##### 









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, 2003                                           
|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

(SBS LOGO)

Spanish Broadcasting System, Inc.

(Exact name of registrant as specified in its
charter)


|                                                                   |  |                                         
|------------------------------------------------------------------ |  | ----------------------------------------
|Delaware                                                           |  | 13-3827791                              
|(State or other jurisdiction of
    incorporation or organization) |  | (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)


(Former name, former address and former fiscal
year,

if changed since last report)


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
an accelerated filer (as defined in Rule 12b-2 of the
Exchange
Act).     Yes þ          No o

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each
of the issuers classes of common stock, as of the latest
practicable date: as of November 12, 2003, 37,079,655
shares of Class A common stock, par value $.0001 per share,
and 27,605,150 shares of Class B common stock, par value
$.0001 per share, were outstanding.



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##### 



SPANISH BROADCASTING SYSTEM, INC.

INDEX

|                                   |  |                                                                                                                                                 |  |      |    | 
|---------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                   |  |                                                                                                                                                 |  | Page
|                                   |  |                                                                                                                                                 |  |     
|PART I.  FINANCIAL
    INFORMATION
|ITEM 1.                            |  | Financial Statements  Unaudited                                                                                                                |  |      | 3  | 
|                                   |  | Unaudited Condensed Consolidated Balance Sheets
    as of December 29, 2002 and September 30, 2003                                              |  |      | 3  | 
|                                   |  | Unaudited Condensed Consolidated Statements of
    Operations for the Three and Nine-Months Ended
    September 29, 2002 and September 30, 2003 |  |      | 4  | 
|                                   |  | Unaudited Condensed Consolidated Statements of
    Cash Flows for the Nine-Months Ended September 29, 2002 and
    September 30, 2003           |  |      | 5  | 
|                                   |  | Notes to Unaudited Condensed Consolidated
    Financial Statements                                                                              |  |      | 6  | 
|ITEM 2.                            |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations                                                       |  |      | 16 | 
|ITEM 3.                            |  | Quantitative and Qualitative Disclosures About
    Market Risk                                                                                  |  |      | 26 | 
|ITEM 4.                            |  | Controls and Procedures                                                                                                                         |  |      | 26 | 
|ITEM 1.                            |  | Legal Proceedings                                                                                                                               |  |      | 27 | 
|ITEM 2.                            |  | Changes in Securities and Use of Proceeds                                                                                                       |  |      | 27 | 
|ITEM 4.                            |  | Submission of Matters to a Vote of Security
    Holders                                                                                         |  |      | 27 | 
|ITEM 5.                            |  | Other Information                                                                                                                               |  |      | 28 | 
|ITEM 6.                            |  | Exhibits and Reports on Form 8-K                                                                                                                |  |      | 30 | 

2



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##### 



PART I.  FINANCIAL
INFORMATION

Item 1.Financial
Statements  Unaudited

SPANISH BROADCASTING SYSTEM, INC. AND
SUBSIDIARIES



UNAUDITED CONDENSED CONSOLIDATED BALANCE
SHEETS


|                                           |                                                                                                                                                                                                                     |                                            |         |                    |         |  |         |          |         | 
|------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ------------------ | ------- |  | ------- | -------- | ------- | 
|                                           |                                                                                                                                                                                                                     | December 29, 2002                          |         | September 30, 2003
|                                           |                                                                                                                                                                                                                     |                                            |         |                   
|                                           |                                                                                                                                                                                                                     |                                           
|                                           |                                                                                                                                                                                                                     | (In thousands, except share information)  
|ASSETS                                    
|Current assets:                            |                                                                                                                                                                                                                     |                                            |         |                    |         |  |         |         
|                                           | Cash and cash equivalents                                                                                                                                                                                           |                                            | $       | 71,430             |         |  | $       | 46,604   |        
|                                           | Receivables, net                                                                                                                                                                                                    |                                            |         | 25,516             |         |  |         | 26,834   |        
|                                           | Other current assets                                                                                                                                                                                                |                                            |         | 2,252              |         |  |         | 2,272    |        
|                                           | Assets held for sale                                                                                                                                                                                                |                                            |         | 27,139             |         |  |         | 27,192   |        
|                                           |                                                                                                                                                                                                                     |                                            |         |                    |         |  |         |         
|                                           |                                                                                                                                                                                                                     | Total current assets                       |         |                    | 126,337 |  |         |          | 102,902 | 
|Property and equipment, net                |                                                                                                                                                                                                                     |                                            | 23,618  |                    |         |  | 24,420  |         
|Intangible assets                          |                                                                                                                                                                                                                     |                                            | 476,369 |                    |         |  | 513,001 |         
|Deferred financing costs, net              |                                                                                                                                                                                                                     |                                            | 8,759   |                    |         |  | 7,980   |         
|Deferred offering costs                    |                                                                                                                                                                                                                     |                                            |        |                    |         |  | 432     |         
|Other assets                               |                                                                                                                                                                                                                     |                                            | 201     |                    |         |  | 1,385   |         
|                                           |                                                                                                                                                                                                                     |                                            |         |                    |         |  |         |         
|                                           |                                                                                                                                                                                                                     | Total assets                               |         | $                  | 635,284 |  |         | $        | 650,120 | 
|                                           |                                                                                                                                                                                                                     |                                            |         |                    |         |  |         |         
|LIABILITIES AND STOCKHOLDERS
    EQUITY  
|Current liabilities:                       |                                                                                                                                                                                                                     |                                            |         |                    |         |  |         |         
|                                           | Current portion of long-term debt                                                                                                                                                                                   |                                            | $       | 208                |         |  | $       | 222      |        
|                                           | Accounts payable and accrued expenses                                                                                                                                                                               |                                            |         | 15,691             |         |  |         | 15,786   |        
|                                           | Accrued interest                                                                                                                                                                                                    |                                            |         | 5,226              |         |  |         | 13,553   |        
|                                           | Deferred commitment fee                                                                                                                                                                                             |                                            |         | 581                |         |  |         | 115      |        
|                                           |                                                                                                                                                                                                                     |                                            |         |                    |         |  |         |         
|                                           |                                                                                                                                                                                                                     | Total current liabilities                  |         |                    | 21,706  |  |         |          | 29,676  | 
|9 5/8% senior subordinated notes, net      |                                                                                                                                                                                                                     |                                            | 324,154 |                    |         |  | 324,960 |         
|Other long-term debt, less current portion |                                                                                                                                                                                                                     |                                            | 3,948   |                    |         |  | 3,780   |         
|Deferred income taxes                      |                                                                                                                                                                                                                     |                                            | 58,051  |                    |         |  | 63,723  |         
|                                           |                                                                                                                                                                                                                     |                                            |         |                    |         |  |         |         
|                                           |                                                                                                                                                                                                                     | Total liabilities                          |         |                    | 407,859 |  |         |          | 422,139 | 
|                                           |                                                                                                                                                                                                                     |                                            |         |                    |         |  |         |         
|Stockholders equity:                      |                                                                                                                                                                                                                     |                                            |         |                    |         |  |         |         
|                                           | Class A common stock, $.0001 par value.
    Authorized 100,000,000 shares; 37,076,655 shares issued and
    outstanding at December 29, 2002 and 37,079,655 shares
    issued and outstanding at September 30, 2003 |                                            |         | 3                  |         |  |         | 3        |        
|                                           | Class B common stock, $.0001 par value.
    Authorized 50,000,000 shares; 27,605,150 shares issued and
    outstanding at December 29, 2002 and September 30, 2003                                                  |                                            |         | 3                  |         |  |         | 3        |        
|                                           | Additional paid-in capital                                                                                                                                                                                          |                                            |         | 444,594            |         |  |         | 447,561  |        
|                                           | Accumulated deficit                                                                                                                                                                                                 |                                            |         | (217,175           | )       |  |         | (219,586 | )      
|                                           |                                                                                                                                                                                                                     |                                            |         |                    |         |  |         |         
|                                           |                                                                                                                                                                                                                     | Total stockholders equity                 |         |                    | 227,425 |  |         |          | 227,981 | 
|                                           |                                                                                                                                                                                                                     |                                            |         |                    |         |  |         |         
|                                           |                                                                                                                                                                                                                     | Total liabilities and stockholders equity |         | $                  | 635,284 |  |         | $        | 650,120 | 
|                                           |                                                                                                                                                                                                                     |                                            |         |                    |         |  |         |         

See accompanying notes to unaudited condensed
consolidated financial statements.

3



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##### 



SPANISH BROADCASTING SYSTEM, INC. AND
SUBSIDIARIES



UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS


|                                                                                                                             |                               |                                                                                                                                                  |             |                   |        |               |        |               |        |        |         |        |         |         |         |        |        |         |  
|---------------------------------------------------------------------------------------------------------------------------- | ----------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------ | ----------- | ----------------- | ------ | ------------- | ------ | ------------- | ------ | ------ | ------- | ------ | ------- | ------- | ------- | ------ | ------ | ------- | -
|                                                                                                                             |                               |                                                                                                                                                  |             |                  
|                                                                                                                             |                               | Three Months Ended                                                                                                                               |             | Nine Months Ended
|                                                                                                                             |                               |                                                                                                                                                  |             |                  
|                                                                                                                             |                               | September 29,                                                                                                                                    |             | September 30,     |        | September 29, |        | September 30,
|                                                                                                                             |                               | 2002                                                                                                                                             |             | 2003              |        | 2002          |        | 2003         
|                                                                                                                             |                               |                                                                                                                                                  |             |                   |        |               |        |              
|                                                                                                                             |                               |                                                                                                                                                 
|                                                                                                                             |                               | (In thousands, except per share data)                                                                                                           
|Gross revenue                                                                                                                |                               | $                                                                                                                                                | 40,219      |                   |        | $             | 41,171 |               |        | $      | 114,915 |        |         | $       | 115,268 |       
|Less agency commissions                                                                                                      |                               |                                                                                                                                                  | 5,095       |                   |        |               | 5,471  |               |        |        | 13,710  |        |         |         | 15,110  |       
|                                                                                                                             |                               |                                                                                                                                                  |             |                   |        |               |        |               |        |        |         |        |         |         |         |       
|                                                                                                                             |                               |                                                                                                                                                  | Net revenue |                   |        | 35,124        |        |               |        | 35,700 |         |        |         | 101,205 |         |        |        | 100,158 |  
|                                                                                                                             |                               |                                                                                                                                                  |             |                   |        |               |        |               |        |        |         |        |         |         |         |       
|Operating expenses:                                                                                                          |                               |                                                                                                                                                  |             |                   |        |               |        |               |        |        |         |        |         |         |         |       
|                                                                                                                             | Engineering                   |                                                                                                                                                  |             | 847               |        |               |        | 940           |        |        |         | 2,597  |         |         |         | 2,787  |       
|                                                                                                                             | Programming                   |                                                                                                                                                  |             | 5,333             |        |               |        | 4,914         |        |        |         | 15,079 |         |         |         | 14,857 |       
|                                                                                                                             | Stock-based programming       |                                                                                                                                                  |             |                  |        |               |        | 1,321         |        |        |         |       |         |         |         | 2,943  |       
|                                                                                                                             | Selling                       |                                                                                                                                                  |             | 9,570             |        |               |        | 8,616         |        |        |         | 31,634 |         |         |         | 26,487 |       
|                                                                                                                             | General and administrative    |                                                                                                                                                  |             | 3,230             |        |               |        | 3,269         |        |        |         | 9,779  |         |         |         | 10,610 |       
|                                                                                                                             | Corporate expenses            |                                                                                                                                                  |             | 3,609             |        |               |        | 4,570         |        |        |         | 9,559  |         |         |         | 13,751 |       
|                                                                                                                             | Depreciation and amortization |                                                                                                                                                  |             | 715               |        |               |        | 651           |        |        |         | 2,102  |         |         |         | 2,117  |       
|                                                                                                                             |                               |                                                                                                                                                  |             |                   |        |               |        |               |        |        |         |        |         |         |         |       
|                                                                                                                             |                               |                                                                                                                                                  | 23,304      |                   |        |               | 24,281 |               |        |        | 70,750  |        |         |         | 73,552  |       
|                                                                                                                             |                               |                                                                                                                                                  |             |                   |        |               |        |               |        |        |         |        |         |         |         |       
|                                                                                                                             |                               | Operating income from continuing operations                                                                                                      |             |                   | 11,820 |               |        |               | 11,419 |        |         |        | 30,455  |         |         |        | 26,606 |        
|Other (income) expenses:                                                                                                     |                               |                                                                                                                                                  |             |                   |        |               |        |               |        |        |         |        |         |         |         |       
|                                                                                                                             | Interest expense, net         |                                                                                                                                                  |             | 8,574             |        |               |        | 8,826         |        |        |         | 25,775 |         |         |         | 26,256 |       
|                                                                                                                             | Other, net                    |                                                                                                                                                  |             | 66                |        |               |        | (2,643        | )      |        |         | (200   | )       |         |         | (2,866 | )     
|                                                                                                                             |                               |                                                                                                                                                  |             |                   |        |               |        |               |        |        |         |        |         |         |         |       
|                                                                                                                             |                               | Income from continuing operations before income
    taxes, discontinued operations and cumulative effect of a change
    in accounting principle |             |                   | 3,180  |               |        |               | 5,236  |        |         |        | 4,880   |         |         |        | 3,216  |        
|Income tax expense                                                                                                           |                               |                                                                                                                                                  | 5,103       |                   |        |               | 7,410  |               |        |        | 49,242  |        |         |         | 5,287   |       
|                                                                                                                             |                               |                                                                                                                                                  |             |                   |        |               |        |               |        |        |         |        |         |         |         |       
|                                                                                                                             |                               | Loss from continuing operations before
    discontinued operations and cumulative effect of a change in
    accounting principle                 |             |                   | (1,923 | )             |        |               | (2,174 | )      |         |        | (44,362 | )       |         |        | (2,071 | )      
|Income (loss) from discontinued operations,
    net of tax                                                                   |                               |                                                                                                                                                  | 1,830       |                   |        |               | (225   | )             |        |        | 1,906   |        |         |         | (340    | )     
|Cumulative effect of a change in accounting
    principle for intangible assets, net of income tax benefit                   |                               |                                                                                                                                                  |            |                   |        |               |       |               |        |        | (45,288 | )      |         |         |        |       
|                                                                                                                             |                               |                                                                                                                                                  |             |                   |        |               |        |               |        |        |         |        |         |         |         |       
|                                                                                                                             |                               |                                                                                                                                                  | Net loss    |                   | $      | (93           | )      |               | $      | (2,399 | )       |        | $       | (87,744 | )       |        | $      | (2,411  | )
|                                                                                                                             |                               |                                                                                                                                                  |             |                   |        |               |        |               |        |        |         |        |         |         |         |       
|Net loss per common share before discontinued
    operations, and cumulative effect of a change in accounting
    principle: |                               |                                                                                                                                                  |             |                   |        |               |        |               |        |        |         |        |         |         |         |       
|                                                                                                                             | Basic and Diluted             |                                                                                                                                                  | $           | 0.03              |        |               | $      | (0.04         | )      |        | $       | (0.69  | )       |         | $       | (0.03  | )     
|Net income (loss) per common share for
    discontinued operations                                                           |                               |                                                                                                                                                  |             |                   |        |               |        |               |        |        |         |        |         |         |         |       
|                                                                                                                             | Basic and Diluted             |                                                                                                                                                  | $           | 0.03              |        |               | $      |              |        |        | $       | 0.03   |         |         | $       | (0.01  | )     
|Net loss per common share attributed to a
    cumulative effect of a change in accounting principle, net of
    tax:         |                               |                                                                                                                                                  |             |                   |        |               |        |               |        |        |         |        |         |         |         |       
|                                                                                                                             | Basic and Diluted             |                                                                                                                                                  | $           |                  |        |               | $      |              |        |        | $       | (0.70  | )       |         | $       |       |       
|                                                                                                                             |                               |                                                                                                                                                  |             |                   |        |               |        |               |        |        |         |        |         |         |         |       
|Net loss per common share:                                                                                                   |                               |                                                                                                                                                  |             |                   |        |               |        |               |        |        |         |        |         |         |         |       
|                                                                                                                             | Basic and Diluted             |                                                                                                                                                  | $           |                  |        |               | $      | (0.04         | )      |        | $       | (1.36  | )       |         | $       | (0.04  | )     
|                                                                                                                             |                               |                                                                                                                                                  |             |                   |        |               |        |               |        |        |         |        |         |         |         |       
|Weighted-average common shares outstanding:                                                                                  |                               |                                                                                                                                                  |             |                   |        |               |        |               |        |        |         |        |         |         |         |       
|                                                                                                                             | Basic and Diluted             |                                                                                                                                                  |             | 64,673            |        |               |        | 64,684        |        |        |         | 64,699 |         |         |         | 64,683 |       
|                                                                                                                             |                               |                                                                                                                                                  |             |                   |        |               |        |               |        |        |         |        |         |         |         |       

See accompanying notes to unaudited condensed
consolidated financial statements.

