##### Table of Contents









SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




---

Form 10-Q

|           |  |                                                                                                 
|---------- |  | ------------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                                 
|þ          |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR
    15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934 
|          
|           |  | For the quarterly period ended
    September 29, 2002                                           
|          
|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



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Spanish Broadcasting System, Inc.

(Exact name of registrant as specified in its
charter)


SEE TABLE OF ADDITIONAL REGISTRANTS

|                                                                                                                        |  |                                         
|----------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------
|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)


Not Applicable

(Former name, former address and former fiscal
year, if changed since last report)


Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the
past
90 days.     Yes þ          No o

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

APPLICABLE ONLY TO CORPORATE
ISSUERS:

Indicate the number of shares outstanding of each
of the issuers classes of common stock, as of the latest
practicable date: As of November 12, 2002,
37,067,655 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                                                                                        
|PART I -- FINANCIAL INFORMATION                                                              
|                                                                                              | Item 1. Financial Statements -- Unaudited                         
|                                                                                              |                                                                    | 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 1. Legal Proceedings                                         
|Item 5. Other Information                                                                    
|Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                                                                                   
|CERTIFICATIONS                                                                               
|Stock Option Agreement - William B. Tanner                                                   
|Stock Option Agreement - Raul Alarcon, Jr.                                                   
|Certification of CEO                                                                         
|Certification of CFO                                                                         



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##### Table of Contents



TABLE OF ADDITIONAL REGISTRANTS

|                                                       |  |                 |             |                |  |                 |      |  |  |  |            | 
|------------------------------------------------------ |  | --------------- | ----------- | -------------- |  | --------------- | ---- |  |  |  | ---------- | 
|                                                       |  |                 |             | Primary        |  |                
|                                                       |  |                 |             | Standard       |  |                
|                                                       |  | State or Other  |             | Industrial     |  | I.R.S. Employer
|                                                       |  | Jurisdiction of |             | Classification |  | Identification 
|Name                                                   |  | Incorporation   |             | Number         |  | Number         
|                                                       |  |                 |             |                |  |                
|Spanish Broadcasting System of California,
    Inc.    |  |                 | California  |                |  |                 | 4832 |  |  |  | 92-3952357 | 
|Spanish Broadcasting System Network,
    Inc.          |  |                 | New York    |                |  |                 | 7380 |  |  |  | 13-3511101 | 
|SBS Promotions, Inc.                                   |  |                 | New York    |                |  |                 | 7380 |  |  |  | 13-3456128 | 
|SBS Funding, Inc.                                      |  |                 | Delaware    |                |  |                 | 6199 |  |  |  | 52-2176317 | 
|Alarcon Holdings, Inc.                                 |  |                 | New York    |                |  |                 | 6512 |  |  |  | 13-3475833 | 
|SBS of Greater New York, Inc.                          |  |                 | New York    |                |  |                 | 4832 |  |  |  | 13-3888732 | 
|Spanish Broadcasting System of Florida,
    Inc.       |  |                 | Florida     |                |  |                 | 4832 |  |  |  | 58-1700848 | 
|Spanish Broadcasting System of Greater Miami,
    Inc. |  |                 | Delaware    |                |  |                 | 4832 |  |  |  | 65-0774450 | 
|Spanish Broadcasting System of Puerto Rico,
    Inc.   |  |                 | Delaware    |                |  |                 | 4832 |  |  |  | 52-2139546 | 
|Spanish Broadcasting System, Inc.                      |  |                 | New Jersey  |                |  |                 | 4832 |  |  |  | 13-3181941 | 
|Spanish Broadcasting System of Illinois,
    Inc.      |  |                 | Delaware    |                |  |                 | 4832 |  |  |  | 36-4174296 | 
|Spanish Broadcasting System of San Antonio,
    Inc.   |  |                 | Delaware    |                |  |                 | 4832 |  |  |  | 65-0820776 | 
|Spanish Broadcasting System Finance Corporation        |  |                 | Delaware    |                |  |                 | 6199 |  |  |  | 65-1081341 | 
|Spanish Broadcasting System SouthWest,
    Inc.        |  |                 | Delaware    |                |  |                 | 4832 |  |  |  | 75-2130336 | 
|Spanish Broadcasting System  San
    Francisco, Inc.  |  |                 | Delaware    |                |  |                 | 4832 |  |  |  | 94-3405231 | 
|Spanish Broadcasting System of Puerto Rico,
    Inc.   |  |                 | Puerto Rico |                |  |                 | 4832 |  |  |  | 66-0564244 | 



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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC.






INDEX


|                              |  |                                                                                                                                                  |  |      |    | 
|----------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---- | -- | 
|                              |  |                                                                                                                                                  |  | Page
|                              |  |                                                                                                                                                  |  |     
|PART I. FINANCIAL INFORMATION
|Item 1.                       |  | Financial Statements  Unaudited                                                                                                                 |  |      | 2  | 
|                              |  | Unaudited Condensed Consolidated Balance Sheets
    as of December 30, 2001 and September 29, 2002                                               |  |      | 2  | 
|                              |  | Unaudited Condensed Consolidated Statements of
    Operations for the Three- and Nine-Months Ended
    September 30, 2001 and September 29, 2002 |  |      | 3  | 
|                              |  | Unaudited Condensed Consolidated Statements of
    Cash Flows for the Nine-Months Ended September 30, 2001 and
    September 29, 2002            |  |      | 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                                                                                   |  |      | 22 | 
|Item 4.                       |  | Controls and Procedures                                                                                                                          |  |      | 22 | 
|PART II. OTHER INFORMATION   
|Item 1.                       |  | Legal Proceedings                                                                                                                                |  |      | 22 | 
|Item 5.                       |  | Other Information                                                                                                                                |  |      | 23 | 
|Item 6.                       |  | Exhibits and Reports on Form 8-K                                                                                                                 |  |      | 24 | 

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 data)


|                                           |                                                                                                                                                                                                                     |                                            |         |               |         |  |         |          |         | 
|------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ------------- | ------- |  | ------- | -------- | ------- | 
|                                           |                                                                                                                                                                                                                     | December 30,                               |         | September 29,
|                                           |                                                                                                                                                                                                                     | 2001                                       |         | 2002         
|                                           |                                                                                                                                                                                                                     |                                            |         |              
|ASSETS                                    
|Current assets:                            |                                                                                                                                                                                                                     |                                            |         |               |         |  |         |         
|                                           | Cash and cash equivalents                                                                                                                                                                                           |                                            | $       | 51,640        |         |  |         | 80,818   |        
|                                           | Net receivables                                                                                                                                                                                                     |                                            |         | 23,388        |         |  |         | 24,939   |        
|                                           | Other current assets                                                                                                                                                                                                |                                            |         | 1,706         |         |  |         | 1,287    |        
|                                           | Assets held for sale                                                                                                                                                                                                |                                            |         | 41,113        |         |  |         |         |        
|                                           |                                                                                                                                                                                                                     |                                            |         |               |         |  |         |         
|                                           |                                                                                                                                                                                                                     | Total current assets                       |         |               | 117,847 |  |         |          | 107,044 | 
|Property and equipment, net                |                                                                                                                                                                                                                     |                                            | 23,424  |               |         |  | 24,181  |         
|Intangible assets, net                     |                                                                                                                                                                                                                     |                                            | 535,511 |               |         |  | 502,590 |         
|Deferred financing costs, net              |                                                                                                                                                                                                                     |                                            | 10,040  |               |         |  | 9,079   |         
|Other assets                               |                                                                                                                                                                                                                     |                                            | 256     |               |         |  | 204     |         
|                                           |                                                                                                                                                                                                                     |                                            |         |               |         |  |         |         
|                                           |                                                                                                                                                                                                                     | Total assets                               |         | $             | 687,078 |  |         |          | 643,098 | 
|                                           |                                                                                                                                                                                                                     |                                            |         |               |         |  |         |         
|LIABILITIES AND STOCKHOLDERS
    EQUITY  
|Current liabilities:                       |                                                                                                                                                                                                                     |                                            |         |               |         |  |         |         
|                                           | 12 1/2% senior unsecured notes                                                                                                                                                                                      |                                            | $       | 100           |         |  |         |         |        
|                                           | Current portion of other long-term debt                                                                                                                                                                             |                                            |         | 191           |         |  |         | 204      |        
|                                           | Accounts payable and accrued expenses                                                                                                                                                                               |                                            |         | 13,765        |         |  |         | 16,902   |        
|                                           | Accrued interest                                                                                                                                                                                                    |                                            |         | 5,316         |         |  |         | 13,464   |        
|                                           | Deferred commitment fee                                                                                                                                                                                             |                                            |         | 1,282         |         |  |         | 756      |        
|                                           |                                                                                                                                                                                                                     |                                            |         |               |         |  |         |         
|                                           |                                                                                                                                                                                                                     | Total current liabilities                  |         |               | 20,654  |  |         |          | 31,326  | 
|                                          
|9 5/8% senior subordinated notes, net      |                                                                                                                                                                                                                     |                                            | 323,184 |               |         |  | 323,900 |         
|Other long-term debt, less current portion |                                                                                                                                                                                                                     |                                            | 4,156   |               |         |  | 4,002   |         
|Deferred income taxes                      |                                                                                                                                                                                                                     |                                            | 30,885  |               |         |  | 54,392  |         
|                                          
|Stockholders equity:                      |                                                                                                                                                                                                                     |                                            |         |               |         |  |         |         
|                                           | Class A common stock, $.0001 par value.
    Authorized 100,000,000 shares; 36,862,705 shares issued and
    outstanding at December 30, 2001; 37,067,655 shares
    issued and outstanding at September 29, 2002    |                                            |         | 3             |         |  |         | 3        |        
|                                           | Class B common stock, $.0001 par value.
    Authorized 50,000,000 shares; 27,795,500 shares issued
    and outstanding at December 30, 2001;
    27,605,150 shares issued and outstanding at
    September 29, 2002 |                                            |         | 3             |         |  |         | 3        |        
|                                           | Additional paid-in capital                                                                                                                                                                                          |                                            |         | 435,522       |         |  |         | 444,545  |        
|                                           | Accumulated deficit                                                                                                                                                                                                 |                                            |         | (127,329      | )       |  |         | (215,073 | )      
|                                           |                                                                                                                                                                                                                     |                                            |         |               |         |  |         |         
|                                           |                                                                                                                                                                                                                     | Total stockholders equity                 |         |               | 308,199 |  |         |          | 229,478 | 
|                                           |                                                                                                                                                                                                                     |                                            |         |               |         |  |         |         
|                                           |                                                                                                                                                                                                                     | Total liabilities and stockholders equity |         | $             | 687,078 |  |         |          | 643,098 | 
|                                           |                                                                                                                                                                                                                     |                                            |         |               |         |  |         |         

