##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2010
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 000-27823
 
 Spanish Broadcasting System, Inc.
  Delaware(State or other jurisdiction of 
incorporation or organization)
    
    13-3827791(I.R.S. Employer
Identification No.)
 2601 South Bayshore Drive, PH 2
Coconut Grove, Florida 33133  (Address of principal executive offices) (Zip Code)
 (305) 441-6901  (Registrants telephone number, including area code)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
 Yes o No þ




---



##### 



SPANISH BROADCASTING SYSTEM, INC.
INDEX
 PagePART I. FINANCIAL INFORMATIONITEM 1. Financial Statements  Unaudited
    
    
    4Unaudited Condensed Consolidated Balance Sheets as of June 30, 2010 and December 31, 2009
    
    
    4Unaudited Condensed Consolidated Statements of Operations for the Three- and Six-Months
Ended June 30, 2010 and 2009
    
    
    5Unaudited Condensed Consolidated Statement of Changes in Stockholders Deficit and
Comprehensive Income for the Six-Months Ended June 30, 2010
    
    
    6Unaudited Condensed Consolidated Statements of Cash Flows for the Six-Months Ended June
30, 2010 and 2009
    
    
    7Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    8ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14ITEM 4. Controls and Procedures
    
    
    22PART II. OTHER INFORMATIONITEM 1. Legal Proceedings
    
    
    22ITEM 1A. Risk Factors
    
    
    22ITEM 6. Exhibits
    
    
    23Exhibit 10.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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Special Note Regarding Forward-Looking Statements
   3




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements  Unaudited
 SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
 
  June 30,
    
    
    December 31,2010
    
    
    2009(In thousands, except share data)AssetsCurrent assets:Cash and cash equivalents
    
    $
    44,648
    
    
    
    53,580Receivables, net of allowance for doubtful accounts of $839 in 2010 and $1,247 in 2009
    
    
    25,824
    
    
    
    24,800Prepaid expenses and other current assets
    
    
    3,301
    
    
    
    3,439Total current assets
    
    
    73,773
    
    
    
    81,819Property and equipment, net of accumulated depreciation of $52,540 in 2010 and $49,560 in 2009
    
    
    43,162
    
    
    
    45,365FCC broadcasting licenses
    
    
    312,623
    
    
    
    312,623Goodwill
    
    
    32,806
    
    
    
    32,806Other intangible assets, net of accumulated amortization of $231 in 2010 and $214 in 2009
    
    
    1,202
    
    
    
    1,220Deferred financing costs, net of accumulated amortization of $5,559 in 2010 and $5,028 in 2009
    
    
    2,043
    
    
    
    2,574Other assets
    
    
    2,322
    
    
    
    2,386Total assets
    
    $
    467,931
    
    
    
    478,793Liabilities and Stockholders DeficitCurrent liabilities:Accounts payable and accrued expenses
    
    $
    18,569
    
    
    
    18,211Accrued interest
    
    
    4,066
    
    
    
    5,608Unearned revenue
    
    
    471
    
    
    
    570Other liabilities
    
    
    266
    
    
    
    602Derivative instruments
    
    
    
    
    
    
    5,863Senior credit facility revolver due 2010
    
    
    
    
    
    
    15,000Current portion of the senior credit facility term loan due 2012
    
    
    3,250
    
    
    
    3,250Current portion of other long-term debt
    
    
    441
    
    
    
    447Series B cumulative exchangeable redeemable preferred stock dividends payable
    
    
    9,514
    
    
    
    7,032Total current liabilities
    
    
    36,577
    
    
    
    56,583Other liabilities, less current portion
    
    
    2,249
    
    
    
    405Derivative instruments
    
    
    838
    
    
    
    612Senior credit facility term loan due 2012, less current portion
    
    
    304,687
    
    
    
    306,313Other long-term debt, less current portion
    
    
    6,388
    
    
    
    6,605Deferred income taxes
    
    
    74,895
    
    
    
    71,408Total liabilities
    
    
    425,634
    
    
    
    441,926Commitments and contingencies (note 7)Cumulative exchangeable redeemable preferred stock

