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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q







|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended June 30, 2009

OR



| ̈ | 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 333-110122





LBI MEDIA HOLDINGS, INC.

(Exact Name of Registrant as Specified in Its Charter)







|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|Delaware                                                       |  | 05-05849018                      
|(State or other Jurisdiction of Incorporation or Organization) |  | (IRS Employer Identification No.)

1845 West Empire Avenue

Burbank, California 91504

(Address of principal executive offices, excluding
zip code) (Zip code)

Registrants Telephone Number, Including Area Code: (818) 563-5722

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   ̈    No   ̈ (Note: As a
voluntary filer, the registrant has filed all reports under Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months, but the registrant is not subject to such filing requirements.)

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files)    Yes    ̈     No    ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):



|                                              |  |                             
|--------------------------------------------- |  | ----------------------------
|Large accelerated filer   ̈                    |  | Accelerated filer   ̈        
|Non-accelerated filer  x                      |  | Smaller reporting company   ̈
|(Do not check if a smaller reporting company) |  |                             

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).    Yes   ̈    No  x

As of August 14, 2009, there were 100 shares of common stock, $0.01 par value per share, of LBI Media Holdings, Inc. issued and outstanding.









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LBI MEDIA HOLDINGS, INC.

FORM 10-Q QUARTERLY REPORT

TABLE OF CONTENTS



|                              |  |          |  |                                                                                       |  |     
|----------------------------- |  | -------- |  | ------------------------------------------------------------------------------------- |  | ----
|                              |  |          |  |                                                                                       |  | Page
|PART I. FINANCIAL INFORMATION |  | 1       
|                              |  |          | 
|                              |  | Item 1.  |  | Financial Statements                                                                  |  | 1   
|                              |  |          | 
|                              |  | Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 21  
|                              |  |          | 
|                              |  | Item 3.  |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 37  
|                              |  |          | 
|                              |  | Item 4.  |  | Controls and Procedures                                                               |  | 37  
|                              | 
|PART II. OTHER INFORMATION    |  | 38      
|                              |  |          | 
|                              |  | Item 1.  |  | Legal Proceedings                                                                     |  | 38  
|                              |  |          | 
|                              |  | Item 1A. |  | Risk Factors                                                                          |  | 38  
|                              |  |          | 
|                              |  | Item 2.  |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 38  
|                              |  |          | 
|                              |  | Item 3.  |  | Defaults upon Senior Securities                                                       |  | 38  
|                              |  |          | 
|                              |  | Item 4.  |  | Submission of Matters to a Vote of Security Holders                                   |  | 38  
|                              |  |          | 
|                              |  | Item 5.  |  | Other Information                                                                     |  | 38  
|                              |  |          | 
|                              |  | Item 6.  |  | Exhibits                                                                              |  | 39  



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PART I. FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

LBI MEDIA HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)



|                                                                                                                             |  |              |          |   |                  |   |          |  
|---------------------------------------------------------------------------------------------------------------------------- |  | ------------ | -------- | - | ---------------- | - | -------- | -
|                                                                                                                             |  | June 30,2009 |          |   | December 31,2008 |  
|                                                                                                                             |  | (Unaudited)  |          |   | (Note 1)         |  
|Assets                                                                                                                       |  |              |          |   |                  |   |          |  
|Current assets:                                                                                                              |  |              |          |   |                  |   |          |  
|Cash and cash equivalents                                                                                                    |  | $            | 992      |   |                  | $ | 450      |  
|Accounts receivable (less allowances for doubtful accounts of $3,210 as of June 30, 2009 and $3,072 as of December 31,
2008) |  |              | 19,997   |   |                  |   | 18,244   |  
|Current portion of program rights, net                                                                                       |  |              | 331      |   |                  |   | 457      |  
|Amounts due from related parties                                                                                             |  |              | 213      |   |                  |   | 175      |  
|Current portion of notes receivable from related parties                                                                     |  |              | 462      |   |                  |   | 457      |  
|Current portion of employee advances                                                                                         |  |              | 691      |   |                  |   | 744      |  
|Prepaid expenses and other current assets                                                                                    |  |              | 1,645    |   |                  |   | 1,862    |  
|                                                                                                                             |  |              |          |   |                  |   |          |  
|Total current assets                                                                                                         |  |              | 24,331   |   |                  |   | 22,389   |  
|Property and equipment, net                                                                                                  |  |              | 96,164   |   |                  |   | 95,745   |  
|Broadcast licenses, net                                                                                                      |  |              | 240,880  |   |                  |   | 292,343  |  
|Deferred financing costs, net                                                                                                |  |              | 7,401    |   |                  |   | 8,131    |  
|Notes receivable from related parties, excluding current portion                                                             |  |              | 2,532    |   |                  |   | 2,399    |  
|Employee advances, excluding current portion                                                                                 |  |              | 948      |   |                  |   | 888      |  
|Program rights, excluding current portion                                                                                    |  |              | 3,804    |   |                  |   | 738      |  
|Other assets                                                                                                                 |  |              | 5,169    |   |                  |   | 5,420    |  
|                                                                                                                             |  |              |          |   |                  |   |          |  
|Total assets                                                                                                                 |  | $            | 381,229  |   |                  | $ | 428,053  |  
|                                                                                                                             |  |              |          |   |                  |   |          |  
|Liabilities and stockholders deficiency                                                                                     |  |              |          |   |                  |   |          |  
|Current liabilities:                                                                                                         |  |              |          |   |                  |   |          |  
|Cash overdraft                                                                                                               |  | $            |         |   |                  | $ | 395      |  
|Accounts payable                                                                                                             |  |              | 3,815    |   |                  |   | 4,414    |  
|Accrued liabilities                                                                                                          |  |              | 5,886    |   |                  |   | 4,071    |  
|Accrued interest                                                                                                             |  |              | 9,780    |   |                  |   | 9,633    |  
|Current portion of long-term debt                                                                                            |  |              | 1,351    |   |                  |   | 1,347    |  
|                                                                                                                             |  |              |          |   |                  |   |          |  
|Total current liabilities                                                                                                    |  |              | 20,832   |   |                  |   | 19,860   |  
|Long-term debt, excluding current portion                                                                                    |  |              | 423,557  |   |                  |   | 415,998  |  
|Fair value of interest rate swap                                                                                             |  |              | 6,270    |   |                  |   | 7,627    |  
|Deferred income taxes                                                                                                        |  |              | 8,647    |   |                  |   | 23,691   |  
|Other liabilities                                                                                                            |  |              | 1,246    |   |                  |   | 1,683    |  
|                                                                                                                             |  |              |          |   |                  |   |          |  
|Total liabilities                                                                                                            |  |              | 460,552  |   |                  |   | 468,859  |  
|                                                                                                                             |  |             
|Commitments and contingencies                                                                                                |  |              |          |   |                  |   |          |  
|                                                                                                                             |  |             
|Stockholders deficiency:                                                                                                    |  |              |          |   |                  |   |          |  
|Common stock, $0.01 par value:                                                                                               |  |              |          |   |                  |   |          |  
|Authorized shares  1,000                                                                                                    |  |              |          |   |                  |   |          |  
|Issued and outstanding shares  100                                                                                          |  |              |         |   |                  |   |         |  
|Additional paid-in capital                                                                                                   |  |              | 63,003   |   |                  |   | 63,056   |  
|Accumulated deficit                                                                                                          |  |              | (142,326 | ) |                  |   | (103,862 | )
|                                                                                                                             |  |              |          |   |                  |   |          |  
|Total stockholders deficiency                                                                                               |  |              | (79,323  | ) |                  |   | (40,806  | )
|                                                                                                                             |  |              |          |   |                  |   |          |  
|Total liabilities and stockholders deficiency                                                                               |  | $            | 381,229  |   |                  | $ | 428,053  |  
|                                                                                                                             |  |              |          |   |                  |   |          |  

See accompanying notes.



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LBI MEDIA HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands)



|                                                                           |  |                            |        |   |                          |   |        |      |  |   |         |   |  |   |         |  
|-------------------------------------------------------------------------- |  | -------------------------- | ------ | - | ------------------------ | - | ------ | ---- |  | - | ------- | - |  | - | ------- | -
|                                                                           |  | Three Months EndedJune 30, |        |   | Six Months EndedJune 30, |  
|                                                                           |  | 2009                       |        |   | 2008                     |   |        | 2009 |  |   | 2008    |  
|Net revenues                                                               |  | $                          | 28,419 |   |                          | $ | 34,008 |      |  | $ | 50,228  |   |  | $ | 60,415  |  
|Operating expenses:                                                        |  |                            |        |   |                          |   |        |      |  |   |         |   |  |   |         |  
|Program and technical, exclusive of depreciation shown below               |  |                            | 5,344  |   |                          |   | 6,444  |      |  |   | 10,220  |   |  |   | 12,523  |  
|Promotional, exclusive of depreciation shown below                         |  |                            | 806    |   |                          |   | 871    |      |  |   | 1,261   |   |  |   | 1,313   |  
|Selling, general and administrative, exclusive of depreciation shown below |  |                            | 9,732  |   |                          |   | 10,640 |      |  |   | 20,452  |   |  |   | 21,367  |  
|Depreciation                                                               |  |                            | 2,380  |   |                          |   | 2,381  |      |  |   | 4,853   |   |  |   | 4,864   |  
|Loss on disposal of property and equipment                                 |  |                            | 941    |   |                          |   |       |      |  |   | 941     |   |  |   |        |  
|Impairment of broadcast licenses                                           |  |                            |       |   |                          |   |       |      |  |   | 51,466  |   |  |   |        |  
|                                                                           |  |                            |        |   |                          |   |        |      |  |   |         |   |  |   |         |  
|Total operating expenses                                                   |  |                            | 19,203 |   |                          |   | 20,336 |      |  |   | 89,193  |   |  |   | 40,067  |  
|                                                                           |  |                            |        |   |                          |   |        |      |  |   |         |   |  |   |         |  
|Operating income (loss)                                                    |  |                            | 9,216  |   |                          |   | 13,672 |      |  |   | (38,965 | ) |  |   | 20,348  |  
|Interest expense, net of amounts capitalized                               |  |                            | (8,424 | ) |                          |   | (9,460 | )    |  |   | (16,702 | ) |  |   | (18,609 | )
|Interest rate swap income                                                  |  |                            | 1,021  |   |                          |   | 2,742  |      |  |   | 1,357   |   |  |   | 74      |  
|Gain on note purchase                                                      |  |                            | 520    |   |                          |   |       |      |  |   | 520     |   |  |   |        |  
|Equity in losses of equity method investment                               |  |                            | (25    | ) |                          |   |       |      |  |   | (63     | ) |  |   |        |  
|Interest and other income                                                  |  |                            | 18     |   |                          |   | 24     |      |  |   | 45      |   |  |   | 56      |  
|                                                                           |  |                            |        |   |                          |   |        |      |  |   |         |   |  |   |         |  
|Income (loss) before provision for income taxes                            |  |                            | 2,326  |   |                          |   | 6,978  |      |  |   | (53,808 | ) |  |   | 1,869   |  
|(Provision for) benefit from income taxes                                  |  |                            | (2,005 | ) |                          |   | (2,366 | )    |  |   | 15,344  |   |  |   | (4,909  | )
|                                                                           |  |                            |        |   |                          |   |        |      |  |   |         |   |  |   |         |  
|Net income (loss)                                                          |  | $                          | 321    |   |                          | $ | 4,612  |      |  | $ | (38,464 | ) |  | $ | (3,040  | )
|                                                                           |  |                            |        |   |                          |   |        |      |  |   |         |   |  |   |         |  

See accompanying notes.



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LBI MEDIA HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)



|                                                                                          |  |                          |         |   |      |   |         |  
|----------------------------------------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | -
|                                                                                          |  | Six Months EndedJune 30, |        
|                                                                                          |  | 2009                     |         |   | 2008 |  
|Operating activities                                                                      |  |                          |         |   |      |   |         |  
|Net loss                                                                                  |  | $                        | (38,464 | ) |      | $ | (3,040  | )
|Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |  |                          |         |   |      |   |         |  
|Depreciation                                                                              |  |                          | 4,853   |   |      |   | 4,864   |  
|Loss on disposal of property and equipment                                                |  |                          | 941     |   |      |   |        |  
|Impairment of broadcast licenses                                                          |  |                          | 51,466  |   |      |   |        |  
|Equity in losses of equity method investment                                              |  |                          | 63      |   |      |   |        |  
|Stock-based compensation                                                                  |  |                          | 15      |   |      |   |        |  
|Amortization of deferred financing costs                                                  |  |                          | 730     |   |      |   | 729     |  
|Amortization of discount on subordinated notes                                            |  |                          | 135     |   |      |   | 125     |  
|Amortization of program rights                                                            |  |                          | 1,014   |   |      |   | 280     |  
|Accretion on senior discount notes                                                        |  |                          |        |   |      |   | 3,459   |  
|Gain on note purchase                                                                     |  |                          | (520    | ) |      |   |        |  
|Interest rate swap income                                                                 |  |                          | (1,357  | ) |      |   | (74     | )
|Provision for doubtful accounts                                                           |  |                          | 691     |   |      |   | 637     |  
|Changes in operating assets and liabilities:                                              |  |                          |         |   |      |   |         |  
|Cash overdraft                                                                            |  |                          | (395    | ) |      |   |        |  
|Accounts receivable                                                                       |  |                          | (2,444  | ) |      |   | (5,593  | )
|Program rights                                                                            |  |                          | (3,954  | ) |      |   | (1,159  | )
|Amounts due from related parties                                                          |  |                          | (20     | ) |      |   | (35     | )
|Prepaid expenses and other current assets                                                 |  |                          | 217     |   |      |   | 121     |  
|Employee advances                                                                         |  |                          | (7      | ) |      |   | (404    | )
|Accounts payable                                                                          |  |                          | (1,034  | ) |      |   | (1,039  | )
|Accrued liabilities                                                                       |  |                          | 2,015   |   |      |   | (131    | )
|Accrued interest                                                                          |  |                          | 147     |   |      |   | (204    | )
|Deferred income taxes                                                                     |  |                          | (15,044 | ) |      |   | 4,772   |  
|Other assets and liabilities                                                              |  |                          | (45     | ) |      |   | 757     |  
|                                                                                          |  |                          |         |   |      |   |         |  
|Net cash (used in) provided by operating activities                                       |  |                          | (997    | ) |      |   | 4,065   |  
|                                                                                          |  |                          |         |   |      |   |         |  
|Investing activities                                                                      |  |                          |         |   |      |   |         |  
|Purchases of property and equipment                                                       |  |                          | (5,978  | ) |      |   | (4,743  | )
|Deposits on purchases of property and equipment                                           |  |                          | (236    | ) |      |   |        |  
|Acquisition of broadcast licenses                                                         |  |                          | (3      | ) |      |   |        |  
|Notes receivable issued to related parties                                                |  |                          | (125    | ) |      |   |        |  
|Repayment of notes receivable from related parties                                        |  |                          | 1       |   |      |   |        |  
|Investment in PortalUno, Inc. (including acquisition costs)                               |  |                          |        |   |      |   | (458    | )
|Acquisition costs                                                                         |  |                          |        |   |      |   | (137    | )
|                                                                                          |  |                          |         |   |      |   |         |  
|Net cash used in investing activities                                                     |  |                          | (6,341  | ) |      |   | (5,338  | )
|                                                                                          |  |                          |         |   |      |   |         |  
|Financing activities                                                                      |  |                          |         |   |      |   |         |  
|Proceeds from bank borrowings                                                             |  |                          | 27,200  |   |      |   | 24,700  |  
|Payments on bank borrowings                                                               |  |                          | (18,772 | ) |      |   | (24,094 | )
|Purchase of senior discount notes                                                         |  |                          | (480    | ) |      |   |        |  
|Payments of deferred financing costs                                                      |  |                          |        |   |      |   | (499    | )
|Distributions to Parent                                                                   |  |                          | (68     | ) |      |   | (3      | )
|                                                                                          |  |                          |         |   |      |   |         |  
|Net cash provided by financing activities                                                 |  |                          | 7,880   |   |      |   | 104     |  
|                                                                                          |  |                          |         |   |      |   |         |  
|Net increase (decrease) in cash and cash equivalents                                      |  |                          | 542     |   |      |   | (1,169  | )
|Cash and cash equivalents at beginning of period                                          |  |                          | 450     |   |      |   | 1,697   |  
|                                                                                          |  |                          |         |   |      |   |         |  
|Cash and cash equivalents at end of period                                                |  | $                        | 992     |   |      | $ | 528     |  
|                                                                                          |  |                          |         |   |      |   |         |  
|Supplemental disclosure of cash flow information:                                         |  |                          |         |   |      |   |         |  
|Non-cash amounts included in accounts payable:                                            |  |                          |         |   |      |   |         |  
|Purchases of property and equipment                                                       |  | $                        | 1,766   |   |      | $ | 667     |  
|                                                                                          |  |                          |         |   |      |   |         |  
|Acquisition costs                                                                         |  | $                        |        |   |      | $ | 54      |  
|                                                                                          |  |                          |         |   |      |   |         |  
|Cash paid during the period for:                                                          |  |                          |         |   |      |   |         |  
|Interest                                                                                  |  | $                        | 15,708  |   |      | $ | 14,465  |  
|                                                                                          |  |                          |         |   |      |   |         |  
|Income taxes                                                                              |  | $                        | 240     |   |      | $ | 214     |  
|                                                                                          |  |                          |         |   |      |   |         |  

See accompanying notes.



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LBI MEDIA HOLDINGS, INC.

NOTES TO INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



1. Description of Business and Basis of Presentation

LBI Media Holdings, Inc. (LBI Media Holdings) was incorporated in Delaware on June 23, 2003 and is a wholly owned subsidiary of Liberman
Broadcasting, Inc., a Delaware corporation (successor in interest to LBI Holdings I, Inc.) (the Parent or Liberman Broadcasting). Pursuant to an Assignment and Exchange Agreement dated September 29, 2003 between the
Parent and LBI Media Holdings, the Parent assigned to LBI Media Holdings all of its right, title and interest in 100 shares of common stock of LBI Media, Inc. (LBI Media) (constituting all of the outstanding shares of LBI Media) in
exchange for 100 shares of common stock of LBI Media Holdings. Thus, upon consummation of the exchange, LBI Media Holdings became a wholly owned subsidiary of the Parent, and LBI Media became a wholly owned subsidiary of LBI Media Holdings.

LBI Media Holdings is not engaged in any business operations and has not acquired any assets or incurred any liabilities, other than the
acquisition of stock of LBI Media, the issuance and purchase of a portion of its senior discount notes (see Note 5) and the operations of its subsidiaries. Accordingly, its only material source of cash is dividends and distributions from its
subsidiaries, which are subject to restrictions by LBI Medias senior credit facilities and the indenture governing the senior subordinated notes issued by LBI Media (see Note 5). Parent-only condensed financial information of LBI Media
Holdings on a stand-alone basis has been presented in Note 12.

LBI Media Holdings and its wholly owned subsidiaries (collectively referred
to as the Company) own and operate radio and television stations located in California, Arizona, Texas and Utah. In addition, the Company owns television production facilities that are used to produce programming for its owned and
affiliated television stations. The Company sells commercial airtime on its radio and television stations to local, regional and national advertisers. In addition, the Company has entered into time brokerage agreements with third parties for four of
its radio stations.

The Companys KHJ-AM, KVNR-AM, KWIZ-FM, KBUE-FM, KBUA-FM, KEBN-FM and KRQB-FM radio stations serve the greater
Los Angeles, California market (including Riverside/San Bernardino), its KQUE-AM, KJOJ-AM, KSEV-AM, KEYH-AM, KJOJ-FM, KTJM-FM, KQQK-FM, KTNE-FM (formerly KIOX-FM) and KXGJ-FM radio stations serve the Houston, Texas market and its KNOR-FM, KZMP-AM,
KTCY-FM, KZZA-FM, KZMP-FM and KBOC-FM radio stations serve the Dallas-Fort Worth, Texas market.

The Companys television stations,
KRCA, KSDX, KVPA, KZJL, KMPX and KPNZ serve the Los Angeles, California, San Diego, California, Phoenix, Arizona, Houston, Texas, Dallas-Fort Worth, Texas, and Salt Lake City, Utah markets, respectively.

The Companys television studio facilities in Burbank, California, Houston, Texas, and Dallas, Texas, are owned and operated by its indirect, wholly
owned subsidiaries, Empire Burbank Studios LLC (Empire), Liberman Television of Houston LLC and Liberman Television of Dallas LLC, respectively.