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                                                                                                                                                          |             | Nine Months Ended 
|                                                                                                                                                |                                                                                                                                                      |                                                                                                                                                                             |             |                   
|                                                                                                                                                |                                                                                                                                                      | September 30, 2001                                                                                                                                                          |             | September 29, 2002 |        | September 30, 2001 |        | September 29, 2002
|                                                                                                                                                |                                                                                                                                                      |                                                                                                                                                                             |             |                    |        |                    |        |                   
|Gross revenue                                                                                                                                   |                                                                                                                                                      | $                                                                                                                                                                           | 39,647      |                    |        |                    | 41,463 |                    |        |        | 106,867 |        |        |        | 118,607 |        
|Less agency commissions                                                                                                                         |                                                                                                                                                      |                                                                                                                                                                             | 4,625       |                    |        |                    | 5,226  |                    |        |        | 12,527  |        |        |        | 14,085  |        
|                                                                                                                                                |                                                                                                                                                      |                                                                                                                                                                             |             |                    |        |                    |        |                    |        |        |         |        |        |        |         |        
|                                                                                                                                                |                                                                                                                                                      |                                                                                                                                                                             | Net revenue |                    |        | 35,022             |        |                    |        | 36,237 |         |        |        | 94,340 |         |         |        | 104,522 |  
|                                                                                                                                                |                                                                                                                                                      |                                                                                                                                                                             |             |                    |        |                    |        |                    |        |        |         |        |        |        |         |        
|Operating expenses:                                                                                                                             |                                                                                                                                                      |                                                                                                                                                                             |             |                    |        |                    |        |                    |        |        |         |        |        |        |         |        
|                                                                                                                                                | Engineering                                                                                                                                          |                                                                                                                                                                             |             | 960                |        |                    |        | 908                |        |        |         | 2,525  |        |        |         | 2,767   |       
|                                                                                                                                                | Programming                                                                                                                                          |                                                                                                                                                                             |             | 4,725              |        |                    |        | 5,542              |        |        |         | 13,314 |        |        |         | 15,670  |       
|                                                                                                                                                | Selling                                                                                                                                              |                                                                                                                                                                             |             | 11,243             |        |                    |        | 9,988              |        |        |         | 31,432 |        |        |         | 32,646  |       
|                                                                                                                                                | General and administrative                                                                                                                           |                                                                                                                                                                             |             | 3,854              |        |                    |        | 3,428              |        |        |         | 12,318 |        |        |         | 10,406  |       
|                                                                                                                                                | Corporate expenses                                                                                                                                   |                                                                                                                                                                             |             | 3,025              |        |                    |        | 3,609              |        |        |         | 8,004  |        |        |         | 9,559   |       
|                                                                                                                                                | Depreciation and amortization                                                                                                                        |                                                                                                                                                                             |             | 4,938              |        |                    |        | 749                |        |        |         | 13,402 |        |        |         | 2,201   |       
|                                                                                                                                                |                                                                                                                                                      |                                                                                                                                                                             |             |                    |        |                    |        |                    |        |        |         |        |        |        |         |        
|                                                                                                                                                |                                                                                                                                                      |                                                                                                                                                                             | 28,745      |                    |        |                    | 24,224 |                    |        |        | 80,995  |        |        |        | 73,249  |        
|                                                                                                                                                |                                                                                                                                                      |                                                                                                                                                                             |             |                    |        |                    |        |                    |        |        |         |        |        |        |         |        
|                                                                                                                                                |                                                                                                                                                      | Operating income from continuing operations                                                                                                                                 |             |                    | 6,277  |                    |        |                    | 12,013 |        |         |        | 13,345 |        |         |         | 31,273 |        
|Other (income) expenses:                                                                                                                        |                                                                                                                                                      |                                                                                                                                                                             |             |                    |        |                    |        |                    |        |        |         |        |        |        |         |        
|                                                                                                                                                | Interest expense, net                                                                                                                                |                                                                                                                                                                             |             | 8,977              |        |                    |        | 8,569              |        |        |         | 23,102 |        |        |         | 25,757  |       
|                                                                                                                                                | Other, net                                                                                                                                           |                                                                                                                                                                             |             | 20                 |        |                    |        | 66                 |        |        |         | (260   | )      |        |         | (200    | )     
|                                                                                                                                                |                                                                                                                                                      |                                                                                                                                                                             |             |                    |        |                    |        |                    |        |        |         |        |        |        |         |        
|                                                                                                                                                |                                                                                                                                                      | (Loss) income from continuing operations before
    income taxes, discontinued operations, extraordinary item and
    cumulative effect of a change in accounting principle |             |                    | (2,720 | )                  |        |                    | 3,378  |        |         |        | (9,497 | )      |         |         | 5,716  |        
|Income tax (benefit) expense                                                                                                                    |                                                                                                                                                      |                                                                                                                                                                             | (1,104      | )                  |        |                    | 5,264  |                    |        |        | (3,665  | )      |        |        | 49,919  |        
|                                                                                                                                                |                                                                                                                                                      |                                                                                                                                                                             |             |                    |        |                    |        |                    |        |        |         |        |        |        |         |        
|                                                                                                                                                | Loss from continuing operations before
    discontinued operations, extraordinary item and cumulative
    effect of a change in accounting principle |                                                                                                                                                                             |             | (1,616             | )      |                    |        | (1,886             | )      |        |         | (5,832 | )      |        |         | (44,203 | )     
|                                                                                                                                                |                                                                                                                                                      |                                                                                                                                                                             |             |                    |        |                    |        |                    |        |        |         |        |        |        |         |        
|Discontinued operations:                                                                                                                        |                                                                                                                                                      |                                                                                                                                                                             |             |                    |        |                    |        |                    |        |        |         |        |        |        |         |        
|                                                                                                                                                | Loss from operations of discontinued station
    KTCY-FM, net of tax                                                                                 |                                                                                                                                                                             |             | (21                | )      |                    |        | (21                | )      |        |         | (456   | )      |        |         | (67     | )     
|                                                                                                                                                | Gain on the sale of KTCY-FM, net of tax                                                                                                              |                                                                                                                                                                             |             |                   |        |                    |        | 1,814              |        |        |         |       |        |        |         | 1,814   |       
|                                                                                                                                                |                                                                                                                                                      |                                                                                                                                                                             |             |                    |        |                    |        |                    |        |        |         |        |        |        |         |        
|                                                                                                                                                | (Loss) income on discontinued operations, net of
    tax                                                                                             |                                                                                                                                                                             |             | (21                | )      |                    |        | 1,793              |        |        |         | (456   | )      |        |         | 1,747   |       
|                                                                                                                                                |                                                                                                                                                      |                                                                                                                                                                             |             |                    |        |                    |        |                    |        |        |         |        |        |        |         |        
|Extraordinary item, net of tax                                                                                                                  |                                                                                                                                                      |                                                                                                                                                                             |            |                    |        |                    |       |                    |        |        | (1,896  | )      |        |        |        |        
|Cumulative effect of a change in accounting
    principle for intangible assets, net of tax                                                     |                                                                                                                                                      |                                                                                                                                                                             |            |                    |        |                    |       |                    |        |        |        |        |        |        | (45,288 | )      
|                                                                                                                                                |                                                                                                                                                      |                                                                                                                                                                             |             |                    |        |                    |        |                    |        |        |         |        |        |        |         |        
|                                                                                                                                                |                                                                                                                                                      |                                                                                                                                                                             | Net loss    |                    | $      | (1,637             | )      |                    |        | (93    | )       |        |        | (8,184 | )       |         |        | (87,744 | )
|                                                                                                                                                |                                                                                                                                                      |                                                                                                                                                                             |             |                    |        |                    |        |                    |        |        |         |        |        |        |         |        
|Net loss per common share before discontinued
    operations, extraordinary item and cumulative effect of a change
    in accounting principle: |                                                                                                                                                      |                                                                                                                                                                             |             |                    |        |                    |        |                    |        |        |         |        |        |        |         |        
|                                                                                                                                                | Basic and Diluted                                                                                                                                    |                                                                                                                                                                             | $           | (0.03              | )      |                    |        | (0.03              | )      |        |         | (0.09  | )      |        |         | (0.69   | )     
|Net (loss) income per common share for
    discontinued operations                                                                              |                                                                                                                                                      |                                                                                                                                                                             |             |                    |        |                    |        |                    |        |        |         |        |        |        |         |        
|                                                                                                                                                | Basic and Diluted                                                                                                                                    |                                                                                                                                                                             | $           |                   |        |                    |        | 0.03               |        |        |         | (0.01  | )      |        |         | 0.03    |       
|Net loss per common share for extraordinary item,
    net of tax                                                                                |                                                                                                                                                      |                                                                                                                                                                             |             |                    |        |                    |        |                    |        |        |         |        |        |        |         |        
|                                                                                                                                                | Basic and Diluted                                                                                                                                    |                                                                                                                                                                             | $           |                   |        |                    |        |                   |        |        |         | (0.03  | )      |        |         |        |       
|Net loss per common share attributed to a
    cumulative effect of a change in accounting principle, net of
    tax:                            |                                                                                                                                                      |                                                                                                                                                                             |             |                    |        |                    |        |                    |        |        |         |        |        |        |         |        
|                                                                                                                                                | Basic and Diluted                                                                                                                                    |                                                                                                                                                                             | $           |                   |        |                    |        |                   |        |        |         |       |        |        |         | (0.70   | )     
|                                                                                                                                                |                                                                                                                                                      |                                                                                                                                                                             |             |                    |        |                    |        |                    |        |        |         |        |        |        |         |        
|Net loss per common share:                                                                                                                      |                                                                                                                                                      |                                                                                                                                                                             |             |                    |        |                    |        |                    |        |        |         |        |        |        |         |        
|                                                                                                                                                | Basic and Diluted                                                                                                                                    |                                                                                                                                                                             | $           | (0.03              | )      |                    |        |                   |        |        |         | (0.13  | )      |        |         | (1.36   | )     
|                                                                                                                                                |                                                                                                                                                      |                                                                                                                                                                             |             |                    |        |                    |        |                    |        |        |         |        |        |        |         |        
|Weighted-average common shares outstanding:                                                                                                     |                                                                                                                                                      |                                                                                                                                                                             |             |                    |        |                    |        |                    |        |        |         |        |        |        |         |        
|                                                                                                                                                | Basic and Diluted                                                                                                                                    |                                                                                                                                                                             |             | 64,658             |        |                    |        | 64,673             |        |        |         | 64,658 |        |        |         | 64,669  |       
|                                                                                                                                                |                                                                                                                                                      |                                                                                                                                                                             |             |                    |        |                    |        |                    |        |        |         |        |        |        |         |        

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)


