FORM 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the quarterly period ended September 30, 2008

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 33-82114

Spanish Broadcasting System, Inc.

(Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)		13-3827791 (I.R.S. Employer Identification No.)

___________________________

2601 South Bayshore Drive, PH II
Coconut Grove, Florida 33133
(Address of principal executive offices) (Zip Code)

(305) 441-6901
(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, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer o	Accelerated filer þ		Non-accelerated filer o	Smaller reporting company þ
		(Do not check if a smaller reporting company)

Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

As of November 7, 2008, 41,445,222 shares of Class A common stock, par value $0.0001 per share, 23,403,500 shares of Class B common stock, par value $0.0001 per share and 380,000 shares of Series C convertible preferred stock, $0.01 par value per share, which are convertible into 7,600,000 shares of Class A common stock, were outstanding.

Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains both historical and forward-looking statements. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are not based on historical facts, but rather reflect our current expectations concerning future results and events. These forward-looking statements generally can be identified by the use of statements that include phrases such as “believe”, “expect”, “anticipate”, “intend”, “estimate”, “plan”, “project”, “foresee”, “likely”, “will” or other words or phrases with similar meanings. Similarly, statements that describe our objectives, plans or goals are, or may be, forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be different from any future results, performance and anticipated achievements expressed or implied by these statements. We do not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to those described in this report, in Part II, “Item 1A. Risk Factors” and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2007, and those described from time to time in our future reports filed with the Securities and Exchange Commission (the “SEC”).

PART I. FINANCIAL INFORMATION


Item 1.		*Financial Statements — Unaudited*

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets


	September 30,			December 31,
	2008			2007
	(In thousands, except share data)
Assets
Current assets:
Cash and cash equivalents	$	34,005			61,122
Receivables, net of allowance for doubtful accounts of $1,458 in 2008 and $3,623 in 2007		29,663			35,835
Prepaid expenses and other current assets		8,100			4,515

Total current assets		71,768			101,472
Property and equipment, net of accumulated depreciation of $42,649 in 2008 and $38,188 in 2007		53,769			43,739
FCC broadcasting licenses		353,612			749,864
Goodwill		32,806			32,806
Other intangible assets, net of accumulated amortization of $169 in 2008 and $142 in 2007		1,265			1,292
Deferred financing costs, net of accumulated amortization of $3,686 in 2008 and $2,860 in 2007		3,977			4,803
Other assets		3,086			2,153

Total assets	$	520,283			936,129


Liabilities and Stockholders’ (Deficit) Equity

Current liabilities:
Accounts payable and accrued expenses	$	15,384			19,640
Accrued interest		256			246
Unearned revenue		3,357			4,015
Deferred commitment fee		244			300
Other liabilities		55			84
Non-interest bearing promissory note payable due 2009, net of unamortized discount of $363 in 2008		18,137			—
Current portion of the senior credit facilities term loan due 2012		3,250			3,250
Current portion of other long-term debt		436			430
Series B cumulative exchangeable redeemable preferred stock dividends payable		—			2,014
Total current liabilities		41,119			29,979
Unearned revenue, less current portion		—			305

Other liabilities, less current portion		166			187
Derivative instruments		4,639			3,582
Senior secured credit facility term loan due 2012, less current portion		310,375			312,813
Other long-term debt, less current portion		7,163			7,490
Non-interest bearing promissory note payable due 2009, net of unamortized discount of $1,410 in 2007		—			17,090
Deferred income taxes		71,798			170,148

Total liabilities		435,260			541,594


Cumulative exchangeable redeemable preferred stock:
10³/4% Series B cumulative exchangeable redeemable preferred stock, $0.01 par value, liquidation value $1,000 per share. Authorized 280,000 shares; 89,932 shares issued and outstanding at September 30, 2008 and December 31, 2007, respectively		91,946			89,932

Stockholders’ (deficit) equity:
Series C convertible preferred stock, $0.01 par value and liquidation value. Authorized 600,000 shares; 380,000 shares issued and outstanding at September 30, 2008 and December 31, 2007, respectively		4			4
Class A common stock, $0.0001 par value. Authorized 100,000,000 shares; 41,443,555 and 40,777,805 shares issued and outstanding at September 30, 2008 and December 31, 2007, respectively		4			4
Class B common stock, $0.0001 par value. Authorized 50,000,000 shares; 23,403,500 and 24,003,500 shares issued and outstanding at September 30, 2008 and December 31, 2007, respectively		2			2
Additional paid-in capital		524,630			524,030
Accumulated other comprehensive loss		(8,042	)		(3,582	)
Accumulated deficit		(523,521	)		(215,855	)


Total stockholders’ (deficit) equity		(6,923	)		304,603

Total liabilities and stockholders’ (deficit) equity	$	520,283			936,129

See accompanying notes to the unaudited condensed consolidated financial statements.

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Operations


	Three-Months Ended						Nine-Months Ended
	September 30,						September 30,
	2008			2007			2008			2007
	(In thousands, except per share data)

Net revenue	$	41,253			46,772			122,866			133,580


Operating expenses:
Engineering and programming		13,992			12,553			44,110			37,224
Selling, general and administrative		16,585			17,219			53,797			53,323
Corporate expenses		2,707			3,881			9,972			10,596
Depreciation and amortization		1,792			1,194			4,596			3,436

Total operating expenses		35,076			34,847			112,475			104,579
(Gain) loss on the disposal of assets, net		(5	)		51			(10	)		50
Impairment of FCC broadcasting licenses and restructuring costs		2,199			—			398,451			—

Operating income (loss)		3,983			11,874			(388,050	)		28,951

Other (expense) income:
Interest expense, net		(5,686	)		(4,789	)		(16,085	)		(14,213	)
Change in fair value of derivative instrument		3,585			—			3,585			—
Other, net		—			25			1,928			1,985

Income (loss) before income taxes		1,882			7,110			(398,622	)		16,723
Income tax expense (benefit)		2,325			4,569			(98,207	)		10,778

Net (loss) income		(443	)		2,541			(300,415	)		5,945

Dividends on Series B preferred stock		(2,417	)		(2,417	)		(7,251	)		(7,251	)

Net (loss) income applicable to common stockholders	$	(2,860	)		124			(307,666	)		(1,306	)


Basic and diluted net loss per common share	$	(0.04	)		—			(4.25	)		(0.02	)


Weighted average common shares outstanding:
Basic		72,418			72,381			72,409			72,381

Diluted		72,418			72,386			72,409			72,381

See accompanying notes to the unaudited condensed consolidated financial statements.

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statement of Changes in Stockholders’ (Deficit) Equity
and Comprehensive Loss for the Nine-Months Ended September 30, 2008


	Class C				Class A				Class B							Accumulated						Total
	preferred stock				common stock				common stock					Additional		other						stockholders’
	Number of		Par		Number of		Par		Number of			Par		paid-in		comprehensive			Accumulated			(deficit)
	shares		value		shares		value		shares			value		capital		loss			deficit			equity
									(In thousands, except share data)
Balance at December 31, 2007		380,000	$	4		40,777,805	$	4		24,003,500		$	2	$	524,030	$	(3,582	)	$	(215,855	)	$	304,603
Conversion of Class B common stock to Class A common stock		—		—		600,000		—		(600,000	)		—		—		—			—			—
Issuance of Class A common stock from vesting of restricted stock		—		—		65,750		—		—			—		—		—			—			—
Stock-based compensation		—		—		—		—		—			—		600		—			—			600
Series B preferred stock dividends		—		—		—		—		—			—		—		—			(7,251	)		(7,251	)
Comprehensive loss:
Net loss		—		—		—		—		—			—		—		—			(300,415	)		(300,415	)
Unrealized loss on derivative instruments		—		—		—		—		—			—		—		(4,460	)		—			(4,460	)

Comprehensive loss																							(304,875	)

Balance at September 30, 2008		380,000	$	4		41,443,555	$	4		23,403,500		$	2	$	524,630	$	(8,042	)	$	(523,521	)	$	(6,923	)

See accompanying notes to the unaudited condensed consolidated financial statements.

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows


	Nine-Months Ended
	September 30,
	2008			2007
	(In thousands)
Cash flows from operating activities:
Net (loss) income	$	(300,415	)		5,945
Adjustments to reconcile net income to net cash provided by operating activities:
(Gain) loss on the sale of assets		(10	)		50
Impairment of FCC broadcasting licenses and restructuring costs		398,451			—
Stock-based compensation		600			1,229
Depreciation and amortization		4,596			3,436
Net barter income		(144	)		(173	)
Provision for trade doubtful accounts		717			1,122
Amortization of deferred financing costs		826			835
Amortization of discount on the non-interest bearing promissory note payable		1,047			968
Deferred income taxes		(98,350	)		10,642
Decrease in unearned revenue		(1,731	)		(1,800	)
Accretion of the time-value of money component related to unearned revenue		122			183
Change in fair value of derivative instrument, net of amortization		(3,403	)		—
Amortization of deferred commitment fee		(56	)		(56	)
Amortization of other liabilities		(50	)		(17	)
Changes in operating assets and liabilities:
Decrease (increase) in trade receivables		5,628			(4,588	)
Increase in other current assets		(3,585	)		(52	)
Increase in other assets		(933	)		(1,396	)
Decrease in accounts payable and accrued expenses		(5,579	)		(2,557	)
Increase in unearned revenue		617			—
Increase (decrease) in accrued interest		45			(77	)

Net cash (used in) provided by operating activities		(1,607	)		13,694

Cash flows from investing activities:
Purchases of property and equipment		(9,763	)		(4,141	)
Acquisition of a building and its related building improvements		(5,828	)		(2,590	)
Proceeds from an insurance recovery		91			15

Net cash used in investing activities		(15,500	)		(6,716	)

Cash flows from financing activities:
Payment of senior secured credit facility term loan 2012		(2,438	)		(2,438	)
Payment of Series B preferred stock cash dividends		(7,251	)		(7,251	)
Payments of other long-term debt		(321	)		(294	)
Net cash used in financing activities		(10,010	)		(9,983	)

Net decrease in cash and cash equivalents		(27,117	)		(3,005	)
Cash and cash equivalents at beginning of period		61,122			66,815

Cash and cash equivalents at end of period	$	34,005			63,810

Supplemental cash flows information:
Interest paid	$	14,893			14,950

Income taxes paid, net		22			—

Noncash investing and financing activities:
Ten-year promissory note issued for the acquisition of a building	$	—			7,650

Accrual of preferred stock as payment of preferred stock dividend		2,014			—

Unrealized loss on derivative instruments		(4,460	)		(4,961	)

See accompanying notes to the unaudited condensed consolidated financial statements.

