##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549




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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 March 31,
    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 fiscal year:

Last Sunday in December of each calendar
year


(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.     þ Yes          o No

Indicate by check mark whether the registrant is
an accelerated filer (as defined in Rule 12b-2 of the
Exchange
Act).     þ Yes          o No

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 May 13, 2003, 37,076,655 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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TABLE OF CONTENTS



|                              |                                                                                               |                                                           |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | --------------------------------------------------------- |  |  |  |  |  | 
|INDEX                        
|                              |                                                                                               | UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS          
|                              |                                                                                               | UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|                              |                                                                                               | UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|                              | NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                               
|                              | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                              | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|                              | Item 4. Controls and Procedures                                                              
|PART II -- OTHER INFORMATION 
|                              | Item 2. Changes in Securities and Use of Proceeds                                            
|                              | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                   
|EX-10.4 Warrant dated 3/31/03
|EX-10.5 Warrant dated 4/30/03
|EX-99.1 Certification of CEO 
|EX-99.2 Certification of CFO 



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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC.






INDEX


|         |         |                                                                                                                  |                                                                                           |  |   |    | 
|-------- | ------- | ---------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------- |  | - | -- | 
|PART I.  |         | FINANCIAL INFORMATION                                                                                            |                                                                                           |  |   |   
|         | ITEM 1. |                                                                                                                  | Financial Statements  Unaudited                                                          |  |   | 2  | 
|         |         | Unaudited Condensed Consolidated Balance Sheets
    as of December 29, 2002 and March 31, 2003                   |                                                                                           |  | 2 |   
|         |         | Unaudited Condensed Consolidated Statements of
    Operations for the Three-Months Ended March 31, 2002 and 2003 |                                                                                           |  | 3 |   
|         |         | Unaudited Condensed Consolidated Statements of
    Cash Flows for the Three-Months Ended March 31, 2002 and 2003 |                                                                                           |  | 4 |   
|         |         | Notes to Unaudited Condensed Consolidated
    Financial Statements                                               |                                                                                           |  | 5 |   
|         | ITEM 2. |                                                                                                                  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations |  |   | 14 | 
|         | ITEM 3. |                                                                                                                  | Quantitative and Qualitative Disclosures About
    Market Risk                            |  |   | 21 | 
|         | ITEM 4. |                                                                                                                  | Controls and Procedures                                                                   |  |   | 21 | 
|PART II. |         | OTHER INFORMATION                                                                                                |                                                                                           |  |   |   
|         | ITEM 2. |                                                                                                                  | Changes in Securities and Use of Proceeds                                                 |  |   | 21 | 
|         | ITEM 6. |                                                                                                                  | Exhibits and Reports on Form 8-K                                                          |  |   | 22 | 

1



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##### Table of Contents



Part I.  FINANCIAL
INFORMATION

Item 1.     Financial
Statements  Unaudited

SPANISH BROADCASTING SYSTEM, INC. AND
SUBSIDIARIES






UNAUDITED CONDENSED CONSOLIDATED BALANCE
SHEETS


(In thousands, except share
information)


|                                           |                                                                                                                                                                 |                                            |         |                |         |   |         |          |         | 
|------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | -------------- | ------- | - | ------- | -------- | ------- | 
|                                           |                                                                                                                                                                 | December 29, 2002                          |         | March 31, 2003
|                                           |                                                                                                                                                                 |                                            |         |               
|ASSETS                                    
|Current assets:                            |                                                                                                                                                                 |                                            |         |                |         |   |         |         
|                                           | Cash and cash equivalents                                                                                                                                       |                                            | $       | 71,430         |         |   | $       | 65,078   |        
|                                           | Receivables, net                                                                                                                                                |                                            |         | 25,516         |         |   |         | 20,912   |        
|                                           | Other current assets                                                                                                                                            |                                            |         | 2,252          |         |   |         | 2,115    |        
|                                           |                                                                                                                                                                 |                                            |         |                |         |   |         |         
|                                           |                                                                                                                                                                 | Total current assets                       |         |                | 99,198  |   |         |          | 88,105  | 
|Property and equipment, net                |                                                                                                                                                                 |                                            | 24,482  |                |         |   | 24,974  |         
|Intangible assets                          |                                                                                                                                                                 |                                            | 502,644 |                |         |   | 517,794 |         
|Deferred financing costs, net              |                                                                                                                                                                 |                                            | 8,759   |                |         |   | 8,438   |         
|Other assets                               |                                                                                                                                                                 |                                            | 201     |                |         |   | 1,303   |         
|                                           |                                                                                                                                                                 |                                            |         |                |         |   |         |         
|                                           |                                                                                                                                                                 | Total assets                               |         | $              | 635,284 |   |         | $        | 640,614 | 
|                                           |                                                                                                                                                                 |                                            |         |                |         |   |         |         
|LIABILITIES AND STOCKHOLDERS
    EQUITY  
|Current liabilities:                       |                                                                                                                                                                 |                                            |         |                |         |   |         |         
|Current portion of long-term debt          |                                                                                                                                                                 | $                                          | 208     |                |         | $ | 213     |         
|Accounts payable and accrued expenses      |                                                                                                                                                                 |                                            | 15,691  |                |         |   | 16,091  |         
|Accrued interest                           |                                                                                                                                                                 |                                            | 5,226   |                |         |   | 13,376  |         
|Deferred commitment fee                    |                                                                                                                                                                 |                                            | 581     |                |         |   | 405     |         
|                                           |                                                                                                                                                                 |                                            |         |                |         |   |         |         
|                                           |                                                                                                                                                                 | Total current liabilities                  |         |                | 21,706  |   |         |          | 30,085  | 
|9 5/8% senior subordinated notes, net      |                                                                                                                                                                 |                                            | 324,154 |                |         |   | 324,415 |         
|Other long-term debt, less current portion |                                                                                                                                                                 |                                            | 3,948   |                |         |   | 3,893   |         
|Deferred income taxes                      |                                                                                                                                                                 |                                            | 58,051  |                |         |   | 55,254  |         
|                                           |                                                                                                                                                                 |                                            |         |                |         |   |         |         
|                                          
|                                           |                                                                                                                                                                 | Total liabilities                          |         |                | 407,859 |   |         |          | 413,647 | 
|                                           |                                                                                                                                                                 |                                            |         |                |         |   |         |         
|                                          
|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 March 31, 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 March 31, 2003  |                                            |         | 3              |         |   |         | 3        |        
|                                           | Additional paid-in capital                                                                                                                                      |                                            |         | 444,594        |         |   |         | 444,937  |        
|                                           | Accumulated deficit                                                                                                                                             |                                            |         | (217,175       | )       |   |         | (217,976 | )      
|                                           |                                                                                                                                                                 |                                            |         |                |         |   |         |         
|                                           |                                                                                                                                                                 | Total stockholders equity                 |         |                | 227,425 |   |         |          | 226,967 | 
|                                           |                                                                                                                                                                 |                                            |         |                |         |   |         |         
|                                           |                                                                                                                                                                 | Total liabilities and stockholders equity |         | $              | 635,284 |   |         | $        | 640,614 | 
|                                           |                                                                                                                                                                 |                                            |         |                |         |   |         |         

See accompanying notes to unaudited condensed
consolidated financial statements.

2



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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC. AND
SUBSIDIARIES






UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS


(In thousands, except per share
data)