103/4% Series B cumulative exchangeable redeemable preferred stock, $0.01 par value,
liquidation value $1,000 per share. Authorized 280,000 shares; 92,349 shares issued and
outstanding at June 30, 2010 and December 31, 2009, respectively
    
    
    92,349
    
    
    
    92,349Stockholders deficit:Series C convertible preferred stock, $0.01 par value and liquidation value. Authorized 600,000 shares;
380,000 shares issued and outstanding at June 30, 2010 and December 31, 2009, respectively
    
    
    4
    
    
    
    4Class A common stock, $0.0001 par value. Authorized 100,000,000 shares; 41,596,513 and 41,542,513
shares issued and outstanding at June 30, 2010 and December 31, 2009, respectively
    
    
    4
    
    
    
    4Class B common stock, $0.0001 par value. Authorized 50,000,000 shares; 23,403,500
shares issued and outstanding at June 30, 2010 and December 31, 2009, respectively
    
    
    2
    
    
    
    2Additional paid-in capital
    
    
    525,142
    
    
    
    525,026Accumulated other comprehensive loss
    
    
    (838
    )
    
    
    (2,513
    )Accumulated deficit
    
    
    (574,366
    )
    
    
    (578,005
    )Total stockholders deficit
    
    
    (50,052
    )
    
    
    (55,482
    )Total liabilities and stockholders deficit
    
    $
    467,931
    
    
    
    478,793
   4




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SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
 
  Three-Months Ended
    
    
    Six-Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands, except per share data)Net revenue
    
    $
    35,837
    
    
    
    37,052
    
    
    
    66,683
    
    
    
    64,846Operating expenses:Engineering and programming
    
    
    9,991
    
    
    
    11,234
    
    
    
    19,865
    
    
    
    22,239Selling, general and administrative
    
    
    10,832
    
    
    
    12,463
    
    
    
    23,621
    
    
    
    23,825Corporate expenses
    
    
    2,254
    
    
    
    2,312
    
    
    
    4,475
    
    
    
    5,173Depreciation and amortization
    
    
    1,446
    
    
    
    1,570
    
    
    
    3,002
    
    
    
    3,163Total operating expenses
    
    
    24,523
    
    
    
    27,579
    
    
    
    50,963
    
    
    
    54,400Loss (gain) on the disposal of assets, net
    
    
    8
    
    
    
    (26
    )
    
    
    8
    
    
    
    (15
    )Impairment of assets and restructuring costs
    
    
    
    
    
    
    70
    
    
    
    
    
    
    
    10,686Operating income (loss)
    
    
    11,306
    
    
    
    9,429
    
    
    
    15,712
    
    
    
    (225
    )Other (expense) income:Interest expense, net
    
    
    (3,123
    )
    
    
    (6,701
    )
    
    
    (9,426
    )
    
    
    (13,118
    )Change in fair value of derivative instrument
    
    
    3,016
    
    
    
    (366
    )
    
    
    5,863
    
    
    
    2,490Other, net
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Income (loss) before income taxes
    
    
    11,199
    
    
    
    2,363
    
    
    
    12,149
    
    
    
    (10,852
    )Income tax expense (benefit)
    
    
    1,768
    
    
    
    1,904
    
    
    
    3,546
    
    
    
    (365
    )Net income (loss)
    
    
    9,431
    
    
    
    459
    
    
    
    8,603
    
    
    
    (10,487
    )Dividends on Series B preferred stock
    
    
    (2,482
    )
    
    
    (2,482
    )
    
    
    (4,964
    )
    
    
    (4,964
    )Net income (loss) applicable to
common stockholders
    
    $
    6,949
    
    
    
    (2,023
    )
    
    
    3,639
    
    
    
    (15,451
    )Basic and diluted net income (loss) per common share
    
    $
    0.10
    
    
    
    (0.03
    )
    
    
    0.05
    
    
    
    (0.21
    )Weighted average common shares outstanding:Basic
    
    
    72,600
    
    
    
    72,502
    
    
    
    72,600
    
    
    
    72,502Diluted
    
    
    72,870
    
    
    
    72,502
    
    
    
    72,824
    
    
    
    72,502
   5




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SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
 
 
 Class C
    
    
    Class A
    
    
    Class B
    
    
    
    
    
