##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2005
 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
    
    13-3827791(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    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)
 (Former name, former address and former fiscal year,
if changed since last report)
 R £
 R £
 APPLICABLE ONLY TO CORPORATE ISSUERS:




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SPANISH BROADCASTING SYSTEM, INC.
 INDEX
  
 PagePART I. FINANCIAL INFORMATIONITEM 1. Financial Statements  Unaudited
    
    
    
    3Unaudited Condensed Consolidated Balance Sheets as of December 31, 2004 and June 30, 2005
    
    
    
    3Unaudited Condensed Consolidated Statements of Operations for the Three- and Six-Months
Ended June 30, 2004  and 2005
    
    
    
    4Unaudited Condensed Consolidated Statements of Cash Flows for the Six-Months Ended June
30, 2004 and 2005
    
    
    
    5Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    
    6ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    
    12ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    
    19ITEM 4. Controls and Procedures
    
    
    
    20PART II. OTHER INFORMATION
    
    
    
    20ITEM 1. Legal Proceedings
    
    
    
    20ITEM 4. Submission of Matters to a Vote of Security Holders
    
    
    
    22ITEM 5. Other Information
    
    
    
    22ITEM 6. Exhibits
    
    
    
    22EX-10.1: ASSET PURCHASE AGREEMENTEX-10.2: SECOND AMENDMENT TO LEASEEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.2: CERTIFICATIONEX-32.2: CERTIFICATION
  2




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##### Table of Contents



PART I.  FINANCIAL INFORMATION
 
 Item 1. Financial Statements  Unaudited
 SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
 
 Unaudited Condensed Consolidated Balance Sheets
 December 31,
    
    June 30,2004
    
    2005(In thousands,except share data)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    132,032
    
    
    $
    80,870Restricted cash for redemption of 9 5/8% senior subordinated notes due 2009
    
    
    
    
    
    
    357,483Net receivables
    
    
    32,622
    
    
    
    31,457Prepaid expenses and other current assets
    
    
    2,520
    
    
    
    2,398Assets held for sale
    
    
    65,004
    
    
    
    65,085Total current assets
    
    
    232,178
    
    
    
    537,293Property and equipment, net
    
    
    22,178
    
    
    
    22,450FCC licenses
    
    
    710,410
    
    
    
    710,410Goodwill
    
    
    32,806
    
    
    
    32,806Other intangible assets, net
    
    
    1,400
    
    
    
    1,382Deferred financing costs, net
    
    
    10,073
    
    
    
    14,900Other assets
    
    
    678
    
    
    
    928$
    1,009,723
    
    
    $
    1,320,169LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of the 9 5/8% senior subordinated notes due 2009, net
    
    $
    
    
    
    $
    327,148Current portion of the senior credit facility term loan due 2009
    
    
    123,750
    
    
    
    Current portion of the senior credit facility term loan due 2012
    
    
    
    
    
    
    3,250Current portion of the senior credit facility term loan due 2013
    
    
    
    
    
    
    100,000Current portion of other long-term debt
    
    
    3,154
    
    
    
    72Deposits on sale of stations
    
    
    
    
    
    
    20,000Accounts payable and accrued expenses
    
    
    24,225
    
    
    
    16,320Accrued interest
    
    
    5,428
    
    
    
    5,850Deferred commitment fee
    
    
    525
    
    
    
    488Total current liabilities
    
    
    157,082
    
    
    
    473,128Senior credit facility term loan due 2013, less current portion
    
    
    
    
    
    
    320,9389 5/8% senior subordinated notes due 2009, net
    
    
    326,476
    
    
    
    Other long-term debt, less current portion
    
    
    567
    
    
    
    530Deferred income taxes
    
    
    127,055
    
    
    
    127,055Other long-term liabilities
    
    
    993
    
    
    
    837Total liabilities
    
    
    612,173
    
    
    
    922,488Cumulative exchangeable redeemable preferred stock:10 3/4% Series B cumulative exchangeable redeemable preferred stock, plus
accrued dividends, $0.01 par value, liquidation value $1,000 per share.
Authorized 280,000 shares; 83,054 shares issued and outstanding at
December 31, 2004 and 87,578 shares issued and outstanding at June 30,
2005
    
    
    84,914
    
    
    
    89,539Stockholders equity:Series C preferred stock, $0.01 par value and liquidation value.
Authorized 600,000 shares; issued and outstanding 380,000 shares
    