4



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##### 



SPANISH BROADCASTING SYSTEM, INC. AND
SUBSIDIARIES



UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS


|                                                         |                                                                                     |                                                                                 |                                                         |                                              |        |        |         |         |       |         |        | 
|-------------------------------------------------------- | ----------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | ------------------------------------------------------- | -------------------------------------------- | ------ | ------ | ------- | ------- | ----- | ------- | ------ | 
|                                                         |                                                                                     | Nine Months Ended                                                               |                                                         | Nine Months Ended                           
|                                                         |                                                                                     | September 29, 2002                                                              |                                                         | September 30, 2003                          
|                                                         |                                                                                     |                                                                                 |                                                         |                                             
|                                                         |                                                                                     |                                                                                
|                                                         |                                                                                     | (In thousands)                                                                 
|Cash flows from operating activities:                    |                                                                                     |                                                                                 |                                                         |                                              |        |        |         |        
|                                                         | Net loss                                                                            |                                                                                 | $                                                       | (87,744                                      | )      |        | $       | (2,411  | )    
|                                                         | Adjustments to reconcile net loss to net cash
    provided by operating activities: |                                                                                 |                                                         |                                              |        |        |         |         |      
|                                                         |                                                                                     | (Income) loss from discontinued operations                                      |                                                         |                                              | (1,906 | )      |         |         | 340   |        
|                                                         |                                                                                     | Stock-based programming expense                                                 |                                                         |                                              |       |        |         |         | 2,943 |        
|                                                         |                                                                                     | Cumulative effect of a change in accounting
    principle for intangible assets |                                                         |                                              | 75,480 |        |         |         |      |        
|                                                         |                                                                                     | Loss (gain) on disposal of assets                                               |                                                         |                                              | 22     |        |         |         | (151  | )      
|                                                         |                                                                                     | Depreciation and amortization                                                   |                                                         |                                              | 2,103  |        |         |         | 2,117 |        
|                                                         |                                                                                     | Reduction of doubtful accounts                                                  |                                                         |                                              | (700   | )      |         |         | (998  | )      
|                                                         |                                                                                     | Amortization of debt discount                                                   |                                                         |                                              | 716    |        |         |         | 806   |        
|                                                         |                                                                                     | Amortization of deferred financing costs                                        |                                                         |                                              | 961    |        |         |         | 961   |        
|                                                         |                                                                                     | Increase in deferred income taxes                                               |                                                         |                                              | 18,352 |        |         |         | 4,903 |        
|                                                         |                                                                                     | Decrease in deferred commitment fee                                             |                                                         |                                              | (526   | )      |         |         | (466  | )      
|                                                         |                                                                                     | Changes in operating assets and liabilities, net
    of acquisitions:           |                                                         |                                              |        |        |         |         |       |        
|                                                         |                                                                                     |                                                                                 | Increase in receivables                                 |                                              |        | (1,486 | )       |         |       | (174    | )     
|                                                         |                                                                                     |                                                                                 | Decrease (increase) in other current assets             |                                              |        | 410    |         |         |       | (3      | )     
|                                                         |                                                                                     |                                                                                 | Decrease (increase) in other assets                     |                                              |        | 52     |         |         |       | (1,184  | )     
|                                                         |                                                                                     |                                                                                 | Increase in accounts payable and accrued expenses       |                                              |        | 2,704  |         |         |       | 43      |       
|                                                         |                                                                                     |                                                                                 | Increase in accrued interest                            |                                              |        | 8,148  |         |         |       | 8,327   |       
|                                                         |                                                                                     |                                                                                 |                                                         |                                              |        |        |         |        
|                                                         |                                                                                     |                                                                                 |                                                         | Net cash provided by continuing operations   |        |        | 16,586  |         |       |         | 15,053 | 
|                                                         |                                                                                     |                                                                                 |                                                         | Net cash provided by discontinued operations |        |        | 2,309   |         |       |         | 379    | 
|                                                         |                                                                                     |                                                                                 |                                                         |                                              |        |        |         |        
|                                                         |                                                                                     |                                                                                 |                                                         | Net cash provided by operating activities    |        |        | 18,895  |         |       |         | 15,432 | 
|                                                         |                                                                                     |                                                                                 |                                                         |                                              |        |        |         |        
|Cash flows from investing activities:                    |                                                                                     |                                                                                 |                                                         |                                              |        |        |         |        
|                                                         | Proceeds from sale of assets                                                        |                                                                                 |                                                         |                                             |        |        |         | 595     |      
|                                                         | Proceeds from sale of assets of discontinued
    operations                         |                                                                                 |                                                         |                                             |        |        |         | 44      |      
|                                                         | Proceeds from sale of radio station, net of
    closing costs                       |                                                                                 |                                                         | 34,534                                       |        |        |         |        |      
|                                                         | Advances on purchase price of radio station                                         |                                                                                 |                                                         | (21,221                                      | )      |        |         | (15,283 | )    
|                                                         | Acquisition of radio stations                                                       |                                                                                 |                                                         |                                             |        |        |         | (22,356 | )    
|                                                         | Additions to property and equipment                                                 |                                                                                 |                                                         | (2,730                                       | )      |        |         | (2,364  | )    
|                                                         | Additions to property and equipment of
    discontinued operations                  |                                                                                 |                                                         | (160                                         | )      |        |         | (149    | )    
|                                                         |                                                                                     |                                                                                 |                                                         |                                              |        |        |         |        
|                                                         |                                                                                     |                                                                                 | Net cash used in (provided by) investing
    activities |                                              |        | 10,423 |         |         |       | (39,513 | )     
|                                                         |                                                                                     |                                                                                 |                                                         |                                              |        |        |         |        
|Cash flows from financing activities:                    |                                                                                     |                                                                                 |                                                         |                                              |        |        |         |        
|                                                         | Increase in deferred financing costs                                                |                                                                                 |                                                         |                                             |        |        |         | (432    | )    
|                                                         | Increase in deferred offering costs                                                 |                                                                                 |                                                         |                                             |        |        |         | (182    | )    
|                                                         | Proceeds from Class A stock option exercised                                        |                                                                                 |                                                         | 101                                          |        |        |         | 23      |      
|                                                         | Repayment of other long-term debt                                                   |                                                                                 |                                                         | (241                                         | )      |        |         | (154    | )    
|                                                         |                                                                                     |                                                                                 |                                                         |                                              |        |        |         |        
|                                                         |                                                                                     |                                                                                 | Net cash used in financing activities                   |                                              |        | (140   | )       |         |       | (745    | )     
|                                                         |                                                                                     |                                                                                 |                                                         |                                              |        |        |         |        
|Net increase (decrease) in cash and cash
    equivalents |                                                                                     |                                                                                 | 29,178                                                  |                                              |        |        | (24,826 | )      
|Cash and cash equivalents at beginning of period         |                                                                                     |                                                                                 | 51,640                                                  |                                              |        |        | 71,430  |        
|                                                         |                                                                                     |                                                                                 |                                                         |                                              |        |        |         |        
|Cash and cash equivalents at end of period               |                                                                                     | $                                                                               | 80,818                                                  |                                              |        | $      | 46,604  |        
|                                                         |                                                                                     |                                                                                 |                                                         |                                              |        |        |         |        
|Supplemental cash flow information:                      |                                                                                     |                                                                                 |                                                         |                                              |        |        |         |        
|                                                         | Interest paid                                                                       |                                                                                 | $                                                       | 16,427                                       |        |        | $       | 16,572  |      
|                                                         |                                                                                     |                                                                                 |                                                         |                                              |        |        |         |        
|                                                         | Income taxes (received) paid, net                                                   |                                                                                 | $                                                       | (14                                          | )      |        | $       | 191     |      
|                                                         |                                                                                     |                                                                                 |                                                         |                                              |        |        |         |        
|Non-cash financing and investing activities:             |                                                                                     |                                                                                 |                                                         |                                              |        |        |         |        
|                                                         | Issuance of warrants towards the acquisition of a
    radio station                 |                                                                                 | $                                                       | 8,922                                        |        |        | $       |        |      
|                                                         |                                                                                     |                                                                                 |                                                         |                                              |        |        |         |        

See accompanying notes to unaudited condensed
consolidated financial statements.

5



---



##### 



SPANISH BROADCASTING SYSTEM, INC. AND
SUBSIDIARIES



NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS


September 30, 2003


1.     Basis of
Presentation

The unaudited condensed consolidated financial
statements include the accounts of Spanish Broadcasting System,
Inc. and its subsidiaries (the Company or
SBS). All intercompany balances and transactions
have been eliminated in consolidation. The accompanying
unaudited condensed consolidated financial statements as of
December 29, 2002 and September 30, 2003, and for the
three and nine-month periods ended September 29, 2002 and
September 30, 2003 do not contain all disclosures required
by generally accepted accounting principles. These unaudited
condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements of the
Company as of and for the fiscal year ended December 29,
2002 included in the Companys fiscal year 2002 Annual
Report on Form 10-K.

Effective December 30, 2002, the Company
changed its year-end from a broadcast calendar 52-53-week fiscal
year ending on the last Sunday in December to a calendar year
ending on December 31. Pursuant to Securities and Exchange
Commission Financial Reporting Release No. 35, such change
is not deemed a change in fiscal year for financial reporting
purposes and the Company is not required to file a separate
transition report or to report separate financial information
for the two-day period of December 30 and 31, 2002.
Financial results for December 30 and 31, 2002 are included
in the Companys financial results for the nine-month
period ended September 30, 2003.

In the opinion of the Companys management,
the accompanying unaudited condensed consolidated financial
statements contain all adjustments, which are 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, 2003
are not necessarily indicative of the results for a full year.

2.     Financial
Information for Guarantor and Non-Guarantor
Subsidiaries

Certain of the Companys subsidiaries
(collectively, the Subsidiary Guarantors) have
guaranteed the Companys 9 5/8% senior subordinated
notes due 2009 on a joint and several basis. The Company has not
included separate financial statements of the Subsidiary
Guarantors because (i) all of the Subsidiary Guarantors are
wholly owned subsidiaries of the Company, and (ii) the
guarantees issued by the Subsidiary Guarantors are full and
unconditional. The Company has not included separate parent-only
financial statements since the parent is a holding company with
no independent assets or operations other than its investments
in its subsidiaries. In December 1999, the Company transferred
the Federal Communications Commission (FCC) licenses
of WRMA-FM, WXDJ-FM, WLEY-FM, WSKQ-FM, KLEY-FM, WPAT-FM,
WCMA-FM, WZET-FM (formerly WSMA-FM and prior to that, WEGM-FM),
WMEG-FM, WCMQ-FM, and KLAX-FM, to special purpose subsidiaries
that were formed solely for the purpose of holding each
respective FCC license. In addition, all FCC licenses acquired
subsequent to December 1999 are held by special purpose
subsidiaries and/or non-guarantor subsidiaries. All of the
special purpose subsidiaries are non-guarantors of the
9 5/8% senior subordinated notes due 2009. Condensed
consolidating unaudited financial information for the Company
and its guarantor and non-guarantor subsidiaries is as follows
(in thousands):

6



---



##### 



CONDENSED CONSOLIDATING BALANCE
SHEET

As of December 29, 2002


|                                            |                                            |              |          |               |  |              |          |        |  |   |         |         |   |   |          |         | 
|------------------------------------------- | ------------------------------------------ | ------------ | -------- | ------------- |  | ------------ | -------- | ------ |  | - | ------- | ------- | - | - | -------- | ------- | 
|                                            |                                            | Parent and   |          |               |  |              |          |       
|                                            |                                            | Guarantor    |          | Non-Guarantor |  |              |          |       
|                                            |                                            | Subsidiaries |          | Subsidiaries  |  | Eliminations |          | Total 
|                                            |                                            |              |          |               |  |              |          |       
|Cash and cash equivalents                   |                                            | $            | 69,253   |               |  | $            | 2,177    |        |  | $ |        |         |   | $ | 71,430   |        
|Receivables, net                            |                                            |              | 23,837   |               |  |              | 1,679    |        |  |   |        |         |   |   | 25,516   |        
|Other current assets                        |                                            |              | 1,875    |               |  |              | 377      |        |  |   |        |         |   |   | 2,252    |        
|Asset held for sale                         |                                            |              | 864      |               |  |              | 26,275   |        |  |   |        |         |   |   | 27,139   |        
|                                            |                                            |              |          |               |  |              |          |        |  |   |         |         |   |   |          |        
|                                            | Total current assets                       |              |          | 95,829        |  |              |          | 30,508 |  |   |         |        |   |   |          | 126,337 | 
|Property and equipment, net                 |                                            |              | 16,141   |               |  |              | 7,477    |        |  |   |        |         |   |   | 23,618   |        
|Intangible assets                           |                                            |              | 66,189   |               |  |              | 410,180  |        |  |   |        |         |   |   | 476,369  |        
|Deferred financing costs, net               |                                            |              | 8,759    |               |  |              |         |        |  |   |        |         |   |   | 8,759    |        
|Investment in subsidiaries and intercompany |                                            |              | 428,740  |               |  |              | (401,926 | )      |  |   | (26,814 | )       |   |   |         |        
|Other assets                                |                                            |              | 200      |               |  |              | 1        |        |  |   |        |         |   |   | 201      |        
|                                            |                                            |              |          |               |  |              |          |        |  |   |         |         |   |   |          |        
|                                            | Total assets                               |              | $        | 615,858       |  |              | $        | 46,240 |  |   | $       | (26,814 | ) |   | $        | 635,284 | 
|                                            |                                            |              |          |               |  |              |          |        |  |   |         |         |   |   |          |        
|Current portion of long-term debt           |                                            | $            | 62       |               |  | $            | 146      |        |  | $ |        |         |   | $ | 208      |        
|Accounts payable and accrued expenses       |                                            |              | 12,333   |               |  |              | 3,358    |        |  |   |        |         |   |   | 15,691   |        
|Accrued interest                            |                                            |              | 5,226    |               |  |              |         |        |  |   |        |         |   |   | 5,226    |        
|Deferred commitment fee                     |                                            |              | 581      |               |  |              |         |        |  |   |        |         |   |   | 581      |        
|                                            |                                            |              |          |               |  |              |          |        |  |   |         |         |   |   |          |        
|                                            | Total current liabilities                  |              |          | 18,202        |  |              |          | 3,504  |  |   |         |        |   |   |          | 21,706  | 
|Long-term debt                              |                                            |              | 324,857  |               |  |              | 3,245    |        |  |   |        |         |   |   | 328,102  |        
|Deferred income taxes                       |                                            |              | 45,374   |               |  |              | 12,677   |        |  |   |        |         |   |   | 58,051   |        
|                                            |                                            |              |          |               |  |              |          |        |  |   |         |         |   |   |          |        
|                                            | Total liabilities                          |              |          | 388,433       |  |              |          | 19,426 |  |   |         |        |   |   |          | 407,859 | 
|                                            |                                            |              |          |               |  |              |          |        |  |   |         |         |   |   |          |        
|Common stock                                |                                            |              | 6        |               |  |              | 1        |        |  |   | (1      | )       |   |   | 6        |        
|Additional paid-in capital                  |                                            |              | 444,594  |               |  |              | 94,691   |        |  |   | (94,691 | )       |   |   | 444,594  |        
|Accumulated deficit                         |                                            |              | (217,175 | )             |  |              | (67,878  | )      |  |   | 67,878  |         |   |   | (217,175 | )      
|                                            |                                            |              |          |               |  |              |          |        |  |   |         |         |   |   |          |        
|                                            | Total stockholders equity                 |              |          | 227,425       |  |              |          | 26,814 |  |   |         | (26,814 | ) |   |          | 227,425 | 
|                                            |                                            |              |          |               |  |              |          |        |  |   |         |         |   |   |          |        
|                                            | Total liabilities and stockholders equity |              | $        | 615,858       |  |              | $        | 46,240 |  |   | $       | (26,814 | ) |   | $        | 635,284 | 
|                                            |                                            |              |          |               |  |              |          |        |  |   |         |         |   |   |          |        