    
    Accumulatedpreferred stock
    
    
    common stock
    
    
    common stock
    
    
    Additional
    
    
    other
    
    
    
    
    
    
    TotalNumber of
    
    
    Par
    
    
    Number of
    
    
    Par
    
    
    Number of
    
    
    Par
    
    
    paid-in
    
    
    comprehensive
    
    
    Accumulated
    
    
    stockholdersshares
    
    
    value
    
    
    shares
    
    
    value
    
    
    shares
    
    
    value
    
    
    capital
    
    
    loss
    
    
    deficit
    
    
    deficit(In thousands, except share data)Balance at December 31, 2009
    
    
    380,000
    
    
    $
    4
    
    
    
    41,542,513
    
    
    $
    4
    
    
    
    23,403,500
    
    
    $
    2
    
    
    $
    525,026
    
    
    $
    (2,513
    )
    
    $
    (578,005
    )
    
    $
    (55,482
    )Issuance of Class A common stock from
vesting of restricted stock
    
    
    
    
    
    
    
    
    
    
    54,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    116
    
    
    
    
    
    
    
    
    
    
    
    116Series B preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,964
    )
    
    
    (4,964
    )Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,603
    
    
    
    8,603Amounts reclassified to earnings during the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,901
    
    
    
    
    
    
    
    1,901Unrealized loss on derivative instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (226
    )
    
    
    
    
    
    
    (226
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,278Balance at June 30, 2010
    
    
    380,000
    
    
    $
    4
    
    
    
    41,596,513
    
    
    $
    4
    
    
    
    23,403,500
    
    
    $
    2
    
    
    $
    525,142
    
    
    $
    (838
    )
    
    $
    (574,366
    )
    
    $
    (50,052
    )
 See accompanying notes to the unaudited condensed consolidated financial statements.
  6




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SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
 
  Six-Months EndedJune 30,2010
    
    
    2009(In thousands)Cash flows from operating activities:Net income (loss)
    
    $
    8,603
    
    
    
    (10,487
    )Adjustments to reconcile net income (loss) to net cash provided by operating activities:Loss (gain) loss on the sale of assets
    
    
    8
    
    
    
    (15
    )Impairment of assets
    
    
    
    
    
    
    10,123Stock-based compensation
    
    
    116
    
    
    
    132Depreciation and amortization
    
    
    3,002
    
    
    
    3,163Net barter income
    
    
    (216
    )
    
    
    (248
    )Provision for trade doubtful accounts
    
    
    202
    
    
    
    (115
    )Amortization of deferred financing costs
    
    
    531
    
    
    
    537Deferred income taxes
    
    
    3,487
    
    
    
    (684
    )Unearned revenue
    
    
    99
    
    
    
    135Change in fair value of derivative instrument
    
    
    (3,962
    )
    
    
    201Amortization of other liabilities
    
    
    
    
    
    
    (33
    )Changes in operating assets and liabilities:Trade receivables
    
    
    (1,208
    )
    
    
    1,700Prepaid expenses and other current assets
    
    
    138
    
    
    
    528Other assets
    
    
    64
    
    
    
    627Accounts payable and accrued expenses
    
    
    376
    
    
    
    1,250Accrued interest
    
    
    (1,542
    )
    
    
    4,532Other liabilities
    
    
    1,508
    
    
    
    Net cash provided by operating activities
    
    
    11,206
    
    
    
    11,346Cash flows from investing activities:Purchases of property and equipment
    
    
    (807
    )
    
    
    (547
    )Proceeds from the sale of property and equipment and insurance recoveries
    
    
    
    
    
    
    212Net cash used in investing activities
    
    
    (807
    )
    
    
    (335
    )Cash flows from financing activities:Payment of senior credit facility revolver due 2010
    
    
    (15,000
    )
    
    
    Payment of senior secured credit facility term loan 2012
    
    
    (1,626
    )
    
    
    (1,626
    )Payment of Series B preferred stock cash dividends
    
    
    (2,482
    )
    
    
    (4,964
    )Payments of other long-term debt
    
    
    (223
    )
    
    
    (217
    )Net cash used in financing activities
    
    
    (19,331
    )
    
    
    (6,807
    )Net (decrease) increase in cash and cash
equivalents
    
    
    (8,932
    )
    