    
    1
    
    
    
    1Class A common stock, $0.0001 par value. Authorized 100,000,000 shares;
40,197,805 shares issued and outstanding at December 31, 2004 and
40,277,805 shares issued and outstanding at June 30, 2005
    
    
    4
    
    
    
    4Class B common stock, $0.0001 par value. Authorized 50,000,000 shares;
24,583,500 shares issued and outstanding at December 31, 2004 and
24,503,500 shares issued and outstanding at June 30, 2005
    
    
    2
    
    
    
    2Additional paid-in capital
    
    
    520,450
    
    
    
    520,421Accumulated deficit
    
    
    (207,821
    )
    
    
    (212,286
    )Total stockholders equity
    
    
    312,636
    
    
    
    308,142$
    1,009,723
    
    
    $
    1,320,169
  3




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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
 
 Unaudited Condensed Consolidated Statements of Operations
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2004
    
    2005
    
    2004
    
    2005(In thousands, except per
    
    (In thousands, except pershare data)
    
    share data)Net revenue
    
    $
    40,292
    
    
    $
    44,575
    
    
    $
    69,524
    
    
    $
    79,914Operating expenses:Engineering and programming
    
    
    7,537
    
    
    
    8,452
    
    
    
    14,949
    
    
    
    16,317Selling, general and administrative
    
    
    14,701
    
    
    
    16,858
    
    
    
    25,618
    
    
    
    32,176Corporate expenses
    
    
    2,999
    
    
    
    3,733
    
    
    
    6,227
    
    
    
    7,434Depreciation and amortization
    
    
    824
    
    
    
    824
    
    
    
    1,646
    
    
    
    1,654Total operating expenses
    
    
    26,061
    
    
    
    29,867
    
    
    
    48,440
    
    
    
    57,581Operating income from continuing operations
    
    
    14,231
    
    
    
    14,708
    
    
    
    21,084
    
    
    
    22,333Other (expense) income:Interest expense, net
    
    
    (10,200
    )
    
    
    (10,646
    )
    
    
    (20,438
    )
    
    
    (20,816
    )Loss on early extinguishment of debt
    
    
    
    
    
    
    (3,154
    )
    
    
    
    
    
    
    (3,154
    )Other, net
    
    
    80
    
    
    
    1,793
    
    
    
    255
    
    
    
    1,800Income from continuing operations before income taxes
and discontinued operations
    
    
    4,111
    
    
    
    2,701
    
    
    
    901
    
    
    
    163Income tax expense
    
    
    5,446
    
    
    
    2,579
    
    
    
    1,498
    
    
    
    (Loss) income from continuing operations before
discontinued operations
    
    
    (1,335
    )
    
    
    122
    
    
    
    (597
    )
    
    
    163(Loss) income on discontinued operations, net of tax
    
    
    (51
    )
    
    
    (1
    )
    
    
    10,889
    
    
    
    (3
    )Net (loss) income
    
    $
    (1,386
    )
    
    $
    121
    
    
    $
    10,292
    
    
    $
    160Dividends on preferred stock
    
    
    (2,107
    )
    
    
    (2,343
    )
    
    
    (4,161
    )
    
    
    (4,625
    )Net (loss) income applicable to common stockholders
    
    $
    (3,493
    )
    
    $
    (2,222
    )
    
    $
    6,131
    
    
    $
    (4,465
    )Basic and diluted (loss) income per common share:Net loss per common share before discontinued operations:
    
    $
    (0.05
    )
    
    $
    (0.03
    )
    
    $
    (0.07
    )
    
    $
    (0.06
    )Net income per common share from discontinued operations:
    
    $
    
    
    
    $
    
    
    
    $
    0.16
    
    
    $
    Net (loss) income per common share:
    
    $
    (0.05
    )
    
    $
    (0.03
    )
    
    $
    0.09
    
    
    $
    (0.06
    )Weighted average common shares outstanding:Basic
    
    
    64,718
    
    
    
    72,381
    
    
    
    64,705
    
    
    
    72,381Diluted
    
    
    64,718
    
    
    
    72,381
    
    
    
    65,178
    
    
    
    72,381
  4




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SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
 
 Unaudited Condensed Consolidated Statements of Cash Flows
 Six Months EndedJune 30,2004
    