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The unaudited condensed consolidated financial statements include the accounts of Spanish Broadcasting System, Inc. and its subsidiaries (the “Company”, “we”, “us”, “our” or “SBS”). All intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements as of September 30, 2008 and December 31, 2007 and for the three- and nine-month periods ended September 30, 2008 and 2007 have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. They do not include all information and notes required by GAAP for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with our consolidated financial statements as of, and for the fiscal year ended December 31, 2007, included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, which are all of a normal and recurring nature, necessary for a fair presentation of the results of the interim periods. The results of operations for the three- and nine-month periods ended September 30, 2008 are not necessarily indicative of the results for a full year.

2. Stockholders’ Equity

(a) Series C Convertible Preferred Stock

On December 23, 2004, in connection with the closing of the merger agreement, dated October 5, 2004, with CBS Radio (formerly known as Infinity Media Corporation, “CBS Radio”), a division of CBS Corporation, Infinity Broadcasting Corporation of San Francisco (“Infinity SF”) and SBS Bay Area, LLC, a wholly-owned subsidiary of SBS (“SBS Bay Area”), we issued to CBS Radio (i) an aggregate of 380,000 shares of Series C convertible preferred stock, $0.01 par value per share (the “Series C preferred stock”), each of which is convertible at the option of the holder into twenty fully paid and non-assessable shares of our Class A common stock, $0.0001 par value per share (the “Class A common stock”); and (ii) a warrant to purchase an additional 190,000 shares of Series C preferred stock, exercisable at any time from December 23, 2004 until December 23, 2008, at an exercise price of $300.00 per share (the “Warrant”).

Under the terms of the certificate of designation governing the Series C preferred stock, the holder of the Series C preferred stock has the right to convert each share into twenty fully paid and non-assessable shares of our Class A common stock. The shares of Series C preferred stock issued at the closing of the merger are convertible into 7,600,000 shares of our Class A common stock, subject to adjustment, and the Series C preferred stock issuable upon exercise of the Warrant is convertible into an additional 3,800,000 shares of our Class A common stock, subject to adjustment. To date, the Warrant has not been exercised.

In connection with the closing of the merger transaction, we also entered into a registration rights agreement with CBS Radio, pursuant to which, CBS Radio may instruct us to file up to three registration statements, on a best efforts basis, with the SEC providing for the registration for resale of the Class A common stock issuable upon conversion of the Series C preferred stock.

We are required to pay holders of Series C preferred stock dividends on parity with our Class A common stock and Class B common stock, $0.0001 par value per share (the “Class B common stock”), and each other class or series of our capital stock, if created, after December 23, 2004.

(b) Class A and B Common Stock

The rights of the holders of shares of Class A common stock and Class B common stock are identical, except for voting rights and conversion provisions. The Class A common stock is entitled to one vote per share and the Class B common stock is entitled to ten votes per share. The Class B common stock is convertible to Class A common stock on a share-for-share basis at the option of the holder at any time, or automatically upon the transfer to a person or entity which is not a permitted transferee. Holders of each class of common stock are entitled to receive dividends and, upon liquidation or dissolution, are entitled to receive all assets available for distribution to stockholders. The

holders of each class have no preemptive or other subscription rights and there are no redemption or sinking fund provisions with respect to such shares. Each class of common stock is subordinate to our 10 ³/₄% Series B cumulative exchangeable redeemable preferred stock, par value $0.01 per share and liquidation preference of $1,000 per share (the “Series B preferred stock”) and on parity with the Series C preferred stock with respect to dividend rights and rights upon liquidation, winding up and dissolution of SBS.

(c) Warrant

In connection with the merger agreement with CBS Radio, as discussed in Note 2(a), we have a Warrant outstanding to ultimately purchase an aggregate of 3,800,000 shares of our Class A common stock, which expires on December 23, 2008.

(d) Share-based Compensation Plans

2006 Omnibus Equity Compensation Plan

In July 2006, we adopted an omnibus equity compensation plan (the “Omnibus Plan”) in which grants can be made to participants in any of the following forms: (i) incentive stock options, (ii) non-qualified stock options, (iii) stock appreciation rights, (iv) stock units, (v) stock awards, (vi) dividend equivalents, and (vii) other stock-based awards. The Omnibus Plan authorizes up to 3,500,000 shares of our Class A common stock for issuance, subject to adjustment in certain circumstances. The Omnibus Plan provides that the maximum aggregate number of shares of Class A common stock that may be granted, other than dividend equivalents, to any individual during any calendar year is 1,000,000 shares, subject to adjustments. In addition, the maximum aggregate number of shares of Class A common stock with respect to grants of stock units, stock awards and other stock-based awards that may be granted to any individual during a calendar year is also 1,000,000 shares, subject to adjustments.

1999 Stock Option Plans

In September 1999, we adopted an employee incentive stock option plan (the “1999 ISO Plan”) and a non-employee director stock option plan (the “1999 NQ Plan”, and together with the 1999 ISO Plan, the “1999 Stock Option Plans”). Options granted under the 1999 ISO Plan will vest according to terms to be determined by the compensation committee of our board of directors, and will have a contractual life of up to 10 years from the date of grant. Options granted under the 1999 NQ Plan will vest 20% upon grant and 20% each year for the first four years from the date of grant. All options granted under the 1999 ISO Plan and the 1999 NQ Plan vest immediately upon a change in control of SBS, as defined therein. A total of 3,000,000 shares and 300,000 shares of Class A common stock were reserved for issuance under the 1999 ISO Plan and the 1999 NQ Plan, respectively. Additionally, on November 2, 1999, we granted a stock option to purchase 250,000 shares of Class A common stock to a former director. This option vested immediately, and expires 10 years from the date of grant.

(e) Stock-Based Compensation Expense

The impact on our results of operations of recognizing stock-based compensation for the three- and nine-month periods ended September 30, 2008 and 2007 was as follows (in thousands):


	Three-Months Ended				Nine-Months Ended
	September 30,				September 30,
	2008		2007		2008		2007
Engineering and programming expenses	$	8		192	$	176		569
Selling, general and administrative expenses		22		32		92		101
Corporate expenses		88		144		332		559

Total stock-based compensation expense	$	118		368	$	600		1,229

During the three- and nine-month periods ended September 30, 2008 and 2007, no stock options were exercised; therefore, no cash payments were received. In addition, we did not recognize a tax benefit on our stock-based compensation expense due to our valuation allowance on substantially all of our deferred tax assets.

Stock Options

Stock options have only been granted to employees or directors under our 1999 Stock Option Plans. Our stock options have various vesting schedules and are subject to the employees continuing service to SBS. We recognize compensation expense based on the estimated grant date fair value using the Black-Scholes option pricing model and recognize the compensation expense using a straight-line amortization method. When estimating forfeitures, we consider voluntary termination behaviors, as well as trends of actual option forfeitures. Ultimately, our stock-based compensation expense is based on awards that vest. Our stock-based compensation has been reduced for estimated forfeitures.

A summary of the status of our stock options, as of December 31, 2007 and September 30, 2008, and changes during the nine-months ended September 30, 2008, is presented below (in thousands, except per share data):


								Weighted
				Weighted				Average
				Average		Aggregate		Remaining
				Exercise		Intrinsic		Contractual
	Shares			Price		Value		Life (Years)
Outstanding at December 31, 2007		3,063		$	10.86
Granted		125			0.45
Exercised		—			—
Forfeited		(36	)		10.58

Outstanding at September 30, 2008		3,152		$	10.45	$	—		3.8

Exercisable at September 30, 2008		2,957		$	10.95	$	—		3.4

The following table summarizes information about stock options outstanding and exercisable at September 30, 2008 (in thousands, except per share data):


		Outstanding						Weighted		Exercisable
								Average
						Weighted		Remaining				Weighted
						Average		Contractual				Average
				Unvested		Exercise		Life		Number		Exercise
Range of Exercise Prices		Vested Options		Options		Price		(Years)		Exercisable		Price
$	0.45 — 4.99		362		138	$	2.94		7.7		362	$	3.57
	5.00 — 9.99		1,697		47		8.71		3.5		1,697		8.78
	10.00 — 14.99		193		10		10.77		5.9		193		10.77
	15.00 — 20.00		705		—		20.00		1.1		705		20.00

			2,957		195	$	10.45		3.8		2,957	$	10.95

Nonvested Shares

Nonvested shares (restricted stock or restricted stock units) are awarded to employees under our Omnibus Plan. In general, nonvested shares vest over three to five years and are subject to the employees continuing service to us. The cost of nonvested shares is determined using the fair value of our common stock on the date of grant. The compensation expense is recognized over the vesting period.

A summary of the status of our nonvested shares, as of December 31, 2007 and September 30, 2008, and changes during the nine-months ended September 30, 2008, is presented below (in thousands, except per share data):


				Weighted
				Average Grant-
				Date Fair Value
	Shares			(per Share)
Nonvested at December 31, 2007		77		$	4.19
Awarded		215			0.92
Vested		(66	)		1.86
Forfeited		—			—

Nonvested at September 30, 2008		226		$	1.76

3. Basic and Diluted Net (Loss) Income Per Common Share

Basic net (loss) income per common share was computed by dividing net (loss) income applicable to common stockholders by the weighted average number of shares of common stock and convertible preferred stock outstanding for each period presented, using the “if converted” method. Diluted net (loss) income per common share is computed by giving effect to common stock equivalents as if they were outstanding for the entire period.

Common stock equivalents were not considered in the calculation for the three- and nine-month periods ended September 30, 2008 and for the nine-month period ended September 30, 2007, since their effect would be anti-dilutive. If included, the common stock equivalents for these periods would have amounted to zero for all periods. During the three-month period ended September 30, 2007, common stock equivalents included in the calculation amounted to five for the period.