7



---



##### 



CONDENSED CONSOLIDATING BALANCE
SHEET

As of September 30, 2003


|                                            |                                            |              |          |               |  |              |          |        |  |   |         |         |   |   |          |         | 
|------------------------------------------- | ------------------------------------------ | ------------ | -------- | ------------- |  | ------------ | -------- | ------ |  | - | ------- | ------- | - | - | -------- | ------- | 
|                                            |                                            | Parent and   |          |               |  |              |          |       
|                                            |                                            | Guarantor    |          | Non-Guarantor |  |              |          |       
|                                            |                                            | Subsidiaries |          | Subsidiaries  |  | Eliminations |          | Total 
|                                            |                                            |              |          |               |  |              |          |       
|Cash and cash equivalents                   |                                            | $            | 43,555   |               |  | $            | 3,049    |        |  | $ |        |         |   | $ | 46,604   |        
|Receivables, net                            |                                            |              | 25,645   |               |  |              | 1,189    |        |  |   |        |         |   |   | 26,834   |        
|Other current assets                        |                                            |              | 1,931    |               |  |              | 341      |        |  |   |        |         |   |   | 2,272    |        
|Assets held for sale                        |                                            |              | 917      |               |  |              | 26,275   |        |  |   |        |         |   |   | 27,192   |        
|                                            |                                            |              |          |               |  |              |          |        |  |   |         |         |   |   |          |        
|                                            | Total current assets                       |              |          | 72,048        |  |              |          | 30,854 |  |   |         |        |   |   |          | 102,902 | 
|Property and equipment, net                 |                                            |              | 17,192   |               |  |              | 7,228    |        |  |   |        |         |   |   | 24,420   |        
|Intangible assets                           |                                            |              | 81,928   |               |  |              | 431,073  |        |  |   |        |         |   |   | 513,001  |        
|Deferred financing costs, net               |                                            |              | 7,980    |               |  |              |         |        |  |   |        |         |   |   | 7,980    |        
|Deferred offering costs                     |                                            |              | 432      |               |  |              |         |        |  |   |        |         |   |   | 432      |        
|Investment in subsidiaries and intercompany |                                            |              | 450,332  |               |  |              | (426,538 | )      |  |   | (23,764 | )       |   |   |         |        
|Other assets                                |                                            |              | 1,384    |               |  |              | 1        |        |  |   |        |         |   |   | 1,385    |        
|                                            |                                            |              |          |               |  |              |          |        |  |   |         |         |   |   |          |        
|                                            | Total assets                               |              | $        | 631,296       |  |              | $        | 42,618 |  |   | $       | (23,794 | ) |   | $        | 650,120 | 
|                                            |                                            |              |          |               |  |              |          |        |  |   |         |         |   |   |          |        
|Current portion of long-term debt           |                                            | $            | 65       |               |  | $            | 157      |        |  | $ |        |         |   | $ | 222      |        
|Accounts payable and accrued expenses       |                                            |              | 12,922   |               |  |              | 2,864    |        |  |   |        |         |   |   | 15,786   |        
|Accrued interest                            |                                            |              | 13,553   |               |  |              |         |        |  |   |        |         |   |   | 13,553   |        
|Deferred commitment fee                     |                                            |              | 115      |               |  |              |         |        |  |   |        |         |   |   | 115      |        
|                                            |                                            |              |          |               |  |              |          |        |  |   |         |         |   |   |          |        
|                                            | Total current liabilities                  |              |          | 26,655        |  |              |          | 3,021  |  |   |         |        |   |   |          | 29,676  | 
|Long-term debt                              |                                            |              | 325,614  |               |  |              | 3,126    |        |  |   |        |         |   |   | 328,740  |        
|Deferred income taxes                       |                                            |              | 51,046   |               |  |              | 12,677   |        |  |   |        |         |   |   | 63,723   |        
|                                            |                                            |              |          |               |  |              |          |        |  |   |         |         |   |   |          |        
|                                            | Total liabilities                          |              |          | 403,315       |  |              |          | 18,824 |  |   |         |        |   |   |          | 422,139 | 
|                                            |                                            |              |          |               |  |              |          |        |  |   |         |         |   |   |          |        
|Common stock                                |                                            |              | 6        |               |  |              | 1        |        |  |   | (1      | )       |   |   | 6        |        
|Additional paid-in capital                  |                                            |              | 447,561  |               |  |              | 94,691   |        |  |   | (94,691 | )       |   |   | 447,561  |        
|Accumulated deficit                         |                                            |              | (219,586 | )             |  |              | (70,898  | )      |  |   | 70,898  |         |   |   | (219,586 | )      
|                                            |                                            |              |          |               |  |              |          |        |  |   |         |         |   |   |          |        
|                                            | Total stockholders equity                 |              |          | 227,981       |  |              |          | 23,794 |  |   |         | (23,794 | ) |   |          | 227,981 | 
|                                            |                                            |              |          |               |  |              |          |        |  |   |         |         |   |   |          |        
|                                            | Total liabilities and stockholders equity |              | $        | 631,296       |  |              | $        | 42,618 |  |   | $       | (23,794 | ) |   | $        | 650,120 | 
|                                            |                                            |              |          |               |  |              |          |        |  |   |         |         |   |   |          |        

8



---



##### 



CONDENSED CONSOLIDATING STATEMENT OF
OPERATIONS

For the Three Months Ended September 29,
2002


|                                                |                                             |              |        |               |   |              |       |        |   |   |        |       |  |   |        |        |  
|----------------------------------------------- | ------------------------------------------- | ------------ | ------ | ------------- | - | ------------ | ----- | ------ | - | - | ------ | ----- |  | - | ------ | ------ | -
|                                                |                                             | Parent and   |        |               |   |              |       |       
|                                                |                                             | Guarantor    |        | Non-Guarantor |   |              |       |       
|                                                |                                             | Subsidiaries |        | Subsidiaries  |   | Eliminations |       | Total 
|                                                |                                             |              |        |               |   |              |       |       
|Net revenue                                     |                                             | $            | 32,293 |               |   | $            | 2,831 |        |   | $ |       |       |  | $ | 35,124 |       
|Station operating expenses                      |                                             |              | 16,901 |               |   |              | 2,079 |        |   |   |       |       |  |   | 18,980 |       
|Corporate expenses                              |                                             |              | 3,609  |               |   |              | 120   |        |   |   | (120   | )     |  |   | 3,609  |       
|Depreciation and amortization                   |                                             |              | 559    |               |   |              | 156   |        |   |   |       |       |  |   | 715    |       
|                                                |                                             |              |        |               |   |              |       |        |   |   |        |       |  |   |        |       
|                                                | Operating income from continuing operations |              |        | 11,224        |   |              |       | 476    |   |   |        | 120   |  |   |        | 11,820 |  
|Interest expense, net                           |                                             |              | 7,227  |               |   |              | 1,347 |        |   |   |       |       |  |   | 8,574  |       
|Other (income) expense, net                     |                                             |              | (54    | )             |   |              |      |        |   |   | 120    |       |  |   | 66     |       
|Equity in net loss of subsidiaries              |                                             |              | 1,051  |               |   |              |      |        |   |   | (1,051 | )     |  |   |       |       
|Income tax expense                              |                                             |              | 4,923  |               |   |              | 180   |        |   |   |       |       |  |   | 5,103  |       
|Income from discontinued operations, net of tax |                                             |              | 1,830  |               |   |              |      |        |   |   |       |       |  |   | 1,830  |       
|                                                |                                             |              |        |               |   |              |       |        |   |   |        |       |  |   |        |       
|                                                | Net loss                                    |              | $      | (93           | ) |              | $     | (1,051 | ) |   | $      | 1,051 |  |   | $      | (93    | )
|                                                |                                             |              |        |               |   |              |       |        |   |   |        |       |  |   |        |       

CONDENSED CONSOLIDATING STATEMENT OF
OPERATIONS

For the Three Months Ended September 30,
2003


|                                              |                                             |              |        |               |   |              |       |       |   |   |      |     |  |   |        |        |  
|--------------------------------------------- | ------------------------------------------- | ------------ | ------ | ------------- | - | ------------ | ----- | ----- | - | - | ---- | --- |  | - | ------ | ------ | -
|                                              |                                             | Parent and   |        |               |   |              |       |      
|                                              |                                             | Guarantor    |        | Non-Guarantor |   |              |       |      
|                                              |                                             | Subsidiaries |        | Subsidiaries  |   | Eliminations |       | Total
|                                              |                                             |              |        |               |   |              |       |      
|Net revenue                                   |                                             | $            | 33,114 |               |   | $            | 2,586 |       |   | $ |     |     |  | $ | 35,700 |       
|Station operating expenses                    |                                             |              | 17,078 |               |   |              | 1,982 |       |   |   |     |     |  |   | 19,060 |       
|Corporate expenses                            |                                             |              | 4,570  |               |   |              | 120   |       |   |   | (120 | )   |  |   | 4,570  |       
|Depreciation and amortization                 |                                             |              | 573    |               |   |              | 78    |       |   |   |     |     |  |   | 651    |       
|                                              |                                             |              |        |               |   |              |       |       |   |   |      |     |  |   |        |       
|                                              | Operating income from continuing operations |              |        | 10,893        |   |              |       | 406   |   |   |      | 120 |  |   |        | 11,419 |  
|Interest expense, net                         |                                             |              | 7,495  |               |   |              | 1,331 |       |   |   |     |     |  |   | 8,826  |       
|Other (income) expense, net                   |                                             |              | (2,763 | )             |   |              |      |       |   |   | 120  |     |  |   | (2,643 | )     
|Equity in net loss of subsidiaries            |                                             |              | 969    |               |   |              |      |       |   |   | (969 | )   |  |   |       |       
|Income tax expense                            |                                             |              | 7,366  |               |   |              | 44    |       |   |   |     |     |  |   | 7,410  |       
|Loss from discontinued operations, net of tax |                                             |              | (225   | )             |   |              |      |       |   |   |     |     |  |   | (225   | )     
|                                              |                                             |              |        |               |   |              |       |       |   |   |      |     |  |   |        |       
|                                              | Net loss                                    |              | $      | (2,399        | ) |              | $     | (969  | ) |   | $    | 969 |  |   | $      | (2,399 | )
|                                              |                                             |              |        |               |   |              |       |       |   |   |      |     |  |   |        |       

9



---



##### 



CONDENSED CONSOLIDATING STATEMENT OF
OPERATIONS

For the Nine Months Ended September 29,
2002


|                                                                      |                                             |              |        |               |   |              |         |         |   |   |         |        |  |   |         |         |  
|--------------------------------------------------------------------- | ------------------------------------------- | ------------ | ------ | ------------- | - | ------------ | ------- | ------- | - | - | ------- | ------ |  | - | ------- | ------- | -
|                                                                      |                                             | Parent and   |        |               |   |              |         |        
|                                                                      |                                             | Guarantor    |        | Non-Guarantor |   |              |         |        
|                                                                      |                                             | Subsidiaries |        | Subsidiaries  |   | Eliminations |         | Total  
|                                                                      |                                             |              |        |               |   |              |         |        
|Net revenue                                                           |                                             | $            | 92,440 |               |   | $            | 8,765   |         |   | $ |        |        |  | $ | 101,205 |        
|Station operating expenses                                            |                                             |              | 52,749 |               |   |              | 6,340   |         |   |   |        |        |  |   | 59,089  |        
|Corporate expenses                                                    |                                             |              | 9,559  |               |   |              | 360     |         |   |   | (360    | )      |  |   | 9,559   |        
|Depreciation and amortization                                         |                                             |              | 1,600  |               |   |              | 502     |         |   |   |        |        |  |   | 2,102   |        
|                                                                      |                                             |              |        |               |   |              |         |         |   |   |         |        |  |   |         |        
|                                                                      | Operating income from continuing operations |              |        | 28,532        |   |              |         | 1,563   |   |   |         | 360    |  |   |         | 30,455  |  
|Interest expense, net                                                 |                                             |              | 21,750 |               |   |              | 4,025   |         |   |   |        |        |  |   | 25,775  |        
|Other (income) expense, net                                           |                                             |              | (558   | )             |   |              | (2      | )       |   |   | 360     |        |  |   | (200    | )      
|Equity in net loss of subsidiaries                                    |                                             |              | 47,929 |               |   |              |        |         |   |   | (47,929 | )      |  |   |        |        
|Income tax expense                                                    |                                             |              | 49,061 |               |   |              | 181     |         |   |   |        |        |  |   | 49,242  |        
|Income from discontinued operations, net of tax                       |                                             |              | 1,906  |               |   |              |        |         |   |   |        |        |  |   | 1,906   |        
|Cumulative effect of a change in accounting
    principle, net of tax |                                             |              |       |               |   |              | (45,288 | )       |   |   |        |        |  |   | (45,288 | )      
|                                                                      |                                             |              |        |               |   |              |         |         |   |   |         |        |  |   |         |        
|                                                                      | Net loss                                    |              | $      | (87,744       | ) |              | $       | (47,929 | ) |   | $       | 47,929 |  |   | $       | (87,744 | )
|                                                                      |                                             |              |        |               |   |              |         |         |   |   |         |        |  |   |         |        