In the third quarter of 2009, the Company expects to provide its original programming through its EstrellaTV network to its affiliated stations. Currently, this affiliate network consists of sixteen
television stations in various states serving specific market areas, including six in Texas, four in Florida, two in California and one each in New York, Arizona, New Mexico and Oregon.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting
principles (GAAP) for interim financial information and with the instructions for Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (SEC). Accordingly, they do not include all of the
information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The results of
operations for interim periods are not necessarily indicative of the results that may be expected for the fiscal year. The condensed consolidated financial statements should be read in conjunction with the Companys December 31, 2008
consolidated financial statements and accompanying notes included in the Companys annual report on Form 10-K (the Annual Report). All terms used but not defined elsewhere herein have the meanings ascribed to them in the Annual
Report.

The condensed consolidated balance sheet at December 31, 2008 has been derived from the audited financial statements at that
date but does not include all the information and footnotes required by GAAP for complete financial statements. The condensed consolidated financial statements include the accounts of LBI Media Holdings and its wholly owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated.

As described in Note 2, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 165, Subsequent Events (FAS 165) for the period ended June 30, 2009. FAS 165 requires disclosure of the date through which a company evaluated the need to
disclose events that occurred subsequent to the balance sheet date and whether that date represents the date the



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LBI MEDIA HOLDINGS, INC.

NOTES TO INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



financial statements were issued or were available to be issued. The Company has evaluated subsequent events through the date the financial statements were
issued, August 14, 2009.

2. Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, Fair Value Measurements (FAS 157). FAS 157 provides a single definition of
fair value, together with a framework for measuring it, and requires additional disclosure about the use of fair value to measure assets and liabilities. In February 2008, the FASB issued FASB Staff Position (FSP) FAS 157-2,
Effective Date of FASB Statement No. 157 which defers the implementation for certain non-recurring, nonfinancial assets and liabilities from fiscal years beginning after November 15, 2007 to fiscal years beginning after
November 15, 2008, which is the Companys fiscal year ending December 31, 2009. In October 2008, the FASB issued FSP FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not
Active which clarifies the application of FAS 157 in a market that is not active. FSP FAS 157-3 is effective upon issuance, including prior periods for which financial statements have not been issued.

FAS 157 establishes a new framework for measuring fair value and expands related disclosures. The fair value framework requires the categorization
of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment.
The three levels are defined as follows:



Level 1:

Inputs are unadjusted quoted prices in active markets for identical assets and liabilities that can be assessed at a measurement date.Level 2:

Observable inputs other than those included in Level 1. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or
liabilities in inactive markets.Level 3:

Unobservable inputs reflecting managements own assumptions about the inputs used in pricing the asset or liability.


As of June 30, 2009 and December 31, 2008, respectively, the fair values of the
Companys financial liabilities are categorized as follows:



|                                               |  |       |       |                |   |         |  |         |       |  |   |  
|---------------------------------------------- |  | ----- | ----- | -------------- | - | ------- |  | ------- | ----- |  | - | -
|                                               |  | Total |       | Level 1        |   | Level 2 |  | Level 3
|                                               |  |       |       | (In thousands) |   |        
|As of June 30, 2009                            |  |       |       |                |   |         |  |         |       |  |   |  
|Liabilities subject to fair value measurement: |  |       |       |                |   |         |  |         |       |  |   |  
|Interest rate swap (a)                         |  | $     | 6,270 |                | $ |        |  | $       | 6,270 |  | $ | 
|                                               |  |       |       |                |   |         |  |         |       |  |   |  
|Total                                          |  | $     | 6,270 |                | $ |        |  | $       | 6,270 |  | $ | 
|                                               |  |       |       |                |   |         |  |         |       |  |   |  
|As of December 31, 2008                        |  |       |       |                |   |         |  |         |       |  |   |  
|Liabilities subject to fair value measurement: |  |       |       |                |   |         |  |         |       |  |   |  
|Interest rate swap (a)                         |  | $     | 7,627 |                | $ |        |  | $       | 7,627 |  | $ | 
|                                               |  |       |       |                |   |         |  |         |       |  |   |  
|Total                                          |  | $     | 7,627 |                | $ |        |  | $       | 7,627 |  | $ | 
|                                               |  |       |       |                |   |         |  |         |       |  |   |  



|(a) | Based on London Interbank Offered Rate (LIBOR). See Interest Rate Swap in Note 5.
|--- | -------------------------------------------------------------------------------------

Certain assets and liabilities are measured at fair value on a non-recurring basis. This means that certain assets are not measured at fair value on an
ongoing basis but are subject to fair value adjustments only in certain circumstances. Included in this category are the Companys radio and television Federal Communications Commission (FCC) broadcast licenses that are written
down to fair value when they are determined to be impaired.

As of June 30, 2009, each major category of assets and liabilities
measured at fair value on a non-recurring basis during the period is categorized as follows:



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LBI MEDIA HOLDINGS, INC.

NOTES TO INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



|                                                         |  |       |         |                |   |         |  |         |   |                    |   |         |  |   |         |  
|-------------------------------------------------------- |  | ----- | ------- | -------------- | - | ------- |  | ------- | - | ------------------ | - | ------- |  | - | ------- | -
|                                                         |  | Total |         | Level 1        |   | Level 2 |  | Level 3 |   | TotalGains(Losses) |  
|                                                         |  |       |         | (In thousands) |   |         |  |         |  
|As of June 30, 2009                                      |  |       |         |                |   |         |  |         |   |                    |   |         |  |   |         |  
|Non-recurring assets subject to fair market measurement: |  |       |         |                |   |         |  |         |   |                    |   |         |  |   |         |  
|Broadcast licenses                                       |  | $     | 240,880 |                | $ |        |  | $       |  |                    | $ | 240,880 |  | $ | (51,466 | )
|                                                         |  |       |         |                |   |         |  |         |   |                    |   |         |  |   |         |  
|Total                                                    |  | $     | 240,880 |                | $ |        |  | $       |  |                    | $ | 240,880 |  | $ | (51,466 | )
|                                                         |  |       |         |                |   |         |  |         |   |                    |   |         |  |   |         |  

As of December 31, 2008, the total recorded carrying value of the Companys broadcasting
licenses was approximately $292.3 million. Pursuant to SFAS No. 142 Goodwill and Other Intangible Assets (FAS 142), and in connection with an interim impairment test performed for asset values as of March 31, 2009,
the carrying values for several of the Companys radio and television broadcasting licenses were written down to their estimated fair values, resulting in a total broadcast license carrying value of approximately $240.9 million as of
March 31, 2009 and June 30, 2009. The broadcast license write-downs resulted in an impairment charge of approximately $51.5 million, which is recorded as impairment of broadcast licenses in the accompanying condensed consolidated
statements of operations for the six months ended June 30, 2009. A description of the Level 3 inputs and the information used to develop the inputs is discussed in Note 3 Broadcast Licenses.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities-including an amendment of
FASB Statement No. 115 (FAS 159). FAS 159 expands the use of fair value accounting but does not affect existing standards that require assets or liabilities to be carried at fair value. Under FAS 159, a company may elect to
use fair value to measure certain financial assets and liabilities and any changes in fair value are recognized in earnings. This statement was effective on January 1, 2008. The Company did not elect the fair value option upon adoption of FAS
159.

In December 2007, the FASB issued SFAS No. 141R, Business Combinations (FAS 141R), which requires an
acquirer to measure the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree at their fair values on the acquisition date, with goodwill being the excess value over the net identifiable assets
acquired. FAS 141R also changed the accounting for the treatment of acquisition related transaction costs. FAS 141R became effective and the Company adopted the provisions of FAS141R on January 1, 2009. As such, the accompanying condensed
consolidated statements of operations for the six months ended June 30, 2009 include a charge of approximately $0.4 million, which relates to the write-off of pre-acquisition costs for certain asset purchases that did not close prior to
December 31, 2008 (see Note 6).

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statements (FAS 160), which clarifies that a noncontrolling interest in a subsidiary should be reported as equity in the consolidated financial statements. FAS 160 is effective beginning January 1, 2009. The adoption
of FAS 160 did not have a material effect on the Companys financial position, results of operations or cash flows.

In March 2008,
the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133 (FAS 161), which requires enhanced disclosures for derivative and hedging
activities. The objective of the guidance is to provide users of financial statements with an enhanced understanding of how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for, and how
derivative instruments and related hedged items effect and entitys financial position, financial performance and cash flows. FAS 161 was adopted on January 1, 2009.

In April 2008, the FASB issued FSP No. FAS 142-3, Determination of Useful Life of Intangible Assets (FSP 142-3). FSP 142-3 amends
the factors that should be considered in developing the renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FAS 142. The intent of this FSP is to improve the consistency between the useful life
of an intangible asset determined under FAS 142 and the period of expected cash flows used to measure the fair value of the asset under FAS 141R. FSP 142-3 is effective for fiscal years beginning after December 15, 2008, and interim periods
within those fiscal years. The adoption of FSP 142-3 did not have a material effect on the Companys financial position, results of operations or cash flows.

In April 2009, the FASB issued FSP No. FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability have Significantly Decreased and Identifying Transactions That Are
Not Orderly (FSP 157-4). The provisions of FSP 157-4 became effective for the Company on April 1, 2009. FSP 157-4 provides additional guidance on how to determine the



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NOTES TO INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



fair value of assets and liabilities under FAS 157. The adoption of FSP 157-4 did not have a material effect on the Companys financial position,
results of operations or cash flows.

In April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, Interim Disclosures about
Fair Value of Financial Instruments (FSP 107-1 and APB 28-1). FSP 107-1 and APB 28-1 amends SFAS No. 107 to require disclosures about fair value of financial instruments in interim financial statements as well as
in annual financial statements. FSP FAS 107-1 and APB 28-1 also amends Accounting Principles Board Opinion No. 28, Interim Financial Reporting, to require these disclosures in all interim financial statements. The provisions
of FSP 107-1 and APB 28-1 became effective for the Company on April 1, 2009. The adoption of FSP 107-1 and APB 28-1 did not have a material effect on the disclosures required in the Companys financial statements.

The carrying value of the Companys financial instruments included in current assets and current liabilities (such as cash and equivalents, accounts
receivable, accounts payable and accrued liabilities, and other similar items) approximate fair value due to the short-term nature of such instruments. The estimated fair value of LBI Medias 2007 Senior Subordinated Notes (see Note 4), based
on quoted bid prices, was approximately $120.0 million and $80.1 million at June 30, 2009 and December 31, 2008, respectively, (carrying value of $225.5 million and $225.4 million as of June 30, 2009 and December 31, 2008,
respectively). The estimated fair value of LBI Media Holdings Senior Discount Notes (see Note 4), based on quoted bid prices, was approximately $20.9 million and $18.6 million at June 30, 2009 and December 31, 2008, respectively
(carrying values of $45.4 million and $46.4 million as of June 30, 2009 and December 31, 2008, respectively). The Companys other long-term debt has variable interest rates or rates that the Company believes approximate current
market rates and, accordingly, the carrying value is a reasonable estimate of its fair value.

In April 2009, the FASB issued FSP No.
FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary-Impairments (FSP 115-2 and FSP 124-2). FSP 115-2 and FSP 124-2 incorporates impairment guidance for debt securities from various
sources of authoritative literature and clarifies the interaction of the factors that should be considered when determining whether a debt security is other than temporarily impaired. The provisions of FSP 115-2 and FSP 124-2 became effective for
the Company on April 1, 2009. The adoption of FSP 115-2 and FSP 124-2 did not have a material effect on the Companys financial position, results of operations or cash flows.

In May 2009, the FASB issued FAS 165, Subsequent Events. FAS 165 requires disclosure of the date through which a company evaluated
the need to disclose events that occurred subsequent to the balance sheet date and whether that date represents the date the financial statements were issued or were available to be issued. The Company adopted FAS 165 for the period ended
June 30, 2009. The adoption of FAS 165 did not have a material effect on the disclosures required in the Companys consolidated financial statements. The Company considered subsequent events through August 14, 2009 for disclosure in
this Quarterly Report on Form 10-Q, which is the date the financial statements were available to be issued.

In June 2009, the FASB issued
SFAS No. 167, Amendments to FASB Interpretation No. 46(R) (FAS 167). Among other things, FAS 167 amends FASB Interpretation No. 46, Consolidation of Variable Interest Entities (Revised
December 2003), (FIN 46(R)) to replace the calculation for determining which entities, if any, have a controlling financial interest in a variable interest entity (VIE) from a quantitative based risks and rewards
calculation, to a qualitative approach that focuses on identifying which entities have the power to direct the activities of a variable interest entity that most significantly impact the entitys economic performance and, the obligation to
absorb losses of the entity or the right to receive benefits from the entity. This standard also requires ongoing assessments as to whether an enterprise is the primary beneficiary of a VIE (previously, reconsideration was only required upon the
occurrence of specific events), modifies the presentation of consolidated VIE assets and liabilities, and requires additional disclosures about a companys involvement in VIEs. FAS 167 will be effective for the company beginning January 1,
2010. The Company is currently evaluating the effect that adoption of this standard will have on its consolidated financial position and results of operations when it becomes effective in 2010.

3. Broadcast Licenses

The Companys
indefinite-lived assets consist of its FCC broadcast licenses. The Company believes its broadcast licenses have indefinite useful lives given that they are expected to indefinitely contribute to the future cash flows of the Company and that they may
be continually renewed without substantial cost to the Company. In certain prior years, the licenses were considered to have finite lives and were subject to amortization. Accumulated amortization of broadcast licenses totaled approximately $17.7
million at June 30, 2009 and December 31, 2008.

In accordance with FAS 142, the Company no longer amortizes its broadcast
licenses. The Company tests its broadcast licenses for impairment at least annually or when indicators of impairment are identified. The Companys valuations principally use the discounted cash flow methodology, an income approach based on
market revenue projections, and not company-specific projections, which assumes broadcast licenses are acquired and operated by a third party. This approach incorporates several variables including,



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LBI MEDIA HOLDINGS, INC.

NOTES TO INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



but not limited to, types of signals, media competition, audience share, market advertising revenue projections, anticipated operating margins, capital
expenditures and discount rates that are based on the weighted average costs of capital for the broadcasting markets in which the Company operates, without taking into consideration the stations format or management capabilities. This method
calculates the estimated present value that would be paid by a prudent buyer for the Companys FCC licenses as new radio or television stations. If the discounted cash flows estimated to be generated from these assets are less than the carrying
value, an adjustment to reduce the carrying value to the fair market value of the assets is recorded.

The Company generally tests its
broadcast licenses for impairment at the individual license level. However, the Company has applied the guidance of Emerging Issues Task Force Issue No. 02-07, Unit of Accounting for Testing Impairment of Indefinite-Lived Intangible
Assets (EITF 02-07), to certain of its broadcast licenses. EITF 02-07 states that separately recorded indefinite-lived intangible assets should be combined into a single unit of accounting for purposes of testing impairment if they
are operated as a single asset and, as such, are essentially inseparable from one another. Accordingly, the Company aggregates broadcast licenses for impairment testing if their signals are simulcast and are operating as one revenue-producing asset.

As a result of the continued slowdown in the U.S. advertising industry, advertising revenue projections for the markets in which the
Company operates declined beyond levels assumed in the Companys 2008 annual and year end impairment testing. Accordingly, the Company conducted an additional review of the fair value of some of its broadcast licenses in the first quarter of
2009. Based on its evaluation, the Company determined that several of its radio and television broadcast licenses were impaired and recorded an impairment charge of approximately $51.5 million to reduce the net book value of these broadcast licenses
to their estimated fair market values. The impairment charge resulted from market changes in estimates and assumptions that were attributable to lower advertising revenue growth projections for the broadcasting industry, increased discount rates and
a decline in cash flow multiples for recent station sales. As no impairment indicators were noted during the three months ended June 30, 2008 and 2009, or during the six months ended June 30, 2008, no such impairment review was conducted
during those periods.

Below are key assumptions used in the income approach model for estimating asset fair values for the impairment
testing performed as of March 31, 2009 and December 31, 2008. Ranges are included because the Company evaluates each station on an individual basis (or cluster basis for simulcast stations) for impairment and the ranges reflect the range
of assumptions for the stations included in the categories below.



|                                  |  |                   |  |                  
|--------------------------------- |  | ----------------- |  | -----------------
|Radio Broadcasting Licenses       |  | March 31, 2009    |  | December 31, 2008
|Discount Rate                     |  | 11.9%             |  | 11.2%            
|2009 Market Growth Rate Range     |  | (10.0)% - (15.0)% |  | (6.0)% - (10.3)% 
|Out-year Market Growth Rate Range |  | 0.6% - 1.8%       |  | 2.0% - 3.7%      
|Market Share Range (1)            |  | 0.6% - 2.6%       |  | 0.7% - 2.6%      
|Operating Profit Margin Range (1) |  | 26.3% - 32.2%     |  | 27.4% - 32.2%    
|                                  |  |                  
|Television Broadcasting Licenses  |  | March 31, 2009    |  | December 31, 2008
|Discount Rate                     |  | 12.1%             |  | 10.8%            
|2009 Market Growth Rate Range     |  | (8.5)% - (15.0)%  |  | (6.5)% - (7.5)%  
|Out-year Market Growth Rate Range |  | 0.4% - 2.2%       |  | 2.6% - 3.2%      
|Market Share Range (1)            |  | 0.2% - 11.8%      |  | 0.2% - 11.4%     
|Operating Profit Margin Range (1) |  | 27.7% - 35.0%     |  | 29.2% - 37.2%    



|(1) | Excludes first year of operations.
|--- | ----------------------------------

4. Program Rights

Costs incurred for the production of the Companys original television programs are expensed based on the ratio of the current periods gross
revenues to estimated remaining total gross revenues from all sources (Ultimate Revenues) on an individual program basis. Costs of television productions are subject to regular recovery assessments which compare the estimated fair values
with the unamortized costs. The amount by which the unamortized costs of television productions exceed their estimated fair values is written off. Prior to January 1, 2009, television production costs for all programs were charged to operating
expense as incurred because the Company had estimated that the useful lives of these programs did not exceed one year. Beginning January 1, 2009, the Company



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LBI MEDIA HOLDINGS, INC.

NOTES TO INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



determined, based on an evaluation of historical programming data, that certain of its television programs have demonstrated the ability to generate gross
revenues beyond the current fiscal year, and therefore, television production costs for these programs are charged to operating expense based on the ratio of the current periods gross revenues to Ultimate Revenues as described above. Costs
related to the production of all other television programs for which the Company does not believe have a useful life beyond the current fiscal year are expensed as incurred. The adoption impact of the change in estimate of the useful life for
certain television programs was a reduction in program and technical expenses of approximately $0.9 million and $3.2 million during the three and six months ended June 30, 2009, respectively.

Television program rights acquired by the Company from third-party vendors are stated at the lower of unamortized cost or estimated net realizable value.
These program rights, together with the related liabilities, are recorded when the license period begins and the program becomes available for broadcast. Program rights are amortized using the straight-line method over the license term. Program
rights expected to be amortized in the succeeding year and program rights payable due within one year are classified as current assets and current liabilities, respectively.

5. Long-Term Debt

Long-term debt consists of the following:



|                                        |  |                |         |   |                  |   |         |  
|--------------------------------------- |  | -------------- | ------- | - | ---------------- | - | ------- | -
|                                        |  | June 30,2009   |         |   | December 31,2008 |  
|                                        |  | (In thousands) |        
|2006 Revolver due 2012                  |  | $              | 35,750  |   |                  | $ | 26,650  |  
|2006 Term Loan due 2012                 |  |                | 116,300 |   |                  |   | 116,900 |  
|2007 Senior Subordinated Notes due 2017 |  |                | 225,491 |   |                  |   | 225,356 |  
|Senior Discount Notes due 2013          |  |                | 45,383  |   |                  |   | 46,383  |  
|2004 Empire Note due 2019               |  |                | 1,984   |   |                  |   | 2,056   |  
|                                        |  |                |         |   |                  |   |         |  
|                                        |  |                | 424,908 |   |                  |   | 417,345 |  
|Less current portion                    |  |                | (1,351  | ) |                  |   | (1,347  | )
|                                        |  |                |         |   |                  |   |         |  
|                                        |  | $              | 423,557 |   |                  | $ | 415,998 |  
|                                        |  |                |         |   |                  |   |         |  

LBI Medias 2006 Revolver and 2006 Term Loan

In May 2006, LBI Media refinanced its then existing senior secured revolving credit facility with a $110.0 million senior term loan credit facility
(as amended by the term loan commitment increase in January 2008, the 2006 Term Loan) and a $150.0 million senior revolving credit facility (the 2006 Revolver, and together with the 2006 Term Loan, the 2006 Senior
Credit Facilities). The 2006 Revolver includes a $5.0 million swing line sub-facility and allows for letters of credit up to the lesser of $5.0 million and the available remaining revolving commitment amount. In January 2008, LBI Media
increased its senior term loan credit facility by $10.0 million. LBI Media has the option to request its existing or new lenders under the 2006 Term Loan and the 2006 Revolver to increase the aggregate amount of the 2006 Senior Credit Facilities by
an additional $40.0 million; however, its existing and new lenders are not obligated to do so. The increases under the 2006 Senior Credit Facilities, taken together, cannot exceed $50.0 million in the aggregate (including the $10.0 million increase
in January 2008).