4. Operating Segments

Statement of Financial Accounting Standards (“SFAS”) No. 131, “Disclosures about Segments of an Enterprise and Related Information,” establishes standards for the way public business enterprises report information about operating segments in annual financial statements and requires those enterprises to report selected information about operating segments in interim financial reports. We have two reportable segments: radio and television. The following summary table presents separate financial data for each of our operating segments (in thousands):


	Three-Months Ended											Nine-Months Ended
	September 30,						Change					September 30,						Change
	2008			2007			$			%		2008			2007			$			%
Net revenue:
Radio	$	36,411			44,333			(7,922	)		(18%)		110,445			126,421			(15,976	)		(13%)
Television		4,842			2,439			2,403			99%		12,421			7,159			5,262			74%

Consolidated	$	41,253			46,772			(5,519	)		(12%)		122,866			133,580			(10,714	)		(8%)


Engineering and programming expenses:
Radio	$	9,438			8,957			481			5%		29,590			26,867			2,723			10%
Television		4,554			3,596			958			27%		14,520			10,357			4,163			40%

Consolidated	$	13,992			12,553			1,439			11%		44,110			37,224			6,886			18%


Selling, general and administrative expenses:
Radio	$	13,579			15,351			(1,772	)		(12%)		45,449			48,068			(2,619	)		(5%)
Television		3,006			1,868			1,138			61%		8,348			5,255			3,093			59%

Consolidated	$	16,585			17,219			(634	)		(4%)		53,797			53,323			474			1%


Corporate expenses:	$	2,707			3,881			(1,174	)		(30%)		9,972			10,596			(624	)		(6%)

Depreciation and amortization:
Radio	$	817			716			101			14%		2,397			2,153			244			11%
Television		578			170			408			240%		1,022			440			582			132%
Corporate		397			308			89			29%		1,177			843			334			40%

Consolidated	$	1,792			1,194			598			50%		4,596			3,436			1,160			34%


(Gain) loss on the disposal of assets, net:
Radio	$	(5	)		51			(56	)		(110%)		(10	)		50			(60	)		(120%)
Television		—			—			—			0%		—			—			—			0%
Corporate		—			—			—			0%		—			—			—			0%

Consolidated	$	(5	)		51			(56	)		(110%)		(10	)		50			(60	)		(120%)


Impairment of FCC broadcasting licenses and restructuring costs:

Radio	$	2,191			—			2,191			100%		381,606			—			381,606			100%
Television		8			—			8			100%		16,845			—			16,845			100%
Corporate		—			—			—			0%		—			—			—			0%

Consolidated	$	2,199			—			2,199			100%		398,451			—			398,451			100%


Operating income (loss):
Radio	$	10,391			19,258			(8,867	)		(46%)		(348,587	)		49,283			(397,870	)		(807%)
Television		(3,304	)		(3,195	)		(109	)		3%		(28,314	)		(8,893	)		(19,421	)		218%
Corporate		(3,104	)		(4,189	)		1,085			(26%)		(11,149	)		(11,439	)		290			(3%)

Consolidated	$	3,983			11,874			(7,891	)		(66%)		(388,050	)		28,951			(417,001	)		(1440%)


Capital expenditures:
Radio	$	326			342			(16	)		(5%)		2,643			1,358			1,285			95%
Television		2,826			1,005			1,821			181%		12,525			3,030			9,495			313%
Corporate		60			974			(914	)		(94%)		423			2,343			(1,920	)		(82%)

Consolidated	$	3,212			2,321			891			38%		15,591			6,731			8,860			132%


	September 30,			December 31,
Total Assets:		2008			2007

Radio	$	447,300			862,048
Television		63,519			62,462
Corporate		9,464			11,619

Consolidated	$	520,283			936,129

5. Comprehensive (Loss) Income

Our total comprehensive (loss) income, comprised of net (loss) income and unrealized loss on derivative instruments, for the three- and nine-months ended September 30, 2008 and 2007, respectively, was as follows (in thousands):


	Three-Months ended						Nine-Months ended
	September 30,						September 30,
	2008			2007			2008			2007
Net (loss) income	$	(443	)		2,541			(300,415	)		5,945
Other comprehensive loss:
Unrealized loss on derivative instruments		(3,200	)		(6,630	)		(4,460	)		(4,961	)

Total comprehensive (loss) income	$	(3,643	)		(4,089	)		(304,875	)		984

6. New Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 141R, Business Combinations (“SFAS No. 141R”) and SFAS No. 160, Non-controlling Interests in Consolidated Financial Statements — an amendment to ARB No. 51 (“SFAS No. 160”). SFAS No. 141R and SFAS No. 160 require most identifiable assets, liabilities, non-controlling interests, and goodwill acquired in a business combination to be recorded at “full fair value” and require noncontrolling interests (previously referred to as minority interests) to be reported as a component of equity, which changes the accounting for transactions with non-controlling interest holders. Both SFAS No. 141R and SFAS No. 160 are effective for periods beginning on or after December 15, 2008 or fiscal year 2009 for us. SFAS No. 141R will be applied to business combinations occurring after the effective date. SFAS No. 160 will be applied prospectively to all non-controlling interests, including any that arose before the effective date. We are currently evaluating the impact of adopting SFAS No. 141R and SFAS No. 160 on our results of operations and financial position.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities (“SFAS No. 161”), which amends SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS No. 133”). SFAS No. 161 requires companies with derivative instruments to disclose information that should enable financial statement users to understand how and why a company uses derivative instruments, how derivative instruments and related hedged items are accounted for under SFAS No. 133, and how derivative instruments and related hedged items affect a company’s financial position, financial performance, and cash flows. The required disclosures include the fair value of derivative instruments and their gains or losses in tabular format, information about credit risk-related contingent features in derivative agreements, counterparty credit risk, and a company’s strategies and objectives for using derivative instruments. SFAS No. 161 expands the current disclosure framework in SFAS No. 133 and is effective prospectively for periods beginning on or after November 15, 2008 or fiscal year 2009 for us.

7. Income Taxes

During the three-months ended September 30, 2008, we determined we are no longer able to estimate our annual effective tax rate which would be applied to our pre-tax ordinary income. In accordance with FASB Interpretation No. 18, Accounting for Income Taxes in Interim Periods, we are calculating our effective income tax rate using a year to date income tax calculation. Our income tax expense differs from the statutory federal tax rate of 35% and related statutory state tax rates, primarily as a result of the application of SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”). Under SFAS No. 142, the reversal of our deferred tax liabilities related to our intangible assets could no longer be assured over our net operating loss carry forward period. Therefore, our effective tax rate is impacted by establishing a valuation allowance on substantially all of our deferred tax assets.

On January 1, 2007, we adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109 (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement 109, Accounting for Income Taxes, and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

We file federal, state and local income tax returns in the United States and Puerto Rico. The tax years that remain subject to assessment of additional liabilities by the United States federal, state, and local tax authorities are 2005 through 2007. The tax years that remain subject to assessment of additional liabilities by the Puerto Rico tax authority are 2003 through 2007.

Based on our evaluation, we have concluded that there are no significant uncertain tax positions requiring recognition in our consolidated financial statements. Upon implementation of FIN 48, we reviewed prior year tax filings and other corporate records for any uncertain tax positions in accordance with recognition standards established for which the statute of limitations remained open.

8. Litigation

We are subject to certain legal proceedings and claims that have arisen in the ordinary course of business and have not been fully adjudicated. In our opinion, we do not have a potential liability related to any current legal proceedings and claims that would individually or in the aggregate have a material adverse effect on our financial condition or operating results. However, the results of legal proceedings cannot be predicted with certainty. Should we fail to prevail in any of these legal matters or should all of these legal matters be resolved against us in the same reporting period, the operating results of a particular reporting period could be materially adversely affected.

Wolf, et al., Litigation

On November 28, 2001, a complaint was filed against us in the United States District Court for the Southern District of New York (the “Southern District of New York”) and was amended on April 19, 2002. The amended complaint alleges that the named plaintiff, Mitchell Wolf, purchased shares of our Class A common stock pursuant to the October 27, 1999, prospectus and registration statement relating to our initial public offering which closed on November 2, 1999 (the “IPO”). The complaint was brought on behalf of Mr. Wolf and an alleged class of similarly situated purchasers against us, eight underwriters and/or their successors-in-interest who led or otherwise participated in our IPO, two members of our senior management team, one of whom is our Chairman of the Board, and an additional director, referred to collectively as the individual defendants. To date, the complaint, while served upon us, has not been served upon the individual defendants.

This case is one of more than 300 similar cases brought by similar counsel against more than 300 issuers, 40 underwriter defendants, and 1,000 individuals alleging, in general, violations of federal securities laws in connection with initial public offerings, in particular, failing to disclose that the underwriter defendants allegedly solicited and received additional, excessive and undisclosed commissions from certain investors in exchange for which they allocated to those investors material portions of the restricted shares issued in connection with each offering. All of these cases, including the one involving us, have been assigned for consolidated pretrial purposes to one judge of the Southern District of New York. One of the claims against the individual defendants, specifically the Section 10b-5 claim, has been dismissed. On September 21, 2007, Kaye Scholer, on behalf of the individual defendants, executed a tolling agreement with plaintiffs providing for the dismissal without prejudice of all claims against the individual defendants upon the provision to plaintiffs of documentation showing that SBS has entity coverage for the period in question. Documentation of such coverage was subsequently provided to plaintiffs on December 19, 2007.

In June of 2003, after lengthy negotiations, a settlement proposal was embodied in a memorandum of understanding among the investors in the plaintiff class, the issuer defendants and the issuer defendants’ insurance carriers. On July 23, 2003, our Board of Directors approved both the memorandum of understanding and an agreement between the issuer defendants and the insurers. The principal components of the settlement include: (1) a release of all claims against the issuer defendants and their directors, officers and certain other related parties arising out of the alleged wrongful conduct in the amended complaint; (2) the assignment to the plaintiffs of certain of the issuer defendants’ potential claims against the underwriter defendants; and (3) a guarantee by the insurers to the plaintiffs of the difference between $1.0 billion and any lesser amount recovered by the plaintiffs against the underwriter defendants. The payments will be charged to each issuer defendant’s insurance policy on a pro rata basis.

On February 15, 2005, the Southern District of New York granted preliminary approval to the proposed settlement agreement, subject to a narrowing of the proposed bar on underwriter and non-settling defendant claims against the issuer defendants to cover only contribution claims. The court directed the parties to submit revised settlement documents consistent with its opinion and scheduled a conference for March 18, 2005 in order to (a) make final determinations as to the form, substance and program of notice and (b) schedule a Rule 23 fairness hearing. Pursuant to the court’s request, on May 2, 2005 the parties submitted an Amendment to Stipulation and Agreement of Settlement with Defendant Issuers and Individuals (the “Amendment”). Our Board of Directors approved the Amendment on May 4, 2005 and it has since received unanimous approval from all the non-bankrupt issuers. On August 31, 2005, the court issued an order of preliminary approval, reciting that the Amendment had been entered into by the parties to the Issuers’ Settlement Stipulation.