|                                                 |                                                                                     |                                                                                 |                                                   |                                                         |        |       |         |         |        |        |        |  
|------------------------------------------------ | ----------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | ------------------------------------------------- | ------------------------------------------------------- | ------ | ----- | ------- | ------- | ------ | ------ | ------ | -
|                                                 |                                                                                     | Nine Months                                                                     |                                                   | Nine Months                                            
|                                                 |                                                                                     | Ended                                                                           |                                                   | Ended                                                  
|                                                 |                                                                                     | September 30, 2001                                                              |                                                   | September 29, 2002                                     
|                                                 |                                                                                     |                                                                                 |                                                   |                                                        
|Cash flows from operating activities:            |                                                                                     |                                                                                 |                                                   |                                                         |        |       |         |        
|                                                 | Net loss                                                                            |                                                                                 | $                                                 | (8,184                                                  | )      |       |         | (87,744 | )     
|                                                 | Adjustments to reconcile net loss to net cash
    provided by operating activities: |                                                                                 |                                                   |                                                         |        |       |         |         |       
|                                                 |                                                                                     | Loss (income) from discontinued operations,
    net of tax                      |                                                   |                                                         | 456    |       |         |         | (1,747 | )     
|                                                 |                                                                                     | Loss on early extinguishment of debt                                            |                                                   |                                                         | 3,063  |       |         |         |       |       
|                                                 |                                                                                     | Cumulative effect of a change in accounting
    principle for intangible assets |                                                   |                                                         |       |       |         |         | 75,480 |       
|                                                 |                                                                                     | Loss on disposal of assets                                                      |                                                   |                                                         | 19     |       |         |         | 22     |       
|                                                 |                                                                                     | Depreciation and amortization                                                   |                                                   |                                                         | 13,402 |       |         |         | 2,201  |       
|                                                 |                                                                                     | Provision for (reduction of) doubtful accounts                                  |                                                   |                                                         | 2,047  |       |         |         | (820   | )     
|                                                 |                                                                                     | Amortization of debt discount                                                   |                                                   |                                                         | 290    |       |         |         | 716    |       
|                                                 |                                                                                     | Amortization of deferred financing costs                                        |                                                   |                                                         | 1,024  |       |         |         | 961    |       
|                                                 |                                                                                     | Deferred income taxes                                                           |                                                   |                                                         | (5,922 | )     |         |         | 19,030 |       
|                                                 |                                                                                     | Decrease in deferred commitment fee                                             |                                                   |                                                         | (526   | )     |         |         | (526   | )     
|                                                 |                                                                                     | Changes in operating assets and liabilities:                                    |                                                   |                                                         |        |       |         |         |        |       
|                                                 |                                                                                     |                                                                                 | Decrease (increase) in receivables                |                                                         |        | 285   |         |         |        | (1,231 | )     
|                                                 |                                                                                     |                                                                                 | Decrease in other current assets                  |                                                         |        | 1,133 |         |         |        | 413    |       
|                                                 |                                                                                     |                                                                                 | Decrease in other assets                          |                                                         |        | 88    |         |         |        | 52     |       
|                                                 |                                                                                     |                                                                                 | Increase in accounts payable and accrued expenses |                                                         |        | 921   |         |         |        | 2,701  |       
|                                                 |                                                                                     |                                                                                 | Increase in accrued interest                      |                                                         |        | 9,787 |         |         |        | 8,148  |       
|                                                 |                                                                                     |                                                                                 |                                                   |                                                         |        |       |         |        
|                                                 |                                                                                     |                                                                                 |                                                   | Net cash provided by continuing operations              |        |       | 17,883  |         |        |        | 17,656 |  
|                                                 |                                                                                     |                                                                                 |                                                   | Net cash provided by discontinued operations            |        |       | 642     |         |        |        | 1,239  |  
|                                                 |                                                                                     |                                                                                 |                                                   |                                                         |        |       |         |        
|                                                 |                                                                                     |                                                                                 |                                                   | Net cash provided by operating activities               |        |       | 18,525  |         |        |        | 18,895 |  
|                                                 |                                                                                     |                                                                                 |                                                   |                                                         |        |       |         |        
|Cash flows from investing activities:            |                                                                                     |                                                                                 |                                                   |                                                         |        |       |         |        
|                                                 | Proceeds from the sale of radio station, net of
    closing costs                   |                                                                                 |                                                   |                                                        |        |       |         | 34,534  |       
|                                                 | Advances on purchase price of radio station                                         |                                                                                 |                                                   | (21,076                                                 | )      |       |         | (21,221 | )     
|                                                 | Additions to property and equipment                                                 |                                                                                 |                                                   | (2,823                                                  | )      |       |         | (2,887  | )     
|                                                 | Additions to property and equipment of
    discontinued operations                  |                                                                                 |                                                   | (1,003                                                  | )      |       |         | (3      | )     
|                                                 |                                                                                     |                                                                                 |                                                   |                                                         |        |       |         |        
|                                                 |                                                                                     |                                                                                 |                                                   | Net cash (used in) provided by investing
    activities |        |       | (24,902 | )       |        |        | 10,423 |  
|                                                 |                                                                                     |                                                                                 |                                                   |                                                         |        |       |         |        
|Cash flows from financing activities:            |                                                                                     |                                                                                 |                                                   |                                                         |        |       |         |        
|                                                 | Retirement of senior credit facilities                                              |                                                                                 |                                                   | (65,000                                                 | )      |       |         |        |       
|                                                 | Proceeds from senior subordinated notes                                             |                                                                                 |                                                   | 84,039                                                  |        |       |         |        |       
|                                                 | Increase in deferred financing costs                                                |                                                                                 |                                                   | (365                                                    | )      |       |         |        |       
|                                                 | Proceeds from Class A stock options exercised                                       |                                                                                 |                                                   |                                                        |        |       |         | 101     |       
|                                                 | Repayment of other long-term debt                                                   |                                                                                 |                                                   | (130                                                    | )      |       |         | (241    | )     
|                                                 |                                                                                     |                                                                                 |                                                   |                                                         |        |       |         |        
|                                                 |                                                                                     |                                                                                 |                                                   | Net cash provided by (used in) financing
    activities |        |       | 18,544  |         |        |        | (140   | )
|                                                 |                                                                                     |                                                                                 |                                                   |                                                         |        |       |         |        
|Net increase in cash and cash equivalents        |                                                                                     |                                                                                 | 12,167                                            |                                                         |        |       | 29,178  |        
|Cash and cash equivalents at beginning of period |                                                                                     |                                                                                 | 47,733                                            |                                                         |        |       | 51,640  |        
|                                                 |                                                                                     |                                                                                 |                                                   |                                                         |        |       |         |        
|Cash and cash equivalents at end of period       |                                                                                     | $                                                                               | 59,900                                            |                                                         |        |       | 80,818  |        
|                                                 |                                                                                     |                                                                                 |                                                   |                                                         |        |       |         |        
|Supplemental cash flow information:              |                                                                                     |                                                                                 |                                                   |                                                         |        |       |         |        
|                                                 | Interest paid                                                                       |                                                                                 | $                                                 | 14,564                                                  |        |       |         | 16,427  |       
|                                                 |                                                                                     |                                                                                 |                                                   |                                                         |        |       |         |        
|                                                 | Income taxes paid (received)                                                        |                                                                                 | $                                                 | (147                                                    | )      |       |         | (14     | )     
|                                                 |                                                                                     |                                                                                 |                                                   |                                                         |        |       |         |        
|Non-cash financing and investing activities:     |                                                                                     |                                                                                 |                                                   |                                                         |        |       |         |        
|                                                 | Issuance of warrants towards the acquisition of a
    radio station                 |                                                                                 | $                                                 |                                                        |        |       |         | 8,922   |       
|                                                 |                                                                                     |                                                                                 |                                                   |                                                         |        |       |         |        
|                                                 | Discount on senior notes                                                            |                                                                                 | $                                                 | 12,331                                                  |        |       |         |        |       
|                                                 |                                                                                     |                                                                                 |                                                   |                                                         |        |       |         |        

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


September 29, 2002




|   |                      
|-- | ---------------------
|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 30, 2001 and September 29, 2002, and for the
three- and nine-month periods ended September 30, 2001 and
September 29, 2002 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 September 30,
2001 included in the Companys fiscal year 2001 Annual
Report on Form 10-K.

The Company reports revenue and expenses on a
broadcast calendar basis. Broadcast calendar basis
means a period ending on the last Sunday of each reporting
period. The Company changed its fiscal year end from the last
Sunday in September to the last Sunday in December. As a result,
the quarter ended December 30, 2001 represented a
transitional reporting period.

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- and nine-month periods ended September 29, 2002
are not necessarily indicative of the results for a full year.

2.     Financial
Information for Guarantor and Non-Guarantor
Subsidiaries

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

5



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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC. AND
SUBSIDIARIES


NOTES TO UNAUDITED CONDENSED
CONSOLIDATED

FINANCIAL
STATEMENTS  (Continued)


|                                          |                                             |                                            |   |               |         |              |  |          |         |  |  |         |         |   |  |          |         | 
|----------------------------------------- | ------------------------------------------- | ------------------------------------------ | - | ------------- | ------- | ------------ |  | -------- | ------- |  |  | ------- | ------- | - |  | -------- | ------- | 
|                                          |                                             |                                           
|                                          |                                             | As of December 30, 2001                   
|                                          |                                             |                                           
|                                          |                                             | Parent and                                 |   |              
|                                          |                                             | Guarantor                                  |   | Non-Guarantor |         |             
|                                          |                                             | Subsidiaries                               |   | Subsidiaries  |         | Eliminations |  | Total   
|                                          |                                             |                                            |   |               |         |              |  |         
|CONDENSED CONSOLIDATING
    BALANCE SHEET |                                             |                                            |   |               |         |              |  |          |         |  |  |         |         |   |  |         
|                                          | Cash and cash equivalents                   |                                            | $ | 48,741        |         |              |  | 2,899    |         |  |  |        |         |   |  | 51,640   |        
|                                          | Net receivables                             |                                            |   | 21,885        |         |              |  | 1,503    |         |  |  |        |         |   |  | 23,388   |        
|                                          | Other current assets                        |                                            |   | 1,186         |         |              |  | 520      |         |  |  |        |         |   |  | 1,706    |        
|                                          | Assets held for sale                        |                                            |   | 693           |         |              |  | 40,420   |         |  |  |        |         |   |  | 41,113   |        
|                                          |                                             |                                            |   |               |         |              |  |          |         |  |  |         |         |   |  |         
|                                          |                                             | Total current assets                       |   |               | 72,505  |              |  |          | 45,342  |  |  |         |        |   |  |          | 117,847 | 
|                                          | Property and equipment, net                 |                                            |   | 15,489        |         |              |  | 7,935    |         |  |  |        |         |   |  | 23,424   |        
|                                          | Intangible assets, net                      |                                            |   | 35,992        |         |              |  | 499,519  |         |  |  |        |         |   |  | 535,511  |        
|                                          | Deferred financing costs, net               |                                            |   | 10,040        |         |              |  |         |         |  |  |        |         |   |  | 10,040   |        
|                                          | Investment in subsidiaries and intercompany |                                            |   | 524,623       |         |              |  | (447,851 | )       |  |  | (76,772 | )       |   |  |         |        
|                                          | Other assets                                |                                            |   | 255           |         |              |  | 1        |         |  |  |        |         |   |  | 256      |        
|                                          |                                             |                                            |   |               |         |              |  |          |         |  |  |         |         |   |  |         
|                                          |                                             | Total assets                               |   | $             | 658,904 |              |  |          | 104,946 |  |  |         | (76,772 | ) |  |          | 687,078 | 
|                                          |                                             |                                            |   |               |         |              |  |          |         |  |  |         |         |   |  |         
|                                          | Current portion of long-term debt           |                                            | $ | 159           |         |              |  | 132      |         |  |  |        |         |   |  | 291      |        
|                                          | Accounts payable and accrued expenses       |                                            |   | 11,735        |         |              |  | 2,030    |         |  |  |        |         |   |  | 13,765   |        
|                                          | Accrued interest                            |                                            |   | 5,315         |         |              |  | 1        |         |  |  |        |         |   |  | 5,316    |        
|                                          | Deferred commitment fee                     |                                            |   | 1,282         |         |              |  |         |         |  |  |        |         |   |  | 1,282    |        
|                                          |                                             |                                            |   |               |         |              |  |          |         |  |  |         |         |   |  |         
|                                          |                                             | Total current liabilities                  |   |               | 18,491  |              |  |          | 2,163   |  |  |         |        |   |  |          | 20,654  | 
|                                          | Long-term debt                              |                                            |   | 323,949       |         |              |  | 3,391    |         |  |  |        |         |   |  | 327,340  |        
|                                          | Deferred income taxes                       |                                            |   | 8,265         |         |              |  | 22,620   |         |  |  |        |         |   |  | 30,885   |        
|                                          |                                             |                                            |   |               |         |              |  |          |         |  |  |         |         |   |  |         
|                                          |                                             | Total liabilities                          |   |               | 350,705 |              |  |          | 28,174  |  |  |         |        |   |  |          | 378,879 | 
|                                          |                                             |                                            |   |               |         |              |  |          |         |  |  |         |         |   |  |         
|                                          | Common stock                                |                                            |   | 6             |         |              |  | 1        |         |  |  | (1      | )       |   |  | 6        |        
|                                          | Additional paid-in capital                  |                                            |   | 435,522       |         |              |  | 94,691   |         |  |  | (94,691 | )       |   |  | 435,522  |        
|                                          | Accumulated deficit                         |                                            |   | (127,329      | )       |              |  | (17,920  | )       |  |  | 17,920  |         |   |  | (127,329 | )      
|                                          |                                             |                                            |   |               |         |              |  |          |         |  |  |         |         |   |  |         
|                                          |                                             | Total stockholders equity                 |   |               | 308,199 |              |  |          | 76,772  |  |  |         | (76,772 | ) |  |          | 308,199 | 
|                                          |                                             |                                            |   |               |         |              |  |          |         |  |  |         |         |   |  |         
|                                          |                                             | Total liabilities and stockholders equity |   | $             | 658,904 |              |  |          | 104,946 |  |  |         | (76,772 | ) |  |          | 687,078 | 
|                                          |                                             |                                            |   |               |         |              |  |          |         |  |  |         |         |   |  |         

