##### Table of Contents



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, 2010
 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 000-27823
 
 Spanish Broadcasting System, Inc.
  Delaware(State or other jurisdiction of 
incorporation or organization)
    
    13-3827791(I.R.S. Employer
Identification No.)
 2601 South Bayshore Drive, PH 2
Coconut Grove, Florida 33133  (Address of principal executive offices) (Zip Code)
 (305) 441-6901  (Registrants telephone number, including area code)
 þ o
 Yes o No o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 Yes o No þ




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##### 



SPANISH BROADCASTING SYSTEM, INC.
INDEX
 PagePART I. FINANCIAL INFORMATIONITEM 1. Financial Statements  UnauditedUnaudited Condensed Consolidated Balance Sheets as of September 30, 2010 and December 31, 2009Unaudited Condensed Consolidated Statements of Operations for the Three- and Nine-Months
Ended September 30, 2010 and 2009Unaudited Condensed Consolidated Statement of Changes in Stockholders Deficit and
Comprehensive Income for the Nine-Months Ended September 30, 2010Unaudited Condensed Consolidated Statements of Cash Flows for the Nine-Months Ended September
30, 2010 and 2009Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    4ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    11ITEM 4. Controls and Procedures
    
    
    19PART II. OTHER INFORMATIONITEM 1. Legal Proceedings
    
    
    20ITEM 1A. Risk Factors
    
    
    20ITEM 6. Exhibits
    
    
    21Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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Special Note Regarding Forward-Looking Statements
   3




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements  Unaudited
 SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
 
  September 30,
    
    
    December 31,2010
    
    
    2009(In thousands, except share data)AssetsCurrent assets:Cash and cash equivalents
    
    $
    51,818
    
    
    
    53,580Receivables, net of allowance for doubtful accounts of $885 in 2010 and $1,247 in 2009
    
    
    24,644
    
    
    
    24,800Prepaid expenses and other current assets
    
    
    2,975
    
    
    
    3,439Total current assets
    
    
    79,437
    
    
    
    81,819Property and equipment, net of accumulated depreciation of $55,057 in 2010 and $49,560 in 2009
    
    
    40,919
    
    
    
    45,365FCC broadcasting licenses
    
    
    312,623
    
    
    
    312,623Goodwill
    
    
    32,806
    
    
    
    32,806Other intangible assets, net of accumulated amortization of $240 in 2010 and $214 in 2009
    
    
    1,193
    
    
    
    1,220Deferred financing costs, net of accumulated amortization of $5,823 in 2010 and $5,028 in 2009
    
    
    1,778
    
    
    
    2,574Other assets
    
    
    2,183
    
    
    
    2,386Total assets
    
    $
    470,939
    
    
    
    478,793Liabilities and Stockholders DeficitCurrent liabilities:Accounts payable and accrued expenses
    
    $
    17,793
    
    
    
    18,211Accrued interest
    
    
    4,072
    
    
    
    5,608Unearned revenue
    
    
    691
    
    
    
    570Other liabilities
    
    
    630
    
    
    
    602Derivative instruments
    
    
    
    
    
    
    5,863Senior credit facility revolver due 2010
    
    
    
    
    
    
    15,000Current portion of the senior credit facility term loan due 2012
    
    
    3,250
    
    
    
    3,250Current portion of other long-term debt
    
    
    424
    
    
    
    447Series B cumulative exchangeable redeemable preferred stock dividends payable
    
    
    11,996
    
    
    
    7,032Total current liabilities
    
    
    38,856
    
    
    
    56,583Other liabilities, less current portion
    
    
    1,527
    
    
    
    405Derivative instruments
    
    
    1,031
    
    
    
    612Senior credit facility term loan due 2012, less current portion
    
    
    303,875
    
    
    
    306,313Other long-term debt, less current portion
    
    
    6,282
    
    
    
    6,605Deferred income taxes
    
    
    76,638
    
    
    
    71,408Total liabilities
    
    
    428,209
    
    
    
    441,926Commitments and contingencies (note 7)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; 92,349 shares issued and
outstanding at September 30, 2010 and December 31, 2009, respectively
    
