31, 2007, filed on the date hereof with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(b) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Stephen B. Morris  

Stephen B. Morris 

Chief Executive Officer  

Date: May 4, 2007 

/s/ Sean R. Creamer  

Sean R. Creamer 

Chief Financial Officer  

Date: May 4, 2007 

31