6



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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC. AND
SUBSIDIARIES


NOTES TO UNAUDITED CONDENSED
CONSOLIDATED

FINANCIAL
STATEMENTS  (Continued)


|                                      |                                             |                                            |   |               |         |              |  |          |        |  |  |         |         |   |  |          |         | 
|------------------------------------- | ------------------------------------------- | ------------------------------------------ | - | ------------- | ------- | ------------ |  | -------- | ------ |  |  | ------- | ------- | - |  | -------- | ------- | 
|                                      |                                             |                                           
|                                      |                                             | As of September 29, 2002                  
|                                      |                                             |                                           
|                                      |                                             | Parent and                                 |   |              
|                                      |                                             | Guarantor                                  |   | Non-Guarantor |         |             
|                                      |                                             | Subsidiaries                               |   | Subsidiaries  |         | Eliminations |  | Total   
|                                      |                                             |                                            |   |               |         |              |  |         
|CONDENSED CONSOLIDATING BALANCE SHEET |                                             |                                            |   |               |         |              |  |          |        |  |  |         |         |   |  |         
|                                      | Cash and cash equivalents                   |                                            | $ | 77,979        |         |              |  | 2,839    |        |  |  |        |         |   |  | 80,818   |        
|                                      | Net receivables                             |                                            |   | 23,290        |         |              |  | 1,649    |        |  |  |        |         |   |  | 24,939   |        
|                                      | Other current assets                        |                                            |   | 898           |         |              |  | 389      |        |  |  |        |         |   |  | 1,287    |        
|                                      |                                             |                                            |   |               |         |              |  |          |        |  |  |         |         |   |  |         
|                                      |                                             | Total current assets                       |   |               | 102,167 |              |  |          | 4,877  |  |  |         |        |   |  |          | 107,044 | 
|                                      | Property and equipment, net                 |                                            |   | 16,676        |         |              |  | 7,505    |        |  |  |        |         |   |  | 24,181   |        
|                                      | Intangible assets, net                      |                                            |   | 66,135        |         |              |  | 436,455  |        |  |  |        |         |   |  | 502,590  |        
|                                      | Deferred financing costs, net               |                                            |   | 9,079         |         |              |  |         |        |  |  |        |         |   |  | 9,079    |        
|                                      | Investment in subsidiaries and intercompany |                                            |   | 430,211       |         |              |  | (370,995 | )      |  |  | (59,216 | )       |   |  |         |        
|                                      | Other assets                                |                                            |   | 203           |         |              |  | 1        |        |  |  |        |         |   |  | 204      |        
|                                      |                                             |                                            |   |               |         |              |  |          |        |  |  |         |         |   |  |         
|                                      |                                             | Total assets                               |   | $             | 624,471 |              |  |          | 77,843 |  |  |         | (59,216 | ) |  |          | 643,098 | 
|                                      |                                             |                                            |   |               |         |              |  |          |        |  |  |         |         |   |  |         
|                                      | Current portion of long-term debt           |                                            | $ | 61            |         |              |  | 143      |        |  |  |        |         |   |  | 204      |        
|                                      | Accounts payable and accrued expenses       |                                            |   | 14,378        |         |              |  | 2,524    |        |  |  |        |         |   |  | 16,902   |        
|                                      | Accrued interest                            |                                            |   | 13,464        |         |              |  |         |        |  |  |        |         |   |  | 13,464   |        
|                                      | Deferred commitment fee                     |                                            |   | 756           |         |              |  |         |        |  |  |        |         |   |  | 756      |        
|                                      |                                             |                                            |   |               |         |              |  |          |        |  |  |         |         |   |  |         
|                                      |                                             | Total current liabilities                  |   |               | 28,659  |              |  |          | 2,667  |  |  |         |        |   |  |          | 31,326  | 
|                                      | Long-term debt                              |                                            |   | 324,619       |         |              |  | 3,283    |        |  |  |        |         |   |  | 327,902  |        
|                                      | Deferred income taxes                       |                                            |   | 41,715        |         |              |  | 12,677   |        |  |  |        |         |   |  | 54,392   |        
|                                      |                                             |                                            |   |               |         |              |  |          |        |  |  |         |         |   |  |         
|                                      |                                             | Total liabilities                          |   |               | 394,993 |              |  |          | 18,627 |  |  |         |        |   |  |          | 413,620 | 
|                                      |                                             |                                            |   |               |         |              |  |          |        |  |  |         |         |   |  |         
|                                      | Common stock                                |                                            |   | 6             |         |              |  | 1        |        |  |  | (1      | )       |   |  | 6        |        
|                                      | Additional paid-in capital                  |                                            |   | 444,545       |         |              |  | 94,691   |        |  |  | (94,691 | )       |   |  | 444,545  |        
|                                      | Accumulated deficit                         |                                            |   | (215,073      | )       |              |  | (35,476  | )      |  |  | 35,476  |         |   |  | (215,073 | )      
|                                      |                                             |                                            |   |               |         |              |  |          |        |  |  |         |         |   |  |         
|                                      |                                             | Total stockholders equity                 |   |               | 229,478 |              |  |          | 59,216 |  |  |         | (59,216 | ) |  |          | 229,478 | 
|                                      |                                             |                                            |   |               |         |              |  |          |        |  |  |         |         |   |  |         
|                                      |                                             | Total liabilities and stockholders equity |   | $             | 624,471 |              |  |          | 77,843 |  |  |         | (59,216 | ) |  |          | 643,098 | 
|                                      |                                             |                                            |   |               |         |              |  |          |        |  |  |         |         |   |  |         

7



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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC. AND
SUBSIDIARIES


NOTES TO UNAUDITED CONDENSED
CONSOLIDATED

FINANCIAL
STATEMENTS  (Continued)


|                                                |                                     |                                                    |   |               |        |              |  |        |        |   |  |      |     |  |  |        |        |  
|----------------------------------------------- | ----------------------------------- | -------------------------------------------------- | - | ------------- | ------ | ------------ |  | ------ | ------ | - |  | ---- | --- |  |  | ------ | ------ | -
|                                                |                                     |                                                   
|                                                |                                     | For the Three Months Ended September 30, 2001     
|                                                |                                     |                                                   
|                                                |                                     | Parent and                                         |   |              
|                                                |                                     | Guarantor                                          |   | Non-Guarantor |        |             
|                                                |                                     | Subsidiaries                                       |   | Subsidiaries  |        | Eliminations |  | Total 
|                                                |                                     |                                                    |   |               |        |              |  |       
|CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS |                                     |                                                    |   |               |        |              |  |        |        |   |  |      |     |  |  |       
|                                                | Net revenue                         |                                                    | $ | 31,796        |        |              |  | 3,226  |        |   |  |     |     |  |  | 35,022 |       
|                                                | Station operating expenses          |                                                    |   | 18,245        |        |              |  | 2,537  |        |   |  |     |     |  |  | 20,782 |       
|                                                | Corporate expenses                  |                                                    |   | 3,025         |        |              |  | 183    |        |   |  | (183 | )   |  |  | 3,025  |       
|                                                | Depreciation and amortization       |                                                    |   | 601           |        |              |  | 4,337  |        |   |  |     |     |  |  | 4,938  |       
|                                                |                                     |                                                    |   |               |        |              |  |        |        |   |  |      |     |  |  |       
|                                                |                                     | Operating income (loss) from continuing operations |   |               | 9,925  |              |  |        | (3,831 | ) |  |      | 183 |  |  |        | 6,277  |  
|                                                | Interest expense, net               |                                                    |   | 7,599         |        |              |  | 1,378  |        |   |  |     |     |  |  | 8,977  |       
|                                                | Other (income) expense, net         |                                                    |   | 4,174         |        |              |  | (4,337 | )      |   |  | 183  |     |  |  | 20     |       
|                                                | Equity in net loss of subsidiaries  |                                                    |   | 921           |        |              |  |       |        |   |  | (921 | )   |  |  |       |       
|                                                | Income tax (benefit) expense        |                                                    |   | (1,153        | )      |              |  | 49     |        |   |  |     |     |  |  | (1,104 | )     
|                                                | Discontinued operations, net of tax |                                                    |   | (21           | )      |              |  |       |        |   |  |     |     |  |  | (21    | )     
|                                                |                                     |                                                    |   |               |        |              |  |        |        |   |  |      |     |  |  |       
|                                                |                                     | Net loss                                           |   | $             | (1,637 | )            |  |        | (921   | ) |  |      | 921 |  |  |        | (1,637 | )
|                                                |                                     |                                                    |   |               |        |              |  |        |        |   |  |      |     |  |  |       

|                                                |                                     |                                               |   |               |        |              |  |       |        |   |  |        |       |  |  |        |        |  
|----------------------------------------------- | ----------------------------------- | --------------------------------------------- | - | ------------- | ------ | ------------ |  | ----- | ------ | - |  | ------ | ----- |  |  | ------ | ------ | -
|                                                |                                     |                                              
|                                                |                                     | For the Three Months Ended September 29, 2002
|                                                |                                     |                                              
|                                                |                                     | Parent and                                    |   |              
|                                                |                                     | Guarantor                                     |   | Non-Guarantor |        |             
|                                                |                                     | Subsidiaries                                  |   | Subsidiaries  |        | Eliminations |  | Total
|                                                |                                     |                                               |   |               |        |              |  |      
|CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS |                                     |                                               |   |               |        |              |  |       |        |   |  |        |       |  |  |       
|                                                | Net revenue                         |                                               | $ | 33,406        |        |              |  | 2,831 |        |   |  |       |       |  |  | 36,237 |       
|                                                | Station operating expenses          |                                               |   | 17,787        |        |              |  | 2,079 |        |   |  |       |       |  |  | 19,866 |       
|                                                | Corporate expenses                  |                                               |   | 3,609         |        |              |  | 120   |        |   |  | (120   | )     |  |  | 3,609  |       
|                                                | Depreciation and amortization       |                                               |   | 593           |        |              |  | 156   |        |   |  |       |       |  |  | 749    |       
|                                                |                                     |                                               |   |               |        |              |  |       |        |   |  |        |       |  |  |       
|                                                |                                     | Operating income from continuing operations   |   |               | 11,417 |              |  |       | 476    |   |  |        | 120   |  |  |        | 12,013 |  
|                                                | Interest expense, net               |                                               |   | 7,222         |        |              |  | 1,347 |        |   |  |       |       |  |  | 8,569  |       
|                                                | Other (income) expense, net         |                                               |   | (54           | )      |              |  |      |        |   |  | 120    |       |  |  | 66     |       
|                                                | Equity in net loss of subsidiaries  |                                               |   | 1,051         |        |              |  |      |        |   |  | (1,051 | )     |  |  |       |       
|                                                | Income tax expense                  |                                               |   | 5,084         |        |              |  | 180   |        |   |  |       |       |  |  | 5,264  |       
|                                                | Discontinued operations, net of tax |                                               |   | 1,793         |        |              |  |      |        |   |  |       |       |  |  | 1,793  |       
|                                                |                                     |                                               |   |               |        |              |  |       |        |   |  |        |       |  |  |       
|                                                |                                     | Net loss                                      |   | $             | (93    | )            |  |       | (1,051 | ) |  |        | 1,051 |  |  |        | (93    | )
|                                                |                                     |                                               |   |               |        |              |  |       |        |   |  |        |       |  |  |       