    
    92,349
    
    
    
    92,349Stockholders deficit: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, 2010 and December 31, 2009,
respectively
    
    
    4
    
    
    
    4Class A common stock, $0.0001 par value. Authorized 100,000,000 shares; 41,638,138 and 41,542,513
shares issued and outstanding at September 30, 2010 and December 31, 2009, respectively
    
    
    4
    
    
    
    4Class B common stock, $0.0001 par value. Authorized 50,000,000 shares; 23,403,500
shares issued and outstanding at September 30, 2010 and December 31, 2009, respectively
    
    
    2
    
    
    
    2Additional paid-in capital
    
    
    525,172
    
    
    
    525,026Accumulated other comprehensive loss
    
    
    (1,031
    )
    
    
    (2,513
    )Accumulated deficit
    
    
    (573,770
    )
    
    
    (578,005
    )Total stockholders deficit
    
    
    (49,619
    )
    
    
    (55,482
    )Total liabilities and stockholders deficit
    
    $
    470,939
    
    
    
    478,793
   4




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SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
 
  Three-Months Ended
    
    
    Nine-Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands, except per share data)Net revenue
    
    $
    34,553
    
    
    
    38,582
    
    
    
    101,236
    
    
    
    103,428Operating expenses:Engineering and programming
    
    
    9,969
    
    
    
    9,591
    
    
    
    29,834
    
    
    
    31,830Selling, general and administrative
    
    
    12,502
    
    
    
    12,775
    
    
    
    36,123
    
    
    
    36,600Corporate expenses
    
    
    1,331
    
    
    
    2,372
    
    
    
    5,806
    
    
    
    7,545Depreciation and amortization
    
    
    1,392
    
    
    
    1,574
    
    
    
    4,394
    
    
    
    4,73725,194
    
    
    
    26,312
    
    
    
    76,157
    
    
    
    80,712Loss (gain) on the disposal of assets, net
    
    
    23
    
    
    
    (14
    )
    
    
    31
    
    
    
    (29
    )Impairment charges and restructuring costs
    
    
    2,097
    
    
    
    
    
    
    
    2,097
    
    
    
    10,686Operating income
    
    
    7,239
    
    
    
    12,284
    
    
    
    22,951
    
    
    
    12,059Other (expense) income:Interest expense, net
    
    
    (2,317
    )
    
    
    (6,723
    )
    
    
    (11,743
    )
    
    
    (19,841
    )Change in fair value of derivative instrument
    
    
    
    
    
    
    958
    
    
    
    5,863
    
    
    
    3,448Other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Income (loss) before income taxes
    
    
    4,922
    
    
    
    6,519
    
    
    
    17,071
    
    
    
    (4,333
    )Income tax expense
    
    
    1,844
    
    
    
    1,976
    
    
    
    5,390
    
    
    
    1,611Net income (loss)
    
    
    3,078
    
    
    
    4,543
    
    
    
    11,681
    
    
    
    (5,944
    )Dividends on Series B preferred stock
    
    
    (2,482
    )
    
    
    (2,482
    )
    
    
    (7,446
    )
    
    
    (7,446
    )Net income (loss) applicable to common stockholders
    
    $
    596
    
    
    
    2,061
    
    
    
    4,235
    
    
    
    (13,390
    )Basic and diluted net income (loss) per common share
    
    $
    0.01
    
    
    
    0.03
    
    
    
    0.06
    
    
    
    (0.18
    )Weighted average common shares outstanding:Basic
    
    
    72,613
    
    
    
    72,515
    
    
    
    72,604
    
    
    
    72,507Diluted
    
    
    72,828
    
    
    
    72,555
    
    
    
    72,824
    
    
    
    72,507
   5




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SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
 
 
 Class C
    
    
    Class A
    
    
    Class B
    
    
    
    
    
    
    Accumulatedpreferred stock
    
    
    common stock
    
    
    common stock
    
    
    Additional
    
    
    other
    
    
    
    
    