On December 5, 2006, the United States Court of Appeals for the Second Circuit (the “Second Circuit”) reversed the Southern District Of New York’s October 13, 2004 order granting a motion for class certification in six “focus cases” out of the more than 300 consolidated class actions, holding that Plaintiffs could not satisfy the predominance requirement for a Federal Rule of Civil Procedure 23(b)(3) class action. On December 14, 2006, the court held a conference with all counsel in the IPO cases to consider the impact of the Second Circuit’s reversal of class certification on these cases, including whether a class can be certified for settlement purposes when it cannot otherwise be certified for litigation purposes. The court determined to defer deciding the motion for final approval of the Issuers’ Settlement until further word from the Second Circuit about whether or not it will want to consider rehearing. On January 5, 2007, Plaintiffs filed a petition with the Second Circuit for a rehearing or rehearing en banc.

On May 30, 2007, the Southern District of New York held a status conference to discuss the impact of the Second Circuit’s December 5, 2006 decision and plaintiffs made an oral motion for class certification with respect to all of the consolidated actions, based on newly proposed class definitions. On October 10, 2008, at plaintiff’s request, the Southern District of New York ordered the withdrawal without prejudice of plaintiff’s motion for class certification, which had been fully briefed and was sub judice.

On August 14, 2007, plaintiffs filed amended complaints in the six “focus cases” and amended master allegations in the consolidated actions. On November 13, 2007, the issuer defendants moved to dismiss the amended complaints in the six “focus cases.” On March 26, 2008, the court granted in part the motion as to a subset of plaintiffs’ Section 11 claims, but denied the motion as to plaintiffs’ other claims. We are not named in any of the six “focus cases.”

On December 21, 2007, the underwriter defendants and issuer defendants filed oppositions to plaintiffs’ motion for class certification in the six “focus cases.” Plaintiffs’ reply brief was filed on March 28, 2008 and the underwriter defendants’ and issuer defendants’ surreply briefs were due on April 22, 2008. The court has not indicated that it will hold oral argument.

On January 7, 2008, the underwriter defendants filed a motion (in which the issuer defendants joined) to strike class allegations in 26 of the consolidated cases, including the case against us, on the ground that plaintiffs lacked a putative class representative in those cases at the time of their May 30, 2007 oral motion.

On May 13, 2008, the Court issued an order granting the motion in part and striking certain of the class allegations relating to the Section 10b-5 claims in 8 of the 26 actions, including the action against us. The order also requires Plaintiffs to make certain disclosures with respect to the putative class representatives in the remaining 18 actions. Once the disclosures are filed, Defendants may seek clarification of the Court’s May 13, 2008 order with respect to the status of the remaining 10b-5-related class allegations in the other 8 actions, including our action, as well as the status of the Section 11-related class allegations. Based on the current developments, we believe that it is unlikely that this litigation will result in any material liability to us that would not be covered by our existing insurance.

9. Impairment of FCC Broadcasting Licenses and Restructuring Costs

Our indefinite-lived intangible assets consist of FCC broadcasting licenses. FCC broadcasting licenses are granted to stations for up to eight years under the Telecommunications Act of 1996 (the “Act”). The Act requires the FCC to renew a broadcast license if: (i) it finds that the station has served the public interest, convenience and necessity; (ii) there have been no serious violations of either the Communications Act of 1934

or the FCC’s rules and regulations by the licensee; and (iii) there have been no other serious violations, which taken together, constitute a pattern of abuse. We intend to renew our licenses indefinitely and evidence supports our ability to do so. Historically, there has been no material challenge to our license renewals. In addition, the technology used in broadcasting is not expected to be replaced by another technology any time in the foreseeable future.

In accordance with SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”), we do not amortize our FCC broadcasting licenses. We test these indefinite-lived intangible assets for impairment at least annually or when an event occurs that may indicate that impairment may have occurred. Our valuations principally use the discounted cash flow methodology. This income approach consists of a quantitative model, which assumes the FCC broadcasting licenses are acquired and operated by a third-party. This income approach incorporates variables such as types of signals, media competition, audience share, market advertising revenue, market revenue projections, anticipated operating profit margins and discount rates. In the preparation of the FCC broadcasting license appraisals, we make estimates and assumptions that affect the valuation of the intangible assets. These estimates and assumptions could differ from actual results.

We generally test for impairment on our FCC broadcasting license intangible assets at the individual license level. However, we have applied the guidance in EITF 02-07, Unit of Accounting for Testing Impairment of Indefinite-Lived Intangible Assets (“EITF 02-07”), to certain of our FCC broadcasting license intangible assets. EITF 02-07 states that separately recorded indefinite-lived intangible assets should be combined into a single unit of accounting for purposes of testing impairment if they are operated as a single asset and, as such, are essentially inseparable from one another. We aggregate FCC broadcasting licenses for impairment testing if their signals are simulcast and are operating as one revenue-producing asset.

Our “goodwill” consists of the excess of the purchase price over the fair value of tangible and identifiable intangible net assets acquired in business combinations, when a “business” has been acquired under the applicable accounting literature. SFAS No. 142 requires us to test goodwill for impairment at least annually at the reporting unit level in lieu of being amortized. We have determined that we have two reporting units under SFAS No. 142, Radio and Television.

The goodwill impairment test is a two-step test. Under the first step, the fair value of the reporting unit is compared with its carrying value (including goodwill). If the fair value of the reporting unit is less than its carrying value, an indication of goodwill impairment exists for the reporting unit. Accordingly, the enterprise must perform step two of the impairment test (measurement).

During the three-months ended June 30, 2008, we performed an impairment review of our indefinite-lived intangible assets and determined that there was an impairment of our FCC broadcasting licenses. We recorded a non-cash impairment loss of approximately $396.3 million related to the FCC broadcasting licenses for certain individual stations in our Los Angeles, San Francisco, Puerto Rico, Miami and New York markets. The tax impact of the impairment loss was a tax benefit of approximately $109.2 million, which related to the reduction of the book/tax basis differences on our FCC broadcasting licenses. The impairment loss was due to market changes in estimates and assumptions which (a) decreased advertising revenue growth projections for the broadcasting industry, and (b) increased the discount rate. Also, the current decline in cash flow multiples for recent station sales were considered in the estimates and assumptions used. Additionally, we performed an impairment review of our goodwill and determined that there was no impairment.

Under a restructuring plan to reduce expenses throughout the Company, we incurred costs totaling $2.2 million related to the termination of various programming contracts and personnel.

10. Derivative Instruments

Fair Value of Derivative Instruments

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”), which defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We adopted SFAS No. 157 effective January 1, 2008. The adoption of SFAS No. 157 did not impact our consolidated financial position and results of operations. In accordance with SFAS No. 157, the following table represents our liabilities that are measured at fair value on a recurring basis at September 30, 2008 and the level within the fair value hierarchy in which the fair value measurements are included.


	Fair Value Measurements at
	September 30, 2008
	Using Significant Other
Description	Observable Inputs (Level 2)
Derivatives — Liabilities	$	4,639

In February 2008, the FASB issued Staff Position FAS 157-2, Effective Date of FASB Statement No. 157 (“FSP No. 157-2”), which defers the effective date of SFAS No. 157 for non-financial assets and liabilities, except for items that are recognized or disclosed at fair value on a recurring basis, to fiscal years beginning after November 15, 2008 and interim periods within those fiscal years. We have elected the deferral option permitted by FSP No. 157-2 for our non-financial assets and liabilities initially measured at fair value in prior business combinations including intangible assets and goodwill. On October 10, 2008, the FASB issued Staff Position FAS No. 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active, which clarifies the application of SFAS No. 157, Fair Value Measurements, and includes an example illustrating the key principles for determining fair value in a market that is not active.

Accounting for Derivative Instruments

In September and October 2008, the counterparty to one of our interest rate swaps, Lehman Brothers Special Financing Inc., and its parent and credit support provider, Lehman Brothers Holdings Inc., each filed for bankruptcy. Based on these bankruptcy filings, we believe that these cash flow hedges no longer qualify for hedge accounting. Therefore, the change in fair value from September 15, 2008, the last time this hedge was determined to be effective, to September 30, 2008, was $3.6 million which was recorded in earnings as a “Change in fair value of derivative instrument”.

On September 15, 2008, the Accumulated Other Comprehensive Loss associated with this hedge was $7.8 million and will be reclassified into earnings (interest expense) over the remaining life of the hedge, which terminates on June 30, 2010. During the three months ended September 30, 2008, $0.2 million was reclassified and recorded as interest expense.

11. Fair Value of Financial Instruments

SFAS No. 107, Disclosures About Fair Value of Financial Instruments, requires disclosure of the fair value of certain financial instruments. Cash and cash equivalents, receivables, prepaids and other current assets, as well as accounts payable, accrued expenses, unearned revenue and other current liabilities, as reflected in the condensed consolidated balance sheets, approximate fair value because of the short-term maturity of these instruments. The estimated fair value of our other long-term debt instruments, approximate their carrying amounts as the interest rates approximate our current borrowing rate for similar debt instruments of comparable maturity, or have variable interest rates.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

The estimated fair values of our financial instruments are as follows (in millions):


	September 30,				December 31,
	2008				2007
	Gross				Gross
	carrying				carrying
Description	amount		Fair value		amount		Fair value
Senior credit facilities	$	313.6		181.9		316.1		291.6
10³/₄% Series B cumulative exchangeable redeemable preferred stock	$	91.9		39.9		89.9		89.9

The fair value estimates of the financial instruments were based upon quotes from major financial institutions taking into consideration current rates offered to us for debt or equity instruments of the same remaining maturities.

12. Subsequent Events

Draw Down of Revolving Credit Facility

On October 3, 2008, we requested to draw down $25.0 million from our $25.0 million revolver facility under the senior secured credit facility agreement, dated as of June 10, 2005, among us, Merrill Lynch, Pierce Fenner & Smith, Incorporated, as syndication agent, Wachovia Bank, National Association, as documentation agent, Lehman Commercial Paper Inc. (“Lehman”), as administrative agent, and various lenders from time to time. On October 8, 2008, we only received an aggregate of $15.0 million of the $25.0 million revolver as a result of Lehman’s failure to fund its $10.0 million portion of the facility due to its bankruptcy filing.