|                                                                                                                                                |                                                                                                                                 |                                                                                                                                                                    |        |                |          |   |        |        |        |  
|----------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------ | -------------- | -------- | - | ------ | ------ | ------ | -
|                                                                                                                                                |                                                                                                                                 |                                                                                                                                                                   
|                                                                                                                                                |                                                                                                                                 | Three Months Ended                                                                                                                                                
|                                                                                                                                                |                                                                                                                                 |                                                                                                                                                                   
|                                                                                                                                                |                                                                                                                                 | March 31, 2002                                                                                                                                                     |        | March 31, 2003
|                                                                                                                                                |                                                                                                                                 |                                                                                                                                                                    |        |               
|Gross revenue                                                                                                                                   |                                                                                                                                 | $                                                                                                                                                                  | 32,592 |                |          | $ | 33,049 |       
|Less agency commissions                                                                                                                         |                                                                                                                                 |                                                                                                                                                                    | 3,689  |                |          |   | 4,242  |       
|                                                                                                                                                |                                                                                                                                 |                                                                                                                                                                    |        |                |          |   |        |       
|                                                                                                                                                |                                                                                                                                 | Net revenue                                                                                                                                                        |        |                | 28,903   |   |        |        | 28,807 |  
|                                                                                                                                                |                                                                                                                                 |                                                                                                                                                                    |        |                |          |   |        |       
|Operating expenses:                                                                                                                             |                                                                                                                                 |                                                                                                                                                                    |        |                |          |   |        |       
|                                                                                                                                                | Engineering                                                                                                                     |                                                                                                                                                                    |        | 934            |          |   |        | 985    |       
|                                                                                                                                                | Programming                                                                                                                     |                                                                                                                                                                    |        | 4,200          |          |   |        | 5,468  |       
|                                                                                                                                                | Stock-based programming                                                                                                         |                                                                                                                                                                    |        |               |          |   |        | 343    |       
|                                                                                                                                                | Selling                                                                                                                         |                                                                                                                                                                    |        | 9,557          |          |   |        | 8,020  |       
|                                                                                                                                                | General and administrative                                                                                                      |                                                                                                                                                                    |        | 3,214          |          |   |        | 3,626  |       
|                                                                                                                                                | Corporate expenses                                                                                                              |                                                                                                                                                                    |        | 2,862          |          |   |        | 4,489  |       
|                                                                                                                                                | Depreciation and amortization                                                                                                   |                                                                                                                                                                    |        | 732            |          |   |        | 743    |       
|                                                                                                                                                |                                                                                                                                 |                                                                                                                                                                    |        |                |          |   |        |       
|                                                                                                                                                |                                                                                                                                 |                                                                                                                                                                    | 21,499 |                |          |   | 23,674 |       
|                                                                                                                                                |                                                                                                                                 |                                                                                                                                                                    |        |                |          |   |        |       
|                                                                                                                                                |                                                                                                                                 | Operating income from continuing operations                                                                                                                        |        |                | 7,404    |   |        |        | 5,133  |  
|Other (income) expenses:                                                                                                                        |                                                                                                                                 |                                                                                                                                                                    |        |                |          |   |        |       
|                                                                                                                                                | Interest expense, net                                                                                                           |                                                                                                                                                                    |        | 8,511          |          |   |        | 8,627  |       
|                                                                                                                                                | Other, net                                                                                                                      |                                                                                                                                                                    |        |               |          |   |        | (26    | )     
|                                                                                                                                                |                                                                                                                                 |                                                                                                                                                                    |        |                |          |   |        |       
|                                                                                                                                                |                                                                                                                                 | Loss from continuing operations before income
    taxes, discontinued operations, extraordinary item and
    cumulative effect of a change in accounting principle |        |                | (1,107   | ) |        |        | (3,468 | )
|Income tax expense (benefit)                                                                                                                    |                                                                                                                                 |                                                                                                                                                                    | 54,063 |                |          |   | (2,667 | )     
|                                                                                                                                                |                                                                                                                                 |                                                                                                                                                                    |        |                |          |   |        |       
|                                                                                                                                                |                                                                                                                                 | Loss from continuing operations before
    discontinued operations, extraordinary item and cumulative
    effect of a change in accounting principle               |        |                | (55,170  | ) |        |        | (801   | )
|Discontinued operations:                                                                                                                        |                                                                                                                                 |                                                                                                                                                                    |        |                |          |   |        |       
|                                                                                                                                                | Loss from operations of discontinued station
    KTCY-FM, net of tax                                                            |                                                                                                                                                                    |        | (17            | )        |   |        |       |       
|                                                                                                                                                | Cumulative effect of a change in accounting
    principle for intangible assets, net of income tax benefit of
    $30.2 million |                                                                                                                                                                    |        | (45,288        | )        |   |        |       |       
|                                                                                                                                                |                                                                                                                                 |                                                                                                                                                                    |        |                |          |   |        |       
|                                                                                                                                                |                                                                                                                                 | Net loss                                                                                                                                                           |        | $              | (100,475 | ) |        | $      | (801   | )
|                                                                                                                                                |                                                                                                                                 |                                                                                                                                                                    |        |                |          |   |        |       
|Net loss per common share before discontinued
    operations, extraordinary item and cumulative effect of a change
    in accounting principle: |                                                                                                                                 |                                                                                                                                                                    |        |                |          |   |        |       
|                                                                                                                                                | Basic and Diluted                                                                                                               |                                                                                                                                                                    | $      | (0.85          | )        |   | $      | (0.01  | )     
|Net (loss) income per common share for
    discontinued operations                                                                              |                                                                                                                                 |                                                                                                                                                                    |        |                |          |   |        |       
|                                                                                                                                                | Basic and Diluted                                                                                                               |                                                                                                                                                                    | $      |               |          |   | $      |       |       
|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                                                                                                               |                                                                                                                                                                    | $      | (1.55          | )        |   | $      | (0.01  | )     
|                                                                                                                                                |                                                                                                                                 |                                                                                                                                                                    |        |                |          |   |        |       
|Weighted-average common shares outstanding:                                                                                                     |                                                                                                                                 |                                                                                                                                                                    |        |                |          |   |        |       
|                                                                                                                                                | Basic and Diluted                                                                                                               |                                                                                                                                                                    |        | 64,661         |          |   |        | 64,682 |       
|                                                                                                                                                |                                                                                                                                 |                                                                                                                                                                    |        |                |          |   |        |       

See accompanying notes to unaudited condensed
consolidated financial statements.

3



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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC. AND
SUBSIDIARIES






UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS


(In thousands)


|                                                 |                                                                                     |                                                                                 |                                                         |                                              |        |         |        |         |        |         |        | 
|------------------------------------------------ | ----------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | ------------------------------------------------------- | -------------------------------------------- | ------ | ------- | ------ | ------- | ------ | ------- | ------ | 
|                                                 |                                                                                     | Three Months                                                                    |                                                         | Three Months                                
|                                                 |                                                                                     | Ended                                                                           |                                                         | Ended                                       
|                                                 |                                                                                     | March 31,                                                                       |                                                         | March 31,                                   
|                                                 |                                                                                     | 2002                                                                            |                                                         | 2003                                        
|                                                 |                                                                                     |                                                                                 |                                                         |                                             
|Cash flows from operating activities:            |                                                                                     |                                                                                 |                                                         |                                              |        |         |        |        
|                                                 | Net loss                                                                            |                                                                                 | $                                                       | (100,475                                     | )      |         | $      | (801    | )     
|                                                 | Adjustments to reconcile net loss to net cash
    provided by operating activities: |                                                                                 |                                                         |                                              |        |         |        |         |       
|                                                 |                                                                                     | Loss from discontinued operations                                               |                                                         |                                              | 17     |         |        |         |       |        
|                                                 |                                                                                     | Stock-based programming expense                                                 |                                                         |                                              |       |         |        |         | 343    |        
|                                                 |                                                                                     | Cumulative effect of a change in accounting
    principle for intangible assets |                                                         |                                              | 75,480 |         |        |         |       |        
|                                                 |                                                                                     | Depreciation and amortization                                                   |                                                         |                                              | 732    |         |        |         | 743    |        
|                                                 |                                                                                     | Bad debt recoveries                                                             |                                                         |                                              | (351   | )       |        |         | (183   | )      
|                                                 |                                                                                     | Amortization of debt discount                                                   |                                                         |                                              | 231    |         |        |         | 261    |        
|                                                 |                                                                                     | Amortization of deferred financing costs                                        |                                                         |                                              | 320    |         |        |         | 321    |        
|                                                 |                                                                                     | Deferred income taxes                                                           |                                                         |                                              | 23,830 |         |        |         | (2,797 | )      
|                                                 |                                                                                     | Decrease in deferred commitment fee                                             |                                                         |                                              | (175   | )       |        |         | (176   | )      
|                                                 |                                                                                     | Changes in operating assets and liabilities, net
    of acquisitions:           |                                                         |                                              |        |         |        |         |        |        
|                                                 |                                                                                     |                                                                                 | Decrease in receivables                                 |                                              |        | 4,507   |        |         |        | 4,787   |       
|                                                 |                                                                                     |                                                                                 | Decrease in other current assets                        |                                              |        | 99      |        |         |        | 137     |       
|                                                 |                                                                                     |                                                                                 | Decrease (increase) in other assets                     |                                              |        | 11      |        |         |        | (1,102  | )     
|                                                 |                                                                                     |                                                                                 | Increase in accounts payable and accrued expenses       |                                              |        | 802     |        |         |        | 400     |       
|                                                 |                                                                                     |                                                                                 | Increase in accrued interest                            |                                              |        | 8,064   |        |         |        | 8,150   |       
|                                                 |                                                                                     |                                                                                 |                                                         |                                              |        |         |        |        
|                                                 |                                                                                     |                                                                                 |                                                         | Net cash provided by continuing operations   |        |         | 13,092 |         |        |         | 10,083 | 
|                                                 |                                                                                     |                                                                                 |                                                         | Net cash provided by discontinued operations |        |         | 249    |         |        |         |       | 
|                                                 |                                                                                     |                                                                                 |                                                         |                                              |        |         |        |        
|                                                 |                                                                                     |                                                                                 | Net cash provided by operating activities               |                                              |        | 13,341  |        |         |        | 10,083  |       
|                                                 |                                                                                     |                                                                                 |                                                         |                                              |        |         |        |        
|Cash flows from investing activities:            |                                                                                     |                                                                                 |                                                         |                                              |        |         |        |        
|                                                 | Advances on purchase price of radio stations                                        |                                                                                 |                                                         | (15,176                                      | )      |         |        | (15,150 | )     
|                                                 | Additions to property and equipment                                                 |                                                                                 |                                                         | (1,095                                       | )      |         |        | (1,235  | )     
|                                                 | Additions to property and equipment of
    discontinued operations                  |                                                                                 |                                                         | (3                                           | )      |         |        |        |       
|                                                 |                                                                                     |                                                                                 |                                                         |                                              |        |         |        |        
|                                                 |                                                                                     |                                                                                 | Net cash used in investing activities                   |                                              |        | (16,274 | )      |         |        | (16,385 | )     
|                                                 |                                                                                     |                                                                                 |                                                         |                                              |        |         |        |        
|Cash flows from financing activities:            |                                                                                     |                                                                                 |                                                         |                                              |        |         |        |        
|                                                 | Proceeds from Class A stock option exercised                                        |                                                                                 |                                                         | 77                                           |        |         |        |        |       
|                                                 | Repayment of other long-term debt                                                   |                                                                                 |                                                         | (46                                          | )      |         |        | (50     | )     
|                                                 |                                                                                     |                                                                                 |                                                         |                                              |        |         |        |        
|                                                 |                                                                                     |                                                                                 | Net cash provided by (used in) financing
    activities |                                              |        | 31      |        |         |        | (50     | )     
|                                                 |                                                                                     |                                                                                 |                                                         |                                              |        |         |        |        
|Net decrease in cash and cash equivalents        |                                                                                     |                                                                                 | (2,902                                                  | )                                            |        |         | (6,352 | )      
|Cash and cash equivalents at beginning of period |                                                                                     |                                                                                 | 51,640                                                  |                                              |        |         | 71,430 |        
|                                                 |                                                                                     |                                                                                 |                                                         |                                              |        |         |        |        
|Cash and cash equivalents at end of period       |                                                                                     | $                                                                               | 48,738                                                  |                                              |        | $       | 65,078 |        
|                                                 |                                                                                     |                                                                                 |                                                         |                                              |        |         |        |        
|Supplemental cash flow information:              |                                                                                     |                                                                                 |                                                         |                                              |        |         |        |        
|                                                 | Interest paid                                                                       |                                                                                 | $                                                       | 101                                          |        |         | $      | 142     |       
|                                                 |                                                                                     |                                                                                 |                                                         |                                              |        |         |        |        
|                                                 | Income taxes (received) paid                                                        |                                                                                 | $                                                       | (40                                          | )      |         | $      | 187     |       
|                                                 |                                                                                     |                                                                                 |                                                         |                                              |        |         |        |        
|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.