    2005(In thousands)Cash flows from operating activities:Net income
    
    $
    10,292
    
    
    $
    160Adjustments to reconcile net income to net cash provided by operating activities:(Income) loss from discontinued operations, net of tax
    
    
    (10,889
    )
    
    
    3Loss on early extinguishment of debt
    
    
    
    
    
    
    3,154Gain (loss) on disposal of fixed assets
    
    
    7
    
    
    
    (2
    )Depreciation and amortization
    
    
    1,646
    
    
    
    1,654Net barter expense
    
    
    (100
    )
    
    
    (126
    )Provision
for (reduction of) doubtful trade accounts receivable
    
    
    365
    
    
    
    (167
    )Amortization of debt discount
    
    
    597
    
    
    
    672Amortization of deferred financing costs
    
    
    992
    
    
    
    1,031Increase in deferred income taxes
    
    
    1,390
    
    
    
    Amortization of deferred commitment fee
    
    
    (37
    )
    
    
    (37
    )Changes in operating assets and liabilities:(Increase) decrease in trade receivables
    
    
    (5,094
    )
    
    
    1,185Decrease in other current assets
    
    
    437
    
    
    
    93Increase in other assets
    
    
    (581
    )
    
    
    (260
    )Decrease in accounts payable and accrued expenses
    
    
    (3,664
    )
    
    
    (7,693
    )Increase in deferred commitment fee
    
    
    600
    
    
    
    (Decrease) increase in accrued interest
    
    
    (945
    )
    
    
    422Net cash (used in) provided by continuing operations
    
    
    (4,984
    )
    
    
    89Net cash provided by (used in) discontinued operations
    
    
    789
    
    
    
    (245
    )Net cash used in operating activities
    
    
    (4,195
    )
    
    
    (156
    )Cash flows from investing activities:Proceeds from sale of radio stations, net of closing costs
    
    
    23,730
    
    
    
    Deposit on sale of stations
    
    
    500
    
    
    
    20,000Additions to property and equipment
    
    
    (1,350
    )
    
    
    (1,987
    )Net cash provided by investing activities
    
    
    22,880
    
    
    
    18,013Cash flows from financing activities:Repayments of other long-term debt
    
    
    (111
    )
    
    
    (3,275
    )Payment of deferred financing costs
    
    
    (163
    )
    
    
    (8,699
    )Payment of deferred offering costs
    
    
    (375
    )
    
    
    Proceeds from Class A stock options exercised
    
    
    226
    
    
    
    Restricted
cash related to the redemption of the 9 5/8% senior subordinated notes, due 2009
    
    
    
    
    
    
    (357,483
    )Proceeds
from senior credit facility term loan due 2012
    
    
    
    
    
    
    325,000Proceeds from senior credit facility term loan due 2013
    
    
    
    
    
    
    100,000Repayment of senior credit facility term loan due 2012
    
    
    
    
    
    
    (812
    )Repayment of senior credit facility term loan due 2009
    
    
    (625
    )
    
    
    (123,750
    )Net cash used in financing activities
    
    
    (1,048
    )
    
    
    (69,019
    )Net increase (decrease) in cash and cash equivalents
    
    
    17,637
    
    
    
    (51,162
    )Cash and cash equivalents at beginning of period
    
    
    45,609
    
    
    
    132,032Cash and cash equivalents at end of period
    
    
    63,246
    
    
    
    80,870Supplemental cash flows information:Interest paid during the period
    
    
    20,086
    
    
    
    20,673Income taxes paid during the period, net
    
    
    323
    
    
    
    1,582Non-cash investing and financing activities:Accrual of preferred stock as payment of preferred stock dividend
    
    $
    4,161
    
    
    $
    1,961
  5




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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. New Accounting Pronouncements
  3. Assets Held for Sale
      6




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4. Stockholders Equity
 (a) Series C Preferred Stock
     (b) Class A and B Common Stock
  (c) Warrants
  Number of Class ACommon Shares
    
    Per Share
    
    WarrantWarrant Date of Issue
    
    Underlying Warrants
    
    Exercise Price
    
    Expiration DateMarch 31, 2003
    
    
    100,000
    
    
    
    $6.14
    
    
    March 31, 2006April 30, 2003
    
    
    100,000
    
    
    
    $7.67
    
    
    April 30, 2006May 31, 2003
    
    
    100,000
    
    
    