The $15.0 million drawn on October 8, 2008 currently bears interest at a rate equal to 1.0% over the base prime rate unless converted to a LIBOR-based term rate. As of October 8, 2008, the applicable margin of the revolving credit facility was (i) 2.00% per annum for Eurodollar loans and (ii) 1.00% per annum for base rate loans.

On October 24, 2008, the draw down on the revolver was used, with other funds, to repay the non-interest bearing secured promissory note of $18.5 million. Please refer to the “Early Extinguishment of the $18.5 million Non-interest Bearing Promissory Note” section below for further details.

We are exploring options to replace Lehman’s commitment within the revolver, but we cannot guarantee that we will be able to obtain such replacement from others. However, we believe that we have sufficient liquidity to conduct our normal operations and do not believe that the potential reduction in available capacity under this revolver will have a material impact on our short-term liquidity.

Dividend Payment on the Series B Preferred Stock

Under the terms of our Series B preferred stock, we are required to pay dividends at a rate of 10 ³/4 % per year of the $1,000 liquidation preference per share of Series B preferred stock. From October 30, 2003 to October 15, 2008, we had the option to pay these dividends in either cash or additional shares of Series B preferred stock. On October 15, 2008, we paid our quarterly dividend in additional shares of our Series B preferred stock. After October 15, 2008, we are required to pay the quarterly dividends on our Series B preferred stock in cash.

NASDAQ Delisting Letter and Temporary Postponement

On October 22, 2008, we received a notification letter (the “Letter”) from The Nasdaq Stock Market (“NASDAQ”), notifying us that NASDAQ has suspended, for a three-month period, effective October 16, 2008, the enforcement of the rule requiring a minimum bid price and market value of publicly held shares (the “Rule”). NASDAQ has said that it will not take any action to delist any security for these concerns during the suspension period. NASDAQ has stated that, given the current extraordinary market conditions, this suspension will remain in effect through Friday, January 16, 2009 and that the Rule will be reinstated on Monday, January 19, 2009, and the first relevant trade date will be Tuesday, January 20, 2009.

We previously received a Staff Deficiency Letter from NASDAQ on August 20, 2008 indicating that the minimum bid price of our common stock had fallen below $1.00 for 30 consecutive trading days, and that it was therefore not in compliance with NASDAQ Marketplace Rule 4450(b). The notice further provided that in accordance with the NASDAQ Marketplace Rules, we would be provided 180 calendar days, or until February 17, 2009, to regain compliance with the minimum bid price requirement.

We had 124 calendar days remaining in our compliance period as of October 16, 2008, the effective date of NASDAQ’s suspension. Upon reinstatement of the rules on January 19, 2009, we will have the same number of days remaining, or until May 26, 2009, to regain compliance. We may regain compliance, either during the suspension or during the compliance period resuming after the suspension, by achieving a $1.00 closing bid price for a minimum of 10 consecutive trading days.

During this interim period, our common stock is expected to continue to trade on The NASDAQ Global Market. If compliance with Marketplace Rule 4450(b) cannot be demonstrated by May 26, 2009, our common stock will be subject to delisting from The NASDAQ Global Market.

We intend to use all reasonable efforts to maintain the listing of our common stock on the Nasdaq Global Market, but there can be no guarantee that we will regain compliance with the continued listing requirements, or will be able to demonstrate a plan to sustain compliance in order to avoid delisting from the Nasdaq Global Market.

Early Extinguishment of the $18.5 million Non-interest Bearing Promissory Note

On October 24, 2008, we entered into a letter agreement with BC Media Funding Company II, LLC, as agent for Media Funding Company, LLC, successors in interest to the rights of WDLP Broadcasting Company, LLC and Robin Broadcasting Company, LLC, for the early extinguishment of the $18,500,000 non-interest bearing promissory note due January 2, 2009 (the “Note”).

Pursuant to the letter agreement, we received a discount of $150,000 and only paid $18,350,000 (the “Payoff Amount”) in full satisfaction due under the Note. We used cash on hand and $15.0 million of proceeds drawn down from the revolving credit facility to satisfy the Payoff Amount.

In addition, on October 24, 2008, we were released from all obligations and liabilities, security interests, pledges, liens, mortgages, assignments or other interests granted by us and our subsidiaries pursuant to the security agreement, the pledge agreement, the Note and any and all documentation related to the loan documents.


Item 2.		*Management’s Discussion and Analysis of Financial Condition and Results of Operations*

Overview

We own and/or operate 21 radio stations in markets that reach approximately 48% of the U.S. Hispanic population. In addition, we own and operate two television stations and have four broadcasting outlets under affiliation or programming agreements, which reach approximately 3.0 million households throughout the U.S. and Puerto Rico.

The success of each of our stations depends significantly upon its audience ratings and share of the overall advertising revenue within its market. The broadcasting industry is a highly competitive business, but some barriers to entry do exist. Each of our stations competes with both Spanish-language and English-language stations in its market, as well as with other advertising media, such as newspapers, cable television, the Internet, magazines, outdoor advertising, satellite radio and television, transit advertising and direct mail marketing. Factors which are material to our competitive position include management experience, our stations’ rank in their markets, signal strength and frequency, and audience demographics, including the nature of the Spanish-language market targeted by a particular station.

Our primary source of revenue is the sale of advertising time on our stations to local and national advertisers. Our revenue is affected primarily by the advertising rates that our stations are able to charge, as well as the overall demand for advertising time in each respective market. Seasonal net broadcasting revenue fluctuations are common in the broadcasting industry and are primarily due to fluctuations in advertising demand from local and national advertisers. Typically for the broadcasting industry, the first calendar quarter generally produces the lowest revenue. Our most significant operating expenses are compensation expenses, programming expenses, professional fees, and advertising and promotional expenses. Our senior management strives to control these expenses, as well as other expenses, by working closely with local station management and others, including vendors.

Our radio stations are located in six of the top-ten Hispanic markets of Los Angeles, New York, Puerto Rico, Chicago, Miami and San Francisco. Los Angeles and New York have the largest and second largest Hispanic populations, and are also the largest and second largest radio markets in the United States in terms of advertising revenue, respectively. We format the programming of each of our radio stations to capture a substantial share of the U.S. Hispanic audience in their respective markets. The U.S. Hispanic population is diverse, consisting of numerous identifiable groups from many different countries of origin and each with its own musical and cultural heritage. The music, culture, customs and Spanish dialects vary from one radio market to another. We strive to maintain familiarity with the musical tastes and preferences of each of the various Hispanic ethnic groups and customize our programming to match the local preferences of our target demographic audience in each market we serve. Our radio revenue is generated primarily from the sale of local and national advertising.

Our television stations and related affiliates operate under one brand known as “MegaTV”. We have created a unique television format which focuses on entertainment, events and variety with high-quality production. Our programming is formatted to capture shares of the U.S. Hispanic audience by focusing on our core strengths as an “entertainment” company, thus offering a new alternative compared to the traditional Latino channels. MegaTV’s programming is based on a strategy designed to showcase a combination of programs, ranging from televised radio-branded shows to general entertainment programs, such as music, celebrity, debate, interviews and personality based shows. As part of our strategy, we have incorporated certain of our on-air personalities into our programming, as well as including interactive elements to complement our Internet websites. We develop and produce more than 70% of our programming and obtain other content from Spanish-language production partners. Our television revenue is generated primarily from the sale of local advertising and paid programming.

As part of our operating business, we also operate LaMusica.com, Mega.tv, and our radio station websites which are bilingual (Spanish — English) websites providing content related to Latin music, entertainment, news and culture. LaMusica.com and our network of station websites generate revenue primarily from advertising and sponsorship. In addition, the majority of our station websites simultaneously stream our stations’ content, which has broadened the audience reach of our radio stations. We also occasionally produce live concerts and events throughout the United States, including Puerto Rico.

Comparison Analysis of the Operating Results for the Three-Month Periods Ended September 30, 2008 and 2007

The following summary table presents financial data for each of our operating segments (in thousands):


	Three-Months Ended
	September 30,						Change
	2008			2007			$			%
Net revenue:
Radio	$	36,411			44,333			(7,922	)		(18	%)
Television		4,842			2,439			2,403			99	%

Consolidated	$	41,253			46,772			(5,519	)		(12	%)


Engineering and programming expenses:
Radio	$	9,438			8,957			481			5	%
Television		4,554			3,596			958			27	%

Consolidated	$	13,992			12,553			1,439			11	%


Selling, general and administrative expenses:
Radio	$	13,579			15,351			(1,772	)		(12	%)
Television		3,006			1,868			1,138			61	%

Consolidated	$	16,585			17,219			(634	)		(4	%)


Corporate expenses:	$	2,707			3,881			(1,174	)		(30	%)

Depreciation and amortization:
Radio	$	817			716			101			14	%
Television		578			170			408			240	%
Corporate		397			308			89			29	%

Consolidated	$	1,792			1,194			598			50	%


(Gain) loss on the disposal of assets, net:
Radio	$	(5	)		51			(56	)		(110	%)
Television		—			—			—			0	%
Corporate		—			—			—			0	%

Consolidated	$	(5	)		51			(56	)		(110	%)


Restructuring costs:
Radio	$	2,191			—			2,191			100	%
Television		8			—			8			100	%
Corporate		—			—			—			0	%

Consolidated	$	2,199			—			2,199			100	%


Operating income (loss):
Radio	$	10,391			19,258			(8,867	)		(46	%)
Television		(3,304	)		(3,195	)		(109	)		3	%
Corporate		(3,104	)		(4,189	)		1,085			(26	%)

Consolidated	$	3,983			11,874			(7,891	)		(66	%)

The following summary table presents a comparison of our results of operations for the three-month periods ended September 30, 2008 and 2007. Various fluctuations illustrated in the table are discussed below. This section should be read in conjunction with our unaudited condensed consolidated financial statements and notes.