CONDENSED CONSOLIDATING STATEMENT OF
OPERATIONS

For the Nine Months Ended September 30,
2003


|                                              |                                             |              |        |               |   |              |       |        |   |   |        |       |  |   |         |        |  
|--------------------------------------------- | ------------------------------------------- | ------------ | ------ | ------------- | - | ------------ | ----- | ------ | - | - | ------ | ----- |  | - | ------- | ------ | -
|                                              |                                             | Parent and   |        |               |   |              |       |       
|                                              |                                             | Guarantor    |        | Non-Guarantor |   |              |       |       
|                                              |                                             | Subsidiaries |        | Subsidiaries  |   | Eliminations |       | Total 
|                                              |                                             |              |        |               |   |              |       |       
|Net revenue                                   |                                             | $            | 92,229 |               |   | $            | 7,929 |        |   | $ |       |       |  | $ | 100,158 |       
|Station operating expenses                    |                                             |              | 51,567 |               |   |              | 6,117 |        |   |   |       |       |  |   | 57,684  |       
|Corporate expenses                            |                                             |              | 13,751 |               |   |              | 360   |        |   |   | (360   | )     |  |   | 13,751  |       
|Depreciation and amortization                 |                                             |              | 1,789  |               |   |              | 328   |        |   |   |       |       |  |   | 2,117   |       
|                                              |                                             |              |        |               |   |              |       |        |   |   |        |       |  |   |         |       
|                                              | Operating income from continuing operations |              |        | 25,122        |   |              |       | 1,124  |   |   |        | 360   |  |   |         | 26,606 |  
|Interest expense, net                         |                                             |              | 22,248 |               |   |              | 4,008 |        |   |   |       |       |  |   | 26,256  |       
|Other (income) expense, net                   |                                             |              | (3,227 | )             |   |              | 1     |        |   |   | 360    |       |  |   | (2,866  | )     
|Equity in net loss of subsidiaries            |                                             |              | 3,020  |               |   |              |      |        |   |   | (3,020 | )     |  |   |        |       
|Income tax expense                            |                                             |              | 5,152  |               |   |              | 135   |        |   |   |       |       |  |   | 5,287   |       
|Loss from discontinued operations, net of tax |                                             |              | (340   | )             |   |              |      |        |   |   |       |       |  |   | (340    | )     
|                                              |                                             |              |        |               |   |              |       |        |   |   |        |       |  |   |         |       
|                                              | Net loss                                    |              | $      | (2,411        | ) |              | $     | (3,020 | ) |   | $      | 3,020 |  |   | $       | (2,411 | )
|                                              |                                             |              |        |               |   |              |       |        |   |   |        |       |  |   |         |       

CONDENSED CONSOLIDATING STATEMENT OF CASH
FLOWS

For the Nine Months Ended September 29,
2002


|                                     |  |              |        |               |  |              |     |       |  |   |   |  |  |   |        |  
|------------------------------------ |  | ------------ | ------ | ------------- |  | ------------ | --- | ----- |  | - | - |  |  | - | ------ | -
|                                     |  | Parent and   |        |               |  |              |     |      
|                                     |  | Guarantor    |        | Non-Guarantor |  |              |     |      
|                                     |  | Subsidiaries |        | Subsidiaries  |  | Eliminations |     | Total
|                                     |  |              |        |               |  |              |     |      
|Cash flows from operating activities |  | $            | 18,786 |               |  | $            | 109 |       |  | $ |  |  |  | $ | 18,895 |  
|                                     |  |              |        |               |  |              |     |       |  |   |   |  |  |   |        |  
|Cash flows from investing activities |  | $            | 10,494 |               |  | $            | (71 | )     |  | $ |  |  |  | $ | 10,423 |  
|                                     |  |              |        |               |  |              |     |       |  |   |   |  |  |   |        |  
|Cash flows from financing activities |  | $            | (42    | )             |  | $            | (98 | )     |  | $ |  |  |  | $ | (140   | )
|                                     |  |              |        |               |  |              |     |       |  |   |   |  |  |   |        |  

10



---



##### 



CONDENSED CONSOLIDATING STATEMENT OF CASH
FLOWS

For the Nine Months Ended September 30,
2003


|                                     |  |              |         |               |  |              |       |       |  |   |   |  |  |   |         |  
|------------------------------------ |  | ------------ | ------- | ------------- |  | ------------ | ----- | ----- |  | - | - |  |  | - | ------- | -
|                                     |  | Parent and   |         |               |  |              |       |      
|                                     |  | Guarantor    |         | Non-Guarantor |  |              |       |      
|                                     |  | Subsidiaries |         | Subsidiaries  |  | Eliminations |       | Total
|                                     |  |              |         |               |  |              |       |      
|Cash flows from operating activities |  | $            | 14,374  |               |  | $            | 1,058 |       |  | $ |  |  |  | $ | 15,432  |  
|                                     |  |              |         |               |  |              |       |       |  |   |   |  |  |   |         |  
|Cash flows from investing activities |  | $            | (39,405 | )             |  | $            | (108  | )     |  | $ |  |  |  | $ | (39,513 | )
|                                     |  |              |         |               |  |              |       |       |  |   |   |  |  |   |         |  
|Cash flows from financing activities |  | $            | (667    | )             |  | $            | (78   | )     |  | $ |  |  |  | $ | (745    | )
|                                     |  |              |         |               |  |              |       |       |  |   |   |  |  |   |         |  

3.     New Accounting
Pronouncements

In June 2001, the Financial Accounting Standards
Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 143,
Accounting for Asset Retirement Obligations. SFAS
No. 143 requires the Company to record the fair value of an
asset retirement obligation as a liability in the period in
which it incurs a legal obligation associated with the
retirement of tangible long-lived assets that results from the
acquisition, construction, development, and/or normal use of the
assets. The Company would also record a corresponding asset that
is depreciated over the life of the asset. Subsequent to the
initial measurement of the asset retirement obligation, the
obligation will be adjusted at the end of each period to reflect
the passage of time and changes in the estimated future cash
flows underlying the obligation. The Company adopted SFAS
No. 143 on December 30, 2002. The adoption of SFAS
No. 143 did not have a material effect on the
Companys condensed consolidated financial statements.

In April 2002, the FASB issued SFAS No. 145,
Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical
Corrections (SFAS No. 145). SFAS
No. 145 rescinds FASB Statement No. 4, Reporting
Gains and Losses from Extinguishment of Debt, and an
amendment of that Statement, FASB Statement No. 44,
Accounting for Intangible Assets of Motor Carriers
and FASB Statement No. 64, Extinguishments of Debt
Made to Satisfy Sinking-Fund Requirements. SFAS
No. 145 amends FASB No. 13, Accounting for
Leases and other existing authoritative pronouncements to
make various technical corrections and clarify meanings, or
describes their applicability under changed conditions. SFAS
No. 145 will be effective for fiscal years beginning after
May 15, 2002. The adoption of SFAS No. 145 will
require that the Companys extraordinary loss recognized on
the extinguishments of debt in 2000 and 2001 be reclassified to
income or loss from continuing operations in its condensed
consolidated financial statements beginning in 2003.

In December 2002, the FASB issued SFAS
No. 148, Accounting for Stock-Based
Compensation-Transition and Disclosure. This pronouncement
amends SFAS No. 123 to provide alternative methods of
transition for an entity that voluntarily changes to the fair
value-based method of accounting for stock-based compensation.
SFAS No. 148 also expands the disclosure requirements with
respect to stock-based compensation. The Company does not intend
to change to the fair value method of accounting. The required
expanded disclosure is included in the September 30, 2003
condensed consolidated financial statements and notes thereto.

In January 2003, the FASB issued Interpretation
No. 46, Consolidation of Variable Interest Entities
(FIN 46). Subject to certain criteria defined in the
Interpretation, FIN 46 will require consolidation by business
enterprises of variable interest entities if the enterprise has
a variable interest that will absorb the majority of the
entitys expected losses, receives a majority of its
expected returns, or both. The provisions of FIN 46 are
effective immediately for interests acquired in variable
interest entities after January 31, 2003, and at the
beginning of the first interim or annual period beginning after
June 15, 2003, for interests acquired in variable interest
entities before February 1, 2003. The FASB has delayed the
effective date until the end of the first interim or annual
period ending after December 15, 2003 (for the Company,
December 31, 2003). The Company is in the process of
determining what impact, if any, the adoption of the provisions
of FIN 46 will have upon its financial condition or results of
operations.

11



---



##### 



In May 2003, the FASB issued SFAS No. 150,
Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity, effective
for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning
of the first interim period beginning after June 15, 2003.
This statement establishes standards for how an issuer
classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that
an issuer classify a freestanding financial instrument that is
within its scope as a liability (or an asset in some
circumstances) when that financial instrument embodies an
obligation of the issuer. The adoption of SFAS No. 150 did
not have an impact on the Companys condensed consolidated
financial statements.

4.     Cumulative
Effect of Accounting Change

In July 2001, FASB issued SFAS No. 142,
Goodwill and Other Intangible Assets. SFAS
No. 142 requires that goodwill and intangible assets with
indefinite useful lives no longer be amortized, but instead
tested for impairment at least annually in accordance with the
provisions of SFAS No. 142. The Company has concluded that
its intangible assets, comprised primarily of FCC licenses,
qualify as indefinite-life intangible assets under SFAS
No. 142.

The Company adopted the provisions of SFAS
No. 142 effective December 31, 2001. After performing
the transitional impairment evaluation of its indefinite-life
intangible assets, the Company determined that the carrying
value of certain indefinite-life intangible assets acquired from
AMFM Operating, Inc. in January 2000, and certain
indefinite-life intangible assets acquired from Rodriguez
Communications, Inc. and New World Broadcasters Corp., in
November 2000, exceeded their respective fair market values.
Fair market values of the Companys FCC licenses were
determined through the use of a third-party valuation. These
valuations were performed on the FCC licenses, which exclude the
franchise values of the stations (i.e. going concern value).
These valuations were based on a discounted cash flow model
incorporating various market assumptions and types of signals,
and assumed the FCC licenses were acquired and operated by a
third-party. As a result, the Company recorded a non-cash charge
for the cumulative effect of a change in accounting principle of
$45.3 million, net of income tax benefit of
$30.2 million. Under SFAS No. 142, goodwill is deemed to be
impaired if the net book value of the reporting unit exceeds its
estimated fair value. The Company has determined that it has one
reporting unit under SFAS No. 142 and that there was no
impairment of goodwill as a result of adopting SFAS No. 142.

Additionally, since amortization of its
indefinite-life intangible assets ceased for financial statement
purposes under SFAS No. 142, the Company could not be
assured that the reversals of the deferred tax liabilities
relating to those indefinite-life intangible assets would occur
within the Companys net operating loss carry-forward
period. Therefore, on December 31, 2001, the Company
recognized a non-cash charge totaling $55.4 million to
income tax expense to establish a valuation allowance against
the Companys deferred tax assets, primarily consisting of
net operating loss carry-forwards.

As of the Companys adoption of SFAS
No. 142 effective December 31, 2001, the Company had
unamortized goodwill in the amount of $32.7 million, and
unamortized identifiable intangible assets in the amount of
$543.2 million, all of which was subject to the transition
provision of SFAS No. 142. The following table presents
adjusted financial results for the nine-month periods ended
September 29, 2002 and

12



---



##### 



September 30, 2003, respectively, adjusting
for the cumulative effect of accounting principle and the
increase in the income tax valuation allowance upon adoption of
SFAS No. 142 on December 31, 2001.


|                                                                                    |  |                       |         |               |  |   |        |  
|----------------------------------------------------------------------------------- |  | --------------------- | ------- | ------------- |  | - | ------ | -
|                                                                                    |  |                      
|                                                                                    |  | Nine Months Ended    
|                                                                                    |  |                      
|                                                                                    |  | September 29,         |         | September 30,
|                                                                                    |  | 2002                  |         | 2003         
|                                                                                    |  |                       |         |              
|                                                                                    |  |                      
|                                                                                    |  | (In thousands, except
|                                                                                    |  | per share data)      
|                                                                                    |  | (Unaudited)          
|Reported net loss:                                                                  |  | $                     | (87,744 | )             |  | $ | (2,411 | )
|Add back:cumulative
    effect of a change in accounting principle, net of tax(1)   |  |                       | 45,288  |               |  |   |       |  
|Add back:income tax
    valuation allowance(2)                                      |  |                       | 55,358  |               |  |   |       |  
|                                                                                    |  |                       |         |               |  |   |        |  
|Adjusted net income (loss)                                                          |  | $                     | 12,902  |               |  | $ | (2,411 | )
|                                                                                    |  |                       |         |               |  |   |        |  
|Basic and diluted loss per share:                                                   |  |                       |         |               |  |   |        |  
|Reported net loss per share:                                                        |  | $                     | (1.36   | )             |  | $ | (0.04  | )
|Cumulative effect per share of a change in
    accounting principle, net of tax(1): |  |                       | 0.70    |               |  |   |       |  
|Income tax valuation allowance per share(2):                                        |  |                       | 0.86    |               |  |   |       |  
|                                                                                    |  |                       |         |               |  |   |        |  
|Adjusted net income (loss) per share:                                               |  | $                     | 0.20    |               |  | $ | (0.04  | )
|                                                                                    |  |                       |         |               |  |   |        |  



---



|    |                                                                                                                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | As a result of the adoption of SFAS No. 142
    on December 31, 2001, the Company incurred a non-cash
    transitional charge of $45.3 million, net of income tax
    benefit of $30.2 million, due to the cumulative effect of
    the change in accounting principle.
|   
|(2) | As a result of the adoption of SFAS No. 142
    on December 31, 2001, the Company incurred a non-cash
    income tax expense of $55.4 million to establish a
    valuation allowance against deferred tax assets on the date of
    adoption.                          

5.     Subsequent
Events

On October 2, 2003, we entered into an asset
purchase agreement with 3 Point Media  San
Francisco, LLC to sell the assets of radio station KPTI-FM,
serving the San Francisco, California market, for a cash
purchase price of $30.0 million. In connection with this
agreement, 3 Point Media  San Francisco, LLC
made a $1.5 million deposit on the purchase price
subsequent to September 30, 2003.

On October 30, 2003, SBS completed the
acquisition of the assets of radio station KXOL-FM (formerly
KFSG-FM), serving the Los Angeles, California market, from the
International Church of the FourSquare Gospel (ICFG)
at a cash purchase price of $250.0 million plus the
issuance to ICFG on February 8, 2002 of a warrant
exercisable for an aggregate of 2,000,000 shares of SBSs
Class A common stock at an exercise price of $10.50 per
share. This warrant is exercisable for a period of thirty-six
months from the date of issuance after which it will expire if
not exercised. To date, this warrant has not been exercised. SBS
assigned the warrant a fair market value of approximately $8.9
million based on the Black-Scholes option pricing model in
accordance with SFAS No. 123, Accounting for
Stock-Based Compensation. The fair market value of this
warrant was recorded as an increase to intangible assets and
additional paid-in capital on the date of grant. Additionally,
SBS paid $2.9 million in brokers fees in connection
with the KXOL-FM acquisition.

In addition to the FCC license of KXOL-FM, the
assets acquired by SBS from ICFG include certain radio
transmission equipment and a fifty year lease at a rent of $1.00
per year for the KXOL-FM tower site, all of which were used by
ICFG for radio broadcasting and which SBS also intends to use
for radio broadcasting. The consideration for the acquisition of
the assets of KXOL-FM was determined through arms-length
negotiations between SBS and ICFG. On November 2, 2000,
pursuant to the asset purchase agreement between SBS and ICFG
for the acquisition of the assets of KXOL-FM, SBS made a
non-refundable deposit of $5.0 million which was credited
towards the $250.0 million cash purchase price at closing.
Pursuant to amendments to the asset purchase agreement, prior to
the closing SBS made additional non-refundable deposits toward
the cash purchase price in the aggregate amount of
$55.0 million which were also credited

13



---



##### 



towards the $250.0 million cash purchase
price at closing. Cash on hand was used to make all the
non-refundable deposits toward the cash purchase price. The
remaining $190.0 million of the cash purchase price was
funded from (1) the proceeds of SBSs private offering
of $75,000,000 of 10 3/4% Series A cumulative
exchangeable redeemable preferred stock which closed on
October 30, 2003 and (2) borrowings under a senior
secured credit facility, consisting of a $125.0 million
term loan facility, which SBS entered into on October 30,
2003.


