<PAGE>   1

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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
                                AMENDMENT NO. 1

                                       TO

                                   FORM 10-K
(MARK ONE)
[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934
                  FOR THE FISCAL YEAR ENDED SEPTEMBER 24, 2000
                        COMMISSION FILE NUMBER 000-27823

                                       OR

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934
        FOR THE TRANSITION PERIOD FROM                TO

                       SPANISH BROADCASTING SYSTEM, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                      SEE TABLE OF ADDITIONAL REGISTRANTS

<TABLE>
<CAPTION>
                      DELAWARE                                                    13-3827791
                      --------                                                    ----------
<S>                                                          <C>
            (STATE OR OTHER JURISDICTION                                       (I.R.S. EMPLOYER
          OF INCORPORATION OR ORGANIZATION)                                   IDENTIFICATION NO.)
</TABLE>

                           2601 SOUTH BAYSHORE DRIVE
                          COCONUT GROVE, FLORIDA 33133
             (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)

      REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:  (305) 441-6901

       SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:  NONE

          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                CLASS A COMMON STOCK, PAR VALUE $.0001 PER SHARE
                                (TITLE OF CLASS)

     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  [X]  No  [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [ ]

     As of December 20, 2000, the aggregate market value of the Class A Common
Stock held by non-affiliates of the Company was approximately $172.7 million.
The aggregate market value of the Class B Common Stock held by non-affiliates of
the Company was approximately $0.3 million. (We have assumed that our shares of
Class B Common Stock would trade at the same price per share as our shares of
Class A Common Stock.) (For purposes of this paragraph, directors and executive
officers have been deemed affiliates.)

     As of December 20, 2000, 36,856,305 shares of Class A Common Stock, par
value $.0001 per share and 27,801,900 shares of Class B Common Stock, par value
$.0001 per share were outstanding.

                   DOCUMENTS INCORPORATED BY REFERENCE:  NONE
--------------------------------------------------------------------------------
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<PAGE>   2

                        TABLE OF ADDITIONAL REGISTRANTS

<TABLE>
<CAPTION>
                                                                      PRIMARY STANDARD
                                                    STATE OR OTHER       INDUSTRIAL      I.R.S. EMPLOYER
                                                    JURISDICTION OF    CLASSIFICATION    IDENTIFICATION
NAME                                                 INCORPORATION         NUMBER            NUMBER
----                                                ---------------   ----------------   ---------------
<S>                                                 <C>               <C>                <C>
Spanish Broadcasting System of California,
  Inc. ...........................................   California             4832           92-3952357
Spanish Broadcasting System Network, Inc..........    New York              4899           13-3511101
SBS Promotions, Inc...............................    New York              7999           13-3456128
SBS Funding, Inc..................................    Delaware              4832           52-6999475
Alarcon Holdings, Inc.............................    New York              6512           13-3475833
SBS of Greater New York, Inc......................    New York              4832           13-3888732
Spanish Broadcasting System of Florida, Inc.......     Florida              4832           58-1700848
Spanish Broadcasting System of Greater Miami,
  Inc.............................................    Delaware              4832           65-0774450
Spanish Broadcasting System of Puerto Rico,
  Inc. ...........................................    Delaware              4832           52-2139546
Spanish Broadcasting System, Inc..................   New Jersey             4832           13-3181941
Spanish Broadcasting System of Illinois, Inc......    Delaware              4832           36-4174296
Spanish Broadcasting System of San Antonio,
  Inc.............................................    Delaware              4832           65-0820776
Spanish Broadcasting System of Puerto Rico,
  Inc. ...........................................   Puerto Rico            4832           66-0564244
</TABLE>
<PAGE>   3

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                        PAGE
                                                                        ----
<S>       <C>                                                           <C>
PART I    ............................................................    1
ITEM 1.   BUSINESS....................................................    1
ITEM 2.   PROPERTIES..................................................   19
ITEM 3.   LEGAL PROCEEDINGS...........................................   19
ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.........   19
PART II   ............................................................   19
ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
          STOCKHOLDER MATTERS.........................................   19
ITEM 6.   SELECTED FINANCIAL DATA.....................................   21
ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          AND RESULTS OF OPERATIONS...................................   24
ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
          RISK........................................................   30
ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.................   30
ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
          AND FINANCIAL DISCLOSURE....................................   30
PART III  ............................................................   30
ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT..........   30
ITEM 11.  EXECUTIVE COMPENSATION......................................   33
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT..................................................   39
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..............   41
PART IV   ............................................................   42
ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
          8-K.........................................................   42
</TABLE>

                                        i
<PAGE>   4

                                     PART I

ITEM 1.  BUSINESS

     All references to "we", "us", "our", "SBS" or "our company" in this report
mean Spanish Broadcasting System, Inc., a Delaware corporation, and all entities
owned or controlled by Spanish Broadcasting System, Inc. and, if prior to 1994,
refer to our predecessor parent company Spanish Broadcasting System, Inc., a New
Jersey corporation. Our executive offices are located at 2601 South Bayshore
Drive, Coconut Grove, Florida 33133, and our telephone number is (305) 441-6901.

     SBS, founded in 1983 and incorporated in the State of Delaware in 1994, is
the second largest Spanish-language radio broadcasting company in the United
States. We currently own and operate 23 FM radio stations and one AM radio
station. We operate an additional AM radio station under a time brokerage
agreement. All 25 of our stations are located in eight of the largest Hispanic
markets in the United States, including Los Angeles, Puerto Rico, New York,
Miami, San Francisco, Chicago, San Antonio and Dallas. Our radio stations reach
over 61% of the U.S. Hispanic population. Our WSKQ-FM station in New York is
ranked in the Summer 2000 Arbitron(R) ratings as the number one station in its
target demographic group (Hispanic men and women ages 18-49).

     Our strategy is to maximize the profitability of our radio station
portfolio and to expand in our existing markets and into additional markets that
have a significant Hispanic population. We believe that the favorable
demographics of the U.S. Hispanic population and the rapid increase in
advertising targeting Hispanics provide us with significant opportunities for
growth. We also believe that we have competitive advantages in the radio
industry due to our focus on formats targeting U.S. Hispanic audiences and our
skill in programming and marketing to these audiences.

     Our Internet strategy is designed to complement our existing business and
to enable us to capitalize on our U.S. Hispanic market expertise. In 1999 we
purchased 80% of the issued and outstanding capital stock of JuJu Media, Inc.,
the owner of LaMusica.com, a bilingual Spanish-English Internet Web site and
on-line community that focuses on the U.S. Hispanic market. LaMusica.com is a
provider of original information and interactive content related to Latin music,
entertainment, news and culture. LaMusica.com provides our advertisers with an
additional means of reaching the U.S. Hispanic consumer markets and is a growing
revenue source for us.

     SBS is led by Mr. Raul Alarcon, Jr., who became our Chairman of the Board
of Directors when we completed our initial public offering on November 2, 1999
and has been Chief Executive Officer since June 1994, and President and a
director since October 1985. The Alarcon family has been involved in
Spanish-language radio broadcasting since the 1950's, when Mr. Raul Alarcon,
Sr., our Chairman Emeritus and a member of our board of directors, established
his first radio station in Camaguey, Cuba. Members of our senior management
team, on average, have over 15 years of experience in Spanish-language media and
radio broadcasting.

BUSINESS STRATEGY

     We focus on maximizing the profitability of our radio station portfolio by
strengthening the performance of our existing radio stations and making
additional strategic station acquisitions in both our existing markets and in
new markets that have a significant Hispanic population. In addition, we have
implemented an Internet strategy in order to develop new revenue sources.

OPERATING STRATEGY

     Our operating strategy focuses on maximizing our radio stations' appeal to
our audience and our advertisers while minimizing operating expenses in order to
increase revenue and cash flow. To achieve these goals, we focus on:

     Providing High-Quality Spanish-Language Programming.  We format the
programming of each of our stations to capture a significant share of the
Spanish-language audience. We use market research, including
                                        1
<PAGE>   5

third party consultants and periodic music testing, to assess listener
preferences in each station's target demographic audience. We then refine our
programming to reflect the results of this research and testing. Because the
U.S. Hispanic population is so diverse, consisting of numerous identifiable
groups from many different countries of origin each with its own cultural and
musical heritage, we strive to make ourselves intimately familiar with the
musical tastes and the preferences of each of the various Hispanic ethnic groups
and we customize our programming accordingly.

     Retaining Strong Local Management Teams.  We employ local management teams
in each of our markets who are responsible for the day-to-day operations of our
radio stations. Our key local managers generally consist of a general station
manager, general sales manager and programming director. Stations are staffed
with managers who have experience and knowledge of the local radio market and
the local Hispanic market. Because of the cultural diversity of the Hispanic
population from region to region in the United States, most decisions regarding
day-to-day programming, sales and promotional efforts are made by local
managers. We believe this approach improves our flexibility and responsiveness
to changing conditions in each of the markets we serve.

     Utilizing Aggressive Sales Efforts.  Our sales force focuses on converting
audience share into advertising revenue. In order to encourage an aggressive and
focused sales force, we have developed compensation structures tied to
advertising revenue. We seek to maximize our sales to national advertisers
because national advertising generally commands a higher rate per advertising
spot than does local advertising. We have attracted key sales executives from
general market radio who have applied their expertise and relationships with the
advertising community to increase our share of advertising from leading general
market advertisers. We believe that our focused sales efforts are working to
increase media spending targeted at the U.S. Hispanic consumer market and will
enable us to continue to achieve significant revenue growth, and to narrow the
gap between the level of advertising currently targeted at U.S. Hispanics and
the potential buying power of the U.S. Hispanic population.

     Controlling Operating Costs.  By employing a disciplined approach to
operating our radio stations, we have been able to achieve operating margins
which we believe are among the highest in the radio broadcast industry. We
emphasize control of each station's operating costs through detailed budgeting,
tight control over staffing levels and frequent expense analysis. While local
management is responsible for the day-to-day operation of each station,
corporate management is responsible for long-range and strategic planning,
establishing policies and procedures, maximizing cost savings where centralized
activity is appropriate, allocating resources and maintaining overall control of
the stations.

     Making Effective Use of Promotions and Special Events.  We believe that
effective promotional efforts play a significant role in both adding new
listeners and increasing listener loyalty. Our promotional and marketing
campaigns focus on increasing Hispanic consumer awareness of advertisers'
products and services. Our goal is to use our expertise at marketing to the
Hispanic consumer in each of the markets in which we own and operate stations,
thereby attracting a large share of advertising revenue. We have organized
special promotional appearances, such as station van appearances at client
events, concerts and tie-ins to major events which form an important part of our
marketing strategy. Many of these events build advertiser loyalty because they
enable us to offer advertisers an additional means of reaching the Hispanic
consumer. In many instances, these events are co-sponsored by local television
and newspapers, allowing our advertisers to reach a larger combined audience.

     Maintaining Strong Community Involvement.  We have historically been, and
will continue to be, actively involved within the local communities that we
serve. Our radio stations participate in numerous community programs,
fund-raisers and activities benefitting the local community and Hispanics
abroad. Other examples of our community involvement include free public service
announcements, free equal-opportunity employment announcements, tours and
discussions held by radio station personalities with school and community groups
designed to limit drug and gang involvement, free concerts and events designed
to promote family values within the local Hispanic communities, and extended
coverage, when necessary, of significant events which have an impact on the U.S.
Hispanic population. Our stations and members of our management have received
numerous community service awards and acknowledgments from government entities
and

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<PAGE>   6

community and philanthropic organizations for their service to the community. We
believe that this involvement helps to build and maintain station awareness and
listener loyalty.

ACQUISITION STRATEGY

     Our acquisition strategy is to acquire radio stations in the largest U.S.
Hispanic markets. We consider acquisitions of stations in our existing markets,
as well as acquisitions of stations in other markets with a large Hispanic
population, where we can maximize our revenues through aggressive sales to U.S.
Hispanic and general market advertisers. These acquisitions may include stations
which do not currently target the U.S. Hispanic market, but which we believe can
be successfully reformatted.

     In analyzing potential radio station acquisition candidates, we consider
many factors including:

     - the size of the Hispanic market;

     - anticipated growth, demographics, and other characteristics of the
       market;

     - the nature and number of competitive stations in the market;

     - the nature of other media competition in the station's market;

     - the probability of achieving operating synergies through multiple station
       ownership within the target market;

     - the existing or potential quality of the broadcast signal and
       transmission facility;

     - the station's ratings, revenue and operating cash flow; and

     - the price and terms of the purchase.

     We cannot, however, be assured that our acquisition strategy will be
successful. Our acquisition strategy is subject to a number of risks, including,
but not limited to: stations acquired by us may not increase our broadcast cash
flow or yield other anticipated benefits; required regulatory approvals may
result in unanticipated delays in completing acquisitions; we may have
difficulty managing our rapid growth; and we may be required to raise additional
financing in order to finance such acquisitions while our ability to do so is
limited by the terms of our debt instruments.

INTERNET STRATEGY

     Our Internet strategy is designed to complement our existing business and
to enable us to capitalize on our U.S. Hispanic market expertise. The core of
our strategy is LaMusica.com, an Internet Web site and on-line community focused
on the U.S. Hispanic market. This Web site offers some of our radio stations'
broadcasts through the use of audio streaming technology and provides our
advertisers with a complementary means of reaching their target audience.

TOP 10 HISPANIC RADIO MARKETS IN THE UNITED STATES

     The table below indicates the top 10 Hispanic radio markets in the United
States, including Puerto Rico. We currently own and operate radio stations in
Los Angeles, Puerto Rico, New York, Miami, San Francisco, Chicago, San Antonio
and Dallas. Population estimates are for 2000 and are based upon statistics
provided by the Strategy Research Corporation -- 2000 U.S. Hispanic Market
Report and the Strategy Research Corporation -- 2000 U.S. Latin America Market
Report.

                                        3
<PAGE>   7

<TABLE>
<CAPTION>
                                                                          % HISPANIC OF
                                                                              TOTAL         % OF TOTAL
HISPANIC                                                     HISPANIC     POPULATION IN    U.S. HISPANIC
RANK                          MARKET                        POPULATION     THE MARKET       POPULATION
--------                      ------                        ----------    -------------    -------------
                                                              (000)
<C>        <S>                                              <C>           <C>              <C>
   1.      Los Angeles..................................      6,928.5         40.6%            18.3%
   2.      Puerto Rico..................................      3,884.4         99.6             10.3
   3.      New York.....................................      3,776.2         18.5             10.0
   4.      Miami........................................      1,522.1         38.8              4.0
   5.      San Francisco/San Jose.......................      1,423.9         20.1              3.8
   6.      Chicago......................................      1,354.0         14.2              3.6
   7.      Houston......................................      1,312.8         25.3              3.5
   8.      San Antonio..................................      1,167.9         55.0              3.1
   9.      Dallas/Ft. Worth.............................        927.8         15.7              2.5
  10.      McAllen/Brownsville (Texas)..................        874.1         89.5              2.3
                                                             --------         ----             ----
           Top 10 Hispanic Markets......................     23,171.7         32.7%            61.3%
                                                             ========         ====             ====
</TABLE>

PROGRAMMING

     We format the programming of each of our stations to capture a substantial
share of the U.S. Hispanic audience. The U.S. Hispanic population is diverse,
consisting of numerous identifiable groups from many different countries of
origin, each with its own musical and cultural heritage. The music, culture,
customs and Spanish dialects vary from one radio market to another. We strive to
be very familiar with the musical tastes and preferences of each of the various
Hispanic ethnic groups and customize our programming to match the local
preferences of our target demographic audience in each market we serve. We have
an in-house research department in Miami of 14 employees who conduct extensive
radio market research on a daily, weekly, monthly and annual basis. By employing
listener study groups and telephone surveys modeled after Arbitron(R) written
survey methodology, but with even larger sample sizes than Arbitron(R), we are
able to assess listener preferences, track trends and gauge our success on a
daily basis, well before Arbitron(R) quarterly results are published. In this
manner, we can respond immediately to changing listener preferences and trends
by refining our programming to reflect the results of our research and testing.
Each of our programming formats is described below.

     - Spanish Tropical.  The Spanish Tropical format primarily consists of
       salsa, merengue and cumbia music. Salsa is dance music combining Latin
       Caribbean rhythms with jazz originating from Puerto Rico, Cuba and the
       Dominican Republic, which is popular with Hispanics living in New York
       and Miami. Merengue music is up-tempo dance music originating from the
       Dominican Republic. Cumbia is a festive, folkloric music which originated
       in Colombia.

     - Regional Mexican.  The Regional Mexican format consists of various types
       of music played in different regions of Mexico such as ranchera, nortena,
       banda and cumbia. Ranchera music, originating from Jalisco, Mexico, is a
       traditional folkloric sound commonly referred to as mariachi music.
       Mariachi music features acoustical instruments and is considered the
       music indigenous to Mexicans who live in country towns. Nortena means
       northern, and is representative of Northern Mexico. Featuring an
       accordion, nortena has a polka sound with a distinct Mexican flavor.
       Banda is a regional format from the state of Sinaloa, Mexico and is
       popular in California. Banda resembles up-tempo marching band music with
       synthesizers.

     - Tejano.  The Tejano format consists of music based on Mexican themes but
       which originated in Texas. Tejano music is a combination of contemporary
       rock, ranchera and country music, the lyrics of which are primarily sung
       in Spanish.

     - Spanish Adult Contemporary.  The Spanish Adult Contemporary format
       includes pop, Latin rock, and ballads. This format is similar to English
       Adult Contemporary featured on contemporary hit radio stations.

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<PAGE>   8

     - American Contemporary Hits.  The American Contemporary Hits format
       consists of popular music released within the last year. This format also
       tends to play a variety of music styles including Rock/ Pop/Dance or
       R&B/Rap/Dance and is mostly rhythmic in nature.

     - American 80's Hits.  The American 80's Hits format consists of the top
       American chart hits from the 1980's.

     - Spanish Adult Top 40.  The Spanish Adult Top 40 format consists of a
       variety of Latin hit songs from the 1980's and 1990's.

     - Spanish Oldies.  The Spanish Oldies format includes a variety of Latin
       music mainly from the 1950's, 1960's and 1970's.

     - Dance.  The Dance format consists of upbeat dance and house rhythms,
       mainly from the 1980's and 1990's, that are played in dance clubs,
       including English-language music.

     The programming formats of our radio stations and the target demographic of
each station are as follows:

<TABLE>
<CAPTION>
                                                             TARGET
                                                           DEMOGRAPHIC
MARKET         STATION               FORMAT                 (BY AGE)
------         -------               ------                -----------
<S>            <C>      <C>                                <C>
Los Angeles    KLAX-FM  Regional Mexican                    18-49
               KMJR-FM  Spanish Adult Contemporary          25-54
               KNJR-FM  Spanish Adult Contemporary          25-54
Puerto Rico    WMEG-FM  American Contemporary Hits          18-34
               WEGM-FM  American Contemporary Hits          18-34
               WCMA-FM  American 80's Hits                  18-49
               WIOA-FM  Spanish Adult Contemporary          18-49  (Women)
               WIOB-FM  Spanish Adult Contemporary          18-49  (Women)
               WIOC-FM  Spanish Adult Contemporary          18-49  (Women)
               WZNT-FM  Salsa                               18-49  (Men)
               WCTA-FM  Salsa                               18-49  (Men)
               WZMT-FM  Salsa                               18-49  (Men)
               WCOM-FM  American Contemporary Hits          18-24
               WOYE-FM  American Contemporary Hits          18-24
New York       WSKQ-FM  Spanish Tropical                    18-49
               WPAT-FM  Spanish Adult Contemporary          25-54
Miami          WXDJ-FM  Spanish Tropical                    18-34
               WCMQ-FM  Spanish Oldies                      35-54
               WRMA-FM  Spanish Adult Contemporary          25-54
San Francisco  KXJO-FM  Regional Mexican                    18-34
Chicago        WLEY-FM  Regional Mexican                    18-34
San Antonio    KLEY-FM  Regional Mexican                    18-49
               KSAH-AM  Regional Mexican                    18-49
Dallas         KTCY-FM  Regional Mexican                    18-34
               KXEB-AM  Time Brokerage Agreement             None
</TABLE>

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RADIO STATION PORTFOLIO

     The following is a general description of each of our markets.

LOS ANGELES

     The Los Angeles market is the largest radio market in terms of advertising
revenues which are projected to be $851.0 million in 2000. In 2000, the Los
Angeles market had the largest U.S. Hispanic population, with approximately 6.9
million Hispanics, which is approximately 40.6% of the Los Angeles market's
total population. Los Angeles experienced annual radio revenue growth of 8.3%
between 1993 and 1998, and radio revenue in Los Angeles is expected to continue
growing at an annual rate of 9.2% between 1999 and 2003.

PUERTO RICO

     The Puerto Rico market is the twenty-seventh largest radio market in terms
of advertising revenues which are projected to be $115.8 million in 2000. In
2000, the Puerto Rico market had the second largest U.S. Hispanic population,
with approximately 3.9 million Hispanics, which we believe is approximately
99.6% of the Puerto Rico market's total population. Puerto Rico experienced
annual radio revenue growth of 5.4% between 1992 and 1998, and radio revenue in
Puerto Rico is expected to continue growing at an annual rate of 5.7% between
1999 and 2002.

NEW YORK

     The New York market is the second largest radio market in terms of
advertising revenues, which are projected to be $816.4 million in 2000. In 2000,
the New York market had the third largest U.S. Hispanic population, with
approximately 3.8 million Hispanics, which is approximately 18.5% of the New
York market's total population. We believe that we own the strongest franchise
in terms of audience share and number of Spanish-language radio stations in the
New York market, with two of the three FM Spanish-language radio stations. New
York experienced annual radio revenue growth of 10.8% between 1993 and 1998, and
radio revenue in New York is expected to continue growing at an annual rate of
10.0% between 1999 and 2003.

MIAMI

     The Miami market is the eleventh largest radio market in terms of
advertising revenues which are projected to be $277.6 million in 2000. In 2000,
the Miami market had the fourth largest U.S. Hispanic population, with
approximately 1.5 million Hispanics, which is approximately 38.8% of the Miami
market's total population. Miami experienced annual radio revenue growth of
12.4% between 1993 and 1998, and radio revenue in Miami is expected to continue
growing at an annual rate of 9.5% between 1999 and 2003.

SAN FRANCISCO

     The San Francisco market is the fourth largest radio market in terms of
advertising revenues which are projected to be $547 million in 2000. In 2000,
the San Francisco market had the fifth largest U.S. Hispanic population, with
approximately 1.4 million Hispanics, which is approximately 20.1% of the San
Francisco market's total population. San Francisco experienced annual radio
revenue growth of 12.0% between 1993 and 1998, and radio revenue in San
Francisco is expected to continue growing at an annual rate of 19.8% between
1999 and 2003.

CHICAGO

     The Chicago market is the third largest radio market in terms of
advertising revenues which are projected to be $633.2 million in 2000. In 2000,
the Chicago market had the sixth largest U.S. Hispanic population, with
approximately 1.4 million Hispanics, which is approximately 14.2% of the Chicago
market's total population. We believe that we own the strongest franchise in the
Chicago market with the number one ranked FM Spanish-language radio station.
Chicago experienced annual radio revenue growth of 9.3% between 1993 and 1998,
and radio revenue in Chicago is expected to continue growing at an annual rate
of 11.7% between 1999 and 2003.

                                        6
<PAGE>   10

SAN ANTONIO

     The San Antonio market is the thirty-third largest radio market in terms of
advertising revenues which are projected to be $83.4 million in 2000. In 2000,
San Antonio had the eighth largest U.S. Hispanic population, with approximately
1.2 million Hispanics, which is approximately 55% of the San Antonio market's
total population. San Antonio experienced annual radio revenue growth of 8.3%
between 1993 and 1998, and radio revenue in San Antonio is expected to continue
growing at an annual rate of 4.5% between 1999 and 2003.

DALLAS

     The Dallas market is the fifth largest radio market in terms of advertising
revenues which are projected to be $381.8 million in 2000. In 2000, the Dallas
market had the ninth largest U.S. Hispanic population, with approximately
927,000 Hispanics, which is approximately 15.7% of the Dallas market's total
population. Dallas experienced annual radio revenue growth of 11.3% between 1993
and 1998, and radio revenue in Dallas is expected to continue growing at an
annual rate of 10.7% between 1999 and 2003.

LATIN MUSIC ON-LINE ("LAMUSICA.COM")

     LaMusica.com is a bilingual Spanish-English Internet Web site and on-line
community that focuses on the U.S. Hispanic market. LaMusica.com is a provider
of original information and interactive content related to Latin music,
entertainment, news and culture. We believe that LaMusica.com, together with our
radio station portfolio, enables our audience to enjoy additional targeted and
culturally-specific entertainment options, such as concert listings, CD reviews,
local entertainment calendars, and interactive content on popular Latin
recording artists and musicians. Similarly, LaMusica.com enables our advertisers
to cost-effectively reach their targeted Hispanic consumer through an
additional, dynamic and rapidly growing medium.

     LaMusica.com has links to the Web sites for some of our radio stations.
This network of Web sites permits our target audiences to listen to streaming
audio of live radio broadcasts from our radio stations from anywhere in the
United States and the world. In addition to our network of station Web sites and
our production of original interactive content relating to Latin music and
entertainment, we offer enhanced community features on LaMusica.com such as
branded e-mail, bulletin boards, fan clubs, chat rooms, personals and
horoscopes.

     LaMusica.com and our network of station Web sites generate revenues
primarily from two distinct sources: (1) advertising and sponsorship and (2)
electronic commerce opportunities, such as on-line music sales. We use our
stations' on-air marketing power to draw visitors to LaMusica.com. We continue
to conduct a nationwide advertising campaign on our radio stations in order to
increase audience awareness of LaMusica.com. We utilize our strong relationships
with advertisers and the music industry to develop banner advertising and
sponsorships. In May 2000, we signed a two-year three-way agreement with
LaMusica.com and America Online (AOL), whereby AOL provides LaMusica.com with a
co-branded Web site, with a guaranteed minimum number of impressions over a two
year period. We believe we can use these impressions to increase revenues. Under
the agreement, AOL also provides a programming plan enabling LaMusica.com to
create rich content for several AOL brands.

MANAGEMENT AND PERSONNEL

     As of December 20, 2000, we had 568 full-time employees, 14 of whom were
primarily involved in senior management, 249 in programming, 177 in sales, 112
in general administration and 16 in technical activities.

     To facilitate efficient management from our Coconut Grove, Florida
headquarters, we access and utilize computerized accounting systems, including
our recently purchased Oracle software, from our stations to provide timely
information to management on station operations and to assist in cost control
and the preparation of monthly financial statements. Corporate executives
regularly visit each station to monitor its operations and ensure that our
policies are properly followed.

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     Our business depends upon the efforts, abilities and expertise of our
executive officers and other key employees, including Raul Alarcon, Jr., our
Chairman of the Board of Directors, President and Chief Executive Officer. The
loss of any of these officers and key employees could have a material adverse
effect on our business. We do not maintain key man life insurance on any of our
personnel.

SEASONALITY

     Seasonal net broadcasting revenue fluctuations are common in the radio
broadcasting industry and are due primarily to fluctuations in advertising
expenditures by local and national advertisers. Our second fiscal quarter
(January through March) generally produces the lowest net broadcasting revenue
for the year because of normal post-holiday decreases in advertising
expenditures.

ADVERTISING

     Virtually all radio station revenue is derived from advertising. This
revenue is usually classified in one of two categories -- "national" or "local."
"National" generally refers to advertising that is solicited by a national
representative firm that represents the station and is paid commissions based on
collected net revenues. Our national sales representative is Caballero Spanish
Media, LLC, a division of Interep National Radio Sales, Inc. "Local" refers to
advertising purchased by advertisers and agencies in the local community served
by a particular station.

     We believe that radio is one of the most efficient and cost-effective means
for advertisers to reach targeted demographic groups. Advertising rates charged
by a radio station are based primarily on the station's ability to attract
listeners in a given market and on the attractiveness to advertisers of the
station's listener demographics. Rates vary depending upon a program's
popularity among the listeners an advertiser is seeking to attract, the number
of advertisers vying for available air time and the availability of alternative
media in the market. Radio advertising rates generally are highest during the
morning and afternoon drive-time hours which are the peak hours for radio
audience listening. We believe that having multiple stations in a market is
attractive to national advertisers, enabling the broadcaster to command higher
advertising rates. We believe that we will be able to increase our rates as new
and existing advertisers recognize the increasing desirability of targeting the
growing Hispanic population in the United States.

     Each station broadcasts a predetermined number of advertisements each hour
with the actual number depending upon the format of a particular station. We
determine the number of advertisements broadcast hourly that can maximize the
station's available revenue dollars without jeopardizing its audience listener
levels. While there may be shifts from time to time in the number of
advertisements broadcast during a particular time of the day, the total number
of advertisements broadcast on a particular station generally does not vary
significantly from year to year.

     As is customary in the radio industry, the majority of our advertising
contracts are short-term, generally running for less than three months. We have
long-term relationships with some of our advertisers. In each of our
broadcasting markets, we employ salespeople to obtain local advertising
revenues. We believe that our local sales force is crucial to maintaining
relationships with key local advertisers and agencies and identifying new
advertisers. We generally pay sales commissions to our local sales staff upon
the receipt from advertisers of the payments related to these sales. We offer
assistance to local advertisers by providing them with studio facilities to
produce commercials free of charge.

COMPETITION

     The success of each of our stations depends significantly upon its audience
ratings and its share of the overall advertising revenue within its market. The
radio broadcasting industry is a highly competitive business. Each of our radio
stations competes with both Spanish-language and English-language radio stations
in its market as well as with other advertising media such as newspapers,
broadcast television, cable television, the Internet, magazines, outdoor
advertising, transit advertising and direct mail marketing. Several of the
stations with which we compete are subsidiaries of large national or regional
companies that have substantially greater resources than we do. Factors which
are material to competitive position include management experience, the
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station's rank in its market, signal strength and frequency, and audience
demographics, including the nature of the Spanish-language market targeted by a
particular station.

     Although the radio broadcasting industry is highly competitive, some
barriers to entry exist. These barriers can be mitigated to some extent by
changing existing radio station formats and upgrading power, among other
actions. The operation of a radio station requires a license or other
authorization from the FCC, and the number of radio stations that can operate in
a given market is limited by the availability of FM and AM radio frequencies
allotted by the FCC to communities in that market. In addition, the FCC's
multiple ownership rules regulate the number of stations that may be owned and
controlled by a single entity in a given market. However, in recent years, these
rules have changed significantly. For a discussion of FCC regulation, see
"Federal Regulation of Radio Broadcasting."

     The radio industry is also subject to competition from new media
technologies that are being developed or introduced, such as the delivery of
audio programming by cable television systems, by satellite and by terrestrial
delivery of digital audio broadcasting (known as "DAB"). DAB may deliver to
nationwide and regional audiences, multi-channel, multi-format, digital radio
services with sound quality equivalent to that of compact discs. The FCC has
authorized spectrum for the use of a new technology, satellite digital audio
radio services (known as "SDARS"), to deliver audio programming. SDARS may
provide a medium for the delivery by satellite of multiple new audio programming
formats to local and national audiences. It is not known at this time whether
digital technology also may be used in the future by existing radio broadcast
stations either on existing or alternate broadcasting frequencies. The FCC also
has begun accepting applications for a new "low power" radio or
"microbroadcasting" service which could open up opportunities for low cost
neighborhood service on frequencies which would not interfere with existing
stations. No FCC action has been taken on these applications to date.

     The delivery of information through the presently unregulated Internet also
could create a new form of competition. The radio broadcasting industry
historically has grown despite the introduction of new technologies for the
delivery of entertainment and information, such as television broadcasting,
cable television, audio tapes and compact discs. A growing population and the
greater availability of radios, particularly car and portable radios, have
contributed to this growth. We cannot assure you, however, that the development
or introduction in the future of any new media technology will not have an
adverse effect on the radio broadcasting industry.

     We cannot predict what other matters might be considered in the future by
the FCC, nor can we assess in advance what impact, if any, the implementation of
any of these proposals or changes might have on our business. See "Federal
Regulation of Radio Broadcasting."

ANTITRUST

     An important part of our growth strategy is the acquisition of additional
radio stations. Since the passage of the Telecommunications Act of 1996, the
Justice Department has become more aggressive in reviewing proposed acquisitions
of radio stations and radio station networks. The Justice Department is
particularly aggressive when the proposed buyer already owns one or more radio
stations in the market of the station it is seeking to buy. Recently, the
Justice Department has challenged a number of radio broadcasting transactions.
Some of those challenges ultimately resulted in consent decrees requiring, among
other things, divestitures of certain stations. In general, the Justice
Department has more closely scrutinized radio broadcasting acquisitions that
result in local market shares in excess of 40% of radio advertising revenue.
Similarly, the FCC staff has announced new procedures to review proposed radio
broadcasting transactions even if the proposed acquisition otherwise complies
with the FCC's ownership limitations. In particular, the FCC may invite public
comment on proposed radio transactions that the FCC believes, based on its
initial analysis, may present ownership concentration concerns in a particular
local radio market.

FEDERAL REGULATION OF RADIO BROADCASTING

     The radio broadcasting industry is subject to extensive and changing
regulation by the FCC of programming, technical operations, employment and other
business practices. The FCC regulates radio
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broadcast stations pursuant to the Communications Act. The Communications Act
permits the operation of radio broadcast stations only in accordance with a
license issued by the FCC upon a finding that the grant of a license would serve
the public interest, convenience and necessity. The Communications Act provides
for the FCC to exercise its licensing authority to provide a fair, efficient and
equitable distribution of broadcast service throughout the United States. Among
other things, the FCC:

     - assigns frequency bands for radio broadcasting;

     - determines the particular frequencies, locations and operating power of
       radio broadcast stations;

     - issues, renews, revokes and modifies radio broadcast station licenses;

     - establishes technical requirements for certain transmitting equipment
       used by radio broadcast stations;

     - adopts and implements regulations and policies that directly or
       indirectly affect the ownership, operation, program content and
       employment and business practices of radio broadcast stations; and

     - has the power to impose penalties, including monetary forfeitures, for
       violations of its rules and the Communications Act.