    
    TotalNumber of
    
    
    Par
    
    
    Number of
    
    
    Par
    
    
    Number of
    
    
    Par
    
    
    paid-in
    
    
    comprehensive
    
    
    Accumulated
    
    
    stockholdersshares
    
    
    value
    
    
    shares
    
    
    value
    
    
    shares
    
    
    value
    
    
    capital
    
    
    loss
    
    
    deficit
    
    
    deficit(In thousands, except share data)Balance at December 31, 2009
    
    
    380,000
    
    
    $
    4
    
    
    
    41,542,513
    
    
    $
    4
    
    
    
    23,403,500
    
    
    $
    2
    
    
    $
    525,026
    
    
    $
    (2,513
    )
    
    $
    (578,005
    )
    
    $
    (55,482
    )Issuance of Class A common stock from
vesting of restricted stock
    
    
    
    
    
    
    
    
    
    
    95,625
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    146
    
    
    
    
    
    
    
    
    
    
    
    146Series B preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,446
    )
    
    
    (7,446
    )Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,681
    
    
    
    11,681Amounts reclassified to earnings during the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,901
    
    
    
    
    
    
    
    1,901Unrealized loss on derivative instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (419
    )
    
    
    
    
    
    
    (419
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,163Balance at September 30, 2010
    
    
    380,000
    
    
    $
    4
    
    
    
    41,638,138
    
    
    $
    4
    
    
    
    23,403,500
    
    
    $
    2
    
    
    $
    525,172
    
    
    $
    (1,031
    )
    
    $
    (573,770
    )
    
    $
    (49,619
    )
   6




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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
 
  Nine-Months EndedSeptember 30,2010
    
    
    2009(In thousands)Cash flows from operating activities:Net income (loss)
    
    $
    11,681
    
    
    
    (5,944
    )Adjustments to reconcile net income (loss) to net cash provided by operating activities:Loss (gain) on the sale of assets
    
    
    31
    
    
    
    (29
    )Impairment charges
    
    
    2,097
    
    
    
    10,123Stock-based compensation
    
    
    146
    
    
    
    214Depreciation and amortization
    
    
    4,394
    
    
    
    4,737Net barter income
    
    
    (214
    )
    
    
    (370
    )Provision for trade doubtful accounts
    
    
    370
    
    
    
    335Amortization of deferred financing costs
    
    
    796
    
    
    
    805Deferred income taxes
    
    
    5,230
    
    
    
    1,848Unearned revenue
    
    
    220
    
    
    
    116Change in fair value of derivative instrument
    
    
    (3,962
    )
    
    
    664Amortization of other liabilities
    
    
    
    
    
    
    (50
    )Changes in operating assets and liabilities:Trade receivables
    
    
    (99
    )
    
    
    (1,491
    )Prepaid expenses and other current assets
    
    
    464
    
    
    
    661Other assets
    
    
    203
    
    
    
    794Accounts payable and accrued expenses
    
    
    (429
    )
    
    
    1,355Accrued interest
    
    
    (1,536
    )
    
    
    7,466Other liabilities
    
    
    369
    
    
    
    Net cash provided by operating activities
    
    
    19,761
    
    
    
    21,234Cash flows from investing activities:Purchases of property and equipment
    
    
    (1,257
    )
    
    
    (815
    )Proceeds from the sale of property and equipment and insurance recoveries
    
    
    
    
    
    
    226Net cash used in investing activities
    
    
    (1,257
    )
    
    
    (589
    )Cash flows from financing activities:Payment of senior credit facility revolver due 2010
    
    
    (15,000
    )
    
    
    Payment of senior secured credit facility term loan 2012
    
    
    (2,438
    )
    
    
    (2,438
    )Payment of Series B preferred stock cash dividends
    
    
    (2,482
    )
    
    
    (4,964
    )Payments of other long-term debt
    
    
    (346
    )
    
    
    (327
    )Net cash used in financing activities
    
    
    (20,266
    )
    
    
    (7,729
    )Net (decrease) increase in cash and cash equivalents
    
    
    (1,762
    )
    
    
    12,916Cash and cash equivalents at beginning of period
    
    
    53,580
    
    
    
    32,852Cash and cash equivalents at end of period
    
    $
    51,818
    
    
    