8



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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC. AND
SUBSIDIARIES


NOTES TO UNAUDITED CONDENSED
CONSOLIDATED

FINANCIAL
STATEMENTS  (Continued)


|                                                |                                     |                                                    |   |               |        |              |  |         |         |   |  |        |       |  |  |        |        |  
|----------------------------------------------- | ----------------------------------- | -------------------------------------------------- | - | ------------- | ------ | ------------ |  | ------- | ------- | - |  | ------ | ----- |  |  | ------ | ------ | -
|                                                |                                     |                                                   
|                                                |                                     | For the Nine Months Ended September 30, 2001      
|                                                |                                     |                                                   
|                                                |                                     | Parent and                                         |   |              
|                                                |                                     | Guarantor                                          |   | Non-Guarantor |        |             
|                                                |                                     | Subsidiaries                                       |   | Subsidiaries  |        | Eliminations |  | Total  
|                                                |                                     |                                                    |   |               |        |              |  |        
|CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS |                                     |                                                    |   |               |        |              |  |         |         |   |  |        |       |  |  |       
|                                                | Net revenue                         |                                                    | $ | 85,047        |        |              |  | 9,293   |         |   |  |       |       |  |  | 94,340 |       
|                                                | Station operating expenses          |                                                    |   | 51,636        |        |              |  | 7,953   |         |   |  |       |       |  |  | 59,589 |       
|                                                | Corporate expenses                  |                                                    |   | 8,004         |        |              |  | 548     |         |   |  | (548   | )     |  |  | 8,004  |       
|                                                | Depreciation and amortization       |                                                    |   | 1,775         |        |              |  | 11,627  |         |   |  |       |       |  |  | 13,402 |       
|                                                |                                     |                                                    |   |               |        |              |  |         |         |   |  |        |       |  |  |       
|                                                |                                     | Operating income (loss) from continuing operations |   |               | 23,632 |              |  |         | (10,835 | ) |  |        | 548   |  |  |        | 13,345 |  
|                                                | Interest expense, net               |                                                    |   | 18,956        |        |              |  | 4,146   |         |   |  |       |       |  |  | 23,102 |       
|                                                | Other (income) expense, net         |                                                    |   | 10,819        |        |              |  | (11,627 | )       |   |  | 548    |       |  |  | (260   | )     
|                                                | Equity in net loss of subsidiaries  |                                                    |   | 3,570         |        |              |  |        |         |   |  | (3,570 | )     |  |  |       |       
|                                                | Income tax (benefit) expense        |                                                    |   | (3,881        | )      |              |  | 216     |         |   |  |       |       |  |  | (3,665 | )     
|                                                | Discontinued operations, net of tax |                                                    |   | (456          | )      |              |  |        |         |   |  |       |       |  |  | (456   | )     
|                                                | Extraordinary item, net of tax      |                                                    |   | (1,896        | )      |              |  |        |         |   |  |       |       |  |  | (1,896 | )     
|                                                |                                     |                                                    |   |               |        |              |  |         |         |   |  |        |       |  |  |       
|                                                |                                     | Net loss                                           |   | $             | (8,184 | )            |  |         | (3,570  | ) |  |        | 3,570 |  |  |        | (8,184 | )
|                                                |                                     |                                                    |   |               |        |              |  |         |         |   |  |        |       |  |  |       

|                                                |                                                                       |                                              |   |               |         |              |  |         |         |   |  |         |        |  |  |         |         |  
|----------------------------------------------- | --------------------------------------------------------------------- | -------------------------------------------- | - | ------------- | ------- | ------------ |  | ------- | ------- | - |  | ------- | ------ |  |  | ------- | ------- | -
|                                                |                                                                       |                                             
|                                                |                                                                       | For the Nine Months Ended September 29, 2002
|                                                |                                                                       |                                             
|                                                |                                                                       | Parent and                                   |   |              
|                                                |                                                                       | Guarantor                                    |   | Non-Guarantor |         |             
|                                                |                                                                       | Subsidiaries                                 |   | Subsidiaries  |         | Eliminations |  | Total  
|                                                |                                                                       |                                              |   |               |         |              |  |        
|CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS |                                                                       |                                              |   |               |         |              |  |         |         |   |  |         |        |  |  |        
|                                                | Net revenue                                                           |                                              | $ | 95,757        |         |              |  | 8,765   |         |   |  |        |        |  |  | 104,522 |        
|                                                | Station operating expenses                                            |                                              |   | 55,149        |         |              |  | 6,340   |         |   |  |        |        |  |  | 61,489  |        
|                                                | Corporate expenses                                                    |                                              |   | 9,559         |         |              |  | 360     |         |   |  | (360    | )      |  |  | 9,559   |        
|                                                | Depreciation and amortization                                         |                                              |   | 1,699         |         |              |  | 502     |         |   |  |        |        |  |  | 2,201   |        
|                                                |                                                                       |                                              |   |               |         |              |  |         |         |   |  |         |        |  |  |        
|                                                |                                                                       | Operating income from continuing operations  |   |               | 29,350  |              |  |         | 1,563   |   |  |         | 360    |  |  |         | 31,273  |  
|                                                | Interest expense, net                                                 |                                              |   | 21,732        |         |              |  | 4,025   |         |   |  |        |        |  |  | 25,757  |        
|                                                | Other (income) expense, net                                           |                                              |   | (558          | )       |              |  | (2      | )       |   |  | 360     |        |  |  | (200    | )      
|                                                | Equity in net loss of subsidiaries                                    |                                              |   | 17,556        |         |              |  |        |         |   |  | (17,556 | )      |  |  |        |        
|                                                | Income tax expense                                                    |                                              |   | 49,738        |         |              |  | 181     |         |   |  |        |        |  |  | 49,919  |        
|                                                | Discontinued operations, net of tax                                   |                                              |   | 1,747         |         |              |  |        |         |   |  |        |        |  |  | 1,747   |        
|                                                | Cumulative effect of a change in accounting
    principle, net of tax |                                              |   | (30,373       | )       |              |  | (14,915 | )       |   |  |        |        |  |  | (45,288 | )      
|                                                |                                                                       |                                              |   |               |         |              |  |         |         |   |  |         |        |  |  |        
|                                                |                                                                       | Net loss                                     |   | $             | (87,744 | )            |  |         | (17,556 | ) |  |         | 17,556 |  |  |         | (87,744 | )
|                                                |                                                                       |                                              |   |               |         |              |  |         |         |   |  |         |        |  |  |        

9



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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC. AND
SUBSIDIARIES


NOTES TO UNAUDITED CONDENSED
CONSOLIDATED

FINANCIAL
STATEMENTS  (Continued)


|                                                |                                      |                                              |   |               |   |              |  |       |   |  |  |   |  |  |  |         |  
|----------------------------------------------- | ------------------------------------ | -------------------------------------------- | - | ------------- | - | ------------ |  | ----- | - |  |  | - |  |  |  | ------- | -
|                                                |                                      |                                             
|                                                |                                      | For the Nine Months Ended September 30, 2001
|                                                |                                      |                                             
|                                                |                                      | Parent and                                   |   |              
|                                                |                                      | Guarantor                                    |   | Non-Guarantor |   |             
|                                                |                                      | Subsidiaries                                 |   | Subsidiaries  |   | Eliminations |  | Total
|                                                |                                      |                                              |   |               |   |              |  |      
|CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS |                                      |                                              |   |               |   |              |  |       |   |  |  |   |  |  |  |        
|                                                | Cash flows from operating activities |                                              | $ | 17,028        |   |              |  | 1,497 |   |  |  |  |  |  |  | 18,525  |  
|                                                |                                      |                                              |   |               |   |              |  |       |   |  |  |   |  |  |  |        
|                                                | Cash flows from investing activities |                                              | $ | (23,960       | ) |              |  | (942  | ) |  |  |  |  |  |  | (24,902 | )
|                                                |                                      |                                              |   |               |   |              |  |       |   |  |  |   |  |  |  |        
|                                                | Cash flows from financing activities |                                              | $ | 18,631        |   |              |  | (87   | ) |  |  |  |  |  |  | 18,544  |  
|                                                |                                      |                                              |   |               |   |              |  |       |   |  |  |   |  |  |  |        

|                                                |                                      |                                              |   |               |   |              |  |       |   |  |  |   |  |  |  |        |  
|----------------------------------------------- | ------------------------------------ | -------------------------------------------- | - | ------------- | - | ------------ |  | ----- | - |  |  | - |  |  |  | ------ | -
|                                                |                                      |                                             
|                                                |                                      | For the Nine Months Ended September 29, 2002
|                                                |                                      |                                             
|                                                |                                      | Parent and                                   |   |              
|                                                |                                      | Guarantor                                    |   | Non-Guarantor |   |             
|                                                |                                      | Subsidiaries                                 |   | Subsidiaries  |   | Eliminations |  | Total
|                                                |                                      |                                              |   |               |   |              |  |      
|CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS |                                      |                                              |   |               |   |              |  |       |   |  |  |   |  |  |  |       
|                                                | Cash flows from operating activities |                                              | $ | 18,786        |   |              |  | 109   |   |  |  |  |  |  |  | 18,895 |  
|                                                |                                      |                                              |   |               |   |              |  |       |   |  |  |   |  |  |  |       
|                                                | Cash flows from investing activities |                                              | $ | 10,494        |   |              |  | (71   | ) |  |  |  |  |  |  | 10,423 |  
|                                                |                                      |                                              |   |               |   |              |  |       |   |  |  |   |  |  |  |       
|                                                | Cash flows from financing activities |                                              | $ | (42           | ) |              |  | (98   | ) |  |  |  |  |  |  | (140   | )
|                                                |                                      |                                              |   |               |   |              |  |       |   |  |  |   |  |  |  |       

3.     New Accounting
Pronouncements and Cumulative Effect of Accounting
Change

In July 2001, the Financial Accounting Standards
Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 141,
Business Combinations, and SFAS No. 142,
Goodwill and Other Intangible Assets. SFAS
No. 141 requires that the purchase method of accounting be
used for all business combinations initiated after June 30,
2001 as well as for all purchase method business combinations
completed after June 30, 2001. SFAS No. 141 also
specifies the criteria that intangible assets acquired in a
purchase method business combination must meet to be recognized
and reported apart from goodwill, noting that any purchase price
allocable to an assembled workforce may not be accounted for
separately. 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. 141 upon its issuance and 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.