     The Communications Act prohibits the assignment of an FCC license, or other
transfer of control of an FCC licensee, without the prior approval of the FCC.
In determining whether to approve assignments or transfers, and in determining
whether to grant or renew a radio broadcast license, the FCC considers a number
of factors pertaining to the licensee (and any proposed licensee), including
restrictions on foreign ownership, compliance with FCC media ownership limits
and other FCC rules, licensee character and compliance with the Anti-Drug Abuse
Act of 1988.

     The following is a brief summary of certain provisions of the
Communications Act and specific FCC rules and policies. This summary does not
purport to be complete and is subject to the text of the Communications Act, the
FCC's rules and regulations, and the rulings of the FCC. You should refer to the
Communications Act and these FCC rules, regulations and rulings for further
information concerning the nature and extent of federal regulation of radio
broadcast stations.

     A licensee's failure to observe the requirements of the Communications Act
or FCC rules and policies may result in the imposition of various sanctions,
including admonishment, fines, the grant of renewal terms of less than eight
years, the grant of a license with conditions or, for particularly egregious
violations, the denial of a license renewal application, the revocation of an
FCC license or the denial of FCC consent to acquire additional broadcast
properties.

     Congress and the FCC have had under consideration, and may in the future
consider and adopt, new laws, regulations and policies regarding a wide variety
of matters that could, directly or indirectly, affect the operation, ownership
and profitability of SBS's radio stations, result in the loss of audience share
and advertising revenue for our radio broadcast stations or affect our ability
to acquire additional radio broadcast stations or finance these acquisitions.
Such matters may include:

     - changes to the license authorization and renewal process;

     - proposals to impose spectrum use or other fees on FCC licensees;

     - auction of new broadcast licenses;

     - changes to the FCC's equal employment opportunity regulations and other
       matters relating to involvement of minorities and women in the
       broadcasting industry;

     - proposals to change rules relating to political broadcasting including
       proposals to grant free air time to candidates, and other changes
       regarding program content;

     - proposals to restrict or prohibit the advertising of beer, wine and other
       alcoholic beverages;

     - technical and frequency allocation matters;

     - the implementation of digital audio broadcasting on both a satellite and
       terrestrial basis;
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<PAGE>   14

     - changes in broadcast cross-interest, multiple ownership, foreign
       ownership, cross-ownership and ownership attribution policies;

     - proposals to allow telephone companies to deliver audio and video
       programming to homes in their service areas; and

     - proposals to alter provisions of the tax laws affecting broadcast
       operations and acquisitions.

     We cannot predict what changes, if any, might be adopted, nor can we
predict what other matters might be considered in the future, nor can we judge
in advance what impact, if any, the implementation of any particular proposals
or changes might have on our business.

FCC LICENSES

     The FCC licenses for the radio stations are or will be held by direct or
indirect wholly-owned subsidiaries of SBS.

     The Communications Act provides that a broadcast station license may be
granted to any applicant if the public interest, convenience and necessity will
be served thereby, subject to certain limitations. In making licensing
determinations, the FCC considers an applicant's legal, technical, financial and
other qualifications. The FCC grants radio broadcast station licenses for
specific periods of time and, upon application, may renew them for additional
terms. Under the Communications Act, radio broadcast station licenses may be
granted for a maximum term of eight years.

     Generally, the FCC renews radio broadcast licenses without a hearing upon a
finding that:

     - the radio station has served the public interest, convenience and
       necessity;

     - there have been no serious violations by the licensee of the
       Communications Act or FCC rules and regulations; and

     - there have been no other violations by the licensee of the Communications
       Act or FCC rules and regulations which, taken together, indicate a
       pattern of abuse.

After considering these factors, the FCC may grant the license renewal
application with or without conditions, including renewal for a term less than
the maximum term otherwise permitted by law, or hold an evidentiary hearing.

     In addition, the Communications Act authorizes the filing of petitions to
deny a license renewal application during specific periods of time after a
renewal application has been filed. Interested parties, including members of the
public, may use these petitions to raise issues concerning a renewal applicant's
qualifications. If a substantial and material question of fact concerning a
renewal application is raised by the FCC or other interested parties, or if for
any reason the FCC cannot determine that granting a renewal application would
serve the public interest, convenience and necessity, the FCC will hold an
evidentiary hearing on the application. If as a result of an evidentiary hearing
the FCC determines that the licensee has failed to meet the requirements
specified above and that no mitigating factors justify the imposition of a
lesser sanction, then the FCC may deny a license renewal application.
Historically, our licenses have been renewed without any conditions or sanctions
being imposed, but we cannot assure you that the licenses of each of our
stations will continue to be renewed or will continue to be renewed without
conditions or sanctions.

     The FCC classifies each AM and FM radio station. An AM radio station
operates on either a clear channel, regional channel or local channel. A clear
channel is one on which AM radio stations are assigned to serve wide areas,
particularly at night.

     The minimum and maximum facilities requirements for an FM radio station are
determined by its class. Possible FM class designations depend upon the
geographic zone in which the transmitter of the FM radio station is located. In
general, commercial FM radio stations are classified as follows, in order of
increasing power and antenna height: Class A, B1, C3, B, C2, C1 or C radio
stations. The FCC recently has adopted rules to divide Class C stations into two
subclasses based on antenna height. Stations not meeting the

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<PAGE>   15

minimum height requirement within a three-year transition period would be
downgraded automatically to the new Class C0 category.

     Ownership Matters.  The Communications Act requires prior approval of the
FCC for the assignment of a broadcast license or the transfer of control of a
corporation or other entity holding a license. In determining whether to approve
an assignment of a radio broadcast license or a transfer of control of a
broadcast licensee, the FCC considers, among other things:

     - the financial and legal qualifications of the prospective assignee or
       transferee, including compliance with FCC restrictions on non-U.S.
       citizen or entity ownership and control;

     - compliance with FCC rules limiting the common ownership of attributable
       interests in broadcast and newspaper properties;

     - the history of compliance with FCC operating rules; and

     - the character qualifications of the transferee or assignee and the
       individuals or entities holding attributable interests in them.

Applications to the FCC for assignments and transfers are subject to petitions
in favor of denying the assignment or transfer by interested parties.

     To obtain the FCC's prior consent to assign or transfer a broadcast
license, appropriate applications must be filed with the FCC. The application
must be placed on public notice for a period of 30 days during which petitions
to deny the application may be filed by interested parties, including members of
the public. Informal objections may be filed any time up until the FCC acts upon
the application. If the FCC grants an assignment or transfer application,
interested parties have 30 days from public notice of the grant to seek
reconsideration of that grant. The FCC usually has an additional ten days to set
aside such grant on its own motion. When ruling on an assignment or transfer
application, the FCC is prohibited from considering whether the public interest
might be served by an assignment or transfer to any party other than the
assignee or transferee specified in the application.

     Under the Communications Act, a broadcast license may not be granted to or
held by any corporation that has more than 20% of its capital stock owned or
voted by non-U.S. citizens or entities or their representatives, by foreign
governments or their representatives, or by non-U.S. corporations. Furthermore,
the Communications Act provides that no FCC broadcast license may be granted to
or held by any corporation directly or indirectly controlled by any other
corporation of which more than 25% of its capital stock is owned of record or
voted by non-U.S. citizens or entities or their representatives, or foreign
governments or their representatives or by non-U.S. corporations, if the FCC
finds the public interest will be served by the refusal or revocation of such
license. These restrictions apply in modified form to other forms of business
organizations, including partnerships and limited liability companies. Thus, the
licenses for our stations could be revoked if more than 25% of our outstanding
capital stock is issued to or for the benefit of non-U.S. citizens.

     The FCC generally applies its other broadcast ownership limits to
"attributable" interests held by an individual, corporation, partnership or
other association or entity, including limited liability companies. In the case
of a corporation holding broadcast licenses, the interests of officers,
directors and those who, directly or indirectly, have the right to vote five
percent or more of the stock of a licensee corporation are generally deemed
attributable interests, as are positions as an officer or director of a
corporate parent of a broadcasting licensee. The FCC treats all partnership
interests as attributable, except for those limited partnership interests that
under FCC policies are considered insulated from material involvement in the
management or operation of the media-related activities of the partnership. The
FCC currently treats limited liability companies like limited partnerships for
purposes of attribution. Stock interests held by insurance companies, mutual
funds, bank trust departments and certain other passive investors that hold
stock for investment purposes only become attributable with the ownership of ten
percent or more of the voting stock of the corporation holding broadcast
licenses.

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     To assess whether a voting stock interest in a direct or an indirect parent
corporation of a broadcast licensee is attributable, the FCC uses a "multiplier"
analysis in which non-controlling voting stock interests are deemed
proportionally reduced at each non-controlling link in a multi-corporation
ownership chain. A time brokerage agreement with another radio station in the
same market creates an attributable interest in the brokered radio station as
well for purposes of the FCC's local radio station ownership rules, if the
agreement affects more than 15% of the brokered radio station's weekly broadcast
hours.

     Debt instruments, non-voting stock, options and warrants for voting stock
that have not yet been exercised, insulated limited partnership interests where
the limited partner is not materially involved in the media-related activities
of the partnership, and minority voting stock interests in corporations where
there is a single holder of more than 50% of the outstanding voting stock whose
vote is sufficient to affirmatively direct the affairs of the corporation,
generally do not subject their holders to attribution. However, the FCC's rules
also specify other exceptions to these general principles for attribution. The
FCC is currently evaluating whether to:

     - raise the benchmark for voting stock from five to ten percent;

     - raise the benchmark for passive investors holding voting stock from ten
       to twenty percent;

     - continue the single 50% stockholder exception; and/or

     - attribute non-voting stock or perhaps only when combined with other
       rights such as voting shares or contractual relationships.

More recently, the FCC has solicited comment on proposed rules that would:

     - treat an otherwise non-attributable ownership equity or debt interest in
       a licensee as an attributable interest where the interest holder is a
       program supplier or the owner of a broadcast station in the same market
       and the equity and/or debt holding is greater than a specified benchmark;
       and

     - in some circumstances, treat the licensee of a broadcast station that
       sells advertising time of another station in the same market pursuant to
       a joint sales agreement as having an attributable interest in the station
       whose advertising is being sold.

     Communications Act and FCC rules generally restrict ownership, operation or
control of, or the common holding of attributable interests in:

     - radio broadcast stations above certain limits servicing the same local
       market;

     - a radio broadcast station and a television broadcast station servicing
       the same local market; and

     - a radio broadcast station and a daily newspaper serving the same local
       market.

These rules include specific signal contour overlap standards to determine
compliance, and the FCC defined market will not necessarily be the same market
used by Arbitron(R) or other surveys, or for purposes of the HSR Act. Under
these "cross-ownership" rules, we, absent waivers, would not be permitted to own
a radio broadcast station and acquire an attributable interest in any daily
newspaper or television broadcast station, other than a low-powered television
station, in the same market where we then owned any radio broadcast station. Our
stockholders, officers or directors, absent a waiver, may not hold an
attributable interest in a daily newspaper or television broadcast station in
those same markets.

     The FCC is currently reviewing the ban on common ownership of a radio
station and a daily newspaper in the same market. The FCC's rules provide for
the liberal grant of a waiver of the rule prohibiting common ownership of radio
and television stations in the same geographic market in the top 25 television
markets if specific conditions are satisfied, and the FCC will consider waivers
in other markets under more restrictive standards. The FCC is reviewing its ban
on the common ownership of a radio station and a television station or newspaper
including extending the policy of liberal waivers of common ownership of radio
and television stations to the top 50 television markets.

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     Although current FCC nationwide radio broadcast ownership rules allow one
entity to own, control or hold attributable interests in an unlimited number of
FM radio stations and AM radio stations nationwide, the Communications Act and
the FCC's rules limit the number of radio broadcast stations in local markets in
which a single entity may own an attributable interest as follows:

     - In a radio market with 45 or more commercial radio stations, a party may
       own, operate or control up to eight commercial radio stations, not more
       than five of which are in the same service (AM or FM).

     - In a radio market with between 30 and 44 (inclusive) commercial radio
       stations, a party may own, operate or control up to seven commercial
       radio stations, not more than four of which are in the same service (AM
       or FM).

     - In a radio market with between 15 and 29 (inclusive) commercial radio
       stations, a party may own, operate or control up to six commercial radio
       stations, not more than four of which are in the same service (AM or FM).

     - In a radio market with 14 or fewer commercial radio stations, a party may
       own, operate or control up to five commercial radio stations, not more
       than three of which are in the same service (AM or FM), except that a
       party may not own, operate, or control more than 50 percent of the radio
       stations in such market.

     Because of these multiple and cross-ownership rules, if a stockholder,
officer or director of SBS holds an attributable interest in SBS, such
stockholder, officer or director may violate the FCC's rules if such person or
entity also holds or acquires an attributable interest in other television
stations, radio stations or daily newspapers, depending on their number and
location. If an attributable stockholder, officer or director of SBS violates
any of these ownership rules, we may be unable to obtain from the FCC one or
more authorizations needed to conduct our radio station business and may be
unable to obtain FCC consents for future acquisitions. As long as one person or
entity holds more than 50% of the voting power of the common stock of SBS where
the vote of such person or entity is sufficient to affirmatively direct the
affairs of SBS, another stockholder, unless serving as an officer and/or
director, generally would not hold an attributable interest in SBS. However, as
described above, the FCC is currently evaluating whether to continue the
exception for a single majority stockholder of more than 50% of a licensee's
voting stock. As of December 19, 2000, Raul Alarcon, Jr. held more than 50% of
the total voting power of our common stock.

     Under its cross-interest policy, the FCC considers meaningful relationships
among competing media outlets that serve substantially the same area, even if
the ownership rules do not specifically prohibit the relationship. Under this
policy, the FCC may consider whether to prohibit one party from holding an
attributable interest and a substantial non-attributable interest (including
non-voting stock, limited partnership and limited liability company interests)
in a media outlet in the same market, or from entering into a joint venture or
having common key employees with competitors. The cross-interest policy does not
necessarily prohibit all of these interests, but requires that the FCC consider
whether, in a particular market, the meaningful relationships between
competitors could have a significant adverse effect upon economic competition
and program diversity. In a rule making proceeding concerning the attribution
rules, the FCC has sought comment on, among other things, (1) whether the
cross-interest policy should be applied only in smaller markets, and (2) whether
non-equity financial relationships, such as debt, when combined with multiple
business relationships, such as local marketing agreements or joint sales
arrangements, raise concerns under the cross-interest policy.

     Programming and Operations.  The Communications Act requires broadcasters
to serve the public interest. A broadcast licensee is required to present
programming in response to community problems, needs and interests and to
maintain certain records demonstrating its responsiveness. The FCC will consider
complaints from listeners about a broadcast station's programming when it
evaluates the licensee's renewal application, but listeners' complaints also may
be filed and considered at any time. Stations also must pay regulatory and
application fees, and follow various FCC rules that regulate, among other
things, political advertising, the broadcast of obscene or indecent programming,
sponsorship identification, the broadcast of contests and lotteries and
technical operation.

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     The FCC requires that licensees not discriminate in hiring practices,
develop and implement programs designed to promote equal employment
opportunities and submit reports to the FCC on these matters annually and in
connection with each license renewal application.

     The FCC rules also prohibit a broadcast licensee from simulcasting more
than 25% of its programming on another radio station in the same broadcast
service (that is, AM/AM or FM/FM). The simulcasting restriction applies if the
licensee owns both radio broadcast stations or owns one and programs the other
through a local marketing agreement, provided that the contours of the radio
stations overlap in a certain manner.

     Local Marketing Agreements.  Often radio stations enter into LMAs or time
brokerage agreements. These agreements take various forms. Separately owned and
licensed radio stations may agree to function cooperatively in programming,
advertising sales and other matters, subject to compliance with the antitrust
laws and the FCC's rules and policies, including the requirement that the
licensee of each radio station maintain independent control over the programming
and other operations of its own radio station.

     Joint Sales Agreements.  Over the past few years, a number of radio
stations have entered into cooperative arrangements commonly known as joint
sales agreements or JSAs. The FCC has determined that issues of joint
advertising sales should be left to enforcement by antitrust authorities, and
therefore does not generally regulate joint sales practices between stations.
Currently, stations for which another licensee sells time under a JSA are not
deemed by the FCC to be an attributable interest of that licensee. However, in
connection with its ongoing rulemaking proceedings concerning the attribution
rules, the FCC is considering whether JSAs should be considered attributable
interests or within the scope of the FCC's cross-interest policy, particularly
when JSAs contain provisions for the supply of programming services and/or other
elements typically associated with local marketing agreements.

     RF Radiation.  In 1985, the FCC adopted rules based on a 1982 American
National Standards Institute (ANSI) standard regarding human exposure to levels
of radio frequency (RF) radiation. These rules require applicants for renewal of
broadcast licenses or modification of existing licenses to inform the FCC at the
time of filing such applications whether an existing broadcast facility would
expose people to RF radiation in excess of certain limits. In 1992, ANSI adopted
a new standard for RF exposure that, in some respects, was more restrictive in
the amount of environmental RF exposure permitted. The FCC has since adopted
more restrictive radiation limits which became effective October 15, 1997, and
which are based in part on the revised ANSI standard.

     Digital Audio Radio Service.  The FCC has allocated spectrum to a new
technology, digital audio radio service (DARS), to deliver satellite-based audio
programming to a national or regional audience and issued regulations for a DARS
service in early 1997. The nationwide reach of satellite DARS could allow niche
programming aimed at diverse communities that SBS is targeting. The licensees
will be permitted to sell advertising and lease channels in these media. The
FCC's rules require that these licensees launch and begin operating at least one
space station by 2001 and be fully operational by 2003.

     Low Power Radio Broadcast Service.  The FCC recently adopted rules
establishing two classes of a low power radio service, both of which will
operate in the existing FM radio band: a primary class with a maximum operating
power of 100 watts and a secondary class with a maximum power of 10 watts. These
low power radio stations will have limited service areas of 3.5 miles and 1 to 2
miles, respectively. Implementation of a low power radio service or
microbroadcasting will provide an additional audio programming service that
could compete with SBS's radio stations for listeners, but we cannot predict the
effect upon SBS.

ENVIRONMENTAL MATTERS

     In connection with our sale of WXLX-AM in 1997, we assigned the lease of
the transmitter for WXLX-AM in Lyndhurst, New Jersey, to the purchaser of the
station. The transmitter is located on a former landfill which ceased operations
in the late 1960's. Although WXLX-AM has been sold, we retain potential exposure
to possible environmental liabilities relating to the transmitter site. Because
the lessee of the property is under a long-term lease, we may become liable for
costs associated with remediation of the site. We are

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unable to assess the likelihood that any claim for remediation of this site will
arise, and no amounts have been accrued in the consolidated financial statements
relating to this contingent liability.

     On September 28, 1999, we received notice from the purchaser of KXMG-AM, a
station located in Los Angeles that we sold in December 1997, that it would make
a claim against us for indemnification under the asset purchase agreement,
pursuant to which it purchased the station, for the removal of an underground
fuel storage tank. The notice did not specify the amount of the indemnification
claim. We do not have sufficient information to assess our potential exposure to
liability, and no amounts have been accrued in the consolidated financial
statements relating to this contingent liability.

RECENT DEVELOPMENTS

     Initial Public Offering and Related Transactions.  On November 2, 1999, we
closed our initial public offering of 25,055,510 shares of Class A Common Stock,
raising $389.4 million in net proceeds to SBS, including proceeds from the
exercise of the over-allotment option granted to the underwriters. Selling
shareholders who participated in the offering raised an aggregate of $80.4
million in net proceeds. The shares of Class A Common Stock were offered at an
initial offering price of $20.00 per share. Our shares began trading on the
Nasdaq National Market on October 28, 1999.

     On November 2, 1999, we also closed our offering of $235.0 million of
9 5/8% Senior Subordinated Notes due 2009, raising $228.0 million in net
proceeds to SBS.

     On September 30, 1999, we commenced tender offers and the solicitation of
consents to adopt amendments to the indentures governing our then outstanding
senior notes to eliminate substantially all of the restrictive covenants and
default provisions contained in the indentures, other than the covenants
relating to the payment of interest on the principal of the notes. On November
3, 1999, we accepted for payment consent solicitations and tender offers for two
series of our then outstanding senior notes totaling $176,559,000 in aggregate
principal amount. The first series, aggregate principal amount $101,559,000 of
outstanding 12 1/2% Senior Notes due 2002, was redeemed at $1,142.86 per each
validly tendered $1,000 12 1/2% Note. We received consents and tenders from
99.7% of our 12 1/2% Notes. As of December 20, 2000, there is an aggregate
principal amount of $100,000 of our 12 1/2% Notes that remains outstanding. The
second series, aggregate principal amount $75.0 million of outstanding 11%
Senior Notes due 2004, Series B was purchased by us at $1,108.04 per each
validly tendered $1,000 11% Note. We received consents and tenders from 100% of
the holders of our 11% Notes.

     On November 2, 1999, we gave notice of redemption of all of our outstanding
14 1/4% Senior Exchangeable Preferred Stock at 105% of the liquidation
preference of each share at an aggregate cost to us of approximately $265.6
million. We completed the redemption on December 2, 1999.

     Reclassification and Stock Split of Common Stock.  On September 29, 1999,
we filed a third amended and restated certificate of incorporation to reclassify
all of our then outstanding shares of Class A Common Stock, par value $.01 per
share, into shares of Class B Common Stock, par value $.0001 per share and
effect a 50-to-1 stock split of the new shares of Class B Common Stock. Each
share of Class A Common Stock entitles its holder to one vote and each share of
Class B Common Stock entitles its holder to ten votes.

     Purchase of Additional Puerto Rico Stations.  On September 22, 1999,
Spanish Broadcasting System of Puerto Rico, Inc., a Delaware corporation and
wholly owned subsidiary of SBS, entered into a stock purchase agreement to
purchase all of the outstanding capital stock of the following nine subsidiaries
of AMFM Operating Inc., a Delaware corporation (formerly known as Chancellor
Media Corporation of Los Angeles) ("AMFM"): Primedia Broadcast Group, Inc., WIO,
Inc., Cadena Estereotempo, Inc., Portorican American Broadcasting, Inc., WLDI,
Inc., WRPC, Inc., WOYE, Inc., WZNT, Inc., WOQI, Inc. (the "Primedia Station
Group"). The Primedia Station Group owns and operates eight radio stations in
Puerto Rico: WIOA-FM, WIOB-FM, WIOC-FM, WCOM-FM, WZMT-FM, WZNT-FM, WOYE-FM, and
WCTA-FM. On January 14, 2000, we completed the purchase from AMFM of all of the
outstanding capital stock of the Primedia Station Group for total cash
consideration of $90.8 million (net of $1.0 million cash

                                       16
<PAGE>   20

acquired), including a $10.0 million deposit that was made on September 22, 1999
and closing costs of $0.7 million. The acquisition was financed from cash on
hand.

     Sale of Florida Keys Stations.  On February 2, 2000, SBS completed the sale
of WVMQ-FM in Key West, Florida and WZMQ-FM in Key Largo, Florida to South
Broadcasting System, Inc., a company owned by Mr. Pablo Raul Alarcon, Sr., our
Chairman Emeritus and a member of our board of directors, for total cash
consideration of $0.7 million.

     Shelf Registration.  On March 13, 2000, in fulfillment of our obligation
pursuant to registration rights agreements dated June 29, 1994 and March 15,
1997, respectively, we filed a registration statement on Form S-3 through which
certain selling stockholders are offering for sale from time to time up to an
aggregate of 7,387,750 shares of our Class A Common Stock, which shares were
originally issued to the selling stockholders as shares of Class B Common Stock
pursuant to 1994 and 1997 warrants. On May 8, 2000, the SEC declared the
registration statement on Form S-3 effective. The selling stockholders may sell
the shares of Class A Common Stock from time to time on the over-the-counter
market in regular brokerage transactions or in privately negotiated
transactions. We will not receive any portion of the proceeds from the sale of
these shares by the selling stockholders.

     Senior Credit Facility.  On July 6, 2000, we entered into a credit
agreement with Lehman Commercial Paper, Inc. as administrative agent and the
several banks and other financial institutions or entities from time to time a
party to the credit agreement. The senior credit facility includes a six year
$25.0 million revolving credit facility and $125.0 million multi-draw term loan
facility.

     Purchase of Dallas, San Francisco, and Additional Los Angeles and San
Antonio Stations.  On May 8, 2000, we entered into a stock purchase agreement
with Rodriguez Communications, Inc., a Delaware corporation ("RCI") and the
stockholders of RCI to acquire all of the outstanding capital stock of RCI which
owns and operates radio stations KMJR-FM (formerly KFOX-FM) and KNJR-FM
(formerly KREA-FM) serving the Los Angeles, California market, KXJO-FM serving
the San Francisco, California market and KSAH-AM serving the San Antonio, Texas
market. On May 8, 2000 we also entered into an asset purchase agreement with New
World Broadcasters Corp. ("New World"), a Texas corporation and an affiliate of
RCI, to acquire radio station KTCY-FM serving the Dallas, Texas market, and a
stock purchase agreement with New World and 910 Broadcasting Corp., a Texas
corporation and wholly-owned subsidiary of New World, to acquire all of the
outstanding capital stock of 910 Broadcasting Corp. which owns and operates
radio station KXEB-AM serving the Dallas, Texas market.

     On November 10, 2000, we completed the purchase of all the outstanding
capital stock of RCI and the purchase of radio station KTCY-FM for total
consideration of $164.3 million, consisting of 4,441,545 shares of SBS Class A
Common Stock valued at $42.6 million and $121.7 million in cash. We financed the
purchase of all the outstanding capital stock of RCI and the purchase of radio
station KTCY-FM with previously unissued shares of our Class A Common Stock,
cash on hand and borrowings under our credit agreement dated July 6, 2000 with
Lehman Commercial Paper, Inc. as administrative agent, and the several banks and
other financial institutions or entities from time to time party to the credit
agreement. From May 8, 2000 to November 10, 2000, we operated radio station
KTCY-FM under a time brokerage agreement with New World. From May 23, 2000 to
November 10, 2000, we operated radio station KSAH-AM under a time brokerage
agreement with RCI. From July 6, 2000 to November 10, 2000, we operated radio
stations KMJR-FM and KNJR-FM under a time brokerage agreement with RCI. From
August 23, 2000 to November 10, 2000, we operated radio station KXJO-FM under a
time brokerage agreement with RCI.

     We have not yet closed the purchase of all the outstanding capital stock of
910 Broadcasting Corp., the owner and operator of radio station KXEB-AM because
FCC approval is still pending for this transaction. We cannot assure you that
this acquisition will occur. We began operating radio station KXEB-AM on May 8,
2000 under a time brokerage agreement with New World and 910 Broadcasting Corp.,
which will continue until the closing of the purchase of all the outstanding
capital stock of 910 Broadcasting Corp.

     Purchase of Additional Los Angeles Station.  On November 2, 2000, we
entered into an asset purchase agreement with International Church of the Four
Square Gospel to purchase radio station KFSG-FM in Los

                                       17
<PAGE>   21

Angeles, California at a purchase price of $250,000,000. In connection with this
acquisition, we made an initial deposit of $5,000,000 toward the purchase price.
The agreement contains customary representations and warranties, and the closing
of our acquisition is subject to the satisfaction of certain customary
conditions, including receipt of regulatory approval from the FCC. The agreement
may be terminated by us or by the seller if the closing does not occur by
December 31, 2001.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     This report contains forward-looking statements, including statements under
the captions "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business" and elsewhere in this report, concerning our
expectations of future sales; gross profits; research and development expenses;
selling, general and administrative expenses; product introductions and cash
requirements. Forward-looking statements often include words or phrases such as
"will likely result", "expect", "will continue", "anticipate", "estimate",
"intend", "plan", "project", "outlook" or similar expressions. The statements
are not guarantees of future performance and are subject to certain risks,
uncertainties and other factors, some of which are beyond our control, are
difficult to predict and could cause actual results to differ materially from
those expressed in the forward-looking statements. Factors which could cause
actual results to differ from expectations include those in the "Risk Factors"
section of our registration statement on Form S-1, as amended (Registration No.
333-85499) and our registration statement on Form S-3, as amended (Registration
No. 333-32240). We cannot assure you that our results of operations will not be
adversely affected by one or more of these factors. We caution you not to place
undue reliance on these forward-looking statements, which reflect our
management's view only as of the date of this report. We are not obligated to
update these statements or publicly release the results of any revisions to them
to reflect events or circumstances occurring after the date of this report or to
reflect the occurrence of unanticipated events.

CERTAIN CONSIDERATIONS

     - Our substantial level of debt could limit our ability to grow and
       compete.

     - The terms of our debt restrict us from engaging in many activities and
       require us to satisfy various financial tests.

     - We have experienced net losses in the past and to the extent that we
       experience losses in the future, our ability to raise capital and the
       market prices of our securities could be adversely affected.

     - A large portion of our net broadcast revenue and broadcast cash flow
       comes from the New York and Miami markets.

     - Loss of key personnel could adversely affect our business, including Raul
       Alarcon, Jr., our Chairman of the Board of Directors, President and Chief
       Executive Officer.

     - We compete for advertising revenue with other radio groups as well as
       television and other media, many operators of which have greater
       resources than we do.

     - Our growth depends on successfully executing our acquisition strategy. We
       intend to grow by acquiring radio stations primarily in the largest U.S.
       Hispanic markets. We cannot assure you that our acquisition strategy will
       be successful.

     - Raul Alarcon, Jr., Chairman of the Board of Directors, Chief Executive
       Officer and President, has majority voting control.

     - We must be able to respond to rapidly changing technology, services and
       standards which characterize our industry in order to remain competitive.

     - Our business depends on maintaining our FCC licenses. We cannot assure
       you that we will be able to maintain these licenses.

     - We may face regulatory review for additional acquisitions in our existing
       markets and, potentially, new markets.
                                       18
<PAGE>   22

     - A national or regional recession could impair our revenues.

     - Future sales by existing stockholders could depress the market price of
       our Class A Common Stock.

ITEM 2.  PROPERTIES

     As of December 1, 2000, we relocated our corporate headquarters to Coconut
Grove, Florida to a building owned by Mr. Alarcon, Jr. We entered into a ten
year lease with Irradio Holdings Ltd., a Florida limited partnership. See "Item
13. Certain Relationships and Related Transactions." The types of properties
required to support each of our radio stations include offices, broadcasting
studios and antenna towers where broadcasting transmitters and antenna equipment
are located. We own the building housing the office and studios in New York for
WSKQ-FM and WPAT-FM, and in Los Angeles for KLAX-FM. Additionally, we own a
separate building in Los Angeles that we previously used as the office for our
Los Angeles operations. We own the auxiliary transmitter site for KSAH-AM in
Universal City, Texas and we lease all of our other transmitter sites, with
lease terms that expire between 2000 and 2035, assuming all renewal options are
exercised. We also own a tower site in Signal Hill, California where we lease
space to a public broadcast station and other members of the telecommunications
industry. The studios and offices of our Miami and South Florida stations are
currently located in leased facilities with lease terms that expire in 2012. See
"Item 13. Certain Relationships and Related Transactions." We lease the office
and studio facilities for our stations in Chicago, Dallas, Oakland, San Antonio
and Puerto Rico.

     The transmitter sites for our stations are material to our overall
operations. Management believes that our properties are in good condition and
are suitable for our operations; however, we continually seek opportunities to
upgrade our properties. We own substantially all of the equipment used in our
radio broadcasting business. See "Item 1. Business -- Environmental Matters."

ITEM 3.  LEGAL PROCEEDINGS

     From time to time we are involved in litigation incidental to the conduct
of our business, such as contract matters and employee-related matters. We are
not currently a party to litigation which, in the opinion of management, is
likely to have a material adverse effect on our business. See "Item 1.
Business -- Environmental Matters."

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted to a vote of security holders during the fourth
quarter of fiscal year 2000.

                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Our shares of Class A Common Stock were not registered under the Securities
Act of 1933 or the Securities Exchange Act of 1934, as amended, until October
27, 1999. The principal market upon which our Class A Common Stock is traded is
the Nasdaq National Market. Our shares of Class A Common Stock began trading on
the Nasdaq National Market on October 28, 1999. For the period from October 28,
1999 to December 26, 1999, the high and low bids for our Class A Common Stock
were $39.88 and $25.25, respectively. For the period from December 27, 1999 to
March 26, 2000, the high and low bids for our Class A Common Stock were $42.00
and $17.25, respectively. For the period from March 27, 2000 to June 25, 2000,
the high and low bids for our Class A Common Stock were $25.50 and $13.94,
respectively. For the period from June 26, 2000 to September 24, 2000, the high
and low bids for our Class A Common Stock were $22.50 and $8.63, respectively.
As of December 20, 2000, there were approximately 6,500 holders of our Class A
Common Stock, par value $.0001 per share.

     There is no established trading market for our Class B Common Stock, par
value $.0001 per share. As of December 20, 2000, there were seven record holders
of our Class B Common Stock. This figure does not

                                       19
<PAGE>   23

include an estimate of the indeterminate number of beneficial holders whose
shares may be held of record by brokerage firms and clearing agencies.