    
    4,204Cash and cash equivalents at beginning of period
    
    
    53,580
    
    
    
    32,852Cash and cash equivalents at end of period
    
    $
    44,648
    
    
    
    37,056Supplemental cash flows information:Interest paid
    
    $
    6,539
    
    
    
    5,362Income taxes paid, net
    
    $
    8
    
    
    
    22Noncash investing and financing activities:Accrual of Series B preferred stock cash dividends not declared
    
    $
    2,482
    
    
    
    Unrealized (loss) gain on derivative instruments
    
    $
    (226
    )
    
    
    359
   7




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




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(c) Share-Based Compensation Plans
 2006 Omnibus Equity Compensation Plan
  1999 Stock Option Plans
  Stock Options and Nonvested Shares Activity
   WeightedWeighted
    
    
    
    
    
    
    AverageAverage
    
    
    Aggregate
    
    
    RemainingExercise
    
    
    Intrinsic
    
    
    ContractualShares
    
    
    Price
    
    
    Value
    
    
    Life (Years)Outstanding at December 31, 2009
    
    
    2,057
    
    
    $
    6.41Granted
    
    
    50
    
    
    
    1.79Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (25
    )
    
    
    2.55Outstanding at June 30, 2010
    
    
    2,082
    
    
    $
    6.35
    
    
    $
    221
    
    
    
    4.3Exercisable at June 30, 2010
    
    
    1,980
    
    
    $
    6.60
    
    
    $
    193
    
    
    
    4.1
   9




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##### Table of Contents



WeightedOutstanding
    
    
    Average
    
    
    ExercisableWeighted
    
    
    Remaining
    
    
    
    
    
    
    WeightedAverage
    
    
    Contractual
    
    
    
    
    
    
    AverageUnvested
    
    
    Exercise
    
    
    Life
    
    
    Number
    
    
    ExerciseRange of Exercise Prices
    
    Vested Options
    
    
    Options
    
    
    Price
    
    
    (Years)
    
    
    Exercisable
    
    
    Price$0.20  4.99
    
    
    623
    
    
    
    102
    
    
    $
    2.19
    
    
    
    7.0
    
    
    
    623
    
    
    $
    2.325.00  9.99
    
    
    1,159
    
    
    
    
    
    
    
    8.19
    
    
    
    2.7
    
    
    
    1,159
    
    
    
    8.1910.00  11.78
    
    
    198
    
    
    
    
    
    
    
    10.79
    
    
    
    4.3
    
    
    
    198
    
    
    
    10.791,980
    
    
    
    102
    
    
    $
    6.35
    
    
    
    4.3
    
    
    
    1,980
    
    
    $
    6.60
   WeightedAverage Grant-Date Fair ValueShares
    
    
    (per Share)Nonvested at December 31, 2009
    
    
    127
    
    
    $
    1.73Awarded
    
    
    
    
    
    
    Vested
    
    
    (54
    )
    
    
    2.78Forfeited
    
    
    
    
    
    
    Nonvested at June 30, 2010
    
    
    73
    
    
    $
    0.96
 3. Basic and Diluted Net Income (Loss) Per Common Share
    Three-Months Ended
    
    
    Six-Months endedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Basic weighted average shares outstanding
    
    
    72,600
    
    
    
    72,502
    
    
    
    72,600
    
    
    
    72,502Effect of dilutive equity instruments
    
    
    270
    
    
    
    
    
    
    
    224
    
    
    
    Dilutive weighted average shares outstanding
    
    
    72,870
    
    
    
    72,502
    
    
    
    72,824
    
    
    
    72,502Options to purchase shares of common stock and other
stock-based awards outstanding which are not
included in the calculation of diluted net income (loss)
per share because their impact is anti-dilutive
    
    
    1,757
    
    
    
    2,712
    
    
    
    1,789
    
    
    
    2,712
  10




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4. Operating Segments
  Three-Months Ended
    
    
    Six-Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands)
    
    
    (In thousands)Net revenue:Radio
    
    $
    31,823
    
    
    
    33,189
    
    
    
    58,903
    
    
    
    57,365Television
    
    
    4,014
    
    
    
    3,863
    
    
    
    7,780
    
    
    
    7,481Consolidated
    
    $
    35,837
    
    
    