    45,768Supplemental cash flows information:Interest paid
    
    $
    8,582
    
    
    
    7,467Income taxes paid, net
    
    $
    20
    
    
    
    29Noncash investing and financing activities:Accrual of Series B preferred stock cash dividends not declared
    
    $
    4,964
    
    
    
    4,550Unrealized (loss) gain on derivative instruments
    
    $
    (419
    )
    
    
    237
   7




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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
 
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1. Basis of Presentation
   2. Stockholders Deficit
 (a) Series C Convertible Preferred Stock
    (b) Class A and B Common Stock
 3 4
  8




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(c) Share-Based Compensation Plans
 2006 Omnibus Equity Compensation Plan
  1999 Stock Option Plans
  Stock Options and Nonvested Shares Activity
   WeightedWeighted
    
    
    
    
    
    
    AverageAverage
    
    
    Aggregate
    
    
    RemainingExercise
    
    
    Intrinsic
    
    
    ContractualShares
    
    
    Price
    
    
    Value
    
    
    Life (Years)Outstanding at December 31, 2009
    
    
    2,057
    
    
    $
    6.41Granted
    
    
    50
    
    
    
    1.79Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (89
    )
    
    
    6.85Outstanding at September 30, 2010
    
    
    2,018
    
    
    $
    6.28
    
    
    $
    137
    
    
    
    4.2Exercisable at September 30, 2010
    
    
    1,968
    
    
    $
    6.39
    
    
    $
    137
    
    
    
    4.1
   9




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##### Table of Contents



WeightedOutstanding
    
    
    Average
    
    
    ExercisableWeighted
    
    
    Remaining
    
    
    
    
    
    
    WeightedAverage
    
    
    Contractual
    
    
    
    
    
    
    AverageUnvested
    
    
    Exercise
    
    
    Life
    
    
    Number
    
    
    ExerciseRange of Exercise Prices
    
    Vested Options
    
    
    Options
    
    
    Price
    
    
    (Years)
    
    
    Exercisable
    
    
    Price$0.20  4.99
    
    
    675
    
    
    
    50
    
    
    $
    2.19
    
    
    
    6.7
    
    
    
    675
    
    
    $
    2.215.00  9.99
    
    
    1,095
    
    
    
    
    
    
    
    8.17
    
    
    
    2.6
    
    
    
    1,095
    
    
    
    8.1710.00  11.78
    
    
    198
    
    
    
    
    
    
    
    10.79
    
    
    
    4.0
    
    
    
    198
    
    
    
    10.791,968
    
    
    
    50
    
    
    $
    6.28
    
    
    
    4.2
    
    
    
    1,968
    
    
    $
    6.39
   WeightedAverage Grant-Date Fair ValueShares
    
    
    (per Share)Nonvested at December 31, 2009
    
    
    127
    
    
    $
    1.73Awarded
    
    
    
    
    
    
    Vested
    
    
    (95
    )
    
    
    1.77Forfeited
    
    
    
    
    
    
    Nonvested at September 30, 2010
    
    
    32
    
    
    $
    1.62
 3. Basic and Diluted Net Income (Loss) Per Common Share
    10




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##### Table of Contents



Three-Months Ended
    
    
    Nine-Months endedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Basic weighted average shares outstanding
    
    
    72,613
    
    
    
    72,515
    
    
    
    72,604
    
    
    
    72,507Effect of dilutive equity instruments
    
    
    215
    
    
    
    40
    
    
    
    220
    
    
    
    Dilutive weighted average shares outstanding
    
    
    72,828
    
    
    
    72,555
    
    
    
    72,824
    
    
    
    72,507Options to purchase shares of common stock
and other stock-based awards outstanding
which are not included in the calculation
of diluted net income (loss) per share
because their impact is anti-dilutive
    
    
    1,693
    
    
    
    2,562
    
    
    
    1,695
    
    
    
    2,562
  11




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##### Table of Contents



4. Operating Segments
  Three-Months Ended
    
    
    Nine-Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands)
    
    
    (In thousands)Net revenue:Radio
    
    $
    30,468
    
    
    