4



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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC. AND
SUBSIDIARIES






NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS


March 31, 2003


1.     Basis of
Presentation

The unaudited condensed consolidated financial
statements include the accounts of Spanish Broadcasting System,
Inc. and its subsidiaries (the Company). All
significant intercompany balances and transactions have been
eliminated in consolidation. The accompanying unaudited
condensed consolidated financial statements as of
December 29, 2002 and March 31, 2003, and for the
three-month periods ended March 31, 2002 and 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 first quarter
ended March 31, 2003.

In the opinion of the Companys management,
the accompanying unaudited condensed consolidated financial
statements contain all adjustments, which are all of a normal
and recurring nature, necessary for a fair presentation of the
results of the interim periods. The results of operations for
the three-month period ended March 31, 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

5



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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC. AND
SUBSIDIARIES


NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

consolidating unaudited financial information for
the Company and its guarantor and non-guarantor subsidiaries is
as follows (in thousands):

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    |        
|                                            |                                            |                         |          |               |  |              |          |        |  |   |         |         |   |   |          |        
|                                            | Total current assets                       |                         |          | 94,965        |  |              |          | 4,233  |  |   |         |        |   |   |          | 99,198  | 
|Property and equipment, net                 |                                            |                         | 17,005   |               |  |              | 7,477    |        |  |   |        |         |   |   | 24,482   |        
|Intangible assets                           |                                            |                         | 66,189   |               |  |              | 436,455  |        |  |   |        |         |   |   | 502,644  |        
|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 | 
|                                            |                                            |                         |          |               |  |              |          |        |  |   |         |         |   |   |          |        

6



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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC. AND
SUBSIDIARIES


NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

CONDENSED CONSOLIDATING BALANCE
SHEET

|                                            |                                            |                      |          |               |  |              |          |        |  |   |         |         |   |   |          |         | 
|------------------------------------------- | ------------------------------------------ | -------------------- | -------- | ------------- |  | ------------ | -------- | ------ |  | - | ------- | ------- | - | - | -------- | ------- | 
|                                            |                                            |                     
|                                            |                                            | As of March 31, 2003
|                                            |                                            |                     
|                                            |                                            | Parent and           |          |              
|                                            |                                            | Guarantor            |          | Non-Guarantor |  |             
|                                            |                                            | Subsidiaries         |          | Subsidiaries  |  | Eliminations |          | Total 
|                                            |                                            |                      |          |               |  |              |          |       
|Cash and cash equivalents                   |                                            | $                    | 62,387   |               |  | $            | 2,691    |        |  | $ |        |         |   | $ | 65,078   |        
|Receivables, net                            |                                            |                      | 19,683   |               |  |              | 1,229    |        |  |   |        |         |   |   | 20,912   |        
|Other current assets                        |                                            |                      | 1,785    |               |  |              | 330      |        |  |   |        |         |   |   | 2,115    |        
|                                            |                                            |                      |          |               |  |              |          |        |  |   |         |         |   |   |          |        
|                                            | Total current assets                       |                      |          | 83,855        |  |              |          | 4,250  |  |   |         |        |   |   |          | 88,105  | 
|Property and equipment, net                 |                                            |                      | 17,617   |               |  |              | 7,357    |        |  |   |        |         |   |   | 24,974   |        
|Intangible assets                           |                                            |                      | 81,795   |               |  |              | 435,999  |        |  |   |        |         |   |   | 517,794  |        
|Deferred financing costs, net               |                                            |                      | 8,438    |               |  |              |         |        |  |   |        |         |   |   | 8,438    |        
|Investment in subsidiaries and intercompany |                                            |                      | 427,961  |               |  |              | (402,321 | )      |  |   | (25,640 | )       |   |   |         |        
|Other assets                                |                                            |                      | 1,302    |               |  |              | 1        |        |  |   |        |         |   |   | 1,303    |        
|                                            |                                            |                      |          |               |  |              |          |        |  |   |         |         |   |   |          |        
|                                            | Total assets                               |                      | $        | 620,968       |  |              | $        | 45,286 |  |   | $       | (25,640 | ) |   | $        | 640,614 | 
|                                            |                                            |                      |          |               |  |              |          |        |  |   |         |         |   |   |          |        
|Current portion of long-term debt           |                                            | $                    | 63       |               |  | $            | 150      |        |  | $ |        |         |   | $ | 213      |        
|Accounts payable and accrued expenses       |                                            |                      | 12,478   |               |  |              | 3,613    |        |  |   |        |         |   |   | 16,091   |        
|Accrued interest                            |                                            |                      | 13,376   |               |  |              |         |        |  |   |        |         |   |   | 13,376   |        
|Deferred commitment fee                     |                                            |                      | 405      |               |  |              |         |        |  |   |        |         |   |   | 405      |        
|                                            |                                            |                      |          |               |  |              |          |        |  |   |         |         |   |   |          |        
|                                            | Total current liabilities                  |                      |          | 26,322        |  |              |          | 3,763  |  |   |         |        |   |   |          | 30,085  | 
|Long-term debt                              |                                            |                      | 325,102  |               |  |              | 3,206    |        |  |   |        |         |   |   | 328,308  |        
|Deferred income taxes                       |                                            |                      | 42,577   |               |  |              | 12,677   |        |  |   |        |         |   |   | 55,254   |        
|                                            |                                            |                      |          |               |  |              |          |        |  |   |         |         |   |   |          |        
|                                            | Total liabilities                          |                      |          | 394,001       |  |              |          | 19,646 |  |   |         |        |   |   |          | 413,647 | 
|                                            |                                            |                      |          |               |  |              |          |        |  |   |         |         |   |   |          |        
|Common stock                                |                                            |                      | 6        |               |  |              | 1        |        |  |   | (1      | )       |   |   | 6        |        
|Additional paid-in capital                  |                                            |                      | 444,937  |               |  |              | 94,691   |        |  |   | (94,691 | )       |   |   | 444,937  |        
|Accumulated deficit                         |                                            |                      | (217,976 | )             |  |              | (69,052  | )      |  |   | 69,052  |         |   |   | (217,976 | )      
|                                            |                                            |                      |          |               |  |              |          |        |  |   |         |         |   |   |          |        
|                                            | Total stockholders equity                 |                      |          | 226,967       |  |              |          | 25,640 |  |   |         | (25,640 | ) |   |          | 226,967 | 
|                                            |                                            |                      |          |               |  |              |          |        |  |   |         |         |   |   |          |        
|                                            | Total liabilities and stockholders equity |                      | $        | 620,968       |  |              | $        | 45,286 |  |   | $       | (25,640 | ) |   | $        | 640,614 | 
|                                            |                                            |                      |          |               |  |              |          |        |  |   |         |         |   |   |          |        