	Three-Months Ended
	September 30,						Change
	2008			2007			$			%
	(In thousands)
Net revenue	$	41,253			46,772			(5,519	)		(12	%)

Engineering and programming expenses		13,992			12,553			1,439			11	%
Selling, general and administrative expenses		16,585			17,219			(634	)		(4	%)
Corporate expenses		2,707			3,881			(1,174	)		(30	%)
Depreciation and amortization		1,792			1,194			598			50	%
(Gain) loss on disposal of assets, net		(5	)		51			(56	)		(110	%)
Restructuring costs		2,199			—			2,199			100	%

Operating income	$	3,983			11,874			(7,891	)		(66	%)
Interest expense, net		(5,686	)		(4,789	)		(897	)		19	%
Change in fair value of derivative instrument		3,585			—			3,585			100	%
Other income, net		—			25			(25	)		(100	%)
Income tax expense		2,325			4,569			(2,244	)		(49	%)

Net (loss) income	$	(443	)	$	2,541			(2,984	)		(117	%)

Net Revenue. The decrease in our consolidated net revenue of $5.5 million or 12% was due to the decrease in net revenue from our radio segment of $7.9 million or 18%, offset by an increase in our television segment net revenue of $2.4 million or 99%. Our radio segment had a decrease in net revenue primarily due to lower local and national sales. The decrease in local sales occurred primarily in our Miami, Los Angeles, New York and Chicago markets, offset by an increase in our Puerto Rico market. The decrease in national sales occurred throughout all of our markets. Our television segment net revenue growth was primarily due to increases in local spot sales, subscriber revenue related to the DIRECTV affiliation agreements, barter sales, and local integrated sales.

Engineering and Programming Expenses. The increase in our consolidated engineering and programming expenses of $1.4 million or 11% was due to increases in both our television and radio segments. Our television segment expenses increased $0.9 million or 27%, primarily due to an increase in original produced programming, as well as fiber link and transmitter line charges related to the expansion of MegaTV outlets. Our radio segment expenses increased $0.5 million or 5%, primarily related to an increase in compensation and benefits for our radio programming personnel related to new morning shows in our Puerto Rico, Chicago and Miami markets and an increase in transmitter lines, rent and electricity expenses.

Selling, General and Administrative Expenses. The decrease in our consolidated selling, general and administrative expenses of $0.6 million or 4% was due to a decrease in our radio segment. Our radio segment expenses decreased $1.7 million or 12%, primarily due to a decrease in advertising, promotional and marketing costs, sales commissions, and a decrease in the allowance for doubtful account provision. Our television segment expenses increased $1.1 million or 61%, primarily due to the increase in advertising, promotional and marketing costs related to new shows, barter expense and employee compensation.

Corporate Expenses. The decrease in corporate expenses was a result of decreases in professional fees related to legal costs, and employee compensation.

Depreciation and Amortization. The increase in our consolidated depreciation and amortization expenses is directly related to the increase in capital expenditures throughout our company.

Restructuring Costs. The increase was related to restructuring costs associated with the implementation of our restructuring plan. Under a restructuring plan to reduce expenses throughout the company, we incurred costs totaling $2.2 million related to the terminations of programming contracts and personnel.

Operating Income. The decrease in operating income was mainly due to the decrease in consolidated net revenue and the restructuring costs of $2.2 million, offset by a decrease in corporate expenses.

Interest Expense, net. The increase in interest expense, net, was due to a decrease in interest income, resulting from a general decline in interest rates on our lower cash balances.

Change in Fair Value of Derivative Instrument. In September and October 2008, the counterparty to one of our interest rate swaps, Lehman Brothers Special Financing Inc., and its parent and credit support provider, Lehman Brothers Holdings Inc., each filed for bankruptcy. Based on these bankruptcy filings, we believe that these cash flow hedges no longer qualify for hedge accounting. Therefore, the change in fair value from September 15, 2008, the last time this hedge was determined to be effective, and to September 30, 2008, was $3.6 million, which was recorded in earnings as a “Change in fair value of derivative instrument”.

Income Taxes. The decrease in income tax expense was related to the impact of the prior quarter’s impairment of FCC broadcasting licenses had on our income taxes for the current period.

Net (Loss) Income. The decrease in net (loss) income was primarily due to the decrease in operating income, offset by the change in fair value of derivative instrument and decrease in income taxes.

Comparison Analysis of the Operating Results for the Nine-Month Periods Ended September 30, 2008 and 2007

The following summary table presents financial data for each of our operating segments (in thousands):


	Nine-Months Ended
	September 30,						Change
	2008			2007			$			%

Net revenue:
Radio		110,445			126,421			(15,976	)		(13	%)
Television		12,421			7,159			5,262			74	%

Consolidated		122,866			133,580			(10,714	)		(8	%)


Engineering and programming expenses:
Radio		29,590			26,867			2,723			10	%
Television		14,520			10,357			4,163			40	%

Consolidated		44,110			37,224			6,886			18	%


Selling, general and administrative expenses:
Radio		45,449			48,068			(2,619	)		(5	%)
Television		8,348			5,255			3,093			59	%

Consolidated		53,797			53,323			474			1	%


Corporate expenses:		9,972			10,596			(624	)		(6	%)

Depreciation and amortization:
Radio		2,397			2,153			244			11	%
Television		1,022			440			582			132	%
Corporate		1,177			843			334			40	%

Consolidated		4,596			3,436			1,160			34	%


(Gain) loss on the disposal of assets, net:
Radio		(10	)		50			(60	)		(120	%)
Television		—			—			—			0	%
Corporate		—			—			—			0	%

Consolidated		(10	)		50			(60	)		(120	%)


Impairment of FCC broadcasting licenses and restructuring costs:
Radio		381,606			—			381,606			100	%
Television		16,845			—			16,845			100	%
Corporate		—			—			—			0	%

Consolidated		398,451			—			398,451			100	%


Operating (loss) income:
Radio		(348,587	)		49,283			(397,870	)		(807	%)
Television		(28,314	)		(8,893	)		(19,421	)		218	%
Corporate		(11,149	)		(11,439	)		290			(3	%)

Consolidated		(388,050	)		28,951			(417,001	)		(1440	%)

The following summary table presents a comparison of our results of operations for the nine-month periods ended September 30, 2008 and 2007. Various fluctuations illustrated in the table are discussed below. This section should be read in conjunction with our unaudited condensed consolidated financial statements and notes.


	Nine-Months Ended
	September 30,						Change
	2008			2007			$			%
	(In thousands)
Net revenue	$	122,866			133,580			(10,714	)		(8	%)
Engineering and programming expenses		44,110			37,224			6,886			18	%
Selling, general and administrative expenses		53,797			53,323			474			1	%
Corporate expenses		9,972			10,596			(624	)		(6	%)
Depreciation and amortization		4,596			3,436			1,160			34	%
(Gain) loss on disposal of assets, net		(10	)		50			(60	)		(120	%)
Impairment of FCC broadcasting licenses and restructuring costs		398,451			—			398,451			100	%

Operating (loss) income	$	(388,050	)		28,951			(417,001	)		(1440	%)
Interest expense, net		(16,085	)		(14,213	)		(1,872	)		13	%
Change in fair value of derivative instrument		3,585			—			3,585			100	%
Other income, net		1,928			1,985			(57	)		(3	%)
Income tax (benefit) expense		(98,207	)		10,778			(108,985	)		(1011	%)

Net (loss) income	$	(300,415	)	$	5,945			(306,360	)		(5153	%)

Net Revenue. The decrease in our consolidated net revenue of $10.7 million or 8% was due to the decrease in net revenue from our radio segment of $16.0 million or 13%, offset by an increase in our television segment net revenue of $5.3 million or 74%. Our radio segment had a decrease in net revenue primarily due to lower local and national sales. The decrease in local sales occurred primarily in our Miami, Los Angeles, Chicago and New York markets, offset by an increase in our Puerto Rico market. The decrease in national sales occurred in our Miami, Chicago and New York markets, offset by an increase in our Los Angeles market. Our television segment net revenue growth was primarily due to increases in subscriber revenue related to the DIRECTV affiliation agreements, local spot sales, barter sales, and local integrated sales.

Engineering and Programming Expenses. The increase in our consolidated engineering and programming expenses of $6.9 million or 18% was due to increases in both our television and radio segments. Our television segment expenses increased $4.2 million or 40%, primarily due to increases in (a) original produced programming, (b) acquired programming licenses, (c) on-air promotions related to newly produced or acquired shows, and (d) fiber link and transmitter line charges related to the expansion of MegaTV outlets. Our radio segment expenses increased $2.7 million or 10%, primarily related to increases in (a) compensation and benefits for our radio programming personnel related to new morning shows in our Puerto Rico, Chicago and Miami markets, (b) legal settlement related to the Amigo Broadcasting litigation, (c) music license fees, and (d) transmitter lines, rent and electricity expenses.

Selling, General and Administrative Expenses. The increase in our consolidated selling, general and administrative expenses of $0.5 million or 1% was due to an increase in our television segment. Our television segment expenses increased $3.1 million or 59%, primarily due to an increase in advertising, promotional and marketing costs related to new shows, barter expense and professional fees. Our radio segment expenses decreased $2.6 million or 5%, primarily due to a decrease in sales commissions, taxes and licenses, and the allowance for doubtful account provision.

Corporate Expenses. The decrease in corporate expenses was a result of a decrease in employee compensation.

Depreciation and Amortization. The increase in our consolidated depreciation and amortization expenses is directly related to the increase in capital expenditures throughout our company.

Impairment of FCC Broadcasting Licenses and Restructuring Costs. As a result of our SFAS No. 142 impairment testing of our indefinite-lived intangible assets and goodwill, we recorded a non-cash impairment loss of approximately $396.3 million related to the FCC broadcasting licenses for certain individual stations in our Los Angeles, San Francisco, Puerto Rico, Miami and New York markets. The impairment loss was due to market changes in estimates and assumptions which (a) decreased advertising revenue growth projections for the broadcasting industry, and (b) increased the discount rate. Also, the current decline in cash flow multiples for recent station sales were considered in the estimates and assumptions used.

In addition, under a restructuring plan to reduce expenses throughout the Company, we incurred costs totaling $2.2 million related to the terminations of programming contracts and personnel.

Operating (Loss) Income. The decrease in operating (loss) income was mainly due to the impairment of FCC broadcasting licenses and restructuring costs of $398.5 million. Also contributing to the decrease in operating (loss) income was an increase in our television segment’s operating expenses and a decrease in our radio segment’s net revenue.

Interest Expense, net. The increase in interest expense, net, was due to a decrease in interest income, resulting from a general decline in interest rates on our lower cash balances.