    34,558
    
    
    
    89,371
    
    
    
    91,923Television
    
    
    4,085
    
    
    
    4,024
    
    
    
    11,865
    
    
    
    11,505Consolidated
    
    $
    34,553
    
    
    
    38,582
    
    
    
    101,236
    
    
    
    103,428Engineering and programming expenses:Radio
    
    $
    5,795
    
    
    
    6,478
    
    
    
    17,269
    
    
    
    20,973Television
    
    
    4,174
    
    
    
    3,113
    
    
    
    12,565
    
    
    
    10,857Consolidated
    
    $
    9,969
    
    
    
    9,591
    
    
    
    29,834
    
    
    
    31,830Selling, general and administrative expenses:Radio
    
    $
    10,628
    
    
    
    10,902
    
    
    
    30,583
    
    
    
    30,357Television
    
    
    1,874
    
    
    
    1,873
    
    
    
    5,540
    
    
    
    6,243Consolidated
    
    $
    12,502
    
    
    
    12,775
    
    
    
    36,123
    
    
    
    36,600Corporate expenses:
    
    $
    1,331
    
    
    
    2,372
    
    
    
    5,806
    
    
    
    7,545Depreciation and amortization:Radio
    
    $
    622
    
    
    
    781
    
    
    
    2,008
    
    
    
    2,374Television
    
    
    569
    
    
    
    556
    
    
    
    1,695
    
    
    
    1,646Corporate
    
    
    201
    
    
    
    237
    
    
    
    691
    
    
    
    717Consolidated
    
    $
    1,392
    
    
    
    1,574
    
    
    
    4,394
    
    
    
    4,737Loss (gain) on the disposal of assets, net:Radio
    
    $
    23
    
    
    
    (6
    )
    
    
    23
    
    
    
    (26
    )Television
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    19Corporate
    
    
    
    
    
    
    (8
    )
    
    
    
    
    
    
    (22
    )Consolidated
    
    $
    23
    
    
    
    (14
    )
    
    
    31
    
    
    
    (29
    )Impairment charges and restructuring costs:Radio
    
    $
    
    
    
    
    
    
    
    
    
    
    
    
    10,614Television
    
    
    43
    
    
    
    
    
    
    
    43
    
    
    
    24Corporate
    
    
    2,054
    
    
    
    
    
    
    
    2,054
    
    
    
    48Consolidated
    
    $
    2,097
    
    
    
    
    
    
    
    2,097
    
    
    
    10,686Operating (loss) income:Radio
    
    $
    13,400
    
    
    
    16,403
    
    
    
    39,488
    
    
    
    27,631Television
    
    
    (2,575
    )
    
    
    (1,518
    )
    
    
    (7,986
    )
    
    
    (7,284
    )Corporate
    
    
    (3,586
    )
    
    
    (2,601
    )
    
    
    (8,551
    )
    
    
    (8,288
    )Consolidated
    
    $
    7,239
    
    
    
    12,284
    
    
    
    22,951
    
    
    
    12,059Capital expenditures:Radio
    
    $
    218
    
    
    
    34
    
    
    
    619
    
    
    
    428Television
    
    
    62
    
    
    
    214
    
    
    
    372
    
    
    
    338Corporate
    
    
    170
    
    
    
    20
    
    
    
    266
    
    
    
    49Consolidated
    
    $
    450
    
    
    
    268
    
    
    
    1,257
    
    
    
    815
 September. 30,
    
    
    December 31,2010
    
    
    2009Total Assets:
    
    (In thousands)Radio
    
    $
    422,005
    
    
    
    425,565Television
    
    
    44,552
    
    
    
    45,811Corporate
    
    
    4,382
    
    
    
    7,417Consolidated
    
    $
    470,939
    
    
    
    478,793
  12




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5. Comprehensive Income (Loss)
  Three-Months Ended
    
    
    Nine-Months endedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net income (loss)
    
    $
    3,078
    
    
    
    4,543
    
    
    $
    11,681
    
    
    
    (5,944
    )Other comprehensive income (loss):Amounts reclassified to earnings during the period
    
    
    
    
    