7



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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC. AND
SUBSIDIARIES


NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

CONDENSED CONSOLIDATING STATEMENT OF
OPERATIONS

|                                                                      |                  |                                           |        |               |   |              |         |         |   |   |         |        |  |   |         |          |  
|--------------------------------------------------------------------- | ---------------- | ----------------------------------------- | ------ | ------------- | - | ------------ | ------- | ------- | - | - | ------- | ------ |  | - | ------- | -------- | -
|                                                                      |                  |                                          
|                                                                      |                  | For the Three Months Ended March 31, 2002
|                                                                      |                  |                                          
|                                                                      |                  | Parent and                                |        |              
|                                                                      |                  | Guarantor                                 |        | Non-Guarantor |   |             
|                                                                      |                  | Subsidiaries                              |        | Subsidiaries  |   | Eliminations |         | Total  
|                                                                      |                  |                                           |        |               |   |              |         |        
|Net revenue                                                           |                  | $                                         | 25,955 |               |   | $            | 2,948   |         |   | $ |        |        |  | $ | 28,903  |         
|Station operating expenses                                            |                  |                                           | 15,855 |               |   |              | 2,050   |         |   |   |        |        |  |   | 17,905  |         
|Corporate expenses                                                    |                  |                                           | 2,862  |               |   |              | 120     |         |   |   | (120    | )      |  |   | 2,862   |         
|Depreciation and amortization                                         |                  |                                           | 542    |               |   |              | 190     |         |   |   |        |        |  |   | 732     |         
|                                                                      |                  |                                           |        |               |   |              |         |         |   |   |         |        |  |   |         |         
|                                                                      | Operating income |                                           |        | 6,696         |   |              |         | 588     |   |   |         | 120    |  |   |         | 7,404    |  
|Interest expense, net                                                 |                  |                                           | 7,202  |               |   |              | 1,309   |         |   |   |        |        |  |   | 8,511   |         
|Other (income) expense, net                                           |                  |                                           | (119   | )             |   |              | (1      | )       |   |   | 120     |        |  |   |        |         
|Equity in net loss of subsidiaries                                    |                  |                                           | 48,735 |               |   |              |        |         |   |   | (48,735 | )      |  |   |        |         
|Income tax expense                                                    |                  |                                           | 51,336 |               |   |              | 2,727   |         |   |   |        |        |  |   | 54,063  |         
|Discontinued operations, net of tax                                   |                  |                                           | (17    | )             |   |              |        |         |   |   |        |        |  |   | (17     | )       
|Cumulative effect of a change in accounting
    principle, net of tax |                  |                                           |       |               |   |              | (45,288 | )       |   |   |        |        |  |   | (45,288 | )       
|                                                                      |                  |                                           |        |               |   |              |         |         |   |   |         |        |  |   |         |         
|                                                                      | Net loss         |                                           | $      | (100,475      | ) |              | $       | (48,735 | ) |   | $       | 48,735 |  |   | $       | (100,475 | )
|                                                                      |                  |                                           |        |               |   |              |         |         |   |   |         |        |  |   |         |         

CONDENSED CONSOLIDATING STATEMENT OF
OPERATIONS

|                                   |                  |                                           |        |               |   |              |       |        |   |   |        |       |  |   |        |       |  
|---------------------------------- | ---------------- | ----------------------------------------- | ------ | ------------- | - | ------------ | ----- | ------ | - | - | ------ | ----- |  | - | ------ | ----- | -
|                                   |                  |                                          
|                                   |                  | For the Three Months Ended March 31, 2003
|                                   |                  |                                          
|                                   |                  | Parent and                                |        |              
|                                   |                  | Guarantor                                 |        | Non-Guarantor |   |             
|                                   |                  | Subsidiaries                              |        | Subsidiaries  |   | Eliminations |       | Total 
|                                   |                  |                                           |        |               |   |              |       |       
|Net revenue                        |                  | $                                         | 26,374 |               |   | $            | 2,433 |        |   | $ |       |       |  | $ | 28,807 |      
|Station operating expenses         |                  |                                           | 16,467 |               |   |              | 1,975 |        |   |   |       |       |  |   | 18,442 |      
|Corporate expenses                 |                  |                                           | 4,489  |               |   |              | 120   |        |   |   | (120   | )     |  |   | 4,489  |      
|Depreciation and amortization      |                  |                                           | 618    |               |   |              | 125   |        |   |   |       |       |  |   | 743    |      
|                                   |                  |                                           |        |               |   |              |       |        |   |   |        |       |  |   |        |      
|                                   | Operating income |                                           |        | 4,800         |   |              |       | 213    |   |   |        | 120   |  |   |        | 5,133 |  
|Interest expense, net              |                  |                                           | 7,287  |               |   |              | 1,340 |        |   |   |       |       |  |   | 8,627  |      
|Other (income) expense, net        |                  |                                           | (146   | )             |   |              |      |        |   |   | 120    |       |  |   | (26    | )    
|Equity in net loss of subsidiaries |                  |                                           | 1,174  |               |   |              |      |        |   |   | (1,174 | )     |  |   |       |      
|Income tax benefit                 |                  |                                           | (2,714 | )             |   |              | 47    |        |   |   |       |       |  |   | (2,667 | )    
|                                   |                  |                                           |        |               |   |              |       |        |   |   |        |       |  |   |        |      
|                                   | Net loss         |                                           | $      | (801          | ) |              | $     | (1,174 | ) |   | $      | 1,174 |  |   | $      | (801  | )
|                                   |                  |                                           |        |               |   |              |       |        |   |   |        |       |  |   |        |      

8



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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC. AND
SUBSIDIARIES


NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

|                                     |  |                                                 |         |               |  |              |     |       |  |   |   |  |  |   |         |  
|------------------------------------ |  | ----------------------------------------------- | ------- | ------------- |  | ------------ | --- | ----- |  | - | - |  |  | - | ------- | -
|                                     |  |                                                
|                                     |  | Condensed Consolidating Statement of Cash Flows
|                                     |  | For the Three Months Ended March 31, 2002      
|                                     |  |                                                
|                                     |  | Parent and                                      |         |              
|                                     |  | Guarantor                                       |         | Non-Guarantor |  |             
|                                     |  | Subsidiaries                                    |         | Subsidiaries  |  | Eliminations |     | Total
|                                     |  |                                                 |         |               |  |              |     |      
|Cash flows from operating activities |  | $                                               | 13,208  |               |  | $            | 133 |       |  | $ |  |  |  | $ | 13,341  |  
|                                     |  |                                                 |         |               |  |              |     |       |  |   |   |  |  |   |         |  
|Cash flows from investing activities |  | $                                               | (16,232 | )             |  | $            | (42 | )     |  | $ |  |  |  | $ | (16,274 | )
|                                     |  |                                                 |         |               |  |              |     |       |  |   |   |  |  |   |         |  
|Cash flows from financing activities |  | $                                               | 63      |               |  | $            | (32 | )     |  | $ |  |  |  | $ | 31      |  
|                                     |  |                                                 |         |               |  |              |     |       |  |   |   |  |  |   |         |  

|                                     |  |                                                 |         |               |  |              |     |       |  |   |   |  |  |   |         |  
|------------------------------------ |  | ----------------------------------------------- | ------- | ------------- |  | ------------ | --- | ----- |  | - | - |  |  | - | ------- | -
|                                     |  |                                                
|                                     |  | Condensed Consolidating Statement of Cash Flows
|                                     |  | For the Three Months Ended March 31, 2003      
|                                     |  |                                                
|                                     |  | Parent and                                      |         |              
|                                     |  | Guarantor                                       |         | Non-Guarantor |  |             
|                                     |  | Subsidiaries                                    |         | Subsidiaries  |  | Eliminations |     | Total
|                                     |  |                                                 |         |               |  |              |     |      
|Cash flows from operating activities |  | $                                               | 9,529   |               |  | $            | 554 |       |  | $ |  |  |  | $ | 10,083  |  
|                                     |  |                                                 |         |               |  |              |     |       |  |   |   |  |  |   |         |  
|Cash flows from investing activities |  | $                                               | (16,380 | )             |  | $            | (5  | )     |  | $ |  |  |  | $ | (16,385 | )
|                                     |  |                                                 |         |               |  |              |     |       |  |   |   |  |  |   |         |  
|Cash flows from financing activities |  | $                                               | (15     | )             |  | $            | (35 | )     |  | $ |  |  |  | $ | (50     | )
|                                     |  |                                                 |         |               |  |              |     |       |  |   |   |  |  |   |         |  

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

9



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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC. AND
SUBSIDIARIES


NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

expanded disclosure is included in the
March 31, 2003 condensed consolidated financial statements
and notes thereto.