LBI Media must pay 0.25% of the original principal amount of the 2006 Term Loan each quarter (or $275,000 per
quarter) plus 0.25% of amounts borrowed in connection with the term loan increase (or $25,000 per quarter), and 0.25% of any additional principal amount incurred in the future under the 2006 Term Loan. There are no scheduled reductions of
commitments under the 2006 Revolver.

Borrowings under the 2006 Senior Credit Facilities bear interest based on either, at the option of
LBI Media, the base rate for base rate loans or the LIBOR rate for LIBOR loans, in each case plus the applicable margin stipulated in the senior credit agreements. The base rate is the higher of (i) Credit Suisses prime rate and
(ii) the Federal Funds Effective Rate (as published by the Federal Reserve Bank of New York) plus 0.50%. The applicable margin for loans under the 2006 Revolver, which is based on LBI Medias total leverage ratio, ranges from 0% to
1.00% per annum for base rate loans and from 1.00% to 2.00% per annum for LIBOR loans. The applicable margin for the original principal amount of the 2006 Term Loan is 0.50% for base rate loans and 1.50% for LIBOR loans. The applicable
margin for the $10.0 million increase in the principal amount of the 2006 Term Loan ranges from 0.50% to 0.75% for base rate loans and from 1.50% to 1.75% for LIBOR loans. The applicable margin for any future term loans will be agreed upon at the
time those term loans are incurred. Interest on base rate loans is payable quarterly in arrears and interest on LIBOR loans



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NOTES TO INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



is payable either monthly, bimonthly or quarterly depending on the interest period elected by LBI Media. All amounts that are not paid when due under either
the 2006 Revolver or 2006 Term Loan will accrue interest at the rate otherwise applicable plus 2.00% until such amounts are paid in full. Borrowings under the 2006 Revolver and 2006 Term Loan bore interest at rates between 1.81% and 4.25%, including
the applicable margin, at June 30, 2009.

Borrowings under the 2006 Senior Credit Facilities are secured by substantially all of the
tangible and intangible assets of LBI Media and its wholly owned subsidiaries, including a first priority pledge of all capital stock of each of LBI Medias subsidiaries. The 2006 Senior Credit Facilities also contain customary representations,
affirmative and negative covenants and defaults for a senior credit facility, including restrictions on LBI Medias ability to pay dividends. Under the 2006 Revolver, LBI Media must also maintain a maximum senior secured leverage ratio (as
defined in the senior credit agreement). As of June 30, 2009, LBI Media was in compliance with all such covenants.

LBI Media pays
quarterly commitment fees on the unused portion of the 2006 Revolver based on its utilization rate of the total borrowing capacity. Under certain circumstances, if LBI Media borrows less than 50% of the revolving credit commitment, it must pay a
quarterly commitment fee of 0.50% times the unused portion. If LBI Media borrows 50% or more of the total revolving credit commitment, it must pay a quarterly commitment fee of 0.25% times the unused portion.

LBI Medias Senior Subordinated Notes due 2017

In July 2007, LBI Media issued approximately $228.8 million aggregate principal amount of 81/2% senior
subordinated notes due 2017 (the 2007 Senior Subordinated Notes). The 2007 Senior Subordinated Notes were sold at 98.350% of the principal amount, resulting in gross proceeds of approximately $225.0 million. All of LBI Medias
subsidiaries are wholly owned and provide full and unconditional joint and several guarantees of the 2007 Senior Subordinated Notes.

The 2007 Senior Subordinated Notes bear interest at a rate of 8.5% per annum. Interest payments are made on a semi-annual basis each February 1 and August 1, and commenced on February 1, 2008. The 2007 Senior
Subordinated Notes will mature in August 2017.

LBI Media may redeem the 2007 Senior Subordinated Notes at any time on or after
August 1, 2012 at redemption prices specified in the indenture governing its 2007 Senior Subordinated Notes, plus accrued and unpaid interest. At any time prior to August 1, 2012, LBI Media may redeem some or all of its 2007 Senior
Subordinated Notes at a redemption price equal to a make whole amount as set forth in the indenture governing the 2007 Senior Subordinated Notes. Also, LBI Media may redeem up to 35% of the aggregate principal amount of the 2007 Senior
Subordinated Notes with the net proceeds of certain equity offerings completed on or prior to August 1, 2010 at a redemption price of 108.5% of the principal amount of the notes, plus accrued and unpaid interest, if any, thereon to the
applicable redemption date.

The indenture governing the 2007 Senior Subordinated Notes limits, among other things, LBI Medias
ability to borrow under the 2006 Senior Credit Facilities and pay dividends. LBI Media could borrow up to an aggregate of $260.0 million under the 2006 Senior Credit Facilities (subject to certain reductions under certain circumstances) without
having to comply with specified leverage ratios contained in the indenture, but any amount over $260.0 million (subject to certain reductions under certain circumstances) would be subject to LBI Medias compliance with a specified leverage
ratio (as defined in the indenture governing the 2007 Senior Subordinated Notes).

The indenture governing the 2007 Senior Subordinated
Notes also prohibits the incurrence of indebtedness, the proceeds of which would be used to repay, redeem, repurchase or refinance any of LBI Media Holdings Senior Discount Notes (defined below) earlier than one year prior to the stated
maturity of the Senior Discount Notes unless such indebtedness is (i) unsecured, (ii) pari passu or junior in right of payment to the 2007 Senior Subordinated Notes, and (iii) otherwise permitted to be incurred under the
indenture governing the 2007 Senior Subordinated Notes. At June 30, 2009, LBI Media was in compliance with all such covenants.

The
indenture governing the 2007 Senior Subordinated Notes provides for customary events of default, which include (subject in certain instances to cure periods and dollar thresholds): nonpayment of principal, interest and premium, if any, on the 2007
Senior Subordinated Notes, breach of covenants specified in the indenture, payment defaults or acceleration of other indebtedness, a failure to pay certain judgments and certain events of bankruptcy, insolvency and reorganization. The 2007 Senior
Subordinated Notes will become due and payable immediately without further action or notice upon an event of default arising from certain events of bankruptcy or insolvency with respect to LBI Media and certain of its subsidiaries. If any other
event of default occurs and is continuing, the trustee or the holders of at least 25% in principal amount of the then outstanding 2007 Senior Subordinated Notes may declare all the 2007 Senior Subordinated Notes to be due and payable immediately.



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Senior Discount Notes due 2013

In October 2003, LBI Media Holdings issued $68.4 million aggregate principal amount at maturity of senior discount notes that mature in 2013 (the Senior Discount Notes). The Senior Discount Notes were sold
at 58.456% of principal amount at maturity, resulting in gross proceeds of approximately $40.0 million and net proceeds of approximately $38.8 million after certain transaction costs. Under the terms of the Senior Discount Notes, cash interest did
not accrue and was not payable on the notes prior to October 15, 2008 and instead the value of the notes increased each period until it equaled $68.4 million on October 15, 2008; such accretion (approximately $1.8 million and $3.5 million
for the three and six months ended June 30, 2008, respectively) was recorded as additional interest expense by LBI Media Holdings. On October 15, 2008, cash interest began to accrue at a rate of 11% per year payable semi-annually on
each April 15 and October 15.

In the fourth quarter of 2008, LBI Media Holdings purchased approximately $22.0 million aggregate
principal amount of its Senior Discount Notes in various open market transactions at a weighted average purchase price of 43.321% of the principal amount. In the second quarter of 2009, LBI Media Holdings purchased an additional $1.0 million
aggregate principal amount of its Senior Discount Notes in an open market transaction at a purchase price of 48.0% of the principal amount.

The indenture governing the Senior Discount Notes contains certain restrictive covenants that, among other things, limit LBI Media Holdings ability to incur additional indebtedness and pay dividends. As of June 30, 2009, LBI
Media Holdings was in compliance with all such covenants. The Senior Discount Notes are structurally subordinated to the 2006 Senior Credit Facilities and the 2007 Senior Subordinated Notes.

LBI Medias 2004 Empire Note

In July 2004,
Empire issued an installment note for approximately $2.6 million (the 2004 Empire Note) and used the proceeds to repay its former mortgage note. The 2004 Empire Note bears interest at the rate of 5.52% per annum and is payable in
monthly principal and interest payments of approximately $21,000 through maturity in July 2019. The borrowings under the 2004 Empire Note are secured primarily by all of Empires real property.

Scheduled Debt Repayments

As of June 30, 2009,
the Companys long-term debt had scheduled repayments as follows:



|                  |  |                |        
|----------------- |  | -------------- | -------
|                  |  | (in thousands)
|Remainder of 2009 |  | $              | 675    
|2010              |  |                | 1,356  
|2011              |  |                | 1,364  
|2012              |  |                | 149,223
|2013              |  |                | 45,566 
|Thereafter        |  |                | 226,724
|                  |  |                |        
|                  |  | $              | 424,908
|                  |  |                |        

The above table does not include projected interest payments the Company may ultimately pay.

Interest Rate Swap

The Company uses
an interest rate swap to manage interest rate risk associated with its variable rate borrowings. In connection with the issuance of the 2006 Senior Credit Facilities, in July 2006, the Company entered into a fixed-for-floating interest rate swap to
hedge the underlying interest rate risk on the expected outstanding balance of the 2006 Term Loan over time. Pursuant to the terms of this interest rate swap, the Company pays a fixed rate of 5.56% on the $80.0 million notional amount and receives
payments based on LIBOR. This swap fixes the interest rate at 7.56% on the Companys variable rate borrowings (including the applicable margin) and terminates in November 2011.

The Company accounts for its interest rate swap in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, as amended (FAS 133), and its related interpretations. As noted above, the effect of the interest rate swap is to fix the interest rate at 7.56% on the Companys variable rate borrowings (including the applicable
margin). However, changes in the fair value of the interest rate swap for each reporting period have been recorded in interest rate swap income in the accompanying condensed consolidated statements of operations because the interest rate swap does
not qualify for hedge accounting.



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LBI MEDIA HOLDINGS, INC.

NOTES TO INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



The fair value of the interest rate swap agreement at each balance sheet date was as follows
(unaudited, in millions):



|                                                  |  |                             |  |              |     |                  |   |    
|------------------------------------------------- |  | --------------------------- |  | ------------ | --- | ---------------- | - | ---
|Derivatives Not Designated As Hedging Instruments |  | Balance Sheet Location      |  | June 30,2009 |     | December 31,2008
|Interest rate swap agreement                      |  | Other long-term liabilities |  | $            | 6.3 |                  | $ | 7.6

The following table presents the effect of the interest rate swap agreement on the Companys
condensed consolidated statements of operations for the three and six months ended June 30, 2009 and 2008 (unaudited, in millions):



|                                                 |  |                           |  |                                |     |                                |   |                              |  |                              |     |  |   |    
|------------------------------------------------ |  | ------------------------- |  | ------------------------------ | --- | ------------------------------ | - | ---------------------------- |  | ---------------------------- | --- |  | - | ---
|Derivatives Not Designated As HedgingInstruments |  | Location ofGain (Loss)    |  | Three MonthsEnded June 30,2009 |     | Three MonthsEnded June 30,2008 |   | Six MonthsEnded June 30,2009 |  | Six MonthsEnded June 30,2008
|Interest rate swap agreement                     |  | Interest rate swap income |  | $                              | 1.0 |                                | $ | 2.7                          |  | $                            | 1.4 |  | $ | 0.1

The Company measures the fair value of its interest rate swap on a recurring basis pursuant to FAS
157. As described in Note 2, FAS 157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The three tiers are: Level 1, defined as inputs such as quoted prices in active markets; Level 2, defined
as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own
assumptions. The Company categorizes this swap contract as Level 2.

As a result of the adoption of FAS 157, the Company modified the
assumptions used in measuring the fair value of its interest rate swap. Specifically, the Company now includes the impact of its own credit risk on the interest rate swap, which is measured at fair value under FAS 157. Counterparty credit risk
adjustments are applied to the valuation of the interest rate swap, if necessary. Because all counterparties do not have the same credit risk, the counterpartys credit risk is considered in order to estimate the fair value of such an item. In
addition, bilateral or own credit risk adjustments are applied to the Companys own credit risk when valuing derivatives measured at fair value. Credit adjustments consider the estimated future cash flows between the Company and its
counterparty under the terms of the instruments and affect the credit risk on the valuation of those cash flows.

The fair value of the
Companys interest rate swap was a liability of $6.3 million and $7.6 million at June 30, 2009 and December 31, 2008, respectively. The fair value of the interest rate swap represents the present value of the expected future cash
flows that are estimated to be received from or paid to a marketplace participant of the instrument. It is valued using inputs such as broker dealer quotes and adjusted for non-performance risk, which are based on valuation models that incorporate
observable market information and are classified within Level 2 of the fair value hierarchy.

Interest Paid and Capitalized

The total amount of interest paid (net of amounts capitalized) was approximately $4.4 million and $2.2 million for the three months ended June 30,
2009 and 2008, respectively, and approximately $15.7 million and $14.5 million for the six months ended June 30, 2009 and 2008, respectively. Interest is capitalized on individually significant construction projects during the construction
period. Capitalized interest was approximately $34,000 and $0, for the three months ended June 30, 2009 and 2008, respectively, and approximately $60,000 and $0 for the six months ended June 30, 2009 and 2008, respectively. Capitalized
interest in 2009 relates to the construction of a new corporate office building and broadcast studio facility in Dallas, Texas.

6. Acquisitions

In December 2008, two of LBI Media Holdings indirect, wholly owned subsidiaries, KRCA Television LLC (KRCA TV) and KRCA
License LLC (KRCA License), as buyers, consummated the acquisition of selected assets of television station KVPA-LP, licensed to Phoenix, Arizona, from Latin America Broadcasting of Arizona, Inc., as seller, pursuant to an asset purchase
agreement entered into in August 2008. The aggregate purchase price was approximately $1.4 million, including acquisition costs of approximately $0.1 million, and was paid in cash. The assets acquired included, among other things, (i) licenses
and permits authorized by the FCC for or in connection with the operation of the television station and (ii) transmission and other broadcast equipment used to operate the television station. The Company allocated the purchase price as follows:



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LBI MEDIA HOLDINGS, INC.

NOTES TO INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



|                       |  |                |      
|---------------------- |  | -------------- | -----
|                       |  | (in thousands)
|Broadcast licenses     |  | $              | 1,329
|Property and equipment |  |                | 65   
|                       |  |                |      
|                       |  | $              | 1,394
|                       |  |                |      

In November 2008, KRCA TV and KRCA License, as buyers, entered into an asset purchase
agreement with Venture Technologies Group, LLC, as seller, pursuant to which the buyers have agreed to acquire selected assets of low-power television station WASA-LP, licensed to Port Jervis, New York, from the seller. The selected assets include,
among other things, licenses and permits authorized by the FCC for or in connection with the operation of the station. The total purchase price will be $6.0 million in cash, subject to certain adjustments, of which $0.6 million has been deposited
into escrow. As a result of the adoption of FAS 141R on January 1, 2009, the Company wrote-off approximately $0.2 million in pre-acquisition costs related to this proposed acquisition. Such amount is included in selling, general and
administrative expenses in the accompanying condensed consolidated statements of operations for the six months ended June 30, 2009. Consummation of the acquisition is currently subject to customary closing conditions, as the transaction has
been granted regulatory approval from the FCC.

In September 2008, two of LBI Media Holdings indirect, wholly owned subsidiaries,
Liberman Broadcasting of California LLC (LBI California) and LBI Radio License LLC (LBI Radio), as buyers, entered into an asset purchase agreement with Sun City Communications, LLC and Sun City Licenses, LLC, as sellers
(collectively, Sun City), pursuant to which the buyers had agreed to acquire certain assets of radio station KVIB-FM, 95.1 FM, licensed to Phoenix, Arizona, from the sellers. Those assets were to include, among other things,
(i) licenses and permits authorized by the FCC for or in connection with the operation of the station, (ii) antenna and transmitter facilities, (iii) broadcast and other studio equipment used to operate the station, and
(iv) contract rights and other intangible assets. The total purchase price was to be approximately $15.0 million in cash, subject to certain adjustments, of which $0.8 million had been deposited into escrow as of June 30, 2009 and
December 31, 2008. Such amount is included in other assets in the accompanying condensed consolidated balance sheets. In December 2008, the Company submitted a formal notice to Sun City to terminate the asset purchase agreement as a result of a
material adverse event that the Company believes has occurred since entering into the asset purchase agreement. The Company expects to recoup the $0.8 million escrow deposit once the agreement has been formally terminated.

In November 2007, LBI California and LBI Radio, as buyers, entered into an asset purchase agreement with R&R Radio Corporation (R&R
Radio), as seller, pursuant to which the buyers had agreed to acquire selected assets of radio station KDES-FM, located in Palm Springs, California, from the seller. As a result of the adoption of FAS 141R on January 1, 2009, the Company
wrote-off approximately $0.2 million in pre-acquisition costs related to this proposed acquisition. Such amount is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations for the
six months ended June 30, 2009. The selected assets were to include, among other things, (i) licenses and permits authorized by the FCC for or in connection with the operation of the station and (ii) transmitter and other broadcast
equipment used to operate the station. The Company intended to change the location of KDES-FM from Palm Springs, California to Redlands, California.

The aggregate purchase price was to be approximately $17.5 million in cash, subject to certain adjustments, of which $0.5 million had been deposited in escrow. Such escrow amount is included in other assets in the
accompanying condensed consolidated balance sheets as of June 30, 2009 and December 31, 2008. The Company would have paid $10.5 million of the aggregate purchase price to the seller and $7.0 million to Spectrum Scan-Idyllwild, LLC
(Spectrum Scan). As a condition to the Companys then pending purchase of the assets from the seller, LBI California had entered into an agreement relating to the relocation and purchase of KDES-FM with Spectrum Scan whereby it
would have paid $7.0 million to Spectrum Scan in exchange for Spectrum Scans agreement to terminate its option to purchase KWXY-FM, located in Cathedral City, California, and Spectrum Scans assistance in the relocation of KDES-FM from
Palm Springs, California to Redlands, California. Payment to Spectrum Scan was conditioned on the completion of the purchase of the assets from the seller. However, if the Company had received final FCC approval and the purchase of KDES-FM was not
completed, the Company would have been required to pay a $0.5 million fee to Spectrum Scan.

As discussed in more detail in Note 13, in
July 2009, LBI California and LBI Radio entered into an assignment and assumption agreement with LC Media LP (LC Media) and R&R Radio, pursuant to which LBI California and LBI Radio assigned all of their rights and obligations under
the asset purchase agreement to purchase the selected assets of KDES-FM to LC Media. In connection therewith, LBI California and LBI Radio entered into an amendment with Spectrum Scan to the November 2007 agreement.



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LBI MEDIA HOLDINGS, INC.

NOTES TO INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



7. Commitments and Contingencies

Deferred Compensation

The Parent has entered into employment agreements with certain employees.
Services required under the employment agreements are rendered to the Company. Accordingly, the Company has reflected amounts due under the employment agreements in its financial statements. In addition to annual compensation and other benefits, one
agreement (the Deferred Compensation Agreement) provides the employee with the ability to participate in the increase of the net value (as defined in the Deferred Compensation Agreement) of the Parent over a certain base
amount (Incentive Compensation) that was negotiated at the time the Deferred Compensation Agreement was entered into. There are two components of Incentive Compensation: (i) a component that vests in varying amounts over time; and
(ii) a component that vests upon the attainment of certain performance measures. The time vesting component is accounted for over the vesting period specified in the Deferred Compensation Agreement. Performance based amounts are accounted for
at the time it is considered probable that the performance measures will be attained. Any Incentive Compensation amounts due are required to be paid within thirty days after the date the net value of the Parent is determined.

The Deferred Compensation Agreement contains provisions, however, that allow for limited accelerated vesting in the event of a change in control of
the Parent (as defined in the Deferred Compensation Agreement). Unless there is a change in control of the Parent (as defined in the Deferred Compensation Agreement), the net value of the Parent will be determined as of December 31,
2009.

Until the net value of the Parent has been determined by appraisal as of such valuation date, the Company evaluates and
estimates the deferred compensation liability under the Deferred Compensation Agreement. As a part of the calculation of this Incentive Compensation, the Company uses the income and market valuation approaches to estimate the net value
of the Parent. The income approach analyzes future cash flows and discounts them to arrive at a current estimated fair value. The market approach uses recent sales and offering prices of similar properties to determine estimated fair value.

As of June 30, 2009, the Company estimated that no Incentive Compensation had been earned under the Deferred Compensation Agreement.