    37,052
    
    
    
    66,683
    
    
    
    64,846Engineering and programming expenses:Radio
    
    $
    5,684
    
    
    
    7,104
    
    
    
    11,474
    
    
    
    14,495Television
    
    
    4,307
    
    
    
    4,130
    
    
    
    8,391
    
    
    
    7,744Consolidated
    
    $
    9,991
    
    
    
    11,234
    
    
    
    19,865
    
    
    
    22,239Selling, general and administrative expenses:Radio
    
    $
    9,084
    
    
    
    10,303
    
    
    
    19,955
    
    
    
    19,455Television
    
    
    1,748
    
    
    
    2,160
    
    
    
    3,666
    
    
    
    4,370Consolidated
    
    $
    10,832
    
    
    
    12,463
    
    
    
    23,621
    
    
    
    23,825Corporate expenses:
    
    $
    2,254
    
    
    
    2,312
    
    
    
    4,475
    
    
    
    5,173Depreciation and amortization:Radio
    
    $
    653
    
    
    
    780
    
    
    
    1,386
    
    
    
    1,593Television
    
    
    564
    
    
    
    552
    
    
    
    1,126
    
    
    
    1,090Corporate
    
    
    229
    
    
    
    238
    
    
    
    490
    
    
    
    480Consolidated
    
    $
    1,446
    
    
    
    1,570
    
    
    
    3,002
    
    
    
    3,163Loss (gain) on the disposal of assets, net:Radio
    
    $
    
    
    
    
    (12
    )
    
    
    
    
    
    
    (20
    )Television
    
    
    8
    
    
    
    
    
    
    
    8
    
    
    
    19Corporate
    
    
    
    
    
    
    (14
    )
    
    
    
    
    
    
    (14
    )Consolidated
    
    $
    8
    
    
    
    (26
    )
    
    
    8
    
    
    
    (15
    )Impairment of assets and restructuring costs:Radio
    
    $
    
    
    
    
    66
    
    
    
    
    
    
    
    10,614Television
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24Corporate
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    48Consolidated
    
    $
    
    
    
    
    70
    
    
    
    
    
    
    
    10,686Operating (loss) income:Radio
    
    $
    16,402
    
    
    
    14,948
    
    
    
    26,088
    
    
    
    11,228Television
    
    
    (2,613
    )
    
    
    (2,979
    )
    
    
    (5,411
    )
    
    
    (5,766
    )Corporate
    
    
    (2,483
    )
    
    
    (2,540
    )
    
    
    (4,965
    )
    
    
    (5,687
    )Consolidated
    
    $
    11,306
    
    
    
    9,429
    
    
    
    15,712
    
    
    
    (225
    )Capital expenditures:Radio
    
    $
    342
    
    
    
    216
    
    
    
    401
    
    
    
    394Television
    
    
    15
    
    
    
    26
    
    
    
    310
    
    
    
    124Corporate
    
    
    65
    
    
    
    16
    
    
    
    96
    
    
    
    29Consolidated
    
    $
    422
    
    
    
    258
    
    
    
    807
    
    
    
    547
 June 30,
    
    
    December 31,Total Assets:
    
    2010
    
    
    2009(In thousands)Radio
    
    $
    415,891
    
    
    
    425,565Television
    
    
    45,698
    
    
    
    45,811Corporate
    
    
    6,342
    
    
    
    7,417Consolidated
    
    $
    467,931
    
    
    
    478,793
  11




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##### Table of Contents



5. Comprehensive Income (Loss)
  Three-Months Ended
    
    
    Six-Months endedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net income (loss)
    
    $
    9,431
    
    
    
    459
    
    
    $
    8,603
    
    
    
    (10,487
    )Other comprehensive income (loss):Amounts reclassified to earnings during the period
    
    
    873
    
    
    
    1,449
    
    
    
    1,901
    
    
    
    2,691Unrealized (loss) gain on derivative instruments
    
    
    (142
    )
    
    
    (29
    )
    
    
    (226
    )
    
    
    359Total comprehensive income (loss)
    
    $
    10,162
    
    
    
    1,879
    
    
    $
    10,278
    
    
    