In January 2003, the FASB issued Interpretation
No. 46, Consolidation of Variable Interest Entities:
an Interpretation of ARB No. 51
(FIN 46). FIN 46 addresses consolidation
by business enterprises of entities in which equity investors do
not have the characteristics of a controlling financial interest
or do not have sufficient equity at risk for the entity to
finance its activities without additional subordinated financial
support from other parties. Variable interest entities are
required to be consolidated by their primary beneficiaries if
they do not effectively disperse risks among parties involved.
The primary beneficiary of a variable interest entity is the
party that absorbs a majority of the entitys expected
losses or receives a majority of its expected residual returns.
The consolidation requirements of FIN 46 apply immediately to
variable interest entities created after January 31, 2003
and apply to existing entities in the first fiscal year or
interim period beginning after June 15, 2003. Certain new
disclosure requirements apply to all financial statements issued
after January 31, 2003. The Company adopted FIN 46 on
February 1, 2003. The adoption of FIN 46 did not have
a material effect 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 three-month periods ended
March 31, 2002 and 2003,

10



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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC. AND
SUBSIDIARIES


NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

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.

|                                                                                    |  |                           |          |           |  |  |       |  
|----------------------------------------------------------------------------------- |  | ------------------------- | -------- | --------- |  |  | ----- | -
|                                                                                    |  |                          
|                                                                                    |  | Three Months Ended       
|                                                                                    |  |                          
|                                                                                    |  | March 31,                 |          | March 31,
|                                                                                    |  | 2002                      |          | 2003     
|                                                                                    |  |                           |          |          
|                                                                                    |  |                          
|                                                                                    |  | (In thousands, except per
|                                                                                    |  | share data)              
|                                                                                    |  |                          
|                                                                                    |  | (Unaudited)              
|Reported net loss:                                                                  |  | $                         | (100,475 | )         |  |  | (801  | )
|Add back:cumulative
    effect of accounting principle, net of tax(1)               |  |                           | 45,288   |           |  |  |      |  
|Add back:income tax
    valuation allowance(2)                                      |  |                           | 55,358   |           |  |  |      |  
|                                                                                    |  |                           |          |           |  |  |       |  
|Adjusted net income (loss)                                                          |  | $                         | 171      |           |  |  | (801  | )
|                                                                                    |  |                           |          |           |  |  |       |  
|Basic and diluted loss per share:                                                   |  |                           |          |           |  |  |       |  
|Reported net loss per share:                                                        |  | $                         | (1.55    | )         |  |  |      |  
|Cumulative effect per share of a change in
    accounting principle, net of tax(1): |  |                           | 0.70     |           |  |  |      |  
|Income tax valuation allowance per share(2):                                        |  |                           | 0.85     |           |  |  |      |  
|                                                                                    |  |                           |          |           |  |  |       |  
|Adjusted net loss per share:                                                        |  | $                         |         |           |  |  | (0.01 | )
|                                                                                    |  |                           |          |           |  |  |       |  



---



|    |                                                                                                                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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.     Acquisitions

On December 31, 2002, we entered into an
asset purchase agreement with Big City Radio, Inc. and Big City
Radio-Chi, LLC to acquire the assets of radio stations WDEK-FM,
WKIE-FM and WKIF-FM, serving the Chicago, Illinois market, at a
purchase price of $22.0 million. On December 31, 2002,
we also entered into a time brokerage agreement with Big City
Radio-Chi, LLC pursuant to which we broadcast our programming
over radio stations WDEK-FM, WKIE-FM and WKIF-FM from
January 6, 2003 to April 4, 2003. On April 4,
2003, we completed the purchase of these stations. This
acquisition was financed from cash on hand.

On November 2, 2000, we entered into an
asset purchase agreement (the Asset Purchase
Agreement) with the International Church of the FourSquare
Gospel (ICFG) to acquire the assets of radio station
KXOL-FM (formerly KFSG-FM), serving Los Angeles, California, at
a purchase price of $250.0 million and made a non-refundable
deposit of $5.0 million to be credited towards the purchase
price at closing. The Asset Purchase Agreement contains
customary representations and warranties, and the closing of our
acquisition is subject to the satisfaction of certain customary
conditions, including receipt of regulatory approval from the
Federal Communications Commission and expiration of the waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended. On March 13, 2001, we entered into an
Addendum to the Asset Purchase Agreement and two Time Brokerage
Agreements with ICFG pursuant to which we are permitted to
broadcast our programming over radio station KXOL-FM (the
TBA) and ICFG was permitted to broadcast its
programming over radio stations KFSG-FM (currently KZAB-FM) and
KFSB-

11



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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC. AND
SUBSIDIARIES


NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

FM (currently KZBA-FM) (the 93.5
TBA). In connection with the Addendum to the Asset
Purchase Agreement and the TBA, we made an additional
non-refundable deposit of $20.0 million, which will be credited
towards the purchase price at closing. On April 30, 2001,
we commenced broadcasting our programming under the TBA and ICFG
commenced broadcasting its programming under the 93.5 TBA.

On February 8, 2002, we entered into an
additional amendment to the Asset Purchase Agreement and an
amendment to the TBA and the 93.5 TBA (collectively, the
Second Amendment). The Second Amendment extends the
deadline for closing under the amended Asset Purchase Agreement
(the KXOL Closing) to December 31, 2003. The
KXOL Closing is subject to acceleration if we sell all of five
specified stations (including KTCY-FM which was sold on
August 23, 2002), during the term of the TBA. Pursuant to
the Second Amendment, we made additional non-refundable deposits
of $15.0 million, $5.0 million and $15.0 million on
March 12, 2002, September 27, 2002 and March 12,
2003, respectively. All payments are non-refundable (except in
the case of breach by ICFG) and will be credited towards the
purchase price at the KXOL Closing. In accordance with the
Second Amendment, the term of the TBA will continue until the
earlier to occur of (i) the KXOL Closing or (ii) the
termination of the amended Asset Purchase Agreement.

Pursuant to the Second Amendment, on
February 8, 2002, we granted ICFG a warrant exercisable for
an aggregate of 2,000,000 shares of our Class A common
stock at an exercise price of $10.50 per share. This warrant
will be 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. We 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.

Under the Second Amendment, we must also grant to
ICFG additional warrants if ICFG ceases to broadcast its
programming under the 93.5 TBA. On February 28, 2003, ICFG
ceased to broadcast its programming under the 93.5 TBA.
Therefore, beginning on March 31, 2003, and on the last day
of each calendar month thereafter, we are required to issue to
ICFG warrants exercisable for 100,000 shares of our Class A
common stock at an exercise price equal to the closing price of
our shares on the last trading day of such respective month,
until the earlier to occur of (i) the KXOL Closing or
(ii) the termination of the amended Asset Purchase
Agreement. These warrants will also be exercisable for a period
of thirty-six months after the date of issuance after which they
will expire if not exercised. The fair market value of these
warrants, as calculated under the Black-Scholes option-pricing
model, will be recorded as a programming expense. On
March 31, 2003 and April 30, 2003, we granted ICFG a
warrant exercisable for an aggregate of 100,000 shares of our
Class A common stock at an exercise price of $6.14 and
$7.67 per share, respectively. We assigned the warrants fair
market values of approximately $0.3 million and
$0.4 million, respectively, based on the Black-Scholes
option pricing model in accordance with SFAS No. 123
Accounting for Stock-Based Compensation. The fair
market values of these warrants were recorded as a stock-based
programming expense on the respective dates of grant.

We intend to fund the acquisition of radio
station KXOL-FM from a combination of cash on hand, internally
generated cash flow, potential equity and debt financing and/or
asset sales. Although we intend to complete this transaction,
there can be no assurance that the acquisition of radio station
KXOL-FM will be completed.

6.     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

12



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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC. AND
SUBSIDIARIES


NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

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:

|                        |  |                |         |                |  |  |         | 
|----------------------- |  | -------------- | ------- | -------------- |  |  | ------- | 
|                        |  | March 31, 2002 |         | March 31, 2003
|                        |  |                |         |               
|Expected life           |  |                | 7 years |                |  |  | 7 years | 
|Dividends               |  |                | None    |                |  |  | None    | 
|Risk-free interest rate |  |                | 4.93%   |                |  |  | 3.35%   | 
|Expected volatility     |  |                | 88%     |                |  |  | 86%     | 

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 Ended |          | Three-Months Ended
|                                                                                                                                    |  | March 31, 2002     |          | March 31, 2003    
|                                                                                                                                    |  |                    |          |                   
|Net loss applicable to common stockholders:                                                                                         |  |                    |          |                    |  |   |        |  
|As reported                                                                                                                         |  | $                  | (100,475 | )                  |  | $ | (801   | )
|Deduct: total stock-based employee compensation
    expense determined under fair value based method for all awards,
    net of tax |  |                    | (1,332   | )                  |  | $ | (1,020 | )
|                                                                                                                                    |  |                    |          |                    |  |   |        |  
|Pro forma net loss                                                                                                                  |  | $                  | (101,807 | )                  |  | $ | (1,821 | )
|                                                                                                                                    |  |                    |          |                    |  |   |        |  
|Net loss per common share:                                                                                                          |  |                    |          |                    |  |   |        |  
|As reported                                                                                                                         |  | $                  | (1.55    | )                  |  | $ | (0.01  | )
|                                                                                                                                    |  |                    |          |                    |  |   |        |  
|Pro forma                                                                                                                           |  | $                  | (1.57    | )                  |  | $ | (0.03  | )
|                                                                                                                                    |  |                    |          |                    |  |   |        |  

13



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##### Table of Contents








|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|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 EBITDA, are compensation
expenses, programming expenses, 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 consists of reported
Generally Accepted Accounting Principles (GAAP) net revenue less
station operating expenses. Station operating income replaces
broadcast cash flow (BCF) as the metric used by management to
assess the performance of its 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. Earnings Before Interest, Taxes,
Depreciation and Amortization (EBITDA) consists of GAAP
operating income from continuing operations excluding
depreciation and amortization.