Litigation

In 2008, the Company began
negotiations with Broadcast Music, Inc. (BMI) related to royalties due to BMI in the amount of approximately $1.5 million. As of June 30, 2009, the Company had reserved approximately $1.0 million related to this dispute. After
several previous attempts to settle the matter, in March 2009, the Company submitted another formal offer to settle a portion of the disputed amounts with BMI totaling approximately $0.4 million. It is the Companys position that the remaining
portion of the total disputed amounts is related to billings for the Companys simulcast stations, as well as unilateral fee increases and other differences, for which the Company was improperly billed. BMI has rejected the Companys
offer, and therefore, the parties are continuing their discussions.

The Company is also subject to other pending litigation arising in the
normal course of its business. While it is not possible to predict the results of such litigation, management does not believe the ultimate outcome of these matters will have a materially adverse effect on the Companys financial position or
results of operations.

8. Related Party Transactions

The Company had approximately $3.2 million and $3.0 million due from stockholders of the Parent and from affiliated companies at June 30, 2009 and December 31, 2008, respectively. These amounts include a
$1.9 million loan the Company made to one of the stockholders of the Parent in July 2002. The loans due from the stockholders of the Parent bear interest at the applicable federal rate and currently mature through December 2009. Although no specific
determination has been made, the Company plans to extend certain of these loans to such stockholders beyond their current December 2009 maturity date; therefore, such loans have been classified in notes receivable from related parties, net of
current, in the accompanying condensed consolidated balance sheets.

In 2008, the Company made a loan of approximately $0.1 million to a
certain religious organization at the request of a stockholder of the Parent, which is payable upon demand. Such loan is included in amounts due from related parties in the accompanying condensed consolidated balance sheets.

The Company also had approximately $690,000 due from one if its executive officers and directors at June 30, 2009 and December 31, 2008, which
is included in employee advances in the accompanying condensed consolidated balance sheets. The Company made these loans in various transactions in 1998, 2002 and 2006. Except for $30,000, which does not bear interest and does not have a maturity
date, the remaining loans bear interest at 8.0% and mature through December 2010.



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LBI MEDIA HOLDINGS, INC.

NOTES TO INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



In April 2008, LBI California entered into a Purchase Agreement and an Investors Rights
Agreement with PortalUno, Inc. (PortalUno) and Reivax Technology, Inc. (Reivax). Under these agreements, LBI California purchased shares of the Series A Preferred Stock of PortalUno representing 30% of the fully diluted
capital stock of PortalUno. The shares were purchased for $450,000, of which $425,000 was paid in cash and the remaining $25,000 of consideration was the cancellation of a $25,000 note in favor of LBI California. An employee of one of LBI Media
Holdings indirect, wholly owned subsidiaries is an owner of Reivax, which holds the remaining ownership interest in PortalUno.

The
Company accounts for its investment in PortalUno using the equity method under Accounting Principles Board Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock. As such, the Companys share of
PortalUnos net loss is included in equity in losses of equity method investment in the accompanying condensed consolidated statements of operations.

Condensed financial information has not been provided because the operations are not considered to be significant.

In December 2008, stockholders of the Parent and one of the Companys executive officers purchased approximately $1.2 million aggregate principal amount of the Senior Discount Notes in various open market transactions. The weighted
average price of the notes purchased was 41.250% of principal.

One of the Parents stockholders is the sole shareholder of L.D.L.
Enterprises, Inc. (LDL), a mail order business. From time to time, the Company allows LDL to use, free of charge, unsold advertising time on its radio and television stations.

9. Equity Incentive Plan

In December 2008, the
stockholders of the Parent adopted the Liberman Broadcasting, Inc. Stock Incentive Plan (the Plan). Grants of equity under the Plan are made to employees who render services to the Company. Accordingly, the Company reflects compensation
expense related to the options in its financial statements. The Plan allows for the award of up to 14.568461 shares of the Parents Class A common stock and awards under the Plan may be in the form of incentive stock options, nonqualified
stock options, restricted stock awards or stock awards. The Plan is administered by the Board of Directors. The Board of Directors determines the type, number, vesting requirements and other features and conditions of such awards.

As of June 30, 2009, the only option grant under the Plan has been to one of the Companys executive officers, which was made in December 2008,
pursuant to such employees employment agreement. The options have a contractual term of ten years from the date of the grant and vest over 5 years. No new options were granted during the three or six months ended June 30, 2009.

The fair value of each stock option is estimated on the date of grant using the Black-Scholes option pricing model that uses assumptions
for expected term, dividends, risk-free interest rate and expected volatility. For the awards, the Company recognizes compensation expense using a straight-line amortization method. Expected volatilities are based on historical volatility of the
Companys publicly traded competitors. The Company uses historical data to estimate option exercise and employee termination, including voluntary termination behavior, within the valuation model. The expected term of the option is estimated
using the simplified method as provided in SEC Staff Accounting Bulletin No. 107 Share-Based Payment. Under this method, the expected life equals the arithmetic average of the vesting term and the original contractual
term of the options. The risk-free interest rate for periods within the contractual life of the stock option is based on the U.S. Treasury yield curve in effect at the time of grant.

The Company calculated the fair value of each option award on the date of grant using the Black-Scholes option pricing model. The weighted average grant
date fair value using the Black-Scholes option pricing model was approximately $90,000 per share. Unamortized compensation as of June 30, 2009 was approximately $181,000 and is being amortized over the expected term of 7.5 years.

Stock-based compensation expense was approximately $7,000 and $0 for the three months ended June 30, 2009 and 2008, respectively, and approximately
$15,000 and $0 for the six months ended June 30, 2009 and 2008, respectively.

The following is a summary of the Companys stock
options as of June 30, 2009:



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LBI MEDIA HOLDINGS, INC.

NOTES TO INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



|                                  |  |        |  |                                       |           |                         |   |                                                 |  |    
|--------------------------------- |  | ------ |  | ------------------------------------- | --------- | ----------------------- | - | ----------------------------------------------- |  | ---
|                                  |  | Shares |  | WeightedAverageExercisePrice PerShare |           | AggregateIntrinsicValue |   | WeightedAverageRemainingContractualLife (Years)
|Outstanding at June 30, 2009      |  | 2.19   |  | $                                     | 1,368,083 |                         | $ |                                                |  | 9.5
|Exercisable at June 30, 2009      |  | 0.44   |  | $                                     | 1,368,083 |                         | $ |                                                |  | 9.5
|Expected to vest at June 30, 2009 |  | 1.75   |  | $                                     | 1,368,083 |                         | $ |                                                |  | 9.5

During the six months ended June 30, 2009, options to purchase 0.437054 shares of the
Parents Class A common stock had vested. However, none of these stock options had been exercised and no stock options expired during the six months ended June 30, 2009. Additionally, there was no intrinsic value for the stock options
exercisable at June 30, 2009.

10. Segment Data

SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information, requires companies to provide certain information about their operating segments. The Company has two reportable
segmentsradio operations and television operations. Management uses operating income or loss before stock-based compensation expense, depreciation, loss on disposal of property and equipment and impairment of broadcast licenses as its measure
of profitability for purposes of assessing performance and allocating resources.



|                                                                                                                                                                            |  |                            |        |                          |   |        |  |      |        |  |   |       
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | ------ | ------------------------ | - | ------ |  | ---- | ------ |  | - | ------
|                                                                                                                                                                            |  | Three Months EndedJune 30, |        | Six Months EndedJune 30,
|                                                                                                                                                                            |  | 2009                       |        | 2008                     |   | 2009   |  | 2008
|                                                                                                                                                                            |  | (in thousands)            
|Net revenues:                                                                                                                                                               |  |                            |        |                          |   |        |  |      |        |  |   |       
|Radio operations                                                                                                                                                            |  | $                          | 17,069 |                          | $ | 19,765 |  | $    | 29,203 |  | $ | 33,460
|Television operations                                                                                                                                                       |  |                            | 11,350 |                          |   | 14,243 |  |      | 21,025 |  |   | 26,955
|                                                                                                                                                                            |  |                            |        |                          |   |        |  |      |        |  |   |       
|Consolidated net revenues                                                                                                                                                   |  |                            | 28,419 |                          |   | 34,008 |  |      | 50,228 |  |   | 60,415
|                                                                                                                                                                            |  |                            |        |                          |   |        |  |      |        |  |   |       
|Operating expenses, excluding stock-based compensation expense, depreciation, loss on disposal of property and equipment and impairment of
broadcast licenses:              |  |                            |        |                          |   |        |  |      |        |  |   |       
|Radio operations                                                                                                                                                            |  |                            | 8,250  |                          |   | 8,360  |  |      | 16,678 |  |   | 16,073
|Television operations                                                                                                                                                       |  |                            | 7,625  |                          |   | 9,595  |  |      | 15,240 |  |   | 19,130
|                                                                                                                                                                            |  |                            |        |                          |   |        |  |      |        |  |   |       
|Consolidated operating expenses, excluding stock-based compensation expense, depreciation, loss on disposal of property and equipment and
impairment of broadcast licenses: |  |                            | 15,875 |                          |   | 17,955 |  |      | 31,918 |  |   | 35,203
|                                                                                                                                                                            |  |                            |        |                          |   |        |  |      |        |  |   |       
|Operating income before stock-based compensation expense, depreciation, loss on disposal of property and equipment and impairment of broadcast
licenses:                    |  |                            |        |                          |   |        |  |      |        |  |   |       
|Radio operations                                                                                                                                                            |  |                            | 8,819  |                          |   | 11,405 |  |      | 12,525 |  |   | 17,387
|Television operations                                                                                                                                                       |  |                            | 3,725  |                          |   | 4,648  |  |      | 5,785  |  |   | 7,825 
|                                                                                                                                                                            |  |                            |        |                          |   |        |  |      |        |  |   |       
|Consolidated operating income before stock-based compensation expense, depreciation, loss on disposal of property and equipment and impairment
of broadcast licenses        |  |                            | 12,544 |                          |   | 16,053 |  |      | 18,310 |  |   | 25,212
|                                                                                                                                                                            |  |                            |        |                          |   |        |  |      |        |  |   |       
|Stock-based compensation expense:                                                                                                                                           |  |                            |        |                          |   |        |  |      |        |  |   |       
|Corporate operations                                                                                                                                                        |  |                            | 7      |                          |   |       |  |      | 15     |  |   |      
|                                                                                                                                                                            |  |                            |        |                          |   |        |  |      |        |  |   |       
|Consolidated stock-based compensation expense                                                                                                                               |  |                            | 7      |                          |   |       |  |      | 15     |  |   |      
|                                                                                                                                                                            |  |                            |        |                          |   |        |  |      |        |  |   |       
|Depreciation expense:                                                                                                                                                       |  |                            |        |                          |   |        |  |      |        |  |   |       
|Radio operations                                                                                                                                                            |  |                            | 1,174  |                          |   | 1,271  |  |      | 2,432  |  |   | 2,522 
|Television operations                                                                                                                                                       |  |                            | 1,206  |                          |   | 1,110  |  |      | 2,421  |  |   | 2,342 
|                                                                                                                                                                            |  |                            |        |                          |   |        |  |      |        |  |   |       
|Consolidated depreciation expense                                                                                                                                           |  |                            | 2,380  |                          |   | 2,381  |  |      | 4,853  |  |   | 4,864 
|                                                                                                                                                                            |  |                            |        |                          |   |        |  |      |        |  |   |       
|Loss on disposal of property and equipment:                                                                                                                                 |  |                            |        |                          |   |        |  |      |        |  |   |       
|Radio operations                                                                                                                                                            |  |                            | 32     |                          |   |       |  |      | 32     |  |   |      
|Television operations                                                                                                                                                       |  |                            | 909    |                          |   |       |  |      | 909    |  |   |      
|                                                                                                                                                                            |  |                            |        |                          |   |        |  |      |        |  |   |       
|Consolidated loss on disposal of property and equipment                                                                                                                     |  |                            | 941    |                          |   |       |  |      | 941    |  |   |      
|                                                                                                                                                                            |  |                            |        |                          |   |        |  |      |        |  |   |       
|Impairment of broadcast licenses:                                                                                                                                           |  |                            |        |                          |   |        |  |      |        |  |   |       
|Radio operations                                                                                                                                                            |  |                            |       |                          |   |       |  |      | 31,886 |  |   |      
|Television operations                                                                                                                                                       |  |                            |       |                          |   |       |  |      | 19,580 |  |   |      
|                                                                                                                                                                            |  |                            |        |                          |   |        |  |      |        |  |   |       
|Consolidated impairment of broadcast licenses                                                                                                                               |  |                            |       |                          |   |       |  |      | 51,466 |  |   |      
|                                                                                                                                                                            |  |                            |        |                          |   |        |  |      |        |  |   |       



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LBI MEDIA HOLDINGS, INC.

NOTES TO INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



|                                                                                                                                                                                                                                             |  |                            |        |   |                          |   |        |      |  |   |         |   |  |   |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | ------ | - | ------------------------ | - | ------ | ---- |  | - | ------- | - |  | - | ------- | -
|                                                                                                                                                                                                                                             |  | Three Months EndedJune 30, |        |   | Six Months EndedJune 30, |  
|                                                                                                                                                                                                                                             |  | 2009                       |        |   | 2008                     |   |        | 2009 |  |   | 2008    |  
|                                                                                                                                                                                                                                             |  | (in thousands)             |       
|Operating income (loss):                                                                                                                                                                                                                     |  |                            |        |   |                          |   |        |      |  |   |         |   |  |   |         |  
|Radio operations                                                                                                                                                                                                                             |  |                            | 7,609  |   |                          |   | 10,134 |      |  |   | (21,825 | ) |  |   | 14,865  |  
|Television operations                                                                                                                                                                                                                        |  |                            | 1,610  |   |                          |   | 3,538  |      |  |   | (17,125 | ) |  |   | 5,483   |  
|Corporate                                                                                                                                                                                                                                    |  |                            | (7     | ) |                          |   |       |      |  |   | (15     | ) |  |   |        |  
|                                                                                                                                                                                                                                             |  |                            |        |   |                          |   |        |      |  |   |         |   |  |   |         |  
|Consolidated operating income (loss)                                                                                                                                                                                                         |  | $                          | 9,216  |   |                          | $ | 13,672 |      |  | $ | (38,965 | ) |  | $ | 20,348  |  
|                                                                                                                                                                                                                                             |  |                            |        |   |                          |   |        |      |  |   |         |   |  |   |         |  
|Reconciliation of operating income before stock-based compensation expense, depreciation, loss on disposal of property and equipment and
impairment of broadcast licenses to income (loss) before (provision for) benefit from income taxes: |  |                            |        |   |                          |   |        |      |  |   |         |   |  |   |         |  
|Operating income before stock-based compensation expense, depreciation, loss on disposal of property and equipment and impairment of broadcast
licenses                                                                                      |  | $                          | 12,544 |   |                          | $ | 16,053 |      |  | $ | 18,310  |   |  | $ | 25,212  |  
|Stock-based compensation expense                                                                                                                                                                                                             |  |                            | (7     | ) |                          |   |       |      |  |   | (15     | ) |  |   |        |  
|Depreciation                                                                                                                                                                                                                                 |  |                            | (2,380 | ) |                          |   | (2,381 | )    |  |   | (4,853  | ) |  |   | (4,864  | )
|Loss on disposal of property and equipment                                                                                                                                                                                                   |  |                            | (941   | ) |                          |   |       |      |  |   | (941    | ) |  |   |        |  
|Impairment of broadcast licenses                                                                                                                                                                                                             |  |                            |       |   |                          |   |       |      |  |   | (51,466 | ) |  |   |        |  
|Gain on note purchase                                                                                                                                                                                                                        |  |                            | 520    |   |                          |   |       |      |  |   | 520     |   |  |   |        |  
|Equity in losses of equity method investment                                                                                                                                                                                                 |  |                            | (25    | ) |                          |   |       |      |  |   | (63     | ) |  |   |        |  
|Interest expense, net of amounts capitalized                                                                                                                                                                                                 |  |                            | (8,424 | ) |                          |   | (9,460 | )    |  |   | (16,702 | ) |  |   | (18,609 | )
|Interest rate swap income                                                                                                                                                                                                                    |  |                            | 1,021  |   |                          |   | 2,742  |      |  |   | 1,357   |   |  |   | 74      |  
|Interest and other income                                                                                                                                                                                                                    |  |                            | 18     |   |                          |   | 24     |      |  |   | 45      |   |  |   | 56      |  
|                                                                                                                                                                                                                                             |  |                            |        |   |                          |   |        |      |  |   |         |   |  |   |         |  
|Income (loss) before (provision for) benefit from income taxes                                                                                                                                                                               |  | $                          | 2,326  |   |                          | $ | 6,978  |      |  | $ | (53,808 | ) |  | $ | 1,869   |  
|                                                                                                                                                                                                                                             |  |                            |        |   |                          |   |        |      |  |   |         |   |  |   |         |  

11. Income Taxes

During the first quarter of 2009, the Company recorded a $51.5 million non-cash impairment charge to reduce the value of certain broadcast licenses. This impairment charge substantially reduced the Companys
deferred tax liability because the difference between the carrying value of the broadcast licenses for income tax purposes and the value for financial reporting purposes was substantially reduced. Accordingly, the Company recorded a benefit from
income taxes for the six months ended June 30, 2009 of $15.3 million, as compared to a provision for income taxes of $4.9 million for the six months ended June 30, 2008. As there was no such impairment charge recorded during the three
months ended June 30, 2009 and 2008, the Company recorded a provision for income taxes of $2.0 million and $2.4 million, respectively, during those periods. The deferred provision for income taxes was $2.4 million for the three months ended
June 30, 2009 and 2008, respectively. The deferred benefit from income taxes for the six months ended June 30, 2009 was $15.0 million, as compared to a deferred provision for income taxes of $4.8 million for the six months ended
June 30, 2008.

The Companys net deferred tax liabilities as of June 30, 2009 and December 31, 2008 were approximately
$8.6 million and $23.7 million, respectively, and result primarily from book and tax basis differences of the Companys indefinite-lived intangible assets. In addition to the deferred tax liability for its indefinite-lived intangible
assets, the Company has net deferred tax assets for which it has provided a full valuation allowance. The valuation allowance on deferred taxes relates to future deductible temporary differences and net operating losses for which the Company has
concluded it is more likely than not that these items will not be realized in the ordinary course of operations. As of June 30, 2009 and December 31, 2008, the net deferred tax asset and the related valuation allowance were approximately
$25.5 million and $19.9 million, respectively.

The Company adopted the provisions of Financial Interpretation No. 48,
Accounting for Uncertainty in Income Taxes on January 1, 2007. The Companys policy is to recognize interest related to unrecognized tax benefits (UTB) and penalties as additional income tax expense.



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LBI MEDIA HOLDINGS, INC.

NOTES TO INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



A reconciliation of the beginning and ending amount of UTB for the six months ended June 30,
2009 is as follows:



|                                                             |  |   |          |  
|------------------------------------------------------------ |  | - | -------- | -
|Balance at January 1, 2009                                   |  | $ | 342,000  |  
|Additions based on tax positions related to the current year |  |   |         |  
|Additions for tax positions of prior years                   |  |   |         |  
|Reductions for tax positions of prior years                  |  |   |         |  
|Lapse of statute of limitations                              |  |   | (342,000 | )
|Settlements                                                  |  |   |         |  
|                                                             |  |   |          |  
|Balance at June 30, 2009                                     |  | $ |         |  
|                                                             |  |   |          |  

During the three months ended June 30, 2009, the Company recognized approximately $342,000 of
these UTB due to the expiration of the respective statute of limitations and, accordingly, the effective tax rate was reduced. The Company is no longer subject to federal or state income tax examinations for years prior to 2005 and 2004,
respectively. As a result of the expiration of the statute of limitations in certain jurisdictions, the accrual for UTB for tax positions taken in previously filed tax returns decreased by approximately $342,000 during the three months ended
June 30, 2009. Notwithstanding the adjustments discussed above, the Company believes that it has appropriate support for the income tax positions taken and presently expected to be taken on its tax returns. Additionally, the Company believes
that its accruals for tax liabilities are adequate for all years open to income tax examinations based on an assessment of many factors including past experience, past examinations by taxing authorities and interpretations of tax law applied to the
facts of each matter.

12. LBI Media Holdings, Inc. (Parent Company Only)

The terms of LBI Medias 2006 Senior Credit Facilities and the indenture governing LBI Medias 2007 Senior Subordinated Notes restrict LBI
Medias ability to transfer net assets to LBI Media Holdings in the form of loans, advances, or cash dividends. The following parent-only unaudited condensed financial information presents balance sheets and related statements of operations and
cash flows of LBI Media Holdings by accounting for the investments in the owned subsidiaries on the equity method of accounting. The accompanying unaudited condensed financial information should be read in conjunction with the condensed consolidated
financial statements and notes thereto.