    
    1,421
    
    
    
    1,901
    
    
    
    4,112Unrealized (loss) gain on derivative instruments
    
    
    (193
    )
    
    
    (122
    )
    
    
    (419
    )
    
    
    237Total comprehensive income (loss)
    
    $
    2,885
    
    
    
    5,842
    
    
    $
    13,163
    
    
    
    (1,595
    )
 6. Income Taxes
    7. Litigation
  8. Derivative and Hedging Activities
      13




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9. Fair Value Measurement Disclosures
 Fair Value of Financial Instruments
    September 30, 2010
    
    
    December 31, 2009Gross
    
    
    
    
    
    
    GrossCarrying
    
    
    
    
    
    
    CarryingDescription
    
    Amount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueSenior credit facility term loan
    
    $
    307.1
    
    
    
    287.9
    
    
    
    309.6
    
    
    
    255.9103/4%
Series B cumulative
exchangeable redeemable
preferred stock
    
    
    92.3
    
    
    
    68.1
    
    
    
    92.3
    
    
    
    57.9Promissory note payable,
included in other long-term
debt
    
    
    6.5
    
    
    
    6.4
    
    
    
    6.8
    
    
    
    6.5
  Fair Value of Derivative Instruments
  Fair value measurements at September 30, 2010LiabilitiesSeptember 30, 2010
    
    
    Quoted prices in
    
    
    Significantcarrying value and
    
    
    active markets
    
    
    other
    
    
    Significantbalance sheet
    
    
    for identical
    
    
    observable
    
    
    unobservablelocation of derivative
    
    
    instruments
    
    
    inputs
    
    
    inputsDescription
    
    instruments
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Derivative
designated as a
cash flow hedging
instrument:Interest rate swap
    
    $
    1,031
    
    
    
    
    
    
    
    1,031
    
    
    
    
  14




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##### Table of Contents



Fair value measurements at December 31, 2009LiabilitiesDecember 31, 2009
    
    
    Quoted prices in
    
    
    Significantcarrying value and
    
    
    active markets
    
    
    other
    
    
    Significantbalance sheet
    
    
    for identical
    
    
    observable
    
    
    unobservablelocation of derivative
    
    
    instruments
    
    
    inputs
    
    
    inputsDescription
    
    instruments
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Derivative
designated as a
cash flow hedging
instrument:Interest rate swap
    
    $
    612
    
    
    
    
    
    
    
    612
    
    
    
    Derivative no
longer designated
as a cash flow
hedging instrument:Interest rate swap
    
    
    5,863
    
    
    
    
    
    
    
    5,863
    
    
    
    Total
    
    $
    6,475
    
    
    
    
    
    
    
    6,475
    
    
    
    
  Three-Months Ended
    
    
    Nine-Months EndedSeptember 30,
    
    
    September 30,Interest rate swaps
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009(Loss) gain recognized in other comprehensive
loss (effective portion)
    
    $
    (193
    )
    
    
    (122
    )
    
    $
    (419
    )
    
    
    237Loss reclassified from accumulated other
comprehensive loss into interest expense
    
    
    
    
    
    
    1,421
    
    
    
    1,901
    
    
    
    4,112Gain recognized in change in fair value of
derivative instrument
    
    
    
    
    
    
    958
    
    
    
    5,863
    
    
    
    3,448
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
     15




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16




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Comparison Analysis of the Operating Results for the Three-Months Ended September 30, 2010 and
2009
  Three-Months EndedSeptember 30,2010
    
    
    2009(In thousands)Net revenue:Radio
    
    $
    30,468
    
    
    
    34,558Television
    
    
    4,085
    
    
    
    4,024Consolidated
    
    $
    34,553
    
    
    
    38,582Engineering and programming expenses:Radio
    
    $
    5,795
    
    
    
    6,478Television
    
    
    4,174
    
    
    
    3,113Consolidated
    
    $
    9,969
    
    
    
    9,591Selling, general and administrative expenses:Radio
    
    $
    10,628
    
    
    
    10,902Television
    
    
    1,874
    
    
    
    1,873Consolidated
    
    $
    12,502
    
    
    