Station operating income and EBITDA are not
measures of performance or liquidity calculated in accordance
with GAAP. However, the Company believes that these measures are
useful in evaluating its performance because they reflect a
measure of performance for its radio stations before considering
costs and expenses related to its specific corporate and capital
structure. These measures are widely used in the broadcast
industry to evaluate a radio companys operating
performance and are used by management for internal budgeting
purposes and to evaluate the performance of the Companys
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 the Companys operating performance
or liquidity that is calculated in accordance with GAAP. In
addition, because station operating income and EBITDA are not
calculated in accordance with GAAP, they are not necessarily
comparable to similarly titled measures employed by other
companies. Included below is a table that reconciles station
operating income and EBITDA to GAAP reported unaudited operating
income from continuing operations.

|                                                                                                         |                                                             |                 |        |        |  |   |        |        | 
|-------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------- | --------------- | ------ | ------ |  | - | ------ | ------ | 
|                                                                                                         |                                                             |                
|                                                                                                         |                                                             | Three Months   
|                                                                                                         |                                                             | Ended March 31,
|                                                                                                         |                                                             |                
|                                                                                                         |                                                             | 2002            |        | 2003  
|                                                                                                         |                                                             |                 |        |       
|                                                                                                         |                                                             |                
|                                                                                                         |                                                             | (In thousands) 
|Reported net revenue                                                                                     |                                                             | $               | 28,903 |        |  | $ | 28,807 |       
|Less: Reported station operating expenses
    (Engineering, Programming, Selling and G & A
    expenses) |                                                             |                 | 17,906 |        |  |   | 18,442 |       
|                                                                                                         |                                                             |                 |        |        |  |   |        |       
|                                                                                                         | Station operating income (formerly broadcast cash
    flow) |                 |        | 10,997 |  |   |        | 10,365 | 
|Less: Reported corporate expenses                                                                        |                                                             |                 | 2,861  |        |  |   | 4,489  |       
|                                                                                                         |                                                             |                 |        |        |  |   |        |       
|                                                                                                         | EBITDA                                                      |                 |        | 8,136  |  |   |        | 5,876  | 
|Less: Reported deprecation and amortization                                                              |                                                             |                 | 732    |        |  |   | 743    |       
|                                                                                                         |                                                             |                 |        |        |  |   |        |       
|                                                                                                         | Reported operating income from continuing
    operations    |                 | $      | 7,404  |  |   | $      | 5,133  | 
|                                                                                                         |                                                             |                 |        |        |  |   |        |       

AOL Barter Agreement.In fiscal year 2000, the Company
entered into an advertising barter agreement 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

14



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##### Table of Contents



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 expense and station operating income,
the Company will 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 March 31, 2003
    Compared to the Three Months Ended March 31,
    2002.

Net Revenue.Net
revenue was $28.8 million for the three months ended
March 31, 2003 compared to $28.9 million for the three
months ended March 31, 2002, a decrease of
$0.1 million. The net revenue decrease was generated by the
decrease in barter revenue primarily related to the AOL barter
agreement that concluded in August 2002. To provide better
clarity on our net revenue, if the non-cash AOL barter revenue
of $2.5 million is excluded from the prior year quarter
ended March 31, 2002 results, pro forma net revenue
actually increased by $2.4 million or 9.1%. The increase
was due to the improvement in local and national sales in our
Los Angeles, Miami and New York markets.

Station Operating Expenses.Station operating expenses were
$18.4 million for the three months ended March 31,
2003 compared to $17.9 million for the three months ended
March 31, 2002, an increase of $0.5 million or 2.8%.
The station operating expenses increase was offset by a decrease
in barter expense primarily due to the conclusion of the AOL
barter agreement in August 2002. To provide better clarity on
our station operating expenses, if the non-cash AOL barter
expense of $2.5 million is excluded from the prior year
quarter ended March 31, 2002 results, pro forma station
operating expenses actually increased by $3.0 million or
19.5%. The increase was primarily attributed to expenses related
to the start-up stations in Chicago and Los Angeles which began
operating on January 6, 2003 and March 1, 2003,
respectively. These start-up stations had station operating
expenses of $1.0 million. In addition, we granted ICFG a
warrant exercisable for an aggregate of 100,000 shares of our
Class A common stock with a fair market value of
approximately $0.3 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 a non-cash
programming expense.

Station Operating Income.Station operating income was
$10.4 million for the three months ended March 31,
2003 compared to $11.0 million for the three months ended
March 31, 2002, a decrease of $0.6 million or 5.5%.
Our station operating income margin decreased to 36% for the
three months ended March 31, 2003 compared to 38% for the
three months ended March 31, 2002. Station operating income
and margin decreased as a result of the increase in station
operating expenses due to the start-up stations and non-cash
programming expense related to the warrant issuance.

Corporate Expenses.Corporate expenses were
$4.5 million for the three months ended March 31, 2003
compared to $2.9 million for the three months ended
March 31, 2002, an increase of $1.6 million or 55.2%.
The increase in corporate expenses resulted mainly from an
increase in legal and professional fees, as well as insurance,
including directors and officers insurance.

EBITDA.EBITDA was
$5.9 million for the three months ended March 31, 2003
compared to $8.1 million for the three months ended
March 31, 2002, a decrease of $2.2 million or 27.2%.
The decrease in EBITDA was attributed to the decrease in station
operating income and the increase in corporate expenses.

Depreciation and Amortization.Depreciation and amortization expense
was $0.7 million for the three months ended March 31,
2003 and 2002.

Operating Income from Continuing Operations.Operating income from continuing
operations was $5.1 million for the three months ended
March 31, 2003 compared to $7.4 million for the three
months ended March 31, 2002, a decrease of
$2.3 million or 31.1%. The decrease in operating income
from continuing operations was caused by a decrease in EBITDA.

Interest Expense, Net.Interest expense, net, was
$8.6 million for the three months ended March 31, 2003
compared to $8.5 million for the three months ended
March 31, 2002, an increase of $0.1 million or

15



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##### Table of Contents



1.2%. The increase in interest expense, net, was
primarily due to one extra day of interest compared to the prior
period.


Income Taxes.Income
tax benefit was $(2.7) million for the three months ended
March 31, 2003 compared to an income tax expense of
$54.1 million for the three months ended March 31,
2002. Income tax (benefit) expense of $(2.7) and
$54.1 million were based on our high effective book tax
rates for the 2003 and 2002 years, respectively. Our
effective 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 tax rate reflects a full valuation allowance on our
deferred tax assets.

Discontinued Operations, Net of Taxes.Income on discontinued operations, net
of taxes, was minimal for the three months ended March 31,
2002. The Company determined that the sale of its KTCY-FM
station serving Dallas, Texas met the criteria in accordance
with SFAS No. 144 to classify KTCY-FMs operations as
discontinued operations. Thus, KTCY-FMs results from
operations for the three months ended March 31, 2002 have
been classified as discontinued operations.

Cumulative Effect of a Change in Accounting
Principle, Net of Taxes.For the three
months ended March 31, 2003, the Company had no cumulative
effect of a change in accounting principle. For the three months
ended March 31, 2002, the Company had a cumulative effect
of a change in accounting principle, net of taxes, non-cash
transitional charge of $45.3 million. 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 $0.8 million for the three months ended March 31,
2003 compared to a net loss of $100.5 million for the three
months ended March 31, 2002. The net loss for the three months
ended March 31, 2003 was due to the decrease in EBITDA,
offset by the income tax benefit based on our high effective
book tax rate for the 2003 fiscal year. The net loss for the
three months ended March 31, 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.