Condensed Balance Sheet Information:

(in thousands)



|                                             |  |              |        |                  |   |       
|-------------------------------------------- |  | ------------ | ------ | ---------------- | - | ------
|                                             |  | As of       
|                                             |  | June 30,2009 |        | December 31,2008
|                                             |  | (Unaudited)  |        | (Note 1)        
|Assets                                       |  |              |        |                  |   |       
|Deferred financing costs                     |  | $            | 847    |                  | $ | 947   
|Investment in subsidiary                     |  |              |       |                  |   | 15,645
|Other assets                                 |  |              | 1      |                  |   | 3     
|                                             |  |              |        |                  |   |       
|Total assets                                 |  | $            | 848    |                  | $ | 16,595
|                                             |  |              |        |                  |   |       
|Liabilities and stockholders deficiency     |  |              |        |                  |   |       
|Accrued interest                             |  | $            | 1,068  |                  | $ | 1,093 
|Interest due to subsidiary                   |  |              | 201    |                  |   | 26    
|Long term debt                               |  |              | 45,383 |                  |   | 46,383
|Notes payable to subsidiary                  |  |              | 12,949 |                  |   | 9,899 
|Losses in excess of investment in subsidiary |  |              | 20,570 |                  |   |      
|                                             |  |              |        |                  |   |       
|Total liabilities                            |  |              | 80,171 |                  |   | 57,401
|                                             |  |             
|Stockholders deficiency:                    |  |              |        |                  |   |       
|Common stock                                 |  |              |       |                  |   |      



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LBI MEDIA HOLDINGS, INC.

NOTES TO INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



|                                               |  |              |          |   |                  |   |          |  
|---------------------------------------------- |  | ------------ | -------- | - | ---------------- | - | -------- | -
|                                               |  | As of        |         
|                                               |  | June 30,2009 |          |   | December 31,2008 |  
|                                               |  | (Unaudited)  |          |   | (Note 1)         |  
|Additional paid-in capital                     |  |              | 63,003   |   |                  |   | 63,056   |  
|Accumulated deficit                            |  |              | (142,326 | ) |                  |   | (103,862 | )
|                                               |  |              |          |   |                  |   |          |  
|Total stockholders deficiency                 |  |              | (79,323  | ) |                  |   | (40,806  | )
|                                               |  |              |          |   |                  |   |          |  
|Total liabilities and stockholders deficiency |  | $            | 848      |   |                  | $ | 16,595   |  
|                                               |  |              |          |   |                  |   |          |  

Condensed Statement of Operations Information:

(Unaudited, in thousands)



|                                          |  |                            |        |   |                          |   |        |      |  |   |         |   |  |   |        |  
|----------------------------------------- |  | -------------------------- | ------ | - | ------------------------ | - | ------ | ---- |  | - | ------- | - |  | - | ------ | -
|                                          |  | Three Months EndedJune 30, |        |   | Six Months EndedJune 30, |  
|                                          |  | 2009                       |        |   | 2008                     |   |        | 2009 |  |   | 2008    |  
|Income:                                   |  |                            |        |   |                          |   |        |      |  |   |         |   |  |   |        |  
|Equity in earnings (losses) of subsidiary |  | $                          | 1,205  |   |                          | $ | 6,430  |      |  | $ | (36,162 | ) |  | $ | 519    |  
|Gain on note purchase                     |  |                            | 520    |   |                          |   |       |      |  |   | 520     |   |  |   |       |  
|Expenses:                                 |  |                            |        |   |                          |   |        |      |  |   |         |   |  |   |        |  
|Interest expense                          |  |                            | (1,404 | ) |                          |   | (1,818 | )    |  |   | (2,822  | ) |  |   | (3,559 | )
|                                          |  |                            |        |   |                          |   |        |      |  |   |         |   |  |   |        |  
|Net income (loss)                         |  | $                          | 321    |   |                          | $ | 4,612  |      |  | $ | (38,464 | ) |  | $ | (3,040 | )
|                                          |  |                            |        |   |                          |   |        |      |  |   |         |   |  |   |        |  

Condensed Statement of Cash Flows Information:

(Unaudited, in thousands)



|                                                                                |  |                          |         |   |      |   |        |  
|------------------------------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------ | -
|                                                                                |  | Six Months EndedJune 30, |        
|                                                                                |  | 2009                     |         |   | 2008 |  
|Cash flows provided by operating activities:                                    |  |                          |         |   |      |   |        |  
|Net loss                                                                        |  | $                        | (38,464 | ) |      | $ | (3,040 | )
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |                          |         |   |      |   |        |  
|Equity in losses (earnings) of subsidiary                                       |  |                          | 36,162  |   |      |   | (519   | )
|Gain on note purchase                                                           |  |                          | (520    | ) |      |   |       |  
|Amortization of deferred financing costs                                        |  |                          | 100     |   |      |   | 98     |  
|Accretion on senior discount notes                                              |  |                          |        |   |      |   | 3,459  |  
|Other assets and liabilities, net                                               |  |                          | 152     |   |      |   | 2      |  
|Distributions from subsidiary                                                   |  |                          | 68      |   |      |   | 3      |  
|                                                                                |  |                          |         |   |      |   |        |  
|Net cash provided by operating activities                                       |  |                          | 2,502   |   |      |   | 3      |  
|Cash flows provided by (used in) financing activities:                          |  |                          |         |   |      |   |        |  
|Loan from subsidiary                                                            |  |                          | 4,262   |   |      |   |       |  
|Repayment of notes payable due to subsidiary                                    |  |                          | (1,212  | ) |      |   |       |  
|Purchase of senior discount notes                                               |  |                          | (480    | ) |      |   |       |  
|Distributions to Parent                                                         |  |                          | (68     | ) |      |   | (3     | )
|                                                                                |  |                          |         |   |      |   |        |  
|Net cash provided by (used in) financing activities                             |  |                          | 2,502   |   |      |   | (3     | )
|Net change in cash and cash equivalents                                         |  |                          |        |   |      |   |       |  
|Cash and cash equivalents at beginning of period                                |  |                          |        |   |      |   |       |  
|                                                                                |  |                          |         |   |      |   |        |  
|Cash and cash equivalents at end of period                                      |  | $                        |        |   |      | $ |       |  
|                                                                                |  |                          |         |   |      |   |        |  



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LBI MEDIA HOLDINGS, INC.

NOTES TO INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



13. Subsequent Events

In July 2009, LBI California and LBI Radio entered into an assignment and assumption agreement with LC Media and R&R Radio, pursuant to which LBI California and LBI Radio assigned all of their rights, title and
interest in and to a certain asset purchase agreement to purchase the selected assets of radio station KDES-FM to LC Media and LC Media assumed all of the rights, benefits, obligations and duties under such asset purchase agreement, including
payment of the purchase price to R&R Radio and the entry into a substitute escrow agreement with R&R Radio. As a result, the $0.5 million escrow deposit that had been previously paid by the Companys indirect, wholly-owned subsidiaries
was returned to the Company in August 2009. Such escrow deposit is included in other assets as of June 30, 2009 in the accompanying condensed consolidated balance sheets. See Note 6 for a description of the terms of asset purchase agreement.

In connection with the assignment and assumption agreement, LBI California and Spectrum Scan entered into an amendment to the agreement
relating to the relocation and purchase of KDES-FM, pursuant to which LBI California will pay, subject to certain exceptions, approximately $4.2 million to Spectrum Scan (instead of the $7.0 million previously agreed upon) in exchange for Spectrum
Scans agreement to terminate its option to purchase KWXY-FM, located in Cathedral City, California, and Spectrum Scans assistance in the relocation of KDES-FM from Palm Springs, California to Redlands, California when LC Media and
R&R Radio consummate the acquisition of the selected assets.

As consideration for the assignment and assumption agreement and the
amendment to the agreement with Spectrum Scan, LC Media will pay, subject to and upon consummation of the purchase of KDES-FM from R&R Radio by LC Media, $5.9 million to the Company. Upon receipt of this payment, the Company will then pay $4.2
million to Spectrum Scan pursuant to the amendment to the agreement relating to the relocation and purchase of KDES-FM, as described above.

In July 2009, a co-borrower to one of the Companys notes receivables filed for relief under Chapter 11 of the United States Bankruptcy Code. Management has evaluated this note and has determined that the outstanding balance is fully
collectible as of June 30, 2009. Managements determination was based in part on the existence and estimated value of the underlying collateral to the secured note and managements ability to seek recovery from the other co-borrowers. The
balance of this note receivable was approximately $0.7 million as of June 30, 2009, and is included in prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets.



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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements
included elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements for the year ended December 31, 2008, included in our Annual Report on Form 10-K (File No. 333-110122). This Quarterly Report contains, in
addition to historical information, forward-looking statements, which involve risk and uncertainties. The words believe, expect, estimate, may, will, could, plan, or
continue, and similar expressions are intended to identify forward-looking statements. Our actual results could differ significantly from the results discussed in such forward-looking statements. The forward-looking statements in this
Quarterly Report on Form 10-Q, as well as subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf, are hereby expressly qualified in their entirety by the cautionary statements in this Quarterly
Report on Form 10-Q, the risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2008 and other documents that we file from time to time with the Securities and Exchange Commission, particularly any Current
Reports on Form 8-K.

Overview

We
own and operate radio and television stations in Los Angeles (including Riverside and San Bernardino counties), California, Houston, Texas and Dallas, Texas and television stations in San Diego, California, Salt Lake City, Utah and Phoenix, Arizona.
Our radio stations consist of five FM and two AM stations serving Los Angeles, California and its surrounding areas, five FM and four AM stations serving Houston, Texas and its surrounding areas, and five FM stations and one AM station serving
Dallas-Fort Worth, Texas and its surrounding areas. Our six television stations consist of four full-power stations serving Los Angeles, California, Houston, Texas, Dallas-Fort Worth, Texas and Salt Lake City, Utah. We also have two low-power
television stations serving the San Diego, California and Phoenix, Arizona markets.

In addition, we operate a television production
facility, Empire Burbank Studios, in Burbank, California that we use to produce our core programming for all of our television stations, and we have television production facilities in Houston and Dallas-Fort Worth, Texas, that allow us to produce
programming in those markets as well. We have entered into time brokerage agreements with third parties for four of our radio stations as well.

We are also affiliated with sixteen television stations in various states serving specific market areas including six in Texas, four in Florida, two in California and one each in New York, Arizona, New Mexico and Oregon.

We operate in two reportable segments, radio and television. We generate revenue from sales of local, regional and national advertising time on our radio
and television stations and the sale of time to brokered or infomercial customers on our radio and television stations. Beginning in the fourth quarter of 2009, we also expect to generate advertising sales on our affiliated stations that will
broadcast our EstrellaTV network programming. Advertising rates are, in large part, based on each stations ability to attract audiences in demographic groups targeted by advertisers. Our stations compete for audiences and
advertising revenue directly with other Spanish-language radio and television stations, and we generally do not obtain long-term commitments from our advertisers. As a result, our management team focuses on creating a diverse advertiser base,
providing cost-effective advertising solutions for clients, executing targeted marketing campaigns to develop a local audience and implementing strict cost controls. We recognize revenues when the commercials are broadcast or the brokered time is
made available to the customer. We incur commissions from agencies on local, regional and national advertising, and our net revenue reflects deductions from gross revenue for commissions to these agencies.

Our primary expenses are employee compensation, including commissions paid to our local and national sales staffs, promotion, selling, programming and
engineering expenses, general and administrative expenses, and interest expense. Our programming expenses for television consist of amortization of capitalized costs related to the production of original programming content, production of local
newscasts and, to a lesser extent, the amortization of programming content acquired from other sources. Because we are highly leveraged, we will need to dedicate a substantial portion of our cash flow from operations to pay interest on our debt. We
may need to pursue one or more alternative strategies in the future to meet our debt obligations, such as refinancing or restructuring our indebtedness, selling equity securities or selling assets.

We are organized as a Delaware corporation. Prior to March 30, 2007, we were a qualified subchapter S subsidiary as we were deemed for tax purposes
to be part of our parent, an S corporation under federal and state tax laws. Accordingly, our taxable income was reported by the stockholders of our parent on their respective federal and state income tax returns. As a result of the sale of
Class A common stock of our parent (as described below under Sale and Issuance of Liberman Broadcastings Class A Common Stock), Liberman Broadcasting, Inc., a Delaware corporation and successor in interest to LBI
Holdings I, Inc., no longer qualified as an S Corporation, and none of its subsidiaries, including us, are able to qualify as qualified subchapter S subsidiaries. Thus, we have been taxed at regular corporate rates since March 30, 2007.



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Acquisitions

In December 2008, two of our indirect, wholly owned subsidiaries, KRCA Television LLC and KRCA License LLC, consummated the acquisition of selected assets of low-power television station KVPA-LP, Channel 42, licensed to Phoenix Arizona,
from Latin America Broadcasting of Arizona, Inc., pursuant to an asset purchase agreement entered into by the parties in August 2008. The total purchase price of approximately $1.4 million (including acquisition costs of approximately $0.1 million)
and was primarily paid for in cash. The assets acquired included, among other things, (i) licenses and permits authorized by the Federal and Communications Commission, or FCC, for or in connection with the operation of the station and
(ii) transmission and other broadcast equipment used to operate the station. The purchase of these assets marked our first entry into the Phoenix market.

In November 2008, KRCA Television LLC and KRCA License LLC entered into an asset purchase agreement with Venture Technologies Group, LLC, as seller, pursuant to which we have agreed to acquire selected assets of
low-power television station WASA-LP, licensed to Port Jervis, New York, from the seller. The selected assets include, among other things, licenses and permits authorized by the FCC for or in connection with the operation of the station. The total
purchase price will be $6.0 million in cash, subject to certain adjustments, of which $0.6 million has been deposited into escrow. Consummation of the acquisition is currently subject to customary closing conditions, as the transaction has been
granted regulatory approval from the FCC.

In September 2008, two of our indirect, wholly owned subsidiaries, Liberman Broadcasting of
California LLC and LBI Radio License LLC, as buyers, entered into an asset purchase agreement with Sun City Communications, LLC and Sun City Licenses, LLC, as sellers, or together, Sun City, pursuant to which we agreed to acquire certain assets of
radio station KVIB-FM, 95.1 FM, licensed to Phoenix, Arizona, from Sun City. Those assets were to include, among other things, (i) licenses and permits authorized by the FCC for or in connection with the operation of the station,
(ii) antenna and transmitter facilities, (iii) broadcast and other studio equipment used to operate the station, and (iv) contract rights and other intangible assets. The total purchase price was to be approximately $15.0 million in
cash, subject to certain adjustments, of which $0.8 million has been deposited into escrow. In December 2008, we submitted a formal notice to Sun City to terminate the asset purchase agreement as a result of a material adverse event which we believe
has occurred since entering into the agreement. We expect to recoup the $0.8 million escrow deposit paid once the agreement has been formally terminated.

In November 2007, Liberman Broadcasting of California and LBI Radio License, entered into an asset purchase agreement with R&R Radio Corporation, as the seller, pursuant to which we had agreed to acquire selected
assets of radio station KDES-FM, located in Palm Springs, California, from the seller. The selected assets were to include, among other things, (i) licenses and permits authorized by the FCC for or in connection with the operation of the
station, (ii) transmitter and other broadcast equipment used to operate the station, and (iii) other related assets. We intended to change the programming format and the location of KDES-FM from Palm Springs, California to Redlands,
California. The aggregate purchase price was to be approximately $17.5 million in cash, subject to certain adjustments, of which $0.5 million had been deposited in escrow. We would have paid $10.5 million of the aggregate purchase price to the
seller and $7.0 million to Spectrum Scan-Idyllwild, LLC, or Spectrum Scan. As a condition to our then pending purchase of the assets from the seller, Liberman Broadcasting of California had entered into an agreement relating to the relocation and
purchase of KDES-FM with Spectrum Scan whereby it would have paid $7.0 million to Spectrum Scan in exchange for Spectrum Scans agreement to terminate its option to purchase KWXY-FM, located in Cathedral City, California, and Spectrum
Scans assistance in the relocation of KDES-FM from Palm Springs, California to Redlands, California. Payment to Spectrum Scan was conditioned on the completion of the purchase of the assets from the seller. However, if we had received final
FCC approval and the purchase of KDES-FM was not completed, we would have been required to pay a $500,000 fee to Spectrum Scan.

In July
2009, Liberman Broadcasting of California and LBI Radio License entered into an assignment and assumption agreement with LC Media LP and R&R Radio Corporation, pursuant to which Liberman Broadcasting of California and LBI Radio License assigned
all of their rights, title and interest in and to such asset purchase agreement to purchase the selected assets of radio station KDES-FM to LC Media and LC Media assumed all of the rights, benefits, obligations and duties under such asset purchase
agreement, including payment of the purchase price to R&R Radio Corporation and the entry into a substitute escrow agreement with R&R Radio Corporation. As a result, the $0.5 million escrow deposit that had been previously paid by our
subsidiaries was returned to us in August 2009. Such escrow deposit is included in other assets in our condensed consolidated balance sheets.

In connection with the assignment and assumption agreement, Liberman Broadcasting of California and Spectrum Scan entered into an amendment to the agreement relating to the relocation and purchase of KDES-FM, pursuant to which Liberman
Broadcasting of California will pay, subject to certain exceptions, approximately $4.2 million to Spectrum Scan (instead of the $7.0 million that had been previously agreed upon) in exchange for Spectrum Scans agreement to terminate its option
to purchase KWXY-FM, located in Cathedral City, California, and Spectrum Scans assistance in the relocation of KDES-FM from Palm Springs, California to Redlands, California when LC Media and R&R Radio Corporation consummate the acquisition
of the selected assets.



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As consideration for the assignment and assumption agreement and the amendment to the agreement with
Spectrum Scan, LC Media will pay, subject to and upon consummation of the purchase of KDES-FM from R&R Radio by LC Media, $5.9 million to us. Upon receipt of this payment, we will then pay $4.2 million to Spectrum Scan pursuant to the amendment
to the agreement relating to the relocation and purchase of KDES-FM, as described above.

We generally experience lower operating margins
for several quarters following the acquisition of radio and television stations. This is primarily due to the time it takes to fully implement our format changes, build our advertiser base and gain viewer or listener support.

From time to time, we engage in discussions with third parties concerning the possible acquisition of additional radio or television stations and their
related assets. Any such discussions may or may not lead to our acquisition of additional broadcasting assets.

Sale and Issuance of Liberman
Broadcastings Class A Common Stock

On March 30, 2007, our parent, Liberman Broadcasting, sold shares of its
Class A common stock to affiliates of Oaktree Capital Management LLC and Tinicum Capital Partners II, L.P.