    12,775Corporate expenses:
    
    $
    1,331
    
    
    
    2,372Depreciation and amortization:Radio
    
    $
    622
    
    
    
    781Television
    
    
    569
    
    
    
    556Corporate
    
    
    201
    
    
    
    237Consolidated
    
    $
    1,392
    
    
    
    1,574Loss (gain) on the disposal of assets, net:Radio
    
    $
    23
    
    
    
    (6
    )Television
    
    
    
    
    
    
    Corporate
    
    
    
    
    
    
    (8
    )Consolidated
    
    $
    23
    
    
    
    (14
    )Impairment charges and restructuring costs:Radio
    
    $
    
    
    
    
    Television
    
    
    43
    
    
    
    Corporate
    
    
    2,054
    
    
    
    Consolidated
    
    $
    2,097
    
    
    
    Operating (loss) income:Radio
    
    $
    13,400
    
    
    
    16,403Television
    
    
    (2,575
    )
    
    
    (1,518
    )Corporate
    
    
    (3,586
    )
    
    
    (2,601
    )Consolidated
    
    $
    7,239
    
    
    
    12,284
  17




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Three-Months EndedSeptember 30,2010
    
    
    2009(In thousands)Net revenue
    
    $
    34,553
    
    
    
    38,582Engineering and programming expenses
    
    
    9,969
    
    
    
    9,591Selling, general and administrative expenses
    
    
    12,502
    
    
    
    12,775Corporate expenses
    
    
    1,331
    
    
    
    2,372Depreciation and amortization
    
    
    1,392
    
    
    
    1,574Loss (gain) on disposal of assets, net of
disposal costs
    
    
    23
    
    
    
    (14
    )Impairment charges and restructuring costs
    
    
    2,097
    
    
    
    Operating income
    
    $
    7,239
    
    
    
    12,284Interest expense, net
    
    
    (2,317
    )
    
    
    (6,723
    )Change in fair value of derivative instrument
    
    
    
    
    
    
    958Income tax expense
    
    
    1,844
    
    
    
    1,976Net income
    
    $
    3,078
    
    
    
    4,543
 Net Revenue
  Engineering and Programming Expenses
  Selling, General and Administrative Expenses
  Corporate Expenses
  Impairment Charges and Restructuring Costs
  Operating Income
   18




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Interest Expense, Net
  Income Taxes
  Net Income
  Comparison Analysis of the Operating Results for the Nine-Months Ended September 30, 2010 and
2009
  Nine-Months EndedSeptember 30,2010
    
    
    2009(In thousands)Net revenue:Radio
    
    
    89,371
    
    
    
    91,923Television
    
    
    11,865
    
    
    
    11,505Consolidated
    
    
    101,236
    
    
    
    103,428Engineering and programming expenses:Radio
    
    
    17,269
    
    
    
    20,973Television
    
    
    12,565
    
    
    
    10,857Consolidated
    
    
    29,834
    
    
    
    31,830Selling, general and administrative expenses:Radio
    
    
    30,583
    
    
    
    30,357Television
    
    
    5,540
    
    
    
    6,243Consolidated
    
    
    36,123
    
    
    
    36,600Corporate expenses:
    
    
    5,806
    
    
    
    7,545Depreciation and amortization:Radio
    
    
    2,008
    
    
    
    2,374Television
    
    
    1,695
    
    
    
    1,646Corporate
    
    
    691
    
    
    
    717Consolidated
    
    
    4,394
    
    
    
    4,737Loss (gain) on the disposal of assets, net:Radio
    
    
    23
    
    
    
    (26
    )Television
    
    
    8
    
    
    
    19Corporate
    
    
    
    
    
    
    (22
    )Consolidated
    
    
    31
    
    
    
    (29
    )Impairment charges and restructuring costs:Radio
    
    
    
    
    
    
    10,614Television
    
    
    43
    
    
    
    24Corporate
    
    
    2,054
    
    
    
    48Consolidated
    
    
    2,097
    
    
    
    10,686Operating (loss) income:Radio
    
    
    39,488
    
    
    
    27,631Television
    
    
    (7,986
    )
    