    (7,437
    )
 6. Income Taxes
    7. Litigation
  8. Derivative and Hedging Activities
  Fixedinterest
    
    
    Expiration
    
    Notional
    
    
    FairAgreement
    
    rate
    
    
    date
    
    amounts
    
    
    valueInterest rate swap
    
    
    5.98
    %
    
    June 2010
    
    $
    
    
    
    $
    Interest rate swap
    
    
    6.31
    %
    
    January 2017
    
    
    6,605
    
    
    
    838$
    6,605
    
    
    $
    838
    12




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##### Table of Contents



9. Fair Value Measurement Disclosures
 Fair Value of Financial Instruments
    June 30, 2010
    
    
    December 31, 2009Gross
    
    
    
    
    
    
    GrossCarrying
    
    
    
    
    
    
    CarryingDescription
    
    Amount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueSenior credit facility term loan
    
    $
    307.9
    
    
    
    266.4
    
    
    
    309.6
    
    
    
    255.9103/4% Series B cumulative
exchangeable redeemable preferred stock
    
    
    92.3
    
    
    
    61.4
    
    
    
    92.3
    
    
    
    57.9Promissory note payable, included in other long-term debt
    
    
    6.6
    
    
    
    6.5
    
    
    
    6.8
    
    
    
    6.5
  Fair Value of Derivative Instruments
  Fair value measurements at June 30, 2010LiabilitiesJune 30, 2010
    
    
    Quoted prices in
    
    
    Significantcarrying value and
    
    
    active markets
    
    
    other
    
    
    SignificantBalance sheet
    
    
    for identical
    
    
    observable
    
    
    unobservablelocation of derivative
    
    
    instruments
    
    
    inputs
    
    
    inputsDescription
    
    instruments
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Derivative
designated as a
cash flow hedging
instrument:Interest rate swap
    
    $
    838
    
    
    
    
    
    
    
    838
    
    
    
    
  13




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##### Table of Contents



Fair value measurements at December 31, 2009LiabilitiesDecember 31, 2009
    
    
    Quoted prices in
    
    
    Significantcarrying value and
    
    
    active markets
    
    
    other
    
    
    Significantbalance sheet
    
    
    for identical
    
    
    observable
    
    
    unobservablelocation of derivative
    
    
    instruments
    
    
    inputs
    
    
    inputsDescription
    
    instruments
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Derivative
designated as a
cash flow hedging
instrument:Interest rate swap
    
    $
    612
    
    
    
    
    
    
    
    612
    
    
    
    Derivative no
longer designated
as a cash flow
hedging instrument:Interest rate swap
    
    
    5,863
    
    
    
    
    
    
    
    5,863
    
    
    
    Total
    
    $
    6,475
    
    
    
    
    
    
    
    6,475
    
    
    
    
  Three-Months Ended June 30,
    
    
    Six-Months Ended June 30,Interest rate swaps
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009(Loss) gain
recognized in other
comprehensive loss
(effective portion)
    
    $
    (142
    )
    
    
    (29
    )
    
    $
    (226
    )
    
    
    359Loss reclassified
from accumulated
other comprehensive
loss into interest
expense
    
    
    873
    
    
    
    1,449
    
    
    
    1,901
    
    
    
    2,691Gain (loss)
recognized in
change in fair
value of derivative
instrument
    
    
    3,016
    
    
    
    (366
    )
    
    
    5,863
    
    
    
    2,490
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Overview
    14




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15




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Comparison Analysis of the Operating Results for the Three-Months Ended June 30, 2010 and 2009
  Three-Months EndedJune 30,2010
    
    
    2009(In thousands)Net revenue:Radio
    
    $
    31,823
    
    
    
    33,189Television
    
    
    4,014
    
    
    
    3,863Consolidated
    
    $
    35,837
    
    
    
    37,052Engineering and programming expenses:Radio
    
    $
    5,684
    
    
    
    7,104Television
    
    
    4,307
    
    
    
    4,130Consolidated
    
    $
    9,991
    
    
    
    11,234Selling, general and administrative expenses:Radio
    
    $
    9,084
    
    
    
    10,303Television
    
    
    1,748
    
    
    
    2,160Consolidated
    
    $
    10,832
    
    
    
    12,463Corporate expenses:
    