DIVIDEND POLICY

     We intend to retain future earnings for use in our business and do not
anticipate declaring or paying any cash or stock dividends on shares of our
common stock in the foreseeable future. In addition, any determination to
declare and pay dividends will be made by our board of directors in light of our
earnings, financial position, capital requirements and other factors that our
board of directors deems relevant. Furthermore, the indenture governing our
9 5/8% senior subordinated notes offering contains restrictions on our ability
to pay dividends. We previously declared and paid an extraordinary dividend in
March 1998, pursuant to which some of our warrantholders elected to increase the
conversion rates of their warrants instead of receiving cash. We do not expect
to make payments of any similar dividends in the near future.

RECENT SALES OF UNREGISTERED SECURITIES

     On November 10, 2000, we issued an aggregate of 4,441,545 shares of our
Class A Common Stock to New World Broadcasters Corp., the shareholders of
Rodriguez Communications, Inc. ("RCI"), and to certain individuals as part of
the purchase price for radio station KTCY-FM and all the outstanding capital
stock of RCI (which owns and operates radio stations KFOX-FM, KREA-FM, KXJO-FM
and KSAH-FM). We relied on Section 4(2) of the Securities Act of 1933, as
amended, to claim exemption from registration for this issuance, as a
transaction not involving any public offering.

     Prior to June 30, 1999, we issued 182,303 shares to qualified institutional
buyers and accredited institutional investors who exercised warrants to purchase
shares of our Class A Common Stock. Our warrants were initially issued in 1994
as part of units that included our senior notes and in 1997 as part of units
that included our senior exchangeable preferred stock. The exercise price for
the warrants was $.01 per warrant. Holders exercising the 1997 warrants received
 .428 shares per warrant and holders exercising the 1994 warrants received one
share per warrant. On September 29, 1999, we filed our third amended and
restated certificate of incorporation to reclassify all of our then outstanding
shares of Class A Common Stock, par value $.01 per share, into shares of Class B
Common Stock, par value $.0001 per share and to effect a 50-to-1 stock split of
the new shares of Class B Common Stock. We relied on Sections 3(a)(9) and 4(2)
of the Securities Act of 1933, as amended, to claim exemption from registration
for this issuance, as a transaction not involving any public offering.

                                       20
<PAGE>   24

ITEM 6.  SELECTED FINANCIAL DATA

             SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
      (IN THOUSANDS EXCEPT RATIOS, SHARES OUTSTANDING AND PER SHARE DATA)

     The following table sets forth the historical financial information of our
business. The selected historical consolidated financial information presented
below under the caption "Statement of Operations Data" and "Balance Sheet Data,"
as of and for each of the fiscal years in the five-year period ended September
24, 2000 are derived from our historical consolidated financial statements,
which have been audited by KPMG LLP, independent certified public accountants.
Our selected historical consolidated financial data should be read in
conjunction with our historical consolidated financial statements as of
September 26, 1999 and September 24, 2000, and for each of the fiscal years in
the three-year period ended September 24, 2000, the related notes and
independent auditors' report included elsewhere in this report. For additional
information see the financials section of this report and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
                                                                     FISCAL YEAR ENDED
                                            -------------------------------------------------------------------
                                              9/29/96       9/28/97       9/27/98       9/26/99       9/24/00
                                            -----------   -----------   -----------   -----------   -----------
<S>                                         <C>           <C>           <C>           <C>           <C>
STATEMENT OF OPERATIONS DATA:
Gross revenues............................  $    55,338   $    67,982   $    86,766   $   111,233   $   141,468
Less: agency commissions..................        6,703         7,972        10,623        13,882        18,800
                                            -----------   -----------   -----------   -----------   -----------
Net revenues..............................       48,635        60,010        76,143        97,351       122,668
Station operating expenses(1).............       27,876        31,041        39,520        44,620        57,555
Corporate expenses........................        3,748         5,595         6,893        10,636        20,730
Depreciation and amortization.............        4,556         7,619         8,877         9,906        13,126
                                            -----------   -----------   -----------   -----------   -----------
  Operating income........................       12,455        15,755        20,853        32,189        31,257
Interest expense, net(2)..................      (16,533)      (22,201)      (20,860)      (21,178)      (19,495)
Other income (expense), net(3)............       (1,574)         (791)         (213)         (749)         (302)
Gain on sale of AM stations...............           --        36,242            --            --            --
                                            -----------   -----------   -----------   -----------   -----------
  Income (loss) before income taxes and
    extraordinary items...................       (5,652)       (7,237)       36,022        10,262        11,460
Income tax expense (benefit)..............       (1,166)       (2,715)       15,624         4,445         4,915
                                            -----------   -----------   -----------   -----------   -----------
Income (loss) before extraordinary
  items...................................       (4,486)       (4,522)       20,398         5,817         6,545
Extraordinary (loss) net of income
  taxes(4)................................           --        (1,647)       (1,613)           --      ( 17,151)
                                            -----------   -----------   -----------   -----------   -----------
  Net income (loss).......................  $    (4,486)  $    (6,169)  $    18,785   $     5,817   $   (10,606)
                                            ===========   ===========   ===========   ===========   ===========
Dividends on preferred stock..............       (2,994)      (17,044)      (30,270)      (34,749)      (28,372)
                                            -----------   -----------   -----------   -----------   -----------
  Net income (loss) applicable to common
    stock.................................  $    (7,480)  $   (23,213)  $   (11,485)  $   (28,932)  $   (38,978)
                                            ===========   ===========   ===========   ===========   ===========
Dividends per share on common stock.......  $        --   $        --   $      0.11   $        --   $        --
                                            ===========   ===========   ===========   ===========   ===========
Earnings (loss) per common share:
  Basic (before extraordinary items)......  $     (0.25)  $     (0.71)  $     (0.33)  $     (0.86)        (0.38)
  Diluted (before extraordinary items)....        (0.25)        (0.71)        (0.33)        (0.86)        (0.38)
  Basic...................................        (0.25)        (0.77)        (0.38)        (0.86)        (0.67)
  Diluted.................................        (0.25)        (0.77)        (0.38)        (0.86)        (0.67)
Weighted average common shares
  outstanding(8):
  Basic...................................   30,333,400    30,333,400    30,333,400    33,584,576    58,162,671
  Diluted.................................   30,333,400    30,333,400    30,333,400    33,584,576    58,162,671
</TABLE>

                                       21
<PAGE>   25

<TABLE>
<CAPTION>
                                                                     FISCAL YEAR ENDED
                                            -------------------------------------------------------------------
                                              9/29/96       9/28/97       9/27/98       9/26/99       9/24/00
                                            -----------   -----------   -----------   -----------   -----------
<S>                                         <C>           <C>           <C>           <C>           <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................  $     5,468   $    12,288   $    37,642   $    16,975        59,559
Total assets..............................      176,860       334,367       351,034       365,681       634,691
Total debt (including current portion)....      135,914       183,013       171,126       172,486       304,664
Preferred stock...........................       35,939       171,262       201,368       235,918            --
Total stockholders' (deficiency) equity...       (3,569)      (32,047)      (46,193)      (75,122)      274,465
OTHER FINANCIAL DATA:
Broadcast cash flow(5)....................  $    20,759   $    28,969   $    36,623   $    52,731   $    65,113
Broadcast cash flow margin................         42.7%         48.3%         48.1%         54.2%         53.1%
EBITDA(6).................................       17,011        23,374        29,730        42,095        44,383
After-tax cash flow(7)....................           70         3,097         7,530        15,723        19,671
Capital expenditures......................        3,811         2,022         1,645         2,100         3,793
Net cash provided by operating
  activities..............................        8,813         6,386        10,923        20,782        28,672
Net cash provided by (used in) investing
  activities..............................      (90,195)     (144,358)       32,190       (38,384)     (205,050)
Net cash provided by (used in) financing
  activities..............................       69,034       144,792       (17,758)       (3,065)      218,962
</TABLE>

                                       22
<PAGE>   26

        NOTES TO SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION

(1) Station operating expenses include engineering, programming, selling and
    general and administrative expenses.

(2) Interest expense includes non-cash interest, such as the accretion of
    principal, the amortization of discounts on debt and the amortization of
    deferred financing costs.

(3) During the 1996, 1997 and 1999 fiscal years, we wrote down the value of our
    land and building located on Sunset Boulevard in Los Angeles by $697,741,
    $487,973 and $451,048, respectively. The write-downs were based on current
    market values of real estate in the Los Angeles area. Financing costs are
    also included in other income (expenses).

(4) On June 29, 1994, we sold 107,059 units, each consisting of $1,000 principal
    amount, of our 12 1/2% notes and warrants to purchase one share of common
    stock per unit. The 12 1/2% notes were issued at a substantial discount from
    their principal amount. The sale of the 12 1/2% notes and warrants generated
    gross proceeds of $94,000,000 and proceeds to us of $87,774,002, net of
    financing costs of $6,225,998. Of the $94,000,000 of gross proceeds from the
    sale of the 12 1/2% notes and warrants, $88,603,000 was allocated to the
    12 1/2% notes and $5,397,000 was determined to be the value of the warrants.
    Of the net proceeds from the sale of the 12 1/2% notes and warrants,
    $83,000,000 was used to satisfy in full our obligations to our two former
    principal lenders and the balance was used to settle litigation with a
    former stockholder and for general corporate purposes.

    For the fiscal year ended September 28, 1997, we recorded an extraordinary
    loss resulting from the redemption of our 12 1/4% senior secured notes due
    2001 at par which was approximately $1.5 million in excess of their carrying
    value and from the write-off of the related unamortized deferred financing
    costs of approximately $1.3 million, net of the related tax benefit of
    approximately $1.1 million.

    For the fiscal year ended September 27, 1998, we recorded an extraordinary
    loss resulting from the repurchase of $13.2 million par value of 12 1/2%
    notes, at a premium of approximately $2.2 million in excess of their
    carrying value and from the write-off of the related unamortized deferred
    financing costs of approximately $0.5 million, net of the related tax
    benefit of approximately $1.1 million.

    For the fiscal year ended September 24, 2000, we recorded an extraordinary
    loss of $17.2 million related to the early retirement of our 11% and 12 1/2%
    notes at a premium of approximately $23.1 million in excess of their
    carrying value and from the write-off of the related unamortized deferred
    financing costs of approximately $5.5 million, net of the related tax
    benefit of approximately $11.4 million.

(5) The term "broadcast cash flow" means operating income before depreciation,
    amortization and corporate expenses. Broadcast cash flow should not be
    considered in isolation from, or as a substitute for, net income or cash
    flow and other consolidated income or cash flow statement data or as a
    measure of our profitability or liquidity. Although broadcast cash flow is
    not a measure of performance calculated in accordance with generally
    accepted accounting principles, broadcast cash flow is widely used in the
    broadcasting industry as a measure of a broadcasting company's operating
    performance. Broadcast cash flow may not be comparable to a similarly
    entitled item reported by other entities that do not define the term exactly
    as the Company defines it. The Company believes that broadcast cash flow is
    a useful indicator to investors of the cash flow generated by the operations
    of the Company's stations and permits investors to compare the Company's
    performance with respect to station operations with those of other radio
    broadcast companies. The Company believes that broadcast cash flow is
    particularly useful in analyzing acquisition opportunities.

(6) The term "EBITDA" means earnings before extraordinary items, gain on sale of
    AM stations, net interest expense, income taxes, depreciation, amortization
    and other income or expense. Although EBITDA is not a measure of performance
    calculated in accordance with generally accepted accounting principles,
    EBITDA is widely used in the broadcasting industry as a measure of a
    broadcasting company's operating performance. EBITDA may not be comparable
    to a similarly entitled item reported by other entities that do not define
    the term exactly as the Company defines it. The Company believes that

                                       23
<PAGE>   27

    EBITDA is a useful indicator to investors of the Company's capacity to incur
    and service debt. Many debt instruments, including the indenture governing
    the Company's 9 5/8% Senior Subordinated Notes, contain covenants which use
    formulas based on EBITDA calculations.

(7) The term "after-tax cash flow" means income before income tax benefit
    (expense) and extraordinary items, minus net gain on sale of AM stations
    (net of tax) and the current income tax provision, plus depreciation and
    amortization expense. Although after-tax cash flow is not a measure of
    performance calculated in accordance with generally accepted accounting
    principles, after-tax cash flow is widely used in the broadcasting industry
    as a measure of a broadcasting company's operating performance.

(8) On September 29, 1999, we filed a third amended and restated certificate of
    incorporation which resulted in (1) the redesignation of our previously
    outstanding shares of Class A Common Stock into shares of Class B Common
    Stock, (2) a 50-to-1 stock split of our Class B Common Stock and (3) a
    reduction in the par value of our Class A Common Stock and Class B Common
    Stock from $0.01 per share to $0.0001 per share. The financial information
    has been restated to reflect this redesignation, stock split and change in
    par value.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

BACKGROUND

     We commenced operations with the purchase of our first radio station,
WXLX-AM (formerly WSKQ-AM) serving the New York metropolitan area in 1983. Since
1983 we have purchased 28 stations, including three additional AM stations, in
eight U.S. markets. Today, we are the second largest Spanish-language radio
broadcasting company in the United States, currently owning and operating a
total of 23 FM radio stations and one AM radio station. We operate an additional
AM radio station under a time brokerage agreement. Twenty-five of our stations
are located in eight of the largest Hispanic markets in the United States,
including Los Angeles, Puerto Rico, New York, Miami, San Francisco, Chicago, San
Antonio and Dallas. In total, our radio stations reach over 61% of the U.S.
Hispanic population.

     Our financial results depend on a number of factors, including the strength
of the national economy and the local economies served by our stations, total
advertising dollars dedicated to the markets served by our stations, advertising
dollars targeted to the Hispanic consumers in the markets served by our
stations, our stations' audience ratings, our ability to provide popular
programming, local market competition from other radio stations and other
advertising media, and government regulations and policies.

     We report our revenues and expenses on a broadcast month basis. "Broadcast
month basis" means a four or five week period ending on the last Sunday of each
calendar month. For fiscal years 1998, 1999 and 2000 we reported 52 weeks of
revenues and expenses.

     As is true of other radio groups, our performance is customarily measured
by our ability to generate broadcast cash flow, EBITDA and after-tax cash flow.
Broadcast cash flow consists of operating income before depreciation,
amortization and corporate expenses. EBITDA consists of earnings before
extraordinary items, gain on sale of AM stations, net interest expense, income
taxes, depreciation, amortization and other income or expenses. After-tax cash
flow consists of income before income tax benefit (expense) and extraordinary
items, minus net gain on sale of AM stations (net of tax) and the current income
tax provision, plus depreciation and amortization expense. Although broadcast
cash flow, EBITDA and after-tax cash flow are not measures of performance
calculated in accordance with generally accepted accounting principles, we
believe that broadcast cash flow, EBITDA and after-tax cash flow are useful in
evaluating us because these measures are accepted by the broadcasting industry
as generally recognized measures of performance and are used by securities
industry analysts who publish reports on the performance of broadcasting
companies. In addition, we have included information concerning broadcast cash
flow, EBITDA and after-tax cash flow in this report because it is used by some
investors as a measure of a company's ability to service its debt obligations
and it is also the basis for determining compliance with certain covenants
contained in the indentures governing our debt securities and in the certificate
of designation governing our preferred stock. Broadcast cash flow, EBITDA and
after-tax cash flow are not intended to be substitutes for operating income

                                       24
<PAGE>   28

as determined in accordance with generally accepted accounting principles, or
alternatives to cash flow from operating activities (as a measure of liquidity)
or net income.

REVENUES

     Our primary source of revenue is the sale of advertising time on our radio
stations to local and national advertisers. Our revenues are affected primarily
by the advertising rates that our radio stations are able to charge as well as
the overall demand for radio advertising time in a market. Advertising rates are
based primarily on (1) a radio station's audience share in the demographic
groups targeted by advertisers, as measured principally by periodic reports
developed by Arbitron(R), (2) the number of radio stations in the market
competing for the same demographic groups, and (3) the supply of and demand for
radio advertising time. Advertising rates fluctuate daily and are generally
highest during the morning and afternoon commuting hours. Seasonal net
broadcasting revenue fluctuations are common in the radio broadcasting industry
and are due primarily to fluctuations in advertising expenditures by local and
national advertisers. Our second fiscal quarter (January through March)
generally produces the lowest net broadcasting revenue for the year because of
normal post-holiday decreases in advertising expenditures.

FISCAL YEAR 2000 COMPARED TO FISCAL YEAR 1999

     Net Revenues.  Our net revenues were $122.7 million for fiscal year 2000,
compared to $97.4 million for fiscal year 1999, an increase of $25.3 million or
26.0%. The increase was primarily attributable to the inclusion of operating
results of certain of our Puerto Rico stations, which we purchased from AMFM
Operating Inc. ("AMFM") in January, that had not yet been acquired during the
same period in fiscal year 1999. Additionally, our net revenues increased due to
higher advertising rates, as advertisers continue to be attracted to the
Spanish-language market.

     Station Operating Expenses.  Total station operating expenses were $57.6
million for fiscal year 2000, compared to $44.6 million for fiscal year 1999, an
increase of $13.0 million or 29.1%. The increase was primarily attributable to
the inclusion of operating results of certain of our Puerto Rico stations, which
we purchased from AMFM in January, that had not yet been acquired during the
same period in fiscal year 1999 as well as the stations operated under time
brokerage agreements in connection with the Rodriguez Communications, Inc. and
related transactions. In addition, on a same station basis, we experienced
higher music license fees and commissions associated with increased sales.

     Broadcast Cash Flow.  Broadcast cash flow was $65.1 million for fiscal year
2000, compared to $52.7 million for fiscal year 1999, an increase of $12.4
million or 23.5%. Our broadcast cash flow margin decreased slightly to 53.1% for
fiscal year 2000 compared to 54.2% for fiscal year 1999. Excluding net Internet
broadcast cash flow of ($2.1) million for fiscal year 2000 and ($0.5) million
for fiscal year 1999, broadcast cash flow would have increased by $14.0 million
to $67.2 million, a 26.3% increase, and our broadcast cash flow margin would
have reached 54.9% for the fiscal year 2000.

     Corporate Expenses.  Total corporate expenses were $20.7 million for fiscal
year 2000, compared to $10.6 million for fiscal year 1999, an increase of $10.1
million or 95.3%. The increase in corporate expenses resulted mainly from a
non-recurring severance payment of $10.2 million related to the purchase of an
annuity for two of our retired executives.

     EBITDA.  EBITDA was $44.4 million for fiscal year 2000, compared to $42.1
million for fiscal year 1999, an increase of $2.3 million or 5.5%. The increase
in EBITDA was mostly attributable to the increase in broadcast cash flow,
partially offset by the non-recurring severance payment of $10.2 million.
Excluding the non-recurring severance payment, EBITDA was $54.6 million for the
fiscal year 2000, an increase of $12.5 million or 29.7%, and our EBITDA margin
was 44.5%.

     Depreciation and Amortization.  Depreciation and amortization expense was
$13.1 million for fiscal year 2000, compared to $9.9 million for fiscal year
1999, an increase of $3.2 million or 32.3%. The increase was related primarily
to an increase in amortization costs resulting from the purchase of the Puerto
Rico stations from AMFM.

                                       25
<PAGE>   29

     Operating Income.  Operating income was $31.3 million for fiscal year 2000,
compared to $32.2 million for fiscal year 1999, a decrease of $0.9 million or
2.8%. The decrease was due primarily to the non-recurring severance payment of
$10.2 million.

     Interest Expense, Net.  Interest expense was $19.5 million for fiscal year
2000, compared to $21.2 million for fiscal year 1999, a decrease of $1.7 million
or 8.0%. This decrease was due primarily to interest income earned on the unused
proceeds from the initial public offering, partially offset by interest on
additional debt related to the refinancing of the 12 1/2% and 11% notes.

     Other Expense, Net.  We had other expenses of $0.3 million for fiscal year
2000, compared to $0.7 million for fiscal year 1999, a decrease of $0.4 million
or 57.1%. The other expenses during fiscal year 2000 included a $0.3 million
write-off of costs related to a financing transaction that we abandoned.

     Extraordinary Loss.  The Company incurred an extraordinary loss of $17.2
million, net of an income tax benefit of $11.4 million, in fiscal year 2000
related to the early retirement of our 11% and 12 1/2% notes for an amount in
excess of our carrying value and the write-off of the related unamortized debt
issuance costs.

     Net Income (Loss).  Our net loss was $10.6 million for fiscal year 2000,
compared to net income of $5.8 million for fiscal year 1999. The loss was caused
primarily by the extraordinary loss and the non-recurring severance payment.

     After-Tax Cash Flow.  After-tax cash flow was $19.7 million for fiscal year
2000, compared to $15.7 million for fiscal year 1999, an increase of $4.0
million or 25.5%. This increase was primarily attributable to the increase in
broadcast cash flow that exceeded the non-recurring severance payment, net of
tax benefit. Excluding the net non-recurring severance payment, after-tax cash
flow was $25.5 million for fiscal year 2000, an increase of $9.8 million or
62.4% compared to fiscal year 1999.

FISCAL YEAR 1999 COMPARED TO FISCAL YEAR 1998

     Net Revenues.  Our net revenues were $97.4 million for fiscal year 1999,
compared to $76.1 million for fiscal year 1998, an increase of $21.3 million or
28.0%. The increase in net revenues, from a percentage standpoint, was mostly
attributable to the Chicago and New York market stations where our net revenues
increased 30.7% and 27.2%, respectively, due to high ratings, robust local
economies and increased advertising rates. All of the markets in which we
operate stations experienced strong increases in net revenues, including our Los
Angeles FM station where net revenue increased by 24.0%.

     Station Operating Expenses.  Total station operating expenses were $44.6
million for fiscal year 1999, compared to $39.5 million for fiscal year 1998, an
increase of $5.1 million or 12.9%. The higher station operating expenses were
caused mainly by the inclusion of the results of the recent acquisitions in San
Antonio and Puerto Rico as well as JuJu Media, Inc. accounting for $4.2 million
or 82.4% of the increase in station operating expenses. To a lesser extent, all
of our other radio stations experienced higher commissions and higher music
license fees associated with increased sales. Additionally, the New York market
had an increase in performance bonuses due to increased sales and broadcast cash
flow, and the Los Angeles market had an increase in salaries related to on-air
talent. This increase in operating expenses was offset by lower general and
administrative expenses due to improved collections.

     Broadcast Cash Flow.  Broadcast cash flow was $52.7 million for fiscal year
1999, compared to $36.6 million for fiscal year 1998, an increase of $16.1
million or 44.0%. This increase was attributable to strong revenue growth and
effective management of operating expenses. Our broadcast cash flow margin
increased to 54.2% for fiscal year 1999 compared to 48.1% for fiscal year 1998.

     Corporate Expenses.  Total corporate expenses were $10.6 million for fiscal
year 1999, compared to $6.9 million for fiscal year 1998, an increase of $3.7
million or 53.6%. The increase in corporate expenses resulted mainly from
performance bonuses paid to our executives, increases in the number of our
employees and increased travel and other corporate overhead expenses relating to
our expansion into new markets.

     EBITDA.  EBITDA was $42.1 million for fiscal year 1999, compared to $29.7
million for fiscal year 1998, an increase of $12.4 million or 41.8%. Our EBITDA
margin was 43.2% for fiscal year 1999, compared to
                                       26
<PAGE>   30

39.0% for fiscal year 1998. The increase in EBITDA and EBITDA margin was caused
by the increase in net revenues which was partially offset by the increase in
station operating expenses and corporate expenses.

     Depreciation and Amortization.  Depreciation and amortization expense was
$9.9 million for fiscal year 1999, compared to $8.9 million for fiscal year
1998, an increase of $1.0 million or 11.2%. The increase was related to an
increase in amortization costs as a result of the stations purchased in Puerto
Rico, WCMA-FM, WMEG-FM and WEGM-FM and the purchase of 80% of the stock of JuJu
Media, Inc.

     Operating Income.  Operating income was $32.2 million for fiscal year 1999,
compared to $20.9 million for fiscal year 1998, an increase of $11.3 million or
54.1%. The increase was due to the increase in net revenues, partially offset by
the increase in operating expenses.

     Interest Expense, Net.  Interest expense was $21.2 million for fiscal year
1999, compared to $20.9 million for fiscal year 1998, an increase of $0.3
million or 1.4%. This increase was caused by lower interest income in fiscal
year 1999 related to lower cash balances in fiscal year 1999.

     Other Income (Expense).  We had other expenses of $0.7 million for fiscal
year 1999, compared to other income of $36.0 million for fiscal year 1998. The
other expenses in 1999 resulted primarily from an additional write-down of owned
vacant real estate in the Los Angeles area and the Nuestra Telefonica
receivable. The other income in 1998 was the result of a gain on the sale of our
AM stations during fiscal year 1998.

     Net Income.  Our net income was $5.8 million for fiscal year 1999, compared
to $18.8 million for fiscal year 1998, a decrease of $13.0 million or 69.1%. The
decrease was caused by the absence of the gain on the sale of our AM stations.

     After-Tax Cash Flow.  After-tax cash flow was $15.7 million for fiscal year
1999, compared to $7.5 million for fiscal year 1998, an increase of $8.2 million
or 109.3%. This increase was primarily attributable to an increase in EBITDA,
offset by higher income taxes.

LIQUIDITY AND CAPITAL RESOURCES

     Our primary source of liquidity is cash on hand, cash provided by
operations and, to the extent necessary, undrawn commitments that are available
under the $150.0 million senior credit facility arranged by Lehman Brothers Inc.
in July 2000. The senior credit facility includes a six-year $25.0 million
revolving credit facility and $125.0 million multi-draw term loan facility.

     Our ability to increase our indebtedness is limited by the terms of the
credit agreement governing our senior credit facilities and the indenture
governing our senior subordinated notes. Additionally, the credit agreement and
indenture place restrictions on us with respect to the sale of assets, liens,
investments, dividends, debt repayments, capital expenditures, transactions with
affiliates and consolidations and mergers, among other things.

     Net cash flows provided by operating activities were $28.7 million, $20.8
million and $10.9 million for fiscal years 2000, 1999, and 1998, respectively.
Changes in our net cash flows from operating activities are primarily a result
of changes in advertising revenues and station operating expenses which are
affected by the acquisition and disposition of stations during those periods, as
well as changes in corporate expenses which included a non-recurring severance
payment of $10.2 million for the benefit of certain retiring executives in
fiscal year 2000.

     Net cash flows used in investing activities were $205.1 million and $38.4
million for fiscal years 2000 and 1999, respectively. Net cash flows provided by
investing activities was $41.5 million for fiscal year 1998. Changes in our net
cash flow from investing activities are primarily a result of the acquisition
and disposition of stations during those periods.

     Net cash flows provided by financing activities were $219.0 million, for
fiscal year 2000. Net cash flows used in financing activities were $3.1 million
and $17.8 million for fiscal years 1999 and 1998, respectively.

                                       27
<PAGE>   31

Changes in our net cash flows from financing are primarily a result of
redemption of and proceeds from notes and preferred stock and proceeds from our
initial public offering of Class A Common Stock and from senior credit
facilities.

     For fiscal year 2000, total capital expenditures were $3.8 million. These
expenditures were financed by funds from operations.

     Management believes that cash from operating activities, together with cash
on hand, should be sufficient to permit us to meet our obligations in the
foreseeable future, including: (1) required significant cash interest payments
pursuant to the terms of the senior subordinated notes due 2009, (2) operating
obligations and (3) capital expenditures. Assumptions (none of which can be
assured) that underlie management's belief, include:

     - the economic conditions within the radio broadcasting market and economic
       conditions in general will not deteriorate in any material respect;

     - we will continue to successfully implement our business strategy;

     - we will not incur any material unforeseen liabilities, including
       environmental liabilities; and

     - no future acquisitions will adversely affect our liquidity.

     We continuously review, and are currently reviewing, opportunities to
acquire additional radio stations, primarily in the largest Hispanic markets in
the United States. We engage in discussions regarding potential acquisitions
from time to time in the ordinary course of business. On November 10, 2000, we
completed the purchase of all the outstanding capital stock of Rodriguez
Communications, Inc. and the purchase of radio station KTCY-FM, serving the
Dallas, Texas market, from New World Broadcasters Corp. ("New World") for total
consideration of $164.3 million, consisting of $42.6 million of SBS Class A
Common Stock and $121.7 million in cash.

     The purchase of RCI includes the acquisition of the following radio
stations: KMJR-FM (formerly KFOX-FM) and KNJR-FM (formerly KREA-FM)
broadcasting, on a co-channeled basis, at 93.5 MHz serving the Los Angeles,
California market; KXJO-FM broadcasting at 92.7 MHz serving the San Francisco,
California market; and KSAH-AM broadcasting at 720 kHz serving the San Antonio,
Texas market.

     On May 8, 2000 we entered into a stock purchase agreement with New World
and 910 Broadcasting Corp., a wholly-owned subsidiary of New World, to acquire
all of the outstanding capital stock of 910 Broadcasting Corp. which owns and
operates radio station KXEB-AM serving the Dallas, Texas market. We have not yet
closed the purchase of all the outstanding capital stock of 910 Broadcasting
Corp. FCC approval is pending for this transaction, and we cannot assure you
that the acquisition will occur. We began operating radio station KXEB-AM on May
8, 2000 under a time brokerage agreement with New World and 910 Broadcasting
Corp., which will continue until the closing of the purchase of all the
outstanding capital stock of 910 Broadcasting Corp.

     On November 2, 2000 we entered into an asset purchase agreement with
International Church of the Four Square Gospel to purchase radio station KFSG-FM
in Los Angeles, California at a purchase price of $250.0 million. In connection
with this acquisition, we made an initial deposit of $5.0 million toward the
purchase price. The agreement contains customary representations and warranties,
and the closing of our acquisition is subject to the satisfaction of certain
customary conditions, including receipt of regulatory approval from the FCC. The
agreement may be terminated by us or by the seller if the closing does not occur
by December 31, 2001.

     We have no other written understandings, letters of intent or contracts to
acquire radio stations or other companies. We expect to fund the acquisition of
radio station KFSG-FM by increasing our senior credit facility, accessing the
high yield capital market and undertaking certain potential dispositions.
However, there can be no assurance that financing from any of these sources, if
available, can be obtained on favorable terms.

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<PAGE>   32

YEAR 2000 ISSUE

     To date, no material interruptions to our operations have occurred as a
result of the year 2000 issue. The greatest threat to our ability to continue
broadcasting due to year 2000 issues comes from the utilities which we depend
on. To date, we are not aware of any external utility vendor with a year 2000
issue that has materially impacted our results of operations, liquidity, or
capital resources. While we believe our efforts provide reasonable assurance
that material disruptions will not occur due to internal or vendor failure, the
possibility of interruption still exists.

     In 1999 we performed various analysis of potential problems related to the
year 2000 issue. Internally, we bear some risks in the following areas: computer
hardware and software for our accounting and administrative functions,
computer-controlled programming of music and the transmission of our signals.
Externally, we are at risk, like most companies, of losing power and phone
lines. As of December 20, 2000, we spent $0.1 million to upgrade/replace
non-compliant systems and equipment.

NEW ACCOUNTING PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133 "Accounting for Derivative
Instruments and Hedging Activities" (SFAS No. 133). SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities.
It requires an entity to recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at fair value.
SFAS No. 133, as amended by SFAS No. 137, is expected to be effective for our
fiscal year ending September 30, 2001. Management does not believe that the
adoption of SFAS No. 133 will have a significant impact on our consolidated
financial statements.

     In November 1999, the Emerging Issues Task Force ("EITF") of the FASB
issued EITF 99-17, "Accounting for Advertising Barter Transactions", which
provides guidance on barter transactions that involve nonmonetary exchanges of
advertising. EITF 99-17 requires an entity to account for barter advertising
revenues and expenses at the determinable fair value of the advertising
surrendered or received in the exchange, or at book value if the fair value can
not be determined within reasonable limits. The adoption of EITF 99-17 did not
have a significant impact on our consolidated financial statements.

     In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition", which provides
guidance on the recognition, presentation and disclosure of revenue in financial
statements filed with the SEC. SAB 101 outlines the basic criteria that must be
met in order to recognize revenue and provides guidance for disclosures related
to revenue recognition policies. In June 2000, the SEC issued SAB 101B, "Second
Amendment: Revenue Recognition in Financial Statements" which extends the
effective date of SAB 101 to the fourth fiscal quarter of fiscal years
commencing after December 15, 1999. At this time, management is still assessing
the impact of SAB 101 on our financial position and results of operations.

     In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities (A
Replacement of SFAS No. 125)". SFAS No. 140 provides guidance on accounting for
(1) securitization transactions involving financial assets; (2) sales of
financial assets (including loan participations); (3) factoring transactions;
(4) wash sales; (5) servicing assets and liabilities; (6) collateralized
borrowing arrangements; (7) securities lending transactions; (8) repurchase
agreements; and (9) extinguishment of liabilities. While most of the provisions
of SFAS No. 140 will become effective for transactions entered into after March
31, 2001, companies with calendar fiscal year ends that hold beneficial
interests from previous securitizations will be required to make additional
disclosures in their December 31, 2000 financial statements. Management does not
believe that the adoption of SFAS No. 140 will have a significant impact on our
consolidated financial statements.

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<PAGE>   33

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We believe that inflation has not had a material impact on the results of
operations for each of our fiscal years in the three-year period ended September
24, 2000. However, there can be no assurance that future inflation would not
have an adverse impact on our operating results and financial condition.