    
    (7,284
    )Corporate
    
    
    (8,551
    )
    
    
    (8,288
    )Consolidated
    
    
    22,951
    
    
    
    12,059
  19




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Nine-Months EndedSeptember 30,2010
    
    
    2009(In thousands)Net revenue
    
    $
    101,236
    
    
    
    103,428Engineering and programming expenses
    
    
    29,834
    
    
    
    31,830Selling, general and administrative expenses
    
    
    36,123
    
    
    
    36,600Corporate expenses
    
    
    5,806
    
    
    
    7,545Depreciation and amortization
    
    
    4,394
    
    
    
    4,737Loss (gain) on disposal of assets, net of disposal costs
    
    
    31
    
    
    
    (29
    )Impairment charges and restructuring costs
    
    
    2,097
    
    
    
    10,686Operating income
    
    $
    22,951
    
    
    
    12,059Interest expense, net
    
    
    (11,743
    )
    
    
    (19,841
    )Change in fair value of derivative instrument
    
    
    5,863
    
    
    
    3,448Other income, net
    
    
    
    
    
    
    1Income tax expense
    
    
    5,390
    
    
    
    1,611Net income (loss)
    
    $
    11,681
    
    
    
    (5,944
    )
 Net Revenue
  Engineering and Programming Expenses
  Selling, General and Administrative Expenses
  Corporate Expenses
  Impairment Charges and Restructuring Costs
   20




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##### Table of Contents



Operating Income (Loss)
  Interest Expense, Net
  Change in Fair Value of Derivative Instrument
  Income Taxes
  Net Income (Loss)
  Liquidity and Capital Resources
   
    
    the demand for advertising within the broadcasting industry and
economic conditions in general will not 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 but
not limited to taxes, environmental liabilities, regulatory matters
and legal judgments.
  21




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##### Table of Contents



Nine-Months EndedSeptember 30,
    
    
    Change2010
    
    
    2009
    
    
    $(In thousands)Capital expenditures:Radio
    
    $
    619
    
    
    
    428
    
    
    
    191Television
    
    
    372
    
    
    
    338
    
    
    
    34Corporate
    
    
    266
    
    
    
    49
    
    
    
    217Consolidated
    
    $
    1,257
    
    
    
    815
    
    
    
    442Net cash flows provided by operating activities
    
    $
    19,761
    
    
    
    21,234
    
    
    
    (1,473
    )Net cash flows used in investing activities
    
    
    (1,257
    )
    
    
    (589
    )
    
    
    (668
    )Net cash flows used in financing activities
    
    
    (20,266
    )
    
    
    (7,729
    )
    
    
    (12,537
    )Net (decrease) increase in cash and cash equivalents
    
    $
    (1,762
    )
    
    
    12,916
 Net Cash Flows Provided by Operating Activities
  Net Cash Flows Used in Investing Activities
  Net Cash Flows Used in Financing Activities
  Recent Developments
 NASDAQ Delisting Letter
   22




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Dividend Payment on the Series B Preferred Stock
 3 4
   Lehman Hedge Settlement
  Off-Balance Sheet Arrangements
  
 Item 4. Controls and Procedures
 Evaluation Of Disclosure Controls And Procedures.
 Changes In Internal Control Over Financial Reporting.
  23




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  The liquidity of our common stock could be adversely affected if we are delisted from the
NASDAQ Global Market.
      24




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##### Table of Contents



Item 6. Exhibits
 (a) Exhibits
  ExhibitNumber
    
    Exhibit Description31.1
    *
    
    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.
 *
    
    Filed herewith**
    
    Furnished herewith  25




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##### Table of Contents



SIGNATURES
  SPANISH BROADCASTING SYSTEM, INC.By:
    /s/ JOSEPH A. GARCÍAJOSEPH A. GARCÍAChief Financial Officer,
Chief Administrative Officer, 
Senior
Executive Vice President and Secretary
(principal financial and accounting officer
and duly authorized officer of the registrant)   26




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Exhibit Description31.1
    *
    
    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.
 *
    
    Filed herewith**
    
    Furnished herewith  27