In connection with the
sale of Liberman Broadcastings Class A common stock, Liberman Broadcasting and its stockholders entered into an investor rights agreement that defines certain rights and obligations of Liberman Broadcasting and the stockholders of
Liberman Broadcasting. Pursuant to this investor rights agreement, the investors have the right to consent to certain transactions involving us, Liberman Broadcasting, and our subsidiaries, including:



| |  |  | certain acquisitions or dispositions of assets by us, Liberman Broadcasting and our subsidiaries that are consummated on or after September 30, 2009;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | certain transactions between us, Liberman Broadcasting and our subsidiaries, on the one hand, and Jose Liberman, our chairman and president and LBI Medias
chairman and president, Lenard Liberman, our executive vice president and secretary and LBI Medias executive vice president and secretary, or certain of their respective family members, on the other hand;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | certain issuances of equity securities to employees or consultants of ours, Liberman Broadcasting, and our subsidiaries;
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | certain changes in the compensation arrangements with Jose Liberman, Lenard Liberman or certain of their respective family members;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | material modifications in our business strategy and the business strategy of Liberman Broadcasting and our subsidiaries;
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | commencement of a bankruptcy proceeding related to us, Liberman Broadcasting, and our subsidiaries;
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | certain issuances of new equity securities to the public prior to March 30, 2010;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | certain changes in Liberman Broadcastings corporate form to an entity other than a Delaware corporation;
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | any change in Liberman Broadcastings auditors to a firm that is not a big four accounting firm; and
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | certain change of control transactions.
| | - |  | ---------------------------------------



23



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##### Table of Contents

Results of Operations

Separate financial data for each of our operating segments is provided below. We evaluate the performance of our operating segments based on the following:



|                                                                                                                                                                 |  |                            |        |                          |      |   |        |  |   |         |   |  |   |       
|---------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | ------ | ------------------------ | ---- | - | ------ |  | - | ------- | - |  | - | ------
|                                                                                                                                                                 |  | Three Months EndedJune 30, |        | Six Months EndedJune 30,
|                                                                                                                                                                 |  | 2009                       |        |                          | 2008 |   | 2009   |  |   | 2008   
|Net revenues:                                                                                                                                                    |  |                            |        |                          |      |   |        |  |   |         |   |  |   |       
|Radio                                                                                                                                                            |  | $                          | 17,069 |                          |      | $ | 19,765 |  | $ | 29,203  |   |  | $ | 33,460
|Television                                                                                                                                                       |  |                            | 11,350 |                          |      |   | 14,243 |  |   | 21,025  |   |  |   | 26,955
|                                                                                                                                                                 |  |                            |        |                          |      |   |        |  |   |         |   |  |   |       
|Total                                                                                                                                                            |  | $                          | 28,419 |                          |      | $ | 34,008 |  | $ | 50,228  |   |  | $ | 60,415
|                                                                                                                                                                 |  |                            |        |                          |      |   |        |  |   |         |   |  |   |       
|Total operating expenses before stock-based compensation expense, impairment of broadcast licenses, loss on disposal of property and equipment
and depreciation: |  |                            |        |                          |      |   |        |  |   |         |   |  |   |       
|Radio                                                                                                                                                            |  | $                          | 8,250  |                          |      | $ | 8,360  |  | $ | 16,678  |   |  | $ | 16,073
|Television                                                                                                                                                       |  |                            | 7,625  |                          |      |   | 9,595  |  |   | 15,240  |   |  |   | 19,130
|                                                                                                                                                                 |  |                            |        |                          |      |   |        |  |   |         |   |  |   |       
|Total                                                                                                                                                            |  | $                          | 15,875 |                          |      | $ | 17,955 |  | $ | 31,918  |   |  | $ | 35,203
|                                                                                                                                                                 |  |                            |        |                          |      |   |        |  |   |         |   |  |   |       
|Stock-based compensation expense:                                                                                                                                |  |                            |        |                          |      |   |        |  |   |         |   |  |   |       
|Corporate                                                                                                                                                        |  | $                          | 7      |                          |      | $ |       |  | $ | 15      |   |  | $ |      
|                                                                                                                                                                 |  |                            |        |                          |      |   |        |  |   |         |   |  |   |       
|Total                                                                                                                                                            |  | $                          | 7      |                          |      | $ |       |  | $ | 15      |   |  | $ |      
|                                                                                                                                                                 |  |                            |        |                          |      |   |        |  |   |         |   |  |   |       
|Impairment of broadcast licenses:                                                                                                                                |  |                            |        |                          |      |   |        |  |   |         |   |  |   |       
|Radio                                                                                                                                                            |  | $                          |       |                          |      | $ |       |  | $ | 31,886  |   |  | $ |      
|Television                                                                                                                                                       |  |                            |       |                          |      |   |       |  |   | 19,580  |   |  |   |      
|                                                                                                                                                                 |  |                            |        |                          |      |   |        |  |   |         |   |  |   |       
|Total                                                                                                                                                            |  | $                          |       |                          |      | $ |       |  | $ | 51,466  |   |  | $ |      
|                                                                                                                                                                 |  |                            |        |                          |      |   |        |  |   |         |   |  |   |       
|Loss on disposal of property and equipment:                                                                                                                      |  |                            |        |                          |      |   |        |  |   |         |   |  |   |       
|Radio                                                                                                                                                            |  | $                          | 32     |                          |      | $ |       |  | $ | 32      |   |  | $ |      
|Television                                                                                                                                                       |  |                            | 909    |                          |      |   |       |  |   | 909     |   |  |   |      
|                                                                                                                                                                 |  |                            |        |                          |      |   |        |  |   |         |   |  |   |       
|Total                                                                                                                                                            |  | $                          | 941    |                          |      | $ |       |  | $ | 941     |   |  | $ |      
|                                                                                                                                                                 |  |                            |        |                          |      |   |        |  |   |         |   |  |   |       
|Depreciation:                                                                                                                                                    |  |                            |        |                          |      |   |        |  |   |         |   |  |   |       
|Radio                                                                                                                                                            |  | $                          | 1,174  |                          |      | $ | 1,271  |  | $ | 2,432   |   |  | $ | 2,522 
|Television                                                                                                                                                       |  |                            | 1,206  |                          |      |   | 1,110  |  |   | 2,421   |   |  |   | 2,342 
|                                                                                                                                                                 |  |                            |        |                          |      |   |        |  |   |         |   |  |   |       
|Total                                                                                                                                                            |  | $                          | 2,380  |                          |      | $ | 2,381  |  | $ | 4,853   |   |  | $ | 4,864 
|                                                                                                                                                                 |  |                            |        |                          |      |   |        |  |   |         |   |  |   |       
|Total operating expenses:                                                                                                                                        |  |                            |        |                          |      |   |        |  |   |         |   |  |   |       
|Radio                                                                                                                                                            |  | $                          | 9,456  |                          |      | $ | 9,631  |  | $ | 51,028  |   |  | $ | 18,595
|Television                                                                                                                                                       |  |                            | 9,740  |                          |      |   | 10,705 |  |   | 38,150  |   |  |   | 21,472
|Corporate                                                                                                                                                        |  |                            | 7      |                          |      |   |       |  |   | 15      |   |  |   |      
|                                                                                                                                                                 |  |                            |        |                          |      |   |        |  |   |         |   |  |   |       
|Total                                                                                                                                                            |  | $                          | 19,203 |                          |      | $ | 20,336 |  | $ | 89,193  |   |  | $ | 40,067
|Operating income (loss):                                                                                                                                         |  |                            |        |                          |      |   |        |  |   |         |   |  |   |       
|Radio                                                                                                                                                            |  | $                          | 7,613  |                          |      | $ | 10,134 |  | $ | (21,825 | ) |  | $ | 14,865
|Television                                                                                                                                                       |  |                            | 1,610  |                          |      |   | 3,538  |  |   | (17,125 | ) |  |   | 5,483 
|Corporate                                                                                                                                                        |  |                            | (7     | )                        |      |   |       |  |   | (15     | ) |  |   |      
|                                                                                                                                                                 |  |                            |        |                          |      |   |        |  |   |         |   |  |   |       
|Total                                                                                                                                                            |  | $                          | 9,216  |                          |      | $ | 13,672 |  | $ | (38,965 | ) |  | $ | 20,348
|                                                                                                                                                                 |  |                            |        |                          |      |   |        |  |   |         |   |  |   |       
|Adjusted EBITDA (1):                                                                                                                                             |  |                            |        |                          |      |   |        |  |   |         |   |  |   |       
|Radio                                                                                                                                                            |  | $                          | 8,819  |                          |      | $ | 11,405 |  | $ | 12,525  |   |  | $ | 17,387
|Television                                                                                                                                                       |  |                            | 3,725  |                          |      |   | 4,648  |  |   | 5,785   |   |  |   | 7,825 
|                                                                                                                                                                 |  |                            |        |                          |      |   |        |  |   |         |   |  |   |       
|Total                                                                                                                                                            |  | $                          | 12,544 |                          |      | $ | 16,053 |  | $ | 18,310  |   |  | $ | 25,212
|                                                                                                                                                                 |  |                            |        |                          |      |   |        |  |   |         |   |  |   |       



|(1) | We define Adjusted EBITDA as net income or loss plus income tax benefit or expense, net interest expense, interest rate swap income or expense, impairment of broadcast licenses,
depreciation, loss on disposal of property and equipment, stock-based compensation expense, and other non-cash gains or losses. Management considers this measure an important indicator of our liquidity relating to our operations because it
eliminates the effects of certain non-cash items and our capital structure. This measure should be considered in addition to, but not as a substitute for or superior to, other measures of liquidity and financial performance prepared in accordance
with U.S. generally accepted accounting principles, or GAAP, such as cash flows from operating activities, operating income or loss and net income or loss. In addition, our definition of Adjusted EBITDA may differ from those of many companies
reporting similarly named measures.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We discuss Adjusted EBITDA and the limitations of this financial measure in more detail
under Non-GAAP Financial Measures.

The table set forth below reconciles net cash used in operating activities,
calculated and presented in accordance with GAAP, to Adjusted EBITDA:



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|                                                    |  |                            |        |   |                          |   |        |      |  |   |         |   |  |   |        |  
|--------------------------------------------------- |  | -------------------------- | ------ | - | ------------------------ | - | ------ | ---- |  | - | ------- | - |  | - | ------ | -
|                                                    |  | Three Months EndedJune 30, |        |   | Six Months EndedJune 30, |  
|                                                    |  | 2009                       |        |   | 2008                     |   |        | 2009 |  |   | 2008    |  
|                                                    |  | (In thousands)             |       
|Net cash provided by (used in) operating activities |  | $                          | 3,139  |   |                          | $ | 8,106  |      |  | $ | (997    | ) |  | $ | 4,065  |  
|Add:                                                |  |                            |        |   |                          |   |        |      |  |   |         |   |  |   |        |  
|Income tax expense (benefit)                        |  |                            | 2,005  |   |                          |   | 2,366  |      |  |   | (15,344 | ) |  |   | 4,909  |  
|Interest expense and other income, net              |  |                            | 8,406  |   |                          |   | 9,436  |      |  |   | 16,657  |   |  |   | 18,553 |  
|Less:                                               |  |                            |        |   |                          |   |        |      |  |   |         |   |  |   |        |  
|Amortization of deferred financing costs            |  |                            | (366   | ) |                          |   | (367   | )    |  |   | (730    | ) |  |   | (729   | )
|Amortization of discount on subordinated notes      |  |                            | (68    | ) |                          |   | (63    | )    |  |   | (135    | ) |  |   | (125   | )
|Amortization of program rights                      |  |                            | (871   | ) |                          |   | (144   | )    |  |   | (1,014  | ) |  |   | (280   | )
|Accretion on senior discount notes                  |  |                            |       |   |                          |   | (1,768 | )    |  |   |        |   |  |   | (3,459 | )
|Provision for doubtful accounts                     |  |                            | (394   | ) |                          |   | (392   | )    |  |   | (691    | ) |  |   | (637   | )
|Changes in operating assets and liabilities:        |  |                            |        |   |                          |   |        |      |  |   |         |   |  |   |        |  
|Accounts receivable                                 |  |                            | 4,468  |   |                          |   | 5,598  |      |  |   | 2,444   |   |  |   | 5,593  |  
|Cash overdraft                                      |  |                            | 1,596  |   |                          |   | 773    |      |  |   | 395     |   |  |   |       |  
|Program rights                                      |  |                            | 1,633  |   |                          |   | (1     | )    |  |   | 3,954   |   |  |   | 1,159  |  
|Amounts due from related parties                    |  |                            | 15     |   |                          |   | 16     |      |  |   | 20      |   |  |   | 35     |  
|Prepaid expenses and other current assets           |  |                            | 5      |   |                          |   | (101   | )    |  |   | (217    | ) |  |   | (121   | )
|Employee advances                                   |  |                            | (30    | ) |                          |   | 274    |      |  |   | 7       |   |  |   | 404    |  
|Accounts payable                                    |  |                            | 166    |   |                          |   | 85     |      |  |   | 1,034   |   |  |   | 1,039  |  
|Accrued liabilities                                 |  |                            | (1,600 | ) |                          |   | (342   | )    |  |   | (2,015  | ) |  |   | 131    |  
|Accrued interest                                    |  |                            | (3,609 | ) |                          |   | (5,081 | )    |  |   | (147    | ) |  |   | 204    |  
|Deferred income taxes                               |  |                            | (2,396 | ) |                          |   | (2,391 | )    |  |   | 15,044  |   |  |   | (4,772 | )
|Other assets and liabilities                        |  |                            | 445    |   |                          |   | 49     |      |  |   | 45      |   |  |   | (757   | )
|                                                    |  |                            |        |   |                          |   |        |      |  |   |         |   |  |   |        |  
|Adjusted EBITDA                                     |  | $                          | 12,544 |   |                          | $ | 16,053 |      |  | $ | 18,310  |   |  | $ | 25,212 |  
|                                                    |  |                            |        |   |                          |   |        |      |  |   |         |   |  |   |        |  

Three Months Ended June 30, 2009 Compared to the Three Months Ended June 30, 2008

Net Revenues. Net revenues decreased by $5.6 million, or 16.4%, to $28.4 million for the three months ended June 30, 2009, from
$34.0 million for the same period in 2008. The change was primarily attributable to decreased advertising revenue in both our radio and television segments, reflecting the general decline in the advertising industry consistent with the
continued downturn in the local and U.S. economies.

Net revenues for our radio segment decreased by $2.7 million, or 13.6%, to $17.1
million for the three months ended June 30, 2009, from $19.8 million for the same period in 2008. This change was primarily attributable to a decline in advertising revenue in our Los Angeles market, though we experienced modest declines in our
Dallas and Houston markets as well.

Net revenues for our television segment decreased by $2.9 million, or 20.3%, to $11.3 million for the
three months ended June 30, 2009, from $14.2 million for the same period in 2008. This decrease was primarily attributable to lower advertising revenue in all of our television markets, reflecting the continued downturn in the local and U.S.
economies.

We currently anticipate full year net revenue to decline in 2009, as compared to 2008, in both our radio and television
segments as a result of the U.S. economic recession, which has negatively impacted the national and local advertising markets.



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Total operating expenses. Total operating expenses decreased by $1.1 million, or 5.6%, to $19.2
million for the three months ended June 30, 2009, as compared to $20.3 million for the same period in 2008. The decrease was primarily attributable to:



| | (1) | a $1.1 million decline in program and technical expenses, primarily resulting from an increase in managements estimate of the period over which certain of our internally
produced programs contribute to our revenues. Prior to January 1, 2009, television production costs for all programs were charged to operating expense as incurred, because we had estimated that the useful lives of these programs did not exceed
one year. Beginning January 1, 2009, we determined, based on an evaluation of our historical programming data, that certain of our television programs have demonstrated the ability to generate gross revenues beyond one year, and therefore,
television production costs for these programs are charged to operating expense based on the ratio of the current periods gross revenues to estimated remaining total gross revenues from all sources on an individual program basis. If we had not
made this change and continued to expense television production costs for these programs as incurred as we had in the prior fiscal year, our program and technical expenses would have been approximately $0.9 million higher for the three months ended
June 30, 2009. The decline in program and technical expenses was also due to lower payroll expenses resulting from staff reductions; and
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | a $0.9 million decline in selling, general and administrative expenses, primarily attributable to lower professional fees, insurance costs and lower sales commissions (resulting
from lower sales and a reduction in commission payout rates).
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

These declines were partially offset by a $0.9 million
increase in our loss on disposal of property and equipment, which primarily relates to the write-off in the second quarter of 2009 of obsolete analog transmission equipment for our Utah television station.

Total operating expenses for our radio segment decreased by $0.1 million, or 1.8%, to $9.5 million for the three months ended June 30, 2009, from
$9.6 million for the three months ended June 30, 2008. This change was primarily attributable to a $0.1 million decline in promotional expenses and a $0.1 million decrease in depreciation expense. These declines were partially offset by an
increase in our loss on disposal of property and equipment, attributable to the write-off in the second quarter of 2009 of obsolete radio transmission equipment.

Total operating expenses for our television segment decreased by $1.0 million, or 9.0%, to $9.7 million for the three months ended June 30, 2009, from $10.7 million for the same period in 2008. This decrease was
primarily due to:



| | (1) | a $1.1 million decrease in programming and technical expenses, reflecting the increase in the period over which certain in-house television production costs are amortized, as
discussed above, and lower payroll expenses resulting from staff reductions; and
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | a $0.9 million decline in selling, general and administrative expenses, primarily attributable to lower professional fees, insurance costs and lower sales commissions (resulting
from lower sales and a reduction in commission payout rates).
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

These declines were partially offset by a $0.9 million
increase in our loss on disposal of property and equipment, which primarily relates to the write-off in the second quarter of 2009 of obsolete analog transmission equipment for our Utah television station, and a $0.1 million increase in depreciation
expense.

We believe that our total operating expenses, before consideration of any impairment charges, will decrease in the remainder of
2009 as compared to 2008, due to the extension of the period over which certain in-house television production costs are amortized, as described above, and a decrease in sales commissions and administrative expenses resulting from lower advertising
revenues and operating cost reductions. However, this expectation could be negatively impacted by the consummation of the acquisition of WASA-LP and the number and size of additional radio and television assets that we acquire, if any.

Interest expense and interest and other income. Interest expense and interest and other income decreased by $1.1 million, or 10.9%, to $8.4
million for the three months ended June 30, 2009, as compared to $9.5 million for the same period in 2008. Although the average debt balance under LBI Medias senior secured credit facilities was higher in the second quarter of 2009, as
compared to the same period in 2008, the average interest rates were lower during the current year period, which more than offset the higher debt balances. In addition, our senior discount notes began accruing cash interest at 11% in October 2008,
which was lower than the effective yield at which the notes had been previously accreting. As a result, interest expense related to our senior discount notes decreased by $0.5 million during the three months ended June 30, 2009, as compared to
the same period in 2008.

Our interest expense may increase in 2009 if we borrow additional amounts under LBI Medias senior revolving
credit facility to acquire additional radio or television station assets, including the acquisition of the selected assets of television station WASA-LP from Venture Technologies Group, LLC. See Acquisitions.



26



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Interest rate swap income. Interest rate swap income decreased by $1.7 million, or 62.8%, to $1.0
million for the three months ended June 30, 2009, as compared to $2.7 million for the same period in 2008. Interest rate swap income (or expense) reflects changes in the estimated fair market value of our interest rate swap during the
respective period.

Gain on note purchase.During the three months ended June 30, 2009, we purchased $1.0 million aggregate
principal amount of our outstanding 11% senior discount notes at a purchase price of 48.0% of face value in an open market transaction. The purchase resulted in a pre-tax gain of approximately $0.5 million (see Liquidity and Capital
ResourcesSenior Discount Notes). No such purchase occurred during the three months ended June 30, 2008.

Equity in
losses of equity method investment. In April 2008, one of our indirect, wholly owned subsidiaries purchased a 30% interest in PortalUno, Inc., or PortalUno, a development stage, online search engine for the Hispanic community. Equity in losses
of equity method investment of $25,000 for the three months ended June 30, 2009 represents our share of PortalUnos net loss during the period.

(Provision for) benefit from income taxes.During the three months ended June 30, 2009, our income tax provision decreased by $0.4 million, or 15.3%, to $2.0 million for the three months ended
June 30, 2009, as compared to $2.4 million for the same period in 2008. The decrease was primarily attributable to the expiration of the statute of limitations for certain previously accrued unrecognized tax benefits.

Net income (loss). We recognized net income of $0.3 million for the three months ended June 30, 2009, as compared to $4.6 million for the
same period of 2008, a decrease of $4.3 million. This change was primarily attributable to the $4.5 million decrease in operating income, based on the factors discussed above.

Adjusted EBITDA. Adjusted EBITDA decreased by $3.6 million, or 21.9%, to $12.5 million for the three months ended June 30, 2009, as compared
to $16.1 million for the same period in 2008. This change was primarily the result of the overall decline in radio and television advertising revenues, partially offset by the decrease in program and technical expenses and selling, general and
administrative expenses.

Adjusted EBITDA for our radio segment decreased by $2.6 million, or 22.7%, to $8.8 million for the three months
ended June 30, 2009, as compared to $11.4 million for the same period in 2008. The decrease was primarily the result of the decline in advertising revenues in all of our markets, partially offset by the decline in promotional expenses, as
discussed above.

Adjusted EBITDA for our television segment decreased by $1.0 million, or 19.9%, to $3.7 million for the three months
ended June 30, 2009, from $4.7 million for the same period in 2008. This decrease was primarily the result of lower advertising revenue, partially offset by declines in program and technical expenses and selling, general and administrative
expenses, as discussed above.

Six Months Ended June 30, 2009 Compared to the Six Months Ended June 30, 2008

Net Revenues. Net revenues decreased by $10.2 million, or 16.9%, to $50.2 million for the six months ended June 30, 2009, from
$60.4 million for the same period in 2008. The change was primarily attributable to decreased advertising revenue in all of our radio and television markets, reflecting the general decline in the advertising industry consistent with the
continued downturn in the local and U.S. economies.

Net revenues for our radio segment decreased by $4.2 million, or 12.7%, to $29.2
million for the six months ended June 30, 2009, from $33.4 million for the same period in 2008. This change was primarily attributable to a decline in advertising revenue in our Los Angeles market, though we experienced modest declines in our
Dallas and Houston markets as well.

Net revenues for our television segment decreased by $6.0 million, or 22.0%, to $21.0 million for the
six months ended June 30, 2009, from $27.0 million for the same period in 2008. This decrease was primarily attributable to lower advertising revenue in our California and Texas markets, reflecting the continued downturn in the local and U.S.
economies.

Total operating expenses. Total operating expenses increased by $49.1 million, or 122.6%, to $89.2 million for the six
months ended June 30, 2009, as compared to $40.1 million for the same period in 2008. This increase was primarily the result of a $51.5 million increase in broadcast license impairment charges. Excluding the impact of the impairment charges,
total operating expenses decreased by $2.3 million, or 5.8%, to $37.7 million for the six months ended June 30, 2009. This decrease was the result of a $2.3 million decline in program and technical expenses, primarily resulting from an increase
in managements estimate of the period over which certain of our internally produced programs contribute to our revenues. As described above, prior to January 1, 2009, television production costs for all programs were charged to operating
expense as incurred because we estimated that the useful lives of these programs did not exceed one year. Beginning January 1, 2009, we began charging television production costs for these programs to operating expense based on the ratio of the
current periods gross revenues to estimated remaining total gross revenues from all sources on an individual program basis. If we had not made this change and continued to expense television production costs for these



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programs as incurred as we had in the prior fiscal year, our program and technical expenses would have been approximately $3.2 million higher for the six
months ended June 30, 2009. This benefit realized from deferring the period over which television production costs for these programs are expensed was partially offset by an increase in music license and ratings service fees.