     We are not subject to currency fluctuations since we do not have any
international operations other than Puerto Rico where the currency is the U.S.
dollar. We have limited market risk exposure since we do not have any
outstanding variable rate debt or derivative financial and commodity instruments
as of December 20, 2000. Our financial instruments outstanding at September 24,
2000 with market risk are our 9 5/8% Senior Subordinated Notes due 2009 and our
12 1/2% Senior Notes due 2002 of which only an aggregate principal amount of
$100,000 remains outstanding.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The information called for by this Item 8 is included in Item 14, under
"Financial Statements" and "Financial Statement Schedule" appearing at the end
of this annual report on Form 10-K.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

     There have been no changes in or disagreements between us and our
accountants on accounting or financial disclosure during our two most recent
fiscal years or any subsequent interim period.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The following table sets forth the names, ages and positions of the
directors, executive officers and certain key employees of SBS as of September
24, 2000. Each of our directors and officers serves until his successor is
elected and qualifies.

<TABLE>
<CAPTION>
NAME                             AGE                         POSITION WITH SBS
----                             ---                         -----------------
<S>                              <C>  <C>
Raul Alarcon, Jr. .............   44  Chairman of the Board of Directors, Chief Executive Officer and
                                      President
Pablo Raul Alarcon, Sr. .......   74  Chairman Emeritus and Director
Jose Grimalt...................   72  Secretary Emeritus and Director
Joseph A. Garcia...............   55  Chief Financial Officer, Executive Vice President and Secretary
Luis Diaz-Albertini............   49  Vice President/Group Sales
Jesus Salas....................   25  Vice President of Programming
Roman Martinez IV..............   52  Director
Jason L. Shrinsky..............   63  Director
William Tanner.................   56  Executive Vice President of Programming
Juan A. Garcia.................   33  Vice President of Finance and Strategic Planning
</TABLE>

     RAUL ALARCON, JR. has been President and a director since October 1985 and
Chief Executive Officer since June 1994. On November 2, 1999, Mr. Alarcon, Jr.
became Chairman of the Board of Directors and continues as our Chief Executive
Officer and President. Mr. Alarcon, Jr. joined SBS as a sales manager in 1983.
Mr. Alarcon, Jr. is responsible for our long-range strategic planning and was
instrumental in the acquisition and financing of each of our radio stations as
well as our initial public offering. Mr. Alarcon, Jr. is the son of Mr. Alarcon,
Sr. and the son-in-law of Mr. Grimalt.

     PABLO RAUL ALARCON, SR. was our Chairman of the Board of Directors from
March 1983 until November 2, 1999, when he became Chairman Emeritus. Mr.
Alarcon, Sr. continues to be a member of our

                                       30
<PAGE>   34

board of directors. Mr. Alarcon, Sr. has been involved in Spanish-language radio
broadcasting for much of his life. He started his broadcasting career in Cuba in
the early 1950's when he established a radio station chain in Camaguey, Cuba.
Upon his arrival in the United States, Mr. Alarcon, Sr. continued his career in
radio broadcasting and was an on-air personality for a New York radio station
before being promoted to programming director. Mr. Alarcon, Sr. subsequently
owned and operated a recording studio and an advertising agency. In 1983, he
purchased our first radio station. Mr. Alarcon, Sr. is Raul Alarcon, Jr.'s
father.

     JOSE GRIMALT has been a member of our board of directors and Secretary
since 1986. On November 2, 1999, Mr. Grimalt became Secretary Emeritus. From
1969 to 1986, Mr. Grimalt owned and operated Spanish-language station WLVH-FM in
Hartford, Connecticut. In 1984, Mr. Grimalt became a stockholder and the
President of SBS's California subsidiary which operated KXMG-AM in Los Angeles.
Mr. Grimalt is Mr. Alarcon, Jr.'s father-in-law.

     JOSEPH A. GARCIA has been Chief Financial Officer since 1994, Executive
Vice President since 1996 and Secretary since November 2, 1999. Before joining
SBS in 1984, Mr. Garcia spent thirteen years in financial positions with Philip
Morris and Revlon, where he was Manager of Financial Planning for
Revlon -- Latin America.

     JESUS SALAS has been the Vice President of Programming since April 1998. He
joined SBS in March 1997 as the Programming Director for our Miami stations.
Prior to joining us he worked for New Age Broadcasting, Inc., where he began his
career in November 1993 as a disc jockey and was eventually promoted to
programming director.

     LUIS DIAZ-ALBERTINI has been the Vice President/Group Sales since September
1998. He began his employment with SBS as the General Manager of WLEY-FM in
Chicago in March 1997. Prior to joining us, Mr. Diaz-Albertini's experience
included being VP/General Manager of the four stations located in Miami for
Hispanic Broadcasting Corporation (formerly Heftel Broadcasting Corporation).
Mr. Diaz-Albertini has worked in the broadcasting industry for 27 years.

     ROMAN MARTINEZ IV became one of our directors on November 2, 1999. Mr.
Martinez is a Managing Director for the investment banking firm of Lehman
Brothers Inc. where he has held this title since 1978. Mr. Martinez has been an
investment banker advising corporations on financings, mergers and acquisitions
and related financial matters since 1971. Mr. Martinez sits on the Board of
Governors of New York Presbyterian Healthcare System, Inc. and on the Board of
Directors of the International Rescue Committee. Lehman Brothers Inc. acts and
has acted as financial advisor to us in connection with our financings and one
of our acquisitions in fiscal year 2000. An affiliate of Lehman Brothers Inc.,
Lehman Commercial Paper Inc., acted as administrative agent in connection with
our senior credit facilities. See "Item 13. Certain Relationships and Related
Transactions."

     JASON L. SHRINSKY became one of our directors on November 2, 1999. Mr.
Shrinsky is a partner of the law firm of Kaye, Scholer, Fierman, Hays & Handler,
LLP, where he has been a partner since 1986. Mr. Shrinsky has been a lawyer
counseling corporations and high net worth individuals on financings, mergers
and acquisitions, other related financial transactions and regulatory procedures
since 1964. Kaye, Scholer, Fierman, Hays & Handler, LLP has served as our
counsel for more than 16 years. See "Item 13. Certain Relationships and Related
Transactions."

     JUAN A. GARCIA served as Vice President of Finance and Strategic Planning
from February 1, 2000 to November 24, 2000. Prior to joining us, Mr. Garcia
worked as an investment banker at Lehman Brothers Inc. where he began as an
associate in September 1995 and became Vice President in 1999.

     WILLIAM TANNER has served as our Executive Vice President of Programming
since September 1, 2000. Prior to joining us Mr. Tanner was the Vice President
of Programming at Hispanic Broadcasting Corporation for six years.

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<PAGE>   35

COMMITTEES OF THE BOARD OF DIRECTORS

     Our board of directors maintains an Audit Committee whose members are Roman
Martinez IV and Jason L. Shrinsky.

     Our board of directors also maintains a Compensation Committee, whose
members consist of Raul Alarcon, Jr., Roman Martinez IV and Jason L. Shrinsky.
Mr. Alarcon, Jr. is our Chairman of the Board, Chief Executive Officer and
President. The Compensation Committee met on November 13, 2000 to review certain
compensation items for fiscal years 2000 and 2001. Arrangements for our key
employees for fiscal year 2000 were determined prior to the creation of the
Compensation Committee, which was organized after the completion of our initial
public offering on November 2, 1999. See "Certain Relationships and Related
Transactions."

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers and persons who own more than 10%
of a registered class of the Company's equity securities (collectively,
"Reporting Persons") to file reports of ownership and changes in ownership of
the Company's securities with the SEC. Reporting Persons are required by the SEC
to furnish the Company with copies of all Section 16(a) forms they file.

     Based solely on its review of the copies of such forms received or written
representations from the Reporting Persons, the Company believes that with
respect to the fiscal year ended September 24, 2000, all the Reporting Persons
complied with all applicable filing requirements, except that: (1) on November
8, 1999, Luis Diaz-Albertini filed a Form 3 due on October 27, 1999 to report
his ownership of options to purchase shares of the Company's Class A Common
Stock; (2) on January 10, 2000, Mr. Diaz-Albertini filed a Form 4 due on
November 10, 1999 to report his purchase of shares of the Company's Class A
Common Stock; (3) on January 9, 2001, Mr. Diaz-Albertini filed an amended Form 4
for October 1999 to report his ownership of options to purchase shares of the
Company's Class A Common Stock and to correct the reported vesting schedule for
such options reported on his Form 3 filed on November 8, 1999; (4) on January 9,
2001, Mr. Diaz-Albertini filed an amended Form 3 to redact his prior report of
ownership of options to purchase shares of the Company's Class A Common Stock
reported on Form 3 filed on November 8, 1999; (5) on January 19, 2001, Jason L.
Shrinsky filed an amended Form 3, to amend his Form 3 filed on November 12,
1999, to report his ownership of 15,000 shares of the Company's Class A Common
Stock which he owns jointly with his spouse and to correct the reported vesting
schedule for his options to purchase shares of the Company's Class A Common
Stock; (6) on January 10, 2001, William Tanner filed a Form 3 due on September
10, 2000; and (7) on January 10, 2001, William Tanner filed a Form 4 due on
September 10, 2000 to report, among other transactions, his ownership of options
to purchase 218,552 shares of the Company's Class A Common Stock which were not
granted by the Compensation Committee of the Board of Directors until January
2001, but which Mr. Tanner was entitled to receive as of August 31, 2000,
pursuant to his employment agreement.

                                       32
<PAGE>   36

ITEM 11.  EXECUTIVE COMPENSATION

     The following table sets forth all compensation awarded to, earned by or
paid for services rendered to SBS and its subsidiaries, in all capacities during
the fiscal years 2000, 1999 and 1998, by our Chief Executive Officer and
President and our next four highest paid executive officers at September 24,
2000, whose total annual salary and bonus exceeded $100,000. On November 2,
1999, Mr. Alarcon, Sr. ceased being a salaried executive of SBS and retired
effective December 31, 1999. He remains as a member of our board of directors.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                                     LONG TERM
                                                                                                   COMPENSATION
                                                                                                      AWARDS
                                                                                                  ---------------
                                                                                                    SECURITIES
                                                                                 OTHER ANNUAL       UNDERLYING
NAME                   PRINCIPAL POSITION    YEAR   SALARY ($)    BONUS ($)    COMPENSATION ($)   OPTIONS/SARS(#)
----                   -------------------   ----   ----------    ----------   ----------------   ---------------
<S>                    <C>                   <C>    <C>           <C>          <C>                <C>
Raul Alarcon, Jr.....  Chief Executive       2000   $1,000,000    $1,000,000       $201,829(1)        100,000
                       Officer, President    1999    1,985,768     1,265,857        202,452(1)             --
                       and Chairman of the   1998    1,633,743(2)    215,000         63,624(1)             --
                       Board of Directors
Joseph A. Garcia.....  Executive Vice        2000      300,000       150,000               (3)        250,000
                       President, Chief      1999      296,298       385,000               (3)             --
                       Financial Officer     1998      266,346        27,500               (3)             --
                       and Secretary
Luis
  Diaz-Albertini.....  Vice President/       2000      225,000        80,000               (7)         50,000
                       Group Sales           1999      225,053       210,000               (3)             --
                                             1998      200,000        25,000               (3)             --
Juan A. Garcia(4)....  Vice President of     2000      136,500        70,000               (3)        100,000
                       Finance and           1999           --            --             --                --
                       Strategic Planning    1998           --            --             --                --
Pablo Raul Alarcon, Sr. Director (formerly   2000      124,923(5)         --         56,955(6)             --
                       Chairman of the       1999      481,846(5)    362,368         59,291(6)             --
                       Board of Directors)   1998      492,577(2)     25,000         50,745(6)             --
</TABLE>

---------------
(1) Excludes amounts paid by us in connection with our lease of an apartment in
    Manhattan owned by Mr. Alarcon, Jr. which is used primarily by Mr. Alarcon,
    Jr. while on SBS business in New York. Mr. Alarcon, Jr. received personal
    benefits in addition to his salary and bonus, including use of automobiles.
    We paid an aggregate of $85,329, $96,512 and $62,691 in each of 2000, 1999
    and 1998, respectively, for automobiles used, including driver's salary, by
    Mr. Alarcon, Jr. In fiscal year 2000, Mr. Alarcon, Jr. received total
    personal benefits estimated at $201,829, including living quarters for the
    Raul Alarcon, Jr. family pending completion of the construction of their
    family home in Miami, Florida. As a result of Mr. Alarcon, Jr.'s relocation
    to his newly constructed home, our last rent payment for his apartment in
    Key Biscayne was made on November 30, 2000.

(2) Excludes the payment of a dividend to our stockholders in 1998, of which Mr.
    Alarcon, Jr. received $3.1 million and Mr. Alarcon, Sr. received $0.2
    million. Excludes reimbursement of Mr. Alarcon, Jr.'s relocation expenses
    incurred in connection with the relocation of our headquarters. See "Certain
    Relationships and Related Transactions."

(3) Excludes perquisites and other personal benefits, securities or property
    which aggregate the lesser of $50,000 or 10% of the total of annual salary
    and bonus.

(4) Juan A. Garcia served as our Vice President of Finance and Strategic
    Planning from February 1, 2000 to November 24, 2000.

(5) Mr. Alarcon, Sr. received compensation as an officer of SBS through December
    31, 1999. He is also entitled to reimbursement of his out-of-pocket expenses
    as a member of the board of directors. Pursuant to his retirement agreement,
    upon completion of our initial public offering on November 2, 1999, we
    purchased an annuity for his retirement which became effective on January 2,
    2000. See "Employment Agreements and Arrangements."

                                       33
<PAGE>   37

(6) In addition to his salary and bonus, Mr. Alarcon, Sr. received personal
    benefits including the use of automobiles. We paid an aggregate of $56,955,
    $57,451 and $49,812 in each of 2000, 1999 and 1998, respectively, for
    automobiles used by Mr. Alarcon, Sr., including driver's salary.

(7) Excludes a $50,000 loan made by SBS to Mr. Diaz-Albertini which is to be
    repaid over two years with amounts withheld from Mr. Diaz-Albertini's
    salary. The loan is subject to forgiveness if Mr. Diaz-Albertini meets
    certain sales targets.

STOCK OPTIONS

     The following table sets forth information concerning the grant of stock
options to each of the named executive officers in fiscal year 2000:

                     OPTION/SAR GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
                                                   INDIVIDUAL GRANTS                            POTENTIAL REALIZABLE
                            ----------------------------------------------------------------   VALUE AT ASSUMED ANNUAL
                              NUMBER OF     PERCENT OF TOTAL                                    RATES OF STOCK PRICE
                             SECURITIES       OPTIONS/SARS                                        APPRECIATION FOR
                             UNDERLYING        GRANTED TO      EXERCISE OR                           OPTION TERM
                            OPTIONS/SARS      EMPLOYEES IN     BASE PRICE                      -----------------------
NAME                        GRANTED(#)(1)   FISCAL YEAR 2000     ($/SH)      EXPIRATION DATE     5%($)        10%($)
----                        -------------   ----------------   -----------   ---------------   ----------   ----------
<S>                         <C>             <C>                <C>           <C>               <C>          <C>
Raul Alarcon, Jr..........     100,000(2)          6.3%         $  20.00        10/27/04       $1,257,789   $3,187,485
Joseph A. Garcia..........     250,000            15.7          $  20.00        10/27/09        3,144,473    7,968,712
Luis Diaz-Albertini.......      50,000             3.1          $  20.00        10/27/09          628,895    1,593,742
Juan A. Garcia............     100,000(3)          6.3          $20.8125        02/16/10        1,308,887    3,316,976
Pablo Raul Alarcon,
  Sr. ....................          --              --                --              --               --           --
</TABLE>

---------------
(1) Each option was granted under our 1999 Stock Option Plan and, other than as
    noted in footnote (2) or (3), vests 20% immediately, and 20% on the
    anniversary date of the completion of our initial public offering on
    November 2, 1999 for the following four consecutive years. The options that
    are not otherwise exercisable prior to a change in control of the Company
    shall become exercisable on the date of a change in control of the Company
    and shall remain exercisable for the remainder of the term of the option, as
    discussed in the Company's 1999 Stock Option Plan.

(2) Raul Alarcon, Jr.'s options vested immediately and became exercisable upon
    completion of our initial public offering on November 2, 1999.

(3) Juan A. Garcia served as our Vice President of Finance and Strategic
    Planning from February 1, 2000 to November 24, 2000. Of Mr. Juan A. Garcia's
    options, 10,000 vested on February 16, 2000, and became immediately
    exercisable and the remainder were forfeited upon the termination of his
    employment with the Company on November 24, 2000.

                                       34
<PAGE>   38

     The following table sets forth certain information regarding stock options
exercised by the named executive officers during the fiscal year ended September
24, 2000, including the aggregate value of gains on the date of exercise. In
addition, the table sets forth the number of shares covered by both exercisable
and nonexercisable stock options as of September 24, 2000. Also reported are the
values of "in the money" options which represent the positive spread between the
exercise price of any existing stock options and the Class A Common Stock price
as of September 24, 2000.

                 AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL
                  YEAR AND FISCAL YEAR END OPTIONS/SAR VALUES

<TABLE>
<CAPTION>
                                                                    NUMBER OF SECURITIES           VALUE OF UNEXERCISED
                                                                   UNDERLYING UNEXERCISED              IN-THE-MONEY
                                                                      OPTIONS/ SARS AT            OPTIONS AT FISCAL YEAR
                                                                     FISCAL YEAR END (#)                  END ($)
                           SHARES ACQUIRED        VALUE         -----------------------------   ---------------------------
NAME                       ON EXERCISE (#)     REALIZED ($)     EXERCISABLE    UNEXERCISABLE    EXERCISABLE   UNEXERCISABLE
----                       ---------------   ----------------   -----------   ---------------   -----------   -------------
<S>                        <C>               <C>                <C>           <C>               <C>           <C>
Raul Alarcon, Jr.........           --             --             100,000               0               --             --
Joseph A. Garcia.........           --             --              50,000         200,000               --             --
Luis Diaz-Albertini......           --             --              10,000          40,000               --             --
Juan A. Garcia...........           --             --              10,000          90,000*              --             --
Pablo Raul Alarcon,
  Sr. ...................           --             --                  --              --               --             --
</TABLE>

     *Upon the termination of Mr. Juan A. Garcia's employment with SBS on
November 24, 2000, Mr. Garcia's unexercisable options to purchase 90,000 Shares
of Class A Common Stock were forfeited.

DIRECTOR COMPENSATION

     Directors who are officers or who were formerly officers do not receive any
compensation for serving on our board of directors. Our non-employee directors
are eligible to receive options under our Non-Employee Director Stock Option
Plan. All directors are reimbursed for their out-of-pocket expenses incurred in
connection with their service as directors.

     In connection with their election to the board of directors on November 2,
1999, we granted each of Messrs. Roman Martinez IV and Jason L. Shrinsky options
for 50,000 shares of Class A Common Stock exercisable at the public offering
price, of which, options for 10,000 shares vested immediately, options for
10,000 shares vested on November 2, 2000 and the rest will vest ratably over the
next three years. Mr. Shrinsky holds his options for the benefit of his law
firm, Kaye, Scholer, Fierman, Hays & Handler, LLP. See "Stock
Plans -- Non-Employee Director Stock Option Plan."

     Arnold Sheiffer, who served as a director from 1996 until August 1999,
received a cash payment of $250,000, which was accrued in fiscal year 1999, and
was granted options to purchase 250,000 shares of Class A Common Stock
exercisable at $20.00 per share, which vested on November 2, 1999, for his past
services as a director.

EMPLOYMENT AGREEMENTS AND ARRANGEMENTS

  Raul Alarcon, Jr.

     We have an employment agreement with Raul Alarcon, Jr. dated as of October
25, 1999, pursuant to which Mr. Alarcon, Jr. serves as our Chairman of the Board
of Directors, Chief Executive Officer and President. The agreement became
effective on October 27, 1999, expires on December 31, 2004 and renews for
successive one-year periods after December 31, 2004, unless notice of
termination is delivered by either party 90 days prior to the termination date.
The agreement provides for a base salary of not less than $1.0 million for each
year of the employment term, which may be increased by the board of directors.
Under the terms of the agreement, Mr. Alarcon, Jr. will be paid an annual cash
performance bonus determined by the board of directors based on annual same
station broadcast cash flow growth. Mr. Alarcon, Jr. has the right to receive
options to purchase 100,000 shares of Class A Common Stock each year of
employment. The initial grant of options to purchase 100,000 shares was made on
October 27, 1999 and vested on November 2, 1999 at

                                       35
<PAGE>   39

an exercise price equal to $20.00 per share. The additional grants will be made
on each anniversary of October 27, 1999 at an exercise price equal to the then
fair market value of our Class A Common Stock. Mr. Alarcon, Jr. is also entitled
to participate in our employee benefit plans and to receive other non-salary
benefits, such as health insurance, life insurance, reimbursement for business
related expenses and reimbursement for personal tax and accounting expenses. The
agreement provides that Mr. Alarcon, Jr.'s employment may be terminated at the
election of the board of directors upon his disability or for cause (as defined
in the agreement). Pursuant to the agreement, Mr. Alarcon, Jr. is entitled to
the use of one automobile and driver at our expense.

  Joseph A. Garcia

     During fiscal year 2000, we had an employment agreement with Joseph A.
Garcia dated as of October 25, 1999, pursuant to which Mr. Garcia served as our
Chief Financial Officer, Executive Vice President and Secretary. This employment
agreement became effective on October 27, 1999, was to terminate on October 27,
2002 and was to automatically renew for successive one-year periods after
October 27, 2002, unless notice of termination was delivered by either party
within 90 days prior to the termination date or any succeeding October 27. Mr.
Garcia received an annual base salary of $300,000 which could be increased by
the board of directors. In addition, Mr. Garcia was entitled to receive (a) an
annual cash bonus to be determined by the board of directors, based on
performance, and (b) options to purchase 250,000 shares of Class A Common Stock,
at an exercise price equal to $20.00 per share, for past performance. The
options were granted on October 27, 1999, with options to purchase 50,000 shares
vesting on November 2, 1999 and the remaining options to purchase 200,000 shares
to vest ratably over the ensuing four-year period. Mr. Garcia was also entitled
to receive standard employee benefits provided to all of our executives, such as
health, life and long-term disability insurance and reimbursement for business
related expenses.

     On December 7, 2000, we entered into a new employment agreement with Mr.
Garcia pursuant to which he continues to serve as our Chief Financial Officer,
Executive Vice President and Secretary. This new employment agreement became
effective as of December 7, 2000 and has similar terms to his employment
agreement signed in fiscal year 2000 including a discretionary bonus, except
that the new employment agreement has a term expiring December 7, 2005 (with a
similar automatic renewal as the October 25, 1999 employment agreement) and
provides for an annual base salary of $400,000. Under his new agreement Mr.
Garcia is entitled to receive options to purchase 100,000 shares of common stock
at an exercise price equal to the closing price on the Nasdaq National Market on
December 7, 2000. Options to purchase 20,000 shares vested on December 7, 2000
and the remaining options will vest ratably over the next four years.

  Luis Diaz-Albertini

     We have an employment agreement with Luis Diaz-Albertini dated as of
October 25, 1999, pursuant to which Mr. Diaz-Albertini serves as our Vice
President/Group Sales. The employment agreement became effective on October 27,
1999, terminates on October 27, 2002 and automatically renews for successive
one-year periods after October 27, 2002, unless notice of termination is
delivered by either party within 90 days prior to the termination date or any
succeeding October 27. Mr. Diaz-Albertini receives an annual salary of $225,000
which may be increased by the board of directors. In addition, Mr.
Diaz-Albertini is entitled to receive (a) an annual cash bonus to be determined
by the board of directors, based on performance, and (b) options to purchase
50,000 shares of Class A Common Stock for past performance. The options were
granted on October 27, 1999, with options to purchase 10,000 shares vesting on
November 2, 1999 at an exercise price equal to $20.00 per share and options to
purchase 40,000 shares to vest ratably over a four-year period. Mr.
Diaz-Albertini is also entitled to receive standard employee benefits provided
to all of our executives, such as health, life and long-term disability
insurance and reimbursement for business related expenses.

  Juan A. Garcia

     We had an employment agreement with Juan A. Garcia during fiscal year 2000
pursuant to which Mr. Garcia served as our Vice President of Finance and
Strategic Planning. This employment agreement became effective on February 16,
2000, was to terminate on February 16, 2003 and automatically renew for

                                       36
<PAGE>   40

successive one-year periods after February 16, 2003, unless notice of
termination was delivered by either party within 90 days prior to the
termination date or any succeeding February 16. Mr. Garcia received an annual
base salary of $210,000 which could be increased by the board of directors. In
addition, Mr. Garcia was entitled to receive (a) an annual cash bonus based on
SBS meeting projected consolidated broadcast cash flow for each fiscal year, and
(b) options to purchase 100,000 shares of Class A Common Stock with an exercise
price of $20.8125 per share. The options were granted effective as of February
16, 2000 with options to purchase 10,000 shares vesting on February 16, 2000,
options to purchase 10,000 shares to vest on February 16, 2001 and options to
purchase 20,000 shares to vest on each of the next four anniversaries of
February 16, 2001. Mr. Garcia was also entitled to receive standard employee
benefits provided to all of our executives. Mr. Garcia's employment with us
terminated on November 24, 2000, at which time his unvested options were
forfeited.

ANNUITY

     Upon the completion of our initial public offering on November 2, 1999, we
purchased an annuity from The Canada Life Assurance Company as a retirement
vehicle for the benefit of Messrs. Alarcon, Sr. and Grimalt for $10.2 million.
Messrs. Alarcon, Sr. and Grimalt will receive annual payments of approximately
$700,000 and $300,000, respectively, for the rest of their lives. Mr. Alarcon,
Sr.'s wife and Mr. Grimalt's wife are joint annuitants with their husbands.
Should Mrs. Alarcon, Sr. or Mrs. Grimalt survive their husbands, they would
receive annual payments of $350,000 and $150,000, respectively, for the rest of
their lives.

STOCK PLANS

  1999 Stock Option Plan

     We adopted an option plan to incentivize our present and future executive,
managerial and other employees through equity ownership. The option plan
provides for the granting of stock options to individuals selected by the
compensation committee of the board of directors (or by the board if such
committee is not appointed). An aggregate of 3,000,000 shares of Class A Common
Stock have been reserved for issuance under this option plan. The option plan
allows us to tailor incentive compensation for the retention of personnel, to
support corporate and business objectives, and to anticipate and respond to a
changing business environment and competitive compensation practices. As of
September 24, 2000, options to purchase 1,593,552 shares of Class A Common Stock
have been granted under this plan at exercise prices ranging from $10.00 to
$24.63 per share.

     The compensation committee, or such other committees as the board of
directors shall determine, has discretion to select the participants, to
determine the type, size and terms of each award, to modify the terms of awards,
to determine when awards will be granted and paid, and to make all other
determinations which it deems necessary or desirable in the interpretation and
administration of the option plan. The option plan terminates ten years from the
date that it was approved and adopted by the stockholders of SBS. Generally, a
participant's rights and interest under the option plan are not transferable
except by will or by the laws of descent and distribution.

     Options, which include non-qualified stock options and incentive stock
options, are rights to purchase a specified number of shares of Class A Common
Stock at a price fixed by the compensation committee. The option price may be
less than, equal to or greater than the fair market value of the underlying
shares of Class A Common Stock, but in no event will the exercise price of an
incentive stock option be less than the fair market value on the date of grant.

     Options will expire no later than ten years after the date on which they
are granted (five years in the case of incentive stock options granted to 10%
stockholders). Options will become exercisable at such times and in such
installments as the compensation committee or other designated committee shall
determine. Notwithstanding this, any nonexercisable options shall immediately
vest and become exercisable upon a change in control of SBS. Upon termination of
a participant's employment with SBS, options that are not exercisable will be
forfeited immediately and options that are exercisable will remain exercisable
for twelve months following any termination by reason of an optionholder's
death, disability or retirement. If termination is for any other reason other
than cause, exercisable options will remain exercisable for three months
following such

                                       37
<PAGE>   41

termination. Payment of the option price must be made in full at the time of
exercise in such form (including, but not limited to, cash or common stock of
SBS) as the compensation committee may determine.

     In the event of a reorganization, recapitalization, stock split, stock
dividend, combination of shares, merger, consolidation, distribution of assets,
or any other change in the corporate structure of shares of SBS, the
compensation committee will have the discretion to make any adjustments it deems
appropriate in the number and kind of shares reserved for issuance upon the
exercise of options and vesting of grants under the option plan and in the
exercise price of outstanding options.

  Non-Employee Director Stock Option Plan

     We also adopted a separate option plan for our non-employee directors. The
terms of the plan provide that the board of directors has the discretion to
grant stock options to any non-employee director. An aggregate of 300,000 shares
of Class A Common Stock have been reserved for issuance under this option plan.
The plan is administered by the board of directors. In connection with their
election as directors, on November 2, 1999, we granted each of Messrs. Shrinsky
and Martinez an option under this plan to purchase 50,000 shares of Class A
Common Stock exercisable at $20.00 per share. Of these options to purchase
50,000 shares, options to purchase 10,000 shares vested immediately and options
to purchase 10,000 shares vested on November 2, 2000. Options to purchase 10,000
shares vest each year over the next three years on the anniversary of the grant
so long as Messrs. Shrinsky and Martinez remain directors. Mr. Shrinsky holds
his options for the benefit of his law firm, Kaye, Scholer, Fierman, Hays &
Handler, LLP. Any non-exercisable options shall immediately vest and become
exercisable upon a change in control of SBS. If a non-employee director's
service as a director is terminated for any reason, all options held by the
non-employee director which have not then vested shall terminate automatically.

401(k) PLAN

     We offer a tax-qualified employee savings and retirement plan (the "401(k)
Plan") covering our employees. Pursuant to the 401(k) Plan, an employee may
elect to reduce his annual salary by 1%-15%, not to exceed the statutorily
prescribed annual limit which is $10,500 for 2000, and have the amount of such
reduction contributed to the 401(k) Plan. We may, at our option and in our sole
discretion, make matching and/or profit sharing contributions to the 401(k) Plan
on behalf of all participants. The 401(k) Plan is intended to qualify under
Section 401(a) of the Internal Revenue Code so that contributions by employees
or by us to the 401(k) Plan and income earned on plan contributions are not
taxable to employees until distributed to them and contributions by us will be
deductible by us when, and if, made. The trustees under the 401(k) Plan, at the
direction of each participant, invest such participant's assets in the 401(k)
Plan in selected investment options.

LIMITATIONS ON DIRECTORS' AND OFFICERS' LIABILITY

     Our third amended and restated certificate of incorporation has a provision
which limits the liability of directors to us to the maximum extent permitted by
Delaware law. The third amended and restated certificate of incorporation
specifies that our directors will not be personally liable for monetary damages
for breach of fiduciary duty as a director. This limitation does not apply to
actions by a director or officer that do not meet the standards of conduct which
make it permissible under the Delaware General Corporation Law for SBS to
indemnify directors or officers.

     Our amended and restated by-laws provide for indemnification of directors
and officers (and others) in the manner, under the circumstances and to the
fullest extent permitted by the Delaware General Corporation Law, which
generally authorizes indemnification as to all expenses incurred or imposed as a
result of actions, suits or proceedings if the indemnified parties act in good
faith and in a manner they reasonably believe to be in or not opposed to the
best interests of SBS. Each director has entered into an indemnification
agreement with us that provides for indemnification to the fullest extent
provided by law. We believe that these provisions are necessary or useful to
attract and retain qualified persons as directors and officers.

                                       38
<PAGE>   42

     We have obtained insurance for the benefit of our directors and officers
that provides for coverage of up to $100.0 million.

     There is no pending litigation or proceeding involving a director or
officer as to which indemnification is being sought.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     Our board of directors maintains a Compensation Committee, whose members
consist of Raul Alarcon, Jr., Roman Martinez IV and Jason L. Shrinsky. Mr.
Alarcon, Jr. is our Chairman of the Board, Chief Executive Officer and
President. Roman Martinez IV and Jason L. Shrinsky are directors. The
Compensation Committee met on November 13, 2000 to review certain compensation
items for fiscal years 2000 and 2001. Arrangements for our key employees for
fiscal year 2000 were determined prior to the creation of the Compensation
Committee, which was organized after the completion of our initial public
offering on November 2, 1999. See "Item 13. Certain Relationships and Related
Transactions."

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth information concerning the beneficial
ownership of our Class A Common Stock and our Class B Common Stock as of
December 20, 2000, by:

     - each person known by us to beneficially own more than 5% of any class of
       common stock;

     - each director and each executive officer named in the Summary
       Compensation Table; and

     - all named executive officers and directors as a group.

Unless indicated below, each stockholder listed had sole voting and sole
investment power with respect to all shares beneficially owned, subject to
community property laws, if applicable.