From April 30, 2001 until the closing of the
acquisition, SBS broadcast its programming over KXOL-FM pursuant
to a time brokerage agreement with ICFG. ICFG broadcast its
programming over SBS radio stations KZAB-FM and KZBA-FM pursuant
to a time brokerage agreement with SBS from April 30, 2001
until February 28, 2003. Pursuant to the amended asset
purchase agreement and amended time brokerage agreements, SBS
was required to issue additional warrants to ICFG from the date
that ICFG ceased to broadcast its programming over KZAB-FM and
KZBA-FM until the closing of the acquisition of KXOL-FM. On each
of March 31, 2003, April 30, 2003, May 31, 2003,
June 30, 2003, July 31, 2003, August 31, 2003 and
September 30, 2003, SBS granted ICFG a warrant exercisable
for 100,000 shares (an aggregate of 700,000 shares) of
SBSs Class A common stock at an exercise price of
$6.14, $7.67, $7.55, $8.08, $8.17, $7.74 and $8.49 per share,
respectively. The warrant issued on September 30, 2003 was
the final warrant required under the amended time brokerage
agreement due to the closing of the acquisition of KXOL-FM. SBS
assigned each warrant a fair market value of approximately
$0.3 million, $0.4 million, $0.4 million,
$0.4 million, $0.4 million, $0.4 million and
$0.5 million, respectively, based on the Black-Scholes
option pricing model in accordance with SFAS No. 123,
Accounting for Stock-Based Compensation. The fair
market value of each warrant was recorded as a stock-based
programming expense on the respective date of grant. These
warrants are exercisable for a period of thirty-six months after
the date of issuance after which they will expire if not
exercised.

On October 30, 2003, SBS completed a private
offering of $75,000,000 of 10 3/4% Series A cumulative
exchangeable redeemable preferred stock, par value $.01 per
share, with a liquidation preference of $1,000 per share,
without a specified maturity date. The offering was made within
the United States only to qualified institutional buyers in
reliance on Rule 144A under the Securities Act of 1933, as
amended (the Securities Act) and outside the United
States only to non-U.S. persons in reliance on Regulation S
under the Securities Act.

On October 30, 2003, SBS also entered into
senior secured credit facilities with Lehman Commercial Paper
Inc. as syndication agent and administrative agent and the
several banks and other financial institutions or entities from
time to time a party to the credit agreement (the Credit
Agreement). The senior secured credit facilities include a
six-year $125.0 million term loan facility and a five-year
$10.0 million revolving credit facility.

SBS used the net proceeds from the offering of
its preferred stock, together with most of the term loan
facility, to fund the purchase of KXOL-FM. SBS is obligated to
repay a portion of the borrowings under the senior secured
credit facilities with a portion of the net proceeds it receives
from the sale of its San Antonio and San Francisco stations. The
$10.0 million revolving credit facility remains undrawn and
may be used for working capital purposes, capital needs and
general corporate purposes.

The Credit Agreement contains a number of
financial covenants which, among other things, require us to
maintain specified financial ratios and impose certain
limitations on us with respect to indebtedness, capital
expenditures, transactions with affiliates and consolidations
and mergers, among other things.

6.     Sale of
Stations

On September 18, 2003, we entered into an
asset purchase agreement with Border Media Partners, LLC to sell
the assets of radio stations KLEY-FM and KSAH-AM, serving the
San Antonio, Texas market, for a cash purchase price of
$24.4 million. In connection with this agreement, Border
Media Partners, LLC made a $1.2 million deposit on the
purchase price, which is being held in escrow.

14



---



##### 



Additionally, on October 2, 2003, we entered
into an asset purchase agreement with 3 Point Media 
San Francisco, LLC to sell the assets of radio station KPTI-FM,
serving the San Francisco, California market, for a cash
purchase price of $30.0 million. In connection with this
agreement, 3 Point Media  San Francisco, LLC made a
$1.5 million deposit on the purchase price, subsequent to
September 30, 2003.

The closings of these sales of stations is
subject to the satisfaction of certain customary conditions
including receipt of regulatory approval from the FCC. The
Company anticipates that these sales will close by the end of
the first quarter of 2004. However, there can be no assurance
that these sales will be completed.

The Company determined that the pending sales of
these stations met the criteria in accordance with SFAS
No. 144 to classify their respective assets as held for
sale and their respective operations as discontinued operations.
The results of operations in the current year and prior year
periods of these stations have been classified as discontinued
operations in the unaudited condensed consolidated statements of
operations. On September 30, 2003, these stations
assets held for sale consisted of $26.3 million of
intangible assets and $0.9 million of property and
equipment.

7.     Stock
Options

The Company accounts for its stock option plans
in accordance with Accounting Principles Board (APB)
Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations, under which
compensation expense is recorded to the extent that the market
price on the grant date of the underlying stock exceeds the
exercise price. No stock-based employee compensation cost is
reflected in net income (loss), as all options granted under
these plans had an exercise price equal to the market value of
the underlying common stock on the date of grant. The fair value
of each option granted to employees is estimated on the date of
grant using the Black-Scholes option pricing model with the
following assumptions at:

|                        |  |                    |         |                    |  |  |         | 
|----------------------- |  | ------------------ | ------- | ------------------ |  |  | ------- | 
|                        |  | September 29, 2002 |         | September 30, 2003
|                        |  |                    |         |                   
|Expected life           |  |                    | 7 years |                    |  |  | 7 years | 
|Dividends               |  |                    | None    |                    |  |  | None    | 
|Risk-free interest rate |  |                    | 3.36%   |                    |  |  | 3.41%   | 
|Expected volatility     |  |                    | 88%     |                    |  |  | 82%     | 

Had compensation expense for the Companys
plans been determined consistent with SFAS No. 123, the
Companys net loss applicable to common stockholders and
net loss per common share would have been increased to pro forma
amounts indicated below (in thousands, except per share data):

|                                                                                                                                    |  |               |        |               |  |               |        |               |  |   |         |   |  |   |        |  
|----------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------ | ------------- |  | ------------- | ------ | ------------- |  | - | ------- | - |  | - | ------ | -
|                                                                                                                                    |  | Three-Months  |        | Three-Months  |  | Nine-Months   |        | Nine-Months  
|                                                                                                                                    |  | Ended         |        | Ended         |  | Ended         |        | Ended        
|                                                                                                                                    |  | September 29, |        | September 30, |  | September 29, |        | September 30,
|                                                                                                                                    |  | 2002          |        | 2003          |  | 2002          |        | 2003         
|                                                                                                                                    |  |               |        |               |  |               |        |              
|Net loss applicable to common stockholders:                                                                                         |  |               |        |               |  |               |        |               |  |   |         |   |  |   |        |  
|As reported                                                                                                                         |  | $             | (93    | )             |  | $             | (2,399 | )             |  | $ | (87,744 | ) |  | $ | (2,411 | )
|Deduct: total stock-based employee compensation
    expense determined under fair value based method for all awards,
    net of tax |  |               | (1,194 | )             |  |               | (1,266 | )             |  |   | (3,864  | ) |  |   | (3,292 | )
|                                                                                                                                    |  |               |        |               |  |               |        |               |  |   |         |   |  |   |        |  
|Pro forma net loss                                                                                                                  |  | $             | (1,287 | )             |  | $             | (3,665 | )             |  | $ | (91,608 | ) |  | $ | (5,703 | )
|                                                                                                                                    |  |               |        |               |  |               |        |               |  |   |         |   |  |   |        |  
|Net loss per common share:                                                                                                          |  |               |        |               |  |               |        |               |  |   |         |   |  |   |        |  
|As reported: Basic and Diluted                                                                                                      |  | $             |       |               |  | $             | (0.04  | )             |  | $ | (1.36   | ) |  | $ | (0.04  | )
|                                                                                                                                    |  |               |        |               |  |               |        |               |  |   |         |   |  |   |        |  
|Pro forma: Basic and Diluted                                                                                                        |  | $             | (0.02  | )             |  | $             | (0.06  | )             |  | $ | (1.42   | ) |  | $ | (0.09  | )
|                                                                                                                                    |  |               |        |               |  |               |        |               |  |   |         |   |  |   |        |  

15



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##### 





|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis
    of Financial Condition and Results of Operations

General

Our primary source of revenue is the sale of
advertising time on our radio stations to local and national
advertisers. Our revenue is affected primarily by the
advertising rates that our radio stations are able to charge, as
well as the overall demand for radio advertising time in each
respective market. Seasonal net broadcasting revenue
fluctuations are common in the radio broadcasting industry and
are due to fluctuations in advertising expenditures by local and
national advertisers. Typically for the radio broadcasting
industry, the first calendar quarter generally produces the
lowest revenue. Our most significant operating expenses, for
purposes of the computation of station operating income
(formerly broadcast cash flow) and Adjusted EBITDA, 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.

Non-GAAP Measures

Station operating income (our former broadcast
cash flow) consists of reported Generally Accepted Accounting
Principles (GAAP) operating income from continuing
operations before corporate expenses and depreciation and
amortization. Station operating income replaces our former
broadcast cash flow (BCF) as the metric used by our
management to assess the performance of our stations. Although
it is calculated in the same manner as BCF, management believes
that using the term station operating income
provides a more accurate description of the performance measure.
Station operating income margin consists of station operating
income divided by net revenue.

EBITDA consists of earnings before interest
expense, interest income, income taxes, depreciation and
amortization of assets, gain or loss from extinguishments of
debt, discontinued operations and the cumulative effect of a
change in accounting principle. We calculate our EBITDA
differently. Our EBITDA is EBITDA as defined above
but excluding other income or expense, or, alternatively, GAAP
operating income from continuing operations excluding
depreciation and amortization. To distinguish our calculation of
EBITDA from other possible meanings of EBITDA for periods ending
after March 31, 2003 and going forward we changed
references to EBITDA in our financial reports to the
term Adjusted EBITDA. Although our Adjusted
EBITDA and what we formerly referred to as our
EBITDA are calculated in the same manner, management
believes Adjusted EBITDA is a more accurate
description.

Station operating income, station operating
income margin and Adjusted EBITDA, as we define the terms, are
not measures of performance or liquidity calculated in
accordance with GAAP and may not be comparable to similarly
titled measures employed by other companies. However, we believe
that these measures are useful to an investor in evaluating an
investment in our securities because they are measures widely
used in the broadcast industry to evaluate a radio
companys operating performance before considering costs
and expenses related to specific corporate and capital
structures and are used by management for internal budgeting
purposes and to evaluate the performance of our radio stations.
However, these measures should not be considered in isolation or
as substitutes for operating income, net income (loss), cash
flows from operating activities or any other measure for
determining our operating performance or liquidity that is
calculated in accordance with GAAP. In addition, because station
operating income and Adjusted EBITDA are not calculated in
accordance with GAAP, they are not necessarily comparable to
similarly titled measures

16



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##### 



employed by other companies. Included below is a
table that reconciles station operating income and Adjusted
EBITDA to GAAP reported unaudited operating income from
continuing operations and net loss.


|                                                                                               |                                                             |                    |        |                   |   |      |        |        |   |   |         |         |   |   |         |        |  
|---------------------------------------------------------------------------------------------- | ----------------------------------------------------------- | ------------------ | ------ | ----------------- | - | ---- | ------ | ------ | - | - | ------- | ------- | - | - | ------- | ------ | -
|                                                                                               |                                                             |                    |        |                  
|                                                                                               |                                                             | Three Months Ended |        | Nine Months Ended
|                                                                                               |                                                             | September          |        | September        
|                                                                                               |                                                             |                    |        |                  
|                                                                                               |                                                             | 2002               |        | 2003              |   | 2002 |        | 2003  
|                                                                                               |                                                             |                    |        |                   |   |      |        |       
|                                                                                               |                                                             |                   
|                                                                                               |                                                             | (In thousands)    
|Reported net revenue                                                                           |                                                             | $                  | 35,124 |                   |   | $    | 35,700 |        |   | $ | 101,205 |         |   | $ | 100,158 |       
|Reported station operating expenses
    (Engineering, Programming, Selling and G & A expenses) |                                                             |                    | 18,980 |                   |   |      | 19,060 |        |   |   | 59,089  |         |   |   | 57,684  |       
|                                                                                               |                                                             |                    |        |                   |   |      |        |        |   |   |         |         |   |   |         |       
|                                                                                               | Station operating income (formerly broadcast
    cash flow) |                    |        | 16,144            |   |      |        | 16,640 |   |   |         | 42,116  |   |   |         | 42,474 |  
|Reported corporate expenses                                                                    |                                                             |                    | 3,609  |                   |   |      | 4,570  |        |   |   | 9,559   |         |   |   | 13,751  |       
|                                                                                               |                                                             |                    |        |                   |   |      |        |        |   |   |         |         |   |   |         |       
|                                                                                               | Adjusted EBITDA                                             |                    |        | 12,535            |   |      |        | 12,070 |   |   |         | 32,557  |   |   |         | 28,723 |  
|Reported depreciation and amortization                                                         |                                                             |                    | 715    |                   |   |      | 651    |        |   |   | 2,102   |         |   |   | 2,117   |       
|                                                                                               |                                                             |                    |        |                   |   |      |        |        |   |   |         |         |   |   |         |       
|                                                                                               | Reported operating income from continuing
    operations    |                    |        | 11,820            |   |      |        | 11,419 |   |   |         | 30,455  |   |   |         | 26,606 |  
|Reported interest expense, net                                                                 |                                                             |                    | 8,574  |                   |   |      | 8,826  |        |   |   | 25,775  |         |   |   | 26,256  |       
|Reported other expense (income), net                                                           |                                                             |                    | 66     |                   |   |      | (2,643 | )      |   |   | (200    | )       |   |   | (2,866  | )     
|Reported income tax expense                                                                    |                                                             |                    | 5,103  |                   |   |      | 7,410  |        |   |   | 49,242  |         |   |   | 5,287   |       
|Reported income (loss) from discontinued
    operations, net                                   |                                                             |                    | 1,830  |                   |   |      | (225   | )      |   |   | 1,906   |         |   |   | (340    | )     
|Reported cumulative effect of a change in
    accounting principle, net                        |                                                             |                    |       |                   |   |      |       |        |   |   | (45,288 | )       |   |   |        |       
|                                                                                               |                                                             |                    |        |                   |   |      |        |        |   |   |         |         |   |   |         |       
|                                                                                               | Net loss                                                    |                    | $      | (93               | ) |      | $      | (2,399 | ) |   | $       | (87,744 | ) |   | $       | (2,411 | )
|                                                                                               |                                                             |                    |        |                   |   |      |        |        |   |   |         |         |   |   |         |       

AOL Barter Agreement.In fiscal year 2000, the Company
entered into a barter agreement for advertising with AOL Time
Warner (AOL) whereby AOL agreed to provide a
guaranteed minimum number of impressions to the Company on the
AOL internet network over a two-year period in exchange for
advertising time on certain of the Companys stations. The
aggregate fair value of the barter agreement was approximately
$19.7 million. The barter agreement concluded in August
2002. To provide better comparability of net revenue, station
operating expenses and station operating income, the Company
will also discuss pro forma results excluding the prior
years non-recurring and significant non-cash impact of the
AOL barter agreement.

Results of Operations



| |                                                                                                     
| | ----------------------------------------------------------------------------------------------------
| | Three Months Ended September 30, 2003
    Compared to the Three Months Ended September 29,
    2002.

Net Revenue.Net
revenue was $35.7 million for the three months ended
September 30, 2003 compared to $35.1 million for the
three months ended September 29, 2002, an increase of
$0.6 million or 1.7%. To provide better comparability on
our net revenue, if the non-cash AOL barter revenue of
$1.6 million is excluded from the prior years three
months ended September 29, 2002 results, pro forma
net revenue actually increased by $2.2 million or
6.6%. This pro forma net revenue increase was due to the
continued double-digit growth in our stations KLAX-FM and
KXOL-FM, serving the Los Angeles market. In addition, the
start-up stations in Chicago and Los Angeles which began
operating in the first quarter of 2003, generated a combined net
revenue of $1.2 million. Offsetting these increases was a
decrease in net revenue in our station WSKQ-FM, serving the New
York market.