    $7.55
    
    
    May 31, 2006June 30, 2003
    
    
    100,000
    
    
    
    $8.08
    
    
    June 30, 2006July 31, 2003
    
    
    100,000
    
    
    
    $8.17
    
    
    July 31, 2006August 31, 2003
    
    
    100,000
    
    
    
    $7.74
    
    
    August 31, 2006September 30, 2003
    
    
    100,000
    
    
    
    $8.49
    
    
    September 30, 2006December 23, 2004
    
    
    3,800,000
    
    
    (see Note 4(a))
    
    December 23, 20084,500,000
 7




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##### Table of Contents



(d) Stock Option Plans
   WeightedAverageExerciseShares
    
    PriceOutstanding at December 31, 2003
    
    
    2,351
    
    
    $
    13.05Granted
    
    
    993
    
    
    
    10.12Exercised
    
    
    (89
    )
    
    
    6.53Forfeited
    
    
    (242
    )
    
    
    12.99Outstanding at December 31, 2004
    
    
    3,013
    
    
    
    12.28Granted
    
    
    95
    
    
    
    10.41Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (157
    )
    
    
    19.77Outstanding at June 30, 2005
    
    
    2,951
    
    
    $
    11.82
  WeightedAverageRemaining
    
    Weighted
    
    
    
    
    
    WeightedContractual
    
    Average
    
    
    
    
    
    AverageNumber
    
    Life
    
    Exercise
    
    Number
    
    ExerciseRange of Exercise Prices
    
    Outstanding
    
    (Years)
    
    Price
    
    Exercisable
    
    Price$     0  4.99
    
    
    
    100
    
    
    
    5.4
    
    
    $
    4.81
    
    
    
    100
    
    
    $
    4.815  9.99
    
    
    
    1,636
    
    
    
    7.7
    
    
    
    9.05
    
    
    
    1,024
    
    
    
    8.6910  14.99
    
    
    
    486
    
    
    
    5.0
    
    
    
    10.52
    
    
    
    296
    
    
    
    10.3215  19.99
    
    
    
    19
    
    
    
    6.9
    
    
    
    15.48
    
    
    
    19
    
    
    
    15.4820  24.99
    
    
    
    710
    
    
    
    4.3
    
    
    
    20.00
    
    
    
    710
    
    
    
    20.002,951
    
    
    
    6.3
    
    
    
    11.82
    
    
    
    2,149
    
    
    
    12.53
  Three-Months Ended
    
    Six-Months EndedJune 30,
    
    June 30,2004
    
    2005
    
    2004
    
    2005Expected life

    
    7 years
    
    
    5 years
    
    
    7 years
    
    
    5 yearsDividends
    
    None
    
    
    None
    
    
    None
    
    
    NoneRisk-free interest rate
    
    
    4.24
    %
    
    
    3.72
    %
    
    
    3.45
    %
    
    
    4.11
    %Expected volatility
    
    
    76
    %
    
    
    71
    %
    
    
    78
    %
    
    
    72
    %
 8




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Three-Months Ended
    
    Six-Months EndedJune 30,
    
    June 30,2004
    
    2005
    
    2004
    
    2005Net (loss) income applicable to common stockholders:As reported
    
    $
    (3,493
    )
    
    
    (2,222
    )
    
    $
    6,131
    
    
    
    (4,465
    )Deduct: total stock-based employee compensation expense
determined under fair value based method for all awards,
net of tax
    
    
    (1,085
    )
    
    
    (587
    )
    
    
    (2,869
    )
    
    
    (1,329
    )Pro forma net (loss) income
    
    $
    (4,578
    )
    
    
    (2,809
    )
    
    $
    3,262
    
    
    
    (5,794
    )Net (loss) income per common share:As reported: Basic and Diluted
    
    $
    (0.05
    )
    
    
    (0.03
    )
    
    $
    0.09
    
    
    
    (0.06
    )Pro forma: Basic and Diluted
    
    $
    (0.07
    )
    
    
    (0.04
    )
    
    $
    0.05
    
    
    
    (0.08
    )
 5. Litigation
      9




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6. New Senior Secured Credit Facilities
 General
   10