10



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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC. AND
SUBSIDIARIES


NOTES TO UNAUDITED CONDENSED
CONSOLIDATED

FINANCIAL
STATEMENTS  (Continued)


The Company will perform an annual impairment
review of its indefinite-life intangible assets and goodwill
during the fourth quarter of each fiscal year, commencing in the
fourth quarter of 2002. 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 subjected to the transition
provision of SFAS No. 142. Amortization expense related to
goodwill and identifiable intangible assets was
$4.5 million and $12.0 million for the three- and
nine-month periods ended September 30, 2001, respectively.
The following table presents adjusted financial results for the
three- and nine-month periods ended September 30, 2001 and
September 29, 2002, respectively, on a basis consistent
with the new accounting principle.

|                                                                                    |                              |                                       |        |                   |   |           |     |           |  |  |        |       |   |  |         |       |  
|----------------------------------------------------------------------------------- | ---------------------------- | ------------------------------------- | ------ | ----------------- | - | --------- | --- | --------- |  |  | ------ | ----- | - |  | ------- | ----- | -
|                                                                                    |                              |                                       |        |                  
|                                                                                    |                              | Three Months Ended                    |        | Nine Months Ended
|                                                                                    |                              |                                       |        |                  
|                                                                                    |                              | Sept. 30,                             |        | Sept. 29,         |   | Sept. 30, |     | Sept. 29,
|                                                                                    |                              | 2001                                  |        | 2002              |   | 2001      |     | 2002     
|                                                                                    |                              |                                       |        |                   |   |           |     |          
|                                                                                    |                              |                                      
|                                                                                    |                              | (In thousands, except per share data)
|                                                                                    |                              | (Unaudited)                          
|Reported net loss:                                                                  |                              | $                                     | (1,637 | )                 |   |           | (93 | )         |  |  | (8,184 | )     |   |  | (87,744 | )    
|Add
    back:cumulative effect of
    accounting principle, net of tax(1)           |                              |                                       |       |                   |   |           |    |           |  |  |       |       |   |  | 45,288  |      
|Add
    back:income tax valuation
    allowance(2)                                  |                              |                                       |       |                   |   |           |    |           |  |  |       |       |   |  | 55,358  |      
|Add
    back:amortization of goodwill
    and intangible assets(3)                  |                              |                                       | 4,461  |                   |   |           |    |           |  |  | 12,023 |       |   |  |        |      
|Income tax expense adjustment(3):                                                   |                              |                                       | (5,207 | )                 |   |           |    |           |  |  | (8,256 | )     |   |  |        |      
|                                                                                    |                              |                                       |        |                   |   |           |     |           |  |  |        |       |   |  |         |      
|Adjusted (loss) net income                                                          |                              | $                                     | (2,383 | )                 |   |           | (93 | )         |  |  | (4,417 | )     |   |  | 12,902  |      
|                                                                                    |                              |                                       |        |                   |   |           |     |           |  |  |        |       |   |  |         |      
|Basic and diluted (loss) income per share:                                          |                              |                                       |        |                   |   |           |     |           |  |  |        |       |   |  |         |      
|                                                                                    | Reported net loss per share: |                                       | $      | (0.03             | ) |           |     |          |  |  |        | (0.13 | ) |  |         | (1.36 | )
|Cumulative effect per share of a change in
    accounting principle, net of tax(1): |                              |                                       |       |                   |   |           |    |           |  |  |       |       |   |  | 0.70    |      
|Income tax valuation allowance per share(2):                                        |                              |                                       |       |                   |   |           |    |           |  |  |       |       |   |  | 0.86    |      
|Amortization of goodwill and intangible assets
    per share(3):                    |                              |                                       | 0.07   |                   |   |           |    |           |  |  | 0.19   |       |   |  |        |      
|Income tax adjustment per share(3):                                                 |                              |                                       | (0.08  | )                 |   |           |    |           |  |  | (0.13  | )     |   |  |        |      
|                                                                                    |                              |                                       |        |                   |   |           |     |           |  |  |        |       |   |  |         |      
|Adjusted net (loss) income per share:                                               |                              | $                                     | (0.04  | )                 |   |           |    |           |  |  | (0.07  | )     |   |  | 0.20    |      
|                                                                                    |                              |                                       |        |                   |   |           |     |           |  |  |        |       |   |  |         |      



---



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

11



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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC. AND
SUBSIDIARIES


NOTES TO UNAUDITED CONDENSED
CONSOLIDATED

FINANCIAL
STATEMENTS  (Continued)




|    |                                                                                                                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | The adjusted financial results in the three- and
    nine-month periods ended September 30, 2001 add back
    non-cash goodwill and intangible assets amortization of
    $4.5 million and $12.0 million, respectively, and
    reflect adjusted income tax expense assuming that SFAS
    No. 142 was effective as of January 1, 2001.

In August 2001, the FASB issued SFAS
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, which addresses financial accounting
and reporting for the impairment and disposal of long-lived
assets. SFAS No. 144 requires that long-lived assets be
reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used
is measured by a comparison of the carrying amount of an asset
to future net cash flows expected to be generated by the asset.
If the carrying amount of an asset exceeds its estimated future
cash flows, an impairment charge is recognized in the amount by
which the carrying amount of the asset exceeds the estimated
fair value of the asset. SFAS No. 144 also requires
companies to separately report discontinued operations and
extends the reporting requirements to a component of an entity
that either has been disposed of (by sale, abandonment, or in a
distribution to owners) or is classified as held for sale.
Assets to be disposed of are reported at the lower of the
carrying amount or estimated fair value less costs to sell. The
Company adopted SFAS No. 144 on December 31, 2001.
Refer to Note (5) SALE OF STATION.

4.     Acquisitions

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 purchase 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 is permitted to broadcast its
programming over radio stations KFSG-FM (formerly KMJR-FM) and
KFSB-FM (formerly KNJR-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, during the term of the
TBA. Pursuant to the Second Amendment, we made additional
non-refundable deposits of $15.0 million on March 12,
2002 and $5.0 million on September 27, 2002, both of
which will be credited towards the purchase price at closing.
Additionally, we are required to make a payment to ICFG of
$15.0 million on March 12, 2003, if the KXOL Closing
has not occurred or the amended Asset Purchase Agreement has not
terminated by such date. All payments are non-refundable (except
in case of breach by ICFG) and will be credited towards the
purchase price at the KXOL Closing.

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 value of

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SPANISH BROADCASTING SYSTEM, INC. AND
SUBSIDIARIES


NOTES TO UNAUDITED CONDENSED
CONSOLIDATED

FINANCIAL
STATEMENTS  (Continued)


approximately $8.9 million based upon the
Black-Scholes option pricing model in accordance with SFAS
No. 123 Accounting for Stock-Based
Compensation. The fair market value of this warrant was
recorded as an increase to intangible assets and additional
paid-in capital on the date of grant. Additionally, if ICFG
ceases to broadcast its programming under the 93.5 TBA at any
time after September 1, 2002, commencing the last day of
such calendar month, we will issue to ICFG each month
thereafter, 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
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 from the date of issuance after which they
will expire if not exercised. If these warrants are ever issued,
the fair value of these warrants would be recorded as a
programming expense. On August 14, 2002, ICFG extended the
93.5 TBA for an additional six months commencing on
September 1, 2002. The 93.5 TBA currently expires on
February 28, 2003.

Pursuant to 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. If we do not make the March 12, 2003
payment discussed above, the TBA and the amended Asset Purchase
Agreement will both terminate on such date. The term of the
93.5 TBA will continue until the earlier to occur of
(i) the KXOL Closing or (ii) February 28, 2003,
unless extended by ICFG for an additional ten-month period. ICFG
has the right to cancel the 93.5 TBA at anytime upon thirty days
prior written notice.

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.

5.     Sale of
Station

On June 4, 2002, the Company and one of its
subsidiaries, KTCY Licensing, Inc., entered into an asset
purchase agreement (the Entravision Agreement) with
Entravision-Texas Limited Partnership, a Texas limited
partnership (Entravision) for the sale of certain
assets and the FCC license of KTCY-FM serving Dallas, Texas for
a purchase price of $35.0 million. Additionally, KTCY
Licensing, Inc. entered into a time brokerage agreement with
Entravision Communications Corporation, a Delaware corporation
(Entravision Communications), whereby Entravision
Communications was permitted to broadcast its programming over
radio station KTCY-FM until the closing of the asset sale. The
FCC granted approval for the transfer of the FCC license of
KTCY-FM and on August 23, 2002, the Company sold
KTCY-FMs assets held for sale consisting of
$31.4 million of intangible assets and $1.3 million of
property and equipment. The Company recognized a gain of
approximately $1.8 million, net of closing costs and taxes.

The Company determined that the sale of certain
assets and the FCC license of KTCY-FM met the criteria in
accordance with SFAS No. 144 to classify KTCY-FMs
assets as held for sale and its operations as discontinued
operations. The results of operations in the current year and
prior year periods of KTCY-FM have been classified as
discontinued operations in the unaudited condensed consolidated
statements of operations.

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

General

The performance of a radio station group is
customarily measured by its ability to generate broadcast cash
flow and EBITDA. Broadcast cash flow consists of operating
income from continuing operations excluding corporate expenses
and depreciation and amortization. EBITDA consists of operating
income from continuing operations excluding depreciation and
amortization. Broadcast cash flow margin consists of broadcast
cash flow divided by net revenue. Broadcast cash flow and EBITDA
are not measures of performance calculated in accordance with
generally accepted accounting principles. These measures are not
intended to be substitutes for operating income (loss), cash
flow from operating activities, net income (loss), or any other
measure for determining operating performance or liquidity that
is calculated in accordance with generally accepted accounting
principles. Broadcast cash flow and EBITDA do not take into
account our debt service requirements and/or any other
commitments.

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 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.

Results of Operations

Three
Months Ended September 29, 2002 Compared to the Three
Months Ended September 30, 2001.

Net Revenue.Net
revenue was $36.2 million for the three months ended
September 29, 2002 compared to $35.0 million for the
three months ended September 30, 2001, an increase of
$1.2 million or 3.4%. The increase was generated by the
growth in revenue from our Los Angeles market and promotional
events in various other markets. The revenue growth was
partially offset by a decrease in barter revenue related to the
AOL Time Warner barter agreement that concluded in August 2002.

Station Operating
Expenses.Station operating expenses
were $19.9 million for the three months ended
September 29, 2002 compared to $20.8 million for the
three months ended September 30, 2001, a decrease of
$0.9 million or 4.3%. The decrease was primarily attributed
to lower barter expenses due to the conclusion of the AOL Time
Warner agreement in August 2002 and a decrease in the allowance
for doubtful accounts due to improved collections. The decrease
in station operating expenses was offset by increases in
expenses related to revenue such as commissions and promotional
event expenses.

Broadcast Cash Flow.Broadcast cash flow was $16.4 million for the three months
ended September 29, 2002 compared to $14.2 million for
the three months ended September 30, 2001, an increase of
$2.2 million or 15.5%. Our broadcast cash flow margin
increased to 45.3% for the three months ended September 29,
2002 compared to 40.6% for the three months ended
September 30, 2001. The broadcast cash flow margin
increased due to the increase in net revenue coupled with our
continuous efforts to control operating expenses and the
decrease in barter and allowance for doubtful accounts.
Additionally, the broadcast cash flow margin was positively
impacted by the growth in net revenue from our Los Angeles
market compared to the prior year period.

Corporate Expenses.Corporate expenses were $3.6 million for the three months
ended September 29, 2002 compared to $3.0 million for
the three months ended September 30, 2001, an increase of
$0.6 million or 20.0%. The increase in corporate expenses
resulted mainly from an increase in legal expenses.

EBITDA.EBITDA was
$12.8 million for the three months ended September 29,
2002 compared to $11.2 million for the three months ended
September 30, 2001, an increase of $1.6 million or
14.3%. The

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increase in EBITDA was attributed to the increase
in broadcast cash flow, partially offset by the increase in
corporate expenses.


Depreciation and
Amortization.Depreciation and
amortization expense was $0.7 million for the three months
ended September 29, 2002 compared to $4.9 million for
the three months ended September 30, 2001, a decrease of
$4.2 million or 85.7%. The decrease was related to the
adoption of SFAS No. 142, which ceased the amortization of
all our intangible assets and goodwill, effective
December 31, 2001.

Operating Income from Continuing
Operations.Operating income from
continuing operations was $12.0 million for the three
months ended September 29, 2002 compared to
$6.3 million for the three months ended September 30,
2001, an increase of $5.7 million or 90.5%. The increase in
operating income from continuing operations was caused by an
increase in EBITDA and a decrease in amortization expense due to
the adoption of SFAS No. 142.

Interest Expense,
Net.Interest expense, net, was
$8.6 million for the three months ended September 29,
2002 compared to $9.0 million for the three months ended
September 30, 2001, a decrease of $0.4 million or
4.4%. The decrease in interest expense, net, was primarily due
to fewer days of interest compared to the prior period.