Station Operating Expenses.Station operating expenses were
$19.1 million for the three months ended September 30,
2003 compared to $19.0 million for the three months ended
September 29, 2002, an increase of $0.1 million or
0.5%. To provide better comparability on our station operating
expenses, if the non-cash AOL

17



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##### 



barter expense of $1.5 million is excluded
from the prior years three months ended September 29,
2002 results, pro forma station operating expenses
increased by $1.6 million or 9.1%. The pro forma station
operating expenses increase was attributed to the start-up
stations in Chicago and Los Angeles, which had combined station
operating expenses of $1.0 million. In addition, during the
three months ended September 30, 2003, we granted ICFG
three warrants, each exercisable for 100,000 shares (an
aggregate of 300,000 shares) of our Class A common
stock with a total fair market value of approximately
$1.3 million. These warrants were issued under the terms of
our amended time brokerage agreement for KXOL-FM. The fair
market value was calculated based on the Black-Scholes option
pricing model in accordance with SFAS No. 123
Accounting for Stock-Based Compensation and was
recorded as a non-cash programming expense in the three months
ended September 30, 2003. Excluding prior quarters
AOL barter expense of $1.5 million and the current
quarters start-up stations operating expenses of
$1.0 million and non-cash programming (warrant) expense of
$1.3 million, as adjusted station operating expenses
decreased $0.7 million or 4.0% from $17.5 million to $16.8
million mainly due to a decrease in expenses related to
promotional events.


Station Operating
Income.Station operating income was
$16.6 million for the three months ended September 30,
2003 compared to $16.1 million for the three months ended
September 29, 2002, an increase of $0.5 million or
3.1%. Our station operating income margin increased to 46.5% for
the three months ended September 30, 2003 compared to 45.9%
for the three months ended September 29, 2002. To provide better
comparability on our station operating income margin, if the
non-cash AOL barter revenue and expenses of $1.6 million
and $1.5 million, respectively, are excluded from the prior
years three months ended September 29, 2002 results,
pro forma station operating income margin actually
decreased from 47.8% to 46.5%. The pro forma station operating
income margin decrease was primarily attributed to the non-cash
programming expense related to the warrant issuances to ICFG.

Corporate Expenses.Corporate expenses were $4.6 million for the three months
ended September 30, 2003 compared to $3.6 million for
the three months ended September 29, 2002, an increase of
$1.0 million or 27.8%. The increase in corporate expenses
resulted mainly from an increase in legal and professional fees,
as well as insurance premiums, including directors and officers
liability insurance.

Adjusted EBITDA.Adjusted EBITDA was $12.1 million for the three months
ended September 30, 2003 compared to $12.5 million for
the three months ended September 29, 2002, a decrease of
$0.4 million or 3.2%. The decrease in Adjusted EBITDA was
attributed to the increase in corporate expenses, offset by the
increase in station operating income.

Depreciation and
Amortization.Depreciation and
amortization expense was $0.7 million for the three months
ended September 30, 2003 and September 29, 2002,
respectively.

Operating Income from Continuing
Operations.Operating income from
continuing operations was $11.4 million for the three
months ended September 30, 2003 compared to $11.8 million
for the three months ended September 29, 2002, a decrease
of $0.4 million or 3.4%. The decrease in operating income
from continuing operations is primarily attributed to the
decrease in Adjusted EBITDA.

Interest Expense,
Net.Interest expense, net, was
$8.8 million for the three months ended September 30,
2003 compared to $8.6 million for the three months ended
September 29, 2002, an increase of $0.2 million or
2.3%. The increase in interest expense, net, was primarily due
to one extra day of interest incurred compared to the prior
period, interest expense on a lawsuit judgment that is being
appealed, and a decrease in interest income resulting from a
general decline in interest rates and lower cash balances.

Other, Net.Other,
net, was income of $2.6 million for the three months ended
September 30, 2003 compared to expenses of
$0.1 million for the three months ended September 29,
2002, an increase of $2.7 million. Other, net, was income
of $2.6 million for the three months ended
September 30, 2003 due mostly to an insurance recovery for
a claim related to our New York facilities and operations.

Income Taxes.Income
tax expense was $7.4 million for the three months ended
September 30, 2003 compared to $5.1 million for the
three months ended September 29, 2002. Income tax expense
for the three-months ended September 30, 2003 and
September 29, 2002 were based on our high estimated
effective book tax rates for the 2003 and 2002 fiscal years. Our
effective book tax rate was impacted by the adoption of SFAS

18



---



##### 



No. 142 on December 31, 2001. As a
result of adopting 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 book tax rate reflects a full
valuation allowance on our deferred tax assets.


Discontinued Operations, Net of Taxes.Loss on discontinued operations, net
of taxes, was $0.2 million for the three months ended
September 30, 2003 compared to income on discontinued
operation, net of taxes, of $1.8 million for the three
months ended September 29, 2002. The Company determined
that the pending sales of its KLEY-FM and KSAH-AM stations
serving San Antonio, Texas, KPTI-FM station serving San
Francisco, California, and the sale of its KTCY-FM station
serving Dallas, Texas, all met the criteria in accordance with
SFAS No. 144 to classify their operations as discontinued
operations. Consequently these stations results from
operations for the three months ended September 30, 2003
and September 29, 2002 have been classified as discontinued
operations. On August 23, 2002, the Company sold
KTCY-FMs assets held for sale consisting of intangible
assets and property and equipment and recognized a gain of
approximately $1.8 million, net of closing costs and taxes.

Net Loss.Net loss
was $2.4 million for the three months ended September 30,
2003 compared to $0.1 million for the three months ended
September 29, 2002, an increase of $2.3 million. The
net losses were primarily due to our income tax expense as a
result of our high effective book tax rates.



| |                                                                                                   
| | --------------------------------------------------------------------------------------------------
| | Nine Months Ended September 30, 2003
    Compared to the Nine Months Ended September 29,
    2002.

Net Revenue.Net
revenue was $100.2 million for the nine months ended
September 30, 2003 compared to $101.2 million for the
nine months ended September 29, 2002, a decrease of
$1.0 million or 1.0%. The net revenue decrease was due to
the decrease in barter revenue primarily related to the AOL
barter agreement that concluded in August 2002. To provide
better comparability on our net revenue, if the non-cash AOL
barter revenue of $6.4 million is excluded from the prior
years nine months ended September 29, 2002 results,
pro forma net revenue actually increased by
$5.4 million or 5.7%. This pro forma net revenue increase
was due to the double-digit growth in our stations KLAX-FM and
KXOL-FM, serving the Los Angeles market. In addition, the
start-up stations in Chicago and Los Angeles, which began
operating on January 6, 2003 and March 1, 2003,
respectively, generated combined net revenue of $2.1 million.
Offsetting these increases were decreases in promotional events
held in the New York and Miami markets and barter revenue in the
core markets.

Station Operating
Expenses.Station operating expenses
were $57.7 million for the nine months ended
September 30, 2003 compared to $59.1 million for the
nine months ended September 29, 2002, a decrease of
$1.4 million or 2.4%. The station operating expenses
decrease was caused by the decrease in barter expense related to
the conclusion of the AOL barter agreement in August 2002. To
provide better comparability on our station operating expenses,
if the non-cash AOL barter expense of $6.4 million is
excluded from the prior years nine months ended
September 29, 2002 results, pro forma station
operating expenses actually increased by $5.0 million
or 9.5%. This pro forma station operating expenses increase was
primarily attributed to the start-up stations in Chicago and Los
Angeles, which had combined station operating expenses of
$3.2 million. In addition, we granted ICFG seven warrants,
each exercisable for 100,000 shares (an aggregate of 700,000
shares) of our Class A common stock with an aggregate fair
market value of approximately $2.9 million. These warrants
were issued under the terms of our amended time brokerage
agreement for KXOL-FM. The fair market value was based on the
Black-Scholes option pricing model in accordance with SFAS
No. 123, Accounting for Stock-Based
Compensation and was recorded as a non-cash programming
expense in the nine months ended September 30, 2003.
Excluding prior years nine months AOL barter expense of
$6.4 million and the current years nine months start-up
stations operating expenses of $3.2 million and non-cash
programming (warrant) expense of $2.9 million, as
adjusted station operating expenses decreased $1.1 million
or 2.1% from $52.7 million to $51.6 million mainly due to a
decrease in expenses related to promotional events.

Station Operating
Income.Station operating income was
$42.5 million for the nine months ended September 30,
2003 compared to $42.1 million for the nine months ended
September 29, 2002, an increase of $0.4 million or
1.0%. Our station operating income margin increased to 42.4% for
the nine months ended

19



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##### 



September 30, 2003 compared to 41.6% for the
nine months ended September 29, 2002. To provide better
comparability on our station operating income margin, if the
non-cash AOL barter revenue and expenses of $6.4 million
and $6.4 million, respectively, are excluded from the prior
years nine months ended September 29, 2002 results,
pro forma station operating income margin decreased
from 44.4% to 42.4%. This pro forma station operating income
margin decrease was primarily attributed to the station
operating losses generated by the start-up stations and non-cash
programming expense related to the warrant issuances to ICFG.


Corporate Expenses.Corporate expenses were $13.8 million for the nine months
ended September 30, 2003 compared to $9.6 million for
the nine months ended September 29, 2002, an increase of
$4.2 million or 43.8%. The increase in corporate expenses
resulted mainly from an increase in legal and professional fees,
as well as insurance premiums, including directors and officers
liability insurance.

Adjusted EBITDA.Adjusted EBITDA was $28.7 million for the nine months ended
September 30, 2003 compared to $32.6 million for the
nine months ended September 29, 2002, a decrease of
$3.9 million or 12.0%. The decrease in Adjusted EBITDA was
attributed to the increase in corporate expenses.

Depreciation and
Amortization.Depreciation and
amortization expense was $2.1 million for the nine months
ended September 30, 2003 and 2002.

Operating Income from Continuing
Operations.Operating income from
continuing operations was $26.6 million for the nine months
ended September 30, 2003 compared to $30.5 million for
the nine months ended September 29, 2002, a decrease of
$3.9 million or 12.8%. The decrease in operating income
from continuing operations was primarily attributed to the
decrease in Adjusted EBITDA.

Interest Expense, Net.Interest expense, net, was
$26.3 million for the nine months ended September 30,
2003 compared to $25.8 million for the nine months ended
September 29, 2002, an increase of $0.5 million or
1.9%. The increase in interest expense, net, was primarily due
to two extra days of interest incurred compared to the prior
period, interest expense on a lawsuit judgment that is being
appealed, and a decrease in interest income resulting from a
general decline in interest rates on our cash balances.

Other, Net.Other,
net, was income of $2.9 million for the nine months ended
September 30, 2003 compared to income of $0.2 million
for the nine months ended September 29, 2002, an increase
of $2.7 million. Other, net, was income of
$2.9 million for the nine months ended September 30,
2003 due mostly to an insurance recovery for a claim related to
our New York facilities and operations.

Income Taxes.Income
tax expense was $5.3 million for the nine months ended
September 30, 2003 compared to an income tax expense of
$49.2 million for the nine months ended September 29,
2002. Income tax expense of $5.3 million for the nine
months ended September 30, 2003 was based on our high
estimated effective book tax rate for fiscal year 2003. Our
effective book tax rate was impacted by the adoption of SFAS
No. 142 on December 31, 2001. As a result of adopting
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 carryforward period. Therefore, our
effective book tax rate reflects a full valuation allowance on
our deferred tax assets. Income tax expense for the nine months
ended September 29, 2002 consisted primarily of a
$55.4 million non-cash charge to income tax expense to
establish a valuation allowance against our deferred tax assets,
effective December 31, 2001. Additionally, the Company
recorded an income tax expense of $7.7 million based on the
effective book tax rate for the 2002 fiscal year, offset by a
$13.9 million non-cash income tax benefit due to a
reduction of some of the Companys valuation allowance on
its deferred taxes, determined in accordance with SFAS
No. 109 and available information. Excluding the prior
years nine months ended September 29, 2002 non-cash
income tax expense of $55.4 million and non-cash income tax
benefit of $13.9 million, as adjusted income tax expense
decreased $2.4 million or 31.2% from $7.7 million to
$5.3 million due to a decrease in pre-tax income and our
estimated effective book tax rate.

Discontinued Operations, Net of
Taxes.Loss on discontinued
operations, net of taxes, was $0.3 million for the nine
months ended September 30, 2003 compared to income on
discontinued operations, net of taxes, of $1.9 million for
the nine months ended September 29, 2002. The Company
determined that the pending sales of its KLEY-FM and KSAH-AM
stations serving San Antonio, Texas, KPTI-FM station serving San

20



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##### 



Francisco, California, and the sale of its
KTCY-FM station serving Dallas, Texas, all met the criteria in
accordance with SFAS No. 144 to classify their operations
as discontinued operations. Consequently, these stations
results from operations for the nine months ended
September 30, 2003 and September 29, 2002 have been
classified as discontinued operations. On August 23, 2002,
the Company sold KTCY-FMs assets held for sale consisting
of intangible assets and property and equipment and recognized a
gain of approximately $1.8 million, net of closing costs
and taxes.


Cumulative Effect of a Change in Accounting
Principle, Net of Taxes.Cumulative
effect of a change in accounting principle, net of taxes was
$45.3 million for the nine months ended September 29, 2002.
The Company adopted SFAS No. 142, effective
December 31, 2001, which eliminated the amortization of
goodwill and intangible assets with indefinite useful lives, and
changed the method of determining whether there is a goodwill or
intangible assets impairment from an undiscounted cash flow
method to an estimated fair value method. As a result of the
adoption of this standard, the Company incurred a non-cash
transitional charge of $45.3 million, net of income tax
benefit.

Net Loss.Net loss
was $2.4 million for the nine months ended September 30,
2003 compared to $87.7 million for the nine months ended
September 29, 2002. The net loss for the nine months ended
September 29, 2002 was due to the adoption of SFAS
No. 142, which resulted in the $55.4 million non-cash
charge to establish a valuation allowance on our deferred tax
assets and the non-cash charge of $45.3 million related to
the cumulative effect of a change in accounting principle, net
of income tax benefit. Excluding the prior years nine
months ended September 29, 2002 non-cash income tax expense
of $55.4 million, income tax benefit of $13.9 million,
and cumulative effect of accounting principle of
$45.3 million, as adjusted net loss increased
$1.5 million from a net loss of $0.9 million to
$2.4 million. The increase in the as adjusted net loss was
due primarily to income tax expense due to our high effective
book tax rate for 2003 and a decrease in pre-tax income.

The following table presents adjusted financial
results for the nine-month periods ended September 29, 2002
and 2003, respectively, adjusting for the cumulative effect of
accounting principle and the increase in the income tax
valuation allowance upon adoption of SFAS No. 142 on
December 31, 2001.

|                                                                                    |  |                       |         |               |  |   |        |  
|----------------------------------------------------------------------------------- |  | --------------------- | ------- | ------------- |  | - | ------ | -
|                                                                                    |  |                      
|                                                                                    |  | Nine Months Ended    
|                                                                                    |  |                      
|                                                                                    |  | September 29,         |         | September 30,
|                                                                                    |  | 2002                  |         | 2003         
|                                                                                    |  |                       |         |              
|                                                                                    |  |                      
|                                                                                    |  | (In thousands, except
|                                                                                    |  | per share data)      
|                                                                                    |  |                      
|                                                                                    |  | (Unaudited)          
|Reported net loss:                                                                  |  | $                     | (87,744 | )             |  | $ | (2,411 | )
|Add back:cumulative
    effect of a change in accounting principle, net of tax(1)   |  |                       | 45,288  |               |  |   |       |  
|Add back:income tax
    valuation allowance(2)                                      |  |                       | 55,358  |               |  |   |       |  
|                                                                                    |  |                       |         |               |  |   |        |  
|Adjusted net income (loss)                                                          |  | $                     | 12,902  |               |  | $ | (2,411 | )
|                                                                                    |  |                       |         |               |  |   |        |  
|Basic and diluted loss per share:                                                   |  |                       |         |               |  |   |        |  
|Reported net loss per share:                                                        |  | $                     | (1.36   | )             |  | $ | (0.04  | )
|Cumulative effect per share of a change in
    accounting principle, net of tax(1): |  |                       | 0.70    |               |  |   |       |  
|Income tax valuation allowance per share(2):                                        |  |                       | 0.86    |               |  |   |       |  
|                                                                                    |  |                       |         |               |  |   |        |  
|Adjusted net income (loss) per share:                                               |  | $                     | 0.20    |               |  |   | (0.04  | )
|                                                                                    |  |                       |         |               |  |   |        |  



---



|    |                                                                                                                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | As a result of the adoption of SFAS No. 142
    on December 31, 2001, the Company incurred a non-cash
    transitional charge of $45.3 million, net of income tax
    benefit of $30.2 million, due to the cumulative effect of
    the change in accounting principle.