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Interest and Fees
   Collateral and Guarantees
  Covenants and Other Matters
  
    
    incur additional debt, incur contingent obligations and issue additional preferred stock;
    
    create liens;
    
    pay dividends, distributions or make other specified restricted payments, and restrict
the ability of certain of our subsidiaries to pay dividends or make other payments to us;
    
    sell assets;
    
    make certain capital expenditures, investments and acquisitions;
    
    enter into certain transactions with affiliates;
    
    enter into sale and leaseback transactions; and
    
    merge or consolidate with any other person or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of our assets.
 11




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7. Derivative Financial Instrument (Interest Rate Swap)
  8. Redemption of 9 5/8% Senior Subordinated Notes due 2009 (Subsequent Event)
  9. Television Station Acquisition (Subsequent Event)
  10.
Second Amendment to Related Party Lease Agreement
   
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
  12




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Comparison Analysis of the Operating Results for the Three Months Ended June 30, 2004 and 2005
  Three Months EndedJune 30,
    
    Change2004
    
    2005
    
    $
    
    %(In thousands)Net revenue
    
    $
    40,292
    
    
    $
    44,575
    
    
    
    4,283
    
    
    
    11
    %Engineering and programming expense
    
    
    7,537
    
    
    
    8,452
    
    
    
    915
    
    
    
    12
    %Selling, general and administrative expense
    
    
    14,701
    
    
    
    16,858
    
    
    
    2,157
    
    
    
    15
    %Corporate expenses
    
    
    2,999
    
    
    
    3,733
    
    
    
    734
    
    
    
    24
    %Depreciation and amortization
    
    
    824
    
    
    
    824
    
    
    
    
    
    
    
    0
    %Operating income from continuing operations
    
    
    14,231
    
    
    
    14,708
    
    
    
    477
    
    
    
    3
    %Interest expense, net
    
    
    (10,200
    )
    
    
    (10,646
    )
    
    
    (446
    )
    
    
    4
    %Loss on early extinguishment of debt
    
    
    
    
    
    
    (3,154
    )
    
    
    (3,154
    )
    
    
    100
    %Other income (expense), net
    
    
    80
    
    
    
    1,793
    
    
    
    1,713
    
    
    
    2141
    %Income tax expense
    
    
    5,446
    
    
    
    2,579
    
    
    
    (2,867
    )
    
    
    (53
    )%Loss from discontinued operations, net
    
    
    (51
    )
    
    
    (1
    )
    
    
    50
    
    
    
    (98
    )%Net (loss) income
    
    $
    (1,386
    )
    
    $
    121
    
    
    
    1,507
    
    
    
    (109
    )%
 Net
Revenue.
 Engineering and Programming Expenses.
 Selling, General and Administrative Expenses.
 Corporate Expenses.
 Operating Income from Continuing Operations.
 13




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##### Table of Contents



Interest Expense, Net.
 Loss on early extinguishment of debt.
 Other Income, net.
 Income Taxes.
 Net Income.
 Comparison Analysis of the Operating Results for the Six Months Ended June 30, 2004 and 2005
  Six Months EndedJune 30,
    
    Change2004
    
    2005
    
    $
    
    %(In thousands)Net revenue
    
    $
    69,524
    
    
    $
    79,914
    
    
    
    10,390
    
    
    
    15
    %Engineering and programming expense
    
    
    14,949
    
    
    
    16,317
    
    
    
    1,368
    
    
    
    9
    %Selling, general and administrative expense
    
    
    25,618
    
    
    
    32,176
    
    
    
    6,558
    
    
    
    26
    %Corporate expenses
    
    
    6,227
    
    
    
    7,434
    
    
    
    1,207
    
    
    
    19
    %Depreciation and amortization
    
    
    1,646
    
    
    
    1,654
    
    
    
    8
    
    
    
    0
    %Operating income from continuing operations
    
    
    21,084
    
    
    
    22,333
    
    
    
    1,249
    
    
    
    6
    %Interest expense, net
    
    
    (20,438
    )
    
    
    (20,816
    )
    
    
    (378
    )
    
    
    2
    %Loss on early extinguishment of debt
    
    
    
    
    
    
    (3,154
    )
    
    
    (3,154
    )
    
    
    100
    %Other income, net
    
    
    255
    
    
    
    1,800
    
    
    
    1,545
    
    
    
    606
    %Income tax expense
    
    
    1,498
    
    
    
    
    
    
    
    (1,498
    )
    
    
    (100
    )%Income (loss) from discontinued operations, net
    
    
    10,889
    
    
    