Total operating expenses for our radio segment increased by $32.4 million, or 174.5%, to $51.0 million for the six months ended June 30, 2009, from
$18.6 million in the six months ended June 30, 2008. This increase was primarily attributable to:



| | (1) | a $31.9 million increase in broadcast license impairment charges;
| | --- | -----------------------------------------------------------------



| | (2) | a $0.5 million increase in selling, general and administrative expenses, primarily due to higher legal expenses and pre-acquisition costs (the adoption of FAS 141R resulted in the
write-off of $0.2 million in previously capitalized pre-acquisition expenses. See Recent Accounting Pronouncements). These increases were partially offset by lower sales payroll and commission expenses, reflecting lower sales and
commission payout rates; and
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | a $0.2 million increase in programming and technical expenses, primarily associated with higher music license and ratings service fees.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------

These increases were partially offset by declines in promotional expenses and depreciation expense.

Total operating expenses for our television segment increased by $16.7 million, or 77.7%, to $38.2 million for the six months ended June 30, 2009,
from $21.5 million for the same period in 2008. This increase was primarily the result of a $19.6 million increase in broadcast license impairment charges. However, excluding the impairment charges, total operating expenses decreased by $2.9
million, or 13.5%, for the six months ended June 30, 2009, as compared to the same period in 2008. This decrease was primarily due to:



| | (1) | a $2.5 million decrease in programming and technical expenses, reflecting the increase in the period over which certain in-house television production costs are amortized, as
discussed above, and lower payroll expenses, resulting from staff reductions. These declines were partially offset by an increase in music license and ratings service fees; and
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | a $1.5 million decrease in selling, general and administrative expenses, primarily reflecting lower sales payroll and commission expenses, as a result of the decline in advertising
sales and a reduction in payout rates, partially offset by higher legal expenses and pre-acquisition costs (the adoption of FAS 141R resulted in the write-off of $0.2 million in previously capitalized pre-acquisition expenses).
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

These declines were partially offset by a $0.9 million increase in our loss on disposal of property and equipment, which
primarily relates to the write-off of obsolete analog transmission equipment for our Utah television station, and modest increases in promotional expenses and depreciation.

Interest expense and interest and other income. Interest expense and interest and other income decreased by $1.9 million, or 10.2%, to $16.7
million for the six months ended June 30, 2009, as compared to $18.6 million for the same period in 2008. Although the average debt balance under LBI Medias senior secured credit facilities was higher in the first half of 2009, as
compared to the same period in 2008, the average interest rates were lower during the current period, which more than offset the higher debt balances. In addition, our senior discount notes began accruing cash interest at 11% in October 2008, which
was lower than the effective yield at which the notes had been previously accreting. As a result, interest expense related to our senior discount notes decreased by $0.9 million during the six months ended June 30, 2009, as compared to the same
period in 2008.

Interest rate swap income. Interest rate swap income was $1.4 million for the six months ended June 30, 2009,
as compared to $0.1 million for the same period of 2008, an increase of $1.3 million. Interest rate swap income (or expense) reflects changes in the estimated fair market value of our interest rate swap during the respective period.

Gain on note purchase.During the six months ended June 30, 2009, we purchased $1.0 million aggregate principal amount of our outstanding 11%
senior discount notes at a purchase price of 48.0% of face value in an open market transaction. The purchase resulted in a pre-tax gain of approximately $0.5 million (see Liquidity and Capital ResourcesSenior Discount Notes). No
such purchase occurred during the six months ended June 30, 2008.

Equity in losses of equity method investment. As described
above, one of our indirect, wholly owned subsidiaries purchased a 30% interest in PortalUno in April 2008. Equity in losses of equity method investment of $63,000 for the six months ended June 30, 2009 represents our share of PortalUnos
net loss during the period.

(Provision for) benefit from income taxes.During the six months ended June 30, 2009, we
recognized an income tax benefit of $15.3 million, as compared to an income tax provision of $4.9 million for the same period in 2008. The change in our income tax benefit (provision) of $20.2 million primarily resulted from the impact of the $51.5
million broadcast license impairment charge we recorded in the first quarter of 2009, as described above.



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Net income (loss). We recognized a net loss of $38.5 million for the six months ended
June 30, 2009, as compared to a net loss of $3.0 million for the same period of 2008, a decrease of $35.5 million. This change was primarily attributable to the $51.5 million increase in broadcast license impairment charges, partially offset by
the $20.2 million change in income tax benefit (provision) and the other changes noted above.

Adjusted EBITDA. Adjusted EBITDA
decreased by $6.9 million, or 27.4%, to $18.3 million for the six months ended June 30, 2009, as compared to $25.2 million for the same period in 2008. This change was primarily the result of the overall decline in radio and television
advertising revenues, partially offset by the decrease in program and technical expenses and selling, general and administrative expenses.

Adjusted EBITDA for our radio segment decreased by $4.9 million, or 28.0%, to $12.5 million for the six months ended June 30, 2009, as compared to $17.4 million for the same period in 2008. The decrease was primarily the result of the
decline in advertising revenues in our Los Angeles market and an increase in program and technical expenses and selling, general and administrative expenses, as discussed above.

Adjusted EBITDA for our television segment decreased by $2.0 million, or 26.1%, to $5.8 million for the six months ended June 30, 2009, from $7.8
million for the same period in 2008. This decrease was primarily the result of lower advertising revenue, partially offset by declines in program and technical expenses and selling, general and administrative expenses, as discussed above.

Liquidity and Capital Resources

LBI Medias Senior Credit Facilities.Our primary sources of liquidity are cash provided by operations and available borrowings under LBI Medias $150.0 million senior revolving credit facility. In May 2006, LBI Media
refinanced its prior $220.0 million senior revolving credit facility with a $150.0 million senior revolving credit facility and a $110.0 million senior term loan facility. In January 2008, LBI Media entered into a commitment increase agreement
pursuant to which its senior term loan facility increased by $10.0 million, from $108.4 million (net of principal repayments from May 2006 through January 2008) to $118.4 million. LBI Media borrowed the full amount of the increase in the commitment.

LBI Media has the option to request its existing or new lenders under its senior secured term loan facility and under its $150.0 million
senior secured revolving credit facility to increase the aggregate amount of its senior credit facilities by an additional $40.0 million; however, its existing and new lenders are not obligated to do so. The increases under the senior secured
revolving credit facility and the senior secured term loan credit facility, taken together, cannot exceed $50.0 million in the aggregate (including the $10.0 million increase in January 2008).

Under the senior revolving credit facility, LBI Media has a swing line sub-facility equal to an amount of not more than $5.0 million. Letters of
credit are also available to LBI Media under the senior revolving credit facility and may not exceed the lesser of $5.0 million or the available revolving commitment amount. There are no scheduled reductions of commitments under the senior revolving
credit facility. Under the senior term loan facility, each quarter, LBI Media must pay 0.25% of the original principal amount of the term loans (repayment of $275,000 per quarter as of June 30, 2009), plus 0.25% of the additional amount
borrowed in January 2008 (repayment of $25,000 per quarter as of June 30, 2009) and 0.25% of any additional principal amount incurred in the future under the senior term loan facility. The senior credit facilities mature on March 31, 2012.

As of June 30, 2009, LBI Media had $35.8 million aggregate principal amount outstanding under the senior revolving credit facility
and $116.3 million aggregate principal amount of outstanding senior term loans. Since June 30, 2009, LBI Media has borrowed, net of repayments, an additional $7.7 million under its senior secured revolving credit facility.

Borrowings under the senior credit facilities bear interest based on either, at LBI Medias option, the base rate for base rate loans or the LIBOR
rate for LIBOR loans, in each case plus the applicable margin stipulated in the senior credit agreements. The base rate is the higher of (i) Credit Suisses prime rate and (ii) the Federal Funds Effective Rate (as published by the
Federal Reserve Bank of New York) plus 0.50%. The applicable margin for revolving loans, which is based on LBI Medias total leverage ratio, ranges from 0% to 1.00% per annum for base rate loans and from 1.00% to 2.00% per annum for
LIBOR loans. Including the $10.0 million increase to LBI Medias senior secured term loan facility in January 2008, the applicable margin for term loans ranges from 0.50% to 0.75% for base rate loans and from 1.50% to 1.75% for LIBOR loans. The
applicable margin for any future term loans will be agreed upon at the time those loans are incurred. Interest on base rate loans is payable quarterly in arrears, and interest on LIBOR loans is payable either monthly, bimonthly or quarterly
depending on the interest period elected by LBI Media. All amounts that are not paid when due under either the senior revolving credit facility or the senior term loan facility will accrue interest at the rate otherwise applicable plus 2.00% until
such amounts are paid in full. In addition, LBI Media pays a quarterly unused commitment fee ranging from 0.25% to 0.50% depending on the level of facility usage. At June 30, 2009, borrowings under LBI Medias senior credit facilities bore
interest at rates between 1.81% and 4.25%, including the applicable margin.



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Under the indentures governing LBI Medias 81/2% senior subordinated notes and our senior discount notes (described below), LBI Media is limited in its ability to borrow under the senior revolving credit facility and to borrow
additional amounts under the senior term loan facility. LBI Media may borrow up to an aggregate of $260.0 million under the senior credit facilities (subject to certain reductions under certain circumstances) without having to comply with specified
leverage ratios under the indentures governing its 81/2% senior subordinated notes and our senior discount notes, but any amount over
such $260.0 million that LBI Media may borrow under the senior credit facilities (subject to certain reductions under certain circumstances) will be subject to LBI Medias and our compliance with specified leverage ratios (as defined in the
indentures governing LBI Medias 81/2% senior subordinated notes and our senior discount notes). Also, the indenture
governing LBI Medias 81/2% senior subordinated notes prohibits borrowings under LBI Medias senior
credit facilities, the proceeds of which would be used to repay, redeem, repurchase or refinance any of our senior discount notes earlier than one year prior to their stated maturity.

LBI Medias senior credit facilities contain customary restrictive covenants that, among other things, limit its ability to incur additional
indebtedness and liens in connection therewith and pay dividends. Under the senior revolving credit facility, LBI Media must also maintain a maximum senior secured leverage ratio (as defined in the senior credit agreement). As of June 30, 2009,
LBI Media was in compliance with all such covenants.

LBI Medias 81/2% Senior Subordinated Notes. In July 2007, LBI Media issued approximately $228.8 million aggregate
principal amount of 81/2% Senior Subordinated Notes that mature in 2017, resulting in gross proceeds of
approximately $225.0 million and net proceeds of approximately $221.6 million after deducting certain transaction costs. Under the terms of LBI Medias 81/2% senior subordinated notes, it must pay semi-annual interest payments of approximately $9.7 million each February 1 and August 1, commencing February 1, 2008. LBI Media may
redeem the 81/2% senior subordinated notes at any time on or after August 1, 2012 at
redemption prices specified in the indenture governing its 81/2% senior subordinated notes, plus accrued and unpaid interest. At any time prior
to August 1, 2012, LBI Media may redeem some or all of its 81/2% senior subordinated notes at a redemption price equal to a make
whole amount as set forth in the indenture governing such senior subordinated notes. Also, LBI Media may redeem up to 35% of the aggregate principal amount of the notes with the net proceeds of certain equity offerings completed on or prior to
August 1, 2010 at a redemption price of 108.5% of the principal amount of the notes, plus accrued and unpaid interest, if any, thereon to the applicable redemption date.

The indenture governing these notes contains restrictive covenants that limit, among other things, LBI Medias and its
subsidiaries abilities to incur additional indebtedness, issue certain kinds of equity, and make particular kinds of investments. The indenture governing LBI Medias 81/2% senior subordinated notes also prohibits the incurrence of indebtedness, the proceeds of which would be used to repay, redeem, repurchase or refinance any of our senior discount notes earlier
than one year prior to the stated maturity of the senior discount notes unless such indebtedness is (i) unsecured, (ii) pari passu or junior in right of payment to the 81/2% senior subordinated notes of LBI Media, and (iii) otherwise permitted to be incurred under the indenture governing LBI Medias 81/2% senior subordinated notes. As of June 30, 2009, LBI Media was in compliance with all such covenants.

The indenture governing these notes also provides for customary events of default, which include (subject in certain instances to
cure periods and dollar thresholds): nonpayment of principal, interest and premium, if any, on the notes, breach of covenants specified in the indenture, payment defaults or acceleration of other indebtedness, a failure to pay certain judgments and
certain events of bankruptcy, insolvency and reorganization. The 81/2% senior subordinated notes will become due and payable immediately
without further action or notice upon an event of default arising from certain events of bankruptcy or insolvency with respect to us and certain of our subsidiaries. If any other event of default occurs and is continuing, the trustee or the holders
of at least 25% in principal amount of the then outstanding notes may declare all the notes to be due and payable immediately.

Senior Discount Notes. In October 2003, we issued $68.4 million aggregate principal amount at maturity of senior discount notes that mature in 2013. Under the terms of the senior discount notes, cash interest did not accrue and was
not payable on the senior discount notes prior to October 15, 2008 and instead the accreted value of the senior discount notes had been increased each period until the value equaled $68.4 million on October 15, 2008. We recorded such
accretion as additional interest expense. After October 15, 2008, cash interest began to accrue at a rate of 11% per year payable semi-annually on each April 15 and October 15.

In the fourth quarter of 2008, we purchased approximately $22.0 million aggregate principal amount of our senior discount notes in various open market
transactions at a weighted average purchase price of 43.321% of the principal amount. In the second quarter of 2009, we purchased an additional $1.0 million aggregate principal amount of our senior discount notes on the open market at a purchase
price of 48.0% of the principal amount.

The indenture governing the senior discount notes contains certain restrictive
covenants that, among other things, limit our ability to incur additional indebtedness and pay dividends to Liberman Broadcasting. Our senior discount notes are structurally subordinated to LBI Medias senior credit facilities and LBI
Medias 81/2% senior subordinated notes. As of June 30, 2009, we were in compliance with
all such covenants.



Empire Burbank Studios
Mortgage Note. In July 2004, one of our indirect, wholly owned subsidiaries, Empire Burbank Studios LLC, or Empire, issued an installment note for approximately $2.6 million and repaid its former mortgage note. The loan is secured by



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Empires real property and bears interest at 5.52% per annum. The loan is payable in monthly principal and interest payments of approximately
$21,000 through maturity in July 2019.

The following table summarizes our various levels of indebtedness at June 30, 2009.



|                           |  |                                                         |  |                                                       |  |                         |  |                                                                                                                                    
|-------------------------- |  | ------------------------------------------------------- |  | ----------------------------------------------------- |  | ----------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------
|Issuer                     |  | Form of Debt                                            |  | Principal AmountOutstanding                           |  | Scheduled Maturity Date |  | Interest rate                                                                                                                      
|LBI Media, Inc.            |  | $150.0 million senior secured revolving credit facility |  | $35.8 million (1)                                     |  | March 31, 2012          |  | LIBOR or base rate, plus an applicable margin dependent on LBI Medias leverage ratio (2.4% weighted average rate at June 30, 2009)
|                           |  |                                                         |  |                                                      
|LBI Media, Inc.            |  | Senior secured term loan credit facility                |  | $116.3 million                                        |  | March 31, 2012          |  | LIBOR or base rate, plus an applicable margin dependent on LBI Medias leverage ratio (1.8% weighted average rate at June 30, 2009)
|                           |  |                                                         |  |                                                      
|LBI Media, Inc.            |  | Senior subordinated notes                               |  | $228.8 million aggregate principal amount at maturity |  | August 1, 2017          |  | 8.5%                                                                                                                               
|                           |  |                                                         |  |                                                      
|LBI Media Holdings, Inc.   |  | Senior discount notes                                   |  | $68.4 million (2)                                     |  | October 15, 2013        |  | 11.0%                                                                                                                              
|                           |  |                                                         |  |                                                      
|Empire Burbank Studios LLC |  | Mortgage note                                           |  | $2.0 million                                          |  | July 1, 2019            |  | 5.52%                                                                                                                              



|(1) | Since June 30, 2009, LBI Media has borrowed, net of repayments, an additional $7.7 million under its senior secured revolving credit facility.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------

|(2) | In the fourth quarter of 2008 and the second quarter of 2009, we purchased approximately $22.0 million and $1.0 million, respectively, aggregate principal amount of our senior
discount notes in various open market transactions. As such, the total principal amount outstanding and due to third party noteholders was $45.4 million as of June 30, 2009.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Cash Flows. Cash and cash equivalents were $0.9 million and $0.5 million at June 30, 2009 and December 31, 2008, respectively.

Net cash flow used in operating activities was $1.0 million for the six months ended June 30, 2009, as compared to cash provided by
operations of $4.1 million for the six months ended June 30, 2008. The change was primarily attributable to a decline in advertising revenues, partially offset by lower operating costs.

Net cash flow used in investing activities was $6.2 million and $5.3 million for the six months ended June 30, 2009 and 2008, respectively. The
increase was primarily attributable to higher capital expenditures during the first six months of 2009, as compared to 2008, primarily reflecting additional expenditures related to the construction of our new office building and studio facility in
Dallas, Texas.

Net cash flow provided by financing activities was $7.9 million and $0.1 million for the six months ended June 30,
2009 and 2008. The increase primarily reflects a $7.8 million increase in net borrowings under LBI Medias senior revolving credit facility.

Contractual Obligations. We had no material changes in commitments for long-term debt obligations or operating lease obligations as of June 30, 2009, as compared to those disclosed in our table of contractual obligations
included in our Annual Report on Form 10-K for the year ended December 31, 2008.

Expected Use of Cash Flows. We believe that
our cash on hand, cash provided by operating activities and borrowings under LBI Medias senior revolving credit facility will be sufficient to permit us to fund our contractual obligations and operations for at least the next twelve months.
For both our radio and television segments, we have historically funded, and will continue to fund, expenditures



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for operations, administrative expenses, capital expenditures and debt service from our operating cash flow and borrowings under LBI Medias senior
revolving credit facility. In connection with the purchase of the selected assets of five radio stations in Dallas, we also purchased a building in Dallas, Texas to accommodate our growth in stations owned and operated in the Dallas-Fort Worth
market. We estimate we will spend an additional $1.0 million on improvements and equipment for our new Dallas building. In addition, our senior discount notes began accruing cash interest at a rate of 11% per year on October 15, 2008, with
the first payment made on April 15, 2009. Prior to October 15, 2008, our senior discount notes had not been accruing cash interest and instead the accreted value of the notes had been increasing. The interest payments are payable on
April 15 and October 15 of each year until the notes mature on October 15, 2013. We also expect to use cash to fund the purchase price for the selected assets of television station WASA-LP within the next twelve months, primarily
through borrowings under LBI Medias senior revolving credit facility.

We have used, and expect to continue to use, a significant
portion of our capital resources to fund acquisitions. Future acquisitions will be funded from amounts available under LBI Medias senior revolving credit facility, the proceeds of future equity or debt offerings and our internally generated
cash flows. However, our ability to pursue future acquisitions may be impaired if we or our parent are unable to obtain funding from other capital sources. As a result, we may not be able to increase our revenues at the same rate as we have in
recent years.

Seasonality

Seasonal
net revenue fluctuations are common in the television and radio broadcasting industry and result primarily from fluctuations in advertising expenditures by local and national advertisers. Our first fiscal quarter generally produces the lowest net
revenue for the year.

Non-GAAP Financial Measures

We use the term Adjusted EBITDA throughout this report. Adjusted EBITDA consists of net income or loss plus income tax benefit or expense, net interest expense, interest rate swap income or expense,
stock-based compensation expense, impairment of broadcast licenses, depreciation, loss on disposal of property and equipment and other non-cash gains or losses.

This term, as we define it, may not be comparable to a similarly titled measure employed by other companies and is not a measure of performance calculated in accordance with GAAP.

Management considers this measure an important indicator of our liquidity relating to our operations, as it eliminates the effects of certain non-cash
items and our capital structure. Management believes liquidity is an important measure for our company because it reflects our ability to meet our interest payments under our substantial indebtedness and is a measure of the amount of cash available
to grow our company through our acquisition strategy. This measure should be considered in addition to, but not as a substitute for or superior to, other measures of liquidity and financial performance prepared in accordance with GAAP, such as cash
flows from operating activities, operating income and net income.