<TABLE>
<CAPTION>
                                                  CLASS A SHARES                 CLASS B SHARES
                                         --------------------------------   ------------------------   PERCENT OF   PERCENT OF
                                                               PERCENT OF                 PERCENT OF     TOTAL        TOTAL
                                         NUMBER OF              CLASS A     NUMBER OF      CLASS B      ECONOMIC      VOTING
NAME AND ADDRESS(1)(2)                     SHARES                SHARES       SHARES        SHARES      INTEREST      POWER
----------------------                   ----------            ----------   ----------    ----------   ----------   ----------
<S>                                      <C>                   <C>          <C>           <C>          <C>          <C>
Raul Alarcon, Jr.......................     200,000(3)               *      26,156,750       94.1%        40.8%        83.1%
Pablo Raul Alarcon, Sr.................          --                  0%      1,070,000(15)    3.85%       1.65%         3.4%
Joseph A. Garcia.......................     130,000(3)               *              0%          0%           *            *
Juan A. Garcia.........................      18,000(3)(4)            *              --          0%           *            *
Luis Diaz-Albertini....................      35,470(3)               *              --          0%           *            *
Roman Martinez IV......................      20,000(16)              *              --          0%           *            *
Jason L. Shrinsky......................      35,000(3)(5)            *              --          0%           *            *
All named executive officers and
  directors as a group.................     438,470(3)             1.2%     27,226,750       97.9%        42.8%        86.6%
The Marcos and Sonya Rodriguez Family
  Trust(7).............................   2,958,844                8.0%             --          0%        4.57%           *
Massachusetts Financial Services
  Company(9)(14).......................   2,038,370(13)           5.53%             --          0%        3.15%           *
Putnam Investments, Inc.(10)(12).......   3,695,000               10.0%             --          0%        5.71%        1.17%
TCW Group Inc. (11)(14)................   2,496,800                6.8%             --          0%        3.86%           *
James L. Anderson(8)...................   3,445,586(6)             9.3%             --          0%        5.32%         1.1%
</TABLE>

---------------
 *  Indicates less than 1%.

(1) The address of all directors and executive officers in this table, unless
    otherwise specified, is c/o Spanish Broadcasting System, Inc., 2601 South
    Bayshore Drive, Coconut Grove, Florida 33133.

(2) As used in this table, "beneficial ownership" means the sole or shared power
    to vote or direct the voting of a security, or the sole or shared power to
    dispose, or direct the disposition, of a security. A person is deemed as of
    any date to have beneficial ownership of any security that the person has
    the right to acquire

                                       39
<PAGE>   43

    within 60 days after that date. For purposes of computing the percentage of
    outstanding shares held by each person named above, any security that the
    person has the right to acquire within 60 days of the date of calculation is
    deemed to be outstanding, but is not deemed to be outstanding for purposes
    of computing the percentage ownership of any other person.

 (3) Includes Class A Common Stock issuable upon the exercise of options that
     the holder has the right to exercise within sixty days of the date of this
     report.

 (4) Includes 4,500 shares owned indirectly through Fraga Incorporated Profit
     Sharing Plan, an incentive plan of Fraga, Inc., a Florida subchapter S
     corporation (Mr. Juan A. Garcia shares voting and investment power relating
     to such shares with his brother, David R. Garcia), 2,750 shares owned
     jointly with Mr. Juan A. Garcia's spouse (Mr. Juan A. Garcia shares voting
     and investment power relating to such shares with his spouse) and 750
     shares owned by Mr. Juan A. Garcia's spouse (Mr. Juan A. Garcia shares
     voting and investment power relating to such shares with his spouse).

 (5) Mr. Shrinsky holds options to purchase 20,000 shares of Class A Common
     Stock for the benefit of his law firm, Kaye, Scholer, Fierman, Hays &
     Handler, LLP. Mr. Shrinsky shares ownership of, and voting and investment
     power for, 15,000 shares of Class A Common Stock with his spouse.

 (6) James L. Anderson has sole voting power and sole dispositive power with
     respect to 2,961,494 shares and shared voting power with respect to 484,092
     shares.

     The Marcos and Sonya Rodriguez Family Trust has the right to receive
     dividends relating to and the proceeds from the sale of 2,958,844 shares of
     the Company's Class A Common Stock for which Mr. Anderson has sole voting
     and dispositive power resulting from his serving as Trustee of such trust.

     A company of which Mr. Anderson is president has the right to receive
     dividends relating to and the proceeds from the sale of 484,092 shares of
     the Company's Class A Common Stock for which Mr. Anderson has shared voting
     power.

 (7) The address of The Marcos and Sonya Rodriguez Family Trust is 8828 North
     Stemmons Freeway, Suite 106, Dallas, Texas 75247.

 (8) The address of James L. Anderson is 8828 North Stemmons Freeway, Suite 106,
     Dallas, Texas 75247.

 (9) The address of the Massachusetts Financial Services Company is 500 Boylston
     Street, Boston, MA 02116.

(10) The address of Putnam Investments, Inc. is One Post Office Square, Boston,
     MA 02109.

(11) The address of the TCW Group Inc. is 865 South Figueroa Street, Los
     Angeles, CA 90017.

(12) Putnam Investments, Inc. ("Putnam") is a wholly-owned subsidiary of Marsh &
     McLennan Companies, Inc. Putnam wholly owns two registered investment
     advisers: Putnam Investment Management, Inc., which is the investment
     adviser to the Putnam family of mutual funds and The Putnam Advisory
     Company, Inc., ("PAC"), which is the investment adviser to Putnam's
     institutional clients. Both subsidiaries have dispository power over the
     shares as investment managers, but each of the mutual fund's trustees have
     voting power over the shares held by each fund, and The Putnam Advisory
     Company, Inc. has shared voting power over the shares held by the
     institutional clients.

     Putnam and PAC have shared voting power with respect to 192,273 shares.

(13) The Massachusetts Financial Services Company has sole voting power with
     respect to 1,946,545 shares.

(14) We obtained this information from Form 13F filed November 1, 2000.

(15) Mr. Pablo Raul Alarcon, Sr.'s shares are held in a Flint Trust with Mr.
     Alarcon, Sr. as sole beneficiary.

(16) Class A Common Stock issuable upon the exercise of options that Mr.
     Martinez has the right to exercise within sixty days of the date of this
     report.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Upon the completion of our initial public offering on November 2, 1999, we
purchased an annuity for $10.2 million from The Canada Life Assurance Company as
a retirement vehicle for the benefit of Mr. Alarcon, Sr., our Chairman Emeritus
and a member of our board of directors, and Mr. Grimalt, our

                                       40
<PAGE>   44

Secretary Emeritus and a member of our board of directors. Messrs. Alarcon, Sr.
and Grimalt will receive annual payments of approximately $0.7 million and $0.3
million, respectively, for the rest of their lives. Mr. Alarcon, Sr.'s wife and
Mr. Grimalt's wife are joint annuitants with their husbands. Should Mrs.
Alarcon, Sr. or Mrs. Grimalt survive their husbands, they would receive annual
payments of $350,000 and $150,000, respectively, for the rest of their lives.

     On February 2, 2000, SBS completed the sale of WVMQ-FM in Key West, Florida
and WZMQ-FM in Key Largo, Florida to South Broadcasting System, Inc., a company
owned by Mr. Pablo Raul Alarcon, Sr., our Chairman Emeritus and a member of our
board of directors, for total cash consideration of $0.7 million.

     We lease a two-bedroom furnished condominium apartment in midtown Manhattan
from Mr. Alarcon, Jr., our Chief Executive Officer, President and Chairman of
the Board of Directors, for a monthly rent of $9,000. The lease commenced in
August 1987 and will expire in August 2007. During fiscal years 1999 and 1998,
we renovated the apartment and incurred approximately $0.2 million in renovation
expenses. We made no renovations in fiscal year 2000. Generally, the apartment
is used by Mr. Alarcon, Jr. while on SBS business in New York. We believe that
the lease for this apartment is at the market rate.

     For the year ended September 26, 1999, SBS paid operating expenses
aggregating $0.1 million for a boat owned by CMQ Radio, an entity owned equally
by Messrs. Alarcon, Sr. and Alarcon, Jr. The boat was used by SBS for business
entertainment. For the year ended September 26, 1999, the amount paid by SBS for
our use of the boat owned by CMQ Radio was comparable to amounts we would have
paid had we leased the boat from an unaffiliated party. In November 1999, we
discontinued our arrangement with respect to this boat. We have not made any
further payments to CMQ Radio, Inc.

     Effective July 1993, Messrs. Alarcon, Sr. and Alarcon, Jr. executed
promissory notes to SBS for the principal amounts of $0.5 million and $1.6
million, respectively. These promissory notes evidenced loans made by SBS to
Messrs. Alarcon, Sr. and Alarcon, Jr. over several prior years. The notes were
to mature in 2001 and bore interest at the rate of 6% percent per annum until
July 19, 1994 and after that at the lesser of 9% percent per annum or the prime
rate charged by the Chase Manhattan Bank, N.A. Interest on the unpaid principal
amount of the notes was payable annually. In December 1995, SBS exchanged these
promissory notes for amended and restated notes in the principal amounts of $0.6
million and $1.9 million due from Messrs. Alarcon, Sr. and Alarcon, Jr.,
respectively. The amended and restated notes bore interest at the rate of 6.36%
per annum, and mature on December 30, 2025, and the interest was payable in 30
equal annual installments of $43,570 and $143,158, respectively, on December
30th of each year starting December 30, 1996. As of September 26, 1999, $0.6
million and $1.9 million, plus accrued and unpaid interest of $0.1 million and
$0.4 million to date, was outstanding, respectively, on these promissory notes.
Upon completion of our initial public offering, Messrs. Alarcon, Sr. and
Alarcon, Jr. paid all remaining amounts outstanding under these notes.

     In 1992, Messrs. Alarcon, Sr. and Alarcon, Jr. acquired a building in Coral
Gables, Florida, for the purpose of housing the studios of WCMQ-AM and WCMQ-FM.
In June 1992, Spanish Broadcasting System of Florida, Inc., a subsidiary of SBS,
entered into a 20-year net lease with Messrs. Alarcon, Sr. and Alarcon, Jr. for
the Coral Gables building which provides for a base monthly rent of $9,000.
Effective June 1, 1998, the lease on this building was assigned to SBS Realty
Corp., a realty management company owned by Messrs. Alarcon, Sr. and Alarcon,
Jr. This building currently houses the offices and studios of all of our Miami
stations. The lease on the stations' previous studios expired in October 1993,
was for less than half the space of the stations' present studios and had a
monthly rental of approximately $7,500. Based upon our prior lease for studio
space, we believe that the lease for the current studio is at market rates.

     In 1992, Mr. Alarcon, Jr. and other investors organized Nuestra Telefonica,
Inc., a New York corporation, to operate long distance telephone service in
Spanish aimed at the Hispanic population in the markets served by our radio
stations. In February 1993, Nuestra Telefonica entered into an access agreement
with a common carrier and commenced operations. Nuestra Telefonica advertised
its Spanish-language long distance telephone service on our radio stations in
Los Angeles and New York and purchased this air time at standard station rates.
Since early 1994, Nuestra Telefonica has not utilized any air time on our radio
stations. As of September 26, 1999 Nuestra Telefonica owed SBS $0.4 million
related to unpaid air time and $0.3 million related to certain expenses paid by
SBS on Nuestra Telefonica's behalf. The amounts due were

                                       41
<PAGE>   45

recorded on our books as a receivable and due from related party asset,
respectively. Mr. Alarcon, Jr. personally guaranteed the payment of $0.5 million
of Nuestra Telefonica's obligations to SBS. Mr. Alarcon, Jr. is Nuestra
Telefonica's Chairman and majority shareholder. Joseph A. Garcia, our Executive
Vice President and Chief Financial Officer and Secretary, is Nuestra
Telefonica's President and a minority shareholder. Nuestra Telefonica is no
longer an operating entity and, therefore, upon the completion of our initial
public offering on November 2, 1999, we forgave the loans and canceled the
guarantees described above. The unreserved portion of these receivables was
written-off by SBS at September 26, 1999 and is included in our financial
statements for the year ended September 26, 1999 under the line item "Other
income (expense), net".

     Mr. Grimalt's son is employed by SBS as an operations manager. He was paid
$129,419 and a bonus of $5,000 for the fiscal year ended September 24, 2000. As
part of his compensation, we also paid the leasing costs for an automobile in
the amount of $8,028. Mr. Alarcon, Jr.'s uncle is currently employed by us as an
operations manager and his salary is $76,500.

     Roman Martinez IV, one of our directors, is a Managing Director for Lehman
Brothers Inc. which acts and acted as financial advisor to us in connection with
our financings and one of our acquisitions in fiscal year 2000. Jason L.
Shrinsky, one of our directors, is a partner of Kaye, Scholer, Fierman, Hays &
Handler, LLP, which firm has regularly represented us as our legal counsel and
will continue to do so. See "Item 10. Directors and Executive Officers of the
Registrant -- Committees of the Board of Directors." and "Item 12. Security
Ownership of Certain Beneficial Owners and Management."

     On November 30, 2000, we loaned Luis Diaz-Albertini, our Vice
President/Group Sales, $50,000 which is to be repaid over two years with amounts
withheld from Mr. Diaz-Albertini's salary. The loan is subject to forgiveness if
Mr. Diaz-Albertini meets certain sales targets.

     Our new corporate headquarters is located on one floor of a 21-story office
building in Coconut Grove, Florida owned by Irradio Holdings Ltd., a Florida
limited partnership, for which the general partner is Irradio Investments, Inc.,
a Florida subchapter S corporation wholly-owned by Mr. Alarcon, Jr. As of
November 1, 2000, we are leasing our office space under a 10-year lease, with
the right to renew for two consecutive five-year terms. We believe the monthly
rent we pay for our new office space is below market rate.

                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

  (a)1. Financial Statements

     The following financial statements have been filed as required by Item 8 of
this report:

        Independent Auditors' Report

        Consolidated Balance Sheets as of September 26, 1999 and September 24,
        2000

        Consolidated Statements of Operations for each of the fiscal years in
        the three-year period ended September 24, 2000

        Consolidated Statements of Changes in Stockholders' Equity (Deficiency)
        for each of the fiscal years in the three-year period ended September
        24, 2000

        Consolidated Statements of Cash Flows for each of the fiscal years in
        the three-year period ended September 24, 2000

        Notes to Consolidated Financial Statements

     2. Financial Statement Schedule

     The following financial statement schedule has been filed as required by
Item 8 of this report:

        Financial Statement Schedule -- Valuation and Qualifying Accounts

                                       42
<PAGE>   46

                       SPANISH BROADCASTING SYSTEM, INC.
                                AND SUBSIDIARIES

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Independent Auditors' Report................................  F-2
Consolidated Balance Sheets as of September 26, 1999 and
  September 24, 2000........................................  F-3
Consolidated Statements of Operations for each of the fiscal
  years in the three-year period ended September 24, 2000...  F-4
Consolidated Statements of Changes in Stockholders' Equity
  (Deficiency) for each of the fiscal years in the
  three-year period ended September 24, 2000................  F-5
Consolidated Statements of Cash Flows for each of the fiscal
  years in the three-year period ended September 24, 2000...  F-6
Notes to Consolidated Financial Statements..................  F-8
Financial Statement Schedule -- Valuation and Qualifying
  Accounts..................................................  F-31
</TABLE>

                                       F-1
<PAGE>   47

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Spanish Broadcasting System, Inc.:

We have audited the consolidated financial statements of Spanish Broadcasting
System, Inc. and subsidiaries as listed in the accompanying index. In connection
with our audits of the consolidated financial statements, we have also audited
the financial statement schedule as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Spanish Broadcasting
System, Inc. and subsidiaries as of September 26, 1999 and September 24, 2000,
and the results of their operations and their cash flows for each of the fiscal
years in the three-year period ended September 24, 2000, in conformity with
accounting principles generally accepted in the United States of America. Also,
in our opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.

/s/  KPMG LLP

Miami, Florida
December 8, 2000

                                       F-2
<PAGE>   48

                       SPANISH BROADCASTING SYSTEM, INC.
                                AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                   SEPTEMBER 26, 1999 AND SEPTEMBER 24, 2000

<TABLE>
<CAPTION>
                                                              SEPTEMBER 26,    SEPTEMBER 24,
                                                                  1999             2000
                                                              -------------    -------------
<S>                                                           <C>              <C>
ASSETS
Current assets:
  Cash and cash equivalents.................................  $ 16,974,650       59,558,929
  Receivables:
    Trade...................................................    26,006,007       30,986,110
    Barter..................................................     2,260,217        2,360,184
                                                              ------------     ------------
                                                                28,266,224       33,346,294
Less allowance for doubtful accounts........................     6,365,959        8,082,275
                                                              ------------     ------------
      Net receivables.......................................    21,900,265       25,264,019
Other current assets........................................     2,194,387        3,862,182
                                                              ------------     ------------
        Total current assets................................    41,069,302       88,685,130
Property and equipment, net.................................    14,777,703       21,675,239
Intangible assets, net of accumulated amortization of
  $35,654,956 in 1999 and $46,280,239 in 2000...............   301,454,059      513,357,655
Deferred financing costs, net of accumulated amortization of
  $5,815,931 in 1999 and $910,897 in 2000...................     6,228,716       10,794,733
Deferred offering costs.....................................     1,965,551               --
Other assets................................................       185,190          178,066
                                                              ------------     ------------
                                                              $365,680,521      634,690,823
                                                              ============     ============
LIABILITIES AND STOCKHOLDERS' (DEFICIENCY) EQUITY
Current liabilities:
  Current portion of other long-term debt...................  $  1,800,572          171,262
  Accounts payable and accrued expenses.....................    11,831,145       13,984,267
  Accrued interest..........................................     3,941,088       11,032,889
  Deferred commitment fee...................................     2,348,931        2,158,850
  Dividends payable.........................................     1,323,018               --
                                                              ------------     ------------
        Total current liabilities...........................    21,244,754       27,347,268
12 1/2% Senior unsecured notes due 2002, net of unamortized
  discount of $1,630,076 in 1999 and $0 in 2000.............    92,262,924          100,000
11% Senior unsecured notes due 2004.........................    75,000,000               --
9 5/8% Senior subordinated notes due 2009...................            --      235,000,000
Senior credit facilities term loan due 2006.................            --       65,000,000
Other long-term debt, less current portion..................     3,422,341        4,392,302
Deferred income taxes.......................................    12,954,515       28,386,169
Redeemable Preferred Stock:
  14 1/4% Series A Senior Exchangeable Preferred Stock, $.01
    par value. Authorized 1,000,000 shares, issued and
    outstanding 245,815 shares (liquidation value
    $245,815,000) in 1999 and none outstanding in 2000......   235,918,055               --
Stockholders' (deficiency) equity:
  Class A common stock, $.0001 par value. Authorized
    100,000,000 shares; none issued and outstanding in 1999;
    32,399,760 shares issued and outstanding in 2000........            --            3,240
  Class B common stock, $.0001 par value. Authorized
    50,000,000 shares; issued and outstanding 39,448,550
    shares in 1999 and 27,816,900 shares in 2000............         3,945            2,782
  Additional paid-in capital................................     6,869,241      392,972,851
  Accumulated deficit.......................................   (79,535,846)    (118,513,789)
                                                              ------------     ------------
                                                               (72,662,660)     274,465,084
  Less loans receivable from stockholders...................    (2,459,408)              --
                                                              ------------     ------------
        Total stockholders' (deficiency) equity.............   (75,122,068)     274,465,084
                                                              ------------     ------------
Commitments and contingencies (notes 14, 15, 18 and 19)
                                                              $365,680,521      634,690,823
                                                              ============     ============
</TABLE>

          See accompanying notes to consolidated financial statements.
                                       F-3
<PAGE>   49

                       SPANISH BROADCASTING SYSTEM, INC.
                                AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     FISCAL YEARS ENDED SEPTEMBER 27, 1998,
                   SEPTEMBER 26, 1999 AND SEPTEMBER 24, 2000

<TABLE>
<CAPTION>
                                                                    FISCAL YEARS
                                                     -------------------------------------------
                                                         1998            1999           2000
                                                     ------------    ------------    -----------
<S>                                                  <C>             <C>             <C>
Gross revenues.....................................  $ 86,766,158    111,233,463     141,468,330
Less agency commissions............................    10,623,062     13,882,877      18,799,915
                                                     ------------    -----------     -----------
       Net revenues................................    76,143,096     97,350,586     122,668,415
                                                     ------------    -----------     -----------
Operating expenses:
  Engineering......................................     1,924,744      2,222,605       2,509,325
  Programming......................................     8,462,258     10,120,338      14,982,656
  Selling..........................................    18,574,529     22,015,346      25,829,058
  General and administrative.......................    10,558,965     10,260,931      14,234,399
  Corporate expenses...............................     6,892,705     10,636,435      20,730,382
  Depreciation and amortization....................     8,876,876      9,905,574      13,125,734
                                                     ------------    -----------     -----------
                                                       55,290,077     65,161,229      91,411,554
                                                     ------------    -----------     -----------
     Operating income..............................    20,853,019     32,189,357      31,256,861
Other income (expense):
  Interest expense, net............................   (20,860,210)   (21,178,164)    (19,495,083)
  Other, net.......................................      (213,239)      (748,898)       (356,894)
  Gain on sale of stations.........................    36,241,947             --          54,963
                                                     ------------    -----------     -----------
     Income before income taxes and extraordinary
       item........................................    36,021,517     10,262,295      11,459,847
Income tax expense.................................    15,624,032      4,444,919       4,914,479
                                                     ------------    -----------     -----------
Income before extraordinary item...................    20,397,485      5,817,376       6,545,368
Extraordinary item -- loss on extinguishment of
  debt, net of income taxes of $1,075,149 in 1998
  and $11,433,945 in 2000..........................    (1,612,723)            --     (17,150,918)
                                                     ------------    -----------     -----------
       Net income (loss)...........................  $ 18,784,762      5,817,376     (10,605,550)
                                                     ============    ===========     ===========
Net loss applicable to common stockholders [note
  2(n)]............................................  $(11,484,845)   (28,931,410)    (38,977,943)
                                                     ============    ===========     ===========
Basic and diluted loss per common share:
  Net loss per common share before extraordinary
     item..........................................  $      (0.33)         (0.86)          (0.38)
  Net loss per common share for extraordinary
     item..........................................         (0.05)            --           (0.29)
                                                     ------------    -----------     -----------
  Net loss per common share........................  $      (0.38)         (0.86)          (0.67)
                                                     ============    ===========     ===========
  Weighted average common shares outstanding (basic
     and diluted)..................................    30,333,400     33,584,576      58,162,671
                                                     ============    ===========     ===========
</TABLE>

          See accompanying notes to consolidated financial statements.
                                       F-4
<PAGE>   50

                       SPANISH BROADCASTING SYSTEM, INC.
                                AND SUBSIDIARIES

    CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' (DEFICIENCY) EQUITY
                     FISCAL YEARS ENDED SEPTEMBER 27, 1998,
                   SEPTEMBER 26, 1999 AND SEPTEMBER 24, 2000
<TABLE>
<CAPTION>
                                                                CLASS A                CLASS B
                                                              COMMON STOCK          COMMON STOCK
                                                          --------------------   -------------------   ADDITIONAL
                                                            NUMBER       PAR       NUMBER      PAR       PAID-IN     ACCUMULATED
                                                          OF SHARES     VALUE    OF SHARES    VALUE      CAPITAL       DEFICIT
                                                          ----------   -------   ----------   ------   -----------   ------------
<S>                                                       <C>          <C>       <C>          <C>      <C>           <C>
Balance at September 28, 1997...........................          --   $   --    30,333,400   $3,033     6,593,506    (35,119,184)
Preferred stock dividends...............................          --       --            --       --            --    (27,717,142)
Accretion of preferred stock............................          --       --            --       --            --     (2,552,465)
Decrease in loans receivable from stockholders..........          --       --            --       --            --             --
Cash dividends on common stock..........................          --       --            --       --            --     (3,726,579)
Issuance of warrants as dividends.......................          --       --            --       --       273,828       (273,828)
Net income..............................................          --       --            --       --            --     18,784,762
                                                          ----------   ------    ----------   ------   -----------   ------------
Balance at September 27, 1998...........................          --       --    30,333,400    3,033     6,867,334    (50,604,436)
Preferred stock dividends...............................          --       --            --       --            --    (31,755,475)
Accretion of preferred stock............................          --       --            --       --            --     (2,993,311)
Exercised warrants for common stock.....................          --       --     9,115,150      912         1,907             --
Net income..............................................          --       --            --       --            --      5,817,376
                                                          ----------   ------    ----------   ------   -----------   ------------
Balance at September 26, 1999...........................          --       --    39,448,550    3,945     6,869,241    (79,535,846)
                                                          ----------   ------    ----------   ------   -----------   ------------
Issuance of common stock for initial public offering,
  net of expenses.......................................  25,731,210    2,573    (4,963,100)    (496)  386,103,610             --
Conversion of Class B common stock to Class A common
  stock.................................................   6,668,550      667    (6,668,550)    (667)           --             --
Preferred stock dividends...............................          --       --            --       --            --    (18,475,448)
Accretion of preferred stock............................          --       --            --       --            --     (9,896,945)
Repayment of stockholder note receivable................          --       --            --       --            --             --
Net loss................................................          --       --            --       --            --    (10,605,550)
                                                          ----------   ------    ----------   ------   -----------   ------------
Balance at September 24, 2000...........................  32,399,760   $3,240    27,816,900   $2,782   392,972,851   (118,513,789)
                                                          ==========   ======    ==========   ======   ===========   ============

<CAPTION>

                                                          LESS: LOANS
                                                           RECEIVABLE        TOTAL
                                                              FROM       STOCKHOLDERS'
                                                          STOCKHOLDERS    DEFICIENCY
                                                          ------------   -------------
<S>                                                       <C>            <C>
Balance at September 28, 1997...........................   (3,524,466)    (32,047,111)
Preferred stock dividends...............................           --     (27,717,142)
Accretion of preferred stock............................           --      (2,552,465)
Decrease in loans receivable from stockholders..........       14,827          14,827
Cash dividends on common stock..........................    1,050,231      (2,676,348)
Issuance of warrants as dividends.......................           --              --
Net income..............................................           --      18,784,762
                                                           ----------     -----------
Balance at September 27, 1998...........................   (2,459,408)    (46,193,477)
Preferred stock dividends...............................           --     (31,755,475)
Accretion of preferred stock............................           --      (2,993,311)
Exercised warrants for common stock.....................           --           2,819
Net income..............................................           --       5,817,376
                                                           ----------     -----------
Balance at September 26, 1999...........................   (2,459,408)    (75,122,068)
                                                           ----------     -----------
Issuance of common stock for initial public offering,
  net of expenses.......................................           --     386,105,687
Conversion of Class B common stock to Class A common
  stock.................................................           --              --
Preferred stock dividends...............................           --     (18,475,448)
Accretion of preferred stock............................           --      (9,896,945)
Repayment of stockholder note receivable................    2,459,408       2,459,408
Net loss................................................           --     (10,605,550)
                                                           ----------     -----------
Balance at September 24, 2000...........................           --     274,465,084
                                                           ==========     ===========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       F-5
<PAGE>   51

                       SPANISH BROADCASTING SYSTEM, INC.
                                AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                     FISCAL YEARS ENDED SEPTEMBER 27, 1998,
                   SEPTEMBER 26, 1999 AND SEPTEMBER 24, 2000

<TABLE>
<CAPTION>
                                                                   FISCAL YEARS
                                                    -------------------------------------------
                                                        1998           1999            2000
                                                    ------------    -----------    ------------
<S>                                                 <C>             <C>            <C>
Cash flows from operating activities:
  Net income (loss)...............................  $ 18,784,762      5,817,376     (10,605,550)
                                                    ------------    -----------    ------------
  Adjustments to reconcile net income (loss) to
     net cash provided by operating activities:
     Loss on extinguishment of debt...............     2,687,872             --      28,584,863
     Gain on sale of radio stations...............   (36,241,947)            --         (54,963)
     Depreciation and amortization................     8,876,876      9,905,574      13,125,734
     Provision for doubtful accounts..............     2,634,509      1,670,438       4,077,047
     Amortization of debt discount................       658,297        594,459          61,295
     Amortization of deferred financing costs.....     1,555,016      1,601,594       1,068,912
     Write-down of fixed assets...................            --        451,048              --
     Write-off of amounts due from related
       party......................................            --        289,869              --
     Accretion of interest to principal on other
       long-term debt.............................       307,200        313,037         151,440
     Deferred income taxes........................    12,748,883      3,879,919      (6,769,466)
     Changes in operating assets and liabilities:
       Increase in receivables....................    (4,112,373)    (6,980,861)     (4,940,801)
       Increase in other current assets...........      (412,678)      (371,803)     (2,796,795)
       Decrease in other assets...................        80,483         24,111           7,124
       Increase (decrease) in accounts payable and
          accrued expenses........................     3,361,411      3,042,312        (138,448)
       (Decrease) increase in accrued interest....      (595,539)            --       7,091,801
       Increase (decrease) in deferred commitment
          fee.....................................       590,201        544,548        (190,081)
                                                    ------------    -----------    ------------
          Total adjustments.......................    (7,861,789)    14,964,245      39,277,662
                                                    ------------    -----------    ------------
          Net cash provided by operating
            activities............................    10,922,973     20,781,621      28,672,112
                                                    ------------    -----------    ------------
Cash flows from investing activities:
  Proceeds from sale of radio stations, net of
     disposal costs of $838,167 in 1998 and $9,696
     in 2000......................................    43,161,833             --         690,304
  Additions to property and equipment.............    (1,644,533)    (2,099,507)     (3,792,828)
  Acquisition of radio stations, net of cash
     acquired of $1,047,739 in 2000...............    (9,327,713)   (26,284,504)    (80,826,429)
  Advances on purchase price of radio stations....            --    (10,000,000)   (121,121,260)
                                                    ------------    -----------    ------------
          Net cash provided by (used in) investing
            activities............................    32,189,587    (38,384,011)   (205,050,213)
                                                    ------------    -----------    ------------
</TABLE>

          See accompanying notes to consolidated financial statements.
                                       F-6
<PAGE>   52

                       SPANISH BROADCASTING SYSTEM, INC.
                                AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                     FISCAL YEARS ENDED SEPTEMBER 27, 1998,
                   SEPTEMBER 26, 1999 AND SEPTEMBER 24, 2000

<TABLE>
<CAPTION>
                                                                   FISCAL YEARS
                                                    -------------------------------------------
                                                        1998           1999            2000
                                                    ------------    -----------    ------------
<S>                                                 <C>             <C>            <C>
Cash flows from financing activities:
  Dividends on common stock.......................  $ (2,676,348)            --              --
  Retirement of Senior unsecured notes............   (15,055,055)            --    (190,295,268)
  Retirement of Series A senior exchangable
     preferred stock..............................            --             --    (265,613,466)
  Proceeds from Class A common stock..............            --             --     388,071,238
  Exercise of warrants............................            --          2,819              --
  Repayments of debt, including accrued
     interest.....................................       (41,521)      (548,125)     (4,510,790)
  Proceeds from senior notes, net of financing
     costs of $8,503,260..........................            --             --     227,051,070
  Proceeds from senior credit facilities, net of
     financing costs of $3,199,812................            --             --      61,800,188
  Increase in deferred financing costs............            --       (554,330)             --
  Increase in deferred offering costs.............            --     (1,965,551)             --
  Repayments of loans receivable from
     stockholders.................................        14,827             --       2,459,408
                                                    ------------    -----------    ------------
       Net cash (used in) provided by financing
          activities..............................   (17,758,097)    (3,065,187)    218,962,380
                                                    ------------    -----------    ------------
       Net increase (decrease) in cash and cash
          equivalents.............................    25,354,463    (20,667,577)     42,584,279
Cash and cash equivalents at beginning of
  period..........................................    12,287,764     37,642,227      16,974,650
                                                    ------------    -----------    ------------
Cash and cash equivalents at end of period........  $ 37,642,227     16,974,650      59,558,929
                                                    ============    ===========    ============
Supplemental cash flow information:
  Interest paid during the period.................  $ 20,561,613     20,540,882      17,407,591
                                                    ============    ===========    ============
  Income taxes paid during the period.............  $  1,787,191      1,166,846       2,407,797
                                                    ============    ===========    ============
Noncash investing and financing activities:
  Dividends declared on preferred stock...........  $ 27,717,142     31,755,475              --
                                                    ============    ===========    ============
  Issuance of preferred stock as payment of
     preferred stock dividends....................  $(27,553,543)   (31,556,817)             --
                                                    ============    ===========    ============
  Issuance of warrants as payment of dividends....  $    273,828             --              --
                                                    ============    ===========    ============
  Issuance of note as payment towards purchase
     price of JuJu Media, Inc.....................  $         --      1,000,000              --
                                                    ============    ===========    ============
  Issuance of note as payment towards purchase
     price of building............................  $         --             --       3,700,000
                                                    ============    ===========    ============
  Deferred tax liability recorded for difference
     in assigned values and tax bases of radio
     stations acquired............................  $         --             --      22,201,120
                                                    ============    ===========    ============
  Repayment of stockholder loan and accrued
     interest through dividend withholding........  $  1,098,368             --              --
                                                    ============    ===========    ============
</TABLE>

          See accompanying notes to consolidated financial statements.
                                       F-7
<PAGE>   53

                       SPANISH BROADCASTING SYSTEM, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   SEPTEMBER 26, 1999 AND SEPTEMBER 24, 2000

(1) ORGANIZATION AND NATURE OF BUSINESS

     Spanish Broadcasting System, Inc., a Delaware corporation, and subsidiaries
(the "Company") owns and operates nineteen Spanish-language radio stations
serving the New York, Puerto Rico, Miami, Chicago, San Antonio and Los Angeles
markets through its subsidiaries, SBS of Greater New York, Inc., Spanish
Broadcasting System of Florida, Inc., Spanish Broadcasting System of California,
Inc., Spanish Broadcasting System of Greater Miami, Inc., Spanish Broadcasting
System of San Antonio, Inc., Spanish Broadcasting System of Illinois, Inc. and
Spanish Broadcasting System of Puerto Rico, Inc., a Puerto Rico corporation.
Additionally, the Company's other subsidiaries include Spanish Broadcasting
System, Inc., a New Jersey corporation, Spanish Broadcasting System of Puerto
Rico, Inc., a Delaware corporation, SBS Funding, Inc., a Delaware corporation,
JuJu Media, Inc., a New York corporation, Alarcon Holdings, Inc. ("Alarcon"),
Spanish Broadcasting System Network, Inc. ("SBS Network") and SBS Promotions,
Inc. ("SBS Promotions"). Alarcon owns and operates the building where the
Company's New York offices are located. SBS Network and SBS Promotions are
currently dormant. SBS Network was formerly the Company's exclusive agency
representative for national advertising sales. SBS Promotions formerly performed
promotional services for the Company's radio stations.