    (3
    )
    
    
    (10,892
    )
    
    
    (100
    )%Net income
    
    $
    10,292
    
    
    $
    160
    
    
    
    (10,132
    )
    
    
    (98
    )%
 Net Revenue.
 Engineering and Programming Expenses.
 Selling, General and Administrative Expenses.
 14




---



##### Table of Contents



Corporate Expenses.
 Operating Income from Continuing Operations.
 Interest Expense, Net.
 Loss on early extinguishment of debt.
 Other Income, net.
 Income Taxes.
 Discontinued Operations, Net of Taxes.
 Net Income.
 Liquidity and Capital Resources
   Six Months Ended June 30,
    
    Change2004
    
    2005
    
    $(In thousands)Capital expenditures
    
    $
    1,350
    
    
    $
    1,987
    
    
    
    637Net cash flows used in operating activities
    
    $
    (4,195
    )
    
    $
    (156
    )
    
    
    4,039Net cash flows provided by investing activities
    
    
    22,880
    
    
    
    18,013
    
    
    
    (4,867
    )Net cash flows used in financing activities
    
    
    (1,048
    )
    
    
    (69,019
    )
    
    
    (67,971
    )Net increase (decrease) in cash and cash equivalents
    
    $
    17,637
    
    
    $
    (51,162
    )
 15




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##### Table of Contents



Net Cash Flows Used In Operating Activities.
 Net Cash Flows Provided by Investing Activities.
 Net Cash Flows Used In Financing Activities.
  
    
    the demand for advertising within the radio broadcasting industry and economic conditions in
general will not deteriorate in any material respect;
    
    we will continue to successfully implement our business strategies; and
    
    we will not incur any material unforeseen liabilities, including environmental liabilities.
       16




---



##### Table of Contents



As of June 30,
    
    For the year endedContractual Obligations
    
    Total
    
    2005
    
    2006
    
    2007
    
    2008
    
    2009
    
    2010
    
    ThereafterRecorded obligations:Senior
secured credit facility term loan due 2012 (a)
    
    $
    464,507
    
    
    
    11,685
    
    
    
    22,418
    
    
    
    22,223
    
    
    
    22,029
    
    
    
    21,835
    
    
    
    23,941
    
    
    
    340,376Senior
secured credit facility term loan due 2013 (b)
    
    
    105,546
    
    
    
    3,858
    
    
    
    101,688
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9 5/8% senior subordinated notes due 2009 (c)
    
    
    357,483
    
    
    
    357,483
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other long-term debt (d)
    
    
    744
    
    
    
    54
    
    
    
    108
    
    
    
    108
    
    
    
    108
    
    
    
    108
    
    
    
    108
    
    
    
    15010 3/4% Series B cumulative exchangeable redeemable
preferred stock (e)
    
    
    195,757
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,843
    
    
    
    13,647
    
    
    
    13,647
    
    
    
    165,620$
    1,124,037
    
    
    
    373,080
    
    
    
    124,214
    
    
    
    22,331
    
    
    
    24,980
    
    
    
    35,590
    
    
    
    37,696
    
    
    
    506,146Unrecorded obligations:Operating leases (f)
    
    
    38,155
    
    
    
    1,997
    
    
    
    3,738
    
    
    
    3,637
    
    
    
    3,569
    
    
    
    3,054
    
    
    
    3,262
    
    
    
    18,898Employment agreements (g)
    
    
    33,320
    
    
    
    6,784
    
    
    
    11,880
    
    
    
    8,139
    
    
    
    5,745
    
    
    
    772
    
    
    
    
    
    
    
    $
    71,475
    
    
    
    8,781
    
    
    
    15,618
    
    
    
    11,776
    
    
    
    9,314
    
    
    
    3,826
    
    
    
    3,262
    
    
    
    18,898Total obligations
    
    $
    1,195,512
    
    
    
    381,861
    
    
    
    139,832
    
    
    
    34,107
    
    
    
    34,294
    
    
    
    39,416
    
    
    
    40,958
    
    
    
    525,044
 
 (a)
    
    Our new senior secured credit facility term loan due 2012 are a variable-rate debt instrument, but we
entered into an interest rate swap to fix our interest rate for five
years. See Notes 6 and 7
to our unaudited condensed consolidated financial statements for additional information. For
the purpose of calculating our contractual obligations, we assumed an interest rate of
approximately 7.48% after the five year interest rate swap terminates.(b)
    