The following table presents adjusted financial
results for the three-month periods ended March 31, 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.

|                                                                                    |  |                           |          |           |  |  |       |  
|----------------------------------------------------------------------------------- |  | ------------------------- | -------- | --------- |  |  | ----- | -
|                                                                                    |  |                          
|                                                                                    |  | Three Months Ended       
|                                                                                    |  |                          
|                                                                                    |  | March 31,                 |          | March 31,
|                                                                                    |  | 2002                      |          | 2003     
|                                                                                    |  |                           |          |          
|                                                                                    |  |                          
|                                                                                    |  | (In thousands, except per
|                                                                                    |  | share data)              
|                                                                                    |  |                          
|                                                                                    |  | (Unaudited)              
|Reported net loss:                                                                  |  | $                         | (100,475 | )         |  |  | (801  | )
|Add back:cumulative
    effect of accounting principle, net of tax(1)               |  |                           | 45,288   |           |  |  |      |  
|Add back:income tax
    valuation allowance(2)                                      |  |                           | 55,358   |           |  |  |      |  
|                                                                                    |  |                           |          |           |  |  |       |  
|Adjusted net income (loss)                                                          |  | $                         | 171      |           |  |  | (801  | )
|                                                                                    |  |                           |          |           |  |  |       |  
|Basic and diluted loss per share:                                                   |  |                           |          |           |  |  |       |  
|Reported net loss per share:                                                        |  | $                         | (1.55    | )         |  |  |      |  
|Cumulative effect per share of a change in
    accounting principle, net of tax(1): |  |                           | 0.70     |           |  |  |      |  
|Income tax valuation allowance per share(2):                                        |  |                           | 0.85     |           |  |  |      |  
|                                                                                    |  |                           |          |           |  |  |       |  
|Adjusted net loss per share:                                                        |  | $                         |         |           |  |  | (0.01 | )
|                                                                                    |  |                           |          |           |  |  |       |  

16



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---



|    |                                                                                                                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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.                          

Liquidity and Capital Resources

Our primary source of liquidity is cash on hand
and cash provided by operations. Our ability to raise funds by
increasing our indebtedness is limited by the terms of the
indentures governing our senior subordinated notes.
Additionally, the indentures place restrictions 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 $10.1 million for the three months ended
March 31, 2003 compared to net cash flows provided by
operating activities of $13.3 million for the three months
ended March 31, 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
$16.4 million for the three months ended March 31,
2003 compared to net cash flows used in investing activities of
$16.3 million for the three months ended March 31,
2002. Changes in our net cash flows from investing activities
were primarily a result of an increase in capital expenditures
for the three months ended March 31, 2003.

Net cash flows used in financing activities were
minimal for the three months ended March 31, 2003 and 2002.

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 capital
expenditures, excluding the acquisitions 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; and                                                                                      
|
| |  | we will not incur any material unforeseen
    liabilities, including environmental liabilities.                                                                

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

On December 31, 2002, we entered into an
asset purchase agreement with Big City Radio, Inc. and Big City
Radio-Chi, LLC to acquire the assets of radio stations WDEK-FM,
WKIE-FM and WKIF-FM, serving the Chicago, Illinois market, at a
purchase price of $22.0 million. On December 31, 2002, we
also entered into a time brokerage agreement with Big City
Radio-Chi, LLC pursuant to which we broadcast our programming
over radio stations WDEK-FM, WKIE-FM and WKIF-FM from
January 6, 2003 to April 4, 2003. On April 4,
2003, we completed the purchase of these stations. This
acquisition was financed from cash on hand.

On November 2, 2000, we entered into an
asset purchase agreement (the Asset Purchase
Agreement) with the International Church of the FourSquare
Gospel (ICFG) to acquire the assets of radio station
KXOL-FM (formerly KFSG-FM), serving Los Angeles, California, at
a purchase price of $250.0 million and made a non-refundable
deposit of $5.0 million to be credited towards the purchase
price at closing. The Asset Purchase Agreement contains
customary representations and warranties, and the closing of our
acquisition is

17



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##### Table of Contents



subject to the satisfaction of certain customary
conditions, including receipt of regulatory approval from the
Federal Communications Commission and expiration of the waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended. On March 13, 2001, we entered into an
Addendum to the Asset Purchase Agreement and two Time Brokerage
Agreements with ICFG pursuant to which we are permitted to
broadcast our programming over radio station KXOL-FM (the
TBA) and ICFG was permitted to broadcast its
programming over radio stations KFSG-FM (currently KZAB-FM) and
KFSB-FM (currently KZBA-FM) (the 93.5 TBA). In
connection with the Addendum to the Asset Purchase Agreement and
the TBA, we made an additional non-refundable deposit of $20.0
million, which will be credited towards the purchase price at
closing. On April 30, 2001, we commenced broadcasting our
programming under the TBA and ICFG commenced broadcasting its
programming under the 93.5 TBA.


On February 8, 2002, we entered into an
additional amendment to the Asset Purchase Agreement and an
amendment to the TBA and the 93.5 TBA (collectively, the
Second Amendment). The Second Amendment extends the
deadline for closing under the amended Asset Purchase Agreement
(the KXOL Closing) to December 31, 2003. The
KXOL Closing is subject to acceleration if we sell all of five
specified stations (including KTCY-FM which was sold on
August 23, 2002), during the term of the TBA. Pursuant to
the Second Amendment, we made additional non-refundable deposits
of $15.0 million, $5.0 million and $15.0 million on
March 12, 2002, September 27, 2002 and March 12,
2003, respectively. All payments are non-refundable (except in
the case of breach by ICFG) and will be credited towards the
purchase price at the KXOL Closing. In accordance with the
Second Amendment, the term of the TBA will continue until the
earlier to occur of (i) the KXOL Closing or (ii) the
termination of the amended Asset Purchase Agreement.

Pursuant to the Second Amendment, on
February 8, 2002, we granted ICFG a warrant exercisable for
an aggregate of 2,000,000 shares of our Class A common
stock at an exercise price of $10.50 per share. This warrant
will be 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. We 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.

Under the Second Amendment, we must also grant to
ICFG additional warrants if ICFG ceases to broadcast its
programming under the 93.5 TBA. On February 28, 2003, ICFG
ceased to broadcast its programming under the 93.5 TBA.
Therefore, beginning on March 31, 2003, and on the last day
of each calendar month thereafter, we are required to issue to
ICFG warrants exercisable for 100,000 shares of our Class A
common stock at an exercise price equal to the closing price of
our shares on the last trading day of such respective month,
until the earlier to occur of (i) the KXOL Closing or
(ii) the termination of the amended Asset Purchase
Agreement. These warrants will also be exercisable for a period
of thirty-six months after the date of issuance after which they
will expire if not exercised. The fair market value of these
warrants, as calculated under the Black-Scholes option-pricing
model, will be recorded as a programming expense. On
March 31, 2003 and April 30, 2003, we granted ICFG a
warrant exercisable for an aggregate of 100,000 shares of our
Class A common stock at an exercise price of $6.14 and
$7.67 per share, respectively. We assigned the warrants fair
market values of approximately $0.3 million and
$0.4 million, respectively, based on the Black-Scholes
option pricing model in accordance with SFAS No. 123
Accounting for Stock-Based Compensation. The fair
market values of these warrants were recorded as a stock-based
programming expense on the respective dates of grant.

We intend to fund the acquisition of radio
station KXOL-FM from a combination of cash on hand, internally
generated cash flow, potential equity and debt financing and/or
asset sales. Although we intend to complete this transaction,
there can be no assurance that the acquisition of radio station
KXOL-FM will be completed.

We have no other written understandings, letters
of intent or contracts to acquire radio stations or other
companies. We anticipate that any future acquisitions would be
financed through funds generated from permitted debt financing,
equity financing, operations, asset sales or a combination of
these sources. However,

18



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there can be no assurance that financing from any
of these sources, if available, can be obtained on favorable
terms for future acquisitions.


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
March 31, 2003 condensed consolidated financial statements
and notes thereto.