     Additionally, the Company operates six Spanish-language radio stations
serving the Dallas, San Antonio, Los Angeles, and San Francisco markets under
various time brokerage agreements (see note 3).

     The domestic broadcasting industry is subject to extensive federal
regulation which, among other things, requires approval by the Federal
Communications Commission ("FCC") for the issuance, renewal, transfer and
assignment of broadcasting station operating licenses and limits the number of
broadcasting properties the Company may acquire. The Company operates in the
domestic radio broadcasting industry which is subject to extensive and changing
regulation by the FCC.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RELATED MATTERS

  (a) Basis of Presentation

     The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany balances and transactions
have been eliminated in consolidation.

     Certain of the Company's subsidiaries (hereinafter referred to in this
paragraph collectively as "Subsidiary Guarantors") have guaranteed the Company's
senior notes referred to in note 8 on a joint and several basis. The Company has
not included separate financial statements of the Subsidiary Guarantors because
(i) all of the Subsidiary Guarantors are wholly owned subsidiaries of the
Company, and (ii) the guarantees issued by the Subsidiary Guarantors are full
and unconditional. The Company has not included separate parent-only financial
statements since the parent is a holding company with no independent assets or

                                       F-8
<PAGE>   54
                       SPANISH BROADCASTING SYSTEM, INC.
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

operations other than its investments in its subsidiaries. Condensed
consolidating unaudited financial information for the Company and its guarantor
and non-guarantor subsidiaries is as follows:

<TABLE>
<CAPTION>
                                        PARENT AND
                                        GUARANTOR      NON-GUARANTOR
CONDENSED CONSOLIDATING BALANCE SHEET  SUBSIDIARIES    SUBSIDIARIES     ELIMINATIONS        TOTAL
-------------------------------------  ------------    -------------    ------------    -------------
                                                          AS OF SEPTEMBER 24, 2000
                                       --------------------------------------------------------------
<S>                                    <C>             <C>              <C>             <C>
Cash and cash equivalents..........    $ 59,237,041         321,888               --       59,558,929
Receivables, net...................      23,718,499       1,545,520               --       25,264,019
Other current assets...............       3,315,263         546,919               --        3,862,182
                                       ------------    ------------     ------------    -------------
     Current assets................      86,270,803       2,414,327               --       88,685,130
Property and equipment, net........      14,183,896       7,491,343               --       21,675,239
Intangible assets, net.............     401,347,908     112,009,747               --      513,357,655
Deferred financing costs, net......      10,792,176           2,557               --       10,794,733
Investment in subsidiaries
  and intercompany.................      97,597,926      (2,905,659)     (94,692,267)              --
Other assets.......................         178,683            (617)              --          178,066
                                       ------------    ------------     ------------    -------------
     Total assets..................    $610,371,392     119,011,698      (94,692,267)     634,690,823
                                       ============    ============     ============    =============
Current portion of long-term debt...         53,805         117,457               --          171,262
Accounts payable and accrued
  expenses.........................      11,624,801       2,359,466               --       13,984,267
Accrued interest...................      11,032,889              --               --       11,032,889
Deferred commitment fee............       2,158,850              --               --        2,158,850
                                       ------------    ------------     ------------    -------------
  Current liabilities..............      24,870,345       2,476,923               --       27,347,268
Long-term debt.....................     300,937,384       3,554,918               --      304,492,302
Deferred income taxes..............       6,186,169      22,200,000               --       28,386,169
                                       ------------    ------------     ------------    -------------
     Total liabilities.............     331,993,898      28,231,841               --      360,225,739
Common stock.......................           6,022           1,000           (1,000)           6,022
Additional paid-in capital.........     392,972,851      94,691,267      (94,691,267)     392,972,851
Accumulated deficit................    (114,601,379)     (3,912,410)              --     (118,513,789)
                                       ------------    ------------     ------------    -------------
     Stockholders' equity..........     278,377,494      90,779,857      (94,692,267)     274,465,084
                                       ------------    ------------     ------------    -------------
     Total liabilities and
       stockholders' equity........    $610,371,392     119,011,698      (94,692,267)     634,690,823
                                       ============    ============     ============    =============
</TABLE>

                                       F-9
<PAGE>   55
                       SPANISH BROADCASTING SYSTEM, INC.
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
                                                  PARENT AND
                                                   GUARANTOR     NON-GUARANTOR
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS  SUBSIDIARIES    SUBSIDIARIES    ELIMINATIONS      TOTAL
-----------------------------------------------  -------------   -------------   ------------   ------------
                                                        FOR THE FISCAL YEAR ENDED SEPTEMBER 24, 2000
                                                 -----------------------------------------------------------
<S>                                              <C>             <C>             <C>            <C>
Net broadcasting revenues...................     $ 113,882,012     8,786,403         --          122,668,415
Station operating expenses..................        48,683,056     8,872,382         --           57,555,438
Corporate expenses..........................        20,730,382            --         --           20,730,382
Depreciation and amortization...............        10,138,825     2,986,909         --           13,125,734
                                                 -------------    ----------          --        ------------
     Operating income.......................        34,329,749    (3,072,888)        --           31,256,861
Interest income (expense), net..............       (19,433,521)      (61,562)        --          (19,495,083)
Other income (expense), net.................          (184,871)     (117,060)        --             (301,931)
Income tax expense (benefit)................         4,859,281        55,198         --            4,914,479
Extraordinary item, net of income taxes.....       (17,150,918)           --         --          (17,150,918)
                                                 -------------    ----------          --        ------------
     Net income (loss)......................     $  (7,298,842)   (3,306,708)        --          (10,605,550)
                                                 =============    ==========          ==        ============
</TABLE>

<TABLE>
<CAPTION>
                                                  PARENT AND
                                                   GUARANTOR     NON-GUARANTOR
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS  SUBSIDIARIES    SUBSIDIARIES    ELIMINATIONS      TOTAL
-----------------------------------------------  -------------   -------------   ------------   ------------
                                                        FOR THE FISCAL YEAR ENDED SEPTEMBER 24, 2000
                                                 -----------------------------------------------------------
<S>                                              <C>             <C>             <C>            <C>
Cash flows from operating activities........     $  26,750,856     1,921,256         --           28,672,112
                                                 =============    ==========          ==        ============
Cash flows from investing activities........     $(203,058,672)   (1,991,541)        --         (205,050,213)
                                                 =============    ==========          ==        ============
Cash flows from financing activities........     $ 218,122,649       839,731         --          218,962,380
                                                 =============    ==========          ==        ============
</TABLE>

     The Company's fiscal year is the 52-week or 53-week period which ends on
the last Sunday of September.

  (b) Revenue Recognition

     Revenues are recognized when advertisements are aired.

  (c) Property and Equipment

     Property and equipment are stated at cost. The Company depreciates the cost
of its property and equipment using the straight-line method over the respective
estimated useful lives. Leasehold improvements are amortized on a straight-line
basis over the shorter of the remaining life of the lease or the useful life of
the improvements.

  (d) Long-Lived Assets

     The Company follows the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of." SFAS No. 121 requires that
long-lived assets and certain identifiable intangibles to be held and used or
disposed of by an entity be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. See note 6 for impairment losses related to fixed assets.

                                      F-10
<PAGE>   56
                       SPANISH BROADCASTING SYSTEM, INC.
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  (e) Intangible Assets

     Intangible assets primarily represent the portion of the purchase price of
station acquisitions allocated to FCC licenses of those stations and are
amortized on a straight-line basis over 40 years, based on the industry practice
of renewing FCC licenses periodically, and other intangible assets, including
goodwill, which are being amortized on a straight-line basis over the respective
estimated useful lives. The Company periodically assesses the recoverability of
the carrying amount of intangible assets, including goodwill, as well as the
amortization period to determine whether current events or circumstances warrant
adjustments to the carrying value and/or revised estimates of useful lives. This
evaluation consists of the projection of undiscounted cash flows for each of the
Company's radio stations over the remaining amortization periods of the related
intangible assets. If such projections indicate that undiscounted cash flows are
not expected to be adequate to recover the carrying amounts of the related
intangible assets, a loss is recognized to the extent the carrying amount of the
asset exceeds its fair value. At this time, the Company believes that no
significant impairment of its intangible assets, including goodwill, has
occurred and that no reduction of the estimated useful lives is warranted. This
assessment will be impacted if such projections are not achieved.

  (f) Deferred Financing Costs

     Deferred financing costs relate to the refinancing of the Company's debt in
October 1999 (see note 8) and additional debt financing obtained in July 2000
(see note 10).

     Deferred financing costs are being amortized using a method which
approximates the effective-interest method over the respective lives of the
related indebtedness.

  (g) Barter Transactions

     Barter transactions represent advertising time exchanged for promotional
items, advertising, supplies, equipment and services. Revenues from barter
transactions are recognized as income when advertisements are broadcast.
Expenses are recognized when goods or services are received or used. The Company
records barter transactions at the fair value of goods or services received or
advertising surrendered, whichever is more readily determinable.

     During fiscal 2000, the Company entered into a barter transaction with an
Internet Service Provider ("ISP") whereby the ISP will provide a guaranteed
minimum of impressions to the Company on the ISP's networks over a two-year
period in exchange for advertising time on certain of the Company's stations,
with an aggregate fair value of $19.7 million at the date of the transaction.

     Unearned revenue related to this transaction consists of the excess of the
aggregate fair value of impressions delivered by the ISP, over the aggregate
fair value of advertising time delivered by the Company. The total amount of
unearned revenue related to this transaction at September 24, 2000 is $0.2
million, and is included in accounts payable and accrued expenses in the
accompanying consolidated balance sheets.

  (h) Cash Equivalents

     Cash equivalents, consisting primarily of interest-bearing money market
accounts and certificates of deposits which have an original maturity date of
less than three months, totaled approximately $17.0 million and $59.6 million at
September 26, 1999 and September 24, 2000, respectively.

  (i) Income Taxes

     The Company files a consolidated federal income tax return with its
subsidiaries. The Company accounts for income taxes under the asset and
liability method. Deferred tax assets and liabilities are recognized for the

                                      F-11
<PAGE>   57
                       SPANISH BROADCASTING SYSTEM, INC.
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

future tax consequences attributable to temporary differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.

  (j) Advertising Costs

     The Company incurs various marketing and promotional costs to add and
maintain listenership. These costs are charged to expense in the period
incurred.

  (k) Deferred Commitment Fee

     On December 30, 1996, the Company entered into an agreement with a national
advertising agency (the "Agency") whereby the Agency would serve as the
Company's exclusive sales representative for all national sales for a seven-year
period. Pursuant to this agreement, the Agency agreed to pay a commitment fee of
$5.1 million to the Company, of which $1.0 million was paid upon execution of
the agreement and $4.1 million was to be remitted on a monthly basis over a
three-year period, through January 2000. During fiscal year 2000, the Agency
revised its agreement with the Company to reduce the total commitment fee to
$5.0 million. The commitment fee is recognized on a straight-line basis over the
seven-year contractual term of the arrangement as a reduction of Agency
commissions. Deferred commitment fee represents the excess of payments received
from the Agency over the amount recognized.

  (l) Use of Estimates

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

  (m) Concentration of Risk

     All of the Company's business is conducted in the New York, Florida,
California, Illinois, Texas, and Puerto Rico markets. Net revenue earned from
radio stations in these markets as a percentage of total revenue for the fiscal
years ended September 27, 1998, September 26, 1999 and September 24, 2000 is as
follows:

<TABLE>
<CAPTION>
                                                          1998    1999    2000
                                                          ----    ----    ----
<S>                                                       <C>     <C>     <C>
New York................................................   44%     44%     40%
Florida.................................................   28%     24%     21%
California..............................................   17%     17%     12%
Illinois................................................   11%     11%     12%
Texas...................................................   --       2%      4%
Puerto Rico.............................................   --       2%     11%
                                                          ---     ---     ---
                                                          100%    100%    100%
                                                          ===     ===     ===
</TABLE>

     The increase in market concentration risk in Puerto Rico in fiscal 2000
results from the acquisitions of WCMA, WMEG, and WEGM in fiscal 1999 and
WIOA-FM, WIOB-FM, WIOC-FM, WCOM-FM, WZMT-FM, WZNT-FM, WOYE-FM, and WCTA-FM in
fiscal 2000 as discussed in note 3.

                                      F-12
<PAGE>   58
                       SPANISH BROADCASTING SYSTEM, INC.
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  (n) Basic and Diluted Net Loss Per Common Share

     The Company has presented net loss per common share pursuant to SFAS No.
128, "Earnings Per Share," and the Securities and Exchange Commission Staff
Accounting Bulletin No. 98.

     In accordance with Securities and Exchange Commission ("SEC") Staff
Accounting Bulletin No. 98, certain common stock and common stock equivalents
issued for nominal consideration prior to the initial filing of a registration
statement relating to an initial public offering are treated as outstanding for
the entire period. The Company had no nominal issuances during this period.

     Basic net loss per common share was computed by dividing net loss by the
weighted average number of shares of common stock outstanding for each period
presented. Diluted net loss per common share is computed by giving effect to
common stock equivalents as if they were outstanding for the entire period.
Common stock equivalents were not considered for the years presented since their
effect would be antidilutive. Common stock equivalents of 8,798,612 and 220,123
in fiscal 1998 and 2000, respectively, related to warrants outstanding (see note
9) and outstanding stock options (see note 13), respectively. There were no
common stock equivalents outstanding at September 26, 1999.

<TABLE>
<CAPTION>
                                                 1998           1999           2000
                                             ------------    -----------    -----------
<S>                                          <C>             <C>            <C>
Income (loss) before extraordinary item....  $ 20,397,485      5,817,376      6,545,368
Less accretion of preferred stock..........     2,552,465      2,993,311      9,896,945
Less dividends on preferred stock..........    27,717,142     31,755,475     18,475,448
                                             ------------    -----------    -----------
Loss before extraordinary item.............    (9,872,122)   (28,931,410)   (21,827,025)
Extraordinary item.........................    (1,612,723)            --    (17,150,918)
                                             ------------    -----------    -----------
Net loss applicable to common
  Stockholders.............................  $(11,484,845)   (28,931,410)   (38,977,943)
                                             ============    ===========    ===========
Weighted average common shares outstanding
  (basic and diluted)......................    30,333,400     33,584,576     58,162,671
                                             ============    ===========    ===========
Basic and diluted loss per common share
Net loss per common share before
  extraordinary item.......................  $      (0.33)         (0.86)         (0.38)
Net loss per common share for extraordinary
  item.....................................         (0.05)            --          (0.29)
                                             ------------    -----------    -----------
Net loss per common share..................  $      (0.38)         (0.86)         (0.67)
                                             ============    ===========    ===========
</TABLE>

  (o) Fair Value of Financial Instruments

     SFAS No. 107, "Disclosures About Fair Value of Financial Instruments,"
requires disclosure of fair value of certain financial instruments. Cash and
cash equivalents, receivables, other current assets and due from related party,
as well as accounts payable, accrued expenses and other current liabilities, as
reflected in the consolidated financial statements, approximate fair value
because of the short-term maturity of these instruments. The estimated fair
value of the Company's other long-term debt instruments approximate the carrying
amount as the interest rates approximate the Company's current borrowing rate
for similar debt instruments of comparable maturity.

     Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates are subjective in nature and involve uncertainties and matters
of significant judgment and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.

                                      F-13
<PAGE>   59
                       SPANISH BROADCASTING SYSTEM, INC.
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The estimated fair value of the Company's senior notes and preferred stock
is as follows (in millions):

<TABLE>
<CAPTION>
                                                         1999                 2000
                                                   -----------------    -----------------
                                                   CARRYING    FAIR     CARRYING    FAIR
                                                    AMOUNT     VALUE     AMOUNT     VALUE
                                                   --------    -----    --------    -----
<S>                                                <C>         <C>      <C>         <C>
12 1/2% Senior unsecured notes...................   $ 92.3     102.5       0.1        0.1
11% Senior unsecured notes.......................     75.0      81.4        --         --
14 1/4% Series A senior exchangeable preferred
  stock..........................................    235.9     258.4        --         --
9 5/8% Senior subordinated notes.................       --        --     235.0      233.2
</TABLE>

     The fair value estimates of the senior notes and preferred stock were based
upon quotes from major financial institutions taking into consideration current
rates offered to the Company for debt instruments of the same remaining
maturities.

  (p) Redeemable Preferred Stock

     Redeemable preferred stock is stated at redemption value less the
unamortized discount. The discount is accreted into the carrying value of the
preferred stock through the date at which the preferred stock is mandatorily
redeemable with a charge to accumulated deficit using the effective-interest
method. During fiscal year 2000, the Company redeemed its redeemable preferred
stock and accreted the remaining original issue discount with a charge to
accumulated deficit (see note 8).

  (q) Stock Option Plans

     The Company accounts for its stock option plans in accordance with the
provisions of Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations. As such,
compensation expense would be recorded on the date of grant only if the current
market price of the underlying stock exceeded the exercise price. SFAS No. 123,
"Accounting for Stock-based Compensation," permits entities to recognize as
expense over the vesting period the fair value of all stock-based awards on the
date of grant. Alternatively, SFAS No. 123 also allows entities to continue to
apply the provisions of APB Opinion No. 25 and provide pro forma net loss and
pro forma net loss per share disclosures for employee stock option grants made
as if the fair-value-based method defined in SFAS No. 123 had been applied. The
Company has elected to apply the provisions of APB Opinion No. 25 and provide
the pro forma disclosures of SFAS No. 123.

  (r) Reclassification

     Certain prior year amounts have been reclassified to conform with the
current year presentation.

  (s) Segment Reporting

     SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," establishes standards for the way public business enterprises
report information about operating segments in annual financial statements and
requires those enterprises to report selected information about operating
segments in interim financial reports issued to shareholders. SFAS No. 131 is
effective for financial statements for periods beginning after December 15,
1997. The adoption of SFAS No. 131 did not have a significant impact on the
Company's financial reporting as of and for each of the fiscal years in the
three-year period ended September 24, 2000, since the Company believes it has
only one reportable segment.

                                      F-14
<PAGE>   60
                       SPANISH BROADCASTING SYSTEM, INC.
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(3) ACQUISITIONS

     On May 13, 1998, the Company acquired the FCC broadcast license and
substantially all of the assets used or useful in the operation of radio station
KRIO-FM serving the San Antonio area for $9.2 million, plus closing costs of
$0.1 million. The Company financed this purchase from cash on hand and from
operations. The Company subsequently changed the call letters to KLEY-FM. The
aforementioned acquisition was not deemed material in fiscal 1998 for financial
pro forma presentation purposes.

     On December 1, 1998, the Company acquired from Pan Caribbean Broadcasting
Corporation the FCC broadcast license and substantially all of the assets of
WCMA-FM (formerly WDOY-FM) in Puerto Rico for $8.3 million. The acquisition of
WCMA-FM was financed from cash on hand and cash from operations.

     On April 26, 1999, the Company acquired 80 percent of the issued and
outstanding capital stock of JuJu Media, Inc., the owner and operator of
LaMusica.com, an Internet web site and "portal" targeting the U.S. hispanic
market, for $2.0 million in cash and the issuance of a promissory note for $1.0
million.

     On April 30, 1999, the Company acquired the FCC broadcast licenses and
substantially all of the assets used or useful in the operation of WMEG-FM and
WEGM-FM, in Puerto Rico for $16.0 million. The Company financed this purchase
from cash on hand and cash from operations.

     On September 22, 1999, Spanish Broadcasting System of Puerto Rico, Inc., a
Delaware corporation, a wholly owned subsidiary of the Company, entered into a
stock purchase agreement to purchase all of the outstanding capital stock of the
following nine subsidiaries of AMFM Operating Inc., a Delaware corporation
(formerly known as Chancellor Media Corporation of Los Angeles) ("AMFM"):
Primedia Broadcast Group, Inc., WIO, Inc., Cadena Estereotempo, Inc., Portorican
American Broadcasting, Inc., WLDI, Inc., WRPC, Inc., WOYE, Inc., WZNT, Inc.,
WOQI, Inc. (the "Primedia Station Group"). The Primedia Station Group owns and
operates eight radio stations in Puerto Rico: WIOA-FM, WIOB-FM, WIOC-FM,
WCOM-FM, WZMT-FM, WZNT-FM, WOYE-FM, and WCTA-FM. On January 14, 2000, the
Company completed the purchase from AMFM of all of the outstanding capital stock
of the Primedia Station Group for total cash consideration of $90.8 million (net
of $1.0 million cash acquired), including a $10.0 million deposit that was made
on September 22, 1999 and closing costs of $0.7 million. This acquisition was
financed from cash on hand.

     The allocation of the purchase price for the Primedia Station Group was
based on the relative fair values of the assets and liabilities acquired on
January 14, 2000, as follows:

<TABLE>
<S>                                                           <C>
Account receivable..........................................     2,500,000
Prepaid expenses and other..................................       150,000
Property and equipment......................................     2,200,000
FCC licenses................................................    89,546,999
Goodwill....................................................    22,201,120
Accounts payable and accrued expenses.......................    (2,291,570)
Income taxes payable........................................    (1,279,000)
Deferred taxes payable......................................   (22,201,120)
                                                              ------------
                                                              $ 90,826,429
                                                              ============
</TABLE>

     The following unaudited pro forma summary presents the consolidated results
of operations as if the acquisition of the Primedia Station Group had occurred
as of the beginning of fiscal 1999 and 2000, respectively after giving effect to
certain adjustments, including amortization of intangible assets. These pro
forma results have been prepared for comparative purposes only and do not
purport to be indicative of what

                                      F-15
<PAGE>   61
                       SPANISH BROADCASTING SYSTEM, INC.
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

would have occurred had the acquisitions been made as of those dates or of
results which may occur in the future.

<TABLE>
<CAPTION>
                                                 YEAR ENDED            YEAR ENDED
PRO FORMA DISCLOSURES                        SEPTEMBER 26, 1999    SEPTEMBER 24, 2000
---------------------                        ------------------    ------------------
                                                (UNAUDITED)           (UNAUDITED)
<S>                                          <C>                   <C>
Net revenues...............................     $111,725,000          $126,589,000
Income before extraordinary item...........        3,499,000             6,813,000
Net loss applicable to common
  stockholders.............................      (31,249,000)          (38,820,000)
Net loss per common share..................            (0.93)                (0.67)
</TABLE>

     On May 8, 2000, the Company entered into agreements to acquire all of the
outstanding capital stock of Rodriguez Communications, Inc. ("RCI") and certain
holdings of its affiliate, New World Broadcasters Corp. ("New World"), for total
consideration of $165.2 million, consisting of $43.5 million of the Company's
Class A common stock and $121.7 million in cash, subject to certain conditions
and adjustments. The Company has made advances of approximately $121.1 million
(including closing costs of $2.1 million) on the purchase price of these
acquisitions as of September 24, 2000, which is included in intangible assets in
the accompanying consolidated balance sheets.

     The purchase of RCI includes the rights to acquire the following radio
stations -- KFOX-FM and KREA-FM serving the Los Angeles market; KXJO-FM serving
the San Francisco market; and KSAH-AM serving the San Antonio market. The
Company intends to acquire from New World the Dallas radio stations KTCY-FM and
KXEB-AM. Until closing, the Company is broadcasting programming on these
stations under various time brokerage agreements that commenced in May through
September, 2000. Each of these transactions were subject to numerous conditions
and approvals, including receipt of regulatory approvals under the federal
communications laws and review by federal antitrust authorities. The
acquisitions of KFOX-FM, KREA-FM, KXJO-FM, KSAH-AM, and KTCY-FM closed on
November 10, 2000. The Company expects the acquisition of KXEB-AM to close by
the second quarter of fiscal 2001. However, there can be no assurances that this
acquisition can be completed during the expected time frame or at all.

     The Company's consolidated results of operations include the results of
KLEY-FM, WCMA-FM, WMEG-FM, WEGM-FM, WIOA-FM, WIOB-FM, WIOC-FM, WCOM-FM, WZMT-FM,
WZNT-FM, WOYE-FM, and WCTA-FM and JuJu Media, Inc. from the respective dates of
acquisition. These acquisitions have been accounted for under the purchase
method of accounting. The purchase price has been allocated to the assets
acquired, principally FCC licenses.

(4) SALE OF STATIONS

     On July 2, 1997, the Company entered into an agreement for the sale of the
assets and FCC licenses of radio stations WXLX-AM, serving the New York
metropolitan area, KXMG-AM, serving the Los Angeles metropolitan area, and
WCMQ-AM, serving the Miami metropolitan area. Pursuant to this agreement, on
September 29, 1997, the Company sold the assets and FCC licenses of WXLX-AM and
WCMQ-AM for a sales price of $26.0 million and recorded a gain of $18.6 million.
On December 2, 1997, the Company consummated the sale of the assets and FCC
license of KXMG-AM for a sales price of $18.0 million and recorded a gain of
$17.6 million. These transactions are classified under other income as gain on
sale of stations in the accompanying consolidated statements of operations.

     On February 2, 2000, the Company completed the sale of WVMQ-FM in Key West
and WZMQ-FM in Key Largo to South Broadcasting System, Inc., a company owned by
the Chairman Emeritus of the Company, for total cash consideration of $0.7
million and recorded a gain of $0.1 million. This amount has

                                      F-16
<PAGE>   62
                       SPANISH BROADCASTING SYSTEM, INC.
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

been classified under other income as gain on sale of stations in the
accompanying consolidated statements of operations.

(5) INTANGIBLE ASSETS

     Intangible assets consist of the following at September 26, 1999 and
September 24, 2000:

<TABLE>
<CAPTION>
                                                                              ESTIMATED
                                                  1999           2000        USEFUL LIVES
                                              ------------    -----------    ------------
<S>                                           <C>             <C>            <C>
FCC licenses................................  $334,028,344    534,350,103       40 years
Goodwill and other..........................     3,080,671     25,287,791     5-40 years
                                              ------------    -----------
                                               337,109,015    559,637,894
Less accumulated amortization...............    35,654,956     46,280,239
                                              ------------    -----------
                                              $301,454,059    513,357,655
                                              ============    ===========
</TABLE>

(6) PROPERTY AND EQUIPMENT

     Property and equipment consist of the following at September 26, 1999 and
September 24, 2000:

<TABLE>
<CAPTION>
                                                                              ESTIMATED
                                                   1999           2000       USEFUL LIVES
                                                -----------    ----------    ------------
<S>                                             <C>            <C>           <C>
Land..........................................  $ 1,000,000     2,586,774             --
Building and building improvements............   14,995,440    19,301,182       20 years
Tower and antenna systems.....................    2,257,814     2,359,909     7-15 years
Studio and technical equipment................    5,564,258     6,184,061       10 years
Furniture and fixtures........................    2,072,817     2,412,195     3-10 years
Transmitter equipment.........................    1,220,225     2,416,038     7-10 years
Leasehold improvements........................    1,873,609     1,905,072     5-13 years
Computer equipment and software...............    1,739,392     2,493,320        5 years
Other.........................................      629,997       784,663        5 years
                                                -----------    ----------
                                                 31,353,552    40,443,214
Less accumulated depreciation and
  amortization................................   16,575,849    18,767,975
                                                -----------    ----------
                                                $14,777,703    21,675,238
                                                ===========    ==========
</TABLE>

     During fiscal 1999, the Company wrote down the value of one of its
properties in Los Angeles (which was part of the assets acquired in the purchase
of the Los Angeles AM radio station) by $0.5 million. The write-down was based
on current market values of real estate in the Los Angeles area. This amount is
included in other, net in the accompanying consolidated statements of
operations.

     During fiscal 2000, the Company acquired a building and land in Puerto Rico
for $5.3 million. The Company funded the acquisition using cash on hand and
proceeds from a bank loan of $3.7 million (see note 11).

                                      F-17
<PAGE>   63
                       SPANISH BROADCASTING SYSTEM, INC.
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(7) ACCOUNT PAYABLE AND ACCRUED EXPENSES

     Accounts payable and accrued expenses at September 26, 1999 and September
24, 2000 consists of the following:

<TABLE>
<CAPTION>
                                                        1999           2000
                                                     -----------    ----------
<S>                                                  <C>            <C>
Accounts payable -- trade..........................  $ 1,371,933     1,281,942
Accounts payable -- barter.........................      347,106       808,519
Accrued compensation and commissions...............    5,537,663     5,364,205
Accrued professional fees..........................    2,107,266     2,854,418
Accrued music license fees.........................      741,269       701,126
Other accrued expenses.............................    1,725,908     2,974,057
                                                     -----------    ----------
                                                     $11,831,145    13,984,267
                                                     ===========    ==========
</TABLE>

(8) SENIOR NOTES AND PREFERRED STOCK

  12 1/2% Senior Unsecured Notes

     On June 29, 1994, the Company, through a private placement offering (the
"Offering") completed the sale of 107,059 units (the "Units"), each consisting
of $1,000 principal amount of 12 1/2% Senior Notes (the "12 1/2% Notes") due
2002 and warrants to purchase 5,352,950 shares of Class B common stock. The
12 1/2% Notes and warrants are separately transferable. The 12 1/2% Notes were
issued at a discount and generated proceeds to the Company of $87.8 million, net
of financing costs of $6.2 million. Of the $94.0 million of gross proceeds,
$88.6 million was allocated to the 12 1/2% Notes and $5.4 million was determined
to be the value of the warrants.

     Pursuant to the 12 1/2% Notes, the Company was required to use the greater
of $25.0 million or 50 percent of the net proceeds from any disposition of
certain asset sales (including the FCC broadcast licenses of the AM stations
referred to in note 4) to make offers to purchase the 12 1/2% Notes at 110
percent of the principal value thereof.

     On October 17, 1997, the Company made a tender offer to purchase for cash
any and all of the 12 1/2% Notes up to $22.7 million plus accrued interest up
to, but not including the payment date. The amount payable by the Company was
110 percent of the principal amount of the 12 1/2% Notes. The Company paid $6.3
million to the noteholders who responded to the tender offer and purchased $5.5
million in principal amount of 12 1/2% Notes for $6.0 million plus accrued
interest of $0.3 million in November 1997. The Company also repurchased $7.7
million in principal amount of 12 1/2% Notes for $9.0 million plus accrued
interest of $0.4 million in November 1997. The Company recognized a loss on the
tender offer and repurchased notes of $1.6 million, net of income tax benefit of
$1.1 million, due to the premium paid for the 12 1/2% Notes and the subsequent
write-off of the deferred financing costs and original issue discounts related
to the 12 1/2% Notes purchased. This amount has been classified as an
extraordinary item in the accompanying consolidated statements of operations.

     On November 2, 1999, the Company repurchased $101.5 million in principal
amount of 12 1/2% Notes. In connection with this repurchase, the Company
realized a loss on the early extinguishment of debt of approximately $10.1
million, net of income taxes of approximately $6.8 million. This loss relates to
the premium paid on the repurchase of the 12 1/2% Notes, the write-off of
related deferred financing costs, and the amortization of the remaining original
issue discount on the 12 1/2% Notes, and is classified as an extraordinary item
in the accompanying consolidated statements of operations.

                                      F-18
<PAGE>   64
                       SPANISH BROADCASTING SYSTEM, INC.
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  14 1/4% Series A Senior Exchangeable Preferred Stock and 11% Senior Unsecured
Notes

     On March 27, 1997, the Company financed the purchase of radio stations
WYSY-FM (renamed WLEY-FM by the Company), WRMA-FM and WXDJ-FM with proceeds from
the sale through a private placement of 175,000 shares of the Company's 14 1/4%
Series A Senior Exchangeable Preferred Stock ("Series A Preferred Stock") and
warrants to purchase 3,745,000 shares of the Company's Class B common stock. The
Series A Preferred Stock and the warrants are separately transferable. The gross
proceeds from the issuance of the Series A Preferred Stock and warrants,
amounted to $175.0 million. The value of the warrants was determined to be $16.6
million. The Company also issued $75.0 million aggregate principal amount of the
Company's 11% Senior Unsecured Notes (the "11% Senior Notes") due 2004. In
connection with this transaction, the Company capitalized financing costs of
$5.7 million related to the 11% Senior Notes and charged issuance costs of $9.0
million related to the Series A Preferred Stock and warrants to paid-in capital.

     On November 2, 1999, the Company repurchased $75.0 million in principal
amount of 11% Senior Notes. In connection with this repurchase, the Company
realized a loss on the early extinguishment of debt of approximately $7.0
million, net of income taxes of approximately $4.7 million. This loss relates to
the premium paid on the repurchase of the 11% Senior Notes and the write-off of
related deferred financing costs, and is classified as an extraordinary item in
the accompanying consolidated statements of operations.

     On December 2, 1999, the Company redeemed in full the Series A Preferred
Stock. In connection with this redemption, the Company recorded total additional
dividends of approximately $28.4 million, on the Series A Preferred Stock, which
reduced the income available to common stockholders in the accompanying fiscal
2000 consolidated statement of operations. These additional dividends relate to
the premium on the redemption, and the accretion of the remaining original issue
discount on the Series A Preferred Stock.

  9 5/8% Senior Subordinated Notes

     On October 28, 1999, concurrently with the Company's initial public
offering ("IPO") of Class A common stock (see note 13), the Company sold $235.0
million aggregate principal amount of 9 5/8% senior subordinated notes due 2009
(the "1999 Notes"), from which the Company received proceeds of $228.0 million
after payment of underwriter commissions. In connection with this transaction,
the Company capitalized financing costs of $8.5 million related to the 1999
Notes.