We believe Adjusted EBITDA is useful to an investor in evaluating our
liquidity and cash flow because:



| |  |  | it is widely used in the broadcasting industry to measure a companys liquidity and cash flow without regard to items such as stock-based compensation expense,
depreciation and impairment of broadcast licenses. The broadcast industry uses liquidity to determine whether a company will be able to cover its capital expenditures and whether a company will be able to acquire additional assets and broadcast
licenses if the company has an acquisition strategy. We believe that by eliminating the effect of certain non-cash items, Adjusted EBITDA provides a meaningful measure of liquidity;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | it gives investors another measure to evaluate and compare the results of our operations from period to period by removing the impact of non-cash expense items,
such as depreciation and impairment of broadcast licenses. By removing the non-cash items, it allows our investors to better determine whether we will be able to meet our debt obligations as they become due; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | it provides a liquidity measure before the impact of a companys capital structure by removing net interest expense items and interest rate swap income or
expense.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our management uses Adjusted EBITDA:



| |  |  | as a measure to assist us in planning our acquisition strategy;
| | - |  | ---------------------------------------------------------------



| |  |  | in presentations to our board of directors to enable them to have the same consistent measurement basis of liquidity and cash flow used by management;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | as a measure for determining our operating budget and our ability to fund working capital; and
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | as a measure for planning and forecasting capital expenditures.
| | - |  | ---------------------------------------------------------------



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The Securities and Exchange Commission, or SEC, has adopted rules regulating the use of non-GAAP
financial measures, such as Adjusted EBITDA, in filings with the SEC and in disclosures and press releases. These rules require non-GAAP financial measures to be presented with and reconciled to the most nearly comparable financial measure
calculated and presented in accordance with GAAP. We have included a presentation of net cash (used in) provided by operating activities and a reconciliation to Adjusted EBITDA on a consolidated basis under Results of Operations.

Critical Accounting Policies

The
discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to
acquisitions of radio station and television station assets, allowance for doubtful accounts, program rights, intangible assets, deferred compensation and commitments and contingencies. We base our estimates on historical experience and on various
other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or conditions.

We believe the following accounting policies and the
related judgments and estimates affect the preparation of our consolidated financial statements.

Acquisitions of radio and television station assets

Our radio and television station acquisitions have consisted primarily of FCC licenses to broadcast in a particular market
(broadcast licenses). We generally acquire the existing format and change it upon acquisition. As a result, a substantial portion of the purchase price for the assets of a radio or television station is allocated to its broadcast license. The
allocations assigned to acquired broadcast licenses and other assets are subjective by their nature and require our careful consideration and judgment. We believe the allocations represent appropriate estimates of the fair value of the assets
acquired.

Allowance for doubtful accounts

We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. A considerable amount of judgment is required in assessing the likelihood of
ultimate realization of these receivables including our history of write offs, relationships with our customers and the current creditworthiness of each advertiser. Our historical estimates have been a reliable method to estimate future allowances,
with historical reserves averaging approximately 8.5% of our outstanding receivables. If the financial condition of our advertisers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be
required. The effect of an increase in our allowance of 3.0% of our outstanding receivables as of June 30, 2009, from 13.8% to 16.8%, or $3.2 million to $3.9 million, would result in a decrease in pre-tax income of $0.7 million for the six
months ended June 30, 2009.

Program Rights

Costs incurred in connection with the production of our internal television programs are expensed based on the ratio of the current periods gross revenues to estimated remaining total gross revenues from all
sources (Ultimate Revenues) on an individual program basis. Costs of television productions are subject to regular recovery assessments which compare the estimated fair values with the unamortized costs. The amount by which the unamortized costs of
television productions exceed their estimated fair values is written off. Prior to January 1, 2009, television production costs for all programs were charged to operating expense as incurred because we estimated that the useful lives of these
programs did not exceed one year. Beginning January 1, 2009, we determined, based on an evaluation of our historical programming data, that certain of our television programs have demonstrated the ability to generate gross revenues beyond the
current fiscal year, and therefore, television production costs for these programs are charged to operating expense based on the ratio of the current periods gross revenues to Ultimate Revenues as described above. Costs related to the
production of all other television programs for which we do not believe have a useful life beyond the current fiscal year are expensed as incurred. The adoption impact of the change in estimate of the useful life for certain television programs was
a reduction in program and technical expenses of approximately $0.9 million and $3.2 million during the three and six months ended June 30, 2009, respectively.

With respect to television programs intended for broadcast, the most sensitive factors affecting estimates of Ultimate Revenues is the programs rating (which directly impacts the number of times the show is
expected to air) and the strength of the advertising market. Program ratings, which are an indication of market acceptance, directly affect our ability to generate advertising revenues during the airing of the program. Poor ratings may result in the
cancellation of a television program, which would require the



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immediate write-off of any unamortized production costs. A significant decline in the advertising market could also negatively impact our estimates.

Intangible assets

Our
indefinite-lived assets consist of our FCC broadcast licenses. We believe that our broadcast licenses have indefinite useful lives given that they are expected to indefinitely contribute to our future cash flows and that they may be continually
renewed without substantial cost to us. In certain prior years, the licenses were considered to have finite lives and were subject to amortization.

In accordance with Statement of Financial Accounting Standards No. 142 Goodwill and Other Intangible Assets, (FAS 142) we do not amortize our broadcast licenses. We test our broadcast licenses for impairment at least
annually or when indicators of impairment are identified. Our valuations principally use the discounted cash flow methodology, an income approach based on market revenue projections and not company-specific projections, which assumes broadcast
licenses are acquired and operated by a third party. This approach incorporates several variables including, but not limited to, types of signals, media competition, audience share, market advertising revenue projections, anticipated operating
margins, capital expenditures and discount rates that are based on the weighted average costs of capital for the broadcasting markets in which we operate, without taking into consideration the stations format or management capabilities. This
method calculates the estimated present value that would be paid by a prudent buyer for our FCC licenses as new radio or television stations as of the annual valuation date (September 30 of each year). If the discounted cash flows estimated to be
generated from these assets are less than the carrying value, an adjustment to reduce the carrying value to the fair market value of the assets is recorded.

We generally test our broadcast licenses for impairment at the individual license level. However, we aggregate broadcast licenses for impairment testing if their signals are simulcast and are operating as one
revenue-producing asset.

As a result of the continued slowdown in the U.S. advertising industry, advertising revenue projections for the
markets in which we operate declined beyond levels assumed in our 2008 annual and year end impairment testing. Accordingly, we conducted an additional review of the fair value of some of our broadcast licenses in the first quarter of 2009. As such,
we recorded an impairment charge of approximately $51.5 million to reduce the net book value of these broadcast licenses to their estimated fair market values. The impairment charge resulted from market changes in estimates and assumptions that were
attributable to lower advertising revenue growth projections for the broadcasting industry, increased discount rates and a decline in cash flow multiples for recent station sales. As no impairment indicators were noted during the three months ended
June 30, 2009 or during the three and six months ended June 30, 2008, no such impairment reviews were conducted during those periods.

In assessing the recoverability of our indefinite-lived intangible assets, we must make assumptions about the estimated future cash flows and other factors to determine the fair value of these assets. Assumptions about future revenue and
cash flows require significant judgment because of the current state of the economy and the fluctuation of actual revenue and the timing of expenses. We develop future revenue estimates based on projected ratings increases, planned timing of signal
strength upgrades, planned timing of promotional events, customer commitments and available advertising time. Estimates of future cash flows assume that expenses will grow at rates consistent with historical rates. Alternatively, some stations under
evaluation have had limited relevant cash flow history due to planned conversion of format or upgrade of station signal. The assumptions about cash flows after conversion reflect estimates of how these stations are expected to perform based on
similar stations and markets and possible proceeds from the sale of the assets. If the expected cash flows are not realized, impairment losses may be recorded in the future.

Deferred compensation

Our parent, Liberman Broadcasting, has entered into employment
agreements with certain employees. In addition to annual compensation and other benefits, one agreement provides an employee with the ability to participate in the increase of the net value of Liberman Broadcasting over certain base
amounts.

Our deferred compensation liability can increase based on changes in the employees vesting percentage and can increase or
decrease based on changes in the net value of Liberman Broadcasting. We have two deferred compensation components that comprise the employees vesting percentage: (i) a component that vests in varying amounts over time; and
(ii) a component that vests upon the attainment of certain performance measures. We account for the time vesting component over the vesting period specified in the employment agreement and account for the performance-based component when we
consider it probable that the performance measures will be attained.

As part of the calculation of the deferred compensation liability, we
use the income and market valuation approaches to determine the net value of Liberman Broadcasting. The income approach analyzes future cash flows and discounts them to arrive at a current estimated fair value. The market approach uses
recent sales and offering prices of similar properties to determine estimated fair value. Based on the net value of Liberman Broadcasting as determined in these analyses, and based on the percentage of incentive compensation that has
vested (as specified in the employment agreement), we record deferred compensation expense or benefit (and a corresponding credit or charge to deferred compensation liability). As such, estimation of the net value of Liberman



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Broadcasting requires considerable management judgment and the amounts recorded as periodic deferred compensation expense or benefit are dependent on that
judgment.

Such employment agreement has a net value determination date of December 31, 2009, and as of June 30,
2009, we estimated that the employee had not earned any incentive compensation amounts.

If we assumed no change in the net
value of Liberman Broadcasting from that at June 30, 2009, we would not expect to record any deferred compensation expense during the remainder of 2009 relating solely to the time vesting portion of the deferred compensation. The
employment agreement requires us to pay the deferred compensation amount in cash unless Liberman Broadcastings common stock becomes publicly traded, at which time we may pay such amount in cash or Liberman Broadcastings common stock, at
our option.

Commitments and contingencies

We periodically record the estimated impacts of various conditions, situations or circumstances involving uncertain outcomes. These events are called contingencies, and our accounting for these events is
prescribed by SFAS No. 5, Accounting for Contingencies.

The accrual of a contingency involves considerable judgment on
the part of our management. We use our internal expertise, and outside experts (such as lawyers), as necessary, to help estimate the probability that a loss has been incurred and the amount (or range) of the loss. We currently do not have any
material contingencies that we believe require loss accruals; however, we refer you to Note 7 of our condensed consolidated financial statements for a discussion of other known contingencies.

Recent Accounting Pronouncements

In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (FAS 157). FAS 157 provides a single definition of fair value, together with a framework for measuring it, and requires additional disclosure about the
use of fair value to measure assets and liabilities. In February 2008, the FASB issued FASB Staff Position (FSP) FAS 157-2, Effective Date of FASB Statement No. 157 which defers the implementation for certain
non-recurring, nonfinancial assets and liabilities from fiscal years beginning after November 15, 2007 to fiscal years beginning after November 15, 2008, which will be our fiscal year 2009. In October 2008, the FASB issued FSP
FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active which clarifies the application of FAS 157 in a market that is not active. FSP FAS 157-3 is effective upon issuance, including prior
periods for which financial statements have not been issued. The adoption of FSP FAS 157-3 and the remaining provisions of FAS 157 did not have a material effect on our results of operations, financial position or cash flows.

In addition, in February 2007, the FASB issued FAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities-including an
amendment of FASB Statement No. 115 (FAS 159). FAS 159 expands the use of fair value accounting but does not affect existing standards that require assets or liabilities to be carried at fair value. Under FAS 159, a company may elect to
use fair value to measure certain financial assets and liabilities and any changes in fair value are recognized in earnings. This statement was effective on January 1, 2008. We did not elect the fair value option upon adoption of FAS 159.

In December 2007, the FASB issued SFAS No. 141R, Business Combinations (FAS 141R), which requires an acquirer to measure
the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree at their fair values on the acquisition date, with goodwill being the excess value over the net identifiable assets acquired. FAS 141R also
changes the accounting for the treatment of acquisition related transaction costs. FAS 141R became effective and we adopted the provisions of FAS 141R on January 1, 2009. As such, the accompanying condensed consolidated statements of operations
for the six months ended June 30, 2009 include a charge of approximately $0.4 million, which relates to the write-off of pre-acquisition costs for certain asset purchases that did not close prior to December 31, 2008.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements (FAS 160), which clarifies
that a noncontrolling interest in a subsidiary should be reported as equity in the consolidated financial statements. FAS 160 became effective for us on January 1, 2009. The adoption of FAS 160 did not have a material impact on the disclosures
required in our financial statements.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and
Hedging Activities, an amendment of FASB Statement No. 133 (FAS 161), which requires enhanced disclosures for derivative and hedging activities. The objective of the guidance is to provide users of financial statements with an enhanced
understanding of how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for, and how derivative instruments and related hedged items effect and entitys financial position, financial
performance and cash flows. FAS 161 was adopted on January 1, 2009.



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In April 2008, the FASB issued FSP No. FAS 142-3, Determination of Useful Life of Intangible
Assets (FSP 142-3). FSP 142-3 amends the factors that should be considered in developing the renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FAS 142. The intent of this FSP is to
improve the consistency between the useful life of an intangible asset determined under FAS 142 and the period of expected cash flows used to measure the fair value of the asset under FAS 141R. FSP 142-3 is effective for fiscal years beginning after
December 15, 2008, and interim periods within those fiscal years. The adoption of FSP 142-3 did not have a material effect on our financial statements.

In April 2009, the FASB issued FSP No. FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability have Significantly Decreased and Identifying Transactions That Are
Not Orderly (FSP 157-4). The provisions of FSP 157-4 became effective for us on April 1, 2009. FSP 157-4 provides additional guidance on how to determine the fair value of assets and liabilities under FAS 157. The adoption of
FSP 157-4 did not have a material impact on our results of operations, financial position or cash flows.

In April 2009, the FASB
issued FSP No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments (FSP 107-1 and APB 28-1, respectively). FSP 107-1 and APB 28-1 amends SFAS No. 107 to require disclosures about fair value of
financial instruments in interim financial statements as well as in annual financial statements. FSP FAS 107-1 and APB 28-1 also amends Accounting Principles Board Opinion No. 28, Interim Financial Reporting, to require these
disclosures in all interim financial statements. The provisions of FSP 107-1 and APB 28-1 became effective for us on April 1, 2009. The adoption of FSP 107-1 and APB 28-1 did not have a material impact on the disclosures required in our
financial statements.

In April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2, Recognition and Presentation of
Other-Than-Temporary-Impairments (FSP 115-2 and FSP 124-2, respectively). FSP 115-2 and FSP 124-2 incorporates impairment guidance for debt securities from various sources of authoritative literature and clarifies the interaction of the
factors that should be considered when determining whether a debt security is other than temporarily impaired. The provisions of FSP 115-2 and FSP 124-2 became effective for us on April 1, 2009. The adoption of FSP 115-2 and FSP 124-2 did
not have a material impact on our results of operations, financial position or cash flows.

In May 2009, the FASB issued SFAS
No. 165, Subsequent Events (FAS 165). FAS 165 requires disclosure of the date through which a company evaluated the need to disclose events that occurred subsequent to the balance sheet date and whether that date represents the date
the financial statements were issued or were available to be issued. We adopted FAS 165 for the period ended June 30, 2009. The adoption of FAS 165 did not have a material impact on the disclosures required in our consolidated financial
statements. We considered subsequent events through August 14, 2009 for disclosure in this Quarterly Report on Form 10-Q, which is the date the financial statements were available to be issued.

In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R) (FAS 167). Among other things,
FAS 167 amends FASB Interpretation No. 46, Consolidation of Variable Interest Entities (Revised December 2003), (FIN 46(R)) to replace the calculation for determining which entities, if any, have a controlling financial
interest in a variable interest entity (VIE) from a quantitative based risks and rewards calculation, to a qualitative approach that focuses on identifying which entities have the power to direct the activities of a variable interest entity that
most significantly impact the entitys economic performance and, the obligation to absorb losses of the entity or the right to receive benefits from the entity. This standard also requires ongoing assessments as to whether an enterprise is the
primary beneficiary of a VIE (previously, reconsideration was only required upon the occurrence of specific events), modifies the presentation of consolidated VIE assets and liabilities, and requires additional disclosures about a companys
involvement in VIEs. FAS 167 will be effective for us beginning January 1, 2010. We are currently evaluating the effect that adoption of this standard will have on our consolidated financial position and results of operations when it becomes
effective in 2010.

Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995. You can
identify these statements by the use of words like may, will, could, continue, expect and variations of these words or comparable words. Actual results could differ substantially from the
results that the forward-looking statements suggest for various reasons. The risks and uncertainties include, but are not limited to:



| |  |  | our dependence on advertising revenues;
| | - |  | ---------------------------------------



| |  |  | general economic conditions in the United States and in the regions in which we operate;
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | our ability to reduce costs without adversely impacting revenues;
| | - |  | -----------------------------------------------------------------



| |  |  | changes in the rules and regulations of the FCC;
| | - |  | ------------------------------------------------



| |  |  | our ability to attract, motivate and retain salespeople and other key personnel;
| | - |  | --------------------------------------------------------------------------------



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| |  |  | our ability to successfully convert acquired radio and television stations to a Spanish-language format;
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | our ability to maintain FCC licenses for our radio and television stations;
| | - |  | ---------------------------------------------------------------------------



| |  |  | successful integration of acquired radio and television stations;
| | - |  | -----------------------------------------------------------------



| |  |  | potential disruption from natural hazards;
| | - |  | ------------------------------------------



| |  |  | our ability to protect our intellectual property rights;
| | - |  | --------------------------------------------------------



| |  |  | our ability to remediate or otherwise mitigate any material weakness in internal control over financial reporting or significant deficiencies that may be identified
in the future;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | sufficient cash to meet our debt service obligations; and
| | - |  | ---------------------------------------------------------



| |  |  | our ability to obtain regulatory approval for future acquisitions.
| | - |  | ------------------------------------------------------------------

The foregoing factors are not exhaustive, and new factors may emerge or changes to the foregoing factors may occur that could impact our business. The forward-looking statements in this Quarterly Report, as well as
subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf, are hereby expressly qualified in their entirety by the cautionary statements in this Quarterly Report, the risk factors included in our
Annual Report on Form 10-K for the year ended December 31, 2008 and other documents that we file from time to time with the Securities and Exchange Commission, particularly any Current Reports on Form 8-K. We are not obligated to update or
revise any forward-looking statements, whether as a result of new information, future events or otherwise.



|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------

In the ordinary course of business, we are exposed to various market risk factors, including fluctuations in interest rates and changes in general economic conditions. Please see Item 7A. Quantitative and Qualitative Disclosures about
Market Risk, contained in our Annual Report on Form 10-K for the year ended December 31, 2008 for further discussion on quantitative and qualitative disclosures about market risk.



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

As required by SEC Rule
15d-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our President and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of June 30,
2009. Based on the foregoing, our President and our Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective at the reasonable assurance level.

There have been no significant changes in our internal control over financial reporting identified in connection with the evaluation of such internal
control that occurred during our last fiscal quarter, which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



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PART II. OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

Our dispute with Broadcast
Music, Inc. relating to royalties is ongoing. No material developments in this matter occurred during the three months ended June 30, 2009. For more information on these proceedings, see Item 1. Legal Proceedings in our Annual
Report on Form 10-K for the twelve month period ended December 31, 2008 and Note 7 to our condensed consolidated financial statements in Part I. Financial Information.

We are subject to pending litigation arising in the normal course of our business. While it is not possible to predict the results of such litigation,
management does not believe the ultimate outcome of these matters will have a materially adverse effect on our financial position or results of operations.



|Item 1A. | Risk Factors
|-------- | ------------

There have been no material changes
in our risk factors from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2008.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------

None.



|Item 3. | Defaults upon Senior Securities
|------- | -------------------------------

None.



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

None.



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

None.



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|Item 6. | Exhibits
|------- | --------



| | (a) | Exhibits
| | --- | --------



|              |  |                                                                                                                                                                                                    
|------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Exhibit Description                                                                                                                                                                                
|3.1           |  | Restated Certificate of Incorporation of LBI Media Holdings, Inc. (1)                                                                                                                              
|              | 
|3.2           |  | Amended and Restated Bylaws of LBI Media Holdings, Inc. (1)                                                                                                                                        
|              | 
|4.1           |  | Indenture governing LBI Media Holdings, Inc.s 11% Senior Discount Notes due 2013, dated October 10, 2003, by and among LBI Media Holdings, Inc. and U.S. Bank National Association, as
Trustee (2)
|              | 
|4.2           |  | Form of Exchange Note (included as Exhibit A-1 to Exhibit 4.1)                                                                                                                                     
|              | 
|31.1          |  | Certification of President pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934*                                                                                      
|              | 
|31.2          |  | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934*                                                                        



|* | Filed herewith.
|- | ---------------

|(1) | Incorporated by reference to LBI Media Holdings, Inc.s Quarterly Report on Form 10-Q filed on May 17, 2007.
|--- | ------------------------------------------------------------------------------------------------------------

|(2) | Incorporated by reference to LBI Media Holdings, Inc.s Registration Statement on Form S-4 (Registration No. 333-110122), filed with the Securities and Exchange Commission
on October 30, 2003, as amended.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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SIGNATURE

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



LBI MEDIA HOLDINGS, INC.By:

/s/    Wisdom LuWisdom LuChief Financial Officer


Date: August 14, 2009



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