21



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##### 





|    |                                                                                                                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | As a result of the adoption of SFAS No. 142
    on December 31, 2001, the Company incurred a non-cash
    income tax expense of $55.4 million to establish a
    valuation allowance against deferred tax assets on the date of
    adoption.

Liquidity and Capital Resources

Our primary source of liquidity is cash on hand,
cash provided by operations and, to the extent necessary,
undrawn commitments that are available under the five-year
$10.0 million revolving credit facility entered into on
October 30, 2003.

Our ability to raise funds by increasing our
indebtedness is limited by the terms of the credit agreement
governing our senior credit facilities (entered into on
October 30, 2003) and the indenture governing our senior
subordinated notes. Additionally, such credit agreement and
indenture 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.

Net cash flows provided by operating activities
were $15.4 million for the nine months ended
September 30, 2003 compared to net cash flows provided by
operating activities of $18.9 million for the nine months
ended September 29, 2002. Changes in our net cash flows
from operating activities were primarily a result of changes in
working capital balances and a decrease in operating income from
continuing operations.

Net cash flows used in investing activities were
$39.5 million for the nine months ended September 30,
2003 compared to net cash flows provided by investing activities
of $10.4 million for the nine months ended
September 29, 2002. Changes in our net cash flows from
investing activities were primarily a result of the acquisition
of the Chicago radio stations in April 2003 and the sale of the
Dallas radio station in August 2002.

Net cash flows used in financing activities were
$0.7 million for the nine months ended September 30,
2003 compared to $0.1 million for the nine months ended
September 29, 2002. Changes in our net cash flows used in
financing activities were primarily related to the financing for
the acquisition of KXOL-FM.

Management 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 required cash interest payments pursuant to
the terms of the senior subordinated notes due 2009 and the new
senior secured credit facilities, principal payments pursuant to
the terms of the new senior secured credit facilities and
capital expenditures, excluding the acquisition of FCC licenses.
Assumptions (none of which can be assured) which underlie
managements beliefs, include the following:



| |   |                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the economic conditions within the radio
    broadcasting industry and economic conditions in general will
    not further deteriorate in any material respect;
|
| |  | we will continue to successfully implement our
    business strategy;                                                                                          
|
| |  | we will not incur any material unforeseen
    liabilities, including environmental liabilities; and                                                            
|
| |  | no future acquisitions will adversely affect our
    liquidity.                                                                                                

We continuously review opportunities to acquire
additional radio stations, primarily in the largest Hispanic
markets in the United States. We engage in discussions regarding
potential acquisitions and dispositions from time to time in the
ordinary course of business.

On September 18, 2003, we entered into an
asset purchase agreement with Border Media Partners, LLC to sell
the assets of radio stations KLEY-FM and KSAH-AM, serving the
San Antonio, Texas market, for a cash purchase price of
$24.4 million. In connection with this agreement, Border
Media Partners, LLC made a $1.2 million deposit on the
purchase price, which is being held in escrow.

Additionally, on October 2, 2003, we entered
into an asset purchase agreement with 3 Point Media 
San Francisco, LLC to sell the assets of radio station KPTI-FM,
serving the San Francisco, California market, for a cash
purchase price of $30.0 million. In connection with this
agreement, 3 Point Media  San Francisco, LLC made a
$1.5 million deposit on the purchase price, subsequent to
September 30, 2003.

22



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The closings of these sales of stations is
subject to the satisfaction of certain customary conditions
including receipt of regulatory approval from the FCC. The
Company anticipates that these sales will close by the end of
the first quarter of 2004. However, there can be no assurance
that these sales will be completed.

On October 30, 2003, SBS completed the
acquisition of the assets of radio station KXOL-FM (formerly
KFSG-FM), serving the Los Angeles, California market, from the
International Church of the FourSquare Gospel (ICFG)
at a cash purchase price of $250.0 million plus the
issuance to ICFG on February 8, 2002 of a warrant
exercisable for an aggregate of 2,000,000 shares of SBSs
Class A common stock at an exercise price of $10.50 per
share. This warrant is exercisable for a period of thirty-six
months from the date of issuance after which it will expire if
not exercised. To date, this warrant has not been exercised. SBS
assigned the warrant a fair market value of approximately $8.9
million based on the Black-Scholes option pricing model in
accordance with SFAS No. 123, Accounting for
Stock-Based Compensation. The fair market value of this
warrant was recorded as an increase to intangible assets and
additional paid-in capital on the date of grant. Additionally,
SBS paid $2.9 million in brokers fees in connection
with the KXOL-FM acquisition.

In addition to the FCC license of KXOL-FM, the
assets acquired by SBS from ICFG include certain radio
transmission equipment and a fifty year lease at a rent of $1.00
per year for the KXOL-FM tower site, all of which were used by
ICFG for radio broadcasting and which SBS also intends to use
for radio broadcasting. The consideration for the acquisition of
the assets of KXOL-FM was determined through arms length
negotiations between SBS and ICFG. On November 2, 2000,
pursuant to the asset purchase agreement between SBS and ICFG
for the acquisition of the assets of KXOL-FM, SBS made a
non-refundable deposit of $5.0 million which was credited
towards the $250.0 million cash purchase price at closing.
Pursuant to amendments to the asset purchase agreement, prior to
the closing SBS made additional non-refundable deposits toward
the cash purchase price in the aggregate amount of
$55.0 million which were also credited towards the
$250.0 million cash purchase price at closing. Cash on hand
was used to make all the non-refundable deposits toward the cash
purchase price. The remaining $190.0 million of the cash
purchase price was funded from (1) the proceeds of
SBSs private offering of $75,000,000 of 10 3/4%
Series A cumulative exchangeable redeemable preferred stock
which closed on October 30, 2003 and (2) borrowings
under a senior secured credit facility, consisting of a
$125.0 million term loan facility, which SBS entered into
on October 30, 2003.

From April 30, 2001 until the closing of the
acquisition, SBS broadcast its programming over KXOL-FM pursuant
to a time brokerage agreement with ICFG. ICFG broadcast its
programming over SBS radio stations KZAB-FM and KZBA-FM pursuant
to a time brokerage agreement with SBS from April 30, 2001
until February 28, 2003. Pursuant to the amended asset
purchase agreement and amended time brokerage agreements, SBS
was required to issue additional warrants to ICFG from the date
that ICFG ceased to broadcast its programming over KZAB-FM and
KZBA-FM until the closing of the acquisition of KXOL-FM. On each
of March 31, 2003, April 30, 2003, May 31, 2003,
June 30, 2003, July 31, 2003, August 31, 2003 and
September 30, 2003, SBS granted ICFG a warrant exercisable
for 100,000 shares (an aggregate of 700,000 shares) of
SBSs Class A common stock at an exercise price of
$6.14, $7.67, $7.55, $8.08, $8.17, $7.74 and $8.49 per share,
respectively. The warrant issued on September 30, 2003 was
the final warrant required under the amended time brokerage
agreement due to the closing of the acquisition of KXOL-FM. SBS
assigned each warrant a fair market value of approximately
$0.3 million, $0.4 million, $0.4 million,
$0.4 million, $0.4 million, $0.4 million and
$0.5 million, respectively, based on the Black-Scholes
option pricing model in accordance with SFAS No. 123,
Accounting for Stock-Based Compensation. The fair
market value of each warrant was recorded as a stock-based
programming expense on the respective date of grant. These
warrants are exercisable for a period of thirty-six months after
the date of issuance after which they will expire if not
exercised.

On October 30, 2003, SBS completed a private
offering of $75,000,000 of 10 3/4% Series A cumulative
exchangeable redeemable preferred stock, par value $.01 per
share, with a liquidation preference of $1,000 per share,
without a specified maturity date. The offering was made within
the United States only to qualified

23



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##### 



institutional buyers in reliance on
Rule 144A under the Securities Act of 1933, as amended (the
Securities Act) and outside the United States only
to non-U.S. persons in reliance on Regulation S under the
Securities Act.


On October 30, 2003, SBS also entered into
senior secured credit facilities with Lehman Commercial Paper
Inc. as syndication agent and administrative agent and the
several banks and other financial institutions or entities from
time to time a party to the credit agreement (the Credit
Agreement). The senior secured credit facilities include a
six-year $125.0 million term loan facility and a five-year
$10.0 million revolving credit facility.

SBS used the net proceeds from the offering of
its preferred stock, together with most of the term loan
facility, to fund the purchase of KXOL-FM. SBS is obligated to
repay a portion of the borrowings under the senior secured
credit facilities with a portion of the net proceeds it receives
from the sale of its San Antonio and San Francisco stations. The
$10.0 million revolving credit facility remains undrawn and
may be used for working capital purposes, capital needs and
general corporate purposes.

The Credit Agreement contains a number of
financial covenants which, among other things, require us to
maintain specified financial ratios and impose certain
limitations on us with respect to indebtedness, capital
expenditures, transactions with affiliates and consolidations
and mergers, among other things.

New Accounting Pronouncements

In June 2001, the Financial Accounting Standards
Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 143,
Accounting for Asset Retirement Obligations. SFAS
No. 143 requires the Company to record the fair value of an
asset retirement obligation as a liability in the period in
which it incurs a legal obligation associated with the
retirement of tangible long-lived assets that results from the
acquisition, construction, development, and/or normal use of the
assets. The Company would also record a corresponding asset that
is depreciated over the life of the asset. Subsequent to the
initial measurement of the asset retirement obligation, the
obligation will be adjusted at the end of each period to reflect
the passage of time and changes in the estimated future cash
flows underlying the obligation. The Company adopted SFAS
No. 143 on December 30, 2002. The adoption of SFAS
No. 143 did not have a material effect on the
Companys condensed consolidated financial statements.

In April 2002, the FASB issued SFAS No. 145,
Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical
Corrections (SFAS No. 145). SFAS
No. 145 rescinds FASB Statement No. 4, Reporting
Gains and Losses from Extinguishment of Debt, and an
amendment of that Statement, FASB Statement No. 44,
Accounting for Intangible Assets of Motor Carriers
and FASB Statement No. 64, Extinguishments of Debt
Made to Satisfy Sinking-Fund Requirements. SFAS
No. 145 amends FASB No. 13, Accounting for
Leases and other existing authoritative pronouncements to
make various technical corrections and clarify meanings, or
describes their applicability under changed conditions. SFAS
No. 145 will be effective for fiscal years beginning after
May 15, 2002. The adoption of SFAS No. 145 will
require that the Companys extraordinary loss recognized on
the extinguishments of debt in 2000 and 2001 be reclassified to
income or loss from continuing operations in its condensed
consolidated financial statements beginning in 2003.

In December 2002, the FASB issued SFAS
No. 148, Accounting for Stock-Based
Compensation-Transition and Disclosure. This pronouncement
amends SFAS No. 123 to provide alternative methods of
transition for an entity that voluntarily changes to the fair
value-based method of accounting for stock-based compensation.
SFAS No. 148 also expands the disclosure requirements with
respect to stock-based compensation. The Company does not intend
to change to the fair value method of accounting. The required
expanded disclosure is included in the September 30, 2003
condensed consolidated financial statements and notes thereto.

In January 2003, the FASB issued Interpretation
No. 46, Consolidation of Variable Interest Entities
(FIN 46). Subject to certain criteria defined
in the Interpretation, FIN 46 will require consolidation by
business enterprises of variable interest entities if the
enterprise has a variable interest that will absorb the

24



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##### 



majority of the entitys expected losses,
receives a majority of its expected returns, or both. The
provisions of FIN 46 are effective immediately for
interests acquired in variable interest entities after
January 31, 2003, and at the beginning of the first interim
or annual period beginning after June 15, 2003, for
interests acquired in variable interest entities before
February 1, 2003. The FASB has delayed the effective date
until the end of the first interim or annual period ending after
December 15, 2003 (for the Company, December 31,
2003). The Company is in the process of determining what impact,
if any, the adoption of the provisions of FIN 46 will have
upon its financial condition or results of operations.


In May 2003, the FASB issued SFAS No. 150,
Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity, effective
for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning
of the first interim period beginning after June 15, 2003.
This statement establishes standards for how an issuer
classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that
an issuer classify a freestanding financial instrument that is
within its scope as a liability (or an asset in some
circumstances) when that financial instrument embodies an
obligation of the issuer. The adoption of SFAS No. 150 did
not have an impact on the Companys condensed consolidated
financial statements.

Disclosure 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 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,
plan, foresee, likely,
will or other similar words or phrases. 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 achievements expressed or implied by these
statements. Factors that could cause actual results to differ
from those expressed in forward-looking statements include, but
are not limited to:



| |   |                                                                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Our substantial amount of debt could adversely
    affect our financial health and prevent us from fulfilling our
    obligations under the new Series A preferred stock and the
    senior secured credit facilities;                                                                                          
|
| |  | We will require a significant amount of cash to
    service our debt and to make cash dividend payments under the
    new Series A preferred stock;                                                                                                                                                             
|
| |  | Our ability to generate cash depends on many
    factors beyond our control;                                                                                                                                                                                                                                    
|
| |  | 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. This could further intensify the risks described
    above;                                                                                                                  
|
| |  | The terms of our debt restrict us from engaging
    in many activities and require us to satisfy various financial
    tests;                                                                                                                                                                                   
|
| |  | The terms of our debt, new Series A
    preferred stock and the new senior secured credit facilities
    impose or will impose restrictions on us that may adversely
    affect our business and our ability to fulfill our obligations
    under the new Series A preferred stock and/or other
    commitments;
|
| |  | The restrictions imposed by our debt may prevent
    us from paying cash dividends on the new Series A preferred
    stock and exchanging the new Series A preferred stock for
    exchange notes;                                                                                                              
|
| |  | We may not have the funds or the ability to raise
    the funds necessary to repurchase our new Series A
    preferred stock if holders exercise their repurchase right, or
    to finance the change of control offer required by the new
    Series A preferred stock;                                        

25



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| |   |                                                                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We may not complete the pending sales of our San
    Antonio and San Francisco stations;                                                                                                                                                                                                              
|
| |  | Our creditors will have priority over the new
    Series A preferred stock;                                                                                                                                                                                                                           
|
| |  | Actual or constructive distributions with respect
    to our new Series A preferred stock may lead to unplanned
    deemed dividend income and original issue discount;                                                                                                                               
|
| |  | We have experienced net losses in the past and to
    the extent that we experience net losses in the future, the
    market price of our common stock may be adversely affected which
    in turn may adversely affect our ability to raise capital;                                                 
|
| |  | Our operating results could be adversely affected
    by a national or regional recession;                                                                                                                                                                                                            
|
| |  | Loss of any of our key personnel could adversely
    affect our business;                                                                                                                                                                                                                             
|
| |  | Our growth depends on successfully executing our
    acquisition strategy;                                                                                                                                                                                                                            
|
| |  | 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, many
    operators of which have greater resources than we do;                                                                                                                                  
|
| |  | We will face increased competition because of the
    recent merger of Univision Communications Inc. and Hispanic
    Broadcasting Corp;                                                                                                                                                              
|
| |  | 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; and                                                                                                                                                               
|
| |  | We may face regulatory review for additional
    acquisitions in our existing markets and, potentially, new
    markets.                                                                                                                                                                              

Consequently, such forward-looking statements
should be regarded solely as our current plans, estimates and
beliefs. We do not undertake any obligation to update any
forward-looking statements to reflect subsequent events or
circumstances.