(9) WARRANTS

     Warrants consist of the following:

<TABLE>
<CAPTION>
                                                          NUMBER OF CLASS B COMMON SHARES
                                                        REPRESENTED BY OUTSTANDING WARRANTS
                                                       -------------------------------------
                                                          1998          1999         2000
                                                       -----------    ---------    ---------
<S>                                                    <C>            <C>          <C>
Issued in connection with:
12 1/2% Senior Notes(a)..............................   2,469,950           --           --
14 1/4% Series A Senior Exchangeable Preferred
  Stock(b)...........................................   3,745,000           --           --
Replacement warrants(a)..............................   2,910,450           --           --
                                                        ---------      -------      -------
     Total...........................................   9,125,400           --           --
                                                        =========      =======      =======
</TABLE>

          (a) In 1994, in conjunction with the issuance of 12 1/2% Senior Notes,
     the Company issued warrants exercisable for 5,352,950 shares of Class B
     common stock at an exercise price of $.01 per warrant share which are
     subject to adjustment upon the occurrence of certain events, as defined in
     the warrant agreement. In connection with the declaration of a cash
     dividend on common stock, in March 1998, holders of these warrants were
     given the option to participate in such dividends in lieu of maintaining

                                      F-19
<PAGE>   65
                       SPANISH BROADCASTING SYSTEM, INC.
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     their antidilution rights with respect to such dividends. Holders of
     warrants representing 2,910,450 shares of Class B common stock exercised
     this option and received cash dividends of $0.326 million and replacement
     warrants representing 2,910,450 shares of Class B common stock which have
     an exercise price of $.01 per share. The remaining warrant holders had
     their underlying shares adjusted upward resulting in an increase to
     additional paid-in capital and a charge to accumulated deficit of $0.274
     million. The remaining warrant holders exercised the warrants during the
     nine-month period ended June 27, 1999. During the fiscal year ended
     September 26, 1999, replacement warrants were exercised for 2,900,950
     shares of Class B common stock. The remaining replacement warrants expired
     on June 30, 1999, representing 9,500 shares of common stock.

          (b) In 1997, in conjunction with the issuance of the 14 1/4% Series A
     Senior Exchangeable Preferred Stock, the Company issued warrants that
     entitle the holder to acquire 21.4 shares of Class B common stock or
     3,745,000 shares at a price equal to $0.01 per 21.4 shares, subject to
     adjustment from time to time upon the occurrence of certain changes of
     common stock, certain common stock distributions, certain issuances of
     options or convertible securities, certain dividends and distributions and
     certain other increases in the number of shares or common stock. During the
     fiscal year ended September 26, 1999, warrants were exercised for 3,744,250
     shares of Class B common stock. The remaining warrants expired on June 30,
     1999, representing 750 shares of common stock.

(10) SENIOR CREDIT FACILITY

     On July 6, 2000, the Company entered into a $150.0 million senior secured
credit facility (the "Senior Facility"). The Senior Facility includes a six-year
$25.0 million revolving credit line and $125.0 million of term loans. At
September 24, 2000, the Company had term loans outstanding of $65.0 million. In
connection with this transaction, the Company capitalized financing costs of
$3.2 million related to the Senior Facility.

(11) OTHER LONG-TERM DEBT

     Other long-term debt consists of the following at September 26, 1999 and
September 24, 2000:

<TABLE>
<CAPTION>
                                                                 1999         2000
                                                              ----------    ---------
<S>                                                           <C>           <C>
Obligation under capital lease with related party payable in
  monthly installments of $9,000, including interest at
  6.25%, commencing June 1992 (see note 14).................  $  941,761      891,189
Note payable, including interest at an annual rate of
  three-month LIBOR plus 450 basis points; paid in full in
  December 1999 -- see note below...........................   3,281,152           --
Note payable due on April 26, 2000 including interest at an
  annual rate of 6%; paid in full in September 2000 -- see
  note below................................................   1,000,000           --
Note payable due in monthly installments of $39,196,
  including interest at 9.75%, commencing August 2000, with
  balance due on June 2005 (see note 6).....................          --    3,672,375
                                                              ----------    ---------
                                                               5,222,913    4,563,564
Less current portion........................................   1,800,572      171,262
                                                              ----------    ---------
                                                              $3,422,341    4,392,302
                                                              ==========    =========
</TABLE>

                                      F-20
<PAGE>   66
                       SPANISH BROADCASTING SYSTEM, INC.
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The scheduled maturities of other long-term debt are as follows at
September 24, 2000:

<TABLE>
<CAPTION>
FISCAL YEAR ENDING SEPTEMBER                         AMOUNT
----------------------------                       ----------
<S>                                                <C>
2001.............................................  $  171,262
2002.............................................     186,722
2003.............................................     202,729
2004.............................................     222,074
2005.............................................   3,195,276
Thereafter.......................................     585,501
                                                   ----------
                                                   $4,563,564
                                                   ==========
</TABLE>

     On December 2, 1999, the Company repaid in full the note payable to the
seller of WLEY-FM (formerly WYSY-FM) of approximately $3.3 million, plus accrued
interest of approximately $0.1 million. Additionally, on August 9, 2000, the
Company repaid in full the note payable to the sellers of JuJu Media, Inc. of
approximately $1.0 million, plus accrued interest of approximately $0.1 million.

(12) LOANS RECEIVABLE FROM STOCKHOLDERS AND RELATED-PARTY TRANSACTIONS

     Loans receivable from stockholders were comprised of loans receivable from
the Company's Chief Executive Officer ("CEO") and Chairman of the Board of
Directors ("Chairman"). Loans receivable have been classified as an increase in
stockholders' deficiency in the accompanying consolidated balance sheets as of
September 26, 1999. Interest receivable of $0.4 million at September 26, 1999,
is included in other current assets. On November 2, 1999, the loans receivable
from stockholders plus interest were repaid with the shareholders' proceeds from
the IPO.

     At September 26, 1999, the Company had advances totaling $0.3 million due
from a party related through common ownership. During fiscal 1999, the Company
agreed to forgive these advances and wrote off the amount due from the related
party. Additionally, at September 26, 1999, the Company had trade receivables
totaling $0.4 million due from this related party which were fully reserved as
being uncollectible.

     During each of fiscal years 1998 and 1999, the Company paid operating
expenses of approximately $0.1 million for a boat owned by a related party
through common ownership which was used by the Company for business
entertainment purposes.

     The Company leases an apartment from its CEO for annual rentals of $0.1
million through August 2007. Certain renovation expenses were paid for by the
Company totaling $0.2 million during 1998 and 1999. In addition, the Company
occupies a building under a capital lease agreement with certain stockholders
(see note 14). The building lease expires in 2012 and calls for an annual base
rent of approximately $0.1 million.

     In connection with the relocation of offices from the New York metropolitan
area to the Miami metropolitan area, the Company advanced the CEO an aggregate
of $1.1 million to pay for various expenses. On July 16, 1997, the CEO executed
a promissory note to the Company for the principal amount of $1.1 million to
evidence these advances. The note was payable on demand and bore interest at a
rate of 7 percent per annum. The Company declared and paid a dividend in 1998
and applied a portion of the proceeds of such dividend which were otherwise
payable to the CEO to the repayment in full of this promissory note.

     On September 24, 1999, the Company entered into letters of understanding
with its then Chairman and Secretary. These letters outlined the mutual
intentions of the Company and these individuals in connection

                                      F-21
<PAGE>   67
                       SPANISH BROADCASTING SYSTEM, INC.
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

with the Company's IPO, and were contingent upon the completion of the IPO (see
note 13). These letters provided for the following:

     - The sale by these individuals of $14.0 million of their Class B common
       stock in the IPO (see note 13);

     - The purchase by the Company of annuities providing aggregate annual
       retirement compensation of $1.0 million to these individuals. These
       annuities were purchased by the Company for $10.2 million in November
       1999;

     - The retention of these individuals as members of the Company's Board of
       Directors, with titles of "Chairman Emeritus" and "Secretary Emeritus",
       respectively;

     - An agreement to sell, to the Chairman, the Company's two radio stations
       located in the Florida Keys for $0.7 million (see note 4).

     - The repayment by the Chairman of a stockholder loan for approximately
       $0.6 million, plus accrued interest of approximately $0.1 million. This
       stockholder loan and the related accrued interest was repaid in full by
       the Chairman in November 1999;

     - An agreement by the Chairman to assume responsibility for a boat leased
       by the Company during fiscal 1998 and 1999. Responsibility for this boat
       was assumed by the Chairman in November 1999; and

     - The use by the Chairman of a car and driver, and by the Secretary of a
       car, to be provided by the Company.

(13) STOCKHOLDERS' (DEFICIENCY) EQUITY

  (a) Stock Split

     On September 29, 1999, the Company amended and restated its Certificate of
Incorporation, resulting in a conversion of all existing shares of Class A
common stock into shares of Class B common stock equal to the number of shares
representing a 50 to 1 stock split for each share. The number of authorized
shares of capital stock was increased to 151 million comprised of 100 million
shares of Class A common stock, 50 million shares of Class B common stock and 1
million shares of Preferred Stock, and the par values of both the Class A common
stock and Class B common stock were changed from $.01 per share to $.0001 per
share. In addition, Class B common stockholders are entitled to ten votes per
share and Class A common stockholders are entitled to one vote per share. Upon
transfer or sale of stock by Class B common stockholders to non-affiliate
parties, such shares automatically convert to shares of Class A common stock.

     The accompanying consolidated financial statements have been retroactively
restated to reflect these actions.

     The rights of the holders of shares of Class A common stock and Class B
common stock are identical except for voting rights and conversion provisions.
Holders of each class of common stock are entitled to receive dividends and upon
liquidation or dissolution are entitled to receive all assets available for
distribution to stockholders. The holders of each class have no preemptive or
other subscription rights and there are no redemption or sinking fund provisions
with respect to such shares. Each class of common stock is subordinate to the
Series A Preferred Stock with respect to dividend rights and rights on
liquidation, winding up and dissolution of the Company.

  (b) Initial Public Offering

     On October 27, 1999, the Company and selling shareholders sold 25,055,510
shares of Class A common stock in an IPO, from which the Company received
proceeds of $389.4 million after payment of underwriter

                                      F-22
<PAGE>   68
                       SPANISH BROADCASTING SYSTEM, INC.
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

commissions. Concurrently with this IPO, on October 28, 1999, the Company sold
$235.0 million aggregate principal amount of 1999 Notes (see note 8).

     In connection with these offerings, in October 1999 the Company amended its
employment agreement with its CEO and entered into employment agreements with
two other executive officers of the Company. In addition, the CEO repaid a
shareholder loan for approximately $1.9 million, plus accrued interest of
approximately $0.4 million, in November 1999.

     In connection with the IPO, the Company also granted an aggregate of
100,000 options to non-employee directors, 250,000 options to a former director,
and an aggregate of 400,000 options to executives of the Company, in November
1999. These options were granted at an exercise price per share equal to the IPO
price per share, with vesting periods ranging from zero to four years.

  (c) Stock Option Plans

     The Company maintains a stock option plan pursuant to which the Company has
reserved up to 1,337,500 shares of Class A common stock for issuance upon the
exercise of options granted under the plan. The plan covers all regular salaried
employees of the Company and its subsidiaries. As of September 24, 2000, no
options have been granted under this plan.

     In September 1999, the Company adopted an employee incentive stock option
plan ("the 1999 ISO Plan") and a nonemployee director stock option plan ("the
1999 NQ Plan"). Options granted under the 1999 ISO Plan will vest according to
terms to be determined by the Compensation Committee of the Company's Board of
Directors, and will have a contractual life of five to ten years from date of
grant. Options granted under the 1999 NQ Plan will vest 20 percent upon grant,
and 20 percent each year for the first four years from grant. All options
granted under the 1999 ISO Plan and the 1999 NQ Plan vest immediately upon a
change in control of the Company, as defined. A total of 3,000,000 shares and
300,000 shares of Class A common stock have been reserved for issuance under the
1999 ISO Plan and the 1999 NQ Plan, respectively.

     A summary of the status of the Company's stock option plans, as of
September 24, 2000, and changes during the year then ended, is presented below:

<TABLE>
<CAPTION>
                                                                      WEIGHTED-
                                                                       AVERAGE
                                                                      EXERCISE
                                                          SHARES        PRICE
                                                         ---------    ---------
<S>                                                      <C>          <C>
Outstanding at beginning of year.......................         --     $   --
Granted................................................  1,593,552      18.69
Exercised..............................................         --         --
Forfeited..............................................    (40,000)     20.00
                                                         ---------
Outstanding at end of year.............................  1,553,552     $18.66
                                                         =========
Options exercisable at end of year.....................    512,851
Weighted average fair value of options exercisable
  during the year......................................                $14.35
</TABLE>

                                      F-23
<PAGE>   69
                       SPANISH BROADCASTING SYSTEM, INC.
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The following table summarizes information about stock options outstanding
and exercisable at September 24, 2000:

<TABLE>
<CAPTION>
                          OPTIONS OUTSTANDING
                 --------------------------------------     OPTIONS EXERCISABLE
                                WEIGHTED-                 -----------------------
                                 AVERAGE      WEIGHTED-                 WEIGHTED-
                                REMAINING      AVERAGE                   AVERAGE
RANGE OF           NUMBER      CONTRACTUAL    EXERCISE      NUMBER      EXERCISE
EXERCISE PRICES  OUTSTANDING   LIFE (YEARS)     PRICE     EXERCISABLE     PRICE
---------------  -----------   ------------   ---------   -----------   ---------
<S>              <C>           <C>            <C>         <C>           <C>
$10 to $15          218,552        9.92        $10.00        72,851      $10.00
$16 to $20        1,230,000        9.02         20.00       430,000       20.00
$21 to $25          105,000        9.62         20.99        10,000       20.81
                  ---------                                 -------
                  1,553,552        9.19        $18.66       512,851      $18.60
                  =========                                 =======
</TABLE>

     The Company applies APB Opinion No. 25 and related interpretations in
accounting for its stock option plans. The fair value of each option granted to
employees is estimated on the date of grant using the Black-Scholes option
pricing model with the following assumptions:

<TABLE>
<S>                                                           <C>
Expected life...............................................  5 years
Dividends...................................................     None
Risk-free interest rate.....................................     5.65%
Expected volatility.........................................      100%
</TABLE>

     Had compensation expense for the Company's plans been determined consistent
with FASB Statement No. 123, the Company's net loss applicable to common
stockholders and net loss per common share would have been increased to pro
forma amounts indicated below:

<TABLE>
<S>                                                           <C>
Net loss applicable to common stockholders:
  As reported...............................................  $(38,977,943)
  Pro forma.................................................  $(48,744,622)
Net loss per common share:
  As reported...............................................  $      (0.67)
  Pro forma.................................................  $      (0.84)
</TABLE>

(14) COMMITMENTS

  (a) Leases

     The Company occupies a building under a capital lease agreement with
certain stockholders of the Company expiring in June 2012. The amount
capitalized under this lease agreement and included in property and equipment at
September 26, 1999 and September 24, 2000 is as follows:

<TABLE>
<CAPTION>
                                                          1999         2000
                                                       ----------    ---------
<S>                                                    <C>           <C>
Building under capital lease.........................  $1,230,440    1,230,440
Less: Accumulated depreciation.......................    (451,055)    (512,577)
                                                       ----------    ---------
                                                       $  779,385      717,863
                                                       ==========    =========
</TABLE>

     The Company leases office space and facilities and certain equipment under
operating leases, one of which is with a related party (see note 12), that
expire at various dates through 2035. Certain leases provide for base rental
payments plus escalation charges for real estate taxes and operating expenses.

                                      F-24
<PAGE>   70
                       SPANISH BROADCASTING SYSTEM, INC.
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     At September 24, 2000, future minimum lease payments under such leases are
as follows:

<TABLE>
<CAPTION>
                                                               CAPITAL      OPERATING
FISCAL YEAR ENDING SEPTEMBER                                    LEASE        LEASES
----------------------------                                  ----------    ---------
<S>                                                           <C>           <C>
2001........................................................  $  149,000    1,014,900
2002........................................................     149,000      946,500
2003........................................................     149,000      908,400
2004........................................................     149,000      770,900
2005........................................................     149,000      587,300
Thereafter..................................................     989,637    2,669,100
                                                              ----------    ---------
Total minimum lease payments................................   1,734,637    6,897,100
                                                                            =========
  Less executory costs......................................    (478,360)
                                                              ----------
                                                               1,256,277
  Less interest at 6.25%....................................    (365,088)
                                                              ----------
Present value of minimum lease payments.....................  $  891,189
                                                              ==========
</TABLE>

     Total rent expense for the fiscal years ended September 27, 1998, September
26, 1999 and September 24, 2000 amounted to $1.1 million, $1.4 million and $1.5
million, respectively.

     The Company has agreements to sublease its radio frequencies and portions
of its tower sites. Such agreements provide for payments through 2004. The
future minimum rental income to be received under these agreements as of
September 24, 2000 is as follows:

<TABLE>
<CAPTION>
FISCAL YEAR ENDING SEPTEMBER                         AMOUNT
----------------------------                       ----------
<S>                                                <C>
2001...........................................    $  710,246
2002...........................................       589,374
2003...........................................       492,044
2004...........................................       306,044
                                                   ----------
                                                   $2,097,708
                                                   ==========
</TABLE>

  (b) Employment Agreements

     At September 24, 2000, the Company is committed to employment contracts for
certain executives, on-air talent and general managers expiring through 2005.
Future payments under such contracts are as follows:

<TABLE>
<CAPTION>
FISCAL YEAR ENDING SEPTEMBER                        AMOUNT
----------------------------                      -----------
<S>                                               <C>
2001..........................................    $ 5,143,450
2002..........................................      4,453,354
2003..........................................      3,457,582
2004..........................................      2,292,911
2005..........................................        887,494
                                                  -----------
                                                  $16,234,790
                                                  ===========
</TABLE>

     Included in the future payments schedule above is a five-year employment
agreement with the CEO. The agreement provides for an annual base salary of not
less than $1.0 million, and a cash bonus equal to 7.5 percent of the dollar
increase in same station broadcast cash flow for any fiscal year, including
acquired

                                      F-25
<PAGE>   71
                       SPANISH BROADCASTING SYSTEM, INC.
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

stations on a pro forma basis. Under the terms of the agreement, the CEO's
annual base salary and cash bonus may be increased by the board of directors in
its sole discretion. The total cash bonus earned by the CEO for fiscal 2000 was
$1.0 million, of which $0.8 million was paid in fiscal 2000 and $0.2 million is
included in accounts payable and accrued expenses in the accompanying
consolidated balance sheets.

     Certain employees' contracts provide for additional amounts to be paid if
station ratings or cash flow targets are met.

  (c) 401(k) Profit Sharing

     In September 1999, the Company adopted a tax-qualified employee savings and
retirement plan ("the 401(k) Plan"). The 401(k) Plan provides for Company
contributions to match 25 percent of an eligible employee's contributions, up to
5 percent of the employee's base monthly earnings. All employees over the age of
21 that have completed at least 500 hours of service are eligible to participate
in the 401(k) Plan. There were no contributions associated with this plan to
date.

(15) CONTINGENCIES

     In connection with the sale of WXLX-AM (see note 4), the Company assigned a
lease for a transmitter site which is located on a former landfill which ceased
operations in the late 1960s. As part of the sales agreement, the Company
retained potential exposure relating to possible environmental liabilities
relating to this site. Management is unable to assess the likelihood that any
claim for remediation of this site will arise and no amounts have been accrued
in the consolidated financial statements relating to this contingent liability.

     On September 28, 1999, the Company received notice from the purchaser of
KXMG-AM (see note 4) that it would make a claim against the Company for
indemnification under the agreement pursuant to which KXMG-AM was sold, for the
removal of an underground fuel storage tank located on the site of KXMG-AM's
transmitter. The notice did not specify the amount involved in the
indemnification claim. The Company does not have sufficient information to
assess the potential exposure related to this matter, and no amounts have been
accrued in the consolidated financial statements relating to this contingent
liability.

(16) NEW ACCOUNTING PRONOUNCEMENTS

     In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities. It requires
an entity to recognize all derivatives as either assets or liabilities in the
balance sheet and measure those instruments at fair value. SFAS No. 133, as
amended by SFAS No. 137, is expected to be effective for the Company's fiscal
year ending September 30, 2001. Management does not believe that the adoption of
SFAS No. 133 will have a significant impact on the Company's consolidated
financial statements.

     In November 1999, the Emerging Issues Task Force ("EITF") of the FASB
issued EITF 99-17, "Accounting for Advertising Barter Transactions", which
provides guidance on barter transactions that involve nonmonetary exchanges of
advertising. EITF 99-17 requires an entity to account for barter advertising
revenues and expenses at the determinable fair value of the advertising
surrendered or received in the exchange, or at book value if the fair value can
not be determined within reasonable limits. The adoption of EITF 99-17 did not
have a significant impact on the Company's consolidated financial statements.

     In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition", which provides
guidance on the recognition, presentation and disclosure of revenue in financial
statements filed with the SEC. SAB 101 outlines the basic criteria that must be
met in order to recognize revenue and provides guidance for disclosures related
to revenue recognition
                                      F-26
<PAGE>   72
                       SPANISH BROADCASTING SYSTEM, INC.
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

policies. In June 2000, the SEC issued SAB 101B, "Second Amendment: Revenue
Recognition in Financial Statements" which extends the effective date of SAB 101
to the fourth fiscal quarter of fiscal years commencing after December 15, 1999.
At this time, management is still assessing the impact of SAB 101 on the
Company's financial position and results of operations.

     In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities (A
Replacement of SFAS No. 125)". SFAS No. 140 provides guidance on accounting for
(1) securitization transactions involving financial assets; (2) sales of
financial assets (including loan participations); (3) factoring transactions;
(4) wash sales; (5) servicing assets and liabilities; (6) collateralized
borrowing arrangements; (7) securities lending transactions; (8) repurchase
agreements; and (9) extinguishment of liabilities. While most of the provisions
of SFAS No. 140 will become effective for transactions entered into after March
31, 2001, companies with calendar fiscal year ends that hold beneficial
interests from previous securitizations will be required to make additional
disclosures in their December 31, 2000 financial statements. Management does not
believe that the adoption of SFAS No. 140 will have a significant impact on the
Company's consolidated financial statements.

(17) INCOME TAXES

     Income tax expense (benefit) for the fiscal years ended September 27, 1998,
September 26, 1999 and September 24, 2000 consists of the following and was
allocated as follows:

<TABLE>
<CAPTION>
                                                             1998
                                      --------------------------------------------------
                                      CURRENT-
                                      STATE AND    CURRENT     DEFERRED
                                        LOCAL      FEDERAL      FEDERAL         TOTAL
                                      ---------    -------    -----------    -----------
<S>                                   <C>          <C>        <C>            <C>
Income from operations..............  $950,000     850,000     13,824,032     15,624,032
Extraordinary item -- loss on
  extinguishment of debt............        --          --     (1,075,149)    (1,075,149)
                                      --------     -------    -----------    -----------
                                      $950,000     850,000     12,748,883     14,548,883
                                      ========     =======    ===========    ===========
</TABLE>

<TABLE>
<CAPTION>
                                                             1999
                                      --------------------------------------------------
                                      CURRENT-
                                      STATE AND    CURRENT     DEFERRED
                                        LOCAL      FEDERAL      FEDERAL         TOTAL
                                      ---------    -------    -----------    -----------
<S>                                   <C>          <C>        <C>            <C>
Income from operations..............  $550,000      15,000      3,879,919      4,444,919
                                                   =======    ===========    ===========
                                      ========
</TABLE>

<TABLE>
<CAPTION>
                                                             2000
                                      --------------------------------------------------
                                      CURRENT-                 DEFERRED
                                      STATE AND    CURRENT    FEDERAL AND
                                        LOCAL      FEDERAL       STATE          TOTAL
                                      ---------    -------    -----------    -----------
<S>                                   <C>          <C>        <C>            <C>
Income from operations..............  $250,000          --      4,664,479      4,914,479
Extraordinary item -- loss on
  extinguishment of debt............        --          --    (11,433,945)   (11,433,945)
                                      --------     -------    -----------    -----------
                                      $250,000          --     (6,769,466)    (6,519,466)
                                      ========     =======    ===========    ===========
</TABLE>

     During fiscal 1998 and 1999, the Company utilized net operating loss
carryforwards of approximately $38.8 million and $0.2 million, respectively. For
fiscal 2000, no net operating losses were utilized.

                                      F-27
<PAGE>   73
                       SPANISH BROADCASTING SYSTEM, INC.
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The tax effect of temporary differences and carryforwards that give rise to
deferred tax assets and deferred tax liabilities at September 27, 1998,
September 26, 1999 and September 24, 2000 is as follows:

<TABLE>
<CAPTION>
                                                 1998           1999           2000
                                             ------------    -----------    -----------
<S>                                          <C>             <C>            <C>
Deferred tax assets:
  Net operating loss carryforwards.........  $ 16,919,249     16,849,019     30,222,128
  Foreign net operating loss
     carryforwards.........................            --             --        819,738
  Deferred interest........................     6,080,278      6,458,459             --
  Allowance for doubtful accounts..........     3,108,024      2,546,384      4,270,372
  Fixed assets.............................       474,286        474,286        474,286
  Unearned revenue.........................       856,582      1,074,402        863,540
  AMT credit...............................       850,000        865,000        865,000
                                             ------------    -----------    -----------
     Total gross deferred tax assets.......    28,288,419     28,267,550     37,515,064
Less valuation allowance...................   (17,396,470)   (17,396,470)   (17,396,470)
                                             ------------    -----------    -----------
     Total net deferred tax assets.........    10,891,949     10,871,080     20,118,594
                                             ------------    -----------    -----------
Deferred tax liabilities:
  Depreciation and amortization............    14,463,595     18,322,645     20,800,693
  Intangible assets........................     5,502,950      5,502,950     27,704,070
                                             ------------    -----------    -----------
  Total gross deferred tax liabilities.....    19,966,545     23,825,595     48,504,763
                                             ------------    -----------    -----------
     Net deferred tax asset (liability)....  $ (9,074,596)   (12,954,515)   (28,386,169)
                                             ============    ===========    ===========
</TABLE>

     Total income tax expense (benefit) differed from the amounts computed by
applying the U.S. Federal income tax rate of 35 percent for fiscal years 1998,
1999 and 2000 as a result of the following:

<TABLE>
<CAPTION>
                                                              1998    1999    2000
                                                              ----    ----    -----
<S>                                                           <C>     <C>     <C>
Computed "expected" tax expense (benefit)...................  35.0%   35.0%   (35.0)%
State income taxes, net of federal income tax benefit.......   6.5%    5.5%    (4.6)%
Nondeductible expenses......................................   0.4%    0.4%     1.0%
Other.......................................................   1.8%    2.7%     0.6%
                                                              ----    ----    -----
                                                              43.7%   43.6%   (38.0)%
</TABLE>

     The valuation allowance for deferred tax assets as of September 27, 1998,
September 26, 1999 and September 24, 2000 was $17,396,470. In assessing the
realizability of deferred tax assets, management considers whether it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled reversal of
deferred tax liabilities, projected future taxable income, and tax planning
strategies in making this assessment.

     Based upon the level of historical taxable income and projections for
future taxable income over the periods which the deferred tax assets are
deductible, management believes it is more likely than not the Company will
realize the benefits of these deductible differences, net of the existing
valuation allowances. The amount of the deferred tax asset considered
realizable, however, could be reduced in the near term if estimates of future
taxable income during the carryforward period are reduced.

                                      F-28
<PAGE>   74
                       SPANISH BROADCASTING SYSTEM, INC.
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     At September 24, 2000, the Company has domestic net operating loss
carryforwards available to offset future taxable income expiring as follows:

<TABLE>
<CAPTION>
                                                NET OPERATING
EXPIRING IN SEPTEMBER                         LOSS CARRYFORWARDS
---------------------                         ------------------
<S>                                           <C>
2007........................................     $ 5,597,000
2008........................................      12,213,000
2009........................................      11,445,000
2010........................................      12,868,000
2011........................................      33,432,000
                                                 -----------
                                                 $75,555,000
                                                 ===========
</TABLE>

     Additionally at September 24, 2000, the Company has foreign net operating
loss carryforwards of $2,050,000 available to offset future taxable income
expiring in September 2007.

(18) LITIGATION

     The Company is the defendant in a number of lawsuits and claims incidental
in its ordinary course of business, certain of which have been brought by former
employees. The litigation which is probable to result in an unfavorable outcome
and can be reasonably estimated amounts to $0.3 million which the Company has
accrued. The Company does not believe the outcome of any litigation, current or
pending, would have a material adverse impact on the financial position or the
results of operations of the Company.

     Additionally, the Company is the defendant in a lawsuit where on October
12, 2000, the plaintiff obtained a $1.9 million final default judgment. The
Company believes that the default judgment was improperly entered because, among
other reasons, (1) plaintiff's counsel failed to contact the Company counsel
prior to seeking the default judgment, (2) the Company can demonstrate excusable
neglect and a bona fide defense to the complaint, and (3) the plaintiff did not
name a proper corporate entity. The Company does not have sufficient information
to assess the outcome of this litigation, and no amounts have been accrued in
the consolidated financial statements relating to this contingent liability.

(19) SUBSEQUENT EVENTS

  (a) Acquisition of Stations

     On November 3, 2000, the Company entered into an agreement to acquire the
assets of KFSG-FM broadcasting, serving the Los Angeles, California market, from
International Church of the Foursquare Gospel, for total cash consideration of
$250.0 million. In connection with this acquisition, the Company made a $5.0
million nonrefundable deposit on the purchase price into escrow. The closing of
this acquisition is subject to numerous conditions and approvals, including
receipt of regulatory approvals under the Federal communications laws and review
by Federal antitrust authorities. The Company expects to fund this transaction
by increasing its senior credit facility, accessing the high yield capital
markets and undertaking certain potential asset dispositions. The Company
expects to close the acquisition by December 31, 2001. However, there can be no
assurances that this acquisition can be completed during the expected time frame
or at all, or that the Company will be able to obtain additional financing or
dispose of certain assets at terms favorable to the Company or at all.

                                      F-29
<PAGE>   75
                       SPANISH BROADCASTING SYSTEM, INC.
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     On November 10, 2000, the Company closed on all stations acquired from RCI
and New World (see note 3), except for KXEB-AM, for total consideration of
$164.3 million, consisting of $42.6 million of the Company's Class A common
stock and $121.7 million in cash. The Company expects to complete the
acquisition of KXEB-AM in the second quarter of fiscal 2001. However, there can
be no assurances that the acquisition of KXEB-AM can be completed during the
expected time frame or at all.

  (b) Commitment

     On December 1, 2000, the Company entered into a lease for its new corporate
headquarters with a Florida limited partnership for which the general partner is
a company wholly-owned by the Company's CEO. The Company is leasing the office
space under a 10-year operating lease with rental payments of approximately $0.4
million per year, with the right to renew for two consecutive five-year terms.

                                      F-30
<PAGE>   76

                       SPANISH BROADCASTING SYSTEM, INC.
                                AND SUBSIDIARIES

       FINANCIAL STATEMENT SCHEDULE -- VALUATION AND QUALIFYING ACCOUNTS
FISCAL YEARS ENDED SEPTEMBER 27, 1998, SEPTEMBER 26, 1999 AND SEPTEMBER 24, 2000

<TABLE>
<CAPTION>
                                                  COLUMN C ADDITIONS
                                  COLUMN B     ------------------------                     COLUMN E
                                  BALANCE      CHARGED TO    CHARGED TO                      BALANCE
COLUMN A                         BEGINNING      COST AND       OTHER         COLUMN D        AT END
DESCRIPTION                      OF PERIOD      EXPENSE       ACCOUNTS     DEDUCTIONS(1)    OF PERIOD
-----------                      ----------    ----------    ----------    -------------    ---------
<S>                              <C>           <C>           <C>           <C>              <C>
Fiscal year 1998:
  Allowance for doubtful
     accounts..................  $5,405,095    2,634,509        --             269,544      7,770,060
Fiscal year 1999:
  Allowance for doubtful
     accounts..................  $7,770,060    1,670,438        --           3,074,539      6,365,959
Fiscal year 2000:
  Allowance for doubtful
     accounts..................  $6,365,959    4,077,047        --           2,360,731      8,082,275
</TABLE>

---------------
(1) Write-offs, net of recoveries.

                                      F-31
<PAGE>   77

  (a) 2. Financial Statement Schedules

     See end of financial statements above for Schedule of Valuation and
Qualifying Accounts.