Income Taxes.Income
tax expense was $5.3 million for the three months ended
September 29, 2002 compared to an income tax benefit of
$(1.1) million for the three months ended
September 30, 2001. Income tax expense of $5.3 million
was based on our high estimated effective book tax rate for the
2002 fiscal year. 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 $1.8 million for the three
months ended September 29, 2002 and a minimal loss for the
three months ended September 30, 2001. 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 September 29, 2002 and September 30, 2001
have been classified as discontinued operations. On
August 23, 2002, the Company sold KTCY-FMs assets
held for sale consisting of intangible assets and property and
equipment and recognized a gain of approximately
$1.8 million, net of closing costs and taxes.

Net Loss.Net loss
was $0.1 million for the three months ended
September 29, 2002 compared to a net loss of
$1.6 million for the three months ended September 30,
2001. The net loss for the three months ended September 29,
2002 was due to the income tax expense based on our high
effective book tax rate for the 2002 fiscal year.



| |                                                                                                   
| | --------------------------------------------------------------------------------------------------
| | Nine Months Ended September 29, 2002
    Compared to the Nine Months Ended September 30,
    2001.

Net Revenue.Net
revenue was $104.5 million for the nine months ended
September 29, 2002 compared to $94.3 million for the
nine months ended September 30, 2001, an increase of
$10.2 million or 10.8%. The increase was generated by the
growth in revenue from our Los Angeles market, promotional
events in various other markets and an increase in local
revenue. The revenue growth was partially offset by a decrease
in barter revenue related to the AOL Time Warner barter
agreement that concluded in August 2002.

Station Operating
Expenses.Station operating expenses
were $61.5 million for the nine months ended September 29,
2002 compared to $59.6 million for the nine months ended
September 30, 2001, an increase of $1.9 million or
3.2%. The increase was primarily attributed to an increase in
national commissions, advertising and promotional expenditures
in various markets, as well as, the increase in costs related to
KXOL-FM which was operated for the entire nine-months ended
September 29, 2002 compared to five-months in the prior
year period. In turn, these increases were offset by decreases
in barter expenses due to the conclusion of the AOL Time Warner
agreement in August 2002, professional fees and the allowance
for doubtful accounts.

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Broadcast Cash Flow.Broadcast cash flow was $43.0 million for the nine months
ended September 29, 2002 compared to $34.8 million for
the nine months ended September 30, 2001, an increase of
$8.2 million or 23.6%. Our broadcast cash flow margin
increased to 41.1% for the nine months ended September 29,
2002 compared to 36.9% for the nine months ended
September 30, 2001. The broadcast cash flow margin
increased due to the increase in net revenue and the decreases
in the allowance for doubtful accounts and the AOL barter
expense. Additionally, the broadcast cash flow margin was
positively impacted by the growth in net revenue from our Los
Angeles market compared to the prior year period.

Corporate Expenses.Corporate expenses were $9.6 million for the nine months
ended September 29, 2002 compared to $8.0 million for
the nine months ended September 30, 2001, an increase of
$1.6 million or 20.0%. The increase in corporate expenses
resulted mainly from an increase in legal expenses.

EBITDA.EBITDA was
$33.5 million for the nine months ended September 29,
2002 compared to $26.7 million for the nine months ended
September 30, 2001, an increase of $6.8 million or
25.5%. The increase in EBITDA was attributed to the increase in
broadcast cash flow, partially offset by the increase in
corporate expenses.

Depreciation and
Amortization.Depreciation and
amortization expense was $2.2 million for the nine months
ended September 29, 2002 compared to $13.4 million for
the nine months ended September 30, 2001, a decrease of
$11.2 million or 83.6%. The decrease was related to the
adoption of SFAS No. 142, which ceased the amortization of
all our intangible assets and goodwill, effective
December 31, 2001.

Operating Income From Continuing
Operations.Operating income from
continuing operations was $31.3 million for the nine months
ended September 29, 2002 compared to $13.3 million for
the nine months ended September 30, 2001, an increase of
$18.0 million or 135.3%. The increase in operating income
from continuing operations was caused by an increase in EBITDA
and a decrease in amortization expense due to the adoption of
SFAS No. 142.

Interest Expense,
Net.Interest expense, net, was
$25.8 million for the nine months ended September 29,
2002 compared to $23.1 million for the nine months ended
September 30, 2001, an increase of $2.7 million or
11.7%. The increase in interest expense, net, was primarily due
to interest expense incurred on the additional
$100.0 million 9 5/8% senior subordinated notes that
were issued in June 2001. In addition, interest expense, net,
increased due to a decrease in interest income resulting from a
general decline in interest rates on our cash balances.

Other, Net.Other
income, net, was $0.2 million for the nine months ended
September 29, 2002 due mainly to an insurance recovery for
a claim related to the New York facilities. Other income, net,
was $0.3 million for the nine months ended
September 30, 2001 due to an insurance recovery for a claim
related to an office building in Los Angeles.

Income Taxes.Income
tax expense was $49.9 million for the nine months ended
September 29, 2002 compared to an income tax benefit of
$(3.7) million for the nine months ended September 30,
2001. Income tax expense for the nine months ended
September 29, 2002 consisted primarily of a
$55.4 million non-cash charge to income tax expense to
establish a valuation allowance against our deferred tax assets
effective December 31, 2001. As a result of adopting SFAS
No. 142, amortization of indefinite-life intangible assets
ceased and the Company could not be assured that the reversals
of our deferred tax liabilities related to those indefinite-life
intangible assets would occur within our net operating loss
carry-forward period. Additionally, the Company recorded an
income tax expense of $8.4 million based on our high
estimated effective tax rate for the 2002 fiscal year, offset by
a $13.9 million non-cash income tax benefit due to a
reduction of some of the Companys valuation allowance on
its deferred taxes, determined in accordance with SFAS
No. 109 and currently available information.

Discontinued Operations, Net of
Taxes.Income on discontinued
operations, net of taxes, was $1.7 million for the nine
months ended September 29, 2002 compared to a loss on
discontinued operations, net of taxes of $0.5 million for
the nine months ended September 30, 2001. 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.
KTCY-FMs results from operations for the nine months

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ended September 29, 2002 and
September 30, 2001 have been classified as discontinued
operations. On August 23, 2002, the Company sold
KTCY-FMs assets held for sale consisting of intangible
assets and property and equipment and recognized a gain of
approximately $1.8 million, net of closing costs and taxes.


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

Net Loss.Net loss
was $87.7 million for the nine months ended
September 29, 2002 compared to $8.2 million for the
nine months ended September 30, 2001. The net loss for the
nine months ended September 29, 2002 was due to income tax
expense and the cumulative effect of a change in accounting
principle, net of income tax benefit, related to the adoption of
SFAS No. 142.

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 $18.9 million for the nine months ended
September 29, 2002 compared to net cash flows provided by
operating activities of $18.5 million for the nine months
ended September 30, 2001. Changes in our net cash flows
from operating activities were primarily a result of changes in
working capital balances.

Net cash flows provided by investing activities
were $10.4 million for the nine months ended
September 29, 2002 compared to net cash flows used in
investing activities of $24.9 million for the nine months
ended September 30, 2001. Changes in our net cash flows
from investing activities were primarily a result of the
proceeds from the sale of radio station KTCY-FM during the nine
months ended September 29, 2002 as compared to the nine
months ended September 30, 2001.

Net cash flows used in financing activities were
$0.1 million for the nine months ended September 29,
2002 compared to net cash flows provided by financing activities
of $18.5 million for the nine months ended September 30,
2001. Our net cash flows from financing activities during the
nine months ended September 30, 2001 were primarily a
result of our Rule 144A offering of $100 million of
9 5/8% senior subordinated notes due 2009 and our repayment
of the outstanding indebtedness under our senior credit facility
which we then terminated.

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

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acquisitions from time to time in the ordinary
course of business. 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 purchase 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 is permitted to broadcast its
programming over radio stations KFSG-FM (formerly KMJR-FM) and
KFSB-FM (formerly KNJR-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, during the term of the
TBA. Pursuant to the Second Amendment, we made additional
non-refundable deposits of $15.0 million on March 12,
2002 and $5.0 million on September 27, 2002, both of
which will be credited towards the purchase price at closing.
Additionally, we are required to make a payment to ICFG of
$15.0 million on March 12, 2003, if the KXOL Closing
has not occurred or the amended Asset Purchase Agreement has not
terminated by such date. 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.

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 value of approximately
$8.9 million based on the Black-Scholes option pricing
model in accordance with SFAS No. 123 Accounting for
Stock-Based Compensation. The fair market value of this
warrant was recorded as an increase to intangible assets and
additional paid-in capital on the date of grant. Additionally,
if ICFG ceases to broadcast its programming under the
93.5 TBA at any time after September 1, 2002,
commencing the last day of such calendar month, we will issue to
ICFG each month thereafter, 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 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 from the date of
issuance after which they will expire if not exercised. If these
warrants are ever issued, the fair value of these warrants would
be recorded as a programming expense. On August 14, 2002,
ICFG extended the 93.5 TBA for an additional six months
commencing on September 1, 2002. The 93.5 TBA
currently expires on February 28, 2003.

Pursuant to 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. If we do not make the March 12, 2003
payment discussed above, the TBA and the amended Asset Purchase
Agreement will both terminate on such date. The term of the
93.5 TBA will continue until the earlier to occur of
(i) the KXOL Closing or (ii) February 28, 2003,
unless extended by ICFG for an additional ten-month period. ICFG
has the right to cancel the 93.5 TBA at any time upon
thirty days prior written notice.

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

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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, 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 and Cumulative
Effect of Accounting Change

In July 2001, the Financial Accounting
Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 141,
Business Combinations, and SFAS No. 142,
Goodwill and Other Intangible Assets. SFAS
No. 141 requires that the purchase method of accounting be
used for all business combinations initiated after June 30,
2001 as well as for all purchase method business combinations
completed after June 30, 2001. SFAS No. 141 also specifies
the criteria that intangible assets acquired in a purchase
method business combination must meet to be recognized and
reported apart from goodwill, noting that any purchase price
allocable to an assembled workforce may not be accounted for
separately. 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. 141 upon its issuance and 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.