    $
    2,254
    
    
    
    2,312Depreciation and amortization:Radio
    
    $
    653
    
    
    
    780Television
    
    
    564
    
    
    
    552Corporate
    
    
    229
    
    
    
    238Consolidated
    
    $
    1,446
    
    
    
    1,570Loss (gain) on the disposal of assets, net:Radio
    
    $
    
    
    
    
    (12
    )Television
    
    
    8
    
    
    
    Corporate
    
    
    
    
    
    
    (14
    )Consolidated
    
    $
    8
    
    
    
    (26
    )Impairment of assets and restructuring costs:Radio
    
    $
    
    
    
    
    66Television
    
    
    
    
    
    
    Corporate
    
    
    
    
    
    
    4Consolidated
    
    $
    
    
    
    
    70Operating (loss) income:Radio
    
    $
    16,402
    
    
    
    14,948Television
    
    
    (2,613
    )
    
    
    (2,979
    )Corporate
    
    
    (2,483
    )
    
    
    (2,540
    )Consolidated
    
    $
    11,306
    
    
    
    9,429
  Three-Months EndedJune 30,2010
    
    
    2009(In thousands)Net revenue
    
    $
    35,837
    
    
    
    37,052Engineering and programming expenses
    
    
    9,991
    
    
    
    11,234Selling, general and administrative expenses
    
    
    10,832
    
    
    
    12,463Corporate expenses
    
    
    2,254
    
    
    
    2,312Depreciation and amortization
    
    
    1,446
    
    
    
    1,570Loss (gain) on disposal of assets, net of disposal costs
    
    
    8
    
    
    
    (26
    )Impairment of assets and restructuring costs
    
    
    
    
    
    
    70Operating income
    
    $
    11,306
    
    
    
    9,429Interest expense, net
    
    
    (3,123
    )
    
    
    (6,701
    )Change in fair value of derivative instrument
    
    
    3,016
    
    
    
    (366
    )Other income, net
    
    
    
    
    
    
    1Income tax expense
    
    
    1,768
    
    
    
    1,904Net income
    
    $
    9,431
    
    
    
    459
  16




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Net Revenue
  Engineering and Programming Expenses
  Selling, General and Administrative Expenses
  Corporate Expenses
  Operating Income
  Interest Expense, Net
  Change in Fair Value of Derivative Instrument
  Income Taxes
  Net Income
   17




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Comparison Analysis of the Operating Results for the Six-Months Ended June 30, 2010 and 2009
  Six-Months EndedJune 30,2010
    
    
    2009(In thousands)Net revenue:Radio
    
    $
    58,903
    
    
    
    57,365Television
    
    
    7,780
    
    
    
    7,481Consolidated
    
    $
    66,683
    
    
    
    64,846Engineering and programming expenses:Radio
    
    $
    11,474
    
    
    
    14,495Television
    
    
    8,391
    
    
    
    7,744Consolidated
    
    $
    19,865
    
    
    
    22,239Selling, general and administrative expenses:Radio
    
    $
    19,955
    
    
    
    19,455Television
    
    
    3,666
    
    
    
    4,370Consolidated
    
    $
    23,621
    
    
    
    23,825Corporate expenses:
    
    $
    4,475
    
    
    
    5,173Depreciation and amortization:Radio
    
    $
    1,386
    
    
    
    1,593Television
    
    
    1,126
    
    
    
    1,090Corporate
    
    
    490
    
    
    
    480Consolidated
    
    $
    3,002
    
    
    
    3,163Loss (gain) on the disposal of assets, net:Radio
    
    $
    
    
    
    
    (20
    )Television
    
    
    8
    
    
    
    19Corporate
    
    
    
    
    
    
    (14
    )Consolidated
    
    $
    8
    
    
    
    (15
    )Impairment of assets and restructuring costs:Radio
    
    $
    
    
    
    
    10,614Television
    
    
    
    
    
    
    24Corporate
    
    
    
    
    
    
    48Consolidated
    
    $
    
    
    
    
    10,686Operating (loss) income:Radio
    
    $
    26,088
    
    
    
    11,228Television
    
    
    (5,411
    )
    
    
    (5,766
    )Corporate
    
    
    (4,965
    )
    