Income Taxes. The income tax benefit of $98.2 million arose primarily from the impact of the reduction of our deferred tax liabilities related to the impairment of our FCC broadcasting licenses of approximately $109.2 million, offset by income tax expense resulting from the tax amortization of our FCC broadcasting licenses.

Net (Loss) Income. The decrease in net (loss) income was primarily due to the decrease in operating (loss) income related primarily to the impairment of FCC broadcasting licenses and restructuring costs, partially offset by its related income tax benefit.

Liquidity and Capital Resources

Our primary sources of liquidity are cash on hand ($34.0 million as of September 30, 2008), cash expected to be provided by operations and any additional proceeds from our existing revolving credit facility. Our cash flow from operations is subject to such factors as shifts in population, station listenership and viewership, demographics, audience tastes and fluctuations in preferred advertising media. Our ability to raise funds by increasing our indebtedness is limited by the terms of the certificates of designation governing our Series B preferred stock and the credit agreement governing our senior secured credit facility. Additionally, our certificates of designations and credit agreement each place restrictions on us with respect to the sale of assets, liens, investments, dividends, debt repayments, capital expenditures, transactions with affiliates and consolidations and mergers, among other things.

Management continually projects anticipated cash requirements and believes that cash from operating activities, together with cash on hand, should be sufficient to permit us to meet our operating obligations in the foreseeable future, including, among other things, required quarterly interest and principal payments pursuant to the credit agreements governing our senior secured credit facility due 2012, quarterly cash dividend payments pursuant to the certificates of designation governing our Series B preferred stock, and capital expenditures, excluding the acquisitions of FCC licenses. While not significant to us to date, the disruptions in the capital and credit markets may result in increased borrowing costs associated with our short-term and long-term debts. Assumptions (none of which can be assured) which underlie management’s beliefs, include the following:

	•		the demand for advertising within the broadcasting industry and economic conditions in general will not continue to deteriorate further in any material respect;

	•		we will continue to successfully implement our business strategy; and

•

we will not incur any material unforeseen liabilities, including environmental liabilities and legal judgments.

Our strategy is to primarily utilize cash flows from operations to meet our capital needs and contractual obligations.

We continuously evaluate opportunities to make strategic acquisitions and/or dispositions, primarily in the largest Hispanic markets in the United States. We engage in discussions regarding potential acquisitions and/or dispositions from time to time in the ordinary course of business. We anticipate that any future acquisitions would be financed through funds generated from permitted debt financing, equity financing, operations, asset sales or a combination of these or other available sources. However, there can be no assurance that financing from any of these sources, if necessary and available, can be obtained on favorable terms for future acquisitions.

The following summary table presents a comparison of our capital resources for the nine-month periods ended September 30, 2008 and 2007, with respect to certain of our key measures affecting our liquidity. The changes set forth in the table are discussed below. This section should be read in conjunction with the unaudited condensed consolidated financial statements and notes.


	Nine-Months Ended
	September 30,						Change
	2008			2007			$
	(In thousands)
Capital expenditures:
Radio		2,643			1,358			1,285
Television		12,525			3,030			9,495
Corporate		423			2,343			(1,920	)

Consolidated	$	15,591			6,731			8,860


Net cash flows (used in) provided by operating activities	$	(1,607	)		13,694			(15,301	)
Net cash flows used in investing activities		(15,500	)		(6,716	)		(8,784	)
Net cash flows used in financing activities		(10,010	)		(9,983	)		(27	)

Net decrease in cash and cash equivalents	$	(27,117	)		(3,005	)

Capital Expenditures. The increase in our capital expenditures is a result of various capital projects, including but not limited to the SBS Miami Broadcast Center that was completed in the third quarter of 2008. We are estimating our capital expenditures for the fiscal year 2008 to be in the range of $16.0 million to $18.0 million.

Net Cash Flows (Used In) Provided by Operating Activities. Changes in our net cash flows from operating activities were primarily a result of the decrease in cash sales and an increase in cash paid to vendors.

Net Cash Flows Used in Investing Activities. Changes in our net cash flows from investing activities were primarily a result of the following: (a) in 2008, we continued to make improvements to the SBS Miami Broadcast Center which was purchased in 2007; these improvements totaled $5.8 million and other capital expenditures totaled $9.8 million, and (b) in 2007, we acquired the SBS Miami Broadcast Center and began making improvements to that building totaling $2.6 million and other capital expenditures of $4.1 million.

Net Cash Flows Used In Financing Activities. There were no significant changes in our net cash flows from financing activities.

Restructuring Costs

Under a restructuring plan to reduce expenses throughout the Company, we incurred costs totaling $2.2 million related to the termination of various programming contracts and personnel. We believe that the restructuring plan and other cost-cutting measures will likely result in cost savings of approximately $11.0 to $13.0 million over the next twelve-months. This range excludes savings from our significant reduction of cash advertising and marketing expenses. In addition, we will continue to review other cost-cutting measures.

Recent Developments

Draw Down of Revolving Credit Facility

Dividend Payment on the Series B Preferred Stock

NASDAQ Delisting Letter and Temporary Postponement

Early Extinguishment of the $18.5 million Non-interest Bearing Promissory Note

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.

Impact of Inflation

We believe that inflation has not had a material impact on our results of operations for the nine-months ended September 30, 2008. However, there can be no assurance that inflation will not have an adverse impact on our future operating results and financial condition.


Item 3.		*Quantitative and Qualitative Disclosures About Market Risk*

Interest Rate Risk. As part of our efforts to mitigate interest rate risk, on June 29, 2005, we entered into a five year interest rate swap agreement that hedged (fixed) the interest rate, based on LIBOR, on our current Eurodollar rate of our $313.6 million senior secured credit facility term loan at an interest rate for five years at 4.23%, plus the applicable margin of 1.75%. This swap agreement is intended to reduce our exposure to interest rate fluctuations and was not entered into for speculative purposes.

Our exposure under our interest rate swap agreement reflects the cost of replacing an agreement in the event of nonperformance by our counter party. In September and October 2008, the counterparty to this swap agreement, Lehman Brothers Special Financing Inc. (“Lehman Brothers”), and its parent and credit support provider, Lehman Brothers Holdings Inc. (“Lehman Holdings”), each filed for bankruptcy, which created a default under the swap agreement. As of September 30, 2008, the rate under this swap agreement was unfavorable compared to the market. Therefore, we believe that interest rate risk is not significant to our consolidated financial position or results of operations. We will continue to evaluate swap rates as the market dictates and we are exploring our options that may be available to us as a result of Lehman Holdings and Lehman Brothers’ defaults under the swap agreement.


Item 4.		*Controls and Procedures*

Evaluation Of Disclosure Controls And Procedures. Our Chief Executive Officer and Chief Financial Officer have conducted an evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures,” as such term is defined under Rule 13a-15(e) of the Exchange Act, to ensure that information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and include controls and procedures designed to ensure that information we are required to disclose in such reports is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded, as a result of the material weakness in internal control over financial reporting discussed below, that our disclosure controls and procedures were not effective as of the end of the period covered by this report. However, we believe that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.

In November 2008, management concluded that a control deficiency with respect to the review and verification of the accuracy of the calculation of the provision for income taxes constituted a material weakness in internal control over financial reporting. This control deficiency resulted in an adjustment to the unaudited interim condensed consolidated financial statements for the quarter ended September 30, 2008 affecting the provision for income taxes.

Management is in the process of reviewing and, as necessary, revising its policies and procedures with respect to controls over the review and verification of the accuracy of the calculation of the provision for income taxes to ensure that all reasonable steps will be taken to correct this material weakness. As part of this process, management expects to add additional review and controls, and improve the system applications used to calculate the provision for income taxes. The deficiency will not be considered remediated until the new internal controls are operational for a period of time and tested, and management concludes that the controls are operating effectively.

Changes In Internal Control Over Financial Reporting. There have been no significant changes in our internal control over financial reporting that occurred during the period covered by this report, other than the material weakness described above, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION


Item 1.		*Legal Proceedings*

The information set forth under Note 8 contained in the “Notes to Unaudited Condensed Consolidated Financial Statements” of this Quarterly Report on Form 10-Q is incorporated by reference in answer to this Item.

Item 1A. Risk Factors

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2007, which could materially affect our business, financial condition or future results. There have been no material changes from the risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2007, but they are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.


Item 5.		Other Information

The information set forth under Note 12 contained in the “Notes to Unaudited Condensed Consolidated Financial Statements” of this Quarterly Report on Form 10-Q is incorporated by reference in answer to this Item.


Item 6.		*Exhibits*

(a) Exhibits

The following exhibits, which are numbered in accordance with Item 601 of Regulation S-K, are filed herewith or, as noted, incorporated by reference herein:


Exhibit
Number			Exhibit Description

	3.1	—	Third Amended and Restated Certificate of Incorporation of Spanish Broadcasting System, Inc. (the “Company”), dated September 29, 1999 (incorporated by reference to the Company’s 1999 Registration Statement on Form S-1 (Commission File No. 333-85499) (the “1999 Registration Statement”)) (Exhibit A to this exhibit is incorporated by reference to the Company’s Current Report on Form 8-K, dated March 25, 1996 (the “1996 Current Report”).

	3.2	—	Certificate of Amendment to the Third Amended and Restated Certificate of Incorporation of the Company, dated September 29, 1999 (incorporated by reference to Exhibit 3.2 of the Company’s 1999 Registration Statement).

	3.3	—	Amended and Restated By-Laws of the Company (incorporated by reference to Exhibit 3.3 of the Company’s 1999 Registration Statement).

	3.4	—	Certificate of Elimination of 141/4% Senior Exchangeable Preferred Stock, Series A of the Company, dated October 28, 2003 (incorporated by reference to Exhibit 3.3 of the Company’s Quarterly Report on Form 10-Q, dated November 14, 2003 (the “11/14/03 Quarterly Report”)).

	4.1	—	Article V of the Third Amended and Restated Certificate of Incorporation of the Company, dated September 29, 1999 (incorporated by reference to Exhibit 3.1 of the Company’s 1999 Registration Statement).

	4.2	—	Certificate of Designations dated October 29, 2003 Setting Forth the Voting Power, Preferences and Relative, Participating, Optional and Other Special Rights and Qualifications, Limitations and Restrictions of the 103/4% Series A Cumulative Exchangeable Redeemable Preferred Stock of Spanish Broadcasting System, Inc. (incorporated by reference to Exhibit 4.1 of the Company’s 11/14/03 Quarterly Report).