In January 2003, the FASB issued Interpretation
No. 46, Consolidation of Variable Interest Entities:
an Interpretation of ARB No. 51
(FIN 46). FIN 46 addresses consolidation
by business enterprises of entities in which equity investors do
not have the characteristics of a controlling financial interest
or do not have sufficient equity at risk for the entity to
finance its activities without additional subordinated financial
support from other parties. Variable interest entities are
required to be consolidated by their primary beneficiaries if
they do not effectively disperse risks among parties involved.
The primary beneficiary of a variable interest entity is the
party that absorbs a majority of the entitys expected
losses or receives a majority of its expected residual returns.
The consolidation requirements of FIN 46 apply immediately to
variable interest entities created after January 31, 2003
and apply to existing entities in the first fiscal year or
interim period beginning after June 15, 2003. Certain new
disclosure requirements apply to all financial statements issued
after January 31, 2003. The Company adopted FIN 46 on
February 1, 2003. The adoption of FIN 46 did not have
a material effect 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

19



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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 ability to finance the acquisition of KXOL-FM
    may be limited. In the event that we are unable to complete the
    acquisition under its current terms, we will lose the
    non-refundable deposits that we have made (except in the case of
    breach by ICFG);                                                                          
|
| |  | If we complete our acquisition of KXOL-FM and/or
    acquire additional stations in the future, depending on the
    financing used to fund these acquisitions, interest expense and
    payments may increase;                                                                                                                                    
|
| |  | Our most important operating assets are our
    intangible assets, principally consisting of our FCC licenses.
    Impairment to the carrying value of these assets could have a
    material effect on our results of operations and financial
    position;                                                                                      
|
| |  | Our broadcast revenue and operating results could
    be adversely affected by the current recession, or by another
    national or regional recession;                                                                                                                                                                                            
|
| |  | Our substantial level of debt could limit our
    ability to grow and compete;                                                                                                                                                                                                                                                                     
|
| |  | Despite current indebtedness levels and limits
    imposed by our indentures on additional indebtedness, we and our
    subsidiaries are able to incur substantially more debt which
    could further limit our ability to grow and compete;                                                                                                      
|
| |  | If any lender to us or our subsidiaries
    accelerates any debt, we and our subsidiaries may not have the
    resources to repay that debt. An event of default under any
    material debt instruments would harm our business and financial
    condition;                                                                                      
|
| |  | The terms of our debt restrict us from engaging
    in many activities, require us to satisfy various financial
    tests and may adversely affect our business by limiting our
    flexibility;                                                                                                                                                   
|
| |  | We have experienced net losses in the past and to
    the extent that we experience 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;                                                                                                  
|
| |  | A large portion of our net broadcast revenue and
    broadcast cash flow comes from the New York and Miami markets
    and a significant decline in net broadcast revenue or broadcast
    cash flow from our stations in either of these markets could
    have a material adverse effect on our financial position and
    results of operations;
|
| |  | Loss of key personnel, including Raúl
    Alarcón, Jr., our Chairman of the Board of Directors,
    President and Chief Executive Officer, could adversely affect
    our business;                                                                                                                                                                
|
| |  | We compete for advertising revenue with other
    broadcasting groups as well as other media groups, many of which
    have greater resources than we do;                                                                                                                                                                                          
|
| |  | Our growth depends upon successfully executing
    our acquisition strategy. We intend to grow by acquiring radio
    stations primarily in the largest U.S. Hispanic markets, but we
    cannot assure you that our acquisition strategy will be
    successful;                                                                                  
|
| |  | Raúl Alarcón, Jr., 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 of SBS such as a merger or sale of
    SBS;                               

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| |   |                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We must be able to respond to rapidly changing
    technology, services and standards which characterize our
    industry for us to remain competitive;
|
| |  | Our business depends on maintaining our FCC
    licenses. We cannot assure you that we will be able to maintain
    these licenses;                    
|
| |  | We may face regulatory review for additional
    acquisitions in our existing markets and, potentially, new
    markets;                               
|
| |  | We have only two independent directors serving on
    our Audit Committee;                                                                             
|
| |  | The market price of our shares of Class A
    common stock may fluctuate significantly; and                                                            
|
| |  | Current or future sales by existing or future
    stockholders could depress the market price of our Class A
    common stock.                         

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-month period ended March 31, 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. We do not have any variable rate debt or
derivative financial or commodity instruments.






|        |                        
|------- | -----------------------
|Item 4. | Controls and Procedures

Our principal executive and financial officers
have concluded, based on their evaluation as of a date within
90 days before the filing of this quarterly report on
Form 10-Q, that our disclosure controls and procedures
under Rule 13a-14(c) of the Exchange Act are effective to
ensure that information we are required to disclose in the
reports we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods
specified in the SECs rules and forms, and include
controls and procedures designed to ensure that information we
are required to disclose in such reports is accumulated and
communicated to management, including our principal executive
and financial officers, as appropriate to allow timely decisions
regarding required disclosure.

Subsequent to our evaluation, there were no
significant changes in internal controls or other factors that
could significantly affect these internal controls.




PART II  OTHER
INFORMATION






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

Recent Sales of Unregistered
Securities

On March 31, 2003 and April 30, 2003,
we issued to the International Church of the FourSquare Gospel
(ICFG) a warrant exercisable for an aggregate of
100,000 shares of our Class A common stock at an exercise
price of $6.14 and $7.67 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

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(currently KZAB-FM) and KFSB-FM (currently
KZBA-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 the warrants fair market values of
approximately $0.3 million and $0.4 million,
respectively, based on the Black-Scholes option pricing model in
accordance with SFAS No. 123, Accounting for
Stock-Based Compensation. The fair market values of these
warrants were recorded as a programming expense on the
respective dates 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 6. | Exhibits and Reports on
    Form 8-K

(a) Exhibits 

|     |  |                                                                                                                                                                                                                                                                                                                                 
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1 |  | Asset Purchase Agreement dated as of
    December 31, 2002 by and among Spanish Broadcasting System
    of Illinois, Inc., Big City Radio, Inc. and Big City Radio-CHI,
    L.L.C. (incorporated by reference to Exhibit 10.59 to the
    Companys Annual Report on Form 10-K filed
    March 31, 2003 (the 2003 Form 10-K)).
|10.2 |  | Time Brokerage Agreement dated as of
    December 31, 2002 between Big City Radio-CHI, L.L.C. as
    Licensee and Spanish Broadcasting System of Illinois, Inc. as
    Programmer (incorporated by reference to Exhibit 10.60 to
    the Companys 2003 Form 10-K).                                                             
|10.3 |  | Guaranty Agreement dated as of December 31,
    2002 by the Company in favor of Big City Radio, Inc. and Big
    City Radio-CHI, L.L.C. (incorporated by reference to
    Exhibit 10.61 to the Companys 2003 Form 10-K).                                                                                                       
|10.4 |  | Warrant dated March 31, 2003 by the Company
    in favor of International Church of the FourSquare Gospel.                                                                                                                                                                                                                      
|10.5 |  | Warrant dated April 30, 2003 by the Company
    in favor of International Church of the FourSquare Gospel.                                                                                                                                                                                                                      
|99.1 |  | 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.                                                                                                                                                                       
|99.2 |  | 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



| |  |                                                                                          
| |  | -----------------------------------------------------------------------------------------
| |  | There were no reports on Form 8-K filed
    during the three months ended March 31, 2003.

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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. GARCíA

| |                                                
| | -----------------------------------------------
| |                                                
| | Joseph A. García                               
| | Executive Vice President,                      
| | Chief Financial Officer and
    Secretary      
| | (principal financial and accounting
    officer



| |                                                   
| | --------------------------------------------------
| | and duly authorized officer of the
    registrant)

Date: May 15, 2003

23



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CERTIFICATIONS

I, Raúl Alarcón, Jr., certify that:

1. I have reviewed this quarterly report on
Form 10-Q of Spanish Broadcasting System, Inc;

2. Based on my knowledge, this quarterly
report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period
covered by this quarterly report;

3. Based on my knowledge, the financial
statements, and other financial information included in this
quarterly report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report;

4. The registrants other certifying
officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have:



| |                                                                                                                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this quarterly report is being prepared;
|
| | (b) evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this
    quarterly report (the Evaluation Date); and                                                                                                      
|
| | (c) presented in this quarterly report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date.                                                                                                                                

5. The registrants other certifying
officer and I have disclosed, based on our most recent
evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons
performing the equivalent function):



| |                                                                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | (b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls.                                                                                                                                                        

6. The registrants other certifying
officer and I have indicated in this quarterly report whether or
not there were significant changes in internal controls or in
other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies
and material weaknesses.



| |                        
| | -----------------------
| | /s/ RAÚL ALARCÓN, JR.  
| |                        
| | Name: Raúl Alarcón, Jr.

| |        |                                    
| | ------ | -----------------------------------
| | Title: | Chairman of the Board of Directors,

| |                                          
| | -----------------------------------------
| | Chief Executive Officer and
    President

Date: May 15, 2003

24



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I, Joseph A. García, certify that:

1. I have reviewed this quarterly report on
Form 10-Q of Spanish Broadcasting System, Inc;

2. Based on my knowledge, this quarterly
report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period
covered by this quarterly report;

3. Based on my knowledge, the financial
statements, and other financial information included in this
quarterly report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report;

4. The registrants other certifying
officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have:



| |                                                                                                                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this quarterly report is being prepared;
|
| | (b) evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this
    quarterly report (the Evaluation Date); and                                                                                                      
|
| | (c) presented in this quarterly report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date.                                                                                                                                

5. The registrants other certifying
officer and I have disclosed, based on our most recent
evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons
performing the equivalent function):



| |                                                                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | (b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls.                                                                                                                                                        

6. The registrants other certifying
officer and I have indicated in this quarterly report whether or
not there were significant changes in internal controls or in
other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies
and material weaknesses.



| |                       
| | ----------------------
| | /s/ JOSEPH A. GARCíA  
| |                       
| | Name: Joseph A. García

| |        |                         
| | ------ | ------------------------
| | Title: | Chief Financial Officer,

| |                                           
| | ------------------------------------------
| | Executive Vice President and
    Secretary

Date: May 15, 2003

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