    Our new senior secured credit facility term loan due 2013 are a variable-rate debt instrument. The
net cash proceeds received from the sale of our Los Angeles (KZAB-FM and KZBA-FM) radio
stations, when and if completed, will be used to repay our borrowings under the Credit Facilities. Therefore, we reclassified
the Credit Facilities balance from long-term debt to current debt. For the
purpose of calculating our contractual obligations, we assumed that the senior secured credit
facility will be paid-down on January 31, 2006 and an interest
rate of approximately 7.72%. 17




---



##### Table of Contents



(c)
    
    On July 12, 2005, the 9 5/8% senior subordinated notes due 2009 were redeemed. See
Note 8 to our unaudited condensed consolidated financial statements for additional
information.(d)
    
    Other long-term debt relates to a capital lease.(e)
    
    Our Series B preferred stock has no specified maturity. However, holders of the preferred
stock may exercise an option on October 15, 2013 to require us to redeem all or a portion of
their preferred stock. The holders of shares of Series B preferred stock are entitled to
receive cumulative dividends at a rate of 10 3/4% per year of the $1,000 liquidation
preference per share. All dividends are cumulative from the date of issuance of the Series B
preferred stock and are payable quarterly in arrears on October 15, January 15, April 15 and
July 15 of each year. On or before October 15, 2008, we, at our option, may pay dividends in
cash or in additional fully paid and non-assessable shares of Series B preferred stock
(including fractional shares or, at our option, cash in lieu of fractional shares) having an
aggregate liquidation preference equal to the amount of such dividends. For the purpose of
calculating our contractual obligations we assumed that the Series B preferred stock will pay
dividends in additional fully paid and non-assessable shares until October 15, 2008, which are
excluded from this contractual obligation table. We expect those dividends to be approximately
$9.5 million, $10.6 million, $11.7 million, and $10.2 million for the fiscal years ended 2005,
2006, 2007 and 2008, respectively.After October 15, 2008, dividends may be paid only in cash, which are included in this
contractual obligation table. Our ability to pay cash dividends is subject to, and will be
limited by, the terms of our existing 9 5/8% senior subordinated
notes due 2009 and our Credit Facilities.(f)
    
    Included in our non-cancelable operating lease obligations are minimum lease payments for
office space and facilities and certain equipment.(g)
    
    We are committed to employment contracts for certain executives, on-air talent and general
managers expiring through 2009. New Accounting Pronouncements
  Disclosure Regarding Forward-Looking Statements
  
    
    Our substantial amount of debt could adversely affect our financial health;
    
    We will require a significant amount of cash to service our debt and to make cash
dividend payments under our Series B preferred stock;
    
    Our ability to generate cash depends on many factors, some of which are beyond our
control;
    
    We may not have the funds or the ability to raise the funds necessary to repurchase our
Series B preferred stock if holders exercise their repurchase right, or to finance the
change of control offer required by our Series B preferred stock and the indenture that
would govern our 10 3/4% subordinated exchange notes due 2013, if issued;
    
    Any acceleration of our debt or event of default would harm our business and financial
condition;
    
    Despite our current significant level of debt, we and our subsidiaries may still be able
to incur substantially more debt, which, if increased, could further intensify the risks
associated with our substantial leverage;
    
    The terms of our debt restrict us from engaging in many activities and require us to
satisfy various financial tests;
 18




---



##### Table of Contents




    
    The terms of our debt and our preferred stock impose or will impose restrictions
on us that may adversely affect our business;
    
    We may not complete the proposed sale of our Los Angeles stations;
    
    We have experienced net losses in the past and, to the extent that we experience net
losses in the future, our ability to raise capital and the market price of our common stock
may be adversely affected;
    
    Our operating results could be adversely affected by a national or regional recession;
    
    A large portion of our net revenue and station operating income currently comes from our
New York, Los Angeles and Miami markets;
    
    Loss of any key personnel could adversely affect our business;
    
    Our growth depends on successfully executing our acquisition strategy;
    
    We are a holding company and depend entirely upon cash flow from our subsidiaries to meet our obligations;
    
    Raúl Alarcón, Jr., our Chairman of the Board of Directors, Chief Executive Officer and
President, has majority voting control and this control may discourage or influence certain
types of transactions, including an actual or potential change of control such as a merger
or sale;
    