  (a) 3. Exhibits

<TABLE>
<C>    <S>  <C>
 3.1   --   Third Amended and Restated Certificate of Incorporation of
            the Company, dated September 29, 1999 (incorporated by
            reference to the Company's 1999 Registration Statement on
            Form S-1 (Commission File No. 333-85499) (the "1999
            Registration Statement")) (Exhibit A to this exhibit 3.1 is
            incorporated by reference to the Company's Current Report on
            Form 8-K, dated March 25, 1996 (the "1996 Current Report")).
 3.2   --   Certificate of Amendment to the Third Amended and Restated
            Certificate of Incorporation of the Company, dated September
            29, 1999 (incorporated by reference to the Company's 1999
            Registration Statement).
 3.3   --   Amended and Restated By-Laws of the Company (incorporated by
            reference to the Company's 1999 Registration Statement).
 4.1   --   Article V of the Third Amended and Restated Certificate of
            Incorporation of the Company, dated September 29, 1999
            (incorporated by reference to the Company's 1999
            Registration Statement) (see Exhibit 3.1).
 4.2   --   Certificate of Designation filed as Exhibit A to the Third
            Amended and Restated Certificate of Incorporation of the
            Company, dated September 29, 1999 (incorporated by reference
            to the Company's 1999 Registration Statement) (see Exhibit
            3.1).
 4.3   --   Indenture dated June 29, 1994 among the Company, IBJ
            Schroder Bank & Trust Company, as Trustee, the Guarantors
            named therein and the Purchasers named therein (incorporated
            by reference to Exhibit 4.1 of the Company's 1994
            Registration Statement on Form S-4, the "1994 Registration
            Statement").
 4.4   --   First Supplemental Indenture dated as of March 25, 1996 to
            the Indenture dated as of June 29, 1994 among the Company,
            the Guarantors named therein and IBJ Schroder Bank & Trust
            Company, as Trustee (incorporated by reference to the 1996
            Current Report).
 4.5   --   Second Supplemental Indenture dated as of March 21, 1997 to
            the Indenture dated as of June 29, 1994 among the Company,
            the Guarantors named therein and IBJ Schroder Bank & Trust
            Company, as Trustee (incorporated by reference to the 1996
            Current Report).
 4.6   --   Supplemental Indenture dated as of October 21, 1999 to the
            Indenture dated as of June 29, 1994 among the Company, the
            Guarantors named therein and IBJ Schroder Bank & Trust
            Company, as Trustee (incorporated by reference to the
            Company's 1999 Registration Statement).
 4.7   --   Indenture with respect to 9 5/8% Senior Subordinated Notes
            due 2009 with The Bank of New York as Trustee, dated
            November 2, 1999 (incorporated by reference to the Current
            Report on Form 8-K dated November 2, 1999 (the "1999 Current
            Report")).
 4.8   --   Form of stock certificate for the Class A Common Stock of
            the Company (incorporated by reference to the Company's 1999
            Registration Statement).
10.1   --   Warrant Agreement dated as of March 15, 1997 among the
            Company and IBJ Schroder Bank & Trust Company, as Warrant
            Agent (incorporated by reference to the 1996 Current
            Report).
10.2   --   National Radio Sales Representation Agreement dated as of
            February 3, 1997 between Caballero Spanish Media, L.L.C. and
            the Company (incorporated by reference to the 1996 Current
            Report).
10.3   --   Common Stock Registration Rights and Stockholders Agreement
            dated as of June 29, 1994 among the Company, certain
            Management Stockholders named therein (incorporated by
            reference to the 1994 Registration Statement).
</TABLE>

                                       43
<PAGE>   78
<TABLE>
<C>    <S>  <C>
10.4   --   Amended and Restated Employment Agreement dated as of
            October 25, 1999, by and between the Company and Raul
            Alarcon, Jr. (incorporated by reference to the Company's
            1999 Registration Statement).
10.5   --   Employment Agreement dated February 5, 1997 between Carey
            Davis and the Company (incorporated by reference to the
            Company's 1999 Registration Statement).
10.6   --   Employment Agreement dated as of October 25, 1999, by and
            between the Company and Joseph A. Garcia (incorporated by
            reference to the Company's 1999 Registration Statement).
10.7   --   Employment Agreement dated as of October 25, 1999, by and
            between the Company and Luis Diaz-Albertini (incorporated by
            reference to the Company's 1999 Registration Statement).
10.8   --   Employment Agreement, dated April 1, 1999, between Spanish
            Broadcasting System of Greater Miami, Inc. and Jesus Salas
            (incorporated by reference to the Company's 1999
            Registration Statement).
10.9   --   Letter Agreement dated January 13, 1997 between the Company
            and Caballero Spanish Media, LLC (incorporated by reference
            to the Current Report).
10.10  --   1994 Stock Option Plan of the Company (incorporated by
            reference to Exhibit 10.4 of the 1994 Registration
            Statement).
10.11  --   Ground Lease dated December 18, 1995 between Louis Viola
            Company and SBS-J (incorporated by reference to the 1996
            Current Report).
10.12  --   Ground Lease dated December 18, 1995 between Frank F. Viola
            and Estate of Thomas C. Viola and SBS-NJ (incorporated by
            reference to the 1996 Current Report).
10.13  --   Lease and License Agreement dated February 1, 1991 between
            Empire State Building Company, as landlord, and SBS-NY, as
            tenant (incorporated by reference to Exhibit 10.15.1 of the
            1994 Registration Statement).
10.14  --   Modification of Lease and License dated June 30, 1992
            between Empire State Building Company and SBS-NY related to
            WSKQ-FM (incorporated by reference to Exhibit 10.15.2 of the
            1994 Registration Statement).
10.15  --   Lease and License Modification and Extension Agreement dated
            as of June 30, 1992 between Empire State Building Company,
            as landlord, and SBS-NY as tenant (incorporated by reference
            to Exhibit 10.15.3 of the 1994 Registration Statement).
10.16  --   Promissory Note, dated as of December 31, 1995 of Raul
            Alarcon, Sr. to SBS-NJ in the principal amount of $577,323
            (incorporated by reference to Exhibit 10.26 to the Company's
            1995 Annual Report on Form 10-K).
10.17  --   Promissory Note, dated as of December 31, 1995 of Raul
            Alarcon, Jr. to SBS-NJ in the principal amount of $1,896,913
            (incorporated by reference to Exhibit 10.27 to the Company's
            1995 Annual Report on Form 10-K).
10.18  --   Lease Agreement dated June 1, 1992 among Raul Alarcon, Sr.,
            Raul Alarcon, Jr., and SBS-Fla (incorporated by reference to
            Exhibit 10.30 of the 1994 Registration Statement).
10.19  --   Indenture dated October 12, 1988 between Alarcon Holdings,
            Inc. and SBS-NJ related to the studio located at 26 West
            56th Street, NY, NY (incorporated by reference to Exhibit
            10.32 of the 1994 Registration Statement).
10.20  --   Agreement of Lease dated as of March 1, 1996. No.
            WT-174-A119 1067 between The Port Authority of New Jersey
            and SBS-GNY as assignee of Park Radio (incorporated by
            reference to the 1996 Current Report).
10.21  --   Asset Purchase Agreement dated as of July 2, 1997, by and
            between Spanish Broadcasting System, Inc. (New Jersey),
            Spanish Broadcasting System of California, Inc., Spanish
            Broadcasting System of Florida, Inc., Spanish Broadcasting
            System, Inc., and One-on-One Sports, Inc. (incorporated by
            reference to Exhibit 10.62 of the Company's Registration
            Statement on Form S-4 (Commission File No. 333-26295)).
</TABLE>

                                       44
<PAGE>   79
<TABLE>
<C>    <S>  <C>
10.22  --   Amendment No. 1 dated as of September 29, 1997 to the Asset
            Purchase Agreement dated as of July 2, 1997, by and between
            Spanish Broadcasting System, Inc. (New Jersey), Spanish
            Broadcasting System of California, Inc., Spanish
            Broadcasting System of Florida, Inc., Spanish Broadcasting
            System, Inc., and One-on-One Sports, Inc. (incorporated by
            reference to the Company's Registration Statement on Form
            S-1, dated January 21, 1999 (Commission File No.
            333-29449)).
10.23  --   Promissory Note dated July 16, 1997 of Raul Alarcon, Jr. to
            the Company in the principal amount of $1,050,229.63
            (incorporated by reference to Exhibit 10.63 of the Company's
            Registration Statement on Form S-4 (Commission File No.
            333-26295)).
10.24  --   Asset Purchase Agreement dated January 28, 1998 by and
            between Spanish Broadcasting System of San Antonio, Inc. and
            Radio KRIO, Ltd. (incorporated by reference to the Company's
            Form 10-Q dated February 12, 1998).
10.25  --   Asset Purchase Agreement dated June 16, 1998 by and between
            Spanish Broadcasting System of Puerto Rico, Inc. and Pan
            Caribbean Broadcasting Corporation (incorporated by
            reference to the Company's Form 10-Q dated July 12, 1998).
10.26  --   Extension of lease of a Condominium Unit (Metropolitan Tower
            Condominium) between Raul Alarcon, Jr. ("Landlord") and
            Spanish Broadcasting System, Inc. ("Tenant") (incorporated
            by reference to the Company's 1998 Annual Report on Form
            10-K).
10.27  --   Asset Purchase Agreement dated January 8, 1999 by and
            between Spanish Broadcasting System of Puerto Rico, Inc. and
            Guayama Broadcasting Company, Inc. and LaMega Estacion, Inc.
            (incorporated by reference to the Company's Registration
            Statement on Form S-1, dated January 21, 1999).
10.28  --   Stock Purchase Agreement among JuJu Media, Inc., each of the
            individual sellers, and Spanish Broadcasting System, Inc.,
            dated April 26, 1999 (incorporated by reference to the
            Company's 1999 Registration Statement).
10.29  --   Asset Purchase Agreement, dated as of October 25, 1999, by
            and between Spanish Broadcasting System of Florida, Inc.,
            and Pablo Raul Alarcon, Sr. (incorporated by reference to
            the Company's 1999 Registration Statement).
10.30  --   Indemnification Agreement with Raul Alarcon, Jr. dated as of
            November 2, 1999 (incorporated by reference to the 1999
            Current Report).
10.31  --   Indemnification Agreement with Roman Martinez IV dated as of
            November 2, 1999 (incorporated by reference to the 1999
            Current Report).
10.32  --   Indemnification Agreement with Jason L. Shrinsky dated as of
            November 2, 1999 (incorporated by reference to the 1999
            Current Report).
10.33  --   Spanish Broadcasting System 1999 Stock Option Plan
            (incorporated by reference to the Company's 1999
            Registration Statement).
10.34  --   Spanish Broadcasting System 1999 Company Stock Option Plan
            for Nonemployee Directors (incorporated by reference to the
            Company's 1999 Registration Statement).
10.35  --   Time Brokerage Agreement, dated as of October 25, 1999, by
            and between Spanish Broadcasting System of Florida, Inc. and
            Pablo Raul Alarcon, Sr. (incorporated by reference to the
            Company's 1999 Registration Statement).
10.36  --   Form of Lock-Up Letter Agreement (incorporated by reference
            in the Company's 1999 Registration Statement).
10.37  --   Form of Option Grant not under Stock Option Plans
            (incorporated by reference to the Company's 1999
            Registration Statement).
10.38  --   Option Grant not under the Stock Option Plans with Arnold
            Sheiffer, dated October 27, 1999 (incorporated by reference
            to the 1999 Current Report).
</TABLE>

                                       45
<PAGE>   80
<TABLE>
<C>    <S>  <C>
10.39  --   Stock Purchase Agreement, dated as of May 8, 2000, by and
            among Rodriguez Communications, Inc., a Delaware
            corporation, each of the Stockholders identified therein and
            Spanish Broadcasting System, Inc., a Delaware corporation
            (incorporated by reference to Exhibit 10.1 of the Company's
            Amended Quarterly Report on Form 10-Q/A, dated August 11,
            2000 (the "Company's Amended Quarterly Report")).
10.40  --   Asset Purchase Agreement, dated as of May 8, 2000, by and
            between New World Broadcasters Corp., a Texas corporation,
            and Spanish Broadcasting System, Inc., a Delaware
            corporation (incorporated by reference to Exhibit 10.2 of
            the Company's Amended Quarterly Report).
10.41  --   Stock Purchase Agreement, dated as of May 8, 2000, by and
            between New World Broadcasters Corp., a Texas corporation,
            910 Broadcasting Corp., a Texas corporation, and Spanish
            Broadcasting System, Inc., a Delaware corporation
            (incorporated by reference to Exhibit 10.2 of the Company's
            Amended Quarterly Report).
10.42  --   Time Brokerage Agreement, dated May 8, 2000, by and among,
            New World Broadcasters Corp., a Texas corporation, 910
            Broadcasting Corp., a Texas corporation, and Spanish
            Broadcasting System of San Antonio, Inc., a Delaware
            corporation and Spanish Broadcasting System, Inc., a
            Delaware corporation (incorporated by reference to Exhibit
            10.5 of the Company's Quarterly Report on Form 10-Q, dated
            August 9, 2000 (the "Company's 2000 Quarterly Report")).
10.43  --   Credit Agreement, dated as of May 8, 2000, by and among, New
            World Broadcasters Corp., a Texas corporation, Rodriguez
            Communications, Inc., a Delaware corporation, RCI (Alameda)
            Acquisition, Inc., a Delaware corporation, the Guarantors
            named therein and Spanish Broadcasting System, Inc., a
            Delaware corporation (incorporated by reference to Exhibit
            10.6 of the Company's Quarterly Report).
10.44  --   Credit Agreement, dated as of July 6, 2000, among Spanish
            Broadcasting System, Inc., a Delaware corporation, the
            several banks and other financial institutions or entities
            from time to time party to the Credit Agreement and Lehman
            Commercial Paper, Inc., as administrative agent.*
10.45  --   Guarantee and Collateral Agreement made by Spanish
            Broadcasting System, Inc. and certain of its subsidiaries in
            favor of Lehman Commercial Paper, Inc. as Administrative
            Agent, dated as of July 6, 2000.*
10.46  --   Employment Agreement dated December 7, 2000, between Joseph
            Garcia and the Company.*
10.47  --   Employment Agreement dated August 31, 2000, between William
            Tanner and the Company.*
10.48  --   Employment Agreement dated February 16, 2000, between Juan
            A. Garcia and the Company.*
10.49  --   Deed of Constitution of Mortgage, Cadera Estereotempo, Inc.,
            as Mortgagor, and Banco Bilbao Vizcaya Puerto Rico, as
            Mortgagee.*
10.50  --   Lease Agreement by and between the Company and Irradio
            Holdings, Ltd. made as of December 14, 2000.*
10.51  --   First Addendum to Lease between the Company and Irradio
            Holdings, Ltd. as of December 14, 2000*
10.52  --   Asset Purchase Agreement dated as of November 2, 2000 by and
            between International Church of the Foursquare Gospel and
            the Company.*
21.1   --   List of Subsidiaries of the Company.*
27.1   --   Financial Data Schedule.*
</TABLE>

---------------

* Filed with the initial filing of this Form 10-K on December 26, 2000.

                                       46
<PAGE>   81

  (b) Reports on Form 8-K.

     The Company filed a report on Form 8-K dated November 27, 2000, which
reported that:

          (1) On May 8, 2000, the Company entered into a stock purchase
     agreement, by and among Rodriguez Communications, Inc. ("RCI"), each of the
     stockholders of RCI identified on Annex I thereto, and the Company, to
     purchase all of the outstanding capital stock of RCI; and an Asset Purchase
     Agreement, by and between New World Broadcasters Corp. ("New World"), to
     purchase radio station KTCY-FM in Texas (the "KTCY").

          (2) On November 10, 2000, the Company completed the purchase of KTCY
     and all of the outstanding capital stock of RCI; in consideration for which
     SBS paid to RCI, the shareholders of RCI and New World, total consideration
     of $165.2 million, consisting of $43.5 million of SBS's Class A common
     stock and $121.7 million in cash.

     The Company filed a report on Form 8-K dated December 8, 2000, which
reported that:

          (1) The annual meeting of the shareholders (the "Meeting") of the
     Company, is to be held on February 9, 2001. Shareholder proposals to be
     presented at the Meeting are required to be received by the Company no
     later than December 29, 2000 to be included in the Company's Proxy
     Statement for the Meeting.

          (2) If the Company is not notified of a stockholder proposal by
     December 29, 2000, then the management proxies may have discretion to vote
     against such stockholder proposal, even though such proposal is not
     discussed in the proxy statement.

                                       47
<PAGE>   82

                                   SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Amendment No. 1 to its Annual Report on Form
10-K to be signed on its behalf by the undersigned, thereunto duly authorized,
on the 23rd day of January, 2001.

                                          SPANISH BROADCASTING SYSTEM, INC.

                                          By: /s/   RAUL ALARCON, JR.
                                            ------------------------------------
                                          Name: Raul Alarcon, Jr.
                                          Title: Chairman of the Board of
                                                 Directors,
                                             Chief Executive Officer and
                                             President

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities indicated on the 23rd day of January, 2001.

<TABLE>
<CAPTION>
                     SIGNATURE
                     ---------
<C>                                                  <S>
               /s/ RAUL ALARCON, JR.                 Chairman of the Board of Directors, Chief
---------------------------------------------------    Executive Officer and President (principal
                 Raul Alarcon, Jr.                     executive officer)

               /s/ JOSEPH A. GARCiA                  Executive Vice President, Chief Financial
---------------------------------------------------    Officer, and Secretary (principal financial and
                 Joseph A. Garcia                      accounting officer)

            /s/ PABLO RAUL ALARCON, SR.              Director
---------------------------------------------------
              Pablo Raul Alarcon, Sr.

                 /s/ JOSE GRIMALT                    Director
---------------------------------------------------
                   Jose Grimalt

               /s/ ROMAN MARTiNEZ IV                 Director
---------------------------------------------------
                 Roman Martinez IV

               /s/ JASON L. SHRINSKY                 Director
---------------------------------------------------
                 Jason L. Shrinsky
</TABLE>

                                       48
<PAGE>   83

                                   SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, each
of the additional registrants has duly caused this Amendment No. 1 to the
registrant's Annual Report on Form 10-K to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 23rd day of January, 2001.

                                          EACH OF THE ADDITIONAL
                                          REGISTRANTS LISTED
                                          ON THE TABLE OF
                                          ADDITIONAL REGISTRANTS

                                          By: /s/   RAUL ALARCON, JR.
                                            ------------------------------------
                                          Name: Raul Alarcon, Jr.
                                          Title: Chief Executive Officer and
                                                 President

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of each
additional registrant in the capacities indicated on the 23rd day of January,
2001.

<TABLE>
<CAPTION>
                     SIGNATURE
                     ---------
<C>                                                  <S>
               /s/ RAUL ALARCON, JR.                 Chairman of the Board of Directors, Chief
---------------------------------------------------    Executive Officer and President (principal
                 Raul Alarcon, Jr.                     executive officer)

               /s/ JOSEPH A. GARCiA                  Executive Vice President, Chief Financial Officer
---------------------------------------------------    and Secretary (principal financial and
                 Joseph A. Garcia                      accounting officer), and a director
</TABLE>

                                       49
<PAGE>   84

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                 DESCRIPTION                           PAGE
-------                                -----------                           ----
<C>       <S>  <C>                                                           <C>
     3.1  --   Third Amended and Restated Certificate of Incorporation of
               the Company, dated September 29, 1999 (incorporated by
               reference to the Company's 1999 Registration Statement on
               Form S-1 (Commission File No. 333-85499) (the "1999
               Registration Statement")) (Exhibit A to this exhibit 3.1 is
               incorporated by reference to the Company's Current Report on
               Form 8-K, dated March 25, 1996 (the "1996 Current Report")).
     3.2  --   Certificate of Amendment to the Third Amended and Restated
               Certificate of Incorporation of the Company, dated September
               29, 1999 (incorporated by reference to the Company's 1999
               Registration Statement).
     3.3  --   Amended and Restated By-Laws of the Company (incorporated by
               reference to the Company's 1999 Registration Statement).
     4.1  --   Article V of the Third Amended and Restated Certificate of
               Incorporation of the Company, dated September 29, 1999
               (incorporated by reference to the Company's 1999
               Registration Statement) (see Exhibit 3.1).
     4.2  --   Certificate of Designation filed as Exhibit A to the Third
               Amended and Restated Certificate of Incorporation of the
               Company, dated September 29, 1999 (incorporated by reference
               to the Company's 1999 Registration Statement) (see Exhibit
               3.1).
     4.3  --   Indenture dated June 29, 1994 among the Company, IBJ
               Schroder Bank & Trust Company, as Trustee, the Guarantors
               named therein and the Purchasers named therein (incorporated
               by reference to Exhibit 4.1 of the Company's 1994
               Registration Statement on Form S-4, the "1994 Registration
               Statement").
     4.4  --   First Supplemental Indenture dated as of March 25, 1996 to
               the Indenture dated as of June 29, 1994 among the Company,
               the Guarantors named therein and IBJ Schroder Bank & Trust
               Company, as Trustee (incorporated by reference to the 1996
               Current Report).
     4.5  --   Second Supplemental Indenture dated as of March 21, 1997 to
               the Indenture dated as of June 29, 1994 among the Company,
               the Guarantors named therein and IBJ Schroder Bank & Trust
               Company, as Trustee (incorporated by reference to the 1996
               Current Report).
     4.6  --   Supplemental Indenture dated as of October 21, 1999 to the
               Indenture dated as of June 29, 1994 among the Company, the
               Guarantors named therein and IBJ Schroder Bank & Trust
               Company, as Trustee (incorporated by reference to the
               Company's 1999 Registration Statement).
     4.7  --   Indenture with respect to 9 5/8% Senior Subordinated Notes
               due 2009 with The Bank of New York as Trustee, dated
               November 2, 1999 (incorporated by reference to the Current
               Report on Form 8-K dated November 2, 1999 (the "1999 Current
               Report")).
     4.8  --   Form of stock certificate for the Class A Common Stock of
               the Company (incorporated by reference to the Company's 1999
               Registration Statement).
    10.1  --   Warrant Agreement dated as of March 15, 1997 among the
               Company and IBJ Schroder Bank & Trust Company, as Warrant
               Agent (incorporated by reference to the 1996 Current
               Report).
    10.2  --   National Radio Sales Representation Agreement dated as of
               February 3, 1997 between Caballero Spanish Media, L.L.C. and
               the Company (incorporated by reference to the 1996 Current
               Report).
</TABLE>
<PAGE>   85

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                 DESCRIPTION                           PAGE
-------                                -----------                           ----
<C>       <S>  <C>                                                           <C>
    10.3  --   Common Stock Registration Rights and Stockholders Agreement
               dated as of June 29, 1994 among the Company, certain
               Management Stockholders named therein (incorporated by
               reference to the 1994 Registration Statement).
    10.4  --   Amended and Restated Employment Agreement dated as of
               October 25, 1999, by and between the Company and Raul
               Alarcon, Jr. (incorporated by reference to the Company's
               1999 Registration Statement).
    10.5  --   Employment Agreement dated February 5, 1997 between Carey
               Davis and the Company (incorporated by reference to the
               Company's 1999 Registration Statement).
    10.6  --   Employment Agreement dated as of October 25, 1999, by and
               between the Company and Joseph A. Garcia (incorporated by
               reference to the Company's 1999 Registration Statement).
    10.7  --   Employment Agreement dated as of October 25, 1999, by and
               between the Company and Luis Diaz-Albertini (incorporated by
               reference to the Company's 1999 Registration Statement).
    10.8  --   Employment Agreement, dated April 1, 1999, between Spanish
               Broadcasting System of Greater Miami, Inc. and Jesus Salas
               (incorporated by reference to the Company's 1999
               Registration Statement).
    10.9  --   Letter Agreement dated January 13, 1997 between the Company
               and Caballero Spanish Media, LLC (incorporated by reference
               to the Current Report).
    10.10 --   1994 Stock Option Plan of the Company (incorporated by
               reference to Exhibit 10.4 of the 1994 Registration
               Statement).
    10.11 --   Ground Lease dated December 18, 1995 between Louis Viola
               Company and SBS-J (incorporated by reference to the 1996
               Current Report).
    10.12 --   Ground Lease dated December 18, 1995 between Frank F. Viola
               and Estate of Thomas C. Viola and SBS-NJ (incorporated by
               reference to the 1996 Current Report).
    10.13 --   Lease and License Agreement dated February 1, 1991 between
               Empire State Building Company, as landlord, and SBS-NY, as
               tenant (incorporated by reference to Exhibit 10.15.1 of the
               1994 Registration Statement).
    10.14 --   Modification of Lease and License dated June 30, 1992
               between Empire State Building Company and SBS-NY related to
               WSKQ-FM (incorporated by reference to Exhibit 10.15.2 of the
               1994 Registration Statement).
    11.15 --   Lease and License Modification and Extension Agreement dated
               as of June 30, 1992 between Empire State Building Company,
               as landlord, and SBS-NY as tenant (incorporated by reference
               to Exhibit 10.15.3 of the 1994 Registration Statement).
    10.16 --   Promissory Note, dated as of December 31, 1995 of Raul
               Alarcon, Sr. to SBS-NJ in the principal amount of $577,323
               (incorporated by reference to Exhibit 10.26 to the Company's
               1995 Annual Report on Form 10-K).
    10.17 --   Promissory Note, dated as of December 31, 1995 of Raul
               Alarcon, Jr. to SBS-NJ in the principal amount of $1,896,913
               (incorporated by reference to Exhibit 10.27 to the Company's
               1995 Annual Report on Form 10-K).
    10.18 --   Lease Agreement dated June 1, 1992 among Raul Alarcon, Sr.,
               Raul Alarcon, Jr., and SBS-Fla (incorporated by reference to
               Exhibit 10.30 of the 1994 Registration Statement).
    10.19 --   Indenture dated October 12, 1988 between Alarcon Holdings,
               Inc. and SBS-NJ related to the studio located at 26 West
               56th Street, NY, NY (incorporated by reference to Exhibit
               10.32 of the 1994 Registration Statement).
</TABLE>
<PAGE>   86

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                 DESCRIPTION                           PAGE
-------                                -----------                           ----
<C>       <S>  <C>                                                           <C>
    10.20 --   Agreement of Lease dated as of March 1, 1996. No.
               WT-174-A119 1067 between The Port Authority of New Jersey
               and SBS-GNY as assignee of Park Radio (incorporated by
               reference to the 1996 Current Report).
    10.21 --   Asset Purchase Agreement dated as of July 2, 1997, by and
               between Spanish Broadcasting System, Inc. (New Jersey),
               Spanish Broadcasting System of California, Inc., Spanish
               Broadcasting System of Florida, Inc., Spanish Broadcasting
               System, Inc., and One-on-One Sports, Inc. (incorporated by
               reference to Exhibit 10.62 of the Company's Registration
               Statement on Form S-4 (Commission File No. 333-26295)).
    10.22 --   Amendment No. 1 dated as of September 29, 1997 to the Asset
               Purchase Agreement dated as of July 2, 1997, by and between
               Spanish Broadcasting System, Inc. (New Jersey), Spanish
               Broadcasting System of California, Inc., Spanish
               Broadcasting System of Florida, Inc., Spanish Broadcasting
               System, Inc., and One-on-One Sports, Inc. (incorporated by
               reference to the Company's Registration Statement on Form
               S-1, dated January 21, 1999 (Commission File No.
               333-29449)).
    10.23 --   Promissory Note dated July 16, 1997 of Raul Alarcon, Jr. to
               the Company in the principal amount of $1,050,229.63
               (incorporated by reference to Exhibit 10.63 of the Company's
               Registration Statement on Form S-4 (Commission File No.
               333-26295)).
    10.24 --   Asset Purchase Agreement dated January 28, 1998 by and
               between Spanish Broadcasting System of San Antonio, Inc. and
               Radio KRIO, Ltd. (incorporated by reference to the Company's
               Form 10-Q dated February 12, 1998).
    10.25 --   Asset Purchase Agreement dated June 16, 1998 by and between
               Spanish Broadcasting System of Puerto Rico, Inc. and Pan
               Caribbean Broadcasting Corporation (incorporated by
               reference to the Company's Form 10-Q dated July 12, 1998).
    10.26 --   Extension of lease of a Condominium Unit (Metropolitan Tower
               Condominium) between Raul Alarcon, Jr. ("Landlord") and
               Spanish Broadcasting System, Inc. ("Tenant") (incorporated
               by reference to the Company's 1998 Annual Report on Form
               10-K).
    10.27 --   Asset Purchase Agreement dated January 8, 1999 by and
               between Spanish Broadcasting System of Puerto Rico, Inc. and
               Guayama Broadcasting Company, Inc. and LaMega Estacion, Inc.
               (incorporated by reference to the Company's Registration
               Statement on Form S-1, dated January 21, 1999).
    10.28 --   Stock Purchase Agreement among JuJu Media, Inc., each of the
               individual sellers, and Spanish Broadcasting System, Inc.,
               dated April 26, 1999 (incorporated by reference to the
               Company's 1999 Registration Statement).
    10.29 --   Asset Purchase Agreement, dated as of October 25, 1999, by
               and between Spanish Broadcasting System of Florida, Inc.,
               and Pablo Raul Alarcon, Sr. (incorporated by reference to
               the Company's 1999 Registration Statement).
    10.30 --   Indemnification Agreement with Raul Alarcon, Jr. dated as of
               November 2, 1999 (incorporated by reference to the 1999
               Current Report).
    10.31 --   Indemnification Agreement with Roman Martinez IV dated as of
               November 2, 1999 (incorporated by reference to the 1999
               Current Report).
    10.32 --   Indemnification Agreement with Jason L. Shrinsky dated as of
               November 2, 1999 (incorporated by reference to the 1999
               Current Report).
    10.33 --   Spanish Broadcasting System 1999 Stock Option Plan
               (incorporated by reference to the Company's 1999
               Registration Statement).
    10.34 --   Spanish Broadcasting System 1999 Company Stock Option Plan
               for Nonemployee Directors (incorporated by reference to the
               Company's 1999 Registration Statement).
</TABLE>
<PAGE>   87

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                 DESCRIPTION                           PAGE
-------                                -----------                           ----
<C>       <S>  <C>                                                           <C>
    10.35 --   Time Brokerage Agreement, dated as of October 25, 1999, by
               and between Spanish Broadcasting System of Florida, Inc. and
               Pablo Raul Alarcon, Sr. (incorporated by reference to the
               Company's 1999 Registration Statement).
    10.36 --   Form of Lock-Up Letter Agreement (incorporated by reference
               in the Company's 1999 Registration Statement).
    10.37 --   Form of Option Grant not under Stock Option Plans
               (incorporated by reference to the Company's 1999
               Registration Statement).
    10.38 --   Option Grant not under the Stock Option Plans with Arnold
               Sheiffer, dated October 27, 1999 (incorporated by reference
               to the 1999 Current Report).
    10.39 --   Stock Purchase Agreement, dated as of May 8, 2000, by and
               among Rodriguez Communications, Inc., a Delaware
               corporation, each of the Stockholders identified therein and
               Spanish Broadcasting System, Inc., a Delaware corporation
               (incorporated by reference to Exhibit 10.1 of the Company's
               Amended Quarterly Report on Form 10-Q/ A, dated August 11,
               2000 (the "Company's Amended Quarterly Report")).
    10.40 --   Asset Purchase Agreement, dated as of May 8, 2000, by and
               between New World Broadcasters Corp., a Texas corporation,
               and Spanish Broadcasting System, Inc., a Delaware
               corporation (incorporated by reference to Exhibit 10.2 of
               the Company's Amended Quarterly Report).
    10.41 --   Stock Purchase Agreement, dated as of May 8, 2000, by and
               between New World Broadcasters Corp., a Texas corporation,
               910 Broadcasting Corp., a Texas corporation, and Spanish
               Broadcasting System, Inc., a Delaware corporation
               (incorporated by reference to Exhibit 10.2 of the Company's
               Amended Quarterly Report).
    10.42 --   Time Brokerage Agreement, dated May 8, 2000, by and among,
               New World Broadcasters Corp., a Texas corporation, 910
               Broadcasting Corp., a Texas corporation, and Spanish
               Broadcasting System of San Antonio, Inc., a Delaware
               corporation and Spanish Broadcasting System, Inc., a
               Delaware corporation (incorporated by reference to Exhibit
               10.5 of the Company's Quarterly Report on Form 10-Q, dated
               August 9, 2000 (the "Company's 2000 Quarterly Report")).
    10.43 --   Credit Agreement, dated as of May 8, 2000, by and among, New
               World Broadcasters Corp., a Texas corporation, Rodriguez
               Communications, Inc., a Delaware corporation, RCI (Alameda)
               Acquisition, Inc., a Delaware corporation, the Guarantors
               named therein and Spanish Broadcasting System, Inc., a
               Delaware corporation (incorporated by reference to Exhibit
               10.6 of the Company's Quarterly Report).
    10.44 --   Credit Agreement, dated as of July 6, 2000, among Spanish
               Broadcasting System, Inc., a Delaware corporation, the
               several banks and other financial institutions or entities
               from time to time party to the Credit Agreement and Lehman
               Commercial Paper, Inc., as administrative agent.*
    10.45 --   Guarantee and Collateral Agreement made by Spanish
               Broadcasting System, Inc. and certain of its subsidiaries in
               favor of Lehman Commercial Paper, Inc. as Administrative
               Agent, dated as of July 6, 2000.*
    10.46 --   Employment Agreement dated December 7, 2000, between Joseph
               Garcia and the Company.*
    10.47 --   Employment Agreement dated August 31, 2000, between William
               Tanner and the Company.*
    10.48 --   Employment Agreement dated February 16, 2000, between Juan
               A. Garcia and the Company.*
</TABLE>
<PAGE>   88

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                 DESCRIPTION                           PAGE
-------                                -----------                           ----
<C>       <S>  <C>                                                           <C>
    10.49 --   Deed of Constitution of Mortgage, Cadera Estereotempo, Inc.,
               as Mortgagor, and Banco Bilbao Vizcaya Puerto Rico, as
               Mortgagee.*
    10.50 --   Lease Agreement by and between the Company and Irradio
               Holdings, Ltd. made as of December 14, 2000.*
    10.51 --   First Addendum to Lease between the Company and Irradio
               Holdings, Ltd. as of December 14, 2000.*
    10.52 --   Asset Purchase Agreement dated as of November 2, 2000 by and
               between International Church of the Foursquare Gospel and
               the Company.*
    21.1  --   List of Subsidiaries of the Company.*
    27.1  --   Financial Data Schedule.*
</TABLE>

---------------

* Filed with the initial filing of this Form 10-K on December 26, 2000.