The Company will perform an annual impairment
review of its indefinite-life intangible assets and goodwill
during the fourth quarter of each fiscal year, commencing in the
fourth quarter of 2002. 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 subjected to the
transition provision of SFAS No. 142. Amortization expense
related to goodwill and identifiable intangible assets was
$4.5 million and $12.0 million for the three- and
nine-month periods ended September 30, 2001, respectively.
The following table presents

19



---



##### Table of Contents



adjusted financial results for the three- and
nine-month periods ended September 30, 2001 and
September 29, 2002, respectively, on a basis consistent
with the new accounting principle.


|                                                                      |                                                                                     |                                       |        |                   |   |           |     |           |  |  |        |       |   |  |         |       |  
|--------------------------------------------------------------------- | ----------------------------------------------------------------------------------- | ------------------------------------- | ------ | ----------------- | - | --------- | --- | --------- |  |  | ------ | ----- | - |  | ------- | ----- | -
|                                                                      |                                                                                     |                                       |        |                  
|                                                                      |                                                                                     | Three Months Ended                    |        | Nine Months Ended
|                                                                      |                                                                                     |                                       |        |                  
|                                                                      |                                                                                     | Sept. 30,                             |        | Sept. 29,         |   | Sept. 30, |     | Sept. 29,
|                                                                      |                                                                                     | 2001                                  |        | 2002              |   | 2001      |     | 2002     
|                                                                      |                                                                                     |                                       |        |                   |   |           |     |          
|                                                                      |                                                                                     |                                      
|                                                                      |                                                                                     | (In thousands, except per share data)
|                                                                      |                                                                                     | (Unaudited)                          
|Reported net loss:                                                    |                                                                                     | $                                     | (1,637 | )                 |   |           | (93 | )         |  |  | (8,184 | )     |   |  | (87,744 | )    
|Add back:cumulative
    effect of accounting principle, net of tax(1) |                                                                                     |                                       |       |                   |   |           |    |           |  |  |       |       |   |  | 45,288  |      
|Add back:income tax
    valuation allowance(2)                        |                                                                                     |                                       |       |                   |   |           |    |           |  |  |       |       |   |  | 55,358  |      
|Add back:amortization of goodwill and
    intangible assets(3)        |                                                                                     |                                       | 4,461  |                   |   |           |    |           |  |  | 12,023 |       |   |  |        |      
|Income tax expense adjustment(3):                                     |                                                                                     |                                       | (5,207 | )                 |   |           |    |           |  |  | (8,256 | )     |   |  |        |      
|                                                                      |                                                                                     |                                       |        |                   |   |           |     |           |  |  |        |       |   |  |         |      
|Adjusted (loss) net income                                            |                                                                                     | $                                     | (2,383 | )                 |   |           | (93 | )         |  |  | (4,417 | )     |   |  | 12,902  |      
|                                                                      |                                                                                     |                                       |        |                   |   |           |     |           |  |  |        |       |   |  |         |      
|Basic and diluted (loss) income per share:                            |                                                                                     |                                       |        |                   |   |           |     |           |  |  |        |       |   |  |         |      
|                                                                      | Reported net loss per share:                                                        |                                       | $      | (0.03             | ) |           |     |          |  |  |        | (0.13 | ) |  |         | (1.36 | )
|                                                                      | Cumulative effect per share of a change in
    accounting principle, net of tax(1): |                                       |        |                  |   |           |     |          |  |  |        |      |   |  |         | 0.70  |  
|                                                                      | Income tax valuation allowance per share(2):                                        |                                       |        |                  |   |           |     |          |  |  |        |      |   |  |         | 0.86  |  
|                                                                      | Amortization of goodwill and intangible assets
    per share(3):                    |                                       |        | 0.07              |   |           |     |          |  |  |        | 0.19  |   |  |         |      |  
|                                                                      | Income tax adjustment per share(3):                                                 |                                       |        | (0.08             | ) |           |     |          |  |  |        | (0.13 | ) |  |         |      |  
|                                                                      |                                                                                     |                                       |        |                   |   |           |     |           |  |  |        |       |   |  |         |      
|Adjusted net (loss) income per share:                                 |                                                                                     | $                                     | (0.04  | )                 |   |           |    |           |  |  | (0.07  | )     |   |  | 0.20    |      
|                                                                      |                                                                                     |                                       |        |                   |   |           |     |           |  |  |        |       |   |  |         |      



---



|    |                                                                                                                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 adopting 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.                                                                                                     
|   
|(3) | The adjusted financial results in the three- and
    nine-month periods ended September 30, 2001 add back
    non-cash goodwill and intangible assets amortization of
    $4.5 million and $12.0 million, respectively, and
    reflect adjusted income tax expense assuming that SFAS
    No. 142 was effective as of January 1, 2001.

In August 2001, the FASB issued SFAS
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, which addresses financial accounting
and reporting for the impairment and disposal of long-lived
assets. SFAS No. 144 requires that long-lived assets be
reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used
is measured by a comparison of the carrying amount of an asset
to future net cash flows expected to be generated by the asset.
If the carrying amount of an asset exceeds its estimated future
cash flows, an impairment charge is recognized in the amount by
which the carrying amount of the asset exceeds the estimated
fair value of the asset. SFAS No. 144 also requires
companies to separately report discontinued operations and
extends the reporting requirements to a component of an entity
that either has been disposed of (by sale, abandonment, or in a
distribution to owners) or is classified as held for sale.
Assets to be disposed of are reported at the lower of the
carrying amount or estimated fair value less costs to sell. The
Company adopted SFAS No. 144 on December 31, 2001.
Refer to Note (5) SALE OF STATION in the
accompanying unaudited condensed consolidated financial
statements.

20



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##### Table of Contents



Disclosure Regarding Forward-Looking
Statements

This report on Form 10-Q contains both
historical and forward-looking statements. All statements other
than statements of historical fact are, or may be deemed to be,
forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, as
amended. These forward-looking statements are not based on
historical facts, but rather reflect our current expectations
concerning future results and events. These forward-looking
statements generally can be identified by the use of statements
that include phrases such as believe,
expect, anticipate, intend,
plan, foresee, likely,
will or other similar words or phrases. Similarly,
statements that describe our objectives, plans or goals are, or
may be, forward-looking statements. These forward-looking
statements involve known and unknown risks, uncertainties and
other factors which may cause our actual results, performance or
achievements to be different from any future results,
performance and achievements expressed or implied by these
statements. Factors that could cause actual results to differ
from those expressed in forward-looking statements include, but
are not limited to:



| |   |                                                                                                                                                                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Our 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 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 may still be able to incur substantially more debt
    which could limit our ability to grow and compete;                                                                                                       
|
| |  | If any lender to us or our subsidiaries
    accelerates any debt in the event of a default under our or our
    subsidiaries indebtedness, we and our subsidiaries may not
    have the resources to repay that debt, and an event of default
    under any material debt instrument would result and 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 securities and our ability to raise capital could
    be adversely affected;                                                                                                                                   
|
| |  | 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;                                                                                    

21



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##### Table of Contents





| |   |                                                                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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;
|
| |  | 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;                                                                                                                                                                                            
|
| |  | 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 three-year period ended September 30, 2001, for the
three-month transitional period ended December 30, 2001, and for
the nine-month period ended September 29, 2002. 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 1.     Legal
Proceedings

As reported in the Companys quarterly
report on Form 10-Q for the quarter ended March 31,
2002, on November 28, 2001, a class action lawsuit was
filed in the United States District Court for the Southern
District of New York on behalf of purchasers who acquired shares
of our Class A common stock pursuant to the registration
statement and prospectus (collectively, the
Prospectus) relating to our initial public offering
which closed on November 2, 1999 (the IPO). The
complaint was amended on April 19, 2002. The lawsuit was
filed against SBS, eight underwriters of the IPO and/or their
successors-in-interest (collectively, the
Underwriters), two members of our senior management
team, one of which is our Chairman of the Board of Directors,
and an additional director (collectively, the
Individuals). The claims being made under the
complaint are similar to claims currently being made in over 300
class action suits filed against companies with

22



---



##### Table of Contents



recent initial public offerings and their
underwriters. All of these suits, including the one involving
SBS, have been assigned for consolidated pretrial purposes to
one judge.


The class action complaint alleges violations of
the federal securities laws, specifically that the Prospectus
contained materially false and misleading statements based on
alleged misstatements and/or omissions of material facts
relating to underwriting commissions. The complaint also alleges
Rule 10b-5 violations by the Underwriters and SBS, but not
by the Individuals. In addition, the complaint alleges
violations of Section 15 of the Securities Act and
Section 20(a) of the Exchange Act by the Individuals. We
believe that we would have a valid claim against the
Underwriters for indemnification in the event that the
plaintiffs were to be awarded damages as a result of such
lawsuit. Motions to dismiss the complaints covering issues
common among all issuer defendants in the consolidated cases and
issues common among all underwriter defendants in the
consolidated cases have been fully briefed and were argued on
November 1, 2002. Discovery has been stayed pending
decision on the motions to dismiss.

As reported in the Companys quarterly
report on Form 10-Q for the quarter ended March 31,
2002, on June 14, 2001, an action was filed in the Circuit
Court of the Eleventh Judicial Circuit in and for Miami-Dade
County, Florida, by Julio Rumbaut against SBS, alleging that he
was entitled to compensation for work performed for SBS and a
commission for the pending purchase of a radio station by SBS.
Mr. Rumbaut subsequently amended his theory of damages and
claimed approximately $8.0 million in damages, plus
attorneys fees and pre-judgment interest. On July 29,
2002, a final judgment was entered in favor of the plaintiff for
a total of $1.5 million consisting of compensation for
executive services of $0.5 million and $1.0 million
for the plaintiffs contribution towards the pending
purchase of a radio station. The final judgment was subsequently
amended to reflect an award of $1.2 million, consisting of
compensation for executive services of $0.2 million and
$1.0 million for the plaintiffs contribution towards
the pending purchase of a radio station. The Company has accrued
for this judgment in the condensed consolidated financial
statements for the three- and nine-month periods ended
September 29, 2002. The Company has filed a notice of
appeal and is considering additional legal options. After the
amended final judgment was entered, the Court held that the
plaintiff was entitled to prejudgment interest totaling
$0.2 million. On October 11, 2002, the Company made a
payment of $1.4 million into an escrow account for the
final judgment and postjudgment interest, pending the appeal.
The Court is currently considering the amount of attorneys
fees to be awarded to the plaintiff.

As reported in the Companys quarterly
report on Form 10-Q for the quarter ended June 30,
2002, on June 12, 2002, SBS filed a lawsuit in the United
States District Court for the Southern District of Florida
against Clear Channel Communications (Clear Channel)
and Hispanic Broadcasting Corporation (HBC), and
filed an Amended Complaint on July 31, 2002. The lawsuit
asserts federal and state antitrust law violations and other
state law claims and alleges that Clear Channel and HBC have
adversely affected SBSs ability to raise capital,
depressed SBSs share price, impugned SBSs
reputation, made station acquisitions more difficult, and
interfered with SBSs business opportunities and
contractual arrangements. SBS is seeking actual damages in
excess of $500 million, which are to be trebled under
anti-trust law. Both defendants have moved to dismiss the
Amended Complaint and briefing on this motion is underway.
Discovery has commenced in this action, which is scheduled to be
ready for trial in January 2004.

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






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

On September 30, 2002, the Company
terminated its lease for a two-bedroom furnished condominium
apartment in midtown Manhattan which the Company leased since
August 1987 from Mr. Alarcón Jr., our Chief Executive
Officer, President and Chairman of the Board of Directors, for a
monthly rent of $9,000.

23



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##### Table of Contents








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

|     |  |                                                                                                                                                          
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|(a)  |  | Exhibits                                                                                                                                                
|    
|10.1 |  | Stock Option Agreement dated as of
    August 30, 2002, between the Company and William B. Tanner.                                                       
|10.2 |  | Stock Option Agreement dated as of
    October 29, 2002, between the Company and Raúl
    Alarcón, Jr.                                                   
|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 September 29, 2002.                                                            

24



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##### Table of Contents






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 and on behalf of the additional
registrants by the undersigned thereunto duly authorized.



| |                                                  
| | -------------------------------------------------
| | Spanish Broadcasting System, Inc. and each of the
| | additional registrants listed in the Table of    
| | Additional Registrants                           



| |     |                     
| | --- | --------------------
| | 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: November 13, 2002

25



---



##### Table of Contents






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
    officers 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
    officers 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
    officers 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.

Date: November 13, 2002

| |  |                       |  |                                      
| |  | --------------------- |  | -------------------------------------
| |  | /s/ RAÚL ALARCÓN, JR.
| |  |                      
| |  | Name:                 |  | Raúl Alarcón, Jr.                    
| |  | Title:                |  | Chairman of the Board of Directors,  
| |  |                       |  | Chief Executive Officer and President

26



---



##### Table of Contents



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
    officers 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
    officers 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
    officers 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.

Date: November 13, 2002

| |  |                      |  |                                       
| |  | -------------------- |  | --------------------------------------
| |  | /s/ JOSEPH A. GARCíA
| |  |                     
| |  | Name:                |  | Joseph A. García                      
| |  | Title:               |  | Chief Financial Officer,              
| |  |                      |  | Executive Vice President and Secretary

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