    We compete for advertising revenue with other radio groups as well as television and
other media companies, many of which have greater resources than we do;
    
    Cancellations or reductions in advertising could adversely affect our net revenues;
    
    The FCC has begun more vigorous enforcement of its indecency rules against the broadcast
industry, which could have a material adverse effect on our business;
    
    We may face regulatory review for additional acquisitions and divestitures in our
existing markets and, potentially, acquisitions in new markets;
    
    Any failure by us to comply with the Sarbanes-Oxley Act of 2002 could cause a loss of
confidence in the reliability of our financial statements and could have a material adverse
effect on our business and the price of our Class A common stock;
    
    We must be able to respond to rapidly changing technology, services and standards which
characterize our industry in order to remain competitive;
    
    Our business depends on maintaining our FCC licenses. We cannot assure you that we will
be able to maintain these licenses;
    
    The market price of our shares of Class A common stock may fluctuate significantly; and
    
    Current or future sales by existing stockholders could depress the market price of our Class A common stock.
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
   19




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##### Table of Contents



Item 4. Controls and Procedures
 Evaluation Of Disclosure Controls And Procedures.
 Changes In Internal Control Over Financial Reporting.
 
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
    20




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##### Table of Contents



21




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##### Table of Contents



Item 4. Submission of Matters to a Vote of Security Holders
  Directors
    
    Votes For
    
    Votes Against/WithheldRaúl Alarcón, Jr.
    
    
    258,589,607
    
    
    
    14,267,479Pablo Raúl Alarcón, Sr.
    
    
    258,320,908
    
    
    
    14,536,178Antonio S. Fernandez
    
    
    272,071,846
    
    
    
    785,240Dan Mason
    
    
    272,197,153
    
    
    
    659,933Jason L. Shrinsky
    
    
    258,136,569
    
    
    
    14,720,517Jose A. Villamil
    
    
    272,197,102
    
    
    
    659,984
  
 Item 5. Other Information
    
 Item 6. Exhibits
 Exhibits 
 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 Quarterly Report on Form 10-Q, dated May 10, 2005).3.4
    
    
    
    Certificate of Elimination of 14 1 1/4% 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 10 3/4% 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 10 3/4% 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).
 22




---



##### Table of Contents



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 9 5/8% Senior Subordinated Notes due 2009 with The Bank of New York as
Trustee, dated November 2, 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 9 5/8%
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 14 1 1/4% 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 Quarterly 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 the Companys Annual Report on Form 10-K filed on
March 16, 2005).10.1
    
    
    
    Asset Purchase Agreement dated July 12, 2005 among the Company, WDLP Broadcasting Company, LLC, WDLP
Licensed Subsidiary, LLC, Robin Broadcasting Company, LLC and Robin Licensed Subsidiary, LLC.10.2
    
    
    
    Second Amendment to Lease dated
December 1, 2004 between the Company and Irradio Holdings,
Ltd.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.
 23




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##### Table of Contents



SIGNATURES
  SPANISH BROADCASTING SYSTEM, INC.By:
    /s/ JOSEPH A. GARCÍAJOSEPH A. GARCÍAExecutive Vice President, Chief
Financial Officer and Secretary

(principal financial and accounting officer and duly authorized 
officer
of the registrant)  24




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##### Table of Contents



Exhibits 
 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 Quarterly Report on Form 10-Q, dated May 10, 2005).3.4
    
    
    
    Certificate of Elimination of 14 1 1/4% 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 10 3/4% 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 10 3/4% 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 9 5/8% Senior Subordinated Notes due 2009 with The Bank of New York as
Trustee, dated November 2, 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 9 5/8%
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 14 1 1/4% 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 Quarterly Report on Form 8-K filed on
December 27, 2004).
 25




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##### Table of Contents



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 the Companys Annual Report on Form 10-K filed on
March 16, 2005).10.1
    
    
    
    Asset Purchase Agreement dated July 12, 2005 among the Company, WDLP Broadcasting Company, LLC, WDLP
Licensed Subsidiary, LLC, Robin Broadcasting Company, LLC and Robin Licensed Subsidiary, LLC.10.2
    
    
    
    Second Amendment to Lease dated
December 1, 2004 between the Company and Irradio Holdings, Ltd.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.
 26