    
    (5,687
    )Consolidated
    
    $
    15,712
    
    
    
    (225
    )
  18




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Six-Months EndedJune 30,2010
    
    
    2009(In thousands)Net revenue
    
    $
    66,683
    
    
    
    64,846Engineering and programming expenses
    
    
    19,865
    
    
    
    22,239Selling, general and administrative expenses
    
    
    23,621
    
    
    
    23,825Corporate expenses
    
    
    4,475
    
    
    
    5,173Depreciation and amortization
    
    
    3,002
    
    
    
    3,163Loss (gain) on disposal of assets, net of disposal costs
    
    
    8
    
    
    
    (15
    )Impairment of assets and restructuring costs
    
    
    
    
    
    
    10,686Operating income (loss)
    
    $
    15,712
    
    
    
    (225
    )Interest expense, net
    
    
    (9,426
    )
    
    
    (13,118
    )Change in fair value of derivative instrument
    
    
    5,863
    
    
    
    2,490Other income, net
    
    
    
    
    
    
    1Income tax expense (benefit)
    
    
    3,546
    
    
    
    (365
    )Net income (loss)
    
    $
    8,603
    
    
    
    (10,487
    )
 Net Revenue
  Engineering and Programming Expenses
  Selling, General and Administrative Expenses
  Corporate Expenses
  Operating Income (Loss)
  Interest Expense, Net
   19




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Change in Fair Value of Derivative Instrument
  Income Taxes
  Net Income (Loss)
  Liquidity and Capital Resources
   
    
    the demand for advertising within the broadcasting industry and economic conditions
in general will not deteriorate further in any material respect;
    
    we will continue to successfully implement our business strategy; and
    
    we will not incur any material unforeseen liabilities, including but not limited to
taxes, environmental liabilities, regulatory matters and legal judgments.
    20




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##### Table of Contents



Six-Months EndedJune 30,
    
    
    Change2010
    
    
    2009
    
    
    $(In thousands)Capital expenditures:Radio
    
    $
    401
    
    
    
    394
    
    
    
    7Television
    
    
    310
    
    
    
    124
    
    
    
    186Corporate
    
    
    96
    
    
    
    29
    
    
    
    67Consolidated
    
    $
    807
    
    
    
    547
    
    
    
    260Net cash flows provided by operating activities
    
    $
    11,206
    
    
    
    11,346
    
    
    
    (140
    )Net cash flows used in investing activities
    
    
    (807
    )
    
    
    (335
    )
    
    
    (472
    )Net cash flows used in financing activities
    
    
    (19,331
    )
    
    
    (6,807
    )
    
    
    (12,524
    )Net (decrease) increase in cash and cash equivalents
    
    $
    (8,932
    )
    
    
    4,204
 Net Cash Flows Provided by Operating Activities
  Net Cash Flows Used in Investing Activities
  Net Cash Flows Used in Financing Activities
  Recent Developments
 NASDAQ Audit Committee Compliance Letter
  Dividend Payment on the Series B Preferred Stock
 3 4
   
  21




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Lehman Hedge Settlement
  Off-Balance Sheet Arrangements
  
 Item 4. Controls and Procedures
 Evaluation Of Disclosure Controls And Procedures.
 Changes In Internal Control Over Financial Reporting.
 
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  The liquidity of our common stock
could be adversely affected if we are delisted from the NASDAQ Global
Market.
     22




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##### Table of Contents



Item 6. Exhibits
 (a) Exhibits
  ExhibitNumber
    
    Exhibit Description10.1*
    
    Stock Option Agreement dated as of June 3, 2010 between the Company and Manuel E. Machado.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.
  * Filed herewith** Furnished herewith
  23




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##### Table of Contents



SIGNATURES
  SPANISH BROADCASTING SYSTEM, INC.By:
    /s/ JOSEPH A. GARCÍAJOSEPH A. GARCÍAChief Financial Officer,
Chief Administrative Officer, Senior 
Executive
Vice President and Secretary
(principal financial and accounting officer 
and duly
authorized officer of the registrant)   24




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Exhibit Description10.1*
    
    Stock Option Agreement dated as of June 3, 2010 between the Company and Manuel E. Machado.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.
  * Filed herewith** Furnished herewith
  25