	4.3	—	Certificate of Designations dated October 29, 2003 Setting Forth the Voting Power, Preferences and Relative, Participating, Optional and Other Special Rights and Qualifications, Limitations and Restrictions of the 103/4% Series B Cumulative Exchangeable Redeemable Preferred Stock of Spanish Broadcasting System, Inc. (incorporated by reference to Exhibit 4.2 of the Company’s 11/14/03 Quarterly Report).

	4.4	—	Indenture dated June 29, 1994 among the Company, IBJ Schroder Bank & Trust Company, as Trustee, the Guarantors named therein and the Purchasers named therein (incorporated by reference to Exhibit 4.1 of the Company’s 1994 Registration Statement on Form S-4 (the “1994 Registration Statement”).

	4.5	—	First Supplemental Indenture dated as of March 25, 1996 to the Indenture dated as of June 29, 1994 among the Company, the Guarantors named therein and IBJ Schroder Bank & Trust Company, as Trustee (incorporated by reference to the 1996 Current Report).

	4.6	—	Second Supplemental Indenture dated as of March 1, 1997 to the Indenture dated as of June 29, 1994 among the Company, the Guarantors named therein and IBJ Schroder Bank & Trust Company, as Trustee (incorporated by reference to the 1996 Current Report).

	4.7	—	Supplemental Indenture dated as of October 21, 1999 to the Indenture dated as of June 29, 1994 among the Company, the Guarantors named therein and IBJ Schroder Bank & Trust Company, as Trustee (incorporated by reference to the Company’s 1999 Registration Statement).


Exhibit
Number			Exhibit Description

	4.8	—	Indenture with respect to 95/8% Senior Subordinated Notes due 2009 with The Bank of New York as Trustee, dated November 8, 1999 (incorporated by reference to the Current Report on Form 8-K dated November 2, 1999 (the “1999 Current Report”)).

	4.9	—	Indenture with respect to 95/8% Senior Subordinated Notes due 2009 with the Bank of New York as Trustee, dated June 8, 2001 (incorporated by reference to the Company’s Registration Statement on Form S-3, filed on June 25, 2001 (the “2001 Form S-3”).

	4.10	—	Form of stock certificate for the Class A common stock of the Company (incorporated by reference to the Company’s 1999 Registration Statement).

	4.11	—	Certificate of Elimination of 141/4% of Senior Exchangeable Preferred Stock, Series A of the Company, dated October 28, 2003 (incorporated by reference to Exhibit 3.3 of the Company’s Quarterly Report on Form 10-Q filed November 14, 2003).

	4.12	—	Certificate of Designation Setting Forth the Voting Power, Preferences and Relative, Participating, Optional and Other Special Rights and Qualifications, Limitations and Restrictions of the Series C Convertible Preferred Stock of the Company (“Certificate of Designation of Series C Preferred Stock”) (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed on December 27, 2004).

	4.13	—	Certificate of Correction to Certificate of Designation of Series C Preferred Stock of the Company dated January 7, 2005 (incorporated by reference to Exhibit 4.13 of the Company’s Annual Report filed on Form 10-K for the fiscal year 2004).

	10.1		Amended and Restated Employment Agreement dated as of August 4, 2008, by and between the Company and Joseph A. García (incorporated by reference to Exhibit 10.1 of the Company’s Current Report filed on Form 8-K filed on August 8, 2008).

	14.1	—	Code of Business Conduct and Ethics (incorporated by reference to Exhibit 14.1 of the Company’s Form 10-K for the fiscal year 2003).

	31.1	—	Chief Executive Officer’s Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	31.2	—	Chief Financial Officer’s Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	32.1	—	Chief Executive Officer’s Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

	32.2	—	Chief Financial Officer’s Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

EXHIBIT INDEX


Exhibit
Number			Exhibit Description

	3.1	—	Third Amended and Restated Certificate of Incorporation of Spanish Broadcasting System, Inc. (the “Company”), dated September 29, 1999 (incorporated by reference to the Company’s 1999 Registration Statement on Form S-1 (Commission File No. 333-85499) (the “1999 Registration Statement”)) (Exhibit A to this exhibit is incorporated by reference to the Company’s Current Report on Form 8-K, dated March 25, 1996 (the “1996 Current Report”).

	3.2	—	Certificate of Amendment to the Third Amended and Restated Certificate of Incorporation of the Company, dated September 29, 1999 (incorporated by reference to Exhibit 3.2 of the Company’s 1999 Registration Statement).

	3.3	—	Amended and Restated By-Laws of the Company (incorporated by reference to Exhibit 3.3 of the Company’s 1999 Registration Statement).

	3.4	—	Certificate of Elimination of 141/4% Senior Exchangeable Preferred Stock, Series A of the Company, dated October 28, 2003 (incorporated by reference to Exhibit 3.3 of the Company’s Quarterly Report on Form 10-Q, dated November 14, 2003 (the “11/14/03 Quarterly Report”)).

	4.1	—	Article V of the Third Amended and Restated Certificate of Incorporation of the Company, dated September 29, 1999 (incorporated by reference to Exhibit 3.1 of the Company’s 1999 Registration Statement).

	4.2	—	Certificate of Designations dated October 29, 2003 Setting Forth the Voting Power, Preferences and Relative, Participating, Optional and Other Special Rights and Qualifications, Limitations and Restrictions of the 103/4% Series A Cumulative Exchangeable Redeemable Preferred Stock of Spanish Broadcasting System, Inc. (incorporated by reference to Exhibit 4.1 of the Company’s 11/14/03 Quarterly Report).

	4.3	—	Certificate of Designations dated October 29, 2003 Setting Forth the Voting Power, Preferences and Relative, Participating, Optional and Other Special Rights and Qualifications, Limitations and Restrictions of the 103/4% Series B Cumulative Exchangeable Redeemable Preferred Stock of Spanish Broadcasting System, Inc. (incorporated by reference to Exhibit 4.2 of the Company’s 11/14/03 Quarterly Report).

	4.4	—	Indenture dated June 29, 1994 among the Company, IBJ Schroder Bank & Trust Company, as Trustee, the Guarantors named therein and the Purchasers named therein (incorporated by reference to Exhibit 4.1 of the Company’s 1994 Registration Statement on Form S-4 (the “1994 Registration Statement”).

	4.5	—	First Supplemental Indenture dated as of March 25, 1996 to the Indenture dated as of June 29, 1994 among the Company, the Guarantors named therein and IBJ Schroder Bank & Trust Company, as Trustee (incorporated by reference to the 1996 Current Report).

	4.6	—	Second Supplemental Indenture dated as of March 1, 1997 to the Indenture dated as of June 29, 1994 among the Company, the Guarantors named therein and IBJ Schroder Bank & Trust Company, as Trustee (incorporated by reference to the 1996 Current Report).

	4.7	—	Supplemental Indenture dated as of October 21, 1999 to the Indenture dated as of June 29, 1994 among the Company, the Guarantors named therein and IBJ Schroder Bank & Trust Company, as Trustee (incorporated by reference to the Company’s 1999 Registration Statement).

	4.8	—	Indenture with respect to 95/8% Senior Subordinated Notes due 2009 with The Bank of New York as Trustee, dated November 8, 1999 (incorporated by reference to the Current Report on Form 8-K dated November 2, 1999 (the “1999 Current Report”)).


Exhibit
Number			Exhibit Description

	4.9	—	Indenture with respect to 95/8% Senior Subordinated Notes due 2009 with the Bank of New York as Trustee, dated June 8, 2001 (incorporated by reference to the Company’s Registration Statement on Form S-3, filed on June 25, 2001 (the “2001 Form S-3”).

	4.10	—	Form of stock certificate for the Class A common stock of the Company (incorporated by reference to the Company’s 1999 Registration Statement).

	4.11	—	Certificate of Elimination of 141/4% of Senior Exchangeable Preferred Stock, Series A of the Company, dated October 28, 2003 (incorporated by reference to Exhibit 3.3 of the Company’s Quarterly Report on Form 10-Q filed November 14, 2003).

	4.12	—	Certificate of Designation Setting Forth the Voting Power, Preferences and Relative, Participating, Optional and Other Special Rights and Qualifications, Limitations and Restrictions of the Series C Convertible Preferred Stock of the Company (“Certificate of Designation of Series C Preferred Stock”) (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed on December 27, 2004).

	4.13	—	Certificate of Correction to Certificate of Designation of Series C Preferred Stock of the Company dated January 7, 2005 (incorporated by reference to Exhibit 4.13 of the Company’s Annual Report filed on Form 10-K for the fiscal year 2004).

	10.1		Amended and Restated Employment Agreement dated as of August 4, 2008, by and between the Company and Joseph A. García (incorporated by reference to Exhibit 10.1 of the Company’s Current Report filed on Form 8-K filed on August 8, 2008).

	14.1	—	Code of Business Conduct and Ethics (incorporated by reference to Exhibit 14.1 of the Company’s Form 10-K for the fiscal year 2003).

	31.1	—	Chief Executive Officer’s Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	31.2	—	Chief Financial Officer’s Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	32.1	—	Chief Executive Officer’s Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

	32.2	—	Chief Financial Officer’s Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


	Page
PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements — Unaudited		4

Unaudited Condensed Consolidated Balance Sheets as of September 30, 2008 and December 31, 2007		4

Unaudited Condensed Consolidated Statements of Operations for the Three- and Nine-Months Ended September 30, 2008 and 2007		5

Unaudited Condensed Consolidated Statement of Changes in Stockholders’ (Deficit) Equity and Comprehensive Loss for the Nine-Months Ended September 30, 2008		6

Unaudited Condensed Consolidated Statements of Cash Flows for the Nine-Months Ended September 30, 2008 and 2007		7

Notes to Unaudited Condensed Consolidated Financial Statements		8

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		18

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk		26

ITEM 4. Controls and Procedures		26

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings		27

ITEM 1A. Risk Factors		27

ITEM 5. Other Information		27

ITEM 6. Exhibits		28
EX-31.1
EX-31.2
EX-32.1
EX-32.2


	SPANISH BROADCASTING SYSTEM, INC.
	By:	/s/ JOSEPH A. GARCÍA
		JOSEPH A. GARCÍA
		Chief Financial Officer, Chief Administrative Officer, Senior Executive Vice President and Secretary (principal financial and accounting officer and duly authorized officer of the registrant)

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