Item 3.     Quantitative
and Qualitative Disclosures About Market Risk

We believe that inflation has not had a material
impact on our results of operations for each of our fiscal years
in the two-year period ended September 30, 2001, for the
three-month transitional period ended December 30, 2001,
for the fiscal year ended December 29, 2002 and for the
three and nine-month periods ended September 30, 2003.
However, there can be no assurance that future inflation will
not have an adverse impact on our operating results and
financial condition.

We are not subject to currency fluctuations since
we do not have any operations other than where the currency is
the U.S. dollar. At September 30, 2003, we had limited market
risk exposure since we did not have any variable rate debt or
derivative financial or commodity instruments.

Item 4.     Controls
and Procedures

With the participation of management, the
Companys chief executive officer and chief financial
officer have evaluated the effectiveness of the Companys
disclosure controls and procedures as of the end of the period
covered by this report. Based upon this evaluation, the chief
executive officer and chief financial officer have concluded
that, as of the end of such period, the Companys
disclosure controls and procedures are effective.

26



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##### 



There have not been any changes in the
Companys internal control over financial reporting during
the fiscal quarter to which this report relates that have
materially affected, or are reasonably likely to materially
affect, the Companys internal control over financial
reporting.

PART II  OTHER
INFORMATION

Item 1.     Legal
Proceedings

From time to time the Company is involved in
litigation incidental to the conduct of its business, such as
contractual matters and employee-related matters. In the opinion
of management, such litigation is not likely to have a material
adverse effect on the Companys business, operating
results, or financial position.

On June 12, 2002, SBS filed a lawsuit in the
United States District Court for the Southern District of
Florida against Clear Channel Communications (Clear
Channel) and Hispanic Broadcasting Corporation
(HBC), and filed an amended complaint on
July 31, 2002. The lawsuit asserts federal and state
antitrust law violations and other state law claims and alleges
that Clear Channel and HBC have adversely affected SBSs
ability to raise capital, depressed SBSs share price,
impugned SBSs reputation, made station acquisitions more
difficult, and interfered with SBSs business opportunities
and contractual arrangements. In the amended complaint, SBS
sought actual damages in excess of $500.0 million, which
would be trebled under antitrust law. On January 31, 2003,
the Court granted defendants motions for failure to
adequately allege antitrust injury. SBS filed a motion for
reconsideration of that opinion and asked for leave to file a
proposed second amended complaint, which contains additional
economic analysis and factual detail based on the depositions of
Clear Channels CEO and CFO and HBCs CFO and document
production in the action, and which seeks damages in an amount
to be determined at trial. On August 6, 2003, the District
Court denied SBSs motion for reconsideration. On
September 5, 2003, SBS filed an appeal to the 11th Circuit
Court of Appeals of the District Courts decisions dated
January 31, 2003 and August 6, 2003, and briefing on
that appeal is expected to be completed by early December 2003.



|        |                                              
|------- | ---------------------------------------------
|Item 2. | Changes in Securities and Use of
    Proceeds

Recent Sales of Unregistered
Securities

On each of March 31, 2003, April 30,
2003, May 31, 2003, June 30, 2003, July 31, 2003,
August 31, 2003 and September 30, 2003 we issued to
the International Church of the FourSquare Gospel
(ICFG) a warrant exercisable for 100,000 shares
(aggregate of 700,000 shares) of our Class A common stock
at an exercise price of $6.14, $7.67, $7.55, $8.08, $8.17, $7.74
and $8.49 per share, respectively. We made these issuances
pursuant to the terms of our amended time brokerage agreement
with ICFG relating to radio station KXOL-FM as part of the
consideration for our right to continue broadcasting our
programming over KXOL-FM after ICFG ceased to broadcast its
programming under a time brokerage agreement with us relating to
radio stations KFSG-FM (currently KZAB-FM) and KFSB-FM
(currently KZBA-FM). The warrant issued on September 30,
2003 was the final warrant required under the amended time
brokerage agreement due to the closing of our acquisition of
KXOL-FM. These warrants are exercisable for a period of
thirty-six months from the date of issuance after which they
will expire if not exercised. To date, these warrants have not
been exercised. We assigned each of the warrants a fair market
value of approximately $0.3 million, $0.4 million,
$0.4 million, $0.4 million, $0.4 million,
$0.4 million and $0.5 million, respectively, based on
the Black-Scholes option pricing model in accordance with SFAS
No. 123, Accounting for Stock-Based
Compensation. The fair market value of each warrant was
recorded as a stock-based programming expense on the respective
date of grant. We relied on Section 4(2) of the Securities
Act of 1933, as amended, to claim exemption from registration
for these issuances, as transactions not involving any public
offering.



|        |                                                        
|------- | -------------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security
    Holders

The matter described below was submitted to a
vote of security holders, through the solicitation of proxies
pursuant to Section 14 under the Securities Exchange Act of
1934, as amended, at the annual meeting of stockholders held on
July 10, 2003 (the Annual Meeting).

27



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##### 



Stockholders elected the following directors at
the Annual Meeting as set forth below:

|                        |  |           |             |                |  |  |            | 
|----------------------- |  | --------- | ----------- | -------------- |  |  | ---------- | 
|Directors               |  | Votes For |             | Votes Withheld
|                        |  |           |             |               
|Raúl Alarcón, Jr.       |  |           | 293,900,488 |                |  |  | 9,706,654  | 
|Pablo Raúl Alarcón, Sr. |  |           | 293,933,395 |                |  |  | 9,673,747  | 
|Jason L. Shrinsky       |  |           | 288,670,160 |                |  |  | 14,936,982 | 
|Carl Parmer             |  |           | 294,366,870 |                |  |  | 9,240,272  | 
|Jack Langer             |  |           | 303,128,924 |                |  |  | 478,218    | 
|Dan Mason               |  |           | 303,128,424 |                |  |  | 478,718    | 

There were no broker non-votes.



|        |                  
|------- | -----------------
|Item 5. | Other Information

On October 30, 2003, SBS completed the
acquisition of the assets of radio station KXOL-FM (formerly
KFSG-FM), serving the Los Angeles, California market, from the
International Church of the FourSquare Gospel (ICFG)
at a cash purchase price of $250.0 million plus the
issuance to ICFG on February 8, 2002 of a warrant
exercisable for an aggregate of 2,000,000 shares of SBSs
Class A common stock at an exercise price of $10.50 per
share. This warrant is exercisable for a period of thirty-six
months from the date of issuance after which it will expire if
not exercised. To date, this warrant has not been exercised. SBS
assigned the warrant a fair market value of approximately
$8.9 million based on the Black-Scholes option pricing
model in accordance with SFAS No. 123, Accounting for
Stock-Based Compensation. The fair market value of this
warrant was recorded as an increase to intangible assets and
additional paid-in capital on the date of grant. Additionally,
SBS paid $2.9 million in brokers fees in connection
with the KXOL-FM acquisition.

In addition to the FCC license of KXOL-FM, the
assets acquired by SBS from ICFG include certain radio
transmission equipment and a fifty-year lease at a rent of $1.00
per year for the KXOL-FM tower site, all of which were used by
ICFG for radio broadcasting and which SBS also intends to use
for radio broadcasting. The consideration for the acquisition of
the assets of KXOL-FM was determined through arms-length
negotiations between SBS and ICFG. On November 2, 2000,
pursuant to the asset purchase agreement between SBS and ICFG
for the acquisition of the assets of KXOL-FM, SBS made a
non-refundable deposit of $5.0 million which was credited
towards the $250.0 million cash purchase price at closing.
Pursuant to amendments to the asset purchase agreement, prior to
the closing SBS made additional non-refundable deposits toward
the cash purchase price in the aggregate amount of
$55.0 million which were also credited towards the
$250.0 million cash purchase price at closing. Cash on hand
was used to make all the non-refundable deposits toward the cash
purchase price. The remaining $190.0 million of the cash
purchase price was funded from (1) the proceeds of
SBSs private offering of $75,000,000 of 10 3/4%
Series A cumulative exchangeable redeemable preferred stock
which closed on October 30, 2003 and (2) borrowings
under a senior secured credit facility, consisting of a
$125.0 million term loan facility, which SBS entered into
on October 30, 2003.

From April 30, 2001 until the closing of the
acquisition, SBS broadcast its programming over KXOL-FM pursuant
to a time brokerage agreement with ICFG. ICFG broadcast its
programming over SBS radio stations KZAB-FM and KZBA-FM pursuant
to a time brokerage agreement with SBS from April 30, 2001
until February 28, 2003. Pursuant to the amended asset
purchase agreement and amended time brokerage agreements, SBS
was required to issue additional warrants to ICFG from the date
that ICFG ceased to broadcast its programming over KZAB-FM and
KZBA-FM until the closing of the acquisition of KXOL-FM. On each
of March 31, 2003, April 30, 2003, May 31, 2003,
June 30, 2003, July 31, 2003, August 31, 2003 and
September 30, 2003, SBS granted ICFG a warrant exercisable
for 100,000 shares (an aggregate of 700,000 shares) of
SBSs Class A common stock at an exercise price of
$6.14, $7.67, $7.55, $8.08, $8.17, $7.74 and $8.49 per share,
respectively. The warrant issued on September 30, 2003 was
the final warrant required under the amended time brokerage
agreement due to the closing of the acquisition of KXOL-FM. SBS
assigned each warrant a fair market value of approximately
$0.3 million, $0.4 million, $0.4 million,
$0.4 million, $0.4 million, $0.4 million and
$0.5 million, respectively, based on the Black-Scholes
option

28



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##### 



pricing model in accordance with SFAS
No. 123, Accounting for Stock-Based
Compensation. The fair market value of each warrant was
recorded as a stock-based programming expense on the respective
date of grant. These warrants are exercisable for a period of
thirty-six months after the date of issuance after which they
will expire if not exercised.


On October 30, 2003, SBS completed a private
offering of $75,000,000 of 10 3/4% Series A cumulative
exchangeable redeemable preferred stock, par value $.01 per
share, with a liquidation preference of $1,000 per share,
without a specified maturity date. The offering was made within
the United States only to qualified institutional buyers in
reliance on Rule 144A under the Securities Act of 1933, as
amended (the Securities Act) and outside the United
States only to non-U.S. persons in reliance on Regulation S
under the Securities Act.

On October 30, 2003, SBS also entered into
senior secured credit facilities with Lehman Commercial Paper
Inc. as syndication agent and administrative agent and the
several banks and other financial institutions or entities from
time to time a party to the credit agreement (the Credit
Agreement). The senior secured credit facilities include a
six-year $125.0 million term loan facility and a five-year
$10.0 million revolving credit facility.

SBS used the net proceeds from the offering of
its preferred stock, together with most of the term loan
facility, to fund the purchase of KXOL-FM. SBS is obligated to
repay a portion of the borrowings under the senior secured
credit facilities with a portion of the net proceeds it receives
from the sale of its San Antonio and San Francisco stations. The
$10.0 million revolving credit facility remains undrawn and
may be used for working capital purposes, capital needs and
general corporate purposes.

The Credit Agreement contains a number of
financial covenants which, among other things, require us to
maintain specified financial ratios and impose certain
limitations on us with respect to indebtedness, capital
expenditures, transactions with affiliates and consolidations
and mergers, among other things.

29



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|        |                                     
|------- | ------------------------------------
|Item 6. | Exhibits and Reports on
    Form 8-K

(a) Exhibits 

|     |  |                                                                                                                                                                                                                                                                                                                                                   
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1  |  | Third Amended and Restated Certificate of
    Incorporation of 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)).                                                                    
|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 the
    Companys 1999 Registration Statement).                                                                                                                            
|3.3  |  | Certificate of Elimination of 14 1/4% Senior
    Exchangeable Preferred Stock, Series A of the Company,
    dated October 28, 2003.                                                                                                                                                                                                               
|4.1  |  | 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.
|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 B Cumulative Exchangeable
    Redeemable Preferred Stock of Spanish Broadcasting System, Inc.
|10.1 |  | Warrant dated August 31, 2003 by the Company
    in favor of International Church of the FourSquare Gospel.                                                                                                                                                                                                                                       
|10.2 |  | Warrant dated September 30, 2003 by the
    Company in favor of International Church of the FourSquare
    Gospel.                                                                                                                                                                                                                                
|10.3 |  | Credit Agreement between the Company and Merrill
    Lynch, Pierce Fenner & Smith Incorporated, Deutsche Bank
    Securities Inc. and Lehman Commercial Paper Inc. dated
    October 30, 2003.                                                                                                                                                    
|10.4 |  | Guarantee and Collateral Agreement between the
    Company and certain of its subsidiaries in favor of Lehman
    Commercial Paper Inc. dated October 30, 2003.                                                                                                                                                                                   
|10.5 |  | Assignment of Leases and Rents by the Company in
    favor of Lehman Commercial Paper Inc. dated October 30,
    2003.                                                                                                                                                                                                                            
|10.6 |  | Deed of Trust, Assignment of Leases and Rents,
    Security Agreement and Fixture Filing by the Company in favor of
    Lehman Commercial Paper Inc. dated October 30, 2003.                                                                                                                                                                      
|10.7 |  | Transmission Facilities Lease between the Company
    and International Church of the FourSquare Gospel, dated
    October 30, 2003.                                                                                                                                                                                                              
|10.8 |  | Purchase Agreement dated October 30, 2003
    between the Company and Merrill Lynch, Pierce Fenner & Smith
    Incorporated, Deutsche Bank Securities Inc. and Lehman Brothers
    Inc. with respect to 10 3/4% Series A Cumulative
    Exchangeable Redeemable Preferred Stock.                                                                  
|10.9 |  | Registration Rights Agreement dated
    October 30, 2003 between the Company and Merrill Lynch,
    Pierce Fenner & Smith Incorporated, Deutsche Bank Securities
    Inc. and Lehman Brothers Inc. with respect to 10 3/4%
    Series A Cumulative Exchangeable Redeemable Preferred Stock.                                                       
|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.                                                                                                                                                                                         

(b) Reports on Form 8-K

30



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##### 



The Company filed the following reports on
Form 8-K during the three months ended September 30,
2003:



| |                                                                                                                                                                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i) a current report on Form 8-K on
    August 6, 2003 to report that on August 6, 2003, the
    Company issued a press release announcing its second quarter
    2003 financial results; and                                                                                                                                                                                                               
|
| | (ii) a current report on Form 8-K on
    September 25, 2003 to report that on September 18,
    2003, the Company entered into an asset purchase agreement with
    Border Media Partners, LLC for the sale of certain assets,
    including the FCC licenses, of the Companys radio stations
    KLEY-FM and KSAH-AM serving the San Antonio, Texas market for a
    cash purchase price of $24.4 million.

31



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##### 



SIGNATURES

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



| |                                  
| | ---------------------------------
| | SPANISH BROADCASTING SYSTEM, INC.



| |     |                     
| | --- | --------------------
| | By: | /s/ JOSEPH A. GARCIA

| |                                                      
| | -----------------------------------------------------
| |                                                      
| | Joseph A. García                                     
| | Executive Vice President, Chief Financial
    Officer
| | and Secretary (principal financial
    and           
| | accounting officer and duly
    authorized           
| | officer of the registrant)                           

Date: November 14, 2003

32